ARIEL GROWTH FUND, 485BPOS, 1999-02-01

ARIEL GROWTH FUND
485BPOS, 1999-02-01

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

REGISTRATION NO. 33-7699

Post-Effective Amendment No. 22

and

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940

REGISTRATION NO. 811-4786

Amendment No. 22

ARIEL GROWTH FUND
-----------------

307 North Michigan Avenue
Suite 500
Chicago, Illinois 60601

Registrant's Telephone Number, Including Area Code

1-312-726-0140

Agent for Service:

Sheldon R. Stein
D'Ancona & Pflaum LLC
111 W. Wacker Drive
Suite 2800
Chicago, Illinois 60601-4205
(312) 602-2014

It is proposed that this filing will become effective:

Immediately upon filing pursuant to paragraph (b)
---
X on February 1, 1999 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)
---
on (date) pursuant to paragraph (a) of Rule 485
---

<PAGE>

THE ARIEL MUTUAL FUNDS
CROSS REFERENCE SHEET
FORM N-1A

SECTION IN PROSPECTUS
(Ariel and Appreciation Funds and Bond Fund-Investor Class)
<TABLE>
<CAPTION>
ITEM
----
<S> <C>
1. . . . Cover Page; Back Cover Page
2. . . . Ariel Stock Funds Overview; Ariel Bond Fund Overview; Investment
Objective; Investment Strategy; Investment Risks; Who Should
Consider Investing in the Funds and Who should not; Total
Returns, after Fees and Expenses
3. . . . Annual Operating Expenses of the Funds
4. . . . The Ariel Stock Funds in Depth; The Ariel Bond Fund In Depth
5. . . . (Not Applicable)
6. . . . How the Ariel Funds are Organized
7. . . . Managing Your Ariel Account; Choosing Your Ariel Account; Buying
Ariel Mutual Fund Shares, Selling Ariel Mutual Fund Shares;
Shareholder Services; Calculating the Funds' Share Prices; Paying
Taxes on Your Ariel Mutual Fund Earnings
8. . . . Annual Operating Expenses
9. . . . Financial Highlights: Ariel Stock Funds; Financial Highlights:
Ariel Premier Bond Fund

SECTION IN STATEMENT OF
ADDITIONAL INFORMATION
(Ariel and Appreciation Funds Only)
ITEM
----
10 . . . Cover Page
11 . . . General Information
12 . . . General Information; Investment Restrictions; Investment Strategy
and Risks; Portfolio Transactions; Appendix
13 . . . Trustees and Officers; Compensation Schedule
14 . . . Significant Shareholders; Trustees and Officers
15 . . . Investment Adviser and Services Administration; Transfer Agent
and Custodian; Independent Auditors
16 . . . Portfolio Transactions
17 . . . General Information
18 . . . Purchasing, Exchanging and Redeeming Shares; Net Asset Value
19 . . . Dividends, Capital Gains and Taxes
20 . . . Investment Adviser and Services Administrator; Method of
Distribution
21 . . . Calculation of Total Return; Total Return and Other Performance
Information
22 . . . Cover Page
</TABLE>

<PAGE>

THE ARIEL MUTUAL FUNDS
CROSS REFERENCE SHEET
FORM N-1A

SECTION IN PROSPECTUS
(Premier Bond Fund-Institutional Class)
<TABLE>
<CAPTION>
ITEM
----
<S> <C>
1. . . . Cover Page; Back Cover Page
2. . . . Ariel Bond Fund Overview; Investment Objective; Investment
Strategy; Investment Risks; Who Should Consider Investing in the
Funds and Who should not; Total Returns, after Fees and Expenses
3. . . . Annual Operating Expenses of the Fund
4. . . . The Ariel Bond Fund In Depth
5. . . . (Not Applicable)
6. . . . How the Ariel Funds are Organized
7. . . . Managing Your Ariel Account; Choosing Your Ariel Account; Buying
Ariel Mutual Fund Shares, Selling Ariel Mutual Fund Shares;
Shareholder Services; Calculating the Funds' Share Prices; Paying
Taxes on Your Ariel Mutual Fund Earnings
8. . . . Annual Operating Expenses
9. . . . Financial Highlights: Ariel Premier Bond Fund

SECTION IN STATEMENT OF
ADDITIONAL INFORMATION (Bond Fund - Both Classes)

ITEM
----
10 . . . Cover Page
11 . . . General Information
12 . . . General Information; Investment Restrictions; Investment Strategy
and Risks; Portfolio Transactions; Appendix
13 . . . Trustees and Officers; Compensation Schedule
14 . . . Significant Shareholders; Trustees and Officers
15 . . . Investment Adviser and Services Administration; Transfer Agent
and Custodian; Independent Auditors
16 . . . Portfolio Transactions
17 . . . General Information
18 . . . Purchasing, Exchanging and Redeeming Shares; In-Kind Purchases
of Institutional Class Shares of the Fund; Net Asset Value
19 . . . Dividends, Capital Gains and Taxes
20 . . . Investment Adviser and Services Administrator; Method of
Distribution of the Investor Class Shares
21 . . . Calculation of Total Return, Total Return, Yield and Other
Performance Information
22 . . . Cover Page
</TABLE>

<PAGE>

Ariel Mutual Funds

STOCK FUNDS
ARIEL FUND

ARIEL APPRECIATION FUND

BOND FUND

ARIEL PREMIER BOND FUND - INVESTOR CLASS

NO-LOAD MUTUAL FUNDS

PROSPECTUS

FEBRUARY 1, 1999

The Securities and Exchange Commission has not approved or disapproved of the
shares of Ariel Mutual Funds. Nor has the Securities and Exchange Commission
determined whether this prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.

<PAGE>

TABLE OF CONTENTS

<TABLE>

<S> <C>
ARIEL STOCK FUNDS OVERVIEW. . . . . . . . . . . . . . . . . . . . . . . . .3

ARIEL STOCK FUNDS IN DEPTH. . . . . . . . . . . . . . . . . . . . . . . . .12

FINANCIAL HIGHLIGHTS: ARIEL STOCK FUNDS . . . . . . . . . . . . . . . . . .18

ARIEL PREMIER BOND FUND OVERVIEW. . . . . . . . . . . . . . . . . . . . . .19

ARIEL PREMIER BOND FUND IN DEPTH. . . . . . . . . . . . . . . . . . . . . .24

FINANCIAL HIGHLIGHTS: PREMIER BOND FUND . . . . . . . . . . . . . . . . . .27

HOW THE ARIEL FUNDS ARE ORGANIZED . . . . . . . . . . . . . . . . . . . . .28

MANAGING YOUR ARIEL ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . .35

</TABLE>

<PAGE>

ARIEL STOCK FUNDS OVERVIEW

INVESTMENT OBJECTIVE

Both the Ariel Fund and the Ariel Appreciation Fund are no-load mutual funds
that seek long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGY

The Ariel Fund invests primarily in the stocks of small companies with market
capitalization's under $1.5 billion at the time of investment.

The Ariel Appreciation Fund invests primarily in the stocks of medium size
companies with market capitalizations between $200 million and $5 billion at the
time of investment.

[SIDEBAR: "MARKET CAPITALIZATION," OR "MARKET CAP," PROVIDES A READY GAUGE OF A
COMPANY'S SIZE. IT IS THE TOTAL NUMBER OF THE COMPANY'S OUTSTANDING SHARES
MULTIPLIED BY THE CURRENT PRICE OF ITS STOCK. THE CHART [TK] USES MARKET CAP TO
COMPARE THE AVERAGE SIZE OF THE COMPANIES HELD BY THE ARIEL FUND WITH THE SIZE
OF THE COMPANIES IN THE ARIEL APPRECIATION FUND AND WITH THE COMPANIES IN THE
STANDARD & POOR'S 500-STOCK INDEX.]

Both Ariel Stock Funds seek to invest in sound companies that many other
institutional investors have misunderstood or ignored. These companies share
three attributes that we believe should result in capital appreciation over
time:

- a product or service whose strong brand franchise and loyal customer
base pose formidable barriers to potential competition

- capable, dedicated management

- a solid balance sheet with high levels of cash flow and a low burden
of debt.

The essence of the Ariel Stock Funds' strategy is patience. Ariel Capital
Management, Inc., the Stock Funds' Investment Adviser, holds investments for a
relatively long period of time--typically three to five years.

Page No.: 3
<PAGE>

PRINCIPAL INVESTMENT RISKS

Although we make every effort to achieve the Ariel Stock Funds' objective of
long-term capital appreciation, we cannot guarantee we will attain that
objective. You could lose money on your purchase of shares in the Ariel Fund or
Ariel Appreciation Fund. The table below lists some of the principal risks of
investing in the Ariel Stock Funds and the measures we take in attempting to
limit those risks:

<TABLE>
<CAPTION>
RISKS HOW WE TRY TO MANAGE THEM
<S> <C>
- The general level of stock prices - Buy stocks whose prices are low
declines. relative to their earnings
potential; such stocks have done
better than the market average in
past declines.
- Small-cap and mid-cap stocks like - Avoid startup ventures and highly
those held by the Ariel Stock cyclical or speculative
Funds fall out of favor. companies; seek companies with
solid finances and proven
records.
- Ariel Stock Funds hold relatively - Research stocks exhaustively
few stocks; a fluctuation in one before purchase; monitor
stock could significantly affect continuously after purchase;
the Funds' overall performance. limit the value of a single stock
as a percentage of total Fund--if
its price rises to exceed the
limit, sell the excess.
</TABLE>

Page No.: 4
<PAGE>

WHO SHOULD CONSIDER INVESTING IN THE FUNDS--AND WHO SHOULD NOT

You should consider investing in the Ariel Stock Funds if you are looking for
long-term capital appreciation and are willing to accept the associated risks.
Although past performance cannot predict future results, stock investments
historically have outperformed most bond and money-market investments.

However, this higher return has come at the expense of greater short-term price
fluctuations, down as well as up. Thus, you should NOT consider investing in the
Funds if you anticipate a near-term need--typically within five years--for
either the principal or the gains from your investment.

An investment in either of the Ariel Stock Funds, like any mutual fund, is not a
bank deposit. It is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.

Page No.: 5
<PAGE>

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar charts and tables below can help you evaluate the potential risk and
rewards of investing in the Ariel Stock Funds by showing changes in the Funds'
performance from year to year and by showing how the Funds' average annual
returns for one, five and ten years (or since inception) compare with those of a
broad measure of market performance. Total return measures how much the price of
an investment in a mutual fund changes, assuming that all dividend income and
capital gain distributions are reinvested. For any fund, you should evaluate
total return in light of the fund's particular investment objectives and
policies, as well as general market conditions during the reported time periods.
The bar chart for the Ariel Fund shows the Fund's annual total returns for each
of the last ten calendar years. For the Ariel Appreciation Fund, the bar chart
shows its returns for each full calendar year after inception in December 1,
1989. The returns include reinvestment of all dividends and distributions.

The tables compare AVERAGE annual returns for the Ariel Mutual Funds with
standard benchmark indices: the S&P 500-stock Index and the Russell 2000 Index
for the Ariel Fund; the S&P 500-stock Index and the Russell Mid-Cap Index for
the Ariel Appreciation Fund. The indices do not represent the actual returns an
investor might experience. They measure overall market returns. They do not take
into account the costs of buying and selling securities or managing a stock
portfolio, costs which are deducted from mutual fund returns.

[SIDEBAR: THE S&P 500-STOCK INDEX FOLLOWS THE STOCK-MARKET PERFORMANCE OF 500 OF
THE LARGEST COMPANIES IN THE UNITED STATES. THE COMPANIES COVER THE ENTIRE RANGE
OF AMERICAN BUSINESS AND REPRESENT A SUBSTANTIAL PROPORTION OF THE STOCKS TRADED
EVERYDAY. INVESTORS CAN COMPARE THE PERFORMANCE OF STOCK MUTUAL FUNDS WITH THIS
BROAD INDICATOR OF HOW THE "MARKET" WAS DOING.

THE RUSSELL 2000 AND THE RUSSELL MID-CAP INDEX ARE MORE SPECIFIC AND RELEVANT
INDICES FOR THE ARIEL AND ARIEL APPRECIATION FUNDS, RESPECTIVELY:

Page No.: 6

<PAGE>

- - THE RUSSELL 2000 CONSISTS OF COMPANIES IN THE RUSSELL 3000. THE RUSSELL
3000 TRACKS THE STOCK RETURNS OF THE 3,000 LARGEST PUBLICLY HELD COMPANIES
IN THE UNITED STATES. THE RUSSELL 2000 FOLLOWS THE SMALLEST 2,000 OF THOSE
COMPANIES.

- - THE RUSSELL MIDCAP INDEX MEASURES THE PERFORMANCE OF THE 800 SMALLEST
COMPANIES IN THE RUSSELL 1000 INDEX. THE RUSSELL 1000 INDEX MEASURES THE
PERFORMANCE OF THE 1,000 LARGEST US COMPANIES BASED ON TOTAL MARKET
CAPITALIZATION.]

The tables show the average annual returns for the last one, five, ten years and
since inception for the Ariel Fund. For the Ariel Appreciation Fund, they show
the average annual returns for the last one and five year periods and since
inception.

Page No.: 7
<PAGE>

ARIEL FUND
Year-by-Year Returns
for each full calendar year since 1988

[BAR CHART]

9.89 36.44 23.51 18.52 -4.22 8.72 11.73 32.72 -16.08 25.12 39.93
- ---- ----- ----- ----- ----- ---- ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988

</TABLE>

<TABLE>
<S> <C> <C>
Best Quarter: Q1 1988 20.30%

Worst Quarter: Q3 1980 -25.39%

</TABLE>

Return for the fiscal quarter ended 12/31/98 was 20.10%. The Ariel Fund's
past returns do not provide any indication of future performance.

ARIEL FUND
Average Annual Returns
as of December 31, 1998

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years Life
<S> <C> <C> <C> <C> <C>
Ariel Fund 9.89% 22.80% 16.02% 13.53% 15.32%

Russell 2000 Index -2.55% 11.58% 11.86% 12.92% 11.51%

S&P 500 Index 28.58% 28.23% 24.06% 19.21% 17.36%

</TABLE>

Page No.: 8
<PAGE>

ARIEL APPRECIATION FUND
Year-by-Year Returns
for each full calendar year since inception
(December 1, 1989)

[BAR CHART]

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
19.55% 37.95 23.72 24.16 (8.39) 7.94 13.24 33.15 (1.51)
- ----- ----- ------ ----- ------ ------ ------ ------ ------
1998 1997 1996 1995 1994 1993 1992 1991 1990

</TABLE>

<TABLE>
<S> <C> <C> <C>
Best Quarter: Q4 1998 23.38%

Worst Quarter: Q3 1990 -22.44%

</TABLE>

Return for the fiscal quarter ended 12/31/98 was 23.38%. The Ariel
Appreciation Fund's past returns do not provide any indication of future
performance.

ARIEL APPRECIATION FUND
Average Annual Returns
as of December 31, 1998

1 year 3 years 5 years Since Inception
<S> <C> <C> <C> <C>
Ariel Appreciation Fund 19.55% 26.83% 18.34% 15.62%

Russell Midcap Index 10.10% 19.11% 17.34% 15.08%

S&P 500 Index 28.58% 28.23% 24.06% 18.01%

</TABLE>

Page No.: 9

<PAGE>

ANNUAL OPERATING EXPENSES FOR FISCAL YEAR ENDED SEPTEMBER 30, 1998

The tables below describe the fees and expenses the Funds pay and that you bear
indirectly if you buy and hold shares in the Ariel or the Ariel Appreciation
Fund. BOTH ARIEL STOCK FUNDS ARE "NO-LOAD" FUNDS. YOU DO NOT PAY A SALES CHARGE
WHEN YOU BUY OR SELL THEIR SHARES.

ARIEL FUND APPRECIATION FUND
(percentage of average (percentage of average
daily net Fund assets) daily net Fund assets)
<S> <C> <C>
Management fees 0.65% 0.75%

Distribution (12b-1) fees 0.25% 0.25%

Other expenses 0.31% 0.26%

Total annual operating expenses 1.21% 1.26%

</TABLE>

[SIDEBAR:

- - MANAGEMENT FEES COVER THE COSTS OF OVERSEEING THE FUND'S INVESTMENTS AND
THE COSTS OF ADMINISTRATION AND ACCOUNTING.

- - 12b-1 FEES PAY FOR PROMOTION AND DISTRIBUTION OF FUND SHARES AND SERVICES
PROVIDED TO SHAREHOLDERS. BECAUSE THESE FEES ARE PAID FROM FUND ASSETS ON
AN ONGOING BASIS, THESE FEES WILL INCREASE THE COST OF YOUR INVESTMENT AND
MAY COST YOU MORE THAN OTHER TYPES OF SALES CHARGES.

- - OTHER EXPENSES INCLUDE THE COSTS OF THE CUSTODIAN AND TRANSFER AGENT,
ACCOUNTANTS, ATTORNEYS AND DIRECTORS.]

COST COMPARISON EXAMPLES

The examples below illustrate the expenses you would incur on a $10,000
investment in the Ariel or the Ariel Appreciation Fund based on each Fund's
current level of expenses. The examples assume that each Fund each earned an
annual return of 5% over the periods

Page No.: 10

<PAGE>

shown and you redeem your shares at the end of each time period.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years/Inception
<S> <C> <C> <C> <C>
Ariel Fund $123 $384 $665 $1,466

Ariel Appreciation Fund $128 $400 $692 $1,523

</TABLE>

These examples are hypothetical and are included for the purpose of comparing
the Funds' expenses with other mutual funds. They do not represent estimates of
future expenses or returns, either of which may be greater or less than the
amounts shown.

Page No.: 11

<PAGE>

ARIEL STOCK FUNDS IN DEPTH

INVESTMENT OBJECTIVE

The Ariel Fund and the Ariel Appreciation Fund pursue a common objective:
long-term capital appreciation--the Ariel Fund primarily through investment in
small company stocks, the Ariel Appreciation Fund primarily through investment
in medium-sized company stocks. The two Ariel Stock Funds invest for
appreciation, not income. They seek stocks whose underlying value should
increase over time. Any dividend and interest income these Funds earn is
incidental to their fundamental objective. Ariel Capital Management, Inc., the
Funds' Investment Adviser, cannot guarantee either Fund will achieve capital
appreciation in every circumstance, but we are dedicated to that objective. We
believe long-term capital appreciation:

- results from investments in undervalued stocks; stocks that other
investors have overlooked or ignored.

[SIDEBAR: INVESTORS CONSIDER A STOCK UNDERVALUED WHEN IT TRADES AT A PRICE
BELOW WHAT THEY THINK THE BUSINESS IS WORTH. THE CONCEPT IS RELATIVE. INVESTORS
MIGHT JUDGE A STOCK UNDERVALUED ON THE BASIS OF PRICE TO EARNINGS RATIO: THEY
PAY LESS FOR A DOLLAR OF CORPORATE EARNINGS WHEN THEY BUY A PARTICULAR STOCK
THAN THEY WOULD IF THEY BOUGHT ANOTHER. OR THEY MIGHT JUDGE A STOCK UNDERVALUED
ON THE BASIS OF THE RATIO OF THE VALUE OF ITS ASSETS TO THE VALUE OF ITS MARKET
CAPITALIZATION: THEY PAY LESS FOR A DOLLAR OF UNDERLYING ASSETS THAN THEY WOULD
IF THEY BOUGHT ANOTHER STOCK. ]

- results from investing in companies with long histories of consistent
earnings in both good and bad economic times.

- is more likely to be found in consistent, predictable businesses that
often sell everyday goods or services and enjoy a high level of repeat
sales.

- occurs when companies dominate their markets. These companies'
products have gained such strong brand recognition that in many cases
their names are synonymous with the products themselves.

Page No.: 12

<PAGE>

- is a product of committed and experienced management running its
business efficiently and delivering solid value to its customers.

INVESTMENT STRATEGY AND APPROACH

OUR APPROACH TO INVESTING

We believe successful long-term investing results from disciplined research, not
from impulsive speculation or arbitrary guesswork. This conviction has shaped
our process for the past 16 years. It has defined an investment agenda that
emphasizes small and mid-size companies.

SMALL AND MID-SIZE COMPANIES

The concept of undervalued companies whose long-term growth prospects have gone
largely unappreciated by the market implies an information gap. Investors have
misjudged these companies: They may not have recognized the companies' inherent
strengths or they may have overlooked them altogether. Because Wall Street
follows large corporations closely, such companies rarely encounter such
misperceptions. If a large company's share price seems low, its stock will
probably have fallen for a well-documented reason. If its prospects are strong,
investors will usually have bid up its price in anticipation of growth. Wall
Street covers small and mid-cap companies far less intensively than large
companies. According to a 1998 survey(a), an average of seven professional
financial analysts covered each of the stocks held in the Ariel Fund compared to
an average of 24 for each large stock listed in the S&P 500. We believe this
discrepancy in coverage makes it more likely that we will discover the
opportunities often inherent in small- and mid-cap stocks ahead of the rest of
the market.

- ------------------------
(a) Frank B. Russell & Co.

Page No.: 13

<PAGE>

CONSISTENT INDUSTRIES

Our disciplined research process favors tried-and-true businesses with
predictable revenues over trendy "concept stocks". We avoid areas characterized
by rapid obsolescence and industries vulnerable to new competition. We prefer
established businesses with mature markets--the quiet, unnoticed businesses that
produce the goods and services of everyday life. And we prefer companies with
long track records built over several business cycles. We prefer steady earnings
to cyclical peaks and valleys.

THE RESPONSIBILITY FACTOR

We believe ethical business practices make good investment sense. In the long
run, a company that adopts environmentally sound policies will face less
government intrusion. A company that fosters community involvement among its
employees will inspire community support. We believe that a company that
cultivates diversity is more likely to attract and recruit the best talent and
broaden its markets in profitable new directions. For these reasons, we avoid
corporations whose primary business involves the sale or production of alcoholic
beverages, tobacco products or nuclear weapons and energy. We feel these
industries are more likely to face shrinking growth prospects, draining
litigation costs and legal liability which cannot be quantified.

Page No.: 14

<PAGE>

INVESTMENT PROCESS: A FOCUS ON RESEARCH

UNCOVERING VALUE AND GROWTH

Our proprietary research process begins with the usual Wall Street
sources--financial analysts' reports, the standard computer databases and
company press releases. Digging deeper, we review more than 150 newspapers,
trade periodicals and technical journals. We often say our research team reads
for a living. In this way, we believe they can uncover the outstanding companies
buried in the day-to-day routine of the nation's business.

We apply the same intensive research once we have identified a candidate for
investment. We comb through the company's financial history and analyze its
prospects. We develop independent long-range financial projections and detail
the risks.

We verify our findings first-hand. We visit a portfolio candidate to form our
own impression. We meet with its suppliers and customers. We talk to its
competitors and former employees. We measure the shelf space a consumer products
manufacturer commands in the supermarket; we count a newspaper's ad lineage and
the cars in a retailer's parking lot on a Saturday morning. We sample a
restaurant chain's menu at units around the country to assure ourselves of
quality and consistency.

We learn all we can about a company's management. We believe the character and
quality of a company's management weighs at least as heavily as any other factor
in determining its success, especially in the smaller companies in which we
invest. The skill of the management team will help the company overcome
unforeseen obstacles. Its contacts and experience will alert the company to
emerging opportunities.

Page No.: 15

<PAGE>

A LONG-TERM VIEW

When we have completed our research process, we "own" the companies in which we
invest, we don't merely trade their stock. We believe the market will ultimately
reward these companies, and we give them the time such recognition requires,
five years on average and sometimes, even longer. This means that the Ariel
Stock Funds typically have low rates of turnover.

Each time a fund turns over a holding--sells one stock to buy another--it incurs
transaction charges that negatively impact investment returns--the higher the
turnover rate, the more negative the impact. High turnover rates can reduce
investment performance; low turnover rates can enhance it. A low rate of
turnover can offer yet another advantage because it may reduce a fund's taxable
capital gains.

[SIDEBAR: TURNOVER IS AN INDICATION OF HOW LONG A FUND TYPICALLY HOLDS TO STOCKS
IT PURCHASES. A TURNOVER RATE OF 100% IMPLIES THAT THE FUND CHANGES ITS ENTIRE
INVESTMENT PORTFOLIO EVERY YEAR.]

PRINCIPAL INVESTMENTS

We are demanding and selective investors. Each company we choose for our
portfolio must meet ALL our criteria:

- - a competitive stock price relative to its peers as well as historic market
valuations,

- - seasoned management,

- - a solid balance sheet and sound finances, and

- - a dominant market niche.

Only a few such companies exist at any one time. A portfolio consisting
exclusively of stocks in these companies is highly select: The Ariel Fund
generally contains no more than 35 stocks and the Ariel Appreciation Fund no
more than 45.

[SIDEBAR: FROM A DATABASE OF 9,200 PUBLICLY TRADED COMPANIES, ONLY SOME 200
QUALIFY FOR CLOSER ANALYSIS AND 80 FOR INTENSE ANALYSIS. FROM THIS GROUP, ONLY
SIX OR SEVEN NEW STOCKS MAY MAKE THEIR WAY INTO AN ARIEL STOCK FUND EACH YEAR.]

Page No.: 16
<PAGE>

FINANCIAL HIGHLIGHTS: ARIEL STOCK FUNDS

The tables below provide the Ariel Stock Funds' financial performance for the
past five fiscal years. The information reflects financial results for a single
share of either the Ariel or the Ariel Appreciation Fund. The total returns
represent the rates of return that an investor would have earned, assuming all
dividends and distributions were reinvested in additional shares. Ernst & Young
LLP, the Funds' Independent Auditors, has audited this information. The Funds'
financial statements are included in the Funds' Annual Report, which is
available free of charge by request.

ARIEL FUND

Year Ended September 30

1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $41.49 $30.58 $30.78 $28.84 $30.46
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.13 0.07 0.18 0.36 0.18
Net realized and unrealized gains (losses)
on investments (1.41) 12.62 4.24 3.51 0.23
----- ----- ---- ----- ----
Total from
investment operation (1.28) 12.69 4.42 3.87 0.41
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (0.14) -- (0.44) (0.23) (0.30)
Distributions from capital gains (3.58) (1.78) (4.18) (1.70) (1.73)
----- ----- ----- ----- -----
Total distributions (3.72) (1.78) (4.62) (1.93) (2.03)
----- ----- ----- ----- -----
Net asset value, end
of year $36.49 $41.49 $30.58 $30.78 $28.84
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Total return (3.83)% 43.25% 16.28% 14.38% 1.41%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of year, in thousands $162,279 $164,065 $109,770 $120,953 $149,511
Ratio of expenses to average net assets 1.21% 1.25% 1.31% 1.37%(a) 1.25%
Ratio of net investment income to average net assets 0.30% 0.23% 0.57% 1.18%(a) 0.56%
Portfolio turnover rate 22% 20% 17% 16% 9%

</TABLE>

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

(a) Net of reimbursements. Without the fee waiver, the ratio of expenses to
average net assets would have been 1.39%, and the ratio of expenses to
average net assets would have been 1.16% for the fiscal year ended 1998.

