<PAGE> 1
ARK FUNDS
Supplement to Retail Class Prospectus dated September 1, 1996
This supplement provides new and additional information beyond that
contained in the Retail Class Prospectus and should be retained and read in
conjunction with the Prospectus.
1. The information under "Summary" in the Prospectus at page 2 is revised by
deleting the references to the U.S. Government Money Market Portfolio and
Equity Income Portfolio in the last sentence of the first paragraph. These
Portfolios are currently offering Retail Class shares.
2. The following expense information updates and replaces the expense
information with respect to the Portfolios in the tables under "Fees and
Expenses" at pages 4 through 7 of the Prospectus:
<TABLE>
<CAPTION>
RETAIL CLASS
---------------------------------------------------------
U.S.
TREASURY U.S. GOVERNMENT MONEY TAX-FREE
MONEY MARKET MONEY MARKET MARKET MONEY MARKET
SHAREHOLDER TRANSACTION EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)................. None None None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price)........................................ None None None None
Maximum Contingent Deferred Sales Charge........ None None None None
Exchange Fee.................................... None None None None
Redemption Fee.................................. None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees (after waivers)(1)................ .19% .14% .10% .09%
12b-1 Fees (after waivers)(2)................... .31% .31% .31% .31%
Other Expenses (after fee waivers)(3)........... .18% .18% .17% .20%
- -----------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers)(4)................................... .68% .63% .58% .60%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The adviser has agreed to waive, on a voluntary basis, a portion of its fees
for the Portfolios and the advisory fees shown reflect those voluntary
waivers. The adviser reserves the right to terminate its fee waivers at any
time in its sole discretion. Absent such waivers, the advisory fees for the
Portfolios would be .25%.
(2) 12b-1 fees include a distribution fee and a shareholder servicing fee. A
portion or all of the shareholder servicing fees are being waived for the
Portfolios. Absent such waivers, the shareholder servicing fees would be
.15%.
(3) Other expenses are estimated based on amounts incurred during the previous
fiscal year and include all expenses except nonrecurring account fees,
brokerage commissions and other capital items, and advisory and 12b-1 fees.
(4) Absent the voluntary fee waivers described above, total operating expenses
for Retail Class shares of the U.S. Treasury Money Market Portfolio, U.S.
Government Money Market Portfolio, Money Market Portfolio and Tax-Free Money
Market Portfolio would be .83%, .83%, .83% and .85%, respectively.
EXAMPLE
- --------------------------------------------------------------------------------
An investor in Retail Class shares would pay the following expenses on a
$1,000 investment assuming (1) 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
----- ------ ------ -------
<S> <C> <C> <C> <C>
U.S. Treasury Money Market Portfolio............ 7 22 38 85
U.S. Government Money Market Portfolio.......... 6 20 35 79
Money Market Portfolio.......................... 6 19 32 73
Tax-Free Money Market Portfolio................. 6 19 33 75
</TABLE>
<PAGE> 2
The example assumes that all applicable sales loads have been waived, that all
dividends and distributions are reinvested and that the amounts listed under
"Total Operating Expenses" remain the same in the years shown. The example
should not be considered a representation of past or future expenses and actual
expenses may be greater or less than shown.
<TABLE>
<CAPTION>
RETAIL CLASS
---------------------------------------------------------------
SHORT-TERM INTERMEDIATE MARYLAND PENNSYLVANIA
TREASURY FIXED INCOME INCOME TAX-FREE TAX-FREE
SHAREHOLDER TRANSACTION EXPENSES PORTFOLIO PORTFOLIO+ PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......... None -- 4.50%* 4.50%* 4.50%*
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price)....................................... None -- None None None
Maximum Contingent Deferred Sales Charge....... None -- None None None
Exchange Fee................................... None -- None None None
Redemption Fee................................. None -- None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees (after waivers)(1)............... .30% .45% .50% .45% .37%
12b-1 Fees (after waivers)(2).................. .25% .00% .25% .25% .25%
Other Expenses (after fee waivers)(3).......... .25% .23% .20% .23% .26%
- ---------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers)(4).................................. .80% .68% .95% .93% .88%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
+ Retail Class shares of this Portfolio are not currently being offered.
