FRIENDS IVORY FUNDS, 497, 2000-01-24

FRIENDS IVORY FUNDS
497, 2000-01-24

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Advisor Shares

prospectus

December 28, 1999

FRIENDS IVORY FUNDS
Friends Ivory Social Awareness Fund
Friends Ivory European Social Awareness Fund

Investment Adviser
Friends Ivory & Sime, Inc.
Investment Sub-Adviser
Friends Ivory & Sime plc

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.

[Logo Omitted of Friends Ivory & Sime]

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About This Prospectus

Friends Ivory Funds (Trust) 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 Advisor Shares of the Funds
that you should know before investing. Please read this prospectus and keep it
for future reference.

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

RISK/RETURN INFORMATION COMMON TO THE FUNDS .............................. 2
FRIENDS IVORY SOCIAL AWARENESS FUND ...................................... 4
FRIENDS IVORY EUROPEAN SOCIAL AWARENESS FUND ............................. 10
MORE INFORMATION ABOUT RISK .............................................. 15
MORE INFORMATION ABOUT FUND INVESTMENTS .................................. 16
THE INVESTMENT ADVISER AND SUB-ADVISER ................................... 17
PORTFOLIO MANAGERS ............... ....................................... 18
PURCHASING, SELLING AND EXCHANGING FUND SHARES ........................... 20
DIVIDENDS AND DISTRIBUTIONS AND TAXES .................................... 25
HOW TO OBTAIN MORE INFORMATION ABOUT FRIENDS IVORY FUNDS ........... Back Cover

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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 they believe 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 a 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.

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FRIENDS IVORY & SIME'S APPROACH TO SOCIALLY RESPONSIBLE 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. This positive social
screen is implemented by Friends Ivory & Sime's Ethics Team, which is led by
Karina Litvack in Europe and Elizabeth Elliott McGeveran in the USA. 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,
demonstrate corporate accountability and are proactive in improving human
rights. The investment process also filters out companies with substantial
involvement in military contracting, environmental damage or pollution, nuclear
power and promoting tobacco, alcohol or gambling. Friends Ivory & Sime's Ethics
Team has developed and continually updates the social screening criteria and
ensures that each individual investment complies.

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FRIENDS IVORY SOCIAL AWARENESS 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 Friends Ivory Social Awareness 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:

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

o have an improving business outlook; and

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

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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.

SOCIALLY/ENVIRONMENTALLY RESPONSIBLE PRODUCTS - The investment manager will
favor companies whose products or services enhance or sustain 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.

HUMAN RIGHTS - For companies in sectors particularly exposed to human rights
issues, the investment manager will favor companies that are proactive in
improving human rights in their countries of operation. The investment manager
would encourage companies to adopt effective policies and practices on human
rights to insure that issues are dealt with effectively.

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

Stocks may be sold if they 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.

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PRINCIPAL RISKS OF INVESTING IN THE FRIENDS IVORY SOCIAL AWARENESS FUND

EQUITY RISK - Since it purchases common stocks, 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.

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PERFORMANCE INFORMATION

The information set forth below represents the performance of the Adviser's
predecessor private account. The private account commenced operations before the
Fund's registration statement became effective. This past performance has been
adjusted to reflect current expenses for the Advisor Shares of the Fund. Advisor
Shares have different expenses than the private account, which will result in
different performance. The Adviser's private 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 private account's performance may have been lower.
Nevertheless, the Adviser believes that the private account has been managed in
a manner that is equivalent in all material respects as to objectives, policies,
guidelines and restrictions to how the Fund will be managed. The performance
information provided was prepared in accordance with standard SEC average annual
total return calculations. The performance was calculated by deducting the
expenses to reflect the charges applicable to Advisor Shares of the Funds. The
performance information supplied by the Adviser has not been audited or
verified, but the Trust believes that the information is reliable.

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.