Page No.: 17
<PAGE>

ARIEL APPRECIATION FUND

Year Ended September 30

1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $33.70 $24.99 $22.76 $21.82 $21.67
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.09 0.02 0.13 0.14 0.04
Net realized and unrealized gains on investments 1.14 10.13 4.07 2.26 0.51
----- ------ ----- ------ -----
Total from
investment operation 1.23 10.15 4.20 2.40 0.55
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (0.07) (0.07) (0.20) (0.06) (0.05)
Distributions from capital gains (3.06) (1.37) (1.77) (1.40) (0.35)
----- ------ ----- ------ -----
Total Distributions (3.13) (1.44) (1.97) (1.46) (0.40)
Net asset value, end of year $31.80 $33.70 $24.99 $22.76 $21.82
----- ------ ----- ------ -----
----- ------ ----- ------ -----
Total Return 3.40% 42.33% 19.60% 12.11% 2.56%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of year, in thousands $213,812 $186,478 $135,627 $143,312 $162,280
Ratio of expenses to average net assets 1.26% 1.33% 1.36%(a) 1.36%(a) 1.35%(a)
Ratio of net investment income to average net assets 0.25% 0.07% 0.50%(a) 0.61%(a) 0.17%(a)
Portfolio turnover rate 20% 19% 26% 18% 12%

</TABLE>

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

(a) Net of reimbursements. Without the fee waiver, the ratio of expenses to
average net assets would have been 1.40%, 1.58%, and 1.40% for 1996,
1995, and 1994; and the ratio of net investment income to average net
assets for the periods would have been 0.46%, 0.39% and 0.12%.

Page No.: 18

<PAGE>

ARIEL PREMIER BOND FUND OVERVIEW

The Ariel Premier Bond Fund currently offers two classes of shares, the Investor
Class and the Institutional Class. The Institutional Class is offered through a
separate prospectus primarily to institutional investors. All discussion of the
Premier Bond Fund in this Prospectus relates to the Investor Class.

INVESTMENT OBJECTIVE. The Ariel Premier Bond Fund seeks to maximize total
return through a combination of income and capital appreciation. [SIDEBAR: A
BOND'S TOTAL RETURN REFLECTS TWO COMPONENTS: FIRST, THE INTEREST INCOME IT
GENERATES IN A GIVEN PERIOD; AND SECOND, THE CHANGE IN THE BOND'S VALUE DURING
THE PERIOD. (AN INCREASE IN THE VALUE OF THE BOND ADDS TO TOTAL RETURN, A
DECREASE REDUCES TOTAL RETURN.) THE CALCULATIONS ASSUME THE REINVESTMENT OF ALL
DIVIDENDS AND DISTRIBUTIONS.]

PRINCIPAL INVESTMENT STRATEGY. The Ariel Premier Bond Fund invests no less than
80% of its assets in high-quality fixed income securities for which a ready
market exists. If the securities are private-sector issues--corporate bonds,
commercial paper or bonds secured by assets such as home mortgages--they must
have earned an "A" rating or better from a nationally recognized statistical
rating organization such as Moody's Investors Service or the Standard & Poor's
Corporation. We also consider all bonds issued by the U.S. Government and its
agencies to be high quality.

PRINCIPAL INVESTMENT RISKS. Although the Ariel Premier Bond Fund's Investment
Sub-Adviser, Lincoln Capital Management Company, makes every effort to achieve
the Fund's objective of maximizing total investment returns, there can be no
guarantee the Fund will attain its objective. You could lose money on your
purchase of shares in the Ariel Premier Bond Fund. The table below lists some of
the principal risks of investing in the Ariel Premier Bond Fund and the measures
the Fund's Investment Sub-Adviser takes in attempting to limit those risks.

<TABLE>
<CAPTION>
RISKS HOW THE FUND TRIES TO MANAGE THEM
<S> <C>
Issuers of bonds held by the Fund cannot Only hold bonds with high credit ratings,
make timely payments of either interest or A or better, on average.
principal when they fall due.

Highly rated bonds are downgraded because Conduct independent evaluation of the
of issuers' financial problems. creditworthiness of the bonds and their issuers.

Bond prices decline because of an Actively manage Fund's average duration in
increase in interest rates. anticipation of interest rate changes.

</TABLE>

Page No.: 19

<PAGE>

WHO SHOULD CONSIDER INVESTING IN THE FUND--AND WHO SHOULD NOT

You should consider investing in the Ariel Premier Bond Fund if you are seeking
current income and capital appreciation. You should be willing to accept
short-term price fluctuations, which will occur from time to time. Traditionally
these fluctuations have been less than those associated with stocks.

You should not consider investing in the Ariel Premier Bond Fund if you cannot
tolerate moderate short-term declines in share value or if you are seeking the
higher returns historically achieved by stocks.

Page No.: 20

<PAGE>

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar table below can help you evaluate the potential risk and rewards of
investing in the Ariel Premier Bond Fund by showing changes in the Fund's
performance for its first calendar year and comparing the Fund's performance
with a broad measure of market performance. The bar chart shows the Fund's total
return for 1998, the first full calendar year since it began operations in
February 1997. The table compares the Fund's total annual return with the return
of a relevant benchmark, the Lehman Brothers Aggregate Bond Index.

As is the case with indices, the Lehman Brothers Aggregate Bond Index does not
represent the actual returns an investor might experience. It measures the bond
market's total return (the interest income it earns, plus or minus the price
change in a given period). It does not take into account the costs of buying and
selling securities or the fees related to managing a portfolio.

[SIDEBAR: THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS ONE OF THE MOST WIDELY
ACCEPTED BENCHMARKS OF BOND MARKET TOTAL RETURN. IT INCLUDES MORE THAN 6,000
TAXABLE GOVERNMENT, INVESTMENT-GRADE CORPORATE AND MORTGAGE-BACKED SECURITIES.]

Page No.: 21

<PAGE>

ARIEL PREMIER BOND FUND
Return for 1998
[BAR CHART]

(first full calendar year)

7.23%

<TABLE>
<CAPTION>
<S> <C> <C>
Best Quarter: 3Q 1998 3.40%
Worst Quarter: 4Q 1998 0.04%

</TABLE>

The inception date for the Ariel Premier Bond Fund is February 1997.

Return for the fiscal quarter ended 12/31/98 was 0.04%. Ariel Premier Bond
Fund's past returns do not provide any indication of future performance.

Ariel Premier Bond Fund
Annual Return
as of December 31, 1998

<TABLE>
<CAPTION>
1 Year
<S> <C>
Ariel Premier Bond Fund 7.23%
Lehman Brothers Aggregate Bond Index 8.69%
</TABLE>

ANNUAL OPERATING EXPENSES FOR FISCAL YEAR END SEPTEMBER 30, 1998

The table below shows the fees and expenses the Fund pays and that you bear
indirectly if you buy and hold shares in the Ariel Premier Bond Fund.

<TABLE>
<CAPTION>
Percentage of average
daily net assets of the Fund
<S> <C>
Management fees 0.60%

Distribution (12b-1) fees 0.25%
Other expenses (0)
Total annual operating expenses 0.85%

</TABLE>

Ariel Capital Management paid the Premier Bond Fund's other expenses.

Page No.: 22
<PAGE>

COST COMPARISON EXAMPLE

The Examples below illustrate the expenses you would incur on a $10,000
investment in the Ariel Premier Bond Fund Based on the Fund's Current Level of
Expenses. The Example Assumes That the Fund Earned an Annual Return of 5% over
the Periods Shown and That You Redeemed Your Shares at the End of Each Time
Period.

YEAR YEARS YEARS 10 YEARS
<S> <C> <C> <C> <C>
RIEL PREMIER BOND FUND $87 $271 $471 $1,049

</TABLE>

The example is hypothetical and for the purpose of comparing the Fund's expense
ratio with other mutual funds. It does not represent estimates of future
expenses or returns, either of which may be greater or less than the amounts
depicted.

Page No.: 23

<PAGE>

ARIEL PREMIER BOND FUND IN DEPTH

INVESTMENT OBJECTIVE

The Ariel Premier Bond Fund seeks to maximize total return in a bond portfolio
through a combination of interest income and capital appreciation.

INVESTMENT STRATEGY

Ariel Premier Bond Fund's Investment Sub-Adviser, Lincoln Capital Management
Company, considers three principal factors in managing the Fund's investments:

[SIDEBAR: THE PREMIER BOND FUND'S INVESTMENT ADVISER, ARIEL CAPITAL MANAGEMENT
HAS APPOINTED LINCOLN CAPITAL MANAGEMENT COMPANY TO ACT AS INVESTMENT
SUB-ADVISER. THUS, LINCOLN CAPITAL MAKES THE PREMIER BOND FUND'S DAY-TO-DAY
INVESTMENT DECISIONS WHILE ARIEL CAPITAL MANAGEMENT HANDLES THE FUND'S
ADMINISTRATION.]

- - the current level of and expected changes in interest rates;

- - the relative attractiveness of the different sectors of the bond market:
U.S. Treasury bonds or government agency bonds, mortgage-backed bonds,
asset-backed bonds, corporate bonds, and commercial paper; and

[SIDEBAR: THE BOND-ISSUING AGENCIES OF THE FEDERAL GOVERNMENT ARE THE FEDERAL
FARM CREDIT SYSTEM, THE STUDENT LOAN MARKETING ASSOCIATION, THE FEDERAL HOME
LOAN MORTGAGE ASSOCIATION, THE FEDERAL HOME LOAN BANK, THE FEDERAL NATIONAL
MORTGAGE ASSOCIATION AND THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION. ISSUERS
OF MORTGAGE-BACKED BONDS, PRIMARILY THE FEDERAL HOME LOAN MORTGAGE ASSOCIATION
AND THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, BUY UP MORTGAGES AND PACKAGE
THEM TOGETHER INTO BONDS, WHICH THEY SELL TO INVESTORS. THE MORTGAGES SECURE THE
BONDS AND THE MORTGAGE PAYMENTS FLOW THROUGH TO THE BONDHOLDERS. ASSET-BACKED
BONDS ARE SIMILARLY PACKAGED WITH OTHER ASSETS, RANGING FROM CREDIT-CARD
RECEIPTS TO AUTOMOBILE LOANS. COMMERCIAL PAPER FUNCTIONS AS A SHORT-TERM
CORPORATE BOND, WITH FULL PAYMENT DUE IN LESS THAN A YEAR.]

- Individual issue selection criteria.

Page No.: 24

<PAGE>

THE FUND'S INTEREST RATE STRATEGY

Lincoln Capital seeks to protect the value of the Fund's bonds from interest
rate increases--and capture the gain in value when interest rates fall--by
managing the Fund's average duration against that of the overall U.S. bond
market.

[SIDEBAR: DURATION MEASURES THE SENSITIVITY OF BOND PRICES TO CHANGES IN
PREVAILING INTEREST RATES. THE LONGER THE DURATION OF A BOND, THE LONGER IT WILL
TAKE TO REPAY THE PRINCIPAL AND INTEREST OBLIGATIONS AND THE MORE SENSITIVE IT
IS TO CHANGES IN PREVAILING INTEREST RATES.]

The duration of all the bonds in the Lehman Brothers Aggregate Index usually
averages about five years. The Fund's duration will normally vary up to one year
from the average: shorter than the market average if Lincoln Capital's analysis
indicates interest rates will rise and bond prices will fall, and longer than
the market average if the analysis indicates the opposite trend--that rates will
fall and bond prices will rise. The Fund may deviate up to two years from the
bond market's average duration although Lincoln Capital does not anticipate
extending that far except in the most extreme circumstances.

[SIDEBAR: THE FUND'S DURATION FIGURE REPRESENTS A WEIGHTED AVERAGE. EVERY BOND
THE FUND OWNS WILL NOT NECESSARILY HAVE THE SAME DURATION TO ACHIEVE A GIVEN
DURATION TARGET. HOWEVER, THE WEIGHTED AVERAGE OF ALL THE BONDS IN THE FUND
EQUALS THE DURATION TARGET. THAT MEANS SHORTENING OR LENGTHENING THE FUND'S
DURATION WILL ONLY REQUIRE THE PURCHASE AND SALE OF A RELATIVELY SMALL AMOUNT OF
BONDS.]

Lincoln Capital balances a combination of three key factors in its analysis of
the future course of interest rates:

LINCOLN CAPITAL EXPECTS... INTEREST RATES TO RISE/ INTEREST RATES TO FALL/
BOND PRICES TO FALL BOND PRICES TO RISE
<S> <C> <C>
1. Pace of economic activity growing economy slowing economy

2. U.S. monetary policy Federal Reserve raises Federal Reserve lowers
interest rates interest rates

3. Public's expectations for Rising inflation rate Stable or slowing inflation
inflation rate
</TABLE>

Page No.: 25
<PAGE>

SECTOR SELECTION

The difference in interest paid on bonds in various sectors remains fairly
constant. For example, when interest rates on Treasury bonds rise, rates on
corporate bonds will generally rise by a similar amount. But depending on
outside economic influences, investor sentiment, and the law of supply and
demand, a sector may deviate from the norm. This deviation may offer an
opportunity for the Fund to earn more than usual for bonds at a given level of
risk. As Lincoln Capital monitors the bond market, it compares the differences
in sector interest rates with historical levels in an effort to profit from
deviations.

INDIVIDUAL ISSUE SELECTION

When making investment decisions, Lincoln Capital examines the unique
characteristics of each security. These include credit quality, maturity, issue
structure and mortgage prepayment risks. Lincoln seeks to assure that the Fund
receives adequate compensation for the risk it is assuming; and, if possible,
they seek bonds that pay more than the prevailing rate of interest for the risks
they embody.

PRINCIPAL INVESTMENTS

The Fund may invest freely in U.S. Treasury bonds and bonds guaranteed by an
agency of the Federal government. In addition, the Fund may invest in
investment-grade corporate bonds and corporate paper, and mortgage and other
asset-backed bonds. All of these securities must be investment grade, with at
least 80% of them ranking in the three highest grades the rating agencies
assign.

[SIDEBAR: STANDARD & POOR'S RATES INVESTMENT-GRADE BONDS BBB OR HIGHER AND
MOODY'S BAA OR HIGHER. S&P'S THREE HIGHEST CATEGORIES ARE AAA, AA AND A, MOODY'S
ARE AAA, AA AND A.]

Page No.: 26
<PAGE>

FINANCIAL HIGHLIGHTS: ARIEL PREMIER BOND FUND

The table below provides the Ariel Premier Bond Fund's performance for the 1998
fiscal year. The information reflects financial results for a single share. The
total returns in the table represent the rate of return that an investor would
have earned on an investment in the Fund. The returns assume all income and
distributions earned were reinvested in the Fund. Ernst & Young LLP, the Fund's
Independent Auditors, has audited this information. The Fund's financial
statements are included in its Annual Report, which is available free of charge
by request.

ARIEL PREMIER BOND FUND

Year Ended September 30
- -------------------------------------------------------------------------------
1998 Feb. 1(a) to
Sep. 30, 1997
---------- --------------
<S> <C> <C>
Net asset value, beginning of period $10.29 $10.10
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.57 0.37
Net realized and unrealized gains (losses)
on investments 0.41 0.19
----- -----
Total from investment operation 0.98 0.56
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.57) (0.37)
Distributions from capital gains (0.07) ----
----- -----
Total distributions (0.64) (0.37)
----- -----
Net asset value, end of period $10.63 $10.29
----- -----
----- -----
Total Return 9.34% 5.73%(b)
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period, in thousands $1,779 $401
Ratio of expenses to average net assets 0.85% 0.85%(c)
Ratio of net investment income to average net assets 5.46% 5.60%(c)
Portfolio turnover rate 60% 218%

</TABLE>

(a)Commencement of operations
(b)Total return is not annualized
(c) Annualized

Page No.: 27

<PAGE>

HOW THE ARIEL FUNDS ARE ORGANIZED

The accompanying chart outlines the organizational structure of the Ariel Mutual
Funds [TK].

BOARD OF TRUSTEES

The Ariel Mutual Funds operate under the supervision of a Board of Trustees
responsible to each Fund's shareholders. The Trustees are:

- - Bert N. Mitchell, CPA
Chairman
Mitchell & Titus, LLP

HEADS NATION'S LARGEST MINORITY-OWNED ACCOUNTING FIRM; HOLDS B.B.A., M.B.A. AND
HONORARY DOCTORATE FROM THE BARUCH SCHOOL OF BUSINESS OF THE CITY UNIVERSITY OF
NEW YORK; SERVES ON BARUCH FACULTY; ACTIVE IN COMMUNITY AFFAIRS, PHILANTHROPY
AND POLITICS.

- - Mario L. Baeza, Esq.
Chairman and Chief Executive Officer
Latin American Equity Partners, L.P.

REGARDED AS AN EXPERT ON LATIN AMERICAN BUSINESS AND LEGAL ISSUES; HOLDS B.A.
FROM CORNELL UNIVERSITY, J.D. FROM HARVARD LAW SCHOOL

- - James W. Compton
President and Chief Executive Officer
Chicago Urban League

HEADS CHICAGO URBAN LEAGUE, WHICH HAS WORKED TO ELIMINATE RACIAL DISCRIMINATION
SINCE 1916; MEMBER OF THE BOARDS OF COMMONWEALTH EDISON AND UNICOM CORP.; HOLDS
B.A. FROM MOREHOUSE COLLEGE.

Page No.: 28

<PAGE>

- - William C. Dietrich, CPA

INDEPENDENT FINANCIAL CONSULTANT SPECIALIZING IN EARLY STAGE ENTREPRENEURIAL
COMPANIES; HOLDS B.A. FROM GEORGETOWN UNIVERSITY; SERVES ON BOARD OF SHALEM
INSTITUTE, AN INTERNATIONALLY KNOWN ECUMENICAL ORGANIZATION.

- - Royce N. Flippin, Jr.
President, Flippin Associates
formerly Director of Program Advancement, Massachusetts Institute of
Technology

HEADS BROAD-BASED CONSULTING ORGANIZATION PROVIDING STRATEGIC AND IMPLEMENTATION
SERVICES TO THE PUBLIC AND PRIVATE SECTORS; HOLDS B.A. FROM PRINCETON
UNIVERSITY, M.B.A. FROM HARVARD BUSINESS SCHOOL.

- - John G. Guffey, Jr.
Chair, Calvert Social Investments Foundation
Treasurer and Director, Silby, Guffey and Co., Inc.

TREASURER OF VENTURE CAPITAL FIRM SPECIALIZING IN THE HEALTHCARE AND
ENVIRONMENTAL INDUSTRIES; HOLDS B.S. FROM THE WHARTON SCHOOL; SERVES ON BOARDS
OF LOCAL AND NATIONAL NON-PROFIT INSTITUTIONS.

- - Mellody L. Hobson
Senior Vice President, Director of Marketing
Ariel Capital Management, Inc.

DIRECTOR OF MARKETING FOR ARIEL MUTUAL FUNDS; HOLDS B.A. FROM PRINCETON
UNIVERSITY; DIRECTOR OF CHICAGO PUBLIC LIBRARY AND CIVIC FEDERATION OF CHICAGO.

- - Christopher G. Kennedy
Executive Vice President and Director, Merchandise Mart Properties, Inc.

EXECUTIVE OF LEADING NATIONAL MANAGER OF COMMERCIAL REAL ESTATE; HOLDS B.A. FROM
BOSTON COLLEGE, M.B.A. FROM NORTHWESTERN UNIVERSITY; ACTIVE IN COMMUNITY
AFFAIRS.

Page No.: 29

<PAGE>

- - Eric T. McKissack, CFA
Vice Chairman and Co-Chief Investment Officer
Ariel Capital Management, Inc.

BACKGROUND DETAILED BELOW AS PORTFOLIO MANAGER OF ARIEL APPRECIATION FUND.

INVESTMENT ADVISERS

STOCK FUNDS

Ariel Capital Management, Inc. directly manages the investments of the Ariel
Fund and Ariel Appreciation Fund. Its investment management services included
buying and selling securities on behalf of the Ariel Stock Funds and conducting
the research that led to the purchase and sale decisions. It is located at 307
North Michigan Avenue, Suite 500, Chicago, IL 60601.

BOND FUND

Ariel Capital Management, Inc. is the investment adviser of the Ariel Premier
Bond Fund. With the approval of the Ariel Premier Bond Fund's Board of Trustees,
Ariel Capital Management has appointed Lincoln Capital Management Company to act
as Investment Sub-Adviser to the Ariel Premier Bond Fund. It buys and sells
securities for the Premier Bond Fund and conducts the research necessary to
maintain the portfolio.

PORTFOLIO MANAGERS

- - ARIEL FUND

JOHN W. ROGERS, JR., Chairman, President and Treasurer of Ariel Capital
Management, acts as Portfolio Manager of the Ariel Fund. Mr. Rogers founded
Ariel in 1983. He worked previously as a stockbroker for the investment banking
firm of William Blair & Co. and graduated from Princeton University. Mr. Rogers
currently serves as President

Page No.: 30

<PAGE>

of the Board of Commissioners of the Chicago Park District and Director of the
Chicago Urban League. He also sits on the boards of Bank One, Aon Corporation,
Burrell Communications Group and GATX Corp.

- - ARIEL APPRECIATION FUND

ERIC T. MCKISSACK, Chartered Financial Analyst, has managed the Ariel
Appreciation Fund since its inception. He is Vice Chair and Co-Chief Investment
Officer of Funds' Investment Adviser. Prior to joining Ariel in 1986, he worked
as a securities analyst for The First National Bank of Chicago. He holds degrees
from the Massachusetts Institute of Technology and the University of California
at Berkeley. Mr. McKissack sits on the Boards of the Investment Analyst Society
of Chicago and the Travelers and Immigrant Aid Society.

ARIEL PREMIER BOND FUND

Lincoln Capital Management manages the Premier Bond Fund through a committee
composed of five members:

TIMOTHY DOUBEK is a Principal in Portfolio Management at Lincoln Capital. He has
11 years investment experience. He is a Chartered Financial Analyst and holds a
Bachelor of Science degree from the University of Wisconsin and an M.B.A. from
the University of Michigan.

RICHARD W. KNEE is an Executive Vice President and Managing Director of the
firm. He has 18 years investment experience, 16 of them with Lincoln Capital. He
earned a Bachelors in Business Administration Degree from the University of
Notre Dame and an M.B.A. from the University of California at Berkeley.

Page No.: 31
<PAGE>

PETER KNEZ is a Research Principal. He holds a Ph.D. in finance from the Wharton
School of the University of Pennsylvania.

KENNETH R. MEYER is the President and Managing Director of the firm. He has 30
years of investment experience, 17 of them with Lincoln Capital. He holds a
Bachelor of Arts degree from the University of Notre Dame and an M.B.A. from the
Wharton School of the University of Pennsylvania. Mr. Meyer is a Director of
Irish Life of North America and serves on the Arts and Letters Council of the
University of Notre Dame and the Finance Council of the Archdiocese of Chicago.

RAY B. ZEMON is an Executive Vice President and Managing Director of the firm.
He has 22 years of investment experience, 17 of them with Lincoln Capital. He
earned a Bachelor of Science degree from Rensselaer Polytechnic Institute and an
M.B.A. from the University of Wisconsin.

ADMINISTRATION

ARIEL CAPITAL MANAGEMENT IS RESPONSIBLE FOR THE ADMINISTRATIVE SERVICES OF ALL
THE ARIEL MUTUAL FUNDS. THESE SERVICES INCLUDE:

- - Opening Fund accounts

- - Processing purchase and sales orders for Fund shares

- - Responding to shareholder requests for information on their accounts and on
the Ariel Mutual Funds in general

- - Preparing quarterly reports to shareholders on the Funds' strategies and
the progress of their investments

- - Preparing and distributing proxy materials to shareholders

- - Under a wholly owned subsidiary, Ariel Distributors, Inc., marketing shares
of the Funds through banks, brokers and other financial-service firms.

Page No.: 32

<PAGE>

Ariel Capital management has appointed an independent organization, SUNSTONE
FINANCIAL GROUP, INC., to perform the day-to-day fund administration and
services for the fund, and prepare reports for the Board of Trustees. INVESTORS
FIDUCIARY TRUST COMPANY is the Funds' transfer agent, fund accountant and
custodian. In this role, IFTC prices the shares of each Ariel Mutual Fund daily;
maintains the records of the Funds' shareholders; oversees the payment of
distributions to shareholders; and issues share certificates on request.

MANAGEMENT FEES FOR THE LAST FISCAL YEAR ENDED SEPTEMBER 30, 1998

STOCK FUNDS

Ariel Capital Management, Inc. was paid for its investment and administration
services for the Ariel Fund and Appreciation Fund at the annual rate of 0.65%
and 0.75% of average daily net assets, respectively.

BOND FUND

Ariel Capital Management, Inc. was paid as investment adviser at the annual rate
of 0.35% of average daily net assets of the Fund. For its administrative
services, it was paid 0.25% of average daily net assets of the Investor Class.

Lincoln Capital Management Company was paid by Ariel Capital Management (not the
Fund) for its services as sub-adviser at the annual rate of 0.23% of average
daily net assets.

YEAR 2000

Like all financial service providers, Ariel Capital Management, Inc., Ariel
Distributors, Inc., Lincoln Capital Management Company, the Sunstone Financial
Group and

Page No.: 33
<PAGE>

IFTC rely on computer systems that may not accommodate the transition from 1999
to the year 2000. Such a failure could negatively affect individual account
services as well as the handling of securities trades, payment of interest and
dividends, and pricing mutual fund shares. Although we cannot yet be certain
that Year 2000 transition problems will have no adverse impact, the Funds'
service providers are actively working on the necessary changes. These service
providers have informed the Funds that they expect that their computer systems
and those of the third parties with whom they regularly conduct business will be
adapted in time.

Page No.: 34
<PAGE>

MANAGING YOUR ARIEL ACCOUNT

HOW TO CONTACT ARIEL

BY PHONE

Call 1-800-29-ARIEL (1-800-292-7435) during normal business hours.

IN WRITING

Address all correspondence to:

Ariel Mutual Funds
P.O. Box 419121
Kansas City, MO 64141-6121

ON THE WEB: www.arielmutualfunds.com

CHOOSING YOUR ARIEL ACCOUNT

Ariel Mutual Funds come in the account formats described below:

ACCOUNT TYPE SPECIAL FEATURES ACCOUNT MINIMUMS
INITIAL INVESTMENT EACH SUBSEQUENT
INVESTMENT
<S> <C> <C> <C>
Regular $1,000 $50

Retirement Plan Accounts investment earnings grow $250 $50
tax deferred during your
working years

Automatic Investment regular, automatic investment none $50
direct from your bank account
to Ariel; available either monthly
or quarterly

</TABLE>

Please note:

- - You must return an original completed and signed application for every new
account you open, regardless of format.

- - We will charge your Automatic Investment account $10, plus any costs
incurred, any time a scheduled investment cannot be made because your bank
account has insufficient funds, and we reserve the right to close the
account after two successive incidents of insufficient funds.

Page No.: 35

<PAGE>

BUYING ARIEL MUTUAL FUND SHARES

CONTACT US AT TO ASSURE YOUR SECURITY
<S> <C> <C>
Automatic Investment Fill out the Automatic Investment
application in the prospectus.