* Sales loads are currently being waived on all purchases of Portfolio
shares. These waivers may be discontinued at any time.
(1) The adviser has agreed to waive, on a voluntary basis, a portion of its fees
for the Short-Term Treasury Portfolio, Intermediate Fixed Income Portfolio,
Maryland Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio and the
advisory fees shown reflect those voluntary waivers. The adviser reserves
the right to terminate its fee waivers at any time in its sole discretion.
Absent such waivers, the advisory fees for the Short-Term Treasury
Portfolio, Intermediate Fixed Income Portfolio, Maryland Tax-Free Portfolio
and Pennsylvania Tax-Free Portfolio would be .35%, .60%, .50% and .50%,
respectively.
(2) 12b-1 fees include a distribution fee and a shareholder servicing fee. The
Fund's distributor has agreed to waive, on a voluntary basis, a portion of
all of its distribution fees for the Portfolios. Absent such waivers, the
distribution fees would be .40% for the Short-Term Treasury Portfolio and
.30% for the Intermediate Fixed Income Portfolio, Income Portfolio, Maryland
Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio. Additionally, all of
the shareholder servicing fees are being waived for the Portfolios. Absent
such waivers, the shareholder servicing fees would be .06% for the
Short-Term Treasury Portfolio, Intermediate Fixed Income Portfolio, Maryland
Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio, and .15% for the
Income Portfolio.
(3) Other expenses are estimated based on amounts incurred during the previous
fiscal year and include all expenses except nonrecurring account fees,
brokerage commissions and other capital items, and advisory and 12b-1 fees.
(4) Absent the voluntary fee waivers described above, total operating expenses
for Retail Class shares of the Short-Term Treasury Portfolio, Intermediate
Fixed Income Portfolio, Income Portfolio, Maryland Tax-Free Portfolio and
Pennsylvania Tax-Free Portfolio would be 1.06%, 1.19%, 1.15%, 1.09% and
1.12%, respectively.
EXAMPLE
- --------------------------------------------------------------------------------
An investor in Retail Class shares would pay the following expenses on a
$1,000 investment assuming (1) 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
---- ----- ----- ------
<S> <C> <C> <C> <C>
Short-Term Treasury Portfolio...................... 8 26 -- --
Intermediate Fixed Income Portfolio................ 7 22 -- --
Income Portfolio................................... 10 30 53 117
Maryland Tax-Free Portfolio........................ 9 30 -- --
Pennsylvania Tax-Free Portfolio.................... 9 28 -- --
</TABLE>
2
<PAGE> 3
The example assumes that all applicable sales loads have been waived, that all
dividends and distributions are reinvested and that the amounts listed under
"Total Operating Expenses" remain the same in the years shown. The example
should not be considered a representation of past or future expenses and actual
expenses may be greater or less than shown.
<TABLE>
<CAPTION>
RETAIL CLASS
-------------------------------------------------------------------
EQUITY BLUE CHIP MID-CAP
BALANCED INCOME EQUITY EQUITY STOCK
SHAREHOLDER TRANSACTION EXPENSES PORTFOLIO+ PORTFOLIO PORTFOLIO PORTFOLIO++ PORTFOLIO++
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price).................. 4.75%* 4.75%* 4.75%* -- --
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price)......................................... None None None -- --
Maximum Contingent Deferred Sales Charge......... None None None -- --
Exchange Fee..................................... None None None -- --
Redemption Fee................................... None None None -- --
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees (after waivers)(1)................. .55% .60% .60% .65% .65%
12b-1 Fees (after waivers)(2).................... .25% .25% .25% .60% .00%
Other Expenses (after fee waivers)(3)............ .20% .23% .25% .25% .25%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers)(4).................................... 1.00% 1.08% 1.10% .90% .90%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Formerly Growth and Income Portfolio.