[Bar Chart Omitted] Plot Points are as follows:

1997 36.05%
1998 32.34%*

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

Best Quarter Worst Quarter
------------ -------------
25.93% (10.12)%
(12/31/98) (09/30/98)

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* For the period from January 1, 1999, to September 30, 1999, the predecessor
private account's total return was 0.00%. The assets of the predecessor's
separate account (approximately $27.7 million) were transferred to the Fund on
December 28, 1999.

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

ONE SINCE
YEAR INCEPTION
- --------------------------------------------------------------------------------
FRIENDS IVORY SOCIAL AWARENESS FUND - ADVISOR SHARES 32.34% 33.06%*

STANDARD & POOR'S 500 COMPOSITE INDEX 28.76% 31.84%**

- ----------
* The predecessor private account commenced operations on October 1, 1996. On
December 28, 1999, the Fund acquired the assets of the private account.
Information shown for the periods prior to December 28, 1999, relates to the
private account, and has been adjusted to reflect the current expenses of the
Fund.

** Since October 1, 1996.

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.

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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)

Advisor
Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.75%
Distribution (12b-1) Fees 0.25%
Other Expenses 0.73%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES 1.73%
Fee Waivers and Expense Reimbursements (0.48)%
-----
NET OPERATING EXPENSES 1.25%*

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* The Fund's Adviser has contractually agreed to waive fees and to reimburse
expenses in order to keep total operating expenses from exceeding 1.25% for
the Advisor Shares for a period of one year. After that time, the Adviser has
the option to renew this agreement. For more information about these fees, see
"The 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:

1 Year 3 Years
------ -------
ADVISOR SHARES $127 $498

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FRIENDS IVORY EUROPEAN SOCIAL AWARENESS 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 capitalization
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 Friends Ivory European Social Awareness 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 investment 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:

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

o have an improving business outlook; and

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

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ETHICAL POLICIES

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 society or the
natural environment.

Stocks may be sold if they 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.

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PRINCIPAL RISKS OF INVESTING IN THE FRIENDS IVORY EUROPEAN SOCIAL AWARENESS FUND

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 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

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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

Prior to December 28, 1999, the Friends Ivory European Social Awareness Fund had
not commenced operations, and did not have a performance history.

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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)

ADVISOR
SHARES
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.85%
Distribution (12b-1) Fees 0.25%
Other Expenses 0.94%
------
TOTAL ANNUAL FUND OPERATING EXPENSES 2.04%
Fee Waivers and Expense Reimbursements (0.34)%
------
NET OPERATING EXPENSES 1.70%*

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* The Fund's Adviser has contractually agreed to waive fees and to reimburse
expenses in order to keep total operating expenses from exceeding 1.70% for
the Advisor Shares for a period of one year. After that time, the Adviser has
the option to renew this agreement. For more information about these fees, see
"The Investment Adviser and Sub-Adviser" and "Distribution of Fund Shares."

EXAMPLE

1 Year 3 Years
------ -------
ADVISOR SHARES $173 $607

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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.

MASTER/FEEDER OPTION The Funds may in the future seek to achieve their
investment objective by investing all of a Fund's assets in another investment
company having the same investment objective and substantially the same
investment policies and restrictions as those applicable to that Fund. Also,
future Funds may be established as master/feeder funds. The initial shareholder
of each Fund voted to vest such authority in the sole discretion of the Trustees
and such investment may be made without further approval of the shareholders of
the Funds. However, shareholders of the Funds will be given at least 30 days'
prior notice of any such investment. Such investment would be made only if the
Trustees determine it to be in the best interests of a Fund and its
shareholders. In making that determination, the Trustees will consider, among
other things, the benefits to shareholders and/or the opportunity to reduce
costs and achieve operational efficiencies. Although the Funds believe that the
Trustees will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.

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MORE INFORMATION ABOUT FUND INVESTMENTS

The investments and strategies described in this prospectus are those that the
Funds use under normal conditions and each Fund will normally invest at least
65% of its assets in the types of securities described in this prospectus.
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.

