FRIENDS IVORY & SIME FUNDS, N-1A, 1999-10-01

FRIENDS IVORY & SIME FUNDS
N-1A, 1999-10-01

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1999

FILE NO.
FILE NO.

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

and

REGISTRATION STATEMENT UNDER THE
INVESTMENT ACT OF 1940

FRIENDS IVORY & SIME FUNDS
(Exact Name of Registrant as Specified in Charter)

THE CORPORATION TRUST COMPANY
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801, COUNTY OF NEW CASTLE
(Name and Address of Agent for Service)

Copies to:

GEORGE WALKER JOHN H. GRADY, Jr., ESQUIRE
Friends Ivory & Sime, Inc. Morgan, Lewis & Bockius LLP
One World Trade Center 1701 Market Street
Suite 2101 Philadelphia, PA 19103
New York, NY 10048

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

/X/ Approximate date of Proposed Public Offering:
As soon as practicable after the
effective date of this Registration Statement

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

Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.

<PAGE>

FRIENDS IVORY & SIME FUNDS

INSTITUTIONAL SHARES AND RETAIL SHARES

PROSPECTUS
_________, 1999

ETHICAL U.S. EQUITY FUND
ETHICAL EUROPEAN EQUITY FUND

INVESTMENT ADVISER
FRIENDS IVORY & SIME, INC.

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

Page 1 of 21
<PAGE>

ABOUT THIS PROSPECTUS

Friends Ivory & Sime Funds is a mutual fund family that offers different classes
of shares in separate socially responsible investment portfolios (Funds). The
Funds have individual investment goals and strategies. This prospectus gives you
important information about the Institutional Shares and Retail Shares of the
Funds that you should know before investing. Please read this prospectus and
keep it for future reference.

Institutional Shares and Retail Shares have different expenses and other
characteristics. Before investing, you should consider the amount you want to
invest, how long you plan to have it invested, and whether you plan to make
additional investments.

INSTITUTIONAL SHARES
- NO SALES CHARGE
- NO 12b-1 OR SHAREHOLDER FEES
- $250,000 MINIMUM INITIAL INVESTMENT

RETAIL SHARES
- NO SALES CHARGE
- 12b-1/SHAREHOLDER FEES
- $5,000 MINIMUM INITIAL INVESTMENT

THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO THE FUNDS.
FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE:

Page
ETHICAL U.S. EQUITY FUND.........................................XXX
ETHICAL EUROPEAN EQUITY FUND.....................................XXX
MORE INFORMATION ABOUT RISK......................................XXX
MORE INFORMATION ABOUT FUND INVESTMENTS..........................XXX
THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS....................XXX
PURCHASING, SELLING AND EXCHANGING FUND SHARES...................XXX
DIVIDENDS AND DISTRIBUTIONS......................................XXX
TAXES............................................................XXX
FINANCIAL HIGHLIGHTS.............................................XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
FRIENDS IVORY & SIME FUNDS.....................................Back Cover

FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR [VAR:KEYTERMS.DESC].

Page 2 of 21
<PAGE>

RISK/RETURN INFORMATION COMMON TO THE FUNDS

Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using a
professional investment manager, invests it in securities.

Each Fund has its own investment goal and strategies for reaching that goal. The
investment manager invests Fund assets in a way that it believes will help a
Fund achieve its goal. Still, investing in each Fund involves risk and there is
no guarantee that a Fund will achieve its goal. The investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In addition, the Funds' bias
toward investing in socially responsible companies may cause them to
underperform funds that operate without such constraints. In fact, no matter how
good a job the investment manager does, you could lose money on your investment
in the Fund, just as you could with other investments. A Fund share is not a
bank deposit and it is not insured or guaranteed by the FDIC or any government
agency.

The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities a Fund owns and the markets in which they trade. The
effect on a Fund of a change in the value of a single security will depend on
how widely the Fund diversifies its holdings.

- --------------------------------------------------------------------------------
FRIENDS IVORY & SIME'S APPROACH TO ETHICAL INVESTING:
The Funds' investment manager, Friends Ivory & Sime, Inc., utilizes an
investment approach that extends beyond the traditional obligation to safeguard
return to include the use of money in a socially responsible manner. Friends
Ivory & Sime's approach to socially responsible investing makes use of a
screening process referred to as a positive social screen. The investment
process results in a list of companies that, in the view of the Funds' managers,
will both meet their stated financial and investment criteria and provide
quality products that enhance or sustain society or the environment, pursue
diversity and progressive employment practices, protect the environment, and
demonstrate corporate accountability. The investment process also filters out
companies engaged in military contracting, environmental damage or pollution,
nuclear power and promoting tobacco, alcohol or gambling. Friends Ivory & Sime's
ethical research staff has developed and continually updates the social
screening criteria and ensures that each individual investment complies.
- --------------------------------------------------------------------------------

Page 3 of 21
<PAGE>

ETHICAL U.S. EQUITY FUND

FUND SUMMARY

INVESTMENT GOAL Long-term capital growth

INVESTMENT FOCUS U.S. common stocks

SHARE PRICE VOLATILITY Medium

PRINCIPAL INVESTMENT STRATEGY Purchasing primarily stocks of large,
well-established companies with
above-average growth potential that
meet the Fund's ethical policy criteria

INVESTOR PROFILE Investors who can withstand the share
price volatility associated with equity
fund investing, and who want ethical
factors to play a role in their investment
portfolio

INVESTMENT STRATEGY

The Ethical U.S. Equity Fund invests primarily in common stocks issued by
large, well-established U.S. companies that the Fund's investment manager,
Friends Ivory & Sime, Inc., believes have above-average growth potential
and that meet the Fund's ethical screening criteria. The portfolio will be
diversified across various industries and among eligible issuers.

The investment manager initially screens companies using core growth
oriented investing criteria. It looks for companies which:

- are expected to sustain above average growth in earnings per share;

- the outlook for business is improving; and

- are expected to demonstrate above average consistency in the
progression of earnings per share.

ETHICAL POLICIES

Among the companies that meet these investment criteria, the investment
manager's ethical research staff then searches out those companies whose
products and services deliver real benefits to society or the natural
environment, and whose practices demonstrate a commitment to corporate
responsibility and shareholder dialogue. Such companies will typically have
the following characteristics:

ENVIRONMENTAL CONCERN - The investment manager will favor companies which
produce environmentally responsible products and which demonstrate a
commitment to environmental responsibility, high quality environmental
reporting and environmental management systems (EMS). The investment
manager will also encourage companies which operate in high
environmental-impact sectors to achieve high standards of environmental
reporting.

Page 4 of 21
<PAGE>

SOCIALLY/ENVIRONMENTALLY RESPONSIBLE PRODUCTS - The investment manager will
favor companies whose products or services enhance or sustain our society
or the natural environment.

EQUAL OPPORTUNITY/DIVERSITY - The investment manager will favor companies
that have demonstrated a commitment to employee welfare, and will encourage
companies to adopt policies and practices that support this commitment. The
investment manager will also seek to invest in companies which foster
diversity in the workplace at all levels, and guarantee equal
opportunities in terms of gender, ethnic origin and sexual orientation in
hiring, promotion and purchasing from and subcontracting with outside
vendors.

The investment manager will also focus on companies which embody good
corporate citizenship practices and which do not derive more than 4% of
their revenues from businesses relating to alcohol, tobacco, gambling,
military or weapons, pornography or nuclear power.

Stocks may be sold if they no longer meet the investment manager's ethical
criteria, experience fundamental change in the investment outlook, no
longer meet the Fund's ethical criteria, or if a better investment
opportunity arises.

The Fund has the ability to change the above ethical criteria as
circumstances change without shareholder approval, but does not currently
intend to do so.
***
PRINCIPAL RISKS OF INVESTING IN THE ETHICAL U.S. EQUITY FUND

EQUITY RISK - Since it purchases equity securities, the Fund is subject to
the risk that stock prices will fall over short or extended periods of
time. Historically, the equity markets have moved in cycles, and the value
of the Fund's securities may fluctuate significantly from day to day.
Individual companies may report poor results or be negatively affected by
industry and/or economic trends and developments. The prices of securities
issued by such companies may suffer a decline in response. These factors
contribute to price volatility, which is the principal risk of investing in
the Fund.

ETHICAL INVESTING RISK - The Fund's ethical standards will bar the Fund
from investing in certain types of companies. As a result, the Fund may
miss opportunities to invest in certain companies that are providing
superior performance to the market as a whole. While these consequences may
at times adversely affect Fund performance when compared to broad market
indices or to similar funds managed without similar ethical investment
constraints, the Fund may outperform these market indices and other funds
over certain time periods.

INVESTMENT STYLE RISK - The manager's investment approach favors
growth-oriented companies. Stocks of growth-oriented companies may
underperform stocks of other types of companies (e.g., "value" stocks),
during a given period. Also, the Fund will have an investment focus on
large capitalization companies, and the stocks of such companies may
underperform those issued by smaller entities. As a result, the Fund may
underperform funds with a value investing tilt or with a bias to smaller or
mid-sized companies. The Fund is also subject to the risk that U.S. equity
securities may underperform other segments of the world equity markets.

Page 5 of 21
<PAGE>

PERFORMANCE INFORMATION

The information set forth below represents the performance of the Adviser's
similarly managed separate account. This past performance has been adjusted
to reflect current expenses for the Institutional Shares of the Fund.
Institutional Shares have different expenses than the separate account,
which will result in different performance. The Adviser's separate account
was not a registered mutual fund, so it was not subject to the same
investment and tax restrictions as the Fund. If it had been, the separate
account's performance may have been lower.

The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, past performance does
not necessarily indicate how the Fund will perform in the future.

This bar chart shows changes in the performance of the Fund's predecessor
separate account from year to year for 2 years.

1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)

THIS TABLE COMPARES THE PREDECESSOR SEPARATE ACCOUNT'S AVERAGE ANNUAL TOTAL
RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE STANDARD &
POOR'S 500 COMPOSITE INDEX.

<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
------------------------------------------------------------------------------------------------------
<S> <C> <C>
ETHICAL U.S. EQUITY FUND - INSTITUTIONAL SHARES X.XX% X.XX%*

STANDARD & POOR'S 500 COMPOSITE INDEX X.XX% X.XX%**
</TABLE>

* The separate account commenced operations on ________.
** Since _______.

WHAT IS AN INDEX?

An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest
directly in an index. Unlike a mutual fund, an index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The S&P 500 Composite
Index is a widely-recognized, market value-weighted (higher market value
stocks have more influence than lower market value stocks) index of 500
stocks designed to mimic the overall equity market's industry weightings.

Page 6 of 21
<PAGE>

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD FUND SHARES.

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
INSTITUTIONAL SHARES RETAIL SHARES
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees x.xx% x.xx%
Distribution (12b-1) Fees x.xx% x.xx%
Other Expenses x.xx%* x.xx%*
------ ------
Total Annual Fund Operating Expenses x.xx%** x.xx%**

-------------------------------------------------------------------------------------------------------------
</TABLE>

* Based on estimated expenses for the current year.
** The Fund's total actual annual fund operating expenses are
expected to be less than the amount shown above because the
< ** Adviser/Administrator/Distributor ** > intends to waive a portion of
the fees in order to keep total operating expenses at a specified level.
The < ** Adviser/Administrator/Distributor ** > may discontinue all or part
of these waivers at any time. With these fee waivers, the Fund's actual
total operating expenses are expected to be as follows:

Ethical U.S. Equity Fund -- Institutional Shares X.XX%
Ethical U.S. Equity Fund -- Retail Shares X.XX%

For more information about these fees, see "Investment Adviser and
Sub-Adviser" and "Distribution of Fund Shares."

EXAMPLE

This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and that
you sell your shares at the end of the period.

The Example also assumes that each year your investment has a 5% return,
Fund operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different,
your approximate costs of investing $10,000 in the Fund would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
INSTITUTIONAL SHARES $XXX $XXX
RETAIL SHARES $XXX $XXX
</TABLE>

Page 7 of 21
<PAGE>

ETHICAL EUROPEAN EQUITY FUND

FUND SUMMARY

INVESTMENT GOAL Long-term capital growth

INVESTMENT FOCUS European common stocks

SHARE PRICE VOLATILITY Medium

PRINCIPAL INVESTMENT STRATEGY Purchasing stocks of large,
well-established European companies with
above-average growth potential that meet
the Fund's ethical policy criteria

INVESTOR PROFILE Investors who can withstand the share
price volatility associated with
international equity fund investing and
who want ethical factors to play a role
in their investment portfolio

INVESTMENT STRATEGY
***
The Ethical European Equity Fund invests primarily in common stocks issued
by large, well-established European companies that the Fund's investment
manager, Friends Ivory & Sime plc believes have above-average growth
potential and that meet the Fund's ethical screening criteria. The
portfolio will be diversified across various industries and among eligible
issuers.

The Fund seeks to reduce risk by diversifying the Fund's portfolio across
countries, issuers and industries. The manager will focus on stocks of
companies located in the more developed European markets, including
Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
Netherlands, Portugal, Spain, Sweden, Switzerland and the United Kingdom,
and may invest in some emerging market issuers.

The investment manager initially screens companies using core growth
oriented investing criteria. It looks for companies which:

- are expected to sustain above average growth in earnings per share;

- the outlook for the business is improving; and

- are expected to demonstrate above average consistency in the
progression of earnings per share.

ETHICAL POLICIES

Among the companies that meet these investment criteria, the sub-adviser's
ethical research team then searches out those companies whose products and
services deliver real benefits to society or the natural environment, and
whose practices demonstrate a commitment to corporate

Page 8 of 21
<PAGE>

responsibility and shareholder dialogue. Such companies will typically have
the following characteristics:

ENVIRONMENTAL CONCERN - The investment manager will favor companies which
produce environmentally responsible products and which demonstrate a
commitment to environmental responsibility, high quality environmental
reporting and environmental management systems (EMS). The investment
manager will also focus on companies which operate in high
environmental-impact sectors to achieve high standards of environmental
reporting and EMS.

SOCIALLY/ENVIRONMENTALLY RESPONSIBLE PRODUCTS - The investment manager will
favor companies whose products or services enhance or sustain our society
or the natural environment.

EQUAL OPPORTUNITY/DIVERSITY - The investment manager will favor companies
that have demonstrated a commitment to employee welfare, and will encourage
companies to adopt policies and practices that support this commitment. The
investment manager will also seek to invest in companies which fosters
diversity in the workplace at all levels, and guarantee equal
opportunities in terms of gender, ethnic origin and sexual orientation in
hiring, promotion and purchasing from and subcontracting with outside
vendors.

Stocks may be sold if they no longer meet the sub-adviser's ethical
criteria, experience fundamental change in the investment outlook, no
longer meet the Fund's ethical criteria, or if a better investment
opportunity arises.

FOREIGN SECURITY RISKS - Transaction costs in European countries are
generally higher than those in the U.S., and expenses for custodial
arrangements of foreign securities may be somewhat

Page 9 of 21
<PAGE>

greater than typical expenses for custodial arrangements of similar U.S.
securities. Investing in foreign countries poses additional market risks
since political and economic events unique to a country or region will
affect those markets and their issuers. These events will not necessarily
affect the U.S. economy or similar issuers located in the United States.
These various risks will be even greater for investments in emerging market
countries since political turmoil and rapid changes in economic conditions
are more likely to occur in these countries. In addition, the Fund's
investments in foreign countries are generally denominated in a foreign
currency, and changes in the value of those currencies compared to the U.S.
dollar may affect (positively or negatively) the value of the Fund's
investments. These currency movements may happen separately from events
that otherwise affect the value of the security in the issuer's home
country. The Fund at times may attempt to hedge against variations in
foreign exchange rates.

INVESTMENT STYLE RISK - The manager's investment approach favors
growth-oriented companies. Stocks of growth-oriented companies may
underperform stocks of other types of companies (e.g., "value" stocks),
during a given period. Also, the Fund will have an investment focus on
large capitalization companies, and the stocks of such companies may
underperform those issued by smaller entities. As a result, the Fund may
underperform funds with a value investing tilt or with a bias to smaller or
mid-sized companies. The Fund is also subject to the risk that European
equity securities may underperform other segments of the world equity
markets.

PERFORMANCE INFORMATION

As of ________, 1999, the Ethical European Equity Fund had not commenced
operations, and did not have a performance history.

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD FUND SHARES.

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
Institutional Shares Retail Shares
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees x.xx% x.xx%
Distribution (12b-1) Fees x.xx% x.xx%
Other Expenses x.xx%* x.xx%*
------ ------
Total Annual Fund Operating Expenses x.xx%** x.xx%**

----------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ethical European Equity Fund -- Institutional Shares X.XX%
Ethical European Equity Fund -- Retail Shares X.XX%
</TABLE>

For more information about these fees, see "Investment Adviser and
Sub-Adviser" and "Distribution of Fund Shares."

Page 10 of 21
<PAGE>

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
INSTITUTIONAL SHARES $XXX $XXX
RETAIL SHARES $XXX $XXX
</TABLE>

Page 11 of 21
<PAGE>

MORE INFORMATION ABOUT RISK

YEAR 2000 RISK -- The Funds depend on the smooth functioning of computer
systems in almost every aspect of their business. Like other mutual funds,
businesses and individuals around the world, the Funds could be adversely
affected if the computer systems used by their service providers do not
properly process dates on and after January 1, 2000, and distinguish
between the year 2000 and the year 1900. Furthermore, many foreign
countries are not as prepared as the U.S. for the year 2000 transition. As
a result, computer difficulties in foreign markets and with foreign
institutions as a result of the year 2000 may add to the possibility of
losses.

The Funds have asked their mission-critical service providers whether they
expect to have their computer systems adjusted for the year 2000
transition, and have sought and received assurances from such service
providers that they are devoting significant resources to prevent material
adverse consequences to the Funds. While such assurances have been
received, the Funds and their shareholders may experience losses if these
assurances prove to be incorrect or, as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or third
parties, such as custodians, banks, broker-dealers or others with which the
Funds do business.

Page 12 of 21
<PAGE>

MORE INFORMATION ABOUT FUND INVESTMENTS

The investments and strategies described in this prospectus are those that
the Funds use under normal conditions. During unusual economic or market
conditions, or for temporary defensive or liquidity purposes, each Fund may
invest up to 100% of its assets in cash, repurchase agreements and
short-term obligations that would not ordinarily be consistent with a
Fund's objectives. A Fund will do so only if the Adviser believes that the
risk of loss outweighs the opportunity for capital gains. Of course, the
Funds cannot guarantee that any Fund will achieve its investment goal.

In addition to the investments and strategies described in this prospectus,
each Fund also may invest in other securities, use other strategies and
engage in other investment practices. These investments and strategies, as
well as those described in this prospectus, are described in detail in our
Statement of Additional Information.

INVESTMENT ADVISER AND SUB-ADVISER
***
Friends Ivory & Sime, Inc. (the "Adviser"), serves as the Adviser to the
Ethical U.S. Equity Fund and the Ethical European Equity Fund. The Adviser
makes investment decisions for the Ethical U.S. Equity Fund and
continuously reviews, supervises and administers the Fund's investment
program. Friends Ivory & Sime plc (the "Sub-Adviser"), Sub-Adviser to the
Ethical European Equity Fund, makes investment decisions for the assets of
the Fund and administers the Fund's investment program under the
supervision of the Adviser.

The Board of Trustees of Friends Ivory & Sime Funds supervises the Adviser
and Sub-Adviser and establishes policies that the Adviser and Sub-Adviser
follow in their management activities.

