MERRIMAC SERIES, 497, 1999-06-09

MERRIMAC SERIES
497, 1999-06-09

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MAY 3, 1999, SUPPLEMENTED JUNE 2, 1999
PROSPECTUS

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MERRIMAC SERIES

MERRIMAC CASH SERIES

MERRIMAC TREASURY SERIES

MERRIMAC TREASURY PLUS SERIES

MERRIMAC U.S. GOVERNMENT SERIES

MERRIMAC SHORT-TERM ASSET RESERVE (STAR) SERIES

Each Fund offers three classes of shares: Premium Class, Institutional Class
and Investment Class.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.

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CONTENTS Page

THE FUNDS

RISK/RETURN SUMMARIES

Cash Series . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Treasury Series . . . . . . . . . . . . . . . . . . . . . . . . . 3

Treasury Plus Series . . . . . . . . . . . . . . . . . . . . . . . 5

U.S. Government Series. . . . . . . . . . . . . . . . . . . . . . 7

STAR Series . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

FUNDS' INVESTMENTS

Cash Series . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Treasury Series . . . . . . . . . . . . . . . . . . . . . . . . . 14

Treasury Plus Series . . . . . . . . . . . . . . . . . . . . . . . 15

U.S. Government Series. . . . . . . . . . . . . . . . . . . . . . 16

STAR Series . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

FUNDS' MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . 19

YOUR INVESTMENT

SHAREHOLDER INFORMATION

Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Valuation of Shares . . . . . . . . . . . . . . . . . . . . . . . 21

Dividends and Distributions . . . . . . . . . . . . . . . . . . . 22

Federal Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 22

FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . 24

APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Description Of Securities In Which the Portfolios Can Invest

FOR MORE INFORMATION

Back Cover

</TABLE>

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RISK/RETURN SUMMARIES

The following information is only a summary of important information that you
should know about each series of Merrimac Series (the Funds). As with any
mutual fund, there is no guarantee that the Funds will achieve their goals.

Traditional mutual funds directly acquire and manage their own portfolio
securities. The Funds are organized in a "master-feeder" structure, under which
each Fund invests all of its assets in a corresponding series of Merrimac
Master Portfolio or Standish, Ayer & Wood Master Portfolio (each, a Portfolio).
Each Fund and its corresponding Portfolio have substantially the same
investment objectives and investment policies.

MERRIMAC CASH SERIES

> WHAT IS THE FUND'S INVESTMENT OBJECTIVE AND MAIN STRATEGY?

The Merrimac Cash Series' investment objective is to achieve a high level of
current income consistent with preserving principal and liquidity. Allmerica
Asset Management, Inc. (AAM), the subadviser of Merrimac Cash Portfolio,
attempts to achieve the Fund's objective by investing the Portfolio's assets
in high-quality, U.S. dollar-denominated, money market instruments with
maturities of 397 calendar days or less. Most of the Portfolio's investments
will be in U.S. Treasury bills, notes and bonds, other instruments issued or
guaranteed by the U.S. Government or its agencies, securities of U.S. and
foreign banks or thrift organizations, corporate debt obligations,
asset-backed securities, variable rate obligations and repurchase agreements
that are collateralized by these instruments.

> MAIN RISKS OF INVESTING IN THE FUND

The primary risks in investing in the Fund are interest rate risk and credit
risk.

o INTEREST RATE RISK involves the possibility that the value of the Fund's
investments will decline due to an increase in interest rates.

o CREDIT RISK INVOLVES the possibility that an issuer of a security owned by
the Fund has its credit rating downgraded or defaults on its obligation
to pay principal and/or interest.

In view of the risks inherent in all investments in securities, there is no
assurance that the Fund's objective will be achieved. See FUNDS' INVESTMENTS
for more information.

Money market funds can be confused with savings accounts. The Fund is not a
savings account but, rather, a money market mutual fund that issues and
redeems at the Fund's per share net asset value (NAV). The Fund always seeks
to maintain a constant NAV of $1.00 per share.

Unlike a savings account, however, an investment in the Fund is not a deposit
of Investors Bank & Trust Company, or any other bank, and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
the Fund.

> IS THE FUND FOR YOU?

The Fund may be appropriate as part of your investment portfolio if......

o You need your money back within a short period.
o You need to preserve principal.
o You want a low-risk investment.
o You do not need a high total return to achieve your goals.
o You do not seek long-term growth as your primary goal.

<PAGE>

> COULD THE VALUE OF YOUR INVESTMENT IN THE FUND FLUCTUATE?

Yes, it could. The Fund is managed in accordance with strict Securities and
Exchange Commission (SEC) guidelines designed to preserve the Fund's value at
$1.00 per share, although, of course, there cannot be a guarantee that the
value will remain at $1.00 per share. The value of your investment typically
will grow through reinvested dividends.

> TOTAL RETURN

The Fund is newly operational and therefore does not have performance
information for the period ended December 31, 1998. For the Fund's most
current yield information you may call 1-888-MERRMAC. Past performance does
not necessarily indicate what will happen in the future.

> FEES AND EXPENSES

These tables describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are no fees or sales loads charged to your
account when you buy or sell Fund shares.

ANNUAL FUND OPERATING EXPENSES - EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS

PREMIUM CLASS INSTITUTIONAL CLASS INVESTMENT CLASS
Management Fees 0.17% 0.17% 0.17%
Distribution (12b-1) Fees None None 0.25%
Other Expenses (1) 0.08% 0.33% 0.08%
Total Annual Fund
Operating Expenses (2) 0.25% 0.50% 0.50%

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</TABLE>

> EXAMPLE

This example is intended to help you compare the cost of investing in the
PREMIUM, INSTITUTIONAL OR INVESTMENT Class of the Fund with the cost of
investing in other mutual funds.

The example assumes that you invest $10,000 in the PREMIUM, INSTITUTIONAL OR
INVESTMENT Class of the Fund for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that
your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:

CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS

Premium Class $26 $80 $141 $318
Institutional Class $51 $160 $280 $628
Investment Class $51 $160 $280 $628

</TABLE>

<PAGE>

MERRIMAC TREASURY SERIES

> WHAT IS THE FUND'S INVESTMENT OBJECTIVE AND MAIN STRATEGY?

The Merrimac Treasury Series' investment objective is to achieve a high level
of current income consistent with preserving principal and liquidity. M&I
Investment Management Corp. (M&I), the subadviser of Merrimac Treasury
Portfolio, attempts to achieve the Fund's objective by investing the
Portfolio's assets in U.S. Treasury securities with maturities of 397
calendar days or less. The Portfolio will only invest in direct obligations
of the U.S. Treasury, such as U.S. Treasury bills, notes and bonds or in
other mutual funds that invest in such instruments, subject to regulatory
limitations.

> MAIN RISK OF INVESTING IN THE FUND

The primary risk in investing in the Fund is interest rate risk which
involves the possibility that the value of the Fund's investments will
decline due to an increase in interest rates. In view of the risks inherent
in all investments in securities, there is no assurance that the Fund's
objective will be achieved. See Funds' Investments for more information.

Money market funds can be confused with savings accounts. The Fund is not a
savings account but, rather, a money market mutual fund that issues and
redeems at the Fund's per share NAV. The Fund always seeks to maintain a
constant NAV of $1.00 per share.

> IS THE FUND FOR YOU?

The Fund may be appropriate as part of your investment portfolio if......

> COULD THE VALUE OF YOUR INVESTMENT IN THE FUND FLUCTUATE?

Yes, it could. The Fund is managed in accordance with strict SEC guidelines
designed to preserve the Fund's value at $1.00 per share, although, of
course, there cannot be a guarantee that the value will remain at $1.00 per
share. The value of your investment typically will grow through reinvested
dividends.

> TOTAL RETURN

> FEES AND EXPENSES

These tables describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are no fees or sales loads charged to your
account when you buy or sell Fund shares.

<PAGE>

ANNUAL FUND OPERATING EXPENSES - EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS

PREMIUM CLASS INSTITUTIONAL CLASS INVESTMENT CLASS
Management Fees 0.17% 0.17% 0.17%
Distribution (12b-1) Fees None None 0.25%
Other Expenses (1) 0.12% 0.37% 0.12%
Total Annual Fund
Operating Expenses (2) 0.29% 0.54% 0.54%

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</TABLE>

> EXAMPLE

This example is intended to help you compare the cost of investing in the
PREMIUM, INSTITUTIONAL OR INVESTMENT Class of the Fund with the cost of
investing in other mutual funds.

CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS

Premium Class $30 $93 $163 $368
Institutional Class $55 $173 $302 $677
Investment Class $55 $173 $302 $677

</TABLE>

<PAGE>

MERRIMAC TREASURY PLUS SERIES

> WHAT IS THE FUND'S INVESTMENT OBJECTIVE AND MAIN STRATEGY?

The Merrimac Treasury Plus Series' investment objective is to achieve a high
level of current income consistent with preserving principal and liquidity.
M&I, the subadviser of Merrimac Treasury Plus Portfolio, attempts to achieve
the Fund's objective by investing the Portfolio's assets in high-quality,
U.S. dollar-denominated, money market instruments with maturities of 397
calendar days or less. The Portfolio will invest primarily (at least 65% of
total assets) in direct obligations of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds. The Portfolio may invest the remaining 35%
of its total assets in securities issued or guaranteed by the U.S. Government
or its agencies. The Portfolio also may invest in repurchase agreements that
are collateralized by these instruments.

> MAIN RISKS OF INVESTING IN THE FUND

The primary risks in investing in the Fund are interest rate risk and credit
risk.

o INTEREST RATE RISK involves the possibility that the value of the Fund's
investments will decline due to an increase in interest rates.

o CREDIT RISK involves the possibility that an issuer of a security owned by
the Fund has its credit rating downgraded or defaults on its obligation
to pay principal and/or interest.

In view of the risks inherent in all investments in securities, there is no
assurance that the Fund's objective will be achieved. See FUNDS' INVESTMENTS
for more information.

Unlike a savings account, however, an investment in the Fund is not a deposit
of Investors Bank & Trust Company, or any other bank, and is not insured or
guaranteed by the FDIC or any other government agency. Although the Fund
seeks to preserve the value of your investment at $1.00 per share it is
possible to lose money by investing in the Fund.

> IS THE FUND FOR YOU?

The Fund may be appropriate as part of your investment portfolio if......

> COULD THE VALUE OF YOUR INVESTMENT IN THE FUND FLUCTUATE?

> TOTAL RETURN

<PAGE>

> FEES AND EXPENSES

These tables describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are no fees or sales loads charged to your
account when you buy or sell Fund shares.

ANNUAL FUND OPERATING EXPENSES - EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<S> <C> <C> <C>

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</TABLE>

> EXAMPLE

This example is intended to help you compare the cost of investing in the
PREMIUM, INSTITUTIONAL OR INVESTMENT Class of the Fund with the cost of
investing in other mutual funds.

CLASS 1 YEAR 3 YEARS

Premium Class $26 $80
Institutional Class $51 $160
Investment Class $51 $160

</TABLE>

<PAGE>

MERRIMAC U.S. GOVERNMENT SERIES

> WHAT IS THE FUND'S INVESTMENT OBJECTIVE AND MAIN STRATEGY?

The Merrimac U.S. Government Series' investment objective is to achieve a
high level of current income consistent with preserving principal and
liquidity. AAM, the subadviser of the Merrimac U.S. Government Portfolio,
attempts to achieve the Fund's objective by investing the Portfolio's assets
in high-quality, U.S. dollar-denominated, money market instruments with
maturities of 397 calendar days or less. The Portfolio will invest at least
65% of its total assets in securities issued or guaranteed as to principal
and interest by the U.S. Government or its agencies or instrumentalities. The
Portfolio also may invest in repurchase agreements that are collateralized by
these instruments.

> MAIN RISKS OF INVESTING IN THE FUND

The primary risks in investing in the Fund are interest rate risk and credit
risk.

o INTEREST RATE RISK involves the possibility that the value of the Fund's
investments will decline due to an increase in interest rates.

o CREDIT RISK involves the possibility that an issuer of a security owned by
the Fund has its credit rating downgraded or defaults on its obligation
to pay principal and/or interest.

In view of the risks inherent in all investments in securities, there is no
assurance that the Fund's objective will be achieved. See Funds' Investments
for more information.

> IS THE FUND FOR YOU?

The Fund may be appropriate as part of your investment portfolio if......

> COULD THE VALUE OF YOUR INVESTMENT IN THE FUND FLUCTUATE?

> TOTAL RETURN

<PAGE>

> FEES AND EXPENSES

These tables describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are no fees or sales loads charged to your
account when you buy or sell Fund shares.

ANNUAL FUND OPERATING EXPENSES - EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS

PREMIUM CLASS INSTITUTIONAL CLASS INVESTMENT CLASS
Management Fees 0.17% 0.17% 0.17%
Distribution (12b-1) Fees None None 0.25%
Other Expenses(1) 0.13% 0.38% 0.13%
Total Annual Fund
Operating Expenses(2) 0.30% 0.55% 0.55%

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</TABLE>

> EXAMPLE

This example is intended to help you compare the cost of investing in the
PREMIUM, INSTITUTIONAL OR INVESTMENT Class of the Fund with the cost of
investing in other mutual funds.

CLASS 1 YEAR 3 YEARS

PREMIUM CLASS $31 $97
INSTITUTIONAL CLASS $56 $176
INVESTMENT CLASS $56 $176

</TABLE>

<PAGE>

MERRIMAC SHORT-TERM ASSET RESERVE (STAR) SERIES

> WHAT IS THE FUND'S INVESTMENT OBJECTIVE AND MAIN STRATEGY?

The Merrimac STAR Series' investment objective is to achieve a high level of
current income consistent with preserving principal and liquidity. Standish,
Ayer & Wood, Inc. (Standish), the adviser of Standish Short-Term Asset
Reserve Portfolio, attempts to achieve the Fund's objective by investing the
Portfolio's assets primarily in U.S. dollar-denominated money market
instruments, short-term fixed income securities and asset-backed securities
of U.S. and foreign governments, banks and companies. The Portfolio invests
exclusively in investment grade securities and no more than 15% of total
assets in securities rated BBB or Baa (A-2, P-2 or Duff-2 for money market
instruments) by a rating agency of their unrated equivalents. Standish
targets an average credit quality of the Portfolio's investment securities of
AA/Aa. The Portfolio generally will maintain an average dollar-weighted
effective portfolio maturity of 6 to 15 months with a maximum average
maturity of 18 months. No security can have an effective maturity of more
than 5 years.

Standish focuses on identifying undervalued sectors and securities and
minimizes the use of an interest rate forecasting strategy. Standish looks
for securities with the most potential for added value, such as those
involving the potential for credit upgrades, unique structural
characteristics or innovative features. Standish selects securities for the
Portfolio by:

Allocating assets among sectors appearing to have near-term return potential.

Actively trading among various sectors, such as corporate bonds, mortgage
pass through securities, government agencies and asset-backed securities.

Buying when a yield spread advantage presents an opportunity to buy
securities cheaply.

Using research to locate opportunities in less efficient areas of the
short-term fixed-income market.

Using yield curve analysis to identify securities that present the most
attractive tradeoff between the higher returns and higher risks associated
with extending maturities.

Investing in innovative securities that may not be widely followed or
understood by other investors.

> MAIN RISKS OF INVESTING IN THE FUND

Investors could lose money on their investment in the Fund. The primary risks
of investing in the Fund are as follows:

o INTEREST RATE RISK involves the possibility that the value of the Fund's
investments will decline due to an increase in interest rates.

o CREDIT RISK involves the possibility that an issuer of a security owned by
the Fund has its credit rating downgraded or defaults on its obligation to
pay principal and/or interest.

o PREPAYMENT RISK involves the possibility that when interest rates are
declining, the issuer of a security exercises its right to prepay principal
earlier than scheduled, forcing the Fund to reinvest in lower yielding
securities.

o EXTENSION RISK involves the possibility that when interest rates are
rising, the average life of some securities may extend because of slower
than expected principal payments. This will lock in a below-market interest
rate, increase the security's duration and reduce the value of the
security.

o FOREIGN SECURITIES RISK involves the possibility that prices of foreign
securities may decline due to unfavorable foreign government actions,
political, economic or market instability or the absence of accurate
information about foreign companies. Foreign securities are sometimes less
liquid and harder to value than securities of U.S. issuers.

In view of the risks inherent in all investments in securities, there is no
assurance that the Fund's objective will be achieved. See FUNDS' INVESTMENTS
for more information.

An investment in the Fund is not a deposit of Investors Bank & Trust Company,
or any other bank, and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.

<PAGE>

> IS THE FUND FOR YOU?

The Fund may be appropriate as part of your investment portfolio if......

o You seek an alternative to a money market fund without the price stability
of a money market fund.
o You seek limited price fluctuation and current income.
o You are looking to diversify a fixed-income portfolio with short-term
investments.
o You do not need a high total return to achieve your goals.
o You do not seek long-term growth as your primary goal.

> COULD THE VALUE OF YOUR INVESTMENT IN THE FUND FLUCTUATE?

Yes, it could. Unlike a money market fund, the Fund is NOT managed to
preserve the Fund's NAV at $1.00 per share and therefore the Fund's share
price will fluctuate.

> TOTAL RETURN

All mutual funds must use the same formula to calculate total return. The bar
chart and average annual total return table demonstrates the risks of
investing in the Fund. The return shown is for the Standish STAR Fund which
is a separate feeder fund that invests all of its assets in the Portfolio.
The return of the Fund would differ from the return of Standish STAR Fund to
the extent of any differences in their respective operating expenses. The bar
chart shows changes in the performance for the full calendar periods
indicated. The table shows how the average annual total return for different
calendar periods compared to those of a widely recognized index of short-term
Treasury securities and money market fund shares. Past performance does not
necessarily indicate what will happen in the future. The Fund began
operations on August 7, 1998.

[Add chart here.]

During the periods shown in the bar chart, the highest total return for a
quarter was 3.53% (quarter ending June 30, 1989) and the lowest total return
for a quarter was .06% (quarter ending March 31, 1989).

PERIODS ENDED DECEMBER 31, 1998
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 YEAR 5 YEARS 10 YEARS LIFE OF FUND INCEPTION DATE

STAR Fund 5.75% 5.47% 6.45% 6.45% January 3, 1989
IBC Money
Market
Averages
All Taxable
Index 5.09% 4.86% 5.27% 7.27% --

</TABLE>

> FEES AND EXPENSES

These tables describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are no fees or sales loads charged to your
account when you buy or sell Fund shares.

<PAGE>

ANNUAL FUND OPERATING EXPENSES - EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS

PREMIUM CLASS INSTITUTIONAL CLASS INVESTMENT CLASS
Management Fees 0.25% 0.25% 0.25%
Distribution (12b-1) Fees None None 0.25%
Other Expenses (1) 0.20% 0.45% 0.20%
Total Annual Fund
Operating Expenses (2) 0.45% 0.70% 0.70%

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(1) "Other Expenses" include expenses such as legal, accounting and printing
services and shareholder servicing fees for the Institutional Class.
(2) This table and the example below reflect the Fund's own estimated expenses
and the Fund's share of the Portfolio's estimated expenses. Investors Bank
& Trust Company has voluntarily agreed to limit the Fund's annual expenses
to 0.36% of its average net assets and will reimburse the Fund for all
expenses in excess of that amount. This limitation may be discontinued at
any time after 30 days notice to shareholders.

</TABLE>

> EXAMPLE

This example is intended to help you compare the cost of investing in the
PREMIUM, INSTITUTIONAL OR INVESTMENT Class of the Fund with the cost of
investing in other mutual funds.

CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS

PREMIUM CLASS $46 $144 $252 $567
INSTITUTIONAL CLASS $72 $224 $390 $871
INVESTMENT CLASS $72 $224 $390 $871

</TABLE>

<PAGE>

THE FUNDS' INVESTMENTS

MERRIMAC CASH SERIES

> PRINCIPAL INVESTMENT STRATEGIES AND RISKS

Q What is the Fund's principal investment strategy?

A The Fund's principal investment strategy is to invest the Fund's share of
the Portfolio's assets in U.S. dollar-denominated money market instruments
with remaining maturities of 397 calendar days or less that in the opinion
of AAM present minimal credit risk.

Q Into what types of money market instruments will the Fund's assets be
invested?