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THE INVESTMENT ADVISER AND SUB-ADVISER

Friends Ivory & Sime, Inc. (the "Adviser") serves as the Adviser to the Friends
Ivory Social Awareness Fund and the Friends Ivory European Social Awareness
Fund. The Adviser makes investment decisions for the Friends Ivory Social
Awareness Fund and continuously reviews, supervises and administers the Fund's
investment program. Friends Ivory & Sime plc (the "Sub-Adviser"), Sub-Adviser to
the Friends Ivory European Social Awareness 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 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:

FRIENDS IVORY SOCIAL AWARENESS FUND 0.75%
FRIENDS IVORY EUROPEAN SOCIAL AWARENESS FUND 0.85%

The Adviser will compensate the Sub-Adviser out of its advisory fee for the
Friends Ivory European Social Awareness Fund. The Adviser intends to use up to
10% of the advisory fees it receives from the Funds to support charitable
causes.

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PORTFOLIO MANAGERS

The FRIENDS IVORY SOCIAL AWARENESS FUND is managed by a team of investment
professionals. The lead manager is Mr. Andrew Pringle. Mr. Pringle served in
portfolio management positions with Friends Provident Asset Management,
predecessor to the Adviser, since 1985. Mr. Pringle has served as Director &
Senior Vice President at the Adviser since 1998. He has managed U.S. ethical
equity portfolios since 1996. He has more than 14 years of investment
experience. Elizabeth Elliott McGeveran is Vice President of Ethical Research at
the Adviser. Prior to joining the Adviser in November 1999, Ms. McGeveran was
the Managing Director of Co-op America.

Ms. Debbie Clarke is the lead manager of a team of Friends Ivory & Sime plc
investment professionals who make investment decisions for the FRIENDS IVORY
EUROPEAN SOCIAL AWARENESS FUND. She is currently head of the firm's Large
Companies Team, responsible for the management of U.K. and pan-European
portfolios, as well as coordinator of the Pan-European Large Cap Research Team.
In 1998, Ms. Clarke joined London & Manchester Group plc, which was acquired by
the Sub-Adviser in 1999. Ms. Clarke is responsible for a team of pan-European
analysts and portfolio managers. She has over 15 years of investment experience.
Mr. Ian Peart is Director of Pan-European Equities. He is responsible for
managing continental European and pan-European portfolios. He was previously
based at the Adviser's New York office, managing U.S. and Canadian institutional
and retail equity portfolios, including insurance, pension and mutual fund
assets. Mr. Peart joined the firm in 1992. He has

<PAGE>

over 11 years of investment experience. Ms. Liz Feinstein is fund manager of
Pan-European Equities. She is currently a member of the Pan-European Team and is
responsible for continental European portfolios, including ethical mandates. Ms.
Feinstein is also a member of the Pan-European Large Company Research Team.
Prior to joining the firm, she was responsible for managing Latin American
equity portfolios. She has over 12 years of investment experience. Mr. Nick
Hawken is Assistant Director of Unitized Funds. He is responsible for managing
the U.K. Equity, U.K. Growth and U.K. Focus unit trusts, together with the FPLAL
Closed Fund. Prior to joining the firm, Mr. Hawken worked at Confederation Life.
He has over 12 years of investment experience. Mr. David Moss is an Analyst with
the firm. He is currently a member of the Pan-European Large Company Research
Team, specializing in the general retailing and beverage sectors. Mr. Moss
joined the London & Manchester Group in 1996 as a Fixed Interest Analyst. In
1998, Mr. Moss began working on the U.K. Equities Team as an Analyst,
specializing in seven sectors including retailers and media. He has over 3 years
of investment experience. Karina Litvack is Director of Socially Responsible
Investing Research. Ms. Litvack joined the firm in 1998 and previously was a
Green Development project manager for New York City Economic Development
Corporation and was also an Environmental Researcher for Oko Vision based in
Frankfurt, Germany.