As of September 30, 1999, the Adviser had approximately $4.2 billion in
assets under management, and the Sub-Adviser had approximately $52.1
billion in assets under management. For its services to the Funds the
Adviser is entitled to receive investment advisory fees from the Funds as
follows:

<TABLE>
<S> <C>
ETHICAL U.S. EQUITY FUND 0.75%
ETHICAL EUROPEAN EQUITY FUND 0.80%
</TABLE>

The Adviser will compensate the Sub-Adviser out of its advisory fee for the
Ethical European Equity Fund. The Adviser intends to use up to 10% of the
advisory fees it receives from the Funds to support charitable causes.
***
PORTFOLIO MANAGERS

The Ethical U.S. Equity Fund is managed by a team of ____ investment
professionals. The lead manager is Mr. Andrew Pringle. Mr. Pringle has
served as Director & Senior Vice President at Friends Ivory & Sime, Inc.
since __________. He has managed the U.S. ethical equity portfolios at
Friends Ivory & Sime, Inc. since 1996. He has more than twenty years of
investment experience. Prior to joining Friends Ivory & Sime, Inc., Mr.
Pringle served as __________ for Friends Ivory & Sime plc, the parent
company of Friends Ivory & Sime, Inc.

Page 13 of 21
<PAGE>

A committee of 20 investment professionals at the Sub-Adviser manages the
Ethical European Equity Fund. __________________ heads the committee.
Mr./Ms./Mrs. _________________ has _____ years of investment experience,
including _______ with the Sub-Adviser.

THE SUB-ADVISER'S PAST PERFORMANCE

Since ______________, Friends Ivory & Sime plc has managed European equity
accounts using ethical criteria similar to those utilized in managing the
Ethical European Equity Fund.

The following table presents historical performance information for two
composites consisting of the ___________ accounts that are managed by
Friends Ivory & Sime plc in a way that is equivalent in all material
respects as objectives, policies and strategies to how Friends Ivory & Sime
plc will manage the Ethical European Equity Fund. This table also compares
the performance to that of the MSCI European Index, as appropriate. The
computed rates of return include the impact of capital appreciation as well
as the reinvestment of interest and dividends. This data does not indicate
how the Ethical European Equity Fund may perform in the future:

<TABLE>
<CAPTION>
THIRD CALENDAR QUARTER 12 MONTHS, ENDED _____ (INCEPTION) TO
1999 ____/___/99 ___/____/99
<S> <C> <C> <C>
European Composite Gross Performance XX.XX% XX.XX% XX.XX%*
European Composite Net Performance XX.XX% XX.XX% XX.XX%*
MSCI European Performance XX.XX% XX.XX% XX.XX%
</TABLE>

* Annualized

THE MODIFIED BANK ADMINISTRATION INSTITUTE (BAI) METHOD IS USED TO COMPUTE
A TIME WEIGHTED RATE OF RETURN IN ACCORDANCE WITH STANDARDS SET BY THE
ASSOCIATION OF INVESTMENT MANAGEMENT AND RESEARCH (AIMR). THE PERFORMANCE
FIGURES FOR THE SUB-ADVISER'S ACCOUNTS DESCRIBED ABOVE ARE NET OF ADVISORY
FEES AND EXPENSES. THE EFFECT OF DEDUCTING FUND OPERATING EXPENSES ON
ANNUALIZED PERFORMANCE, INCLUDING THE COMPOUNDING EFFECT OVER TIME, MAY BE
SUBSTANTIAL, AND WILL REDUCE THE PERFORMANCE OF THE FUND.

ALL INFORMATION PRESENTED RELIES ON DATA SUPPLIED BY THE SUB-ADVISER AND
STATISTICAL SERVICES, REPORTS OR OTHER SOURCES BELIEVED BY THE TRUST TO BE
RELIABLE. IT HAS NOT BEEN INDEPENDENTLY VERIFIED OR AUDITED BY THE FUND.
***
PURCHASING, SELLING AND EXCHANGING FUND SHARES

This section tells you how to purchase, sell (sometimes called "redeem")
and exchange Institutional Shares and Retail Shares of the Funds.

Institutional and Retail Shares have different expenses and other
characteristics.

INSTITUTIONAL SHARES
- NO SALES CHARGE
- NO 12b-1 OR SHAREHOLDER FEES
- $250,000 MINIMUM INITIAL INVESTMENT

Page 14 of 21
<PAGE>

RETAIL SHARES
- NO SALES CHARGE
- 12b-1 FEES/SHAREHOLDER FEES
- $5,000 MINIMUM INITIAL INVESTMENT

For some investors the minimum initial investment for Institutional Shares
and Retail Shares may be lower.

HOW TO PURCHASE FUND SHARES
***
You may purchase shares directly by:
- Mail
- Telephone
- Wire
- Direct Deposit, or
- Automated Clearing House (ACH).

To purchase shares directly from us, complete and send in the < **
attached/enclosed ** > application. If you need an application or have
questions, please call [VAR:PhoneNumber]. Unless you arrange to pay by wire
or through direct deposit or ACH, write your check, payable in U.S.
dollars, to "Friends Ivory & Sime Funds" and include the name of the
appropriate Fund(s) on the check. A Fund cannot accept third-party checks,
credit cards, credit card checks or cash.

You may also buy shares through accounts with brokers and other
institutions that are authorized to place trades in Fund shares for their
customers. If you invest through an authorized institution, you will have
to follow its procedures which may be different from the procedures for
investing directly. Your broker or institution may charge a fee for its
services, in addition to the fees charged by the Fund. You will also
generally have to address your correspondence or questions regarding a Fund
to your institution.
***
GENERAL INFORMATION

You may purchase shares on any day that the New York Stock Exchange is open
for business (a Business Day).

A Fund may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.

The price per share (the offering price) will be the net asset value per
share (NAV) next determined after a Fund receives your purchase order.

Each Fund calculates its NAV once each Business Day at the
regularly-scheduled close of normal trading on the New York Stock Exchange
(normally, 4:00 p.m., Eastern time). So, for you to receive the current
Business Day's NAV, generally a Fund must receive your purchase order
before each Fund calculates its NAV (generally, 4:00 p.m., Eastern time).

Page 15 of 21
<PAGE>

HOW WE CALCULATE NAV

NAV for one Fund share is the value of that share's portion of the net
assets of the Fund.

In calculating NAV, a Fund generally values its investment portfolio at
market price. If market prices are unavailable or a Fund thinks that they
are unreliable, fair value prices may be determined in good faith using
methods approved by the Board of Trustees.

The Ethical European Equity Fund holds securities that are listed on
foreign exchanges. These securities may trade on weekends or other days
when the Fund does not calculate its NAV. As a result, the market value of
the Fund's investments may change on days when you cannot purchase or sell
Fund shares.

MINIMUM PURCHASES
***
To purchase shares for the first time, you must invest in either Fund at
least:

<TABLE>
<CAPTION>
CLASS DOLLAR AMOUNT
<S> <C>
Institutional $250,000
Retail $5,000
</TABLE>

Your subsequent investments in any Fund must be made in amounts of at least
$< ** minimum.SubsequentInvest ** >.

A Fund may accept investments of smaller amounts for either class of shares
at our discretion.

[VAR:AUTOMATEDTELEPHONE.NAME]

[VAR:AutomatedTelephone.Name] is a telephone activated service that allows
you to transfer money quickly and easily between the Friends Ivory & Sime
Funds and your [VAR:BankAdvisor.Name] bank account(s). To use
[VAR:AutomatedTelephone.Name], you must first contact your
[VAR:Purchasing.Representative.Name] and complete the
[VAR:AutomatedTelephone.Name] application and authorization agreements.
Once you have signed up to use [VAR:AutomatedTelephone.Name], simply call
us at [VAR:PhoneNumber] to complete all of your purchase and redemption
transactions.

SYSTEMATIC INVESTMENT PLAN

If you have a checking or savings account with a bank, you may purchase
Ethical U.S. Equity and Ethical European Equity shares automatically
through regular deductions from your account in amounts of at least
$[VAR:SIP.Minimum] per month.

With a $2,500 minimum initial investment, you may begin regularly scheduled
investments from $100 up to $[SIP.Range.Max] on a monthly basis.

HOW TO SELL YOUR FUND SHARES

Holders of the Funds may sell shares by following the procedures
established when they opened their account or accounts. If you have
questions, call 1-800-___-____.

Page 16 of 21
<PAGE>

If you own your shares directly, you may sell (sometimes called "redeem")
your shares on any Business Day by contacting a Fund directly by mail or
telephone at 1-800-___-____. The minimum amount for telephone redemptions
is $[VAR:Selling.Direct.TelephoneMin].

If you own your shares through an account with a broker or other
institution, contact that broker or institution to sell your shares. Your
broker or institution may charge a fee for its services, in addition to the
fees charged by the Fund.

If you would like to sell $50,000 or more of your shares, please notify the
Fund in writing and include a signature guarantee by a bank or other
financial institution (a notarized signature is not sufficient).

The sale price of each share will be the next NAV determined after the Fund
receives your request.

SYSTEMATIC WITHDRAWAL PLAN

If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange [monthly, quarterly,
semi-annual or] annual automatic withdrawals of at least $100 from any
Fund. The proceeds of each withdrawal will be mailed to you by check or, if
you have a checking or savings account with a bank, electronically
transferred to your account.

RECEIVING YOUR MONEY

Normally, we will send your sale proceeds within seven days after we
receive your request. Your proceeds can be wired to your bank account
(subject to a $10 fee) or sent to you by check. IF YOU RECENTLY PURCHASED
YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE
AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM
YOUR DATE OF PURCHASE).

REDEMPTIONS IN KIND

We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of
the Fund's remaining shareholders) we might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). It is highly unlikely that your
shares would ever be redeemed in kind, but if they were you would probably
have to pay transaction costs to sell the securities distributed to you, as
well as taxes on any capital gains from the sale as with any redemption.

INVOLUNTARY SALES OF YOUR SHARES
***
If your account balance drops below the required minimum you may be
required to sell your shares. The account balance minimums are:

<TABLE>
<CAPTION>
CLASS DOLLAR AMOUNT
<S> <C>
Institutional $100,000
Retail $2,500
</TABLE>

Page 17 of 21
<PAGE>

But, we will always give you at least 60 days' written notice to give you
time to add to your account and avoid the sale of your shares.
***
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

A Fund may suspend your right to sell your shares if the New York Stock
Exchange restricts trading, the SEC declares an emergency or for other
reasons. More information about this is in our Statement of Additional
Information.

HOW TO EXCHANGE YOUR SHARES

You may exchange your shares on any Business Day by contacting us directly
by mail or telephone.

You may [VAR:_also] exchange shares through your financial institution by
mail or telephone. Exchange requests must be for an amount of at least
$[VAR:Exchange.General.Min].

You may exchange your shares up to [VAR:Exchange.MaxPerYear] times during a
calendar year. If you exchange your shares more than
[VAR:Exchange.General.TransactionLimit] times during a year, you may be
charged a $[VAR:Exchange.General.ExtraExchangeFee] fee for each additional
exchange. You will be notified before any fee is charged.

IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE
ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE
UP TO 15 DAYS FROM YOUR DATE OF PURCHASE). This exchange privilege may be
changed or canceled at any time upon < ** Exchange.CancelNotice ** > days'
notice.

When you exchange shares, you are really selling your shares and buying
other Fund shares. So, your sale price and purchase price will be based on
the NAV next calculated after the Fund receives your exchange request.

TELEPHONE TRANSACTIONS

Purchasing, selling and exchanging Fund shares over the telephone is
extremely convenient, but not without risk. Although the Fund has certain
safeguards and procedures to confirm the identity of callers and the
authenticity of instructions, the Fund is not responsible for any losses or
costs incurred by following telephone instructions we reasonably believe to
be genuine. If you or your financial institution transact business with the
Fund over the telephone, you will generally bear the risk of any loss.

DISTRIBUTION OF FUND SHARES

Each Fund has adopted a distribution plan for Retail Shares that allows the
Fund to pay distribution fees for the sale and distribution of Retail
Shares. Because these fees are paid out of a Fund's assets continuously,
over time these fees will increase the cost of your investment and may cost
you more than paying other types of sales charges.

Distribution fees for Retail Shares, as a percentage of average daily net
assets, are 0.25% for each Fund.

Page 18 of 21
<PAGE>

The Distributor may, from time to time in its sole discretion, institute
one or more promotional incentive programs for dealers, which will be paid
for by the Distributor from any sales charge it receives or from any other
source available to it. Under any such program, the Distributor may provide
incentives, in the form of cash or other compensation, including
merchandise, airline vouchers, trips and vacation packages, to dealers
selling shares of the Funds.

Retail Shares are also subject to a service fee of up to 0.25% for
shareholder record keeping services.

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes its income annually.

Each Fund makes distributions of capital gains, if any, at least annually.
If you own Fund shares on a Fund's record date, you will be entitled to
receive these distributions.

You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment,
you must notify the Fund in writing prior to the date of the distribution.
Your election will be effective for dividends and distributions paid after
the Fund receives your written notice. To cancel your election, simply send
the Fund written notice.

TAXES

PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT
FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some
important tax issues that affect the Funds and their shareholders. This
summary is based on current tax laws, which may change.

Each Fund will distribute substantially all of its income and realized
capital gains, if any. The dividends and distributions you receive may be
subject to federal, state and local taxation, depending upon your tax
situation. Distributions you receive from a Fund may be taxable whether or
not you reinvest them. Income distributions are generally taxable at
ordinary income tax rates. Capital gains distributions are generally
taxable at the rates applicable to long-term capital gains. EACH SALE OR
EXCHANGE OF FUND SHARES IS A TAXABLE EVENT.

Some foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes is
recoverable, the non-recovered portion will reduce the income received from
the securities comprising the portfolio of the Ethical European Equity
Fund.

THE ETHICAL EUROPEAN EQUITY FUND MAY BE ABLE TO PASS ALONG A TAX CREDIT FOR
FOREIGN INCOME TAXES IT PAYS. THE FUND WILL NOTIFY YOU IF IT GIVES YOU THE
CREDIT.

MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.

Page 19 of 21
<PAGE>

FRIENDS IVORY & SIME FUNDS

INVESTMENT ADVISER

Friends Ivory & Sime, Inc.
One World Trade Center
Suite 2101
New York, NY 10048

DISTRIBUTOR

SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103

More information about each Fund is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI dated _________, 1999 includes detailed information about the Friends
Ivory & Sime Funds. The SAI is on file with the SEC and is incorporated by
reference into this prospectus. This means that the SAI, for legal purposes, is
a part of this prospectus.

ANNUAL AND SEMI-ANNUAL REPORTS

These reports will contain each Fund's holdings and contain information from the
Fund's managers about strategies, and recent market conditions and trends and
their impact on Fund performance. The reports will also contain detailed
financial information about the Funds.

TO OBTAIN MORE INFORMATION:

BY TELEPHONE: Call 1-800-___-____

BY MAIL: Write to us
[VAR:Fund.Address]

BY E-MAIL: _______@______

BY INTERNET: www._______.___

Page 20 of 21
<PAGE>

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about the Friends Ivory & Sime Funds, from the
SEC's website ("http://www.sec.gov"). You may review and copy documents at the
SEC Public Reference Room in Washington, DC (for information call
1-800-SEC-0330). You may request documents by mail from the SEC, upon payment of
a duplicating fee, by writing to: Securities and Exchange Commission, Public
Reference Section, Washington, DC 20549-6009. Friends Ivory & Sime Funds'
Investment Company Act registration number is 811-[VAR:SEC-Number].

Page 21 of 21
<PAGE>

FRIENDS IVORY & SIME FUNDS

ETHICAL U.S. EQUITY FUND
ETHICAL EUROPEAN EQUITY FUND

INVESTMENT ADVISER:
FRIENDS IVORY & SIME, INC.

This Statement of Additional Information is not a prospectus and relates only to
the Ethical U.S. Equity Fund ("U.S. Equity ") and the Ethical European Equity
Fund ("European Equity") (each a "Fund" and, together, the "Funds"). It is
intended to provide additional information regarding the activities and
operations of the Friends Ivory & Sime Funds (the "Trust"), and should be read
in conjunction with the Funds' Prospectus dated __________, 1999. The Prospectus
may be obtained without charge by calling 1-800-_______-__________.

TABLE OF CONTENTS
THE TRUST ....................................................................S-
INVESTMENT OBJECTIVES ........................................................S-
INVESTMENT POLICIES ..........................................................S-
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS ........................S-
INVESTMENT LIMITATIONS .......................................................S-
THE ADVISER ..................................................................S-
THE ADMINISTRATOR ............................................................S-
DISTRIBUTION AND SHAREHOLDER SERVICES ........................................S-
TRUSTEES AND OFFICERS OF THE TRUST ...........................................S-
COMPUTATION OF YIELD AND TOTAL RETURN ........................................S-
PURCHASE AND REDEMPTION OF SHARES ............................................S-
DETERMINATION OF NET ASSET VALUE .............................................S-
TAXES ........................................................................S-
PORTFOLIO TRANSACTIONS .......................................................S-
VOTING .......................................................................S-
DESCRIPTION OF SHARES ........................................................S-
CUSTODIAN ....................................................................S-
LEGAL COUNSEL ................................................................S-
_______________, 1999

<PAGE>

THE TRUST

This Statement of Additional Information relates only to the Ethical U.S. Equity
Fund ("U.S. Equity") and Ethical European Equity Fund ("European Equity") (each
a "Fund" and, together the "Funds"). Each is a separate series of Friends Ivory
& Sime Funds (the "Trust"), an open-end management investment company
established as a Delaware business trust under a Declaration of Trust dated
____________, 1999. The Declaration of Trust permits the Trust to offer separate
series of units of beneficial interest (the "shares") and separate classes of
funds. Each portfolio is a separate mutual fund and each share of each portfolio
represents an equal proportionate interest in that portfolio. Shareholders may
purchase shares through two separate classes, Institutional Shares and Retail
Shares, which provide for variations in distribution and shareholder servicing
costs, transfer agent fees, voting rights and dividends. Except for these
differences between the Institutional Shares and the Retail Shares, each share
of each series represents an equal proportionate interest in that series. Please
see "Description of Shares" for more information.

INVESTMENT OBJECTIVES

ETHICAL U.S. EQUITY FUND -- The Ethical U.S. Equity Fund seeks long-term capital
growth.

ETHICAL EUROPEAN EQUITY FUND -- The Ethical European Equity Fund seeks long-term
capital growth.

INVESTMENT POLICIES

ETHICAL U.S. EQUITY FUND--The Ethical U.S. Equity Fund invests primarily (and,
under normal conditions, at least 65% of its total assets) in a diversified
portfolio of common stocks of U.S. issuers that the Adviser believes have
above-average earnings growth potential. The Fund seeks to purchase securities
that are well diversified across industries and issuers. The Fund will limit its
exposure to any single issuer to a maximum of 10% of its assets. The Fund
expects its investments to emphasize large capitalization core growth companies.

Any remaining assets may be invested in other equity securities, including
convertible and preferred stocks, warrants and rights to purchase common stocks,
and the Fund may invest up to 10% of its total assets in American Depository
Receipts ("ADRs"). The Fund will only purchase securities that are traded on
registered exchanges or the over-the-counter market in the United States. The
Fund may purchase shares of other investment companies and foreign securities,
and may engage in securities lending transactions.

S-2
<PAGE>

fundamental analyses to identify companies that qualify for further in-depth
analysis, including consideration of their current and historic earnings trends,
quality of management, recent developments and shareholder value. After
appropriate companies have been identified, Friends Ivory & Sime's ethical
research staff conducts social screens based on the Fund's ethical policies.
This investment process results in a list of companies that provide quality
products that enhance or sustain society or the environment, pursue diversity
and progressive employment practices, protect the environment, and demonstrate
corporate accountability. The investment process also filters out companies
engaged in military contracting, environmental damage or pollution, and
promoting tobacco, alcohol or gambling. Friends Ivory & Sime has developed and
continually updates the social screening criteria and ensures that each
individual investment complies. The result is a portfolio of companies, which
are continually reviewed to determine whether they meet the established ethical
and investment criteria. If an issuer is found to have breached the ethical
criteria, the Fund will sell the investment within 90 days of the discovery of
the breach.

