<PAGE>
Rule 497(e)
1933 Act Registration No. 33-7699
1940 Act File No. 811-4786
ARIEL INVESTMENT TRUST
SUPPLEMENT DATED OCTOBER 1, 1995 TO
PROSPECTUS DATED FEBRUARY 1, 1995
ARIEL GROWTH FUND NOW OPEN TO
NEW INVESTORS
Ariel Growth Fund, which had been closed to new investors since April, 1990, is
now open and offered to new investors at net asset value on a no-load basis.
The minimum initial investment is $1,000, unless you participate in an automatic
investment plan, in which case there is a $50 minimum with monthly
contributions. This Supplement supersedes contrary statements in the Prospectus
dated February 1, 1995 (on pages 2 and 17).
<PAGE>
PROSPECTUS FEBRUARY 1, 1995
Ariel Appreciation Fund
Ariel Growth Fund
307 NORTH MICHIGAN AVENUE, SUITE 500, CHICAGO, ILLINOIS
60601
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The Ariel Appreciation Fund ("Appreciation Fund") and the Ariel Growth Fund
("Growth Fund") (collectively, the "Ariel Mutual Funds" or the "Funds") are
series of the Ariel Growth Fund (doing business as Ariel Investment Trust) (the
"Trust"). Ariel Capital Management, Inc. (the "Adviser") serves as the
investment adviser and service administrator for the Funds.
INVESTMENT OBJECTIVE
The investment objective of each Fund is to achieve long-term capital
appreciation by investing primarily in equity securities of issuers that in the
judgment of the Adviser are undervalued but demonstrate a strong potential for
growth. In seeking their objective, the Funds attempt to discover relatively
unknown and undervalued companies, primarily through the Adviser's intensive
research. The Appreciation Fund focuses primarily on companies with market
capitalizations of approximately $200 million to $5 billion and emphasizes
medium size companies. The Growth Fund invests principally in companies with
market capitalizations under $1.5 billion, with an emphasis on smaller
capitalization (small-cap) stocks.
ABOUT THIS PROSPECTUS
This prospectus sets forth important information concerning the Ariel Mutual
Funds. Please read it carefully before investing and keep it for future
reference. It is designed to provide you with information you should know
before investing and to help you decide if the goals of the Funds match your
own.
A Statement of Additional Information (dated February 1, 1995) for the Funds
has been filed with the Securities and Exchange Commission and (together with
any supplement thereto) is incorporated by reference. This Statement is
available upon request, without charge, from the Funds by calling 1-800-29-
ARIEL (1-800-292-7435).
- --------------------------------------------------------------------------------
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE FEDERAL OR
ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
SHARES OF THE APPRECIATION FUND ARE OFFERED GENERALLY TO THE PUBLIC. SHARES OF
THE GROWTH FUND ARE CURRENTLY OFFERED ONLY TO EXISTING SHAREHOLDERS OF THE
GROWTH FUND AS WELL AS SHAREHOLDERS OF THE APPRECIATION FUND. THE GROWTH FUND
IS OTHERWISE CLOSED TO NEW INVESTORS.
YOU PAY NO LOAD
The Funds' shares are sold on a no-load basis. This means that you do not pay a
sales charge at the time of purchase or at the time of redemption. The Funds
do, however, pay 12b-1 fees at the annual rate of 0.25% of average daily net
asset values.
2
<PAGE>
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TABLE OF
CONTENTS
Page(s)
Fund Expenses 3-4
Financial Highlights 5-8
Investment Objective and Policies 9-13
Total Return and Other Performance Information 13
Management and Organization of the Funds 14-16
Distribution Plan 16-17
How to Buy Shares 17-19
Net Asset Value 19-20
When Your Account Will Be Credited 20
Exchanging Shares 20-22
Telephone Transactions 22-23
Signature Guarantees 23
Special Services and Charges 23
Tax-Saving Retirement Plans 24
Redeeming Shares 24-26
Dividends, Capital Gains and Taxes 27
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FUND EXPENSES
<TABLE>
<S> <C>
Maximum Sales Load on Purchases None
Maximum Sales Load on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee None(A)
Exchange Fee None
</TABLE>
SHAREHOLDER
TRANSACTION
COSTS
<TABLE>
<CAPTION>
Appreciation Fund (C) Growth Fund
<S> <C> <C>
Management Fees 0.70% 0.65%
12b-1 Fees(B) 0.25% 0.25%
Other Expenses 0.40% 0.35%
----- -----
Total Fund Operating Expenses 1.35% 1.25%
===== =====
ANNUAL FUND
OPERATING EX- We can illustrate these expenses with the example below. You
PENSES AFTER would pay the following expenses on a $1,000 investment
EXPENSE REIM- (assuming a 5% annual return and redemption at the end of
BURSEMENTS (AS each period):
A PERCENTAGE
OF AVERAGE NET
ASSETS):
<CAPTION>
Appreciation Fund Growth Fund
<S> <C> <C>
One Year $ 14 $ 13
Three Years $ 43 $ 40
Five Years $ 74 $ 69
Ten Years $162 $151
</TABLE>
Explanation of Table: The purpose of the table is to assist
you in understanding the various costs and expenses that an
investor in the Funds would bear directly (shareholder
transaction costs) or indirectly (annual fund operating
3
<PAGE>
expenses). The information is based on the Funds' expenses
for the fiscal year ended September 30, 1994.
THE 5% RATE USED IN THE EXAMPLE IS ONLY FOR ILLUSTRATION AND
IS NOT INTENDED TO BE INDICATIVE OF THE FUTURE PERFORMANCE
OF THE FUNDS, WHICH MAY BE MORE OR LESS THAN THE ASSUMED
RATE. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
(A) If you request a redemption by wire transfer, you will
be charged a $10 wire fee.
(B) ANNUAL FUND OPERATING EXPENSES. Management Fees are
investment advisory and administrative fees which are paid
by each Fund to Ariel Capital Management, Inc. (the
"Adviser"). The Funds incur Other Expenses for maintaining
shareholder records, furnishing shareholder statements and
reports, and other services. Management Fees and Other
Expenses have already been reflected in each Fund's share
price and are not charged directly to individual shareholder
accounts. Please refer to the section "Management and
Organization of the Funds" for further information.
Under the Rule 12b-1 plan, each Fund may pay fees of up to
0.30% of average net assets, but such fees are currently
limited by the Board of Trustees to 0.25% of average annual
daily net assets for the current fiscal year. The effect of
a Rule 12b-1 plan is that in certain instances long-term
shareholders in the Funds may pay more than the economic
equivalent of the maximum front-end sales charge permitted
by rules of the National Association of Securities Dealers,
Inc.