By wire 1-800-29-ARIEL for complete details Provide our operator with your name
and social security number and the
name and address of the financial
institution wiring the money.

By mail Ariel Mutual Funds Make your check or money order payable
P.O. Box 419121 to Ariel Mutual Funds. Send it along the
Kansas City, MO 64141-6121 bottom of your most recent account
statement, or with a note that includes
the registered account name and the name
of the Fund you wish to invest in.

</TABLE>

Please note:

- - We calculate the number of shares you have purchased based on the net asset
value of shares next computed after we receive your order.

- - We can only process purchase orders in U.S. dollars in funds drawn from
U.S. banks.

- - We cannot accept cash, credit-card payments, or third-party checks, except
those payable to an existing shareholder.

- - We cannot send to you the proceeds from a redemption of shares that were
purchased by mail or through Automatic Investment until your purchase
check has cleared.

- - We will only issue share certificates if you request them at the time of
purchase.

Page No.: 36

<PAGE>

SELLING ARIEL FUND SHARES

<TABLE>
<CAPTION>
CONTACT US AT TO ASSURE YOUR SECURITY
<S> <C> <C>
Automatic withdrawal Ariel Mutual Funds Send us a letter with your account name
P.O. Box 419121 and minimum withdrawal of $100 number,
Kansas City, MO 64141-6121 the dollar amount you wish to receive with
each check and how often you wish to receive
checks (either monthly or quarterly).
NOTE: YOU MUST MAINTAIN A MINIMUM BALANCE OF $10,000.

By mail Ariel Mutual Funds Send us a letter with your account name
P.O. Box 419121 and number, the number of shares you wish
Kansas City, MO 64141-6121 to sell or the dollar amount you wish to receive and
where you wish us to send the check.

By phone 1-800-29-ARIEL Provide our operator with your name, social security
number and Ariel account number

By wire 1-800-29-ARIEL or Call or send us a letter with your account
Ariel Mutual Funds name and number, the number of shares you wish
P.O. Box 419121 to sell or the dollar amount you wish
Kansas City, MO 64141-6121 to receive.
NOTE: WE CAN ONLY WIRE THE SALE PROCEEDS TO
THE FINANCIAL INSTITUTION YOU DESIGNATED WHEN
BUYING SHARES. $10 WIRE CHARGE.

By Turtletalk 1-800-29-ARIEL
24 hours, 7 days
</TABLE>

Page No.: 37
<PAGE>

Please note:

- - You may sell all or any portion of your Ariel Stock Fund shares on any day
the New York Stock Exchange is open for business, and your Ariel Premier
Bond Fund shares on any day the New York Stock Exchange is open, plus
Columbus Day and Veterans' Day.

- - We redeem the Ariel shares at the net asset value of shares calculated at
the end of the business we receive your redemption order.

- - We normally send the proceeds of your redemption to you the next business
day, except, as noted, in the case of shares purchased by mail or through
Automatic Investment. If, however, we feel the sale may adversely affect
the operation of the Fund, we may take up to seven days to send your
proceeds.

- - We only honor telephone redemption orders up to $25,000 and we require a
signature for sales in excess of $25,000.

- - We only send proceeds of such sales to the registered address of the
account or we require a guarantee if you instruct us to make payment to
anyone other than the shareholder of record at the address on file for your
account.

- - The address must have been on file with us for no less than 60 days.

- - We require a signature guarantee for redemption in excess of $25,000.

- - We charge a $10 fee to process payment by wire.

- - To sell shares for which we have issued certificates, you must return the
endorsed certificates to us.

- - If a sale or transfer of shares reduces the value of your account below
$1,000, we reserve the right to close your account with 30 days notice.

- - Qualified dealers may charge a fee for processing a sale or purchase.

- - We reserve the right to pay redemptions in the Bond Fund in kind
(marketable portfolio securities).

Page No.: 38
<PAGE>

SHAREHOLDER SERVICES

CONFIRMING YOUR TRANSACTIONS

We will send you a written confirmation of every purchase and sale, including
automatic purchases and sales. Please check them to verify their accuracy.

SECURING YOUR TELEPHONE ORDERS

Ariel will take reasonable precautions to assure that your telephone
transactions are authentic, including tape-recording your instructions. We
cannot, however, be held liable for executing instructions we reasonably believe
are genuine.

EXCHANGING SHARES

You may exchange the shares of any Ariel Mutual Fund you own for shares of any
of the other Ariel Mutual Funds. Also you may exchange your shares for shares of
Cash Resource Trust Money Market Fund, Cash Resource Trust U.S. Government Money
Market Fund or Cash Resource Trust Tax-Exempt Money Market Fund. As long as you
meet the required minimums for each fund, you do not have to pay for the
exchange. You should read the prospectus for any new fund in which you invest.
You can obtain prospectuses by calling 1-800-29 ARIEL.

Bear in mind that:

- - Each exchange represents both a sale and a purchase of fund shares. You may
therefore incur a gain or loss for income tax purposes on any exchange.

- - Shares purchased by exchange must be registered in your current account
name with the same Social Security or taxpayer identification number.

- - Telephone exchanges may be made by any person other than the shareholder of
record--a broker, financial planner, or family member--who can provide the
proper information.

Page No.: 39

<PAGE>

- - You must allow at least 36 hours to make a second exchange between any one
pair of Ariel Mutual Funds.

Ariel Mutual Funds have the right to revoke or modify your exchange privilege
with 60 days written notice, or with no notice on evidence of disruptive or
excessive exchanging of shares.

CALCULATING THE FUNDS' SHARE PRICES

We calculate the price of Ariel Mutual Funds shares (also known as the "Net
Asset Value" or "NAV") in accordance with the standard formula for valuing
mutual-fund shares as of the close of regular trading on the New York Stock
Exchange every day the Exchange is open for business. The formula calls for
deducting all of a fund's liabilities from the total value of its assets--the
market value of the securities it holds, plus its cash reserves--and dividing
the result by the number of shares outstanding.

[SIDEBAR: THE EXCHANGE IS NORMALLY OPEN EVERY WEEK MONDAY THROUGH FRIDAY, EXCEPT
WHEN THE FOLLOWING HOLIDAYS ARE CELEBRATED: NEW YEAR'S DAY, MARTIN LUTHER KING,
JR. DAY (THE THIRD MONDAY IN JANUARY), PRESIDENTS' DAY (THE THIRD MONDAY IN
FEBRUARY), GOOD FRIDAY, MEMORIAL DAY (THE LAST MONDAY IN MAY), JULY 4TH, LABOR
DAY (THE FIRST MONDAY IN SEPTEMBER), THANKSGIVING DAY (THE FOURTH THURSDAY IN
NOVEMBER) AND CHRISTMAS DAY.]

We value the securities in the Funds at their reported market values if price
quotations are available. When price quotes for a particular security are not
readily available, we value the security at a value determined by or under the
direction of the Board of Trustees.

Page No.: 40

<PAGE>

PAYING OUT FUND EARNINGS

Each year, the Ariel Mutual Funds pay out all income (minus expenses) and
capital gains generated by the securities in their portfolios. Unless otherwise
instructed, we reinvest these distributions in additional shares at the share
price computed on the day of the distribution. You may, however, choose to have
dividends or capital gains distributions totaling more than $10 paid out in
cash. To do so, you must notify the Ariel Mutual Funds in writing 60 days prior
to the payment date.

PAYING TAXES ON YOUR ARIEL MUTUAL FUND EARNINGS

The tax status of your distributions from a Fund does not depend on whether you
reinvest them or take them in cash or does it depend on how long you have owned
your shares. Dividends and distributions of short-term capital gains are subject
to federal income tax as ordinary income. Different tax rates apply for
distributions of long-term capital gains.

If you sell shares that you have held for a year or longer, any gain or loss is
treated as a capital gain or loss. If you sell shares within on year after
purchase, any gain is treated as ordinary income; losses are subject to special
rules.

THE TAX LAWS ARE SUBJECT TO CHANGE. WE RECOMMEND CONSULTING YOUR TAX ADVISOR
ABOUT YOUR PARTICULAR TAX SITUATION UNDER THE CURRENT LAWS.

Page No.: 41

<PAGE>

BACK COVER

Additional information about the Ariel Mutual Funds' investments is available in
the Funds' annual and semi-annual reports to shareholders. In the Funds' annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected their performance during their last
fiscal year.

You can find more detailed information about the Ariel Mutual Funds in the
current Statements of Additional Information, dated February 1, 1999, which we
have filed electronically with the Securities and Exchange Commission (SEC) and
are incorporated by reference into this Prospectus. To receive your free copy of
a Statement of Additional Information, or any of the annual or semi-annual
reports, or if you have questions about investing in the Funds, write to us at:

ARIEL MUTUAL FUNDS
P.O. BOX 419121
KANSAS CITY, MO 64141-6121

or call our toll-free number: 1-800-29-ARIEL (1-800-292-7435)

or visit Ariel Mutual Funds' website:
www.arielmutualfunds.com

You can find reports and other information about the Funds on the SEC Website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Funds, including their
Statements of Additional Information, can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. For information on the Public
Reference Room, call the SEC at 1-800-SEC-0330.

Investment Company Act file 811-4786

Page No. 42

<PAGE>

Ariel Mutual Funds

BOND FUND
ARIEL PREMIER BOND FUND - INSTITUTIONAL CLASS

NO-LOAD MUTUAL FUND

PROSPECTUS

FEBRUARY 1, 1999

<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARIEL PREMIER BOND FUND--INSTITUTIONAL CLASS OVERVIEW.........................3

ARIEL PREMIER BOND FUND--INSTITUTIONAL CLASS IN DEPTH.........................8

FINANCIAL HIGHLIGHTS.........................................................11

HOW THE ARIEL PREMIER BOND--INSTITUTIONAL CLASS IS ORGANIZED.................12

MANAGING YOUR ARIEL ACCOUNT..................................................17
</TABLE>

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

ARIEL PREMIER BOND FUND--INSTITUTIONAL CLASS OVERVIEW

INVESTMENT OBJECTIVE

The Ariel Premier Bond Fund--Institutional Class seeks to maximize total return
through a combination of income and capital appreciation.

[SIDEBAR: A BOND'S TOTAL RETURN DERIVES FROM TWO SOURCES: FIRST, THE INTEREST
INCOME IT GENERATES IN A GIVEN PERIOD; AND SECOND, FROM CAPITAL APPRECIATION--AN
INCREASE IN THE PRICE OF THE BOND FROM THE BEGINNING TO THE END OF A GIVEN TIME
PERIOD. (AN INCREASE IN THE PRICE OF THE BOND ADDS TO TOTAL RETURNS, A DECREASE
REDUCES TOTAL RETURNS.) THE CALCULATIONS ASSUME THE REINVESTMENT OF ALL INTEREST
PAYMENTS AND CAPITAL APPRECIATION.]

PRINCIPAL INVESTMENT STRATEGY

The Ariel Premier Bond Fund--Institutional Class invests no less than 80% of its
assets in high-quality fixed-income securities for which a ready market exists.
If the securities are private-sector issues--corporate bonds, commercial paper
or bonds secured by assets such as home mortgages--they will have earned an "A"
rating or better from a nationally recognized statistical rating organization
such as Moody's Investors Service or the Standard & Poor's Corporation. We also
consider all bonds issued by the U.S. government and its agencies to be high
quality.

Page No.: 3
<PAGE>

PRINCIPAL INVESTMENT RISKS

Although the Fund's Investment Sub-Adviser, Lincoln Capital Management Company,
makes every effort to achieve the Fund's objective of maximizing total
investment returns, there can be no guarantee the Fund will attain its
objective. You could lose money on your purchase of shares in the Fund. The
table below lists some of the principal risks of investing in the Fund and the
measures the Fund's Investment Sub-Adviser takes in attempting to limit those
risks.

<TABLE>
<CAPTION>
RISKS HOW THE FUND TRIES TO MANAGE THEM
<S> <C>
- - Issuers of bonds held by the Fund cannot make - Only hold bonds with high credit ratings.
timely payment of either interest or principal
when they fall due.

- - Highly rated bonds are downgraded because of - Conduct independent evaluation of creditworthiness
issuer's financial problems. of the bonds and their issuers.

- - Bond prices decline because of an increase in - Actively manage Fund's average duration to maintain
interest rates. its value despite interest rate increases.
</TABLE>

WHO SHOULD CONSIDER INVESTING IN THE FUND--AND WHO SHOULD NOT

You should consider investing in the Fund if you are seeking current income and
capital appreciation. You should be willing to accept the short-term price
fluctuations, which have occurred from time to time. Traditionally these
fluctuations are less than those associated with stocks.

You should not consider investing in the Fund if you cannot tolerate moderate
short-term declines in share value or if you are seeking the higher returns
historically achieved by stocks.

Page No.: 4
<PAGE>

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table below can help you evaluate the potential risk and
rewards of investing in the Fund. They show changes in the Fund's performance
from year to year and how the Fund's average annual returns for one year and
since inception compare with those of a broad measure of market performance. The
bar chart shows the Fund's ACTUAL returns for 1998 and for each full calendar
year since it began operation in October 1, 1995. The table compares the Fund's
AVERAGE annual return with the returns of a relevant benchmark index, the Lehman
Brothers Aggregate Bond Index. Total return measures how much the prices of an
investment in a mutual fund change, assuming that all dividend, income and
capital gains distributions are reinvested. For any fund, you should evaluate
total return in light of the fund's particular investment objectives and
policies, as well as general market conditions during the reported time periods.

As is the case with indices, Lehman Brothers Aggregate Bond Index does not
represent the actual returns an investor might experience. It measures the bond
market's total return (the interest income it earns, plus or minus the price
change in a given period). It does not take into account the costs of buying and
selling securities or the fees related to managing a portfolio.

Page No.: 5
<PAGE>

ARIEL PREMIER BOND FUND
for each full calendar year since 1996

[BAR CHART]

<TABLE>

<S> <C> <C>
Best Quarter: Q2 1997 3.56%
Worst Quarter: Q1 1996 -2.51%

</TABLE>

Return for the fiscal quarter ended 12/31/98 was 0.24%. The inception date
for the Ariel Premier Bond Fund--Institutional Class is October 1, 1995.

Past returns do not provide any indication of the Fund's future performance.

<TABLE>
<CAPTION>
Ariel Premier Bond Fund
Annual Return
as of December 31, 1998

<S> <C> <C>
1 Year 3 Years
Ariel Premier Bond Fund 7.65% 6.62%
Lehman Brothers Aggregate Bond Index 8.69% 7.29%
</TABLE>

ANNUAL OPERATING EXPENSES FOR FISCAL YEAR ENDED SEPTEMBER 30, 1998
The table below shows the fees and expenses that you may pay if you buy and hold
shares in the Ariel Premier Bond Fund--Institutional Class. These expenses are
paid from the Fund's assets.

<TABLE>
<CAPTION>
Percentage of average
daily net assets of the Fund
<S> <C>
Management fee 0.45%
Distribution (12b-1) fees -0-
Other expenses -0-
Total annual operating expenses 0.45%
</TABLE>

Ariel Capital Management paid the Premier Bond Fund's other expenses.

Page No.: 6
<PAGE>

COST COMPARISON EXAMPLE

The example below illustrate the expenses you would have incurred on a
$1,000,000 investment in the Ariel Premier Bond Fund--Institutional Class
(minimum initial investment) based on its current level of expenses. The example
assumes that the Fund earned an annual return of 5% over the periods shown and
that you redeem your shares at the end of each time period.

1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Ariel Premier Bond Fund $4,602 $14,445 $25,203 $56,687
</TABLE>

Page No.: 7
<PAGE>

THE ARIEL PREMIER BOND FUND--INSTITUTIONAL CLASS IN DEPTH

INVESTMENT OBJECTIVE
The Ariel Premier Bond Fund--Institutional Class seeks to maximize total return
in a bond portfolio through a combination of interest income and capital
appreciation.

INVESTMENT STRATEGY
The Fund's Investment Sub-Adviser, Lincoln Capital Management Company, considers
three principal factors in managing the Fund's investments:

[SIDEBAR: THE PREMIER BOND FUND'S INVESTMENT ADVISER, ARIEL CAPITAL MANAGEMENT,
HAS APPOINTED LINCOLN CAPITAL MANAGEMENT COMPANY TO ACT AS INVESTMENT
SUB-ADVISER. THUS, LINCOLN CAPITAL MAKES THE PREMIER BOND FUND'S DAY-TO-DAY
INVESTMENT DECISIONS, SUBJECT TO THE FUND'S BOARD OF TRUSTEES, WHILE ARIEL
HANDLES THE FUND'S ADMINISTRATION.]

- - the current level of and expected changes in interest rates;
the relative attractiveness of the different sectors of the bond
market: U.S. Treasury bonds or government ency bonds, mortgage-backed
bonds, asset-backed bonds, corporate bonds, and commercial paper; and

- - Individual issue selection criteria.

Page No.: 8
<PAGE>

THE FUND'S INTEREST RATE STRATEGY
Lincoln Capital seeks to insulate the value of the Fund's bonds from interest
rate increases--and capture the gain in value when interest rates fall--by
managing the Fund's average duration against that of the overall U.S. bond
market.

[SIDEBAR: DURATION MEASURES THE SENSITIVITY OF BOND PRICES TO CHANGES IN
INTEREST RATES. THE LONGER THE DURATION OF A BOND, THE LONGER IT WILL TAKE TO
REPAY THE PRINCIPAL AND INTEREST OBLIGATIONS AND THE MORE SENSITIVE IT IS TO
CHANGES IN INTEREST RATES.]

The duration of all the bonds in the Lehman Brothers Aggregate Index usually
averages about five years. The Fund's duration will normally vary up to one year
from the average: shorter than the market average if Lincoln Capital's analysis
indicates interest rates will rise and bond prices will fall, and longer than
the market average if the analysis indicates the opposite trend--that rates will
fall and bond prices will rise. The Fund may deviate up to two years from the
bond market's average duration, although Lincoln Capital does not anticipate
extending that far except in the most extreme circumstances.

Lincoln Capital balances a combination of three key factors in its analysis of
the future course of interest rates:

<TABLE>
<CAPTION>
LINCOLN CAPITAL EXPECTS . . . INTEREST RATES TO RISE/ INTEREST RATES TO FALL/
BOND PRICES TO FALL BOND PRICES TO RISE
<S> <C> <C>
1. Pace of economic activity growing economy slowing economy
2. U.S. monetary policy Federal Reserve raises interest Federal Reserve lowers interest
rates rates
3. Public's expectations Rising inflation rate Stable or slowing inflation rate
for inflation
</TABLE>

Page No.: 9
<PAGE>

SECTOR SELECTION

The difference in interest paid on bonds in various sectors remains fairly
constant. For example when interest rates on Treasury bonds rise, rates on
corporate bonds will generally rise by a similar amount. But depending on
outside economic influences, investor sentiment, and the law of supply and
demand, a sector may deviate from the norm. This deviation may offer an
opportunity for the Fund to earn more than usual for bonds at a given level of
risk. As Lincoln Capital monitors the bond market, it compares differences in
sector interest rates with historical level in an effort to profit from
deviations.

INDIVIDUAL ISSUE SELECTION

PRINCIPAL INVESTMENTS

The Fund may invest freely in U.S. Treasury bonds and bonds guaranteed by an
agency of the Federal government. In addition, the Fund may invest in
investment-grade corporate bonds and corporate paper, and mortgage and other
asset-backed bonds. All of these securities must be investment grade; with at
least 80% of them ranking in the three highest grades rating these agencies
assign.

[SIDEBAR: STANDARD & POOR'S RATES INVESTMENT-GRADE BONDS BBB OR HIGHER AND
MOODY'S Baa OR HIGHER. S&P'S THREE HIGHEST CATEGORIES ARE AAA, AA AND A; MOODY'S
ARE Aaa, Aa AND A.]

Page No.: 10
<PAGE>

FINANCIAL HIGHLIGHTS: ARIEL PREMIER BOND FUND--INSTITUTIONAL CLASS

The table below provides the performance for the Ariel Premier Bond
Fund--Institutional Class for every fiscal year since its inception. The total
returns in the table represent the rate of return that an investor would have
earned on an investment in the Fund. The returns assume all income and
distributions earned were reinvested in the Fund. Ernst & Young LLP, the Fund's
Independent Auditors, has audited this information. The Fund's financial
statements are included in its Annual Report, which is available free of charge
by request.

<TABLE>
<CAPTION>
ARIEL PREMIER BOND FUND
October 1, 1997 October 1, 1996 October 1, 1995
To To To
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1996
<S> <C> <C> <C>
Net Asset Value, beginning of $10.30 $9.95 $10.00
Period
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.61 0.52 0.43
Net realized and unrealized gains 0.40 0.37 (0.04)
(losses) on investments
Total from investment operation 1.01 0.89 0.39
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment (0.61) (0.52) (0.43)
income
Distributions from capital gains (0.07) (0.02) (0.01)
Total distributions (0.68) (0.54) (0.44)
Net asset value, end of period $10.63 $10.30 $9.95)
Total Return 10.20% 9.26% 3.96%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period, in $149,977 $113,998 $15,367
thousands
Ratio of expenses to average net 0.45% 0.45% 0.48%
assets
Ratio of net investment income to 5.86% 6.05% 5.85%
average net assets
Portfolio turnover rate 60% 218% 423%
</TABLE>

Page No.: 11
<PAGE>

HOW THE ARIEL PREMIER BOND FUND--INSTITUTIONAL CLASS IS ORGANIZED

The accompanying chart outlines the organizational structure of the Ariel
Premier Bond--Institutional Class Fund [TK].

BOARD OF TRUSTEES
The Ariel Mutual Funds operate under the supervision of a Board of Trustees
responsible to each Fund's shareholders. The Trustees are:

- - Bert N. Mitchell, CPA
Chairman
Mitchell & Titus, LLP

- - Mario L. Baeza, Esq.
Chairman and Chief Executive Officer
Latin American Equity Partners, L.P.

REGARDED AS AN EXPERT ON LATIN AMERICAN BUSINESS AND LEGAL ISSUES; HOLDS B.A.
FROM CORNELL UNIVERSITY, J.D. FROM HARVARD LAW SCHOOL

- - James W. Compton
President and Chief Executive Officer
Chicago Urban League

HEADS CHICAGO URBAN LEAGUE, WHICH HAS WORKED TO ELIMINATE RACIAL DISCRIMINATION
SINCE 1916; MEMBER OF THE BOARDS OF COMMONWEALTH EDISON AND UNICOM CORP.; HOLDS
B.A. FROM MOREHOUSE COLLEGE.

- - William C. Dietrich, CPA

INDEPENDENT FINANCIAL CONSULTANT SPECIALIZING IN EARLY STAGE ENTREPRENEURIAL
COMPANIES,

Page No.: 12
<PAGE>

HOLDS B.A. FROM GEORGETOWN UNIVERSITY; SERVES ON BOARD OF SHALEM INSTITUTE, AN
INTERNATIONALLY KNOWN ECUMENICAL ORGANIZATION.

- - Royce N. Flippin, Jr.
President, Flippin Associates
Formerly Director of Program Advancement, Massachusetts Institute of
Technology

HEADS BROAD-BASED CONSULTING ORGANIZATION PROVIDING STRATEGIC AND IMPLEMENTATION
SERVICES TO THE PUBLIC AND PRIVATE SECTORS; HOLDS B.A. FROM PRINCETON
UNIVERSITY, M.B.A. FROM HARVARD BUSINESS SCHOOL.

- - John G. Guffey, Jr.
Chair, Calvert Social Investments Foundation
Treasurer and Director, Silby, Guffey and Co., Inc.

TREASURER OF VENTURE CAPITAL FIRM SPECIALIZING IN THE HEALTHCARE AND
ENVIRONMENTAL INDUSTRIES; HOLDS B.S. FROM THE WHARTON SCHOOL; SERVES ON BOARDS
OF LOCAL AND NATIONAL NON-PROFIT INSTITUTIONS.

- - Mellody L. Hobson
Senior Vice President, Director of Marketing
Ariel Capital Management, Inc.

DIRECTOR OF MARKETING FOR ARIEL MUTUAL FUNDS; HOLDS B.A. FROM PRINCETON
UNIVERSITY; DIRECTOR OF CHICAGO PUBLIC LIBRARY AND CIVIC FEDERATION OF CHICAGO.

- - Christopher G. Kennedy
Executive Vice President and Director
Merchandise Mart Properties, Inc.

EXECUTIVE OF NATIONAL MANAGER OF COMMERCIAL REAL ESTATE; HOLDS B.A. FROM BOSTON
COLLEGE, M.B.A. FROM NORTHWESTERN UNIVERSITY; ACTIVE IN COMMUNITY AFFAIRS.

- - Eric T. McKissack, CFA
Vice Chairman and Co-Chief Investment Officer
Ariel Capital Management, Inc.

HOLDS DEGREES FROM THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY AND THE UNIVERSITY
OF CALIFORNIA, BERKELEY, SITS ON BOARDS OF THE INVESTMENT ANALYST SOCIETY OF
CHICAGO AND THE TRAVELERS AND IMMIGRANT AID SOCIETY.

Page No.: 13
<PAGE>

INVESTMENT ADVISOR AND SUB-ADVISER

Ariel Capital Management, Inc., is the investment adviser of the Ariel Premier
Bond Fund--Institutional Class. It is located at 307 North Michigan Avenue,
Suite 500, Chicago, IL 60601. Ariel Capital Management Company has appointed
Lincoln Capital Management Company to act as Investment Sub-Adviser to the Ariel
Premier Bond Fund. Subject to Ariel Capital Management's oversight, Lincoln
Capital buys and sells securities for the Premier Bond Fund and conducts the
research necessary to maintain the portfolio. It is located at 200 South Wacker
Drive, Chicago, IL 60606.

PORTFOLIO MANAGER

Lincoln Capital Management manages the Fund through a committee composed of five
members:

RICHARD W. KNEE is an Executive Vice President and Managing Director of the
firm. He has 18 years investment experience 16 of them with Lincoln Capital. He
earned a Bachelor in Business Administration Degree from the University of Notre
Dame and a M.B.A. from the University of California at Berkeley.

Page No.: 14
<PAGE>

PETER KNEZ is a Research Principal. He holds a Ph.D. in finance from the Wharton
School of the University of Pennsylvania.

KENNETH R. MEYER is the President and Managing Director of the firm. He has 30
years of investment experience, 17 of them with Lincoln Capital. He holds a
Bachelor of Arts degree from the University of Notre Dame and a M.B.A. from the
Wharton School of the University of Pennsylvania. Mr. Meyer is a Director of
Irish Life of North America and serves on the Arts and Letters Council of the
University of Notre Dame and the Finance Council of the Archdiocese of Chicago.

ADMINISTRATION

Ariel Capital Management is responsible for the administrative services of the
Fund. These services include:

- - Opening Fund accounts

- - Processing purchase and sales orders for Fund shares

- - Responding to shareholder requests for information on their accounts and on
the Fund in general

- - Preparing quarterly reports to shareholders on the Fund's strategies and
the progress of its investments

- - Preparing and distributing proxy materials to shareholders

- - Under a wholly owned subsidiary, Ariel Distributors, Inc., marketing
shares of the Funds through banks, brokers and other financial-service
firms.