ETHICAL EUROPEAN EQUITY FUND -- The Ethical European Equity Fund invests
primarily (and, under normal conditions, at least 65% of its total assets) in a
diversified portfolio of equity securities of European issuers located in
Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
Netherlands, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The
Fund may also invest up to 10% of its assets in securities of emerging European
market issuers.

The securities purchased by the Fund will be listed on recognized foreign
exchanges, but securities may be purchased in over-the-counter markets or in the
form of sponsored or unsponsored ADRs traded on registered exchanges or NASDAQ,
or sponsored or unsponsored European Depositary Receipts ("EDRs"), Continental
Depositary Receipts ("CDRs") or Global Depositary Receipts ("GDRs"). The Fund
expects its investments to emphasize large capitalization growth companies.

The Fund may also invest in warrants and rights to purchase common stocks,
convertible and preferred stocks, and securities of other investment companies.
Although permitted to do so, the Fund does not currently intend to invest in
securities issued by passive foreign investment companies or to engage in
securities lending.

The Fund's manager, Friends Ivory & Sime, Inc., utilizes an investment approach
of socially responsible investing. The investment process entails performing a
disciplined bottom-up analysis to identify a company's earnings and growth
potential. Friends Ivory & Sime then employs fundamental analyses to identify
companies that qualify for further in-depth analysis, including consideration of
their current and historic earnings trends, quality of management, recent
developments and shareholder value. After appropriate companies have been
identified, Friends Ivory & Sime's ethical research staff conducts social
screens based on the Fund's ethical policies. This investment process results in
a list of companies that provide quality products that enhance or sustain
society or the environment, pursue diversity and progressive employment
practices, protect the environment, and demonstrate corporate accountability.
The investment process also filters out

S-3
<PAGE>

companies engaged in military contracting, environmental damage or pollution,
and promoting tobacco, alcohol or gambling. Friends Ivory & Sime has developed
and continually updates the social screening criteria and ensures that each
individual investment complies. The result is a portfolio of companies, which
are continually reviewed to determine whether they meet the established ethical
and investment criteria. If an issuer is found to have breached the ehtical
crieteria, the Fund will sell the investment within 90 days of the discovery of
the breach.

GENERAL INVESTMENT POLICIES

Each Fund may purchase securities on a when-issued basis and borrow money.

Each Fund may enter into futures and options transactions.

Each Fund may invest up to 15% of its net assets in illiquid securities.

Each Fund may purchase convertible securities.

Each Fund may enter into repurchase agreements.

Each Fund may purchase Rule 144A securities and other restricted securities.

Each Fund may purchase obligations of supranational entities.

Each Fund may, for temporary defensive purposes, invest up to 100% of its total
assets in money market instruments (including U.S. Government securities, bank
obligations, commercial paper rated in the highest rating category by an NRSRO,
repurchase agreements involving the foregoing securities), shares of money
market investment companies and cash.

DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS

AMERICAN DEPOSITARY RECEIPTS ("ADRS")

ADRs are securities, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
may be available through "sponsored" or "unsponsored" facilities. A sponsored
facility is established jointly by the issuer of the security underlying the
receipt and a depositary, whereas an unsponsored facility may be established by
a depositary without participation by the issuer of the underlying security.
Holders of unsponsored depositary receipts generally bear all the costs of the
unsponsored facility. The depositary of an unsponsored facility frequently is
under no obligation to distribute shareholder communications received from the
issuer of the

S-4
<PAGE>

deposited security or to pass through, to the holders of the receipts, voting
rights with respect to the deposited securities.

BORROWING

The Funds may borrow money equal to 5% of their total assets for temporary
purposes to meet redemptions or to pay dividends. Borrowing may exaggerate
changes in the net asset value of a Fund's shares and in the return on the
Fund's portfolio. Although the principal of any borrowing will be fixed, a
Fund's assets may change in value during the time the borrowing is outstanding.
The Funds may be required to liquidate portfolio securities at a time when it
would be disadvantageous to do so in order to make payments with respect to any
borrowing. The Funds may be required to segregate liquid assets in an amount
sufficient to meet their obligations in connection with such borrowings. In an
interest rate arbitrage transaction, a Fund borrows money at one interest rate
and lends the proceeds at another, higher interest rate. These transactions
involve a number of risks, including the risk that the borrower will fail or
otherwise become insolvent or that there will be a significant change in
prevailing interest rates.

CONVERTIBLE SECURITIES

Convertible securities are corporate securities that are exchangeable for a set
number of another security at a prestated price. Convertible securities
typically have characteristics of both fixed income and equity securities.
Because of the conversion feature, the market value of a convertible security
tends to move with the market value of the underlying stock. The value of a
convertible security is also affected by prevailing interest rates, the credit
quality of the issuer and any call provisions.

DERIVATIVES

Derivatives are securities that derive their value from other securities,
financial instruments or indices. The following are considered derivative
securities: options on futures, futures, options (E.G., puts and calls), swap
agreements, mortgage-backed securities (E.G., CMOs, REMICs, IOs and POs), when
issued securities and forward commitments, floating and variable rate
securities, convertible securities, "stripped" U.S. Treasury securities (E.G.,
Receipts and STRIPs), privately issued stripped securities (E.G., TGRs, TRs, and
CATs). See elsewhere in the "Description of Permitted Investments" for
discussions of these various instruments.

EQUITY SECURITIES

Equity securities include common stocks, preferred stocks, warrants, rights to
acquire common or preferred stocks, and securities convertible into or
exchangeable for common stocks. Investments in equity securities in general are
subject to market risks that may cause their prices to fluctuate over time. The
value of securities convertible into equity securities, such as warrants or
convertible debt,

S-5
<PAGE>

is also affected by prevailing interest rates, the credit quality of the issuer
and any call provision. Fluctuations in the value of equity securities in which
an equity Fund invests will cause the net asset value of the Fund to fluctuate.
An investment in an equity Fund may be more suitable for long-term investors who
can bear the risk of short-term principal fluctuations.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified
future time and at a specified price. An option on a futures contract gives
the purchaser the right, in exchange for a premium, to assume a position in a
futures contract at a specified exercise price during the term of the option.
The Ethical European Equity Fund may use futures contracts and related
options for BONA FIDE hedging purposes, to offset changes in the value of
securities held or expected to be acquired or be disposed of, to minimize
fluctuations in foreign currencies, or to gain exposure to a particular
market or instrument. A Fund will minimize the risk that it will be unable to
close out a futures contract by only entering into futures contracts which
are traded on national futures exchanges. In addition, a Fund will only sell
covered futures contracts and options on futures contracts.

Stock and bond index futures are futures contracts for various stock and bond
indices that are traded on registered securities exchanges. Stock and bond index
futures contracts obligate the seller to deliver (and the purchaser to take) an
amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock or bond index at the close of the last trading day
of the contract and the price at which the agreement is made.

Stock and bond index futures contracts are bilateral agreements pursuant to
which two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock or bond index
value at the close of trading of the contract and the price at which the futures
contract is originally struck. No physical delivery of the stocks or bonds
comprising the index is made; generally contracts are closed out prior to the
expiration date of the contracts.

No price is paid upon entering into futures contracts. Instead, a Fund would be
required to deposit an amount of cash or U.S. Treasury securities known as
"initial margin." Subsequent payments, called "variation margin," to and from
the broker, would be made on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The margin is in the nature of
a performance bond or good-faith deposit on a futures contract.

There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures; (3) there may not be a liquid secondary market
for a futures contract or option; (4) trading restrictions or limitations may be
imposed by an exchange; and (5) government regulations may restrict trading in
futures contracts and futures options.

S-6
<PAGE>

A Fund may enter into futures contracts and options on futures contracts traded
on an exchange regulated by the Commodities Futures Trading Commission ("CFTC"),
as long as, to the extent that such transactions are not for "bona fide hedging
purposes," the aggregate initial margin and premiums on such positions
(excluding the amount by which such options are in the money) do not exceed 5%
of a Fund's net assets. A Fund may buy and sell futures contracts and related
options to manage its exposure to changing interest rates and securities prices.
Some strategies reduce a Fund's exposure to price fluctuations, while others
tend to increase its market exposure. Futures and options on futures can be
volatile instruments and involve certain risks that could negatively impact a
Fund's return.

In order to avoid leveraging and related risks, when a Fund purchases futures
contracts, it will collateralize its position by depositing an amount of cash or
liquid securities equal to the market value of the futures positions held, less
margin deposits, in a segregated account with its custodian. Collateral equal to
the current market value of the futures position will be marked to market on a
daily basis.

HEDGING

Hedging is a strategy designed to offset investment risks. Hedging activities
include, among other things, the use of forwards, options and futures. There are
risks associated with hedging activities, including: (i) the success of a
hedging strategy may depend on an ability to predict movements in the prices of
individual securities, fluctuations in markets, and movements in interest and
currency exchange rates; (ii) there may be an imperfect or no correlation
between the changes in market value of the securities held by a Fund or the
currencies in which those securities are denominated and the prices of forward
contracts, futures and options on futures; (iii) there may not be a liquid
secondary market for a futures contract or option; and (iv) trading restrictions
or limitations may be imposed by an exchange, and government regulations may
restrict trading in currencies, futures contracts and options.

ILLIQUID SECURITIES

Illiquid securities are securities that cannot be disposed of within seven
business days at approximately the price at which they are being carried on the
Fund's books. Illiquid securities include demand instruments with demand notice
periods exceeding seven days, securities for which there is no active secondary
market, and repurchase agreements with durations or maturities over seven days
in length.

INVESTMENT COMPANY SHARES

Each Fund may invest in shares of other investment companies, to the extent
permitted by applicable law and subject to certain restrictions. These
investment companies typically incur fees that are separate from those fees
incurred directly by the Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that shareholders would
indirectly bear

S-7
<PAGE>

a proportionate share of the operating expenses of such investment companies,
including advisory fees, in addition to paying Fund expenses. Under applicable
regulations, a Fund is prohibited from acquiring the securities of another
investment company if, as a result of such acquisition: (1) the Fund owns more
than 3% of the total voting stock of the other company; (2) securities issued by
any one investment company represent more than 5% of the Fund's total assets; or
(3) securities (other than treasury stock) issued by all investment companies
represent more than 10% of the total assets of the Fund. See also "Investment
Limitations."

MONEY MARKET INSTRUMENTS

Money market securities are high-quality, dollar-denominated, short-term debt
instruments. They consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S. banks and U.S. branches
of foreign banks; (ii) U.S. Treasury obligations and obligations issued or
guaranteed by the agencies and instrumentalities of the U.S. Government; (iii)
high-quality commercial paper issued by U.S. and foreign corporations; (iv) debt
obligations with a maturity of one year or less issued by corporations with
outstanding high-quality commercial paper ratings; and (v) repurchase agreements
involving any of the foregoing obligations entered into with highly-rated banks
and broker-dealers.

OPTIONS

A put option gives the purchaser of the option the right to sell, and the writer
of the option the obligation to buy, the underlying security at any time during
the option period. A call option gives the purchaser of the option the right to
buy, and the writer of the option the obligation to sell, the underlying
security at any time during the option period. The premium paid to the writer is
the consideration for undertaking the obligations under the option contract. The
initial purchase (sale) of an option contract is an "opening transaction." In
order to close out an option position, a Fund may enter into a "closing
transaction," which is simply the sale (purchase) of an option contract on the
same security with the same exercise price and expiration date as the option
contract originally opened. If a Fund is unable to effect a closing purchase
transaction with respect to an option it has written, it will not be able to
sell the underlying security until the option expires or the Fund delivers the
security upon exercise.

A Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to anticipate an increase in
the market value of securities that the Fund may seek to purchase in the future.
A Fund purchasing put and call options pays a premium therefor. If price
movements in the underlying securities are such that exercise of the options
would not be profitable for a Fund, loss of the premium paid may be offset by an
increase in the value of the Fund's securities or by a decrease in the cost of
acquisition of securities by the Fund.

A Fund may write covered call options as a means of increasing the yield on its
portfolio and as a means of providing limited protection against decreases in
its market value. When a Fund sells an option, if the underlying securities do
not increase or decrease to a price level that would make the

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exercise of the option profitable to the holder thereof, the option generally
will expire without being exercised and the Fund will realize as profit the
premium received for such option. When a call option written by a Fund is
exercised, the Fund will be required to sell the underlying securities to the
option holder at the strike price, and will not participate in any increase in
the price of such securities above the strike price. When a put option written
by a Fund is exercised, the Fund will be required to purchase the underlying
securities at the strike price, which may be in excess of the market value of
such securities.

A Fund may purchase and write options on an exchange or over the counter. Over
the counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the SEC that OTC options are generally illiquid.

A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an equal amount of the
underlying foreign currency. With respect to put options on foreign currency
written by a Fund, the Fund will establish a segregated account with its
Custodian consisting of cash or liquid, high grade debt securities in an amount
equal to the amount the Fund would be required to pay upon exercise of the put.

A Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. A Fund may choose to
terminate an option position by entering into a closing transaction. The ability
of a Fund to enter into closing transactions depends upon the existence of a
liquid secondary market for such transactions.

All options written on indices must be covered. When a Fund writes an option on
an index, it will establish a segregated account containing cash or liquid
securities with its custodian in an amount at least equal to the market value of
the option and will maintain the account while the option is open or will
otherwise cover the transaction.

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RISK FACTORS: Risks associated with options transactions include: (1) the
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while a Fund will receive a premium
when it writes covered call options, it may not participate fully in a rise in
the market value of the underlying security.

PORTFOLIO TURNOVER

It is possible that an annual portfolio turnover rate in excess of 100% may
result from the Adviser's investment strategy. Portfolio turnover rates in
excess of 100% may result in higher transaction costs, including increased
brokerage commissions, and higher levels of taxable capital gain. Under normal
circumstances a typical turnover for similar accounts run by the Adviser has
been 30%-50%.

REITS

The Funds may invest in real estate investment trusts ("REITs"), which pool
investors' funds for investment in income producing commercial real estate or
real estate related loans or interests.

A REIT is not taxed on income distributed to its shareholders or unitholders if
it complies with regulatory requirements relating to its organization,
ownership, assets and income, and with a regulatory requirement that it
distribute to its shareholders or unitholders at least 95% of its taxable income
for each taxable year. Generally, REITs can be classified as Equity REITs,
Mortgage REITs and Hybrid REITs. Equity REITs invest the majority of their
assets directly in real property and derive their income primarily from rents
and capital gains from appreciation realized through property sales. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
their income primarily from interest payments. Hybrid REITs combine the
characteristics of both Equity and Mortgage REITs. A shareholder in a Fund
should realize that by investing in REITs indirectly through the Fund, he or she
will bear not only his or her proportionate share of the expenses of the Fund,
but also indirectly, similar expenses of underlying REITs.

A Fund may be subject to certain risks associated with the direct investments of
the REITs. REITs may be affected by changes in the value of their underlying
properties and by defaults by borrowers or tenants. Mortgage REITs may be
affected by the quality of the credit extended. Furthermore, REITs are dependent
on specialized management skills. Some REITs may have limited diversification
and may be subject to risks inherent in financing a limited number of
properties. REITs depend generally on their ability to generate cash flow to
make distributions to shareholders or unitholders, and may be subject to
defaults by borrowers and to self-liquidations. In addition, the performance of
a REIT may be affected by its failure to qualify for tax-free pass-through of
income under the Code or its failure to maintain exemption from registration
under the 1940 Act.

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RIGHTS

Rights give existing shareholders of a corporation the right, but not the
obligation, to buy shares of the corporation at a given price, usually below the
offering price, during a specified period.

RULE 144A SECURITIES

Rule 144A securities are securities exempt from registration on resale pursuant
to Rule 144A under the 1933 Act. Rule 144A securities are traded in the
institutional market pursuant to this registration exemption, and, as a result,
may not be as liquid as exchange-traded securities since they may only be resold
to certain qualified institutional investors. Due to the relatively limited size
of this institutional market, these securities may affect the Fund's liquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing such securities. Nevertheless, Rule 144A securities
may be treated as liquid securities pursuant to guidelines adopted by the
Trust's Board of Trustees.

SECURITIES LENDING

In order to generate additional income, a Fund may lend its securities pursuant
to agreements requiring that the loan be continuously secured by collateral
consisting of cash or securities of the U.S. Government or its agencies equal to
at least 100% of the market value of the loaned securities. A Fund continues to
receive interest on the loaned securities while simultaneously earning interest
on the investment of cash collateral. Collateral is marked to market daily.
There may be risks of delay in recovery of the securities or even loss of rights
in the collateral should the borrower of the securities fail financially or
become insolvent.

SECURITIES OF FOREIGN ISSUERS

The Funds may invest in securities of foreign issuers with a strong U.S. trading
presence and in sponsored and unsponsored ADRs. Investments in the securities of
foreign issuers may subject the Funds to investment risks that differ in some
respects from those related to investments in securities of U.S. issuers. Such
risks include future adverse political and economic developments, possible
imposition of withholding taxes on income, possible seizure, nationalization or
expropriation of foreign deposits, possible establishment of exchange controls
or taxation at the source or greater fluctuation in value due to changes in
exchange rates. Foreign issuers of securities often engage in business practices
different from those of domestic issuers of similar securities, and there may be
less information publicly available about foreign issuers. In addition, foreign
issuers are, generally speaking, subject to less government supervision and
regulation than are those in the United States. Investments in securities of
foreign issuers are frequently denominated in foreign currencies and the value
of a Fund's assets measured in U.S. dollars may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and the Funds may incur costs in connection with conversions between various
currencies. Moreover, investments in emerging market

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nations may be considered speculative, and there may be a greater potential for
nationalization, expropriation or adverse diplomatic developments (including
war) or other events which could adversely effect the economies of such
countries or investments in such countries.

U.S. GOVERNMENT SECURITIES

U.S. Government Securities are bills, notes and bonds issued by the U.S.
Government and backed by the full faith and credit of the United States.

U.S. TREASURY OBLIGATIONS

U.S. Treasury Obligations are bills, notes and bonds issued by the U.S.
Treasury, and separately traded interest and principal component parts of such
obligations that are transferable through the Federal book-entry system known as
Separately Traded Registered Interested and Principal Securities ("STRIPS") and
Coupon Under Book Entry Safekeeping ("CUBES").

WARRANTS

Warrants are instruments giving holders the right, but not the obligation, to
buy equity or fixed income securities of a company at a given price during a
specified period.

YEAR 2000

The Funds depend on the smooth functioning of computer systems in almost every
aspect of its business. Like other mutual funds, businesses and individuals
around the world, the Funds could be adversely affected if the computer systems
used by their service providers do not properly process dates on and after
January 1, 2000 and distinguish between the year 2000 and the year 1900. The
Funds have asked their mission critical service providers whether they expect to
have their computer systems adjusted for the year 2000 transition, and have
sought and received assurances from such service providers that they are
devoting significant resources to prevent material adverse consequences to the
Funds. While such assurances have been received, the Funds and their
shareholders may experience losses if these assurances prove to be incorrect or
as a result of year 2000 computer difficulties experienced by issuers of
portfolio securities or third parties, such as custodians, banks, broker-dealers
or others with which the Funds do business.

Furthermore, many foreign countries are not as prepared as the U.S. for the year
2000 transition. As a result, computer difficulties in foreign markets and with
foreign institutions as a result of the year 2000 may add to the possibility of
losses to the Funds and their shareholders.

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INVESTMENT LIMITATIONS

FUNDAMENTAL POLICIES

The following investment limitations are fundamental policies of each Fund which
cannot be changed with respect to a Fund without the consent of the holders of a
majority of that Fund's outstanding shares. The term "majority of the
outstanding shares" means the vote of (i) 67% or more of a Fund's shares present
at a meeting, if more than 50% of the outstanding shares of a Fund are present
or represented by proxy, or (ii) more than 50% of a Fund's outstanding shares,
whichever is less.