A The Portfolio may invest in the following U.S. dollar denominated
instruments:

o obligations of the U.S. Government or its agencies or instrumentalities;
o corporate debt obligations such as notes, bonds, commercial paper and
other money market instruments;
o variable rate obligations;
o securities of U.S. and foreign banks or thrift organizations (such as
bankers' acceptances, time deposits and certificates of deposits);
o asset-backed securities;
o other short-term debt securities; and
o repurchase agreements that are collateralized by the securities listed
above.

Further description of these securities is found in APPENDIX A.

Q Are there any limits on how much that can be invested in one issuer?

A Yes. The SEC has set certain diversification requirements for money market
funds. Generally, these requirements limit a money market fund's
investments in securities of any issuer to no more than 5% of a fund's
assets. Also, strict SEC guidelines do not permit AAM to invest, with
respect to 75% of the Portfolio's assets, greater than 10% of the
Portfolio's assets in securities issued by or subject to guarantees by the
same institution. Purchases of securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities are not counted toward
these limitations.

Q What is the credit quality of the Fund's investments?

A The Portfolio's investments consist of high-quality securities that qualify
as "first-tier" securities under the SEC rules that apply to money market
funds. In general, a first-tier security is defined as a security that is:

o issued or guaranteed by the U.S. Government or any agency or
instrumentality thereof;
o rated or subject to a guarantee that is rated in the highest category for
short-term securities by at least two Nationally Recognized Statistical
Rating Organizations (NRSROs), or by one NRSRO if the security is rated by
only one NRSRO;
o unrated but issued by an issuer or guaranteed by a guarantor that has
other comparable short-term obligations so rated; or
o unrated but determined by AAM to be of comparable quality.

In addition, AAM must consider whether a particular investment presents
minimal credit risk.

<PAGE>

Q Who are the Nationally Recognized Statistical Rating Organizations?

A Current NRSROs include:

o Moody's Investors Service, Inc.;

o Standard & Poor's Ratings Group;

o Fitch's IBCA Investors Service;

o Duff & Phelps; and

o Thomson Bank Watch.

Q What happens if the rating of a security is downgraded?

A If the rating of a security is downgraded after purchase, AAM will
determine whether it is in the best interest of the Portfolio's
shareholders (i.e., the Fund) to continue to hold the security.

Q Will the Fund always maintain a net asset value of $1 per share?

A While AAM will endeavor to maintain a constant Fund NAV of $1 per share,
there is no assurance that they will be able to do so. The shares are
neither insured nor guaranteed by the U.S. Government. As such, the Fund
carries some risk. For example, there is always a risk that the issuer of
a security held by the Portfolio will fail to pay interest or principal
when due. The Portfolio attempts to minimize credit risk by investing only
in securities rated in the highest category for short-term securities, or,
if not rated, of comparable quality, at the time of purchase.
Additionally, the Portfolio will not purchase a security unless AAM has
determined that the security presents minimal credit risk. There is also
a risk that rising interest rates will cause the value of the Portfolio's
securities to decline. The Portfolio attempts to minimize interest rate
risk by limiting the maturity of each security to 397 calendar days or less
and maintaining a dollar-weighted average portfolio maturity for the
Portfolio of 90 days or less.

Q How are the decisions to buy or sell securities made?

A Factors are balanced such as credit quality and maturity to purchase the
best relative value available in the market at any given time. While rare,
sell decisions are usually based on a change in credit analysis or to take
advantage of an opportunity to reinvest at a higher yield.

<PAGE>

MERRIMAC TREASURY SERIES

> PRINCIPAL INVESTMENT STRATEGIES AND RISKS

Q What is the Fund's principal investment strategy?

A The Fund's principal investment strategy is to invest the Fund's share of
the Portfolio's assets in U.S. Treasury securities with maturities of 397
calendar days or less.

Q Into what types of money market instruments will the Fund's assets be
invested?

A The Portfolio may only invest in direct obligations of the U.S. Treasury,
such as U.S. Treasury bills, notes and bonds. To maximize the tax-effective
yield, the Portfolio will usually (but not always) invest in obligations
that qualify for the exemption from state taxation. Further description of
these securities is found in Appendix A.

Q Are there any limits on how much that can be invested in one issuer?

A By the Fund's strategy, the U.S. Treasury is the only issuer in which the
Portfolio invests. If, for liquidity purposes, the Portfolio invests in
other mutual funds having the same principal investment strategy, its total
investment in other mutual funds may not exceed 10% of assets and investment
in a single fund may not exceed 5% of assets or 3% of that fund's total
assets.

Q Will the Fund always maintain a net asset value of $1 per share?

A While M&I will endeavor to maintain a constant Fund NAV of $1 per share,
there is no assurance that they will be able to do so. The shares are
neither insured nor guaranteed by the U.S. Government. As such, the Fund
carries some risk. There is a risk that rising interest rates will cause
the value of the Portfolio's securities to decline. M&I attempts to
minimize this risk by limiting the maturity of each security to 397 calendar
days or less and maintaining a dollar-weighted average portfolio maturity
for the Portfolio of 90 days or less.

Q How are the decisions to buy or sell securities made?

A Factors are balanced such as the Portfolio's objective of maximizing current
income while maintaining safety and liquidity. M&I evaluates the treasury
securities market daily to determine how to provide the most value to the
Portfolio.

<PAGE>

MERRIMAC TREASURY PLUS SERIES

> PRINCIPAL INVESTMENT STRATEGIES AND RISKS

Q What is the Fund's principal investment strategy?

A The Fund's principal investment strategy is to invest the Fund's share of
the Portfolio's assets in high-quality, U.S. dollar-denominated Treasury
securities with maturities of 397 calendar days or less.

Q Into what types of money market instruments will the Fund's assets be
invested?

A The Portfolio will invest at least 65% of its total assets in direct
obligations of the U.S. Treasury; such as U.S. Treasury bills, notes and
bonds and may invest the remaining 35% of its total assets in securities
issued or guaranteed by the U.S. Government or its agencies. The Portfolio
also may invest in repurchase agreements that are collateralized by these
instruments. Further description of these securities is found in APPENDIX
A.

Q Are there any limits on how much that can be invested in one issuer?

A No. Beyond the percentages noted above, the Portfolio is not limited with
respect to purchases of securities issued by the U.S. Government or its
agencies.

Q Will the Fund always maintain a net asset value of $1 per share?

A While M&I will endeavor to maintain a constant Fund NAV of $1 per share,
there is no assurance that they will be able to do so. The shares are
neither insured nor guaranteed by the U.S. Government. As such, the Fund
carries some risk. There is a risk that rising interest rates will cause
the value of the Portfolio's securities to decline. M&I attempts to
minimize interest rate risk by limiting the maturity of each security to 397
calendar days or less and maintaining a dollar-weighted average portfolio
maturity for the Portfolio of 90 days or less.

Q How are the decisions to buy or sell securities made?

A Factors are balanced such as the Portfolio's objective of maximizing current
income while maintaining safety and liquidity. M&I evaluates the government
securities market compared to the repurchase agreement market to determine
which provides the most value to the Portfolio.

<PAGE>

MERRIMAC U.S. GOVERNMENT SERIES

> PRINCIPAL INVESTMENT STRATEGIES AND RISKS

Q What is the Fund's principal investment strategy?

A The Fund's principal investment strategy is to invest the Fund's share of
the Portfolio's assets in high-quality, U.S. dollar-denominated, money
market instruments with maturities of 397 calendar days or less.

Q Into what types of money market instruments will the Fund's assets be
invested?

A The Portfolio will invest at least 65% of its total assets in securities
issued or guaranteed by the U.S. Government or its agencies. The Portfolio
also may invest in direct obligations of the U.S. Treasury such as U.S.
Treasury bills, notes and bonds. The Portfolio also may invest in
repurchase agreements that are collateralized by these instruments. Further
description of these securities is found in APPENDIX A.

Q Are there any limits on how much that can be invested in one issuer?

A No. The Portfolio is not limited with respect to purchases of securities
issued by the U.S. Government or its agencies.

Q Will the Fund always maintain a net asset value of $1 per share?

A While AAM will endeavor to maintain a constant Fund NAV of $1 per share,
there is no assurance that they will be able to do so. The shares are
neither insured nor guaranteed by the U.S. Government. As such, the Fund
carries some risk. There is a risk that rising interest rates will cause
the value of the Portfolio's securities to decline. AAM attempts to
minimize interest rate risk by limiting the maturity of each security to 397
calendar days or less and maintaining a dollar-weighted average portfolio
maturity for the Portfolio of 90 days or less.

Q How are the decisions to buy or sell securities made?

A Factors are balanced such as the Portfolio's objective of maximizing current
income while maintaining safety and liquidity. AAM evaluates the government
securities market compared to the repurchase agreement market to determine
which provides the most value to the Portfolio.

<PAGE>

MERRIMAC STAR SERIES

> PRINCIPAL INVESTMENT STRATEGIES AND RISKS

Q What is the Fund's principal investment strategy?

A The Fund's principal investment strategy is to invest the Fund's share of
the Portfolio's assets in U.S. dollar-denominated money market instruments,
short-term fixed income securities and asset-backed securities of U.S. and
foreign governments, banks and companies.

Q What types of securities will the Fund's assets be invested in?

A The Portfolio may invest in fixed income investments of all types including
the following:

o money market instruments;

o bonds; o notes (including structured notes);

o asset-backed securities; o mortgage-related securities;

o convertible securities;

o eurodollar and Yankee dollar instruments;

o preferred stocks (with a limit of 10% of assets); and

o bond index futures contracts.

Further description of these securities is found in APPENDIX A.

Q Who may issue the securities in which the Fund's assets will be invested?

A The fixed income securities in which the Fund will invest are issued by:

o U.S. and foreign corporations or entities;

o U.S. and foreign banks;

o the U.S. government, its agencies, authorities, instrumentalities or
sponsored enterprises;

o state and municipal governments, or

o foreign governments and their political subdivisions.

Q What is the credit quality of the Fund's investments?

A The Portfolio invests exclusively in investment grade securities and no more
than 15% of assets in securities rated BBB or Baa (A-2, P-2 or Duff-2 for
money market instruments) by a rating agency or their unrated equivalents.

Securities are investment grade if they are:

o rated in one of the four highest long-term rating categories of a NRSRO;

o have received a comparable short-term or other rating; or

o unrated but determined by Standish to be of comparable quality.

If a security receives "split" (different) ratings from multiple NRSROs, the
Portfolio will treat the security as being rated in the higher rating
category. The Portfolio's credit standards also apply to counterparties to
OTC derivative contracts.

<PAGE>

Q Who are the NRSROs?

A Current NRSROs include:

o Moody's Investors Service, Inc.;

o Standard & Poor's Ratings Group;

o Fitch's IBCA Investors Service; and

o Duff & Phelps.

Q What happens if the rating of a security is downgraded?

A If the rating of a security is downgraded after purchase, Standish may
choose not to sell securities that are downgraded below the Portfolio's
minimum acceptable credit rating after its purchase.

Q May the Portfolio invest defensively?

A Yes. The Portfolio may depart from its principal investment strategy in
response to adverse market, economic or political conditions by taking a
temporary defensive position in all types of money market and short-term
debt securities. If the Portfolio takes a temporary defensive position, it
may be unable for a time to achieve its investment objective.

Q May the Portfolio use derivative contracts?

A Yes. The Portfolio may, but is not required to, use derivative contracts
for any of the following purposes:

o To hedge against adverse changes - caused by changing interest rates - in
the market value of securities held by or to be bought for the Portfolio.

o As a substitute for purchasing or selling securities.

o To shorten or lengthen the effective maturity or duration of the
Portfolio's portfolio.

o To enhance the Portfolio's potential gain in non-hedging situations.

A derivative contract will obligate or entitle the Portfolio to deliver or
receive an asset or a cash payment that is based on the change in value of a
designated security or index. Even a small investment in derivative
contracts can have a big impact on a portfolio's interest rate exposure.
Therefore, using derivatives can disproportionately increase portfolio
losses and reduce opportunities for gains when interest rates are changing.
The Portfolio may not fully benefit from or may lose money on derivatives if
changes in their value do not correspond accurately to changes in the value
of the Portfolio's holdings.

Counterparties to OTC derivative contracts present the same types of credit
risk as issuers of fixed income securities. Derivatives can also make the
Portfolio's portfolio less liquid and harder to value, especially in
declining markets.

Q What is the Portfolio's policy regarding portfolio turnover?

A The Portfolio may engage in active and frequent trading to achieve its
principal investment strategies. This may lead to the realization and
distribution to shareholders of higher capital gains, which would increase
their tax liability. Frequent trading also increases transaction costs,
which could detract from the Portfolio's performance.

The Fund's investment objective may be changed by the Fund's Trustees
without shareholder approval. For additional information about other
securities in which the Portfolios invest their assets, see APPENDIX A.

<PAGE>

FUNDS' MANAGEMENT

INVESTMENT ADVISER. The Funds have not retained the services of an investment
adviser because each Fund invests all of its investable assets in its
corresponding Portfolio. The Cash Portfolio, Treasury Portfolio, Treasury Plus
Portfolio and U.S. Government Portfolio have retained the services of Investors
Bank & Trust Company (Investors Bank) as investment adviser. Investors Bank
continuously reviews and supervises the Cash, Treasury, Treasury Plus and U.S.
Government Portfolios' investment program. Investors Bank discharges its
responsibilities subject to the supervision of, and policies established by the
Board of Trustees. Investors Bank's business address is 200 Clarendon Street,
Boston, Massachusetts 02116. Investors Bank began acting as an investment
adviser at the commencement of operations of the Cash Portfolio (November 21,
1996). The Cash Portfolio, Treasury Portfolio, Treasury Plus Portfolio and U.S.
Government Portfolio each pay Investors Bank a unitary fee for servicing these
Portfolios as Investment Adviser, Administrator, Custodian, Fund Accountant and
Transfer Agent. The fee is computed at an annual rate of 0.17% of average net
assets ("ANA") of each of these Portfolios.

The STAR Portfolio has retained the services of Standish, Ayer & Wood, Inc.
(Standish) as investment adviser. Standish manages the Portfolio, selects
investments and places all orders for the purchase and sale of the Portfolio's
securities, subject to the supervision of, and policies established by the
Portfolio's Board of Trustees. Standish has been providing investment advisory
services since it was established in 1933. Standish's business address is One
Financial Center, Boston, Massachusetts 02111. For its services as investment
adviser to the Portfolio, Standish is paid a fee by the STAR Portfolio,
computed at an annual rate of 0.25% of the ANA of the STAR Portfolio, including
those attributable to the STAR Series.

The STAR Portfolio has two portfolio managers, Jennifer Pline and Barbara J.
McKenna. Ms. Pline has been employed by Standish since 1987 and has been a
portfolio manager of the STAR Portfolio's portfolio since January 1, 1991. Ms.
Pline is a Vice President of Standish. Ms. McKenna has been a portfolio manager
of the STAR Portfolio's portfolio since January 1998. Ms. McKenna has served as
a Vice President of Standish since 1996. Prior to joining Standish, Ms. McKenna
managed institutional fixed income accounts at BayBank.

INVESTMENT SUB-ADVISERS. AAM serves as investment sub-adviser to the Cash
Portfolio and to the U.S. Government Portfolio. AAM manages the Cash Portfolio
and the U.S. Government Portfolio, selects investments and places all orders
for the purchase and sale of the Portfolios' securities, subject to the general
supervision of, and policies established by the Portfolios' Board of Trustees
and Investors Bank. The business address of AAM is 440 Lincoln Street,
Worcester, Massachusetts 01653. AAM has been providing investment advisory
services since it was established in 1993 as an indirect, wholly-owned
subsidiary of Allmerica Financial Corporation. AAM receives a fee from
Investors Bank (and not from each Portfolio) for its services as investment
sub-adviser. Prior to September 1, 1998, The Bank of New York acted as
investment sub-adviser for the Cash Portfolio.

M&I serves as investment sub-adviser to the Treasury Portfolio and to the
Treasury Plus Portfolio. M&I manages the Treasury Portfolio and the Treasury
Plus Portfolio, selects investments and places all orders for the purchase and
sale of the Portfolios' securities, subject to the general supervision of, and
policies established by the Portfolios' Board of Trustees and Investors Bank.
The business address of M&I is 1000 North Water Street, Milwaukee, Wisconsin
53202. M&I has been providing investment advisory services since it was
established in 1973 as a first-tier wholly-owned subsidiary of Marshall & Isley
Corporation, a publicly held bank holding company. M&I receives fees from
Investors Bank (and not from each Portfolio) for its services as investment
sub-adviser. Prior to January 4, 1999, Aeltus Investment Management, Inc. acted
as investment sub-adviser for the Treasury Portfolio and received the same fee
from Investors Bank as M&I currently receives.

SHAREHOLDER INFORMATION

> PURCHASES

GENERAL INFORMATION. Shares may be purchased only through the Distributor,
Funds Distributor Inc., which offers each Fund's shares to the public on a
continuous basis. Shares of each Fund may be purchased only in those states
where they may be lawfully sold. Shares are sold at the NAV per share next
computed after the purchase order is received in good order by the
Distributor and payment for shares is received by Investors Bank, the Funds'
Custodian. See the Account Application or call 1-888-MERRMAC for instructions
on how to make payment for shares to the Custodian. Shareholders may also
make general inquiries by calling 1-888-MERRMAC.

INVESTMENT MINIMUM. The minimum initial investment for Premium Class shares
of the Funds is $10 million. Institutions may satisfy the minimum investment
by aggregating their fiduciary accounts. The minimum initial investment for
Institutional Class and Investment Class shares is $10,000. Subsequent
purchases may be in any amount. Each Fund reserves the right to waive the
minimum

<PAGE>

initial investment. When a Premium Class shareholder's account balance falls
below $1 million due to redemption, a Fund may close the account. Such
shareholders will be notified if the minimum balance is not being maintained
and will be allowed 60 days to make additional investments before the account
is closed.

Share purchase orders are deemed to be in good order on the date a Fund
receives a completed Account Application (and other documents required by the
Trust) and federal funds become available to the Fund in the Fund's account
with Investors Bank.

Purchases may be made only by wire. Wiring instructions for purchases of
shares of a Fund are as follows:

Investors Bank & Trust Company
ABA #: 011001438
Attn: [Name of Fund]
DDA #: 717171333
Name of Account
Account #
Amount of Wire:

A bank may impose a charge to execute a wire transfer. A purchaser must call
1-888-MERRMAC to inform Investors Bank of an incoming wire transfer. A
purchase order for shares received in proper form by 4:00 p.m. (ET) for the
Cash Series, the Treasury Plus Series and the U.S. Government Series, by 2:00
p.m. (ET) for the Treasury Series, and by the close of trading on the New
York Stock Exchange (NYSE) (normally 4:00 p.m. (ET)), for the STAR Series, on
a Business Day will be executed at the NAV per share next determined after
receipt of the order, provided that Investors Bank receives the wire by the
close of business on the day the purchase order is received. A Business Day
is any day on which both the NYSE and the New York Federal Reserve Bank are
open, except that the STAR Series is open on any day on which the NYSE is
open. Purchase orders received after 4:00 p.m. (ET) for the Cash Series, the
Treasury Plus Series and the U.S. Government Series, after 2:00 p.m. (ET) for
the Treasury Series, and after the close of trading on the NYSE for the STAR
Series will be effected on the next Business Day if cleared funds are
received before the close of business on the next Business Day. Purchase
orders for shares for which payment has not been received by the close of
business will not be accepted, and notice thereof will be given to the
purchaser. The Cash Series, the Treasury Plus Series and the U.S. Government
Series also may limit the amount of a purchase order received between 3:00
p.m. (ET) and 4:00 p.m. (ET).

On days when the financial markets close early, such as the day after
Thanksgiving and Christmas Eve, all purchase orders must be received by the
close of trading on the NYSE for the STAR Series and by 12:00 noon (ET) for
the other Funds.

Each Fund reserves the right in its sole discretion (i) to suspend the
offering of a Fund's shares, (ii) to reject purchase orders; and (iii) to
modify or eliminate the minimum initial investment in Fund shares. Purchase
orders may be refused if, for example, they are of a size that could disrupt
management of a Portfolio.