(C) THE ADVISER AGREES TO LIMIT CERTAIN EXPENSES. If
expenses were not so limited in fiscal 1994, the Total Fund
Operating Expenses of the Appreciation Fund would have been
1.40% as reflected in the table above. In addition,
Management Fees would represent 0.75% of the Appreciation
Fund's average net assets.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The information set forth in the following tables is for each share outstanding
during each of the periods shown and is derived from the Funds' financial
statements. The information in the table for each Fund is covered by the Report
of the Funds' Independent Auditors. The Report for each Fund is contained in
the Registration Statement and is available upon request. The financial
statements appearing in the September 30, 1994 Annual Report to Shareholders
are incorporated by reference into the Statement of Additional Information for
the Funds. The table should be read in conjunction with the financial
statements and their related notes.
ARIEL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ten Months
Year Ended Ended Year Ended
September 30, September 30, November 30,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.67 $19.42 $17.60 $13.82 $15.00
====== ====== ====== ====== ======
INCOME FROM
INVESTMENT OP-
ERATIONS
Net investment income 0.04 0.06 0.09 0.14 0.15
Net realized and
unrealized gains
(losses) on
investments 0.51 2.27 1.92 3.88 (1.25)
------ ------ ------ ------ ------
Total from investment
operations 0.55 2.33 2.01 4.02 (1.10)
------ ------ ------ ------ ------
</TABLE>
5
<PAGE>
ARIEL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ten Months
DISTRIBUTIONS Year Ended Ended Year Ended
TO September 30 September 30, November 30,
SHAREHOLDERS 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Dividends from
net
investment
income (0.05) (0.08) (0.17) (0.17) (0.08)
Distributions
from
capital gains (0.35) -- (0.02) (0.07) --
------ ------ ------ ------ ------
Total distri-
butions (0.40) (0.08) (0.19) (0.24) (0.08)
------ ------ ------ ------ ------
Net asset val-
ue, end of
period $21.82 $21.67 $19.42 $17.60 $13.82
====== ====== ====== ====== ======
Total return 2.56% 12.03% 11.47%(a) 29.48% (7.37)%
====== ====== ====== ====== ======
SUPPLEMENTAL DATA
AND RATIOS:
Net assets, end of
period
$162,279,573
$207,064,528
$146,624,364
$76,481,886
$23,342,775
--------- ---------
---------
--------
--------
--------- ---------
---------
--------
Ratio of ex- --------
penses to
average net
assets 1.35%(b) 1.37% 1.44%(b)(c) 1.50%(b) 0.70%(b)
====== ====== ====== ====== ======
Ratio of net
income
to average
net assets 0.17%(b) 0.33% 0.57%(b)(c) 1.61%(b) 2.23%(b)
====== ====== ====== ====== ======
Portfolio
turnover rate 12% 56% 2% 20% 4%
====== ====== ====== ====== ======
</TABLE>
- ---------
(a) Total return is not annualized.
(b) Without the fee waiver, the ratio of expenses to average net assets would
have been 1.40%, 1.50%, 1.53% and 1.68%, and the ratio of net investment
income to average net assets would have been 0.12%, 0.51%, 1.58% and 1.25%,
for the fiscal periods ended 1994, 1992, 1991 and 1990, respectively.
(c) Annualized.
6
<PAGE>
ARIEL GROWTH FUND
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<TABLE>
<CAPTION>
Ten Months
Year Ended Ended Year Ended
September 30, September 30, November 30,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net asset
value,
beginning of
period $30.46 $29.59 $27.36 $21.21 $27.20
====== ====== ====== ====== ======
INCOME FROM
INVESTMENT OP-
ERATIONS
Net invest-
ment
income 0.18 0.73 0.31 0.46 0.30
Net realized
and
unrealized
gains
(losses) on
investments 0.23 2.81 3.19 5.97 (5.77)
------ ------ ------ ------ ------
Total from
invest-
ment opera-
tions 0.41 3.54 3.50 6.43 (5.47)
------ ------ ------ ------ ------
DISTRIBUTIONS
TO
SHAREHOLDERS:
Dividends
from net
investment
income (0.30) (0.75) (0.56) (0.28) (0.39)
Distributions
from
capital
gains (1.73) (1.92) (0.71) -- (0.13)
------ ------ ------ ------ ------
Total distri-
butions (2.03) (2.67) (1.27) (0.28) (0.52)
------ ------ ------ ------ ------
Net asset
value, end
of
period $28.84 $30.46 $29.59 $27.36 $21.21
====== ====== ====== ====== ======
Total return 1.41% 12.54% 13.15%(a) 30.62% (20.53)%
====== ====== ====== ====== ======
SUPPLEMENTAL DATA
AND RATIOS:
Net assets, end of
period
$149,511,238
$233,825,910
$236,185,943
$240,059,610
$188,687,292
--------- ---------
---------
---------
---------
--------- ---------
---------
---------
Ratio of ex- ---------
penses to
average net
assets 1.25% 1.16% 1.23%(b) 1.25% 1.31%
====== ====== ====== ====== ======
Ratio of net
income
to average
net assets 0.56% 0.72% 0.83%(b) 1.72% 1.28%
====== ====== ====== ====== ======
Portfolio
turnover
rate 9% 13% 19% 39% 20%
====== ====== ====== ====== ======
</TABLE>
- ---------
(a) Total return is not annualized.
(b) Annualized.
7
<PAGE>
ARIEL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From Inception
(Nov. 6, 1986)
Year Ended November 30, to Nov. 30,
1989 1988 1987 1986
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period $22.07 $15.36 $15.65 $15.23
====== ====== ====== ======
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.60 0.30 0.07 0.01
Net realized and
unrealized gains
(losses) on investments 5.04 7.23 (0.35) 0.41
------ ------ ------ ------
Total from investment
operations 5.64 7.53 (0.28) 0.42
------ ------ ------ ------
DISTRIBUTIONS TO SHARE-
HOLDERS:
Dividends from net in-
vestment income (0.13) (0.08) (0.01) --
Distributions from capi-
tal gains (0.38) (0.74) -- --
------ ------ ------ ------
Total distributions (0.51) (0.82) (0.01) --
------ ------ ------ ------
Net asset value, end of
period $27.20 $22.07 $15.36 $15.65
====== ====== ====== ======
Total return 26.06% 50.81% (1.79)% 2.76%(a)
====== ====== ====== ======
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $164,449,275
$28,865,762
$5,540,124
$2,387,356
--------- --------
-------
-------
--------- --------
-------
-------
Ratio of expenses to av-
erage net assets 1.41% 1.56%(b) 1.23%(b) 0.22%(b)(c)
====== ====== ====== ======
Ratio of net income to
average net assets 2.32% 1.47%(b) 0.54%(b) 0.20%(b)(c)
====== ====== ====== ======
Portfolio turnover rate 14% 22% 60% 0%
====== ====== ====== ======
</TABLE>
- ---------
(a) Total return is not annualized.