No Fund may:

1. (i) Purchase securities of any issuer (except securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities and repurchase agreements involving such securities)
if, as a result, more than 5% of the total assets of the Fund would be
invested in the securities of such issuer; or (ii) acquire more than
10% of the outstanding voting securities of any one issuer. This
restriction applies to 75% of each Fund's total assets.

2. Purchase any securities which would cause 25% or more of the total
assets of the Fund to be invested in the securities of one or more
issuers conducting their principal business activities in the same
industry, provided that this limitation does not apply to investments
in obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities and repurchase agreements involving such
securities.

3. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate the Fund to purchase securities or
require the Fund to segregate assets are not considered to be
borrowings. Asset coverage of at least 300% is required for all
borrowings, except where the Fund has borrowed money for temporary
purposes in amounts not exceeding 5% of its total assets. Each Fund
will not purchase securities while its borrowings exceed 5% of its
total assets.

4. Make loans if, as a result, more than 33 1/3% of its total assets would
be lent to other parties, except that each Fund may (i) purchase or
hold debt instruments in accordance with its investment objective and
policies; (ii) enter into repurchase agreements; and (iii) lend its
securities.

5. Purchase or sell real estate, physical commodities, or commodities
contracts, except that each Fund may purchase: (i) marketable
securities issued by companies which own or invest in real estate
(including real estate investment trusts), commodities, or commodities
contracts; and (ii) commodities contracts relating to financial
instruments, such as financial futures contracts and options on such
contracts.

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<PAGE>

6. Issue senior securities (as defined in the Investment Company Act of
1940 (the "1940 Act")) except as permitted by rule, regulation or order
of the Securities and Exchange Commission (the "SEC").

7. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.

The foregoing percentages (except with respect to the limitation on borrowing)
will apply at the time of the purchase of a security and shall not be considered
violated unless an excess or deficiency occurs immediately after or as a result
of a purchase of such security.

NON-FUNDAMENTAL POLICIES

The following investment limitations are non-fundamental policies of each Fund
and may be changed with respect to a Fund by the Board of Trustees.

No Fund may:

1. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by the Fund's fundamental limitation on borrowing.

2. Invest in companies for the purpose of exercising control.

3. Purchase securities on margin or effect short sales, except that each
Fund may (i) obtain short-term credits as necessary for the clearance
of security transactions; (ii) provide initial and variation margin
payments in connection with transactions involving futures contracts
and options on such contracts; and (iii) make short sales "against the
box" or in compliance with the SEC's position regarding the asset
segregation requirements imposed by Section 18 of the 1940 Act.

4. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act.

5. Purchase or hold illiquid securities, I.E., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing
in more than seven days) if, in the aggregate, more than 15% of its net
assets would be invested in illiquid securities.

Unregistered securities sold in reliance on the exemption from registration in
Section 4(2) of the 1933 Act and securities exempt from registration on re-sale
pursuant to Rule 144A of the 1933 Act may be treated as liquid securities under
procedures adopted by the Board of Trustees.

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THE ADVISER

Friends Ivory & Sime, Inc., One World Trade Center, Suite 2101, New York, NY
10048, is a professional investment management firm whose predecessor was
founded on May 2, 1975. Friends Ivory & Sime plc is the controlling shareholder
of the Adviser, and Peter Derek Jones is the Chairman of the Adviser. As of
September 30, 1999, the Adviser had discretionary management authority with
respect to approximately $4.2 billion of assets and Friends Ivory & Sime plc had
discretionary management authority with respect to approximately $50 billion of
assets.

The Adviser serves as the investment adviser for each Fund under an
investment advisory agreement (the "Advisory Agreement"). Under the Advisory
Agreement, the Adviser makes the investment decisions for the assets of each
Fund and continuously reviews, supervises and administers each Fund's
investment program, subject to the supervision of, and policies established
by, the Trustees of the Trust.

The Advisory Agreement provides that the Adviser shall not be protected against
any liability to the Trust or its shareholders by reason of willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard of its obligations or duties thereunder.

The continuance of the Advisory Agreement as to any Fund after the first two
years must be specifically approved at least annually (i) by the vote of the
Trustees or by a vote of the shareholders of that Fund, and (ii) by the vote of
a majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the Trust or, with respect to any Fund,
by a majority of the outstanding shares of that Fund, on not less than 30 days'
nor more than 60 days' written notice to the Adviser, or by the Adviser on 90
days' written notice to the Trust.

THE ADMINISTRATOR

The Trust and SEI Investments Mutual Funds Services (the "Administrator") have
entered into an administration agreement (the "Administration Agreement"). The
Administration Agreement provides that the Administrator shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Administrator in the performance of its duties or from
reckless disregard by it of its duties and obligations thereunder. The
Administration Agreement shall remain in effect for a period of three (3) years
after the effective date of the agreement and shall continue in effect for
successive periods of one (1) year unless terminated by either party on not less
than 90 days' prior written notice to the other party.

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<PAGE>

The continuance of the Administration Agreement must be specifically approved at
least annually (i) by the vote of a majority of the Trustees or by the vote of a
majority of the outstanding voting securities of the Fund, and (ii) by the vote
of a majority of the Trustees of the Trust who are not parties to the
Administration Agreement or an "interested person" (as that term is defined in
the 1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. The Administration Agreement is terminable
at any time as to any Fund without penalty by the Trustees of the Trust, by a
vote of a majority of the outstanding shares of the Fund or by the Manager on
not less than 30 days' nor more than 60 days' written notice.

The Administrator, a Delaware business trust, has its principal business
offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation
("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI
Investments"), is the owner of all beneficial interest in the Administrator.
SEI Investments and its subsidiaries and affiliates, including the
Administrator, are leading providers of funds evaluation services, trust
accounting systems, and brokerage and information services to financial
institutions, institutional investors, and money managers. The Administrator
and its affiliates also serve as administrator or sub-administrator to the
following other mutual funds: The Achievement Funds Trust, The Advisors'
Inner Circle Fund, Alpha Select Funds, Amerindo Funds, Inc., The Arbor Fund,
ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds-Registered
Trademark-, CNI Charter Funds, CUFUND, The Expedition Funds, First American
Funds, Inc., First American Investment Funds, Inc., First American Strategy
Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Fund, Inc., Oak
Associates Funds, The Parkstone Advantage Fund, The PBHG Funds, Inc., PBHG
Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust,
SEI Daily Income Trust, SEI Index Funds, SEI Institutional International
Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust,
SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic
Variable Trust, TIP Funds and UAM Funds, Inc. II.

DISTRIBUTION AND SHAREHOLDER SERVICES

SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments, and the Trust are parties to a distribution agreement (the
"Distribution Agreement") with respect to shares of the Funds. The Distributor
receives no compensation for distribution of shares of the Funds.

The Distribution Agreement shall remain in effect for a period of two years
after the effective date of the agreement and is renewable annually. The
Distribution Agreement may be terminated by the Distributor, by a majority vote
of the Trustees who are not interested persons and have no financial interest in
the Distribution Agreement or by a majority vote of the outstanding securities
of the Trust upon not more than 60 days' written notice by either party or upon
assignment by the Distributor.

The Trust has adopted a Distribution Plan (the "Plan") for the Retail Shares of
the Funds in accordance with the provisions of Rule 12b-1 under the 1940 Act
which regulates circumstances under which an investment company may directly or
indirectly bear expenses relating to the

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distribution of its shares. In this regard, the Board of Trustees has determined
that the Plan is in the best interests of the shareholders. Continuance of the
Plan must be approved annually by a majority of the Trustees of the Trust and by
a majority of the Qualified Trustees, as defined in the Plan. The Plan requires
that quarterly written reports of amounts spent under the Plan and the purposes
of such expenditures be furnished to and reviewed by the Trustees. The Plan may
not be amended to increase materially the amount which may be spent thereunder
without approval by a majority of the outstanding shares of the Fund or class
affected. All material amendments of the Plan will require approval by a
majority of the Trustees of the Trust and of the Qualified Trustees.

The Plan provides that the Trust will pay a fee of up to 0.25% of the average
daily net assets of each Fund's Retail Shares that the Distributor can use to
compensate broker-dealers and service providers, including SEI Investments
Distribution Co. and its affiliates, which provide distribution-related services
to the Funds' Retail shareholders or their customers who beneficially own Retail
Shares.

Except to the extent that the Adviser benefitted through increased fees from an
increase in the net assets of the Trust which may have resulted in part from the
expenditures, no interested person of the Trust nor any Trustee of the Trust who
is not an interested person of the Trust had a direct or indirect financial
interest in the operation of the Plan or related agreements.

The Funds have adopted a shareholder service plan for Retail Shares (the
"Service Plan") under which firms, including the Distributor, that provide
shareholder and administrative services may receive compensation therefore.
Under the Service Plan, the Distributor may provide those services itself, or
may enter into arrangements under which third parties provide such services and
are compensated by the Distributor. Under such arrangements, the Distributor may
retain as profit any difference between the fee it receives and the amount it
pays such third parties. In addition, the Funds may enter into such arrangements
directly. Under the Service Plan, the Distributor is entitled to receive a fee
at an annual rate of up to 0.25% of each Fund's average daily net assets
attributable to Retail Shares that are subject to the arrangement in return for
provision of a broad range of shareholder and administrative services,
including: maintaining client accounts; arranging for bank wires; responding to
client inquiries concerning services provided for investments; changing dividend
options; account designations and addresses; providing sub-accounting; providing
information on share positions to clients; forwarding shareholder communications
to clients; processing purchase, exchange and redemption orders; and processing
dividend payments.

TRUSTEES AND OFFICERS OF THE TRUST

The management and affairs of the Trust are supervised by the Trustees under the
laws of the State of Delaware. The Trustees have approved contracts under which,
as described above, certain companies provide essential management services to
the Trust. The Trustees and executive officers of the Trust and their principal
occupations for the last five years are set forth below. Each may have held
other positions with the named companies during that period. The Trust pays the
fees for unaffiliated Trustees.

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The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during
that period. Unless otherwise noted, the business address of each Trustee and
each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456.
Certain officers of the Trust also serve as officers of some or all of the
following: The Achievement Funds Trust, The Advisors' Inner Circle Fund,
Alpha Select Funds, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street
Funds, Boston 1784 Funds-Registered Trademark-, CNI Charter Funds, CUFUND,
The Expedition Funds, First American Funds, Inc., First American Investment
Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Huntington
Funds, The Nevis Fund, Inc., Oak Associates Funds, The Parkstone Advantage
Fund, The Parkstone Group of Funds, The PBHG Funds, Inc., PBHG Insurance
Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable
Trust, and TIP Funds, each of which is an open-end management investment
company managed by SEI Investments Mutual Funds Services or its affiliates
and distributed by SEI Investments Distribution Co.

TRUSTEES

J. ROBERT BLOOM, JR. (DOB __/__/__) - ____________ - _____________, Friends
Ivory & Sime, Inc., since _______.

OFFICERS

GEORGE WALKER (DOB __/__/__) - President - ______________,
Friends Ivory & Sime, Inc., since ____.

DEBRA LISS (DOB __/__/__) - Vice President - ______________, Friends Ivory &
Sime, Inc., since ____.

ANDREW PRINGLE (DOB __/__/__) - Vice President - ______________, Friends
Ivory & Sime, Inc., since ____.

TODD B. CIPPERMAN (DOB 02/14/66) - Vice President and Assistant Secretary -
Vice President and Assistant Secretary of SEI Investments, the Administrator
and the Distributor since 1995. Associate, Dewey Ballantine (law firm),
1994-1995. Associate, Winston and Strawn (law firm), 1991-1994.

KEVIN P. ROBINS (DOB 04/15/61) - Vice President, Assistant Secretary - Senior
Vice President and General Counsel SEI Investments, the Administrator and the
Distributor since 1994. Assistant Secretary of SEI Investments since 1992;
Secretary of the Administrator since 1994. Vice President, General Counsel and
Assistant Secretary of the Administrator and the Distributor 1992-1994.
Associate, Morgan, Lewis & Bockius LLP, 1988-1992.

ROBERT J. DELLACROCE (DOB 12/17/63) - Controller and Chief Accounting Officer
- -Director, Funds Administration and Accounting of the Administrator since
1994. Senior Audit Manager, Arthur Andersen LLP, 1986-1994.

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LYDIA A. GAVALIS (DOB 06/05/64) - Vice President and Assistant Secretary -
Vice President and Assistant Secretary of SEI Investments, the Administrator
and the Distributor since 1998. Assistant General Counsel and Director of
Arbitration, Philadelphia Stock Exchange, 1989-1998.

KATHY HEILIG (DOB 12/21/58) - Vice President and Assistant Secretary -
Treasurer of SEI Ivnestments since 1997; Vice President of SEI Investments
since 1991. Vice President and Treasurer of the Administrator since 1997.
Assistant Controller of SEI Investments and Vice President of the Distributor
since 1995. Director of Taxes of SEI Investments, 1987-1991. Tax Manager,
Arthur Andersen LLP prior to 1987.

LYNDA J. STRIEGEL (DOB 10/30/48) - Vice President and Assistant Secretary -
Vice President and Assistant Secretary of SEI Investments, the Administrator
and the Distributor since 1998. Senior Asset Management Counsel, Barnett
Banks, Inc. 1997-1998. Partner, Groom and Nordberg, Chartered, 1996-1997.
Associate General Counsel, Riggs Bank N.A., 1991-1995.

EDWARD SEARLE (DOB 04/03/54) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI Investments Distribution Co. since
1999; Associate, Drinker Biddle & Reath LLP (law firm) 1998-1999; Associate,
Bailard Spahr Andrews & Ingersoll LLP (law firm), 1995-1998.

JOHN H. GRADY, JR. (DOB 06/01/61) - Secretary - 1701 Market Street,
Philadelphia, Pennsylvania 19103, Partner, Morgan, Lewis & Bockius LLP (law
firm) counsel to the Trust, SEI Investments, the Administrator and the
Distributor.

COMPUTATION OF YIELD AND TOTAL RETURN

From time to time the Trust may advertise yield and total return of the Funds.
These figures will be based on historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future yields or returns. The yield of a Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The yield
is calculated by assuming that the income generated by the investment during
that 30-day period is generated in each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:

Yield = 2[((a-b)/cd + 1) TO THE POWER OF 6 - 1] where a = dividends and
interest earned during the period; b = expenses accrued for the period (net
of reimbursement); c = the current daily number of shares outstanding during
the period that were entitled to receive dividends; and d = the maximum
offering price per share on the last day of the period.

The total return of a Fund refers to the average compounded rate of return to
a hypothetical investment for designated time periods (including, but not
limited to, the period from which the Fund commenced operations through the
specified date), assuming that the entire investment is redeemed at the end
of each period. In particular, total return will be calculated according to
the following formula: P (1 + T) TO THE POWER OF n = ERV, where P = a
hypothetical initial payment of $1,000; T = average annual total return; n =
number of years; and ERV = ending redeemable value, as of the end of the

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<PAGE>

designated time period, of a hypothetical $1,000 payment made at the beginning
of the designated time period.

PURCHASE AND REDEMPTION OF SHARES

Purchases and redemptions may be made through ___________________________,
(the "Transfer Agent") on days when the New York Stock Exchange is open for
business. Currently, the weekdays on which the Fund is closed for business are:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Shares of each Fund are offered on a continuous basis.

It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by a Fund in lieu
of cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions.

The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Trust also
reserves the right to suspend sales of shares of any Fund for any period during
which the New York Stock Exchange, the Adviser, the Administrator, the Transfer
Agent and/or the Custodian are not open for business.

DETERMINATION OF NET ASSET VALUE

The securities of each Fund are valued by the Administrator. The Administrator
may use an independent pricing service to obtain valuations of securities. The
pricing service relies primarily on prices of actual market transactions as well
as on trade quotations obtained from third parties. However, the pricing service
may use a matrix system to determine valuations of fixed income securities. This
system considers such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at valuations. The procedures used by the pricing service and its valuation are
reviewed by the officers of the Trust under the general supervision of the
Trustees.

If there is no readily ascertainable market value for a security, the
Administrator will make a good faith determination as to the "fair value" of the
security.

Securities with remaining maturities of 60 days or less will be valued by the
amortized cost method, which involves valuing a security at its cost on the date
of purchase and thereafter (absent unusual circumstances) assuming a constant
amortization of maturity of any discount or premium, regardless of the impact of
fluctuations in general market rates of interest on the value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as

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<PAGE>

determined by this method, is higher or lower than the price the Trust would
receive if it sold the instrument.

TAXES

The following is only a summary of certain tax considerations generally
affecting the Funds and their shareholders, and is not intended as a substitute
for careful tax planning. Shareholders are urged to consult their tax advisors
with specific reference to their own tax situations, including their state and
local tax liabilities.

FEDERAL INCOME TAX

The following is only a summary of certain additional federal tax considerations
generally affecting the Funds and their shareholders that are not discussed in
the Funds' Prospectus. No attempt is made to present a detailed explanation of
the federal, state or local tax treatment of the Funds or their shareholders and
the discussion here and in the Funds' Prospectus is not intended as a substitute
for careful tax planning.

The discussion of federal income tax consequences is based on the Internal
Revenue Code of 1986 (the "Code") and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. New legislation,
as well as administrative changes or court decisions, may significantly change
the conclusions expressed herein, and may have a retroactive effect with respect
to the transactions contemplated herein.

Each Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By following such a policy, each Fund
expects to eliminate or reduce to a nominal amount the federal taxes to which it
may be subject.

In order to qualify for treatment as a RIC under the Code, each Fund must
distribute annually to its shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
the Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities, or certain other income (including
gains from options, futures or forward contracts); (ii) at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. Government securities,
securities of other RICs and other securities, with such other securities
limited, in respect to any one issuer, to an amount that does not exceed 5% of
the value of the Fund's assets and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (iii) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities or the
securities of

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<PAGE>

other RICs) of any one issuer, or of two or more issuers which are engaged in
the same, similar or related trades or business if the Fund owns at least 20% of
the voting power of such issuer.

Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), a
Fund will be subject to a nondeductible 4% federal excise tax to the extent it
fails to distribute by the end of any calendar year 98% of its ordinary income
for that year and 98% of its capital gain net income (the excess of short- and
long-term capital gains over short-and long-term capital losses) for the
one-year period ending on October 31 of that year, plus certain other amounts.

Each Fund intends to make sufficient distributions to avoid liability for the
federal excise tax. A Fund may in certain circumstances be required to liquidate
Fund investments in order to make sufficient distributions to avoid federal
excise tax liability at a time when the investment advisor might not otherwise
have chosen to do so, and liquidation of investments in such circumstances may
affect the ability of a Fund to satisfy the requirements for qualification as a
RIC.

Any gain or loss recognized on a sale, exchange or redemption of shares of a
Fund by a shareholder who is not a dealer in securities will generally, for
individual shareholders, be treated as a long-term capital gain or loss if the
shares have been held for more than twelve months, and otherwise will be treated
as short-term capital gain or loss. However, if shares on which a shareholder
has received a net capital gain distribution are subsequently sold, exchanged or
redeemed and such shares have been held for six months or less, any loss
recognized will be treated as a long-term capital loss to the extent of the net
capital gain distribution. Long-term capital gains are currently taxed at a
maximum rate of 20% and short-term capital gains are currently taxed at ordinary
income tax rates.

In certain cases, a Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup withholding by the Internal Revenue Service, or (3) has not certified to
that Fund that such shareholder is not subject to backup withholding.

If any Fund fails to qualify as a RIC for any taxable year, it will be taxable
at regular corporate rates. In such an event, all distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of the Fund's current and accumulated earnings and profits, and such
distributions may generally be eligible for the corporate dividends-received
deduction.

