STANDISH AYER & WOOD INVESTMENT TRUST, 485APOS, 1997-03-19

STANDISH AYER & WOOD INVESTMENT TRUST
485APOS, 1997-03-19

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As filed with the Securities and Exchange Commission on March 19, 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. 81 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 85 [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 May 1, 1997 pursuant to Rule 485(a)(1)
[X] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On [Date] pursuant to Rule 485(a)(2)

The Registrant has registered an indefinite number of shares under the
Securities Act of 1933, as amended, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. The Rule 24f-2 Notice for series of the
Registrant with fiscal years ended December 31, 1996 was filed on or about
February 24, 1997.

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

This Post-Effective Amendment has been executed outside of the United
States by Standish, Ayer & Wood Master Portfolio.

<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 "Fund Comparison Highlights" and
"Expense Information"

Item 3. Condensed Financial "Financial Highlights"

Item 4. General Description Cover Page, "The Fund
of Registrant and Its 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" and "Custodian,
Transfer Agent and Dividend
Disbursing Agent"

Item 6. Capital Stock and "The Fund and Its 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 Diversified Income 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>

Part B Statement of Additional
Form Item Information Cross-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 Fund and Its 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>

Subject to Completion: dated March 19, 1997

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

[PINE CONE LOGO]

STANDISH DIVERSIFIED INCOME FUND
PROSPECTUS
[ ], 1997

The Standish Diversified Income Fund is one fund in the Standish, Ayer & Wood
family of funds. The Fund is organized as a separate diversified investment
series of Standish, Ayer & Wood Investment Trust ("Trust"), an open end
investment company. The Fund invests solely in the Standish Diversified Income
Portfolio, a series of Standish, Ayer & Wood Master Portfolio ("Portfolio
Trust"), an open end investment company. Standish International Management
Company, L.P. ("SIMCO"), Boston, Massachusetts, is the investment adviser to the
Portfolio.

Investors may purchase shares in the Fund without charge from Standish Fund
Distributors, L.P. An application may be obtained by calling (800) 221-4795.

SIMCO's primary investment management and research focus is at the security and
industry/sector level. SIMCO seeks to add value to the Fund's portfolio by
selecting undervalued investments, rather than by varying the average maturity
of the Fund's portfolio to reflect interest rate forecasts. SIMCO utilizes
fundamental credit and sector valuation techniques to evaluate what it considers
to be less efficient markets and sectors of the fixed income marketplace in an
attempt to select securities with the potential for the highest return. SIMCO
emphasizes intermediate term economic fundamentals relating to foreign countries
and emerging markets, rather than focusing on day-to-day fluctuations in a
particular currency or in the fixed income markets. SIMCO serves as the
international research and investment arm of Standish, Ayer & Wood, Inc.
("Standish") for both debt and equity securities in all countries outside of the
United States. 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. Privately held by twenty-one
employee/directors and headquartered in Boston, Massachusetts, the firm employs
over eighty investment professionals with a total staff of more than two
hundred.

This Prospectus sets forth concisely the information about the Fund 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 [ ],
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) 221-4795.

Shares of the Fund 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. The Portfolio may invest a substantial portion of its assets
in high yield, fixed income securities rated below investment grade that are
considered speculative and generally involve greater price volatility and
greater risk of loss of principal and interest than investments in higher rated
fixed income securities.

<PAGE>

The Fund is intended for investors who can accept the risks associated with the
Portfolio's investments and may not be suitable for all investors.

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.

[On inside front cover]

Shares of the Fund 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 Fund may not
legally be sold. Contact Standish Fund Distributors to determine whether the
Fund is available for sale in your state.

Table of Contents

Page
----

Expense Information................................................2

Investment Objective and Policies..................................3

Description of Securities and Related Risks........................4

Investment Techniques and Related Risks...........................10

Information about the Master-Feeder Structure.....................13

Calculation of Performance Data...................................13

Dividends and Distribution........................................14

Purchase of Shares................................................14

Net Asset Value...................................................15

Exchange of Shares................................................15

Redemption of Shares..............................................16

Management........................................................17

Federal Income Tax................................................19

The Fund and Its Shares...........................................19

Custodian, Transfer Agent and Dividend Disbursing Agent...........20

Independent Accountants...........................................20

<PAGE>

Legal Counsel.....................................................20

Appendix..........................................................20

Tax Certification Instruction.....................................22

<PAGE>

EXPENSE INFORMATION

Total operating expenses are estimated and are based on expenses expected to be
incurred by the Fund for the fiscal year ending December 31, 1997 and include
estimated expenses of the Fund and the Portfolio.

Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Annual Operating Expenses (as a percentage of average net assets)
Management Fees (after expense limitation) 0.00%*
12b-1 Fees None
Other Expenses (after expense limitation)+ 0.60%*
------
Total Operating Expenses (after applicable expense limitation) 0.60%*
======

----------
* Standish has voluntarily and temporarily agreed to limit the Fund's
expenses to 0.00% of the Fund's average daily net assets for the
first three months of the Fund's operations and to 0.80% of such
assets thereafter. In the absence of this agreement, the Fund's
Management Fees, Other Expenses and Total Operating Expenses (as a
percentage of average net assets) are estimated to be 0.50%, 0.66%
and 1.16%. Standish may terminate or revise this agreement at any
time although it has no current intention 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 the 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:

Diversified Income
Fund
------------------
After 1 Year........................................... $ 6
After 3 Years.......................................... $24

The purpose of the table is to assist investors in understanding the various
costs and expenses that an investor in the 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 the Fund's expenses.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT STRATEGY FOR THE STANDISH
DIVERSIFIED INCOME FUND

The Fund's investment objective and policies are set forth below. Because the
Fund invests all of its investible assets in the Standish Diversified Income
Portfolio (the "Portfolio"), the investment objectives and characteristics of
the Fund correspond directly to those of the Portfolio. This structure, where
one fund invests all of its investable assets in another investment company, is
described under the caption "Information About the Master-Feeder Structure"
below. The following discusses the investment objective and policies of the
Portfolio. Because of the uncertainty inherent in all investments, no assurance
can be given that the Portfolio will achieve its investment objective.

Investment Objective. The Portfolio's investment objective is to maximize total
return, consisting primarily of a high level of income. The Portfolio seeks to
achieve its objective by investing in the following three market sectors: U.S.
domestic, high yield, and international and energy markets.

Securities. Under normal market conditions, the Portfolio invests at least 80%
of its net assets in income producing securities. The Portfolio may invest in
all types of income producing securities, including bonds, notes (including
structured or hybrid notes), mortgage-backed securities, asset-backed
securities, convertible securities, Eurodollar and Yankee Dollar instruments,
preferred stocks (including convertible preferred stock), tax-exempt securities,
warrants and commercial paper and other money market instruments. These income
producing securities may be issued by U.S. and foreign corporations or entities,
U.S. and foreign banks, the U.S. Government, its agencies, authorities,
instrumentalities or sponsored enterprises, and foreign governments and their
political subdivisions. The Portfolio may also invest up to 10% of its total
assets in common stocks.

The Portfolio may purchase securities that pay income on a fixed, variable,
floating, inverse floating, contingent, in-kind or deferred basis. The Portfolio
may enter into repurchase agreements and forward dollar roll transactions,
purchase securities on a when-issued or delayed delivery basis and engage in
short sales.

Country Selection. Although there is no limit on the number of countries in
which issuers of the Portfolio's investments are located, the Portfolio intends
to invest in no fewer than three different countries, including the United
States. The Portfolio limits its investments in securities of issuers located in
any one developed country (excluding the U.S.) to 15% of its total assets and
limits its investments in securities of issuers located in any one emerging
market country to 7% of its total assets.

Under normal market conditions, at least 80% of the Portfolio's total assets,
adjusted to reflect the Portfolio's net currency exposure after giving effect to
currency transactions and positions, are denominated in or hedged to the U.S.
dollar. It is expected that the Portfolio will employ currency management
techniques to seek to manage its foreign currency exposure within this limit.
These techniques include options, futures, options on futures, forward foreign
currency exchange contracts and currency swaps.

Credit Quality. The Portfolio invests primarily in income producing securities.
The Portfolio's average dollar-weighted credit quality is expected to be Ba
according to Moody's Investors Service, Inc. or BB according to Standard &
Poor's Ratings Group, Duff & Phelps, Inc., Fitch Investors Service, Inc. or
IBCA, Ltd. Up to 65% of the Portfolio's total assets may be invested in
securities rated, at the time of investment, below investment grade. However,
the Portfolio does not invest in securities that are in default. SIMCO attempts
to select for the Portfolio those non-investment grade fixed income securities
that have the potential for upgrade.

Non-investment grade securities are securities rated Ba or below by Moody's or
BB or below by Standard and Poor's, Duff, Fitch or IBCA, or, if unrated,
determined by SIMCO to be of comparable credit quality. Non-investment grade
securities, commonly referred to as "junk bonds," are considered speculative by
the rating agencies and generally carry a higher degree of risk (greater price
volatility and greater risk of loss of principal and interest) than higher rated
securities. If a security is rated differently by two or more rating agencies,
SIMCO uses the highest rating to compute the Portfolio's credit quality and also
to determine its rating category. In determining whether unrated securities are
of equivalent credit quality, SIMCO

<PAGE>

may take into account, but will not rely entirely on, ratings assigned by
foreign rating agencies. If a security held by the Portfolio is downgraded,
SIMCO will determine whether to retain that security in the Portfolio's
portfolio.

Maturity. Under normal market conditions, the Portfolio's average
dollar-weighted effective portfolio maturity will vary from five to thirteen
years.

DESCRIPTION OF SECURITIES
AND RELATED RISKS

GENERAL RISKS

The Portfolio may invest in non-investment grade fixed income securities and is
subject to risks associated with investments in such securities. These risks
include interest rate risk, default risk and call and extension risk. The
Portfolio is also subject to the risks associated with direct investments in
foreign securities.

Interest Rate Risk. When interest rates decline, the market value of fixed
income securities tends to increase. Conversely, when interest rates increase,
the market value of fixed income securities tends to decline. The volatility of
a security's market value will differ depending upon the security's duration,
the issuer and the type of instrument.

Default Risk/Credit Risk. Investments in fixed income securities are subject to
the risk that the issuer of the security could default on its obligations
causing the Portfolio to sustain losses on such investments. A default could
impact both interest and principal payments.

Call Risk and Extension Risk. Fixed income securities may be subject to both
call risk and extension risk. Call risk exists when the issuer may exercise a
right to pay principal on an obligation earlier than scheduled which would cause
cash flows to be returned earlier than expected. This typically results when
interest rates have declined and the Portfolio will suffer from having to
reinvest in lower yielding securities. Extension risk exists when the issuer may
exercise a right to pay principal on an obligation later than scheduled which
would cause cash flows to be returned later than expected. This typically
results when interest rates have increased and the Portfolio will suffer from
the inability to invest in higher yield securities.

SECURITIES AND SPECIFIC RISKS

The following sections include descriptions of specific risks that are
associated with the Portfolio's purchase of a particular type of security or the
utilization of a specific investment technique.

Investing in Non-Investment Grade Fixed Income Securities. Non-investment grade
fixed income securities are considered predominantly speculative by traditional
investment standards. In some cases, these securities may be highly speculative
and have poor prospects for reaching investment grade standing. Non-investment
grade fixed income securities and unrated securities of comparable credit
quality are subject to the increased risk of an issuer's inability to meet
principal and interest obligations. These securities, also referred to as high
yield securities, may be subject to greater price volatility due to such factors
as specific corporate developments, interest rate sensitivity, negative
perceptions of the high yield markets generally and less secondary market
liquidity.

Non-investment grade fixed income securities are often issued in connection with
a corporate reorganization or restructuring or as part of a merger, acquisition,
takeover or similar event. They are also issued by less established companies
seeking to expand. Such issuers are often highly leveraged and generally less
able than more established or less leveraged entities to make scheduled payments
of principal and interest in the event of adverse developments or business
conditions.

The market value of below-investment grade fixed income securities tends to
reflect individual corporate developments to a greater extent than that of
higher rated securities which react primarily to fluctuations in the general
level of interest rates. As a result, the Portfolio's ability to achieve its
investment objectives may depend to a greater extent on SIMCO's judgment
concerning the creditworthiness of issuers than funds which invest in
higher-rated securities. Issuers of non-investment grade fixed income securities
may not be able to make use of more traditional methods of financing and their
ability to service debt obligations may be more adversely affected than issuers
of higher rated

5
<PAGE>

securities by economic downturns, specific corporate developments or the
issuer's inability to meet specific projected business forecasts. Negative
publicity about the high yield market and investor perceptions regarding lower
rated securities, whether or not based on fundamental analysis, may depress the
prices for such securities.

A holder's risk of loss from default is significantly greater for non-investment
grade fixed income securities than is the case for holders of other debt
securities because non-investment grade securities are generally unsecured and
are often subordinated to the rights of other creditors of the issuers of such
securities. The secondary market for non-investment grade fixed income
securities is dominated by institutional investors, including mutual funds,
insurance companies and other financial institutions. Accordingly, the secondary
market for such securities is not as liquid as, and is more volatile than, the
secondary market for higher rated securities. In addition, market trading volume
for high yield fixed income securities is generally lower and the secondary
market for such securities could contract under adverse market or economic
conditions, independent of any specific adverse changes in the condition of a
particular issuer. These factors may have an adverse effect on the market price
and the Portfolio's ability to dispose of particular portfolio investments. A
less liquid secondary market also may make it more difficult for the Portfolio
to obtain precise valuations of the high yield securities in its portfolio.
Changes in federal and state laws and industry initiatives could adversely
affect the secondary market for non-investment grade fixed income securities and
the financial condition of issuers of these securities.

Non-investment grade fixed income securities also present risks based on payment
expectations. Such securities frequently contain call or redemption features
which permit the issuer to call or repurchase the security from its holder. If
an issuer exercises such a "call option" and redeems the security, the Portfolio
may have to replace the security with a lower yielding security, resulting in a
decreased return for investors. Similarly, if the Portfolio experiences
unexpected net withdrawals, it may be forced to sell its higher rated more
liquid securities, resulting in a decline in the overall credit quality of the
Portfolio and increasing the exposure of the Portfolio to the risks of
non-investment grade fixed income securities.

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 (i.e., 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. In addition, if the exchange rate
for the currency in which the Portfolio receives interest payment declines
against the U.S. dollar before such income is distributed as dividends to
shareholders, the Portfolio may have to sell portfolio securities to obtain
sufficient cash to enable the Fund to pay such dividends. Commissions may be
higher and spreads may be greater on transactions in foreign securities than
those for similar transactions in domestic 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.

<PAGE>

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.

