STANDISH AYER & WOOD INVESTMENT TRUST, 485APOS, 1997-11-14

STANDISH AYER & WOOD INVESTMENT TRUST
485APOS, 1997-11-14

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As filed with the Securities and Exchange Commission on November 14, 1997.

Registration Nos. 33-8214
811-4813

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|

Pre-Effective Amendment No. |_|

Post-Effective Amendment No. 83 |X|

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|

Amendment No. 87 |X|

(Check appropriate box or boxes.)

-------------

Standish, Ayer & Wood Investment Trust
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

One Financial Center, Boston, Massachusetts 02111
--------------------------------------------------
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: (617) 375-1760

ERNEST V. KLEIN, Esq.
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
---------------------------------------
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

|_| Immediately upon filing pursuant to Rule 485(b)

|_| On [Date] pursuant to Rule 485(b)

|_| 60 days after filing pursuant to Rule 485(a)(1)

|_| On [Date] pursuant to Rule 485(a)(1)

|_| 75 days after filing pursuant to Rule 485(a)(2)

|X| On January 27, 1998 pursuant to Rule 485(a)(2)

--------------------------
<PAGE>

STANDISH, AYER & WOOD INVESTMENT TRUST*

Cross-Reference Sheet Pursuant to Rule 495(a)

Part A Prospectus
Form Item Cross-Reference
- --------- ---------------

Item 1. Cover Page Cover Page

Item 2. Synopsis "Expense Information"

Item 3. Condensed Financial Not Applicable

Item 4. General Description Cover Page, "The Funds and Their
of Registrant Shares", "Investment Objective and
Policies", "Description of Securities
and Related Risks", "Investment
Techniques and Related Risks" and
"Information about the Master-Feeder
Structure"

Item 5. Management of the Fund "Management", "Custodians", and
"Transfer Agent and Dividend
Disbursing Agent"

Item 6. Capital Stock and "The Funds and Their Shares",
Other Securities "Purchase of Shares", "Redemption of
Shares", "Dividends and Distributions"
and "Federal Income Taxes"

Item 7. Purchase of Securities Cover Page and "Purchase of
Being Offered Shares"

Item 8. Redemption or Repurchase "Redemption of Shares"

Item 9. Pending Legal Proceedings Not Applicable

- --------
*This Post-Effective Amendment to the Registrant's Registration Statement
is being filed with respect to the following series of the Registrant: Standish
International Equity Fund. The Prospectuses and Statements of Additional
Information for the other series of the Registrant are not effected hereby and,
therefore, are not included herewith.

<PAGE>

Statement of Additional
Part B Information Cross-
Form Item Reference
- --------- ---------

Item 10. Cover Page Cover Page

Item 11. Table of Contents "Contents"

Item 12. General Information
and History Not Applicable

Item 13. Investment Objectives "Investment Objective and
and Policies and Policies" and "Investment
Restrictions"

Item 14. Management of the Fund "Management"

Item 15. Control Persons and "Management"
Principal Holders
of Securities

Item 16. Investment Advisory and "Management"
Other Services

Item 17. Brokerage Allocation "Portfolio Transactions"

Item 18. Capital Stock and "The Funds and Their Shares"
Other Securities

Item 19. Purchase, Redemption "Redemption of Shares" and
and Pricing of Securities "Determination of Net Asset
Being Offered Value"

Item 20. Tax Status "Taxation"

Item 21. Underwriters Not Applicable

Item 22. Calculation of "Calculation of Performance
Performance Data Data"

Item 23. Financial Statements "Experts and Financial Statements"
<PAGE>

- --------------------------------------------------------------------------------

SUPPLEMENT DATED MAY 28, 1997

[LOGO]

TO THE PROSPECTUS OF

STANDISH EQUITY FUND
STANDISH INTERNATIONAL EQUITY FUND
STANDISH SMALL CAPITALIZATION EQUITY FUND
STANDISH SMALL CAPITALIZATION EQUITY FUND II

DATED MAY 1, 1997

................................................................................

Each of the above-referenced Funds may invest in shares of real estate
investment trusts ("REITs"), which are pooled investment vehicles that invest in
real estate or real estate loans or interests. Investing in REITs involves risks
similar to those associated with investing in equity securities of small
capitalization companies. REITs are dependent upon management skills, are not
diversified, and are subject to risks of project financing, default by
borrowers, self-liquidation, and the possibility of failing to qualify for the
exemption from taxation under the Internal Revenue Code.

- --------------------------------------------------------------------------------

<PAGE>

The Standish Group of
Equity Funds

Standish Equity Fund
Standish International
Equity Fund
Standish Small
Capitalization
Equity Fund
Standish Small
Capitalization
Equity Fund II

Prospectus

Standish Group of Equity Funds

The Standish Group of Equity Funds includes the Standish Equity Fund, the
Standish Small Capitalization Equity Fund, the Standish Small Capitalization
Equity Fund II and the Standish International Equity Fund. Each Fund is
organized as a separate diversified investment series of Standish, Ayer & Wood
Investment Trust, an open end investment company. The Equity Fund, Small
Capitalization Equity Fund and Small Capitalization Equity Fund II invest
exclusively in the Standish Equity Portfolio, Standish Small Capitalization
Equity Portfolio and Standish Small Capitalization Equity Portfolio II,
respectively, each an open end investment company. Standish, Ayer & Wood, Inc.
("Standish") is the investment adviser to the Equity Portfolio, the Small
Capitalization Equity Portfolio, and the Small Capitalization Equity Portfolio
II. Standish International Management Company, L.P. ("SIMCO"), Boston,
Massachusetts, is the investment adviser to the International Equity Fund.
Standish and SIMCO are referred to in the Prospectus as the "Adviser" or the
"Advisers."

Prospective investors can obtain more information about the Funds, including an
application and Investor Guide, by calling Standish Fund Distributors, L.P. at
(800) 729-0066.

The Advisers seek to add value by capturing improving business momentum at
reasonable valuations. Their style blends quantitative and fundamental analysis
to find those stocks or markets where estimates of earnings are being revised
upwards but whose valuation does not yet reflect this positive trend. Standish
has been providing investment counseling to mutual funds, other institutional
investors and high net worth individuals for more than sixty years. Standish
offers a broad array of investment services that includes U.S., international
and global management of fixed income and equity securities for mutual funds and
separate accounts. SIMCO serves as Standish's international research and
investment arm for both debt and equity securities in all countries outside of
the United States. Privately held by twenty-one employee/directors and
headquartered in Boston, Massachusetts, Standish employs over eighty investment
professionals with a total staff of more than two hundred.

<PAGE>

This Prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing and should be retained for
future reference. Additional information has been filed with the Securities and
Exchange Commission in a Statement of Additional Information dated April 30,
1997, as amended or supplemented from time to time. The Statement of Additional
Information is incorporated by reference into this Prospectus and is available
without charge upon request from (800)729-0066. Shares of the Funds are not
deposits or obligations of, or guaranteed or endorsed by, any bank or other
insured depository institution, and are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
An investment in shares of the Funds involves investment risks, including
possible loss of principal.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Shares of the Funds are not available for sale in every state. This Prospectus
is not intended to be an offer to sell shares, nor may an offer to purchase
shares be accepted from investors, in those states where shares of the Funds may
not legally be sold. Contact Standish Fund Distributors to determine whether the
Funds are available for sale in your state.

Table of Contents

Fund Comparison Highlights ................................................. 3
Expense Information ........................................................ 4
Financial Highlights ....................................................... 5
Investment Objectives and Policies ......................................... 9
The Equity Fund ............................................................ 9
The Small Capitalization Equity Fund ....................................... 10
The Small Capitalization Equity Fund II .................................... 10
The International Equity Fund .............................................. 10
Description of Securities and Related Risks 11
Investment Techniques and Related Risks .................................... 13
Information about the Master-Feeder Structure .............................. 15
Calculation of Performance Data ............................................ 15
Dividends and Distributions ................................................ 16
Purchase of Shares ......................................................... 16
Net Asset Value ............................................................ 16
Exchange of Shares ......................................................... 17
Redemption of Shares ....................................................... 17
Management ................................................................. 18
Federal Income Taxes ....................................................... 20
The Funds and Their Shares ................................................. 20
Custodians ................................................................. 20
Transfer Agent and Dividend Disbursing Agent ............................... 21
Independent Accountants .................................................... 21
Legal Counsel .............................................................. 21
Tax Certification Instructions ............................................. 21

<PAGE>

Fund Comparison Highlights

The following table highlights information contained in this Prospectus and is
qualified in its entirety by the more detailed information contained within. For
a complete description of each Fund's distinct investment objective and
policies, see "Investment Objectives and Policies," "Description of Securities
and Related Risks" and "Investment Techniques and Related Risks." There can be
no assurance that a Fund's investment objective will be achieved.

<TABLE>
<CAPTION>
Equity Fund Small Capitalization Small Capitalization International Equity Fund
Equity Fund Equity Fund II

<S> <C> <C> <C> <C>
Investment Objective Long-term growth of Long-term growth of Long-term growth of Long-term capital growth
capital through capital through capital. Seeks to through investment in a
investment primarily investment primarily in achieve that objective diversified portfolio of
in equity and equity and equity-related through investment foreign equity
equity-related securities of small primarily in equity and securities
securities of capitalization companies equity related securities
companies which appear of small capitalization
to be undervalued companies.

Key Strategy Emphasize stocks Emphasize rapidly Emphasize rapidly Emphasize stocks and
believed to offer growing, high quality growing, high quality markets believed to
above average companies with market companies with market offer above average
potential for capital capitalizations less than capitalizations less than potential for capital
growth through the use $700 million that are $1 billion that are growth through the use
of statistical involved with value added involved with value added of statistical modeling
modeling techniques products or services products or services techniques
and fundamental
analysis

Market Capitalization of No limit; general $700 million or less $1 billion or less No limit; general range
Companies Focused on by range is medium to is medium to large
the Fund large capitalization capitalization

Foreign Securities Yes; no limit for Yes; limited to 15% of Yes; limited to 15% of Yes; without limit,
securities listed on a total assets total assets including up to 25% of
U.S. exchange or total assets in
traded in the U.S. securities of issuers
over-the-counter located in emerging
("OTC") market but markets
limited to 10% of
total assets for
foreign securities
which are not so
listed or traded

Benchmark Index S&P 500 Russell 2000, Russell Russell 2000, Russell EAFE Index
2000 Growth and S&P 500 2000 Growth and S&P 500
</TABLE>
<PAGE>

Expense Information

Total operating expenses are based on expenses for each Fund's fiscal year ended
December 31, 1996. Total operating expenses for the Equity Fund include expenses
of the Fund and the Equity Portfolio, for the Small Capitalization Equity Fund
include expenses of the Fund and the Small Capitalization Equity Portfolio, and
for the Small Capitalization Equity Fund II include expenses of the Fund and the
Small Capitalization Equity Portfolio II. The Trusts' Trustees believe that
total operating expenses of the Equity Fund, the Small Capitalization Equity
Fund and the Small Capitalization Equity Fund II are approximately equal to or
less than what would be the case if the Funds did not invest all of their
investable assets in their corresponding Portfolios.

<TABLE>
<CAPTION>
Small Small
Capitalization Capitalization International
Equity Fund Equity Fund II Equity Fund II Equity Fund

<S> <C> <C> <C> <C>
Shareholder Transaction Expenses

Maximum Sales Load Imposed on Purchases None None None None

Maximum Sales Load Imposed on Reinvested None None None None
Dividends

Deferred Sales Load None None None None

Redemption Fees None None None None

Annual Operating Expenses
(as a percentage of average net assets)

Management Fees (after applicable limitation) 0.005 0.006 0.00%* 0.21%*

------------

12b-1 Fees None None None None

Other Expenses (after applicable expense 0.0021 0.0015 0.00%* 0.79%
limitation)+
----------- ------------ ------------ ------------

Total Operating Expenses (after applicable
expense limitation) 0.0071 0.0075 0.00%* 1.00%*
=========== ============ ============ ============
</TABLE>

*The Advisers have voluntarily and temporarily agreed to limit certain expenses
of the Small Cap II Fund and International Equity Fund. In the absence of such
agreements, the Management Fees, Other Expenses and Total Operating Expenses (as
a percentage of average daily net assets for the fiscal year ended December 31,
1996) would have been: Small Cap Fund -- 0.60%, 0.16%, and 0.76%; Small Cap II
Fund -- 0.60%, 1.55% and 2.15%; and International Equity Fund -- 0.50%, 0.79%
and 1.29%. The Adviser may revise or discontinue these agreements at any time
although they have no current intentions to do so.

+Other Expenses include custodian and transfer agent fees, registration costs,
payments for insurance, and audit and legal services.

Example

Hypothetically assume that each Fund's annual return is 5% and that its total
operating expenses are exactly as described. For every $1,000 invested, an
investor would have paid the following expenses if an account were closed after
the number of years indicated:

Small Small
Capitalization Capitalization International
Equity Fund Equity Fund II Equity Fund II Equity Fund

After 1 Year $ 7 $ 8 $0 $ 10
After 3 Years 23 25 0 32
After 5 Years 41 43 0 55
After 10 Years 91 95 0 122

The purpose of the table is to assist investors in understanding the various
costs and expenses that an investor in each Fund will bear directly or
indirectly. The example is included solely for illustrative purposes and should
not be considered a representation of future performance or expenses. Actual
expenses may be more or less than those shown. See "Management" for additional
information about each Fund's expenses.

<PAGE>

Financial Highlights

The financial highlights for periods after 1992 have been audited by Coopers &
Lybrand L.L.P., independent accountants, whose reports, together with the
Financial Statements of the Funds, are incorporated into the Statement of
Additional Information. Financial highlights for prior periods were audited by
other independent accountants. The Funds' annual reports, which contain
additional information about Fund performance, may be obtained from Standish
Fund Distributors without charge.

Equity Financial Highlights

<TABLE>
<CAPTION>
Equity Fund Year Ended December 31,
1996 1995 1994 1993 1992* 1991*+
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $34.81 $28.66 $30.89 $26.28 $25.66 $20.00
-------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income $0.60 $0.76 $0.45 $0.50 $0.56 $0.46
Net realized and unrealized gain (loss)
on investments 8.52 9.94 (1.62) 5.57 1.81 6.17
-------- -------- -------- -------- -------- --------
Total from investment operations $9.12 $10.70 ($1.17) $6.07 $2.37 $6.63
-------- -------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income (0.56) (0.78) (0.44) (0.47) (0.54) (0.35)
From realized gain on investments (4.58) (3.77) (0.62) (0.99) (1.19) (0.62)
From paid-in capital -- -- -- -- (0.02) --
-------- -------- -------- -------- -------- --------
Total distributions declared to shareholders (5.14) (4.55) ($1.06) ($1.46) ($1.75) ($0.97)
-------- -------- -------- -------- -------- --------

Net asset value - end of period $38.79 $34.81 $28.66 $30.89 $26.28 $25.66
======== ======== ======== ======== ======== ========

Total return(3) 26.84% 37.55% (3.78%) 20.79% 9.52% 33.45%t
Ratios (to average daily net assets)/Supplemental Data
Net assets at end of period (000 omitted) $105,855 $88,532 $86,591 $72,916 $14,679 $7,498
Expenses**(1) 0.71% 0.69% 0.70% 0.80% 0.00% 1.00%t
Net investment income** 1.53% 2.05% 1.55% 1.29% 2.52% 1.92%t

Portfolio turnover(2) 41% 159% 182% 192% 92% 86%
Average Commission Rate(2) 0.0499
</TABLE>

** For the year ended December 31, 1996 and the three-year period ended
December 31, 1993, Standish did not impose a portion of its advisory fee. If
this voluntary reduction had not been undertaken, the net investment income
per share and the ratios would have been:

<TABLE>
<S> <C> <C> <C> <C>
Net Investment Income per share $0.59 $0.47 $0.34 $0.23
Ratios (to average net assets)
Expenses 0.72% 0.97% 1.00% 1.99%
Net Investment Income 1.52% 1.12% 1.52% 0.93%
</TABLE>

t Computed on an annualized basis.

* Audited by other auditors.

+ For the period from January 2, 1991 (start of business) to December 31,
1991.

1 Includes the Fund's share of the Standish Equity Portfolio's allocated
expenses for the period from May 3, 1996 through December 31, 1996.

2 Portfolio turnover and average broker commission rate represents activity
while the Fund was making investments directly in securities. The portfolio
turnover and average broker commission rate for the period since the Fund
transferred substantially all of its investable assets to the Portfolio are
78% and $0.0483, respectively, as shown in the Standish Equity Portfolio's
financial statements included in the Statement of Additional Information.

3 The Fund's performance benchmark is the S&P 500 Index. See "Calculation of
Performance Data" for a description of the S&P 500 Index. The average annual
total return of the S&P 500 Index for each year since the Fund's inception
was as follows (this total return information is not audited):

<TABLE>
<CAPTION>
Total Return: 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
S&P 500 22.96% 37.58% 1.32% 10.08% 7.63% 30.47%
</TABLE>
<PAGE>

Small Cap Financial Highlights

<TABLE>
<CAPTION>
Small Capitalization Equity Fund Year Ended December 31,
1996 1995 1994 1993 1992* 1991* 1990*+
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $53.46 $42.15 $48.97 $39.83 $39.99 $27.57 $26.24
-------- -------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income (loss) -- -- -- ($0.07) ($0.11) ($0.04) $0.01
Net realized and unrealized gain (loss)
on investments 9.29 12.57 ($1.84) 11.31 4.00 17.87 1.33
-------- -------- -------- -------- -------- -------- --------
Total from investment operations 9.29 $12.57 ($1.84) $11.24 $3.89 $17.83 $1.34
-------- -------- -------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income -- -- -- -- -- -- ($0.01)
From realized gains on investments ($9.79) ($1.26) (4.98) ($2.1) (4.05) ($5.35) --
From paid-in capital -- -- -- -- -- ($0.06) --
-------- -------- -------- -------- -------- -------- --------

Total distributions declared
to shareholders ($9.79) ($1.26) (4.98) ($2.10) (4.05) ($5.41) ($0.01)
-------- -------- -------- -------- -------- -------- --------
Net asset value - end of period $52.96 $53.46 $42.15 $48.97 $39.83 $39.99 $27.57
======== ======== ======== ======== ======== ======== ========
Total return(3) 17.36% 29.83% (3.66%) 28.21% 9.74% 64.71% 15.35%t

Ratios (to average net assets)/
Supplemental Data
Net assets at end of period (000 omitted) $244,131 $180,470 $107,591 $85,141 $50,950 $35,418 $13,273
Expenses(1) 0.75%** 0.75% 0.79% 0.88% 1.04% 0.87% 1.48%t
Net investment income (0.44%)** (0.030%) (0.027%) (0.018%) (0.038%) (0.015%) 0.17%t
Portfolio turnover(2) 28% 112% 130% 144% 101% 96% 13%
Average Broker Commission Rate(2) $0.045 -- -- -- -- -- --
</TABLE>

- ----------
t Computed on an annualized basis.
* Audited by other auditors.
** For the period from January 1, 1996 to May 3, 1996, Standish did not impose
a portion of its advisory fee. If this voluntary reduction had not been
undertaken, the net investment income per share and the ratios would have
been:

Net investment income per share ($0.01)

Ratios (to average net assets):
Expenses 0.076%
Net investment income (0.045%)

+ For the period from August 31, 1990 (start of business) to December 31,
1990.
1 Includes the Fund's share of Standish Small Capitalization Equity
Portfolio's allocated expenses for the period from May 3, 1996 through
December 31, 1996.
2 Portfolio turnover and average broker commission rate represents activity
while the Fund was making investments directly in securities. The portfolio
turnover and average broker commission rate for the period since the Fund
transferred substantially all of its investable assets to the Portfolio are
76% and $0.0434 as shown in the Standish Small Capitalization Portfolio's
financial statements included in the Statement of Additional Information.
3 The Fund's performance benchmarks are the S&P 500 Index, the Russell 2000
Index and the Russell 2000 Growth Index. See "Calculation of Performance
Data" for a description of these indices. The average annual total return of
these indices for each year since the Fund's inception was as follows (this
total return information is not audited):

<TABLE>
<CAPTION>
Total Return: 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500 22.96% 37.58% 1.32% 10.08% 7.63% 39.47% (3.16%)
Russell 2000 16.53% 28.44% (1.83%) 10.89% 18.42% 41.64% (19.52%)
Russell 2000 Growth 11.26% 31.04% (2.43%) 13.36% 7.77% 51.19% (17.41%)
</TABLE>
<PAGE>

Small Cap II Financial Highlights

<TABLE>
<CAPTION>
Small Capitalization Equity Fund II For the period December 23, 1996 (commencement of Operations)
through December 31, 1996
<S> <C>
Net asset value - beginning of period $20.00
-------
Income from investment operations
Net investment income (1) $0.00
Net realized and unrealized gain (loss) on investments 0.39
Total from investment operations $0.39
-------
Less distributions declared to shareholders
From net investment income
From realized gains on investments --
From paid-in capital --
-------

Total distributions declared to shareholders --
Net asset value - end of period $20.39
=======
Total return(1) --

Ratios (to average net assets)/Supplemental Data
Net assets at end of period (000 omitted) $484
Expenses(1)* N/A(2)
Net investment income N/A(2)
</TABLE>

- ----------
* Computed on an annualized basis.
Includes the Fund's share of Portfolio allocated expenses.
Ratios are not meaningful due to the short period of operations. All
expenses were reimbursed by Standish. The Fund's performance benchmarks are
the S&P 500 Index, the Russell 2000 Index and the Russell 2000 Growth Index.
See "Calculation of Performance Data" for a description of these indices.
The average annual total return of these indices for 1996, the year in which
the Fund commenced operations, was as follows (this total return information
is not audited):