> REDEMPTIONS

Shareholders may redeem all or a portion of their shares on any Business Day.
Shares will be redeemed at the NAV next determined after Investors Bank has
received a proper notice of redemption as described below. If notice of
redemption is received prior to 4:00 p.m. (ET) for the Cash Series, the
Treasury Plus Series and the U.S. Government Series, prior to 2:00 p.m. (ET)
for the Treasury Series, and prior to the close of trading on the NYSE for
the STAR Series, on a Business Day, the redemption will be effective on the
date of receipt. Proceeds of the redemption will ordinarily be made by wire
on the date of receipt, but in any event within three Business Days from the
date of receipt.

Shareholder redemption requests received after 4:00 p.m. (ET) for the Cash
Series, the Treasury Plus Series and the U.S. Government Series, after 2:00
p.m. (ET) for the Treasury Series, and after the close of trading on the
NYSE, for the STAR Series, on a Business Day, will ordinarily receive payment
by wire on the next Business Day, but, in any event, within four Business
Days from the date of receipt of a proper notice of redemption, except for
the STAR Series wherein payment will ordinarily be received by wire on the
second Business Day after the date of receipt, but in any event within four
Business Days from the date of receipt. All redemption requests regarding
shares of the Cash Series, the Treasury Plus Series and the U.S. Government
Series placed between 3:00 p.m. and 4:00 p.m. (ET) may only be placed by
telephone.

Each Fund reserves the right in its sole discretion to suspend redemptions or
postpone payments when the NYSE is closed or when trading is restricted for
any reason or under emergency circumstances as determined by the SEC. The
Cash Series, the Treasury Plus Series and the U.S. Government Series each
reserve the right to postpone payments for redemption requests received
between 3:00 p.m. and 4:00 p.m. (ET) until the next Business Day.

On days when the financial markets close early, such as the day after
Thanksgiving and Christmas Eve, all redemption orders must be received by the
close of trading on the NYSE for the STAR Series and by 12:00 noon (ET) for
the other Funds.

A shareholder may elect to receive payment in the form of a wire or check.
There is no charge imposed by a Fund to redeem shares; however, in the case
of redemption by wire, a shareholder's bank may impose its own wire transfer
fee for receipt of the wire.

REDEMPTION BY WIRE. To redeem shares by wire, a shareholder or any authorized
agent (so designated on the Account Application) must provide Investors Bank
with the dollar amount to be redeemed, the account to which the redemption
proceeds should be wired (such account must have been previously designated
by the shareholder on its Account Application, the name of the shareholder
and the shareholder's account number).

A shareholder may change its authorized agent, the address of record or the
account designated to receive redemption proceeds at any time by writing to
Investors Bank with a signature guaranteed by a national bank which is a
member firm of any national or regional securities exchange (a Signature
Guarantee). If the guarantor institution belongs to one of the Medallion
Signature Programs, it must use the specific Medallion "Guaranteed" stamp.
Notarized signatures are not sufficient. Further documentation may be
required when Investors Bank deems it appropriate.

REDEMPTION BY MAIL. A shareholder who desires to redeem shares by mail may do
so by mailing proper notice of redemption directly to Investors Bank, ATTN:
Transfer Agency, OPS 22, P.O. Box 9130, Boston, MA 02117-9130. Proper notice
of redemption includes written notice requesting redemption along with the
signature of all persons in whose names the shares are registered, signed
exactly as the shares are registered. In certain instances, Investors Bank
may require additional documents such as trust instruments or certificates of
corporate authority. Payment will be mailed to the address of record within
seven days of receipt of a proper notice of redemption.

TELEPHONE REDEMPTION. A shareholder may request redemption by calling
Investors Bank at 1-888-MERRMAC. The telephone redemption option is made
available to shareholders of a Fund on the Account Application. Each Fund
reserves the right to refuse a telephone request for redemption if it
believes that it is advisable to do so. Procedures for redeeming shares by
telephone may be modified or terminated at any time by a Fund. Neither the
Funds nor Investors Bank will be liable for following redemption instructions
received by telephone that are reasonably believed to be genuine, and the
shareholder will bear the risk of loss in the event of unauthorized or
fraudulent telephone instructions. Each Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are
genuine. A Fund may be liable for any losses due to unauthorized or
fraudulent instructions in the absence of following these procedures. Such
procedures may include requesting personal identification information or
recording telephone conversations. Redemption checks will be made payable to
the registered shareholder(s) and sent to the address of record on file with
Investors Bank. Payments by wire will only be made to the registered
shareholder through pre-existing bank account instructions.

No bank instruction changes will be accepted over the telephone. See
Redemption By Wire for information on how to change bank instructions.

> VALUATION OF SHARES

Each Fund offers its shares at the NAV per share of the Fund, as determined
once each Business Day. This determination is made as of 4:00 p.m. (ET) for the
Cash Series, the Treasury Plus Series and the U.S. Government Series, as of
2:00 p.m. (ET) for the Treasury Series, and as of the close of trading on the
NYSE (normally 4:00 p.m. (ET)) for the STAR Series. Securities purchased by the
Cash Portfolio, Treasury Portfolio, Treasury Plus Portfolio and U.S. Government
Portfolio are stated at amortized cost, which approximates market value.
Securities purchased by the STAR Portfolio are stated at either amortized cost
or market value depending on the nature of the security. If market quotations
are not readily available, the STAR Portfolio may value its assets by a method
that its Trustees believe accurately reflects fair value. If the STAR Portfolio
uses fair value to price securities, it may value those securities higher or
lower than another mutual fund that uses market quotations. For more
information on how securities are valued, see the Statement of Additional
Information (SAI).

<PAGE>

> DIVIDENDS AND DISTRIBUTIONS

Each Fund intends to declare as a dividend substantially all of its net
investment income at the close of each Business Day and will pay such
dividends monthly. Substantially all of a Fund's distributions will be from
net investment income. Shareholders of the Cash Series, the Treasury Series,
the Treasury Plus Series and the U.S. Government Series shall be entitled to
receive dividends on the Business Day their purchase is effected but shall
not receive dividends on the Business Day that their redemption is effected.
Shareholders of the STAR Series shall be entitled to receive dividends on the
next Business Day after their purchase is effected through the Business Day
that their redemption is effected. Distributions of net capital gains, if
any, are made annually at the discretion of the officers of the Fund.
Dividends and/or capital gain distributions will be reinvested automatically
in additional shares of a Fund at NAV and such shares will be automatically
credited to a shareholder's account, unless a shareholder elects to receive
either dividends or capital gains distributions (or both) in cash.
Shareholders may change their distribution option at any time by writing to
Investors Bank with a Signature Guarantee prior to the record date of any
such dividend or distribution.

> FEDERAL TAXES

TRANSACTIONS TAX STATUS

Sales or exchanges of shares. Usually capital gain or loss. Tax rate
depends on how long shares are held.

Distributions of long-term Taxable as long-term capital gain.
capital gain.

Distributions of short-term Taxable as ordinary income.
capital gain.

Dividends from net investment Taxable as ordinary income.
income.

</TABLE>

Every January, the Funds provide information to their shareholders about the
Funds' dividends and distributions, which are taxable even if reinvested, and
about the shareholders' redemptions during the previous calendar year. Any
shareholder who does not provide the Funds with a correct taxpayer
identification number and required certification may be subject to federal
backup withholding tax.

Shareholders should generally avoid investing in a Fund shortly before an
expected taxable dividend or capital gain distribution. Otherwise, a
shareholder may pay taxes on dividends or distributions that are economically
equivalent to a partial return of the shareholder's investment.

Shareholders should consult their tax advisers about their own particular tax
situations.

> CLASS EXPENSES AND DISTRIBUTION AND SHAREHOLDER SERVICING PLANS

Assets of the Premium Class shares of each Fund are not subject to a 12b-1
(Distribution) or shareholder servicing fee. Assets of the Institutional
Class shares of each Fund are subject to a shareholder servicing fee of up to
0.25% of ANA. Assets of the Investment Class shares of each Fund are subject
to a Distribution fee of up to 0.25% of ANA.

The Institutional Class of each Fund offers shares through certain financial
intermediaries, including Investors Bank (Service Organizations), which have
entered into shareholder servicing agreements with each Fund. Service
Organizations agree to perform certain shareholder servicing, administrative
and accounting services for their clients and customers who are beneficial
owners of Fund shares. The Board of Trustees has approved a Distribution Plan
with respect to the Investment Class shares of each Fund. Under the
Distribution Plan, the Distribution Agent is entitled to receive a fee (as
set forth above) from each Fund with respect to the assets contributed to
such Fund by shareholders who are clients or customers of the Distribution
Agent. Because these fees are paid out of Fund assets on an ongoing basis,
over time the cost of investing in the Funds may cost more than paying other
types of sales charges.

> MASTER/FEEDER STRUCTURE

The Funds are "feeder" funds that invest exclusively in corresponding
"master" portfolios with identical investment objectives. The master
portfolio may accept investments from multiple feeder funds, which bear the
master portfolio's expenses in proportion to their assets.

<PAGE>

Each feeder fund and its master portfolio expect to maintain consistent
investment objectives, but if they do not, a Fund will withdraw from the
master portfolio, receiving either cash or securities in exchange for its
interest in the master portfolio. The Trustees would then consider whether a
Fund should hire its own investment adviser, invest in a different portfolio,
or take other action.

> YEAR 2000 READINESS

Like other mutual funds, governmental and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by the Investors Bank, AAM, M&I, Standish and other
service providers do not properly process and calculate date-related
information from and after January 1, 2000. Each of the above entities is
taking steps that it believes are reasonably designed to address Year 2000
Readiness with respect to computer systems that it uses and to obtain
reasonable assurances that comparable steps are being taken by the Funds'
other major service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact to
the Funds.

<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Funds'
financial performance since the Funds commenced operations. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Ernst & Young LLP for the Funds and the Cash
and Treasury Portfolios (and by PricewaterhouseCoopers LLP for the Standish
Portfolio), whose reports, along with the Funds' financial statements, are
included in the annual report, which is available upon request.

Selected data for a share of beneficial interest outstanding throughout the
period is presented below:

SHORT-TERM
TREASURY ASSET RESERVE
CASH SERIES SERIES SERIES
--------------- -------------- -----------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JUNE 25, 1998 JUNE 25, 1998 AUGUST 7, 1998
(COMMENCEMENT OF (COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) OPERATIONS) OPERATIONS)
TO DECEMBER 31, 1998 TO DECEMBER 31, 1998 TO DECEMBER 31, 1998
--------------------- -------------------- --------------------
--------------------- -------------------- --------------------
PREMIUM INSTITUTIONAL INSTITUTIONAL PREMIUM
CLASS CLASS CLASS CLASS
------- ------------- -------------------- --------------------

Net asset
value,
beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 10.00
------- ------------- -------------------- --------------------

Net investment
income . . . 0.0275 0.0262 0.0220 0.235

Dividends from
net investment
income . . . (0.0275) (0.0262) (0.0220) (0.235)

Net realized
and unrealized
loss on
investments -- -- -- (0.030)
------- ------------- -------------------- --------------------

Net asset
value,
end of period $ 1.00 $ 1.00 $ 1.00 $ 9.97
------- ------------- -------------------- --------------------
------- ------------- -------------------- --------------------

Total Return
(1) . . . . 5.41% 5.15% 4.31% 5.22%

Annualized
Ratios to
Average Net
Assets/
Supplemental
Data . . . .
Net expenses 0.33% 0.58% 0.67% 0.36%
Net investment
income . . 5.28% 5.03% 4.23% 5.80%
Net expenses,
before waivers
and
reimbursements0.34% 0.59% -- 1.36%
Net assets, end
of period (000s
omitted) . . $ 100 $115,127 $ 114,321 $ 1,008

(1) TOTAL RETURN IS CALCULATED ASSUMING A PURCHASE AT THE NAV ON THE FIRST DAY
AND A SALE AT THE NAV ON THE LAST DAY OF EACH PERIOD REPORTED. DIVIDENDS
AND DISTRIBUTIONS ARE ASSUMED REINVESTED AT THE NAV ON THE PAYABLE DATE.
TOTAL RETURN IS COMPUTED ON AN ANNUALIZED BASIS.

</TABLE>

<PAGE>

APPENDIX A

THE FOLLOWING ARE DESCRIPTIONS OF CERTAIN TYPES OF SECURITIES IN WHICH THE
PORTFOLIOS' MAY INVEST:

ASSET-BACKED SECURITIES. The Cash Portfolio and the STAR Portfolio may invest
in asset-backed securities. The principal and interest payments on asset-backed
securities are collateralized by pools of assets such as credit card
receivables and categories of receivables, leases, installment sales or loan
contracts and personal property. Such asset pools are securitized through the
use of special purpose trusts or corporations. Payments or distributions of
principal and interest on asset-backed securities may be guaranteed up to
certain amounts and for a certain time period by a letter of credit or a pool
insurance policy issued by a financial institution; however, privately issued
obligations collateralized by a portfolio of privately issued asset-backed
securities do not involve any government-related guaranty or insurance.
Asset-backed securities are especially sensitive to prepayment and extension
risk.

COMMERCIAL PAPER. The Cash Portfolio and the STAR Portfolio may invest in
commercial paper, which is the term used to designate unsecured short-term
promissory notes issued by corporations and other entities. The Cash Portfolio
and the STAR Portfolio may invest in commercial paper with maturities which
vary from a few days to nine months. The Cash Portfolio and the STAR Portfolio
may also purchase U.S. dollar-denominated commercial paper of a foreign issuer
rated in the highest or second highest rating categories by at least two
NRSROs. The STAR Portfolio may purchase U.S. dollar denominated commercial
paper of U.S. and foreign issuers rated A-2 by Moody's or P-2 or Duff-2 by
Standard & Poor's, Duff or Fitch.

CORPORATE DEBT OBLIGATIONS. Subject to their respective credit quality and
maturity limitations, the Cash Portfolio and the STAR Portfolio may invest in
corporate bonds, including obligations of industrial, utility, banking and
other financial issuers.

EURODOLLAR AND YANKEE DOLLAR INVESTMENTS. The Cash Portfolio and the STAR
Portfolio may invest in Eurodollar and Yankee Dollar instruments. Eurodollar
instruments are bonds of foreign corporate and government issuers that pay
interest and principal in U.S. dollars held in banks outside the United States,
primarily in Europe. Yankee Dollar instruments are U.S. dollar denominated
bonds typically issued in the U.S. by foreign governments and their agencies
and foreign banks and corporations.

MORTGAGE-BACKED SECURITIES. The STAR Portfolio may invest in privately issued
mortgage-backed securities and mortgage-backed securities issued or guaranteed
by the U.S. Government or any of its agencies, instrumentalities or sponsored
enterprises, including, but not limited to, the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Corporation ("FHLMC"). Mortgage-backed
securities represent direct or indirect participations in, or are
collateralized by and payable from, mortgage loans secured by real property.

GNMA securities are backed by the full faith and credit of the U.S. Government,
which means that the U.S. Government guarantees that the interest and principal
will be paid when due. FNMA securities and FHLMC securities are not backed by
the full faith and credit of the U.S. Government; however, these enterprises
have the ability to obtain financing from the U.S. Treasury. See the SAI for
additional descriptions of GNMA, FNMA and FHLMC certificates.

Mortgage-related securities are especially sensitive to prepayment and
extension risk. For mortgage derivatives and structured securities that have
imbedded leverage features, small changes in interest or prepayment rates may
cause large and sudden price movements. Mortgage derivatives can also become
illiquid and hard to value in declining markets. The STAR Portfolio may use
mortgage dollar rolls to finance the purchase of additional investments. Dollar
rolls expose the STAR Portfolio to the risk that it will lose money if the
additional investments do not produce enough income to cover the STAR
Portfolio's dollar roll obligations.

REPURCHASE AGREEMENTS. Each Portfolio, other than the Treasury Portfolio, may
enter into repurchase agreements, which are agreements by which a person
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. In substance, a
repurchase agreement is a loan by the applicable Portfolio collateralized with
securities. Such lending Portfolio's Custodian or its agent will hold the
security as collateral for the repurchase agreement. All repurchase
transactions must be collateralized initially at a value at least equal to 102%
of the repurchase price and counterparties are required to deliver additional
collateral in the event the market value of the collateral falls below 100%.
The repurchase transactions entered into by the Treasury Plus Portfolio and the
U.S. Government Portfolio must be collateralized by securities issued by the
U.S. Government.

RESTRICTED AND ILLIQUID SECURITIES. Each Portfolio may invest in illiquid
securities. Illiquid securities are those that are not readily marketable,
repurchase agreements maturing in more than seven days, time deposits with a
notice or demand period of more than seven days and certain restricted
securities. Based upon continuing review of the trading markets for a specific
restricted security, the security may be determined to be

<PAGE>

eligible for resale to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933 and, therefore, to be liquid. Also, certain
illiquid securities may be determined to be liquid if they are found to satisfy
certain relevant liquidity requirements.

SECURITIES LENDING. Each Portfolio may lend up to 33 1/3% of its portfolio of
securities pursuant to agreements requiring that the loan be continuously
secured by cash or equivalent collateral or by a letter of credit or bank
guarantee in favor of the Portfolio at least equal at all times to 100% of the
market value plus accrued interest on the securities lent. The Portfolio will
continue to receive interest on the securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Collateral is
marked to market daily. Loans are subject to termination by the Portfolio or
the borrower at any time and are, therefore, not considered to be illiquid
investments.

VARIABLE AND FLOATING RATE INSTRUMENTS. Certain of the obligations purchased by
each Portfolio may carry variable or floating rates of interest and may include
variable amount master demand notes. A floating rate security provides for the
automatic adjustment of its interest rate whenever a specified interest rate
changes. A variable rate security provides for the automatic establishment of a
new interest rate on set dates. Variable and floating rate instruments may
include variable amount master demand notes that permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate. There may be no active secondary market with respect to a
particular variable or floating rate instrument. Nevertheless, the periodic
readjustments of their interest rates tend to assure that their value to such
Portfolios will approximate their par value. Further, some of the demand
instruments purchased by such Portfolios derive their liquidity from the
ability of the holder to demand repayment from the issuer or from a third party
providing credit support. The creditworthiness of issuers of variable and
floating rate instruments and their ability to repay principal and interest
will be continuously monitored by AAM or M&I, as applicable.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each Portfolio may invest in
when-issued and delayed delivery securities, which are securities purchased for
delivery beyond the normal settlement date at a stated price and yield, thereby
involving the risk that the yield obtained will be less then that available in
the market at delivery. The purchase of securities on a when-issued or delayed
delivery basis has the effect of leveraging. When such a security is purchased,
the Custodian will set aside cash or liquid securities to satisfy the purchase
commitment unless the relevant Portfolio has entered into an offsetting
agreement to sell the securities. These segregated securities will be valued at
market, and additional cash or securities will be segregated if necessary so
that the market value of the account will continue to satisfy the purchase
commitment. Such Portfolios generally will not pay for such securities or earn
interest on them until received. The Portfolios will only purchase when-issued
and delayed delivery securities for the purpose of acquiring portfolio
securities and not for speculative purposes. However, such Portfolios may sell
these securities or dispose of the commitment before the settlement date if it
is deemed advisable as a matter of investment strategy.

ZERO COUPON AND DEFERRED PAYMENT SECURITIES. The Cash Portfolio and the STAR
Portfolio may invest in zero coupon and deferred payment securities. Zero
coupon securities are securities sold at a discount to par value and on which
interest payments are not made during the life of the security. Upon maturity,
the holder is entitled to receive the par value of the security. A Portfolio is
required to accrue income with respect to these securities prior to the receipt
of cash payments. Because the Cash Series, U.S. Government Series and STAR
Series will each distribute its share of this accrued income to shareholders,
to the extent that the shareholders and shareholders of other mutual funds that
invest in the Cash Portfolio or STAR Portfolio elect to receive dividends in
cash rather than reinvesting such dividends in additional shares, the Cash
Portfolio and STAR Portfolio will have fewer assets with which to purchase
income producing securities. Deferred payment securities are securities that
remain zero coupon securities until a predetermined date, at which time the
stated coupon rate becomes effective and interest becomes payable at regular
intervals. The Treasury Portfolio, the Treasury Plus Portfolio and the U.S.
Government Portfolio may invest in zero coupon treasury securities.

