STANDISH AYER & WOOD MASTER PORTFOLIO /FA/, POS AMI, 1996-10-10

STANDISH AYER & WOOD MASTER PORTFOLIO /FA/
POS AMI, 1996-10-10

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON

OCTOBER 10, 1996

File No. 811-07603

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 1 |X|

STANDISH, AYER & WOOD MASTER PORTFOLIO
(Exact Name of Registrant as Specified in Charter)

P.O. Box 501
George Town, Grand Cayman
Cayman Island, B.W.I.
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: (809) 949-2001

Richard S. Wood
Standish, Ayer & Wood, Inc.
One Financial Center
Boston, Massachusetts 02109
(Name and Address of Agent for Service)

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EXPLANATORY NOTES

This Amendment No. 1 to the Registration Statement on Form N-1A (the
"Amended Registration Statement") has been filed by the Registrant pursuant to
Section 8(b) of the Investment Company Act of 1940, as amended (the "1940 Act"),
and Rule 8b-15 thereunder. However, beneficial interests in the series of the
Registrant are not being registered under the Securities Act of 1933, as amended
(the "1933 Act"), because such interests will be issued solely in transactions
that are exempt from registration under the 1933 Act. Investments in the
Registrant's series may only be made by investment companies, insurance company
separate accounts, common or commingled trust funds or similar organizations or
entities that are "accredited investors" within the meaning of Regulation D
under the 1933 Act. The Amended Registration Statement does not constitute an
offer to sell, or the solicitation of an offer to buy, any beneficial interests
in any series of the Registrant.

This Amended Registration Statement is intended to apply only to the
Standish Small Capitalization Equity Portfolio II and is not intended to affect
the registration status under the 1940 Act of any other series of the
Registrant.

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Dated October 11, 1996

STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAPITALIZATION EQUITY PORTFOLIO II

PART A

THIS PART A DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, ANY BENEFICIAL INTERESTS IN STANDISH SMALL CAPITALIZATION EQUITY
PORTFOLIO II.

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Standish, Ayer & Wood Master Portfolio (the "Portfolio Trust") is a
no-load, open-end management investment company which was organized as a master
trust fund under the laws of the State of New York on January 18, 1996.
Beneficial interests in the Portfolio Trust are divided into separate sub-trust
or series, each having distinct investment objectives and policies, one of
which, Standish Small Capitalization Equity Portfolio II, (the "Portfolio") is
described herein. Beneficial interests in each Portfolio are issued solely in
transactions that are exempt from registration under the Securities Act of 1933
(the "1933 Act"). Investments in the Portfolio Trust may only be made by
investment companies, insurance company separate accounts, common or commingled
trust funds or similar organizations or entities that are "accredited investors"
within the meaning of Regulation D under the 1933 Act. This Registration
Statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.

INVESTMENT OBJECTIVE

The Portfolio's investment objective is to achieve long-term growth of
capital. The Portfolio seeks to achieve its investment objective by investing at
least 80% of its total assets in equity and equity-related securities of small
capitalization companies. Equity and equity-related securities include common
stocks, preferred stocks, securities convertible into common stocks and options,
futures and other strategic transactions based on common stocks. Because of the
uncertainty inherent in all investments, no assurance can be given that the
Portfolio will achieve its investment objective.

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INVESTMENT POLICIES

The companies in whose equity and equity-related securities the
Portfolio invests generally have market capitalizations between $400 million and
$750 million. The Portfolio expects that no more than 20% of its total assets
will be invested in companies that have a market capitalization above $1
billion.

The Portfolio may participate in initial public offerings for
previously privately held companies which are generally expected to have market
capitalizations over $400 million and under $750 million after the consummation
of the offering and whose securities are expected to be liquid after the
offering. Such companies may have a more limited operating history and/or less
experienced management than other companies in which the Portfolio invests,
which may pose additional risks.

At times, particularly when Standish, Ayer & Wood, Inc. (the "Adviser")
believes that securities of small capitalization companies are overvalued, the
Portfolio's portfolio may include securities of larger, more mature companies,
provided that the value of the securities of these companies shall not exceed
20% of the Portfolio's total assets. The Portfolio will invest in publicly
traded equity securities and, excluding equity securities received as
distributions on portfolio securities, will not normally hold equity securities
which are restricted as to disposition under federal securities laws or are
otherwise illiquid or not readily marketable but may do so to the extent
permitted by its investment restrictions under certain circumstances. The
Portfolio will attempt to reduce risk by diversifying its investments within the
investment policies set forth above.

As a temporary matter or for defensive purposes, the Portfolio may
invest all or a portion of its assets in investment grade short-term debt
securities or cash equivalents.

The investment objective of the Portfolio is not a fundamental policy
and may be changed without the approval of the Portfolio's investors. Other
investment policies which are not fundamental polices may be changed by the
Trustees of the Portfolio Trust without the approval of the Portfolio's
investors. The Portfolio's investment policies are described further below and
in Part B.

FOREIGN SECURITIES

The Portfolio may invest up to 15% of its net assets in foreign equity
securities, including securities of foreign issuers that are listed on a United
States exchange or traded in the U.S. over-the-counter market and sponsored and
unsponsored American Depositary Receipts (ADRs). Securities of foreign issuers,
including emerging markets companies, will be selected for investment by the
Portfolio if the Adviser believes these securities will offer above average
capital growth potential.

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Investing in securities of foreign companies which are generally denominated in
foreign currencies and utilizing foreign currency transactions involve certain
risks of political, economic and legal conditions and developments not typically
associated with investing in United States companies. Such conditions or
developments might include favorable or unfavorable changes in currency exchange
rates, exchange control regulations (including currency blockage), civil
disorder, expropriation of assets of companies in which the Portfolio invests,
nationalization of such companies, imposition of withholding taxes on dividend
or interest payments, and possible difficulty in obtaining and enforcing
judgments against a foreign issuer. Also, foreign securities may not be as
liquid as, and may be more volatile than, comparable domestic securities.
Furthermore, issuers of foreign securities are subject to different, often less
comprehensive, accounting, reporting and disclosure requirements than domestic
issuers. The Portfolio, in connection with its purchases and sales of foreign
securities, other than securities denominated in United States dollars, will
incur transaction costs in converting currencies. Also, foreign custodial costs
relating to the Portfolio's portfolio securities are higher than domestic
custodial costs. Fixed commissions on foreign stock exchanges are generally
higher than negotiated commissions on United States exchanges. Finally,
transactions in equity securities effected on some foreign stock exchanges, and
consequently the Portfolio's investments on such exchanges, may not be settled
promptly and therefore such investments may be less liquid and subject to the
risk of fluctuating currency exchange rates pending settlement.

Investments by the Portfolio in securities of issuers in emerging
markets involves risks in addition to those discussed above. Many emerging
market countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have negative effects on the
economies and securities markets of certain emerging market countries. Moreover,
the economies of individual emerging market countries may differ favorably or
unfavorably from the U.S. economy in such respects as the rate of growth of
gross domestic product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.

SHORT TERM DEBT SECURITIES; MONEY MARKET INSTRUMENTS

The Portfolio may invest uncommitted cash and cash needed to maintain
liquidity for redemptions in short-term debt securities and cash equivalents,
including short-term U.S. Government securities (direct obligations of the U.S.
Government backed by the full faith and credit of the United States and
securities issued by agencies and instrumentalities of the U.S. Government),
U.S. and foreign commercial paper, negotiable certificates of deposit,
non-negotiable fixed time deposits, bankers' acceptances, repurchase agreements
and other money market securities and instruments.

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When the Adviser deems it advisable because of market conditions, the
Portfolio may temporarily invest in short-term debt securities or retain cash or
cash equivalents without limit. Such investments will be limited to 20% of total
assets unless the Portfolio is in a temporary defensive position.

The Portfolio's investments in money market securities (i.e.,
securities with maturities of less than one year) will be limited to securities
which are rated P-1 by Moody's Investors Service, Inc. (Moody's) or A-1 by
Standard & Poor's Ratings Group ("Standard & Poor's"). The Portfolio will invest
at least 95% of its assets which are invested in short-term interest-bearing
securities (i.e., securities with maturities of one to three years) in
securities which are rated at the time of investment Aaa, Aa or A by Moody's or
AAA, AA, or A by Standard & Poor's, or which, if not rated, are of comparable
investment quality in the opinion of the Adviser. Up to 5% of assets invested in
such short-term securities may be invested in securities which are rated Baa by
Moody's or BBB by Standard & Poor's, or which, if not rated, are of comparable
investment quality in the opinion of the Adviser. In the case of a security
rated differently by the two rating services the higher rating is used in
applying the 5% limit.

In the event that the rating on a security held in the Portfolio's
portfolio is lowered by a rating service, such action will be considered by the
Adviser in its evaluation of the overall investment merits of that security, but
will not necessarily result in the sale of the security. Securities rated Baa by
Moody's and BBB by Standard & Poor's may have some speculative characteristics
and changes in economic conditions and other circumstances are more likely to
lead to weakened capacity to make principal and interest payments than is the
case with higher rated securities.

REPURCHASE AGREEMENTS

The Portfolio may invest up to 10% of its net assets in repurchase
agreements under normal circumstances. Repurchase agreements acquired by the
Portfolio will always be fully collateralized as to principal and interest by
money market instruments and will be entered into with commercial banks, brokers
and dealers considered creditworthy by the Adviser. If the other party or
"seller" of a repurchase agreement defaults, the Portfolio might suffer a loss
to the extent that the proceeds from the sale of the underlying securities and
other collateral held by the Portfolio in connection with the related repurchase
agreement are less than the repurchase price. In addition, in the event of
bankruptcy of the seller or failure of the seller to repurchase the securities
as agreed, the Portfolio could suffer losses, including loss of interest on or
principal of the security and costs associated with delay and enforcement of the
repurchase agreement.

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STRATEGIC TRANSACTIONS

The Portfolio may, but is not required to, utilize various other
investment strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity market
movements), or to enhance potential gain. Such strategies are generally accepted
as part of modern portfolio management and are regularly utilized by many mutual
funds and other institutional investors. Techniques and instruments used by the
Portfolio may change over time as new instruments and strategies are developed
or regulatory changes occur.

In the course of pursuing its investment objective, the Portfolio may
purchase and sell (write) exchange-listed and over-the-counter put and call
options on securities, equity indices and other financial instruments; purchase
and sell financial futures contracts and options thereon; enter into various
interest rate transactions such as swaps, caps, floors or collars; and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions"). Each
Strategic Transaction described above is a derivative instrument because it
derives its value from the security or contract underlying the specific
Transaction. Strategic Transactions may be used in an attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Portfolio's portfolio resulting from securities markets or currency
exchange rate fluctuations, to protect the Portfolio's unrealized gains in the
value of its portfolio securities, to facilitate the sale of such securities for
investment purposes, or to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities. In
addition to the hedging transactions referred to in the preceding sentence,
Strategic Transactions may also be used to enhance potential gain in
circumstances where hedging is not involved although the Portfolio will attempt
to limit its net loss exposure resulting from Strategic Transactions entered
into for such purposes to not more than 3% of the Portfolio's net assets at any
one time and, to the extent necessary, the Portfolio will close out transactions
in order to comply with this limitation. (Transactions such as writing covered
call options are considered to involve hedging for the purposes of this
limitation.) The Portfolio's use of Strategic Transactions to enhance potential
gain may be considered speculative. In calculating the Portfolio's net loss
exposure from such Strategic Transactions, an unrealized gain from a particular
Strategic Transaction position would be netted against an unrealized loss from a
related Strategic Transaction position. For example, if the Adviser believes
that the Portfolio is underweighted in cyclical stocks and overweighed in
consumer stocks, the Portfolio may buy a cyclical index call option and sell a
cyclical index put option and sell a consumer index call option and buy a
consumer index put option. Under such circumstances, any unrealized loss in the
cyclical position would be netted against any unrealized gain in the consumer
position (and vice versa) for purposes of

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calculating the Portfolio's net loss exposure. The ability of the Portfolio to
utilize these Strategic Transactions successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured. The
Portfolio will comply with applicable regulatory requirements when implementing
these strategies, techniques and instruments. The Portfolio's activities
involving Strategic Transactions may be limited to enable certain of its
investors to comply with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company.

SHORT-SELLING

The Portfolio may make short sales, which are transactions in which the
Portfolio sells a security it does not own in anticipation of a decline in the
market value of that security. To complete such a transaction, the Portfolio
must borrow the security to make delivery to the buyer. The Portfolio then is
obligated to replace the security borrowed by purchasing it at the market price
at the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Portfolio. Until the security is
replaced, the Portfolio is required to pay to the lender amounts equal to any
dividends or interest which accrue during the period of the loan. To borrow the
security, the Portfolio also may be required to pay a premium, which would
increase the cost of the security sold. The proceeds of the short sale will be
retained by the broker, to the extent necessary to meet margin requirements,
until the short position is closed out.

Until the Portfolio replaces a borrowed security in connection with a
short sale, the Portfolio will: (a) maintain daily a segregated account not with
the broker, containing cash or liquid securities, at such a level that the
amount deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short; or (b)
otherwise cover its short position.

The Portfolio anticipates that the frequency of short sales will vary
substantially in different periods, and it does not intend that any specified
portion of its assets, as a matter of practice, will be in short sales. However,
no securities will be sold short if, after effect is given to any such short
sale, the total market value of all securities sold short would exceed 5% of the
value of the Portfolio's net assets.

In addition to the short sales discussed above, the Portfolio may make
short sales "against the box," a transaction in which the Portfolio enters into
a short sale of a security which the Portfolio owns. The proceeds of the short
sale are held by a broker until the settlement date at which time the Portfolio
delivers the security to close the short position. The Portfolio receives the
net proceeds from the short sale.