Ariel Capital Management has appointed an independent organization, the SUNSTONE
FINANCIAL GROUP, to perform the day-to-day FUND ADMINISTRATION AND ACCOUNTING
SERVICES and prepare reports for the Board of Trustees. INVESTORS FIDUCIARY
TRUST COMPANY as the Fund's TRANSFER AGENT and CUSTODIAN. In this dual role,
IFTC prices the shares of the Ariel Mutual Fund daily; maintains the records of
the Fund's shareholders; oversees the payment of distributions to shareholders;
and issues share certificates on request.

Page No.: 15
<PAGE>

MANAGEMENT FEES FOR THE LAST FISCAL YEAR ENDED SEPTEMBER 30, 1998

Ariel Capital Management, Inc. was paid as investment adviser at the annual rate
of 0.35% of average daily net assets. For its administrative services, it was
paid 0.10% of average daily net assets.

Lincoln Capital Management Inc. was paid by Ariel Capital Management (not the
Fund) for its services as subadviser at the annual rate of 0.23% of average
daily net assets.

YEAR 2000

Like all financial service providers, Ariel Capital Management, Lincoln Capital,
the Sunstone Financial Group and IFTC rely on computer systems that may not
accommodate the transition from 1999 to the year 2000. Such a failure could
negatively affect individual account services as well as the handling of
securities trades, payment of interest and dividends and pricing mutual fund
shares. Although we cannot yet be certain that Year 2000 transition problems
will have no adverse impact, the Fund's service providers are actively working
on the necessary changes. These service providers have informed the Fund that
they expect that their computer systems and those of the third parties with whom
they regularly conduct business will be adapted in time.

Page No.: 16
<PAGE>

MANAGING YOUR ARIEL ACCOUNT

HOW TO CONTACT ARIEL
BY PHONE
Call 1-800-29-ARIEL (1-800-292-7435) during normal business hours.

IN WRITING
Address all correspondence to:

Ariel Mutual Funds
P.O. Box 419121
Kansas City, MO 64141-6121

ON THE WEB: www.arielmutualfunds.com

MINIMUM INITIAL INVESTMENT

The minimum initial investment in the Institutional Class is $1,000,000.

<TABLE>
<CAPTION>
BUYING ARIEL MUTUAL FUND SHARES
CONTACT US AT TO ASSURE YOUR SECURITY
<S> <C> <C>
Through your financial
advisor
By wire 1-800-29-ARIEL for Provide our operator with your name and social
complete details security number and the name and address of the
financial institution wiring the money.
By mail Ariel Mutual Funds Make your check or money order payable to Ariel
P.O. Box 419121 Mutual Funds. Send it along with the bottom of your
Kansas City, MO most recent account statement, or with a note that
64141-6121 includes the registered account name and the name of
the Fund you wish to invest in.
</TABLE>

Page No.: 17
<PAGE>

Please note:

- - We calculate the number of shares you have purchased based on the net
asset value of shares next computed after we receive your order.

- - We can only process purchase orders in U.S. dollars in funds drawn from
U.S. banks.

- - We cannot accept cash, credit-card payments, or third-party
checks, except that payable to an existing shareholder.

- - You cannot sell the shares you haveWe cannot send to you the proceeds from
a redemption of shares that were purchased by mail or through Automatic
Investment until your purchase check has cleared.

- - We will only issue share certificates if you request them at the time of
purchase.

SELLING ARIEL FUND SHARES
<TABLE>
<CAPTION>

CONTACT US AT TO ASSURE YOUR SECURITY
<S> <C> <C>
Through your Financial
Advisor
By mail Ariel Mutual Funds Send us a letter with your account name and number,
P.O. Box 419121 the number of shares you wish to sell or the dollar
Kansas City, MO amount you wish to receive and where you wish us to
64141-6121 send the check.
By phone 1-800-29-ARIEL Provide our operator with your Ariel account number.
By wire 1-800-29-ARIEL or Call or send us a letter with your account name and
Ariel Mutual Funds number, the number of shares you wish to sell or the
P.O. Box 419121 dollar amount you wish to receive.
Kansas City, MO NOTE: WE CAN ONLY WIRE THE SALE PROCEEDS TO THE
64141-6121 FINANCIAL INSTITUTION YOU DESIGNATED WHEN BUYING
SHARES.
</TABLE>

Please note:

- - You may sell all or any portion of your Ariel Premier Bond Fund shares on
any day the New York Stock Exchange is open, plus Columbus Day and
Veterans' Day.

- - We redeem Ariel shares at the net asset value of shares next computed at
the end of the business day on which we receive your order.

- - We normally send the proceeds of your sale to you the next business day,
except, as noted, in the case of shares purchased by mail or through
Automatic Investment. If,

Page No.: 18
<PAGE>

however, we feel the sale may adversely affect the operation of the Fund,
we may take up to seven days to send your proceeds.

- - We only honor telephone sales orders up to $25,000.

- - We require a signature guarantee for sales in excess of $25,000.

- - We charge a $10 fee to process wire sales.

- - To sell shares, for which we have issued certificates, you must return the
endorsed certificates to us.

- - If a sale or transfer of shares reduces the value of your account below
$1,000,000, we reserve the right to close your account with 30 days notice.

- - Qualified dealers may charge a fee for processing a sale or purchase.

- - We reserve the right to pay redemptions in the Bond Fund in kind
(marketable portfolio securities).

SHAREHOLDER SERVICES
CONFIRMING YOUR TRANSACTIONS
We will send you a written confirmation of every purchase and sale, including
automatic purchases and sales. Please check them to verify their accuracy.

Page No.: 19
<PAGE>

SECURING YOUR TELEPHONE ORDERS
Ariel will take reasonable precautions to assure that your telephone
transactions are authentic, including tape-recording your instructions. We
cannot, however, be held liable for executing instructions we reasonably believe
are genuine.

EXCHANGING SHARES

Bear in mind that:

- - Each exchange represents both a sale and a purchase of fund shares. You
may therefore incur gain or loss for income tax purposes on any exchange.

- - Shares purchased by exchange must be registered in your current account
name with the same Social Security or taxpayer identification number.

- - Any person other than the shareholder of record such as a broker, financial
planner, or family member who can provide the proper information may make
telephone exchanges.

- - You must allow at least 36 hours to make a second exchange between any one
pair of Ariel Funds.

Page No.: 20
<PAGE>

Ariel Mutual Funds have the right to revoke or modify your exchange privilege
with 60 days written notice, or with no notice on evidence of disruptive or
excessive exchanging of shares.

CALCULATING THE FUND'S SHARE PRICES

We calculate the daily price of Ariel Mutual Funds shares (also known as the
"Net Asset Value" or "NAV") in accordance with the standard formula for valuing
mutual-fund shares as of the close of regular trading on the New York Stock
Exchange every day the Exchange is open for business. The formula calls for
deducting all of a fund's liabilities from the total value of its assets--the
market value of the securities it holds, plus its cash reserves--and dividing
the result by the number of shares outstanding.

Page No.: 21
<PAGE>

PAYING OUT FUND EARNINGS

Each year, the Ariel Mutual Funds pay out all income (minus expenses) and
capital gains generated by the securities in their portfolios. Unless otherwise
instructed, we reinvest these distributions in additional shares at the share
price computed on the day of the distribution. You may, however, choose to have
dividends or capital gain distributions totaling more than $10 paid out in cash.
To do so, you must notify the Ariel Premier Bond Fund--Institutional Class in
writing 60 days prior to the payment date.

PAYING TAXES ON YOUR FUND EARNINGS

The tax status of your distributions from a fund does not depend on whether you
reinvest them or take them in cash. Nor does it depend on how long you have
owned your shares. Dividends and distributions of short-term capital gains are
subject to federal tax as ordinary income. Different tax rates apply for
distributions of the long-term capital gains.

If you sell shares that you have held for a year or longer, any gains or loss is
treated as a capital gain or loss. If you sell shares within one year after
purchase, any gain is treated as ordinary income; losses are subject to special
rules.

THE TAX LAWS ARE SUBJECT TO CHANGE. WE RECOMMEND CONSULTING YOUR TAX
ADVISOR ABOUT YOUR PARTICULAR TAX SITUATION UNDER THE CURRENT LAWS.

Page No.: 22
<PAGE>

[BACK COVER]

You can find more detailed information about the Ariel Mutual Funds in the
current Statements of Additional Information, dated February 1, 1999, which we
have filed electronically with the Securities and Exchange Commission (SEC) and
which are incorporated by reference into this Prospectus. To receive your free
copy of a Statement of Additional Information, or any of the annual or
semi-annual reports, or if you have questions about investing in the Funds,
write to us at:
ARIEL MUTUAL FUNDS
P.O. BOX 419121
KANSAS CITY, MO 64141-6121

Or call our toll-free number: 1-800-29-ARIEL (1-800-292-7435)

or visit Ariel Mutual Funds' web site:
www.arielmutualfunds.com

Investment Company Act file number 811-4786

Page No.: 23
<PAGE>

THIS ARIEL INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION--FEBRUARY 1, 1999
ARIEL APPRECIATION FUND
AND ARIEL FUND

307 North Michigan Avenue
Suite 500
Chicago, Illinois 60601
1-800-29-ARIEL (1-800-292-7435)

Ariel Appreciation Fund ("Appreciation Fund") and Ariel Fund [("Ariel]
Fund") (collectively, the "Ariel Mutual Funds", the "Funds") are series of Ariel
Growth Fund, doing business as Ariel Investment Trust (the "Trust").

The Trust's audited financial statements included in the Annual Report to
Shareholders for the Funds dated September 30, 1998 are expressly incorporated
herein by reference and made a part of this Statement of Additional Information.
Copies of the Annual Report may be obtained free of charge by writing or calling
the Funds.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS BUT PROVIDES
INFORMATION THAT SHOULD BE READ IN CONJUNCTION WITH THE FUNDS' PROSPECTUS DATED
FEBRUARY 1, 1999 AND ANY SUPPLEMENT THERETO, WHICH MAY BE OBTAINED FREE OF
CHARGE BY WRITING OR CALLING THE FUNDS.

TABLE OF CONTENTS

<TABLE>
<S> <C>
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .2
INVESTMENT STRATEGIES AND RISKS. . . . . . . . . . . . . . . . . . . . . . .4
TOTAL RETURN AND OTHER PERFORMANCE INFORMATION . . . . . . . . . . . . . . .7
CALCULATION OF TOTAL RETURN. . . . . . . . . . . . . . . . . . . . . . . . .8
DIVIDENDS, CAPITAL GAINS AND TAXES . . . . . . . . . . . . . . . . . . . [8]
PURCHASING, EXCHANGING, AND REDEEMING SHARES . . . . . . . . . . . . . . . 11
PRICING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
INVESTMENT ADVISER AND SERVICES ADMINISTRATOR. . . . . . . . . . . . . . . 19
METHOD OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 21
TRANSFER AGENT AND CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . 22
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
COMPENSATION SCHEDULE. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SIGNIFICANT SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 26
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

</TABLE>

1
<PAGE>

GENERAL INFORMATION

The Ariel Fund and the Ariel Appreciation Fund are series of Ariel Growth
Fund (doing business as Ariel Investment Trust), an open-end, diversified
management investment company organized as a serial Massachusetts business trust
on April 1, 1986. The Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust. The shareholders of
a Massachusetts business trust might, however, under certain circumstances, be
held personally liable as partners for its obligations. The Declaration of Trust
provides for indemnification and reimbursement of expenses out of Trust assets
for any shareholder held personally liable for obligations of the Trust. The
Declaration of Trust further provides that the Trust may maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance) for
the protection of the Trust, its shareholders, trustees, officers, employees and
agents to cover possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance exists and the Trust
itself is unable to meet its obligations.

Each share of each series of the Trust represents an equal proportionate
interest in that series and is entitled to such dividends and distributions out
of the income belonging to such shares as declared by the Board. Upon any
liquidation of the Trust, shareholders are entitled to share pro rata in the net
assets belonging to that series available for distribution.

The Prospectus and this Statement of Additional Information do not contain
all the information in the Funds' registration statement. The registration
statement is on file with the Securities and Exchange Commission and is
available to the public.

INVESTMENT RESTRICTIONS

The Trust has adopted the following investment restrictions as fundamental
policies. These restrictions cannot be changed as to a Fund without the approval
of the holders of a majority of the outstanding shares of the Fund. As defined
in the Investment Company Act of 1940, this means the lesser of the vote of (a)
67% of the shares of the Fund at a meeting where more than 50% of the
outstanding shares are present in person or by proxy, or (b) more than 50% of
the outstanding shares of the Fund. Shares have equal rights as to voting.

A Fund may not:

(1) Purchase securities of any issuer (other than obligations issued, or
guaranteed by, the United States Government, its agencies or instrumentalities)
if, as a result, more than 5% of the value of the Fund's total assets would be
invested in securities of such issuer.

2
<PAGE>

(2) Concentrate more than 25% of the value of its total assets in any one
industry; provided, however, that there is no limitation with respect to
investments in obligations issued or guaranteed by the United States Government
or its agencies and instrumentalities.

(3) Purchase more than 10% of the outstanding voting securities of any
issuer.

(4) Make loans (other than loans of its portfolio securities, loans through
the purchase of money market instruments and repurchase agreements, or loans
through the purchase of bonds, debentures or other debt securities of the types
commonly offered privately and purchased by financial institutions). The
purchase of a portion of an issue of publicly distributed debt obligations shall
not constitute the making of loans. (See also "Additional Information about
Lending Securities and Repurchase Agreements -- Loans of Portfolio Securities.")

(5) Underwrite the securities of other issuers.

(6) Purchase securities which are subject to legal or contractual
restrictions on resale or for which there is no readily available market or
which are repurchase agreements not terminable within seven days if at the time
of purchase more than 5% of the Appreciation Fund's total assets or 10% of the
[Ariel] Fund's total assets would be so invested.

(7) Purchase from or sell to any of the Fund's officers or trustees, or
firms of which any of them are members, any securities (other than capital stock
of the Fund), but such persons or firms may act as brokers for the Fund for
customary commissions.

(8) Issue senior securities or borrow money, except from banks as a
temporary measure for extraordinary or emergency purposes and then only in an
amount up to 10% of the value of its total assets in order to meet redemption
requests without immediately selling portfolio securities. In order to secure
any such bank borrowings under this section, the Fund may pledge, mortgage or
hypothecate the Fund's assets and then in an amount not greater than 15% of the
value of its total assets. The Fund will not borrow for leverage purposes and
investment securities will not be purchased while any borrowings are
outstanding.

(9) Make short sales of securities, purchase any securities on margin, or
invest in warrants or commodities.

(10) Write, purchase or sell puts, calls, straddles or spreads, or
combinations thereof.

(11) Purchase or retain the securities of any issuer if any officer or
trustee of the Fund or its investment adviser owns beneficially more than 1/2 of
1% of the securities of such issuer and if together such individuals own more
than 5% of the securities of such issuer.

3
<PAGE>

(12) Invest for the purpose of exercising control or management of another
issuer.

(13) Invest in real estate or real estate limited partnerships, although it
may invest in securities which are secured by real estate or real estate
mortgages and may invest in the securities of issuers which invest or deal in
commodities, commodity futures, real estate or real estate mortgages.

(14) Invest in interests in oil, gas, or other mineral exploration or
development programs, although it may invest in securities of issuers which
invest in or sponsor such programs.

(15) Purchase the securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of assets.

(16) Purchase the securities of companies which have a record of less than
three years' continuous operation if, as a result, more than 5% of the value of
the Fund's assets would be invested in securities of such issuer.

(17) Engage in arbitrage transactions.

Restrictions apply as of the time of the transaction entered into by a Fund
without regard to later changes in the value of any portfolio security or the
assets of the Fund.

INVESTMENT STRATEGIES AND RISKS

Although there is no predetermined percentage of assets to be
invested in stocks, bonds, or money market instruments, each Stock Fund will
normally invest [its ]assets in equity securities. Such securities will
include common stocks, convertible debt securities and preferred stocks.
[On occasion, however, the]Funds may invest [in ]debt obligations or
fixed-income obligations, such as money market instruments. Securities may be
purchased subject to repurchase agreements with recognized securities dealers
and banks.

DEBT OBLIGATIONS

Debt obligations in which the Funds may invest may be long-term,
intermediate-term, short-term or any combination thereof, depending on the
Adviser's evaluation of current and anticipated market patterns and trends.
Such debt obligations

4
<PAGE>

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 Stock
Fund is downgraded below the lowest permissible grade, the Stock 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 Stock Fund will not
purchase or, if downgraded, continue to hold debt obligations rated below the
lowest permissible grade if more than 5% of such Stock 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).

THE FUNDS MAY LEND THEIR PORTFOLIO SECURITIES.

Securities of a Fund may be loaned to member firms of the New York Stock
Exchange and commercial banks with assets of one billion dollars or more. Any
such loans must be secured continuously in the form of cash or cash equivalents,
such as U.S. Treasury bills. The amount of the collateral must, on a current
basis, equal or exceed the market value of the loaned securities, and the loan
must be terminable upon notice, at any time. The Trust will exercise its right
to terminate a securities loan in order to preserve its right to vote upon
matters of importance affecting holders of the securities. A Fund may make a
securities loan if the value of the securities loaned from the Fund will not
exceed 10% of the Fund's assets. However, as a matter of non-fundamental policy,
such loan is not made if it would cause more than 5% of net assets of a Fund to
be subject to such loans.

The advantage of such loans would be that the Fund continues to receive the
equivalent of the interest earned or dividends paid by the issuer on the loaned
securities while at the same time earning interest on the cash or equivalent
collateral.

Securities loans would be made to broker-dealers and other financial
institutions to facilitate their deliveries of such securities. As with any
extension of credit there may be risks of delay in recovery and possibly loss of
rights in the loaned securities should the borrower of the loaned securities
fail financially. However, loans will be made only to those firms that Ariel
Capital Management, Inc. (the "Adviser") deems creditworthy and only on such
terms as the Adviser believes should compensate for such risk. On termination of
the loan the borrower is obligated to return the securities to the Fund; any

5
<PAGE>

gain or loss in the market value of the security during the loan period will
inure to the Fund. Custodial fees may be paid in connection with the loan.

BORROWING

The Funds 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.

[LLIQUID SECURITIES]

[The] Funds will not purchase illiquid securities if such a purchase would
cause more than 10% of the [Ariel] Fund's total assets, or 5% of the
Appreciation Fund's total assets, to be invested in such securities.

REPURCHASE AGREEMENTS

A Fund may purchase securities subject to repurchase agreements. Repurchase
agreements are transactions in which a person purchases a security and
simultaneously commits to resell that security to the seller at a mutually
agreed upon time and price. The seller's obligation is secured by the underlying
security. The repurchase price reflects the initial purchase price plus an
agreed upon market rate of interest. While the underlying security may bear a
maturity in excess of one year, the term of the repurchase agreement is always
less than one year. Repurchase agreements not terminable within seven days will
be limited to no more than 5% of a Fund's assets. Repurchase agreements are
short-term money market investments, designed to generate current income.

A Fund will only engage in repurchase agreements with recognized securities
dealers and banks determined to present minimal credit risk by the Adviser.

A Fund will only engage in repurchase agreements reasonably designed to
secure fully, during the term of the agreement, the seller's obligation to
repurchase the underlying security and will monitor the market value of the
underlying security during the term of the agreement. If the value of the
underlying security declines and is not at least equal to the repurchase price
due to the Fund pursuant to the agreement, the Fund will require the seller to
pledge additional securities or cash to secure the seller's obligations pursuant
to the agreement. If the seller defaults on its obligation to repurchase and the
value of the underlying security declines, the Fund may incur a loss and may
incur expenses in selling the underlying security.

INVESTMENT DIVERSIFICATION AND CONCENTRATION

The Funds will not purchase the security of any issuer (other than cash
tems or U.S. Government Securities) if such purchase would cause a Stock Fund's
holdings of that issuer to amount to more than 5% of the Fund's total assets at
the time of purchase.

The Funds will not concentrate 25% or more of their respective total assets
in any one industry. U.S. Government Securities are not subject to this
[limitation.

6
<PAGE>

TOTAL]

RETURN AND OTHER PERFORMANCE INFORMATION

The Funds may advertise total return which are based on historical results
and are not intended to indicate future performance.

TOTAL RETURN. A total return is a change in the value of an investment
during the stated period, assuming all dividends and capital gain distributions
are reinvested. A cumulative total return reflects performance over a stated
period of time. An average annual total return is the hypothetical annual
compounded return that would have produced the same cumulative total return if
the performance had been constant over the entire period. Because average
annual returns tend to smooth out variations in the returns, you should
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.

The Funds also may provide current distribution information to their
shareholders in shareholder reports or other shareholder communications or in
certain types of sales literature provided to prospective investors. Current
distribution information for the Funds will be based on distributions for a
specified period (i.e., total dividends from net investment income), divided by
the net asset value per share on the last day of the period and annualized.
Current distribution rates differ from standardized yield rates in that they
represent what a Fund has declared and paid to shareholders as of the end of a
specified period rather than a Fund's actual net investment income for that
period.

Performance information for the Funds may be compared to the S&P 500 and
the Russell 2500. In addition, performance of each of the Funds may be compared
to indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies or investment
advisers. Unmanaged indices (i.e., other than Lipper) generally do not reflect
deductions for administrative and management costs and expenses. Any
performance information should be considered in light of each Fund's investment
objectives and policies, characteristics and quality of the portfolio and the
market conditions during the time period indicated, and should not be considered
to be representative of what may be achieved in the future.

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.

7
<PAGE>

CALCULATION OF TOTAL RETURN

Average annual total return is computed according to the following formula:

n
P(1 + T) = ERV

where P = the amount of an assumed initial investment in shares of a Fund (less
the maximum sales charge, if any, during the period); T = average annual total
return; n = the number of years from initial investment to the end of the
period; and ERV = the ending redeemable value of shares held at the end of the
period.

Average Annual total return for each of the Fund's shares for the periods
indicated are as follows:

APPRECIATION FUND

Periods Ended September 30, 1998 Average Annual Total Return
- -------------------------------------- ----------------------------
<S> <C>
One year 3.4%
Five years 15.1%
From inception (December 1, 1989) 13.4%

<CAPTION>
[ARIEL] FUND

Periods Ended September 30, 1998 Average Annual Total Return
- -------------------------------------- ----------------------------
<S> <C>
One year < 3.8 >%
Five years 13.2%
Ten years 11.8%
From inception (November 6, 1986) 13.9%

</TABLE>

Total return may be advertised for other periods, such as by quarter, or
cumulatively for more than one year.

Total return, like net asset value per share, fluctuates in response to
changes in market conditions. Performance for any particular time period is
historical in nature and is not intended and should not be considered to be an
indication of future return.

DIVIDENDS, CAPITAL GAINS AND TAXES

The tax discussion in this section is not intended as a complete or
definitive discussion of the tax effects of investment in the Funds. Each
investor should consult his or her own tax adviser regarding the effect of
federal, state and local taxes related to ownership, exchange or sale of Fund
shares.

8
<PAGE>

Each year, the Funds distribute substantially all of their net investment
income and capital gains to shareholders.

The Funds intend to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, as amended (the "Code"). As such,
the Funds generally will not pay Federal income tax on the income and gains they
pay as dividends to their shareholders. In order to avoid a 4% Federal excise
tax, the Funds intend to distribute each year substantially all of their net
income and gains.

Dividends from net investment income are declared and paid annually. Net
investment income consists of the interest income, net short-term capital gains,
if any, and dividends declared and received on investments, less expenses.
Distributions of net short-term capital gains (treated as dividends for tax
purposes) and net long-term capital gains, if any, are normally declared and
paid by the Funds once a year.

DIVIDEND AND DISTRIBUTION PAYMENT OPTIONS

Dividends and any distributions from the Funds are automatically reinvested
in the Funds at net asset value, unless you elect to have the dividends of $10
or more paid in cash. 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.

TAXES ON DISTRIBUTIONS

Distributions are subject to federal income tax, and may also be subject to
state or local taxes. Distributions are taxable when they are paid, whether
they are received in cash, or reinvested. However, distributions declared in
December and paid in January are taxable as if they were paid on December 31 [of
the year they were declared]. For federal tax purposes, the Funds' income and
short-term capital gain distributions are taxed as dividends; long-term capital
gain distributions are taxed as long-term capital gains. Some dividends may be
exempt from state or local income tax as income derived from U.S. Government
Securities. You should consult your tax adviser on the taxability of your
distributions.

"BUYING A DIVIDEND"

At the time of purchase, the share price of a Fund may reflect
undistributed income or capital gains. Any income or capital gains from these
amounts which are later distributed to you are fully taxable. On the record
date of a distribution, the 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.

9
<PAGE>

YOU MAY REALIZE A CAPITAL GAIN OR LOSS WHEN YOU SELL OR EXCHANGE SHARES.

If you sell your shares or exchange them for shares of another fund, you
will have a short or long-term capital gain or loss, depending on how long
you owned the shares which were sold or exchanged. However, the Trust
believes that an exchange between classes of the same fund are non-taxable.
In January, you will be sent a form indicating the proceeds from all sales,
including exchanges. You should keep your annual year-end account statements
to determine the cost (basis) of the shares to report on your tax returns.

The Trust is required to withhold 31% of any dividends (including long-term
capital gain dividends) paid and 31% of each redemption transaction, if: (a) the
shareholder's social security number or other taxpayer identification number
("TIN") is not provided or an obviously incorrect TIN is provided; (b) the
shareholder does not certify under penalties of perjury that the TIN provided is
the shareholder's correct TIN and that the shareholder is not subject to backup
withholding under section 3406(a)(1)(C) of the Internal Revenue Code because of
under reporting (however, failure to provide certification as to the application
of section 3406(a)(1)(C) will result only in backup withholding on dividends,
not on redemptions); or (c) the Fund is notified by the Internal Revenue Service
that the TIN provided by the shareholder is incorrect or that there has been
under reporting of interest or dividends by the shareholder. Affected
shareholders will receive statements at least annually specifying the amount
withheld.

In addition, the Trust is required under the broker reporting provisions of
the Code to report to the Internal Revenue Service the following information
with respect to each redemption transaction: (a) the shareholder's name,
address, account number and taxpayer identification number; (b) the total dollar
value of the redemptions; and (c) each Fund's identifying CUSIP number.

Certain shareholders are, however, exempt from the backup withholding and
broker reporting requirements. Exempt shareholders include: corporations;
financial institutions; tax-exempt organizations; individual retirement plans;
the U.S., a State, the District of Columbia, a U.S. possession, a foreign
government, an international organization, or any political subdivision, agency
or instrumentality of any of the foregoing; U.S. registered commodities or
securities dealers; real estate investment trusts; registered investment
companies; bank common trust funds; certain charitable trusts; foreign central
banks of issue. Non-resident aliens also are generally not subject to either
requirement but, along with certain foreign partnerships and foreign
corporations, may instead be subject to withholding under Section 1441 of the
Code. Shareholders claiming exemption from backup withholding and broker
reporting should call or write the Trust for further information.