LOAN PARTICIPATIONS. The Cash Portfolio may invest in loan participations,
which represent a participation in a corporate loan of a commercial bank. Such
loans must be to corporations in whose obligations the Cash Portfolio may
invest. Since the issuing bank does not guarantee the participations in any
way, they are subject to the credit risks generally associated with the
underlying corporate borrower. It may be necessary under the terms of the loan
participation for the Cash Portfolio to assert through the issuing bank such
rights as may exist against the corporate borrower, in the event the underlying
corporate borrower fails to pay principal and interest when due. In such
circumstances, the Cash Portfolio may be subject to delays, expenses and risks
that are greater than if the Cash Portfolio had purchased a direct obligation
(such as commercial paper) of such borrower. Further, under the terms of the
loan participation, the Cash Portfolio may be regarded as a creditor of the
issuing bank (rather than the underlying corporate borrower), so that the Cash
Portfolio may also be subject to the risk that the issuing bank may become
insolvent. The secondary market for loan participations is extremely limited,
and therefore loan participations purchased by the Cash Portfolio are generally
regarded as illiquid.

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MERRIMAC SERIES
MERRIMAC CASH SERIES
MERRIMAC TREASURY SERIES
MERRIMAC TREASURY PLUS SERIES
MERRIMAC U.S. GOVERNMENT SERIES
MERRIMAC SHORT-TERM ASSET RESERVE SERIES

For investors who want more information about the Funds, the following
documents are available free upon request:

STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds and is legally a part of this prospectus.

ANNUAL/SEMI-ANNUAL REPORTS: The Funds' and the Portfolios' annual and
semi-annual reports provide additional information about the Portfolios'
investments. In the STAR Portfolio's annual report you will find a discussion
of the market conditions and investment strategies that significantly affected
the STAR Fund's performance during its last fiscal year.

You can get free copies of the SAI, the reports, other information and answers
to your questions about the Funds by contacting the Funds' at 1-888-MERRMAC.
You can also view the Funds' SAI and the reports at the Public Reference Room
of the SEC.

For a fee, you can get text-only copies by writing to the Public Reference Room
of the SEC, Washington, D.C. 20549-6009. You can also call 1-800-SEC-0330.

You can also view the SAI and receive the reports free from the SEC's Internet
website at http://www.sec.gov.

Distributed by Funds Distributor Inc.

Investment Company Act o File No. 811-08741

<PAGE>

MERRIMAC SERIES

Merrimac Cash Series
Merrimac Treasury Series
Merrimac Treasury Plus Series
Merrimac U.S. Government Series
Merrimac Short-Term Asset Reserve Series

STATEMENT OF ADDITIONAL INFORMATION
May 3, 1999, Supplemented June 2, 1999

This Statement of Additional Information (the "SAI") is not a Prospectus, but
it relates to the Prospectus of Merrimac Series dated May 3, 1999, supplemented
June 2, 1999. Financial Statements are incorporated by reference into this SAI
from the Funds' most recent Annual Report. You can get a free copy of the
Prospectus for the Merrimac Series or the Funds' most recent annual and
semi-annual reports, request other information and discuss your questions about
the Funds by contacting the Funds at 1-888-MERRMAC.

You can view the Funds' Prospectus as well as other reports at the Public
Reference Room of the Securities and Exchange Commission ("SEC").

You can get text-only copies for a fee by calling the SEC at 1-800-SEC-0330 or
for free from the SEC's Internet website at http://www.sec.gov.

TABLE OF CONTENTS

Page Page

Fund History 2 Capital Stock 28
Description of the Funds, Their Purchase, Redemption and
Investments and Risks 2 Valuation of Shares 29
Classification 2 Purchase and Redemption of
Investment Strategies and Risks 3 Shares 29
Fund Policies 15 Valuation of Shares 30
Management of the Trusts 18 Taxation of the Trust 31
Control Persons 22 Calculation of Performance Data 34
Investment Advisory and Other Independent Auditors 37
Services 22
Investment Advisers and Counsel 37
Subadvisers 22
Distributor 24
Distribution and Shareholder
Servicing Plans 24
Administrator, Transfer Agent,
Custodian and Fund Accountant 25
Brokerage Allocation and Other Financial Statements 37
Practices 26
Portfolio Turnover 27 Appendix 38

</TABLE>

<PAGE>

FUND HISTORY

Merrimac Series (the "Trust") is composed of five funds: Merrimac Cash Series
("Cash Series"), Merrimac Treasury Series ("Treasury Series"), Merrimac
Treasury Plus Series ("Treasury Plus Series"), Merrimac U.S. Government Series
("Government Series") and Merrimac Short-Term Asset Reserve Series ("STAR
Series") each, a "Fund" and collectively, the "Funds").

The Trust is a business trust organized under the laws of the State of Delaware
pursuant to a Master Trust Agreement dated March 30, 1998, as amended, and
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act").

The Merrimac Cash Portfolio ("Cash Portfolio"), the Merrimac Treasury Portfolio
("Treasury Portfolio"), the Merrimac Treasury Plus Portfolio ("Treasury Plus
Portfolio") and the Merrimac U.S. Government Portfolio ("Government Portfolio")
are each a series or sub-trust of the Merrimac Master Portfolio (the "Portfolio
Trust"), a common law trust organized under New York law on October 30, 1996,
registered as an open-end management investment company under the 1940 Act. The
Standish Short-Term Asset Reserve Portfolio ("STAR Portfolio") is a series of
the Standish, Ayer & Wood Master Portfolio (the "Standish Portfolio Trust")
which, like the Trust and the Portfolio Trust, is an open-end management
investment company registered under the 1940 Act. The Standish Portfolio Trust
was organized as a master trust fund under the laws of the State of New York on
January 18, 1996.

The Cash Portfolio, Treasury Portfolio, Treasury Plus Portfolio, Government
Portfolio and STAR Portfolio are collectively referred to as (the
"Portfolios").

This SAI is not a prospectus and is only authorized for distribution when
preceded or accompanied by the Trust's current Prospectus dated May 3, 1999,
supplemented June 2, 1999 (the "Prospectus"). This SAI supplements and should
be read in conjunction with the Prospectus, a copy of which may be obtained
without charge by calling 1-888-MERRMAC. This SAI is not an offer of any Fund
for which an investor has not received a Prospectus.

DESCRIPTION OF THE FUNDS, THEIR INVESTMENTS AND RISKS

CLASSIFICATION

Each Fund is a diversified open-end, management investment company and a
separate series of the Trust.

MASTER/FEEDER STRUCTURE. Cash Series invests all of its investable assets in
the Cash Portfolio. Treasury Series invests all of its investable assets in the
Treasury Portfolio. Treasury Plus Series invests all of its investable assets
in the Treasury Plus Portfolio. Government Series invests all of its investable
assets in the Government Portfolio. STAR Series invests all of its investable
assets in the STAR Portfolio. All five Funds are sometimes referred to in this
SAI as feeder funds.

Each Portfolio has the same investment objective and restrictions as its
corresponding Fund. Because the feeder funds invest all of their investable
assets in their corresponding Portfolios, the description of each Fund's
investment policies, techniques, specific investments and related risks that
follows also applies to the corresponding Portfolio.

<PAGE>

In addition to these feeder funds, other feeder funds may invest in these
Portfolios, and information about the other feeder funds is available by
calling 1-888-637-7622 for the Cash Portfolio, Treasury Portfolio, Treasury
Plus Portfolio and Government Portfolio and 1-800-221-4795 for the STAR
Portfolio. The other feeder funds invest in the Portfolios on the same terms as
the Funds and bear a proportionate share of the Portfolio's expenses. The other
feeder funds may sell shares on different terms and under a different pricing
structure than the Funds, which may produce different investment results.

There are certain risks associated with an investment in a master-feeder
structure. Large scale redemptions by other feeder funds in a Portfolio may
reduce the diversification of a Portfolio's investments, reduce economies of
scale and increase a Portfolio's operating expenses. If the Portfolio Trust's
Board of Trustees approves a change to the investment objective of a Portfolio
that is not approved by the Trust's Board of Trustees, a Fund would be required
to withdraw its investment in the Portfolio and engage the services of an
investment adviser or find a substitute master fund. Withdrawal of a fund's
interest in its Portfolio, which may be required by the Trust's Board of
Trustees without shareholder approval, might cause the fund to incur expenses
it would not otherwise be required to pay.

INVESTMENT STRATEGIES AND RISKS

MATURITY AND DURATION. The effective maturity of an individual portfolio
security in which the STAR Portfolio invests is defined as the period remaining
until the earliest date when the Portfolio can recover the principal amount of
such security through mandatory redemption or prepayment by the issuer, the
exercise by the Portfolio of a put option, demand feature or tender option
granted by the issuer or a third party or the payment of the principal on the
stated maturity date. The effective maturity of variable rate securities is
calculated by reference to their coupon reset dates. Thus, the effective
maturity of a security may be substantially shorter than its final stated
maturity. Unscheduled prepayments of principal have the effect of shortening
the effective maturities of securities in general and mortgage-backed
securities in particular. Prepayment rates are influenced by changes in current
interest rates and a variety of economic, geographic, social and other factors
and cannot be predicted with certainty. In general, securities, such as
mortgage-backed securities, may be subject to greater prepayment rates in a
declining interest rate environment. Conversely, in an increasing interest rate
environment, the rate of prepayment may be expected to decrease. A higher than
anticipated rate of unscheduled principal prepayments on securities purchased
at a premium or a lower than anticipated rate of unscheduled payments on
securities purchased at a discount may result in a lower yield (and total
return) to the Portfolio than was anticipated at the time the securities were
purchased. The Portfolio's reinvestment of unscheduled prepayments may be made
at rates higher or lower than the rate payable on such security, thus affecting
the return realized by the Portfolio.

Duration of an individual portfolio security is a measure of the security's
price sensitivity taking into account expected cash flow and prepayments under
a wide range of interest rate scenarios. In computing the duration of its
portfolio, the Portfolio will have to estimate the duration of obligations that
are subject to prepayment or redemption by the issuer taking into account the
influences of interest rates on prepayments and coupon flows. The STAR
Portfolio may use various techniques to shorten or lengthen the option-adjusted
duration of its portfolio, including the acquisition of debt obligations at a
premium or discount, the use of mortgage swaps and interest rate swaps, caps,
floors and collars.

<PAGE>

MONEY MARKET INSTRUMENTS AND REPURCHASE AGREEMENTS. The money market
instruments in which the Cash Portfolio and the STAR Portfolio invest include
short-term U.S. Government securities (defined below), 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. The Treasury Portfolio invests
only in direct obligations of the U.S. Treasury and the Treasury Plus Portfolio
invests substantially all of its assets in direct obligations of the U.S.
Treasury in U.S. Government Securities and in repurchase agreements. The
Government Portfolio invests substantially all of its assets in short-term U.S.
Government Securities (defined below) 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 U.S. 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 ("FNMA").

A repurchase agreement is an agreement under which a Portfolio acquires money
market instruments (generally U.S. Government Securities) from a 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
a Portfolio and is unrelated to the interest rate on the instruments. The
instruments acquired by a Portfolio (including accrued interest) must have an
aggregate market value in excess of the resale price and will be held by the
custodian bank for the Portfolio until they are repurchased. The Board of
Trustees of the Portfolio Trust and the Standish Portfolio Trust will monitor
the standards that the investment adviser or sub-adviser will use in reviewing
the creditworthiness of any party to a repurchase agreement with a Portfolio.
See "Investment Advisory Services" for information regarding the investment
adviser and sub-adviser.

The use of repurchase agreements involves certain risks. For example, if the
seller defaults on its obligation to repurchase the instruments acquired by a
Portfolio at a time when their market value has declined, a 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 a Portfolio are collateral for a loan by a Portfolio
and therefore are subject to sale by the trustee in bankruptcy. Finally, it is
possible that a Portfolio may not be able to substantiate its interest in the
instruments it acquires. It is expected that these risks can be controlled
through careful documentation and monitoring.

STRUCTURED OR HYBRID NOTES. The STAR Portfolio may invest in structured or
hybrid notes. It is expected that not more than 5% of the Portfolio's net
assets will be at risk as a result of such investments. In addition to the
risks associated with a direct investment in the benchmark asset, investments
in structured and hybrid notes involve the risk that the issuer or counterparty
to the obligation will fail to perform its contractual obligations. Certain
structured or hybrid notes may also be leveraged to the extent that the
magnitude of any change in the interest rate or principal payable on the
benchmark asset is a multiple of the change in the reference price. Leverage
enhances the price volatility of the security and, therefore, the Portfolio's
net asset value ("NAV"). Further, certain structured or hybrid notes may be
illiquid for purposes of the STAR Portfolio's limitation on investments in
illiquid securities.

<PAGE>

MORTGAGE-RELATED OBLIGATIONS. The STAR Portfolio may invest in mortgage-related
obligations. Some of the characteristics of mortgage-related obligations and
the issuers or guarantors of such securities are described below.

LIFE OF MORTGAGE-RELATED OBLIGATIONS. The average life of mortgage-related
obligations is likely to be substantially less than the stated maturities of
the mortgages in the mortgage pools underlying such securities. Prepayments or
refinancing of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of the principal invested long before
the maturity of the mortgages in the pool.

As prepayment rates of individual mortgage pools will vary widely, it is not
possible to predict accurately the average life of a particular issue of
mortgage-related obligations. However, with respect to Government National
Mortgage Association ("GNMA") Certificates, statistics published by the Federal
Housing Administration ("FHA") are normally used as an indicator of the
expected average life of an issue. The actual life of a particular issue of
GNMA Certificates, however, will depend on the coupon rate of the financing.

GNMA CERTIFICATES. The GNMA was established in 1968 when the Federal National
Mortgage Association ("FNMA") was separated into two organizations, GNMA and
FNMA. GNMA is a wholly-owned government corporation within the Department of
Housing and Urban Development. GNMA developed the first mortgage-backed
pass-through instruments in 1970 for Farmers Home Administration-FHMA-insured,
FHA-insured and for Veterans Administration- or VA-guaranteed mortgages
("government mortgages").

GNMA purchases government mortgages and occasionally conventional mortgages to
support the housing market. GNMA is known primarily, however, for its role as
guarantor of pass-through securities collateralized by government mortgages.
Under the GNMA securities guarantee program, government mortgages that are
pooled must be less than one year old by the date GNMA issues its commitment.
Loans in a single pool must be of the same type in terms of interest rate and
maturity. The minimum size of a pool is $1 million for single-family mortgages
and $500,000 for manufactured housing and project loans.

Under the GNMA II program, loans with different interest rates can be included
in a single pool and mortgages originated by more than one lender can be
assembled in a pool. In addition, loans made by a single lender can be packaged
in a custom pool (a pool containing loans with specific characteristics or
requirements).

GNMA GUARANTEE. The National Housing Act authorizes GNMA to guarantee the
timely payment of principal of and interest on securities backed by a pool of
mortgages insured by FHA or FHMA, or guaranteed by VA. The GNMA guarantee is
backed by the full faith and credit of the United States. GNMA is also
empowered to borrow without limitation from the U.S. Treasury if necessary to
make any payments required under its guarantee.

YIELD CHARACTERISTICS OF GNMA CERTIFICATES. The coupon rate of interest on GNMA
Certificates is lower than the interest rate paid on the VA-guaranteed,
FHMA-insured or FHA-insured mortgages underlying the Certificates, but only by
the amount of the fees paid to GNMA and the issuer. For the most common type of
mortgage pool, containing single-family dwelling mortgages, GNMA receives an
annual fee of 0.06% of the outstanding principal for providing its guarantee,
and the issuer is paid an

<PAGE>

annual fee of 0.44% for assembling the mortgage pool and for passing through
monthly payments of interest and principal to GNMA Certificate holders.

The coupon rate by itself, however, does not indicate the yield which will be
earned on the GNMA Certificates for several reasons. First, GNMA Certificates
may be issued at a premium or discount, rather than at par, and, after
issuance, GNMA Certificates may trade in the secondary market at a premium or
discount. Second, interest is paid monthly, rather than semi-annually as with
traditional bonds. Monthly compounding has the effect of raising the effective
yield earned on GNMA Certificates. Finally, the actual yield of each GNMA
Certificate is influenced by the prepayment experience of the mortgage pool
underlying the GNMA Certificate. If mortgagors prepay their mortgages, the
principal returned to GNMA Certificateholders may be reinvested at higher or
lower rates.

MARKET FOR GNMA CERTIFICATES. Since the inception of the GNMA mortgage-backed
securities program in 1970, the amount of GNMA Certificates outstanding has
grown rapidly. The size of the market and the active participation in the
secondary market by securities dealers and many types of investors make the
GNMA Certificates a highly liquid instrument. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things,
the level of market rates, the GNMA Certificate's coupon rate and the
prepayment experience of the pools of mortgages backing each GNMA Certificate.

FHLMC PARTICIPATION CERTIFICATES. The Federal Home Loan Mortgage Corporation
("FHLMC") was created by the Emergency Home Finance Act of 1970. It is a
private corporation, initially capitalized by the Federal Home Loan Bank
System, charged with supporting the mortgage lending activities of savings and
loan associations by providing an active secondary market for conventional
mortgages. To finance its mortgage purchases, FHLMC issues FHLMC Participation
Certificates and Collateralized Mortgage Obligations ("CMOs").

Participation Certificates represent an undivided interest in a pool of
mortgage loans. FHLMC purchases whole loans or participations in 30-year and
15-year fixed rate mortgages, adjustable-rate mortgages ("ARMs") and home
improvement loans. Under certain programs, it will also purchase FHA and VA
mortgages.

Loans pooled for FHLMC must have a minimum coupon rate equal to the
Participation Certificate rate specified at delivery, plus a required spread
for the corporation and a minimum servicing fee, generally 0.375% (37.5 basis
points). The maximum coupon rate on loans is 2% (200 basis points) in excess of
the minimum eligible coupon rate for Participation Certificates. FHLMC requires
a minimum commitment of $1 million in mortgages but imposes no maximum amount.
Negotiated deals require a minimum commitment of $10 million. FHLMC guarantees
timely payment of the interest and the ultimate payment of principal of its
Participation Certificates. This guarantee is backed by reserves set aside to
protect against losses due to default. The FHLMC CMO is divided into varying
maturities with prepayment set specifically for holders of the shorter term
securities. The CMO is designed to respond to investor concerns about early
repayment of mortgages.

FHLMC's CMOs are general obligations, and FHLMC will be required to use its
general funds to make principal and interest payments on CMOs if payments
generated by the underlying pool of mortgages are insufficient to pay principal
and interest on the CMO.

A CMO is a cash-flow bond in which mortgage payments from underlying mortgage
pools pay principal and interest to CMO bondholders. The CMO is structured to
address two major short-comings

<PAGE>

associated with traditional pass-through securities: payment frequency and
prepayment risk. Traditional pass-through securities pay interest and amortized
principal on a monthly basis whereas CMOs normally pay principal and interest
semi-annually. In addition, mortgage-backed securities carry the risk that
individual mortgagors in the mortgage pool may exercise their prepayment
privileges, leading to irregular cash flow and uncertain average lives,
durations and yields.

A typical CMO structure contains four tranches, which are generally referred to
as Classes A, B, C and Z. Each tranche is identified by its coupon and
maturity. The first three classes are usually current interest-bearing bonds
paying interest on a quarterly or semi-annual basis, while the fourth, Class Z,
is an accrual bond. Amortized principal payments and prepayments from the
underlying mortgage collateral redeem principal of the CMO sequentially;
payments from the mortgages first redeem principal on the Class A bonds. When
principal of the Class A bonds has been redeemed, the payments then redeem
principal on the Class B bonds. This pattern of using principal payments to
redeem each bond sequentially continues until the Class C bonds have been
retired. At this point, Class Z bonds begin paying interest and amortized
principal on their accrued value.

The final tranche of a CMO is usually a deferred interest bond, commonly
referred to as the Z bond. This bond accrues interest at its coupon rate but
does not pay this interest until all previous tranches have been fully retired.
While earlier classes remain outstanding, interest accrued on the Z bond is
compounded and added to the outstanding principal. The deferred interest period
ends when all previous tranches are retired, at which point the Z bond pays
periodic interest and principal until it matures. The Adviser would purchase a
Z bond for the STAR Portfolio if it expected interest rates to decline.