(b) Without the fee waiver, the ratio of expenses to average net assets would
have been 1.61%, 2.18% and 1.32%, and the ratio of net investment income
(loss) to average net assets would have been 1.42%, (0.41)% and (0.90)%, for
the fiscal periods ended 1988, 1987 and 1986, respectively.
(c) Annualized.
8
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
THE FUNDS SEEK The investment objective of each Fund is to achieve long-
TO PROVIDE term capital appreciation by investing primarily in equity
LONG-TERM securities of issuers that in the judgment of the Adviser
CAPITAL are undervalued but demonstrate a strong potential for
APPRECIATION. growth. In seeking their objective, the Funds attempt to
discover relatively unknown and undervalued companies,
principally through the Adviser's own intensive research.
THE APPRECIATION FUND focuses primarily on companies with
market capitalizations of approximately $200 million to $5
billion emphasizing medium sized companies.
THE GROWTH FUND invests principally in companies with market
capitalizations under $1.5 billion, with an emphasis on
smaller capitalization (small-cap) stocks.
The Funds will take reasonable risks in seeking to achieve
their investment objective. There is, of course, no
assurance that the Funds will be successful in meeting their
objective since there is risk involved in the ownership of
securities.
THE FUNDS The Funds do not trade or time the market for quick gains;
FOLLOW A LONG- rather, they follow a disciplined, conservative philosophy,
TERM investing for long-term capital appreciation in securities
INVESTMENT which appear to be undervalued relative to the market as a
PHILOSOPHY, whole.
INVESTING
PRIMARILY IN
EQUITY
SECURITIES
WHICH APPEAR
TO BE
UNDERVALUED.
The Adviser looks for issuers that provide quality products
or services and which have not attracted significant
attention from securities analysts, institutional investors
and the media. In order to take advantage of the anticipated
growth of their portfolios, the Funds expect to hold
investments for a relatively long period. Occasionally,
however, securities purchased on a long-term basis may be
sold within 12 months after purchase in light of a change in
the circumstances of a particular company or industry, or in
general market or economic conditions. The Funds avoid
issuers in cyclical, commodity-based, start-up and recently
deregulated industries.
9
<PAGE>
THE FUNDS LOOK The Funds are interested in issuers with conservative
FOR ISSUERS management and accounting and financial practices which have
WITH LONG-TERM demonstrated long-term performance through various economic
PERFORMANCE cycles. Such an issuer's balance sheet should show a
THROUGH favorable cash position, limited debt and a reasonable
DIFFERENT amount of working capital. The Adviser looks for equity
ECONOMIC securities trading at a below average price-to-earnings
CYCLES. ratio and a low price relative to the Adviser's evaluation
of expected sales and earnings growth, book value and
assets. The Funds are primarily interested in issuers which
have demonstrated high earnings-per-share growth potential
and the ability to achieve a high annual return on equity.
Although any investment in securities carries risk, the
conservative approach of the Ariel Mutual Funds is designed
to maximize growth in relation to the risks assumed. Since
the securities in which the Funds seek to invest may be less
actively traded than the securities of larger issuers, they
may not always participate in market rallies to the same
extent as more widely known securities. Conversely, these
securities may be expected to be somewhat less vulnerable
during market downturns. There is also somewhat less readily
available information concerning these securities. The
issuers of these securities tend to have a relatively higher
percentage of insider ownership.
THE FUNDS WILL Although there is no predetermined percentage of assets to
NORMALLY be invested in stocks, bonds or money market instruments,
INVEST AT each Fund will normally invest at least 80% of the value of
LEAST 80% OF its net assets in equity securities. Such securities will
THE VALUE OF include common stocks, convertible debt securities and
THEIR preferred stocks. The Funds may invest up to 20% of the
RESPECTIVE NET value of their assets in bonds, other debt obligations or
ASSETS IN fixed income obligations, such as money market instruments,
EQUITY for defensive or liquidity purposes or pending the
SECURITIES AND investment of the proceeds from the sale of portfolio
MAY INVEST UP securities. Securities may be purchased subject to
TO 20% OF THE repurchase agreements with recognized securities dealers and
VALUE OF THEIR banks. If either Fund has assumed a temporary defensive
ASSETS IN posture, there is no limitation on the percentage of its
BONDS, OTHER assets which may be invested in the fixed income
DEBT obligations, including money market instruments, described
OBLIGATIONS OR below under "Debt Obligations."
FIXED INCOME
OBLIGATIONS.
DEBT Debt obligations in which the Funds invest may be long-term,
OBLIGATIONS intermediate-term, short-term or any combination thereof,
10
<PAGE>
depending on the Adviser's evaluation of current and
anticipated market patterns and trends. Such debt
obligations consist of the following: corporate obligations
which at the date of investment are rated within the four
highest grades established by Moody's Investors Services,
Inc. (Aaa, Aa, A, or Baa), or by Standard & Poor's
Corporation (AAA, AA, A, or BBB), or, if not rated, are of
comparable quality as determined by the Adviser (bonds rated
Baa or BBB are considered medium grade obligations and have
speculative characteristics); obligations issued or
guaranteed as to principal by the United States Government
or its agencies or instrumentalities; certificates of
deposit, time deposits, and bankers' acceptances of U.S.
banks and their branches located outside the U.S. and of
U.S. branches of foreign banks, provided that the bank has
total assets of at least one billion dollars or the
equivalent in other currencies; commercial paper which at
the date of investment is rated A-2 or better by Standard &
Poor's, Prime-2 or better by Moody's or, if not rated, is of
comparable quality as determined by the Adviser; and any of
the above securities subject to repurchase agreements with
recognized securities dealers and banks. In the event any
debt obligation held by a Fund is downgraded below the
lowest permissible grade, the Fund is not required to sell
the security, but the Adviser will consider the downgrade in
determining whether to hold the security. In any event, a
Fund will not purchase or, if downgraded, continue to hold
debt obligations rated below the lowest permissible grade if
more than 5% of such Fund's net assets would be invested in
such debt obligations (including, for the purpose of this
limitation, convertible debt securities rated below Baa or
BBB, or if unrated, of comparable quality).