Investing in Emerging Markets. Although the Portfolio invests primarily in
securities of established issuers based in developed foreign countries, it will
also invest in securities of issuers in emerging market countries, including
issuers in Asia, Eastern Europe, Latin and South America and Africa. The
Portfolio may also invest in currencies of such countries and may purchase
certain options traded on the markets of such countries. Investments in
securities of issuers in emerging market countries may involve a high degree of
risk and many may be considered speculative. These investments carry all of the
risks of investing in securities of foreign issuers to a heightened degree.
These heightened risks include (i) greater risks of expropriation, confiscatory
taxation, nationalization, and less social, political and economic stability;
(ii) limitations on daily price changes and the small current size of the
markets for securities of emerging market issuers and the currently low or
nonexistent volume of trading, resulting in lack of liquidity and in price
volatility; (iii) certain national policies which may restrict the Portfolio's
investment opportunities including limitations on aggregate holdings by foreign
investors and restrictions on investing in issuers or industries deemed
sensitive to relevant national interests; and (iv) the absence of developed
legal structures governing private or foreign investment and private property.

Currency Risks. The U.S. dollar value of foreign securities denominated in a
foreign currency will vary with changes in currency exchange rates, which can be
volatile. Accordingly, changes in the value of these currencies against the U.S.
dollar will result in corresponding changes in the U.S. dollar value of the
Portfolio's assets quoted in those currencies. However, under normal market
conditions, at least 80% of the Portfolio's total assets, adjusted to reflect
the Portfolio's net currency exposure after giving effect to currency
transactions and positions, are denominated in or hedged to the U.S. dollar.
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 may restrict the free conversion of their currencies
into other currencies. Any devaluations in the currencies in which the
Portfolio's securities are denominated may have a detrimental impact on the
Portfolio's net asset value except to the extent such foreign currency exposure
is subject to hedging transactions. The Portfolio utilizes various investment
strategies to seek to minimize the currency risks described above. These
strategies include the use of currency transactions such as currency forward and
futures contracts, cross currency forward and futures contracts, currency swaps
and currency options. The Portfolio's use of currency transactions may expose it
to risks independent of its securities positions.

U.S. Government Securities. The Portfolio may invest in U.S. Government
securities. Generally, these 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 (such as the Government National Mortgage Association), (b)
the right of the issuer to borrow from the U.S. Treasury (such as securities of
the Student Loan Marketing Association), (c) the discretionary authority of the
U.S. Government to purchase certain obligations of the issuer (such as the
Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation) 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

<PAGE>

are traded independently ("STRIPS").

Sovereign Debt Obligations. Investment in sovereign debt obligations involves
special risks not present in corporate debt obligations. The issuer of the
sovereign debt or the governmental authorities that control the repayment of the
debt may be unable or unwilling to repay principal or interest when due, and the
Portfolio may have limited recourse in the event of a default. During periods of
economic uncertainty, the market prices of sovereign debt, and the Portfolio's
net asset value, may be more volatile than prices of U.S. debt obligations. In
the past, certain emerging markets have encountered difficulties in servicing
their debt obligations, withheld payments of principal and interest and declared
moratoria on the payment of principal and interest on their sovereign debts.

A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange, the relative size of the debt service burden, the
sovereign debtor's policy toward principal international lenders and local
political constraints. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
to reduce principal and interest arrearage on their debt. The failure of a
sovereign debtor to implement economic reforms, achieve specified levels of
economic performance or repay principal or interest when due may result in the
cancellation of third-party commitments to lend funds to the sovereign debtor,
which may further impair such debtor's ability or willingness to service its
debts.

Brady Bonds. The Portfolio may invest in Brady Bonds. Brady Bonds are securities
created through the exchange of existing commercial bank loans to public and
private entities in certain emerging markets for new bonds in connection with
debt restructurings. In light of the history of defaults of countries issuing
Brady Bonds on their commercial bank loans, investments in Brady Bonds may be
viewed as speculative. Brady Bonds may be fully or partially collateralized or
uncollateralized, are issued in various currencies (but primarily in U.S.
dollars) and are actively traded in over-the-counter secondary markets.
Incomplete collateralization of interest or principal payment obligations
results in increased credit risk. U.S. dollar-denominated collateralized Brady
Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally
collateralized by U.S. Treasury zero coupon bonds having the same maturity as
the Brady bonds.

Obligations of Supranational Entities. The Portfolio may invest in obligations
of supranational entities designated or supported by governmental entities to
promote economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the "World Bank"), the European Coal
and Steel Community, the Asian Development Bank and the Inter-American
Development Bank. Each supranational entity's lending activities are limited to
a percentage of its total capital (including "callable capital" contributed by
its governmental members at the entity's call), reserves and net income. There
is no assurance that participating governments will be able or willing to honor
their commitments to make capital contributions to a supranational entity.

Eurodollar and Yankee Dollar Investments. The Portfolio may invest in Eurodollar
and Yankee Dollar instruments. Eurodollar instruments are bonds of foreign
corporate and government issuers that pay interest and principal in U.S. dollars
held in banks outside the United States, primarily in Europe. Yankee dollar
instruments are U.S. dollar denominated bonds typically issued in the U.S. by
foreign governments and their agencies and foreign banks and corporations. These
investments involve risks that are different from investments in securities
issued by U.S. issuers, including potential unfavorable political and economic
developments, foreign withholding or other taxes, seizure of foreign deposits,
currency controls, interest limitations or other governmental restrictions which
might affect payment of principal or interest.

Corporate Debt Obligations. The Portfolio may invest in corporate debt
obligations of U.S. and foreign issuers. Corporate debt obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations and may also be subject to price volatility due to such factors
as market interest rates, market perception of the creditworthiness of the
issuer and general market liquidity.

<PAGE>

Mortgage-Backed Securities. The Portfolio may invest in privately issued
mortgage-backed securities and mortgage-backed securities issued or guaranteed
by foreign entities or the U.S. Government or any of its agencies,
instrumentalities or sponsored enterprises. Mortgage-backed securities represent
direct or indirect participations in, or are collateralized by and payable from,
mortgage loans secured by real property. Mortgagors can generally prepay
interest or principal on their mortgages whenever they choose. Therefore,
mortgage-backed securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of principal prepayments on the
underlying loans. This can result in significantly greater price and yield
volatility than is the case with traditional fixed income securities. During
periods of declining interest rates, prepayments can be expected to accelerate,
and thus impair the Portfolio's ability to reinvest the returns of principal at
comparable yields. Conversely, in a rising interest rate environment, a
declining prepayment rate will extend the average life of many mortgage-backed
securities, increase the Portfolio's exposure to rising interest rates and
prevent the Portfolio from taking advantage of such higher yields.

Asset-Backed Securities. The Portfolio may invest in asset-backed securities.
The principal and interest payments on asset-backed securities are
collateralized by pools of assets such as auto loans, credit card receivables,
leases, installment contracts and personal property. Such asset pools are
securitized through the use of special purpose trusts or corporations. Payments
or distributions of principal and interest on asset-backed securities may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution; however,
privately issued obligations collateralized by a portfolio of privately issued
asset-backed securities do not involve any government-related guaranty or
insurance. Like mortgage-backed securities, asset-backed securities are subject
to more rapid prepayment of principal than indicated by their stated maturity
which may greatly increase price and yield volatility. Asset-backed securities
generally do not have the benefit of a security interest in collateral that is
comparable to mortgage assets and there is the possibility that recoveries on
repossessed collateral may not be available to support payments on these
securities.

Convertible Securities. The Portfolio may invest in convertible securities
consisting of bonds, notes, debentures and preferred stocks. Convertible debt
securities and preferred stock acquired by the Portfolio entitle the Portfolio
to exchange such instruments for common stock of the issuer at a predetermined
rate. Convertible securities are subject both to the credit and interest rate
risks associated with debt obligations and to the stock market risk associated
with equity securities.

Inverse Floating Rate Securities. The Portfolio may invest in inverse floating
rate securities. The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher the degree of leverage of an inverse
floater, the greater the volatility of its market value.

Zero Coupon and Deferred Payment Securities. The Portfolio may invest in zero
coupon and deferred payment securities. Zero coupon securities are securities
sold at a discount to par value and on which interest payments are not made
during the life of the security. Upon maturity, the holder is entitled to
receive the par value of the security. The Portfolio is required to accrue
income with respect to these securities prior to the receipt of cash payments.
Because the Portfolio will distribute this accrued income to shareholders, to
the extent that shareholders elect to receive dividends in cash rather than
reinvesting such dividends in additional shares, the Portfolio will have fewer
assets with which to purchase income producing securities. Deferred payment
securities are securities that remain zero coupon securities until a
predetermined date, at which time the stated coupon rate becomes effective and
interest becomes payable at regular intervals. Zero coupon and deferred payment
securities may be subject to greater fluctuation in value and may have less
liquidity in the event of adverse market conditions than comparably rated
securities paying cash interest at regular interest payment periods.

Structured or Hybrid Notes. The Portfolio may invest in structured or hybrid
notes. The distinguishing feature of a structured or hybrid note is that the
amount of interest and/or principal payable on the

<PAGE>

note is based on the performance of a benchmark asset or market other than fixed
income securities or interest rates. Examples of these benchmarks include stock
prices, currency exchange rates and physical commodity prices. Investing in a
structured note allows the Portfolio to gain exposure to the benchmark market
while fixing the maximum loss that it may experience in the event that the
market does not perform as expected. Depending on the terms of the note, the
Portfolio may forego all or part of the interest and principal that would be
payable on a comparable conventional note; the Portfolio's loss cannot exceed
this foregone interest and/or principal. An investment in structured or hybrid
notes involves risks similar to those associated with a direct investment in the
benchmark asset.

Warrants. Warrants acquired by the Portfolio 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. The Portfolio's
investment in warrants will not entitle it to receive dividends or exercise
voting rights and will become worthless if the warrants cannot be profitably
exercised before their expiration dates.

Tax Exempt Securities. The Portfolio is managed without regard to potential tax
consequences. If SIMCO believes that tax-exempt securities will provide
competitive returns, the Portfolio may invest up to 10% of its total assets in
tax-exempt securities. The Portfolio's distributions of interest earned from
these investments will be taxable.

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.

INVESTMENT TECHNIQUES
AND RELATED RISKS

Strategic Transactions. The Portfolio 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 fixed income market
movements), to manage the effective maturity or duration of fixed income
securities, or to enhance potential gain. Such strategies are generally accepted
as part of modern portfolio management and are regularly utilized by many mutual
funds and other institutional investors. Techniques and instruments used by the
Portfolio may change over time as new instruments and strategies are developed
or regulatory changes occur.

In the course of pursuing its investment objective, the Portfolio may purchase
and sell (write) exchange-listed and over-the-counter put and call options on
securities, indices, currencies 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 currency 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 to seek to protect against possible changes
in the market value of securities held in or to be purchased for the Portfolio's
portfolio resulting from securities markets, currency exchange rate or interest
rate fluctuations, to seek to protect the Portfolio's unrealized gains in the
value of portfolio securities, to facilitate the sale of such securities for
investment purposes, to seek to manage the effective maturity or duration of the
Portfolio's portfolio, or to establish a position in the derivatives markets as
a temporary substitute for purchasing or selling particular securities. In
addition to the hedging transactions referred to in the preceding sentence,
Strategic Transactions may also be used to enhance potential gain in
circumstances where hedging is not involved.

The ability of the Portfolio to utilize Strategic Transactions successfully will
depend on SIMCO's ability to predict pertinent market and interest rate and
currency exchange rate movements, which cannot be assured. The Portfolio will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. The Portfolio's activities involving
Strategic Transactions may be limited by the requirements of the United States
Internal Revenue Code, as amended (the "Code") for qualification as a regulated
investment company.

<PAGE>

Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
SIMCO's view as to certain market, interest rate or currency movements is
incorrect, the risk that the use of such Strategic Transactions could result in
losses greater than if they had not been used. The writing of put and call
options may result in losses to the Portfolio, force the purchase or sale,
respectively, of portfolio securities at inopportune times or for prices higher
than (in the case of purchases due to the exercise of put options) or lower than
(in the case of sales due to the exercise of call options) current market
values, limit the amount of appreciation the Portfolio can realize on its
investments or cause the Portfolio to hold a security it might otherwise sell.

The use of options and futures transactions entails certain other risks. Futures
markets are highly volatile and the use of futures may increase the volatility
of the Portfolio'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 the Portfolio creates the possibility that
losses on the hedging instrument may be greater than gains in the value of the
Portfolio's position. The writing of options could significantly increase the
Portfolio's portfolio turnover rate and associated brokerage commissions or
spreads. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Portfolio might not be able to close out a
transaction without incurring substantial losses. 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 and managing
effective maturity and duration should tend to minimize the risk of loss due to
a decline in the value of the position, at the same time, they can limit any
potential gain which might result from an increase in value of such position.
The loss incurred by the Portfolio in writing options on futures and entering
into futures transactions is potentially unlimited.

The use of currency transactions can result in the Portfolio incurring losses as
a result of a number of factors including the imposition of exchange controls,
suspension of settlements, or the inability to deliver or receive a specified
currency.

The Portfolio will attempt to limit its net loss exposure resulting from
Strategic Transactions entered into for non-hedging purposes to no more than 3%
of net assets. In calculating the Portfolio's net loss exposure from such
Strategic Transactions, an unrealized gain from a particular Strategic
Transaction position would be netted against an unrealized loss from a related
position. See the Statement of Additional Information for further information
regarding the Portfolio's use of Strategic Transactions.

When-Issued and Delayed Delivery Securities. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Although the Portfolio
will generally purchase securities on a when-issued or delayed delivery basis
with the intention of actually acquiring the securities, the Portfolio may
dispose of these securities prior to settlement, if SIMCO deems it appropriate
to do so. The payment obligation and interest rate on these securities is fixed
at the time the Portfolio enters into the commitment, but no income will accrue
to the Portfolio until they are delivered and paid for. Unless the Portfolio has
entered into an offsetting agreement to sell the securities, cash or liquid
assets equal to the amount of the Portfolio's commitment must be segregated and
maintained with the Portfolio's custodian to secure the Portfolio's obligation
and to partially offset the leverage inherent in these securities. The market
value of the securities when they are delivered may be less than the amount paid
by the Portfolio.

Repurchase Agreements. The Portfolio may invest in repurchase agreements. In a
repurchase agreement, the Portfolio 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 the Portfolio 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 SIMCO.