++ Retail Class shares of this Portfolio are not currently being offered.
* Sales loads are currently being waived on all purchases of Portfolio shares.
These waivers may be discontinued at any time.
(1) The adviser has agreed to waive, on a voluntary basis, a portion of its fees
for the Equity Income Portfolio, Mid-Cap Equity Portfolio and Stock
Portfolio and the advisory fees shown reflect those voluntary waivers. The
adviser reserves the right to terminate its fee waivers at any time in its
sole discretion. Absent such waivers, the advisory fees for the Equity
Income Portfolio, Mid-Cap Equity Portfolio and Stock Portfolio would be
.70%, .70% and .70%, respectively.
(2) 12b-1 fees include a distribution fee and a shareholder servicing fee. The
Fund's distributor has agreed to waive, on a voluntary basis, a portion or
all of its distribution fees for the Portfolios. Absent such waivers, the
distribution fees for the Portfolios would be .40% for the Balanced
Portfolio, Equity Income Portfolio and Mid-Cap Equity Portfolio and .55% for
the Blue Chip Equity Portfolio and Stock Portfolio. Additionally, all of the
shareholder servicing fees are being waived for the Portfolios. Absent such
waivers, the shareholder servicing fees would be .15% for the Balanced
Portfolio and .06% for the Equity Income Portfolio, Blue Chip Equity
Portfolio, Mid-Cap Equity Portfolio and Stock Portfolio.
(3) Other expenses are estimated based on amounts incurred during the previous
fiscal year and include all expenses except nonrecurring account fees,
brokerage commissions and other capital items, and advisory and 12b-1 fees.
(4) Absent the voluntary fee waivers described above, total operating expenses
for Retail Class shares of the Balanced Portfolio, Equity Income Portfolio,
Blue Chip Equity Portfolio, Mid-Cap Equity Portfolio and Stock Portfolio
would be 1.30%, 1.14%, 1.46%, 1.41% and 1.56%, respectively.
EXAMPLE
- --------------------------------------------------------------------------------
An investor in Retail Class shares would pay the following expenses on a
$1,000 investment assuming (1) 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
---- ----- ----- ------
<S> <C> <C> <C> <C>
Balanced Portfolio................................ 10 32 55 122
Equity Income Portfolio........................... 11 34 -- --
Blue Chip Equity Portfolio........................ 11 35 61 134
Mid-Cap Equity Portfolio.......................... 9 29 -- --
Stock Portfolio................................... 9 29 -- --
</TABLE>
The example assumes that all applicable sales loads have been waived, that all
dividends and distributions are reinvested and that the amounts listed under
"Total Operating Expenses" remain the
3
<PAGE> 4
same in the years shown. The example should not be considered a representation
of past or future expenses and actual expenses may be greater or less than
shown.
<TABLE>
<CAPTION>
RETAIL CLASS
-----------------------------------------
CAPITAL SPECIAL INTERNATIONAL
GROWTH EQUITY EQUITY
SHAREHOLDER TRANSACTION EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)(1)............................................ 4.75%* 4.75%* 4.75%*
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price)................................. None None None
Maximum Contingent Deferred Sales Charge........................ None None None
Exchange Fee.................................................... None None None
Redemption Fee.................................................. None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees (after waivers)(1)................................ .60% .60% .56%
Rule 12b-1 Fees (after waivers)(2).............................. .25% .25% .00%
Other Expenses (after waivers)(3)............................... .23% .27% .99%
- -----------------------------------------------------------------------------------------------------------
Total Operating Expenses (after waivers)(4)..................... 1.08% 1.12% 1.55%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Sales loads are currently being waived on all purchases of Portfolio
shares. These waivers may be discontinued at any time.