BORROWING A Fund may not borrow money, except temporarily for
emergency purposes in an amount not exceeding 10% of total
assets in order to meet redemption requests without
immediately selling portfolio securities.
REPURCHASE Repurchase agreements are arrangements under which a Fund
AGREEMENTS buys securities and the seller simultaneously agrees to
repurchase the securities at a specified time and price. The
Funds may engage in repurchase agreements to earn a higher
rate of return than they could earn by investing in the
obligation which is the subject of the repurchase agreement.
In order to minimize the risk of investing in repurchase
agreements, the Funds may engage in such transactions only
11
<PAGE>
with recognized securities dealers and banks and in all
instances must hold underlying securities with a value at
least equal to the total repurchase price such dealer or
bank has agreed to pay.
ILLIQUID The Funds will not make purchases of illiquid securities
SECURITIES (including entering into repurchase agreements for periods
longer than seven days) if such a purchase would cause more
than 10% of the Growth Fund's total assets, or 5% of the
Appreciation Fund's total assets, to be invested in such
securities.
THE FUNDS MAY Each Fund may lend its portfolio securities in order to earn
LEND THEIR additional income, but will not engage in such a transaction
PORTFOLIO if more than 5% of its net assets would be subject to such
SECURITIES. loans.
FUNDAMENTAL The investment restrictions set forth in the Statement of
POLICIES MAY Additional Information, and the investment objective of each
NOT BE CHANGED Fund, are fundamental policies and may not be changed
WITHOUT without a shareholder vote. All other investment policies of
SHAREHOLDER the Funds are not fundamental and may be changed by the
APPROVAL. Board of Trustees. Any percentage restrictions set forth in
this Prospectus or the Statement of Additional Information
apply at the time of investment without regard to later
increases or decreases in the values of securities or total
or net assets.
THE FUNDS The Funds currently observe the following operating
FOLLOW A policies, which may be changed by the Board of Trustees: (1)
POLICY OF a Fund will not invest in issuers primarily engaged in the
RESPONSIBLE manufacture of weapons systems, the production of nuclear
INVESTING. energy, or the manufacture of equipment to produce nuclear
energy; and (2) a Fund will not invest in issuers which the
Adviser ascertains are engaged in business in South Africa,
that is, issuers with five or more employees or agents in
South Africa, or issuers with loans to companies located in
South Africa, or to the South African Government, until such
time that the Adviser determines it would not present a
conflict for either Fund's existing institutional
shareholders. In addition, with respect to investments of
the Appreciation Fund, the Adviser actively seeks companies
that achieve excellence in both financial return and
environmental soundness, selecting issuers that take
positive steps toward preserving our environment and
avoiding companies with poor environmental records.
12
<PAGE>
The Adviser has engaged the services of Franklin Research
and Development Corporation of Boston to provide
environmental screening for all issuers selected for the
Appreciation Fund. Franklin provides information and
opinions on the companies' environmental histories. However,
Franklin does not make recommendations or provide investment
advice concerning the purchase or sale of securities.
The Adviser believes that there are long-term benefits
inherent in an investment philosophy that demonstrates
concern for human rights, economic priorities and
international relations.
TOTAL RETURN AND OTHER PERFORMANCE INFORMATION
THE FUNDS MAY A total return is a change in the value of an investment
ADVERTISE during the stated period, assuming all dividends and capital
TOTAL RETURN, gain distributions are reinvested. A cumulative total return
WHICH IS BASED reflects performance over a stated period of time. An
ON HISTORICAL average annual total return is the hypothetical annual
RESULTS AND IS compounded return that would have produced the same
NOT INTENDED cumulative total return if the performance had been constant
TO INDICATE over the entire period. Because average annual returns tend
FUTURE to smooth out variations in the returns, you should
PERFORMANCE. recognize that they are not the same as actual year-by-year
results. In addition to advertising average annual returns
for the required standard periods, such returns may be
quoted for other periods, including periods of less than one
year. Further information about each Fund's performance is
contained in the Annual Report to Shareholders, which may be
obtained from the Funds without charge.
From time to time, the Funds or their affiliates may provide
information including, but not limited to, general economic
conditions, comparative performance data and rankings with
respect to comparable investments for the same period and
for unmanaged market indices described in the Statement of
Additional Information.
13
<PAGE>
MANAGEMENT AND ORGANIZATION OF THE FUNDS
THE BOARD OF The Funds are two series of the Ariel Growth Fund (doing
TRUSTEES business as Ariel Investment Trust) (the "Trust"), an open-
SUPERVISES THE end diversified management investment company organized as a
FUNDS' Massachusetts business trust on August 1, 1986.
ACTIVITIES AND
REVIEWS THE
TRUST'S
CONTRACTS WITH
COMPANIES THAT
PROVIDE
SERVICES TO
THE FUNDS.
The Trust is not required to hold annual shareholder
meetings, but special meetings may be called by the Trustees
for purposes such as electing and removing Trustees,
changing fundamental policies, or approving an investment
advisory contract. Special meetings may also be called when
requested in writing by the holders of 10% or more of the
shares eligible to vote at such meetings. As a shareholder,
you receive one vote for each share of the Funds you own.
BOARD OF MARIO L. BAEZA, ESQ.
TRUSTEES President, Wasserstein Perella International Limited,
Managing Director and Chief Executive Officer, Americas
Division, Wasserstein Perella & Co., Inc.
WILLIAM C. DIETRICH, CPA
Chief Financial Officer, Home Shopping Alternatives, Inc.
ROYCE N. FLIPPIN, JR., MBA
President, Flippin Associates; formerly Director of Program
Advancement, Massachusetts Institute of Technology
JOHN G. GUFFEY, JR.
Chair, Calvert Social Investment Foundation
Treasurer and Director, Silby, Guffey and Co., Inc.
MELLODY L. HOBSON
Senior Vice President, Director of Marketing,
Ariel Capital Management, Inc.
CHRISTOPHER G. KENNEDY
Executive Vice President,
Merchandise Mart Properties, Inc.
ERIC T. McKISSACK, CFA
Vice Chairman and Co-Chief Investment Officer,
Ariel Capital Management, Inc.