<TABLE>
<CAPTION>
Total Return:
<S> <C>
S&P 500 22.96%
Russell 2000 16.53%
Russell 2000 Growth 11.26%
</TABLE>
<PAGE>

International Equity Financial Highlights

<TABLE>
<CAPTION>
International Equity Fund Year Ended December 31,
1996 1995 1994 1993 1992* 1991* 1990* 1989* 1988*+

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
- --beginning of period $23.54 $23.12 $26.74 $19.78 $22.20 $20.16 $23.10 $20.07 $20.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from
investment operations
Net investment income $0.47 $0.04 $0.21 $0.26 $0.26 ($0.33) $0.55 $0.49 $0.06
Net realized and unrealized
gain (loss) on investments $1.28 $0.45 ($2.08) $7.29 ($2.47) $2.02 ($2.67) $3.23 $0.01
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations $1.75 $0.49 ($1.87) $7.55 ($2.21) $2.35 ($2.12) $3.72 $0.07
------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions declared
to shareholders
From net investment income ($0.51) -- ($0.12) ($0.23) ($0.21) $0.30 ($0.41) ($0.50) --

In excess of net
investment income -- -- -- ($0.36) -- -- -- -- --

From realized gains
on investments ($1.53) $0.07 ($1.63) -- -- ($0.01) ($0.41) ($0.19) --
------- ------- ------- ------- ------- ------- ------- ------- -------

Total distributions declared
to shareholders ($2.04) ($0.07) ($1.75) ($0.59) ($0.21) ($0.31) ($0.82) ($0.69) $0.00
------- ------- ------- ------- ------- ------- ------- ------- -------

Net asset value
--end of period $23.25 $23.54 $23.12 $26.74 $19.78 $22.20 $20.16 $23.10 $20.07
======= ======= ======= ======= ======= ======= ======= ======= =======

Total return(2) 7.44% 2.14% (6.99%) 38.27% (9.95%) 11.73% (9.44%) 18.79% 5.32%t

Net assets at end of
period (000 omitted) $47,739 $59,473 $104,435 $92,419 $56,539 $47,077 $24,872 $19,141 $10,158
Ratios (to average net assets)/
Supplemental Data
Expenses 0.50%** 1.22% 1.23% 1.34% 1.53% 1.54% 1.60% 1.60% 1.60%t
Net investment income 1.80%** 1.76% 1.52% 1.09% 1.18% 1.30% 2.19% 2.29% 3.90%t
Portfolio turnover 163% 108% 75% 98% 98% 27% 48% 38% 0%
Average Broker Commission
Rate Per Share $0.0092
</TABLE>

- ----------
t Computed on an annualized basis.
* Audited by other auditors.
** Standish voluntarily waived a portion of its investment advisory fee. Had
this action not been undertaken, the net investment income per share and the
ratios would have been:

Net investment income per share $0.27

Ratios (to average net assets):
Expenses 1.29%
Net investment income 1.01%

+ For the period from August 31, 1988 (start of business) to December 31,
1988.
1 Amount represents the average commission per share paid to brokers on the
purchase and sale of portfolio securities.
2 The Fund's performance benchmark is the Europe, Asia, Far-East ("EAFE")
Index. See "Calculation of Performance Data" for a description of the EAFE
Index. The average annual total return of the EAFE Index for each year since
the Fund's inception was as follows (this total return information is not
audited):

<TABLE>
<CAPTION>
Total Return: 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EAFE 6.04% 11.22% 7.79% 32.57% (12.19%) (12.12%) (23.43%) 10.61% 0.60%
</TABLE>

<PAGE>

Investment Objectives and Policies

Investment Strategy

Each Fund is an actively managed diversified portfolio consisting primarily of
equity and equity-related securities. Each Fund is managed to achieve long-term
growth of capital. The Equity Fund seeks to achieve its objective by investing
primarily in equity and equity-related securities of companies which appear to
be undervalued. The Small Capitalization Equity Fund ("Small Cap Fund") and the
Small Capitalization Equity Fund II ("Small Cap II Fund") seek to achieve their
respective objectives by focusing on equity and equity-related securities of
small capitalization companies. The Small Cap Fund invests primarily in
securities of companies with market capitalizations less than $700 million while
the Small Cap II Fund invests primarily in securities of companies with market
capitalizations less than $1 billion. The International Equity Fund seeks to
achieve its objective by investing in a diversified portfolio of foreign equity
securities. The Equity Fund, the Small Cap Fund and the Small Cap II Fund each
invests all of its investable assets in a corresponding Portfolio. These Funds
are sometimes referred to in this Prospectus as the Standish Feeder Funds. This
structure, where one fund invests all of its investable assets in another
investment company, is described below under the caption "Information About The
Master-Feeder Structure."

The Advisers seek to add value to portfolios of securities by finding companies
with improving business momentum whose securities have reasonable valuations.
For the Equity Fund and the International Equity Fund, the Advisers utilize both
quantitative and fundamental analysis to find stocks whose estimates of earnings
are being revised upwards but whose valuation does not yet reflect this positive
trend. For the Small Cap and Small Cap II Funds, Standish emphasizes small
capitalization companies that have developed strong sector or industry positions
and have produced solid balance sheets.

The equity and equity-related securities in which each Fund invests include
exchange-traded and over-the-counter common and preferred stocks but may also
include warrants, rights, convertible securities, depositary receipts,
depositary shares, trust certificates, shares of other investment companies,
limited partnership interests and equity participations. These equity securities
may be issued by U.S. or foreign companies, although not all Funds invest to the
same extent in securities of foreign issuers. Please refer to each Fund's
specific investment objective and policies and "Description of Securities and
Related Risks" for a more comprehensive list of permissible securities and
investments.

* * *
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Each Fund's specific investment objective, policies and strategies are set forth
below to assist the investor in differentiating each Fund's unique
characteristics. Because of the uncertainty inherent in all investments, no
assurance can be given that a Fund will achieve its investment objective. See
"Description of Securities and Related Risks" and "Investment Techniques and
Related Risks" below for additional information.

The Equity Fund

The investment objective and characteristics of the Equity Fund correspond
directly to those of the Equity Portfolio in which the Fund invests all of its
investable assets. The following is a discussion of the investment objective and
policies of the Equity Portfolio. Investment Objective. The Equity Portfolio's
investment objective is to achieve long-term growth of capital through
investment primarily in equity and equity-related securities of companies which
appear to be undervalued.

Principal Investments. Under normal circumstances, at least 80% of the Equity
Portfolio's total assets will be invested in equity and equity-related
securities.

Investment Strategies. The Equity Portfolio follows a disciplined investment
strategy, emphasizing stocks which Standish believes offer above average
potential for capital growth. Although the precise application of the discipline
will vary according to market conditions, Standish intends to use statistical
modeling techniques that utilize stock specific factors (e.g., current price
earnings ratios, stability of earnings growth, forecasted changes in earnings
growth, trends in consensus analysts' estimates, and measures of earnings
results relative to expectations) to identify equity securities that are
attractive as purchase candidates. Once identified, these securities will be
subject to further fundamental analysis by Standish's professional staff before
they are included in the Equity Portfolio's holdings. Securities selected for
inclusion in the Equity Portfolio's holdings will represent various industries
and sectors.

Other Investments. When Standish believes that foreign markets offer above
average growth potential, the Equity Portfolio may invest without limit in
equity and equity-related securities of foreign issuers that are listed on a
United States securities exchange or traded in the U.S. OTC market. The
Portfolio may not invest more than 10% of its total assets in such securities
which are not so listed or traded.

The Equity Portfolio may invest in debt securities and preferred stocks which
are convertible into, or exchangeable for, common stocks. These securities will
be rated Aaa, Aa or A by Moody's Investor Service, Inc., or AAA, AA, or A by
Standard and Poor's Ratings Group, Duff and Phelps, Inc. or Fitch Investors
Service, Inc., or, if unrated, determined by Standish to be of comparable credit
quality. Up to 5% of the Equity Portfolio's total assets invested in convertible
debt securities and preferred stocks may be rated Baa by Moody's or BBB by
Standard & Poor's, Duff, or Fitch. The Equity Portfolio may enter into
repurchase agreements, engage in short selling and invest in restricted and
illiquid securities, although it intends to invest in restricted and illiquid
securities on an occasional basis only. The Equity Portfolio may purchase and
sell put and call options, enter into futures contracts on U.S. equity indices,
purchase and sell options on such futures contracts and engage in currency
transactions. See "Description of Securities and Related Risks" and "Investment
Techniques and Related Risks" below for additional information.

The Small Capitalization Equity Fund

The investment objective and characteristics of the Small Cap Fund correspond
directly to those of the Small Capitalization Equity Portfolio ("Small Cap
Portfolio") in which the Fund invests all of its investable assets. The
following is a discussion of the investment objectives and policies of the Small
Cap Portfolio.
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Investment Objective. The Small Cap Portfolio's investment objective is to
achieve long-term growth of capital through investment primarily in equity and
equity-related securities of small capitalization companies.

Principal Investments. Under normal circumstances, at least 80% of the Small Cap
Portfolio's total assets will be invested in equity and equity-related
securities of small capitalization companies. The Small Cap Portfolio will focus
its investments in small capitalization companies that have market
capitalizations less than $700 million. When Standish believes that securities
of small capitalization companies are overvalued, the Small Cap Portfolio may
invest in securities of larger, more mature companies, provided that such
investments do not exceed 20% of the Portfolio's total assets. The Small Cap
Portfolio may participate in initial public offerings for previously privately
held companies which are expected to have market capitalizations less than $700
million after the consummation of the offering, and whose securities are
expected to be liquid after the offering.

Investment Strategies. The Small Cap Portfolio will pursue investments in
rapidly growing, high quality companies that are involved with value added
products or services. These companies will have market capitalizations less than
$700 million, although the Small Cap Portfolio may include securities of larger,
more mature companies. Companies with small market capitalizations may have more
limited operating histories and/or less experienced management than larger
capitalization companies and may pose additional risks.

Other Investments. When Standish believes that foreign markets offer above
average growth potential, the Small Cap Portfolio may invest up to 15% of its
total assets in equity and equity-related securities of foreign issuers,
including issuers located in emerging markets. The Small Cap Portfolio may enter
into repurchase agreements, engage in short selling and invest in restricted and
illiquid securities, although it intends to invest in restricted and illiquid
securities on an occasional basis only. The Small Cap Portfolio may purchase and
sell put and call options, enter into futures contracts, purchase and sell
options on such futures contracts and engage in currency transactions. See
"Description of Securities and Related Risks" and "Investment Techniques and
Related Risks" below for additional information.

The Small Capitalization Equity Fund II

The investment objective and characteristics of the Small Cap II Fund correspond
directly to those of the Small Capitalization Equity Portfolio II ("Small Cap II
Portfolio") in which the Fund invests all of its investable assets. The
following is a discussion of the investment objectives and policies of the Small
Cap II Portfolio.

Investment Objective. The Small Cap II Portfolio's investment objective is to
achieve long term growth of capital. The Portfolio seeks to achieve its
objective through investment primarily in equity and equity-related securities
of small capitalization companies.

Principal Investments. Under normal circumstances, at least 80% of the Small Cap
II Portfolio's total assets will be invested in equity and equity-related
securities of small capitalization companies. The Small Cap II Portfolio will
focus its investments in small capitalization companies on those with market
values less than $1 billion. When Standish believes that securities of small
capitalization companies are overvalued, the Small Cap II Portfolio may invest
in securities of larger, more mature companies, provided that such investments
do not exceed 20% of the Portfolio's total assets. The Small Cap II Portfolio
may participate in initial public offerings for previously privately held
companies which are generally expected to have market capitalizations less than
$1 billion after the

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consummation of the offering, and whose securities are expected to be liquid
after the offering.

Investment Strategies. The Small Cap II Portfolio will pursue investments in
rapidly growing, high quality companies that are involved with value added
products or services. These companies will have market capitalizations less than
$1 billion. Companies with small market capitalizations may have more limited
operating histories and/or less experienced management than larger
capitalization companies and may pose additional risks.

Other Investments. When Standish believes that foreign markets offer above
average growth potential, the Small Cap II Portfolio may invest up to 15% of its
total assets in equity and equity-related securities of foreign issuers,
including issuers located in emerging markets. The Small Cap II Portfolio may
enter into repurchase agreements, engage in short selling and is permitted to
invest in restricted and illiquid securities, although it intends to invest in
restricted and illiquid securities on an occasional basis only. The Small Cap II
Portfolio may also purchase and sell put and call options, enter into futures
contracts, purchase and sell options on such futures contracts and engage in
currency transactions. See "Description of Securities and Related Risks" and
"Investment Techniques and Related Risks" below for additional information.

The International Equity Fund

Investment Objective. The International Equity Fund's investment objective is to
obtain long-term capital growth through investment in a diversified portfolio of
foreign equity securities. Capital growth is expected to result primarily from
appreciation of the equity securities held in the Fund's portfolio; however, the
Fund may take advantage of changes in currency exchange rates in an effort to
realize additional capital appreciation. Income received on the Fund's
investments is incidental to the Fund's primary objective to obtain long-term
capital growth.

Principal Investments. Under normal circumstances, at least 65% of the
International Equity Fund's total assets will be invested in equity and
equity-related securities of companies located in the foreign countries
represented in the Morgan Stanley Capital International World Index (the "MSCI
Index") and the Europe, Australia, Far East Index (the "EAFE Index"), Canada
and, to a limited extent, emerging markets. The Fund intends to be invested in a
broad range of foreign countries, but is not required to invest in each country
represented in the EAFE Index or to invest in those countries in accordance with
their weightings in the EAFE Index. The Fund intends to invest in a minimum of
five countries.

Up to 25% of the Fund's total assets may be invested in securities of issuers
doing business in emerging markets, provided that not more than 5% of the Fund's
total assets may be invested in issuers located in any one emerging market.
SIMCO considers an emerging equity market to be any country that is not
represented in the MSCI World Index, which is an index of stocks in developed
markets.

Investment Strategy. The Fund follows a disciplined investment strategy,
emphasizing stocks and markets which SIMCO believes offer above average
potential for capital growth. Although the precise application of the discipline
varies according to market conditions, SIMCO uses statistical modeling
techniques that utilize stock and market specific factors to identify equity
securities and markets that are attractive as purchase candidates. These factors
include current and historical price multiple ratios and trends in consensus
analysis estimates. Once identified, these securities and markets are subject to
further review by the Fund's portfolio manager before they are included in the
Fund's

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portfolio. Securities selected for inclusion in the Fund's portfolio will
represent various industries and sectors.

Other Investments. The Fund may invest in fixed income securities such as bonds,
notes, Eurodollar securities and other debt obligations issued by the U.S.
government, its agencies, authorities and sponsored enterprises, foreign
governments and their political subdivisions, and corporate issuers located in
or doing business in foreign countries. These fixed income securities will be
rated at the time of investment A or better by Moody's, Standard & Poor's, Duff
or Fitch or, if unrated, determined by SIMCO to be of comparable credit quality.
The Fund may invest in preferred stocks of an issuer of any credit quality if
the common stocks of the issuer are not available to the Fund for investment.
The Fund may enter into repurchase agreements, engage in short selling and
invest in restricted and illiquid securities. The Fund may purchase and sell put
and call options, enter into futures contracts, purchase and sell options on
such futures contracts and engage in currency transactions. See "Description of
Securities and Related Risks" and "Investment Techniques and Related Risks"
below for additional information.

Description of Securities and Related Risks

The following sections include descriptions of specific securities and the risks
that are associated with the purchase of a particular type of security or the
utilization of a specific investment technique. For purposes of the discussion
in this section and the "Investment Techniques and Related Risks" section of
this Prospectus, the use of the term "Fund" or "Funds" refers to each of the
Equity Portfolio, the Small Cap Portfolio, the Small Cap II Portfolio and the
International Equity Fund, unless otherwise noted.

Common Stocks. Common stocks are shares of a corporation or other entity that
entitle the holder to a pro rata share of the profits of the corporation, if
any, without preference over any other shareholder or class of shareholders,
including holders of the entity's preferred stock and other senior equity.
Common stock usually carries with it the right to vote and frequently an
exclusive right to do so.

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

Convertible Securities Convertible debt securities and preferred stock entitle
the holder to acquire the issuer's stock by exchange or purchase for a
predetermined rate. Convertible securities are subject both to the credit and
interest rate risks associated with fixed income securities and to the stock
market risk associated with equity securities.

Warrants. Warrants acquired by a Fund entitle it to buy common stock from the
issuer at a specified price and time. Warrants are subject to the same market
risks as stocks, but may be more volatile in price. A Fund's investment in
warrants will not entitle it to receive

<PAGE>

dividends or exercise voting rights and will become worthless if the warrants
cannot be profitably exercised before their expiration dates.

Foreign Securities. The International Equity Fund may invest in foreign
securities without limit. The Small Cap Portfolio and the Small Cap II Portfolio
limit their investments in foreign securities to 15% of their respective total
assets, including securities of foreign issuers that trade on a U.S. exchange or
in the U.S. OTC market. The Equity Portfolio may invest without limit in foreign
securities which trade on a U.S. exchange or in the U.S. OTC market, but is
limited to 10% of total assets on those foreign securities which are not so
listed or traded.

Investing in Foreign Securities. Investing in the securities of foreign issuers
involves risks that are not typically associated with investing in U.S.
dollar-denominated securities of domestic issuers. Investments in foreign
issuers may be affected by changes in currency rates, changes in foreign or U.S.
laws or restrictions applicable to such investments and in exchange control
regulations (e.g., currency blockage). A decline in the exchange rate of the
currency (i.e., weakening of the currency against the U.S. dollar) in which a
portfolio security is quoted or denominated relative to the U.S. dollar would
reduce the value of the portfolio security. Commissions on transactions in
foreign securities may be higher than those for similar transactions on domestic
stock markets. In addition, clearance and settlement procedures may be different
in foreign countries and, in certain markets, such procedures have on occasion
been unable to keep pace with the volume of securities transactions, thus making
it difficult to conduct such transactions.

Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the U.S. Most
foreign securities markets may have substantially less trading volume than U.S.
securities markets and securities of many foreign issuers are less liquid and
more volatile than securities of comparable U.S. issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationalization,
expropriation or confiscatory taxation, imposition of withholding or other taxes
on dividend or interest payments (or in some cases, capital gains), limitations
on the removal of funds or other assets, political or social instability or
diplomatic developments which could affect investments in those countries.

Currency Risks. The U.S. dollar value of securities denominated in a foreign
currency will vary with changes in currency exchange rates, which can be
volatile. Accordingly, changes in the value of the currencies in which a Fund's
investments are denominated relative to the U.S. dollar will affect the Fund's
net asset value. Exchange rates are generally affected by the forces of supply
and demand in the international currency markets, the relative merits of
investing in different countries and the intervention or failure to intervene of
U.S. or foreign governments and central banks. Some countries in emerging
markets also may have managed currencies, which are not free floating against
the U.S. dollar. In addition, emerging markets are subject to the risk of
restrictions upon the free conversion of their currencies into other currencies.
Any devaluations relative to the U.S. dollar in the currencies in which a Fund's
securities are quoted would reduce the Fund's net asset value per share.

The International Equity Fund may invest any portion of its assets in securities
denominated in a particular currency. The portion of the International Equity
Fund's assets invested in securities denominated in non-U.S. currencies will
vary depending on market conditions.

<PAGE>

Each Fund may enter into forward foreign currency exchange contracts and cross
currency forward contracts with banks or other foreign currency brokers or
dealers to purchase or sell foreign currencies at a future date and may purchase
and sell foreign currency futures contracts and cross-currency futures contracts
to hedge against changes in foreign currency exchange rates, although the
Equity, the Small Cap and Small Cap II Portfolios have no current intention to
engage in such transactions. A forward foreign currency exchange contract is a
negotiated agreement between the contracting parties to exchange a specified
amount of currency at a specified future time at a specified rate. A
cross-currency forward contract is a forward contract that uses one currency
which historically moves in relation to a second currency to hedge against
changes in that second currency. See "Strategic Transactions" within the
"Investment Techniques and Related Risks" section for a further discussion of
the risks associated with currency transactions.

Emerging Markets. The International Equity Fund is permitted to invest up to 25%
of its total assets in issuers located in emerging markets. The Equity, Small
Cap and Small Cap II Portfolios may invest up to 10% of their total assets in
issuers located in emerging markets generally and up to 3% of their total assets
in issuers of any one specific emerging market country. Investments in emerging
markets involve risks in addition to those generally associated with investments
in foreign securities. Political and economic structures in many emerging
markets may be undergoing significant evolution and rapid development, and such
countries may lack the social, political and economic stability characteristics
of more developed countries. As a result, the risks described above relating to
investments in foreign securities, including the risks of nationalization or
expropriation of assets, may be heightened. In addition, unanticipated political
or social developments may affect the values of the Fund's investments and the
availability to the Fund of additional investments in such emerging markets. The
small size of the securities markets in certain emerging markets and the limited
volume of trading in securities in those markets may make the Fund's investments
in such countries less liquid and more volatile than investments in countries
with more developed securities markets (such as the U.S., Japan and most Western
European countries).