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OTHER INVESTMENT COMPANIES

The Portfolio may invest up to 10% of its total assets in the
securities of other investment companies but may not invest more than 5% of its
total assets in the securities of any one investment company or acquire more
than 3% of the voting securities of any other investment company. For example,
the Portfolio may invest in Standard & Poor's Depositary Receipts (commonly
referred to as "Spiders"), which are exchange-traded shares of a closed-end
investment company that are designed to replicate the price performance and
dividend yield of the Standard & Poor's 500 Composite Stock Price Index. The
Portfolio will indirectly bear its proportionate share of any management fees
and other expenses paid by investment companies in which it invests in addition
to the advisory and administration fees paid by the Portfolio. However, to the
extent that the Portfolio invests in a registered open-end investment company,
the Adviser will not impose its advisory fees on the portion of the Portfolio's
assets so invested.

PORTFOLIO TURNOVER

It is not the policy of the Portfolio to purchase or sell securities
for trading purposes. However, the Portfolio places no restrictions on portfolio
turnover and it may sell any portfolio security without regard to the period of
time it has been held. The Portfolio may therefore generally change its
portfolio investments at any time in accordance with the Adviser's appraisal of
factors affecting any particular issuer or market, or the economy in general.
Portfolio turnover is not expected to exceed 150% on an annual basis. A rate of
turnover of 100% would occur, for example, if the value of the lesser of
purchases or sales of portfolio securities for a particular year equaled the
average monthly value of portfolio securities owned during the year (excluding
securities with a maturity date of one year or less at the date of acquisition).
A high rate of portfolio turnover involves a correspondingly greater amount of
transaction costs which must be borne directly by the Portfolio and thus
indirectly by the Portfolio's investors and their shareholders.

INVESTMENT RESTRICTIONS

The Portfolio has adopted certain fundamental policies which may not be
changed without the approval of the Portfolio's investors.

These policies provide, among other things, that the Portfolio may not:
(i) invest, with respect to at least 75% of its total assets, more than 5% in
the securities of any one issuer (other than the U.S. Government, its agencies
or instrumentalities) or acquire more than 10% of the outstanding voting
securities of any issuer; (ii) invest 25% or more of its total assets in a
single industry except that this restriction shall not apply to U.S. Government
securities; or (iii) borrow money, except in amounts not to exceed 33 1/3% of
the value of the Portfolio's total assets (including the amount

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borrowed) taken at market value (a) from banks for temporary or short-term
purposes or for the clearance of transactions, (b) in connection with the
redemption of shares or to finance failed settlements of portfolio trades
without immediately liquidating portfolio securities or other assets; (c) in
order to fulfill commitments or plans to purchase additional securities pending
the anticipated sale of other portfolio securities or assets; and (d) the
Portfolio may enter into reverse repurchase agreements and forward roll
transactions.

If any percentage restriction described above is adhered to at the time
of investment, a subsequent increase or decrease in the percentage resulting
from a change in the value of the Portfolio's assets will not constitute a
violation of the restriction. Additional fundamental policies adopted by the
Portfolio are described in Part B.

RISK FACTORS

The Portfolio is not intended to provide an investment program meeting
all the requirements of an investor. The companies in which the Portfolio
invests generally reinvest their earnings, and dividend income should not be
expected. Additionally, notwithstanding the Portfolio's ability to diversify and
spread risk by holding securities of a number of Portfolio companies, investors
of the Portfolio should be able and prepared to bear the risk of investment
losses which may accompany the investment contemplated by the Portfolio.

Although investments in small capitalization companies may present
greater opportunities for growth, they also involve greater risks than are
customarily associated with investments in larger, more established companies.
The securities of small capitalization companies may be subject to more volatile
market movements than securities of larger, more established companies. Smaller
companies may have limited product lines, markets or financial resources, and
they may depend upon a limited or less experienced management group. The
securities of small capitalization companies may be traded only on the
over-the-counter market or on a regional securities exchange and may not be
traded daily or in the volume typical of trading on a national securities
exchange. As a result, the disposition by the Portfolio of portfolio securities
in order to meet redemptions or otherwise may require the Portfolio to sell
securities at a discount from market prices, over a longer period of time or
during periods when disposition is not desirable.

Strategic Transactions

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used. The writing of put and call options may result in losses to the Portfolio,
force the purchase or sale, respectively, of portfolio securities at inopportune
times or for prices higher than (in the case of purchases due to the exercise of
put options) or lower than (in the case of sales due to the exercise of call
options) current market values, limit the amount of appreciation the Portfolio
can realize on its investments or cause the Portfolio to hold a security it
might otherwise sell. The use of currency transactions can result in the
Portfolio incurring losses as a result of a number of factors including the
imposition of exchange controls, suspension of settlements, or the inability to
deliver or receive a specified currency. The use of options and futures
transactions entails certain other risks. In particular, the variable degree of
correlation between price movements of futures contracts and price movements in
the related portfolio position of the Portfolio creates the possibility that
losses on the hedging instrument may be greater than gains in the value of the
Portfolio's position. The writing of options could significantly increase the
Portfolio's portfolio turnover rate and, therefore, associated brokerage
commissions or spreads. In addition, futures and options markets may not be
liquid in all circumstances and certain over-the-counter options may have no
markets. As a result, in certain markets, the Portfolio might not be able to
close out a transaction without incurring substantial losses, if at all.
Although the use of futures and options transactions for hedging should tend to
minimize the risk of loss due to a decline in the value of the hedged position,
at the same time, in certain circumstances, these transactions tend to limit any
potential gain which might result from an increase in value of such position.
The loss incurred by the Portfolio in writing options on futures and entering
into futures transactions is potentially unlimited; however, as described above,
the Portfolio will attempt to limit its net loss exposure resulting from
Strategic Transactions entered into for non-hedging purposes to not more than 3%
of its net assets at any one time. Futures markets are highly volatile and the
use of futures may increase the volatility of the Portfolio's net asset value.
Finally, entering into futures contracts would create a greater ongoing
potential financial risk than would purchases of options where the exposure is
limited to the cost of the initial premium. Losses resulting from the use of
Strategic Transactions would reduce net asset value and the net result may be
less favorable than if the Strategic Transactions had not been utilized. Further
information concerning the Portfolio's Strategic Transactions is set forth in
Part B.

Short-Selling

The Portfolio will incur a loss as a result of the short sale if the
price of the security increases between the date of the short sale and the date
on which the Portfolio replaces the borrowed security. The Portfolio will
realize a gain if the security declines in price between those dates by an
amount greater than premium and transaction costs. This result is the opposite
of what one would expect from a cash purchase of a long position in a security.
The amount of any gain will be decreased, and the amount of any loss increased,
by the amount of any premium or

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amounts in lieu of dividends or interest the Portfolio may be required to pay in
connection with a short sale.

The Portfolio's loss on a short sale as a result of an increase in the
price of the security sold short is potentially unlimited. The Portfolio may
purchase call options to provide a hedge against an increase in the price of a
security sold short by the Portfolio. When the Portfolio purchases a call option
it must pay a premium to the person writing the option and a commission to the
broker selling the option. If the option is exercised by the Portfolio, the
premium and the commission paid may be more than the amount of the brokerage
commission charged if the security were to be purchased directly.

ITEM 5. MANAGEMENT OF THE FUND.

TRUSTEES

The Portfolio is a separate investment series of Standish, Ayer & Wood
Master Portfolio, a master trust fund organized under the laws of the State of
New York. Under the terms of the Declaration of Trust, the affairs of the
Portfolio are managed under the supervision of the Trustees of the Portfolio
Trust.

A majority of the Trustees who are not "interested persons" (as defined
in the 1940 Act) of the Portfolio Trust, as the case may be, have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interest arising from the fact that the same individuals are trustees of the
Portfolio Trust and an investor in the Portfolio Trust, up to and including
creating separate boards of trustees. See "Management of the Portfolio" in Part
B for more information about the Trustees and officers of the Portfolio Trust.

INVESTMENT ADVISER

Standish, One Financial Center, Boston, Massachusetts 02111, serves as
investment adviser to the Portfolio pursuant to an investment advisory agreement
and manages the Portfolio's investments and affairs subject to the supervision
of the Trustees of the Portfolio Trust. The Adviser is a Massachusetts
corporation incorporated in 1933 and is a registered investment adviser under
the Investment Advisers Act of 1940.

The Adviser provides fully discretionary management services and
counseling and advisory services to a broad range of clients throughout the
United States and abroad. As of September 30, 1996, Standish or its affiliate,
Standish International Management Company, L.P. ("SIMCO"), served as the
investment adviser to each of the following funds in the Standish, Ayer & Wood
family of funds:

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Net Assets as of
September 30, 1996
Standish Controlled Maturity Fund............................. $ 10,540,255
Standish Equity Portfolio..................................... 107,427,474
Standish Fixed Income Portfolio............................... 2,435,532,278
Standish Fixed Income Fund II................................. 10,434,068
Standish Global Fixed Income Portfolio........................ 157,190,502
Standish Intermediate Tax Exempt Bond Fund.................... 34,789,565
Standish International Equity Fund............................ 48,179,075
Standish International Fixed Income Fund...................... 886,509,347
Standish Massachusetts Intermediate Tax Exempt Bond Fund...... 32,216,649
Standish Securitized Fund..................................... 51,628,213
Standish Short-Term Asset Reserve Fund........................ 222,525,646
Standish Small Capitalization Equity Portfolio................ 236,113,563
Standish Small Capitalization Equity Portfolio II............. 0
Standish Small Cap Tax-Sensitive Equity Fund.................. 6,742,185
Standish Tax-Sensitive Equity Fund............................ 2,840,324

Corporate pension funds are the largest asset under active management
by the Adviser. The Adviser's clients also include charitable and educational
endowment funds, financial institutions, trusts and individual investors. As of
September 30, 1996, the Adviser managed approximately $29 billion of assets.

The Portfolio has two portfolio managers. Mr. Nicholas S. Battelle has
been primarily responsible for the day-to-day management of the Standish Small
Capitalization Equity Portfolio's portfolio since 1990. During the past five
years, Mr. Battelle has served as a Vice President as well as a Director of the
Adviser. Mr. Andrew L. Beja has been associated with the Adviser since March
1996 as Senior Analyst on the small capitalization company team. Prior to
joining the Adviser, Mr. Beja was a Vice President and analyst at Advest, Inc.
from 1985-1996.

Subject to the supervision and direction of the Trustees of the
Portfolio Trust, the Adviser manages the Portfolio in accordance with its stated
investment objective and policies, recommends investment decisions for the
Portfolio, places orders to purchase and sell securities on behalf of the
Portfolio and permits the Portfolio to use the name "Standish." For its services
to the Portfolio, the Adviser receives a monthly fee equal on an annual basis to
0.60% of the Portfolio's average daily net assets.

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ADMINISTRATOR OF THE PORTFOLIO

IBT Trust Company (Cayman) Ltd., P.O. Box 501, Grand Cayman, Cayman
Islands, BWI, serves as the administrator to the Portfolio (the "Portfolio
Administrator") pursuant to a written administration agreement with the
Portfolio Trust on behalf of the Portfolio. The Portfolio Administrator provides
the Portfolio Trust with office space for managing its affairs, and with certain
clerical services and facilities. For its services to the Portfolio Trust, the
Portfolio Administrator will receives a fee from the Portfolio in the amount of
$7,500 annually.

EXPENSES

The Portfolio is responsible for all of its costs and expenses not
expressly stated to be payable by Standish under the investment advisory
agreement with the Portfolio. Among other expenses, the Portfolio pays
investment advisory fees; bookkeeping, share pricing and custodian fees and
expenses; expenses of notices and reports to interest-holders; and expenses of
the Portfolio's administrator. The Portfolio will pay legal and auditing fees;
any registration and reporting fees and expenses; and Trustees' fees and
expenses. Expenses of the Portfolio Trust which relate to more than one of its
series are allocated among such series by the Adviser and SIMCO in an equitable
manner, primarily on the basis of relative net asset values.

Standish has agreed in the investment advisory agreement to limit the
Portfolio's total annual operating expenses (excluding brokerage commissions,
taxes and extraordinary expenses) to 1.50% of the Portfolio's average daily net
assets. If the expense limit is exceeded, the compensation due Standish for such
fiscal year shall be proportionately reduced by the amount of such excess by a
reduction or refund thereof at the time such compensation is payable after the
end of each calendar month, subject to readjustment during such fiscal year.

PORTFOLIO TRANSACTIONS

Subject to the supervision of the Trustees of the Portfolio Trust, the
Adviser selects the brokers and dealers that execute orders to purchase and sell
portfolio securities for the Portfolio. The Adviser will generally seek to
obtain the best available price and most favorable execution with respect to all
transactions for the Portfolio.

Subject to the consideration of best price and execution and to
applicable regulations, the receipt of research and sales of shares of an
investor in the Portfolio may also be considered factors in the selection of
brokers that execute orders to purchase and sell portfolio securities for the
Portfolio.

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ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio Trust was organized as a trust under the laws of the
State of New York on January 18, 1996. Under the Declaration of Trust, the
Trustees are authorized to issue beneficial interests in separate series of the
Portfolio Trust. Each investor is entitled to a vote in proportion to the amount
of its investment in the Portfolio. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of his investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will not be liable for the obligations of the Portfolio although they
will bear the risk of loss of their entire respective interests in the
Portfolio. However, there is a risk that interest-holders in the Portfolio may
be held personally liable as partners for the Portfolio's obligations. Because
the Portfolio Trust's Declaration of Trust disclaims interest-holder liability
and provides for indemnification against such liability, the risk of an investor
in the Portfolio incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and the
Portfolio itself was unable to meet its obligations.

The Portfolio Trust reserves the right to create and issue any number
of series, in which case investments in each series would participate equally in
earnings and assets of the particular series. Currently, the Portfolio Trust has
five series: Standish Fixed Income Portfolio, Standish Equity Portfolio,
Standish Small Capitalization Equity Portfolio, Standish Global Fixed Income
Portfolio and Standish Small
Capitalization Equity Portfolio II.