The Trust intends to operate each Fund to qualify as a "regulated
investment company" under Subchapter M of the Code. By so qualifying, a Fund
will not be subject to federal income taxes to the extent its earnings are
distributed. The Trust also intends to

10
<PAGE>

manage the Funds so they are not subject to the excise tax imposed by the Tax
Reform Act of 1986 (the "Act").

PURCHASING, EXCHANGING, AND REDEEMING SHARES

INITIAL PURCHASES

The minimum initial investment for each of the Funds is $1,000, or $250 for
retirement accounts, unless you participate in an automatic investment plan, in
which case there is a $50 minimum per investment.

A completed and signed application is required for each new account you
open, regardless of the method you choose for making your initial investment. An
account application accompanies the Prospectus. Additional forms may be
required from corporations, associations and certain financial institutions. If
you have any questions or need additional applications, call 1-800-29-ARIEL
(1-800-292-7435).

BY MAIL

To purchase shares by mail, please make your check payable to ARIEL MUTUAL
FUNDS and mail it with an application, indicating which of the Ariel Mutual
Funds you would like to buy, to:

Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121

All purchases made by check should be in U.S. dollars and made payable to
the ARIEL MUTUAL FUNDS. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards, and cash will not be accepted. When purchases are
made by check or periodic automatic investment, [proceeds from the redemption
of such shares will not be sent to you until the purchase check has cleared,
which normally takes] 15 calendar days.

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, the amount of your investment, the name of the Ariel
Mutual Fund in which you wish to invest as well as the name and address of the
financial institution that will be wiring your investment to the Fund. We will
immediately give you an[

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]account number and you may 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 Mutual Fund(s) and the class 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.

BY QUALIFIED DEALER

Shares of the Funds may be purchased directly from the Ariel Mutual Funds
or through certain financial institutions, brokers or dealers which have a sales
agreement with Ariel Distributors, Inc. ("Qualified Dealer"). Shares purchased
through a Qualified Dealer may be subject to administrative charges or
transaction fees.

SUBSEQUENT PURCHASES

You may make subsequent investments in the minimum amount of $50. To
invest directly by bank wire, follow the instructions as shown above for initial
investments, except that there is no need to call us first. Just contact your
financial institution.

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 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 64141-6124

AUTOMATIC INVESTING THROUGH YOUR BANK

You may arrange for automatic investing whereby the Custodian[, IFTC,] will
be authorized to initiate a debit to your bank account of a specific amount
(minimum $50) to be used to purchase shares of the [Fund(s)] on a monthly or
quarterly basis.

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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 reserve the right to close your account. See "Redeeming
Shares - Other Information About Redemptions." If you desire to utilize this
automatic investment option, please indicate your intention to do so on the
application included with the Prospectus.

Please note that each time an automatic investment is rejected, you will be
charged a $10 fee plus any costs incurred by the Funds. After two successive
attempts to purchase funds through the automatic investment program have been
rejected, your account will be removed from this program.

PURCHASING THROUGH RETIREMENT PLANS

Contact the Adviser for complete information kits discussing the plans
and their benefits, provisions and fees.

You may establish your new account under one of several tax-deferred
plans. These plans let you invest for retirement and shelter your investment
income from current taxes. Before opening a retirement account, consult your
tax advisory to determine which options are best suited to your needs.

- Individual Retirement Accounts (IRAs): available to anyone who has earned
income. Earnings grow on a tax-deferred basis and contributions may be
fully or partially deductible for certain individuals. You may also be
able to make investments in the name of your spouse, if your spouse has no
earned income.

- Roth IRAs: available to anyone who has earned income below a certain
limit. Earnings grow tax-deferred and can be withdrawn tax-free at
retirement if underlying contributions are held for at least five years.

- Education IRAs: available to families with children under 18 to help pay
for qualified higher education expenses. Certain income limits apply.

-Savings Incentive Match Plan for Employees (SIMPLE): available as an IRA
for each employee. May be adopted by employers having no other plan and
employing 100 or fewer employees earning at least $5,000 in compensation
during the previous year.

- Qualified Profit-Sharing and Money-Purchase 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.

- 403(b)(7) Custodial Accounts: available to employees of most non-profit
organizations and public schools and universities.

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<PAGE>

WHEN YOUR ACCOUNT WILL BE CREDITED

Your purchase will be processed at the next offering price based on the net
asset value next calculated after your order is received and accepted. Such
calculation is made at the close of regular session trading on the New York
Stock Exchange, which is usually 3:00 p.m. Central time. All your purchases
must be made in U.S. dollars and checks must be drawn on U.S. banks. No cash
will be accepted. The Funds reserve the right to suspend the offering of shares
for a period of time or to reject any specific purchase order. If your check
does not clear, or your automatic investment is rejected, your purchase will be
canceled 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 up to 15
calendar days from the purchase date). 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.

OTHER INFORMATION ABOUT PURCHASING SHARES

Although there is no sales charge imposed by the Funds when you purchase
shares directly, certain Qualified Dealers 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.

HOW TO EXCHANGE SHARES

You may exchange your shares in each Fund for shares of the [Ariel Premier]
Bond Fund or for shares in each of the other Ariel Mutual Funds at no additional
charge as long as your total investment in each class or Fund meets the minimum
investment required for that class or Fund.

You may also exchange your shares in any Ariel Mutual Fund for shares of
Cash Resource Trust Money Market Fund, Cash Resource Trust U.S. Government
Money Market Fund or Cash Resource Trust Tax-Exempt Money Market Fund
(collectively, the "Cash Resource Trust Funds") at no additional charge as
long as your total investment meets any required minimum. This exchange
privilege is a convenient way to buy shares in a money market fund in order
to respond to changes in your goals or in market conditions. These money
market funds are managed by Commonwealth Advisors, Inc.

Before exchanging your shares into shares of the Bond Fund's
Institutional Class or shares of any Cash Resource Trust Fund, read the
applicable prospectus. To obtain a prospectus for any of these funds, call
1-800-29-ARIEL (1-800-292-7435).

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<PAGE>

BY MAIL

To exchange your shares of a Fund into shares of one of the other Ariel
Mutual Funds or Cash Resource Trust Funds, 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 Ariel Mutual Fund or Cash Resource Trust 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.

BY TELEPHONE

Unless you have elected not to have telephone transaction privileges by
checking the appropriate 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."

Other Information about Exchanging Shares. 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 Mutual 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. See
also "Dividends, Capital Gains and Taxes."

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 at least 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 a Fund receives
or anticipates simultaneous orders affecting significant portions of the Fund's
assets. In particular, a pattern of exchanges with a "market timer" strategy
may be disruptive to the Funds.

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<PAGE>

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"
and for signature guarantee instructions see "Signature Guarantees."

Telephone Transactions. If you have telephone transaction privileges, you
may redeem, or exchange shares or wire funds by telephone as described in this
Statement of Additional Information. You automatically have telephone
privileges unless you elect otherwise. These privileges, however, may not be
available through certain Qualified Dealers or other financial institutions. By
exercising the telephone privilege to sell or exchange shares, you agree that
the Funds shall not be liable for following telephone instructions reasonably
believed to be genuine. Reasonable procedures will be employed to confirm that
such instructions are genuine and, if not employed, the Funds may be liable for
unauthorized instructions. 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. Due to the need for signature guarantees,
telephone redemptions in excess of $25,000 will not be accepted.

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 SIGNATURE GUARANTEES. For our mutual protection, we may
require a signature guarantee on certain transaction requests. A signature
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 Qualified [Dealer] or other financial institution, you should read
the program materials in conjunction with this Statement of Additional
Information. Certain features may be modified in these programs, and
administrative charges may be imposed by these institutions for the services
rendered.

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<PAGE>

HOW TO REDEEM 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 the Transfer Agent[, IFTC,] 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, they must be returned duly endorsed or
accompanied by a separate stock assignment. See "Signature Guarantees." See
"Telephone Transactions" for more information.

BY TELEPHONE. Unless you have elected not to have telephone transaction
privileges by checking the box on 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. See "Telephone
Transactions" for more information.

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.

17
<PAGE>

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 normally imposed on wire
redemptions. See the restrictions under "Telephone Transactions" as they also
apply to wire redemptions.

SYSTEMATIC CHECK REDEMPTIONS. If you maintain an account with a balance of
$10,000 or more, you may have regular monthly or quarterly redemption 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
would like checks regularly mailed to another person or place, the signature on
your letter must be guaranteed. See "Signature Guarantees."

OTHER INFORMATION ABOUT REDEMPTIONS

Other than the $10 fee normally imposed on wire redemptions, there is no
charge for redeeming your shares. If, however, you redeem shares through
Qualified Dealers or other financial institutions, you may be charged a fee when
you redeem your shares.

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 (3:00 Central time) 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 ACCOUNT BALANCE IS $1,000. Please maintain a balance in your
account of at least $1,000. If, due to shareholder redemptions, the value of
your account in a Fund falls below $1,000, or you fail to invest at least
$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.
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<PAGE>

PRICING SHARES

NET ASSET VALUE

The net asset value per share of a Fund, the price at which the Fund's
shares are purchased and redeemed, is determined every business day as of the
close of the New York Stock Exchange (generally 3:00 p.m., Central time), and at
such other times as may be necessary or appropriate. The Funds do not determine
net asset value on certain national holidays or other days on which the New York
Stock Exchange is closed: New Year's Day, Martin Luther King Jr.'s Birthday,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

Stocks and other assets are valued based on market quotations.
Fixed-income securities, including those to be purchased under firm commitment
agreements (other than obligations having a maturity of 60 days or less), are
normally valued on the basis of quotes obtained from brokers and dealers or
pricing services. Short-term investments having a maturity of 60 days or less
are valued at amortized cost, unless the Board of Trustees determines that such
method is not appropriate under specific circumstances. Assets for which there
are no quotations available will be valued at fair value as determined by the
Board of Trustees.

The net asset value per share is computed by dividing the value of a Fund's
total assets, less its liabilities, by the total number of shares outstanding.
The Funds' securities are valued as follows: (a) securities for which market
quotations are readily available are valued at the most recent closing price.
All other securities for which reliable bid quotations are available are valued
at the mean between the bid and asked price, or yield equivalent as obtained
from one or more market makers for such securities; (b) securities maturing
within 60 days are valued at cost, plus or minus any amortized discount or
premium, unless the Board of Trustees determines such method not to be
appropriate under the circumstances; and (c) all other securities and assets for
which market quotations are not readily available are fairly valued by the
Adviser in good faith under the supervision of the Board of Trustees.

INVESTMENT ADVISER AND SERVICES ADMINISTRATOR

Ariel Capital Management, Inc. (the "Adviser"), 307 North Michigan Avenue,
Suite 500, Chicago, Illinois 60601, which is controlled by John W. Rogers, Jr.,
acts as investment adviser and services administrator under a management
agreement with the Trust ("Management Agreement") for the Funds.

19
<PAGE>

The Management Agreement between the Trust and the Adviser will remain in
effect as to a Fund indefinitely, provided continuance is approved at least
annually by vote of the holders of a majority of the outstanding shares of the
Fund or by the Board of Trustees of the Trust; and further provided that such
continuance is also approved annually by the vote of a majority of the Trustees
of the Trust who are not parties to the Agreement or interested persons of
parties to the Agreement or interested persons of such parties, cast in person
at a meeting called for the purpose of voting on such approval. The Management
Agreement may be terminated without penalty by the Trust or the Adviser upon 60
days' prior written notice; it automatically terminates in the event of its
assignment.

Pursuant to the Management Agreement, the Adviser is responsible for
determining the investment selections for a Fund in accordance with the Fund's
investment objectives and policies stated above, subject to the direction and
control of the Board of Trustees. The Adviser pays the salaries and fees of all
officers and Trustees who are affiliated persons of the Adviser. The Adviser
also provides the Funds with office space, administrative services, furnishes
executive and other personnel to the Funds and is responsible for providing or
overseeing the Funds' day-to-day management and administration.

The Funds pay all operating expenses not expressly assumed by the Adviser,
including custodial and transfer agency fees, federal and state securities
registration fees, legal and audit fees, and brokerage commissions and other
costs associated with the purchase and sale of portfolio securities, except that
the Adviser must reimburse a Fund if its annual expenses (excluding brokerage,
taxes, interest, Distribution Plan expenses and extraordinary items) exceed
1.50% of the first $30 million of each Fund's average daily net assets and 1% of
such assets in excess of $30 million.

Fees paid to the Adviser for the fiscal year ended September 30, 1997 were
$1,151,445 for the Appreciation Fund and $838,232 for the [Ariel] Fund. No
reimbursements were made by the Adviser for the fiscal year.

Fees paid to the Adviser for the fiscal year ended September 30, 1998 were
$1,637,377 for the Appreciation Fund and $1,159,454 for the [Ariel] Fund. No
reimbursements were made by the Adviser for the fiscal year.

The Adviser has entered into an agreement with Sunstone Financial Group,
Inc. ("Sunstone") under which Sunstone provides certain administrative services
to the Funds. Under the direction and supervision of the Adviser, Sunstone
performs fund accounting services and prepares reports for the Board of
Trustees. For its services, Sunstone receives from the Adviser 0.041% of the
average net assets of the Funds. Sunstone does not receive any compensation
from the Funds.

In connection with the exchange privilege with respect to Cash Trust
Resource Trust Money Market Fund, Cash Resource Trust U.S. Government Money
Market Fund and Cash Resource Trust Tax-Exempt Money Market Fund, the
Distributor[, Ariel

20
<PAGE>

Distributors, Inc.,] acts as a shareholder servicing agent. For its services,
the Distributor receives a fee from each such fund at the rate of 0.25% of the
average net assets of each account in such funds established through the use of
the exchange privilege pursuant to a Rule 12b-1 distribution plan adopted by
Cash Resource Trust Money Market Fund, Cash Resource Trust U.S. Government Money
Market Fund and Cash Resource Trust Tax-Exempt Money Market Fund.

The Adviser has adopted a Code of Ethics which regulates the personal
securities transactions of the Adviser's investment personnel and other
employees and affiliates with access to information regarding securities
transactions of the Fund. The Code of Ethics requires investment personnel to
disclose all personal securities holdings upon commencement of employment and
all subsequent trading activity to the Adviser's Compliance Officer. Investment
personnel are prohibited from engaging in any securities transactions, including
the purchase of securities in a private offering, without the prior consent of
the Compliance Officer. Additionally, such personnel are prohibited from
purchasing securities in an initial public offering and are prohibited from
trading in any securities (i) for which either Fund has a pending buy or sell
order, (ii) which either Fund is considering buying or selling, or (iii) which
either Fund purchased or sold within seven calendar days.

METHOD OF DISTRIBUTION

Ariel Distributors, Inc., a wholly-owned subsidiary of the Adviser, is the
principal underwriter for the Funds under an agreement with the Trust. Pursuant
to the Underwriting Agreement, Ariel Distributors receives a fee at the annual
rate of 0.25% of each Fund's average daily net assets for its distribution
services and for assuming certain marketing expenses. Ariel Distributors is
located at 307 N. Michigan Avenue, Chicago, Illinois 60601.

The Trust has also adopted a Distribution Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940 with respect to the Funds (the "Distribution
Plan"). Rule 12b-1 permits an investment company to finance, directly or
indirectly, any activity which is primarily intended to result in the sale of
its shares only if it does so in accordance with the provisions of such Rule.
The Distribution Plan authorizes the Trust to pay up to 0.25% annually of a
Fund's average daily net assets in connection with the distribution of the
Fund's shares.

During the fiscal year ended September 30, 1998, the Appreciation Fund and
[Ariel] Fund paid Distribution Plan expenses of $545,792 and $445,944,
respectively, to the principal underwriter. Of the total amounts paid $374,302
was used to pay broker-dealers for their distribution and maintenance services
and $617,434 was used for advertising, shareholder account maintenance, printing
and related costs.

The Distribution Plan was approved by the Board of Trustees, including the
Trustees who are not "interested persons" of the Fund (as that term is defined
in the Investment Company Act of 1940) and who have no direct financial interest
in the operation of the Plan or in any agreements related to the Distribution
Plan (the "Independent Trustees"). The selection and nomination of the
Independent Trustees is committed to the discretion of such Independent
Trustees. In establishing the Distribution Plan, the Trustees considered various
factors including the amount of the distribution fee. The Trustees determined
that there is a reasonable likelihood that the Distribution Plan will benefit
the Trust and its shareholders.

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<PAGE>

The Distribution Plan may be terminated as to a Fund by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding shares
of the Fund. Any change in the Distribution Plan that would materially increase
the distribution cost to a Fund requires approval of the shareholders of that
Fund; otherwise, the Distribution Plan may be amended by the Trustees, including
a majority of the Independent Trustees.

The Distribution Plan will continue in effect indefinitely, if not
terminated in accordance with its terms, provided that such continuance is
annually approved by (i) the vote of a majority of the Independent Trustees and
(ii) the vote of a majority of the entire Board of Trustees.

Apart from the Distribution Plan, the Adviser, at its expense, may incur
costs and pay expenses associated with the distribution of shares of the Fund,
including compensation to broker-dealers in consideration of promotional or
administrative services.

The Funds have authorized certain Qualified Dealers to accept on their
behalf purchase and redemption orders. Such Dealers are authorized to designate
other intermediaries to accept purchase and redemption orders on the Funds'
behalf. The Funds will be deemed to have received a purchase or redemption
order when an authorized Dealer or such Dealer's authorized designee, accepts
the order. Customer orders will be priced at the applicable Fund's net asset
value next computed after they are accepted by an authorized Dealer or such
Dealer's designee.

TRANSFER AGENT AND CUSTODIAN

Investors Fiduciary Trust Company ("IFTC") has been retained by the Trust
to act as transfer agent, custodian, dividend disbursing agent and shareholder
servicing agent. These responsibilities include: responding to shareholder
inquiries and instructions concerning their accounts; crediting and debiting
shareholder accounts for purchases and redemptions of Fund shares and confirming
such transactions; updating of shareholder accounts to reflect declaration and
payment of dividends; keeping custody of all of the Funds' investments; and
preparing and distributing quarterly statements to shareholders regarding their
accounts.

PORTFOLIO TRANSACTIONS

Portfolio transactions are undertaken on the basis of their desirability
from an investment standpoint. Investment decisions and choice of brokers and
dealers are made by the Adviser under the direction and supervision of the
Trust's Board of Trustees.

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<PAGE>

The Trust seeks to obtain the best price and most favorable execution and
selects broker-dealers on the basis of their professional capability and the
value and quality of their services. Broker-dealers that provide the Trust with
statistical, research, or other information and services may be selected. Such
broker-dealers may receive compensation for executing portfolio transactions
that is in excess of the compensation another broker-dealer would have received
for executing such transactions, if the Adviser determines in good faith that
such compensation is reasonable in relation to the value of the information and
services provided. Research services furnished by investment firms may be
utilized by the Adviser in connection with its investment services for other
accounts; likewise, research services provided by investment firms used for
other accounts may be utilized by the Adviser in performing its services for the
Trust. Although any statistical, research, or other information or services
provided by broker-dealers may be useful to the Adviser, its dollar value is
generally indeterminable and its availability or receipt does not materially
reduce the Adviser's normal research activities or expenses.

The Adviser may also execute Fund transactions with or through
broker-dealers who have sold shares of the Funds. However, such sales will not
be a qualifying or disqualifying factor in a broker-dealer's selection nor will
the selection of any broker-dealer be based on the volume of Fund shares sold.

The aggregate amount of brokerage commissions paid by the Funds during
fiscal years 1996, 1997, and 1998 were $250,910, $208,553 and $292,169,
respectively.

INDEPENDENT AUDITORS

The Funds' independent auditors, Ernst & Young LLP, 233 South Wacker Drive,
Chicago, IL 60606, audit and report on the Funds' annual financial statements,
review certain regulatory reports and the Funds' federal income tax returns, and
perform other professional accounting, auditing, tax and advisory services when
engaged to do so by the Funds. Shareholders will receive annual audited
financial statements and semi-annual unaudited financial statements.

TRUSTEES AND OFFICERS

Ariel Mutual Funds operates under the supervision of a Board of Trustees
responsible to each Fund's shareholders. Set forth below are the principal
occupations of the Trustees and Officers during the last five years:

MARIO L. BAEZA, ESQ., 48, Trustee. Mr. Baeza is Chairman and Chief Executive
Officer, Latin America Partners, L.L.C. (Venture Capital). Formerly, he was
President of Wasserstein Perella International Limited, and Managing Director
and Chief Executive Officer, Americas Division, Wasserstein Perella & Co., Inc.
Address: 200 Park Avenue, New York, New York 10166.

JAMES COMPTON, 60, Trustee. Mr. Compton is president and Chief Executive
Officer of Chicago Urban League. Address: 4510 S. Michigan Ave., Chicago, IL
60653.

23
<PAGE>

WILLIAM C. DIETRICH, CPA, 49, Trustee. Mr. Dietrich is an independent financial
consultant specializing in early state [entrepreneurial] companies. Chief
Financial Officer for Streamline Mid-Atlantic, Inc. (computerized shopping
service). He formerly served as Vice President and Chief Financial Officer for
Shoppers Express, Inc. Address: 5110 Ridgefield Road, Bethesda, Maryland 20816.

ROYCE N. FLIPPIN, JR., 64, Trustee. Mr. Flippin is President of Flippin
Associates. Formerly, he was Director of Program Advancement at the
Massachusetts Institute of Technology and was the Director of Athletics,
Physical Education and Recreation at MIT. Address: 51 Frost Avenue, East
Brunswick, New Jersey 08816.

JOHN G. GUFFEY, JR., 50, Trustee. Mr. Guffey is Chairman of the Calvert Social
Investment Foundation, organizing director of the Community Capital Bank in
Brooklyn, New York, and a financial consultant to various organizations. In
addition, he is the Treasurer and Director of Silby, Guffey and Co., Inc., a
venture capital firm. Mr. Guffey was formerly an officer and is a
trustee/director of each of the investment companies in the Calvert Group of
Funds, except for Acacia Capital Corporation. Address: 7205 Pomander Lane, Chevy
Chase, Maryland 20815.

CHRISTOPHER G. KENNEDY, 35, Trustee. Mr. Kennedy is [both an] Executive and
Director of Merchandise Mart Properties, Inc., a real estate management firm.
Prior to 1991, he was a student at the J.L. Kellogg Graduate School of
Management at Northwestern University. Address: The Merchandise Mart, 200 World
Trade Center, Suite 470, Chicago, Illinois 60654.

BERT N. MITCHELL, CPA, 60, Chairman of the Board and Trustee. Mr. Mitchell is
the Chairman of Mitchell & Titus L.L.P., the nation's largest minority-owned
certified public accounting firm. Address: One Battery Park Plaza, New York, New
York 10004.

*MELLODY L. HOBSON, 29, Trustee. Ms. Hobson is Senior Vice President, Director
of Marketing of Ariel Capital Management. Address: 307 North Michigan Avenue,
Suite 500, Chicago, Illinois 60601.

*ERIC T. MCKISSACK, 45, Trustee and President. Mr. McKissack is Vice Chairman
and Co-Chief Investment Officer of Ariel Capital Management. Formerly, Mr.
McKissack was a research analyst at First National Bank of Chicago. Address: 307
North Michigan Avenue, Suite 500, Chicago, Illinois 60601.

*JAMES W. ATKINSON, 48, Vice President, Treasurer and Assistant Secretary.
Mr. Atkinson is Vice President, Finance and Management of Ariel Capital
Management. Formerly, he was Senior Vice President and Chief Executive
Officer of Stein Roe & Farnham, Inc. (investment advisers). Address: 307
North Michigan Avenue, Suite 500, Chicago, Illinois 60601.

*ROGER P. SCHMITT, 41, Vice President, Secretary and Assistant Treasurer. Mr.
Schmitt is Chief Operating Officer of Ariel Capital Management. Formerly, Mr.
Schmitt

24
<PAGE>

was Marketing Manager with IBM Corporation. Address: 307 North Michigan Avenue,
Suite 500, Chicago, Illinois 60601.

- ----------
*Officers and Trustees deemed to be "interested persons" of the Funds under the
Investment Company Act of 1940.

COMPENSATION SCHEDULE

During the fiscal year ended September 30, 1998, compensation paid by the Funds
to the Trustees not affiliated with the Adviser was as follows:

<TABLE>
<CAPTION>
NAME COMPENSATION
---- ------------
<S> <C>
Mario L. Baeza $6,400
James Compton $6,400
William C. Dietrich $5,767
Royce N. Flippin, Jr. $6,400
John G. Guffey, Jr. $6,200
Christopher G. Kennedy $6,200
Bert N. Mitchell $6,400

</TABLE>

25
<PAGE>

SIGNIFICANT SHAREHOLDERS

The following table lists the holders of five percent or more of the
outstanding shares of each Fund as of [January 25, 1999:]

[Ariel] Fund
------------

Name and Address Number of Shares Percentage of
of Owner Owned Outstanding Shares
- -------- ----- ------------------
<S> <C> <C>
Illinois State Employees [823,703.926] 16%
Deferred Compensation
604 Stratton Office Building
Springfield, IL 62706

Charles Schwab & Co., Inc. [361,537.256] [7%]
Reinvest Acct.
Attn: Mutual Fund Dept.
101 Montgomery Street
San Francisco, CA 94104

Appreciation Fund
-----------------

Name and Address Number of Share Percentage of
of Owner Owned Outstanding Shares
- -------- ----- ------------------
<S> <C> <C>
Charles Schwab & Co., Inc. [865,865.590] [11%]
Reinvest Acct.
Attn: Mutual Fund Dept.
101 Montgomery Street
San Francisco, CA 94104

Great West Life & Annuity Co. [957,914.644] [12%]
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111

</TABLE>

26
<PAGE>

[MANAGEMENT OWNERSHIP. As of January 25, 1999, the directors and officers of
Ariel Mutual Funds as a group owned 1.36 % of the Ariel Fund and 0.79% of the
Ariel Appreciation Fund.]

APPENDIX

CORPORATE BOND AND COMMERCIAL PAPER RATINGS

The following is a description of Moody's Investors Service, Inc.'s bond
ratings:

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

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

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

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

The following is a description of Standard & Poor's Corporation's investment
grade bond ratings:

27
<PAGE>

AAA: Bonds rated AAA are considered highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. They move with
market interest rates, and thus provide the maximum safety on all counts.

AA: Bonds rated AA are high-grade obligations. In the majority of instances,
they differ from AAA issues only to a small degree. Prices of AA bonds also
move with the long-term money market.

A: Bonds rated A are upper medium grade obligations. They have considerable
investment strength, but are not entirely free from adverse effects of change in
economic and trade conditions. Interest and principal are regarded as safe.
They predominantly reflect money rates in their market behavior but, to some
extent, also economic conditions.

BBB: Bonds rated BBB are medium grade obligations. They are considered
borderline between definitely sound obligations and those where the speculative
element begins to predominate. These bonds have adequate asset coverage and are
normally protected by satisfactory earnings. Their susceptibility to changing
conditions, particularly to depressions, necessitates constant monitoring.
These bonds are more responsive to business and trade conditions than to
interest rates. This group is the lowest that qualifies for commercial bank
investment.