Forward Roll Transactions. To seek to enhance current income, the Portfolio may
invest in forward roll transactions involving mortgage-backed

<PAGE>

securities. In a forward roll transaction, the Portfolio sells a mortgage-backed
security to a financial institution, such as a bank or broker-dealer, and
simultaneously agrees to repurchase a similar security from the institution at a
later date at an agreed-upon price. The mortgage-backed securities that are
repurchased will bear the same interest rate as those sold, but generally will
be collateralized by different pools of mortgages with different prepayment
histories than those sold. During the period between the sale and repurchase,
the Portfolio will not be entitled to receive interest and principal payments on
the securities sold. Proceeds of the sale will be invested in short-term
instruments, such as repurchase agreements or other short-term securities, and
the income from these investments, together with any additional fee income
received on the sale and the amount gained by repurchasing the securities in the
future at a lower price, will generate income and gain for the Portfolio which
is intended to exceed the yield on the securities sold. Forward roll
transactions involve the risk that the market value of the securities sold by
the Portfolio may decline below the repurchase price of those securities. At the
time that the Portfolio enters into a forward roll transaction, it will place
cash or liquid assets in a segregated account that is marked to market daily
having a value at least equal to the repurchase price (including accrued
interest).

Leverage. The use of forward roll transactions involves leverage. Leverage
allows any investment gains made with the additional monies received (in excess
of the costs of the forward roll transaction) to increase the net asset value of
the Portfolio's shares faster than would otherwise be the case. On the other
hand, if the additional monies received are invested in ways that do not fully
recover the costs of such transactions to the Portfolio, the net asset value of
the Portfolio would fall faster than would otherwise be the case.

Short Sales. The Portfolio may engage in short sales and short sales against the
box. In a short sale, the Portfolio 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, the Portfolio either owns or has the right to obtain at no
extra cost the security sold short. A broker holds the proceeds of the short
sale until the settlement date, at which time the Portfolio delivers the
security (or an identical security) to cover the short position. The Portfolio
receives the net proceeds from the short sale. When the Portfolio enters into a
short sale other than against the box, the Portfolio must first borrow the
security to make delivery to the buyer and must place cash or liquid assets in a
segregated account with the Portfolio'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 the Portfolio's net assets.

Restricted and Illiquid Securities. The Portfolio may invest up to 15% of its
net assets in illiquid investments. 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, certain
over-the-counter options, swaps 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, be
liquid. Also, certain illiquid securities may be determined to be liquid if they
are found to satisfy certain relevant liquidity requirements.

The Portfolio Trust's Board of Trustees has adopted guidelines and delegated to
SIMCO the daily function of determining and monitoring the liquidity of
portfolio securities, including restricted and illiquid securities. The Board of
Trustees, however, retains oversight and is 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.

Portfolio Turnover. A high rate of portfolio turnover (100% or more) involves
correspondingly higher transaction costs which must be borne directly by the
Portfolio and thus indirectly by its shareholders. It may also result in the
Portfolio'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 Portfolio to qualify
as a regulated investment company under the Code. It is expected that the

<PAGE>

Portfolio's turnover rate will not exceed 200% for the current fiscal year.

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

Temporary Defensive Investments. The Portfolio may maintain cash balances and
purchase money market instruments for cash management and liquidity purposes.
The Portfolio may adopt a temporary defensive position during adverse market
conditions by investing without limit in U.S. and non-U.S. dollar denominated
high quality money market instruments, including short-term U.S. Government
securities, negotiable certificates of deposit, non-negotiable fixed time
deposits, bankers' acceptances, commercial paper, floating-rate notes and
repurchase agreements.

Investment Restrictions. The investment objective and investment policies set
forth in this Prospectus of the Fund and the Portfolio are not fundamental and
may be changed by the applicable Board of Trustees without the approval of
shareholders. The Fund and the Portfolio have adopted fundamental policies which
may not be changed without the approval of the Fund's 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
the Portfolio's assets will not constitute a violation of the restriction. If
there is a change in the Fund's investment objective, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then current financial situation.

INFORMATION ABOUT THE
MASTER-FEEDER STRUCTURE

The Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which has an identical investment objective.
The Fund is a feeder fund and the Portfolio is the master fund in what is
referred to as the master-feeder structure.

In addition to the Fund, other feeder funds may invest in the Portfolio, and
information about these other feeder funds is available from Standish Fund
Distributors. The other feeder funds invest in the Portfolio on the same terms
as the Fund and bear a proportionate share of the Portfolio's expenses. The
other feeder funds may sell shares on different terms and under a different
pricing structure than the Fund, 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 the Portfolio may
reduce the diversification of the Portfolio's investments, reduce economies of
scale and increase the Portfolio's operating expenses. If the Portfolio Trust's
Board of Trustees approves a change to the investment objective of the Portfolio
that is not approved by the Trust's Board of Trustees, the 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 the Fund's
interest in the Portfolio might cause the Fund to incur expenses it would not
otherwise be required to pay.

If the Fund is requested to vote on a matter affecting the Portfolio, the Fund
will call a meeting of the Fund's shareholders to vote on the matter. The Fund
will vote on any 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
the shares held by Fund shareholders who do not vote in the same proportion as
the shares of Fund shareholders who do vote.

A majority of the Trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940 ("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 the Portfolio Trust.

CALCULATION OF PERFORMANCE DATA

From time to time the Fund may advertise its yield and average annual total
return information. Average annual total return 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

<PAGE>

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. The 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.

The "yield" of the Fund is computed by dividing the net investment income per
share earned during the period stated in the advertisement by the maximum
offering price per share on the last day of the period (using the average number
of shares entitled to receive dividends). For the purpose of determining net
investment income, the calculation includes among expenses of the Fund all
recurring fees that are charged to all shareholder accounts and any nonrecurring
charges for the period stated.

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

The Fund's benchmark against which it compares its performance is the Lehman
Brothers Aggregate Index. This index is comprised of securities from the Lehman
Brothers Government/Corporate Bond Index, Mortgage Backed Securities Index and
the Yankee Bond Index, and is generally considered to be representative of all
unmanaged, domestic, dollar denominated, fixed rate investment grade bonds.

DIVIDENDS AND DISTRIBUTIONS

Dividends from net investment income for the Fund will be declared and
distributed quarterly. The Fund's dividends from short-term and long-term
capital gains, if any, after reduction by capital losses, will be declared and
distributed at least annually. In determining the amounts of its dividends, the
Fund will take into account its share of the income, gain or loss, expense, and
any other tax items of the 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 Fund may be purchased from Standish Fund Distributors, which
offers the Fund's 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 Investors Bank & Trust Company, the Fund's Custodian. Please see the
Fund's account application or call (800) 221-4795 for instructions on how to
make payment for shares to the Custodian. The Fund requires minimum initial
investments of $100,000. Additional investments must be in amounts of at least
$5,000. Certificates for Fund shares are generally not issued.

Shares of the Fund 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 Custodian 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 the
Fund purchased through dealers may be subject to transaction fees on purchase or
redemption, no part of which will be received by the Fund, Standish Fund
Distributors or SIMCO.

In the sole discretion of the Trust, the Fund may accept securities instead of
cash for the purchase of shares. The Trust will ask SIMCO to determine that any
securities acquired by the Fund in this manner are consistent with the
investment objective, policies and restrictions of the Fund. The securities will
be valued in the manner stated below. Purchasing shares of the Fund for
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.

<PAGE>

The Trust reserves the right in its sole discretion (i) to suspend the offering
of the Fund's shares, (ii) to reject purchase orders when in the best interest
of the 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. The Fund's investment
minimums do not apply to accounts for which SIMCO or any of its affiliates
serves as investment adviser or to employees of SIMCO or any of its affiliates
or to members of such persons' immediate families. The 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

The 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 the Fund's investment in the Portfolio and other assets, subtracting
all liabilities and dividing the result by the total number of shares
outstanding. Fixed income securities (other than money market instruments) for
which accurate market prices are readily available are valued at their current
market value on the basis of quotations, which may be furnished by a pricing
service or provided by dealers in such securities. Securities not listed on an
exchange or national securities market, certain mortgage-backed and asset-backed
securities and securities for which there were no reported transactions are
valued at the last quoted bid prices. Fixed income securities for which accurate
market prices are not readily available and all other assets are valued at fair
value as determined in good faith by SIMCO in accordance with procedures
approved by the Trustees, which may include the use of yield equivalents or
matrix pricing. Money market instruments with less than sixty days remaining to
maturity when acquired by the Portfolio are valued on an amortized cost basis
unless the Trustees determine that amortized cost does not represent fair value.
If the Portfolio acquires a money market instrument with more than sixty days
remaining to its maturity, it is valued at current market value until the
sixtieth day prior to maturity and will then be valued at amortized cost based
upon the value on such date unless the Trustees 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 are converted into U.S.
dollar values at currency exchange rates determined by Investors Bank & Trust
Company, the Fund's transfer agent, to be representative of fair rates of
exchange 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
Asian 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 Fund's calculation of its net asset value
unless SIMCO 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 Fund 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

<PAGE>

in investment objectives and expenses of a fund as described in its prospectus
before making an exchange.

Written Exchanges. Shares of the Fund may be exchanged by written order to
Standish Fund Distributors, One Financial Center, Boston, Massachusetts 02111. 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 Fund 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.

Written Redemption. Shares of the Fund may be redeemed by written order to
Standish Fund Distributors, One Financial Center, 26th Floor, Boston,
Massachusetts 02111. 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 Fund's 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 Fund may delay transmittal of
redemption proceeds until such time as it is assured that good funds have been
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

<PAGE>

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., New York City
time). 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 Standish,
Standish Fund Distributors, the Trust and the Fund's custodian 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 Fund employs reasonable procedures to confirm that telephone instructions
are genuine, and follows telephone instructions that it reasonably believes to
be genuine, neither SIMCO, Standish Fund Distributors, the Trust, the Fund, the
Fund's custodian, nor its 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 Fund intends to employ personal
identification or written confirmation of transaction procedures, and if it does
not, the 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 Portfolio's portfolio
investments at the time of redemption or repurchase. The Fund intends to pay
cash for all shares redeemed, but under certain conditions, the Fund may make
payments wholly or partially in securities for this purpose. Please see the
Statement of Additional Information for further information.

The Fund may redeem, at net asset value, the shares in any account which has a
value of less than $50,000 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 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 minimum.

MANAGEMENT

Trustees. The Fund is a separate investment series of Standish, Ayer & Wood
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. The
Portfolio is a separate investment series of the Standish, Ayer & Wood Master
Portfolio, a master trust fund organized under the laws of the State of New
York. Under the terms of the Declaration of Trust, the 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 Adviser. SIMCO, One Financial Center, Boston, Massachusetts 02111,
serves as investment adviser to the Portfolio pursuant to an investment advisory
agreement and manages the Portfolio's investments and affairs subject to the
supervision of the Trustees of the Portfolio Trust. SIMCO is a Delaware limited
partnership organized in 1991 and

<PAGE>

is a registered investment adviser under the Investment Advisers Act of 1940.
The general partner of the Adviser 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 of and Senior Adviser to SIMCO and Standish,
and D. Barr Clayson, Chairman of the Board of SIMCO and Managing Director of
Standish. Ralph S. Tate, Managing Director and Vice President 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 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
managed approximately $30 billion of assets.

The Portfolio is advised by a team of managers and analysts at SIMCO. Members of
the team meet regularly to discuss asset allocation, prospective investments and
portfolio composition. The team of portfolio managers consists of Dolores S.
Driscoll, David C. Stuehr, Richard S. Wood and John McNichols. During the past
five years, Ms. Driscoll has served as a Director of SIMCO and Managing Director
of Standish; Mr. Stuehr has served as a Director of Standish since January 1995
and prior thereto as a Vice President of Standish; Mr. Wood has served as a
Managing Director (since 1995) and Vice President of Standish, Executive Vice
President of SIMCO and President of the Trust and the Portfolio Trust; Mr.
McNichols has served as Vice President of Standish (since 1993) and as a
securities analyst for Jefferson Pilot Life Insurance Co.

Subject to the supervision and direction of the Trustees of the Portfolio Trust,
SIMCO manages the Portfolio in accordance with its investment objective and
policies, recommends investment decisions, places orders to purchase and sell
securities and permits the Portfolio to use the name "Standish." For these
services, the Portfolio pays a monthly fee at a stated annual percentage rate of
the Portfolio's average daily net asset value:

Contractual
Advisory
Fee Annual
Rate
-----------
Diversified Income 0.50%
Portfolio

Administrator. Standish serves as administrator to the Fund. As administrator,
Standish manages the affairs of the Fund, provides all necessary office space
and services of executive personnel for administering the affairs of the Fund,
and allows the Fund 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. The Portfolio and the Fund each bears the expenses of its respective
operations other than those incurred by SIMCO under the investment advisory
agreement or by Standish under the administration agreement. The Portfolio pays
investment advisory fees; bookkeeping, share pricing and custodian fees and
expenses; expenses or notices and reports to interest holders; and expense of
the Portfolio's administrator. The Fund pays shareholder servicing fees and
expenses, expenses of printing prospectuses, statements of additional
information and shareholder reporters which are furnished to existing
shareholders. The Fund and the Portfolio pay legal and auditing fees;
registration and reporting fees and expenses. 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.

Standish has voluntarily and temporarily agreed to limit total expenses
(excluding brokerage commission, taxes and extraordinary expenses) of the Fund
to 0.00% of the Fund's average daily net assets for the first three months of
the Fund's operations and to 0.80% of such assets thereafter. Standish may
terminate or revise this agreement at any time although it has no current
intention to do so.

<PAGE>

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

FEDERAL INCOME TAXES

The Fund is a separate entity for federal tax purposes and intends to qualify
and to continue to qualify for taxation as a "regulated investment company"
under the Code. If it qualifies for treatment as a regulated investment company,
the 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 Fund.
Dividends paid by the 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. Only a small portion, if any, of
these dividends may qualify for the corporate dividends received deduction under
the Code. Dividends paid by the 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 Portfolio 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 Fund may 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 if the Fund makes this election 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 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 Fund and, unless a
current IRS Form W-8 or an acceptable substitute is furnished to the Fund, to
backup withholding on certain payments from that Fund.

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

THE FUND AND ITS SHARES

The Trust was organized on August 13, 1986 as a Massachusetts business trust. In
addition to the Fund offered in this Prospectus, the Trust offers other series
to the public. Shareholders of the Fund are entitled to one full or fractional
vote for each Fund share or fraction thereof. 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

<PAGE>

allow shareholders to vote on the removal of a Trustee and to assist
shareholders in communicating with each other.

The Portfolio Trust was organized on January 18, 1996 as a New York trust. In
addition to the Portfolio, 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 Fund should be made by contacting Standish Fund
Distributors at the address and telephone number listed on the back cover of
this Prospectus.

CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT

Investors Bank & Trust Company, 89 South Street, Boston, Massachusetts 02111,
serves as the Fund's transfer agent, dividend disbursing agent and as custodian
for all cash and securities of the Fund and the Portfolio. Investors Bank &
Trust also provides accounting services to the Fund.