Depositary Receipts and Depositary Shares. Depositary receipts and depositary
shares are typically issued by a U.S. or foreign bank or trust company and
evidence ownership of underlying securities of a U.S. or foreign issuer.
Unsponsored programs are organized independently and without the cooperation of
the issuer of the underlying securities. As a result, available information
concerning the issuer may not be as current as for sponsored depositary
instruments and their prices may be more volatile than if they were sponsored by
the issuers of the underlying securities. Examples of such investments include,
but are not limited to, American Depositary Receipts and Shares ("ADRs" and
"ADSs"), Global Depositary Receipts and Shares ("GDRs" and "GDSs") and European
Depository Receipts and Shares ("EDRs" and "EDSs").

Money Market Instruments and Short-Term Securities. Although each Fund intends
to stay invested in equity and equity-related securities to the extent practical
in light of its objective, each Fund may, under normal market conditions,
establish and maintain cash balances and may purchase money market instruments
with maturities of less than one year and short-term interest-bearing fixed
income securities with maturities of one to three years ("Short-Term
Obligations") to maintain liquidity to meet redemptions. The Small Cap Portfolio
and Small Cap II Portfolio may hold up to 20% of their total assets in money
market instruments and Short-Term Obligations without regard to the liquidity
needs of their portfolios. Each Fund may also maintain cash balances and invest
in money

<PAGE>

market instruments and Short-Term Obligations without limitation as a temporary
defensive measure.

Money market instruments in which the Funds invest will be rated at the time of
purchase P-1 by Moody's or A-1 or Duff-1 by Standard & Poor's, Duff and Fitch
or, if unrated, determined by the Adviser to be of comparable quality. Money
market instruments and Short-Term Obligations include obligations issued or
guaranteed by the U.S. Government or any of its agencies and instrumentalities,
U.S. and foreign commercial paper, bank obligations, repurchase agreements and
other debt obligations of U.S. and foreign issuers. At least 95% of a Fund's
assets that are invested in Short-Term Obligations must be invested in
obligations rated at the time of purchase Aaa, Aa, A or P-1 by Moody's or AAA,
AA, A, A-1 or Duff-1 by Standard & Poor's, Duff or Fitch or, if unrated,
determined by the Adviser to be of comparable credit quality. Up to 5% of a
Fund's total assets invested in Short-Term Obligations may be invested in
obligations rated Baa by Moody's or BBB by Standard & Poor's, Duff or Fitch or,
if unrated, determined by the Adviser to be of comparable credit quality.

Generally, U.S. Government securities include U.S. Treasury obligations and
obligations issued or guaranteed by U.S. Government agencies, instrumentalities
or sponsored enterprises which are supported by (a) the full faith and credit of
the U.S. Treasury, (b) the right of the issuer to borrow from the U.S. Treasury,
(c) the discretionary authority of the U.S. Government to purchase certain
obligations of the issuer, or (d) only the credit of the agency. No assurance
can be given that the U.S. Government will provide financial support to U.S.
Government agencies, instrumentalities or sponsored enterprises in the future.
U.S. Government securities also include Treasury receipts, zero coupon bonds,
deferred interest securities and other stripped U.S. Government securities,
where the interest and principal components of stripped U.S. Government
securities are traded independently ("STRIPS").

Securities rated within the top three investment grade ratings (i.e., Aaa, Aa, A
or P-1 by Moody's or AAA, AA, A, A-1 or Duff-1 by Standard & Poor's, Duff or
Fitch) are generally regarded as high grade obligations. Securities rated Baa by
Moody's or BBB by Standard & Poor's, Duff or Fitch are generally considered
medium grade obligations and have some speculative characteristics. Adverse
changes in economic conditions or other circumstances are more likely to weaken
the medium grade issuer's capability to pay interest and repay principal than is
the case for high grade securities. If a security is rated differently by two or
more rating agencies, the Adviser uses the highest rating to determine its
rating category. If the rating of a security held by a Fund is downgraded below
the minimum rating, the Adviser will determine whether to retain that security
in the Fund's portfolio.

Investment Techniques and Related Risks

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

In the course of pursuing their investment objectives, each Fund may purchase
and sell (write) exchange-listed and over-the-counter put and call options on
securities, equity indices and other financial instruments; purchase and sell
financial futures contracts and options thereon; and, to the extent a Fund
invests in foreign securities, enter into currency

<PAGE>

transactions such as forward foreign currency exchange contracts, currency
futures contracts, currency swaps and options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions"). Strategic
Transactions may be used in an attempt to protect against possible changes in
the market value of securities held in or to be purchased for a Fund's portfolio
resulting from securities markets, currency exchange rate fluctuations, to seek
to protect a Fund's unrealized gains in the value of portfolio securities, to
facilitate the sale of such securities for investment purposes, or to establish
a position in the derivatives markets as a temporary substitute for purchasing
or selling particular securities. In addition to the hedging transactions
referred to in the preceding sentence, Strategic Transactions may also be used
to enhance potential gain in circumstances where hedging is not involved.

The ability of a Fund to utilize Strategic Transactions successfully will depend
on Standish's ability to predict pertinent market and interest rate movements,
which cannot be assured. Each Fund will comply with applicable regulatory
requirements when implementing these strategies, techniques and instruments. The
Funds' activities involving Strategic Transactions may be limited by the
requirements of the Code for qualification as a regulated investment company.

The use of options and futures transactions entails certain other risks. Futures
markets are highly volatile and the use of futures may increase the volatility
of a Fund's net asset value. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of a Fund creates the possibility that losses on the hedging
instrument may be greater than gains in the value of the Fund's position. The
writing of options could significantly increase a Fund's portfolio turnover rate
and 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, a
Fund might not be able to close out a transaction without incurring substantial
losses. Losses resulting from the use of Strategic Transactions could reduce net
asset value and the net result may be less favorable than if the Strategic
Transactions had not been utilized. 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 position, at the same time, such transactions can
limit any potential gain which might result from an increase in value of such
position. The loss incurred by a Fund in writing options on futures and entering
into futures transactions is potentially unlimited. The use of currency
transactions can result in a Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency. Each
Fund will attempt to limit its net loss exposure resulting from Strategic
Transactions entered into for non-hedging purposes to 3% of net assets. In
calculating a Fund's net loss exposure from such Strategic Transactions, an
unrealized gain from a particular Strategic Transaction

<PAGE>

would be netted against an unrealized loss from a related position. See the
Statement of Additional Information for further information regarding the use of
Strategic Transactions.

Repurchase Agreements. Each Fund (except the International Equity Fund) may
invest up to 10% of its net assets in repurchase agreements. The International
Equity Fund is not subject to the same limit, except that investments in
repurchase agreements maturing in more than 7 days are subject to the Fund's 15%
limit on investments in illiquid securities. In a repurchase agreement, a Fund
buys a security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the agreement
defaults or becomes insolvent. Repurchase agreements acquired by a Fund will
always be fully collateralized as to principal and interest by money market
instruments and will be entered into only with commercial banks, brokers and
dealers considered creditworthy by the Adviser.

Short Sales. Each Fund may engage in short sales and short sales against the
box. In a short sale, a Fund sells a security it does not own in anticipation of
a decline in the market value of that security. In a short sale against the box,
a Fund either owns or has the right to obtain at no extra cost the security sold
short. The broker holds the proceeds of the short sale until the settlement
date, at which time the Fund delivers the security (or an identical security) to
cover the short position. The Fund receives the net proceeds from the short
sale. When a Fund enters into a short sale other than against the box, the Fund
must first borrow the security to make delivery to the buyer and must place cash
or liquid assets in a segregated account with the Fund's custodian that is
marked to market daily. Short sales other than against the box involve unlimited
exposure to loss. No securities will be sold short if, after giving effect to
any such short sale, the total market value of all securities sold short would
exceed 5% of the value of a Fund's net assets.

Restricted and Illiquid Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities; however, the Equity Portfolio, the Small Cap
Portfolio and Small Cap II Portfolio invest in these securities only on an
occasional basis. 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, swap transactions, certain
over-the-counter options and certain restricted securities. Based upon
continuing review of the trading markets for a specific restricted security, the
security may be determined to be 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.

The Boards of Trustees have adopted guidelines and delegated to the Adviser the
daily function of determining and monitoring the liquidity of portfolio
securities, including restricted and illiquid securities. The Boards of
Trustees, however, retain oversight and are ultimately responsible for such
determinations. The purchase price and subsequent valuation of illiquid
securities normally reflect a discount, which may be significant, from the
market price of comparable securities for which a liquid market exists.

Investments in Other Investment Companies. Each Fund is permitted to invest up
to 10% of its total assets in shares of investment companies and up to 5% of its
total assets in any one investment company as long as that investment does not
represent more than 3% of the total voting stock of the acquired investment
company. Investments in the securities of other investment companies may involve
duplication of advisory fees and other expenses. Because certain emerging
markets are closed to investment by foreigners, the Funds may invest in issuers
in those markets primarily through specifically authorized investment funds. In
addition, each Fund may invest in investment companies that are designed to

<PAGE>

replicate the composition and performance of a particular index. For example,
Standard & Poor's Depositary Receipts ("SPDERS") are exchange-traded shares of a
closed-end investment company designed to replicate the price performance and
dividend yield of the Standard & Poor's 500 Composite Stock Price Index. Another
example is World Equity Benchmark Series ("WEBS") which are exchange traded
shares of open-end investment companies designed to replicate the composition
and performance of publicly traded issuers in particular countries. Investments
in index baskets involve the same risks associated with a direct investment in
the types of securities included in the baskets.

Portfolio Turnover. A high rate of portfolio turnover (100% or more) involves
correspondingly higher transaction costs which must be borne directly by a Fund
and thus indirectly by its shareholders. It may also result in a Fund's
realization of larger amounts of short-term capital gains, distributions from
which are taxable to shareholders as ordinary income and may, under certain
circumstances, make it more difficult for the Fund to qualify as a regulated
investment company under the Code. See "Financial Highlights" for each Fund's
portfolio turnover rates.

Short-Term Trading. Each Fund will sell a portfolio security without regard to
the length of time such security has been held if, in Standish's view, the
security meets the criteria for disposal.

Investment Restrictions. The investment objectives of the Portfolios and the
Small Capitalization Equity Fund II are not fundamental and may be changed by
the Boards of Trustees without the approval of shareholders. The investment
objectives of the Equity Fund, the International Equity Fund and the Small
Capitalization Equity Fund are fundamental and may not be changed without a vote
of the applicable Fund's shareholders. If there is a change in a Fund's
investment objectives, shareholders should consider whether the Fund remains an
appropriate investment in light of their current financial situation. Each
Portfolio's and Fund's investment policies set forth in this Prospectus are
non-fundamental and may be changed without shareholder approval, except that the
Equity Fund's 10% limit on repurchase agreements is fundamental. Each Fund and
Portfolio has adopted fundamental policies which may not be changed without the
approval of the Funds' shareholders. See "Investment Restrictions" in the
Statement of Additional Information. If any percentage restriction is adhered to
at the time of investment, a subsequent increase or decrease in the percentage
resulting from a change in the value of a Fund's assets will not constitute a
violation of the restriction.

Information About the Master-Feeder Structure

Each Standish Feeder Fund seeks to achieve its investment objective by investing
all of its investable assets in its corresponding Portfolio, which has an
identical investment objective. Each of the Standish Feeder Funds is a feeder
fund and its corresponding Portfolio is the master fund in a so-called
master-feeder structure. The International Equity Fund purchases securities
directly and maintains its own individual portfolio.

In addition to the Standish Feeder Funds, other feeder funds may invest in these
Portfolios, and information about these other feeder funds is available from
Standish Fund Distributors. The other feeder funds invest in the Portfolios on
the same terms as the Funds and bear a proportionate share of the Portfolios'
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

<PAGE>

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 might cause the Fund to incur
expenses it would not otherwise be required to pay. If a Fund is requested to
vote on a matter affecting the Portfolio in which it invests, the Fund will call
a meeting of its shareholders to vote on the matter. The Fund will then vote on
the matter at the meeting of the Portfolio's investors in the same proportion
that the Fund's shareholders voted on the matter. The Fund will vote those
shares held by its shareholders who did not vote in the same proportion as those
Fund shareholders who did vote on the matter.

A majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust or the Portfolio Trust, as the case may be, have adopted
procedures reasonably appropriate to deal with potential conflicts of interest
arising from the fact that the same individuals are trustees of the Trust and of
the Portfolio Trust.

Calculation of Performance Data

From time to time, each Fund may advertise its annual total return which is
determined by computing the average annual percentage change in the value of
$1,000 invested at the maximum public offering price for specified periods
ending with the most recent calendar quarter, assuming reinvestment of all
dividends and distributions at net asset value. The total return calculation
assumes a complete redemption of the investment at the end of the relevant
period. Each Fund 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.

From time to time, a Fund may compare its performance in publications with that
of other mutual funds with similar investment objectives, to stock and other
relevant indices, and to performance rankings prepared by recognized mutual fund
statistical services. In addition, a Fund's performance may be compared to
alternative investment or savings vehicles or to indices or indicators of
economic activity.

The EAFE Index. The EAFE Index is a market capitalization weighted foreign
securities index which is widely used to measure the performance of European,
Australian, and Far Eastern stock markets. The EAFE Index currently includes
over 1,000 companies drawn from the following 20 countries: Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Malaysia, The Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland and the United Kingdom.

The S&P 500 Index. The S&P 500 Index is a market weighted compilation of 500
common stocks selected on a statistical basis by Standard & Poor's. Total return
for the S&P 500 Index assumes reinvestment of dividends. The S&P 500 Index is
typically composed of issues in the following sectors: industrial, financial,
public utilities and transportation. Most stocks that comprise the S&P 500 Index
are traded on the New York Stock Exchange, although some are traded on the
American Stock Exchange and in the over-the-counter market.

The Russell 2000 Index. The Russell 2000 Index is composed of approximately
2,000 small capitalization common stocks and is generally representative of
unmanaged small capitalization stocks in the U.S. markets. A company's stock
market capitalization is the total market value of its floating outstanding
shares.

The Russell 2000 Growth Index. The Russell 2000 Growth Index is composed of
approximately 2,000 small capitalization common stocks and is generally
considered to be representative of those Russell 2000 companies with higher
price-to-book ratios and forecasted growth.

<PAGE>

Dividends and Distributions

The Funds' dividends from short-term and long-term capital gains, if any, after
reduction by capital losses, will be declared and distributed at least annually,
as will dividends from net investment income. In determining the amounts of its
dividends, the Equity Fund, Small Cap Fund and Small Cap II Fund will take into
account their share of the income, gain or loss, expense, and any other tax
items of its corresponding Portfolio. Dividends from net investment income and
capital gains distributions, if any, are automatically reinvested in additional
shares of the applicable Fund unless the shareholder elects to receive them in
cash.

Purchase of Shares

Shares of the Funds may be purchased from Standish Fund Distributors, which
offers the Funds' shares to the public on a continuous basis. Shares are sold at
the net asset value per share next computed after the purchase order is received
in good order by Standish Fund Distributors and payment for the shares is
received by the Fund's custodians (the "Custodians"). Investors Bank & Trust
Company serves as custodian for the Equity Fund, Small Cap Fund and Small Cap II
Fund and Morgan Stanley Trust Company serves as custodian for the International
Equity Fund. Please see each Fund's account application or call (800) 221-4795
for instructions on how to make payment for shares of the Funds. Each Fund
requires minimum initial investments of $100,000. Additional investments must be
in amounts of at least $10,000. Certificates for Fund shares are not issued.
Shares of the Funds may also be purchased through securities dealers. Orders for
the purchase of Fund shares received by dealers by the close of regular trading
on the New York Stock Exchange ("NYSE") on any business day and transmitted to
Standish Funds Distributor or its agent by the close of its business day
(normally 4:00 p.m., New York City time) will be effected as of the close of
regular trading on the NYSE on that day, if payment for the shares is also
received by the Custodians that day. Otherwise, orders will be effected at the
net asset value per share determined on the next business day. It is the
responsibility of dealers to transmit orders so they will be received by
Standish Fund Distributors before the close of its business day. Shares of a
Fund purchased through dealers may be subject to transaction fees on purchase or
redemption, no part of which will be received by the Funds, Standish Fund
Distributors or the Advisers.

In the sole discretion of the Trust, each Fund may accept securities instead of
cash for the purchase of shares. The Trust will ask the applicable Adviser to
determine that any securities acquired by the Funds in this manner are
consistent with the investment objective, policies and restrictions of the
applicable Fund. The securities will be valued in the manner stated below. The
purchase of shares of a Fund by securities instead of cash may cause an investor
who contributed them to realize a taxable gain or loss with respect to the
securities transferred to the Fund.

The Trust reserves the right in its sole discretion (i) to suspend the offering
of a Fund's shares, (ii) to reject purchase orders when in the best interest of
a Fund, (iii) to modify or eliminate the minimum initial or subsequent
investment in Fund shares and (iv) to eliminate duplicate mailings of Fund
material to shareholders who reside at the same address. A Fund's investment
minimums do not apply to accounts for which Standish or any of its affiliates
serves as investment adviser or to employees of Standish or any of its
affiliates or to members of such persons' immediate families. A Fund's
investment minimums apply to the aggregate value invested in omnibus accounts
rather than to the investment of the underlying participants in the omnibus
accounts.

Net Asset Value

<PAGE>

Each Fund's net asset value per share is computed each day on which the NYSE is
open as of the close of regular trading on the NYSE (normally 4:00 p.m., New
York City time). The net asset value per share is calculated by determining the
value of all a Fund's assets (the value of their investments in the
corresponding Portfolio and other assets in the case of the Standish Feeder
Funds), subtracting all liabilities and dividing the result by the total number
of shares outstanding. Portfolio securities are valued at the last sale prices
on the exchange or national securities market on which they are primarily
traded. Securities not listed on an exchange or national securities market or
securities for which there were no reported transactions are valued at the last
quoted bid prices. Securities for which accurate market prices are not readily
available and all other assets are valued at fair value as determined in good
faith by the applicable Adviser in accordance with procedures approved by the
Trustees. Money market instruments with less than sixty days remaining to
maturity when acquired by a Fund are valued on an amortized cost basis unless
the Trustees determine that amortized cost does not represent fair value. If a
Fund 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.

Portfolio securities traded on more than one U.S. national securities exchange
or on a U.S. exchange and a foreign securities exchange are valued at the last
sale price from the exchange representing the principal market for such
securities on the business day when such value is determined. The value of all
assets and liabilities expressed in foreign currencies will be converted into
U.S. dollar values at currency exchange rates determined by Investors Bank and
Trust Company, the Funds' transfer agent, to be representative of fair levels at
times prior to the close of trading on the NYSE. If such rates are not
available, the rate of exchange will be determined in good faith under
procedures established by the Trustees. Trading in securities on European and
Far Eastern securities exchanges and over-the-counter markets is normally
completed well before the close of business on the NYSE and may not take place
on all business days that the NYSE is open and may take place on days when the
NYSE is closed. Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of regular trading on
the NYSE will not be reflected in the Funds' calculation of net asset values
unless the Adviser determines that the particular event would materially affect
net asset value, in which case an adjustment will be made.

Exchange of Shares

Shares of the Funds may be exchanged for shares of one or more other funds in
the Standish fund family subject to the terms and restrictions imposed on the
purchase of shares of such funds. Shares of a fund redeemed in an exchange
transaction are valued at the net asset value next determined after the exchange
request is received by Standish Fund Distributors or its agent. Shares of a fund
purchased in an exchange transaction are valued at the net asset value next
determined after the exchange request is received by Standish Fund Distributors
or its agent and payment for the shares is received by the fund into which
shares are to be exchanged. Until receipt of the purchase price by the fund into
which shares are to be exchanged (which may take up to three business days),
your money will not be invested. To obtain a current prospectus for any of the
other funds in the Standish fund family, please call (800) 221-4795. Please
consider the differences in investment objectives and expenses of a fund as
described in its prospectus before making an exchange.

<PAGE>

Written Exchanges. Shares of the Funds may be exchanged by written order to
Standish Fund Distributors, P.O. Box 1407, Boston, Massachusetts 02205-1407. A
written exchange request must (a) state the name of the current Fund, (b) state
the name of the fund into which the current Fund shares will be exchanged, (c)
state the number of shares or the dollar amount to be exchanged, (d) identify
the shareholder's account numbers in both funds and (e) be signed by each
registered owner exactly as the shares are registered. Signature(s) must be
guaranteed as described under "Written Redemption" below.

Telephone Exchanges. Shareholders who elect telephone privileges may exchange
shares by calling Standish Fund Distributors at (800) 221-4795. Telephone
privileges are not available to shareholders automatically. Proper
identification will be required for each telephone exchange. Please see
"Telephone Transactions" below for more information regarding telephone
transactions.

General Exchange Information. All exchanges are subject to the following
exchange restrictions: (i) the fund into which shares are being exchanged must
be lawfully available for sale in your state; (ii) exchanges may be made only
between funds that are registered in the same name, address and, if applicable,
taxpayer identification number; and (iii) unless waived by the Trust, the amount
to be exchanged must satisfy the minimum account size of the fund to be
exchanged into. Exchange requests will not be processed until payment for the
shares of the current Fund has been received by Standish Fund Distributors. The
exchange privilege may be changed or discontinued and may be subject to
additional limitations upon sixty (60) days' notice to shareholders, including
certain restrictions on purchases by market-timer accounts.

Redemption of Shares

Shares of the Funds may be redeemed or repurchased by the methods described
below at the net asset value per share next determined after receipt by Standish
Fund Distributors or its agent of a redemption or repurchase request in proper
form. Redemptions will not be processed until a completed account application
and payment for the shares to be redeemed have been received.