Investments in the Portfolio have no pre-emptive or conversion rights
and are fully paid and non-assessable, except as set forth above. The Portfolio
Trust is not required and has no current intention to hold annual meetings of
investors, but the Portfolio Trust will hold special meetings of investors when
in the judgment of the Trustees it is necessary or desirable to submit matters
for an investor vote. Changes in fundamental policies will be submitted to
investors for approval. Investors have under certain circumstances (e.g. upon
application and submission of certain specified documents to the Trustees by a
specified percentage of the aggregate value of the Portfolio Trust's outstanding
interests) the right to communicate with other investors in connection with
requesting a meeting of investors for the purpose of removing one or more
Trustees. Investors also have the right to remove one or more Trustees without a
meeting by a declaration in writing by a specified number of investors. Upon
liquidation of a Portfolio, investors would be entitled to share pro rata in the
net assets of the Portfolio available for distribution to investors.

Inquiries concerning the Portfolio should be made by contacting the
Portfolio at the Portfolio Trust's registered office in care of the Portfolio
Administrator, P.O.

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Box 501, Cardinal Avenue, George Town, Grand Cayman, Cayman Islands, British
West Indies.

Please see Item 7 for a discussion of the Portfolio's dividend policy.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

Beneficial interests in the Portfolio are issued solely in transactions
that are exempt from registration under the 1933 Act. See "General Description
of Registrant" above.

An investment in the Portfolio may be made without a sales load by
certain eligible investors. All investments are made at the net asset value next
determined after an order and payment for the investment is received by the
Portfolio or its agent by the designated cutoff time for each accredited
investor. There is no minimum initial or subsequent investment in the Portfolio.
However, because the Portfolio intends to be as fully invested at all times as
is reasonably practicable in order to enhance the yield on its assets,
investments must be made in federal funds (i.e., monies credited to the account
of the Portfolio Trust's custodian bank by a Federal Reserve Bank). The
Portfolio Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

The Portfolio's portfolio securities are valued at the last sale
prices, on the valuation date, on the exchange or national securities market on
which they are primarily traded. Securities not listed on an exchange or
national securities market, or securities for which there were no reported
transactions, are valued at the last quoted bid prices. Securities for which
quotations are not readily available and all other assets are valued at fair
value as determined in good faith by the Adviser in accordance with procedures
approved by the Trustees of the Portfolio Trust. Money market instruments with
less than sixty days remaining to maturity when acquired by the Portfolio are
valued on an amortized cost basis unless the Portfolio Trust's Board of Trustees
determines that amortized cost does not represent fair value. If the Portfolio
acquires a money market 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 cost based upon the value on such
date unless the Trustees of the Portfolio Trust determine during such sixty-day
period that amortized cost does not represent fair value. Additional information
concerning the Portfolio's valuation policies is contained in Part B.

The net asset value of the Portfolio is determined in U.S. dollars each
day on which the New York Stock Exchange ("NYSE") is open for trading ("Business
Day") (and on such other days as are deemed necessary in order to comply with
Rule 22c-1 under the 1940 Act). This determination is made as of the close of
regular trading on the NYSE which is currently 4:00 p.m., New York time (the
"Valuation Time").

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Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each Business Day. At each Valuation Time on each such Business
Day, the value of each investor's beneficial interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, that represents that investor's share of the
aggregate beneficial interests in the Portfolio. Any additions or withdrawals,
which are to be effected on that day, will then be effected. The investor's
percentage of the aggregate beneficial interests in the Portfolio will then be
recomputed as the percentage equal to the fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of the Valuation
Time, on such Business Day plus or minus, as the case may be, the amount of any
additions to or withdrawals from the investor's investment in the Portfolio
effected on such Business Day, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Valuation Time, on such
Business Day plus or minus, as the case may be, the amount of the net additions
to or withdrawals from the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio as of the
Valuation Time, on the following Business Day.

The net income of the Portfolio shall consist of (i) all income
accrued, less the amortization of any premium, on the assets of the Portfolio,
less (ii) all actual and accrued expenses of the Portfolio determined in
accordance with generally accepted accounting principles ("Net Income").
Interest income includes discount earned (including both original issue and
market discount) on discount paper accrued ratably to the date of maturity and
any net realized gains or losses on the assets of the Portfolio. All the Net
Income of the Portfolio is allocated pro rata among the investors in the
Portfolio. The Net Income is accrued daily and reflected in each investor's
interest in the Portfolio.

Under the anticipated method of operation of the Portfolio, it is
expected that the Portfolio will not be subject to any U.S. federal or state
income tax. However, any investor in the Portfolio that is subject to U.S.
federal income taxation will take into account its share (as determined in
accordance with the governing instruments of the Portfolio) of the Portfolio's
ordinary income and capital gain in determining its income tax liability, if
any. The determination of such share will be made in accordance with the
Internal Revenue Code of 1986, as amended (the "Code").

It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that any investor in the Portfolio that is
otherwise eligible to be treated as a regulated investment company will be able
to satisfy the requirements of Subchapter M of the Code, assuming that the
investor invested all of its investment securities (as such terms are used in
the 1940 Act) in the Portfolio.

ITEM 8. REDEMPTION OR REPURCHASE.

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An investor in the Portfolio may withdraw all or any portion of its
investment at the net asset value next determined after receipt by the Portfolio
or its agent, by the close of trading (currently 4:00 p.m. Eastern Time) on the
NYSE or as of such earlier times at which the Portfolio's net asset value is
calculated on each Business Day, of a withdrawal request in proper form. The
proceeds of a withdrawal will be paid by the Portfolio in federal funds normally
on the Business Day the withdrawal is effected, but in any event within five
Business Days following receipt of the request. The Portfolio reserves the right
to pay redemptions in kind. Investments in the Portfolio may not be transferred.

The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the NYSE is closed (other than weekends or holidays)
or trading on such exchange is restricted, or, to the extent otherwise permitted
by the 1940 Act, if an emergency exists.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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Dated October 11, 1996

STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAPITALIZATION EQUITY PORTFOLIO II

PART B

ITEM 10. COVER PAGE.

This Part B expands upon and supplements the information contained in
the Part A of Standish Small Capitalization Equity Portfolio II (the
"Portfolio"), a separate investment series of Standish, Ayer & Wood Master
Portfolio (the "Portfolio Trust"). This Part B should be read in conjunction
with such Part A. NEITHER PART A NOR THIS PART B CONSTITUTES AN OFFER TO SELL,
OR THE SOLICITATION OF AN OFFER TO BUY, ANY BENEFICIAL INTERESTS IN STANDISH
SMALL CAPITALIZATION EQUITY PORTFOLIO II.

ITEM 11. TABLE OF CONTENTS. PAGE

General Information and History.......................................B-1
Investment Objectives and Policies....................................B-1
Management of the Portfolio...........................................B-20
Control Persons and Principal Holders of Securities...................B-22
Investment Advisory and Other Services................................B-22
Brokerage Allocation and Other Practices..............................B-24
Capital Stock and Other Securities....................................B-25
Purchase, Redemption and Pricing of Securities Being Offered..........B-26
Tax Status............................................................B-27
Underwriters..........................................................B-30
Calculation of Performance Data.......................................B-30
Financial Statements..................................................B-30

ITEM 12. GENERAL INFORMATION AND HISTORY.

Not applicable.

ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.

Part A contains additional information about the investment objectives
and policies of the Portfolio. This Part B should be read only in conjunction
with Part A. This section contains supplemental information concerning the types
of securities and other instruments in which the Portfolio may invest, the
investment policies and portfolio strategies that the Portfolio may utilize and
certain risks attendant to those investments, policies and strategies.

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INVESTMENT OBJECTIVE

The Portfolio's investment objective is to achieve long-term growth of
capital. The Portfolio seeks to achieve its investment objective by investing at
least 80% of its total assets in equity and equity-related securities of small
capitalization companies. The Portfolio may invest up to 15% of its net assets
in foreign equity securities, including securities of foreign issuers that are
listed on a U.S. exchange or traded in the over-the-counter market and American
Depositary Receipts (ADRs). In addition, the Portfolio may engage in certain
strategic transactions as discussed below. The Portfolio purchases short-term
interest-bearing securities with uninvested funds, the proportion of which will
depend upon market conditions and the needs of the Portfolio.

COMMON STOCKS

The companies in whose equity and equity-related securities the
Portfolio invests generally have market capitalizations between $400 million and
$750 million. Investments are expected to emphasize companies involved with
value added products or services in expanding industries. At times, particularly
when Standish, Ayer & Wood, Inc. ("Standish" or the "Adviser") believes that the
securities of small companies are overvalued, the Portfolio's portfolio may
include securities of larger, more mature companies, provided that the value of
the securities of such larger, more mature companies shall not exceed 20% of the
Portfolio's net assets. The Portfolio will attempt to reduce risk by
diversifying its investments within the investment policies set forth above.

FOREIGN SECURITIES

Foreign securities may be purchased and sold in over-the-counter
markets or on stock exchanges located in the countries in which the respective
principal offices of their issuers are located, if that is the best available
market. Foreign stock markets are generally not as developed or efficient as
those in the United States. While growing in volume, they usually have
substantially less volume than the New York Stock Exchange, and securities of
some foreign companies are less liquid and more volatile than securities of
comparable United States companies. Fixed commissions on foreign stock exchanges
are generally higher than negotiated commissions on United States exchanges,
although the Portfolio will endeavor to achieve the most favorable net results
on its portfolio transactions. There is generally less government supervision
and regulation of stock exchanges, brokers and listed companies abroad than in
the United States.

The dividends and interest payable on certain of the Portfolio's
foreign portfolio securities may be subject to foreign withholding taxes, (and
in some cases capital gains from such securities may also be subject to foreign
taxes) thus reducing

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the net amount of income available for distribution to the Portfolio's
investors. Investors should understand that the expense ratio of the Portfolio
may be higher than that of investment companies investing exclusively in
domestic securities because of the cost of maintaining the custody of foreign
securities.

The Portfolio may acquire sponsored and unsponsored ADRs. Unsponsored
ADRs are acquired from banks that do not have a contractual relationship with
the issuer of the security underlying the depositary receipt to issue and secure
such depositary receipt. To the extent that the Portfolio invests in such
unsponsored ADRs there may be an increased possibility that the Portfolio may
not become aware of events affecting the underlying security and thus the value
of the related depositary receipt. In addition, certain benefits (i.e., rights
offerings) which may be associated with the security underlying the depositary
receipt may not inure to the benefit of the holder of such depositary receipt.

MONEY MARKET INSTRUMENTS AND REPURCHASE AGREEMENTS

When the Adviser considers investments in equity securities to present
excessive risks, the Portfolio may invest all or a portion of its assets in debt
securities or cash equivalents. The Portfolio will also invest uncommitted cash
in short-term debt securities.

To maintain liquidity for redemptions or at times when the Adviser
deems it advisable because of market conditions, the Portfolio may invest in
short-term debt securities and short-term securities of the United States
government and its instrumentalities or retain cash or cash equivalents.

Money market instruments include short-term U.S. Government securities,
U.S. and foreign commercial paper (promissory notes issued by corporations to
finance their short-term credit needs), negotiable certificates of deposit,
non-negotiable fixed time deposits, bankers' acceptances and repurchase
agreements.

U.S. Government securities include securities which are direct
obligations of the U.S. Government backed by the full faith and credit of the
United States, and securities issued by agencies and instrumentalities of the
U.S. Government, which may be guaranteed by the U.S. Treasury or supported by
the issuer's right to borrow from the Treasury or may be backed by the credit of
the federal agency or instrumentality itself. Agencies and instrumentalities of
the U.S. Government include, but are not limited to, Federal Land Banks, the
Federal Farm Credit Bank, the Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks and the Federal National
Mortgage Association.

A repurchase agreement is an agreement under which the Portfolio
acquires money market instruments (generally U.S. Government securities) from a

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commercial bank, broker or dealer, subject to resale to the seller at an
agreed-upon price and date (normally the next business day). The resale price
reflects an agreed-upon interest rate effective for the period the instruments
are held by the Portfolio and is unrelated to the interest rate on the
instruments. The instruments acquired by the Portfolio (including accrued
interest) must have an aggregate market value in excess of the resale price and
will be held by the Portfolio's custodian bank until they are repurchased. The
Trustees will consider the standards which the Adviser will use in reviewing the
creditworthiness of any party to a repurchase agreement with the Portfolio.

The use of repurchase agreements involves certain risks. For example,
if the seller defaults on its obligation to repurchase the instruments acquired
by the Portfolio at a time when their market value has declined, the Portfolio
may incur a loss. If the seller becomes insolvent or subject to liquidation or
reorganization under bankruptcy or other laws, a court may determine that the
instruments acquired by the Portfolio are collateral for a loan by the Portfolio
and therefore are subject to sale by the trustee in bankruptcy. Finally, it is
possible that the Portfolio may not be able to substantiate its interest in the
instruments it acquires. While the Trustees acknowledge these risks, it is
expected that they can be controlled through careful documentation and
monitoring.

STRATEGIC TRANSACTIONS

The Portfolio may, but is not required to, utilize various other
investment strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity market
movements), to manage the effective maturity or duration of fixed-income
securities, or to enhance potential gain. Such strategies are generally accepted
as part of modern portfolio management and are regularly utilized by many mutual
funds and other institutional investors. Techniques and instruments used by the
Portfolio may change over time as new instruments and strategies are developed
or regulatory changes occur.

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to establish a position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. In addition to the hedging
transactions referred to in the preceding sentence, Strategic Transactions may
also be used to enhance potential gain in circumstances where hedging is not
involved although the Portfolio will attempt to limit its net loss exposure
resulting from Strategic Transactions entered into for such purposes to not more
than 3% of the Portfolio's net assets at any one time and, to the extent
necessary, the Portfolio will close out transactions in order to comply with
this limitation. (Transactions such as writing covered call options are
considered to involve hedging for the purposes of this limitation.) In
calculating the Portfolio's net loss exposure from such Strategic Transactions,
an unrealized gain from a particular Strategic Transaction position would be
netted against an unrealized loss from a related Strategic Transaction position.
For example, if the Adviser believes that the Portfolio is underweighted in
cyclical stocks and overweighed in consumer stocks, the Portfolio may buy a
cyclical index call option and sell a cyclical index put option and sell a
consumer index call option and buy a consumer index put option. Under such
circumstances, any unrealized loss in the cyclical position would be netted
against any unrealized gain in the consumer position (and vice versa) for
purposes of calculating the Portfolio's net loss exposure. The ability of the
Portfolio to utilize these Strategic Transactions successfully will depend on
the Adviser's ability to predict pertinent market movements, which cannot be
assured. The Portfolio will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. The Portfolio's
activities involving Strategic Transactions may be limited in order to enable
certain of the Portfolio's investors to comply with the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), for qualification as a regulated investment company.