Funds may, in certain circumstances involving tax-free reorganizations, accept
securities that are appropriate investments as payment for Fund shares (an
"In-Kind Purchase"). An In-Kind Purchase may result in adverse tax consequences
under certain circumstances to either the investors transferring securities for
shares (an "In-Kind Investors") or to investors who acquire shares of the Fund
after a transfer ("new shareholders"). As a result of an In-Kind Purchase, the
Funds may acquire securities that have appreciated in value or depreciated in
value from the date they were acquired. If appreciated securities were to be
sold after an In-Kind Purchase, the amount of the gain

S-22
<PAGE>

would be taxable to new shareholders as well as to In-Kind Investors. The effect
of this for new shareholders would be to tax them on a distribution that
represents a return of the purchase price of their shares rather than an
increase in the value of their investment. The effect on In-Kind Investors would
be to reduce their potential liability for tax on capital gains by spreading it
over a larger asset base. The opposite may occur if the Funds acquire securities
having an unrealized capital loss. In that case, In-Kind Investors will be
unable to utilize the loss to offset gains, but, because an In-Kind Purchase
will not result in any gains, the inability of In-Kind Investors to utilize
unrealized losses will have no immediate tax effect. For new shareholders, to
the extent that unrealized losses are realized by the Funds, new shareholders
may benefit by any reduction in net tax liability attributable to the losses.
The Adviser cannot predict whether securities acquired in any In-Kind Purchase
will have unrealized gains or losses on the date of the In-Kind Purchase.
Consistent with its duties as investment adviser, the Adviser will, however,
take tax consequences to investors into account when making decisions to sell
portfolio assets, including the impact of realized capital gains on shareholders
of the Funds.

The Funds may use a tax management technique known as "highest in, first out."
Using this technique, the portfolio holdings that have experienced the smallest
gain or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.

STATE TAXES

No Fund is liable for any income or franchise tax in Delaware if it qualifies as
a RIC for federal income tax purposes. Distributions by any Fund to shareholders
and the ownership of shares may be subject to state and local taxes.

PORTFOLIO TRANSACTIONS

The Adviser is authorized to select brokers and dealers to effect securities
transactions for the Funds. The Adviser will seek to obtain the most favorable
net results by taking into account various factors, including price, commission,
if any, size of the transactions and difficulty of executions, the firm's
general execution and operational facilities and the firm's risk in positioning
the securities involved. While the Adviser generally seeks reasonably
competitive spreads or commissions, a Fund will not necessarily be paying the
lowest spread or commission available. The Adviser seeks to select brokers or
dealers that offer a Fund best price and execution or other services which are
of benefit to the Fund.

The Adviser may, consistent with the interests of the Funds, select brokers on
the basis of the research services they provide to the Adviser. Such services
may include analyses of the business or prospects of a company, industry or
economic sector, or statistical and pricing services. Information so received by
the Adviser will be in addition to and not in lieu of the services required to
be performed by the Adviser under the Advisory Agreement. If, in the judgment of
the Adviser, a Fund or other accounts managed by the Adviser will be benefitted
by supplemental research services, the Adviser is authorized to pay brokerage
commissions to a broker furnishing such

S-23
<PAGE>

services which are in excess of commissions which another broker may have
charged for effecting the same transaction. These research services include
advice, either directly or through publications or writings, 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;
furnishing of analyses and reports concerning issuers, securities or industries;
providing information on economic factors and trends; assisting in determining
portfolio strategy; providing computer software used in security analyses; and
providing portfolio performance evaluation and technical market analyses. The
expenses of the Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information, such services may not be used
exclusively, or at all, with respect to a Fund or account generating the
brokerage, and there can be no guarantee that the Adviser will find all of such
services of value in advising that Fund.

It is expected that the Funds may execute brokerage or other agency transactions
through the Distributor, which is a registered broker-dealer, for a commission
in conformity with the 1940 Act, the Securities Exchange Act of 1934 and rules
promulgated by the SEC. Under these provisions, the Distributor is permitted to
receive and retain compensation for effecting portfolio transactions for a Fund
on an exchange if a written contract is in effect between the Trust and the
Distributor expressly permitting the Distributor to receive and retain such
compensation. These rules further require that commissions paid to the
Distributor by a Fund for exchange transactions not exceed "usual and customary"
brokerage commissions. The rules define "usual and customary" commissions to
include amounts which are "reasonable and fair compared to the commission, fee
or other remuneration received or to be received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time." The Trustees,
including those who are not "interested persons" of the Trust, have adopted
procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically.

It is not the Funds' practice to allocate brokerage or principal business on the
basis of sales of its shares which may be made through such firms. However, the
Adviser may place portfolio orders with qualified broker-dealers who recommend a
Fund's shares to clients, and may, when a number of brokers and dealers can
provide best net results on a particular transaction, consider such
recommendations by a broker or dealer in selecting among broker-dealers.

VOTING

Each share held entitles the shareholder of record to one vote for each dollar
invested. In other words, each shareholder of record is entitled to one vote for
each dollar of net asset value of the shares held on the record date for the
meeting. Shares issued by each Fund have no preemptive, conversion, or
subscription rights. Each whole share shall be entitled to one vote and each
fractional share shall be entitled to a proportionate fractional vote. Each
Fund, as a separate series of the Trust, votes separately on matters affecting
only that Fund. Voting rights are not cumulative. Shareholders of each Class of
each Fund will vote separately on matters pertaining solely to that Fund or that
Class. As a Delaware business trust, the Trust is not required to hold annual
meetings of

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<PAGE>

shareholders, but approval will be sought for certain changes in the operation
of the Trust and for the election of Trustees under certain circumstances.

In addition, a Trustee may be removed by the remaining Trustees or by
shareholders at a special meeting called upon written request of shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested, the Trust will provide appropriate assistance and
information to the shareholders requesting the meeting.

Where the Trust's Prospectuses or Statements of Additional Information state
that an investment limitation or a fundamental policy may not be changed without
shareholder approval, such approval means the vote of (1) 67% or more of the
affected Fund's shares present at a meeting if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or (ii)
more than 50% of the affected Fund's outstanding shares, whichever is less.

DESCRIPTION OF SHARES

The Declaration of Trust authorizes the issuance of an unlimited number of
portfolios and shares of each portfolio. Each share of a portfolio represents
an equal proportionate interest in that portfolio with each other share.
Shares are entitled upon liquidation to a PRO RATA share in the net assets of
the portfolio, after taking into account additional distribution and
shareholder servicing expenses attributable to the Retail Class Shares.
Shareholders have no preemptive rights. The Declaration of Trust provides
that the Trustees of the Trust may create additional series of shares or
separate classes of funds. All consideration received by the Trust for shares
of any portfolio or separate class and all assets in which such consideration
is invested would belong to that portfolio or separate class and would be
subject to the liabilities related thereto. Share certificates representing
shares will not be issued.

CUSTODIAN

_________________________ acts as the custodian (the "Custodian") of the Trust.
The Custodian holds cash, securities and other assets of the Trust as required
by the Investment Company Act of 1940, as amended (the "1940 Act").

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania
19103, serves as counsel to the Trust.

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<PAGE>

PART C: OTHER INFORMATION

ITEM 23. EXHIBITS:

(a)(1) Certificate of Trust

(a)(2) Declaration of Trust of Friends Ivory & Sime Funds

(b) By-Laws

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.

Not applicable.

ITEM 25. INDEMNIFICATION.

Article III, Section 8. of the Declaration of Trust filed as Exhibit (a)(2) to
this Registration Statement is incorporated herein by reference.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.

Not applicable.

ITEM 27. PRINCIPAL UNDERWRITERS.

To be completed by Amendment.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

To be completed by Amendment.

ITEM 29. MANAGEMENT SERIES.

Not applicable.

ITEM 30. UNDERTAKINGS.

Not applicable.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement (File No._________) to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York on this
29th day of September, 1999.

Friends Ivory & Sime Funds

By: /s/ George Walker
--------------------------------
Name: George Walker

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacity on the dates indicated.

By: /s/ George Walker September 29, 1999
-----------------------------
Name: George Walker
Title: Trustee

<PAGE>

EXHIBIT INDEX

Name Exhibit Page
- ---- ------------

Certificate of Trust EX-99.B(a)(1)

Declaration of Trust of NewCo Trust EX-99.B(a)(2)

By-Laws EX-99.B(b)

<PAGE>

CERTIFICATE OF TRUST
OF
FRIENDS IVORY & SIME FUNDS

This Certificate of Trust for Friends Ivory & Sime Funds (the "Trust"), a
business trust registered under the Investment Company Act of 1940, is filed in
accordance with the provisions of the Delaware Business Trust Act (Del. Code
Ann. tit.12, Section 3810) and sets forth the following:

1. The name of the trust is:
Friends Ivory & Sime Funds

2. As required by 12 Del. Code Ann. tit. 12 sections 3807 and 3810, the
business address of the registered office of the Trust and of the
registered agent of the Trust for service of process is:

The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801, County of Newcastle

3. This certificate shall be effective upon FILING.

4. Notice is hereby given that the Trust is a series Trust. The debts,
liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular series of the Trust
shall be enforceable against the assets of such series only and not
against the assets of the Trust generally.

This certificate is executed this 29th day of September 1999 in New York, NY,
upon the penalties of perjury and constitutes the oath or affirmation that
the facts stated above are true to the undersigned trustee's belief or
knowledge.

/s/ George Walker
- -----------------
George Walker
Initial Trustee

<PAGE>

AGREEMENT AND DECLARATION OF TRUST

FRIENDS IVORY & SIME FUNDS

WHEREAS, THIS AGREEMENT AND DECLARATION OF TRUST is made and entered into
as of the date set forth below by the Trustees named hereunder for the purpose
of forming a Delaware business trust in accordance with the provisions
hereinafter set forth,

NOW, THEREFORE, the Trustees hereby direct that a Certificate of Trust be
filed with the Office of the Secretary of State of the State of Delaware and do
hereby declare that the Trustees will hold IN TRUST all cash, securities and
other assets which the Trust now possesses or may hereafter acquire from time to
time in any manner and manage and dispose of the same upon the following terms
and conditions for the pro rata benefit of the holders of Shares of this Trust.

ARTICLE I

NAMES AND DEFINITIONS

SECTION 1. NAME. This trust shall be known as "Friends Ivory & Sime Funds"
and the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.

SECTION 2. DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:

(a) The "1940 Act" refers to the Investment Company Act of 1940 and
the Rules and Regulations thereunder, all as amended from time to time;

(b) "By-Laws" shall mean the By-Laws of the Trust as amended from
time to time which By-Laws are expressly herein incorporated by reference as
part of the "governing instrument" within the meaning of the Delaware Act
(defined herein);

(c) "Class" means a class of Shares in a Series of the Trust
established in accordance with the provisions of Article III hereof.

<PAGE>

(d) The terms "Commission" and "Principal Underwriter" shall have the
respective meanings given them in Section 2(a)(7) and Section 2(a)(29) of the
1940 Act;

(e) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust, as amended or restated from time to time;

(f) "Delaware Act" means the Delaware Business Trust Act,
12 Del. Code, Section 3801 et seq., as amended from time to time;

(g) The term "Interested Person" has the meaning given it in
Section 2(a)(19) of the 1940 Act;

(h) "Investment Manager" or "Manager" means a party furnishing
services to the Trust pursuant to any contract described in Article IV, Section
7(a) hereof;

(i) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof, whether domestic or foreign;

(j) "Series" refers to each Series of Shares established and
designated under or in accordance with the provisions of Article III and shall
mean an entity such as that described in Section 18(f)(2) of the 1940 Act, and
subject to Rule 18f-2 thereunder:

(k) "Shareholder" means a record owner of outstanding Shares;

(l) "Shares" means the shares of beneficial interest into which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares as well as whole Shares;

(m) The "Trust" refers to the Delaware business trust established
under the Delaware Act by this Agreement and Declaration of Trust and the filing
of the Certificate of Trust in the Office of the Secretary of State of the State
of Delaware, as it may be amended from time to time;

(n) "Trustees" refer to the persons who have signed this Agreement
and Declaration of Trust, so long as they continue in office in accordance with
the terms hereof, and all other persons who may from time to time be duly
elected or appointed to serve on the Board of Trustees in accordance with the
provisions hereof, and reference herein to a Trustee or the Trustees shall refer
to such person or persons in their capacity as trustees hereunder;

(o) The "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the account
of the Trust, including without limitation the rights referenced in Article
VIII, Section 10 hereof.

2
<PAGE>

ARTICLE II

PURPOSE OF THE TRUST

The purpose of the Trust is to conduct, operate and carry on the business
of a management investment company registered under the 1940 Act through one or
more Series investing primarily in securities.

ARTICLE III

SECTION 1. DIVISION OF BENEFICIAL INTEREST. The beneficial interest in
the Trust shall be divided into one or more Series. Each Series may be divided
into two or more Classes. Subject to the further provisions of this Article III
and any applicable requirements of the 1940 Act, the Trustees shall have full
power and authority, in their sole discretion, and without obtaining any
authorization or vote of the Shareholders of any Series or Class thereof, (i) to
divide the beneficial interest in each Series or Class thereof into Shares, with
or without par value, as the Trustees shall determine, (ii) to issue Shares
without limitation as to number (including fractional Shares), to such Persons
and for such amount and type of consideration, subject to any restriction set
forth in the By-Laws, including cash or securities, at such time or times and on
such terms as the Trustees may deem appropriate, (iii) to establish and
designate and to change in any manner any Series or Class thereof and to fix
such preferences, voting powers, rights, duties and privileges and business
purpose of each Series or Class thereof as the Trustees may from time to time
determine, which preferences, voting powers, rights, duties and privileges may
be senior or subordinate to (or in the case of business purpose, different from)
any existing Series or Class thereof and may be limited to specified property or
obligations of the Trust or profits and losses associated with specified
property or obligations of the Trust, (iv) to divide or combine the Shares or
any Series or Class thereof into a greater or lesser number without thereby
materially changing the proportionate beneficial interest of the Shares of such
Series or Class in the assets held with respect to that Series or Class, (v) to
classify or reclassify any issued Shares of any Series or Class thereof into
shares of one or more Series or Classes thereof, and (vi) to take such other
action with respect to the Shares as the Trustees may deem desirable.

Subject to the distinctions permitted among Classes of the same Series
as established by the Trustees consistent with the requirements of the 1940 Act,
each Share of a Series of the Trust shall represent an equal beneficial interest
in the net assets of such Series, and each holder of Shares of a Series shall be
entitled to receive such holder's pro rata share of distributions of income and
capital gains, if any, made with respect to such Series. Upon redemption of the
Shares of any Series, the applicable Shareholder shall be paid solely out of the
funds and property of such Series of the Trust.

3
<PAGE>

All references to Shares in this Declaration of Trust shall be deemed
to be Shares of any or all Series or Classes thereof, as the context may
require. All provisions herein relating to the Trust shall apply equally to each
Series of the Trust and each Class thereof, except as the context otherwise
requires.

All Shares issued hereunder, including, without limitation, Shares
issued in connection with a dividend paid in Shares or a split or reverse split
of Shares, shall be fully paid and non-assessable. Except as otherwise provided
by the Trustees, Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust.

SECTION 2. OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series (or
Class). No certificates certifying the ownership of Shares shall be issued
except as the Board of Trustees may otherwise determine from time to time. The
Trustees may make such rules as they consider appropriate for the issuance of
Share certificates, transfer of Shares of each Series (or Class) and similar
matters. The record books of the Trust as kept by the Trust, or any transfer or
similar agent, as the case may be, shall be conclusive as to the identity of the
Shareholders of each Series (or Class) and as to the number of Shares of each
Series (or Class) held from time to time by each.

SECTION 3. TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the books of the Trust only by the
record holder thereof or by his duly authorized agent upon delivery to the
Trustees or the Trust's transfer agent of a duly executed instrument of
transfer, together with a Share certificate if one is outstanding, and such
evidence of the genuineness of each such execution and authorization and of such
other matters as may be required by the Trustees. Upon such delivery, and
subject to any further requirements specified by the Trustees or contained in
the By-Laws, the transfer shall be recorded on the books of the Trust. Until a
transfer is so recorded, the Shareholder of record of Shares shall be deemed to
be the holder of such Shares for all purposes hereunder and neither the Trustees
nor the Trust, nor any transfer agent or registrar or any officer, employee or
agent of the Trust, shall be affected by any notice of any proposed transfer.

SECTION 4. INVESTMENTS IN THE TRUST. Investments may be accepted by the
Trust from such Persons, at such times, on such terms, and for such
consideration as the Trustees from time to time may authorize. Each investment
shall be credited to the individual Shareholder's account in the form of full
and fractional Shares of the Trust, in such Series (or Class) as the purchaser
shall select, at the net asset value per Share next determined for such Series
(or Class) after receipt of the investment; provided, however, that the Trustees
may, in their sole discretion, impose a sales charge or transaction fee upon
investments in the Trust.

SECTION 5. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the

4
<PAGE>

terms hereof and to have become a party hereto. The death, incapacity,
dissolution, termination or bankruptcy of a Shareholder during the existence of
the Trust shall not operate to terminate the Trust, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but entitles
such representative only to the rights of such Shareholder under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust Property or right to call for a partition or
division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor, except as specifically provided herein, to call
upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.

SECTION 6. POWER OF BOARD OF TRUSTEES TO CHANGE PROVISIONS RELATING TO
SHARES. Notwithstanding any other provisions of this Declaration of Trust and
without limiting the power of the Board of Trustees to amend the Declaration of
Trust as provided elsewhere herein, the Board of Trustees shall have the power
to amend this Declaration of Trust, at any time and from time to time, in such
manner as the Board of Trustees may determine in their sole discretion, without
the need for Shareholder action, so as to add to, delete, replace or otherwise
modify any provisions relating to the Shares contained in this Declaration of
Trust, provided that before adopting any such amendment without Shareholder
approval the Board of Trustees shall determine that it is consistent with the
fair and equitable treatment of all Shareholders or that Shareholder approval is
not otherwise required by the 1940 Act or other applicable federal or state law.

Subject to the foregoing Paragraph, the Board of Trustees may amend the
Declaration of Trust to amend any of the provisions set forth in paragraphs (a)
through (i) of Section 7 of this Article III.

SECTION 7. ESTABLISHMENT AND DESIGNATION OF SHARES. The establishment and
designation of any Series (or Class) of Shares shall be effective upon the
resolution by a majority of the then Trustees, adopting a resolution which sets
forth such establishment and designation and the relative rights and preferences
of such Series (or Class) whether directly in such resolution or by reference to
another document including, without limitation, any registration statement of
the Trust, or as otherwise provided in such resolution. Each such resolution
shall be incorporated herein by reference upon adoption.

Shares of each Series (or Class) established pursuant to this Section 7,
unless otherwise provided in the resolution establishing such Series (or Class),
shall have the following relative rights and preferences:

(a) ASSETS HELD WITH RESPECT TO A PARTICULAR SERIES. All
consideration received by the Trust for the issue of Shares of a particular
Series, together with all assets in

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which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof from whatever source derived, including, without
limitation, any proceeds derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably be held with respect to that
Series for all purposes, subject only to the rights of creditors, and shall be
so recorded upon the books of account of the Trust. Such consideration, assets,
income, earnings, profits and proceeds thereof, from whatever source derived,
including, without limitation, any proceeds derived from any reinvestment of
such proceeds, in whatever form the same may be, are herein referred to as
"assets held with respect to" that Series. In the event that there are any
assets, income, earnings, profits and proceeds thereof, funds or payments which
are not readily identifiable as assets held with respect to any particular
Series (collectively "General Assets"), the Trustees shall allocate such General
Assets to, between or among any one or more of the Series in such manner and on
such basis as the Trustees, in their sole discretion, deem fair and equitable,
and any General Assets as allocated to a particular Series shall be held with
respect to that Series. Each such allocation by the Trustees shall be conclusive
and binding upon the Shareholders of all Series for all purposes. Separate and
distinct records shall be maintained for each Series and the assets held with
respect to each Series shall be held and accounted for separately from the
assets held with respect to all other Series and General Assets of the Trust not
allocated to such Series.