Commercial paper rated A by Standard & Poor's Corporation has the following
characteristics: liquidity ratios are adequate to meet cash requirements;
long-term senior debt is rated "A" or better; the issuer has access to at least
two adequate channels of borrowing; basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; typically, the issuer's
industry is well-established and the issuer has a strong position within the
industry; and the reliability and quality of management are unquestioned. The
relative strength or weakness of the above factors determines whether an
issuer's commercial paper is rated A-1, A-2, or A-3.

Issuers rated Prime-1 by Moody's Investors Services, Inc., are considered to
have superior capacity of repayment of short-term promissory obligations. Such
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

28
<PAGE>

ARIEL INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION

February 1, 1999

FOR ARIEL PREMIER BOND FUND
307 North Michigan Avenue
Suite 500
Chicago, Illinois 60601
1-800-29-ARIEL (1-800-292-7435)

Ariel Premier Bond Fund (the "Fund") is a series of Ariel Growth Fund,
doing business as Ariel Investment Trust (the "Trust").

The Trust's audited financial statements included in the Annual Report to
Shareholders for the Fund dated September 30, 1998 are expressly incorporated
herein by reference and made a part of this Statement of Additional Information.
Copies of the Annual Report may be obtained free of charge by writing or calling
Fund.

This Statement of Additional Information is not a prospectus but provides
information that should be read in conjunction with the Fund's Prospectus dated
February 1, 1999 and any supplement thereto, which may be obtained free of
charge by writing or calling the Fund.

TABLE OF CONTENTS

<S> <C>
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
FUNDAMENTAL INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . .2
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . .4
TOTAL RETURN, YIELD AND OTHER PERFORMANCE INFORMATION. . . . . . . . . . . . 17
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . 18
PURCHASING, EXCHANGING AND REDEEMING SHARES. . . . . . . . . . . . . . . . . 20
PRICING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
DIVIDENDS, CAPITAL GAINS AND TAXES . . . . . . . . . . . . . . . . . . . . . 28
IN-KIND PURCHASES OF INSTITUTIONAL CLASS SHARES OF THE FUND. . . . . . . . . 30
INVESTMENT ADVISER, SUB-ADVISER AND SERVICES ADMINISTRATOR . . . . . . . . . 31
METHOD OF DISTRIBUTION OF THE INVESTOR CLASS SHARES. . . . . . . . . . . . . 32
TRANSFER AGENT AND CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . 34
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
COMPENSATION SCHEDULE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SIGNIFICANT SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 38
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

</TABLE>

- 1 -
<PAGE>

GENERAL INFORMATION

The Fund, together with Ariel Fund and the Ariel Appreciation Fund are the
three series of Ariel Growth Fund (doing business as Ariel Investment Trust), an
open-end, diversified management investment company organized as a serial
Massachusetts business trust on April 1, 1986. The Declaration of Trust contains
an express disclaimer of shareholder liability for acts or obligations of the
Trust. The shareholders of a Massachusetts business trust might, however, under
certain circumstances, be held personally liable as partners for its
obligations. The Declaration of Trust provides for indemnification and
reimbursement of expenses out of Trust assets for any shareholder held
personally liable for obligations of the Trust. The Declaration of Trust
further provides that the Trust may maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its shareholders, trustees, officers, employees and agents to cover
possible tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance exists and the Trust itself is unable to meet
its obligations.

Each share of a series of the Trust represents an equal proportionate
interest in that series and is entitled to such dividends and distributions out
of the income belonging to such shares as declared by the Board. Upon any
liquidation of the Trust, shareholders are entitled to share pro rata in the net
assets belonging to that series available for distribution.

The Fund currently offers two classes of shares, the Institutional Class
and the Investor Class. The Institutional Class is offered primarily to
institutional investors. Institutional Class shares are sold and redeemed at
net asset value and are not subject to Rule 12b-1 distribution fees. The
Investor Class is offered to retail investors and is sold and redeemed at net
asset value, but is subject to Rule12b-1 distribution fees.

The Prospectus and this Statement of Additional Information do not contain
all the information in the Fund's registration statement. The registration
statement is on file with the Securities and Exchange Commission and is
available to the public.

FUNDAMENTAL INVESTMENT RESTRICTIONS

The investment restrictions set forth below and the Fund's investment
objective are fundamental policies and may not be changed without the approval
of the holders of a majority of the outstanding shares of the Fund. As defined
in the Investment Company Act of 1940, this means the lesser of the vote of (a)
67% of the shares of the Fund at a meeting where more than 50% of the
outstanding shares are present in person or by proxy, or (b) more than 50% of
the outstanding shares of the Fund.

(1) COMMODITIES. The Fund may not purchase or sell commodities or
commodity contracts except contracts in respect to financial futures.

- 2 -
<PAGE>

(2) REAL ESTATE. The Fund may not purchase real estate or real estate
mortgages, but may purchase securities backed by real estate or interests
therein (including mortgage interests) and securities of companies, including
real estate investment trusts, holding real estate or interests (including
mortgage interests) therein. (This does not prevent the Fund from owning and
liquidating real estate or real estate interests incident to a default on
portfolio securities.)

(3) DIVERSIFICATION OF FUND INVESTMENTS.

(a) FUND ASSETS. With respect to 75% of the value of its total
assets, the Fund may not buy the securities of any issuer if more than 5%
of the value of the Fund's total assets would then be invested in that
issuer. Securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities and repurchase agreements involving such
securities ("U.S. Government Securities") are not subject to this
limitation.

(b) SECURITIES OF ISSUERS. With respect to 75% of the value of its
total assets, the Fund may not purchase the securities of any issuer if
after such purchase the Fund would then own more than 10% of such issuer's
voting securities. U.S. Government Securities are not subject to this
limitation.

(4) INDUSTRY CONCENTRATION. The Fund may not purchase the securities of
companies in any one industry if 25% or more of the value of the Fund's total
assets would then be invested in companies having their principal business
activity in the same industry. U.S. Government Securities are not subject to
this limitation.

(5) SENIOR SECURITIES; BORROWING. The Fund may not issue senior
securities except as permitted under the Investment Company Act of 1940. The
Fund may not pledge or hypothecate any of its assets, except in connection with
permitted borrowing.

(6) UNDERWRITING. The Fund does not engage in the underwriting of
securities. (This does not preclude it from selling restricted securities in
its portfolio.)

(7) LENDING MONEY OR SECURITIES. The Fund may not lend money, except that
it may purchase and hold debt securities publicly distributed or traded or
privately placed and may enter into repurchase agreements. The Fund will not
lend securities if such a loan would cause more than one-third of the Fund's net
assets to then be subject to such loans.

(8) OFFICER AND TRUSTEES. The Fund may not purchase from or sell to any
of the Trust's officers or trustees, or firms of which any of them are members,
any securities (other than capital stock of the Fund), but such persons or firms
may act as brokers for the Fund for customary commissions.

- 3 -
<PAGE>

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS

These policies may be changed by the Board of Trustees without shareholder
approval.

(1) MARGIN. The Fund may not purchase any securities on margin, except
that the Fund may (a) obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities; or (b) make margin
deposits in connection with transactions in futures and forward contracts.

(2) BORROWING. The Fund may not borrow money except from banks for
temporary or emergency purposes in an amount not exceeding 33-1/3% of the value
of its total assets (including amounts borrowed). The Fund may not purchase
securities when money borrowed exceeds 5% of its total assets.

(3) FUTURES. The Fund may not purchase a futures contract, except in
respect to interest rates and then only if, with respect to positions which do
not represent bona fide hedging, the aggregate initial margin for such
positions would not exceed 5% of the Fund's total assets.

(4) ILLIQUID SECURITIES. The Fund may not purchase illiquid securities
(including restricted securities which are illiquid and repurchase agreements
maturing in more than seven days) if, as a result, more than 15% of its net
assets would be invested in such securities.

(5) OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND DIRECTORS. The Fund
may not purchase or retain the securities of any issuer if any officer or
trustee of the Fund or its investment adviser owns beneficially more than 1/2 of
1% of the securities of such issuer and if together such individuals own more
than 5% of the securities of such issuer.

(6) LENDING PORTFOLIO SECURITIES. The Fund may not loan portfolio
securities.

(7) OIL AND GAS PROGRAMS. The Fund may not invest in interests in oil,
gas, or other mineral exploration or development programs, although it may
invest in securities of issuers which invest in or sponsor such programs.

(8) INVESTMENT COMPANIES. The Fund may not purchase the securities of
other investment companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets.

(9) UNSEASONED ISSUERS. The Fund may not purchase the securities of
companies which, together with its predecessors, have a record of less than
three years' continuous operation if, as a result, more than 5% of the value of
its assets would be invested in securities of such companies. U.S. Government
Securities and issuers of asset-backed securities are not subject to this
limitation.

- 4 -
<PAGE>

INVESTMENT STATEGIES AND RISKS

THE FUND SEEKS TO MAXIMIZE TOTAL RETURN.

The Fund seeks to achieve its investment objective by implementing
decisions regarding the level and direction of interest rates (duration and
yield curve decisions) and through the purchase and sale of securities to take
advantage of perceived yield spread opportunities.

INVESTMENT OBJECTIVE

The investment objective of the Fund is to seek to maximize total return
through a combination of income and capital appreciation. The Fund generally
invests in high quality, highly liquid fixed-income securities. Normally, the
Fund will invest at least 80% of its total assets in fixed-income securities
rated A or better by Moody's Investors Service, Inc. ("Moody's") or Standard and
Poor's Corporation ("S & P") or that are not rated by Moody's or S & P but are
deemed to be of comparable quality by Lincoln Capital ("A-Grade Securities").
In the event that downgrades of securities cause less than 80% of the Fund's
total assets to be invested in A-Grade Securities, Lincoln Capital will take
steps as soon as practicable to increase the Fund's holdings of A-Grade
Securities. The Fund seeks to achieve its investment objective by implementing
decisions regarding the level and direction of interest rates (duration and
yield curve decisions) and through the purchase and sale of securities to take
advantage of perceived yield spread opportunities.

The Fund may purchase any type of income producing security including, but
not limited to, U.S. government and agency obligations, mortgage-backed and
other asset-backed securities, commercial paper and corporate debt securities.

The Fund will take reasonable risks in seeking to achieve its investment
objective. There is, of course, no assurance that the Fund will be successful
in meeting its objective since there is risk involved in the ownership of
securities.

DURATION

Duration is a measure of the expected life of a fixed-income security that
was developed as a more precise alternative to the concept of term-to-maturity.
Duration incorporates a bond's yield, coupon interest payments, final maturity
and call features into one measure. Duration is also a way to measure the
interest-rate sensitivity of the Fund's portfolio. The duration of the Fund is
calculated by averaging the durations of the bonds held by the Fund with each
duration "weighted" according to the percentage of net assets that it
represents. In general, the higher the Fund's duration, the greater the
appreciation or depreciation of the Fund's assets will be when interest rates
change. In its attempt to maximize total return, Lincoln Capital[, the
sub-adviser,] intends to vary the duration of the Fund, as described below,
depending on its outlook for interest rates.

- 5 -
<PAGE>

INVESTMENT PROCESS

The [Fund's] average duration will be longer when Lincoln Capital believes
that interest rates will fall and shorter when it believes interest rates will
rise.

INTEREST RATE DECISIONS

Lincoln Capital seeks to achieve a duration equal to the duration of the
domestic, investment grade bond market when its outlook for interest rates is
neutral. The portfolio's average duration will be longer when Lincoln Capital
believes that interest rates will fall and shorter when it believes interest
rates will rise. The stronger Lincoln Capital's conviction, the further the
Fund's duration will diverge from the duration of the domestic, investment grade
bond market, which generally averages approximately five years. The Fund's
duration will normally range from four to six years. It is expected that only
on rare occasions will the Fund's duration reach the extreme positions (plus or
minus 2 years from the duration of the domestic, investment grade bond market).

The Fund's duration relative to that of the domestic, investment grade
bond market is established in periodic strategy meetings of a committee
consisting of senior officers of Lincoln Capital. Changes in the Fund's
duration are based on a disciplined evaluation of three factors:

(a) Economic activity and capacity for growth;
(b) U.S. Government monetary policy; and
(c) Expectations for inflation.

The committee evaluates the above factors and weights each one to determine
a precise duration position relative to the duration of the domestic, investment
grade bond market. Over time, changes in the duration position take the form of
a series of small movements; generally in one-half year increments.

Once the Fund's specific duration position has been established, remaining
decisions (i.e. yield curve structure, sector emphasis and issue selections),
are made and implemented by Lincoln Capital's Fixed Income Group working as a
team. These decisions are based on Lincoln Capital's belief that yield spreads
reflect fundamental risk premiums. These premiums reflect compensation for
accepting credit risk or uncertain cash flow patterns (timing and amounts).
Lincoln Capital's judgments on these spreads are influenced by its outlook for
business conditions and for the volatility of interest rates. These judgments
are supported by studies of historical spread relationships and break-even
spread analysis. Cash equivalents may be used to create the desired yield curve
structure. Portfolio positions are continually monitored and evaluated.

SECTOR EMPHASIS AND SECURITY SELECTION

Sector and security selection decisions are based on Lincoln Capital's
judgment and are supported by studies of historical spread relationships,
break-even yield spread analysis, and model driven portfolio return projections.
In order to monitor yield spreads, Lincoln Capital [

- 6 -
<PAGE>

] maintains extensive yield spread data banks and has direct computer
access to extensive historical yield spread data and specific issuer data.

Credit research consists of internally generated fundamental analysis and
input from rating agencies and other sources. A committee at Lincoln Capital
reviews those corporate bonds that are considered for purchase. By focusing on
higher-rated securities and by comparing judgments among outside sources to
internal credit judgments, Lincoln Capital believes that credit risk can be
managed and reduced. It is unlikely that Lincoln Capital will seek to enhance
the Fund's return by anticipating an improvement in the creditworthiness of
specific corporate issuers, particularly lower rated issuers.

FUND INVESTMENTS

IN GENERAL. The Fund may invest in fixed-income securities which are
obligations of, or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"). U.S. Government Securities
are unrated but are generally considered high-grade securities. The Fund may
also invest in other investment grade fixed-income securities, including
corporate bonds, mortgage-backed and other asset-backed securities and other
high quality, liquid investments.

The debt securities in which the Fund will invest are investment grade
securities. These are securities rated in the four highest grades assigned by
Moody's (Aaa, Aa, A and Baa) or S & P (AAA, AA, A and BBB) or that are not rated
by Moody's or S & P but deemed to be of comparable quality by Lincoln Capital.
Generally, at least 80% of the Fund's total assets will be invested in A-Grade
Securities, which are in the three highest grades, or the equivalent, while 20%
of the total assets are not so limited. The lowest investment grade securities
(Baa and BBB) have speculative characteristics because changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments. The Fund will not invest in securities
below investment grade (so called "junk bonds"). In the event of a downgrade of
a debt security held by the Fund to below investment grade, the Fund is not
usually required to automatically sell the issue, but Lincoln Capital will
consider whether to continue holding the security. However, if such a downgrade
would cause more than 5% of net assets to be invested in debt securities below
investment grade, Lincoln Capital will take steps as soon as practicable to
reduce the proportion of debt below investment grade to 5% of net assets or
less.

The value of the shares issued by the Fund is not guaranteed and will
fluctuate with changes in the value of the Fund's portfolio. Generally when
prevailing interest rates rise, the value of the '[s] portfolio is likely to
decline and when prevailing interest rates decline, the value of the Fund's
portfolio is likely to rise.

- 7 -
<PAGE>

U.S. GOVERNMENT SECURITIES

There are two basic types of U.S. Government Securities: (1) direct
obligations of the U.S. Treasury, and (2) obligations issued or guaranteed by an
agency or instrumentality of the U.S. Government. Agencies and
instrumentalities of the U.S. Government include Federal Farm Credit System
("FFCS"), Student Loan Marketing Association ("SLMA"), Federal Home Loan
Mortgage Corporation ("FHLMC"), Federal Home Loan Banks ("FHLB"), Federal
National Mortgage Association ("FNMA") and Government National Mortgage
Association ("GNMA"). Some obligations issued or guaranteed by agencies or
instrumentalities, such as those issued by GNMA, are fully guaranteed by the
U.S. Government. Others, such as FNMA bonds, rely on the assets and credit of
the instrumentality with limited rights to borrow from the U.S. Treasury. Still
other securities, such as obligations of the FHLB, are supported by more
extensive rights to borrow from the U.S. Treasury.

The guarantees of the U.S. Government, its agencies and instrumentalities
are guarantees of the timely payment of principal and interest on the
obligations purchased and not of their market value.

CORPORATE BONDS

The Fund will normally invest in corporate issues that are rated A or
better by Moody's or S&P or which are not rated by Moody's or S&P but are deemed
by Lincoln Capital to be of comparable quality.

The Fund may invest in investment grade corporate bonds. Usually, no
single corporate issuer will comprise more than 5% of the Fund's total assets at
the time of investment. The value of lower-rated corporate debt securities is
more sensitive to economic changes or individual corporate developments than
higher-rated investments.

YANKEE BONDS

Some of the debt securities in which the Fund may invest are known as
"Yankee Bonds"[.] Yankee Bonds are U.S. dollar-denominated debt securities
issued by foreign entities. These bonds are not subject to currency
fluctuation risks. However, currency fluctuations may adversely affect the
ability of the borrower to repay the debt and may increase the possibility of
default. In addition, the issuing entities are sometimes not subject to the
same accounting principles as U.S. corporations. The risks of investment in
foreign issuers may include expropriation or nationalization of assets,
confiscatory taxation, exchange controls and limitations on the use or
transfer of assets, and significant withholding taxes. Lincoln Capital will
take these factors into consideration when determining what Yankee Bonds the
Fund will purchase. Other than Yankee Bonds, the Fund does not intend to
invest in securities of foreign issuers.

LOANS OF PORTFOLIO SECURITIES

The fundamental investment restrictions provide that the Fund may make
secured loans of portfolio securities in order to realize additional income,
provided that the Fund will not lend

- 8 -
<PAGE>

securities if such a loan would cause more than one-third of the total value of
its net assets to then be subject to such loans. However, as a matter of
non-fundamental policy, the Fund does not currently intend to make such loans.
This policy may be changed by the Board of Trustees should they determine that
such loans would benefit the Fund.

REPURCHASE AGREEMENTS

The Fund may purchase securities subject to repurchase agreements which are
transactions in which the Fund purchases a security and simultaneously commits
to resell that security to the seller at a mutually agreed upon time and price.
The seller's obligation is secured by the underlying security. The repurchase
price reflects the initial purchase price plus an agreed upon market rate of
interest. While the underlying security may bear a maturity in excess of one
year, the term of the repurchase agreement is always less than one year.

The Fund will engage in repurchase agreements with recognized securities
dealers and banks determined to present minimal credit risk by the Sub-Adviser.
In addition, the Fund will engage in repurchase agreements reasonably designed
to fully secure the seller's obligation, during the term of the agreement, to
repurchase the underlying security and the Fund will monitor the market value of
the underlying security during the term of the agreement. If the value of the
underlying security declines and is not at least equal to the repurchase price
due to the Fund pursuant to the agreement, the Fund will require the seller to
pledge additional securities or cash to secure the seller's obligations pursuant
to the agreement. If the seller defaults on its obligation to repurchase and the
value of the underlying security declines, the Fund may incur a loss and may
incur expenses in selling the underlying security.

MORTGAGE DOLLAR ROLLS

The Fund may enter into "mortgage dollar rolls," which are transactions in
which the Fund sells a mortgage-related security (such as a GNMA security) to a
dealer and simultaneously agrees to repurchase a similar security (but not the
same security) in the future at a pre-determined price. A "dollar roll" can be
viewed as a collateralized borrowing in which the Fund pledges a
mortgage-related security to a dealer to obtain cash. The dealer with which the
Fund enters into a dollar roll transaction is not obliged to return the same
securities as those originally sold by the Fund, but only securities which are
"substantially identical." To be considered "substantially identical," the
securities returned to the Fund generally must: (1) be collateralized by the
same types of underlying mortgages; (2) be issued by the same agency and be part
of the same program; (3) have a similar original stated maturity; (4) have
identical net coupon rates; (5) have similar market yields (and therefore
price); and (6) satisfy "good delivery" requirements, meaning that the aggregate
principal amounts of the securities delivered and received back must be within
2.5% of the initial amount delivered.

The Fund's obligations under a dollar roll agreement must be covered by
cash or high quality debt securities equal in value to the securities subject to
repurchase by the Fund, maintained in a segregated account. To the extent that
the Fund collateralizes its obligations under a dollar roll agreement, the asset
coverage requirements of the Investment Company Act of 1940, described below,
will not apply to such transactions.

- 9 -
<PAGE>

The Fund may be released from its obligations under a dollar roll agreement
by selling its position to another party at any time prior to the settlement
date. The Fund may realize a gain or loss on such a sale. If the Fund realizes
a gain, it will not be able to collect its profit until the original settlement
date of the agreement. Because dollar roll transactions may be for terms
ranging between one and six months, the amount of any such gain may be deemed
"illiquid" and subject to the Fund's overall limitations on investments in
illiquid securities.

The Investment Company Act of 1940 requires the Fund to maintain continuous
asset coverage (total assets including borrowings, less liabilities exclusive of
borrowings) of 300% of the amount borrowed. If the 300% asset coverage should
decline as a result of market fluctuations or other reasons, the Fund may be
required to sell some of its portfolio holdings within three days to reduce the
debt and restore the 300% asset coverage, even though it may be disadvantageous
from an investment standpoint to sell securities at that time.

MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES

Mortgage-related securities (often referred to as "mortgage-backed"
securities) are interests in pools of residential or commercial mortgage loans,
including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental, government-related and
private organizations . The Fund may also invest in debt securities which are
secured with collateral consisting of mortgage-related securities, and other
types of mortgage-related securities.

MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of mortgage-related
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide a monthly
payment which consists of both interest and principal payments. In effect,
these payments are a "pass-through" of the monthly payments made by the
individual borrowers on their residential or commercial mortgage loans, net of
any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by repayments of principal resulting from the sale of the
underlying property, refinancing or foreclosure, net of fees or costs which may
be incurred. Some mortgage-related securities (such as securities issued by the
Government National Mortgage Association ("GNMA")) are described as "modified
pass-through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.

The principal governmental guarantor of mortgage-related securities is
GNMA. GNMA is a wholly owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the United States Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) backed by pools of FHA-insured or VA-guaranteed mortgages.

- 10 -
<PAGE>

Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA but are not backed by the
full faith and credit of the United States Government.

FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a
government-sponsored corporation formerly owned by the twelve Federal Home Loan
Banks and now owned entirely by private stockholders. FHLMC issues
Participation Certificates ("PCs") which represent interests in conventional
mortgages from FHLMC's national portfolio. FHLMC guarantees the timely payment
of interest and ultimate collection of principal, but PCs are not backed by the
full faith and credit of the United States Government.

Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers
may, in addition, be the originators and/or servicers of the underlying mortgage
loans as well as the guarantors of the mortgage-related securities. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are not
direct or indirect government or agency guarantees of payments in the former
pools. However, timely payment of interest and principal of these pools may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit. The insurance and
guarantees are issued by governmental entities, private insurers and the
mortgage poolers. Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a mortgage-related
security meets the Fund's investment quality standards. There can be no
assurance that the private insurers or guarantors can meet their obligations
under the insurance policies or guarantee arrangements. The Fund currently does
not intend to purchase pass-through securities that are not issued or guaranteed
by an agency or instrumentality of the U.S. Government.

Mortgage-backed securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the Fund's
industry concentration restrictions, set forth under "Fundamental Investment
Restrictions," by virtue of the exclusion from that test available to all U.S.
Government Securities. In case of privately issued mortgage-related securities,
the Fund takes the position that mortgage-related securities do not represent
interests in any particular "industry" or group of industries. The assets
underlying such securities may be represented by a portfolio of first lien
residential mortgages (including both whole mortgage loans and mortgage
participation interests) or portfolios of mortgage pass-through securities
issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a
mortgage-

- 11 -
<PAGE>

related security may in turn be insured or guaranteed by the Federal Housing
Administration or the Department of Veterans Affairs.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs). A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal are paid, in most cases, semiannually. CMOs may
be collateralized by whole mortgage loans, but are more typically collateralized
by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.

CMOs are structured into multiple classes called tranches, each bearing a
different stated maturity. Actual maturity and average life will depend upon
the prepayment experience of the collateral. CMOs can provide for a modified
form of call protection through a DE FACTO breakdown of the underlying pool of
mortgages according to how quickly the loans are repaid. Monthly payment of
principal received from the pool of underlying mortgages, including prepayments,
is first returned to investors holding the shortest maturity tranche. Investors
holding the longer maturity tranches receive principal only after the first
tranche has been retired. An investor is partially guarded against a sooner
than desired return of principal because of the sequential payments.

In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B and C Bonds
all bear current interest. Interest on the Series Z Bond is accrued and added
to principal and a like amount is paid as principal on the Series A, B or C Bond
currently being paid off. When the Series A, B and C Bonds are paid in full,
interest and principal on the Series Z Bond begins to be paid currently. With
some CMOs, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios. The Fund's investments are limited to Planned Amortization Class
and sequential issues.

FHLMC COLLATERALIZED MORTGAGE OBLIGATIONS. FHLMC CMOs are debt obligations
of FHLMC issued in multiple tranches having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans purchased by
FHLMC. Unlike FHLMC Participation Certificates, payments of principal and
interest on the CMOs are made semiannually, as opposed to monthly. The amount
of principal payable on each semiannual payment date is determined in accordance
with FHLMC's mandatory sinking fund schedule, which, in turn, is equal to
approximately 100% of FHA prepayment experience applied to the mortgage
collateral pool. All sinking fund payments in the CMOs are allocated to the
retirement of the individual tranches of bonds in the order of their stated
maturities. Payment of principal on the mortgage loans in the collateral pool
in excess of the amount of FHLMC's minimum sinking fund obligation for any
payment date are paid to the holders of the CMOs as additional sinking fund
payments. This "pass-through" of prepayments has the effect of retiring most
CMO tranches prior to their stated final maturity.

- 12 -
<PAGE>

If collection of principal (including prepayments) on the mortgage loans
during any semiannual payment period is not sufficient to meet FHLMC's minimum
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to
make up the deficiency from its general funds.

Criteria for the mortgage loans in the pool backing the FHLMC CMOs are
identical to those of FHLMC PCs. FHLMC has the right to substitute collateral
in the event of delinquencies and/or defaults.

OTHER MORTGAGE-RELATED SECURITIES. Other mortgage-related securities
include securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including stripped mortgage-backed securities. Other
mortgage-related securities may be equity or debt securities issued by agencies
or instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks, partnerships,
trusts and special purpose entities of the foregoing.