<PAGE>

PURCHASING, SELLING AND EXCHANGING FUND SHARES

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

HOW TO PURCHASE FUND SHARES

You may purchase shares directly by:

o Mail

o Telephone

o Wire

o Direct Deposit, or

o Automated Clearing House (ACH).

To purchase shares directly from us, complete and send in the enclosed
application. If you need an application or have questions, please call
1-800-481-4404. Unless you arrange to pay by wire or through direct deposit or
ACH, write your check, payable in U.S. dollars, to "Friends Ivory 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 (including a
completed application and payment).

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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).

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 Friends Ivory European Social Awareness 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
$2,500. To open an IRA account, you must invest at least $1,000 in any Fund.

Your subsequent investments in any Fund must be made in amounts of at least $50.

A Fund may accept investments of smaller amounts at its discretion.

SYSTEMATIC INVESTMENT PLAN

If you have a checking or savings account with a bank, you may purchase Social
Awareness and European Social Awareness Fund shares automatically through
regular deductions from your account in amounts of at least $50 per month
following your initial investment in the Funds.

<PAGE>

PURCHASING, SELLING AND EXCHANGING FUND SHARES

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
1-800-481-4404.

If you own your shares directly, you may sell your shares on any Business Day by
contacting a Fund directly by mail or telephone at 1-800-481-4404. The minimum
amount for telephone redemptions is $250.

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).

<PAGE>

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 as a result of a
redemption, you may be required to sell your shares. The account balance
minimums are $1,000.

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 also exchange shares through your financial institution by mail or
telephone. Exchange requests must be for an amount of at least $100.

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 60 days' notice.

<PAGE>

PURCHASING, SELLING AND EXCHANGING FUND SHARES

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 Advisor Shares that allows the
Fund to pay distribution fees for the sale and distribution of Advisor 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 Advisor Shares, as a percentage of average daily net
assets, are 0.25% for each Fund.

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.

<PAGE>

DIVIDENDS AND DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes its income at least 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 Friends Ivory European Social Awareness Fund.

THE FRIENDS IVORY EUROPEAN SOCIAL AWARENESS 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>

Notes

<PAGE>

Notes

<PAGE>

Notes

<PAGE>

FRIENDS IVORY FUNDS

INVESTMENT ADVISER

Friends Ivory & Sime, Inc.
One World Trade Center
Suite 2101
New York, New York 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 upon request and without charge
through the following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI dated December 28, 1999 includes detailed information about the Friends
Ivory 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 1-800-481-4404 BY MAIL: Write to us at:
Friends Ivory Funds
P.O. Box 446
Portland, ME 04112

BY E-MAIL: [email protected] BY INTERNET: www.friendsivoryfunds.com

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 Funds, from the EDGAR
Database on 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 on
the operation of the Public Reference Room, call 1-202-942-8090). 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 20549-0102. You may also obtain this information, upon payment of
a duplicating fee, by e-mailing the SEC at the following address:
[email protected].

Friends Ivory Funds' Investment Company Act registration number is 811-09601.

FIS-F-001-01
<PAGE>

FRIENDS IVORY FUNDS

FRIENDS IVORY SOCIAL AWARENESS FUND
FRIENDS IVORY EUROPEAN SOCIAL AWARENESS FUND

INVESTMENT ADVISER:
FRIENDS IVORY & SIME, INC.

INVESTMENT SUB-ADVISER:
FRIENDS IVORY & SIME PLC

This Statement of Additional Information is not a prospectus and relates only to
the Friends Ivory Social Awareness Fund ("Social Awareness") and the Friends
Ivory European Social Awareness Fund ("European Social Awareness") (each a
"Fund" and, together, the "Funds"). It is intended to provide additional
information regarding the activities and operations of the Friends Ivory Funds
(the "Trust"), and should be read in conjunction with the Funds' Prospectus
dated December 28, 1999. The Prospectus may be obtained without charge by
calling 1-800-481-4404.