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, serve as
independent accountants for the Trust and the Portfolio Trust, respectively, and
will audit the Fund's and the Portfolio's 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 SIMCO and its affiliates.

APPENDIX

KEY TO MOODY'S CORPORATE BOND
RATINGS AND FOR SOVEREIGN,
SUBNATIONAL AND SOVEREIGN RELATED
ISSUES

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

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

A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements. Their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

STANDARD & POOR'S RATINGS
DEFINITIONS

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

<PAGE>

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

A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB - Debt rated BB is regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.

STANDARD & POOR'S CHARACTERISTICS
OF SOVEREIGN DEBT OF FOREIGN
COUNTRIES

AAA- Stable, predictable governments with demonstrated track record of
responding flexibly to changing economic and political circumstances

Key players in the global trade and financial system:

- - Prosperous and resilient economies, high per
capita incomes

- - Low fiscal deficits and government debt, low
inflation

- - Low external debt

AA- Stable, predictable governments with demonstrated track record of responding
to changing economic and political circumstances

- - Tightly integrated into global trade and
financial system

- - Differ from AAAs only to a small degree
because:

- - Economies are smaller, less prosperous and
generally more vulnerable to adverse external
influences (e.g., protection and terms of trade
shocks)
- - More variable fiscal deficits, government debt
and inflation

- - Moderate to high external debt

A- Politics evolving toward more open, predictable forms of governance in
environment of rapid economic and social change

- - Established trend of integration into global
trade and financial system

- - Economies are smaller, less prosperous and
generally more vulnerable to adverse external
influences (e.g., protection and terms of trade
shocks), but

- - Usually rapid growth in output and per capita
incomes

- - Manageable through variable fiscal deficits,
government debt and inflation

- - Usually low but variable debt

- - Integration into global trade and financial
system growing but untested

- - Low to moderate income developing economies
but variable performance and quite vulnerable
to adverse external influences

- - Variable to high fiscal deficits, government debt
and inflation

- - Very high and variable debt, often graduates of
Brady plan but track record not well established

<PAGE>

BBB-- Political factors a source of significant uncertainty, either because
system is in transition or due to external threats, or both, often in
environment of rapid economic and social change

- - Integration into global trade and financial
system growing but untested

- - Economies less prosperous and often more
vulnerable to adverse external influences

- - Variable to high fiscal deficits, government debt
and inflation

- - High and variable external debt

BB-- Political factors a source of major uncertainty, either because system is
in transition or due to external threats, or both, often in environment of rapid
economic and social change

- - Integration into global trade and financial
system growing but untested

- - Low to moderate income developing economies,
but variable performance and quite vulnerable
to adverse external influences

- - Variable to high fiscal deficits, government debt
and inflation

- - Very high and variable debt, often graduates of
Brady Plan but track record not well established

In the case of sovereign, subnational and sovereign related issuers, the
Portfolio uses the foreign currency or domestic (local) currency rating
depending upon how a security in the portfolio is denominated. In the case where
the Portfolio holds a security denominated in a domestic (local) currency and
one of the rating services does not provide a domestic (local) currency rating
for the issuer, the Portfolio will use the foreign currency rating for the
issuer; in the case where the Portfolio holds a security denominated in a
foreign currency and one of the rating services does not provide a foreign
currency rating for the issuer, the Portfolio will treat the security as being
unrated.

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. The 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 Fund 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 DIVERSIFIED INCOME FUND

Investment Adviser

Standish International Management Company, L.P.
P.O. Box 1407
One Financial Center
Boston, Massachusetts 02111

Principal Underwriter Independent Accountants

Standish Fund Distributors, L.P. Coopers & Lybrand L.L.P.
P.O. Box 1407 One Post Office Square
One Financial Center Boston, Massachusetts 02109
Boston, MA 02111

Custodian

Investors Bank & Trust Company Coopers & Lybrand
89 South Street P.O. Box 219
Boston, Massachusetts 02111 Grand Cayman, Cayman Islands, BWI
(Standish Diversified Income Portfolio)

Legal Counsel

Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
----------------------------------------------

No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus or
in the Statement of Additional Information, and, if given or made, such other
information or representations must not be relied upon as having been authorized
by the Trust. This Prospectus does not constitute an offering in any
jurisdiction in which such offering may not be lawfully made.

<PAGE>

Subject to Completion: dated March 19, 1997

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.

STANDISH DIVERSIFIED INCOME FUND
P.O. Box 1407
One Financial Center
Boston, Massachusetts 02111
(800) 221-4795

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the Prospectus dated [ ],
1997, as amended and/or supplemented from time to time (the "Prospectus"), of
the Standish Diversified Income Fund ("Diversified Income Fund"), 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

Page
----

Investment Objective and Policies.....................................1
Investment Restrictions..............................................11
Calculation of Performance Data......................................13
Management ..........................................................14
Portfolio Transactions...............................................19
Determination of Net Asset Value.....................................22
The Fund and Its Shares..............................................23
The Portfolio and its Investors......................................24
Taxation.............................................................24
Additional Information...............................................28
Experts and Financial Statements.....................................28

<PAGE>

INVESTMENT OBJECTIVE
AND POLICIES

The Prospectus describes the investment objective and policies of the
Fund. The following discussion supplements the description of the Fund's
investment objective and policies in the Prospectus.

As described in the Prospectus, the Fund seeks to achieve its investment
objective by investing all its investable assets in the Standish Diversified
Income Portfolio (the "Portfolio"), a series of Standish, Ayer & Wood Master
Portfolio (the "Portfolio Trust"), an open-end management investment company.
The Portfolio has the same investment objective and restrictions as the Fund.
Standish International Management Company, L.P. ("SIMCO" or the "Adviser") is
the adviser to the Portfolio.

Since the investment characteristics of the Fund correspond directly to
those of the Portfolio, the following discusses the various investment
techniques employed by the Portfolio. See the Prospectus for a more complete
description of the Fund's and the Portfolio's investment objective, policies and
restrictions.

Fixed Income Obligations. The Portfolio may make a variety of investments,
including investment in long-term, intermediate-term and short-term senior and
subordinated corporate debt and other fixed income obligations. Such securities
may be unrated or rated in the non-investment grade rating categories of Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("Standard
& Poor's") or another rating organization. Bonds rated BB or below by Standard &
Poor's or Ba or below by Moody's (or comparable rated and unrated securities)
are commonly referred to as "junk bonds" and are considered speculative; the
ability of their issuers to make principal and interest payments may be
questionable. In some cases, such bonds may be highly speculative, have poor
prospects for reaching investment grade standing and be in default. As a result,
investment in such bonds will entail greater risks than those associated with
investment grade bonds (i.e., bonds rated AAA, AA, A or BBB by Standard & Poor's
or Aaa, Aa, A or Baa by Moody's). Analysis of the creditworthiness of issuers of
high yield securities may be more complex than for issuers of higher quality
debt securities, and the ability of the Portfolio to achieve its investment
objective may, to the extent of its investments in high yield securities, be
more dependent upon such creditworthiness analysis than would be the case if the
Portfolio were investing in higher quality securities.

The amount of high yield, fixed income securities proliferated in the
1980s and early 1990s as a result of increased merger and acquisition and
leveraged buyout activity. Such securities are also issued by less-established
corporations desiring to expand. Risks associated with acquiring the securities
of such issuers generally are greater than is the case with higher rated
securities because such issuers are often less creditworthy companies or are
highly leveraged and generally less able than more established or less leveraged
entities to make scheduled payments of principal and interest.

The market values of high yield, fixed income securities tends to reflect
individual corporate developments to a greater extent than do those of higher
rated securities, which react primarily to fluctuations in the general level of
interest rates. Issuers of such high yield securities may not be able to make
use of more traditional methods of financing and their ability to service debt
obligations may be more adversely affected than issuers of higher rated
securities by economic downturns, specific corporate developments or the
issuers' inability to meet specific projected business forecasts. These
non-investment grade securities also tend to be more sensitive to economic
conditions than higher-rated securities. Negative publicity about the high yield
bond market and investor perceptions regarding lower rated securities, whether
or not based on Portfolio fundamental analysis, may depress the prices for such
securities.

Since investors generally perceive that there are greater risks associated
with non-investment grade securities of the type in which the Portfolio invests,
the yields and prices of such securities may tend to fluctuate more than those
for higher rated securities. In the lower quality segments of the fixed-income
securities market, changes in perceptions of issuers' creditworthiness tend to
occur more frequently and in a more pronounced manner than do changes in higher
quality

- 1 -

<PAGE>

segments of the fixed-income securities market, resulting in greater yield and
price volatility.

Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In addition,
the prices of fixed-income securities fluctuate in response to the general level
of interest rates. Fluctuations in the prices of portfolio securities subsequent
to their acquisition will not affect cash income from such securities but will
be reflected in the Portfolio's net asset value.

The risk of loss from default for the holders of high yield, fixed-income
securities is significantly greater than is the case for holders of other debt
securities because such high yield, fixed-income securities are generally
unsecured and are often subordinated to the rights of other creditors of the
issuers of such securities. The Portfolio may be required to liquidate other
portfolio securities in order to enable certain of its interest holders to
satisfy their annual distribution obligations in respect of accrued interest
income on securities which are subsequently written off, even though the
Portfolio has not received any cash payments of such interest.

The secondary market for high yield, fixed-income securities is dominated
by institutional investors, including mutual fund Portfolios, insurance
companies and other financial institutions. Accordingly, the secondary market
for such securities is not as liquid as and is more volatile than the secondary
market for higher-rated securities. In addition, the trading volume for high
yield, fixed-income securities is generally lower than that of higher rated
securities and the secondary market for high yield, fixed-income securities
could contract under adverse market or economic conditions independent of any
specific adverse changes in the condition of a particular issuer. These factors
may have an adverse effect on the Portfolio's ability to dispose of particular
portfolio investments. Prices realized upon the sale of such lower rated or
unrated securities, under these circumstances, may be less than the prices used
in calculating the Portfolio's net asset value. A less liquid secondary market
also may make it more difficult for the Portfolio to obtain precise valuations
of the high yield securities in its portfolio.

Proposed federal legislation could adversely affect the secondary market
for high yield securities and the financial condition of issuers of these
securities. The form of any proposed legislation and the probability of such
legislation being enacted is uncertain.

Non-investment grade or high yield, fixed-income securities also present
risks based on payment expectations. High yield, fixed-income securities
frequently contain "call" or buy-back features which permit the issuer to call
or repurchase the security from its holder. If an issuer exercises such a "call
option" and redeems the security, the Portfolio may have to replace such
security with a lower yielding security, resulting in a decreased return for
investors. In addition, if the Portfolio experiences unexpected net redemptions
of the Portfolio's shares, it may be forced to sell its higher rated securities,
resulting in a decline in the overall credit quality of the Portfolio's
portfolio and increasing the exposure of the Portfolio to the risks of high
yield securities. The Portfolio may also incur additional expenses to the extent
that it is required to seek recovery upon a default in the payment of principal
or interest on a portfolio security.

Credit ratings issued by credit rating agencies are designed to evaluate
the safety of principal and interest payments of rated securities. They do not,
however, evaluate the market value risk of non-investment grade securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the conditions of the issuer that affect the market
value of the security. Consequently, credit ratings are used only as a
preliminary indicator of investment quality. Investments in non-investment grade
and comparable unrated obligations will be more dependent on the Adviser's
credit analysis than would be the case with investments in investment-grade debt
obligations. The Adviser employs its own credit research and analysis, which
includes a study of existing debt, capital structure, ability to service debt
and to pay dividends, the issuer's sensitivity to economic conditions, its
operating history and the current

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trend of earnings. The Adviser continually monitors the investments in the
Portfolio's portfolio and evaluates whether to dispose of or to retain
non-investment grade and comparable unrated securities whose credit ratings or
credit quality may have changed.

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

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

The Portfolio may invest in commercial paper rated "P-1" or "P-2" by
Moody's Investors Service, Inc. ("Moody's"), "A-1" or "A-2" by Standard & Poor's
Rating Group ("S&P"), Duff-1 or Duff-2 by Duff & Phelps ("Duff"), or in
commercial paper that is unrated.

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

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

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

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changes in the market value of securities held in or to be purchased for the
Portfolio's portfolio resulting from securities market, interest rate or
currency exchange rate fluctuations, to protect the Portfolio's unrealized gains
in the value of its portfolio securities, to facilitate the sale of such
securities for investment purposes, to manage the effective maturity or duration
of the Portfolio's portfolio, or to establish a position in the derivatives
markets as a temporary substitute for purchasing or selling particular
securities. In addition to the hedging transactions referred to in the preceding
sentence, Strategic Transactions may also be used to seek to enhance potential
gain in circumstances where hedging is not involved although the Portfolio will
attempt to limit its net loss exposure resulting from Strategic Transactions
entered into for such purposes to not more than 3% of its net assets at any one
time and, to the extent necessary, the Portfolio will close out transactions in
order to comply with this limitation. (Transactions such as writing covered call
options are considered to involve hedging for the purposes of this limitation.)
In calculating the Portfolio's net loss exposure from such Strategic
Transactions, an unrealized gain from a particular Strategic Transaction
position would be netted against an unrealized loss from a related Strategic
Transaction position. For example, if SIMCO anticipates that the Belgian franc
will appreciate relative to the French franc, the Portfolio may take a long
forward currency position in the Belgian franc and a short foreign currency
position in the French franc. Under such circumstances, any unrealized loss in
the Belgian franc position would be netted against any unrealized gain in the
French franc position (and vice versa) for purposes of calculating the
Portfolio's net loss exposure. The ability of the Portfolio to utilize these
Strategic Transactions successfully will depend on SIMCO's ability to predict
pertinent market and interest rate movements, which cannot be assured. The
Portfolio will comply with applicable regulatory requirements when implementing
these strategies, techniques and instruments. The Portfolio's activities
involving Strategic Transactions may be limited 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. The use of Strategic Transactions has
associated risks including possible default by the other party to the
transaction, illiquidity and, to the extent SIMCO's view as to certain market,
currency exchange rate or interest rate movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. Writing put and call options may result in losses to the
Portfolio, force the purchase or sale, respectively, of portfolio securities at
inopportune times or for prices higher than (in the case of purchases due to the
exercise of put options) or lower than (in the case of sales due to the exercise
of call options) current market values, limit the amount of appreciation the
Portfolio can realize on its investments or cause the Portfolio to hold a
security it might otherwise sell. The use of currency transactions can result in
the Portfolio incurring losses as a result of a number of factors including the
imposition of exchange controls, suspension of settlements, or the inability to
deliver or receive a specified currency. The use of options and futures
transactions entails certain other risks. In particular, the variable degree of
correlation between price movements of futures contracts and price movements in
the related portfolio position of the Portfolio creates the possibility that
losses on the hedging instrument may be greater than gains in the value of the
Portfolio's position. Writing options could significantly increase the
Portfolio's portfolio turnover rate and, therefore, associated brokerage
commissions or spreads. In addition, futures and options markets may not be
liquid in all circumstances and certain over-the-counter options may have no
markets. As a result, in certain markets, the Portfolio might not be able to
close out a transaction without incurring substantial losses, if at all.
Although the use of futures and options transactions for hedging should tend to
minimize the risk of loss due to a decline in the value of the hedged position,
at the same time, in certain circumstances, they tend to limit any potential
gain which might result from an increase in value of such position. The loss
incurred by the Portfolio in writing options on futures and entering into
futures transactions is potentially unlimited; however, as described above, the
Portfolio will attempt to limit its net loss exposure resulting from Strategic
Transactions entered into for non-hedging purposes to not more than 3% of its
net assets at

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

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

A put option gives the purchaser of the option, in consideration for the
payment of a premium, the right to sell, and the writer the obligation to buy
(if the option is exercised), the underlying security, commodity, index,
currency or other instrument at the exercise price. For instance, the
Portfolio's purchase of a put option on a security might be designed to protect
its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving the
Portfolio the right to sell such instrument at the option exercise price. A call
option, in consideration for the payment of a premium, gives the purchaser of
the option the right to buy, and the seller the obligation to sell (if the
option is exercised), the underlying instrument at the exercise price. The
Portfolio may purchase a call option on a security, futures contract, index,
currency or other instrument to seek to protect the Portfolio against an
increase in the price of the underlying instrument that it intends to purchase
in the future by fixing the price at which it may purchase such instrument. An
American style put or call option may be exercised at any time during the option
period while a European style put or call option may be exercised only upon
expiration or during a fixed period prior thereto. The Portfolio is authorized
to purchase and sell exchange listed options and over-the-counter options ("OTC
options"). Exchange listed options are issued by a regulated intermediary such
as the Options Clearing Corporation ("OCC"), which guarantees the performance of
the obligations of the parties to such options. The discussion below uses the
OCC as an example, but is also applicable to other financial intermediaries.