RISKS OF STRATEGIC TRANSACTIONS

Strategic Transactions have risks associated with them including
possible default by the other party to the transaction, illiquidity and, to the
extent the Adviser's view as to certain market movements is incorrect, the risk
that the use of such Strategic Transactions could result in losses greater than
if they had not been used. The writing of put and call options may result in
losses to the Portfolio, force the purchase or sale, respectively, of portfolio
securities at inopportune times or for prices higher than (in the case of put
options) or lower than (in the case of call options) current market values,
limit the amount of appreciation the Portfolio can realize on its investments or
cause the Portfolio to hold a security it might otherwise sell. The use of
currency transactions can result in the Portfolio incurring losses as a result
of a number of factors including the imposition of exchange controls, suspension
of settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Portfolio creates the

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possibility that losses on the hedging instrument may be greater than gains in
the value of the Portfolio's position. The writing of options could
significantly increase the Portfolio's portfolio turnover rate and, therefore,
associated brokerage commissions or spreads. In addition, futures and options
markets may not be liquid in all circumstances and certain over-the-counter
options may have no markets. As a result, in certain markets, the Portfolio
might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures and options transactions for
hedging should tend to minimize the risk of loss due to a decline in the value
of the hedged position, at the same time, in certain circumstances, they tend to
limit any potential gain which might result from an increase in value of such
position. The loss incurred by the Portfolio in writing options on futures and
entering into futures transactions is potentially unlimited; however, as
described above, the Portfolio will attempt to limit its net loss exposure
resulting from Strategic Transactions entered into for non-hedging purposes to
not more than 3% of its net assets at any one time. Futures markets are highly
volatile and the use of futures may increase the volatility of an investor's net
asset value. Finally, entering into futures contracts would create a greater
ongoing potential financial risk than would purchases of options where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value and the net
result may be less favorable than if the Strategic Transactions had not been
utilized.

GENERAL CHARACTERISTICS OF OPTIONS

Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many Strategic Transactions involving options
require segregation of the Portfolio's assets in special accounts, as described
below under "Use of Segregated Accounts."

A put option gives the purchaser of the option, in consideration for
the payment of a premium, the right to sell, and the writer the obligation to
buy (if the option is exercised), the underlying security, commodity, index,
currency or other instrument at the exercise price. For instance, the
Portfolio's purchase of a put option on a security might be designed to protect
its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving the
Portfolio the right to sell such instrument at the option exercise price. A call
option, in consideration for the payment of a premium, gives the purchaser of
the option the right to buy, and the seller the obligation to sell (if the
option is exercised), the underlying instrument at the exercise price. The
Portfolio may purchase a call option on a security, futures contract, index,
currency or other instrument to seek to protect the Portfolio against an
increase in the price of the underlying instrument that it intends to purchase
in the future by fixing the price at

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which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. The Portfolio is authorized to purchase and sell exchange listed
options and over-the-counter options ("OTC options"). Exchange listed options
are issued by a regulated intermediary such as the Options Clearing Corporation
("OCC"), which guarantees the performance of the obligations of the parties to
such options. The discussion below uses the OCC as an example, but is also
applicable to other financial intermediaries.

With certain exceptions, exchange listed options generally settle by
physical delivery of the underlying security or currency, although in the future
cash settlement may become available. Index options and Eurodollar instruments
are cash settled for the net amount, if any, by which the option is in-the-money
(i.e., where the value of the underlying instrument exceeds, in the case of a
call option, or is less than, in the case of a put option, the exercise price of
the option) at the time the option is exercised. Frequently, rather than taking
or making delivery of the underlying instrument through the process of
exercising the option, listed options are closed by entering into offsetting
purchase or sale transactions that do not result in ownership of the new option.

The Portfolio's ability to close out its position as a purchaser or
seller of an exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. There is no assurance that a liquid option
market on an exchange will exist. In the event that the relevant market for an
option on an exchange ceases to exist, outstanding options on that exchange
would generally continue to be exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct agreement with
the Counterparty. In contrast to exchange listed options, which generally have
standardized terms and performance mechanics, all the terms of an OTC option,
including such terms as method of settlement, term, exercise price, premium,
guarantees and security, are set by negotiation of the parties. The Portfolio
will generally sell (write) OTC options (other than OTC currency options) that
are subject to a buy-back provision permitting the Portfolio to require the
Counterparty to sell the option back to the Portfolio at a formula price within
seven days. (To the extent that the Portfolio does not do so, the OTC options
are subject to the Portfolio's

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restriction on illiquid securities.) The Portfolio expects generally to enter
into OTC options that have cash settlement provisions, although it is not
required to do so.

Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Portfolio or fails to make a cash settlement
payment due in accordance with the terms of that option, the Portfolio will lose
any premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Portfolio will engage in OTC option transactions only with U.S.
Government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers," or broker dealers, domestic or foreign banks or other
financial institutions which have received, combined with any credit
enhancements, a long-term debt rating of A from Standard & Poor's Ratings Group
("S&P") or Moody's Investor Services ("Moody's") or an equivalent rating from
any other nationally recognized statistical rating organization ("NRSRO") or the
debt of which is determined to be of equivalent credit quality by the Adviser.
The staff of the Securities and Exchange Commission (the "SEC") currently takes
the position that, absent the buy-back provisions discussed above, OTC options
purchased by the Portfolio, and portfolio securities "covering" the amount of
the Portfolio's obligation pursuant to an OTC option sold by it (the cost of the
sell-back plus the in-the-money amount, if any) are illiquid, and are subject to
the Portfolio's limitation on investing no more than 15% of its assets in
illiquid securities. However, for options written with "primary dealers" in U.S.
Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount which is considered to be illiquid
may be calculated by reference to a formula price.

If the Portfolio sells (writes) a call option, the premium that it
receives may serve as a partial hedge, to the extent of the option premium,
against a decrease in the value of the underlying securities or instruments in
its portfolio or will increase the Portfolio's income. The sale (writing) of put
options can also provide income.

The Portfolio may purchase and sell (write) call options on securities,
equity securities (including convertible securities) and Eurodollar instruments
that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by the Portfolio must be "covered" (i.e., the
Portfolio must own the securities or futures contract subject to the call) or
must meet the asset segregation requirements described below as long as the call
is outstanding. Even though the Portfolio will receive the option premium to
help protect it against loss, a call sold by the Portfolio exposes the Portfolio
during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or instrument and
may

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require the Portfolio to hold a security or instrument which it might otherwise
have sold.

The Portfolio may purchase and sell (write) put options on securities
including equity securities (including convertible securities) and Eurodollar
instruments (whether or not it holds the above securities in its portfolio), and
on securities indices, currencies and futures contracts. The Portfolio will not
sell put options if, as a result, more than 50% of the Portfolio's assets would
be required to be segregated to cover its potential obligations under such put
options other than those with respect to futures and options thereon. In selling
put options, there is a risk that the Portfolio may be required to buy the
underlying security at a disadvantageous price above the market price.

OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES

The Portfolio may also purchase and sell (write) call and put options
on securities indices and other financial indices. Options on securities indices
and other financial indices are similar to options on a security or other
instrument except that, rather than settling by physical delivery of the
underlying instrument, they settle by cash settlement. For example, an option on
an index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the index upon which the option is based
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option (except if, in the case of an OTC option, physical
delivery is specified). This amount of cash is equal to the differential between
the closing price of the index and the exercise price of the option, which also
may be multiplied by a formula value. The seller of the option is obligated, in
return for the premium received, to make delivery of this amount. In addition to
the methods described above, the Portfolio may cover call options on a
securities index by owning securities whose price changes are expected to be
similar to those of the underlying index, or by having an absolute and immediate
right to acquire such securities without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities in its portfolio.

GENERAL CHARACTERISTICS OF FUTURES

The Portfolio may enter into financial futures contracts or purchase or
sell put and call options on such futures. Futures are generally bought and sold
on the commodities exchanges where they are listed with payment of initial and
variation margin as described below. The sale of futures contracts creates a
firm obligation by the Portfolio, as seller, to deliver to the buyer the
specific type of financial instrument called for in the contract at a specific
future time for a specified price (or, with respect to index futures and
Eurodollar instruments, the net cash amount). The purchase of futures contracts
creates a corresponding obligation by the Portfolio, as

B-9

<PAGE>

purchaser. Options on futures contracts are similar to options on securities
except that an option on a futures contract gives the purchaser the right in
return for the premium paid to assume a position in a futures contract and
obligates the seller to deliver such position if the option is exercised.

The Portfolio's use of financial futures and options thereon will in
all cases be consistent with applicable regulatory requirements and in
particular the regulations of the Commodity Futures Trading Commission relating
to exclusions from regulation as a commodity pool operator. Those regulations
currently provide that the Portfolio may use commodity futures and option
positions (i) for bona fide hedging purposes without regard to the percentage of
assets committed to margin and option premiums, or (ii) for other purposes
permitted by the SEC to the extent that the aggregate initial margin and option
premiums required to establish such non-hedging positions (net of the amount the
positions were "in the money" at the time of purchase) do not exceed 5% of the
net asset value of the Portfolio's portfolio, after taking into account
unrealized profits and losses on such positions. Typically, maintaining a
futures contract or selling an option thereon requires the Portfolio to deposit
with a financial intermediary as security for its obligations an amount of cash
or other specified assets (initial margin) which initially is typically 1% to
10% of the face amount of the contract (but may be higher in some
circumstances). Additional cash or assets (variation margin) may be required to
be deposited thereafter on a daily basis as the value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the
Portfolio. If the Portfolio exercises an option on a futures contract, it will
be obligated to post initial margin (and potential subsequent variation margin)
for the resulting futures position just as it would for any position. Futures
contracts and options thereon are generally settled by entering into an
offsetting transaction, but there can be no assurance that the position can be
offset prior to settlement at an advantageous price, nor that delivery will
occur. The segregation requirements with respect to futures contracts and
options thereon are described below.

CURRENCY TRANSACTIONS

The Portfolio may engage in currency transactions with Counterparties
in order to hedge the value of portfolio holdings denominated in particular
currencies against fluctuations in relative value or to enhance potential gain.
Currency transactions include forward currency contracts, exchange listed
currency futures, exchange listed and OTC options on currencies, and currency
swaps. A forward currency contract involves a privately negotiated obligation to
purchase or sell (with delivery generally required) a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. A
currency swap is an agreement to exchange cash flows based on the notional
(agreed-upon) difference among two or more

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<PAGE>

currencies and operates similarly to an interest rate swap, which is described
below. The Portfolio may enter into over-the-counter currency transactions with
Counterparties which have received, combined with any credit enhancements, a
long term debt rating of A by S&P or Moody's, respectively, or that have an
equivalent rating from a NRSRO or (except for OTC currency options) are
determined to be of equivalent credit quality by the Adviser.

The Portfolio's transactions in forward currency contracts and other
currency transactions such as futures, options, options on futures and swaps
will generally be limited to hedging involving either specific transactions or
portfolio positions. See, "Strategic Transactions." Transaction hedging is
entering into a currency transaction with respect to specific assets or
liabilities of a Portfolio, which will generally arise in connection with the
purchase or sale of its portfolio securities or the receipt of income therefrom.
Position hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.

The Portfolio will not enter into a transaction to hedge currency
exposure to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging as described below.

The Portfolio may also cross-hedge currencies by entering into
transactions to purchase or sell one or more currencies that are expected to
decline in value in relation to other currencies to which the Portfolio has or
in which the Portfolio expects to have portfolio exposure. For example, the
Portfolio may hold a French security and the Adviser may believe that French
francs will deteriorate against German marks. The Portfolio would sell French
francs to reduce its exposure to that currency and buy German marks. This
strategy would be a hedge against a decline in the value of French francs,
although it would expose the Portfolio to declines in the value of the German
mark relative to the U.S. dollar.

To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Portfolio may also engage
in proxy hedging. Proxy hedging is often used when the currency to which the
Portfolio's portfolio is exposed is difficult to hedge or to hedge against the
dollar. Proxy hedging entails entering into a forward contract to sell a
currency whose changes in value are generally considered to be linked to a
currency or currencies in which certain of the Portfolio's portfolio securities
are or are expected to be denominated, and to buy U.S. dollars. The amount of
the contract would not exceed the value of the Portfolio's securities
denominated in linked currencies. For example, if the Adviser considers that the
Austrian schilling is linked to the German deutschemark (the "D-mark"), the
Portfolio holds securities denominated in schillings and the

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<PAGE>

Adviser believes that the value of schillings will decline against the U.S.
dollar, the Adviser may enter into a contract to sell D-marks and buy dollars.
Proxy hedging involves some of the same risks and considerations as other
transactions with similar instruments. Currency transactions can result in
losses to the Portfolio if the currency being hedged fluctuates in value to a
degree or in a direction that is not anticipated. Further, there is the risk
that the perceived linkage between various currencies may not be present or may
not be present during the particular time that the Portfolio is engaging in
proxy hedging. If the Portfolio enters into a currency hedging transaction, the
Portfolio will comply with the asset segregation requirements described below.

RISKS OF CURRENCY TRANSACTIONS

Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Portfolio
if it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Buyers and sellers of currency futures are subject to the same risks that
apply to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.

COMBINED TRANSACTIONS

The Portfolio may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions, structured notes and any combination of futures, options, currency
and interest rate transactions (component transactions), instead of a single
Strategic Transaction, as part of a single or combined strategy when, in the
opinion of the Adviser, it is in the best interests of the Portfolio to do so. A
combined transaction will usually contain elements of risk that are present in
each of its component transactions. Although combined transactions are normally
entered into based on the Adviser's judgment that the combined strategies will
reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead increase such
risks or hinder achievement of the portfolio management objective.