Written Redemption. Shares of each Fund may be redeemed by written order to
Standish Fund Distributors, P.O. Box 1407, Boston, Massachusetts 02205-1407. A
written redemption request must (a) state the name of the Fund and the number of
shares or the dollar amount to be redeemed, (b) identify the shareholder's
account number and (c) be signed by each registered owner exactly as the shares
are registered. Signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the NYSE's Medallion
Signature Program or by any one of the following institutions, provided that the
institution meets credit standards established by Investors Bank & Trust
Company, the Funds' transfer agent: (i) a bank; (ii) a securities broker or
dealer, including a government or municipal securities broker or dealer, that is
a member of a clearing corporation or has net capital of at least $100,000;
(iii) a credit union having authority to issue signature guarantees; (iv) a
savings and loan association, a building and loan association, a cooperative
bank, or a federal savings bank or association; or (v) a national securities
exchange, a registered securities exchange or a clearing agency. Standish Fund
Distributors reserves the right to waive the requirement that signatures be
guaranteed. Additional supporting documents may be required in the case of
estates, trusts, corporations, partnerships and other shareholders that are not
individuals. Redemption proceeds will normally be paid by check mailed within
three business days of receipt by Standish Fund Distributors of a written
redemption request in proper form. If shares to be redeemed were recently
purchased by check, the Funds may delay transmittal of redemption proceeds until
such time as they are assured that good funds have been

<PAGE>

collected for the purchase of the shares. This may take up to fifteen (15) days
in the case of payments made by check.

Telephone Redemption. Shareholders who elect telephone privileges may redeem
shares by calling Standish Fund Distributors at (800) 221-4795. Telephone
privileges are not available to shareholders automatically. Redemption proceeds
will be mailed or wired in accordance with the shareholder's instruction on the
account application to a pre-designated account. Redemption proceeds will
normally be paid promptly after receipt of telephone instructions, but no later
than three business days thereafter, except as described above for shares
purchased by check. Redemption proceeds will be sent only by check payable to
the shareholder of record at the address of record, unless the shareholder has
indicated, in the initial application for the purchase of shares, a commercial
bank to which redemption proceeds may be sent by wire. These instructions may be
changed subsequently only in writing, accompanied by a signature guarantee, and
additional documentation in the case of shares held by a corporation or other
entity or by a fiduciary such as a trustee or executor. Wire charges, if any,
will be deducted from redemption proceeds. Proper identification will be
required for each telephone redemption.

Repurchase Order. In addition to written redemption of Fund shares, Standish
Fund Distributors may accept telephone orders from brokers or dealers for the
repurchase of Fund shares. Brokers and dealers are obligated to transmit
repurchase orders to Standish Fund Distributors promptly prior to the close of
Standish Fund Distributors' business day (normally 4:00 p.m.). Brokers or
dealers may charge for their services in connection with a repurchase of Fund
shares, but neither the Trust nor Standish Fund Distributors imposes a charge
for share repurchases.

Telephone Transactions. By maintaining an account that is eligible for telephone
exchange and redemption privileges, the shareholder authorizes the Advisers,
Standish Fund Distributors, the Trust and the Custodians to act upon
instructions of any person to redeem and/or exchange shares from the
shareholder's account. Further, the shareholder acknowledges that, as long as
the Funds employ reasonable procedures to confirm that telephone instructions
are genuine, and follow telephone instructions that they reasonably believe to
be genuine, neither the Advisers, Standish Fund Distributors, the Trust, the
applicable Fund, the Custodians, nor their respective officers or employees,
will be liable for any loss, expense or cost arising out of any request for a
telephone redemption or exchange, even if such transaction results from any
fraudulent or unauthorized instructions. Depending upon the circumstances, the
Funds intend to employ personal identification or written confirmation of
transaction procedures, and if they do not, a Fund may be liable for any losses
due to unauthorized or fraudulent instructions. All telephone transaction
requests will be recorded. Shareholders may experience delays in exercising
telephone transaction privileges during periods of abnormal market activity.
During these periods, shareholders should transmit redemption and exchange
requests in writing.

* * *

The proceeds paid upon redemption or repurchase may be more or less than the
cost of the shares, depending upon the market value of the applicable Fund's or
Portfolio's portfolio investments at the time of redemption or repurchase. The
Funds intend to pay cash for all shares redeemed, but under certain conditions,
the Funds may make payments wholly or partially in securities for this purpose.
Please see the Statement of Additional Information for further information.

Each Fund may redeem, at net asset value, the shares in any account which has a
value of less than $25,000 as a result of redemptions or transfers. Before doing
so, the Fund will notify the shareholder that the value of the shares in the
account is less than the specified

<PAGE>

minimum and will allow the shareholder 30 days to make an additional investment
to increase the value of the account to an amount equal to or above the stated
minimums.

Management

Trustees. Each Fund is a separate investment series of the Trust, a
Massachusetts business trust. Under the terms of the Agreement and Declaration
of Trust establishing the Trust, the Trustees of the Trust are ultimately
responsible for the management of its business and affairs. Each Portfolio is a
separate investment series of the Standish, Ayer & Wood Master Portfolio
("Portfolio Trust"), a master trust fund organized under the laws of the State
of New York. Under the terms of the Declaration of Trust, each Portfolio's
affairs are managed under the supervision of the Portfolio Trust's Trustees. See
"Management" in the Statement of Additional Information for more information
about the Trustees and officers of the Trust and the Portfolio Trust.

Investment Advisers. Standish, One Financial Center, Boston, Massachusetts
02111, serves as investment adviser to the Equity Portfolio, Small Cap Portfolio
and Small Cap II Portfolio pursuant to separate investment advisory agreements.
Standish is a Massachusetts corporation incorporated in 1933 and is a registered
investment adviser under the Investment Advisers Act of 1940.

SIMCO, One Financial Center, Boston, Massachusetts 02111, serves as investment
adviser to the International Equity Fund pursuant to an investment advisory
agreement and manages the International Equity Fund's investments and affairs
subject to the supervision of the Trustees of the Trust. SIMCO is a Delaware
limited partnership which was organized in 1991 and is a registered investment
adviser under the Investment Advisers Act of 1940. The general partner of SIMCO
is Standish, which holds a 99.98% partnership interest. The limited partners,
who each hold a 0.01% interest in SIMCO, are Walter M. Cabot, Sr., Director and
Senior Adviser to Standish, and D. Barr Clayson, Chairman of the Board and a
Director of SIMCO and a Managing Director of Standish. Ralph S. Tate, a Managing
Director of Standish, is President and a Director of SIMCO. Richard S. Wood,
Vice President and a Managing Director of Standish and the President of the
Trust, is the Executive Vice President and a Director of SIMCO.

Standish and SIMCO provide fully discretionary management services and
counseling and advisory services to a broad range of clients throughout the
United States and abroad. As of March 31, 1997, Standish or SIMCO managed
approximately $31 billion of assets.

The Equity Portfolio's portfolio managers are Ralph S. Tate and David C.
Cameron. Mr. Tate and Mr. Cameron have been primarily responsible for the
day-to-day management of the Fund's portfolio since its inception in January
1991 and of the Portfolio's portfolio since the Fund's conversion to the
master-feeder structure on May 3, 1996. During the past five years, Mr. Tate has
served as a Managing Director of Standish (since 1995) and President of SIMCO
(since 1996) and both Messrs. Tate and Cameron have served as a Director and
Vice President of Standish and a Director of SIMCO (since 1995 for Mr. Cameron).

The International Equity Fund's portfolio manager is Remi J. Browne, who has
been primarily responsible for the day-to-day management of the Fund's portfolio
since December 1996. During the past five years, Mr. Browne has served as Vice
President and Chief Investment Officer of SIMCO and Vice President of Standish
since 1996 and as Managing Director of Ark Asset Management Company, New York,
prior thereto. The Small Capitalization Equity Portfolio's portfolio manager is
Nicholas S. Battelle. Mr. Battelle has been primarily responsible for the
day-to-day management of the Fund's portfolio since its inception in August,
1990 and of the Portfolio's portfolio since the

<PAGE>

Fund's conversion to the master-feeder fund structure on May 3, 1996. During the
past five years, Mr. Battelle has served as a Vice President as well as a
Director of Standish.

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

Subject to the supervision and direction of the Trustees of the Trust and the
Portfolio Trust, Standish manages the Portfolios' investments and SIMCO manages
the International Equity Fund's investments in accordance with their respective
investment objectives and policies, recommend investment decisions, place orders
to purchase and sell securities and permit the Portfolios' and the Funds to use
the name "Standish." For these services, each Portfolio pays Standish and the
International Equity Fund pays SIMCO a monthly fee at a stated annual percentage
rate of such Portfolio's ("Fund's") average daily net asset value:

Actual Rate
Contractual Paid for the
Advisory Fee Year Ended
Annual Rate December 31, 1996
----------- -----------------
Equity Portfolio 0.50% 0.50%
Small Cap Equity Portfolio 0.60% 0.60%
Small Cap Equity II Portfolio 0.60% 0.00%*
International Equity Fund 0.80% 0.00%*

- ----------
*The applicable Adviser has voluntarily and temporarily agreed to limit total
expenses (excluding brokerage commissions, taxes and extraordinary expenses) of
the Small Cap II Fund and the International Equity Fund to 0.00% and 1.00%,
respectively, of the applicable Fund's average daily net assets. (The
International Equity Fund was subject to a different expense limitation prior to
April 1, 1997.) The Advisers may terminate or revise these agreements at any
time although they have no current intention to do so. If an expense limit is
exceeded, the compensation due to an Adviser shall be proportionately reduced by
the amount of such excess by a reduction or refund thereof, subject to
readjustment during the period during which such limit is in place.

Administrator. Standish serves as administrator to the Equity Fund, Small Cap
Fund and Small Cap II Fund. As administrator, Standish manages the affairs of
these Funds, provides all necessary office space and services of executive
personnel for administering the affairs of the Funds, and allows these Funds to
use the name "Standish." For these services, Standish currently does not receive
any additional compensation. The Trustees of the Trust may determine in the
future to compensate Standish for its administrative services.

Expenses. Each Portfolio and each Fund bears the expenses of its respective
operations other than those incurred by the respective Adviser under the
investment advisory agreements or the administration agreement.

Each Portfolio pays investment advisory fees; bookkeeping, share pricing and
custodian fees and expenses; expenses of notices and reports to interest
holders; and expenses of the

<PAGE>

Portfolio's administrator. Each Standish Feeder Fund pays shareholder servicing
fees and expenses, expenses of prospectuses, statements of additional
information and shareholder reports which are furnished to existing
shareholders. Each Standish Feeder Fund and its corresponding Portfolio pays
legal and auditing fees; registration and reporting fees and expenses. The
International Equity Fund, since it does not invest in a corresponding
portfolio, bears all of the expenses listed above for both the Portfolios and
the Funds. Expenses of the Trust which relate to more than one series are
allocated among such series by Standish in an equitable manner.

Standish Fund Distributors bears the distribution expenses attributable to the
offering and sale of Fund shares without subsequent reimbursement.

Each Fund's total annual operating expenses for the fiscal year ended December
31, 1996 are described above under the caption "Financial Highlights."

Portfolio Transactions. Subject to the supervision of the Trustees of the Trust
and the Portfolio Trust, the Advisers select the brokers and dealers that
execute orders to purchase and sell portfolio securities for the Portfolios and
the International Equity Fund. The Advisers will generally seek to obtain the
best available price and most favorable execution with respect to all
transactions for the Portfolios and the International Equity Fund. The Advisers
may also consider the extent to which a broker or dealer provides research to
the Advisers and the number of Fund shares sold by the broker or dealer in
making their selection.

Federal Income Taxes

Each Fund is a separate entity for federal tax purposes and presently qualifies
and intends to continue to qualify for taxation as a "regulated investment
company" under the Code. If it qualifies for treatment as a regulated investment
company, each Fund will not be subject to federal income tax on income
(including capital gains) distributed to shareholders in the form of dividends
or capital gain distributions in accordance with certain timing requirements of
the Code.

Shareholders which are taxable entities or persons will be subject to federal
income tax on dividends and capital gain distributions made by the Funds.
Dividends paid by a Fund from net investment income, certain net foreign
currency gains, and any excess of net short-term capital gain over net long-term
capital loss will be taxable to shareholders as ordinary income, whether
received in cash or reinvested in Fund shares. No portion of such dividends paid
by the International Equity Fund is expected to qualify for the corporate
dividends received deduction under the Code. A portion of such dividends paid by
the other Funds will generally qualify for that deduction, subject to certain
requirements and limitations under the Code. Dividends paid by a Fund from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), called "capital gain distributions," will be taxable to
shareholders as long-term capital gains, whether received in cash or reinvested
in Fund shares and without regard to how long the shareholder has held shares of
the Fund. Capital gain distributions do not qualify for the corporate dividends
received deduction. Dividends and capital gain distributions may also be subject
to state and local or foreign taxes. Redemptions (including exchanges) and
repurchases of shares are taxable events on which a shareholder may recognize a
gain or loss.

The International Equity Fund and the Portfolios may be subject to foreign taxes
with respect to income or gains from certain foreign investments, which will
reduce the yield or return from such investments. The International Equity Fund
may, but the other Funds are

<PAGE>

not likely to, qualify to elect to pass certain qualifying foreign taxes through
to shareholders. If this election is made, shareholders would include their
shares of qualified foreign taxes in their gross incomes (in addition to any
actual dividends and distributions) and might be entitled to a corresponding
federal income tax credit or deduction. Shareholders will receive appropriate
information from the Trust if this election is made for any year.

Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on dividends, capital gain
distributions, and the proceeds of redemptions or repurchases of shares, if they
fail to furnish the applicable Fund with their correct taxpayer identification
number and certain certifications or if they are otherwise subject to backup
withholding. Individuals, corporations and other shareholders that are not U.S.
persons under the Code are subject to different tax rules and may be subject to
nonresident alien withholding at the rate of 30% (or a lower rate provided by an
applicable tax treaty) on amounts treated as ordinary dividends from the Funds
and, unless a current IRS Form W-8 or an acceptable substitute is furnished to
the applicable Fund, to backup withholding on certain payments from that Fund.

After the close of each calendar year, the Funds will send a notice to
shareholders that provides information about the federal tax status of
distributions to shareholders for such calendar year.

The Funds and Their Shares

The Trust was organized on August 13, 1986 as a Massachusetts business trust. In
addition to the Funds offered in this Prospectus, the Trust offers other series
to the public. Shareholders of each Fund are entitled to one full or fractional
vote for each share of that Fund. There is no cumulative voting and shares have
no preemption or conversion rights. All series of the Trust vote together except
as provided in the 1940 Act or the Declaration of Trust. The Trust does not
intend to hold annual meetings of shareholders. The Trustees will call special
meetings of shareholders to the extent required by the Trust's Declaration of
Trust or the 1940 Act. The 1940 Act requires the Trustees, under certain
circumstances, to call a meeting to allow shareholders to vote on the removal of
a Trustee and to assist shareholders in communicating with each other.
Certificates for Fund shares are not issued.

The Portfolio Trust was organized on January 18, 1996 as a New York trust. In
addition to the Portfolios, the Portfolio Trust offers interests in other series
to certain qualified investors. See "Information about the Master-Feeder
Structure" above for additional information about the Portfolio Trust. Inquiries
concerning the Funds should be made by contacting Standish Fund Distributors at
the address and telephone number listed on the back cover of this Prospectus.

Custodians

Investors Bank & Trust Company, John Hancock Tower, 200 Clarendon Street,
Boston, Massachusetts 02116, serves as custodian for all cash and securities of
the Portfolios and the Equity Fund, Small Cap Equity Fund and Small Cap Equity
II Fund.

Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York 11201,
serves as custodian for all cash and securities of the International Equity
Fund.

Transfer Agent and Dividend Disbursing Agent
<PAGE>

Investors Bank & Trust Company, John Hancock Tower, 200 Clarendon Street,
Boston, Massachusetts 02116, serves as the Funds' transfer agent, dividend
disbursing agent and Investors Bank & Trust, Boston and Toronto, Canada, also
provides accounting services to the Funds.

Independent Accountants

Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109
and Coopers & Lybrand, P.O. Box 219, Grand Cayman, Cayman Islands, BWI, serves
as independent accountants for the Trust and the Portfolio Trust, respectively,
and will audit the Funds' and Portfolios' financial statements annually.

Legal Counsel

Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, is legal
counsel to the Trust, the Portfolio Trust and Standish and its affiliates.

Tax-Certification Instructions

Federal law requires that taxable distributions and proceeds of redemptions and
exchanges be reported to the IRS and that 31% be withheld if you fail to provide
your correct Taxpayer Identification Number ("TIN") and the TIN-related
certifications contained in the Account Purchase Application ("Application") or
you are otherwise subject to backup withholding. A Fund will not impose backup
withholding as a result of your failure to make any certification, except the
certifications in the Application that directly relate to your TIN and backup
withholding status. Amounts withheld and forwarded to the IRS can be credited as
a payment of tax when completing your Federal income tax return.

For most individual taxpayers, the TIN is the social security number. Special
rules apply for certain accounts. For example, for an account established under
the Uniform Gift to Minors Act, the TIN of the minor should be furnished. If you
do not have a TIN, you may apply for one using forms available at local offices
of the Social Security Administration or the IRS, and you should write "Applied
For" in the space for a TIN on the Application.

Recipients exempt from backup withholding, including corporations and certain
other entities, should provide their TIN and underline "exempt" in section 2(a)
of the TIN section of the Application to avoid possible erroneous withholding.
Non-resident aliens and foreign entities may be subject to withholding of up to
30% on certain distributions received from the Funds and must provide certain
certifications on IRS Form W-8 to avoid backup withholding with respect to other
payments. For further information, see Code Sections 1441, 1442 and 3406 and/or
consult your tax adviser.

<PAGE>

Standish Group of Equity Funds

Investment Adviser

Standish, Ayer & Wood, Inc.
One Financial Center
Boston, Massachusetts 02111
(Equity Fund, Small Capitalization Equity Fund and
Small Capitalization Equity Fund II)

Investment Adviser

Standish International Management Company, L.P.
One Financial Center
Boston, Massachusetts 02111
(International Equity Fund)

Principal Underwriter

Standish Fund Distributors, L.P.
One Financial Center
Boston, Massachusetts 02111

Custodian

Investors Bank & Trust Company
John Hancock Tower
200 Clarendon Street
Boston, Massachusetts 02116
(Equity Fund, Small Capitalization Equity Fund and
Small Capitalization Equity Fund II)

Independent Accountants

Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109

Custodian

Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11201
(Standish International Equity Fund)

Legal Counsel

Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
<PAGE>

May 1, 1997

STANDISH GROUP OF EQUITY FUNDS

STANDISH EQUITY FUND

STANDISH INTERNATIONAL EQUITY FUND

STANDISH SMALL CAPITALIZATION EQUITY FUND

STANDISH SMALL CAPITALIZATION EQUITY FUND II

One Financial Center
Boston, Massachusetts 02111
(800) 729-0066

STATEMENT OF ADDITIONAL INFORMATION

This combined Statement of Additional Information is not a prospectus, but
expands upon and supplements the information contained in the combined
Prospectus dated May 1, 1997, as amended and/or supplemented from time to time
(the "Prospectus"), of the Standish Equity Fund ("Equity Fund"), the Standish
Small Capitalization Equity Fund ("Small Capitalization Fund"), the Standish
Small Capitalization Equity Fund II ("Small Capitalization II Fund") and the
Standish International Equity Fund ("International Equity Fund"), each a
separate investment series of Standish, Ayer & Wood Investment Trust (the
"Trust"). This Statement of Additional Information should be read in conjunction
with the Prospectus, a copy of which may be obtained without charge by writing
or calling the Trust's principal underwriter, Standish Fund Distributors, L.P.
(the "Principal Underwriter"), at the address and phone number set forth above.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.

Contents
Investment Objective and Policies..................2
Investment Restrictions............................8
Calculation of Performance Data...................11
Management .......................................14
Redemption of Shares..............................21
Portfolio Transactions............................21
Brokerage Commissions.............................22
Determination of Net Asset Value..................22
The Funds and Their Shares........................23
The Portfolio and its Investors...................23
Taxation..........................................23
Additional Information............................26
Experts and Financial Statements..................26

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The Prospectus describes the investment objectives and policies of each
Fund. The following discussion supplements the description of the Funds'
investment policies in the Prospectus.

The Equity Fund invests all of its investible assets in the Standish Equity
Portfolio (the "Equity Portfolio"). The Small Capitalization Equity Fund invests
all of its investible assets in the Standish Small Capitalization Equity
Portfolio (the "Small Capitalization Portfolio"). The Small Capitalization
Equity Fund II invests all of its investible assets in the Standish Small
Capitalization Equity Portfolio II (the "Small Capitalization II Portfolio").
These three Funds are sometimes referred to in this Statement of Additional
Information as Standish Feeder Funds.

Each Portfolio is a series of the Standish, Ayer and Wood Master Portfolio
(the "Portfolio Trust"), an open-end management investment company, and each
Portfolio has the same investment objective and restrictions as its
corresponding Fund. Standish, Ayer and Wood, Inc. ("Standish") is the investment
adviser to the Portfolios. Standish International Management Company, L.P.
("SIMCO") is the investment adviser to the International Equity Fund. Both
Standish and SIMCO are sometimes referred to herein as the "Adviser" or
collectively as the "Advisers".

The Prospectus describes the investment objective of the Standish Feeder
Funds and the Portfolios and summarizes the investment policies they will
follow. Since the investment characteristics of the Standish Feeder Funds
correspond directly to those of their respective Portfolios, the following
discusses the various investment techniques employed by the Portfolios. See the
Prospectus for a more complete description of each Fund's and each Portfolio's
investment objective, policies and restrictions. For purposes of the discussion
in this section of this Statement of Additional Information, the use of the term
"Fund" or "Funds" refers to each of the Equity Portfolio, the Small
Capitalization Portfolio, the Small Capitalization II Portfolio and the
International Equity Fund, unless otherwise noted.