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

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

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

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct agreement with
the Counterparty. In contrast to exchange listed options, which generally have

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standardized terms and performance mechanics, all the terms of an OTC option,
including such terms as method of settlement, term, exercise price, premium,
guarantees and security, are set by negotiation of the parties. The Portfolio
will generally sell (write) OTC options (other than OTC currency options) that
are subject to a buy-back provision permitting the Portfolio to require the
Counterparty to sell the option back to the Portfolio at a formula price within
seven days. OTC options purchased by the Portfolio, and portfolio securities
"covering" the amount of the Portfolio's obligation pursuant to an OTC option
sold by it (the cost of the sell-back plus the in-the-money amount, if any) are
subject to the Portfolio's restriction on illiquid securities, unless determined
to be liquid in accordance with procedures adopted by the Board 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. The Portfolio
expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.

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

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

The Portfolio may purchase and sell (write) put and call options on
securities including U.S. Treasury and agency securities, mortgage-backed and
asset-backed securities, foreign sovereign debt, corporate debt securities,
equity securities (including convertible securities) and Eurodollar instruments
that are traded on U.S. and foreign securities exchanges and in the OTC markets,
and on securities indices, currencies, swaps and futures contracts.

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

The Portfolio will not sell put options if, as a result, more than 50% of
the Portfolio's assets would be required to be segregated to cover its potential
obligations under such put options other than those with respect to futures and
options thereon. In selling put options, there is a risk that the Portfolio may
be required to buy the underlying security at a price above the market price.

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

General Characteristics of Futures. The Portfolio may enter into financial
futures contracts or purchase or sell put and call options on such futures.
Futures are generally bought and sold on the commodities exchanges where they
are listed and involve payment of initial and variation margin as described
below. All future contracts entered into by the Portfolio are traded on U.S.
exchanges or boards of trade that are licensed and regulated by the Commodity
Futures Trading Commission ("CFTC") or on certain foreign exchanges. The sale of
futures contracts creates a firm obligation by the Portfolio, as seller, to
deliver to the buyer the specific type of financial instrument called for in the
contract at a specific future time for a specified price (or, with respect to
index futures and Eurodollar instruments, the net cash amount). The purchase of
futures contracts creates a corresponding obligation by the Portfolio, as
purchaser, to purchase a financial instrument at a specific time and price.
Options on futures contracts are similar to options on securities except that an
option on a futures contract gives the purchaser the right in return for the
premium paid to assume a position in a futures contract and obligates the seller
to deliver such position upon exercise of the option.

The Portfolio's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the regulations of the CFTC relating to exclusions from regulation as a
commodity pool operator. Those regulations currently provide that the Portfolio
may use commodity futures and option positions (i) for bona fide hedging
purposes without regard to the percentage of assets committed to margin and
option premiums, or (ii) for other purposes permitted by the CFTC to the extent
that the aggregate initial margin and option premiums required to establish such
non-hedging positions (net of the amount that the positions were "in the money"
at the time of purchase) do not exceed 5% of the net asset value of the
Portfolio's portfolio, after taking into account unrealized profits and losses
on such positions. Typically, maintaining a futures contract or selling an
option thereon requires the Portfolio to deposit, with 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 Portfolio. If the Portfolio exercises an option on a futures
contract it will be obligated to post initial margin (and potential subsequent
variation margin) for the resulting futures position just as it would for any
position. Futures contracts and options thereon are generally settled by
entering into an offsetting transaction but there can be no assurance that the
position can be offset prior to settlement at an advantageous price, nor that
delivery will occur. The segregation

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requirements with respect to futures contracts and options thereon are described
below.

Currency Transactions. The Portfolio 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 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. The Portfolio may
enter into over-the-counter currency transactions with Counterparties which have
received, combined with any credit enhancements, a long term debt rating of A by
S&P or Moody's, respectively, or that have an equivalent rating from a NRSRO or
(except for OTC currency options) whose obligations are determined to be of
equivalent credit quality by SIMCO.

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

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

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

To seek to reduce the effect of currency fluctuations on the value of
existing or anticipated holdings of portfolio securities, the Portfolio may also
engage in proxy hedging. Proxy hedging is often used when the currency to which
the Portfolio's portfolio is exposed is difficult to hedge or to hedge against
the 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 the Portfolio's portfolio securities
are or are expected to be denominated, and to buy U.S. dollars. The amount of
the contract would not exceed the value of the Portfolio's securities
denominated in linked currencies. For example, if SIMCO considers that the
Austrian schilling is linked to the German deutschemark (the "D-mark"), and a
portfolio contains securities denominated in schillings and SIMCO believes that
the value of schillings will decline against the U.S. dollar, SIMCO may enter
into a contract to sell D-marks and buy dollars. Proxy hedging involves some of
the same risks and considerations as other transactions with similar
instruments. Currency transactions can result in losses to the Portfolio if the
currency being hedged fluctuates in value to a degree or in a direction that is
not anticipated. Further, there is the risk that the perceived linkage between
various currencies may not be present or may

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not be present during the particular time that the Portfolio is engaging in
proxy hedging. If the Portfolio enters into a currency hedging transaction, it
will comply with the asset segregation requirements described below.

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

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

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

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The Portfolio will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the case
may be, only the net amount of the two payments. The Portfolio will not enter
into any swap, cap, floor or collar transaction unless, at the time of entering
into such transaction, the unsecured long-term debt of the Counterparty,
combined with any credit enhancements, is rated at least A by S&P or Moody's or
has an equivalent rating from an NRSRO or the Counterparty issues debt that is
determined to be of equivalent credit quality by SIMCO. If there is a default by
the Counterparty, the Portfolio may have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid. Caps, floors and collars
are more recent innovations for which standardized documentation has not yet
been fully developed. Swaps, caps, floors and collars are considered illiquid
for purposes of the Portfolio's policy regarding illiquid securities, unless it
is determined, based upon continuing review of the trading markets for the
specific security, that such security is liquid. The Trustees have adopted
guidelines and delegated to SIMCO the daily function of determining and
monitoring the liquidity of swaps, caps, floors and collars. The Trustees,
however, retain oversight focusing on factors such as valuation, liquidity and
availability of information and they are ultimately responsible for such
determinations. The staff of the SEC currently takes the position that swaps,
caps, floors and collars are illiquid, and are subject to the Portfolio's
limitation on investing in illiquid securities.

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

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

Use of Segregated Accounts. The Portfolio will hold securities or other
instruments whose values are expected to offset its obligations under the
Strategic Transactions. The Portfolio will cover Strategic Transactions as
required by interpretive positions of the staff of the SEC. The Portfolio will
not enter into Strategic Transactions that expose the Portfolio to an obligation
to another party unless it owns either (i) an offsetting position in securities
or other options, futures contracts or other instruments or (ii) cash,
receivables or liquid securities with a value sufficient to cover its potential
obligations. The Portfolio may have to comply with any applicable regulatory
requirements for Strategic Transactions, and if required, will set aside cash
and other assets in a segregated account with its custodian bank in the amount
prescribed. In that case, the Portfolio's custodian would maintain the value of
such segregated account equal to the prescribed amount by adding or removing
additional cash or other assets to account for fluctuations in the value of the
account and the

- 10 -

<PAGE>

Portfolio's obligations on the underlying Strategic Transactions. Assets held in
a segregated account would not be sold while the Strategic Transaction is
outstanding, unless they are replaced with similar assets. As a result, there is
a possibility that segregation of a large percentage of the Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet redemption
requests or other current obligations.

"When-Issued" and "Delayed Delivery" Securities. The Portfolio may purchase
securities on a "when-issued" or "delayed delivery" basis. Delivery and payment
for securities purchased on a when-issued or delayed delivery basis will
normally take place 15 to 45 days after the date of the transaction. The payment
obligation and interest rate on the securities are fixed at the time that the
Portfolio enters into the commitment, but interest will not accrue to the
Portfolio until delivery of and payment for the securities. Although the
Portfolio will only make commitments to purchase "when-issued" and "delayed
delivery" securities with the intention of actually acquiring the securities,
the Portfolio may sell the securities before the settlement date if deemed
advisable by SIMCO. Unless the Portfolio has entered into an offsetting
agreement to sell the securities purchased on a "when-issued" or "forward
commitment" basis, cash or liquid obligations with a market value equal to the
amount of the Portfolio's commitment will be segregated with the Portfolio's
custodian bank. If the market value of these securities declines, additional
cash or securities will be segregated daily so that the aggregate market value
of the segregated securities equals the amount of the Portfolio's commitment.

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

Portfolio Turnover. It is not the policy of the Portfolio to purchase or sell
securities for trading purposes. However, the Portfolio does not place any
restrictions on portfolio turnover and may sell any portfolio security without
regard to the period of time it has been held, except as may be necessary to
maintain the status of certain of its interest holders as a regulated investment
company under the Code. The Portfolio may therefore generally change its
portfolio investments at any time in accordance with SIMCO's appraisal of
factors affecting any particular issuer or market, or relevant economic
conditions. It is expected that the Portfolio's turnover rate will not exceed
200% for the current fiscal year.

INVESTMENT RESTRICTIONS

The Fund and the Portfolio have adopted the following fundamental
policies. Each of the Fund's and Portfolio's fundamental policies cannot be
changed unless the change is approved by a "vote of the outstanding voting
securities" of 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 Portfolio present at a meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund or Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of the Fund or Portfolio.

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

1. Issue senior securities. For purposes of this restriction, borrowing money
in accordance with paragraph 3 below, making loans in accordance with
paragraph 7 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 5 below, are not
deemed to be senior securities.

2. 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

- 11 -

<PAGE>

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 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. With respect to 75% of its total assets, purchase securities of an issuer
(other than the U.S. Government, its agencies, instrumentalities or
authorities or repurchase agreements collateralized by U.S. Government
securities and other investment companies), if: (a) such purchase would
cause more than 5% of the Portfolio's (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).

8. Invest more than 25% of its total assets in the securities of one or more
issuers conducting their principal business activities in the same
industry (excluding the U.S. Government or its agencies or
instrumentalities). For the purposes of this restriction, state and
municipal governments and their agencies, authorities and
instrumentalities are not deemed to be industries; telephone companies are
considered to be a separate industry from water, gas or electric
utilities; personal credit finance companies and business credit finance
companies are deemed to be separate 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. This restriction does not apply to investments in municipal
securities which have been pre-refunded by the use of obligations of the
U.S. Government or any of its agencies or instrumentalities.

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

- 12 -

<PAGE>

laws, regulations or regulatory policy. The Portfolio (Fund) may not:

a. 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).

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

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

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

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

Notwithstanding any fundamental or non-fundamental policy, the 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 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 the Portfolio's (Fund's) assets will not constitute a
violation of the restriction.

CALCULATION OF PERFORMANCE DATA

As indicated in the Prospectus, the Fund may, from time to time, advertise
certain total return and yield information. The average annual total return of
the 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 Fund's 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 Fund's yield is computed by dividing the net investment income per
share earned during a base period of 30 days, or one month, by the maximum
offering price per share on the last day of the period. For the purpose of
determining net investment income, the calculation includes, among expenses of
the Fund, all recurring fees that are charged to all shareholder accounts and
any non-recurring charges for the period stated. In particular, yield is
determined according to the following formula:

6
Yield = 2[(A - B + 1) - 1]
-----
CD
Where:
a=interest earned during the period; b=net expenses accrued for the
period; c=the average daily number of shares outstanding during the period
that were entitled to receive dividends; d=the maximum offering price (net
asset value) per share on the last day of the period.

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

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

- 13 -

<PAGE>

The 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 Fund may
compare its performance to the Lehman Brothers Aggregate Index which is composed
of securities from the Lehman Brothers Government/Corporate Bond Index, Mortgage
Backed Securities Index and Yankee Bond Index, and is generally considered to be
representative of all unmanaged, domestic, dollar denominated, fixed rate
investment grade bonds.

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 the Fund's past performance to that of 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 SIMCO, the Portfolio's investment
adviser.

Position Held Principal Occupation
Name, Address and Date of Birth 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

- 14 -

<PAGE>

Position Held Principal Occupation
Name, Address and Date of Birth with Trust During Past 5 Years
- ----------------------------------------------------------------------------------------------------------------
*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
Beverly Farms, MA 01915 Company

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

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 and Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Treasurer Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

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

- 15 -

<PAGE>

Position Held Principal Occupation
Name, Address and Date of Birth with Trust During Past 5 Years
- ------------------------------------------------------------------------------------------------------------
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

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

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

- 16 -

<PAGE>

Position Held Principal Occupation
Name, Address and Date of Birth with Trust During Past 5 Years
- ----------------------------------------------------------------------------------------------------------
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

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.