B-12

<PAGE>

SWAPS, CAPS, FLOORS AND COLLARS

Among the Strategic Transactions into which the Portfolio may enter are
interest rate, currency and index swaps and the purchase or sale of related
caps, floors and collars. 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, as a duration management technique or
protecting against an increase in the price of securities the Portfolio
anticipates purchasing at a later date. Swaps, caps, floors and collars may also
be used to enhance potential gain in circumstances where hedging is not involved
although, as described above, the Portfolio will attempt to limit its net loss
exposure resulting from swaps, caps, floors and collars and other Strategic
Transactions entered into for such purposes to not more than 3% of the
Portfolio's net assets at any one time. The Portfolio will not sell interest
rate caps or floors where it does not own securities or other instruments
providing the income stream the Portfolio may be obligated to pay. 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. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them, and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain rate of return within a predetermined range of
interest rates or values.

The Portfolio will usually enter into swaps on a net basis, i.e., the
two payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Portfolio receiving or paying, as
the case may be, only the net amount of the two payments. The Portfolio will not
enter into any swap, cap, floor or collar transaction unless, at the time of
entering into such transaction, the unsecured long-term debt of the
Counterparty, combined with any credit enhancements, is rated at least A by S&P
or Moody's or has an equivalent rating from an NRSRO or is determined to be of
equivalent credit quality by the Adviser. If there is a default by the
Counterparty, the Portfolio may have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid. Caps,

B-13

<PAGE>

floors and collars are more recent innovations for which standardized
documentation has not yet been fully developed. Swaps, caps, floors and collars
are considered illiquid for purposes of the Portfolio's policy regarding
illiquid securities, unless it is determined, based upon continuing review of
the trading markets for the specific security, that such security is liquid. The
Board of Trustees of the Portfolio Trust has adopted guidelines and delegated to
the Adviser the daily function of determining and monitoring the liquidity of
swaps, caps, floors and collars. The Portfolio Trust's Board of Trustees,
however, retains oversight focusing on factors such as valuation, liquidity and
availability of information and is ultimately responsible for such
determinations. The Staff of the SEC currently takes the position that swaps,
caps, floors and collars are illiquid, and are subject to the Portfolio's
limitation on investing in illiquid securities.

EURODOLLAR INSTRUMENTS

The Portfolio may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. The
Portfolio might use Eurodollar futures contracts and options thereon to hedge
against changes in LIBOR, to which many interest rate swaps and fixed income
instruments are linked.

RISKS OF STRATEGIC TRANSACTIONS OUTSIDE THE UNITED STATES

When conducted outside the United States, Strategic Transactions may
not be regulated as rigorously as in the United States, may not involve a
clearing mechanism and related guarantees, and are subject to the risk of
governmental actions affecting trading in, or the prices of, foreign securities,
currencies and other instruments. The value of such positions also could be
adversely affected by: (i) lesser availability than in the United States of data
on which to make trading decisions, (ii) delays in the Portfolio's ability to
act upon economic events occurring in foreign markets during non-business hours
in the United States, (iii) the imposition of different exercise and settlement
terms and procedures and margin requirements than in the United States, (iv)
lower trading volume and liquidity, and (v) other complex foreign political,
legal and economic factors. At the same time, Strategic Transactions may offer
advantages such as trading in instruments that are not currently traded in the
United States or arbitrage possibilities not available in the United States.

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<PAGE>

USE OF SEGREGATED ACCOUNTS

The Portfolio will hold securities or other instruments whose values
are expected to offset its obligations under the Strategic Transactions. The
Portfolio will cover Strategic Transactions as required by interpretive
positions of the SEC. The Portfolio will not enter into Strategic Transactions
that expose the Portfolio to an obligation to another party unless it owns
either (i) an offsetting position in securities or other options, futures
contracts or other instruments or (ii) cash, receivables or liquid securities
with a value sufficient to cover its potential obligations. The Portfolio may
have to comply with any applicable regulatory requirements for Strategic
Transactions, and if required, will set aside cash and other assets in a
segregated account with its custodian bank in the amount prescribed. In that
case, the Portfolio's custodian would maintain the value of such segregated
account equal to the prescribed amount by adding or removing additional cash or
other assets to account for fluctuations in the value of the account or the
Portfolio's obligations on the underlying Strategic Transactions. Assets held in
a segregated account would not be sold while the Strategic Transaction is
outstanding, unless they are replaced with similar assets. As a result, there is
a possibility that segregation of a large percentage of the Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet redemption
requests or other current obligations.

SHORT-TERM DEBT SECURITIES

For defensive or temporary purposes, the Portfolio may invest in
investment grade money market instruments and short-term interest-bearing
securities. Such securities may be used to invest uncommitted cash balances, to
maintain liquidity to meet shareholder redemptions, or to take a defensive
position against potential stock market declines. The Portfolio's investments
will include U.S. Government obligations and obligations issued or guaranteed by
any U.S. Government agencies or instrumentalities, instruments of U.S. and
foreign banks (including negotiable certificates of deposit, non-negotiable
fixed time deposits and bankers' acceptances), repurchase agreements, prime
commercial paper of U.S. and foreign companies, and debt securities that make
periodic interest payments at variable or floating rates.

Yields on debt securities depend on a variety of factors, such as
general conditions in the money and bond markets, and the size, maturity and
rating of a particular issue. Debt securities with longer maturities tend to
produce higher yields and are generally subject to greater potential capital
appreciation and depreciation. The market prices of debt securities usually vary
depending upon available yields, rising when interest rates decline and
declining when interest rates rise.

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<PAGE>

PORTFOLIO TURNOVER

The Portfolio places no restrictions on portfolio turnover and it may
sell any portfolio security without regard to the period of time it has been
held, except as may be necessary to enable certain of the Portfolio's investors
to maintain their status as a regulated investment company under the Internal
Revenue Code. The Portfolio may therefore generally change its portfolio
investments at any time in accordance with the Adviser's appraisal of factors
affecting any particular issuer or market, or the economy in general.

INVESTMENT RESTRICTIONS

The Portfolio has adopted the following fundamental policies. The
Portfolio's fundamental policies cannot be changed unless the change is approved
by the "vote of the outstanding voting securities" of the Portfolio which phrase
as used herein means the lesser of (i) 67% or more of the voting securities of
the Portfolio present at a meeting, if the holders of more than 50% of the
outstanding voting securities of the Portfolio are present or represented by
proxy, or (ii) more than 50% of the outstanding voting securities of the
Portfolio.

As a matter of fundamental policy, the Portfolio may not:

1. Invest more than 25% of the current value of its total assets in any
single industry, provided that this restriction shall not apply to U.S.
Government securities or mortgage-backed securities issued or
guaranteed as to principal or interest by the U.S. Government, its
agencies or instrumentalities.

2. Issue senior securities. For purposes of this restriction, borrowing
money in accordance with paragraph 3 below, making loans in accordance
with paragraph 8 below, the issuance of shares of beneficial interest
in multiple classes or series, the deferral of trustees' fees, the
purchase or sale of options, futures contracts, forward commitments and
repurchase agreements entered into in accordance with the Portfolio's
investment policies or within the meaning of paragraph 6 below, are not
deemed to be senior securities.

3. Borrow money, except in amounts not to exceed 33 1/3% of the value of
the Portfolio's total assets (including the amount borrowed) taken at
market value (i) from banks for temporary or short-term purposes or for
the clearance of transactions, (ii) in connection with the redemption
of Portfolio interests or to finance failed settlements of portfolio
trades without immediately liquidating portfolio securities or other
assets; (iii) in order to fulfill commitments or plans to purchase
additional securities pending the anticipated sale of other portfolio
securities or assets; and (iv) the Portfolio may enter into reverse
repurchase agreements and forward roll transactions. For purposes of

B-16

<PAGE>

this investment restriction, investments in short sales, futures
contracts, options on futures contracts, securities or indices and
forward commitments shall not constitute borrowing.

4. Underwrite the securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the
Portfolio may be deemed to be an underwriter under the Securities Act
of 1933.

5. Purchase or sell real estate except that the Portfolio may (i) acquire
or lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interests therein, (iii) invest
in securities that are secured by real estate or interests therein,
(iv) purchase and sell mortgage-related securities and (v) hold and
sell real estate acquired by the Portfolio as a result of the ownership
of securities.

6. Purchase securities on margin (except that the Portfolio may obtain
such short-term credits as may be necessary for the clearance of
purchases and sales of securities).

7. Purchase or sell commodities or commodity contracts, except the
Portfolio may purchase and sell options on securities, securities
indices and currency, futures contracts on securities, securities
indices and currency and options on such futures, forward foreign
currency exchange contracts, forward commitments, securities index put
or call warrants and repurchase agreements entered into in accordance
with the Portfolio's investment policies.

8. Make loans, except that the Portfolio (1) may lend portfolio securities
in accordance with the Portfolio's investment policies up to 33 1/3% of
the Portfolio's total assets taken at market value, (2) enter into
repurchase agreements, and (3) purchase all or a portion of an issue of
debt securities, bank loan participation interests, bank certificates
of deposit, bankers' acceptances, debentures or other securities,
whether or not the purchase is made upon the original issuance of the
securities.

9. With respect to 75% of its total assets, purchase securities of an
issuer (other than the U.S. Government, its agencies, instrumentalities
or authorities or repurchase agreements collateralized by U.S.
Government securities and other investment companies), if: (a) such
purchase would cause more than 5% of the Portfolio's total assets taken
at market value to be invested in the securities of such issuer; or (b)
such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the
Portfolio.

For purposes of fundamental investment restriction (1) regarding
industry concentration, the Adviser generally classifies issuers by industry in
accordance with

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classifications set forth in the Directory of Companies Filing Annual Reports
With The Securities and Exchange Commission. In the absence of such
classification or if the Adviser determines in good faith based on its own
information that the economic characteristics affecting a particular issuer make
it more appropriately considered to be engaged in a different industry, the
Adviser may classify an issuer according to its own sources. For instance,
personal credit finance companies and business credit finance companies are
deemed to be separate industries and wholly-owned finance companies are
considered to be in the industry of their parents if their activities are
primarily related to financing the activities of their parents.

The following restrictions are not fundamental policies and may be
changed by the Trustees of the Portfolio Trust without investor approval, in
accordance with applicable laws, regulations or regulatory policy.

The Portfolio may not:

(A) Make short sales of securities unless (i) either (a) after effect
is given to any such short sale, the total market value of all securities sold
short would not exceed 5% of the value of the Portfolio's net assets or (b) at
all times during which a short position is open it owns an equal amount of such
securities, or by virtue of ownership of convertible or exchangeable securities
it has the right to obtain through the conversion or exchange of such other
securities an amount equal to the securities sold short, (ii) the securities
sold short are listed on a national securities exchange and (iii) the value of
the securities of any one issuer in which the Portfolio is short may not exceed
2% of the Portfolio's net assets or 2% of the securities of any class of any
issuer.

(B) Invest in companies for the purpose of exercising control or
management.

(C) Purchase a security of other investment companies, except when the
purchase is part of a plan of merger, consolidation, reorganization or
acquisition or except by purchase in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than customary
brokers' commissions and then only if, as a result, (i) not more than 10% of the
Portfolio's assets would be invested in securities of other investment
companies, (ii) not more than 3% of the total outstanding voting securities of
any one such investment company would be held by the Portfolio and (iii) not
more than 5% of the Portfolio's assets would be invested in any one such
investment company.

(D) Invest in interests in oil, gas or other exploration or development
programs or mineral leases; however, this policy will not prohibit the
acquisition of securities of companies engaged in the production or transmission
of oil, gas, or other minerals.

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<PAGE>

(E) Invest more than 5% of the assets of the Portfolio in the
securities of any issuers which, together with their corporate parents, have
records of less than three years' continuous operation, including the operation
of any predecessor, excluding obligations issued or guaranteed by the U.S.
Government or its agencies and securities fully collateralized by such
securities and excluding securities which have been rated investment grade by at
least one nationally recognized statistical rating organization.

(F) Invest in restricted securities or securities which are illiquid
if, as a result, more than 15% of its net assets would consist of such
securities, including repurchase agreements maturing in more than seven days,
securities that are not readily marketable, restricted securities not eligible
for resale pursuant to Rule 144A under the 1933 Act, purchased OTC options,
certain assets used to cover written OTC options, and privately issued stripped
mortgage-backed securities.

(G) Invest in securities of any company if any officer or director
(Trustee) of the Portfolio Trust or of the Adviser owns more than .5% of the
outstanding securities of such company and such officers and directors
(Trustees) own in the aggregate more than 5% of the securities of such company.

(H) Purchase securities while outstanding bank borrowings exceed 5% of
the Portfolio's net assets.

(I) Invest in real estate limited partnership interests, other than
real estate investment trusts organized as limited partnerships.

(J) Purchase or sell (write) options, except pursuant to the
limitations described above in restriction no. 7.

(K) Purchase warrants of any issuer, if, as a result of such purchase,
more than 2% of the value of the Portfolio's total assets would be invested in
warrants which are not listed on an exchange or more than 5% of the value of the
total assets of the Portfolio would be invested in warrants generally, whether
or not so listed. For these purposes, warrants are to be valued at the lesser of
cost or market, but warrants acquired by the Portfolio in units with or attached
to debt securities shall be deemed to be without value.

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ITEM 14. MANAGEMENT OF THE PORTFOLIO.

TRUSTEES AND OFFICERS OF THE PORTFOLIO TRUST

The Trustees and executive officers of the Portfolio Trust are listed
below. All executive officers of the Portfolio Trust are affiliates of Standish,
Ayer & Wood, Inc., the Portfolio's investment adviser.

Name, Address and Date of Birth Position Held With Trust Principal Occupation During Past 5 Years
- ---------------------------------------------- ------------------------------------- ----------------------------------------------
<S> <C> <C>
*D. Barr Clayson, 7/29/35 Vice President and Trustee Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.;
One Financial Center Chairman and Director,
Boston, MA 02111 Standish International
Management Company, L.P.