Suitability and Risk Factors

An investor should not expect, and the Funds do not intend, that each Fund
will provide an investment program which meets all of the requirements of that
investor. The companies in which the Small Capitalization and Small
Capitalization II Portfolios invest generally reinvest their earnings, and
dividend income should not be expected. Also, notwithstanding the Funds' ability
to spread risk by holding securities of a number of companies, shareholders
should be able and be prepared to bear the risk of investment losses which may
accompany the investments contemplated by each Fund.

Common Stocks

The common stocks of small growth companies in which the Small
Capitalization Portfolio invests typically have market capitalizations up to
$700 million. The common stocks of the companies in which the Small
Capitalization II Portfolio invests typically have market capitalizations up to
$1 billion. Morningstar Mutual Funds, a leading mutual fund monitoring service,
includes in the small-cap category all funds with median portfolio market
capitalizations of less than $ 1 billion. Their investments are expected to
emphasize companies involved with value added products or services in expanding
industries. At times, particularly when Standish believes that the securities of
small companies are overvalued, their portfolios may include securities of
larger, more mature companies, provided that the value of the securities of such
larger, more mature companies shall not exceed 20% of each Portfolio's total
assets. Both Portfolios will attempt to reduce risk by diversifying their
investments within the investment policies set forth in the Prospectus and will
invest in publicly traded equity securities and, excluding equity securities
received as distributions on portfolio securities, will not normally hold equity
securities which are restricted as to disposition under federal securities laws
or are otherwise illiquid or not readily marketable.

Foreign Securities
<PAGE>

Foreign securities may be purchased and sold on foreign stock exchanges or
in over-the-counter markets (but persons affiliated with a Fund will not act as
principal in such purchases and sales). Foreign stock markets are generally not
as developed or efficient as those in the United States. While growing in
volume, they usually have substantially less volume than the New York Stock
Exchange, and securities of some foreign companies are less liquid and more
volatile than securities of comparable United States companies. Fixed
commissions on foreign stock exchanges are generally higher than negotiated
commissions on United States exchanges, although each Fund will endeavor to
achieve the most favorable net results on its portfolio transactions. There is
generally less government supervision and regulation of stock exchanges, brokers
and listed companies abroad than in the United States.

The dividends and interest payable on certain foreign securities may be
subject to foreign withholding taxes and in some cases capital gains from such
securities may also be subject to foreign tax, thus reducing the net amount of
income or gain available for distribution to a Fund's shareholders.

Investors should understand that the expense ratio of each Fund may be
higher than that of investment companies investing exclusively in domestic
securities because of the cost of maintaining the custody of foreign securities.

The Funds may invest in foreign securities which take the form of sponsored
and unsponsored American Depository Receipts and Shares ("ADRs" and "ADSs"),
Global Depository Receipts and Shares ("GDRs" and "GDSs") and European
Depository Receipts and Shares ("EDRs" and "EDSs") or other similar instruments
representing securities of foreign issuers (together, "Depository Receipts" and
"Depository Shares"). ADRs and ADSs represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent bank. Prices of
ADRs and ADSs are quoted in U.S. dollars and are traded in the United States on
exchanges or over-the-counter and are sponsored and issued by domestic banks.
EDRs and EDSs and GDRs and GDSs are receipts evidencing an arrangement with a
non-U.S. bank. EDRs and EDSs and GDRs and GDSs are not necessarily quoted in the
same currency as the underlying security. To the extent that a Fund acquires
Depository Receipts or Shares through banks which do not have a contractual
relationship with the foreign issuer of the security underlying the Depository
Receipts or Shares to issue and service such Depository Receipts or Shares
(unsponsored Depository Receipts or Shares), there may be an increased
possibility that the Fund would not become aware of and be able to respond to
corporate actions, such as stock splits or rights offerings involving the
foreign issuer, in a timely manner. In addition, certain benefits which may be
associated with the security underlying the Depository Receipt or Share may not
inure to the benefit of the holder of such Depository Receipt or Share. Further,
the lack of information may result in inefficiencies in the valuation of such
instruments. Investment in Depository Receipts or Shares does not eliminate all
the risks inherent in investing in securities of non-U.S. issuers. The market
value of Depository Receipts or Shares is dependent upon the market value of the
underlying securities and fluctuations in the relative value of the currencies
in which the Depository Receipt or Share and the underlying securities are
quoted. However, by investing in Depository Receipts or Shares, such as ADRs or
ADSs, that are quoted in U.S. dollars, a Fund will avoid currency risks during
the settlement period for purchases and sales.

Strategic Transactions

Each Fund 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, currency exchange rates, and broad or specific equity market
movements), or to enhance potential gain. Such strategies are generally accepted
as part of modern portfolio management and are regularly utilized by many mutual
funds and other institutional investors. Techniques and instruments used by the
Funds may change over time as new instruments and strategies are developed or
regulatory changes occur.

In the course of pursuing its investment objective, a Fund may purchase and
sell (write) exchange-listed and over-the-counter put and call options on
securities, equity, indices and other financial instruments; purchase and sell
financial futures contracts and options thereon; enter into various interest
rate transactions such as swaps, caps, floors or collars; and enter into various

<PAGE>

currency transactions such as currency forward contracts, currency futures
contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions"). Strategic
Transactions may be used in an attempt to protect against possible changes in
the market value of securities held in or to be purchased for a Fund's portfolio
resulting from securities market or currency exchange rate fluctuations, to
protect a Fund's unrealized gains in the value of its portfolio securities, to
facilitate the sale of such securities for investment purposes, or to establish
a position in the derivatives markets as a temporary substitute for purchasing
or selling particular securities. In addition to the hedging transactions
referred to in the preceding sentence, Strategic Transactions may also be used
to enhance potential gain in circumstances where hedging is not involved
although each Fund will attempt to limit its net loss exposure resulting from
Strategic Transactions entered into for such purposes to not more than 3% of its
net assets at any one time and, to the extent necessary, each Fund 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 each Fund's net loss exposure from such
Strategic Transactions, an unrealized gain from a particular Strategic
Transaction position would be netted against an unrealized loss from a related
Strategic Transaction position. For example, if the Adviser believes that a Fund
is underweighted in cyclical stocks and overweighted in consumer stocks, the
Fund may buy a cyclical index call option and sell a cyclical index put option
and sell a consumer index call option and buy a consumer index put option. Under
such circumstances, any unrealized loss in the cyclical position would be netted
against any unrealized gain in the consumer position (and vice versa) for
purposes of calculating the Fund's net loss exposure. The ability of a Fund to
utilize these Strategic Transactions successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured. Each
Fund will comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. A Fund'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") for qualification as a regulated
investment company

Risks of Strategic Transactions

Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. The writing of put and call options may result in losses
to a Fund, 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 a Fund
can realize on its investments or cause a Fund to hold a security it might
otherwise sell. The use of currency transactions can result in a Fund incurring
losses as a result of a number of factors including the imposition of exchange
controls, suspension of settlements, or the inability to deliver or receive a
specified currency. The use of options and futures transactions entails certain
other risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Fund creates the possibility that losses on the hedging
instrument may be greater than gains in the value of the Fund's position. The
writing of options could significantly increase the Fund'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, a
Fund 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 a Fund in writing options on futures and entering
into futures transactions is potentially unlimited; however, as described above,
each Fund will attempt to limit its net loss exposure resulting from Strategic
Transactions entered into for non-hedging purposes to not more than 3% of its
net assets at any one time. Futures markets are highly

<PAGE>

volatile and the use of futures may increase the volatility of a Fund's net
asset value. Finally, entering into futures contracts would create a greater
ongoing potential financial risk than would purchases of options where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value and the net
result may be less favorable than if the Strategic Transactions had not been
utilized.

General Characteristics of Options

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

A put option gives the purchaser of the option, in consideration for the
payment of a premium, the right to sell, and the writer the obligation to buy
(if the option is exercised) the underlying security, commodity, index, currency
or other instrument at the exercise price. For instance, a Fund'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 Fund 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. A Fund may purchase a call option
on a security, futures contract, index, currency or other instrument to seek to
protect the Fund 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.
Each Fund is authorized to purchase and sell exchange listed options and
over-the counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
The discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.

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

A Fund'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. A Fund will
generally sell (write) OTC options that are subject to a buy-back provision
permitting the Fund to require the Counterparty to sell the option back to the
Fund at a formula price within seven days. OTC options purchased by a Fund, and
portfolio securities covering the amount of a Fund's obligation pursuant to

<PAGE>

an OTC option sold by it (the cost of the sell-back plus the in-the-money
amount, if any), are subject to each Fund's restriction on illiquid securities,
unless determined to be liquid in accordance with procedures adopted by the
Boards of Trustees. 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. Each Fund expects generally to enter into OTC options that have
cash settlement provisions, although it is not required to do so.

Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make
delivery of the security, currency or other instrument underlying an OTC option
it has entered into with a Fund or fails to make a cash settlement payment due
in accordance with the terms of that option, the Fund will lose any premium it
paid for the option as well as any anticipated benefit of the transaction.
Accordingly, the Adviser must assess the creditworthiness of each such
Counterparty or any guarantor or credit enhancement of the Counterparty's credit
to determine the likelihood that the terms of the OTC option will be satisfied.
A Fund will engage in OTC option transactions only with U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York as
"primary dealers", or broker dealers, domestic or foreign banks or other
financial institutions which have received, combined with any credit
enhancements, a long-term debt rating of A from Standard & Poor's Ratings Group
("S&P") or Moody's Investors Service, Inc. ("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
Adviser.

If a Fund 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 Fund's income. The sale (writing) of put options
can also provide income.

Each Fund may purchase and sell (write) call options on securities, equity
securities (including convertible securities) and Eurodollar instruments that
are traded on U.S. and foreign securities exchanges and in the over-the-counter
markets, and on securities indices, currencies and futures contracts. All calls
sold by a Fund must be "covered" (i.e., the Fund must own the securities or
futures contract subject to the call) or must meet the asset segregation
requirements described below as long as the call is outstanding. In addition,
each Fund 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
Fund's net exposure on its written option position. Even though the Fund will
receive the option premium to help offset any loss, the Fund 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 a Fund also exposes the Fund 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
Fund to hold a security or instrument which it might otherwise have sold.

Each Fund may purchase and sell (write) put options on securities including
equity securities (including convertible securities) and Eurodollar instruments
(whether or not it holds the above securities in its portfolio), and on
securities indices, currencies and futures contracts. A Fund will not sell put
options if, as a result, more than 50% of the Fund'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 a Fund may be required to buy the underlying security at a
price above the market price.

Options on Securities Indices and Other Financial Indices

Each Fund 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

<PAGE>

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, each Fund 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

Each Fund 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 a
Fund 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 a
Fund, 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 a Fund, 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.

Each Fund'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 a Fund 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 the positions were "in the money" at the time of purchase) do not
exceed 5% of the net asset value of the Fund, after taking into account
unrealized profits and losses on such positions. Typically, maintaining a
futures contract or selling an option thereon requires a Fund 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 Fund. If a Fund exercises an option on a
futures contract it will be obligated to post initial margin (and potential
subsequent variation margin) for the resulting futures position just as it would
for any position. Futures contracts and options thereon are generally settled by
entering into an offsetting transaction but there can be no assurance that the
position can be offset prior to settlement at an advantageous price, nor that
delivery will occur. The segregation requirements with respect to futures
contracts and options thereon are described below.

Currency Transactions

Each Fund may engage in currency transactions with Counterparties to seek to
hedge the value of portfolio holdings denominated in particular currencies
against fluctuations in relative value or to enhance potential gain. Currency
transactions include currency contracts, exchange listed currency futures,
exchange listed and OTC options on currencies, and currency swaps. A forward
currency contract involves a privately negotiated obligation to purchase or sell
(with delivery

<PAGE>

generally required) a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. A currency swap is an agreement to
exchange cash flows based on the notional (agreed-upon) difference among two or
more currencies and operates similarly to an interest rate swap, which is
described below. A Fund may enter into over-the-counter currency transactions
with Counterparties which have received, combined with any credit enhancements,
a long term debt rating of A by S&P or Moody's, respectively, or that have an
equivalent rating from a NRSRO or (except for OTC currency options) whose
obligations are determined to be of equivalent credit quality by the Adviser.

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

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

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

To seek to reduce the effect of currency fluctuations on the value of
existing or anticipated holdings of portfolio securities, a Fund may also engage
in proxy hedging. Proxy hedging is often used when the currency to which a
Fund's portfolio is exposed is difficult to hedge or to hedge against the U.S.
dollar. Proxy hedging entails entering into a forward contract to sell a
currency whose changes in value are generally considered to be linked to a
currency or currencies in which certain of a Fund's portfolio securities are or
are expected to be denominated, and to buy U.S. dollars. The amount of the
contract would not exceed the value of the portfolio securities denominated in
linked currencies. For example, if the Adviser considers that the Austrian
schilling is linked to the German Deutsche mark (the "D-mark"), and a portfolio
contains securities denominated in schillings and the Adviser believes that the
value of schillings will decline against the U.S. dollar, the Adviser may enter
into a contract to sell D-marks and buy dollars. Proxy hedging involves some of
the same risks and considerations as other transactions with similar
instruments. Currency transactions can result in losses to a Fund if the
currency being hedged fluctuates in value to a degree or in a direction that is
not anticipated. Further, there is the risk that the perceived linkage between
various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging. If a Fund enters
into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below.

Risks of Currency Transactions

Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transaction costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures

<PAGE>

generally. Further, settlement of a currency futures contract for the purchase
of most currencies must occur at a bank based in the issuing nation. Trading
options on currency futures is relatively new, and the ability to establish and
close out positions on such options is subject to the maintenance of a liquid
market which may not always be available. Currency exchange rates may fluctuate
based on factors extrinsic to that country's economy.

Combined Transactions

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

Swaps, Caps, Floors and Collars

Among the Strategic Transactions into which each Fund may enter are interest
rate, currency and index swaps and the purchase or sale of related caps, floors
and collars. Each Fund expects to enter into these transactions primarily for
hedging purposes, including, but not limited to, preserving a return or spread
on a particular investment or portion of its portfolio, protecting against
currency fluctuations, or protecting against an increase in the price of
securities a Fund 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, each Fund will attempt to
limit its net loss exposure resulting from swaps, caps, floors and collars and
other Strategic Transactions entered into for such purposes to not more than 3%
of its net assets at any one time. A Fund will not sell interest rate caps or
floors where it does not own securities or other instruments providing the
income stream the Fund may be obligated to pay. Interest rate swaps involve the
exchange by the Fund with another party of their respective commitments to pay
or receive interest, e.g., an exchange of floating rate payments for fixed rate
payments with respect to a notional amount of principal. A currency swap is an
agreement to exchange cash flows on a notional amount of two or more currencies
based on the relative value differential among them and an index swap is an
agreement to swap cash flows on a notional amount based on changes in the values
of the reference indices. The purchase of a cap entitles the purchaser to
receive payments on a notional principal amount from the party selling such cap
to the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of a floor entitles the purchaser to receive payments on a
notional principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain rate of return
within a predetermined range of interest rates or values.

A Fund 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 Fund receiving or paying, as the case may
be, only the net amount of the two payments. A Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the Counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or has an equivalent
rating from an NRSRO or which issue debt that is determined to be of equivalent
credit quality by the Adviser. If there is a default by the Counterparty, the
Fund 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

<PAGE>

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

Eurodollar Contracts

Each Fund 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. A Fund might use
Eurodollar futures contracts and options thereon to hedge against changes in
LIBOR, to which many interest rate swaps and fixed income instruments are
linked.

Risks of Strategic Transactions Outside the United States

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

Use of Segregated Accounts

Each Fund will hold securities or other instruments whose values are
expected to offset its obligations under the Strategic Transactions. A Fund will
cover Strategic Transactions as required by interpretive positions of the SEC. A
Fund will not enter into Strategic Transactions that expose the Fund 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. A Fund may have to comply with any applicable regulatory
requirements for Strategic Transactions, and if required, will set aside cash
and other assets in a segregated account with its custodian bank in the amount
prescribed. In that case, the Funds' 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 Fund'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 a
Fund's assets could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.

Money Market Instruments and Repurchase Agreements

When the Adviser considers investments in equity securities to present
excessive risks and to maintain liquidity for redemptions, each Fund may invest
all or a portion of its assets in money

<PAGE>

market instruments or short-term interest-bearing securities. They may also
invest uncommitted cash in such instruments and securities.

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

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

A repurchase agreement is an agreement under which a Fund acquires money
market instruments (generally U.S. government securities, bankers' acceptances
or certificates of deposit) 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 Fund and is unrelated to the
interest rate on the instruments. The instruments acquired by the Funds
(including accrued interest) must have an aggregate market value in excess of
the resale price and will be held by the Funds' custodian bank until they are
repurchased. The Trustees will monitor the standards which the Adviser will use
in reviewing the creditworthiness of any party to a repurchase agreement with
the Funds.

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

Short-Term Debt Securities

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

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

Portfolio Turnover

Each Fund places no restrictions on portfolio turnover and it may sell any
portfolio security without regard to the period of time it has been held, except
as may be necessary to enable the Fund to maintain its status as a regulated
investment company under the Internal Revenue Code. A Fund

<PAGE>

may therefore generally change its investments at any time in accordance with
the Adviser's appraisal of factors affecting any particular issuer or market, or
the economy in general.

INVESTMENT RESTRICTIONS

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

Standish Equity Fund and Equity Portfolio

As a matter of fundamental policy, the Equity Portfolio (Equity Fund) may
not:

1. Invest more than 25% of the current value of its total assets in any single
industry, provided that this restriction shall not apply to U.S. government
securities.

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

3. Purchase real estate or real estate mortgage loans.

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

5. Purchase or sell commodities or commodity contracts (except futures
contracts and options on such futures contracts and foreign currency
exchange transactions).

6. With respect to at least 75% of its total assets, invest more than 5% in the
securities of any one issuer (other than the U.S. Government, its agencies
or instrumentalities) or acquire more than 10% of the outstanding voting
securities of any issuer.

7. Issue senior securities, borrow money, enter into reverse repurchase
agreements or pledge or mortgage its assets, except that the Portfolio
(Fund) may borrow from banks in an amount up to 15% of the current value of
its total assets as a temporary measure for extraordinary or emergency
purposes (but not investment purposes), and pledge its assets to an extent
not greater than 15% of the current value of its total assets to secure such
borrowings; however, the Fund may not make any additional investments while
its outstanding borrowings exceed 5% of the current value of its total
assets.

8. Make loans of portfolio securities, except that the Portfolio (Fund) may
enter into repurchase agreements and except that the Fund may enter into
repurchase agreements with respect to 10% of the value of its net assets.

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

a. 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.

b. Purchase the securities of any other investment company except to the extent
permitted by the 1940 Act.

c. Invest more than 15% of its net assets in securities which are illiquid.

d. Purchase additional securities if the Fund's borrowings exceed 5% of its net
assets (this restriction is fundamental with respect to the Fund, but not
the Portfolio).

Notwithstanding any fundamental or non-fundamental policy, the Equity Fund
may invest all of its assets (other than assets which are not "investment
securities" (as defined in the 1940 Act) or

<PAGE>

are excepted by the SEC) in an open-end management investment company with
substantially the same investment objective as the Equity Fund.

International Equity Fund

As a matter of fundamental policy, the International Equity Fund may not:

1. With respect to at least 75% of its total assets, invest more than 5% in the
securities of any one issuer (other than the U.S. Government, its agencies
or instrumentalities) or acquire more than 10% of the outstanding voting
securities of any issuer.

2. Issue senior securities, borrow money or pledge or mortgage its assets,
except that the Fund may borrow from banks as a temporary measure for
extraordinary or emergency purposes (but not investment purposes) in an
amount up to 15% of the current value of its total assets, and pledge its
assets to an extent not greater than 15% of the current value of its total
assets to secure such borrowings; however, the Fund may not make any
additional investments while its outstanding borrowings exceed 5% of the
current value of its total assets.

3. Make loans, except that the Fund may purchase or hold a portion of an issue
of publicly distributed debt instruments, purchase negotiable certificates
of deposit and bankers' acceptances, and enter into repurchase agreements.

4. Invest more than 25% of the current value of its total assets in any single
industry (not including obligations of the U.S. Government or its agencies
and instrumentalities).

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

6. Purchase real estate or real estate mortgage loans, although the Fund may
purchase marketable securities of companies which deal in real estate, real
estate mortgage loans or interests therein.

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

8. Purchase or sell commodities or commodity contracts, except that the Fund
may purchase and sell financial futures contracts and options on financial
futures contracts and engage in foreign currency exchange transactions.

The following restrictions are not fundamental policies and may be changed
by the Trustees without shareholder approval, in accordance with applicable
laws, regulations or regulatory policy. The Fund may not:

a. 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.

b. Purchase the securities of any other investment company except to the extent
permitted by the 1940 Act.

c. Invest more than 15% of its assets in securities which are illiquid.

Small Capitalization Equity Fund and Small Capitalization Equity Portfolio

As a matter of fundamental policy, the Small Capitalization Portfolio (Small
Capitalization Fund) may not:

1. Invest more than 25% of the current value of its total assets in any single
industry, provided that this restriction shall not apply to U.S. Government
securities.

3. Purchase real estate or real estate mortgage loans.

<PAGE>

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

5. Purchase or sell commodities or commodity contracts except that the
Portfolio (Fund) may purchase and sell financial futures contracts and
options on financial futures contracts and engage in foreign currency
exchange transactions.