(1) The adviser of the International Equity Portfolio has agreed, on a voluntary
basis, to waive its fee (and, if necessary, to reimburse other expenses) in
order to limit the Portfolio's expense ratio to 1.55%. The advisory fee
shown reflects this voluntary waiver. The adviser reserves the right to
terminate its fee waiver at any time in its sole discretion. Absent such
waiver, the advisory fee for the International Equity Portfolio would be
.80%.
(2) 12b-1 fees include a distribution fee and a shareholder servicing fee. The
Fund's distributor has agreed to waive, on a voluntary basis, a portion or
all of its distribution fees for the Portfolios. Absent such waivers, the
distribution fees for the Portfolios would be .40%. Additionally, all of the
shareholder servicing fees are being waived for the Portfolios. Absent such
waivers, the shareholder servicing fees would be .15% for the Capital Growth
Portfolio and Special Equity Portfolio and .06% for the International Equity
Portfolio.
(3) Other expenses are estimated based on amounts incurred during the previous
fiscal year and include all expenses except nonrecurring account fees,
brokerage commissions and other capital items, and advisory and 12b-1 fees.
(4) Absent the voluntary fee waivers described above, total operating expenses
for Retail Class shares or the Capital Growth Portfolio, Special Equity
Portfolio and International Equity Portfolio would be 1.38%, 1.42% and
2.25%, respectively.
EXAMPLE
- --------------------------------------------------------------------------------
An investor in Retail Class shares would pay the following expenses on a
$1,000 investment assuming (1) 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
---- ----- ----- ------
<S> <C> <C> <C> <C>
Capital Growth Portfolio........................... 11 34 60 132
Special Equity Portfolio........................... 11 36 62 136
International Equity Portfolio..................... 16 49 84 185
</TABLE>
The example assumes that all applicable sales loads have been waived, that all
dividends and distributions are reinvested and that the amounts listed under
"Total Operating Expenses" remain the same in the years shown. The example
should not be considered a representation of past or future expenses and actual
expenses may be greater or less than shown.
4
<PAGE> 5
3. The information under "Purchases, Exchanges and Redemptions -- How Do I
Invest?" in the Prospectus at page 22 is revised to reflect that an order for
the purchase of shares of the Money Market Portfolio and the U.S. Government
Money Market Portfolio will become effective and the shares purchased will be
entitled to dividends on the day of receipt if the order is received,
together with available funds, by 5:00 p.m.
The following becomes the second paragraph under "Purchases, Exchanges and
Redemption -- How Do I Invest?"
Investors who wish to receive same-day acceptance of investments in the
Money Market Portfolio and U.S. Government Money Market Portfolio must contact
the Fund's transfer agent (or its authorized agent) before 5:00 p.m. Eastern
time to place the trade. In order for an investor to begin earning dividends on
the Business Day the investment is made, the transfer agent must receive the
wire before 5:00 p.m. Eastern time.
4. The information under "Purchases, Exchanges and Redemptions -- Sales Charges"
in the Prospectus at page 23 is revised to reflect the fact that no sales
charges are imposed on the Short-Term Treasury Portfolio.
5. The following information relates to the Employee Investment Program and
supplements the information under "Purchases, Exchanges and Redemptions" at
pages 22 through 26 of the Prospectus:
EMPLOYEE INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Current and former trustees and officers of the Fund, current and retired
officers, directors and regular employees of Allied Irish Banks, p.l.c. and its
direct and indirect subsidiaries, and their spouses and minor children
("employees") may open an employee investment account directly with the Fund by
making an initial investment of $100 ($50 if purchasing through the Automatic
Investment Plan) or more in any Portfolio. Shares of the Portfolios may be
purchased without a sales charge and may be redeemed for an employee account as
described below. Automatic investment and systematic withdrawal plans are also
available for employee accounts. To open an employee account call
1-888-4ARK-FUND to request an Account Application.