(b) LIABILITIES HELD WITH RESPECT TO A PARTICULAR SERIES. The assets
of the Trust held with respect to each particular Series shall be charged
against the liabilities of the Trust held with respect to that Series and all
expenses, costs, charges and reserves attributable to that Series, and any
general liabilities of the Trust which are not readily identifiable as being
held with respect to any particular Series shall be allocated and charged by the
Trustees to and among any one or more of the Series in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges, and reserves so charged to a Series are
herein referred to as "liabilities held with respect to" that Series. Each
allocation of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the holders of all Series for all purposes.
All Persons who have extended credit which has been allocated to a particular
Series, or who have a claim or contract which has been allocated to any
particular Series, shall look, and shall be required by contract to look,
exclusively to the assets of that particular Series for payment of such credit,
claim, or contract. In the absence of an express contractual agreement so
limiting the claims of such creditors, claimants and contract providers, each
creditor, claimant and contract provider will be deemed nevertheless to have
impliedly agreed to such limitation unless an express provision to the contrary
has been incorporated in the written contract or other document establishing the
claimant relationship.

(c) DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS, AND REPURCHASES.
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article VI, no dividend or distribution including, without
limitation, any distribution paid upon termination of the Trust or paid on or in
respect to any Series (or Class), nor any redemption or repurchase of the Shares
of any Series (or Class), shall be effected by the Trust other than from

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<PAGE>

the assets held with respect to such Series, nor, except as specifically
provided in Section 8 of this Article III, shall any Shareholder of any
particular Series, otherwise have any right or claim against the assets held
with respect to any other Series except to the extent that such Shareholder has
such a right or claim hereunder as a Shareholder of such other Series. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders.

(d) VOTING. All Shares of the Trust entitled to vote on a matter
shall vote separately by Series (and, if applicable, by Class): that is, the
Shareholders of each Series (or Class) shall have the right to approve or
disapprove matters affecting the Trust and each respective Series (or Class) as
if the Series (or Classes) were separate companies. There are, however, two
exceptions to voting by separate Series (or Classes). First, if the 1940 Act
requires all Shares of the Trust to be voted in the aggregate without
differentiation between the separate Series (or Classes), then all the Trust's
Shares shall be entitled to vote on a dollar-weighted basis, I.E., voting shall
be based on the relative net asset value of each Series (or each Class within a
Series). Second, if any matter affects only the interests of some but not all
Series (or Classes), then only the Shareholders of such affected Series (or
Classes) shall be entitled to vote on the matter on the same dollar-weighted
basis.

(e) EQUALITY. All the Shares of each particular Series shall
represent an equal proportionate undivided interest in the assets held with
respect to that Series (subject to the liabilities held with respect to that
Series and such rights and preferences as may have been established and
designated with respect to Classes of Shares within such Series), and each Share
of any particular Series shall be equal to each Share of that Series.

(f) FRACTIONS. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole Share of that Series,
including rights with respect to voting, receipt of dividends and distributions,
redemption of Shares and termination of the Trust.

(g) EXCHANGE PRIVILEGE. The Trustees shall have the authority t
provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series of Shares in
accordance with such requirements and procedures as may be established by the
Trustees.

(h) COMBINATION OF SERIES. The Trustees shall have the authority,
without the approval of the Shareholders of any Series, unless otherwise
required by applicable law, to combine the assets and liabilities held with
respect to any two or more Series into assets and liabilities held with respect
to a single Series.

(i) ELIMINATION OF SERIES. At any time there are no Shares
outstanding of any particular Series (or Class) previously established and
designated, the Trustees may by resolution

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of a majority of the then Trustees abolish that Series (or Class) and rescind
the establishment and designation thereof.

SECTION 8. INDEMNIFICATION OF SHAREHOLDERS. If any Shareholder or former
Shareholder shall be exposed to liability by reason of a claim or demand
relating to his or her being or having been a Shareholder, and not because of
his or her acts or omissions, the Shareholder or former Shareholder (or his or
her heirs, executors, administrators, or other legal representatives or in the
case of a corporation or other entity, its corporate or other general successor)
shall be entitled to be held harmless from and indemnified out of the assets of
the Trust against all loss and expense arising from such claim or demand, but
only out of the assets held with respect to the particular Series or Class of
which such Person is or was a Shareholder and from or in relation to which such
liability arose.

ARTICLE IV

THE BOARD OF TRUSTEES

SECTION 1. NUMBER, ELECTION AND TENURE. The number of Trustees constituting
the Board of Trustees shall initially be one who shall be George Walker.
Hereafter, the number shall be fixed from time to time by a written instrument
signed, or by resolution approved at a duly constituted meeting, by a majority
of the Board of Trustees, provided, however, that the number of Trustees shall
in no event be less than one (1) nor more than fifteen (15). The Board of
Trustees, by action of a majority of the then Trustees at a duly constituted
meeting, may fill vacancies in the Board of Trustees or remove Trustees with or
without cause. Subject to any policy adopted by the Board of Trustees, each
Trustee shall serve during the continued lifetime of the Trust for a term of
five (5) years, or, if sooner, until he or she dies, resigns, is declared
bankrupt or incompetent by a court or appropriate jurisdiction, or is removed,
or until the next meeting of Shareholders called for the purpose of electing
Trustees and until the election and qualification of his or her successor. In
the event that less than a majority of the Trustees holding office have been
elected by the Shareholders, the Trustees then in office shall call a
Shareholders' meeting for the election of Trustees. Any Trustee may resign at
any time by written instrument signed by him or her and delivered to any officer
of the Trust or to a meeting of the Trustees. Such resignation shall be
effective upon receipt, unless specified to be effective at some other time.
Except to the extent expressly provided in a written agreement with the Trust,
no Trustee resigning and no Trustee removed shall have any right to any
compensation or expense reimbursement for any period following his or her
resignation or removal, or any right to damages on account of such removal. The
Shareholders may elect Trustees at any meeting of Shareholders called by the
Trustees for that purpose. A meeting of Shareholders for the purpose of electing
or removing one or more Trustees may be called (i) by the Trustees upon their
own vote, or (ii) upon the demand of shareholders owning 10% or more of the
Shares of the Trust in the aggregate.

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SECTION 2. EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The death,
declination, resignation, retirement, removal, or incapacity of one or more
Trustees, or all of them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of Trust.
Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is
filled as provided in Article IV, Section 1, the Trustees in office, regardless
of their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration of Trust.
As conclusive evidence of such vacancy, a written instrument certifying the
existence of such vacancy may be executed by an officer of the Trust or by a
majority of the Board of Trustees.

SECTION 3. POWERS. Subject to the provisions of this Declaration of Trust,
the business of the Trust shall be managed by the Board of Trustees, and such
Board shall have all powers necessary or convenient to carry out that
responsibility including the power to engage in securities transactions of all
kinds on behalf of the Trust. The Trustees shall have full power and authority
to do any and all acts and to make and execute any and all contracts and
instruments that they may consider necessary or appropriate in connection with
the administration of the Trust. Without limiting the foregoing, the Trustees
may: (i) adopt By-Laws not inconsistent with this Declaration of Trust providing
for the regulation and management of the affairs of the Trust and may amend and
repeal them to the extent that such By-Laws do not reserve that right to the
Shareholders; (ii) elect and remove, with or without cause, such officers and
appoint and terminate such agents as they consider appropriate; (iii) appoint
from their own number and establish and terminate one or more committees
consisting of two or more Trustees which may exercise the powers and authority
of the Board of Trustees to the extent that the Trustees determine; (iv) employ
one or more custodians of the assets of the Trust and may authorize such
custodians to employ subcustodians and to deposit all or any part of such assets
in a system or systems for the central handling of securities or with a Federal
Reserve Bank, retain a transfer agent or a shareholder servicing agent, or both;
(v) provide for the issuance and distribution of Shares by the Trust directly or
through one or more Principal Underwriters or for the determination of
Shareholders with respect to various matters; (vi) declare and pay dividends and
distributions to Shareholders of each Series from the assets of such Series;
(vii) establish form time to time, in accordance with the provisions of
Article III, hereof, any Series (or Class) of Shares, each such Series (or
Class) to operate as a separate and distinct investment medium and with
separately defined investment objectives and policies and distinct investment
purpose; and (viii) in general delegate such authority as they consider
desirable to any officer of the Trust, to any committee of the Trustees and to
any agent or employee of the Trust or to any such custodian, transfer or
shareholder servicing agent, or Principal Underwriter. Any determination as to
what is in the interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified herein or in the By-Laws or required by law, any action by
the Board of Trustees shall be deemed effective if approved or taken by a
majority of the Trustees present at a meeting of Trustees at which a quorum of
Trustees is present, within or without the State of Delaware. Any action
required or permitted to be taken at any meeting of the Board of Trustees, or
any committee thereof, may be taken without a meeting

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<PAGE>

if all members of the Board of Trustees or committee (as the case may be)
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Trustees, or committee.

Without limiting the foregoing, the Trustees shall have the power and
authority to cause the Trust (or to act on behalf of the Trust):

(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
pledge, sell, assign, transfer, exchange, distribute, write options on, lend or
otherwise deal in or dispose of contracts for the future acquisition or delivery
of fixed income or other securities, and securities of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks, preferred
stocks, negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers acceptances, and other securities of any kind,
issued, created guaranteed, or sponsored by any and all Persons, including,
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision of
the U.S. Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or of any state,
territory, or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, to change the investments of the assets of the Trust; and to
exercise any and all rights, powers, and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons, to exercise any of
said rights, powers and privileges in respect of any of said instruments;

(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options with respect to or otherwise deal in any property rights relating
to any or all of the assets of the Trust or any Series, subject to any
requirements of the 1940 Act;

(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such Person or Persons as the Trustees shall
deem proper, granting to such Person or Persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;

(d) To exercise powers and right of subscription or otherwise which
in any manner arise out of ownership of securities;

(e) To hold any security or property in a form not indicating that it
is Trust Property, whether in bearer, unregistered or other negotiable form, or
in its own name or in the

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<PAGE>

name of a custodian or subcustodian or a nominee or nominees or otherwise or to
authorize the custodian or a subcustodian or a nominee or nominees to deposit
the same in a securities depository;

(f) To consent to, or participate in, any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
security which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer; and to pay
calls or subscriptions with respect to any security held in the Trust;

(g) To join with other security holders in acting through a
committee, depositary, voting trust or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such committee,
depositary or voting trust, and to delegate to them such power and authority
with relation to any security (whether or not so deposited or transferred) as
the Trustees shall deem proper, and to agree to pay, and to pay, such portion of
the expenses and compensation of such committee, depositary or voting trust as
the Trustees shall deem proper;

(h) To compromise, arbitrate or otherwise adjust claims in favor of
or against the Trust or any matter in controversy, including but not limited to
claims for taxes;

(i) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;

(j) To borrow funds or other property in the name of the Trust
exclusively for Trust purposes;

(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;

(l) To purchase and pay for entirely out of Trust Property such
insurance as the Trustees may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, Investment Managers, Principal Underwriters, or
independent contractors of the Trust, individually against all claims and
liabilities of every nature arising by reason of holding Shares, holding, being
or having held any such office or position, or by reason of any action alleged
to have been taken or omitted by any such Person as Trustee, officer, employee,
agent, Investment Manager, Principal Underwriter, or independent contractor,
including any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify such
Person against liability;

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<PAGE>

(m) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust;

(n) To employ one or more banks, trust companies or companies that
are members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Declaration or Trust or in the By-Laws;

(o) To interpret the investment policies, practices or limitations of
any Series or Class; and

(p) To invest part or all of the Trust Property (or part or all of
the assets of any Series), or to dispose of part or all of the Trust Property
(or part or all of the assets of any Series) and invest the proceeds of such
disposition, in securities issued by one or more other investment companies
registered under the 1940 Act (including investment by means of transfer of part
or all of the Trust Property in exchange for an interest or interests in such
one or more investment companies) all without any requirement of approval by
Shareholders unless required by the 1940 Act. Any such other investment company
may (but need not) be a trust (formed under the laws of the State of Delaware or
of any other state) which is classified as a partnership for federal income tax
purposes.

The Trust shall not be limited to investing in obligations maturing before
the possible termination of the Trust or one or more of its Series. The Trust
shall not in any way be bound or limited by any present or future law or custom
in regard to investment by fiduciaries. The Trust shall not be required to
obtain any court order to deal with any assets of the Trust or take any other
action hereunder.

SECTION 4. PAYMENT OF EXPENSES BY THE TRUST. The Trustees are authorized to
pay or cause to be paid out of the principal or income of the Trust or any
Series (or Class), or partly out of the principal and partly out of the income,
and to charge or allocate the same to, between or among such one or more of the
Series (or Classes) that may be established or designated pursuant to
Article III, as they deem fair, all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust or Series (or
Class), or in connection with the management thereof, including, but not limited
to, the Trustees' compensation and such expenses and charges for the services of
the Trust's officers, employees, Investment Manager, Principal Underwriter,
auditors, counsel, custodian, transfer agent, Shareholder servicing agent, and
such other agents or independent contractors and such other expenses and charges
as the Trustees may deem necessary or proper to incur.

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<PAGE>

SECTION 5. PAYMENT OF EXPENSES BY SHAREHOLDERS. The Trustees shall have the
power, as frequently as they may determine, to cause each Shareholder, or each
Shareholder of any particular series, to pay directly, in advance or arrears,
for charges of the Trust's custodian or transfer agent, Shareholder servicing or
similar agent, an amount fixed from time to time by the Trustees, by setting off
such charges due from such Shareholder from declared but unpaid dividends owed
such Shareholder and/or by reducing the number of Shares in the account of such
Shareholder by that number of full and/or fractional Shares which represents the
outstanding amount of such charges due from such Shareholder.

SECTION 6. OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of
the Trust shall at all times be considered as vested in the Trust, except that
the Trustees shall have power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees, or in the name of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine. The right, title and interest of the Trustees in the
Trust Property shall vest automatically in each Person who may hereafter become
a Trustee. Upon the resignation, removal or death of a Trustee he or she shall
automatically cease to have any right, title or interest in any of the Trust
Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.

SECTION 7. SERVICE CONTRACTS.

(a) Subject to such requirements and restrictions as may be set forth
in the ByLaws, the Trustees may, at any time and from time to time, contract for
exclusive or nonexclusive advisory, management and/or administrative services
for the Trust or for any Series with any corporation, trust, association or
other organization; and any such contract may contain such other terms as the
Trustees may determine, including without limitation, authority for the
Investment Manager or administrator to determine from time to time without prior
consultation with the Trustees what investments shall be purchased, held, sold
or exchanged and what portion, if any, of the assets of the Trust shall be held
uninvested and to make changes in the Trust's investments, or such other
activities as may specifically be delegated to such party.

(b) The Trustees may also, at any time and from time to time,
contract with any corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or Principal Underwriter for
the Shares of one or more of the Series (or Classes) or other securities to be
issued by the Trust. Every such contract shall comply with such requirements and
restrictions as may be set forth in the By-Laws; and any such contract may
contain such other terms as the Trustees may determine.

(c) The Trustees are also empowered, at any time and from time to
time, to contract with any corporations, trusts, associations or other
organizations, appointing it or them the custodian, transfer agent and/or
shareholder servicing agent for the Trust or one or more of its

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<PAGE>

Series. Every such contract shall comply with such requirements and restrictions
as may be set forth in the By-Laws or stipulated by resolution of the Trustees.

(d) The Trustees are further empowered, at any time and from time to
time, to contract with any entity to provide other services to the Trust or one
or more of the Series, as the Trustees determine to be in the best interests of
the Trust and the applicable Series.

(e) The fact that:

(i) any of the Shareholders, Trustees, or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter, distributor, or
affiliate or agent of or for any corporation, trust, association,
or other organization or for any parent or affiliate of any
organization with which an advisory, management or administration
contract, or principal underwriter's or distributor's contract,
or transfer, shareholder servicing or other type of service
contract may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that

(ii) any corporation, trust, association or other organization
with which an advisory, management or administration contract or
principal underwriter's or distributor's contract, or transfer,
shareholder servicing or other type of service contract may have
been or may hereafter be made also has an advisory, management or
administration contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or
other service contract with one or more other corporations,
trust, associations, or other organizations, or has other
business or interests

shall not affect the validity of any such contract or disqualify
any Shareholder, Trustee or officer of the Trust from voting upon
or executing the same, or create any liability or accountability
to the Trust or its Shareholders, provided approval of each such
contract is made pursuant to the requirements of the 1940 Act.

ARTICLE V.

SHAREHOLDERS' VOTING POWERS AND MEETINGS

SECTION 1. VOTING POWERS. Subject to the provisions of Article III,
Section 7(d), Shareholders shall have power to vote only (i) for the election or
removal of Trustees as provided in Article IV, Section 1, and (ii) with respect
to such additional matters relating to the Trust as may be required by this
Declaration of Trust, the By-Laws or any registration statement of the

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<PAGE>

Trust filed with the Commission (or any successor agency) or any state, or as
the Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a proportionate
fractional vote. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy with respect to
Shares held in the name of two or more persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. The By-Laws may provide that proxies may also, or
may instead, be given by any electronic or telecommunications device or in any
other manner. Notwithstanding anything else contained herein or in the By-Laws,
in the event a proposal by anyone other than the officers or Trustees of the
Trust is submitted to a vote of the Shareholders of one or more Series or
Classes thereof or of the Trust, or in the event of any proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or
Trustees of the Trust, Shares may be voted only in person or by written proxy at
a meeting. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this Declaration of Trust
or the By-Laws to be taken by the Shareholders.

SECTION 2. VOTING POWER AND MEETINGS. Meetings of the Shareholders may
be called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
by this Declaration of Trust or by the By-Laws. Meetings of the Shareholders may
also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by the
Trustees. Written notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by mailing such notice at least seven (7) days
before such meeting, postage prepaid, stating the time and place of the meeting,
to each Shareholder at the Shareholder's address as it appears on the records of
the Trust. Whenever notice of a meeting is required to be given to a Shareholder
under this Declaration of Trust or the By-Laws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his or her attorney
thereunto authorized and filed with the records of the meeting, shall be deemed
equivalent to such notice.

SECTION 3. QUORUM AND REQUIRED VOTE. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust,
forty percent (40%) of the Shares entitled to vote shall constitute a quorum at
a Shareholders meeting. When any one or more Series (or Classes) is to vote as a
single Class separate from any other Shares, forty percent (40%) of the Shares
of each such Series (or Classes) entitled to vote shall constitute a quorum at a
Shareholder's meeting of that Series (or Class). Any meeting of Shareholders may
be adjourned from time to time by a majority of the votes properly cast upon the
question of adjourning a meeting to another date and time, whether or not a
quorum is present, and the meeting may be held as adjourned within a reasonable
time after the date set for the original

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meeting without further notice. Subject to the provisions of Article III,
Section 7(d), when a quorum is present at any meeting, a majority of the Shares
voted shall decide any questions and a plurality shall elect a Trustee, except
when a larger vote is required by any provision of this Declaration of Trust or
the By-Laws or by applicable law. Where any provision of law or of this
Declaration of Trust requires that the holders of any Series (or Class) shall
vote as a Series (or Class) on the matter (or a plurality with respect to the
election of a Trustee) the vote of a majority of the Shares of the Series (or
Class) shall decide that matter insofar as that Series (or Class) is concerned.

SECTION 4. ACTION BY WRITTEN CONSENT. Any action taken by Shareholders may
be taken without a meeting if Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust, by the By-Laws
or by applicable law) and holding a majority (or such larger proportion as
aforesaid) of the Shares of any Series (or Class) entitled to vote separately on
the matter consent to the action in writing and such written consents are filed
with the records of the meetings of Shareholders. Such consent shall be treated
for all purposes as a vote taken at a meeting of Shareholders.