FNMA SECURITIES. FNMA was created by the National Housing Act of 1938. In 1968,
the agency was separated into two organizations, GNMA to support a secondary
market for government mortgages and FNMA to act as a private corporation
supporting the housing market.

FNMA pools may contain fixed-rate conventional loans on one-to-four-family
properties. Seasoned FHA and VA loans, as well as conventional growing equity
mortgages, are eligible for separate pools. FNMA will consider other types of
loans for securities pooling on a negotiated basis. A single pool may include
mortgages with different loan-to-value ratios and interest rates, though rates
may not vary beyond two percentage points.

PRIVATELY-ISSUED MORTGAGE LOAN POOLS. Savings associations, commercial banks
and investment bankers issue pass-through securities secured by a pool of
mortgages.

Generally, only conventional mortgages on single-family properties are included
in private issues, though seasoned loans and variable rate mortgages are
sometimes included. Private placements allow purchasers to negotiate terms of
transactions. Maximum amounts for individual loans may exceed the loan limit
set for government agency purchase. Pool size may vary, but the minimum is
usually $20 million for public offerings and $10 million for private
placements.

Privately-issued mortgage-related obligations do not carry government or
quasi-government guarantees. Rather, mortgage pool insurance generally is used
to insure against credit losses that may occur in the mortgage pool. Pool
insurance protects against credit losses to the extent of the coverage in
force. Each mortgage, regardless of original loan-to-value ratio, is insured to
100% of principal, interest and other expenses, to a total aggregate loss limit
stated on the policy. The aggregate loss limit of the policy generally is 5% to
7% of the original aggregate principal of the mortgages included in the pool.

<PAGE>

In addition to the insurance coverage to protect against defaults on the
underlying mortgages, mortgage-backed securities can be protected against the
nonperformance or poor performance of servicers. Performance bonding of
obligations such as those of the servicers under the origination, servicing or
other contractual agreement will protect the value of the pool of insured
mortgages and enhance the marketability.

The rating received by a mortgage security will be a major factor in its
marketability. For public issues, a rating is always required, but it may be
optional for private placements depending on the demands of the marketplace and
investors.

Before rating an issue, a nationally recognized statistical rating organization
such as Standard & Poor's Rating Group ("Standard & Poor's"), Moody's Investors
Service, Inc. ("Moody's"), Fitch's IBCA Investors Service ("Fitch") or Duff and
Phelps ("Duff") will consider several factors, including: the creditworthiness
of the issuer; the issuer's track record as an originator and servicer; the
type, term and characteristics of the mortgages, as well as loan-to-value ratio
and loan amounts; the insurer and the level of mortgage insurance and hazard
insurance provided. Where an equity reserve account or letter of credit is
offered, the rating agency will also examine the adequacy of the reserve and
the strength of the issuer of the letter of credit.

STRATEGIC TRANSACTIONS. The STAR Portfolio may, but is not required to, utilize
various other investment strategies as described below to seek to hedge various
market risks (such as interest rates and broad or specific fixed-income 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 STAR 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 STAR Portfolio may
purchase and sell (write) exchange-listed and over-the-counter put and call
options on securities, indices and other financial instruments; purchase and
sell financial futures contracts and options thereon; and enter into various
interest rate transactions such as swaps, caps, floors or collars
(collectively, all the above are called "Strategic Transactions"). Strategic
Transactions may be used to seek to protect against possible changes in the
market value of securities held in or to be purchased for the STAR Portfolio's
portfolio resulting from securities market or interest rate fluctuations, to
protect the STAR Portfolio's unrealized gains in the value of its portfolio
securities, to facilitate the sale of such securities for investment purposes,
to manage the effective maturity or duration of the STAR Portfolio's portfolio,
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 paragraph,
Strategic Transactions may also be used by the STAR Portfolio to seek to
enhance potential gain in circumstances where hedging is not involved although
the STAR Portfolio will attempt to limit its net loss exposure resulting from
Strategic Transactions entered into for such purposes to not more than 1% of
its net assets at any one time and, to the extent necessary, the STAR 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 STAR
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 STAR Portfolio's Adviser believes that short-term interest rates as
indicated in the forward yield curve are too high, the STAR Portfolio may take
a short position in a near-term Eurodollar futures contract and a long position

<PAGE>

in a longer-dated Eurodollar futures contract. Under such circumstances, any
unrealized loss in the near-term Eurodollar futures position would be netted
against any unrealized gain in the near-term Eurodollar futures position (and
vice versa) for purposes of calculating the STAR Portfolio's net loss exposure.

The ability of the STAR Portfolio to utilize these Strategic Transactions
successfully will depend on its Adviser's ability to predict pertinent market
and interest rate movements, which cannot be assured. The STAR Portfolio will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. The STAR Portfolio's activities
involving Strategic Transactions may be limited by the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
that apply to investors in the STAR Portfolio that intend to qualify as
regulated investment companies.

RISKS OF STRATEGIC TRANSACTIONS. The use of Strategic Transactions by the STAR
Portfolio has associated risks including possible default by the other party to
the transaction, illiquidity and, to the extent its Adviser's view as to
certain market or interest rate movements is incorrect, the risk that the use
of such Strategic Transactions could result in losses greater than if they had
not been used. Writing put and call options may result in losses to the STAR
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 STAR Portfolio can realize on its investments or cause the
STAR Portfolio to hold a security it might otherwise sell.

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
STAR Portfolio creates the possibility that losses on the hedging instrument
may be greater than gains in the value of the STAR Portfolio's position.
Writing options could significantly increase the STAR 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 STAR 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 STAR Portfolio in writing options on futures and
entering into futures transactions is potentially unlimited; however, as
described above, the STAR Portfolio will attempt to limit its net loss exposure
resulting from Strategic Transactions entered into for non-hedging purposes to
not more than 1% of its net assets at any one time. Futures markets are highly
volatile and the use of futures may increase the volatility of the STAR
Portfolio's NAV. 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 NAV 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

<PAGE>

require segregation of the STAR 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 or
other instrument at the exercise price. For instance, the STAR 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 STAR 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 STAR
Portfolio may purchase a call option on a security, futures contract, index or
other instrument to seek to protect the STAR Portfolio against an increase in
the price of the underlying instrument that it intends to purchase in the
future by fixing the price at 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 STAR 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, 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 STAR 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 STAR
Portfolio will generally sell (write) OTC options that are subject to a
buy-back provision permitting the STAR Portfolio to require the Counterparty to
sell the option back to the STAR Portfolio at a formula price within seven
days. OTC options purchased by the STAR Portfolio, and portfolio securities
"covering" the amount of the STAR

<PAGE>

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 subject to the STAR
Portfolio's restriction on illiquid securities, unless determined to be liquid
in accordance with procedures adopted by the Board of Trustees of the Standish
Portfolio Trust. For OTC options written with "primary dealers" 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. The STAR 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 the OTC option market. 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 STAR Portfolio or fails to make a cash
settlement payment due in accordance with the terms of that option, the STAR
Portfolio will lose any premium it paid for the option as well as any
anticipated benefit of the transaction. Accordingly, the STAR Portfolio's
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 STAR
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 or Moody's or
an equivalent rating from any other nationally recognized statistical rating
organization ("NRSRO") or which issue debt that is determined to be of
equivalent credit quality by the STAR Portfolio's Adviser.

If the STAR 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 STAR Portfolio's income. The sale (writing)
of put options can also provide income.

The STAR Portfolio may purchase and sell (write) put and call options on
securities, including U.S. Treasury and agency securities and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
OTC markets and on securities indices and futures contracts.

All calls sold by the STAR Portfolio must be "covered" (i.e., the STAR
Portfolio must own the securities or the futures contract subject to the call)
or must meet the asset segregation requirements described below as long as the
call is outstanding. In addition, the STAR Portfolio may cover a written call
option or put option by entering into an offsetting forward contract and/or by
purchasing an offsetting option or any other option which, by virtue of its
exercise price or otherwise, reduces the STAR Portfolio's net exposure on its
written option position. Even though the STAR Portfolio will receive the option
premium to help offset any loss, the STAR Portfolio may incur a loss if the
exercise price is below the market price for the security subject to the call
at the time of exercise. A call sold by the STAR Portfolio also 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 require the STAR Portfolio to hold a security or instrument
which it might otherwise have sold.

The STAR Portfolio will not sell put options if, as a result, more than 50% of
the STAR 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
STAR Portfolio may be required to buy the underlying security at a price above
the market price.

<PAGE>

OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES. The STAR 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 upon exercise
of the option. In addition to the methods described above, the STAR 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 STAR 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 and involve payment of initial and variation margin as described
below. All futures contracts entered into by the STAR Portfolio are traded on
U.S. exchanges or boards of trade that are licensed and regulated by the
Commodity Futures Trading Commission ("CFTC") or on certain foreign exchanges.
The sale of futures contracts creates a firm obligation by the STAR 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
STAR Portfolio, as purchaser, to purchase a financial instrument at a specific
time and price. 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 upon exercise of the option.

The STAR 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 CFTC relating to exclusions from regulation as a
commodity pool operator. Those regulations currently provide that the STAR
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 CFTC to the
extent that the aggregate initial margin and option premiums required to
establish such non-hedging positions (net of the amount that the positions were
"in the money" at the time of purchase) do not exceed 5% of the NAV of the STAR
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 STAR Portfolio to deposit, with its custodian for
the benefit of a futures commission merchant, or directly with the futures
commission merchant, 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
directly with the futures commission merchant 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 STAR Portfolio. If the STAR 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

<PAGE>

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.

COMBINED TRANSACTIONS. The STAR Portfolio may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple interest rate transactions, structured notes and any combination of
futures, options 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 STAR Portfolio's Adviser, it is in the
best interests of the STAR 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 by the
STAR Portfolio based on its 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.

SWAPS, CAPS, FLOORS AND COLLARS. Among the Strategic Transactions into which
the STAR Portfolio may enter are interest rate, index and total return swaps
and the purchase or sale of related caps, floors and collars. The STAR
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, as a duration management
technique or protecting against an increase in the price of securities that the
STAR 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 STAR 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 1% of its net assets at any one time. The STAR Portfolio will not
sell interest rate caps, floors or collars where it does not own securities or
other instruments providing the income stream the STAR Portfolio may be
obligated to pay. Interest rate swaps involve the exchange by the STAR
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. 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 STAR 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 STAR Portfolio receiving or paying,
as the case may be, only the net amount of the two payments. The STAR 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
Standard & Poor's or Moody's or has an equivalent rating from an NRSRO or the
Counterparty issues debt that is determined to be of equivalent credit quality
by the STAR Portfolio's Adviser. If there is a default by the Counterparty, the
STAR 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, floors and collars
are more recent innovations for which standardized documentation has

<PAGE>

not yet been fully developed. Swaps, caps, floors and collars are considered
illiquid for purposes of the STAR 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
Trustees of the Standish Portfolio Trust have adopted guidelines and delegated
to the STAR Portfolio's Adviser the daily function of determining and
monitoring the liquidity of swaps, caps, floors and collars. Such Trustees,
however, retain oversight focusing on factors such as valuation, liquidity and
availability of information and they are ultimately responsible for such
determinations. The staff of the Securities and Exchange Commission ("SEC")
currently takes the position that swaps, caps, floors and collars are illiquid,
and are subject to the STAR Portfolio's limitation on investing in illiquid
securities.

EURODOLLAR CONTRACTS. The STAR Portfolio may make investments in Eurodollar
contracts. Eurodollar contracts 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 STAR 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.

USE OF SEGREGATED ACCOUNTS. The STAR Portfolio will hold securities or other
instruments whose values are expected to offset its obligations under the
Strategic Transactions. The STAR Portfolio will cover Strategic Transactions as
required by interpretive positions of the staff of the SEC. The STAR Portfolio
will not enter into Strategic Transactions that expose the STAR 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 STAR 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 (or marked as segregated on the STAR Portfolio's books) in the amount
prescribed. In that case, the STAR 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 and the STAR 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 STAR Portfolio's assets could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.

"WHEN-ISSUED" AND "DELAYED DELIVERY" SECURITIES. Each Portfolio may invest in
securities purchased on a "when-issued" or "delayed delivery" basis. Delivery
and payment for securities purchased on a when-issued or delayed delivery basis
will normally take place 15 to 45 days after the date of the transaction. The
payment obligation and interest rate on the securities are fixed at the time
that a Portfolio enters into the commitment, but interest will not accrue to a
Portfolio until delivery of and payment for the securities. Although each such
Portfolio will only make commitments to purchase "when-issued" and "delayed
delivery" securities with the intention of actually acquiring the securities,
each such Portfolio may sell the securities before the settlement date if
deemed advisable by their investment adviser or sub-adviser. The Cash,
Treasury, Treasury Plus and Government Portfolios may, with respect to up to
25% of their total assets, enter into contracts to purchase securities for a
fixed price at a future date beyond customary settlement time. The STAR
Portfolio's limitation is 10% of its total assets.

<PAGE>

Unless the Portfolios have entered into an offsetting agreement to sell the
securities purchased on a "when-issued" or "forward commitment" basis, cash or
liquid obligations with a market value equal to the amount of a Portfolio's
commitment will be segregated with a Portfolio's custodian bank. If the market
value of these securities declines, additional cash or securities will be
segregated daily so that the aggregate market value of the segregated
securities equals the amount of a Portfolio's commitment.

Securities purchased on a "when-issued" and "delayed delivery" basis may have a
market value on delivery which is less than the amount paid by a Portfolio.
Changes in market value may be based upon the public's perception of the
creditworthiness of the issuer or changes in the level of interest rates.
Generally, the value of "when-issued", "delayed delivery" and "forward
commitment" securities will fluctuate inversely to changes in interest rates,
i.e., they will appreciate in value when interest rates fall and will decline
in value when interest rates rise.

FUND POLICIES

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

As a matter of fundamental policy, the Cash Portfolio (Series), the Treasury
Portfolio (Series), the Treasury Plus Portfolio (Series) and the Government
Portfolio (Series) may not:

(1) purchase any securities that would cause more than 25% of the
total assets of the Portfolio at the time of such purchase to be
invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that
there is no limitation with respect to U.S. Government Securities or
(for the Cash Portfolio (Series), the Treasury Plus Portfolio
(Series) and the Government Portfolio (Series) bank obligations or
repurchase agreements collateralized by any of such obligations as
applicable;

(2) borrow money, except as a temporary measure for extraordinary or
emergency purposes or to facilitate redemptions, provided that
borrowing does not exceed an amount equal to 33 1/3% of the current
value of the Portfolio's assets taken at market value, less
liabilities, other than borrowings;

(3) purchase securities on margin (except for delayed delivery or
when-issued transactions or such short-term credits as are necessary
for the clearance of transactions);

(4) make loans to any person or firm; provided, however, that the
making of a loan shall not include entering into repurchase
agreements, and provided further that a Portfolio may lend its
portfolio securities to broker-dealers or other institutional
investors if the aggregate value of all securities loaned does not
exceed 33 1/3% of the value of a Portfolio's total assets;

(5) engage in the business of underwriting the securities issued by
others, except that a Portfolio will not be deemed to be engaging in
the business of underwriting with respect to the purchase or sale of
securities subject to legal or contractual restrictions on
disposition;

<PAGE>

(6) issue senior securities, except as permitted by its investment
objective, policies and restrictions, and except as permitted by the
1940 Act; and

(7) purchase or sell real estate, commodities, or commodity contracts
unless acquired as a result of ownership of securities, and provided
further that a Portfolio may invest in securities backed by real
estate and in financial futures contracts and options thereon.

If any percentage restriction described above for the Cash Portfolio (Series),
Treasury Portfolio (Series), Treasury Plus Portfolio (Series) or Government
Portfolio (Series) is adhered to at the time of investment, a subsequent
increase or decrease in the percentage resulting from a change in the net
assets of the Portfolios (Fund) will not constitute a violation of the
restriction. The above restrictions also apply to each Fund, with the exception
that a Fund may invest all of its investable assets without limitation in its
respective Portfolio.

As a matter of fundamental policy, the STAR Portfolio (Series) may not:

(1) issue senior securities. For purposes of this restriction,
borrowing money, making loans, 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 (Fund's) investment policies, are not deemed to be
senior securities.

(2) borrow money, except (i) in amounts not to exceed 33 1/3% of the
value of the Portfolio's (Fund's) total assets (including the amount
borrowed) taken at market value from banks or through reverse
repurchase agreements or forward roll transactions, (ii) up to an
additional 5% of its total assets for temporary purposes, (iii) in
connection with short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) the
Portfolio (Series) may purchase securities on margin to the extent
permitted by applicable law. For purposes of this investment
restriction, investments in short sales, roll transactions, futures
contracts, options on futures contracts, securities or indices and
forward commitments, entered into in accordance with the Portfolio's
(Fund's) investment policies, shall not constitute borrowing.

(3) underwrite the securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, the
Portfolio (Series) may be deemed to be an underwriter under the
Securities Act of 1933.

(4) purchase or sell real estate except that the Portfolio (Series)
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 (Series) as a result of the ownership of securities.

(5) purchase or sell commodities or commodity contracts, except the
Portfolio (Series) 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 (Series') investment policies.

<PAGE>

(6) make loans, except that the Portfolio (Series) (1) may lend
portfolio securities in accordance with the Portfolio's (Series')
investment policies up to 33 1/3% of the Portfolio's (Series') 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.

(7) 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 (Series') 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 (Series).

(8) invest more than 25% of its total assets in the securities of one
or more issuers conducting their principal business activities in the
same industry (excluding the U.S. Government or its agencies or
instrumentalities).

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

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

b. invest in the securities of an issuer for the purpose of
exercising control or management, but it may do so where it is deemed
advisable to protect or enhance the value of an existing investment.

c. purchase the securities of any other investment company except to
the extent permitted by the 1940 Act.

d. invest more than 15% of its net assets in securities which are
illiquid.

e. purchase additional securities if the Portfolio's (Series')
borrowings exceed 5% of its net assets.

It is expected that not more than 5% of the STAR Portfolio's net assets will be
at risk as a result of investment in inverse floating rate securities.

Notwithstanding any fundamental or non-fundamental policy, the STAR Series may
invest all of its assets (other than assets which are not "investment
securities" (as defined in the 1940 Act) or are excepted by the SEC) in an
open-end investment company with substantially the same investment objective as
the STAR Series.

For the purposes of STAR Portfolio's (Series') fundamental restriction 8, state
and municipal governments and their agencies, authorities and instrumentalities
are not deemed to be industries; telephone companies are considered to be a
separate industry from water, gas or electric utilities; personal credit
finance companies and business credit finance companies are deemed to be
separate

<PAGE>

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. Fundamental restriction 8 does not
apply to investments in municipal securities which have been prefunded by the
use of obligations of the U.S. Government or any of its agencies or
instrumentalities. For purposes of fundamental restriction 8, the industry
classification of an asset-backed security is determined by its underlying
assets. For example, certificates for automobile receivables and certificates
for amortizing revolving debts constitute two different industries.

If any percentage restriction described above for the STAR Portfolio (Series)
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
(Series') assets will not constitute a violation of the restriction.

MANAGEMENT OF THE TRUSTS

BOARD OF TRUSTEES

Overall responsibility for management and supervision of the Trust and the
Funds rests with the Board of Trustees. The Trustees approve all significant
agreements between the Trust and the persons and companies that furnish
services to the Trust or the Funds, including agreements with its distributor,
custodian, transfer agent, investment adviser, sub-adviser and administrator.
The day-to-day operations of the Funds are delegated to their Sub-Adviser. The
SAI contains background information regarding each of the Trustees and
executive officers of the Trust.

TRUSTEES AND OFFICERS. The names, addresses, dates of birth and principal
occupation(s) during the last five years of the Trustees and officers of the
Trust, the Portfolio Trust and the Standish Portfolio Trust are listed below.
The business address of the Trustees and officers of the Trust and the
Portfolio Trust is 200 Clarendon Street, Boston, Massachusetts 02116. Unless
otherwise noted, the business address of the Trustees and officers of the
Standish Portfolio Trust is One Financial Center, Boston, Massachusetts 02111.

TRUSTEES AND OFFICERS OF THE TRUST

KEVIN J. SHEEHAN, TRUSTEE*, 6/22/51, Director 1990 - present, President June
1992 - present, Chairman and Chief Executive Officer June 1995 - present,
Investors Bank & Trust Company, Chairman and Chief Executive Officer June 1995
- - present, Investors Financial Services Corp.