TABLE OF CONTENTS
THE TRUST ...................................................................S-2
INVESTMENT OBJECTIVES........................................................S-2
INVESTMENT POLICIES..........................................................S-2
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS........................S-4
INVESTMENT LIMITATIONS......................................................S-10
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES ........................S-11
THE ADVISER.................................................................S-11
THE SUB-ADVISER.............................................................S-12
THE ADMINISTRATOR...........................................................S-12
DISTRIBUTION AND SHAREHOLDER SERVICES.......................................S-13
TRUSTEES AND OFFICERS OF THE TRUST..........................................S-14
COMPUTATION OF YIELD AND TOTAL RETURN.......................................S-15
PURCHASE AND REDEMPTION OF SHARES...........................................S-16
DETERMINATION OF NET ASSET VALUE............................................S-16
TAXES.......................................................................S-16
PORTFOLIO TRANSACTIONS......................................................S-18
VOTING......................................................................S-19
DESCRIPTION OF SHARES.......................................................S-20
INDEPENDENT AUDITORS .......................................................S-20
CUSTODIAN...................................................................S-20
LEGAL COUNSEL...............................................................S-20
FINANCIAL STATEMENTS .......................................................S-20

December 28, 1999

S-1
<PAGE>

THE TRUST

This Statement of Additional Information relates only to the Friends Ivory
Social Awareness Fund ("Social Awareness") and Friends Ivory European Social
Awareness Fund ("European Social Awareness") (each a "Fund" and, together the
"Funds"). Each is a separate series of Friends Ivory Funds (the "Trust"), an
open-end management investment company established as a Delaware business trust
under a Declaration of Trust dated September 14, 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 Advisor 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 Advisor Shares, each share of each series represents an equal
proportionate interest in that series. Institutional Shares are not currently
available to investors. Please see "Description of Shares" for more information.

INVESTMENT OBJECTIVES

FRIENDS IVORY SOCIAL AWARENESS FUND -- The Friends Ivory Social Awareness Fund
seeks long-term capital growth.

FRIENDS IVORY EUROPEAN SOCIAL AWARENESS FUND -- The Friends Ivory European
Social Awareness Fund seeks long-term capital growth.

INVESTMENT POLICIES

FRIENDS IVORY SOCIAL AWARENESS FUND--The Friends Ivory Social Awareness 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
(companies with market capitalizations of over $1 billion) core growth
companies, but will typically invest in companies with market capitalizations of
over $10 billion.

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.

The Fund's investment 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 Ethics Team 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.

FRIENDS IVORY EUROPEAN SOCIAL AWARENESS FUND -- The Friends Ivory European
Social Awareness Fund invests primarily (and, under normal conditions, at least
65% of its total assets) in a diversified portfolio of equity securities of
issuers located in Austria, Belgium, Denmark, Finland, France, Germany, Ireland,
Italy, Netherlands, Portugal, Spain,

S-2
<PAGE>

Sweden, Switzerland and the United Kingdom. The Fund may also invest up to 10%
of its assets in securities of European emerging 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 (companies with market
capitalizations of over $1 billion) 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 investment manager, Friends Ivory & Sime plc, 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 plc 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 plc's Ethics Team 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 plc 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.

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.

S-3
<PAGE>

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 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, 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. Equity securities are the principal investments of the Funds.

S-4
<PAGE>

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 Friends Ivory European Social Awareness 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.

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.

S-5
<PAGE>

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 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.

S-6
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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 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.

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.

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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.

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.

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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 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. Securities of foreign issuers are the principal investments of
the Friends Ivory European Social Awareness Fund.

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.

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.

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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.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

To Fund management's knowledge, the following persons owned beneficially 5% or
more of each Fund's outstanding shares, as of December 15, 1999. Friends Ivory &
Sime, Inc., One World Trade Center, Suite 2101, New York, New York 10048, owned
100% of each Fund's outstanding shares.