- 17 -

<PAGE>

Position Held Principal Occupation
Name, Address and Date of Birth with Trust During Past 5 Years
- -------------------------------------------------------------------------------------------------------
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.

Michael C. Schoeck, 10/24/55 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center since August, 1993;
Boston, MA 02111 formerly, Vice President,
Commerzbank, Frankfurt,
Germany Vice President,
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

Stephen A. Smith, 3/13/49 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc. since
One Financial Center November 2, 1993; formerly Consultant
Boston, MA 02111 Cambridge Associates

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

- 18 -

<PAGE>

Position Held Principal Occupation
Name, Address and Date of Birth with Trust During Past 5 Years
- -------------------------------------------------------------------------------------------------------
Christopher W. Van Alstyne, Vice President Vice President,
3/24/60 Standish, Ayer & Wood, Inc.;
c/o Standish, Ayer & Wood, Inc. Formerly Regional Marketing Director,
One Financial Center Gabelli-O'Connor Fixed Income
Boston, MA 02111 Management
</TABLE>

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

Compensation of Trustees and Officers

Neither the Trust nor the Portfolio Trust compensates the Trustees of the
Trust or the Portfolio Trust that are affiliated with Standish, Ayer & Wood,
Inc. ("Standish") as administrator of the Fund, or SIMCO or the Trust's and
Portfolio Trust's officers.

The following table estimates the amount of fees to be paid to the Trust's
Trustees during the Fund's initial fiscal year ending December 31, 1997.

Pension or Total Compensation
Estimated Retirement from Funds
Aggregate Benefits and Portfolio
Compensation Accrued as Part of and Other Funds
Name of Trustee from the Fund* Funds' Expenses in Complex**
- --------------- ------------- --------------- --------------------
D. Barr Clayson $0 $0 $0
Samuel C. Fleming $67 $0 $49,250
Benjamin M. Friedman $67 $0 $45,500
John H. Hewitt $75 $0 $45,500
Edward H. Ladd $0 $0 $0
Caleb Loring, III $67 $0 $45,500
Richard S. Wood $0 $0 $0
- -------------------

* Estimated. The Fund is newly organized and has not paid any Trustees'
fees. The Fund will bear its pro rata allocation of Trustees' fees paid by
the Portfolio to the Trustees of the Portfolio Trust.

** As of the date of this Statement of Additional Information there were 21
funds in the fund complex. Total Compensation is based on historical data
for the year ended December 31, 1996.

Investment Adviser

SIMCO serves as the Adviser to the Portfolio pursuant to a written
investment advisory agreement. SIMCO is a Delaware limited partnership organized
in 1991 and is registered under the Investment Advisers Act of 1940. The General
Partner of the Adviser is Standish, One Financial Center, Boston, MA 02111,
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 of and a Senior
Adviser to Standish, and D. Barr Clayson, Chairman of the Board of SIMCO and a
Managing Director and Vice President of Standish. Ralph S. Tate, a Managing
Director and Vice President of Standish, is President and a Director of SIMCO.
Richard S. Wood, a Managing Director and Vice President of Standish and the
President of the Trust, is the

- 19 -

<PAGE>

Executive Vice President of SIMCO.

The following, constituting all of the Directors and all of the
shareholders of Standish, are Standish's controlling persons: Caleb F. Aldrich,
Nicholas S. Battelle, 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.

Certain services provided by SIMCO under the advisory agreement are described in
the Prospectus. These services are provided without reimbursement by the
Portfolio for any costs incurred. Under the investment advisory agreement, SIMCO
is paid a fee based upon a percentage of the Portfolio's average daily net asset
value. The contractual advisory fee rate is 0.50% of the Portfolio's average
daily net assets. The advisory fees are payable monthly.

Pursuant to the investment advisory agreement, the Portfolio bears
expenses of its operations other than those incurred by SIMCO. Among other
expenses, the Portfolio pays 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.

SIMCO has voluntarily agreed for the Fund's fiscal year ending December
31, 1997 to limit certain "Total Fund Operating Expenses" (excluding brokerage
commissions, taxes and other extraordinary expenses) to 0.00% per annum of the
Fund's average daily net assets for the first three months of the Fund's
operations and to 0.80% of such assets thereafter. This agreement is voluntary
and temporary and may be discontinued or revised by SIMCO at any time.

Unless terminated as provided below, the investment advisory agreement
continues in full force and effect until December 31, 1998 and continues in
effect for successive periods of one year thereafter, but only for so long as
each such continuance is approved annually (i) by the Trustees of the Portfolio
Trust or by the "vote of a majority of the outstanding voting securities" of the
Portfolio and, in either event (ii) by vote of a majority of the Trustees of the
Portfolio Trust who are not parties to the investment advisory agreement or
"interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval. The
investment advisory agreement may be terminated at any time without the payment
of any penalty by vote of the Trustees of the Portfolio Trust or by the "vote of
a majority of the outstanding voting securities" of the Portfolio or by SIMCO,
on sixty days' written notice to the other party. The investment advisory
agreement terminates in the event of its assignment as defined in the 1940 Act.

In an attempt to avoid any potential conflict with portfolio transactions
for the Fund and the Portfolio, SIMCO, 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
Fund and its shareholders, and the Portfolio and its investors, come before
those of the Adviser and its employees.

Administrator of the Fund

Standish serves as the administrator to the Fund (the "Fund
Administrator") pursuant to a written administration agreement with the Trust on
behalf of the Fund. Certain services provided by the Fund Administrator under
the administration agreement 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. The Fund's
administration agreement can be terminated by either party on not more than
sixty days' written notice.

Administrator of the Portfolio

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

Distributor of the Fund

Standish Fund Distributors, L.P. (the "Principal Underwriter"), an affiliate of
SIMCO, serves as the Trust's exclusive principal underwriter and holds itself
available to receive purchase orders for the 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 the 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 the 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
the 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 the 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 the
Fund of securities owned by it or determination by the Fund of the value of its
net assets is not reasonably practicable; or (iii) for such other periods as the
SEC may permit for the protection of shareholders of the Fund.

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 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 the
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. The Portfolio
has advised the Trust that the Portfolio will not redeem in-kind except in
circumstances in which the Fund is permitted to redeem in-kind or except in the
event the Fund completely withdraws its interest from the Portfolio.

PORTFOLIO TRANSACTIONS

SIMCO is responsible for placing the Portfolio's portfolio transactions
and will do so in a manner deemed fair and reasonable to the

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Portfolio and not according to any formula. The primary consideration in all
portfolio transactions will be prompt execution of orders in an efficient manner
at the most favorable price. In selecting broker-dealers and in negotiating
commissions, SIMCO 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 Fund. In addition, if SIMCO determines in
good faith that the amount of commissions charged by a broker is reasonable in
relation to the value of the brokerage and research services provided by such
broker, the Portfolio may pay commissions to such broker in an amount greater
than the amount another firm may charge. Research services may include (i)
furnishing advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities, (ii) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts, and (iii) effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research services furnished by firms through which
the Portfolio effects its securities transactions may be used by SIMCO in
servicing other accounts; not all of these services may be used by SIMCO in
connection with the Portfolio. The investment advisory fee paid by the Portfolio
under the investment advisory agreement will not be reduced as a result of
SIMCO's receipt of research services.

SIMCO also places portfolio transactions for other advisory accounts.
SIMCO will seek to allocate portfolio transactions equitably whenever concurrent
decisions are made to purchase or sell securities for the Portfolio and another
advisory account. In some cases, this procedure could have an adverse effect on
the price or the amount of securities available to the Portfolio. In making such
allocations, the main factors considered by SIMCO 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.

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

DETERMINATION OF NET ASSET VALUE

The 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 the 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 the Fund (substantially all of which will be represented by the Fund's
interest in the Portfolio) less all liabilities by the number of Fund shares
outstanding, and adjusting to the nearest cent per share. Expenses and fees of
the Fund are accrued daily and taken into account for the purpose of determining
net asset value.

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

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<PAGE>

Portfolio as of 4:00 p.m. on such day plus or minus, as the case may be, the
amount of the netadditions to or reductions in the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of 4:00 p.m. on the following Business Day.

Portfolio securities that are fixed income securities (other than money
market instruments) for which accurate market prices are readily available are
valued at their current market value on the basis of quotations, which may be
furnished by a pricing service or provided by dealers in such securities. Fixed
income securities for which accurate market prices are not readily available and
other assets are valued at fair value as determined in good faith by SIMCO in
accordance with procedures approved by the Trustees, which may include the use
of yield equivalents or matrix pricing.

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

Generally, the close of trading on foreign securities exchanges occurs
each day at various times prior to the close of trading on the New York Stock
Exchange. Securities held by the Portfolio (whose principal trading markets are
such foreign exchanges) will be priced according to values obtained at the close
of trading on the relevant exchange. 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 Portfolio's 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.

THE FUND AND ITS SHARES

The 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
the Fund. Each share of the 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 the Fund,
shareholders 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 the
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 Fund. Pursuant to the Declaration of Trust and subject to
shareholder approval (if then required by applicable law), the Trustees may
authorize the 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 Fund invests all of its investible assets in the
Portfolio.

All Fund shares have equal rights with regard to voting, and shareholders
of the 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

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<PAGE>

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 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, on behalf of the Fund, is
requested to vote on a fundamental policy of or matters pertaining to the
Portfolio, the Trust will hold a meeting of the 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, the 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 the 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

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

TAXATION

Each series of the Trust, including the Fund, is treated as a separate
entity for accounting and tax purposes. The Fund intends to elect to be treated
and to qualify as a "regulated investment company" ("RIC") under Subchapter M of
the Code, and intends to continue to so qualify in the future. As such and by
complying with the applicable provisions of the Code regarding the sources of
its income, the timing of its

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<PAGE>

distributions, and the diversification of its assets, the 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
capitalgain," 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.

The Portfolio is treated as a partnership for federal income tax purposes.
As such, the Portfolio is not subject to federal income taxation. Instead, the
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 Fund invests its assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements in order for the Fund to satisfy them. The
Portfolio will allocate at least annually among its investors, including the
Fund, each investor's distributive share of the Portfolio's net investment
income, net realized capital gains, and any other items of income, gain, loss,
deduction or credit. The Portfolio will make allocations to the Fund in a manner
intended to comply with the Code and applicable regulations and will make moneys
available for withdrawal at appropriate times and in sufficient amounts to
enable the Fund to satisfy the tax distribution requirements that apply to the
Fund and that must be satisfied in order to avoid Federal income and/or excise
tax on the Fund. For purposes of applying the requirements of the Code regarding
qualification as a RIC, the Fund will be deemed (i) to own its proportionate
share of each of the assets of the Portfolio and (ii) to be entitled to the
gross income of the Portfolio attributable to such share.

The 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. The
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
Fund 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.

The Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Fund qualifies as a regulated investment company under
the Code, it will also not be required to pay any Massachusetts income tax.

The 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, the 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.

If the Portfolio invests in zero coupon securities, certain increasing
rate or deferred interest securities or, in general, other securities with
original issue discount (or with market discount if the Fund elects to include
market discount in income currently), the Portfolio must accrue income on such
investments prior to the receipt of the corresponding cash payments. However,
the Fund must distribute, at least annually, all or substantially all of its net
income, including its distributive share of such income accrued by the Portfolio
to shareholders to qualify as a regulated investment company under the Code and
avoid federal income and excise taxes. Therefore, the Portfolio may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing the cash, to enable
the Fund to satisfy the distribution requirements.

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

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<PAGE>

Certain options, futures or currency forward transactions undertaken by
the Portfolio may cause the Fund to recognize gains or losses from marking to
market even though the Portfolio's positions have not been sold or terminated
and affect the character as long-term or short-term (or, in the case of certain
options, futures or forward contracts relating to foreign currency, as ordinary
income or loss) and timing of some capital gains and losses realized by the
Portfolio and allocable to the 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 Fund's taxable income or gain. Certain of the applicable tax rules may be
modified if the Portfolio is eligible and chooses to make one or more of certain
tax elections that may be available. These transactions may affect the amount,
timing and character of the Fund's distributions to shareholders. The 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 dollar rolls, currency swaps,
and interest rate swaps, caps, floors and collars are unclear in certain
respects, and the Portfolio may be required to account for these instruments
under tax rules in a manner that, under certain circumstances, may limit its
transactions in these instruments. Due to possible unfavorable consequences
under present tax law, the Portfolio does not currently intend to acquire
"residual" interests in real estate mortgage investment conduits ("REMICs"),
although it may acquire "regular" interests in REMICs.

Foreign exchange gains and losses realized by the Portfolio 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 Portfolio's investment in
stock or securities, possibly including speculative currency positions or
currency derivatives not used for hedging purposes, may increase the amount of
gain it is deemed to recognize from the sale of certain investments held for
less than three months, which share of such gain plus any such gain the Fund may
realize from other sources is limited under the Code to less than 30% of the
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
the Fund must derive at least 90% of its gross income for its taxable year.

The Portfolio may be subject to withholding and other taxes imposed by
foreign countries with respect to its investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes in some cases. Investors in the 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
that Fund's total assets, 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. For any taxable year, the 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 additional 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 Fund makes this election, shareholders may then deduct such pro
rata portions of foreign income taxes in computing their taxable

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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
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
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 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 the Portfolio 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 Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" actually or 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 Portfolio may limit and/or manage stock holdings, if any,
in passive foreign investment companies to minimize the Fund's tax liability or
maximize its return from these investments.

Investment in debt obligations by the Portfolio that are at risk of or in
default presents special tax issues for the Fund. Tax rules are not entirely
clear about issues such as when the Portfolio may cease to accrue interest,
original issue discount, or market discount, when and to what extent deductions
may be taken for bad debts or worthless securities, how payments received on
obligations in default should be allocated between principal and income, and
whether exchanges of debt obligations in a workout context are taxable. These
and other issues will be addressed by the Portfolio, in the event that it holds
such obligations, in order to reduce the risk of the Fund, or any other RIC
investing in the Portfolio, distributing insufficient income to preserve its
status as a RIC or becoming subject to Federal income or excise tax.

Distributions from the Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Fund's 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.

The Fund's distributions to its corporate shareholders would potentially
qualify in their hands for the corporate dividends received deduction, subject
to certain holding period requirements and limitations on debt financing under
the Code, only to the extent the Fund was allocated dividend income of the
Portfolio from stock investments in U.S. domestic corporations. It is
anticipated that, due to the nature of the Fund's investments, no portion of the
Fund's distributions will generally qualify for the dividends received
deduction.

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 share of the Portfolio's
portfolio. Consequently, subsequent distributions by the 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

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<PAGE>

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 the 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.