FRANCIS J. GAUL, JR., TRUSTEE, 9/25/43, Private Investor July 1998 - present,
Director and Principal, Triad Investment Management Company June 1997 - June
1998, Vice President, Triad Investment Management Company (Registered
Investment Adviser) July 1996 - May 1997, Vice President & Resident Manager,
Goldman Sachs & Co. (Investment Banking & Institutional Sales) June 1993 -
January 1996.

EDWARD F. HINES, JR., TRUSTEE, 9/5/45, Partner 1977 - present, Choate, Hall &
Stewart.

THOMAS E. SINTON, TRUSTEE, 8/26/32, Retired, Managing Director, Corporate
Accounting Policy, April 1993 - October 1996 and Consultant, January 1993 -
March 1996, Bankers Trust Company.

GEORGE A. RIO, PRESIDENT, 1/2/55, Executive Vice President, Client Service
Director of Funds Distributor, Inc., April 1998 - present; Senior Vice
President, Senior Key Account Manager for Putnam

<PAGE>

Mutual Funds, June 1995 - March 1998; Director of Business Development for
First Data Corporation, May 1994 - June 1995; Senior Vice President, Manager of
Client Services and Director of Internal Audit at The Boston Company, September
1983 - May 1994.

PAUL J. JASINSKI, TREASURER AND CHIEF FINANCIAL OFFICER, 2/17/47, Managing
Director, Investors Bank & Trust Company, 1990 - present.

SUSAN C. MOSHER, SECRETARY, 1/29/55, Director, Mutual Fund Administration -
Legal Administration, Investors Bank & Trust Company, 1995 - present, Associate
Counsel, 440 Financial Group of Worcester, Inc., 1993 - 1995.

ANDREW S. JOSEF, ASSISTANT SECRETARY, 2/25/64, Director, Mutual Fund
Administration - Legal Administration, Investors Bank & Trust Company, 1997 -
present, Senior Associate, Sullivan & Worcester LLP, 1995 - 1997, Associate,
Goodwin, Procter & Hoar 1993 - 1995.

TRUSTEES AND OFFICERS OF THE PORTFOLIO TRUST

KEVIN J. SHEEHAN, TRUSTEE**, 6/22/51, Director since 1990, President June 1992
- - present, Chairman and Chief Executive Officer June 1995 - present, Investors
Bank & Trust Company, Chairman and Chief Executive Officer June 1995 - present,
Investors Financial Services Corp.

EDWARD F. HINES, JR., TRUSTEE, 9/5/45, Partner 1977 - present, Choate, Hall &
Stewart.

THOMAS E. SINTON, TRUSTEE, 8/26/32, Retired, Managing Director, Corporate
Accounting Policy, April 1993 - October 1996 and Consultant, January 1993 -
March 1996, Bankers Trust Company.

PAUL J. JASINSKI, PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER, 2/17/47,
Managing Director, Investors Bank & Trust Company, 1990 - present.

TIMOTHY J. COYNE, VICE PRESIDENT, 5/9/67, Director, Corporate Marketing,
Investors Bank & Trust Company, 1997 - present, Vice President, Corporate
Sales, Dreyfus Corporation, 1995 - 1997, Assistant Vice President, Concord
Financial Corp., 1992 - 1995.

CHRISTOPHER J. QUINN, ASSISTANT VICE PRESIDENT, 5/6/66, Manager, Advisory
Client Services, Investors Bank & Trust Company, 1996 - present, Service
Specialist Mutual Funds, Fleet Bank, 1994 - 1996, Executive Sales Assistant,
Concord Financial Corp., 1993 - 1994.

<PAGE>

RAYMOND O'NEILL, ASSISTANT TREASURER AND ASSISTANT SECRETARY, 4/12/62, Managing
Director, IBT Trust & Custodial Services (Ireland) LMTD, 1994 - present; Vice
President, Atlantic Corporate Management Limited, 1991 - 1994.

TRUSTEES AND OFFICERS OF THE STANDISH PORTFOLIO TRUST

D. BARR CLAYSON, VICE PRESIDENT AND TRUSTEE***, 7/29/35, Vice President and
Managing Director, Standish, Ayer & Wood, Inc.; Chairman of the Board and
Director, Standish International Management Company, L.P.; Director, CareGroup
Inc.

SAMUEL C. FLEMING, TRUSTEE, 9/30/40, Chairman of the Board and Chief Executive
Officer, Decision Resources, Inc., Trustee, Cornell University; Director,
CareGroup Inc. His address is c/o Decision Resources, Inc., 1100 Winter Street,
Waltham, Massachusetts 02154.

BENJAMIN M. FRIEDMAN, TRUSTEE, 8/5/44, William Joseph Maier, Professor of
Political Economy, Harvard University. His address is c/o Harvard University,
Cambridge, Massachusetts 02138.

JOHN H. HEWITT, TRUSTEE, 4/11/35, Trustee, The Peabody Foundation; Trustee,
Visiting Nurse Alliance of Vermont and New Hampshire; Trustee, Mertens House,
Inc. His address is P.O. Box 307, South Woodstock, Vermont 05071.

EDWARD H. LADD, VICE PRESIDENT AND TRUSTEE***, 1/3/38, Chairman of the Board
and Managing Director, Standish, Ayer & Wood, Inc.; Director, Standish
International Management Company, L.P.

CALEB LORING III, TRUSTEE, 11/14/43, Trustee, Essex Street Associates (family
investment trust office); Director, Holyoke Mutual Insurance Company; Director,
Carter Family Corporation; Board Member, Gordon-Conwell Theological Seminary;
Chairman of the Advisory Board, Salvation Army; Chairman, Vision New England.
His address is c/o Essex Street Associates, P.O. Box 5600, Beverly Farms,
Massachusetts 01915.

RICHARD S. WOOD, PRESIDENT AND TRUSTEE***, 5/21/54, Vice President and Managing
Director, Standish, Ayer & Wood, Inc.; Executive Vice President and Director,
Standish International Management Company, L.P.

JAMES E. HOLLIS III, EXECUTIVE VICE PRESIDENT, 11/21/48, Vice President and
Director, Standish, Ayer & Wood, Inc.

ANNE P. HERRMANN, VICE PRESIDENT AND SECRETARY, 1/26/56, Senior Fund
Administration Manager, Standish, Ayer & Wood, Inc.

PAUL G. MARTINS, VICE PRESIDENT AND TREASURER, 3/10/56, Vice President of
Finance, Standish, Ayer & Wood, Inc., since October 1996; formerly Senior Vice
President, Treasurer and Chief Financial Officer of Liberty Financial Bank
Group.

<PAGE>

BEVERLY E. BANFIELD, VICE PRESIDENT, 7/6/56, Vice President, Associate Director
and Compliance Officer, Standish, Ayer & Wood, Inc.

LAVINIA B. CHASE, VICE PRESIDENT, 6/4/46, Vice President and Associate
Director, Standish, Ayer & Wood, Inc.

DENISE B. KNEELAND, VICE PRESIDENT, 8/19/51, Vice President and Manager, Mutual
Fund Operations, Standish, Ayer & Wood, Inc. since December 1995; formerly Vice
President, Scudder, Stevens and Clark.

DAVID C. STUEHR, VICE PRESIDENT, 3/1/58, Vice President and Director, Standish,
Ayer & Wood, Inc.

SARAH WALCOTT-ABRAMSON, VICE PRESIDENT, 12/9/65, Compliance Administrator,
Standish, Ayer & Wood, Inc.

KATHLEEN M. BROCCOLI, VICE PRESIDENT, 4/13/65, Vice President and Manager,
Portfolio Accounting, Standish, Ayer & Wood, Inc.

THOMAS J. HANLON, VICE PRESIDENT, 9/25/60, Vice President and Manager, Trade
Settlement and Pricing, Standish, Ayer & Wood, Inc.

ROSALIND J. LILLO, VICE PRESIDENT, 2/6/38, Broker/Dealer Administrator,
Standish, Ayer & Wood, Inc. (since 1995); formerly Compliance Administrator,
New England Securities Corp.

GIGI K. SZEKELY, VICE PRESIDENT, 5/8/67, Manager, Client Communications,
Standish, Ayer & Wood, Inc.

* Indicates that the Trustee is an "interested person" of the Trust as
defined in the 1940 Act.
** Indicates that the Trustee is an "interested person" of the Portfolio
Trust as defined in the 1940 Act.
*** Indicates that the Trustee is an "interested person" of the Standish
Portfolio Trust as defined in the 1940 Act.

COMPENSATION OF THE TRUSTEES AND OFFICERS. Neither the Trust nor the Portfolio
Trust compensates the Trustees or officers of the Trust and the Portfolio Trust
who are affiliated with Investors Bank or the Distributor. Neither the Trust
nor the Standish Portfolio Trust compensates the Trustees and officers of the
Standish Portfolio Trust who are affiliated with Standish. None of the Trustees
or officers of the Trust or the Portfolio Trust have engaged in any financial
transactions with the Trust or the Portfolio Trust, respectively, during the
fiscal year ended December 31, 1998. None of the Trustees or officers of the
Standish Portfolio Trust have engaged in any financial transactions with the
Standish Portfolio Trust during the fiscal year ended December 31, 1998.

The Trustees of the Portfolio Trust are paid an annual retainer of $10,000,
payable in equal quarterly installments, and a $2,500 meeting fee for each
quarterly meeting attended. Each Fund bears its pro rata allocation of
Trustees' fees paid by its corresponding Portfolio to the Trustees of the
Portfolio Trust. The Trustees of the Trust are paid a $1,000 meeting fee for
each quarterly meeting attended. The following table reflects the compensation
paid by the Trust, by the Portfolio Trust and by another related open end
investment company, to each Trustee for the fiscal period ended December 31,
1998.

<PAGE>

Aggregate Pension or Retirement Total Compensation
Compensation Benefits Accrued as From Trust and Fund
Name of Trustee From the Trust Part of Fund's Expenses Complex *
- --------------- -------------- ----------------------- ---------

Kevin J. Sheehan $0 $0 $0

Francis J. Gaul, Jr. $1,167 $0 $25,000

Edward F. Hines, Jr. $1,167 $0 $25,000

Thomas E. Sinton $1,167 $0 $25,000

*Fund Complex consists of the Trust, the Portfolio Trust, the Merrimac Global
Cash Fund and the Merrimac Funds, comprising eight series as of December 31,
1998.

</TABLE>

CONTROL PERSONS

As of February 8, 1999, the Standish Short-Term Asset Reserve Fund owned
approximately 97.37% of the outstanding interests of the STAR Portfolio and,
therefore, was deemed to control the STAR Portfolio. As of February 8, 1999,
the Merrimac Cash Fund beneficially owned approximately 83.08% of the
outstanding interests of the Cash Portfolio (and was, therefore, deemed to
control the Cash Portfolio) and the Merrimac Cash Series beneficially owned
approximately 16.19% of the outstanding interests of the Cash Portfolio. As of
February 8, 1999, the Merrimac Treasury Series owned 100% of the outstanding
interests of the Treasury Portfolio and, therefore, was deemed to control the
Treasury Portfolio. As controlling persons, Standish Short-Term Asset Reserve
Fund, the Merrimac Cash Fund and the Merrimac Treasury Series each may be able
to take actions regarding their corresponding Portfolio without the consent or
approval of other interest holders.

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISERS AND SUBADVISERS

The Cash Portfolio, the Treasury Portfolio, the Treasury Plus Portfolio and the
Government Portfolio each retain Investors Bank & Trust Company ("Investors
Bank" or the "Adviser") as their investment adviser. The Investment Adviser
Agreements (the "Adviser Agreements") between Investors Bank and each of the
Cash Portfolio, the Treasury Portfolio, the Treasury Plus Portfolio and the
Government Portfolio provides that Investors Bank will manage the operations of
the Cash Portfolio, the Treasury Portfolio, the Treasury Plus Portfolio and the
Government Portfolio, subject to the policies established by the Board of
Trustees of the Trust. Investors Bank also provides office space, facilities,
equipment and personnel necessary to supervise the Cash, Treasury, the Treasury
Plus and the Government Portfolios' operations and pays the compensation of
each such Portfolio's officers, employees and directors affiliated with
Investors Bank. The Cash Portfolio, Treasury Portfolio, Treasury Plus Portfolio
and Government Portfolio each pay Investors Bank a unitary fee for servicing
these Portfolios as Investment Adviser, Administrator, Custodian, Fund
Accountant and Transfer Agent. For a description of the rate of compensation
that the Cash Portfolio, the Treasury Portfolio, the Treasury Plus Portfolio
and the Government Portfolio pay Investors Bank under the Adviser Agreements,
see "Administrator, Transfer Agent and Fund Accountant" below.

<PAGE>

Each Portfolio pays Investors Bank a fee for its services. The fee paid to
Investors Bank by the Cash Portfolio for the fiscal year ended December 31,
1998 was $1,760,305. Investors Bank waived $384,213 in fees during the fiscal
year ended December 31, 1998. The fee paid to Investors Bank by the Treasury
Portfolio for the fiscal year ended December 31, 1998 was $98,068. As of
December 31, 1998, Treasury Plus Portfolio and Government Portfolio had not yet
commenced operations.

Pursuant to an Investment Sub-Adviser Agreements, Investors Bank has retained
Allmerica Asset Management, Inc. ("AAM") as sub-adviser to the Cash Portfolio
and the Government Portfolio. AAM is compensated by Investors Bank at no
additional cost to the Cash Portfolio and the Government Portfolio. Subject to
the supervision of Investors Bank and of the Portfolio Trust's Board of
Trustees, AAM furnishes to the Cash Portfolio and the Government Portfolio
investment research, advice and supervision and determines what securities will
be purchased, held or sold by the Cash Portfolio and the Government Portfolio.
AAM is rendered an annual fee, computed and paid monthly, based on the average
net assets ("ANA") of each of the Cash Portfolio and the Government Portfolio
according to the following schedule: 0.09% on the first $500 million in assets;
0.07% on the next $500 million in assets, and 0.06% on assets exceeding $1
billion. Prior to September 1, 1998, the Cash Portfolio was advised by The Bank
of New York ("BNY") and was paid an annual fee, computed and paid monthly,
based on 0.08% of the ANA of the Cash Portfolio. The amount paid by Investors
Bank to BNY for the period January 1, 1998 to August 31, 1998 was $429,014. The
amount paid by Investors Bank to AAM for the period September 1, 1998 to
December 31, 1998 was $233,588. The Government Portfolio had not yet commenced
operations as of December 31, 1998.

Pursuant to Investment Sub-Adviser Agreements, Investors Bank has retained M&I
Investment Management Corp. ("M&I") as sub-adviser to the Treasury Portfolio
and the Treasury Plus Portfolio. M&I is compensated by Investors Bank at no
additional cost to the Treasury Portfolio and the Treasury Plus Portfolio.
Subject to the supervision of Investors Bank and of the Portfolio Trust's Board
of Trustees, M&I furnishes to the Treasury Portfolio and the Treasury Plus
Portfolio investment research, advice and supervision and determines what
securities will be purchased, held or sold by the Treasury Portfolio and the
Treasury Plus Portfolio. M&I is rendered an annual fee, computed and paid
monthly, based on 0.08% of the ANA of each of the Treasury Portfolio and the
Treasury Plus Portfolio. For the fiscal year ended December 31, 1998, the
Treasury Portfolio was advised by Aeltus Investment Management, Inc. ("Aeltus")
and Aeltus received the same fees as M&I currently receives. The amount paid by
Investors Bank to Aeltus for the fiscal year ended December 31, 1998 was
$46,158. The Treasury Plus Portfolio had not commenced operations as of
December 31, 1998.

The Cash, Treasury, Treasury Plus and Government Portfolios bear the expenses
of their operations other than those incurred by AAM or M&I, respectively.
Among the other expenses, the Portfolios pay share pricing and shareholder
servicing fees and expenses; custodian fees and expenses; legal and auditing
fees and expenses; expenses of shareholder reports; registration and reporting
fees and expenses; and the Portfolio Trust's Trustee fees and expenses.

The STAR Portfolio and Standish, Ayer & Wood, Inc. ("Standish") have entered
into an investment advisory agreement under which Standish serves as investment
adviser. Prior to the close of business on January 1, 1998, Standish managed
directly the assets of the Standish STAR Fund pursuant to an investment
advisory agreement. This agreement was terminated by the Standish STAR Fund on
such date subsequent to the approval by Standish STAR Fund's shareholders on
December 17, 1997 to implement certain changes in the Standish STAR Fund's
investment restrictions which would enable the Standish STAR Fund to invest all
of its investable assets in the newly-created STAR Portfolio. Each of

<PAGE>

the STAR Series and the Standish STAR Fund invests all of its investable assets
in the STAR Portfolio as a separate management investment company.

For its services as investment adviser to the STAR Portfolio, Standish is
rendered an annual fee computed and paid monthly, based on 0.25% of the ANA of
the STAR Portfolio. The fee paid to Standish for the fiscal year ended December
31, 1998 was $709,540.

The following, constituting all of the Directors and all of the shareholders of
Standish, are Standish's controlling persons: Caleb F. Aldrich, Nicholas S.
Battelle, David H. Cameron, Karen K. Chandor, D. Barr Clayson, W. Charles Cook,
Joseph M. Corrado, 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, Thomas P. Sorbo, David C. Stuehr, Ralph S. Tate, Michael W.
Thompson and Richard S. Wood.

The STAR Portfolio bears expenses of its operations other than those incurred
by Standish. Among the other expenses, the Portfolio pays share pricing and
expenses; custodian fees and expenses; legal and auditing fees and expenses;
expenses of prospectuses, statements of additional information and shareholder
reports; registration and reporting fees and expenses; and Standish Portfolio
Trust's Trustees fees and expenses.

DISTRIBUTOR

The Premium, Institutional and Investment Class shares of the Funds are
continuously distributed by Funds Distributor, Inc. (the "Distributor")
pursuant to a Distribution Agreement with the Trust dated June 1, 1998. The
Distributor makes itself available to receive purchase orders for the Funds'
shares. Pursuant to the Distribution Agreement, the Distributor has agreed to
use its best efforts to obtain orders for the continuous offering of the Funds'
shares. The Distributor receives no commissions or other compensation from the
Funds for its services, but receives compensation from Investors Bank for
services it performs in acting as the Funds' Distributor.

Funds Distributor is registered with the SEC as a broker-dealer and is a member
of the National Association of Securities Dealers. Funds Distributor is located
at 60 State Street, Suite 1300, Boston, Massachusetts 02109. Funds Distributor
is an indirect wholly-owned subsidiary of Boston Institutional Group, Inc., a
holding company all of whose outstanding shares are owned by key employees.

DISTRIBUTION AND SHAREHOLDER SERVICING PLANS

The Board of Trustees of the Trust has adopted a Plan of Distribution (the
"Distribution Plan") under Rule 12b-1 of the 1940 Act with respect to the
Investment Class of shares of each Fund after having concluded that there is a
reasonable likelihood that the Distribution Plan will benefit the Funds and
their shareholders. The Distribution Plan provides that the Distribution Agent
(defined therein) shall receive a fee from each Fund at an annual rate not to
exceed 0.25% of the average daily net assets of such Fund attributable to
shareholders who are clients of the Distribution Agent, plus reimbursement of
direct out of pocket expenditures incurred in connection with the offer or sale
or shares, including expenses relating to the preparation, printing and
distribution of sales literature and reports.

The Distribution Plan will initially be effective for one year from its
effective date. Thereafter, the Distribution Plan shall continue in effect only
if such continuance is specifically approved at least

<PAGE>

annually by a vote of both a majority of the Board of Trustees of the Trust and
a majority of the Trustees of the Trust who are not "interested persons" of the
Trust (the "Disinterested Trustees.") The Distribution Plan may be terminated
with respect to a Fund at any time by a vote of a majority of the Disinterested
Trustees, or by a vote of a majority of the outstanding voting shares of such
Fund.