8. Make loans of portfolio securities, except that the Portfolio (Fund) may
enter into repurchase agreements with respect to 10% of the value of its net
assets.

a. 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.

b. Purchase the securities of any other investment company except to the extent
permitted by the 1940 Act.

c. Invest more than 15% of its net assets in securities which are illiquid.

d. Purchase additional securities if the Fund's borrowings exceed 5% of its net
assets (this restriction is fundamental with respect to the Fund, but not
the Portfolio).

Notwithstanding any fundamental or non-fundamental policy, the Small
Capitalization Fund 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 management investment company with substantially the same
investment objective as the Small Capitalization Fund.

Small Capitalization Equity Fund II and Small Capitalization Equity Portfolio II

As a matter of fundamental policy, the Small Capitalization Portfolio II
(Small Capitalization Fund II) may not:

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

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

3. Borrow money, except in amounts not to exceed 33 1/3% of the value of the
Portfolio's (Fund's) total assets (including the amount borrowed) taken at
market value (i) from banks for temporary or short-term purposes or for the
clearance of transactions, (ii) in connection with the redemption of
portfolio shares or to finance failed settlements of portfolio trades
without

<PAGE>

immediately liquidating portfolio securities or other assets, (iii) in order
to fulfill commitments or plans to purchase additional securities pending
the anticipated sale of other portfolio securities or assets and (iv) the
Portfolio (Fund) may enter into reverse repurchase agreements and forward
roll transactions. For purposes of this investment restriction, investments
in short sales, futures contracts, options on futures contracts, securities
or indices and forward commitments shall not constitute borrowing.

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

5. Purchase or sell real estate except that the Portfolio (Fund) 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 (Fund) as a result of the ownership of
securities.

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

7. Purchase or sell commodities or commodity contracts, except the Portfolio
(Fund) 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 (Fund's)
investment policies.

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

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

For purposes of the fundamental investment restriction (1) regarding
industry concentration, the adviser generally classifies issuers by industry in
accordance with classifications set forth in the Directory of Companies Filing
Annual Reports With The Securities and Exchange Commission. In the absence of
such classification or if the Adviser determines in good faith based on its own
information that the economic characteristics affecting a particular issuer make
it more appropriately considered to be engaged in a different industry, the
Adviser may classify an issuer according to its own sources. For instance,
personal credit finance companies and business credit finance companies are
deemed to be separate industries and wholly-owned finance companies are
considered to be in the industry of their parents if their activities are
primarily related to financing the activities of their parents.

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

a. 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.

<PAGE>

b. Purchase the securities of any other investment company except to the extent
permitted by the 1940 Act.

c. Invest more than 15% of its net assets in securities which are illiquid.

d. Purchase additional securities if the Fund's borrowings exceed 5% of the its
net assets.

Notwithstanding any fundamental or non-fundamental policy, the Small
Capitalization Fund II 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 Fund.

If any percentage restriction described above is adhered to at the time of
investment, a subsequent increase or decrease in the percentage resulting from a
change in the value of a Fund's or a Portfolio's assets will not constitute a
violation of the restriction.

CALCULATION OF PERFORMANCE DATA

As indicated in the Prospectus, each Fund may, from time to time, advertise
certain total return and yield information. The average annual total return of a
Fund for a period is computed by subtracting the net asset value per share at
the beginning of the period from the net asset value per share at the end of the
period (after adjusting for the reinvestment of any income dividends and capital
gain distributions), and dividing the result by the net asset value 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 Funds' average annual total return for the one-, five- and ten-year (or
life-of-the-Fund, if shorter) periods ended December 31, 1996 and average
annualized yield for the 30-day period ended December 31, 1996 were as follows:

Average Annual Total Return
Average Annual Total Return
Fund 1-Year 5-Year 10-Year
- ---- ------ ------ -------

Equity Fund 26.84% 17.31% 19.84%(1)
----- ----- -----

Small Capitalization
Equity Fund 17.36% 15.61% 22.28%(2)
----- ----- -----

Small Capitalization
Equity Fund II 1.90%(3) N/A N/A

International Equity Fund 7.44% 4.91% 5.42%(4)

- ----------
1 Equity Fund commenced operations on June 2, 1991.
2 Small Capitalization Equity Fund commenced operations on September 1, 1990.
3 Small Capitalization Equity Fund II commenced operations on December 23, 1996.
4 International Equity Fund commenced operations on December 8, 1988.

These performance quotations should not be considered as representative of
any Fund's performance for any specified period in the future.

In addition to average annual return quotations, the Funds may quote
quarterly and annual performance on a net (with management and administration
fees deducted) and gross basis as follows:

<PAGE>

Equity Fund
Quarter/Year Net Gross
- --------------------------------------------------------------------------------

1Q91 16.30% 16.50%
2Q91 (2.76) (2.53)
3Q91 6.15 6.42
4Q91 11.09 11.34
1991 36.36 34.62
1Q92 (2.77) (2.52)
2Q92 (2.63) (2.38)
3Q92 4.03 4.28
4Q92 11.20 10.74
1992 9.52 9.52
1Q93 7.71 7.91
2Q93 2.76 2.96
3Q93 6.64 6.84
4Q93 2.34 2.54
1993 20.79 21.72
1Q94 (2.30) (2.13)
2Q94 (3.14) (2.96)
3Q94 3.22 3.40
4Q94 (1.50) (1.33)
1994 (3.78) (3.10)
1Q95 8.76 8.93
2Q95 11.10 11.28
3Q95 9.56 9.74
4Q95 3.90 4.09
1995 37.55 38.46
1Q96 6.84 6.99
2Q96 2.69 2.87
3Q96 4.96 5.17
4Q96 10.16 10.33
1996 26.84 27.71

Small Capitalization Equity Fund
Quarter/Year Net Gross
- --------------------------------------------------------------------------------

1Q91 28.41% 28.68%
2Q91 2.87 3.12
3Q91 12.58 12.73
4Q91 10.74 10.94
1991 64.71 65.95
Quarter/Year Net Gross
- --------------------------------------------------------------------------------

1Q92 3.16 3.38
2Q92 (12.15) (11.92)
3Q92 7.23 7.52

<PAGE>

4Q92 12.91 13.20
1992 9.74 10.83
1Q93 0.62 0.84
2Q93 3.45 3.70
3Q93 14.45 14.67
4Q93 7.63 7.83
1993 28.21 29.30
1Q94 (3.48) (3.29)
2Q94 (4.39) (4.19)
3Q94 5.90 6.11
4Q94 (1.42) (1.22)
1994 (3.66) (2.88)
1Q95 6.03 6.22
2Q95 2.55 2.73
3Q95 16.17 16.36
4Q95 2.80 2.98
1995 29.83 30.77
1Q96 6.60 6.80
2Q96 10.27 10.47
3Q96 (2.98) (2.80)
4Q96 (2.91) (3.11)
1996 17.36 18.24

Small Capitalization Equity Fund II
Quarter/Year Net Gross
- --------------------------------------------------------------------------------

4Q96 1.90% 1.90%

International Equity Fund
Quarter/Year Net Gross
- --------------------------------------------------------------------------------

1Q89 (0.75)% (0.05)%
2Q89 1.16 1.25
3Q89 11.97 12.37
4Q89 5.67 5.70
1989 18.79 20.20
1Q90 (0.10) 0.29
2Q90 5.81 6.21
3Q90 (18.32) (17.92)
4Q90 4.90 5.31
1990 (9.44) (7.93)
1Q91 6.65 6.96
2Q91 (3.03) (2.70)
3Q91 6.77 7.12

<PAGE>

Quarter/Year Net Gross
- --------------------------------------------------------------------------------

4Q91 1.18 1.64
1991 11.73 13.31
1Q92 (5.09) (4.75)
2Q92 0.62 1.05
3Q92 (5.20) (4.03)
4Q92 (0.55) (0.16)
1992 0.95 0.55
1Q93 7.23 7.57
2Q93 3.11 3.48
3Q93 8.45 8.77
4Q93 15.32 15.64
1993 38.27 40.01
1Q94 (5.87) (5.57)
2Q94 (0.06) 0.22
3Q94 2.84 3.17
4Q94 (3.87) (3.59)
1994 (6.99) (5.83)
1Q95 (5.07) (4.78)
2Q95 2.57 2.86
3Q95 2.41 2.68
4Q95 2.31 2.68
1995 2.01 3.26
1Q96 2.38 2.51
2Q96 4.89 5.02
3Q96 (1.15) (1.03)
4Q96 1.22 1.34
1996 7.44 7.97

These performance quotations should not be considered as representative of a
Fund's performance for any specified period in the future. Each Fund's
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 Equity Fund may compare
its performance to the S&P 500 Index, which is generally considered to be
representative of the performance of unmanaged common stocks that are publicly
traded in the United States securities markets. The Small Capitalization Fund
and Small Capitalization II Fund may compare their performances to the Russell
2000 Index, which is generally considered to be representative of unmanaged
small capitalization stocks in the United States markets, the Russell 2000
Growth Index, which is generally considered to be representative of those
Russell 2000 companies with higher price-to-book ratios and forecasted growth,
and the S&P 500 Index. The International Equity Fund may compare its performance
to Morgan Stanley Capital International Index ("MSCI") and the Europe,
Australia, Far East Index ("EAFE"). The EAFE-Index is generally considered to be
representative of the performance of unmanaged common stocks that are publicly
traded in European, Australian and Far Eastern securities markets and is based
on month-end market capitalization. Comparative performance may also be
expressed by reference to a ranking prepared by a mutual fund monitoring service
or by one or more newspapers, newsletters or financial periodicals. Performance
comparisons may be useful to investors who wish to compare a Fund's past
performance to that of

<PAGE>

other mutual funds and investment products. Of course, past performance is not a
guarantee of future results.

MANAGEMENT

Trustees and Officers of the Trust and Portfolio Trust

The Trustees and executive officers of the Trust are listed below. The
Trustees of the Portfolio Trust are identical to the Trustees of the Trust. The
officers of the Portfolio Trust are Messrs. Clayson, Ladd, Wood, Hollis and
Martin, and Ms. Banfield, Chase, Herrmann and Kneeland, who hold the same office
with the Portfolio Trust as with the Trust. All executive officers of the Trust
and the Portfolio Trust are affiliates of Standish, Ayer & Wood, Inc., the
Portfolio and the Fund's investment adviser.

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

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

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

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

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

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

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

Richard C. Doll, 7/8/48 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Vice President and Director,
Boston, MA 02111 Standish International Management Company, L.P.

James E. Hollis III, 11/21/48 Executive Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. and Treasurer Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Name, Address and Date of Birth Position Held Principal Occupation
With Trust During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Anne P. Herrmann, 1/26/56 Vice President and Mutual Fund Administrator,
c/o Standish, Ayer & Wood, Inc. Secretary Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Paul G. Martins, 3/10/56 Vice President Vice President, Standish, Ayer & Wood, Inc.
c/o Standish, Ayer & Wood, Inc. since October 1996; formerly Senior Vice President,
One Financial Center Treasurer and Chief Financial Officer
Boston, MA 02111 of Liberty Financial Bank Group (1993-95);
prior to 1993, Corporate Controller,
The Berkeley Financial Group

Caleb F. Aldrich, 9/20/57 Vice President Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

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

Nicholas S. Battelle, 6/24/42 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Remi Browne, 10/15/53 Vice President Vice President, Standish, Ayer & Wood, Inc
c/o Standish, Ayer & Wood, Inc. Vice President and Chief Investment Officer
One Financial Center of Standish International Management
Boston, MA 02111 Company, L.P., prior to
August 1996, Managing Director
Ark Asset Management Company

Walter M. Cabot, 1/16/33 Vice President Senior Adviser and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.;
One Financial Center prior to 1991, President,
Boston, MA 02111 Harvard Management Company
Senior Adviser and Director of
Standish International Management Company, L.P.

David H. Cameron, 11/2/55 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Director of
Boston, MA 02111 Standish International Management Company, L.P.

Karen K. Chandor, 2/13/50 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Lavinia B. Chase, 6/4/46 Vice President Vice President and Associate Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Name, Address and Date of Birth Position Held Principal Occupation
With Trust During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Susan B. Coan, 5/1/52 Vice President Vice President and Director
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA O2111

W. Charles Cook II, 7/16/63 Vice President Vice President and Associate Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Vice President,
Boston, MA 02111 Standish International Management Company, L.P.

Joseph M. Corrado, 5/13/55 Vice President Vice President and Associate Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Dolores S. Driscoll, 2/17/48 Vice President Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Director, Standish International
Boston, MA 02111 Management Company, L.P.

Mark A. Flaherty, 4/24/59 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Vice President
Boston, MA 02111 Standish International Management Company, L.P.

Maria D. Furman, 2/3/54 Vice President Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Vice President and Director,
Boston, MA 02111 Standish International Management Company, L.P.

Ann S. Higgins, 4/8/35 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

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

Raymond J. Kubiak, 9/3/57 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Phillip D. Leonardi, 4/24/62 Vice President Vice President, Standish, Ayer & Wood, Inc.
c/o Standish, Ayer & Wood, Inc. since November 1993; formerly,
One Financial Center Investment Sales,
Boston, MA 02111 Cigna Corporation (1993) and
Travelers Corporation (1984-1993)

Laurence A. Manchester, 5/24/43 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Name, Address and Date of Birth Position Held Principal Occupation
With Trust During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
George W. Noyes, 11/12/44 Vice President President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Director of
Boston, MA 02111 Standish International Management Company, L.P.

Arthur H. Parker, 8/12/35 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Jennifer A. Pline, 3/8/60 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Howard B. Rubin, 10/29/59 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Executive Vice President and Director
Boston, MA 02111 Standish International Management Company, L.P.

Austin C. Smith, 7/25/52 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

David C. Stuehr, 3/1/58 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Ralph S. Tate, 4/2/47 Vice President Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc. since
One Financial Center April, 1990; formerly Vice
Boston, MA 02111 President, Aetna Life & Casualty
President and Director,
Standish International Management Company, L.P.

Michael W. Thompson, 3/31/56 Vice President Vice President and Associate Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Christopher W. Van Alstyne, 3/24/60 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.;
One Financial Center Formerly Regional Marketing Director,
Boston, MA 02111 Gabelli-O'Connor Fixed Income Management
One Financial Center Formerly Regional Marketing Director,
Boston, MA 02111 Gabelli-O'Connor Fixed Income Management
</TABLE>

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

Compensation of Trustees and Officers

Neither the Trust nor the Portfolio Trust pays compensation to the Trustees
of the Trust or the Portfolio Trust that are affiliated with Standish or to the
Trust's and Portfolio Trust's officers. None of the Trustees or officers have
engaged in any financial transactions (other than the purchase or redemption of
the Funds' shares) with the Trust, the Portfolio Trust or the Adviser during the
year ended December 31, 1996.

The following table sets forth all compensation paid to the Trust's and the
Portfolio Trust's Trustees as of the Funds' fiscal years ended December 31,
1996:

<TABLE>
<CAPTION>
Aggregate Compensation from the Funds
Pension or
Retirement
Benefits
Accrued as Total Compensation
Small Small Part of from Funds and
Equity Capitalization Capitalization International Funds' Portfolio and Other
Name of Trustee Fund** Equity Fund** Equity Fund II** Equity Fund Expenses Funds in Complex*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
D. Barr Clayson $0 $0 $0 $0 $0 $0
Samuel C. Fleming $851 $1,887 $2 $624 $0 $49,250
Benjamin M. Friedman $787 $1,743 $2 $576 $0 $45,500
John H. Hewitt $787 $1,743 $2 $576 $0 $45,500
Edward H. Ladd $0 $0 $0 $0 $0 $0
Caleb Loring, III $787 $1,743 $2 $576 $0 $45,500
Richard S. Wood $0 $0 $0 $0 $0 $0
</TABLE>

* As of the date of this Statement of Additional Information there were 20 funds
in the fund complex. Total compensation is presented for the calendar year ended
December 31, 1996.

** The Fund bears its pro rata allocation of Trustees' fees paid by its
corresponding Portfolio to the Trustees of the Portfolio Trust.

Certain Shareholders

Except as noted below for the Small Capitalization II Fund, at February 1,
1997, Trustees and officers of the Trust and the Portfolio Trust as a group
beneficially owned (i.e., had voting and/or investment power) less than 1% of
the then outstanding shares of each Fund. The Trustees and Officers of the Trust
as a group beneficially owned approximately 95% of the then outstanding shares
of the Small Capitalization II Fund at that date. At February 1, 1997, the
Equity Fund, Small Capitalization Fund and Small Capitalization II Fund, each
beneficially owned approximately 100% of the then outstanding interests of the
Equity Portfolio, Small Capitalization Portfolio and Small Capitalization II
Portfolio, respectively, and therefore controlled their corresponding
Portfolios. Also at that date, no person beneficially owned 5% or more of the
then outstanding shares of any Fund except:

<PAGE>

Equity Fund

Percentage of
Name and Address Outstanding Shares
- --------------------------------------------------------------------------------
Saturn & Co. 14%
FBO The Boston Home
P.O. Box 1537
Boston, MA 02205

Shipley Company, Inc. 8%
455 Forest Street
Marlborough, MA 01752

Teamsters Local Union 918 Pension Fund 5%
2137-47 Utica Avenue
Brooklyn, NY 11234

Small Capitalization Equity Fund

Percentage of
Name and Address Outstanding Shares
- --------------------------------------------------------------------------------
Bingham, Dana & Gould 8%
Trust Department
150 Federal Street
Boston, MA 02110

Rosemount Aerospace Profit Sharing Plan 6%
Norwest Bank Minnesota, N.A. Trustee
733 Marquette Avenue MS 0036
Minneapolis, MN 55479
Citibank, FSB as Trustee for Lutheran

Health Systems Employee's Pension Plan 6%
c/o Citibank
111 Wall Street, 20th Floor
New York, NY 10043

Small Capitalization Equity Fund II

Percentage of
Name and Address Outstanding Shares
- --------------------------------------------------------------------------------
Edward H. Ladd 10%
c/o Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Christina D. Wood* 20%
c/o Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Dolores S. Driscoll 10%
c/o Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Richard C. Doll 10%
c/o Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Maria D. Furman 6%
c/o Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

<PAGE>

Arthur H. Parker 6%
c/o Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

James E. Hollis 6%
c/o Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Walter M. Cabot 6%
c/o Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

George W. Noyes 5%
c/o Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Dorothy G. Battelle+
c/o Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

*Christina D. Wood is the wife of Richard S. Wood, President and Trustee of the
Trust

+Dorothy G. Battelle is the wife of Nicholas S. Battelle, a Vice President of
the Trust

International Equity Fund

Percentage of
Name and Address Outstanding Shares
- --------------------------------------------------------------------------------
Allendale Mutual Insurance Co. 8%
P. O. Box 7500
Johnston, RI 02919

NationsBank of Texas, NA 7%
TTEE FBO
Keystone Thermometrics Master Trust
P.O. BOX 831575
Dallas, TX 75283

Lumber Mutual Insurance 7%
One Speen Street
Framingham, MA 01701

First Union National Bank 7%
Cannon Foundation
a/c# 1028851439
401 S. Tryon St. CMG 1151
Charlotte, NC 28288

Fletcher Allen Health Care
Depreciation Fund 7%
One Burlington Square
Burlington, VT 05401

Trustees of Reservations 6%
572 Essex STreet
Beverly, MA 01915

OLSEN & Co. 6%
P.O. Box 92800
Rochester, NY 14692

<PAGE>

Bingham Dana & Gould 5%
Trust Department
150 Federal Street
Boston, MA 02110

*Because the shareholder beneficially owned more than 25% of the then
outstanding shares of the indicated Fund, the shareholder was considered to
control such Fund. As a controlling person, the shareholder may be able to
determine whether a proposal submitted to the shareholders of such Fund will be
approved or disapproved.

Investment Adviser

Standish serves as the adviser to the Equity Portfolio, Small Capitalization
Portfolio and Small Capitalization II Portfolio pursuant to written investment
advisory agreements. Prior to the close of business on May 3, 1996, Standish
managed directly the assets of the Equity and Small Capitalization Funds
pursuant to investment advisory agreements. These agreements were terminated by
Equity and Small Capitalization Funds on such date subsequent to the approval by
the Funds' shareholders on March 29, 1996 to implement certain changes in the
Funds' investment restrictions which enable the Funds to invest all of their
investable assets in the Equity Portfolio and Small Capitalization Portfolio,
respectively. Standish is a Massachusetts corporation organized in 1933 and is
registered under the Investment Advisers Act of 1940.

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

SIMCO serves as investment adviser to the International Equity Fund pursuant
to an investment advisory agreement. SIMCO is a Delaware limited partnership
which was organized in 1991 and is a registered investment adviser under the
Investment Advisers Act of 1940. The general partner of SIMCO is Standish, which
holds a 99.98% partnership interest. The limited partners, who each hold a 0.01%
interest in SIMCO, are Walter M. Cabot, Sr., a Director and Adviser to SIMCO and
a Director and Senior Adviser to Standish, and D. Barr Clayson, Chairman of the
Board of SIMCO and a Managing Director of Standish. Ralph S. Tate, a Managing
Director of Standish, is President and a Director of SIMCO. Richard S. Wood, a
Vice President and director of Standish and the President of the Trust, is the
Executive Vice President of SIMCO.

Certain services provided by the Adviser under the advisory agreements are
described in the Prospectus. These services are provided without reimbursement
by the Portfolios or the International Equity Fund for any costs incurred. In
addition to those services, the Adviser provides the Intermittent Equity Fund
(but not the Portfolios) with office space for managing their affairs, with the
services of required executive personnel, and with certain clerical services and
facilities. Under the investment advisory agreements, the Adviser is paid a fee
based upon a percentage of the Intermittent Equity Fund's or the applicable
Portfolio's average daily net asset value computed as set forth below. The
advisory fees are payable monthly.