BERT N. MITCHELL, MBA, CPA
Chairman and Chief Executive Officer,
Mitchell/Titus & Co.
14
<PAGE>
ARIEL CAPITAL Subject to the overall supervision of the Board of Trustees
MANAGEMENT, and pursuant to the Management Agreement, Ariel Capital
INC. SERVES AS Management, Inc. (the "Adviser") provides the Funds with
ADVISER AND investment advice and research and is responsible for the
PRINCIPAL selection of the investments for each Fund. In addition, the
UNDERWRITER TO Adviser is responsible for performing or overseeing the
THE FUNDS. Funds' day-to-day management and administration, providing
the Funds with office space, executive and other personnel
and paying the salaries and fees of all Trustees who are
affiliated persons. The Funds pay all other operating
expenses. The Adviser is paid a fee for its services to the
Growth Fund at the annual rate of 0.65% of the Fund's
average daily net assets for the first $500 million, 0.60%
of the next $500 million and 0.55% of average daily net
assets over $1 billion; and for its services to the
Appreciation Fund at the annual rate of 0.75% of the Fund's
average daily net assets for the first $500 million, 0.70%
of the next $500 million and 0.65% for average daily net
assets over $1 billion. The Adviser is also the principal
underwriter. Under the terms of its Underwriting Agreement,
the Adviser markets and distributes the Funds' shares and is
responsible for payment of commissions and service fees to
broker-dealers, banks, and financial services firms,
preparation of advertising and sales literature, and
printing and mailing of prospectuses to prospective
investors. Pursuant to the Underwriting Agreement, the
Adviser receives a fee at the annual rate of 0.25% of each
Fund's average daily net assets.
The Adviser is a privately held investment management firm,
controlled by John W. Rogers, Jr. The Adviser is located at
307 N. Michigan Avenue, Suite 500, Chicago, Illinois 60601.
As of September 6, 1994, the Adviser had assets under
management of over $2.1 billion, including assets of the
Funds.
PORTFOLIO The Growth Fund's investment selections are made by John W.
MANAGER-- Rogers, Jr., Chairman, President, and Treasurer of Ariel
GROWTH FUND Capital Management, Inc. Mr. Rogers founded Ariel Capital in
1983 as an institutional money management firm specializing
in equities. Prior to 1983, he worked as a stock broker for
the investment banking firm of William Blair & Co. Among his
civic affiliations, Mr. Rogers currently serves as President
of the Board of the Chicago Park District and a Director of
the Chicago Urban League. He also serves as a Director on
the Boards of American National Bank & Trust Company,
Burrell Communications Group, Morrison-Knudsen Corporation
and
15
<PAGE>
Aon Corporation. He is a 1980 graduate of Princeton
University, where he received a B.A. in Economics.
PORTFOLIO The Appreciation Fund's investment selections are made by
MANAGER-- Eric T. McKissack. Mr. McKissack is the Vice Chairman and
APPRECIATION Co-Chief Investment Officer for the Adviser as well as a
FUND trustee and President of the Ariel Investment Trust.
Formerly, Mr. McKissack served as the Adviser's Director of
Research. Prior to
joining the Adviser, he worked for five years as a research
analyst for The First National Bank of Chicago. Mr.
McKissack holds a B.S. in both Management and Architecture
from the Massachusetts Institute of Technology and an M.B.A.
from the University of California at Berkeley. He is a
Chartered Financial Analyst and a board member of the
Investment Analysts Society of Chicago. He also serves as a
board member of Travelers & Immigrant Aid, Urban Gateways
and the Financial Advisory Committee of the Magic Johnson
Foundation. Additionally he serves on the Community Board of
NBD Bank Chicago.
THE TRANSFER Investors Fiduciary Trust Company ("IFTC"), 127 West
AGENT AND 10th Street, Kansas City, Missouri 64105, is the Funds'
CUSTODIAN transfer agent, custodian and dividend disbursing and
shareholder servicing agent.
DISTRIBUTION PLAN
The Funds bear some of the costs of selling their shares
under a Distribution Plan adopted pursuant to Rule 12b-1
under the 1940 Act (the "Plan"). The Plan authorizes
payments by the Funds of up to 0.30% annually of each Fund's
average daily net asset value, but payments under the Plan
are currently limited by the Board of Trustees to 0.25%
annually of such average daily net asset value.
The Plan may be terminated at any time by vote of the
Trustees who are not interested persons of the Adviser or
the Funds and have no direct or indirect financial interest
in the Plan or by a vote of a majority of the outstanding
voting shares of each Fund.
Dealers having sales agreements with respect to a Fund may
receive up to 0.25% of average daily net assets of accounts
as ongoing service and account maintenance fees. The Adviser
may make expense reimbursements for special training and
16
<PAGE>
education of a dealer's registered representatives. Eligible
marketing and distribution expenses may be paid pursuant to
the Plan. Payments pursuant to the Plan are included in the
operating expenses of each Fund.
HOW TO BUY SHARES
SHARES OF THE Shares of the Growth Fund may be purchased by shareholders
GROWTH FUND of the Growth Fund and by shareholders of the Appreciation
ARE NOT Fund. Also, if the Growth Fund is an investment option in
GENERALLY your employer's retirement plan, you may open an account as
OFFERED TO THE a participant in that plan.
PUBLIC.
The Board of Trustees has determined that this limit on new
accounts will preserve the agility and performance of the
Fund by not letting it grow to the point where it is
unwieldy, or where the Adviser's investment strategy can no
longer be employed practically. In particular, this limit
will reduce the portfolio manager's need to acquire
securities of additional issuers or to take larger positions
in existing holdings than he would otherwise prefer to do.
The Growth Fund reserves the right to accept new accounts at
the direction of the Board of Trustees.
SHARES OF THE The minimum initial investment is $1,000, unless you
APPRECIATION participate in an automatic investment plan, in which case
FUND ARE there is a $50 minimum. A completed and signed application
OFFERED TO THE is required for each new account you open, regardless of the
GENERAL method you choose for making your initial investment. An
PUBLIC. account application accompanies this prospectus. Additional
forms may be required from corporations, associations and
certain financial institutions. If you have any questions or
need extra applications, call 1-800-29-ARIEL (1-800-292-
7435).