ADDITIONAL RISKS. Investments by the Fund in mortgage-related U.S.
Government Securities, such as GNMA Certificates, and CMOs also involve other
risks. The yield on a pass-through security is typically quoted based on the
maturity of the underlying instruments and the associated average life
assumption. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Accelerated prepayments adversely impact yields for
pass-throughs purchased at a premium; the opposite is true for pass-throughs
purchased at a discount. During periods of declining interest rates, prepayment
of mortgages underlying pass-through certificates can be expected to increase.
When the mortgage obligations are prepaid, the Fund reinvests the prepaid
amounts in securities, the yields of which reflect interest rates prevailing at
that time. Therefore, the Fund's ability to maintain a portfolio of
high-yielding, mortgage-backed securities will be adversely affected to the
extent that prepayments of mortgages must be reinvested in securities which have
lower yields than the prepaid mortgages. Moreover, prepayments of mortgages
which underlie securities purchased at a premium could result in capital losses.
Investment in such securities could also subject the Fund to "maturity extension
risk" which is the possibility that rising interest rates may cause prepayments
to occur at a slower than expected rate. This particular risk may effectively
change a security which was considered a short or intermediate-term security at
the time of purchase into a long-term security. Long-term securities generally
fluctuate more widely in response to changes in interest rates than short or
intermediate-term securities.

OTHER ASSET-BACKED SECURITIES

The Fund may invest in securities that are backed by a diversified pool of
assets other than mortgages such as trade, credit card and automobile
receivables. Asset-backed securities are generally issued by special purpose
entities in the form of debt instruments. The characteristics and risks of
automobile and credit card receivables are described below.

-13-
<PAGE>

AUTOMOBILE RECEIVABLE SECURITIES. The Fund may invest in asset-backed
securities which are backed by receivables from motor vehicle installment sales
contracts or installment loans secured by motor vehicles ("Automobile Receivable
Securities"). Since installment sales contracts for motor vehicles or
installment loans related to such contracts ("Automobile Contracts") typically
have shorter durations and lower incidences of prepayment, Automobile Receivable
Securities generally will exhibit a shorter average life and are less
susceptible to prepayment risk than mortgage-related securities.

Most entities that issue Automobile Receivable Securities create an
enforceable interest in their respective Automobile Contracts only by filing a
financing statement and by having the servicer of the Automobile Contracts,
which is usually the originator of the Automobile Contracts, take custody of the
Automobile Contract. In such circumstances, if the servicer of the Automobile
Contracts were to sell the Automobile Contracts to another party, in violation
of its obligation not to do so, there is a risk that such party could acquire an
interest in the Automobile Contracts superior to that of the holders of
Automobile Receivable Securities. Also, although most Automobile Contracts
grant a security interest in a motor vehicle being financed, in most states the
security interest in a motor vehicle must be noted on the certificate of title
to create an enforceable security interest against competing claims of other
parties. Due to the large number of vehicles involved, however, the certificate
of title to each vehicle financed, pursuant to the Automobile Contracts
underlying the Automobile Receivable Security, is usually not amended to reflect
the assignment of the seller's security interest for the benefit of the holders
of the Automobile Receivable Securities. Therefore, there is the possibility
that recoveries on repossessed collateral may not, in some cases, be available
to support payments on the securities. In addition, various state and federal
securities laws give the motor vehicle owner the right to assert against the
holder of the owner's Automobile Contract certain defenses such owner would have
against the seller of the motor vehicle. The assertion of such defenses could
reduce payments on the Automobile Receivable Securities. Investment grade
Automobile Receivable Securities are typically over-collateralized and have
other forms of credit enhancement to mitigate these risks.

CREDIT CARD RECEIVABLE SECURITIES. The Fund may invest in asset-backed
securities backed by a diversified pool of receivables from revolving credit
card agreements ("Credit Card Receivable Securities"). Credit balances on
revolving credit card agreements ("Accounts") are generally paid down more
rapidly than are Automobile Contracts. Most Credit Card Receivable Securities
provide for a fixed period during which only interest payments are paid to the
security holder. Principal payments received on underlying Accounts are used to
purchase additional assets. The initial fixed period usually may be shortened
upon the occurrence of specified events which signal a potential deterioration
in the quality of the assets backing the security, such as the imposition of a
cap on interest rates. The ability of the issuer to make principal and interest
payments on Credit Card Receivable Securities thus depends upon the continued
generation of additional principal amounts in the underlying accounts during the
initial period and the non-occurrence of specified events. An acceleration in
cardholders' payments rates or any other event which shortens the period during
which additional credit card charges on an Account may be transferred to the
pool of assets supporting the related Credit Card Receivable Security could
shorten the weighted average life and reduce the yield of the Credit Card
Receivable Security.

-14-
<PAGE>

Credit cardholders are entitled to the protection of a number of state and
federal consumer credit laws, many of which give such holder the right to set
off certain amounts against balances owed on the credit card, thereby reducing
amounts paid on Accounts. In addition, unlike most other asset backed
securities, Accounts are unsecured obligations of the cardholder.

ADDITIONAL RISKS. Issuers of asset-backed securities generally hold no
assets other than the assets underlying such securities and any credit support
provided. As a result, although payments on asset-backed securities are
obligations of the issuers, in the event of defaults on underlying assets not
covered by any credit support, the issuers are unlikely to have sufficient
assets to satisfy their obligations on the related asset-backed securities. The
loans underlying these securities are subject to prepayments which can decrease
maturities and returns. Due to the possibility that prepayments will alter the
cash flow on asset-backed securities, it is not possible to determine in advance
the actual final maturity date or average life. Faster prepayment will shorten
the average life and slower prepayments will lengthen it. However, it is
possible to determine what the range of that movement could be and to calculate
the effect that it will have on the price of the security.

The values of these securities are ultimately dependent upon payment of the
underlying loans by individuals, and the holders, such as the Fund, generally
have no recourse against the originator of the loans. The Fund[,] as a holder
of these securities[,] may experience losses or delays in payment if the
original payments of principal and interest are not made to the issuer with
respect to the underlying loans.

DELAYED DELIVERY TRANSACTIONS

The Fund may purchase or sell securities on a when-issued basis.
When-issued securities are securities purchased at a certain price even though
the securities may not be delivered for up to 90 days. The Fund will maintain,
with its Custodian, an account with a designated portfolio of liquid, high-grade
debt securities or cash in an amount at least equal to these commitments. The
Fund will generally earn income on assets deposited in the designated account.
No payment or delivery is made by the Fund in a when-issued transaction until
it receives payment or delivery from the other party to the transaction.
Although the Fund receives no income from the above described securities prior
to delivery, the market value of such securities is still subject to change. As
a consequence, it is possible that the market price of the securities at the
time of delivery may be higher or lower than the purchase price. The Fund does
not intend to remain fully invested when such purchases are outstanding.
However, if the Fund were to remain substantially fully invested at a time when
delayed delivery purchases are outstanding, the delayed delivery purchases could
result in a form of leveraging. When the Fund has sold a security on a delayed
delivery basis, the Fund does not participate in future gains or losses with
respect to the security. If the other party to a delayed delivery transaction
fails to deliver or pay for the securities, the Fund could miss a favorable
price or yield opportunity or could suffer a loss. The Fund may dispose of or
renegotiate a delayed delivery transaction after it is entered into, and may
sell when-issued securities before they are delivered, which may

-15-
<PAGE>

result in a capital gain or loss.

PORTFOLIO TRANSACTIONS

Lincoln Capital is responsible for the placement of portfolio transactions.
It is the Fund's policy to seek to place portfolio transactions with brokers or
dealers on the basis of best execution.

Generally, Lincoln Capital manages the Fund without regard to restrictions
on portfolio turnover. Trading in fixed-income securities does not generally
involve the payment of brokerage commissions, but does involve indirect
transaction costs. The higher the turnover rate of the Fund's portfolio, the
higher the transaction costs will be for the Fund. See "Financial Highlights"
in the Prospectus dated February 1, 1999 for the Fund's turnover for the fiscal
year ended September 30, 1998.

BORROWING

The Fund may not borrow money to purchase securities. The Fund may
borrow money only for temporary or emergency purposes, and then only from banks
in an amount not exceeding 33-1/3% of the value of the Fund's total assets
(including the amounts borrowed). The Fund will not purchase securities when
its borrowings, less amounts receivable on sales of portfolio securities, exceed
5% of total assets.

ILLIQUID SECURITIES

The Fund will not purchase or hold illiquid securities if more than 15%
of the Fund's net assets would then be illiquid. If at any time more than 15%
of the Fund's net assets are illiquid, steps will be taken as soon as
practicable to reduce the percentage of illiquid assets to 15% or less.

INVESTMENT DIVERSIFICATION AND CONCENTRATION

As to seventy-five percent of its total assets, the Fund will not purchase
the security of any issuer (other than cash items or U.S. Government Securities)
if such purchase would cause the Fund's holdings of that issuer to amount to
more than 5% of the Fund's total assets at the time of purchase. The remaining
25% of the Fund's total assets are not so limited which allows Lincoln Capital
to invest more than 5% of the Fund's total assets in a single issuer. In the
event that Lincoln Capital chooses to make such an investment, it may expose the
Fund to greater risk. However, Lincoln Capital does not intend to (i) make any
investment in a single corporate issuer if, at that time, such issuer would
represent more than 5% of the Fund's total assets, or (ii) make any investment
in a single issuer of asset-backed securities if at that time, such issuer would
represent more than 10% of the Fund's total assets.

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<PAGE>

The Fund will not concentrate 25% or more of its respective total assets in
any one industry. U.S. Government Securities are not subject to this
limitation.

TOTAL RETURN, YIELD AND OTHER PERFORMANCE INFORMATION

The Fund may advertise total return and yield, which are based on
historical results and are not intended to indicate future performance.

TOTAL RETURN. A total return is a change in the value of an investment
during the stated period, assuming all dividends and capital gain distributions
are reinvested. A cumulative total return reflects performance over a stated
period of time. An average annual total return is the hypothetical annual
compounded return that would have produced the same cumulative total return if
the performance had been constant over the entire period. Because average
annual returns tend to smooth out variations in the returns, you should
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 [the] Fund's performance is contained
in the Annual Report to Shareholders, which may be obtained from the Fund
without charge.

YIELD. Quotations of yield for the Fund will be based on the investment
income per share (as defined by the Securities and Exchange Commission) during a
particular 30-day period (including dividends and interest), less expenses
accrued during the period ("net investment income"), and will be computed by
dividing net investment income by the maximum public offering price per share on
the last day of the period.

The Fund also may provide current distribution information to its
shareholders in shareholder reports or other shareholder communications or in
certain types of sales literature provided to prospective investors. Current
distribution information for the Fund will be based on distributions for a
specified period (i.e., total dividends from net investment income), divided by
the net asset value per share on the last day of the period and annualized.
Current distribution rates differ from standardized yield rates in that they
represent what a [fund] has declared and paid to shareholders as of the end of
a specified period rather than a Fund's actual net investment income for that
period.

Performance information for the Fund may be compared to various unmanaged
indices, such as the Lehman Brothers Aggregate Bond Index, the Lehman Brothers
Government/Corporate Index and the Salomon [Smith Barney] Broad
Investment-Grade Bond Index. In addition, performance of the [Fund] may be
compared to indices prepared by Lipper Analytical Services, and other entities
or organizations which track the performance of investment companies or
investment advisers. Unmanaged indices (i.e., other than Lipper) generally do
not reflect deductions for administrative and management costs and expenses.
Any performance information should be considered in light of the Fund's
investment objectives and policies, characteristics and quality of the portfolio
and the market conditions during the time period indicated, and should not be
considered to be representative of what may be achieved in the future.

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<PAGE>

From time to time, the Fund or its 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.

CALCULATION OF PERFORMANCE DATA

TOTAL RETURN

The Fund may advertise performance in terms of average annual total return
for 1-, 5- and 10-year periods, or for such lesser periods as the Fund has been
in existence. Average annual total return is computed by finding the average
annual compounded rates of return over the periods that would equate the initial
amount invested to the ending redeemable value, according to the following
formula:

n
P(1 + T) = ERV

Where: P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $10,000
payment made at the beginning of the 1-, 5- or 10-year
periods at the end of the year or period.

The calculation assumes all charges are deducted from the initial $10,000
payment and assumes all dividends and distributions by the Fund are reinvested
at the price stated in the prospectus on the reinvestment dates during the
period, and includes all recurring fees that are charged to all shareholder
accounts.

The average annual total return for each of the Fund's share classes for
the [periods] indicated are as follows:

INSTITUTIONAL CLASS

<TABLE>
<CAPTION>
PERIODS ENDED SEPTEMBER 30, 1998 AVERAGE ANNUAL TOTAL RETURN
- -------------------------------- ---------------------------
<S> <C>
One year 10.2%

From inception (October 1, 1995) 7.8%

INVESTOR CLASS

PERIODS ENDED SEPTEMBER 30, 1998
- --------------------------------

One year 9.3%

From inception (February 1, 1997) 9.1%
</TABLE>

-18-
<PAGE>

YIELD

The Fund may advertise performance in terms of a 30-day yield quotation.
The 30-day yield quotation is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:

6
Yield = 2 [({a-b} OVER {cd} + 1) - 1]

Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period

Based upon the 30-day period ended September 30, 1998 the yield for the
Fund's Institutional Class of shares was 5.52% and 5.10% for the Investor Class
of shares.

NONSTANDARDIZED TOTAL RETURN

The Fund may provide the above described standard total return results for
a period which ends not earlier than the most recent calendar quarter end and
which begins either twelve months before or at the time of commencement of the
Fund's operations. In addition, the Fund may provide nonstandardized total
return results for differing periods, such as for the most recent six months.
Such nonstandardized total return is computed as otherwise described under
"Total Return" except that no annualization is made.

DISTRIBUTION RATES

The distribution rate is calculated by dividing income dividends per share
for a stated period by the offering price per share as of the end of the period
to which the distribution relates. A distribution can include gross investment
income from debt obligations purchased at a premium and in effect include a
portion of the premium paid. A distribution can also include gross short-term
capital gains without recognition of any unrealized capital losses. Further, a
distribution can include income from the sale of options by the Fund even though
such option income is not considered investment income under generally accepted
accounting principles. For the year ended September 30, 1998, the historical
distribution rate with respect to the Fund's Institutional Class Shares was
3.52% and for the Investor Class was 3.39%.

Because a distribution can include such premiums, capital gains and option
income, the amount of the distribution may be susceptible to control by the
Adviser through transactions designed to increase the amount of such items.
Also, because the distribution rate is calculated in part by dividing the latest
distribution by net asset value, the distribution rate will increase as the net
asset value declines. A distribution rate can be greater than the yield rate
calculated as described above.

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<PAGE>

Annualized current distribution rates are computed by multiplying income
dividends per share for a specified quarter by four and dividing the resulting
figure by the maximum offering price on the last day of the specified period.
The annualized current distribution rate with respect to the Fund's
Institutional Class shares for the quarter ended September 30, 1998 was 5.59%
and for the Investor Class was 5.44%.

PURCHASING, EXCHANGING AND REDEEMING SHARES

INITIAL PURCHASES

Shares are sold at the net asset value next computed after acceptance of
your order by the Fund. The minimum initial investment in the Institutional
Class is $1,000,000 and $1,000 for the Investor Class. However, the Adviser may
waive a minimum initial investment under circumstances in which the Adviser
believes an investor will meet such minimum within a reasonable time. A
completed and signed application is required for each new account you open,
regardless of the method you choose for making your initial investment. An
account application accompanies the Prospectus. Additional forms may be required
from corporations, associations and certain financial institutions. If you have
any questions or need additional applications, call 1-800-29-ARIEL
(1-800-292-7435).

BY MAIL

To purchase shares by mail, please make your check payable to ARIEL MUTUAL
FUNDS and mail it with an application, indicating which of the Ariel Mutual
Funds you would like to buy, to:

Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121

All purchases by check should be in U.S. dollars and made payable to ARIEL
MUTUAL FUNDS. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards, and cash will not be accepted. When purchases are
made by check or periodic automatic investment, [proceeds from redemptions of
such shares cannot be sent to you until the purchase check has cleared, which
normally takes] 15 calendar days.

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<PAGE>

BY WIRE

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 Mutual Fund(s) and the class 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 PURCHASES

You may make subsequent investments in any amount. To invest directly by
bank wire, follow the instructions as shown above for initial investments,
except that there is no need to call us first. Just contact your financial
institution.

Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121

AUTOMATIC INVESTING THROUGH YOUR BANK

You may arrange for automatic investing whereby the Custodian will be
authorized to initiate a debit to your bank account of a specific amount to be
used to purchase shares of the Fund on a monthly or quarterly basis. 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
$1,000,000 for

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<PAGE>

the Institutional Class and $1,000 for the Investor Class, we reserve the right
to close your account. If you desire to utilize this automatic investment
option, please indicate your intention to do so on the application included with
the Prospectus.

Please note that each time and automatic investment is rejected, you will
be charged a $10 fee plus costs incurred by the [Fund]. After two successive
attempts to purchase funds through the automatic investment program that have
been rejected, your account will be removed from this program.

PURCHASING THROUGH TAX-SAVING RETIREMENT PLANS

You may establish your new account under one of several tax-deferred plans.
These plans let you invest for retirement and shelter your investment income
from current taxes. Before opening a retirement account, consult your tax
advisory to determine which options are best suited to your needs.

- Education IRAs: available to families with children under 18 to help pay
for qualified higher education expenses. Certain income limits apply.

- Qualified Profit-Sharing and Money-Purchase 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.

- 403(b)(7) Custodial Accounts: available to employees of most non-profit
organizations and public schools and universities.

Contact the Adviser for complete information kits discussing the plans and
their benefits, provisions and fees.

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<PAGE>

PRICING 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. The Fund's NAV will vary daily based on the market values of its
investments.

Fixed-income securities, including those to be purchased under firm
commitment agreements (other than obligations having a maturity of 60 days or
less), are normally valued on the basis of quotes obtained from brokers and
dealers or pricing services. Short-term investments having a maturity of 60
days or less are valued at amortized cost, unless the Board of Trustees
determines that such method is not appropriate under specific circumstances.
Assets for which there are no quotations available will be valued at fair value
as determined by the Board of Trustees.

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 Fund is closed for
business any day the New York Stock Exchange is closed and on the following
holidays: Columbus Day, and Veterans' Day. All purchases of Fund shares will
be confirmed and credited to your account in full and fractional shares.

WHEN YOUR ACCOUNT WILL BE CREDITED

Your purchase will be processed at the next offering price based on the net
asset value next calculated after your order is received and accepted. Such
calculation is made at the close of regular session trading on the New York
Stock Exchange, which is usually 3:00 p.m. Central time. Except as provided
above, all your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks. No cash will be accepted. The Fund reserves the right to
suspend the offering of shares for a period of time or to reject any specific
purchase order. If your check does not clear or your automatic investment is
rejected, your purchase will be canceled and you will be charged a $10 fee plus
costs incurred by the Fund. When you purchase by check, the Fund can hold
payment on redemptions until they are reasonably satisfied that the investment
is collected (normally up to 15 calendar days from the purchase date). To avoid
this collection period, you can wire federal funds from your bank, which may
charge you a fee.

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<PAGE>

OTHER INFORMATION ABOUT PURCHASING SHARES

Although there is no sales charge imposed by the Fund when you purchase
shares directly, 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 Fund does not issue share certificates unless you specifically request
one each time you make a purchase. Certificates are not issued for fractional
shares. Also, shares represented by certificates may not be redeemed by
telephone. See "Redeeming Shares" for information on how to redeem your shares.

HOW TO EXCHANGE SHARES

You may exchange your shares in the Fund for shares of the other Ariel
Mutual Funds at no additional charge as long as your total investment in each
class or Fund meets the minimum investment required for that class or Fund.

You may also exchange your shares in any Ariel Mutual Fund for shares of
Cash Resource Trust Money Market Fund, Cash Resource Trust U.S. Government Money
Market Fund or Cash Resource Trust Tax-Exempt Money Market Fund (collectively,
the "Cash Resource Trust Funds") at no additional charge as long as your total
investment meets any required minimum. This exchange privilege is a convenient
way to buy shares in a money market fund in order to respond to changes in your
goals or in market conditions. These money market funds are managed by
Commonwealth Advisors, Inc.

Before exchanging your shares into shares of the Fund's Investor Class,
shares of any other Ariel Mutual Fund or shares of any Cash Resource Trust Fund,
read the applicable prospectus. To obtain a prospectus for any of these funds,
just call 1-800-29-ARIEL (1-800-292-7435).

BY MAIL

To exchange your shares of the Fund into shares of one of the other Ariel
Mutual Funds, or Cash Resource Trust Funds 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 Ariel Mutual Fund or Cash Resource Trust 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.

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<PAGE>

BY TELEPHONE

OTHER INFORMATION ABOUT EXCHANGING SHARES

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 Mutual 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 Fund only for shares that have been registered
for sale in your state. See also "Dividends, Capital Gains and Taxes."
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 Fund reserves the right to terminate or modify the exchange privilege
with at least 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 Fund's performance and shareholders,
the Fund also reserves 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 the Fund's
assets. In particular, a pattern of exchanges with a "market timer" strategy may
be disruptive to the Fund.

If you have any share certificates, you must include them with your
exchange request. For certificate delivery instructions see "Redeeming
Shares--By Mail."

SPECIAL SERVICES AND CHARGES

The Fund pays 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 the Fund through a program of services
offered by a broker-dealer or financial institution, you should read the program
materials in conjunction with this Statement of Additional Information. Certain
features may be modified in these programs, and administrative charges may be
imposed by these institutions for the services rendered.

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<PAGE>

HOW TO REDEEM 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 the Transfer
Agent[, IFTC,] 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. Please remember that you cannot
place any conditions on your request. If any share certificates were issued,
they must be returned duly endorsed or accompanied by a separate stock
assignment. Under certain circumstances, signature guarantees may be required.
Please call 1-800-29-ARIEL (1-800-292-7435) for more information.

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. The check can only
be issued for up to $25,000, and only to the registered owner, 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. See
"Telephone Transactions" for more information.

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.

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. See the restrictions under "Telephone Transactions"
as they also apply to wire redemptions.

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<PAGE>

OTHER INFORMATION ABOUT REDEMPTIONS

Shares are redeemed at the net asset value next computed after acceptance
of your order by the Fund. There is no charge for redeeming your shares. If,
however, you redeem shares through certain dealers or financial institutions,
you may be charged a fee when you redeem your shares.

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 except the following
holidays: Columbus Day, and Veterans' Day. 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 Fund may hold payment on
the redemption of your shares until it is reasonably satisfied that payments
made by check have been collected (normally up to 15 calendar days after
investment).

MINIMUM ACCOUNT BALANCE.

Please maintain a balance in your Institutional Class account of at least
$1,000,000 and at least $1,000 for the Investor Class. If, due to shareholder
redemptions, the value of your account in the Fund falls below these dollar
amounts, 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 $1,000,000 or $1,000 minimum.

REDEMPTIONS IN KIND

If conditions arise that would make it undesirable for the Fund to pay for all
redemptions in cash, the Fund may authorize payment to be made in marketable
portfolio securities. However, the Fund has obligated itself under the
Investment Company Act of 1940 to redeem for cash all shares of the Fund
presented for redemption by any one shareholder in any 90-day period up to the
lesser of $250,000 or 1% of the Fund's net assets. Securities delivered in
payment of redemptions would be valued at the same value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities may incur brokerage costs or be subject to dealer markdowns when
these securities are sold.

TELEPHONE TRANSACTIONS

If you have telephone transaction privileges, you may purchase, redeem, or
exchange shares or wire funds by telephone as described in this Statement of
Additional Information. You

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<PAGE>

automatically have telephone privileges unless you elect otherwise. These
privileges, however, may not be available through certain dealers and financial
institutions. By exercising the telephone privilege to sell or exchange shares,
you agree that the Fund shall not be liable for following telephone instructions
reasonably believed to be genuine. Reasonable procedures will be employed to
confirm that such instructions are genuine and, if not employed, the Fund may be
liable for unauthorized instructions. 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 Fund
reserves the right to terminate, suspend or modify telephone transaction
privileges.

DIVIDENDS, CAPITAL GAINS AND TAXES

The tax discussion in this section is not intended as a complete or
definitive discussion of the tax effects of investment in the Fund. Each
investor should consult his or her own tax adviser regarding the effect of
federal, state and local taxes related to ownership, exchange or sale of Fund
shares.

Each year, the Fund distributes substantially all of its net investment
income and capital gains to shareholders.

The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, as amended (the "Code"). As such,
the Fund generally will not pay Federal income tax on the income and gains it
pays as dividends to its shareholders. In order to avoid a 4% Federal excise
tax, the Fund intends to distribute each year substantially all of its net
income and gains.

Dividends from net investment income are declared daily and paid monthly.
Net investment income consists of the interest income, net short-term capital
gains, if any, and dividends declared and received on investments, less
expenses. Distributions of net short-term capital gains (treated as dividends
for tax purposes) and net long-term capital gains, if any, are normally declared
and paid by the Fund once a year.

DIVIDEND AND DISTRIBUTION PAYMENT OPTIONS

Dividends and any distributions from the Fund are automatically reinvested
in the Fund at net asset value, unless you elect to have the dividends of $10 or
more paid in cash. You must notify the Fund 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.

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<PAGE>

TAXES ON DISTRIBUTIONS

Distributions are subject to federal income tax, and may also be subject to
state or local taxes. Distributions are taxable when they are paid, whether
they are received in cash, or reinvested. However, distributions declared in
December and paid in January are taxable as if they were paid on December [31of
the year they are declared]. For federal tax purposes, the Fund's income and
short-term capital gain distributions are taxed as dividends; long-term capital
gain distributions are taxed as long-term capital gains. Some dividends may be
exempt from state or local income tax as income derived from U.S. Government
Securities. You should consult your tax adviser on the taxability of your
distributions.

"BUYING A DIVIDEND"

YOU MAY REALIZE A CAPITAL GAIN OR LOSS WHEN YOU SELL OR EXCHANGE SHARES.

If you sell your shares or exchange them for shares of another fund, you
will have a short or long-term capital gain or loss, depending on how long you
owned the shares which were sold or exchanged. However, the Trust believes that
an exchange between classes of the same fund are non-taxable. In January, you
will be sent a form indicating the proceeds from all sales, including exchanges.
You should keep your annual year-end account statements to determine the cost
(basis) of the shares to report on your tax returns.

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<PAGE>

IN-KIND PURCHASES OF INSTITUTIONAL CLASS SHARES OF THE FUND

Shares of the Fund are continuously offered at their net asset value next
determined after an order is accepted. The methods available for purchasing
shares of the Fund are described in the Prospectus. In addition, Institutional
Class shares of the Fund may be purchased using securities, so long as the
securities delivered to the Fund meet the investment objective and policies of
the Fund, including its investment restrictions, and are otherwise acceptable to
the Sub-Adviser, which reserves the right to reject all or any part of the
securities offered in exchange for shares of the Fund. Among other things, the
Sub-Adviser will consider the following criteria in determining whether to
accept securities for "in-kind" purchase of Fund shares.

(1) The securities offered by the investor in exchange for shares of the
Fund must be readily marketable and must not be in any way restricted as to
resale or otherwise be illiquid.

(2) The securities must have a value which is readily ascertainable in
accordance with the procedures used by the Fund to value its portfolio
securities.

The Fund believes that this ability to purchase Institutional Class shares
of the Fund using securities provides a means by which holders of certain
securities may obtain diversification and continuous professional management of
their investments without the expense of selling those securities in the public
market. Benefits to the Fund may include the ability to acquire desirable
securities at a lower transaction cost.