The Board of Trustees of the Trust have also adopted a Shareholder Servicing
Plan (the "Servicing Plan") with respect to the Institutional Class shares of
each Fund after having concluded that there is a reasonable likelihood that the
Servicing Plan will benefit the Funds and their shareholders. The Servicing
Plan provides that the Shareholder Servicing Agent shall receive a fee from
each Fund at an annual rate not to exceed 0.25% of the average daily net assets
of such Fund.

The Servicing Plan will initially be effective for one year from its effective
date. Thereafter, the Servicing Plan continues in effect if such continuance is
specifically approved at least annually by a vote of both a majority of the
Board of Trustees of the Trust and a majority of the Qualified Trustees. The
Servicing Plan requires that at least quarterly, the Treasurer of the Trust
provide to the Trustees of the Trust and that the Trustees review a written
report of the amounts expended pursuant to the Servicing Plan and the purposes
for which such expenditures were made. The Servicing Plan further provides that
the selection and nomination of the Trust's Qualified Trustees is committed to
the discretion of the Trust's disinterested Trustees then in office. The
Servicing Plan may be terminated at any time by a vote of a majority of the
Qualified Trustees, or by a vote of a majority of the outstanding voting shares
of such Fund. The Plan may not be amended to increase materially the amount of
a Fund's permitted expenses thereunder without the approval of a majority of
the outstanding voting securities of the affected Class of such Fund and may
not be materially amended in any case without a vote of the majority of both
the Trust's Trustees and the Trust's Qualified Trustees.

ADMINISTRATOR, TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT

Investors Bank serves as Administrator to the Funds and IBT Trust & Custodial
Services (Ireland) LMTD ("IBT Ireland"), a subsidiary of Investors Bank, serves
as Administrator to the Portfolios. The services provided by Investors Bank and
IBT Ireland include certain accounting, clerical and bookkeeping services, Blue
Sky (for the Funds only), corporate secretarial services and assistance in the
preparation and filing of tax returns and reports to shareholders and the SEC.

Investors Bank also serves as transfer and dividend paying agent for the Funds
and IBT Fund Services (Canada) Inc., ("IBT Canada") a subsidiary of Investors
Bank, serves as transfer and dividend paying agent for the Portfolios. As
transfer agent, Investors Bank is responsible for the issuance, transfer and
redemption of interests, the establishment and maintenance of accounts and the
payment of distributions for each Fund and IBT Canada is responsible for
maintaining records of holders in interest and for the payment of distributions
for each Portfolio.

Investors Bank also acts as custodian for the Funds and for the Portfolios. As
custodian, Investors Bank holds cash, securities and other assets of the Funds
and the Portfolios as required by the 1940 Act. IBT Canada also serves as fund
accounting agent for the Funds and the Portfolios. As fund accounting agent,
IBT Canada performs certain accounting, clerical and bookkeeping services, and
the daily calculation of net asset value for each Fund and Portfolio.

For its services as Investment Adviser, Administrator, Transfer Agent,
Custodian and Fund Accounting Agent, the Cash Portfolio, the Treasury
Portfolio, the Treasury Plus Portfolio and the Government Portfolio each pay
Investors Bank an aggregate fee, which is calculated daily and paid monthly, at
an annual

<PAGE>

rate of 0.17% of the ANA of such Portfolio. For its services as Transfer Agent,
Custodian and Fund Accounting Agent, the STAR Portfolio pays Investors Bank an
aggregate fee, which is calculated daily and paid monthly, at an annual rate of
0.05% of the first $50 million of ANA, 0.03% of the next $100 million of ANA
and .01% of ANA over $150 million. For its services as Administrator, Transfer
Agent, Custodian and Fund Accounting Agent, the Cash Series, the Treasury
Series, the Treasury Plus Series and the Government Series each pay Investors
Bank an aggregate fee, which is calculated daily and paid monthly, at an annual
rate of 0.01% of ANA of such Fund and the STAR Series pays Investors Bank an
aggregate fee, calculated daily and paid monthly, at an annual rate of 0.03% of
ANA of the STAR Series.

BROKERAGE ALLOCATION AND OTHER PRACTICES

Purchases and sales of securities for the Cash, Treasury, Treasury Plus and
Government Portfolios usually are principal transactions. Securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Cash Portfolio, Treasury Portfolio, Treasury Plus Portfolio
and Government Portfolio do not anticipate paying brokerage commissions. Any
transaction for which the Cash Portfolio, Treasury Portfolio, Treasury Plus
Portfolio or Government Portfolio pays a brokerage commission will be effected
at the best price and execution available. Purchases from underwriters of
securities include a commission or concession paid by the issuer to the
underwriter and purchases from dealers serving as market makers include the
spread between the bid and asked price.

Allocations of transactions, including their frequency, to various dealers is
determined by the respective Sub-Advisers in their best judgment and in a
manner deemed to be in the best interest of each of the Cash Series, Treasury
Series, Treasury Plus Series and Government Series and the other investors in
the Cash Portfolio, Treasury Portfolio, Treasury Plus Portfolio or Government
Portfolio rather than by any formula. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price.

Investment decisions for the Cash Portfolio, Treasury Portfolio, Treasury Plus
Portfolio and Government Portfolio will be made independently from those for
any other account or investment company that is or may in the future become
managed by the Sub-Advisers. If, however, the Cash Portfolio, Treasury
Portfolio, Treasury Plus Portfolio or Government Portfolio and other accounts
managed by its Sub-Adviser are contemporaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by the Cash Portfolio, Treasury Portfolio,
Treasury Plus Portfolio or Government Portfolio or the size of the position
obtainable for the Cash Portfolio, Treasury Portfolio, Treasury Plus Portfolio
or Government Portfolio. In addition, when purchases or sales of the same
security for the Cash Portfolio, Treasury Portfolio, Treasury Plus Portfolio or
Government Portfolio and for other accounts managed by their Sub-Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.

Standish is responsible for placing the STAR Portfolio's portfolio transactions
and will do so in a manner deemed fair and reasonable to the STAR 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, Standish will consider the firm's reliability, the quality of its
execution services on a continuing basis and its financial condition. If
Standish determines in good faith that the amount of commissions charged by a
broker is reasonable in

<PAGE>

relation to the value of the brokerage and research services provided by such
broker, the STAR 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 seminars,
information, analyses and reports concerning issuers, industries, securities,
trading markets and methods, legislative developments, changes in accounting
practices, economic factors and trends, portfolio strategy, access to research
analysts, corporate management personnel, industry experts and economists,
comparative performance evaluation and technical measurement services and
quotation services, and products and other services (such as third party
publications, reports and analysis, and computer and electronic access,
equipment, software, information and accessories that deliver, process or
otherwise utilize information, including the research described above) that
assist Standish in carrying out its responsibilities and (iii) effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research services furnished by firms through which
the STAR Portfolio effects its securities transactions may be used by Standish
in servicing other accounts; not all of these services may be used by Standish
in connection with the STAR Portfolio. The investment advisory fee paid by the
STAR Portfolio under the Standish Advisory Agreement will not be reduced as a
result of Standish's receipt of research services.

Standish also places portfolio transactions for other advisory accounts.
Standish will seek to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities for the STAR
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 STAR Portfolio. In making such allocations, the main factors considered by
Standish 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. To the
extent permitted by law, securities to be sold or purchased for STAR Portfolio
may be aggregated with those to be sold or purchased for other investment
clients of Standish and Standish's personnel in order to obtain best execution.

Because most of the STAR Portfolio's securities transactions will be effected
on a principal basis involving a "spread" or "dealer mark-up," the Portfolio
does not expect to pay any brokerage commissions.

PORTFOLIO TURNOVER

It is not the policy of the STAR Portfolio to purchase or sell securities for
trading purposes. However, the STAR Portfolio does not place any restrictions
on portfolio turnover and may sell any portfolio security without regard to the
period of time it has been held. The STAR Portfolio may therefore generally
change its portfolio investments at any time in accordance with its Adviser's
appraisal of factors affecting any particular issuer or market, or relevant
economic conditions. The portfolio turnover rate for the STAR Portfolio is
generally not expected to exceed 150% on an annual basis. A rate of turnover of
100% would occur if the value of the lesser of purchases and sales of portfolio
securities for a particular year equaled the average monthly value of portfolio
securities owned during the year (excluding short-term securities). A high rate
of portfolio turnover (100% or more) involves a correspondingly greater amount
of brokerage commissions and other costs which must be borne directly by the
STAR Portfolio and thus indirectly by its interestholders. It may also result
in the realization of larger amounts of net short-term capital gains,
distributions of which by an interestholder in the STAR Portfolio that is a
regulated investment company are taxable as ordinary income.

<PAGE>

CAPITAL STOCK

Under the Master Trust Agreement, the Trustees of the Trust have authority to
issue an unlimited number of shares of beneficial interest, par value $0.001
per share, of each Fund. The Master Trust Agreement authorizes the Board of
Trustees to divide the shares into any number of classes or series, each class
or series having such designations, powers, preferences, rights,
qualifications, limitations and restrictions, as shall be determined by the
Board subject to the 1940 Act and other applicable law. The shares of any such
additional classes or series might therefore differ from the shares of the
present class and series of capital stock and from each other as to
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption, subject to applicable law, and might thus be superior or inferior
to the other classes or series in various characteristics.

The Trust generally is not required to hold meetings of its shareholders. Under
the Master Trust Agreement, however, shareholder meetings will be held in
connection with the following matters: (1) the election or removal of Trustees
if a meeting is called for such purpose; (2) the adoption of any investment
advisory contract; (3) any amendment of the Master Trust Agreement (other than
amendments changing the name of the Trust, supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or inconsistent
provision thereof); and (4) such additional matters as may be required by law,
the Master Trust Agreement, the By-laws of the Trust or any registration of the
Trust with the SEC or any state, or as the Trust's Trustees may consider
necessary or desirable. The shareholders also would vote upon changes in
fundamental investment objectives, policies or restrictions.

Each Trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing Trustees and until the election and qualification of
his successor or until such Trustee sooner dies, resigns or is removed by a
vote of two-thirds of the shares entitled to vote, or a majority of the
Trustees. In accordance with the 1940 Act (i) the Trust will hold a shareholder
meeting for the election of Trustees at such time as less than a majority of
the Trustees have been elected by shareholders, and (ii) if, as a result of a
vacancy in the Board of Trustees, less than two-thirds of the Trustees have
been elected by the shareholders, that vacancy will be filled only by a vote of
the shareholders. A shareholders' meeting shall be held for the purpose of
voting upon the removal of a Trustee upon the written request of the holders of
not less than 10% of the outstanding shares. Upon the written request of ten or
more shareholders who have been such for at least six months and who hold
shares constituting at least 1% of the outstanding shares of a Fund stating
that such shareholders wish to communicate with the other shareholders for the
purpose of obtaining the signatures necessary to demand a meeting to consider
removal of a Trustee, the Trust has undertaken to disseminate appropriate
materials at the expense of the requesting shareholders.

The Master Trust Agreement provides that the presence at a shareholder meeting
in person or by proxy of at least 30% of the shares entitled to vote on a
matter shall constitute a quorum. Thus, a meeting of shareholders of the Trust
could take place even if less than a majority of the shareholders were
represented on its scheduled date. Shareholders would in such a case be
permitted to take action which does not require a larger vote than a majority
of a quorum, such as the election of Trustees and ratification of the selection
of auditors. Some matters requiring a larger vote under the Master Trust
Agreement, such as termination or reorganization of the Trust and certain
amendments of the Master Trust Agreement, would not be affected by this
provision; nor would matters which under the 1940 Act require the vote of a
"majority of the outstanding voting securities" as defined in the 1940 Act.

<PAGE>

The Master Trust Agreement specifically authorizes the Board of Trustees to
terminate the Trust (or any series Fund thereof) by notice to the shareholders
without shareholder approval. The Board of Trustees may by amendment to the
Master Trust Agreement add to, delete, replace or otherwise modify any
provisions relating to any series or class, provided that before adopting any
such amendment without shareholder approval, the Board of Trustees determined
that it was consistent with the fair and equitable treatment of all
shareholders and, if shares have been issued, shareholder approval shall be
required to adopt any amendments which would adversely affect to a material
degree the rights and preferences of the shares of any series or class.

Each share of a Fund has equal voting rights with every other share of a Fund,
and all shares of a Fund vote as a single group except where a separate vote of
any class is required by the 1940 Act, the laws of the State of Delaware, the
Master Trust Agreement or the By-Laws, or as the Board may determine in its
sole discretion. Where a separate vote is required with respect to one or more
classes, then the shares of all other classes vote as a single class, provided
that, as to any matter which does not affect the interest of a particular
class, only the holders of shares of the one or more affected classes is
entitled to vote.

Interests in each Portfolio have no preemptive or conversion rights, and are
fully paid and non-assessable, except as set forth in the Prospectus. The
Portfolio Trust and the Standish Portfolio Trust normally will not hold
meetings of holders of such interests except as required under the 1940 Act.
The Portfolio Trust and the Standish Portfolio Trust 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 Trust and the Standish Portfolio Trust continue to hold office until
their successors are elected and have qualified. Holders holding a specified
percentage of interests in a Portfolio may call a meeting of holders in such
Portfolio for the purpose of removing any Trustee. A Trustee of the Portfolio
Trust or the Standish Portfolio Trust may be removed upon a majority vote of
the interests held by holders in the Portfolio Trust or the Standish Portfolio
Trust qualified to vote in the election. The 1940 Act requires the Portfolio
Trust and the Standish Portfolio Trust to assist its holders in calling such a
meeting. Upon liquidation of a Portfolio, holders in a Portfolio would be
entitled to share pro rata in the net assets of the Portfolio available for
distribution to holders. Each holder in a Portfolio is entitled to a vote in
proportion to its percentage interest in such Portfolio

PURCHASE, REDEMPTION AND VALUATION OF SHARES

PURCHASE AND REDEMPTION OF SHARES

Information on how to purchase and redeem shares and the time at which net
asset value of each share is determined is included in the Prospectus.

The Trust may suspend the right to redeem Fund shares or postpone the date of
payment upon redemption for more than seven days (i) for any period during
which the New York Stock Exchange ("NYSE") and the Federal Reserve Bank ("Fed")
are closed (other than customary weekend or holiday closings) or trading on the
exchange is restricted; (ii) for any period during which an emergency exists as
a result of which disposal by the Fund of securities owned by it or
determination by the Fund of the value of its net assets is not reasonably
practicable; or (iii) for such other periods as the SEC may permit for the
protection of shareholders of the Fund.

<PAGE>

The Trust intends to pay redemption proceeds in cash for all Fund shares
redeemed but, under certain conditions, the Trust, with respect to the STAR
Series, may make payment wholly or partly in portfolio securities, in
conformity with a rule of the SEC. Portfolio securities paid upon redemption of
Fund shares will be valued at their then current market value. An investor may
incur brokerage costs in converting portfolio securities received upon
redemption to cash. The Portfolios have advised the Trust that the Portfolios
will not redeem in-kind except in circumstances in which a Fund is permitted to
redeem in-kind or except in the event a Fund completely withdraws its interest
from a Portfolio

VALUATION OF SHARES

The following is a description of the procedures used by the Funds in valuing
their assets.

CASH PORTFOLIO, TREASURY PORTFOLIO, TREASURY PLUS PORTFOLIO AND GOVERNMENT
PORTFOLIO. The investment securities in the Cash Portfolio, Treasury Portfolio,
Treasury Plus Portfolio and Government Portfolio are valued based upon the
amortized cost method which involves valuing a security at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium. Although the amortized cost method provides consistency in valuation,
it may result in periods during which the stated value of a security is higher
or lower than the price the Cash Portfolio, Treasury Portfolio, Treasury Plus
Portfolio or Government Portfolio would receive if the security were sold. This
method of valuation is used in order to stabilize the NAV of shares of the Cash
Series, Treasury Series, Treasury Plus Series or Government Series at $1.00;
however, there can be no assurance that the Cash Series, Treasury Series,
Treasury Plus Series or Government Series' NAV will always remain at $1.00 per
share.

STAR PORTFOLIO. Securities that are fixed income securities (other than money
market instruments) for which accurate market prices are readily available are
valued at their current market value on the basis of quotations, which may be
furnished by a pricing service or provided by dealers in such securities.
Securities not listed on an exchange or national securities market, certain
mortgage-backed and asset-backed securities and securities for which there were
no reported transactions are valued at the last quoted bid prices. Fixed income
securities for which accurate market prices are not readily available and all
other assets are valued at fair value as determined in good faith by Standish
in accordance with procedures approved by the Trustees of the Standish
Portfolio Trust, which may include the use of yield equivalents or matrix
pricing.

Money market instruments with less than sixty days remaining to maturity when
acquired by the STAR Portfolio are valued on an amortized cost basis unless the
Trustees determine that amortized cost does not represent fair value. If the
STAR 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 determine during such sixty-day
period that amortized cost does not represent fair value.

The Board of Trustees of the Standish Portfolio Trust has approved determining
the current market value of securities with one year or less remaining to
maturity on a spread basis which will be employed in conjunction with the
periodic use of market quotations. Under the spread process, Standish
determines in good faith the current market value of these portfolio securities
by comparing their quality, maturity and liquidity characteristics to those of
United States Treasury bills.

<PAGE>

TAXATION OF THE TRUST

Each Fund is treated as a separate entity for accounting and tax purposes. Each
Fund will elect (when it files its initial federal tax return) to be treated
and to qualify as a "regulated investment company" ("RIC") under Subchapter M
of the Code and intends to continue to so qualify in the future. As such and by
complying with the applicable provisions of the Code regarding the sources of
its income, the timing of its distributions, and the diversification of its
assets, each Fund will not be subject to Federal income tax on its investment
company taxable income (i.e., all taxable income, after reduction by deductible
expenses, other than its "net capital gain," which is the excess, if any, of
its net long-term capital gain over its net short-term capital loss) and net
capital gain which are distributed to shareholders in accordance with the
timing and other requirements of the Code.

Each Portfolio is treated as a partnership for federal income tax purposes. As
such, a Portfolio is not subject to federal income taxation. Instead, a Fund
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 its corresponding Portfolio. Because a Fund invests its
assets in its corresponding Portfolio, the Portfolio normally must satisfy the
applicable source of income and diversification requirements in order for its
corresponding Fund to satisfy them. Each 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. A Portfolio will make
allocations to its corresponding Fund in a manner intended to comply with the
Code and applicable regulations and will make moneys available for withdrawal
at appropriate times and in sufficient amounts to enable the Fund to satisfy
the tax distribution requirements that apply to the Fund and that must be
satisfied in order to avoid Federal income and/or excise tax on the Fund. For
purposes of applying the requirements of the Code regarding qualification as a
RIC, each Fund will be deemed (i) to own its proportionate share of each of the
assets of its corresponding Portfolio and (ii) to be entitled to the gross
income of the Portfolio attributable to such share.

Each Fund will be subject to a 4% non-deductible federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a
timely basis in accordance with annual minimum distribution requirements. Each
Fund intends under normal circumstances to seek to avoid liability for such tax
by satisfying such distribution requirements. Certain distributions made in
order to satisfy the Code's distribution requirements may be declared by a Fund
during October, November or December but paid during the following January.
Such distributions will be taxable to taxable shareholders as if received on
December 31 of the year the distributions are declared, rather than the year in
which the distributions are received.

At the discretion of the officers of a Fund, each Fund will distribute net
realized capital gains. For federal income tax purposes, a Fund is permitted to
carry forward a net capital loss in any year to offset its own net capital
gains, if any, during the eight years following the year of the loss. To the
extent subsequent net capital gains are offset by such losses, they would not
result in federal income tax liability to a Fund and, as noted above, would not
be distributed as such to shareholders.

If a Portfolio invests in zero coupon securities, certain increasing rate or
deferred interest securities or, in general, other securities with an original
issue discount (or with market discount if an election is in effect to include
market discount in income currently), the Portfolio must accrue income on such
investments prior to the receipt of the corresponding cash payments. However,
the Fund must distribute, at least annually, all or substantially all of its
net income, including its distributive share of such income accrued

<PAGE>

by the Portfolio, to shareholders to qualify as a regulated investment company
under the Code and avoid federal income and excise taxes. Therefore, the
Portfolio may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash, or may have to leverage itself by borrowing the
cash, to enable the Fund to satisfy the distribution requirements.