PURCHASES BY MAIL. Shares may be purchased for an employee account through
the mail by forwarding a completed Account Application along with a check (in
the case of a new account) or a check with the proper account information and
investment instructions (in the case of existing accounts) to:
ARK Funds
P.O. Box 8525
Boston, MA 02266-8525
All purchases made by check should be in U.S. dollars and made payable to
ARK Funds or for an IRA account, State Street Bank and Trust Company, as
custodian. Third party checks will not be accepted. When purchases are made by
check or through the Automatic Investment Plan, redemptions will not be allowed
until the investment being redeemed has been in the account for 15 calendar
days.
PURCHASES BY WIRE. Shares may be purchased for an employee account by
wiring money to:
State Street Bank and Trust Company
Boston, MA
ABA 011000028
Account Number: 99051609
Attention: [ARK Portfolio Name]
Further Credit to: [Employee Account Name and Number]
5
<PAGE> 6
The wire instructions must include the employee's account number. An order
to purchase shares by Federal Funds wire will be deemed to have been received on
the business day of the wire, provided that employees notify the Fund's transfer
agent at 1-888-4ARK-FUND by 12:00 p.m. (Eastern time) of their intention to wire
money.
REDEMPTIONS BY MAIL. Written requests for redemptions from an employee
account must be received in good order by the Fund's transfer agent in order to
constitute a valid tender for redemption by mail. Requests should be mailed to:
ARK FUNDS
P.O. Box 8525
Boston, MA 02266-8525
The transfer agent may require that the signature on the written request be
guaranteed by a commercial bank or by a member firm of a domestic stock
exchange. Signature guarantees will be required if: (a) the redemption request
is an amount in excess of $25,000; (b) redemption proceeds are to be sent to a
name and/or address that differs from the registered name or address of record;
or (c) a transfer of registration is requested. Otherwise, written redemption
requests by mail may be accepted without a signature guarantee.
REDEMPTIONS BY TELEPHONE. Employees wishing to redeem shares from an
employee account by telephone must provide the information requested in the
Account Application. Thereafter, telephone redemption requests may be made by
calling 1-888-4ARK-FUND. Payment for telephone redemptions will normally be
transmitted on the next business day following receipt of a valid request for
redemption. Employees may have the proceeds sent either by mail or wire.
BY WIRE: Shareholders of record may have their telephone redemption requests
paid by a direct wire to a domestic commercial bank account previously
designated by the employee on the Account Application. The Fund's
transfer agent may deduct its then-current wire fee from the proceeds
for wire redemptions. As of the date of this Supplement, the fee was
$10 for each wire redemption. There is no minimum for telephone
redemptions paid by wire.
BY MAIL: Redemption proceeds may be paid by a check mailed to the name and
address in which the employee's account is registered with the Fund.
There is no minimum for telephone redemptions paid by check.
Employees may not close their accounts by telephone.
Neither the Fund nor its transfer agent will be responsible for any loss,
liability, cost or expense for acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The Fund and the
transfer agent will each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. To ensure the authenticity
of redemption or exchange instructions received by telephone, the transfer agent
examines each shareholder request by verifying the account number and/or tax
identification number at the time the request is made. The transfer agent
subsequently sends confirmations of the transaction to the shareholder for
verification. If reasonable procedures are not employed, the Fund and the
transfer agent may be liable for any losses due to unauthorized or fraudulent
telephone transactions.
REDEMPTION BY CHECKWRITING. Checkwriting is available for regular employee
accounts investing in a money market Portfolio. The Fund will provide
shareholders of record, upon request and without charge, with checks drawn on
the Portfolio. Shareholders will be required to sign signature cards and will be
subject to any applicable rules and regulations of the clearing bank relating to
check redemption privileges.