An investor who wishes to make an "in-kind" purchase must furnish in
writing to the Fund a list with a full and exact description of all of the
securities which the investor proposes to deliver. The Fund will advise the
investor as to those securities which it is prepared to accept and will provide
the investor with the necessary forms to be completed and signed by the
investor. The investor should then send the securities, in the proper form for
transfer, with the necessary forms to the Fund and certify that there are no
legal or contractual restrictions on the free transfer and sale of the
securities. The securities will be valued as of the close of business on the
day of receipt by the Fund in the same manner as portfolio securities of the
Fund are valued. (See the section entitled "Net Asset Value" in the
Prospectus.) The number of shares of

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<PAGE>

the Fund, having a net asset value as of the close of business on the day of
receipt equal to the value of the securities delivered by the investor, will be
issued to the investor.

The exchange of securities by the investor pursuant to this offer will
constitute a taxable transaction and may result in a gain or loss to the
investor for Federal income tax purposes. Each investor should consult a tax
adviser to determine the tax consequences under Federal and state law of making
such an "in-kind" purchase.

INVESTMENT ADVISER, SUB-ADVISER AND SERVICES ADMINISTRATOR

Ariel Capital Management, Inc. (the "Adviser"), 307 North Michigan Avenue,
Suite 500, Chicago, Illinois 60601, which is controlled by John W. Rogers, Jr.,
acts as investment adviser under an Investment Advisory Agreement and also acts
as the Administrator under an Administrative Services Agreement with the Trust.

Both the Investment Advisory Agreement and the Administrative Services
Agreement between the Trust and the Adviser will remain in effect as to the Fund
indefinitely, provided continuance is approved at least annually by vote of the
Board of Trustees of the Trust or by the holders of a majority of the
outstanding shares of the Fund; and further provided that such continuance is
also approved annually by the vote of a majority of the Trustees of the Trust
who are not parties to either Agreement or interested persons of parties to such
agreement or interested persons of such parties, cast in person at a meeting
called for the purpose of voting on such approval. The Agreements may be
terminated without penalty by the Trust or the Adviser upon 60 days' prior
written notice; automatically terminates in the event of its assignment.

Under the Investment Advisory Agreement, the Adviser performs or supervises
the investment and reinvestment of the assets of the Fund and is responsible for
certain management services that are necessary or desirable to the operation of
the Fund. The Adviser may delegate its investment management responsibilities
to a sub-adviser selected by the Adviser and approved in accordance with the
Investment Company Act of 1940. The management services provided by the Adviser
consist of maintaining the Fund's organizational existence, providing office
space and personnel, preparing, filing and distributing notices, proxy
materials, reports to regulatory bodies, and reports to shareholders of the
Fund, maintaining portfolio and general accounting records; and other incidental
management services as are necessary to the conduct of the Fund's affairs except
such notices, materials, reports, records and services as are to be provided
under the Administrative Services Agreement.

The Adviser also performs services under the Administrative Services
Agreement as described in the Prospectus. For the services under the
Administrative Services Agreement, the Institutional Class pays a fee based on
the average daily net assets of the Institutional Class at the annual rate of
0.10%. For these services, the Investor Class pays a fee based on the average
daily net assets of the Investor Class at the annual rate of 0.25% if such net
assets are less than $1 billion; 0.225% if such net assets are at least $1
billion, but less than $2 billion and 0.20% if such net assets are at least $2
billion or more. Fees paid to the Adviser for the fiscal years ended September
30, 1996, 1997 and 1998 were $24,444, $241,717, and $451,083, respectively,
under

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<PAGE>

the Advisory Agreement and $7,396, $69,210, and $130,178, respectively, under
the Administrative Services Agreement.

The Adviser has entered into an agreement with Sunstone Financial Group,
Inc. ("Sunstone") under which Sunstone provides certain administrative services
to the Funds. Under the direction and supervision of the Adviser, Sunstone
performs fund accounting services and prepares reports for the Board of
Trustees. For its services, Sunstone receives from the Adviser 0.041% of the
average net assets of the Ariel Mutal Funds. Sunstone does not receive any
compensation from the Funds.

Lincoln Capital Management Company (the "Sub-Adviser"), 200 South Wacker
Drive, Chicago, IL 60606, acts as the Sub-Adviser of the Fund. Under a
Sub-Advisory agreement with the Adviser, the Sub-Adviser manages the day-to-day
investment operations for the Fund. The Fund pays no fees directly to the
Sub-Adviser.

The Adviser and Sub-Adviser have adopted Codes of Ethics which regulate the
personal securities transactions of the Adviser's and the Sub-Adviser's
investment personnel and other employees and affiliates with access to
information regarding securities transactions of the Fund. Both Codes of Ethics
require investment personnel to disclose all personal securities holdings upon
commencement of employment and all subsequent trading activity to the firm's
Compliance Officer. Investment personnel are prohibited from engaging in any
securities transactions, including the purchase of securities in a private
offering, without the prior consent of the Compliance Officer. Additionally,
such personnel are prohibited from purchasing securities in an initial public
offering and are prohibited from trading in any securities (i) for which the
Fund has a pending buy or sell order, (ii) which the Fund is considering buying
or selling, or (iii) which the Fund purchased or sold within seven calendar
days.

METHOD OF DISTRIBUTION OF THE INVESTOR CLASS SHARES

The Trust has entered into an agreement with Ariel Distributors, Inc.
("Ariel Distributors"), a wholly-owned subsidiary of the Adviser, whereby Ariel
Distributors serves as the principal underwriter to distribute the Investor
Class's shares on a no-load basis.

The Trust has also adopted a Distribution Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940 with respect to the Investor Class (the
"Distribution Plan"). Rule 12b-1 permits an investment company to finance,
directly or indirectly, any activity which is primarily intended to result in
the sale of its shares only if it does so in accordance with the provisions of
such Rule. The Distribution Plan authorizes the Trust to pay up to 0.25%
annually of the average daily net assets of the Investor Class in connection
with the distribution of the Investor Class shares.

The Distribution Plan was approved by the Board of Trustees, including the
Trustees who are not "interested persons" of the Trust (as that term is defined
in the Investment Company Act of 1940) and who have no direct financial interest
in the operation of the Plan or in any agreements related to the Distribution
Plan (the "Independent Trustees"). The selection and

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<PAGE>

nomination of the Independent Trustees is committed to the discretion of such
Independent Trustees. In establishing the Distribution Plan, the Trustees
considered various factors including the amount of the distribution fee. The
Trustees determined that there is a reasonable likelihood that the Distribution
Plan will benefit the Trust and its shareholders.

The Distribution Plan may be terminated as to the Investor Class by vote of
a majority of Independent Trustees, or by vote of a majority of the outstanding
Investor Class shares. Any change in the Distribution Plan that would
materially increase the distribution cost to the class requires approval of the
shareholders of that class; otherwise, the Distribution Plan may be amended by
the Trustees, including a majority of the Independent Trustees.

The Distribution Plan will continue in effect indefinitely, if not
terminated in accordance with its terms, provided that such continuance is
annually approved by (i) the vote of a majority of Independent Trustees, and
(ii) the vote of a majority of the entire Board of Trustees.

Apart from the Distribution Plan, the Adviser, at its expense, may incur
costs and pay expenses associated with the distribution of shares of the
Investor Class, including compensation to broker-dealers in consideration of
promotional or administrative services.

During the last fiscal year ended September 30, 1998, the Investor Class
paid Distribution Plan expenses of $ 2,162 to Ariel Distributors. Of this
amount, $464 was used to pay broker-dealers for their distribution and
maintenance services and $1,698 was used for advertising, shareholder account
maintenance, printing and related costs.

The Fund has authorized certain Qualified Dealers to accept on its behalf
purchase and redemption orders. Such Dealers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when an
authorized Dealer or such Dealer's authorized designee, accepts the order.
Customer orders will be priced at the Fund's net asset value next computed after
they are accepted by an authorized Dealer or such Dealer's designee.

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<PAGE>

TRANSFER AGENT AND CUSTODIAN

Investors Fiduciary Trust Company ("IFTC") has been retained by the Trust
to act as transfer agent, custodian, dividend disbursing agent and shareholder
servicing agent. These responsibilities include: responding to shareholder
inquiries and instructions concerning their accounts; crediting and debiting
shareholder accounts for purchases and redemptions of Fund shares and confirming
such transactions; updating of shareholder accounts to reflect declaration and
payment of dividends; keeping custody of all of the Fund's investments; and
preparing and distributing quarterly statements to shareholders regarding their
accounts.

PORTFOLIO TRANSACTIONS

Lincoln Capital is responsible for the placement of portfolio transactions.
Generally, Lincoln Capital manages the Fund without regard to restrictions on
portfolio turnover. Trading in fixed-income securities does not generally
involve the payment of brokerage commissions, but does involve indirect
transaction costs. In addition to its management of the Fund's portfolio, the
Sub-Adviser also acts as investment adviser to various private accounts. There
may be times when an investment decision may be made to purchase or sell the
same security for the Fund and one or more clients of the Sub-Adviser. In those
circumstances, the transactions will be allocated as to amount and price in a
manner considered equitable to each. In some instances, this procedure could
adversely affect the Fund but the Fund deems that any disadvantage in the
procedure would be outweighed by the increased selection available and the
increased opportunity to engage in volume transactions.

Portfolio transactions are undertaken on the basis of their desirability from an
investment standpoint. Investment decisions and choice of brokers and dealers
are made by the Sub-Adviser under the direction and supervision of the Trust's
Board of Trustees.

The Trust seeks to obtain the best price and most favorable execution and
selects broker-dealers on the basis of their professional capability and the
value and quality of their services. Broker-dealers that provide the Trust with
statistical, research, or other information and services may be selected. Such
broker-dealers may receive compensation for executing portfolio transactions
that is in excess of the compensation another broker-dealer would have received
for executing such transactions, if the Sub-Adviser determines in good faith
that such compensation is reasonable in relation to the value of the information
and services provided. Research services furnished by investment firms may be
utilized by the Sub-Adviser in connection with its investment services for other
accounts; likewise, research services provided by investment firms used for
other accounts may be utilized by the Adviser in performing its services for the
Trust. Although any statistical, research, or other information or services
provided by broker-dealers may be useful to the Sub-Adviser, its dollar value is
generally indeterminable and its availability or receipt does not materially
reduce the Sub-Adviser's normal research activities or expenses.

The Sub-Adviser may also execute Fund transactions with or through
broker-dealers who have sold shares of the Fund. However, such sales will not be
a qualifying or disqualifying factor in a [

-34-
<PAGE>

]broker-dealer's selection nor will the selection of any broker-dealer be based
on the volume of Fund shares sold.

No brokerage commissions were paid by the Fund during fiscal years 1996, 1997,
and 1998.

INDEPENDENT AUDITORS

The Fund's independent auditors, Ernst & Young LLP, 233 South Wacker Drive,
Chicago, IL 60606, audit and report on the Fund's annual financial statements,
review certain regulatory reports and the Fund's federal income tax returns, and
perform other professional accounting, auditing, tax and advisory services when
engaged to do so by the Fund. Shareholders will receive annual audited financial
statements and semi-annual unaudited financial statements.

TRUSTEES AND OFFICERS

Ariel Mutual Funds operate under the supervision of the Board of Trustees
responsible to each Fund's shareholders. Set forth below are the principal
occupations of the Trustees and Officers during the last five years:

JAMES COMPTON, 60, Trustee. Mr. Compton is president and Chief Executive
Officer of Chicago Urban League. Address: 4510 S. Michigan Ave., Chicago, IL
60653.

WILLIAM C. DIETRICH, CPA, 49, Trustee. Mr. Dietrich is and independent financial
consultant specializing in early stage entrepreneurial companies. He formerly
served as Vice President and Chief Financial Officer for Shoppers Express, Inc.
Address: 5110 Ridgefield Road, Bethesda, Maryland 20816.

CHRISTOPHER G. KENNEDY, 35, Trustee. Mr. Kennedy is [both an] Executive and
Director of Merchandise Mart Properties, Inc., a real estate management firm.

-35-
<PAGE>

Prior to 1991, he was a student at the J.L. Kellogg Graduate School of
Management at Northwestern University. Address: The Merchandise Mart, 200 World
Trade Center, Suite 470, Chicago, Illinois 60654.

*MELLODY L. HOBSON, 29, Trustee. Ms. Hobson is Senior Vice President, Director
of Marketing of Ariel Capital Management. Address: 307 North Michigan Avenue,
Suite 500, Chicago, Illinois 60601.

*ROGER P. SCHMITT, 41, Vice President, Secretary and Assistant Treasurer. Mr.
Schmitt is Chief Operating Officer of Ariel Capital Management. Formerly, Mr.
Schmitt was Marketing Manager with IBM Corporation. Address: 307 North Michigan
Avenue, Suite 500, Chicago, Illinois 60601.

(1) Officers and trustees deemed to be "interested persons" of the Fund under
the Investment Company Act of 1940.

-36-
<PAGE>

COMPENSATION SCHEDULE

During the fiscal year ended September 30, 1998, compensation paid by the
Fund to the trustees of the Trust not affiliated with the Adviser was as
follows:

<TABLE>
<CAPTION>
NAME COMPENSATION
- ---- ------------
<S> <C>
Mario L. Baeza $3,200
James Compton $3,200
William C. Dietrich $3,200
Royce N. Flippin, Jr. $3,200
John G. Guffey, Jr. $3,100
Christopher G. Kennedy $3,100
Bert N. Mitchell $3,200
</TABLE>

-37-
<PAGE>

SIGNIFICANT SHAREHOLDERS

The following table lists the holders of five percent or more of the
outstanding shares of each class of the Fund as of [January 27, 1999].

INSTITUTIONAL CLASS

<TABLE>
<CAPTION>
Name and Address Number of Shares Percentage of
of Owner Owned Outstanding Shares
- -------- ---------------- ------------------
<S> <C> <C>
[HW Ward Cust.] [1,880,161.623] [13%]

Hotel Empl & Rest. Empl
International Union Pension Fund
48 Shuman Blvd.
Naperville, IL 60563

Commonwealth Life Insurance Co. [2,568,971.760] [13%]

Investment Operations
11th Floor
400 W. Market Street
Louisville, KY 40202

Local No. 1 Pension Trust Fund [1,396,348.701] 9%
30 N. LaSalle Street, Suite 2000
Chicago, IL 60602
</TABLE>

[MANAGEMENT OWNERSHIP. As of January 25, 1999, the directors and officers of
the Ariel Mutual Funds as a group owned less than 1% of the Investor Class
shares and less than 1% of the Institutional Class shares.]

APPENDIX A

CORPORATE BOND AND COMMERCIAL PAPER RATINGS

The following is a description of Moody's Investors Service, Inc.'s bond
ratings:

-38-
<PAGE>

or fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make long-term risks appear somewhat larger than
Aaa securities.

The following is a description of Standard & Poor's Corporation's investment
grade bond ratings:

AA: Bonds rated AA are high-grade obligations. In the majority of instances,
they differ from AAA issues only to a small degree. Prices of AA bonds also move
with the long-term money market.

A: Bonds rated A are upper medium grade obligations. They have considerable
investment strength, but are not entirely free from adverse effects of change in
economic and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior but, to some extent,
also economic conditions.

BBB: Bonds rated BBB are medium grade obligations. They are considered
borderline between definitely sound obligations and those where the speculative
element begins to predominate. These bonds have adequate asset coverage and are
normally protected by satisfactory earnings. Their susceptibility to changing
conditions, particularly to depressions, necessitates constant monitoring. These
bonds are more responsive to business and trade conditions than to interest
rates. This group is the lowest that qualifies for commercial bank investment.

-39-
<PAGE>

Issuers rated Prime-1 by Moody's Investors Services, Inc., are considered to
have superior capacity of repayment of short-term promissory obligations. Such
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

-40-

<PAGE>

PART C. OTHER INFORMATION

ITEM 23. EXHIBITS

a. Declaration of Trust (incorporated by reference to Registrant's
Post-Effective Amendment No. 17, File No. 33-7699).

b. By-Laws (incorporated by reference to Registrant's Post-Effective
Amendment No. 17, File No. 33-7699).

c. Not Applicable.

d. Management Agreement (incorporated by reference to Registrant's
Post-Effective Amendment No. 17, File No. 33-7699).

Investment Advisory Agreement with respect to Ariel Premier Bond
Fund (incorporated by reference to Registrant's Post-Effective
Amendment No. 15, File No. 33-7699).

Sub-Advisory Agreement (incorporated by reference to Registrant's
Post-Effective Amendment No. 15, File No. 33-7699).

Administrative Services Agreement with respect to Ariel Premier
Bond Fund (incorporated by reference to Registrant's
Post-Effective Amendment No. 16, File No. 33-7699).

e. Underwriting Agreement (incorporated by reference to Registrant's
Post-Effective Amendment No. 17, File No. 33-7699).

f. Not Applicable.

g. Custody Agreement (incorporated by reference to Registrant's
Post-Effective Amendment No. 17, File No. 33-7699).

h. Transfer Agency Contract (incorporated by reference to
Registrant's Post-Effective Amendment No. 17, File No. 33-7699).

i. Opinion and Consent of Counsel as to Legality of Shares Being
Registered.

j. Report of Independent Auditors.

Consent of Independent Auditors to Use of Report.

k. Not Applicable.

l. Not Applicable.

<PAGE>

m. Rule 12b-1 Distribution Plan (incorporated by reference to
Registrant's Post-Effective Amendment No. 17, File No. 33-7699).

n. Schedule for Computation of Performance Quotation (incorporated
by reference to Registrant's Post-Effective Amendment No. 17,
File No. 33-7699).

o. Powers of Attorney (incorporated by reference to Registrant's
Post-Effective Amendments No. 16, 17, and 20 File No. 33-7699).

Plan Pursuant to Rule 18f-3 (incorporated by reference to
Registrant's Post-Effective Amendment No. 15, File No. 33-7699).

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Not Applicable.

ITEM 25. INDEMNIFICATION

Registrant's Declaration of Trust provides, in summary, that officers,
trustees, employees, and agents shall be indemnified by Registrant against
liabilities and expenses incurred by such persons in connection with actions,
suits, or proceedings arising out of their offices or duties of employment,
except that no indemnification can be made to such a person if he has been
adjudged liable of willful misfeasance, bad faith, gross negligence, or reckless
disregard of his duties.

Registrant's Declaration of Trust also provides that Registrant may
purchase and maintain liability insurance on behalf of any officer, trustee,
employee or agent against any liabilities arising from such status. In this
regard, Registrant maintains, jointly with the Adviser, a Directors & Officers
(Partners) Liability Insurance policy providing Registrant and the Adviser with
directors and officers liability coverage.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Ariel Capital Management, Inc., the Registrant's investment adviser,
renders investment advisory services to individual, institutional and pension
and profit-sharing plan accounts. The following directors and officers of the
adviser have been engaged in other professions and/or employment capacities
during the past two fiscal years, as indicated below.

<PAGE>

<TABLE>
<CAPTION>
NAME OF COMPANY,
NAME AND TITLE PRINCIPAL BUSINESS
WITH ADVISER ADDRESS CAPACITY
- ------------ ------------------ --------
<S> <C> <C>
James E. Bowman, Jr., M.D. University of Chicago Professor
Director Dept. of Pathology
Chicago, IL 60637

Anna Perez General Manger of Corporate General
Director Communications and Programs Manager
Chevron Corporation
575 Market Street, Room 814
San Francisco, CA 94105

Robert I. Solomon Silliker Laboratories Vice
Director 900 Maple Road President,
Homewood, IL 60430 Marketing

Paula Wolff Governors' State University President
Director University Park, IL 60466
</TABLE>

ITEM 27. PRINCIPAL UNDERWRITERS

Ariel Distributors, Inc., located at 307 North Michigan Avenue, Suite 500,
Chicago IL 60601, serves as the principal underwriter of the Registrant. Ariel
Distributors, Inc. does not act as principal underwriter for any other
investment company.

(b) Positions of Ariel Distributors' Officers and Directors:

<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION(S) WITH POSITION(S) WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
---------------- ----------- ----------
<S> <C> <C>
Eric T. McKissack President and Chairman Trustee and President
of the Board
Vice President

James Atkinson Director, Vice President
and Treasurer

Edward Singleton Vice President Treasurer and Assistant
Secretary

<PAGE>

<CAPTION>
NAME AND PRINCIPAL POSITION(S) WITH POSITION(S) WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
---------------- ----------- ----------
<S> <C> <C>
Roger P. Schmitt Vice President and Secretary Vice President, Secretary
and Assistant Treasurer

Mellody Hobson Director, Senior Vice Trustee and Vice President
President

Deborah Dunston Vice President and Controller None
</TABLE>

The business address of the above individuals is 307 North Michigan Avenue,
Suite 500, Chicago, Illinois 60601.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION(S) WITH POSITION(S) WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
---------------- ----------- ----------
<S> <C> <C>
James E. Bowman, Jr. Director None
University of Chicago
Dept. of Pathology
Chicago, Illinois 60637

Henry B. Pearsall Director None
721 Ontario, Unit 209
Oak Park, IL 60302

Anna Perez Director None
Chevron Corporation
General Manager of Corporate
Communications and Programs
575 Market Street, Room 814
San Francisco, CA 94105

Robert I. Solomon Director None
Silliker Laboratories
900 Maple Road
Homewood, Illinois 60430

<PAGE>

<CAPTION>
NAME AND PRINCIPAL POSITION(S) WITH POSITION(S) WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
---------------- ----------- ----------
<S> <C> <C>
Paula Wolff Director None
Governors' State University
University Park, Illinois
60466
</TABLE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

All documents and records relating to Ariel Distributors, Inc. are located
at Ariel Capital Management, Inc., 307 North Michigan Avenue, Chicago, Illinois
60601

All documents and records relating to the Ariel Mutual Funds are located at
Sunstone Financial Services, 207 E. Buffalo Street, Suite 400, Milwaukee,
Wisconsin 53202

ITEM 29. MANAGEMENT SERVICES.

Not applicable.

ITEM 30. UNDERTAKINGS.

The Registrant undertakes to furnish to each person to whom a
Prospectus is delivered, a copy of the Registrant's latest Annual Report to
Shareholders, upon request and without charge.

<PAGE>

ARIEL GROWTH FUND

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois on the
27th day of January, 1999.

ARIEL GROWTH FUND

By: /s/Sheldon R. Stein
-------------------
Sheldon R. Stein,
Attorney-in-fact

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

Signature Title Date
--------- ----- ----
Eric T. McKissack* Chief Executive January 27, 1999
- ------------------ Officer and Trustee
Eric T. McKissack

Edward Singleton* Principal Financial January 27, 1999
- ----------------- and Accounting Officer
Edward Singleton

*By:/s/Sheldon R. Stein
-------------------
Sheldon R. Stein,
Attorney-in-Fact

*Sheldon R. Stein signs this document on behalf of the Registrant pursuant
to the power of attorney filed as Exhibit 18(a) to Post-Effective Amendment No.
16 and the foregoing officers pursuant to the Powers of Attorney filed as
Exhibit 18(a) to Post-Effective Amendments No. 17 and 20.

<PAGE>

ARIEL GROWTH FUND

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

Signature Title Date
--------- ----- ----
Mario Baeza* Trustee January 27, 1999
- --------------------------
Mario Baeza

James Compton* Trustee January 27, 1999
- --------------------------
James Compton

William C. Dietrich* Trustee January 27, 1999
- --------------------------
William C. Dietrich

Royce N. Flippin, Jr.* Trustee January 27, 1999
- --------------------------
Royce N. Flippin, Jr.

John G. Guffey, Jr.* Trustee January 27, 1999
- --------------------------
John G. Guffey, Jr.

Christopher G. Kennedy* Trustee January 27, 1999
- --------------------------
Christopher G. Kennedy

Bert N. Mitchell* Trustee January 27, 1999
- --------------------------
Bert N. Mitchell

Mellody Hobson* Trustee January 27, 1999
- --------------------------
Mellody Hobson

*Sheldon R. Stein signs this document on behalf of each of the foregoing
persons pursuant to the Powers of Attorney filed as Exhibit 18(a) to
Post-Effective Amendments No. 17 and 20.

/s/Sheldon R. Stein
-------------------
Sheldon R. Stein,
Attorney-in-Fact

<PAGE>

D'Ancona & Pflaum LLC
111 East Wacker Drive
Suite 2800
Chicago, Illinois 60601-4205

Ariel Investment Trust
307 N. Michigan Avenue
Suite 500
Chicago, Illinois 60601

January 27, 1999

Re: Ariel Fund, Ariel Appreciation Fund and
Ariel Premier Bond Fund (the "Funds")

Ladies and Gentlemen:

We have acted as counsel for Ariel Investment Trust (the "Trust") in
connection with the registration under the Securities Act of 1933 (the "Act") of
an indefinite number of shares of beneficial interest of the series of the Trust
designated Ariel Fund, Ariel Appreciation Fund and Ariel Premier Bond Fund (the
"Shares") in registration statement no. 33-7699 on Form N-1A (the "Registration
Statement").

In this connection we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate and other
records, certificates and other papers as we deemed it necessary to examine for
the purpose of this opinion, including the agreement and declaration of trust
(the "Trust Agreement") and bylaws of the Trust, actions of the board of
trustees of the Trust authorizing the issuance of shares of the Funds and the
Registration Statement.

Based on the foregoing examination, we are of the opinion that upon the
issuance and delivery of the Shares of each Fund in accordance with the Trust
Agreement and the actions of the board of trustees authorizing the issuance of
the Shares, and the receipt by the Trust of the authorized consideration
therefor, the Shares so issued will be validly issued, fully paid and
nonassessable (although shareholders of the Fund may be subject to liability
under certain circumstances as described in the statements of additional
information of the Trust included as Part B of the Registration Statement under
the caption "General Information").

We consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not admit that we are in the category
of persons whose consent is required under section 7 of the Act.

Very truly yours,

D'ANCONA & PFLAUM LLC

By: Sheldon R. Stein, Member

<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholders of
Ariel Mutual Funds:

We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Ariel Growth Fund, and Ariel Appreciation Fund,
and Ariel Premier Bond Fund, comprising Ariel Investment Trust ("Ariel Mutual
Funds"), as of September 30, 1998, the related statements of operations and
changes in net assets and the financial highlights for fiscal periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Ariel Mutual Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1998, by correspondence with the custodian and brokers. 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 audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Funds of the Ariel Mutual Funds at September 30, 1998, and the results of
their operations, the changes in their net the financial highlights for each of
the fiscal periods indicated therein, in conformity with generally accepted
accounting principles.

/s/Ernst & Young LLP
ERNST & YOUNG LLP

Chicago, Illinois
October 16, 1998
<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the use of our report dated
October 16, 1998 in the Registration Statement (Form N-1A) of the Ariel Growth
Fund and its incorporation by reference in the related Prospectuses of the Ariel
Mutual Funds, filed with the Securities and Exchange Commission in the
Post-Effective Amendment No. 22 to the Registration Statement under the
Securities Act of 1933 (File No. 33-7699) and in this Amendment No. 22 to the
Registration Statement under the Investment Company Act of 1940 (File No.
811-4786).

/s/Ernst & Young LLP

Chicago, Illinois
January 27, 1999