Samuel C. Fleming, 9/30/40 Trustee Chairman of the Board
c/o Decision Resources, Inc. and Chief Executive Officer,
1100 Winter Street Decision Resources, Inc.;
Waltham, MA 02154 through 1989, Senior V.P.
Arthur D. Little

Benjamin M. Friedman, 8/5/44 Trustee William Joseph Maier
c/o Harvard University Professor of Political Economy,
Cambridge, MA 02138 Harvard University

John H. Hewitt, 4/11/35 Trustee Trustee, The Peabody Foundation; Trustee,
P.O. Box 307 Visiting Nurse Alliance of Vermont
So. Woodstock, VT 05071 and New Hampshire

*Edward H. Ladd, 1/3/38 Trustee and Vice President Chairman of the Board
c/o Standish, Ayer & Wood, Inc. and Managing Director,
One Financial Center Standish, Ayer & Wood, Inc. since 1990;
Boston, MA 02111 formerly President of Standish, Ayer &
Wood, Inc.; Director of
Standish International Management
Company, L.P.

Caleb Loring III, 11/14/43 Trustee Trustee, Essex Street Associates
c/o Essex Street Associates (family investment trust office);
P.0. Box 5600 Director, Holyoke Mutual Insurance
Beverly Farms, MA 01915 Company

*Richard S. Wood, 5/21/54 President and Trustee Vice President, Secretary,
c/o Standish, Ayer & Wood, Inc. and Managing Director,
One Financial Center Standish, Ayer & Wood, Inc.;
Boston, MA 02111 Executive Vice President and Director,
Standish International Management
Company, L.P.

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<PAGE>

Name, Address and Date of Birth Position Held With Trust Principal Occupation During Past 5 Years
- ---------------------------------------------- ------------------------------------- ----------------------------------------------
James E. Hollis III, 11/21/48 Executive Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Treasurer and Secretary Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Beverly E. Banfield, 7/6/56 Vice President Vice President and Compliance Officer,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.;
One Financial Center Assistant Vice President and Compliance
Boston, MA 02111 Officer, Freedom Capital Management
Corp. (1989-1992)
Lavinia B. Chase, 6/4/46 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Anne P. Herrmann, 1/26/56 Vice President Mutual Fund Administrator,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Denise B. Kneeland, 8/19/51 Vice President Senior Operations, Manager,
c/o Standish, Ayer &Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center since December 1995; formerly
Boston, MA 02111 Vice President, Scudder, Stevens and Clark

</TABLE>

*Indicates that Trustee is an interested person of the Portfolio Trust for
purposes of the 1940 Act.

COMPENSATION OF TRUSTEES AND OFFICERS

The Portfolio Trust pays no compensation to the Trustees of the
Portfolio Trust affiliated with the Adviser or to the Portfolio Trust's
officers. None of the Trustees or officers have engaged in any financial
transactions with the Portfolio Trust or the Adviser.

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<PAGE>

The following table estimates the amount of compensation to be paid to
the Portfolio Trust's Trustees for the Portfolio's initial fiscal year ending
December 31, 1996. In addition, each Trustee is reimbursed for out-of-pocket
expenses associated with attending Trustee meetings.

NAME OF TRUSTEE COMPLEX** FROM THE PORTFOLIO*
D. Barr Clayson $0 $0
Samuel C. Fleming 41,750 .49
Benjamin M. Friedman 36,750 .43
John H. Hewitt 36,750 .43
Edward H. Ladd 0 0
Caleb Loring, III 36,750 .43
Richard S. Wood 0 0

* Estimated. The Portfolio Trust is newly organized and has not paid
Trustee's fees for a complete fiscal year.

** As of the date of this Part B, there were 19 registered investment companies
(or series thereof) in the fund complex, five of which were series of the
Portfolio Trust.
The information is provided for the last calendar year.

ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.

As of September 30, 1996, the Trustees and officers of the Portfolio
Trust as a group beneficially owned (i.e., had voting and/or investment power)
less than 1% of the then outstanding interests of the Portfolio.

Registered investment companies investing in the Portfolio have
informed the Portfolio that whenever such an investor is requested to vote on
matters pertaining to the fundamental policies of the Portfolio, the investment
company will hold a meeting of shareholders and will cast its votes as
instructed by the company's shareholders.

ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.

INVESTMENT ADVISER OF THE PORTFOLIO TRUST

Standish serves as the Adviser to the Portfolio pursuant to a written
investment advisory agreement with the Portfolio Trust. The Adviser is a
Massachusetts corporation organized in 1933 and is registered under the
Investment Advisers Act of 1940.

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<PAGE>

The following, constituting all of the Directors and all of the
shareholders of the Adviser, are the Adviser's controlling persons: Caleb F.
Aldrich, Nicholas S. Battelle, Walter M. Cabot, Sr., David H. Cameron, Karen K.
Chandor, D. Barr Clayson, Richard C. Doll, Dolores S. Driscoll, Mark A.
Flaherty, Maria D. Furman, James E. Hollis III, Raymond J. Kubiak, Edward H.
Ladd, Laurence A. Manchester, George W. Noyes, Arthur H. Parker, Howard B.
Rubin, Austin C. Smith, David C. Stuehr, James J. Sweeney, Ralph S. Tate, and
Richard S. Wood.

Certain services provided by the Adviser under the investment advisory
agreement are described in Part A. These services are provided without
reimbursement by the Portfolio for any costs incurred. Under the investment
advisory agreement, the Adviser is paid a fee based upon a percentage of the
Portfolio's average daily net asset value computed as described in Part A. The
fee is accrued daily and paid monthly.

Pursuant to the investment advisory agreement, the Portfolio bears
expenses of its operations other than those incurred by the Adviser pursuant to
the investment advisory agreement. Among other expenses, the Portfolio will pay
for legal and auditing services, taxes and governmental fees, certain insurance
premiums, costs of notices and reports to interest-holders, typesetting and
printing of registration and financial statements for regulatory purposes and
for distribution to existing and prospective interest-holders, bookkeeping and
interest pricing expenses, fees and disbursements of the Portfolio Trust's
custodian, administrator, transfer and dividend disbursing agent or registrar,
or interest and other like expenses properly payable by the Portfolio Trust.

Unless terminated as provided below, the investment advisory agreement
continues in full force and effect for an initial period of two years from the
date of its execution and for successive periods of one year thereafter, but
only so long as each such continuance is approved annually (i) by either the
Trustees of the Portfolio Trust or by the "vote of a majority of the outstanding
voting securities" of the Portfolio, and, in either event (ii) by vote of a
majority of the Trustees of the Portfolio Trust who are not parties to the
investment advisory agreement or "interested persons" (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The investment advisory agreement may be terminated at
any time without the payment of any penalty by vote of the Trustees of the
Portfolio Trust or by the "vote of a majority of the outstanding voting
securities" of the Portfolio or by the Adviser, on sixty days' written notice to
the other parties. The investment advisory agreement terminates in the event of
its assignment as defined in the 1940 Act.

In an attempt to avoid any potential conflict with portfolio
transactions for the Portfolio, the Adviser and the Portfolio Trust have each
adopted extensive restrictions on personal securities trading by personnel of
the Adviser and its affiliates. These

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<PAGE>

restrictions include: pre-clearance of all personal securities transactions and
a prohibition of purchasing initial public offerings of securities. These
restrictions are a continuation of the basic principle that the interests of the
Portfolio and its investors, come before those of the Adviser, its affiliates
and their employees.

ADMINISTRATOR OF THE PORTFOLIO

IBT Trust Company (Cayman) Ltd., P.O. Box 501, Grand Cayman, Cayman
Islands, BWI, serves as the administrator to the Portfolio (the "Portfolio
Administrator") pursuant to a written administration agreement with the
Portfolio Trust on behalf of the Portfolio. The Portfolio Administrator provides
the Portfolio Trust with office space for managing its affairs, and with certain
clerical services and facilities. For its services to the Portfolio Trust, the
Portfolio Administrator currently receives a fee from the Portfolio in the
amount of $7,500 annually. The Portfolio's administration agreement can be
terminated by either party on not more than sixty days' written notice.

CUSTODIAN

Investors Bank & Trust Company, 89 South, Boston, Massachusetts 02111,
serves as custodian of all cash and securities of the Portfolio.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand, P.O. Box 219, Grand Cayman, Cayman Islands, BWI,
serves as independent accountants for the Portfolio Trust and will audit the
Portfolio's financial statements annually.

ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.

The Adviser is responsible for placing the Portfolio's portfolio
transactions and will do so in a manner deemed fair and reasonable to the
Portfolio and not according to any formula. The primary consideration in all
portfolio transactions will be prompt execution of orders in an efficient manner
at the most favorable price. In selecting broker-dealers and in negotiating
commissions, the Adviser will consider the firm's reliability, the quality of
its execution services on a continuing basis and its financial condition. In
addition, if the Adviser determines in good faith that the amount of commissions
charged by a broker is reasonable in relation to the value of the brokerage and
research services provided by such broker, the Portfolio may pay commissions to
such broker in an amount greater than the amount another firm may charge.
Research services may include (i) furnishing advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities, (ii)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends,

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<PAGE>

portfolio strategy, and the performance of accounts, and (iii) effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research services furnished by firms through which
the Portfolio effects its securities transactions may be used by the Adviser in
servicing other accounts; not all of these services may be used by the Adviser
in connection with the Portfolio. The investment advisory fee paid by the
Portfolio under the advisory agreement will not be reduced as a result of the
Adviser's receipt of research services.

The Adviser also places portfolio transactions for other advisory
accounts. The Adviser will seek to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities for the
Portfolio and another advisory account. In some cases, this procedure could have
an adverse effect on the price or the amount of securities available to the
Portfolio. In making such allocations, the main factors considered by the
Adviser will be the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held, and
opinions of the persons responsible for recommending the investment.

ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio is a series of Standish, Ayer & Wood Master Portfolio, an
open-end management investment company registered under the 1940 Act. The
Portfolio Trust was organized as a master trust fund under the laws of the State
of New York on January 18, 1996. Interests in the Portfolio have no preemptive
or conversion rights, and are fully paid and non-assessable, except as described
in Part A. The Portfolio normally will not hold meetings of holders of such
interests except as required under the 1940 Act or its declaration of trust. The
Portfolio would be required to hold a meeting of holders in the event that at
any time less than a majority of its Trustees holding office had been elected by
holders. The Trustees of the Portfolio continue to hold office until their
successors are elected and have qualified. Holders holding a specified
percentage of interests in the Portfolio may call a meeting of holders in the
Portfolio for the purpose of removing any Trustee. A Trustee of the Portfolio
may be removed upon a majority vote of the interests held by holders in the
Portfolio qualified to vote in the election. The 1940 Act requires the Portfolio
to assist its holders in calling such a meeting. Upon liquidation of the
Portfolio, holders in the Portfolio would be entitled to share pro rata in the
net assets of the Portfolio available for distribution to holders. Each holder
in the Portfolio is entitled to a vote in proportion to its percentage interest
in the Portfolio.

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<PAGE>

ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING
OFFERED.

Beneficial interests in the Portfolio are issued solely in transactions
that are exempt from registration under the Securities Act of 1933. See "General
Description of Registrant," "Purchase of Securities Being Offered" and
"Redemption or Repurchase" in Part A.

The value of the Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined each day on which the New York Stock Exchange is open (a
"Business Day"). Currently the New York Stock Exchange is not open on weekends,
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The value of the Portfolio's net
assets is determined as of the close of regular trading on the New York Stock
Exchange (currently 4:00 p.m., New York City time). Each investor in the
Portfolio may add to or reduce its investment in the Portfolio on each Business
Day. As of 4:00 p.m. (Eastern time) on each Business Day, the value of each
investor's interest in the Portfolio will be determined by multiplying the net
asset value of the Portfolio by the percentage representing that investor's
share of the aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of 4:00 p.m. on such day plus or minus, as the case may be, the amount of net
additions to or reductions in the investor's investment in the Portfolio
effected on such day, and (ii) the denominator of which is the aggregate net
asset value of the Portfolio as of 4:00 p.m. on such day plus or minus, as the
case may be, the amount of the net additions to or reductions in the aggregate
investments in the Portfolio by all investors in the Portfolio. The percentage
so determined will then be applied to determine the value of the investor's
interest in the Portfolio as of 4:00 p.m. on the following Business Day.

Portfolio securities are valued at the last sale prices, on the
valuation day, on the exchange or national securities market on which they are
primarily traded. Securities not listed on an exchange or national securities
market, or securities for which there were no reported transactions, are valued
at the last quoted bid prices. Securities for which quotations are not readily
available and all other assets are valued at fair value as determined by the
Adviser in accordance with procedures approved by the Trustees.

Money market instruments with less than sixty days remaining to
maturity when acquired by the Portfolio are valued on an amortized cost basis.
If the Portfolio acquires a money market instrument with more than sixty days
remaining to its maturity, it is valued at current market value until the
sixtieth day prior to maturity

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<PAGE>

and will then be valued at amortized cost based upon the value on such date
unless the Trustees determine during such sixty-day period that amortized cost
does not represent fair value.

The Portfolio intends to pay redemption proceeds in cash for all
interests redeemed but, under certain conditions, the Portfolio may make payment
wholly or partly in portfolio securities. The Portfolio will select such
securities in a manner it considers equitable, regardless of which securities
were deposited by the investor or the composition of the Portfolio's portfolio
at the time of the redemption in-kind. Portfolio securities paid upon withdrawal
or reduction of an interest-holder's investment in the Portfolio will be valued
at their then current market value. The Portfolio Trust has elected to be
governed by the provisions of Rule 18f-1 under the 1940 Act which limits the
Portfolio's obligation to make cash redemption payments to any investor during
any 90-day period to the lesser of $250,000 or 1% of the Portfolio's net asset
value at the beginning of such period. An investor may incur brokerage costs in
converting portfolio securities received upon redemption to cash. The Portfolio
intends that it will not redeem an investor's interest in-kind except in
circumstances in which the particular investor is permitted to redeem in-kind or
in the event that the particular investor completely withdraws its interest in
the Portfolio.

ITEM 20. TAX STATUS.

