ARROW EQUITY PORTFOLIO
ARROW FIXED INCOME PORTFOLIO
ARROW MUNICIPAL INCOME PORTFOLIO
ARROW GOVERNMENT MONEY MARKET PORTFOLIO
(Portfolios of Arrow Funds)
SUPPLEMENT TO PROSPECTUSES DATED NOVEMBER 30, 1996
Effective April 25, 1997, in connection with the merger of Mark Twain
Bancshares, Inc., the parent company of Mark Twain Bank, into Mercantile
Bancorporation Inc., Mississippi Valley Advisors Inc. succeeded Mark Twain
Bank as the investment adviser to Arrow Funds. The terms of the investment
advisory contract between Arrow Funds and Mississippi Valley Advisors Inc.
are substantially similar to the investment advisory contract between Arrow
Funds and Mark Twain Bank. Mississippi Valley Advisors Inc. is a registered
investment adviser with its principal offices at One Mercantile Center, St.
Louis, Missouri 63166. As a consequence of the merger, all references in
the prospectuses to Mark Twain Bank as the investment adviser should be
replaced with references to Mississippi Valley Advisors Inc., as
appropriate. In addition, all references to Mark Twain Brokerage Services,
Inc. should be augmented with references to Mercantile Investment Services,
Inc.
Mark Twain Bank will initially survive the merger and will continue to
serve as custodian to Arrow Funds until such time as shareholders are
otherwise notified.
Please delete the section entitled `Adviser's Background'' from each
prospectus and replace it with the following:
`ADVISER'S BACKGROUND. Mississippi Valley Advisors Inc. is a wholly-owned
subsidiary of Mercantile Bank National Association, which is a wholly-owned
banking subsidiary of Mercantile Bancorporation Inc. Mississippi Valley
Advisors Inc. has managed the portfolios of ARCH Funds, Inc. since its
inception in 1982. Mercantile Bancorporation Inc., a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, is a
financial services company headquartered in St. Louis, Missouri. Through
its related banking subsidiaries, Mercantile Bancorporation Inc. provides
banking and banking-related services, primarily throughout Missouri,
Illinois, Iowa, Arkansas and Kansas. As of December 31, 1996, Mercantile
Bank National Association had total assets of approximately $19 billion. As
of December 31, 1996, Mississippi Valley Advisors Inc.'s Investment
Management Services held approximately $7.9 billion of investment assets
for a wide range of institutional clients, including corporate, public
sector, multi-employer, endowment/foundation and mutual funds. As part of
their regular banking operations, Mercantile Bank National Association's
affiliates may make loans to public companies. Thus, it may be possible,
from time to time, for a Fund to hold or acquire the securities of issuers
which are also lending clients of Mercantile Bank National Association's
affiliates. The lending relationship will not be a factor in the selection
of securities.
Carl C. Enloe has managed the Equity Fund since its inception, December
1992. Mr. Enloe joined Mark Twain Bank, the Equity Fund's former adviser,
in 1987, as head of investments. Prior to joining Mark Twain Bank, he was
head of investments at another major Missouri bank for 17 years. He served
as senior portfolio manager at a private investment company and an analyst
at a member New York Stock Exchange firm. He is a graduate of the
University of Missouri.
Effective immediately, David A. Bethke, a Senior Associate with Mississippi
Valley Advisors Inc., will manage the Fixed Income Fund. Mr. Bethke has
been the principal portfolio manager for the ARCH Government & Corporate
Bond Portfolio and ARCH U.S. Government Securities Portfolio since their
inception in 1988. Mr. Bethke joined Mississippi Valley Advisors Inc. in
1987. Mr. Bethke holds a B.A. degree from the Upper Iowa University and an
M.B.A. degree from the University of Iowa. He is a Chartered Financial
Analyst.
Effective immediately, Peter C. Merzian will manage the Municipal Income
Fund. Mr. Merzian has been the principal portfolio manager for ARCH Tax-
Exempt Money Market Portfolio and ARCH Missouri Tax-Exempt Bond Portfolio
since 1993, and for ARCH Short-Intermediate Municipal Portfolio and ARCH
National Municipal Bond Portfolio since their inception. Mr. Merzian joined
Mississippi Valley Advisors Inc. in 1993 and has over 8 years of investment
experience. Prior to joining Mississippi Valley Advisors Inc., he was
employed at another financial institution for four years, where he was a
portfolio manager. Mr. Merzian received his B.S. and M.B.A. degrees from
St. Louis University.''
April 25, 1997
Federated Securities Corp., Distributor.
Cusip 042749101
Cusip 042749200
Cusip 042749309
Cusip 042749408
G00924-01 (4/97)