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, the Fund's distributions are derived from interest on (or, in the case
of intangible property taxes, the value of its assets is attributable to)
investments in certain U.S. Government 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 Fund's indirect ownership (through the Portfolio) of any
such obligations, the Federal, and any other state or local, tax consequences of
ownership of shares of, and receipt of distributions from, the Fund in their
particular circumstances.

Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in the 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 Fund.

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

The Fund's financial statements for the current fiscal year will be
audited by Coopers & Lybrand L.L.P., independent accountants. The Portfolio's
financial statements for the current fiscal year will be audited by Coopers &
Lybrand, an affiliate of Coopers & Lybrand L.L.P.

- 28 -

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits
---------------------------------

(a) Financial Statements:

Not Applicable.

(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*

(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*

C-1

<PAGE>

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

(1O) Certificate of Designation of Standish Tax-Sensitive Smal
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) Form of Investment Advisory Agreement between the
Registrant and Standish, Ayer & Wood, Inc. relating to
Standish Short-Term Asset Reserve Fund**

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

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

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

C-2

<PAGE>

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

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

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

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

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

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

(6B) Revised Appendix A to Underwriting Agreement between the
Registrant and Standish Fund Distributors, L.P. with
respect to Standish Equity Asset Fund, Standish Small
Capitalization Equity Asset Fund, Standish Fixed Income
Asset Fund and Standish Global Fixed Income Asset Fund**

(6C) Revised Appendix A to Underwriting Agreement between the
Registrant and Standish Fund Distributors, L.P. with
respect to Standish Small Capitalization Equity Fund II**

(6D) Revised Appendix A to Underwriting Agreement between the
Registrant and Standish Fund Distributors, L.P. with
respect to Standish Small Capitalization Equity Asset Fund
II, Standish Diversified Income Fund, Standish Diversified
Income Asset Fund***

(7) Not applicable

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

(8B) Revised Appendix A to Master Custody Agreement between the
Registrant and Investors Bank & Trust Company with respect
to Standish Equity Asset Fund, Standish Small
Capitalization Equity Asset

C-3

<PAGE>

Fund, Standish Fixed Income Asset Fund and Standish Global
Fixed Income Asset Fund**

(8C) Revised Appendix A to Master Custody Agreement between the
Registrant and Investors Bank & Trust with respect to
Standish Small Capitalization Equity Fund II**

(8D) Revised Appendix A to Master Custody Agreement between the
Registrant and Investors Bank & Trust with respect to
Standish Small Capitalization Equity Asset Fund II,
Standish Diversified Income Fund, Standish Diversified
Income Asset Fund***

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

(9B) Revised Exhibit A to Transfer Agency and Service Agreement
between the Registrant and Investors Bank & Trust Company
with respect to Standish Equity Asset Fund, Standish Small
Capitalization Equity Asset Fund, Standish Fixed Income
Asset Fund and Standish Global Fixed Income Asset Fund**

(9C) Revised Exhibit A to Transfer Agency and Service Agreement
between the Registrant and Investors Bank & Trust Company
with respect to Standish Small Capitalization Equity Fund
II**

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

(9E) Revised Exhibit A to Master Administration Agreement
between the Registrant and Investors Bank & Trust Company
with respect to Standish Equity Asset Fund, Standish Small
Capitalization Equity Asset Fund, Standish Fixed Income
Asset Fund and Standish Global Fixed Income Asset Fund**

(9F) Revised Exhibit A to Master Administration Agreement
between the Registrant and Investors Bank & Trust Company
with respect to Standish Small Capitalization Equity Fund
II**

(9G) Form of Administrative Services Agreement between Standish,
Ayer & Wood, Inc. and the Registrant on behalf of Standish
Fixed Income Fund, Standish Equity Fund, Standish Small Cap
Equity Fund and Standish Global Fixed Income Fund**

C-4

<PAGE>

(9H) Revised Exhibit A to Administrative Services Agreement
between Standish, Ayer & Wood, Inc. and the Registrant with
respect to Standish Equity Asset Fund, Standish Small
Capitalization Equity Asset Fund, Standish Fixed Income
Asset Fund and Standish Global Fixed Income Asset Fund**

(9I) Revised Exhibit A to Administrative Services Agreement
between Standish, Ayer & Wood, Inc. and the Registrant on
behalf of Standish Small Capitalization Equity Fund II**

(9J) Revised Exhibit A to Master Administration Agreement
between the Registrant and Investors Bank & Trust Company
with respect to Standish Small Capitalization Equity Asset
Fund II, Standish Diversified Income Fund, Standish
Diversified Income Asset Fund***

(9K) Revised Exhibit A to Administrative Services Agreement
between Standish, Ayer & Wood, Inc. and the Registrant on
behalf of Standish Small Capitalization Equity Asset Fund
II, Standish Diversified Income Fund, Standish Diversified
Income Asset Fund***

(10A) Opinion and Consent of Counsel for Standish Fixed Income
Fund**

(10B) Opinion and Consent of Counsel for Standish Securitized
Fund**

(10C) Opinion and Consent of Counsel for Standish Short-Term
Asset Reserve Fund**

(10D) Opinion and Consent of Counsel for Standish Small
Capitalization Equity Fund (formerly Standish Marathon
Fund)**

(10E) Opinion and Consent of Counsel for Standish Equity Fund**

(10F) Opinion and Consent of Counsel for Standish International
Fixed Income Fund**

(10G) Opinion and Consent of Counsel for Standish Intermediate
Tax Exempt Bond Fund**

(10H) Opinion and Consent of Counsel for Standish Massachusetts
Intermediate Tax Exempt Bond Fund**

(10I) Opinion and Consent of Counsel for Standish Global Fixed
Income Fund**

C-5

<PAGE>

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

(11) Not applicable

(12) Not applicable

(13) Form of Initial Capital Agreement between the Registrant
and Standish, Ayer & Wood, Inc.**

(14) Not applicable

(15) Not applicable

(16) Performance Calculations**

(17) Not applicable

(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 Portfolio Trust (Richard S. Wood)**

(19J) 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)**

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

C-6

<PAGE>

** 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
-------------------------------

Set forth below is the number of record holders, as of February 1,
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 481
Standish Securitized Fund 12
Standish Short-Term Asset
Reserve Fund 91
Standish International Fixed
Income Fund 200
Standish Global Fixed Income Fund 47
Standish Equity Fund 142
Standish Small Capitalization
Equity Fund 418
Standish Massachusetts Intermediate
Tax Exempt Bond Fund 90
Standish Intermediate Tax Exempt
Bond Fund 113
Standish International Equity Fund 188
Standish Controlled Maturity Fund 17
Standish Fixed Income Fund II 4
Standish Small Cap Tax-Sensitive
Equity Fund 123
Standish Tax-Sensitive Equity Fund 62
Standish Equity Asset Fund 0
Standish Small Capitalization

C-7

<PAGE>

Equity Asset Fund 0
Standish Fixed Income Asset Fund 0
Standish Global Fixed Income Asset Fund 0
Standish Small Capitalization Equity Fund II 23
Standish Small Capitalization Equity
Asset Fund II 0
Standish Diversified Income Fund 0

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 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

C-8

<PAGE>

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;

(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

C-9

<PAGE>

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.

(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, Standish Small Capitalization Equity
Asset Fund II, Standish Diversified Income Fund and
Standish Diversified Income Asset 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-10

<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 1st day of March, 1997.

STANDISH, AYER & WOOD
INVESTMENT TRUST

/s/James E. Hollis III
---------------------------------
James E. Hollis, III, 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-11

<PAGE>

Signature Title Date

Richard S. Wood* Trustee and President March 1, 1997
- ------------------------ (principal executive officer)
Richard S. Wood

James E. Hollis, III* Treasurer (principal March 1, 1997
- ------------------------ financial and accounting
James E. Hollis, III officer) and Secretary

D. Barr Clayson* Trustee March 1, 1997
- ------------------------
D. Barr Clayson

Samuel C. Fleming* Trustee March 1, 1997
- ------------------------
Samuel C. Fleming

Benjamin M. Friedman* Trustee March 1, 1997
- ------------------------
Benjamin M. Friedman

John H. Hewitt* Trustee March 1, 1997
- ------------------------
John H. Hewitt

Edward H. Ladd* Trustee March 1, 1997
- ------------------------
Edward H. Ladd

Caleb Loring III* Trustee March 1, 1997
- ------------------------
Caleb Loring III

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

C-12

<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, outside the United States on the 1st day of March,
1997.

STANDISH, AYER & WOOD
MASTER PORTFOLIO

/s/Richard S. Wood, President
---------------------------------
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 outside the United States by the following
persons in their capacities with Standish, Ayer & Wood Master Portfolio and on
the date indicated.

Signature Title Date

Richard S. Wood* Trustee and President March 1, 1997
- ---------------------- (principal executive
Richard S. Wood officer)

James E. Hollis, III* Treasurer (principal March 1, 1997
- ----------------------- financial and accounting
James E. Hollis, III officer) and Secretary

D. Barr Clayson* Trustee March 1, 1997
- ------------------------
D. Barr Clayson

Samuel C. Fleming* Trustee March 1, 1997
- ------------------------
Samuel C. Fleming

Benjamin M. Friedman* Trustee March 1, 1997
- ------------------------
Benjamin M. Friedman

C-13

<PAGE>

John H. Hewitt* Trustee March 1, 1997
- ------------------------
John H. Hewitt

Edward H. Ladd* Trustee March 1, 1997
- ------------------------
Edward H. Ladd

Caleb Loring III* Trustee March 1, 1997
- ------------------------
Caleb Loring III

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

C-14

<PAGE>

EXHIBIT INDEX

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

(9D) Revised Exhibit A to Transfer Agency and Service Agreement
between the Registrant and Investors Bank & Trust Company
with respect to Standish Small Capitalization Equity Asset
Fund II, Standish Diversified Income Fund, Standish
Diversified Income Asset Fund

STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, Massachusetts 02111

Certificate of Designation
--------------------------

The undersigned, being a Vice President of Standish, Ayer & Wood
Investment Trust (the "Trust"), a trust with transferable shares of the type
commonly called a Massachusetts business trust, DOES HEREBY CERTIFY that,
pursuant to the authority conferred upon the Trustees of the Trust by Section
6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated August
13, 1986, as amended (as so amended, the "Declaration of Trust"), and by the
affirmative vote of a Majority of the Trustees at a meeting duly called and held
on February 28 and March 1, 1997 the Declaration of Trust is amended as set
forth in this Certificate of Designation.

A. There is hereby established and designated three additional Series
of the Trust: "Standish Small Capitalization Equity Asset Fund II," "Standish
Diversified Income Fund" and "Standish Diversified Income Asset Fund." Each such
series is referred to herein as the "Fund."

B. The beneficial interest in the Fund shall be divided into Shares
having a nominal or par value of one cent ($.01) per Share, of which an
unlimited number may be issued, which Shares shall represent interests only in
the Fund. The Shares of the Fund shall have the following rights and
preferences:

1. Assets Belonging to the Fund. Any portion of the Trust
Property allocated to the Fund, and all consideration received by the
Trust for the issue or sale of Shares of the Fund, together with all
assets in which such consideration is invested or reinvested, all
interest, dividends, income, earnings profits and gains therefrom,
and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the
same may be, shall be held by the Trustees in trust for the benefit
of the holders of Shares of the Fund and shall irrevocably belong to
the Fund for all purposes, and shall be so recorded upon the books of
account of the Trust, and the Shareholders of any other Fund who are
not Shareholders of the Fund shall not have, and shall be
conclusively deemed to have waived, any claims to the assets of the
Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General
Items allocated to the Fund as provided in the following sentence,
are herein referred to collectively as "Fund-Assets" of the Fund, and
as assets "belonging to" the Fund. In the event that there are any
assets, income, earnings, profits and proceeds thereof, funds, or
payments which are not readily identifiable as belonging to any
particular Fund (collectively "General Items"), the Trustees shall
allocate such General Items to and among any one

-1-

<PAGE>

or more of the Funds established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem
fair and equitable; and any General Items so allocated to the Fund
shall belong to and be part of the Fund Assets of the Fund. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all the Funds for all purposes.

2. Liabilities of the Fund. The assets belonging to the
Fund shall be charged with the liabilities in respect of the Fund and
all expenses, costs, charges and reserves attributable to the Fund,
and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as pertaining to any
particular Fund shall be allocated and charged by the Trustees to and
among any one or more of the Funds established and designated from
time to time in such manner and on such basis as the Trustees in
their sole discretion deem fair and equitable. The indebtedness,
expenses, costs, charges and reserves allocated and so charged to the
Fund are herein referred to as "liabilities of" the Fund. Each
allocation of liabilities, expenses, costs, charges and reserves by
the Trustees shall be conclusive and binding upon the Shareholders of
all the Funds or all purposes. Any creditor of the Fund may look only
to the assets of the Fund to satisfy such creditor's debt.

3. Dividends. Dividends and distributions on Shares of the
Fund may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees
may determine, to the Shareholders of the Fund, from such of the
income, accrued or realized, and capital gains, realized or
unrealized, and out of the assets belonging to the Fund, as the
Trustees may determine, after providing for actual and accrued
liabilities of the Fund. All dividends and distributions on Shares of
the Fund shall be distributed pro rata to the Shareholders of the
Fund in proportion to the number of such Shares held by such holders
at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may
determine that no dividend or distribution shall be payable on Shares
as to which the Shareholder's purchase order and/or payment have not
been receive by the time or times established by the Trustees under
such program or procedure, or that dividends or distributions shall
be payable on Shares which have been tendered by the holder thereof
for redemption or repurchase, but the redemption or repurchase
proceeds of which have not yet been paid to such Shareholder. Such
dividends and distributions may be made in cash or Shares of the Fund
or a combination thereof as determined by the Trustees, or pursuant
to any program that the Trustees may have in effect at the time for
the election by each Shareholder of the mode of the making of

-2-

<PAGE>

such dividend or distribution to that Shareholder. Any such dividend
or distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with subsection (8) hereof.

4. Liquidation. In the event of the liquidation or
dissolution of the Trust or the liquidation of the Fund, the
Shareholders of the Fund shall be entitled to receive, when and as
declared by the Trustees, the excess of the Fund Assets over the
liabilities of the Fund. The assets so distributable to the
Shareholders of the Fund shall be distributed among such Shareholders
in proportion to the number of Shares of the Fund held by them and
recorded on the books of the Trust. The liquidation of the Fund may
be authorized by vote of a Majority of the Trustees, subject to the
affirmative vote of "a majority of the outstanding voting securities"
of the Fund, as the quoted phrase is defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), determined in
accordance with clause (iii) of the definition of "Majority
Shareholder Vote" in Section 1.4 of the Declaration of Trust.

5. Voting. The Shareholders shall have the voting rights
set forth in or determined under Article 7 of the Declaration of
Trust.