The Portfolio will be treated as a partnership for federal income tax
purposes. As such, the Portfolio is not subject to federal income taxation.
Instead, each investor in the Portfolio that is subject to federal income
taxation must take into account, in computing its federal income tax liability,
if any, its share of the Portfolio's income, gains, losses, deductions, credits
and tax preference items, without regard to whether it has received any cash
distributions from the Portfolio. Because certain investors in the Portfolio
have qualified and elected or intend to qualify and elect to be treated as a
"regulated investment company" ("RIC") under Subchapter M of the Code, the
Portfolio normally must satisfy the applicable source of income and
diversification requirements in order for these investors to satisfy them. The
Portfolio will allocate 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.
The Portfolio will make allocations to an investor that qualifies as a RIC in
accordance with the Code and applicable regulations and will make moneys
available for withdrawal at appropriate times and in sufficient amounts to
enable the investor to satisfy the tax distribution requirements that apply to
the investor and that must be satisfied in order to avoid Federal income and/or
excise tax on the investor. For purposes of applying the requirements of the
Code regarding qualification as a RIC, the investor will be deemed (i) to own
its proportionate share of each of the assets of the Portfolio and (ii) to be
entitled to the gross income of the Portfolio attributable to such share.

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<PAGE>

Limitations imposed by the Code on regulated investment companies may
restrict the Portfolio's ability to enter into futures, options or currency
forward transactions.

Certain options, futures or currency forward transactions undertaken by
the Portfolio may cause the Portfolio to recognize gains or losses from marking
to market even though the Portfolio's positions have not been sold or terminated
and affect the character as long-term or short-term (or, in the case of certain
options, futures or forward contracts, as ordinary income or loss) and timing of
some capital gains and losses realized by the Portfolio and allocable to an
investor in the Portfolio. Any net mark to market gains may also have to be
distributed by an investor that is a RIC to satisfy the distribution
requirements referred to above even though no corresponding cash amounts may
concurrently be received, possibly requiring the disposition by the Portfolio of
portfolio securities or borrowing to obtain the necessary cash. Also, certain of
the Portfolio's losses on the Portfolio's transactions involving options,
futures or forward contracts and/or offsetting Portfolio positions may be
deferred rather than being taken into account currently in calculating the
Portfolio's taxable income or gain. Certain of the applicable tax rules may be
modified if the Portfolio is eligible and chooses to make one or more of certain
tax elections that may be available. Because an investor's income, gains and
losses consist primarily of its share of the income, gains and losses of the
Portfolio, which are directly affected by the provisions described in this
paragraph, these transactions may affect the amount, timing and character of the
distributions to shareholders by an investor that qualifies as a RIC. The
Portfolio will take into account the special tax rules (including consideration
of available elections) applicable to options, futures or forward contracts in
order to minimize any potential adverse tax consequences.

The Federal income tax rules applicable to interest rate or currency
swaps, caps, floors and collars are unclear in certain respects, and the
Portfolio may be required to account for these instruments under tax rules in a
manner that, under certain circumstances, may limit its transactions in these
instruments.

Foreign exchange gains and losses realized by the Portfolio in
connection with certain transactions involving foreign currency-denominated debt
securities, if any, certain foreign currency futures and options, foreign
currency forward contracts, foreign currencies, or payables or receivables
denominated in a foreign currency are subject to Section 988 of the Code, which
generally causes such gains and losses to be treated as ordinary income and
losses and, because certain RICs are expected to invest in the Portfolio, may
affect the amount, timing and character of the distributions to shareholders of
an investor that is a RIC. In some cases, elections may be available that would
alter this treatment. Any such transactions that are not directly related to the
Portfolio's investment in stock or securities, possibly including speculative
currency positions or currency derivatives not used for hedging purposes, may
increase the amount of gain it is deemed to recognize from the sale of certain

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<PAGE>

investments held for less than three months. The share of such gain of an
investor qualifying as a RIC (plus any such gain the investor may realize from
other sources) is limited under the Code to less than 30% of such investor's
annual gross income, and such transactions could under future Treasury
regulations produce income not among the types of "qualifying income" from which
the investor must derive at least 90% of its annual gross income.

The Portfolio may be subject to withholding and other taxes imposed by
foreign countries with respect to its investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. The shareholders of an investor that qualifies as a RIC would be entitled
to claim U.S. foreign tax credits or deductions with respect to such taxes,
subject to certain provisions and limitations contained in the Code, only if
more than 50% of the value of the investor's total assets at the close of any
taxable year were to consist of stock or securities of foreign corporations and
the investor were to file an election with the Internal Revenue Service. The
investments of the Portfolio are such that investors that are RICs generally
will not meet this 50% requirement.

If the Portfolio acquires stock in certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), an investor could be subject to Federal income tax and
additional interest charges on its allocable portion of "excess distributions"
received from such companies or gain from the sale of stock in such companies,
even if all income or gain actually allocated to the investor is timely
distributed to its shareholders. An investor that is a RIC would not be able to
pass through to its shareholders any credit or deduction for such a tax. Certain
elections may, if available, ameliorate these adverse tax consequences, but any
such election would require the investor to recognize taxable income or gain
without the concurrent receipt of cash. The Portfolio may limit and/or manage
its stock holdings, if any, in passive foreign investment companies to minimize
the investor's tax liability or maximize its return from these investments.

Distributions by an investor in the Portfolio that qualifies as a RIC
to its corporate shareholders would potentially qualify in their hands for the
corporate dividends received deduction, subject to certain holding period
requirements and limitations on debt financing under the Code, only to the
extent the RIC investor was properly allocated dividend income from the
Portfolio's stock investments in U.S. domestic corporations. A portion of a RIC
investor's distributions, attributable to its distributive share of the
dividends the Portfolio receives with respect to such stocks, will generally
qualify as dividends in the hands of the RIC for purposes of the RIC's being
able to make distributions that may qualify for the dividends received
deduction.

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<PAGE>

Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in the Portfolio is effectively connected will be subject to
U.S. Federal income tax treatment that is different from that described above.
These investors may be subject to nonresident alien withholding tax at the rate
of 30% (or a lower rate under an applicable treaty) on certain amounts treated
as ordinary income allocated to them by the Portfolio, except to the extent a
withholding tax exemption may be available. Such an exemption will not, however,
be available for dividend income and certain other income. Non-U.S. investors
should consult their tax advisers regarding such treatment and the application
of foreign taxes to an investment in the Portfolio.

There are certain tax issues that will be relevant to only certain of
the investors, such as investors who contribute assets rather than cash to the
Portfolio. It is intended that such contributions of assets will not be taxable,
provided certain requirements are met. Such investors are advised to consult
their own tax advisors as to the tax consequences of an investment in the
Portfolio.

ITEM 21. UNDERWRITERS.

Not applicable.

ITEM 22. CALCULATION OF PERFORMANCE DATA.

Not applicable.

ITEM 23. FINANCIAL STATEMENTS.

Investors will receive the Portfolio's unaudited semi-annual reports
and annual reports audited by the Portfolio's independent accountants.

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<PAGE>

STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAPITALIZATION EQUITY PORTFOLIO II

PART C

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) FINANCIAL STATEMENTS

Not applicable.

(b) EXHIBITS

1(a). Declaration of Trust of the Registrant.**

1(b) Establishment and Designation of Series for Standish Small
Capitalization Equity Portfolio II.*

2. By-Laws of the Registrant.**

5(a). Form of Investment Advisory Agreement between the Registrant,
with respect to Standish Fixed Income Portfolio, and Standish,
Ayer & Wood, Inc. ("Standish").**

5(b). Form of Investment Advisory Agreement between the Registrant,
with respect to Standish Equity Portfolio, and Standish.**

5(c). Form of Investment Advisory Agreement between the Registrant,
with respect to Standish Small Capitalization Equity
Portfolio, and Standish.**

5(d). Form of Investment Advisory Agreement between the Registrant,
with respect to Global Fixed Income Portfolio, and Standish
International Management Company, L.P.**

5(e). Investment Advisory Agreement between the Registrant with
respect to Standish Small Capitalization Equity Portfolio II
and Standish.*

- ------------------------
* Filed herewith
** Filed as exhibit to Portfolio Trust's Registration Statement on Form
N-1A (File No. 811-07603) on April 25, 1996 and incorporated by reference
herein.

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<PAGE>

8(a). Master Custody Agreement between the Registrant and Investors
Bank & Trust Company.**

8(b). Amendment dated October 5, 1996 to Master Custody Agreement.*

9(a). Administration Agreement between the Registrant and IBT Trust
Company (Cayman) Ltd.**

9(b). Amendment dated October 5, 1996 to the Administration
Agreement.*

19(a). Power of Attorney (Richard S. Wood).*

19(b). Power of Attorney (Samuel C. Fleming, Benjamin M. Friedman,
John H. Hewitt, Edward H. Ladd, Caleb Loring III, Richard S.
Wood and D. Barr Clayson)..*

19(c) Power of Attorney (Anne P. Herrmann).*

- ------------------------
* Filed herewith
** Filed as exhibit to Portfolio Trust's Registration Statement on Form
N-1A (File No. 811-07603) on April 25, 1996 and incorporated by reference
herein.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.

Not applicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

TITLE OF CLASS NUMBER OF RECORD HOLDERS
Series of Beneficial Interests (as of September 30, 1996)
Standish Fixed Income Portfolio 465
Standish Equity Portfolio 142
Standish Small Capitalization Equity Portfolio 423
Standish Global Fixed Income Portfolio 49

- --------
** Filed as an exhibit to the Portfolio Trust's Registration
Statement on Form N-1A (File No. 811-07603) on April 25,1996 and incorporated by
reference herein.

ITEM 27. INDEMNIFICATION.

Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an Exhibit herewith.

Under the Registrant's Declaration of Trust, any past or present
Trustee or officer of the Registrant is indemnified to the fullest extent
permitted by law against liability and all expenses reasonably incurred by him
in connection with any action, suit or proceeding to which he may be a party or
is otherwise involved by reason of his being or having been a Trustee or officer
of the Registrant. The Declaration of Trust of the Registrant does not authorize
indemnification where it is determined, in the manner specified in the
Declaration, that such Trustee or officer has not acted in good faith in the
reasonable belief that his actions were in the best interest of the Registrant.
Moreover, the Declaration does not authorize indemnification where such Trustee
or officer is liable to the Registrant or its investors by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his or her
duties.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by any such Trustee, officer or controlling person
against the Registrant in connection with the securities being registered, and
the Commission is still of the same opinion, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

STANDISH, AYER & WOOD, INC. AND STANDISH INTERNATIONAL
MANAGEMENT COMPANY, L.P.:

The business and other connections of the officers and Directors of
Standish, the investment adviser to all series of the Registrant other than
Standish Global Fixed Income Portfolio, are listed on the Form ADV of Standish
as currently on file with the Commission (File No. 801-584). The business and
other connections of the officers and partners of Standish International
Management Company, L.P. ("Standish International"), the investment adviser to
Standish Global Fixed Income Portfolio, are

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listed on the Form ADV of Standish International as currently on file with the
Commission (File No. 801-639338). The following sections of each such Form ADV
are incorporated herein by reference:

(a) Items 1 and 2 of Part 2;

(b) Section IV, Business Background, of each Schedule D.

ITEM 29. PRINCIPAL UNDERWRITERS.

Not applicable.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

The Registrant maintains the records required by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 inclusive thereunder at
its registered office, located in care of IBT Trust Company (Cayman) Ltd., The
Bank of Nova Scotia Building, George Town, Grand Cayman, Cayman Islands, British
West Indies. Certain records, including records relating to the Registrant's
shareholders and the physical possession of its securities, may be maintained
pursuant to Rule 31a-3 at the main offices of the Registrant's custodian.

ITEM 31. MANAGEMENT SERVICES.

Not applicable.

ITEM 32. UNDERTAKINGS.

Not applicable.

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SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment No. 1 to the Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereto
duly authorized, in Tuckerstown, Bermuda on the 5th day of October, 1996.

STANDISH, AYER & WOOD MASTER
PORTFOLIO

By: /s/ Richard S. Wood
Name: Richard S. Wood
Title: President

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EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION

1(b) Establishment and Designation of Series for Standish Small
Capitalization Equity Portfolio II.

5(e). Investment Advisory Agreement between the Registrant with
respect to Standish Small Capitalization Equity Portfolio II
and Standish.

8(b). Amendment dated October 5, 1996 to Master Custody Agreement.

9(b). Amendment dated October 5, 1996 to the Administration
Agreement.

19(a). Power of Attorney (Richard S. Wood).*

19(b). Power of Attorney (Samuel C. Fleming, Benjamin M. Friedman,
John H. Hewitt, Edward H. Ladd, Caleb Loring III, Richard S.
Wood and D. Barr Clayson)..*

19(c) Power of Attorney (Anne P. Herrmann).*

C-5

STANDISH, AYER & WOOD MASTER PORTFOLIO

Certificate of Designation

The undersigned, being the Assistant Secretary of Standish, Ayer & Wood
Master Portfolio (the "Portfolio Trust"), a trust with non-transferable
Interests, DOES HEREBY CERTIFY that, pursuant to the authority conferred upon
the Trustees of the Portfolio Trust by Article VI, ss.6.2 of the Agreement and
Declaration of Trust, dated January 18, 1996 (the "Declaration of Trust"), and
by the affirmative vote of a Majority of the Trustees at a meeting duly called
and held on October 4 and 5, 1996, the Declaration of Trust is amended as set
forth in this Certificate of Designation.

A. There is hereby established and designated an additional
Series of the Portfolio Trust: "Standish Small Capitalization
Equity Portfolio II" (the "New Series").

B. The Interests in the New Series have the following relative
rights and preferences:

(1) ASSETS BELONGING TO NEW SERIES. All consideration
received by the Portfolio Trust for the issue or sale
of Interests in the New Series, together with all
assets in which such consideration is invested or
reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be,
shall be held by the Trustees in a separate trust for
the benefit of the Holders of Interests in the New
Series and shall irrevocably belong to the New Series
for all purposes, and shall be so recorded upon the
books of account of the Portfolio Trust. Such
consideration, assets, income, earnings, profits, and
proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment
of such proceeds, in whatever form the same may be,
are herein referred to as "assets belonging to" the
New Series. No Series shall have any right to or
interest in the assets belonging to the New Series,
and no Holder shall have any right or interest with
respect to the assets belonging to any Series in
which it does not hold an Interest.