INITIAL
PURCHASES
BY MAIL To purchase shares by mail, please make your check payable
to Ariel Mutual Funds and mail it with an application,
indicating which Ariel Mutual Fund shares you would like to
buy, to:
Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121
BY WIRE You may also purchase shares by bank wire. Just call us at
1-800-29-ARIEL (1-800-292-7435) and we will ask you your
name, address, social security or tax identification number,
17
<PAGE>
the amount of your investment, the name of the Ariel Mutual
Fund in which you wish to invest and the name and address of
the financial institution that will be wiring your
investment to the Fund and we will immediately give you an
account number. Then have your financial institution wire
federal funds to the Custodian with the following
instructions:
Ariel Mutual Funds
c/o Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105
ABA #101003621
Account No. 7528205
The name of the Ariel Fund(s) in which you
wish to invest
Your shareholder account
number
The name in which your
account is registered
We accept wires at no charge. However, your bank may charge
you for this service.
SUBSEQUENT You may make subsequent investments directly by bank wire.
PURCHASES Follow the instructions above for initial investments,
except that you don't need to call us first. Just contact
your financial institution.
You may also make subsequent investments in a Fund in the
minimum amount of $50. To add to your account by mail,
please send your check or money order payable to Ariel
Mutual Funds with the detachable stub from the bottom of
your most recent account statement, or you may drop us a
note that includes the registered account name, account
number, the name of the Fund and amount you wish to invest.
Please remember that subsequent purchases should be sent to:
Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121
AUTOMATIC You may arrange for automatic investing whereby the
INVESTING Custodian will be authorized to initiate a debit to your
THROUGH YOUR bank account of a specific amount (minimum $50) to be used
BANK to
18
<PAGE>
purchase shares of a Fund. Scheduled automatic investments
may be made between the third and twenty-eighth day of a
month. After each automatic investment, you will receive a
transaction confirmation and the debit should be reflected
on your next bank statement. You may terminate the plan at
any time, and we may modify or terminate the plan at any
time. If, however, you terminate an automatic investment
plan with an account balance of less than $1,000, we may
close your account. See "Redeeming Shares" on page 24. If
you desire to utilize this investment option, indicate this
on the application attached to this prospectus.
PURCHASING You may also purchase shares of a Fund through one of
THROUGH several tax-deferred retirement plans. For more information,
RETIREMENT see "Tax-Saving Retirement Plans" on page 24.
PLANS
OTHER INFORMATION ABOUT PURCHASING SHARES
Although there is generally no sales charge when you
purchase shares, certain dealers or financial institutions
which sell shares of Ariel Mutual Funds may impose charges
for their services, and such charges may constitute a
significant portion of a smaller account.
The Funds do not issue share certificates unless you
specifically request one each time you make a purchase.
Certificates are not issued for fractional shares or to
shareholders who have elected a systematic withdrawal plan.
Also, shares represented by certificates may not be redeemed
by telephone. See "Redeeming Shares" for information on how
to redeem your shares.
NET ASSET VALUE
Net asset value per share ("NAV") refers to the worth of one
share. NAV is computed by adding the value of all portfolio
holdings, plus other assets, deducting liabilities and then
dividing the result by the number of shares outstanding. A
Fund's NAV will vary daily based on the market values of its
investments.
Portfolio securities and other assets are valued based on
market quotations, except that debt securities maturing
within 60 days are valued at amortized cost, which
approximates market value. If quotations for a security are
not readily available, the security is valued by a method
that the Board of Trustees believes accurately reflects fair
value.
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<PAGE>
The NAV is calculated at the close of the regular session of
the New York Stock Exchange (normally 3:00 p.m. Central
time). The Funds are open for business each day the New York
Stock Exchange is open. All purchases of Fund shares will be
confirmed and credited to your account in full and
fractional shares.
WHEN YOUR ACCOUNT WILL BE CREDITED
BEFORE YOU BUY Your purchase will be processed at the next offering price
SHARES, PLEASE based on the net asset value next calculated after your
READ THE order is received and accepted. Such calculation is made at
FOLLOWING the close of regular session trading on the New York Stock
INFORMATION TO Exchange, which is usually 3:00 p.m. Central time. All your
MAKE SURE YOUR purchases must be made in U.S. dollars and checks must be
INVESTMENT IS drawn on U.S. banks. No cash will be accepted. The Funds
ACCEPTED AND reserve the right to suspend the offering of shares for a
CREDITED period of time or to reject any specific purchase order. If
PROPERLY. your check does not clear, your purchase will be cancelled
and you will be charged a $10 fee plus costs incurred by the
Funds. When you purchase by check, the Funds can hold
payment on redemptions until they are reasonably satisfied
that the investment is collected (normally 15 calendar
days). To avoid this collection period, you can wire federal
funds from your bank, which may charge you a fee.
Certain financial institutions or broker-dealers which have
entered into a sales agreement with the Distributor may
enter confirmed purchase orders on behalf of customers by
phone, with payment to follow within a number of days of the
order as specified by the program. If payment is not
received in the time specified, the financial institution
could be liable for resulting fees or losses. State
securities laws may require such firms to be licensed as
securities dealers in order to sell shares of the Funds.
EXCHANGING SHARES
YOU MAY You may exchange your shares in the Fund for shares of the
EXCHANGE other Ariel Mutual Fund at no charge.
SHARES OF EACH
FUND FOR
SHARES OF
MONEY MARKET
FUNDS AND
SHARES OF THE
OTHER ARIEL
MUTUAL FUND.
You may also exchange your shares in either Ariel Mutual
Fund for shares of Cash Resource Money Market Fund, Cash
Resource U.S. Government Money Market Fund or Cash Resource
Tax-Exempt Money Market Fund at no charge. This exchange
privilege is a convenient way to buy shares
20
<PAGE>
in a money market fund in order to respond to changes in
your goals or in market conditions. These money market funds
are no-load funds managed by Cambridge Investment Advisors,
Inc.
BY MAIL To exchange your shares of one Fund into shares of the other
Ariel Mutual Fund, just send a written request to:
Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121
This request should include your name, account number, the
name of the Fund you currently own, the name of the Fund you
wish to exchange into, and the dollar amount or number of
shares you wish to exchange. Please remember that you cannot
place any conditions on your request.
To exchange your shares of a Fund into shares of Cash
Resource Money Market Fund, Cash Resource U.S. Government
Money Market Fund or Cash Resource Tax-Exempt Money Market
Fund, complete and sign an application and mail it to the
address set forth above.