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

Certain options or futures transactions undertaken by the STAR Portfolio may
cause the STAR Series to recognize gains or losses from marking to market even
though the STAR Portfolio's positions have not been sold or terminated and
affect the character as long-term or short-term and timing of some capital
gains and losses realized by the Portfolio and allocable to the Fund.
Additionally, the STAR Portfolio (and STAR Series) may be required to recognize
gain if an option, future, forward contract, short sale, swap or other
strategic transaction that is not subject to the mark to market rules is
treated as a "constructive sale" of an "appreciated financial position" held by
the Portfolio under Section 1259 of the Code. Any net mark-to-market gains
and/or gains from constructive sales may also have to be distributed by the
STAR Series to satisfy the distribution requirements referred to above even
though no corresponding cash amounts may concurrently be received, possibly
requiring the disposition of portfolio securities or borrowing to obtain the
necessary cash. Also, certain losses on transactions involving options, futures
or forward contracts and/or offsetting or successor positions may be deferred
rather than being taken into account currently in calculating the STAR Series'
taxable income or gain. Certain of the applicable tax rules may be modified if
the STAR Portfolio is eligible and chooses to make one or more of certain tax
elections that may be available. These transactions may affect the amount,
timing and character of the STAR Series' distributions to shareholders. The
STAR Series will take into account the special tax rules applicable to options,
futures, forward contracts and constructive sales in order to minimize any
potential adverse tax consequences.

The Federal income tax rules applicable to dollar rolls, certain structured or
hybrid securities, interest rate swaps, caps, floors and collars, and possibly
other investments or transactions are unclear in certain respects, and the STAR
Portfolio will account for these instruments in a manner that is intended to
allow the STAR Series and other similar investors to qualify as RICs. Due to
possible unfavorable consequences under present tax law, the STAR Portfolio
does not currently intend to acquire "residual" interests in real estate
mortgage investment conduit ("REMICs"), although it may acquire "regular"
interests in REMICs.

Distributions from a Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Prospectus whether taken in shares or in cash. Distributions,
if any, in excess of E&P will constitute a return of capital, which will first
reduce an investor's tax basis in Fund shares and thereafter (after such basis
is reduced to zero) will generally give rise to capital gains. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for federal income tax purposes in each share so received equal to
the amount of cash they would have received had they elected to receive the
distributions in cash, divided by the number of shares received. As a result of
the enactment of the Taxpayer Relief Act of 1997 (the "1997 TRA") on August 5,
1997, gain recognized after May 6, 1997 from the sale of a capital asset is
taxable to individual (noncorporate) investors at different maximum federal
income tax rates, depending generally upon the tax holding period for the
asset, the federal income tax bracket of the taxpayer, and the dates the asset
was acquired and/or sold. The Treasury Department has issued guidance under the
1997 TRA that (subject to possible modification by any "technical corrections"
that may be enacted) will enable the Funds to pass through to their
shareholders the benefits of the capital gains tax rates contained in the

<PAGE>

1997 TRA. Shareholders should consult their own tax advisers on the correct
application of these new rules in their particular circumstances.

It is anticipated that, due to the nature of each Portfolio's investments, no
portion of any Fund's distributions will generally qualify for the dividends
received deduction. A Fund's distributions 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 Fund was allocated
dividend income of its corresponding Portfolio from stock investments in U.S.
domestic corporations.

At the time of an investor's purchase of STAR Series shares, a portion of the
purchase price may be attributable to undistributed realized or unrealized
appreciation in the STAR Series' share of the STAR Portfolio's portfolio.
Consequently, subsequent distributions by the STAR Series on such shares from
such appreciation may be taxable to such investor even if the NAV of the
investor's shares is, as a result of the distributions, reduced below the
investor's cost for such shares, and the distributions economically represent a
return of a portion of the purchase price.

Upon a redemption or other disposition of shares of the STAR Series in a
transaction that is treated as a sale for tax purposes, a shareholder may
realize a taxable gain or loss, depending upon the difference between the
redemption proceeds and the shareholder's tax basis in his shares. Such gain or
loss will generally be treated as capital gain or loss if the shares are
capital assets in the shareholder's hands. Any loss realized on a redemption
may be disallowed to the extent the shares disposed of are replaced with other
shares of the STAR Series within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of, such as pursuant to
automatic dividend reinvestments. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized
upon the redemption of shares with a tax holding period of six months or less
will be treated as a long-term capital loss to the extent of any amounts
treated as distributions of long-term capital gain with respect to such shares.
Shareholders should consult their own tax advisers regarding their particular
circumstances to determine whether a disposition of Fund shares is properly
treated as a sale for tax purposes, as is assumed in the foregoing discussion.
Also, future Treasury Department regulations issued to implement the 1997 TRA
may contain rules for determining different tax rates applicable to sales of
Fund shares held for more than one year, more than 18 months, and (for certain
sales after the year 2000 or the year 2005) more than five years. These
regulations may also modify some of the provisions described above.

Dividends and certain other distributions may be subject to "backup
withholding" of federal income tax at a 31% rate for shareholders who fail to
provide required taxpayer identification numbers or related certifications,
provide incorrect information, or are otherwise subject to such withholding.

Different tax treatment, including penalties on certain excess contributions
and deferrals, certain pre-retirement and post-retirement distributions and
certain prohibited transactions, is accorded to accounts maintained as
qualified retirement plans. Shareholders should consult their tax adviser for
more information.

The STAR Portfolio may be subject to withholding and other taxes imposed by
foreign countries with respect to any investments in foreign securities, and
the STAR Series does not expect to pass its share of such taxes or any related
deductions or credits through to its shareholders. Foreign exchange gains and
losses may be recognized by the STAR Portfolio in connection with hybrid or
structured securities or Strategic Transactions in which its return is
dependent upon changes in the value of a foreign currency. Such gains or losses
may be subject in particular cases to Section 988 of the Code, which generally

<PAGE>

would cause them to be treated as ordinary income and losses and could affect
the amount, timing and character of the STAR Series' distributions to its
shareholders.

The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to any foreign
investors (who may be subject to withholding or other taxes) or certain other
classes of investors, such as tax-exempt entities, insurance companies, and
financial institutions. Dividends, capital gain distributions, and ownership of
or gains realized on the redemption (including an exchange) of Fund shares may
also be subject to state and local taxes. A state income (and possibly local
income and/or intangible property) tax exemption is generally available to the
extent, if any, the Fund's distributions are derived from interest on (or, in
the case of intangible property taxes, the value of its assets is attributable
to) investments in certain U.S. Government Securities, provided in some states
that certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. Shareholders should consult their tax advisers
regarding the applicable requirements in their particular states, including the
effect, if any, of the Fund's indirect ownership (through the Portfolio) of any
such obligations, the Federal, and any other state or local, tax consequences
of ownership of shares of, and receipt of distributions from, the Fund in their
particular circumstances.

CALCULATION OF PERFORMANCE DATA

From time to time, the Cash Series, Treasury Series, Treasury Plus Series and
Government Series may quote their "yield" and "effective yield" and the STAR
Series may quote certain "total return," "yield" and "yield-to-maturity"
information in advertisements, reports and other communications to shareholders
and compare their performance figures to those of other funds or accounts with
similar objectives and to relevant indices. Such performance information will
be calculated as described below. Yield quotations are expressed in annualized
terms and may be quoted on a compounded basis.

YIELD

The current yield for the Cash Series, Treasury Series, Treasury Plus Series
and Government Series is computed by (a) determining the net change in the
value of a hypothetical pre-existing account in the Fund having a balance of
one share at the beginning of a seven calendar day period for which yield is to
be quoted; (b) dividing the net change by the value of the account at the
beginning of the period to obtain the base period return; and (c) annualizing
the results (i.e., multiplying the base period return by 365/7).

The Funds' 7-day yield for the period ended December 31, 1998, were as follows:

CLASS CASH SERIES TREASURY SERIES TREASURY PLUS SERIES GOVERNMENT SERIES

Premium 5.18 N/A** N/A*** N/A***
Institutional 4.93 3.45 N/A*** N/A***
Investment N/A* N/A** N/A*** N/A***

* The INVESTMENT Class did not have invested assets on December 31, 1998.
** The PREMIUM AND INVESTMENT Class did not have invested assets on December
31, 1998.
***The Treasury Plus Series and Government Series are newly operational and
therefore do not have 7-day yields for the period ended December 31, 1998.

</TABLE>

<PAGE>

The STAR Series' yield is computed by dividing the net investment income per
share earned during a base period of 30 days, or one month, by the maximum
offering price per share on the last day of the period. For the purpose of
determining net investment income, the calculation includes, among expenses of
the Fund, all recurring fees that are charged to all shareholder accounts and
any non-recurring charges for the period stated. In particular, yield is
determined according to the following formula:

Yield = 2[(A - B + 1)(6) - 1]
- -----------------------------
CD

Where: A=interest earned during the period; B=net expenses accrued for
the period; C=the average daily number of shares outstanding during
the period that were entitled to receive dividends; D=the maximum
offering price (NAV) per share on the last day of the period.

The 30 day yield for the STAR Series for the period ended December 31,
1998 was 5.12%.

EFFECTIVE YIELD

In addition, the Cash Series, Treasury Series, Treasury Plus Series and
Government Series may calculate a compound effective annualized yield by
determining the net change in the value of a hypothetical pre-existing account
in the Fund having a balance of one share at the beginning of a seven calendar
day period for which yield is to be quoted according to the following formula:

Effective Yield = [( Base Period return +1 ) (365/7 exponentional power)] -
1 (I.E., adding 1 to the base period return (calculated as described
above), raising the sum to a power equal to 365/7 and subtracting 1.)

The net change in the value of the account reflects the value of additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation.

The Funds' 7-day effective yield for the period ended December 31, 1998, were
as follows:

CLASS CASH SERIES TREASURY SERIES TREASURY PLUS SERIES GOVERNMENT SERIES

Premium 5.32 N/A** N/A*** N/A***
Institutional 5.03 4.02 N/A*** N/A***
Investment N/A* N/A** N/A*** N/A***

</TABLE>

TOTAL RETURN

The Funds may advertise performance in terms of average annual total return for
1-, 5-, and 10 year periods, or for such lesser periods as any of such Funds
have been in existence. Average annual total return is computed by finding the
average annual compounded rates of return over the periods that would equate
the initial amount invested to the ending redeemable value, according the
following formula: subtracting the NAV per share at the beginning of the period
from the NAV per share at the end of the

<PAGE>

period (after adjusting for the reinvestment of any income dividends and
capital gain distributions), and dividing the result by the NAV per share at
the beginning of the period. In particular, the Funds' average annual total
return ("T") is computed by using the redeemable value at the end of a
specified period of time ("ERV") of a hypothetical initial investment of $1,000
("P") over a period of time ("n") according to the formula P(1+T)n=ERV.

The STAR Series may also quote non-standardized yield, such as
yield-to-maturity ("YTM"). YTM represents the rate of return an investor will
receive if a long-term, interest bearing investment, such as a bond, is held to
its maturity date. YTM does not take into account purchase price, redemption
value, time to maturity, coupon yield and the time between interest payments.

With respect to the treatment of discount and premium on mortgage or other
receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("pay downs"), the STAR Portfolio accounts
for gain or loss attributable to actual monthly pay downs as an increase or
decrease to interest income during the period. In addition, the STAR Portfolio
may elect (i) to amortize the discount or premium remaining on a security,
based on the cost of the security, to the weighted average maturity date, if
such information is available, or to the remaining term of the security, if the
weighted average maturity date is not available, or (ii) not to amortize the
discount or premium remaining on a security.

In addition to average annual return quotations, the STAR Series may quote
quarterly and annual performance on a net (with management and administration
fees deducted) and gross basis. The STAR Series may also from time to time
advertise total return on a cumulative, average, year-by-year or other basis
for various specified periods by means of quotations, charts, graphs or
schedules.

Past performance quotations should not be considered as representative of any
Fund's performance for any specified period in the future. The Funds'
performance may be compared in sales literature to the performance of other
mutual funds having similar objectives or to standardized indices or other
measures of investment performance. In particular, the STAR Series may compare
its performance to The IBC/Donoghue Money Market Average/All Taxable Index,
which is generally considered to be representative of the performance of
domestic, taxable money market funds, and the One Year Treasury Bills. However,
the average maturity of the STAR Series' portfolio is longer than that of a
money market fund and, unlike a money market fund, the NAV of the STAR Series'
shares may fluctuate.

The Cash Series began operations on June 25, 1998. The average annual total
return for the Premium Class of the Merrimac Cash Fund (which is a separate
feeder fund that invests all of its assets in the Cash Portfolio) for the
fiscal year ended December 31, 1998 was 5.59%.

The Treasury Series began operations on June 25, 1998. The average annual total
return for the Premium Class of Fund is 4.80%. This performance represents a
blend of the performance for the Premium Class of the Merrimac Treasury Fund (a
separate feeder fund that invests all of its assets in the Treasury Portfolio)
for the period January 1, 1998 to June 24, 1998 and the performance for Premium
Class of the Fund from June 24, 1998 to December 31, 1998.

The Treasury Plus Series and the Government Series are newly operational and
therefore do not have total return information for the period ended December
31, 1998.

The STAR Series began operations on August 7, 1998. The total return for the
Standish STAR Fund, which is a separate feeder fund that invests all of its
assets in the STAR Portfolio, for the one, five and

<PAGE>

ten year period beginning January 3, 1989 (inception of the Standish STAR Fund)
through December 31, 1998 was 5.75%, 5.47% and 6.45%, respectively.

Each Fund's performance will vary from time to time depending upon market
conditions, the combustion of the Fund's portfolio and its operating expenses.
As described above, total return is based on historical earnings and is not
intended to indicate future performance. Consequently, any given performance
quotation should not be considered as representative of a Fund's performance
for any specified period in the future. Performance information may be useful
as a basis for comparison with other investment alternatives. However, a Fund's
performance will fluctuate, unlike certain bank deposits or other investments
which pay a fixed yield for a stated period of time.

INDEPENDENT AUDITORS

Ernst & Young LLP serves as the independent auditors to the Trust and the
Portfolio Trust and PricewaterhouseCoopers LLP serves as independent
accountants to the Standish STAR Portfolio.

COUNSEL

Goodwin, Procter & Hoar LLP serves as counsel to the Trust and the Portfolio
Trust and Hale and Dorr LLP serves as counsel to the Standish Portfolio Trust.

FINANCIAL STATEMENTS

The Cash Series, Treasury Series and STAR Series' financial statements
contained in the 1998 Annual Report of the Merrimac Series have been audited by
Ernst & Young LLP, independent auditors, and are incorporated by reference into
this SAI. Copies of the Merrimac Series 1998 Annual Report may be obtained by
calling 1-888-MERRMAC.

<PAGE>

APPENDIX

DESCRIPTION OF COMMERCIAL PAPER RATINGS

The following descriptions of short-term debt ratings have been published by
Standard & Poor's Ratings Service ("Standard & Poor's"), Moody's Investors
Service ("Moody's"), Fitch's IBCA Investors Service ("Fitch"), and Duff and
Phelps ("Duff"), respectively. These obligations have an original maturity not
exceeding thirteen months, unless explicitly noted.

A -- Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. Commercial paper issues rated A-1 by Standard & Poor's reflect a very
strong degree of safety of timely payment. Commercial paper issues rated A-2
reflect a strong degree of safety of timely payment but not as strong as for
issues designated A-1.

Commercial paper issues rated Prime-1 by Moody's are judged by Moody's to be of
the "highest" quality on the basis of relative repayment capacity with a
superior ability for repayment of senior short-term debt obligations.
Commercial paper issues rated Prime-2 are judged by Moody's to be of the
"second highest" quality with a strong ability for repayment of senior
short-term debt obligations.

The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. Commercial paper issues rated Fitch-2 are
regarded as having only a slightly less assurance of timely payment than those
issues rated Fitch-1.

The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors that are supported by ample asset protection.
Risk factors are minor. The rating Duff-2 is regarded as having good certainty
of timely payment with sound liquidity factors supported by good asset
protection. Risk factors are small.

DESCRIPTION OF LONG-TERM DEBT RATINGS

The following is a description of Moody's debt instrument ratings:

Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.

<PAGE>

Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification. The modifier 1 indicates that the obligation ranks in the
higher end of its generic rating category; the modifier 2 indicates a midrange
ranking; and the modifier 3 indicates a ranking in the lower end of that
generic rating category.

The following is a description of Standard & Poor's debt instrument ratings:

Standard & Poor's ratings are based, in varying degrees, on the following
considerations: (i) the likelihood of default -- capacity and willingness of
the obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligations; (ii) the nature of and provisions
of the obligation; and (iii) the protection afforded by, and relative position
of, the obligation in the event of bankruptcy, reorganization, or other
arrangement under the laws of bankruptcy and other laws affecting creditors'
rights.

AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

Plus (+) or minus (-): The ratings may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.

BANK WATCH SHORT-TERM DEBT RATINGS

THOMSON BANK WATCH ratings represent an assessment of the likelihood of an
untimely payment of principal and interest. Important factors that may
influence this assessment are the overall financial health of the particular
company, and the probability that the government will come to the aid of a
troubled institution in order to avoid a default or failure. The probability of
government intervention stems from four primary factors:

o Government Guarantees

o Government Or Quasi-Government Ownership Or Control

o The Degree Of Concentration In The Banking System

o Government Precedent

As with the Issuer Ratings, the Short-Term Debt Ratings incorporate both
qualitative and quantitative factors. The ratings are not meant to be
"pass/fail" but rather to provide a relative indication of creditworthiness.
Therefore, obligations rated TBW-3 are still considered investment-grade.

These Short-Term Debt Ratings can also be restricted to local currency
instruments. In such cases, the ratings will be preceded by the designation LC
for Local Currency. Short-Term Debt Ratings are based on the following scale
and the definitions are:

<PAGE>

TBW-1 LC-1
The highest category; indicates a very high likelihood that principal and
interest will be paid on a timely basis.

TBW-2 LC-2
The second-highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated TBW-1.

TBW-3 LC-3
The lowest investment-grade category; indicates that while the obligation is
more susceptible to adverse developments (both internal and external) than
those with higher ratings, the capacity to service principal and interest in a
timely fashion is considered adequate.

TBW-4 LC-4
The lowest rating category; this rating is regarded as non-investment grade and
therefore speculative.

BANK WATCH LONG-TERM DEBT RATINGS

Long-Term Debt Ratings assigned by THOMSON BANK WATCH ALSO WEIGH HEAVILY
GOVERNMENT OWNERSHIP AND SUPPORT. The quality of both the company's management
and franchise are of even greater importance in the Long-Term Debt Rating
decisions. Long-Term Debt Ratings look out over a cycle and are not adjusted
frequently for what is believed to be short-term performance aberrations.

Long-Term Debt Ratings can be restricted to local currency debt - ratings will
be identified by the designation LC. In addition, Long-Term Debt Ratings may
include a plus (+) or minus (-) to indicate where within the category the issue
is placed. BANK WATCH Long-Term Debt Ratings are based on the following scale:

INVESTMENT GRADE

AAA LC-AAA
Indicates that the ability to repay principal and interest on a timely
basis is extremely high.

AA LC-AA
Indicates a very strong ability to repay principal and interest on a
timely basis, within limited incremental risk compared to issues rated
in the highest category.

A LC-A
Indicates the ability to repay principal and interest is strong. Issues
rated A could be more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings.

BBB LC-BBB
The lowest investment-grade category; indicates an acceptable capacity
to repay principal and interest. BBB issues are more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.

<PAGE>

NON-INVESTMENT GRADE - MAY BE SPECULATIVE IN THE LIKELIHOOD OF TIMELY REPAYMENT
OF PRINCIPAL AND INTEREST.

BB LC-BB
While not investment grade, the BB rating suggests that the likelihood
of default is considerably less than for lower-rated issues. However,
there are significant uncertainties that could affect the ability to
adequately service debt obligations.

B LC-B
Issues rated B show a higher degree of uncertainty and therefore greater
likelihood of default than higher-rated issues. Adverse developments
could negatively affect the payment of interest and principal on a
timely basis.

CCC LC-CCC
Issues rated CCC clearly have a high likelihood of default, with little
capacity to address further adverse changes in financial circumstances.

CC LC-CC
CC is applied to issues that are subordinate to other obligations rated
CCC and are afforded less protection in the event of bankruptcy or
reorganization.

D LC-D
Default