(2) LIABILITIES BELONGING TO NEW SERIES. The assets
belonging to the New Series shall be charged with the
liabilities in respect of the New Series and all
expenses, costs, charges and reserves attributable to
the New Series. The liabilities, expenses, costs,
charges and reserves so charged to the New Series are
herein referred to as "liabilities belonging to" the
New Series. No Series shall be liable for or charged
with the liabilities belonging to the New Series, and
no Holder shall be subject to any liabilities
belonging to any Series in which it does not hold an
Interest.

(3) VOTING. On each matter submitted to a vote of the
Holders, each Holder shall be entitled to a vote
proportionate to its Interest as recorded on the
books of the Portfolio Trust. Each Series shall vote
as a separate class except as to voting for

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<PAGE>

Trustees, as otherwise required by the 1940 Act, or
if determined by the Trustees to be a matter which
affects all Series. As to any matter which does not
affect the interest of all Series, only the Holders
in the one or more affected Series shall be entitled
to vote. On each matter submitted to a vote of the
Holders, a Holder may apportion its vote with respect
to a proposal in the same proportion as its own
shareholders voted with respect to that proposal.

C. The assets and liabilities of the Portfolio Trust existing on
the date hereof shall, except as provided in paragraph B
above, remain allocated among the Series designated as
Standish Equity Portfolio, Standish Global Fixed Income
Portfolio, Standish Small Capitalization Equity Portfolio and
Standish Fixed Income Portfolio.

D. The Trustees shall have the right at any time and from time to
time to reallocate the assets and expenses or to change the
designation of any Series now or hereafter created, or to
otherwise change the relative rights and preferences of any
such Series, provided that such change shall not adversely
affect the rights of Holders.

E. The Interests of the Portfolio Trust outstanding on the date
set forth in the resolution of the Trustees establishing and
designating the New Series of the Portfolio Trust shall remain
classified as Interests of the Series designated as:

Standish Equity Portfolio
Standish Global Fixed Income Portfolio
Standish Small Capitalization Equity Portfolio
Standish Fixed Income Portfolio.

F. The Trustees shall have exclusive power without the
requirement of Holder approval to establish and designate
additional Series of the Portfolio Trust and, subject to the
provisions of the Declaration of Trust and the 1940 Act, to
fix and determine the rights of Holders of Interests in such
Series, including with respect to the price, terms and manner
of purchase and redemption, dividends and other distributions,
rights on liquidation, sinking or purchase fund provisions,
conversion rights and conditions under which the Holders of
the several Series shall have separate voting rights or no
voting rights.

G. All capitalized terms not defined herein shall have the same
meanings as are assigned to those terms in the Declaration of
Trust.

The Trustees further direct that, upon the execution of this
Certificate of Designation, the Portfolio Trust take all necessary action to
file a copy of this Certificate of Designation at any place required by law or
by the Declaration of Trust.

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<PAGE>

IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation in Tuckerstown, Bermuda this 5th day of October, 1996.

By: /s/ Anne P. Herrmann
Name: Anne P. Herrmann
Title: Assistant Secretary
Standish, Ayer & Wood Master Portfolio

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Exhibit 5(e)

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made as of the close of business this 5th day of October, 1996,
by and between Standish, Ayer & Wood Master Portfolio, an unincorporated trust
organized under the laws of the State of New York (the "Portfolio Trust") and
Standish, Ayer & Wood, Inc., a Massachusetts corporation (the "Adviser").

W I T N E S S E T H:

WHEREAS, the Portfolio Trust is engaged in business as an open-end
management investment company and is so registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and

WHEREAS, the assets held by the Trustees of the Portfolio Trust may be
divided into separate funds, each with its own separate investment portfolio,
investment objectives, policies and purposes; and

WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services, and is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended; and

WHEREAS, the Portfolio Trust desires to retain the Adviser to furnish
investment advisory services to the Standish Small Capitalization Equity
Portfolio II (the "Portfolio"), a separate fund of the Portfolio Trust, and the
Adviser is willing to furnish such services;

NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:

I. Appointment of the Adviser. The Portfolio Trust hereby appoints the
Adviser to act as investment adviser of the Portfolio for the period and on the
terms herein set forth. The Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided. The
Adviser shall for all purposes herein be deemed an independent contractor and
shall, unless expressly otherwise provided, have no authority to act for or
represent the Portfolio in any way nor shall otherwise be deemed an agent of the
Portfolio.

II. Duties of the Adviser. A. The Adviser, at its expense, will furnish
continuously an investment program for the Portfolio, will determine, subject to
the overall supervision and review of the Trustees of the Portfolio Trust what
investments shall be purchased, held, sold or exchanged by the Portfolio and
what portion, if any, of the assets of the Portfolio will be held uninvested,

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<PAGE>

and shall, on behalf of the Portfolio Trust, make changes in the investments of
the Portfolio. Subject always to the supervision of the Trustees of the
Portfolio Trust and to the provisions of the Portfolio Trust's Agreement and
Declaration of Trust and Bylaws and of the 1940 Act, the Adviser will also
manage, supervise and conduct the other affairs and business of the Portfolio
and matters incidental thereto. Notwithstanding the foregoing, the Adviser shall
not be required to perform any such non-investment advisory services that may,
in the opinion of counsel to the Portfolio Trust, cause the Portfolio to be
engaged in a "trade or business within the United States", as such term is used
in Section 864 of the Internal Revenue Code of 1986, or any successor statute.
The Adviser, and any affiliate thereof, shall be free to render similar services
to other investment companies and other clients and to engage in other
activities, so long as the services rendered hereunder are not impaired.

B. The Portfolio shall bear the expenses of its operations, including legal
and auditing services, taxes and governmental fees, certain insurance premiums,
costs of notices and reports to interest-holders, typesetting and printing of
registration and financial statements for regulatory purposes and for
distribution to existing and prospective interest-holders, bookkeeping and
interest pricing expenses, fees and disbursements of the Portfolio Trust's
custodian, administrator, transfer and dividend disbursing agent or registrar,
or interest and other like expenses properly payable by the Portfolio Trust.

III. Compensation of the Adviser. A. As full compensation for the services
and facilities furnished by the Adviser under this Agreement, the Portfolio
Trust agrees to pay to the Adviser a fee equal at an annual rate to 0.60% of the
Portfolio's average daily net assets. Such fees shall be accrued when computed
and payable monthly. For purposes of calculating such fee, the Portfolio's
average daily net asset value shall be determined by taking the average of all
determinations of net asset value made in the manner provided in the Portfolio's
current prospectus and statement of additional information.

B. The compensation payable to the Adviser hereunder for any period less
than a full month during which this Agreement is in effect shall be prorated
according to the proportion which such period bears to a full month.

C. The Adviser agrees that if total expenses (excluding brokerage, taxes
and extraordinary expenses) of the Portfolio for any fiscal year of the
Portfolio exceed 1.50% of the Portfolio's average daily net assets, the
compensation due the Adviser for such fiscal year shall be proportionately
reduced by the amount of such excess by a reduction or refund thereof at the
time such compensation is payable after the end of each calendar month, subject
to readjustment during such fiscal year.

IV. Limitation of Liability of Adviser. The Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the

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<PAGE>

Portfolio Trust in connection with any investment policy or the purchase, sale
or retention of any securities on the recommendation of the Adviser; provided,
however, that nothing herein contained shall be construed to protect the Adviser
against any liability to the Portfolio Trust by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties under this Agreement.

V. Term and Termination. A. This Agreement shall become effective on the
date hereof. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years from the date hereof and shall continue
in full force and effect for successive periods of one year thereafter, but only
so long as each such continuance is approved annually (i) by either the Trustees
of the Portfolio Trust or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Portfolio, and, in either event,
(ii) by vote of a majority of the Trustees of the Portfolio Trust who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such party, cast in person at a meeting called for the purpose of voting
on such approval.

B. This Agreement may be terminated at any time without the payment of any
penalty by vote of the Trustees of the Portfolio Trust or by vote of a majority
of the outstanding voting securities (as defined in the 1940 Act) of the
Portfolio or by the Adviser, on sixty days' written notice to the other party.

C. This Agreement shall automatically and immediately terminate in the
event of its assignment as defined in the 1940 Act.

VI. Limitation of Liability. The phrase "Standish, Ayer & Wood Master
Portfolio" means and refers to the Trustees from time to time serving under the
Agreement and Declaration of Trust of the Portfolio Trust dated January 18,
1996, as the same may subsequently thereto have been, or subsequently hereto be,
amended. It is expressly agreed that the obligations of the Portfolio Trust
hereunder shall not be binding upon any of the Trustees, interest-holders,
nominees, officers, agents or employees of the Portfolio Trust, personally, but
shall bind only the trust property of the Portfolio Trust as provided in the
Agreement and Declaration of Trust of the Portfolio Trust. The execution and
delivery of this Agreement have been authorized by the Trustees and
interest-holders of the Portfolio and this Agreement has been signed by an
authorized officer of the Portfolio Trust, acting as such, and neither such
authorization by such Trustees and interest-holders nor such execution and
delivery by such officer shall be deemed to have been made by any of them, but
shall bind only the trust property of the Portfolio Trust as provided in the
Agreement and Declaration of Trust.

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed as of the date first written above.

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<PAGE>

STANDISH, AYER & WOOD MASTER PORTFOLIO,
on behalf of STANDISH SMALL CAPITALIZATION
EQUITY PORTFOLIO II
Attest:

/s/ Richard S. Wood
Richard S. Wood, President
(Executed outside the United States)

STANDISH, AYER & WOOD, INC.
Attest:

By:/s/ Richard S. Wood

Its:Vice President

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CUSTODIAN AGREEMENT
between Standish, Ayer & Wood Master Portfolio
and Investors Bank & Trust Company

Appendix A
(revised October 5, 1996)

Standish Fixed Income Portfolio
Standish Equity Portfolio
Standish Small Capitalization Equity Portfolio
Standish Global Fixed Income Portfolio
Standish Small Capitalization Equity Portfolio II

Exhibit 9(b)

ADMINISTRATION AGREEMENT
between Standish, Ayer & Wood Master Portfolio
and IBT Trust Company (Cayman), Ltd.

Schedule B
(adopted October 5, 1996)

Standish Fixed Income Portfolio
Standish Equity Portfolio
Standish Small Capitalization Equity Portfolio
Standish Global Fixed Income Portfolio
Standish Small Capitalization Equity Portfolio II

POWER OF ATTORNEY

The undersigned officer of Standish, Ayer & Wood Master Portfolio, a New
York trust (the "Portfolio Trust"), does hereby constitute and appoint Edward H.
Ladd, Richard S. Wood, Susan Jakuboski and Raymond O'Neill, and each of them
acting singly, to be my true, sufficient and lawful attorneys, with full power
of substitution to each of them, and each of them acting singly, to sign for me,
in my name and in the capacities indicated below, (1) any and all amendments to
the Registration Statements on Form N-8A and Form N-1A to be filed by the
Portfolio Trust under the Investment Company Act of 1940, as amended (the "1940
Act"), (2) any and all amendments to the registration statement on Form N-1A of
Standish, Ayer & Wood Investment Trust (the "Investment Trust") under the 1940
Act and the Securities Act of 1933, as amended (the "1933 Act"), (3) the
registration statement on Form N-1A of any other registered investment company
that is or will become a holder of an interest in the Portfolio Trust (a
"Holder"), (4) any registration statement on Form N-14, and any and all
amendments thereto, filed by the Portfolio Trust, the Investment Trust or any
Holder and (5) any and all other documents and papers relating thereto, and
generally to do all such things in my name and on my behalf in the capacities
indicated below to enable the Portfolio Trust to comply with the 1940 Act and
the 1933 Act (where applicable) and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by said attorneys or each of them to any and all such
documents.

IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument outside
the United States on this 5th day of October, 1996.

/s/ Richard S. Wood
Richard S. Wood
President (chief executive officer)

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument outside
the United States on this 5th day of October, 1996.

/s/ Anne P. Herrmann
Anne P. Herrmann
Assistant Secretary

POWER OF ATTORNEY

Each of the undersigned Trustees of Standish, Ayer & Wood Master Portfolio,
a New York trust (the "Portfolio Trust"), does hereby constitute and appoint
Edward H. Ladd, Richard S. Wood, Susan Jakuboski and Raymond O'Neill , and each
of them acting singly, to be his true, sufficient and lawful attorneys, with
full power of substitution to each of them, and each of them acting singly, to
sign for him, in his name and in the capacities indicated below, (1) any and all
amendments to the Registration Statements on Form N-8A and Form N-1A to be filed
by the Portfolio Trust under the Investment Company Act of 1940, as amended (the
"1940 Act"), (2) any and all amendments to the registration statement on Form
N-1A of Standish, Ayer & Wood Investment Trust (the "Investment Trust") under
the 1940 Act and the Securities Act of 1933, as amended (the "1933 Act"), (3)
the registration statement on Form N-1A of any other registered investment
company that is or will become a holder of an interest in the Portfolio Trust (a
"Holder"), (4) any registration statement on Form N-14, and any and all
amendments thereto, filed by the Portfolio Trust, the Investment Trust or any
Holder and (5) any and all other documents and papers relating thereto, and
generally to do all such things in his name and on his behalf in the capacities
indicated below to enable the Portfolio Trust to comply with the 1940 Act and
the 1933 Act (where applicable) and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming his signature as
it may be signed by said attorneys or each of them to any and all such
documents.

IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument outside
the United States on this 5th day of October, 1996.

/s/ D. Barr Clayson /s/ Edward H. Ladd
D. Barr Clayson Edward H. Ladd

/s/ Samuel C. Fleming /s/ Caleb Loring, III
Samuel C. Fleming Caleb Loring, III

/s/ Benjamin M. Friedman /s/ Richard S. Wood
Benjamin M. Friedman Richard S. Wood

/s/ John H. Hewitt
John H. Hewitt