SECTION 5. RECORD DATES. For the purpose of determining the Shareholders of
any Series (or Class) entitled to vote or act at any meeting or any adjournment
thereof, the Trustees may from time to time fix a time, which shall be not more
than ninety (90) days before the date of any meeting of Shareholders, as the
record date for determining the Shareholders of the Trust, or of such Series (or
Class), having the right to notice of and to vote at such meeting and any
adjournment thereof, and in such case only Shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date. For the purpose of determining the
Shareholders of any Series (or Class) who are entitled to receive payment of any
dividend or of any other distribution, the Trustees may from time to time fix a
date, which shall be before the date for the payment of such dividend or such
other payment, as the record date for determining the Shareholders of such
Series (or Class) having the right to receive such dividend or distribution.
Without fixing a record date the Trustees may for voting and/or distribution
purposes close the register or transfer books for one or more Series for all or
any part of the period between a record date and a meeting of Shareholders or
the payment of a distribution. Nothing in this Section shall be construed as
precluding the Trustees from setting record dates for different Series (or
Classes).

SECTION 6. ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.

ARTICLE VI.

NET ASSET VALUE, DISTRIBUTIONS, AND REDEMPTIONS

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<PAGE>

SECTION 1. DETERMINATION OF NET ASSET VALUE, NET INCOME, AND DISTRIBUTIONS.
Subject to Article III, Section 7 hereof, the Trustees, in their absolute
discretion, may prescribe and shall set forth in the By-Laws or in a duly
adopted vote of the Trustees such bases and time for determining the per Share
or net asset value of the Shares of any Series (or Class) or net income
attributable to the Shares of any Series (or Class), or the declaration and
payment of dividends and distributions on the Shares of any Series, as they may
deem necessary or desirable.

SECTION 2. REDEMPTIONS AND REPURCHASES. The Trust shall purchase such
Shares as are offered by any Shareholder for redemption, upon the presentation
of a proper instrument of transfer together with a request directed to the Trust
or a Person designated by the Trust that the Trust purchase such Shares or in
accordance with such other procedures for redemption as the Trustees may from
time to time authorize; and the Trust will pay therefor the net asset value
thereof, in accordance with the By-Laws and applicable law. Payment for said
Shares shall be made by the Trust to the Shareholder within seven days after the
date on which the request is made in proper form. The obligation set forth in
this Section 2 is subject to the provision that in the event that any time the
New York Stock Exchange (the "Exchange") is closed for other than weekends or
holidays, or if permitted by the Commission during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable for
the Trust to dispose of the investments of the applicable Series or to determine
fairly the value of the net assets held with respect to such Series or during
any other period permitted by order of the Commission for the protection of
investors, such obligations may be suspended or postponed by the Trustees. In
the case of a suspension of the right of redemption as provided herein, a
Shareholder may either withdraw the request for redemption or receive payment
based on the net asset value per Share next determined after the termination of
such suspension.

The redemption price may in any case or cases be paid wholly or partly in
kind if the Trustees determine that such payment is advisable in the interest of
the remaining Shareholders of the Series for which the Shares are being
redeemed. Subject to the foregoing, the fair value, selection and quantity of
securities or other property so paid or delivered as all or part of the
redemption price may be determined by or under authority of the Trustees. In no
case shall the Trust be liable for any delay of any corporation or other Person
in transferring securities selected for delivery as all or part of any payment
in kind.

SECTION 3. REDEMPTIONS AT THE OPTION OF THE TRUST. The Trustees may require
Shareholders to redeem Shares for any reason under terms set by the Trustees,
including, but not limited to: (i) the determination of the Trustees that direct
or indirect ownership of Shares of any Series has or may become concentrated in
such Shareholder to an extent that would disqualify any Series as a regulated
investment company under the Internal Revenue Code of 1986, as amended (or any
successor statute thereto); (ii) the failure of a Shareholder to supply a tax
identification number if required to do so, or to have the minimum investment
required (which may vary by Series or Class); or (iii) the failure of a
Shareholder to pay when due for the purchase of Shares issued to him. Any such
redemption shall be effected at the redemption price and in the manner provided
in this Article VI.

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<PAGE>

SECTION 4. DISCLOSURE OF OWNERSHIP. The holders of Shares shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares as the Trustees deem necessary to comply with the
provisions of the Internal Revenue Code of 1986, as amended (or any successor
statute thereto), or to comply with the requirements of any other taxing
authority or other applicable law.

ARTICLE VII.

COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES

SECTION 1. COMPENSATION. The Trustees as such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for the advisory, management, legal, accounting, investment banking or
other services and payment for the same by the Trust.

SECTION 2. STANDARD OF CARE. The fiduciary duties of Trustees to the Trust
and its Shareholders are the same as those of the directors of a Delaware
corporation to the corporation and its shareholders.

SECTION 3. INDEMNIFICATION AND LIMITATION OF LIABILITY. A Trustee, when
acting in such capacity, shall not be personally liable to any Person, other
than the Trust or a Shareholder to the extent provided in this Article VII, for
any act, omission or obligation of the Trust, of such Trustee, or of any other
Trustee. A Trustee shall not be personally liable for monetary damages for
breach of fiduciary duty as a trustee except in cases in which (i) the Trustee
breaches the duty of loyalty to the Trust or its Shareholders, (ii) an act or
omission not in good faith or that involves intentional misconduct or a knowing
violation of law, (iii) the Trustee derived an improper personal benefit. The
Trustees shall not be responsible or liable in any event for any neglect or
wrong-doing of any officer, agent, employee, Manager or Principal Underwriter of
the Trust, nor shall any Trustee be responsible for the act or omission of any
other Trustee. The Trust shall indemnify each Person who is, or has been, a
Trustee, officer, employee or agent of the Trust, any Person who is serving or
has served at the Trust's request as a Trustee, officer, trustee, employee or
agent of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise to the extent and in the manner provided in
the By-Laws.

All persons extending credit to, contracting with or having any claim
against the Trust or the Trustees shall look only to the assets of the
appropriate Series, or, if the Trustees have yet to establish Series, of the
Trust for payment under such credit, contract or claim; and neither the Trustees
nor the Shareholders, nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable therefor.

Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust or Trustees by any of them in connection with the Trust shall conclusively
be deemed to have been executed or done only in or

18
<PAGE>

with respect to his or their capacity as Trustee or Trustees, and such Trustee
or Trustees shall not be personally liable thereon. At the Trustees' discretion,
any note, bond, contract, instrument, certificate or undertaking made or issued
by the Trustees or by any officer or officers may give notice that the
Certificate of Trust is on file in the Office of the Secretary of State of the
State of Delaware and that a limitation on the liability of each Series exists
and such note, bond, contract, instrument, certificate or undertaking may, if
the Trustees so determine, recite that the same was executed or made on behalf
of the Trust or by a Trustee or Trustees in such capacity and not individually
or by an officer or officers in such capacity and not individually and that the
obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only on the assets and property of the
Trust or a Series thereof, and may contain such further recital as such Person
or Persons may deem appropriate. The omission of any such notice or recital
shall in no way operate to bind any Trustees, officers or Shareholders
individually.

SECTION 4. TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable to the Trust and to
any Shareholder solely for his or her own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee, and shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and shall be
under no liability for any act or omission in accordance with such advice nor
for failing to follow such advice. The Trustees shall not be required to give
any bond as such, nor any surety if a bond is required.

SECTION 5. INSURANCE. The Trustees shall be entitled and empowered to the
fullest extent permitted by law to purchase with Trust assets insurance for
liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee or officer in connection with any claim, action, suit or
proceeding in which he or she becomes involved by virtue of his or her capacity
or former capacity with the Trust, whether or not the Trust would have the power
to indemnify him or her against such liability under the provisions of this
Article.

ARTICLE VIII.

MISCELLANEOUS

SECTION 1. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No Person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.

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<PAGE>

SECTION 2. TERMINATION OF TRUST OR SERIES.

(a) Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trust may be terminated at any time by vote of a
majority of the Shares of each Series entitled to vote, voting separately by
Series, or by the Trustees by written notice to the Shareholders. Any Series or
Class may be terminated at any time by vote of a majority of the Shares of that
Series or Class entitled to vote, or by the Trustees by written notice to the
Shareholders of that Series or Class.

(b) Upon the requisite Shareholder vote or action by the Trustees to
terminate the Trust or any one or more Series of Shares or any Class thereof,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated, of the Trust or of the
particular Series of any Class thereof as may be determined by the Trustees, the
Trust shall, in accordance with such procedures as the Trustees consider
appropriate, reduce the remaining assets of the Trust or of the affected Series
or Class to distributable form in cash or Shares (if any Series remain) or other
securities, or any combination thereof, and distribute the proceeds to the
Shareholders of the Series or Classes involved, ratably according to the number
of Shares of such Series or Class held by the several Shareholders of such
Series or Class on the date of distribution. Thereupon, the Trust or any
affected Series or Class shall terminate and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties relating thereto or
arising therefrom, and the right, title and interest of all parties with respect
to the Trust or such Series or Class shall be canceled and discharged.

(c) Upon termination of the Trust, following completion of winding up
of its business, the Trustees shall cause a certificate of cancellation of the
Trust's Certificate of Trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee.

SECTION 3. REORGANIZATION AND MASTER/FEEDER.

(a) Notwithstanding anything else herein, the Trustees may, without
Shareholder approval unless such approval is required by applicable law:

(i) cause the Trust to merge or consolidate with or into one or
more trusts (or series thereof to the extent permitted by law), partnerships,
associations, corporations or other business entities (including trusts,
partnerships, associations, corporations or other business entities created by
the Trustees to accomplish such merger or consolidation) so long as the
surviving or resulting entity is an open-end management investment company under
the 1940 Act, or is a series thereof, that will succeed to or assume the Trust's
registration under the 1940 Act and that is formed, organized or existing under
the laws of the United States or of a state, commonwealth, possession or colony
of the United States;

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<PAGE>

(ii) cause the Shares to be exchanged under or pursuant to any
state or federal statute to the extent permitted by law; or

(iii) cause the Trust to incorporate under the laws of Delaware.
Any agreement of merger or consolidation or exchange or certificate of merger
may be signed by a majority of the Trustees and facsimile signatures conveyed by
electronic or telecommunication means shall be valid.

(b) Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Act, and notwithstanding anything to the contrary
contained in this Declaration of Trust, an agreement of merger or consolidation
approved by the Trustees in accordance with this Section 3 may effect any
amendment to the governing instrument of the Trust or effect the adoption of a
new instrument of the Trust if the Trust is the surviving or resulting trust in
the merger or consolidation.

(c) The Trustees may create one or more business trusts to which all
or any part of the assets, liabilities, profits or losses of the Trust or any
Series or Class thereof may be transferred and may provide for the conversion of
Shares in the Trust or any Series or Class thereof into beneficial interests in
any such newly created trust or trusts or any series or classes thereof.

(d) Notwithstanding anything else herein, the Trustees may, without
Shareholder approval, invest all or a portion of the Trust Property of any
Series, or dispose of all or a portion of the Trust Property of any Series, and
invest the proceeds of such disposition in interests 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 State of
Delaware or any other state or jurisdiction) (or subtrust thereof) which is
classified as a partnership for federal income tax purposes. Notwithstanding
anything else herein, the Trustees may, without Shareholder approval unless such
approval is required by applicable law, cause a Series that is organized in the
master/feeder fund structure to withdraw or redeem its Trust Property from the
master fund and cause such Series to invest its Trust Property directly in
securities and other financial instruments or in another master fund.

SECTION 4. AMENDMENTS. Except as specifically provided in this Section, the
Trustees may, without Shareholder vote, restate, amend or otherwise supplement
this Declaration of Trust. Shareholders shall have the right to vote:

(i) on any amendment that would affect their right to vote
granted in Article V, Section 1 hereof;

(ii) on any amendment to this Section 4 Article VIII;

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<PAGE>

(iii) on any amendment for which a Shareholder vote may be
required by applicable law or by the Trust's registration statement filed with
the Commission; and

(iv) on any amendment submitted to them by the Trustees. Any
amendment required or permitted to be submitted to the Shareholders that, as the
Trustees determine, shall affect the Shareholders of one or more Series (or
Class) shall be authorized by a vote of the Shareholders of each Series (or
Class) affected and no vote of Shareholders of a Series (or Class) not affected
shall be required. Notwithstanding anything else herein, no amendment hereof or
shall limit the rights to indemnification referred in Article VII, Section 3
hereof or as provided in the By-Laws with respect to any actions or omissions of
Persons covered thereby prior to such amendment. The Trustees may, without
Shareholder vote, restate, amend, or otherwise supplement the Certificate of
Trust as they deem necessary or desirable.

SECTION 5. FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy
of this instrument and of each restatement and/or amendment hereto shall be kept
at the office of the Trust where it may be inspected by any Shareholder. Anyone
dealing with the Trust may rely on a certificate by an officer of the Trust as
to whether or not any such restatements and/or amendments have been made and as
to any matters in connection with the Trust hereunder; and, with the same effect
as if it were the original, may rely on a copy certified by an officer of the
Trust to be a copy of this instrument or of any such restatements and/or
amendments. Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. Whenever the singular number is used
herein, the same shall include the plural; and the neuter, masculine and
feminine genders shall include each other, as applicable. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.

SECTION 6. APPLICABLE LAW.

(a) The Trust is created under, and this Declaration of Trust is to
be governed by, and construed and enforced in accordance with, the laws of the
State of Delaware. The Trust shall be of the type commonly called a business
trust, and without limiting the provisions hereof, the Trust specifically
reserves the right to exercise any of the powers or privileges afforded to
business trusts or actions that may be engaged in by business trusts under the
Delaware Act, and the absence of a specific reference herein to any such power,
privilege or action shall not imply that the Trust may not exercise such power
or privilege or take such actions.

(b) Notwithstanding the first sentence of Section 6(a) of this
Article VIII, there shall not be applicable to the Trust, the Trustees or this
Declaration of Trust (x) the provisions of Section 3540 of Title 12 of the
Delaware Code or (y) any provisions of the laws (statutory or common) of the
State of Delaware (other than the Delaware Act) pertaining to trusts that relate
to or regulate:

22
<PAGE>

(i) the filing with any court or governmental body or agency of
trustee accounts or schedules of trustee fees and charges;

(ii) affirmative requirements to post bonds for trustees,
officers, agents or employees of the trust;

(iii) the necessity for obtaining a court or other governmental
approval concerning the acquisition, holding or disposition of real or personal
property;

(iv) fees or other sums applicable for trustees, officers, agents
or employees of a trust;

(v) the allocation of receipts and expenditures to income or
principal;

(vi) restrictions or limitations on the permissible nature,
amount or concentration of trust investments or requirements relating to the
titling, storage or other manner of holding of trust assets; or

(vii) the establishment of fiduciary or other standards or
responsibilities or limitations on the acts or powers of trustees that are
inconsistent with the limitations or liabilities or authorities and powers of
the Trustees set forth or referenced in this Declaration of Trust.

SECTION 7. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.

(a) The provisions of this Declaration of Trust are severable, and if
the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration of Trust; provided, however, that such determination
shall not affect any of the remaining provisions of this Declaration of Trust or
render invalid or improper any action taken or omitted prior to such
determination.

(b) If any provision of this Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration of Trust in any jurisdiction.

SECTION 8. BUSINESS TRUST ONLY. It is the intention of the Trustees to
create a business trust pursuant to the Delaware Act, and thereby to create only
the relationship of Trustee and beneficial owners within the meaning of such
Delaware Act between the Trustees and each Shareholder. It is not the intention
of the Trustees to create a general partnership, limited

23
<PAGE>

partnership, joint stock association, corporation, bailment, or any form of
legal relationship other than a business trust pursuant to such Delaware Act.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.

SECTION 9. DERIVATIVE ACTIONS. In addition to the requirements set forth in
Section 3816 of the Delaware Act, a Shareholder may bring a derivative action on
behalf of the Trust only if the following conditions are met:

(a) The Shareholder or Shareholders must make a pre-suit demand upon
the Trustees to bring the subject action unless an effort to cause the Trustees
to bring such an action is not likely to succeed. For purposes of this
Section 9(a), a demand on the Trustees shall only be deemed not likely to
succeed and therefore excused if a majority of the Board of Trustees, or a
majority of any committee established to consider the merits of such action, has
a personal financial interest in the transaction at issue, and a Trustee shall
not be deemed interested in a transaction or otherwise disqualified from ruling
on the merits of a Shareholder demand by virtue of the fact that such Trustee
receives remuneration for his service on the Board of Trustees of the Trust or
on the boards of one or more Trusts that are under common management with or
otherwise affiliated with the Trust.

(b) Unless a demand is not required under paragraph (a) of this
Section 9, Shareholders eligible to bring such derivative action under the
Delaware Act who hold at least 10% of the outstanding Shares of the Trust, or
10% of the outstanding Shares of the Series or Class to which such action
relates, shall join in the request for the Trustees to commence such action; and

(c) Unless a demand is not required under paragraph (a) of this
Section 9, the Trustees must be afforded a reasonable amount of time to consider
such Shareholder request and to investigate the basis of such claim. The
Trustees shall be entitled to retain counsel or other advisors in considering
the merits of the request and shall require an undertaking by the Shareholders
making such request to reimburse the Trust for the expense of any such advisors
in the event that the Trustees determine not to bring such action.

For the purposes of this Section 9, the Board of Trustees may
designate a committee of one Trustee to consider a Shareholder demand if
necessary to create a committee with a majority of Trustees who do not have a
personal financial interest in the transaction at issue. The Trustees shall be
entitled to retain counsel or other advisors in considering the merits of the
request and shall require an undertaking by the Shareholders making such request
to reimburse the Trust for the expense of any such advisors in the event that
the Trustees determine not to bring such action.

SECTION 10. USE OF THE NAME "FRIENDS IVORY & SIME FUNDS" OR "FI&S FUNDS".
The name "Friends Ivory & Sime Funds" or "FI&S Funds" and all rights to the use
of the name

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<PAGE>

"Friends Ivory & Sime Funds" or "FI&S Funds" belong to Friends Ivory & Sime,
Inc. ("FI&S, Inc.") the sponsor of the Trust. FI&S, Inc. has consented to the
use by the Trust of the identifying word "FI&S Funds" and has granted to the
Trust a non-exclusive license to use the name "FI&S Funds" as part of the name
of the Trust and the name of any Series of Shares. In the event an affiliate of
FI&S, Inc. is not appointed as Manager and/or Principal Underwriter or ceases to
be the Manager and/or Principal Underwriter of the Trust or of any Series using
such names, the non-exclusive license granted herein may be revoked by FI&S,
Inc. and the Trust shall cease using the name "FI&S, Inc." as part of its name
or the name of any Series of Shares, unless otherwise consented to by or any
successor to its interests in such names.

[the remainder of this page left intentionally blank]

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<PAGE>

IN WITNESS WHEREOF, the Trustee named below does hereby make and enter
into this Declaration of Trust as of the ____th day of September, 1999.