Checks drawn on the money market Portfolios may be made payable to the
order of any payee in an amount of $500 or more. Shareholders should be aware
that, as is the case with regular bank checks, certain banks may not provide
cash at the time of deposit, but will wait until they have
6
<PAGE> 7
received payment from the clearing bank. When a check is presented to the
clearing bank for payment, subject to the Fund's acceptance of the check, the
clearing bank, as agent, causes the Fund to redeem, at the net asset value next
determined after such presentation, a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check. Checks
will be returned by the clearing bank if there are insufficient shares to meet
the withdrawal amount. Shareholders of record wishing to use this method of
redemption should check the appropriate box on the Account Application, obtain a
signature card by calling 1-888-4ARK-FUND and mail the completed form and
signature card to ARK Funds, P.O. Box 8525, Boston, MA 02266-8525. There is no
charge for the clearance of any checks, although the clearing bank will impose
its customary overdraft fee in connection with returning any checks as to which
there are insufficient shares to meet the withdrawal amount. As of the date of
this Supplement, the overdraft fee was $20.
REDEMPTION BY TELEPHONE EXCHANGE. Employees may make telephone exchanges
of shares held in their accounts for shares in any other Portfolio offering
Retail Class shares by calling 1-888-4ARK-FUND. Shareholders wishing to use the
telephone exchange privilege must check the appropriate box on the Account
Application. The telephone exchange privilege is only available in states where
exchanges from one Portfolio to another can lawfully be made.
Telephone exchange requests received prior to 4:00 p.m. for an equity or
fixed-income Portfolio, or prior to 12:00 p.m. for the U.S. Treasury Money
Market Portfolio and Tax-Free Money Market Portfolio or 5:00 p.m. for the U.S.
Government Money Market Portfolio and Money Market Portfolio, on any business
day will be processed on the date of receipt. 'Processing' a telephone exchange
request means that shares in the Portfolio from which the shareholder is making
the exchange will be redeemed at the net asset value per share as of 4:00 p.m.
(12:00 p.m. for the U.S. Treasury Money Market Portfolio and Tax-Free Money
Market Portfolio or 5:00 p.m. for the U.S. Government Money Market Portfolio and
Money Market Portfolio) on the date of receipt. Purchases of shares for the
Portfolio into which the shareholder is making an exchange will be effected on
the same business day, at such other Portfolio's net asset value per share
determined as of 4:00 p.m. (12:00 p.m. for the U.S. Treasury Money Market
Portfolio and Tax-Free Money Market Portfolio or 5:00 p.m. for the U.S.
Government Money Market Portfolio and Money Market Portfolio) on such business
day. Telephone exchange requests received after 4:00 p.m. for an equity or
fixed-income Portfolio, or after 12:00 p.m. for the U.S. Treasury Money Market
Portfolio and Tax-Free Money Market Portfolio or 5:00 p.m. for the U.S.
Government Money Market Portfolio and Money Market Portfolio, will be processed
on the next business day in the manner described above. The Fund will not be
responsible for the authenticity of exchange instructions received by telephone
and the investor will bear the risk of loss.
Before making an exchange, shareholders should consider the investment
objective, policies and restrictions of the Portfolio into which they are
exchanging, as set forth in the Prospectus. Any telephone exchange must satisfy
the requirements relating to the minimum initial investment amounts of the
Portfolio involved. The Fund reserves the right to reject any telephone exchange
request and to modify or terminate the telephone exchange privilege at any time,
upon 60 days' written notice.
For more information on exchanging shares, please see "Purchases, Exchanges
and Redemptions -- How Do I Exchange Shares?" in the Prospectus.
AUTOMATIC INVESTMENT PLAN. An employee may arrange for periodic
investments on any business day in a Portfolio through automatic deductions from
a checking account by completing the appropriate section of the Account
Application. The minimum pre-authorized investment amount is $50 per month per
Portfolio. All IRA investments made through the plan will be credited as
contributions for the current calendar year.
SYSTEMIC WITHDRAWAL PLAN. The Systematic Withdrawal Plan may be used by
employees who wish to receive regular distributions from their accounts. Upon
commencement of a withdrawal plan, an account must have a current value of
$5,000 or more. Employees may elect to receive automatic
7
<PAGE> 8
payments of $50 or more via check or direct deposit to a checking account on a
monthly, quarterly, semi-annual or annual basis. Automatic withdrawals are
normally processed on the 25th day of the applicable month (if this is not a
business day, then on the next business day) and are paid promptly thereafter.