BY TELEPHONE Unless you have elected not to have telephone transaction
privileges by checking the box in your application, you may
also make exchanges by calling 1-800-29-ARIEL (1-800-292-
7435). Exchanges made over the phone may be made by any
person, not just the shareholder of record. You may only
exchange shares by telephone if the shares you are
exchanging are not in certificate form. Certain other
limitations and conditions apply to all telephone
transactions. Before using your telephone privilege, please
read "Telephone Transactions" on page 22.
OTHER INFORMATION ABOUT EXCHANGING SHARES
Before exchanging your shares into shares of Cash Resource
Money Market Fund, Cash Resource U.S. Government Money
Market Fund or Cash Resource Tax-Exempt Money Market Fund,
read the applicable prospectus. To obtain a prospectus and
an application for any of these funds, just call 1-800-29-
ARIEL (1-800-292-7435).
21
<PAGE>
All accounts opened as a result of using the exchange
privilege must be registered in the same name and taxpayer
identification number as your existing account with the
Ariel Funds.
Because of the time needed to transfer money between funds,
you may not exchange into and out of the same fund on the
same or successive days; there must be at least one day
between exchanges. You may exchange your shares of the Funds
only for shares that have been registered for sale in your
state.
Remember that each exchange represents the sale of shares of
one fund and the purchase of shares of another. Therefore,
you could realize a taxable gain or loss on the transaction.
The Funds reserve the right to terminate or modify the
exchange privilege with 60 days' written notice. If your
account is subject to backup withholding, you may not use
the exchange privilege.
Because excessive trading can hurt the Funds' performance
and shareholders, the Funds also reserve the right to
temporarily or permanently terminate, with or without
advance notice, the exchange privilege of any investor who
makes excessive use of the exchange privilege (e.g. more
than five exchanges per calendar year). Your exchanges may
be restricted or refused if the Fund receives or anticipates
simultaneous orders affecting significant portions of a
Fund's assets. In particular, a pattern of exchanges with a
"market timer" strategy may be disruptive to the Funds.
If you have any share certificates, you must include them
with your exchange request. A signature guarantee is not
required except in cases where shares are also redeemed at
the same time for cash in an amount exceeding $25,000. For
certificate delivery instructions see "Redeeming Shares
By Mail" on page 24 and for signature guarantee instructions
see "Signature Guarantees" on page 23.
TELEPHONE TRANSACTIONS
If you have telephone transaction privileges, you may
purchase, redeem, or exchange shares or wire funds by
telephone as described in this prospectus. You automatically
have telephone privileges unless you elect otherwise. These
privileges, however,
22
<PAGE>
may not be available through certain dealers and financial
institutions. The Funds, the Transfer Agent and their
affiliates are not liable for acting in good faith on
telephone instructions relating to your account, so long as
they follow reasonable procedures to determine that the
telephone instructions are genuine. Such procedures will
include a request for a personal identification number and
tape recording of the instructions. You should verify the
accuracy of telephone transactions immediately upon receipt
of your confirmation statement.
During unusual market conditions, we may have difficulty in
accepting telephone requests, in which case you should mail
your request.
The Funds reserve the right to terminate, suspend or modify
telephone transaction privileges.
SIGNATURE GUARANTEES
WE MAY REQUIRE For our mutual protection, we may require a signature
SIGNATURE guarantee on certain transaction requests. A signature
GUARANTEES. guarantee verifies the authenticity of your signature, and
may be obtained from any bank, trust company, savings and
loan association, credit union, broker-dealer firm or member
of a domestic stock exchange. A signature guarantee cannot
be provided by a notary public. If redemption proceeds are
$25,000 or less and are to be paid or credited to an
individual shareholder of record at the address of record, a
signature guarantee is not required (unless there has been
an address change within 60 days). All other redemption
requests must have signatures guaranteed.
SPECIAL SERVICES AND CHARGES
The Funds pay for shareholder services but not for special
services that are required by a few shareholders, such as a
request for a historical transcript of an account. You may
be required to pay a research fee for these special
services.
If you are purchasing shares of a Fund through a program of
services offered by a broker-dealer or financial
institution, you should read the program materials in
conjunction with this prospectus. Certain features may be
modified in these programs, and administrative charges may
be imposed by the broker-dealer or financial institution for
the services rendered.
23
<PAGE>
TAX-SAVING RETIREMENT PLANS
CONTACT THE You may establish your new account under one of several tax-
ADVISER FOR deferred plans. These plans let you invest for retirement
COMPLETE and shelter your investment income from current taxes. The
INFORMATION minimum investments may differ depending on the type of
KITS plan.
DISCUSSING THE
PLANS, AND
THEIR
BENEFITS,
PROVISIONS AND
FEES.
. Individual Retirement Accounts (IRAs): available to anyone
who has earned income. You may also be able to make
investments in the name of your spouse, if your spouse has
no earned income.
. Qualified Profit-Sharing and Money-Purchase Plans
(including 401(k) Plans): available to self-employed people
and their partners, or to corporations and their employees.
. Simplified Employee Pension Plan (SEP-IRA): available to
self-employed people and their partners, or to corporations.
Salary reduction pension plans (SAR-SEP IRAs) are also
available to employers with 25 or fewer employees.
. 403(b)(7) Custodial Accounts: available to employees of
most non-profit organizations and public schools and
universities.
REDEEMING SHARES
BY MAIL You may redeem shares from your account by sending a letter
of instruction, your name, the name of the Fund and account
number from which shares are to be redeemed, the number of
shares or dollar amount and where you want your check to be
sent. Simply send your written request to redeem your shares
to our Transfer Agent as follows:
Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121
Certain shareholders, such as corporations, trusts and
estates, may be required to submit additional documents. The
letter of instruction must be signed by all required
authorized signers. If you want your money to be wired to a
bank not previously authorized or if you would like funds
sent to a different address or another person, your letter
must be signature guaranteed. Please remember that you
cannot place any conditions on your request. If any share
certificates were issued,
24
<PAGE>
they must be returned duly endorsed or accompanied by a
separate stock assignment. See "Signature Guarantees" on
page 23.
BY TELEPHONE Unless you have elected not to have telephone transaction
privileges by checking the box in your application, you may
also redeem shares by calling 1-800-29-ARIEL (1-800-292-
7435) and receive a check by mail. Remember, however, that
the check can only be issued for up to $25,000, and only to
the registered owner (who must be an individual), and may
only be sent to the address of record, which must have been
on file for at least 60 days. Shares represented by
certificates may not be redeemed by telephone.
BY WIRE Payment for your shares may also be made to you by wire if
you have selected this option in your application and have
named a commercial bank or savings institution with a
routing number to which we can send your money.