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.

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

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<PAGE>

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 SUB-ADVISER

Friends Ivory & Sime plc, 15 Old Bailey, London EC4M 7AP, United Kingdom, is a
professional investment management firm whose predecessor was founded in 1895.
Peter Derek Jones is the CEO of the Sub-Adviser and John Stubbs is the Director
of the Sub-Adviser. As of September 30, 1999, the Sub-Adviser had discretionary
management authority with respect to approximately $52 billion of assets.

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

The Sub-Advisory Agreement provides that the Sub-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 Sub-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 Sub-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 Sub-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 Sub-Adviser, or by the Sub-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 an Initial Term of three (3)
years after the effective date of the agreement and thereafter, for successive
periods of two (2) years unless terminated by either party on not less than 90
days' prior written notice to the other party.

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. This Agreement may be terminated only: (a)
by the mutual written agreement of the parties; (b) by either party hereto on 90
days' written notice, as of the end of the Initial Term or the end of any
Renewal Term; (c) by either party hereto on such date as is specified in written
notice given by the terminating party, in the event of a material breach of this
Agreement by the other party, provided the terminating party has notified the
other party of such breach at least 45 days prior to the specified date of
termination and the breaching party has not remedied such breach by the
specified date; (d) effective upon the liquidation of the Administrator; or (e)
as to any Fund or the Trust, effective upon the liquidation of such Fund or the
Trust, as the case may be. For purposes of this Agreement, the term
"liquidation" shall mean a transaction in which the assets of the Administrator,
the Trust or a Fund are sold or otherwise disposed of and proceeds therefrom are
distributed in

S-12
<PAGE>

cash to the shareholders in complete liquidation of the interests of such
shareholders in the entity.

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(R), 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, UAM
Funds Trust, UAM Funds, Inc. II and UAM Funds, Inc.

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 Advisor 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 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 Advisor 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' Advisor shareholders or their customers who beneficially own
Advisor Shares.

The distribution-related services that may be provided under the Plan include
shareholder services such as establishing and maintaining customer accounts and
records; aggregating and processing purchase and redemption requests from
customers; placing net purchase and redemption orders with the Distributor; and
automatically investing customer account cash balances.

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

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<PAGE>

is not an interested person of the Trust had a direct or indirect financial
interest in the operation of the Plan or related agreements.

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.

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?, 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 08/15/41) - Trustee - President and CEO, Friends
Ivory & Sime, Inc., since 1986.

STEPHEN VIEDERMAN (DOB 03/21/35) - Trustee - President and Director, Jessie
Smith Noyes Foundation (Philanthropy) since 1986.

MARK BOLES (DOB 05/25/60) - Trustee - Teacher, Perth Amboy Adult School since
1995; Teacher, St. Anthony's High School, 1994-1995.

VIDETTE BULLOCK MIXON (DOB 08/27/52) - Trustee - Director of Corporate Relations
and Social Concerns, General Board of Pension and Health Benefits, the United
Methodist Church, since May 1981.

OFFICERS

GEORGE WALKER (DOB 07/25/61) - President - Chief Marketing Officer, Friends
Ivory & Sime, Inc., since 1991.

ANDREW M. PRINGLE (DOB 10/27/59) - Senior Vice President - Director and
Investment Manager, Friends Ivory & Sime, Inc., since 1985.

DEBRA L. LISS (DOB 10/29/57) - Vice President - Vice President, Intermediary
Marketing, Friends Ivory & Sime, Inc., since 1999. Regional Sales
Representative, Oppenheimer Funds (mutual funds), 1993-1998.

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.

JAMES F. VOLK - (DOB 08/28/62) - Treasurer - Accounting Director of the
Administrator since 1996. Assistant Chief Accountant, U.S. Securities and
Exchange Commission, Division of Investment Management, 1993-1996.