Contractual Advisory Fee Rate
(as a percentage of
Fund average daily net assets)
- --------------------------------------------------------------------------------
Equity Portfolio 0.50%

Small Capitalization
Equity Portfolio 0.60%

Small Capitalization
Equity Portfolio II 0.60%

International Equity Fund 0.80%

During the last three fiscal years ended December 31, the Funds and the
Portfolios paid advisory fees in the following amounts:

Fund 1994 1995 1996
- --------------------------------------------------------------------------------
Equity Fund 422,731 555,164 163,530(1)

Equity Portfolio N/A N/A 345,301(2)

Small Capitalization
Equity Fund 557,359 871,879 396,796(1)

Small Capitalization
Equity Portfolio N/A N/A 920,742(2)

Small Capitalization
Equity Fund II N/A N/A 0(3)

Small Capitalization
Equity Portfolio II N/A N/A 62

International Equity Fund 841,166 704,283 7,841

- ----------
1 Equity Fund and Small Capitalization Fund were converted to the master/feeder
fund structure on May 3, 1996 and do not pay directly advisory fees after that
date. Each such Fund bears its pro rata allocation of its corresponding
Portfolio's expenses, including advisory fees.

2 The Equity Portfolio and Small Capitalization Portfolio commenced operations
on April 26, 1996.

3 The Small Capitalization Equity II commenced operations on December 23, 1996.
The Adviser voluntarily agreed not to impose its advisory fee for the period
through December 31, 1996.

Pursuant to the investment advisory agreements, each Portfolio and the
International Equity Fund bears expenses of its operations other than those
incurred by the Adviser pursuant to the investment advisory agreement. Among
other expenses, and the International Equity Fund and the Portfolios will pay
share pricing and shareholder servicing fees 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 Trustees' fees and expenses.

Unless terminated as provided below, the investment advisory agreements
continue in full force and effect from year to year but only so long as each
such continuance is approved annually (i) by either the Trustees of the Trust or
the Portfolio Trust (as applicable) or by the "vote of a majority of the
outstanding voting securities" of the International Equity Fund or the
applicable Portfolio, and, in either event (ii) by vote of a majority of the
Trustees of the Trust or the Portfolio Trust (as applicable) who are not parties
to the investment advisory agreement or "interested persons" (as defined in the
1940 Act) of any such party, cast in person at a meeting called for the purpose
of voting on such approval. Each investment advisory agreement may be terminated
at any time without the payment of any penalty by vote of the Trustees of the
Trust or the Portfolio Trust or by the "vote of a majority of the outstanding
voting securities" of the International Equity Fund or the applicable Portfolio
or by the Adviser, on sixty days' written notice to the other parties. The
investment advisory agreements terminate in the event of their assignment as
defined in the 1940 Act.

In an attempt to avoid any potential conflict with portfolio transactions
for the International Equity Fund and the Portfolios, the Adviser, the Principal
Underwriter, the Trust and the Portfolio Trust have each adopted extensive
restrictions on personal securities trading by personnel of the Adviser and its
affiliates. These restrictions include: pre-clearance of all personal securities
transactions and a prohibition of purchasing initial public offerings of
securities. These restrictions are a continuation of the basic principle that
the interests of the International Equity Fund and its shareholders, and the
Portfolios and their investors, come before those of the Adviser and its
employees.
<PAGE>

Administrator of the Fund

Standish also serves as the administrator ("Fund Administrator") to the
Equity Fund, Small Capitalization Fund and Small Capitalization II Fund pursuant
to written administration agreements with the Trust on behalf of these Funds.
Certain services provided by the Fund Administrator under the administration
agreements are described in the Prospectus. For these services, the Fund
Administrator currently does not receive any additional compensation. The
Trustees of the Trust may, however, determine in the future to compensate the
Fund Administrator for its administrative services. Each of the Equity Fund,
Small Capitalization Fund and Small Capitalization II Fund's administration
agreements can be terminated by either party on not more than sixty days'
written notice.

Administrator of the Portfolio

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

Distributor of the Funds

Standish Fund Distributors, L.P. (the "Principal Underwriter"), an affiliate
of the Adviser, serves as the Trust's exclusive principal underwriter and holds
itself available to receive purchase orders for each Fund's shares. In that
capacity, the Principal Underwriter has been granted the right, as agent of the
Trust, to solicit and accept orders for the purchase of each Fund's shares in
accordance with the terms of the Underwriting Agreement between the Trust and
the Principal Underwriter. Pursuant to the Underwriting Agreement, the Principal
Underwriter has agreed to use its best efforts to obtain orders for the
continuous offering of each Fund's shares. The Principal Underwriter receives no
commissions or other compensation for its services, and has not received any
such amounts in any prior year. The Underwriting Agreement shall continue in
effect with respect to each Fund until two years after its execution and for
successive periods of one year thereafter only if it is approved at least
annually thereafter (i) by a vote of the holders of a majority of the Fund's
outstanding shares or by the Trustees of the Trust or (ii) by a vote of a
majority of the Trustees of the Trust who are not "interested persons" (as
defined by the 1940 Act) of the parties to the Underwriting Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Underwriting Agreement will terminate automatically if assigned by either party
thereto and is terminable at any time without penalty by a vote of a majority of
the Trustees of the Trust, a vote of a majority of the Trustees who are not
"interested persons" of the Trust, or, with respect to a Fund, by a vote of the
holders of a majority of the Fund's outstanding shares, in any case without
payment of any penalty on not more than 60 days' written notice to the other
party. The offices of the Principal Underwriter are located at One Financial
Center, 26th Floor, Boston, Massachusetts 02111.

REDEMPTION OF SHARES

Detailed information on redemption of shares 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 is 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 a Fund of securities
owned by it or determination by a 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 a Fund.

The Trust intends to pay redemption proceeds in cash for all Fund shares
redeemed but, under certain conditions, the Trust may make payment wholly or
partly in portfolio securities, in

<PAGE>

conformity with a rule of the SEC. Portfolio securities paid upon redemption of
Fund shares will be valued at their then current market value. The Trust, on
behalf of each of its series, has elected to be governed by the provisions of
Rule 18f-1 under the 1940 Act which limits each Fund's obligation to make cash
redemption payments to any shareholder during any 90-day period to the lesser of
$250,000 or 1% of the Fund's net asset value at the beginning of such period. An
investor may incur brokerage costs in converting portfolio securities received
upon redemption to cash. Each Portfolio has advised the Trust that the Portfolio
will not redeem in-kind except in circumstances in which the applicable Fund is
permitted to redeem in-kind or except in the event the applicable Fund
completely withdraws its interest from the Portfolio.

PORTFOLIO TRANSACTIONS

The Adviser is responsible for placing the International Equity Fund's and
each Portfolio's portfolio transactions and will do so in a manner deemed fair
and reasonable to the International Equity Fund and the Portfolios and not
according to any formula. The primary consideration in all portfolio
transactions will be prompt execution of orders in an efficient manner at the
most favorable price. In selecting broker-dealers and in negotiating
commissions, the Adviser will consider the firm's reliability, the quality of
its execution services on a continuing basis and its financial condition. When
more than one firm is believed to meet these criteria, preference may be given
to firms which also sell shares of the Funds. In addition, if the Adviser
determines in good faith that the amount of commissions charged by a broker is
reasonable in relation to the value of the brokerage and research services
provided by such broker, the International Equity Fund and the Portfolios may
pay commissions to such broker in an amount greater than the amount another firm
may charge. Research services may include (i) furnishing advice as to the value
of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities, (ii) furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and the performance
of accounts, and (iii) effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement). Research
services furnished by firms through which the International Equity Fund and the
Portfolios effect their securities transactions may be used by the Adviser in
servicing other accounts; not all of these services may be used by the Adviser
in connection with the Fund or the Portfolio generating the soft dollar credits.
The investment advisory fee paid by the International Equity Fund and the
Portfolios under the investment advisory agreements will not be reduced as a
result of the Adviser's receipt of research services.

The Adviser also places portfolio transactions for other advisory accounts.
The Adviser will seek to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities for the
International Equity Fund or a 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 International Equity Fund or a Portfolio. In making
such allocations, the main factors considered by the Adviser will be the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held, and opinions of the persons
responsible for recommending the investment.

BROKERAGE COMMISSIONS

Aggregate Brokerage
Commissions Paid by the Fund or
portfolio transactions
- --------------------------------------------------------------------------------
Equity Fund 422,731 555,164 163,530(1)
Fund 1994 1995 1996
Equity Fund(1) $287,545 $416,680 $80,855
Equity Portfolio(2) N/A N/A $148,871(5)
Small Capitalization
Equity Fund(3) $512,334 $859,777 $162,096
Small Capitalization
Equity Portfolio N/A N/A $255,346(5)
Small Capitalization
Equity Fund II(4) N/A N/A N/A
Small Capitalization
Equity Portfolio II N/A N/A $3,480
International Equity Fund $240,006 $439,738 $286,838
<PAGE>

1 The Fund was converted to the master-feeder structure on May 3, 1996 and does
not directly pay brokerage commissions after that date. The Fund bears its pro
rata share of brokerage commissions paid by its corresponding Portfolio.

2 At December 31, 1996, the Portfolio held the following amounts of securities
of its regular brokers or dealers: Travelers, $1,574,000.

3 The Fund was converted to the master-feeder structure on May 3, 1996 and does
not directly pay brokerage commissions after that date. The Fund bears its pro
rata share of brokerage commissions paid by its corresponding Portfolio.

4 The Fund is a Feeder Fund in the master-feeder structure and does not directly
pay brokerage commissions but bears its pro rata share of brokerage
commissions paid by its corresponding Portfolio.

5 The Portfolio commenced operations on May 3, 1996.

DETERMINATION OF NET ASSET VALUE

Each Fund's net asset value is calculated each day on which the New York
Stock Exchange is open (a "Business Day"). Currently, the New York Stock
Exchange is not open on weekends, New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value of each Fund's shares is determined as of the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m., New York
City time) and is computed by dividing the value of all securities and other
assets of a Fund (substantially all of which, in the case of the Equity Fund,
Small Capitalization Fund and Small Capitalization II Fund will be represented
by the Fund's interest in its corresponding Portfolio) less all liabilities by
the applicable number of Fund shares outstanding, and adjusting to the nearest
cent per share. Expenses and fees of each Fund are accrued daily and taken into
account for the purpose of determining net asset value.

The value of a Portfolio's net assets (i.e., the value of its securities and
other assets less its liabilities, including expenses payable or accrued) is
determined at the same time and on the same days as the net asset value per
share of the Equity, Small Capitalization and Small Capitalization II Funds is
determined. Each investor in a Portfolio may add to or reduce its investment in
the Portfolio on each Business Day. As of 4:00 p.m. (Eastern time) on each
Business Day, the value of each investor's interest in a Portfolio will be
determined by multiplying the net asset value of the Portfolio by the percentage
representing that investor's share of the aggregate beneficial interests in the
Portfolio. Any additions or reductions which are to be effected on that day will
then be effected. The investor's percentage of the aggregate beneficial
interests in a Portfolio will then be recomputed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of 4:00 p.m. on such day plus or minus, as the case may be,
the amount of net additions to or reductions in the investor's investment in the
Portfolio effected on such day, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of 4:00 p.m. on such day plus or
minus, as the case may be, the amount of the net additions to or reductions in
the aggregate investments in the Portfolio by all investors in the Portfolio.
The percentage so determined will then be applied to determine the value of the
investor's interest in a Portfolio as of 4:00 p.m. on the following Business
Day.

Portfolio securities are valued at the last sale prices on the exchange or
national securities market on which they are primarily traded. Securities not
listed on an exchange or national

<PAGE>

securities market, or securities for which there were no reported transactions,
are valued at the last quoted bid price. Securities for which quotation are not
readily available and all other assets are valued at fair value as determined in
good faith at the direction of the Trustees.

Money market instruments with less than sixty days remaining to maturity
when acquired by a Fund or Portfolio are valued on an amortized cost basis. If a
Fund acquires a money market instrument with more than sixty days remaining to
its maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value on
such date unless the Trustees of the Trust or the Portfolio Trust determine
during such sixty-day period that amortized cost does not represent fair value.

Generally, trading in securities on foreign exchanges is substantially
completed each day at various times prior to the close of regular trading on the
New York Stock Exchange. If a security's primary exchange is outside the U.S.,
the value of such security used in computing the net asset value of a Fund's
shares is determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of regular trading on the New York Stock
Exchange. Occasionally, events which affect the values of such securities and
such exchange rates may occur between the times at which they are determined and
the close of regular trading on the New York Stock Exchange and will therefore
not be reflected in the computation of the Funds' net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities are valued at their fair value as determined in good faith by
the Trustees of the Trust or the Portfolio Trust.

THE FUNDS AND THEIR SHARES

Each Fund is an investment series of the Trust, an unincorporated business
trust organized under the laws of The Commonwealth of Massachusetts pursuant to
an Agreement and Declaration of Trust dated August 13, 1986. Under the Agreement
and Declaration of Trust, the Trustees of the Trust have authority to issue an
unlimited number of shares of beneficial interest, par value $.01 per share, of
each Fund. Each share of a Fund represents an equal proportionate interest in
the Fund with each other share and is entitled to such dividends and
distributions as are declared by the Trustees. Shareholders are not entitled to
any preemptive, conversion or subscription rights. All shares, when issued, will
be fully paid and non-assessable by the Trust. Upon any liquidation of a Fund,
shareholders of that Fund are entitled to share pro rata in the net assets
available for distribution.

Pursuant to the Declaration, the Trustees may create additional funds by
establishing additional series of shares in the Trust. The establishment of
additional series would not affect the interests of current shareholders in any
Fund. The Trustees have established other series of the Trust. Pursuant to the
Declaration, the Board may establish and issue multiple classes of shares for
each series of the Trust. As of the date of this Statement of Additional
Information, the Trustees do not have any plan to establish multiple classes of
shares for the Funds. Pursuant to the Declaration of Trust and subject to
shareholder approval (if then required by applicable law), the Trustees may
authorize each Fund to invest all of its investable assets in a single open-end
investment company that has substantially the same investment objectives,
policies and restrictions as the Fund. As of the date of this Statement of
Additional Information, the Equity, Small Capitalization and Small
Capitalization II Funds invest all of their investible assets in other open-end
investment companies.

All Fund shares have equal rights with regard to voting, and shareholders of
a Fund have the right to vote as a separate class with respect to matters as to
which their interests are not identical to those of shareholders of other
classes of the Trust, including the approval of an investment advisory contract
and any change of investment policy requiring the approval of shareholders.

Under Massachusetts law, shareholders of the Trust could, under certain
circumstances, be held liable for the obligations of the Trust. However, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of this disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Declaration also provides for indemnification from the assets
of the Trust for all losses and expenses of any Trust shareholder held liable
for the obligations of the Trust. Thus, the risk of a

<PAGE>

shareholder incurring a financial loss on account of his or its liability as a
shareholder of the Trust is limited to circumstances in which the Trust would be
unable to meet its obligations. The possibility that these circumstances would
occur is remote. Upon payment of any liability incurred by the Trust, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Trust. The Declaration also provides that no series of the
Trust is liable for the obligations of any other series. The Trustees intend to
conduct the operations of the Trust to avoid, to the extent possible, ultimate
liability of shareholders for liabilities of the Trust.

Except as described below, whenever the Trust is requested to vote on a
fundamental policy of or matters pertaining to a Portfolio, the Trust will hold
a meeting of the associated Fund's shareholders and will cast its vote
proportionately as instructed by the Fund's shareholders. Fund shareholders who
do not vote will not affect the Trust's votes at the Portfolio meeting. The
percentage of the Trust's votes representing Fund shareholders not voting will
be voted by the Trustees of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote. Subject to applicable statutory and
regulatory requirements, a Fund would not request a vote of its shareholders
with respect to (a) any proposal relating to the Portfolio, which proposal, if
made with respect to the Fund, would not require the vote of the shareholders of
the Fund, or (b) any proposal with respect to the Portfolio that is identical in
all material respects to a proposal that has previously been approved by
shareholders of the Fund. Any proposal submitted to holders in a Portfolio, and
that is not required to be voted on by shareholders of the Fund, would
nonetheless be voted on by the Trustees of the Trust.

THE PORTFOLIO AND ITS INVESTORS

Each Portfolio is a series of Standish, Ayer & Wood Master Portfolio, a
newly formed trust and, like their corresponding Fund, is an open-end management
investment company under the Investment Company Act of 1940, as amended. The
Portfolio Trust was organized as a master trust fund under the laws of the State
of New York on January 18, 1996.

Interests in a Portfolio have no preemptive or conversion rights, and are
fully paid and non-assessable, except as set forth in the Prospectus. A
Portfolio normally will not hold meetings of holders of such interests except as
required under the 1940 Act. A Portfolio would be required to hold a meeting of
holders in the event that at any time less than a majority of its Trustees
holding office had been elected by holders. The Trustees of a Portfolio 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 the Portfolio for the purpose of removing any Trustee. A Trustee of
the Portfolio may be removed upon a majority vote of the interests held by
holders in the Portfolio qualified to vote in the election. The 1940 Act
requires a Portfolio 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 a Portfolio available for distribution to holders.
Each holder in the Portfolio is entitled to a vote in proportion to its
percentage interest in the Portfolio.

TAXATION

Each series of the Trust, including each Funds, is treated as a separate
entity for accounting and tax purposes. Each Fund has qualified and elected or
intends to elect to be treated 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 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, the
corresponding 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 the Portfolio. Because the Equity Fund,
Small Capitalization Fund and Small

<PAGE>

Capitalization II Fund invest their assets in the Equity, Small Capitalization
and Small Capitalization II Portfolios, respectively, each Portfolio normally
must satisfy the applicable source of income and diversification requirements in
order for the corresponding Fund to satisfy them. Each Portfolio will allocate
at least annually among its investors, including the corresponding Fund each
investor's distributive share of that Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deduction or
credit. Each Portfolio will make allocations to the 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 corresponding Fund to satisfy the tax distribution requirements
that apply to it and that must be satisfied in order for the Fund to avoid
Federal income and/or excise tax. For purposes of applying the requirements of
the Code regarding qualification as a RIC, the Equity Fund, Small Capitalization
Fund and Small Capitalization II Fund each will be deemed (i) to own its
proportionate share of each of the assets of the corresponding Portfolio and
(ii) to be entitled to the gross income of the corresponding 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 the
Funds during October, November or December of the year 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.

Each Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Funds qualify as regulated investment companies under
the Code, they will also not be required to pay any Massachusetts income tax.

Each Fund will not distribute net capital gains realized in any year to the
extent that a capital loss is carried forward from prior years against such
gain. 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 the Fund and, as noted above, would not be distributed as such
to shareholders.

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

Certain options, futures or currency forward transactions undertaken by a
Fund or a Portfolio may cause the Fund or Portfolio to recognize gains or losses
from marking to market even though the Fund's or Portfolio's positions have not
been sold or terminated and affect the character as long-term or short-term (or,
in the case of certain options, futures or forward contracts relating to foreign
currency, as ordinary income or loss) and timing of some capital gains and
losses realized by the International Equity Fund or realized by a Portfolio and
allocable to the corresponding Fund. Any net mark to market gains may also have
to be distributed by a Fund 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 Funds' taxable income or gain. Certain of the applicable tax rules may be
modified if a Fund or a 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 a Fund's distributions to shareholders. Each
Fund will take into account the special tax rules applicable to options, futures
or forward contracts in order to minimize any potential adverse tax
consequences.

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

<PAGE>

transactions in these instruments.

Foreign exchange gains and losses realized by a Portfolio and the
International Equity Fund in connection with certain transactions, if any,
involving foreign currency-denominated debt securities, certain foreign currency
futures and options, foreign currency forward contracts, foreign currencies, or
payables or receivables denominated in a foreign currency are subject to Section
988 of the Code, which generally causes such gains and losses to be treated as
ordinary income and losses and may affect the amount, timing and character of
Fund distributions to shareholders. In some cases, elections may be available
that would alter this treatment. Any such transactions that are not directly
related to the Portfolios' or the International Equity Fund's investment in
stock or securities, possibly including speculative currency positions or
currency derivatives not used for hedging purposes, may increase the amount of
gain a Fund is deemed to recognize from the sale of certain investments held for
less than three months, which gain (or share of such gain in the case of the
Equity Fund, Small Capitalization Fund and Small Capitalization II Fund plus any
such gain the Funds may realize from other sources) is limited under the Code to
less than 30% of each Fund's gross income for its taxable year, and could under
future Treasury regulations produce income not among the types of "qualifying
income" from which each Fund must derive at least 90% of its gross income for
its taxable year.

Each Portfolio and the International Equity Fund may be subject to
withholding and other taxes imposed by foreign countries with respect to
investments in foreign securities. Tax conventions between certain countries and
the U.S. may reduce or eliminate such taxes in some cases. Investors in a Fund
would be entitled to claim U.S. foreign tax credits with respect to such taxes,
subject to certain provisions and limitations contained in the Code, only if
more than 50% of the value of the applicable Fund's total assets (in the case of
a Fund that invests in a Portfolio, taking into account its allocable share of
the Portfolio's assets) at the close of any taxable year were to consist of
stock or securities of foreign corporations and the Fund were to file an
election with the Internal Revenue Service. Because the investments of the
Portfolios are such that each Fund that invests in a Portfolio expects that it
generally will not meet this 50% requirement, shareholders of each such Fund
generally will not directly take into account the foreign taxes, if any, paid by
the corresponding Portfolio and will not be entitled to any related tax
deductions or credits. Such taxes will reduce the amounts these Funds would
otherwise have available to distribute.