Once you have applied for wire redemption privileges, you or
any other person can make such a request by calling 1-800-
29-ARIEL (1-800-292-7435). You may also use your wire
privilege by mailing a signed request that includes the name
of the Fund, account number and amount you wish to have
wired, by writing to:
Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121
The proceeds will be sent only to the financial institution
you have designated on your application. You may terminate
the wire redemption privilege by notifying us in writing. A
charge of $10 is imposed on wire redemptions. See the
restrictions under "Telephone Transactions" on page 22, as
they also
apply to wire redemptions.
SYSTEMATIC If you maintain an account with a balance of $10,000 or
CHECK more, you may have regular monthly or quarterly redemption
REDEMPTIONS checks for a fixed amount sent to you simply by sending a
letter with all the information, including the Fund name,
your account number, the dollar amount ($100 minimum) and
when you want the checks mailed to your address on the
account. If you
25
<PAGE>
would like checks regularly mailed to another person or
place, the signature on your letter must be guaranteed. See
"Signature Guarantees" on p. 23.
OTHER INFORMATION ABOUT REDEMPTIONS
TO ENSURE Other than the $10 fee imposed on wire redemptions, there is
ACCEPTANCE OF no charge for redeeming your shares. If, however, you redeem
YOUR shares through certain dealers not having selling agreements
REDEMPTION with respect to the Funds your broker may charge a fee when
REQUEST, you redeem your shares.
PLEASE FOLLOW
THE PROCEDURES
DESCRIBED HERE
AND BELOW.
Once your shares are redeemed, the proceeds will normally be
sent to you on the next business day. However, if making
immediate payment could adversely affect the Fund, it may
take up to seven calendar days. When the New York Stock
Exchange is closed (or when trading is restricted) for any
reason other than its customary weekend or holiday closing,
or under any emergency circumstances as determined by the
Securities and Exchange Commission, redemptions may be
suspended or payment dates postponed.
You may redeem all or a portion of your shares on any
business day during which the New York Stock Exchange is
open for business. Your shares will be redeemed at the net
asset value next calculated after your redemption request is
received by the Transfer Agent in proper form. Redemptions
made after the New York Stock Exchange has closed will be
made at the next day's net asset value. Remember that, if
you redeem shortly after purchasing shares, the Funds may
hold payment on the redemption of your shares until they are
reasonably satisfied that payments made by check have been
collected (normally up to 15 calendar days after
investment).
MINIMUM Please maintain a balance in your account of at least
ACCOUNT $1,000. If, due to redemptions, the value of your account in
BALANCE IS a Fund falls below $1,000, or you fail to invest at least
$1,000. $1,000, the account may be closed and the proceeds mailed to
you at your address of record. You will be given 30 days'
notice that your account will be closed unless you make an
additional investment to increase your account balance to
the $1,000 minimum.
26
<PAGE>
DIVIDENDS, CAPITAL GAINS AND TAXES
EACH YEAR, THE Dividends from net investment income are declared and paid
FUNDS annually. Net investment income consists of the interest
DISTRIBUTE income, net short-term capital gains, if any, and dividends
SUBSTANTIALLY declared and received on investments, less expenses.
ALL OF THEIR Distributions of net short-term capital gains (treated as
NET INVESTMENT dividends for tax purposes) and net long-term capital gains,
INCOME AND if any, are normally declared and paid by each Fund once a
CAPITAL GAINS year; however, the Funds do not anticipate making any such
TO distributions unless available capital loss carryovers have
SHAREHOLDERS. been used or have expired.
DIVIDEND AND Dividends and any distributions from a Fund are
DISTRIBUTION automatically reinvested in that Fund at net asset value,
PAYMENT unless you elect to have the dividends of $10 or more paid
OPTIONS in cash. New shares will be purchased at net asset value on
the reinvestment date, which is generally up to three days
prior to the payment date. You must notify the Funds in
writing prior to the record date to change your payment
options. If you elect to have dividends and/or distributions
paid in cash, and the U.S. Postal Service cannot deliver the
check, or if it remains uncashed for six months, it, as well
as future dividends and distributions, will be reinvested in
additional shares.
"BUYING A At the time of purchase, the share price of each Fund may
DIVIDEND" reflect undistributed income, capital gains or unrealized
appreciation of securities. Any income or capital gains from
these amounts which are later distributed to you are fully
taxable. On the record date for a distribution, each Fund's
share value is reduced by the amount of the distribution. If
you buy shares just before the record date ("buying a
dividend") you will pay the full price for the shares and
then receive a portion of this price back as a taxable
distribution.
FEDERAL TAXES In January, you will be sent a form indicating the federal
tax status of dividends and capital gain distributions paid
to you during the past year. Generally, dividends (including
short-term capital gains) are taxable to you as ordinary
income regardless of whether they are taken in as cash or
reinvested. Distributions from long-term capital gains are
taxable as long-term capital gains, regardless of how long
you owned your shares.
27
<PAGE>
YOU MAY If you sell or exchange your shares you will have a short or
REALIZE A long-term capital gain or loss, depending on how long you
CAPITAL GAIN owned the shares which were sold. In January, you will be
OR LOSS WHEN sent a form indicating the proceeds from all sales,
YOU SELL OR including exchanges. You should keep your annual year-end
EXCHANGE account statements to determine the cost (basis) of the
SHARES. shares to report on your tax returns.
If we do not have your correct Social Security or Corporate
Tax Identification Number ("TIN") and a signed certified
application or Form W-9, Federal law requires the Funds to
withhold 31% of your dividends and certain redemptions. In
addition, you may be subject to a fine. You will also be
prohibited from opening another account by exchange. If this
TIN information is not received within 60 days after your
account is established, your account may be redeemed at the
current NAV on the date of redemption. The Funds reserve the
right to reject any new account or any purchase order for
failure to supply a certified TIN.
28
<PAGE>
INVESTMENT ADVISER,
SERVICES ADMINISTRATOR AND
PRINCIPAL UNDERWRITER
Ariel Capital Management, Inc.
307 North Michigan Avenue
Suite 500
Chicago, Illinois 60601
1-800-29-ARIEL (1-800-292-7435)
fax (312) 726-7473
INDEPENDENT AUDITORS
Ernst & Young LLP
233 South Wacker Drive
Chicago, Illinois 60606
TRANSFER AGENT AND CUSTODIAN
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
LEGAL COUNSEL
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
29