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<PAGE>

JAMES R. FOGGO (DOB 06/30/64) - Assistant Secretary - Vice President and
Assistant Secretary of SEI Investments since 1998 and Vice President and
Assistant Secretary of the Administrator and Distributor since 1999. Associate,
Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate, Baker &
McKenzie (law firm), 1995-1998. Associate, Battle Fowler, L.L.P. (law firm),
1993-1995. Operations Manager, The Shareholder Services Group, Inc., 1986-1990.

EDWARD T. SEARLE (DOB 04/03/54) - Assistant Treasurer - Vice President and
Assistant Secretary of the Administrator and Distributor since 1999; Associate,
Drinker Biddle & Reath LLP (law firm), 1998-1999; Associate, Ballard Spahr
Andrews & Ingersoll LLP (law firm), 1995-1998.

- ---------------------------
* A Trustee who is an "interested person" as defined in the Investment Company
Act.

The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust compensates the Independent Trustees in the
amount of $2,000 per meeting, ($8,000 per year if all meetings attended), plus
reimbursement for all out-of-pocket expenses.

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)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)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 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 Forum Financial Group, (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. However, a shareholder will at all times be entitled to aggregate cash
redemptions from all Funds of the Trust during any 90-day period of up to the
lesser of $250,000 or 1% of the Trust's net assets. 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

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<PAGE>

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 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,

S-16
<PAGE>

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 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 federal 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 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,

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<PAGE>

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 and Sub-Adviser are authorized to select brokers and dealers to
effect securities transactions for the Funds. The Adviser and Sub-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 and Sub-Adviser generally seek reasonably competitive spreads or
commissions, a Fund will not necessarily be paying the lowest spread or
commission available. The Adviser and Sub-Adviser seek 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 and Sub-Adviser may, consistent with the interests of the Funds,
select brokers on the basis of the research services they provide to the Adviser
(or Sub-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 and Sub-Adviser will be in
addition to and not in lieu of the services required to be performed by the
Adviser (or Sub-Adviser) under the Advisory Agreement (or Sub-Advisory
Agreement). If, in the judgment of the Adviser (or Sub-Adviser), a Fund or other
accounts managed by the Adviser (or Sub-Adviser) will be benefitted by
supplemental research services, the Adviser (or Sub-Adviser) is authorized to
pay brokerage commissions to a broker furnishing such 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 (or Sub-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 (or Sub-Adviser) will
find all of such services of value in advising that Fund.

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.

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<PAGE>

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 (or Sub-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 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 (i) 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.

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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 Advisor 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

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

INDEPENDENT AUDITORS

Ernst & Young LLP, 2 Commerce Square, 2001 Market Street, Suite 4000,
Philadelphia, Pennsylvania 19103, serves as independent auditors to the Trust.

LEGAL COUNSEL

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

FINANCIAL STATEMENTS

See next page.

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<PAGE>

STATEMENTS OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------

FRIENDS IVORY FUNDS
DECEMBER 15, 1999
<TABLE>
<CAPTION>
------------------- ----------------------
SOCIAL EUROPEAN
AWARENESS SOCIAL
FUND AWARENESS
FUND
------------------- ----------------------
<S> <C> <C>
ASSETS:
Cash $ 50,000 $ 50,000
Total Assets $ 50,000 $ 50,000
LIABILITIES: - -
NET ASSETS: $ 50,000 $ 50,000
-------- --------

Shares of beneficial interest issued and
outstanding (unlimited authorization--no par
value)- Advisor Shares $ 5,000 $ 5,000
--------- --------

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE - ADVISOR SHARES $ 10.00 $ 10.00
-------- --------
</TABLE>

SEE ACCOMPANYING NOTES ON THE FOLLOWING PAGE.