The International Equity Fund may meet the 50% threshold referred to in the
previous paragraph and may therefore file an election with the Internal Revenue
Service pursuant to which shareholders of the Fund will be required to (i)
include in ordinary gross income (in addition to taxable dividends actually
received) their pro rata shares of foreign income taxes paid by the Fund even
though not actually received by them, and (ii) treat such respective pro rata
portions as foreign income taxes paid by them.

If the International Equity Fund makes this election, shareholders may then
deduct such pro rata portions of foreign income taxes in computing their taxable
incomes, or, alternatively, use them as foreign tax credits, subject to
applicable limitations, against their U.S. Federal income taxes. Shareholders
who do not itemize deductions for Federal income tax purposes will not, however,
be able to deduct their pro rata portion of foreign income taxes paid by the
International Equity Fund, although such shareholders will be required to
include their share of such taxes in gross income. Shareholders who claim a
foreign tax credit for such foreign taxes may be required to treat a portion of
dividends received from the International Equity Fund as a separate category of
income for purposes of computing the limitations on the foreign tax credit. Tax
exempt shareholders will ordinarily not benefit from this election. Each year
(if any) that the International Equity Fund files the election described above,
its shareholders will be notified of the amount of (i) each shareholder's pro
rata share of foreign income taxes paid by the Fund and (ii) the portion of Fund
dividends which represents income from each foreign country.

If a Portfolio or the International Equity Fund acquires stock in certain
foreign corporations that receive at least 75% of their annual gross income from
passive sources (such as interest, dividends, rents, royalties or capital gain)
or hold at least 50% of their assets in investments producing such passive
income ("passive foreign investment companies"), the relevant Fund could be
subject to Federal income tax and additional interest charges on "excess
distributions" actually or

<PAGE>

constructively received from such companies or gain from the actual or deemed
sale of stock in such companies, even if all income or gain actually realized is
timely distributed to its shareholders. They would not be able to pass through
to their shareholders any credit or deduction for such a tax. Certain elections
may, if available, ameliorate these adverse tax consequences, but any such
election would require them to recognize taxable income or gain without the
concurrent receipt of cash. The Portfolios and the International Equity Fund may
limit and/or manage stock holdings, if any, in passive foreign investment
companies to minimize each Fund's tax liability or maximize its return from
these investments.

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 Funds' 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.

For purposes of the dividends received reduction available to corporations,
dividends received by a Portfolio and allocable to its corresponding Fund, if
any, from U.S. domestic corporations in respect of the stock of such
corporations held by the Portfolio, for U.S. Federal income tax purposes, for at
least a minimum holding period, generally 46 days, and distributed and
designated by the Fund may be treated as qualifying dividends. The International
Equity Fund is unlikely to earn a substantial amount of qualifying dividends,
but the Portfolios' dividend income, if any, probably will generally qualify for
this deduction. Corporate shareholders must meet the minimum holding period
requirements referred to above with respect to their shares of the applicable
Fund in order to qualify for the deduction and, if they borrow to acquire or
otherwise incur debt attributable to such shares, may be denied a portion of the
dividends received deduction. The entire qualifying dividend, including the
otherwise deductible amount, will be included in determining the excess (if any)
of a corporate shareholder's adjusted current earnings over its alternative
minimum taxable income, which may increase its alternative minimum tax
liability.

Additionally, any corporate shareholder should consult its tax adviser
regarding the possibility that its basis in its shares may be reduced, for
Federal income tax purposes, by reason of "extraordinary dividends" received
with respect to the shares, for the purpose of computing its gain or loss on
redemption or other disposition of the shares.

At the time of an investor's purchase of Fund shares, a portion of the
purchase price may be attributable to undistributed net investment income and/or
realized or unrealized appreciation in the Fund's portfolio (or share of a
Portfolio's portfolio). Consequently, subsequent distributions by a Fund on such
shares from such income and/or appreciation may be taxable to such investor even
if the net asset value 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 (including a repurchase) of shares of a Fund, 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 and will be long-term or
short-term, depending upon the shareholder's tax holding period for the shares,
subject to the rules described below. Any loss realized on a redemption may be
disallowed to the extent the shares disposed of are replaced with other shares
of the same Fund 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.
<PAGE>

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 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 certain 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, a 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 obligations, 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 Fixed Income Fund's indirect ownership (through the
Portfolio) of any such obligations, as well as the Federal, and any other state
or local, tax consequences of ownership of shares of, and receipt of
distributions from, a Fund in their particular circumstances.

Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in a Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S. investors should consult their tax adviser regarding such
treatment and the application of foreign taxes to an investment in the Funds.

ADDITIONAL INFORMATION

The Prospectus and this Statement of Additional Information omit certain
information contained in the registration statement filed with the SEC, which
may be obtained from the SEC's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the fee prescribed by the rules and
regulations promulgated by the Commission.

EXPERTS AND FINANCIAL STATEMENTS

Except as noted in the next sentence, each Fund's financial statements
contained in the 1996 Annual Reports of the Funds have been audited by Coopers &
Lybrand L.L.P., independent accountants, and are incorporated by reference into
and attached to this Statement of Additional Information. Financial highlights
of Equity Fund, International Equity Fund and Small Capitalization Fund for
periods from commencement of operations through December 31, 1992 were audited
by Deloitte & Touche, LLP, independent auditors. The Equity Portfolio, Small
Capitalization Portfolio and Small Capitalization II Portfolio's financial
statements contained in their corresponding Fund's 1996 Annual Report have been
audited by Coopers & Lybrand, an affiliate of Coopers & Lybrand L.L.P.

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

Included in Part A of Standish International Equity Fund, Standish Equity Fund,
Standish Small Capitalization Equity Fund and Standish Small Capitalization
Equity Fund II:

Financial Highlights

Included in Part B of Standish International Equity Fund, Standish Equity Fund,
Standish Small Capitalization Equity Fund and Standish Small Capitalization
Equity Fund II:

Schedule of Portfolio Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report

(b) Exhibits:

(1) Agreement and Declaration of Trust dated August 13, 1986*

(1A) Certificate of Designation of Standish Fixed Income Fund**

(1B) Certificate of Designation of Standish International Fund**

(1C) Certificate of Designation of Standish Securitized Fund**

(1D) Certificate of Designation of Standish Short-Term Asset Reserve
Fund**

(1E) Certificate of Designation of Standish Marathon Fund*

(1F) Certificate of Amendment dated November 21, 1989*

(1G) Certificate of Amendment dated November 29, 1989*

C-1
<PAGE>

(1H) Certificate of Amendment dated April 24, 1990*

(1I) Certificate of Designation of Standish Equity Fund**

(1J) Certificate of Designation of Standish International Fixed Income
Fund**

(1K) Certificate of Designation of Standish Intermediate Tax Exempt Bond
Fund*

(1L) Certificate of Designation of Standish Massachusetts Intermediate
Tax Exempt Bond Fund*

(1M) Certificate of Designation of Standish Global Fixed Income Fund*

(1N) Certificate of Designation of Standish Controlled Maturity Fund and
Standish Fixed Income Fund II**

(1O) Certificate of Designation of Standish Tax-Sensitive Small Cap
Equity Fund and Standish Tax-Sensitive Equity Fund**

(1P) Form of Certificate of Designation of Standish Equity Asset Fund,
Standish Small Capitalization Equity Asset Fund, Standish Fixed
Income Asset Fund and Standish Global Fixed Income Asset Fund**

(1Q) Form of Certificate of Designation of Standish Small Capitalization
Equity Fund II**

(1R) Certificate of Designation of Standish Small Capitalization Equity
Asset Fund II, Standish Diversified Income Fund, Standish
Diversified Income Asset Fund**

(2) Bylaws of the Registrant*

(3) Not applicable

(4) Not applicable

(5A) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Securitized Fund**

(5B) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish International Fixed Income
Fund**

C-2
<PAGE>

(5C) Assignment of Investment Advisory Agreement between the Registrant
and Standish, Ayer & Wood, Inc. relating to Standish International
Fixed Income Fund**

(5D) Form of Investment Advisory Agreement between the Registrant and
Standish, Ayer & Wood, Inc. relating to Standish Intermediate Tax
Exempt Bond Fund**

(5E) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Massachusetts Intermediate
Tax Exempt Bond Fund**

(5F) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Controlled Maturity Fund**

(5G) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Fixed Income Fund II**

(5H) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Small Cap Tax-Sensitive
Equity Fund**

(5I) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Tax-Sensitive Equity Fund**

(5J) Form of Investment Advisory Agreement between the Registrant and
Standish, Ayer and Wood, Inc. relating to Standish International
Fund*

(5K) Form of Assignment of Investment Advisory Agreement*

(6A) Underwriting Agreement between the Registrant and Standish Fund
Distributors, L.P.**

(6B) Most recently dated/filed revised Appendix A to Underwriting
Agreement between the Registrant and Standish Fund Distributors,
L.P.**

(7) Not applicable

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

C-3
<PAGE>

(8B) Most recently dated/filed revised Appendix A to Master Custody
Agreement between the Registrant and Investors Bank & Trust
Company**

(8C) Master Custody Agreement between the Registrant and Morgan Stanley
Trust Company*

(9A) Transfer Agency and Service Agreement between the Registrant and
Investors Bank & Trust Company**

(9B) Most recently dated/filed revised Exhibit A to Transfer Agency and
Service Agreement between the Registrant and Investors Bank & Trust
Company**

(9C) Master Administration Agreement between the Registrant and Investors
Bank & Trust Company**

(9D) Most recently dated/filed revised Exhibit A to Master Administration
Agreement between the Registrant and Investors Bank & Trust
Company**

(9E) Form of Administrative Services Agreement between Standish, Ayer &
Wood, Inc. and the Registrant**

(9F) Most recently dated/filed revised Exhibit A to Administrative
Services Agreement between Standish, Ayer & Wood, Inc. and the
Registrant**

(10A) Opinion and Consent of Counsel for the Registrant**

(11A) Consent of Independent Public Accountants***

(11B) Consent of Independent Public Accountants***

(11C) Consent of Independent Public Accountants***

(12) Not applicable

(13) Not applicable

(14) Not applicable

(15) Not applicable

(16) Performance Calculations**

(17) Not applicable

C-4
<PAGE>

(18) Not applicable

(19A) Power of Attorney for Registrant (Richard S. Wood)**

(19B) Power of Attorney for Registrant (James E. Hollis, III)**

(19C) Power of Attorney for Registrant (Samuel C. Fleming)**

(19D) Power of Attorney for Registrant (Benjamin M. Friedman)**

(19E) Power of Attorney for Registrant (John H. Hewitt)**

(19F) Power of Attorney for Registrant (Edward H. Ladd)**

(19G) Power of Attorney for Registrant (Caleb Loring III)**

(19H) Power of Attorney for Registrant (D. Barr Clayson)**

(19I) Power of Attorney for Registrant (Paul G. Martins)**

(19J) Power of Attorney for Portfolio Trust (Richard S. Wood)**

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

(19L) Power of Attorney for Portfolio Trust (Paul G. Martins)**

----------
* Filed as an exhibit to Registration Statement No. 33-10615 and
incorporated herein by reference thereto.
** Filed as an exhibit to Registration Statement No. 33-8214 and
incorporated herein by reference thereto.
*** Filed herewith.

Item 25. Persons Controlled by or under Common Control with Registrant

No person is directly or indirectly controlled by or under common control
with the Registrant.

Item 26. Number of Holders of Securities

C-5
<PAGE>

Set forth below is the number of record holders, as of September 30, 1997,
of the shares of each series of the Registrant.

Number of Record
Title of Class Holders
-------------- ----------------

Shares of beneficial interest,
par value $.01, of:

Standish Fixed Income Fund 484
Standish Securitized Fund 9
Standish Short-Term Asset
Reserve Fund 88
Standish International Fixed
Income Fund 211
Standish Global Fixed Income Fund 53
Standish Equity Fund 155
Standish Small Capitalization
Equity Fund 324
Standish Massachusetts Intermediate
Tax Exempt Bond Fund 94
Standish Intermediate Tax Exempt
Bond Fund 136
Standish International Equity Fund 184
Standish Controlled Maturity Fund 16
Standish Fixed Income Fund II 10
Standish Small Cap Tax-Sensitive
Equity Fund 198
Standish Tax-Sensitive Equity Fund 103
Standish Equity Asset Fund 1
Standish Small Capitalization
Equity Asset Fund 0
Standish Fixed Income Asset Fund 0
Standish Global Fixed Income Asset Fund 0
Standish Small Capitalization Equity Fund II 44
Standish Diversified Income Fund 14

Item 27. Indemnification

Under the Registrant's Agreement and Declaration of Trust, any past or
present Trustee or officer of the Registrant is indemnified to the fullest
extent permitted by law against liability and all expenses reasonably incurred
by him in connection with any action, suit or proceeding to which he may be a
party or is

C-6
<PAGE>

otherwise involved by reason of his being or having been a Trustee or officer of
the Registrant. The Agreement and Declaration of Trust of the Registrant does
not authorize indemnification where it is determined, in the manner specified in
the Declaration, that such Trustee or officer has not acted in good faith in the
reasonable belief that his actions were in the best interest of the Registrant.
Moreover, the Declaration does not authorize indemnification where such Trustee
or officer is liable to the Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his or her
duties.

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

Item 28. Business and Other Connections of Investment Advisers

The business and other connections of the officers and Directors of
Standish, Ayer & Wood, Inc. ("Standish, Ayer & Wood"), the investment adviser to
certain series of the Registrant, are listed on the Form ADV of Standish, Ayer &
Wood as currently on file with the Commission (File No. 801-584), the text of
which is hereby incorporated by reference.

The business and other connections of the officers and partners of
Standish International Management Company, L.P. ("SIMCO"), the investment
adviser to certain other series of the Registrant, are listed on the Form ADV of
SIMCO as currently on file with the Commission (File No. 801-639338), the text
of which is hereby incorporated by reference.

The following sections of each such Form ADV are incorporated herein by
reference:

(a) Items 1 and 2 of Part 2;

C-7
<PAGE>

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

Item 29. Principal Underwriter

(a) Standish Fund Distributors, L.P. serves as the principal
underwriter of each of the series of the Registrant as listed in Item 26 above.

(b) Directors and Officers of Standish Fund Distributors, L.P.:

Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------

James E. Hollis, III Chief Executive Officer Vice President

Beverly E. Banfield Chief Operating Officer Vice President

The General Partner of Standish Fund Distributors, L.P. is Standish, Ayer
& Wood, Inc.

Item 30. Location of Accounts and Records

The Registrant maintains the records required by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 inclusive thereunder at
its principal office, located at One Financial Center, Boston, Massachusetts
02111. Certain records, including records relating to the Registrant's
shareholders and the physical possession of its securities, may be maintained
pursuant to Rule 31a-3 at the main offices of the Registrant's transfer and
dividend disbursing agent and custodian.

Item 31. Management Services

Not applicable

Item 32. Undertakings

(a) Not applicable.

C-8
<PAGE>

(b) With respect to Standish Equity Asset Fund, Standish Small
Capitalization Equity Asset Fund, Standish Fixed Income Asset
Fund, Standish Global Fixed Income Asset Fund and Standish
Diversified Income Fund, the Registrant undertakes to file a
post- effective amendment, using financial statements which
need not be certified, within four to six months from the
effective date of the applicable Post-Effective Amendment to
its Registration Statement registering shares of such Funds.

(c) The Registrant undertakes to furnish each person to whom a
Prospectus is delivered a copy of Registrant's latest annual
report to shareholders, upon request and without charge.

C-9
<PAGE>

STANDISH, AYER & WOOD INVESTMENT TRUST

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 11th day of November, 1997.

STANDISH, AYER & WOOD
INVESTMENT TRUST

/s/ Paul G. Martins
---------------------------------
Paul G. Martins, Treasurer

The term "Standish, Ayer & Wood Investment Trust" means and refers to the
Trustees from time to time serving under the Agreement and Declaration of Trust
of the Registrant dated August 13, 1986, a copy of which is on file with the
Secretary of State of The Commonwealth of Massachusetts. The obligations of the
Registrant hereunder are not binding personally upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the Registrant, but
bind only the trust property of the Registrant, as provided in the Agreement and
Declaration of Trust of the Registrant. The execution of this Registration
Statement has been authorized by the Trustees of the Registrant and this
Registration Statement has been signed by an authorized officer of the
Registrant, acting as such, and neither such authorization by such Trustees nor
such execution by such officer shall be deemed to have been made by any of them,
but shall bind only the trust property of the Registrant as provided in its
Declaration of Trust.

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.

C-10
<PAGE>

Signature Title Date

Richard S. Wood* Trustee and President November 11, 1997
- ---------------------- (principal executive officer)
Richard S. Wood

Paul G. Martins* Treasurer (principal November 11, 1997
- ---------------------- financial and accounting
Paul G. Martins officer)

D. Barr Clayson* Trustee November 11, 1997
- ----------------------
D. Barr Clayson

Samuel C. Fleming* Trustee November 11, 1997
- ----------------------
Samuel C. Fleming

Benjamin M. Friedman* Trustee November 11, 1997
- ----------------------
Benjamin M. Friedman

John H. Hewitt* Trustee November 11, 1997
- ----------------------
John H. Hewitt

Edward H. Ladd* Trustee November 11, 1997
- ----------------------
Edward H. Ladd

Caleb Loring III* Trustee November 11, 1997
- ----------------------
Caleb Loring III

*By: /s/ James E. Hollis, III
----------------------------
James E. Hollis, III
Attorney-In-Fact

C-11
<PAGE>

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Standish, Ayer & Wood Master Portfolio has duly
caused this Post-Effective Amendment to the Registration Statement of Standish,
Ayer & Wood Investment Trust to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 11th day of November, 1997.

STANDISH, AYER & WOOD
MASTER PORTFOLIO

/s/ Richard S. Wood
--------------------------------
Richard S. Wood, President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement of Standish, Ayer & Wood
Investment Trust has been signed by the following persons pursuant to powers of
attorney that were executed outside the United States in their capacities with
Standish, Ayer & Wood Master Portfolio and on the date indicated.

Signature Title Date

Richard S. Wood* Trustee and President November 11, 1997
- ---------------------- (principal executive
Richard S. Wood officer)

Paul G. Martins* Treasurer (principal November 11, 1997
- ---------------------- financial and accounting
Paul G. Martins officer)

D. Barr Clayson* Trustee November 11, 1997
- ----------------------
D. Barr Clayson

Samuel C. Fleming* Trustee November 11, 1997
- ----------------------
Samuel C. Fleming

Benjamin M. Friedman* Trustee November 11, 1997
- ----------------------
Benjamin M. Friedman

C-12
<PAGE>

John H. Hewitt* Trustee November 11, 1997
- ----------------------
John H. Hewitt

Edward H. Ladd* Trustee November 11, 1997
- ----------------------
Edward H. Ladd

Caleb Loring III* Trustee November 11, 1997
- ----------------------
Caleb Loring III

*By: /s/ James E. Hollis, III
------------------------------
James E. Hollis, III
Attorney-In-Fact

C-13
<PAGE>

EXHIBIT INDEX

Exhibit

(11A) Consent of Independent Public Accountants

(11B) Consent of Independent Public Accountants

(11C) Consent of Independent Public Accountants

C-14

[Coopers & Lybrand Letterhead]

Consent of Independent Accountants

To the Trustees of Standish, Ayer & Wood Investment Trust:

We consent to the inclusion in Post-Effective Amendment No. 83 to the
Registration Statement on Form N-1A (1933 Act File Number 33-8214) of Standish,
Ayer & Wood Investment Trust: Standish International Equity Fund, of our report
dated February 20, 1997, on our audit of the financial statements and financial
highlights of the Standish International Equity Fund, which report is included
in the Annual Report to Shareholders for the year ended December 31, 1996, which
is also included in this Registration Statement.

We also consent to the references to our Firm under the caption "The Funds
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.

/s/ Coopers & Lybrand L.L.P.

Coopers & Lybrand L.L.P.

Boston, Massachusetts
November 11, 1997

[Coopers and Lybrand Letterhead]

November 11, 1997

Consent of Independent Accountants

We consent to the inclusion in Post-Effective Amendment No. 83 to the
Registration Statement of Standish, Ayer & Wood Investment Trust (1933 Act File
No. 33-8214) on behalf of Standish Small Capitalization Equity Fund, Standish
Small Capitalization Equity Fund II, Standish Equity Fund, of our reports
relating to Standish Small Capitalization Equity Portfolio, Standish Small
Capitalization Equity Portfolio II, Standish Equity Portfolio, Standish Fixed
Income Portfolio, Standish Global Fixed Income Portfolio dated February 25,
1997, in the Statements of Additional Information, which are part of such
Registration Statements.

We also consent to the reference to our Firm under the caption "Independent
Accountants" in the Prospectuses and under the caption "Experts and Financial
Statements" in the Statements of Additional Information which are part of the
Registration Statements.

Chartered Accountants
Toronto, Ontario

Exhibit 11(c)

INDEPENDENT AUDITORS' CONSENT

We consent in this Post-Effective Amendment No 83 to Registration Statement No.
33-8214 of Standish International Equity Fund Series of Standish, Ayer & Wood
Investment Trust to the reference to us under the heading "Experts and Financial
Statements" appearing in the Statement of Additional Information, which is a
part of such Registration Statement.

Deloitte & Touche LLP
Boston, Massachusetts
November 12, 1997