6. Redemption by Shareholder. Each holder of Shares of the
Fund shall have the right at such times as may be permitted by the
Trust to require the Trust to redeem all or any part of his Shares of
the Fund at a redemption price equal to the net asset value per Share
of the Fund next determined in accordance with subsection (8) hereof
after the Shares are properly tendered for redemption; provided, that
the Trustees may from time to time, in their discretion, determine
and impose a fee for such redemption. Payment of the redemption price
shall be in cash; provided, however, that if the Trustees determine,
which determination shall be conclusive, that conditions exist which
make payment wholly in cash unwise or undesirable, the Trust may make
payment wholly or partly in Securities or other assets belonging to
the Fund at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the
Trust may postpone payment of the redemption price and may suspend
the right of the holders of Shares of the Fund to require the Trust
to redeem Shares of the Fund during any period or at any time when
and to the extent permissible under the 1940 Act.

7. Redemption at the Option of the Trust. Each Share of the
Fund shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then
being redeemed by the Shareholder pursuant to subsection (6) hereof:
(i) at any time, if the Trustees determine in their sole discretion
that failure to so redeem may have materially adverse consequences to
the holders of the Shares of the Trust or of any Fund, or (ii) upon
such other conditions with respect to maintenance of

-3-

<PAGE>

Shareholder accounts of a minimum amount as may from time to time be
determined by the Trustees and set forth in the then current
Prospectus of the Fund. Upon such redemption the holders of the
Shares so redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price.

8. Net Asset Value. The net asset value per Share of the
Fund at any time shall be the quotient obtained by dividing the value
of the net assets of the Fund at such time (being the current value
of the assets belonging to the Fund, less its then existing
liabilities) by the total number of Shares of the Fund then
outstanding, all determined in accordance with the methods and
procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time. The Trustees
may determine to maintain the net asset value per Share of the Fund
at a designated constant dollar amount and in connection therewith
may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Fund as
dividends payable in additional Shares of the Fund at the designated
constant dollar amount and for the handling of any losses
attributable to the Fund. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have
contributed to the shares of beneficial interest account of the Fund
his pro rata portion of the total number of Shares required to be
cancelled in order to permit the net asset value per Share of the
Fund to be maintained, after reflecting such loss, at the designated
constant dollar amount. Each Shareholder of the Fund shall be deemed
to have expressly agreed, by his investment in the Fund, to make the
contribution referred to in the preceding sentence in the event of
any such loss.

9. Transfer. All Shares of the Fund shall be transferable,
but transfers of Shares of the Fund will be recorded on the Share
transfer records of the Trust applicable to the Fund only at such
times as Shareholders shall have the right to require the Trust to
redeem Shares of the Fund and at such other times as may be permitted
by the Trustees.

10. Equality. All Shares of the Fund shall represent an
equal proportionate interest in the assets belonging to the Fund
(subject to the liabilities of the Fund), and each Share of the Fund
shall be equal to each other Share thereof; but the provisions of
this sentence shall not restrict any distinctions permissible under
subsection (3) hereof that may exist with respect to dividends and
distributions on Shares of the Fund. The Trustees may from time to
time divide or combine the Shares of the Fund into a greater or
lesser number of Shares of the Fund without thereby changing the
proportionate beneficial interest in the assets belonging to the Fund
or in any way affecting the rights of the holders of Shares of any
other Fund.

-4-

<PAGE>

11. Rights of Fractional Shares. Any fractional Share of
any Series shall carry proportionately all the rights and obligations
of a whole Share of that Series, including rights and obligation with
respect to voting, receipt of dividends and distributions, redemption
of Shares, and liquidation of the Trust or of the Fund.

12. Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority
to provide that holders of Shares of the Fund shall have the right to
convert said Shares into Shares of one or more other Funds in
accordance with such requirements and procedures as the Trustees may
establish.

13. Master/Feeder. Notwithstanding any other provisions
herein or in the Declaration of Trust as applicable to the Fund, the
Trustees shall have full power in their discretion, without any
requirement of approval by shareholders of the Fund, to invest part
or all of the Fund Assets, or to dispose of parts or all of the Fund
Assets and invest the proceeds of such disposition, in securities
issued by one or more other investment companies registered under the
1940 Act. Any such other investment company may (but need not) be a
trust (formed under the laws of the Commonwealth of Massachusetts any
other state or jurisdiction) which is classified as a partnership for
Federal income tax purposes.

14. Amendment, etc. Subject to the provisions and
limitations of Section 9.3 of the Declaration of Trust and applicable
law, this Certificate of Designation may be amended by an instrument
signed in writing by a Majority of the Trustees (or by an officer of
the Trust pursuant to the Vote of a Majority of the Trustees),
provided that, if any amendment adversely affects the rights of the
Shareholders of the Fund, such amendment may be adopted by an
instrument signed in writing by a Majority of the Trustees (or by an
officer of the Trust pursuant to the vote of a Majority of the
Trustees) when authorized to do so by the vote in accordance with
Section 7.1 of the Declaration of Trust of the holders of a majority
of all the Shares of the Fund outstanding and entitled to vote,
without regard to the other Series.

15. Incorporation of Defined Terms. All capitalized terms
which are not defined herein shall have the same meanings as are
assigned to those terms in the Declaration of Trust filed with the
Secretary of State of The Commonwealth of Massachusetts.

The Trustees further direct that, upon the execution of this
Certificate of Designation, the Trust take all necessary action to file a copy
of this Certificate of Designation with the Secretary of State of The
Commonwealth of Massachusetts and at any other place required by law or by the
Declaration of Trust.

-5-

<PAGE>

IN WITNESS WHEREOF, the undersigned has set his hand and seal this
13th day of March, 1997.

By: /s/ Anne P. Herrmann
--------------------------
Its: Vice President

-6-

<PAGE>

ACKNOWLEDGMENT
--------------

M A S S A C H U S E T T S

SUFFOLK, SS.: March 13, 1997

Then personally appeared the above-named Vice President of Standish,
Ayer & Wood Investment Trust and acknowledged the foregoing instrument to be his
free act and deed.

Before me,

/s/Rosalin J. Lillo
------------------------------
Notary Public

My commission expires: May 4, 2001

-7-

STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, MA 02111

March 14, 1997

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

Re: Underwriting Agreement (the "Agreement")
----------------------------------------

Ladies and Gentlemen:

Attached is an amendment to Exhibit A (the "Amendment") to the Agreement between
Standish, Ayer & Wood Investment Trust (the "Trust") and you. Pursuant to ss.9
of the Agreement, the Trust proposes that the Agreement be amended to include
three additional series of the Trust named in the Amendment in bold.

Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two to the Trust and retaining two for your
records.

Very truly yours,

Standish, Ayer & Wood Standish Fund Distributors, L.P.
Investment Trust

By: /s/ Anne P. Herrmann By: /s/ Beverly E. Banfield
- ---------------------------- --------------------------------
Name: Ms. Anne P. Herrmann Name: Ms. Beverly E. Banfield
Title: Secretary Title: Chief Operating Officer

<PAGE>

UNDERWRITING AGREEMENT
EXHIBIT A

(Revised March 14, 1997)

Funds:

1. Standish Intermediate Tax Exempt Bond Fund
2. Standish Small Cap Tax-Sensitive Equity Fund
3. Standish Tax-Sensitive Equity Fund

Effective: February 22, 1996

Funds:

4. Standish Equity Fund
5. Standish Fixed Income Fund
6. Standish Global Fixed Income Fund
7. Standish Small Capitalization Equity Fund

Effective: April 29, 1996

Funds:

8. Standish Controlled Maturity Fund
9. Standish Fixed Income Fund II
10. Standish International Fixed Income Fund
11. Standish International Equity Fund
12. Standish Massachusetts Intermediate Tax Exempt Bond Fund
13. Standish Securitized Fund
14. Standish Short-Term Asset Reserve Fund

Effective: May 1, 1996

Funds:

15. Standish Equity Asset Fund
16. Standish Fixed Income Asset Fund
17. Standish Global Fixed Income Asset Fund
18. Standish Small Capitalization Equity Asset Fund

Effective: June 26, 1996

<PAGE>

Funds:

19. Standish Small Capitalization Equity Fund II

Effective: October 5, 1996

Funds:

20. Standish Small Capitalization Equity Asset Fund II
21. Standish Diversified Income Fund
22. Standish Diversified Income Asset Fund

Effective: March 14, 1997

STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, MA 02111

March 14, 1997

Investors Bank & Trust Company
89 South Street
Boston, MA 02111

Re: Master Custody Agreement (the "Agreement")
------------------------------------------

Ladies and Gentlemen:

Attached is an amendment to Appendix A (the "Amendment") to the Agreement
between Standish, Ayer & Wood Investment Trust (the "Trust") and you. Pursuant
to ss.17 of the Agreement, the Trust proposes that the Agreement be amended to
include three additional series of the Trust named in the Amendment in bold.

Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two to the Trust and retaining two for your
records.

Very truly yours,

Standish, Ayer & Wood Investors Bank & Trust Company
Investment Trust

By: /s/ Anne P. Herrmann By: /s/ James Keenan
- ------------------------- -------------------------
Name: Ms. Anne P. Herrmann Name: Mr. James Keenan
Title: Secretary Title:

<PAGE>

MASTER CUSTODY AGREEMENT
APPENDIX A

(Revised March 14, 1997)

Standish Massachusetts Intermediate Tax Exempt Bond Fund
Standish Intermediate Tax Exempt Bond Fund
Standish International Fixed Income Fund
Standish Fixed Income Fund
Standish Short-Term Asset Reserve Fund
Standish Equity Fund
Standish Small Capitalization Equity Fund
Standish Securitized Fund
Standish Global Fixed Income Fund
Standish Controlled Maturity Fund
Standish Fixed Income Fund II
Standish Tax-Sensitive Equity Fund
Standish Small Cap Tax-Sensitive Equity Fund
Standish Equity Asset Fund
Standish Global Fixed Income Asset Fund
Standish Fixed Income Asset Fund
Standish Small Capitalization Equity Asset Fund
Standish Small Capitalization Equity Fund II
Standish Small Capitalization Equity Asset Fund II
Standish Diversified Income Fund
Standish Diversified Income Asset Fund

Standish International Equity Fund*

*Fund accounting services only.

STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, MA 02111

March 14, 1997

Investors Bank & Trust Company
89 South Street
Boston, MA 02111

Re: Transfer Agency and Service Agreement (the "Agreement")
-------------------------------------------------------

Ladies and Gentlemen:

Attached is an amendment to Appendix A (the "Amendment") to the Agreement
between Standish, Ayer & Wood Investment Trust (the "Trust") and you. Pursuant
to Article XVII, ss.17.01 of the Agreement, the Trust proposes that the
Agreement be amended to include three additional series of the Trust named in
the Amendment in bold.

Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two to the Trust and retaining two for your
records.

Very truly yours,

Standish, Ayer & Wood Investors Bank & Trust Company
Investment Trust

By: /s/ Anne P. Herrmann By: /s/ James Keenan
- ------------------------- -------------------------
Name: Ms. Anne P. Herrmann Name: Mr. James Keenan
Title: Secretary Title:

<PAGE>

TRANSFER AGENCY AND SERVICE AGREEMENT
APPENDIX A

(Revised March 14, 1997)

STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, MA 02111

March 14, 1997

Investors Bank & Trust Company
89 South Street
Boston, MA 02111

Re: Master Administration Agreement (the "Agreement")
-------------------------------------------------

Ladies and Gentlemen:

Attached is an amendment to Appendix A (the "Amendment") to the Agreement
between Standish, Ayer & Wood Investment Trust (the "Trust") and you. The Trust
proposes that the Agreement be amended to include three additional series of the
Trust named in the Amendment in bold.

Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two to the Trust and retaining two for your
records.

Very truly yours,

Standish, Ayer & Wood Investors Bank & Trust Company
Investment Trust

By: /s/ Anne P. Herrmann By: /s/ James Keenan
- ------------------------- -------------------------
Name: Ms. Anne P. Herrmann Name: Mr. James Keenan
Title: Secretary Title:

<PAGE>

APPENDIX A

(Revised March 14, 1997)

MASTER ADMINISTRATION AGREEMENT
between
STANDISH, AYER & WOOD INVESTMENT TRUST
and
INVESTORS BANK & TRUST COMPANY

Standish Massachusetts Intermediate Tax Exempt Bond Fund
Standish Intermediate Tax Exempt Bond Fund
Standish International Fixed Income Fund
Standish Fixed Income Fund
Standish Short-Term Asset Reserve Fund
Standish Equity Fund
Standish Small Capitalization Equity Fund
Standish Securitized Fund
Standish Global Fixed Income Fund
Standish Controlled Maturity Fund
Standish Fixed Income Fund II
Standish International Equity fund
Standish Tax-Sensitive Equity Fund
Standish Small Cap Tax-Sensitive Equity Fund
Standish Equity Asset Fund
Standish Global Fixed Income Asset Fund
Standish Fixed Income Asset Fund
Standish Small Capitalization Equity Asset Fund
Standish Small Capitalization Equity Fund II
Standish Small Capitalization Equity Asset Fund II
Standish Diversified Income Fund
Standish Diversified Income Asset Fund

STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, MA 02111

March 14, 1997

Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111

Re: Administrative Services Agreement (the "Agreement")
---------------------------------------------------

Ladies and Gentlemen:

Attached is an amendment to Exhibit A (the "Amendment") to the Agreement between
Standish, Ayer & Wood Investment Trust (the "Trust") and you. Pursuant to ss.8
of the Agreement, the Trust proposes that the Agreement be amended to include
three additional series of the Trust named in the Amendment in bold.

Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two to the Trust and retaining two for your
records.

Very truly yours,

Standish, Ayer & Wood Standish, Ayer & Wood, Inc.
Investment Trust

By: /s/ Anne P. Herrmann By: /s/ James E. Hollis III
- ------------------------- ----------------------------
Name: Ms. Anne P. Herrmann Name: Mr. James E. Hollis III
Title: Secretary Title: Vice President

<PAGE>

ADMINISTRATIVE SERVICES AGREEMENT
EXHIBIT A

FUNDS

(Revised March 14, 1997)

1. Standish Equity Fund
2. Standish Global Fixed Income Fund
3. Standish Fixed Income Fund
4. Standish Small Capitalization Equity Fund
5. Standish Equity Asset Fund
6. Standish Global Fixed Income Asset Fund
7. Standish Fixed Income Asset Fund
8. Standish Small Capitalization Equity Asset Fund
9. Standish Small Capitalization Equity Fund II
10. Standish Small Capitalization Equity Asset Fund II
11. Standish Diversified Income Fund
12. Standish Diversified Income Asset Fund