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NOTES TO FINANCIAL STATEMENTS
FRIENDS IVORY FUNDS
DECEMBER 15, 1999

1. ORGANIZATION

Friends Ivory Funds (the "Trust") was organized as a Delaware business trust on
September 29, 1999. The Trust is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company consisting of two
Funds: Friends Ivory Social Awareness Fund and Friends Ivory European Social
Awareness Fund (collectively the "Funds", and each of these, a "Fund"). The
Funds' prospectus provides a description of each Fund's investment objectives,
policies and strategies. The assets of each Fund are segregated, and a
shareholder's interest is limited to the Fund in which shares are held. The
Funds are authorized to offer an unlimited number of shares of beneficial
interest with no par value. The Trust has not commenced operations except those
related to organizational matters and the sale of initial shares of beneficial
interest to Friends Ivory & Sime, Inc. (the "Manager") on December 15, 1999. The
Manager absorbed all expenses of organizing the Trust.

The Trust offers Institutional and Advisor shares. There are currently no
Institutional shares outstanding. Advisor shares are subject to a
12b-1/shareholder fee of 0.25% per year.

2. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies followed by the Funds are as follows:

FEDERAL INCOME TAXES: Each Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company and
to make the requisite distributions of taxable income and gains to its
shareholders which will be sufficient to relieve it from all federal income
taxes. Therefore, no provision for federal income tax has been made.

USE OF ESTIMATES: Estimates and assumptions are required to be made regarding
assets and liabilities when financial statements are prepared. Changes in the
economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ from the
amounts recorded.

3. INVESTMENT ADVISORY AND OTHER AGREEMENTS

The Trust intends to enter into the following service agreements:

Under an Investment Advisory Agreement with the Trust, the Manager will act as
investment adviser to each Fund. Friends, Ivory & Sime plc, an affiliate of the
Manager, serves as the sub-adviser to the Friends Ivory European Social
Awareness Fund and administers the Fund's investment program under the
supervision of the Adviser. For its investment advisory services to the Trust,
the Manager, will receive an annual fee which is calculated daily and paid
monthly based on the aggregate average daily net assets of the Trust as follows:
Friends Ivory Social Awareness Fund, 0.75%; and Friends Ivory European Social
Awareness Fund, 0.85%. The sub-adviser receives a sub-advisory fee from the
Manager for its services calculated at the rate of 0.15% of the aggregate
average daily net assets of the Friends Ivory European Social Awareness Fund.
The Manager has agreed, on a voluntary basis, to waive all or a portion of its
investment advisory fee. In addition, the Manager reserves the right to
terminate its waivers and to reimburse expenses in order to keep total operating
expenses from exceeding 0.65% for the Friends Ivory Social Awareness Fund and
0.86% for the Friends Ivory European Social Awareness Fund for a period of six
months or from exceeding 1.25% and 1.70%, respectively, for a period of one
year.

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<PAGE>

Under an Administration Agreement with the Trust, SEI Investments Management
Corporation (the "Administrator") will provide the Trust with overall
administrative and accounting services. For its services, the Administrator will
receive an annual fee which is calculated daily and paid monthly based on the
aggregate average daily net assets of the Trust as follows: 0.15% up to $100
million; 0.12% from $100 million to $300 million; 0.10% from $300 million to
$600 million; and 0.08% in excess of $600 million. Each Fund pays the
Administrator a minimum annual fee of $85,000 with a minimum of $10,000 per each
additional class.

Under a Distribution Agreement with the Trust, SEI Investments Distribution Co.
(the "Distributor") will provide the Trust with distribution services.

Under a Custodian Agreement with the Trust, Chase Manhattan Bank will serve as
custodian for the assets of the Trust.

S-23
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Shareholder and Board of Trustees
Friends Ivory Funds

We have audited the accompanying statements of assets and liabilities of Friends
Ivory Funds (comprising, respectively, the Friends Ivory Social Awareness Fund
and the Friends Ivory European Social Awareness Fund (the "Funds")) as of
December 15, 1999. These statements of assets and liabilities are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these statements of assets and liabilities based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statements of assets and liabilities are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of the
respective Funds at December 15, 1999, in conformity with generally accepted
accounting principles.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
December 16, 1999

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