____________________________
George Walker

THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS:

One World Trade Center, Suite 2101
New York, NY 10048

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<PAGE>

TABLE OF CONTENTS

<TABLE>

<S> <C>
ARTICLE I Names and Definitions.....................................................................1
Section 1. Name........................................................................1
Section 2. Definitions.................................................................1

ARTICLE II Purpose of the Trust......................................................................3

ARTICLE III Shares....................................................................................3
Section 1. Division of Beneficial Interest............................................3
Section 2. Ownership of Shares........................................................4
Section 3. Transfer of Shares.........................................................4
Section 4. Investments in the Trust...................................................4
Section 5. Status of Shares and Limitation
of Personal Liability......................................................4
Section 6. Power of Board of Trustees to Change
Provisions Relating to Shares..............................................5
Section 7. Establishment and Designation of Shares....................................5
Section 8. Indemnification of Shareholders............................................8

ARTICLE IV The Board of Trustees.....................................................................8
Section 1. Number, Election and Tenure................................................8
Section 2. Effect of Death, Resignation, etc. of a Trustee............................9
Section 3. Powers.....................................................................9
Section 4. Payment of Expenses by the Trust..........................................12
Section 5. Payment of Expenses by Shareholders.......................................13
Section 6. Ownership of Assets of the Trust. ........................................13
Section 7. Service Contracts.........................................................13

ARTICLE V. Shareholders' Voting Powers and Meetings.................................................14
Section 1. Voting Powers.............................................................14
Section 2. Voting Power and Meetings.................................................15
Section 3. Quorum and Required Vote..................................................15
Section 4. Action by Written Consent.................................................16
Section 5. Record Dates..............................................................16
Section 6. Additional Provisions.....................................................16

ARTICLE VI. Net Asset Value, Distributions, and Redemptions..........................................16
Section 1. Determination of Net Asset Value, Net Income, and
Distributions.............................................................16
Section 2. Redemptions and Repurchases...............................................17
Section 3. Redemptions at the Option of the Trust....................................17

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<PAGE>

Section 4. Disclosure of Ownership...................................................18

ARTICLE VII. Compensation and Limitation of Liability of Trustees.....................................18
Section 1. Compensation..............................................................18
Section 2. Standard of Care..........................................................18
Section 3. Indemnification and Limitation of Liability...............................18
Section 4. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety....................................................................19
Section 5. Insurance. ...............................................................19

ARTICLE VIII.Miscellaneous............................................................................19
Section 1. Liability of Third Persons Dealing with Trustees..........................19
Section 2. Termination of Trust or Series............................................20
Section 3. Reorganization and Master/Feeder..........................................20
Section 4. Amendments................................................................21
Section 5. Filing of Copies, References, Headings....................................22
Section 6. Applicable Law............................................................22
Section 7. Provisions in Conflict with Law or Regulations............................23
Section 8. Business Trust Only.......................................................23
Section 9. Derivative Actions........................................................24
Section 10. Use of the name "Friends Ivory & Sime Funds" or "FI&S
Funds"....................................................................24
</TABLE>

<PAGE>

BY-LAWS

FRIENDS IVORY & SIME FUNDS

ARTICLE I

Agreement and Declaration of Trust

SECTION 1. AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be
subject to the Agreement and Declaration of Trust, as from time to time amended,
supplemented or restated (the "Declaration of Trust") of Friends Ivory & Sime
Funds (the "Trust").

SECTION 2. DEFINITIONS. Unless otherwise defined herein, the terms used
herein have the respective meanings given them in the Declaration of Trust.

ARTICLE II

Offices

SECTION 1. PRINCIPAL OFFICE. The principal office of the Trust shall be
located in the City of New York, State of New York or such other location as the
Trustees may from time to time determine.

SECTION 2. REGISTERED OFFICE AND OTHER OFFICES. The registered office of
the Trust shall be located in the City of Wilmington, State of Delaware or such
other location within the State of Delaware as the Trustees may from time to
time determine. The Trust may establish and maintain such other offices and
places of business as the Trustees may from time to time determine.

ARTICLE III

Shareholders

SECTION 1. MEETINGS. Meetings of the Shareholders shall be held at the
principal executive offices of the Trust or at such other place within the
United States of America as the Trustees shall designate. Meetings of the
Shareholders shall be called by the Secretary whenever

<PAGE>

(i) ordered by the Trustees or (ii) for the purpose of voting on the removal of
any Trustee, requested in writing by Shareholders holding at least ten percent
(10%) of the outstanding Shares entitled to vote. If the Secretary, when so
ordered or requested, refuses or neglects for more than 10 days to call such
meetings, the Trustees or the Shareholders so requesting, may, in the name of
the Secretary, call the meeting by giving notice thereof in the manner required
when notice is given by the Secretary.

SECTION 2. NOTICE OF MEETINGS. Notice of all meetings of the Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Secretary by delivering or mailing, postage prepaid, to each Shareholder at his
or her address as recorded on the register of the Trust at least (10) days and
not more than ninety (90) days before the meeting. Any adjourned meeting may be
held as adjourned without further notice. No notice need be given to any
Shareholder who shall have failed to inform the Trust of his or her current
address or if a written waiver of notice, executed before or after the meeting
by the Shareholder or his or her authorized attorney is filed with the records
of the meeting.

SECTION 3. RECORD DATE FOR MEETINGS. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than ninety (90) days
prior to the date of any meeting of Shareholders as a record date for the
determination of the persons to be treated as Shareholders of record for such
purpose.

SECTION 4. PROXIES. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken;
provided, however, that notwithstanding any other provision of this Section 4 to
the contrary, the Trustees may at any time adopt one or more electronic,
telecommunication or other alternatives to execution of a written instrument
that will enable holders of Shares entitled to vote at any meeting to appoint a
proxy to vote such holders' Shares at such meeting. Proxies may be solicited in
the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled by the Declaration
of Trust to vote, and each fractional Share shall be entitled to a proportionate
fractional vote. When any Share is held jointly by several persons, any one of
them may vote at any meeting in person or by proxy in respect of such Share, but
if more than one of them shall be present at such meeting in person or by proxy,
and such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or the legal
control of any other person as regards the charge or management of such Share,
he or she may vote by his or her guardian or

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such other person appointed or having such control, and such vote may be given
in person or by proxy. At all meetings of the Shareholders, unless the voting is
conducted by inspectors, all questions relating to the qualifications of voters,
the validity of proxies, and the acceptance or rejection of votes shall be
decided by the chairman of the meeting. Except as otherwise provided herein or
in the Declaration of Trust, all matters relating to the giving, voting or
validity of proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Trust were a Delaware corporation and the Shareholders were
shareholders of a Delaware corporation.

SECTION 5. INSPECTION OF BOOKS. The Trustees shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions and regulations the accounts and books of the Trust or any of
them shall be open to the inspection of the Shareholders; and no Shareholder
shall have any right to inspect any account or book or document of the Trust
except as conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.

SECTION 6. ACTION WITHOUT MEETING. Any action that may be taken at any
meeting of Shareholders may be taken without a meeting and without prior notice
if a consent in writing setting forth the action so taken is signed by the
holders of outstanding Shares having not less than the minimum number of votes
that would be necessary to authorize or take that action at a meeting at which
all Shares entitled to vote on that action were present and voted. All such
consents shall be filed with the records of Shareholder meetings. Such consents
shall be treated for all purposes as a vote taken at a meeting of Shareholders.

SECTION 7. APPLICATION OF THIS ARTICLE. Meetings of Shareholders shall
consist of Shareholders of any Series (or Class thereof) or of all Shareholders,
as determined pursuant to the Declaration of Trust, and this Article shall be
construed accordingly.

ARTICLE IV

Trustees

SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given, except as may be required by applicable law.
Meetings of the Trustees other than regular or stated meetings shall be held
whenever called by the Chairman, the President, or by any two of the Trustees,
at the time being in office. Notice of the time and place of each meeting other
than regular or stated meetings shall be given by the Secretary or an Assistant
Secretary or by the officer or Trustees calling the meeting and shall be
delivered or mailed, postage prepaid, to each Trustee at least two days before
the meeting, or shall be telegraphed, cabled, wired, or delivered by equivalent
electronic means, to each Trustee at his or her business address, or personally
delivered to him or her, at least one day before the meeting. Such notice may,
however, be

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waived by any Trustee. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him or her before the meeting, is filed
with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him or her. A notice or waiver of notice need not specify the purpose of any
meeting, except as may be required by applicable law. The Trustees may meet by
means of a telephone conference circuit or similar communications equipment by
means of which all persons participating in the meeting are connected, which
meeting shall be deemed to have been held at a place designated by the Trustees
at the meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting. Any action required or permitted to be taken
at any meeting of the Trustees may be taken by the Trustees without a meeting if
a majority of the Trustees then in office (or such higher number of Trustees as
would be required to act on the matter under the Declaration of Trust, these
By-Laws or applicable law if a meeting were held) consent to the action in
writing and the written consents are filed with the records of the Trustees'
meetings. Such consents shall be treated for all purposes as a vote taken at a
meeting of the Trustees. Notwithstanding the foregoing, all actions of the
Trustees shall be taken in compliance with the provisions of the Investment
Company Act of 1940, as amended.

SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees then
in office shall constitute a quorum for the transaction of business. If at any
meeting of the Trustees there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until a quorum shall be
obtained. Notice of an adjourned meeting need not be given. The act of the
majority of the Trustees present at any meeting at which there is a quorum shall
be the act of the Trustees, except as may be otherwise specifically provided by
law or by the Declaration of Trust or by these By-Laws.

ARTICLE V

Committees

SECTION 1. EXECUTIVE, NOMINATING, AUDIT AND OTHER COMMITTEES. The Trustees
by vote of a majority of all the Trustees may elect from their own number an
Executive Committee to consist of not less than three (3) Trustees to hold
office at the pleasure of the Trustees, which shall have the power to conduct
the current and ordinary business of the Trust while the Trustees are not in
session, including the purchase and sale of securities and the designation of
securities to be delivered upon redemption of Shares of the Trust, and such
other powers of the Trustees as the Trustees may, from time to time, delegate to
them except those powers by law, the Declaration of Trust or these By-Laws they
are prohibited from delegating. The Trustees may also elect from their own
number or otherwise other Committees from time to time, the number composing
such Committees, the powers conferred upon the same (subject to the same
limitations as with respect to the Executive Committee) and the terms of
membership on such Committees to be determined by the Trustees. Such Committees
shall include a Nominating and

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Compensation Committee and an Audit Committee. The Trustees may designate a
chairman of any Committee. In the absence of such designation the Committee may
elect its own chairman.

SECTION 2. MEETINGS, QUORUM AND MANNER OF ACTING. The Trustees may (1)
provide for stated meetings of any Committees, (2) specify the manner of calling
and notice required for a special meeting of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum.

ARTICLE VI

Officers

SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall be a
President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including a Chairman of the Board ("Chairman"), Vice
Chairman, one or more Vice Presidents, one or more Assistant Secretaries, and
one or more Assistant Treasurers. The Trustees may delegate to any officer or
Committee the power to appoint any subordinate officers or agents.

SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise provided
by law, the Declaration of Trust or these By-Laws, the President, the Treasurer
and the Secretary, and all other officers shall hold office at the pleasure of
the Trustees. The Secretary and Treasurer may be the same person. A Vice
President and the Treasurer or a Vice President and the Secretary may be the
same person, but the offices of Vice President, Secretary and Treasurer shall
not be held by the same person. The President shall hold no other office, but
may be a Trustee of the Trust. Except as above provided, any two offices may be
held by the same person. The Chairman, if such an officer is elected, shall be a
Trustee and may, but need not be, a Shareholder. Any other officer may be, but
none need be, a Trustee or Shareholder.

SECTION 3. REMOVAL. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer with or without cause, by a vote of a majority
of the Trustees then in office. Any officer or agent appointed by an officer or
committee may be removed with or without cause by such appointing officer or
committee.

SECTION 4. POWERS AND DUTIES OF THE CHAIRMAN. The Chairman, if such an
officer is elected, shall, if present, preside at meetings of the Shareholders
and the Trustees, and shall, subject to the control of the Trustees, have
general supervision, direction and control of the business and the officers of
the Trust and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Trustees or prescribed by the Declaration of
Trust or these By-Laws. In the absence of the Chairman, the Vice Chairman, if
such an officer is elected, shall assume all powers and duties assigned to the
Chairman hereunder.

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SECTION 5. POWERS AND DUTIES OF THE PRESIDENT. Subject to the powers of the
Chairman, if there be such an officer, the President shall be the principal
executive officer of the Trust. He or she may call meetings of the Trustees and
of any Committee thereof when he or she deems it necessary and, in the absence
of the Chairman, shall preside at all meetings of the Shareholders. Subject to
the control of the Trustees, the Chairman and any Committees of the Trustees,
within their respective spheres, as provided by the Trustees, the President
shall at all times exercise a general supervision and direction over the affairs
of the Trust. The President shall have the power to employ attorneys and counsel
for the Trust and to employ such subordinate officers, agents, clerks and
employees as he or she may find necessary to transact the business of the Trust.
He or she shall also have the power to grant, issue, execute or sign such powers
of attorney, proxies or other documents as may be deemed advisable or necessary
in furtherance of the interests of the Trust. The President shall have such
powers and duties as from time to time may be conferred upon or assigned to him
or her by the Trustees.

SECTION 6. POWERS AND DUTIES OF THE VICE PRESIDENT. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him or her from time to time by the Trustees or the
President.

SECTION 7. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be the
principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his or her hands to such
Custodian as the Trustees may employ pursuant to Article X of these By-Laws. He
or she shall render a statement of condition of the finances of the Trust to the
Trustees as often as they shall require the same and he or she shall in general
perform all the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him or her by the Trustees. The
Treasurer shall give a bond for the faithful discharge of his or her duties, if
required so to do by the Trustees, in such sum and with such surety or sureties
as the Trustees shall require.

SECTION 8. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall keep the
minutes of all meetings of the Trustees and of the Shareholders in proper books
provided for that purpose; he or she shall have custody of the seal of the
Trust; he or she shall have charge of the Share transfer books, lists and
records unless the same are in the charge of the Transfer Agent. The Secretary
shall attend to the giving and serving of all notices by the Trust in accordance
with the provisions of these By-Laws and as required by law; and subject to
these By-Laws, he or she shall in general perform all duties incident to the
office of the Secretary and such other duties as from time to time may be
assigned to him or her by the Trustees.

SECTION 9. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall give a bond for

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the faithful discharge of his or her duties, if required so to do by the
Trustees, in such sum and with such surety or sureties as the Trustees shall
require.

SECTION 10. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him or her by the Trustees.

SECTION 11. COMPENSATION OF TRUSTEES. Trustees shall receive such
compensation, including stated salaries, retirement benefits, deferred
compensation or any other form of compensation, as may be set from time to time
by the Board of Trustees or by the Nominating and Compensation Committee. The
Trust is authorized to pay the necessary expenses of members of the Board of
Trustees incurred in connection with the performance of the official duties of
their office.

SECTION 12. COMPENSATION OF OFFICERS. Subject to any applicable provisions
of the Declaration of Trust, the compensation of the officers shall be fixed
from time to time by the Trustees or by any Committee or officer upon whom such
power may be conferred by the Trustees. No officer shall be prevented from
receiving such compensation as such officer by reason of the fact that he or she
is also a Trustee.

ARTICLE VII

Fiscal Year

The fiscal year of the Trust shall end on such date as the Trustees shall from
time to time determine.

ARTICLE VIII

Seal

The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe.

ARTICLE IX

Waivers of Notice

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Whenever any notice whatever is required to be given by law, the Declaration of
Trust or these By-Laws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or wired for the purposes of these By-Laws when it has
been delivered to a representative of any telegraph, cable or wire company with
instructions that it be telegraphed, cabled or wired.

ARTICLE X

Custody of Securities

SECTION 1. EMPLOYMENT OF A CUSTODIAN. The Trust shall place and at all
times maintain in the custody of a Custodian (including any sub-custodian for
the Custodian) all funds, securities and similar investments included in the
Trust Property. The Custodian (and any sub-custodian) shall be a bank or other
depository meeting such requirements as may be set forth in the Investment
Company Act of 1940 and other applicable law and regulations for institutions
serving as custodians of funds held by registered investment companies. The
Custodian shall be appointed from time to time by the Trustees, who shall fix
its remuneration.

SECTION 2. ACTION UPON TERMINATION OF CUSTODIAN AGREEMENT. Upon termination
of a Custodian Agreement or inability of the Custodian to continue to serve, the
Trustees shall promptly appoint a successor Custodian, but in the event that no
successor Custodian can be found who has the required qualifications and is
willing to serve, the Trustees shall call as promptly as possible a special
meeting of the Shareholders to determine whether the Trust shall function
without a Custodian or shall be liquidated. If so directed by a vote of holders
of the majority of the outstanding Shares entitled to vote, the Custodian shall
deliver and pay over all Trust Property held by it as specified in such vote.

SECTION 3. PROVISIONS OF CUSTODIAN CONTRACT. The Custodian contract shall
contain such provisions as may be required in the case of such arrangements by
the Investment Company Act of 1940 and rules and regulations adopted thereunder.

SECTION 4. CENTRAL CERTIFICATE SYSTEM. Subject to applicable rules,
regulations and orders adopted by the Commission, the Trustees may direct the
Custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the
Investment Company Act of 1940, pursuant to which system all securities of any
particular class or series of any issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits shall be
subject to withdrawal only

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upon the order of the Trust.

ARTICLE XI

Indemnification of Trustees, Officers, Employees and Other Agents

SECTION 1. AGENTS, PROCEEDINGS, EXPENSES. For the purpose of this Article,
"agent" means any Person who is or was a Trustee, officer, employee or other
agent of the Trust or is or was serving at the request of the Trust as a
Trustee, officer, employee or agent of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise; "proceeding" means any
threatened, pending or completed claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative (including appeals); and
"expenses" includes, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and all other liabilities
whatsoever.

SECTION 2. INDEMNIFICATION. Subject to the exceptions and limitation
contained in Section 3 below, every agent shall be indemnified by the Trust to
the fullest extent permitted by law against all liabilities and against all
expenses reasonably incurred or paid by him or her in connection with any
proceeding in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been an agent.

SECTION 3. LIMITATIONS, SETTLEMENTS. No indemnification shall be provided
hereunder to an agent:

(a) who shall have been adjudicated by the court or other body before
which the proceeding was brought to be liable to the Trust or its Shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office
(collectively, "disabling conduct"); or

(b) with respect to any proceeding disposed of (whether by settlement,
pursuant to a consent decree or otherwise) without an adjudication by the court
or other body before which the proceeding was brought that such agent was liable
to the Trust or its Shareholders by reason of disabling conduct, unless there
has been a determination that such agent did not engage in disabling conduct:

(i) by the court or other body before which the proceeding was
brought;

(ii) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the proceeding based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or

(iii) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type inquiry);
provided, however, that indemnification

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shall be provided hereunder to an agent with respect to any proceeding in the
event of (1) a final decision on the merits by the court or other body before
which the proceeding was brought that the agent was not liable by reason of
disabling conduct, or (2) the dismissal of the proceeding by the court or other
body before which it was brought for insufficiency of evidence of any disabling
conduct with which such agent has been charged.

SECTION 4. INSURANCE, RIGHTS NOT EXCLUSIVE. The rights of indemnification
herein provided may be insured against by policies maintained by the Trust on
behalf of any agent, shall be severable, shall not be exclusive of or affect any
other rights to which any agent may now or hereafter be entitled and shall inure
to the benefit of the heirs, executors and administrators of any agent.

SECTION 5. ADVANCE OF EXPENSES. Expenses incurred by an agent in connection
with the preparation and presentation of a defense to any proceeding may be paid
by the Trust from time to time prior to final disposition thereof upon receipt
of an undertaking by or on behalf of such agent that such amount will be paid
over by him or her to the Trust if it is ultimately determined that he or she is
not entitled to indemnification under this Article XI; provided, however, that
(a) such agent shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance payments
or (c) either a majority of the Trustees who are neither Interested Persons of
the Trust nor parties to the proceedings, or independent legal counsel in a
written opinion, shall have determined, based upon a review of readily available
facts (as opposed to a trial-type inquiry or full investigation), that there is
reason to believe that such agent will be found entitled to indemnification
under this Article XI.

SECTION 6. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. The Article does not apply
to any proceeding against any Trustee, investment manager or other fiduciary of
an employee benefit plan in that person's capacity as such, even though that
person may also be an agent of this Trust as defined in Section 1 of this
Article. Nothing contained in this Article shall limit any right to
indemnification to which such Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.

ARTICLE XII

Amendments

These By-Laws, or any of them, may be altered, amended or repealed, or new
By-Laws may be adopted by (a) a vote of holders of the majority of the
outstanding Shares entitled to vote or (b) by the Trustees, provided, however,
that no By-Law may be amended, adopted or repealed by the Trustees if such
amendment, adoption or repeal is required by applicable law, the Declaration of
Trust or these By-Laws, to be submitted to a vote of the Shareholders.