To arrange a withdrawal plan, an employee must complete the appropriate section
of the Account Application.
Employees should realize that if withdrawals exceed income dividends, their
invested principal in the account will be depleted. Thus, depending upon the
frequency and amount of the withdrawal payments and/or fluctuations in the net
asset value per share of the applicable Portfolio, their original investment
could be exhausted entirely. To participate in the Systematic Withdrawal
Program, employees must have their dividends automatically reinvested. Employees
may change or cancel a withdrawal plan at any time, upon written notice to ARK
Funds, P.O. Box 8525, Boston, MA 02266-8525.
IRA ACCOUNTS. Any of the Portfolios (other than the Tax-Free Money Market,
Maryland Tax-Free and Pennsylvania Tax-Free Portfolios) may be used as an
investment for an existing or new employee IRA account. Employee IRA accounts
are subject to minimum initial and subsequent investments of $100 ($50 through
the Automatic Investment Plan) in a Portfolio and the applicable contribution
limits set by the Internal Revenue Service. If an employee does not have an
existing IRA that permits investments in the Portfolios, one may be established
by obtaining an Account Application. All IRA investments made through the
Automatic Investment Plan will be credited as contributions for the current
calendar year. The telephone, wire and checkwriting privileges are not available
to employee IRA accounts. For more information about IRA accounts and to obtain
an Account Application, call 1-888-4ARK-FUND.
6. The information under "Management of the Fund -- Portfolio Management" in the
Prospectus at pages 28 and 29 is supplemented to reflect the fact that Mr.
Charles Knudsen is the co-manager, with Mr. Christopher Baggini, of the
Balanced Portfolio and that Mr. Baggini is the co-manager, with Mr.
Christopher Baker, of the Mid-Cap Equity Portfolio. Mr. Baker is an
Investment Officer of Allied Investment Advisors, Inc. He has over two years
of experience in managing mid-cap index common trust funds for the Trust
Division of First Maryland. Mr. Baker has over five years of experience in
First Maryland's Trust Division in investment research and equity analysis.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
June 27, 1997
AK1111-697
8
<PAGE> 9
Supplement to Institutional Class Prospectus dated September 1, 1996
This supplement provides new and additional information beyond that
contained in the Institutional Class Prospectus, and should be retained and read
in conjunction with the Prospectus.
1. The following expense information updates and replaces the expense
information with respect to the Blue Chip Equity Portfolio under "Annual
Operating Expenses" at page 6 of the Prospectus:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
---------------------------------------------------------------
EQUITY BLUE CHIP MID-CAP
BALANCED INCOME EQUITY EQUITY STOCK
PORTFOLIO* PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisory Fees (after waivers)(1)................ .55% .60% .60% .65% .65%
Other Expenses(2)............................... .20% .23% .25% .25% .25%
- ----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after waivers)(3)..... .75% .83% .85% .90% .90%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Formerly Growth and Income Portfolio.
(1) The adviser has agreed to waive, on a voluntary basis, a portion of its fees
for the Equity Income Portfolio, Mid-Cap Equity Portfolio and Stock
Portfolio and the advisory fees shown reflect those voluntary waivers. The
adviser reserves the right to terminate its fee waivers at any time in its
sole discretion. Absent such waivers, the advisory fees for the Equity
Income Portfolio, Mid-Cap Equity Portfolio and Stock Portfolio would be
.70%, .70% and .70%, respectively.
(2) Other expenses are estimated based on amounts incurred during the previous
fiscal year and include all expenses except nonrecurring account fees,
brokerage commissions and other capital items, and advisory fees.
(3) Absent the voluntary fee waivers described above, total operating expenses
for Institutional Class shares of the Equity Income Portfolio, Mid-Cap
Equity Portfolio and Stock Portfolio would be .93%, .95% and .95%,
respectively.
EXAMPLE
- --------------------------------------------------------------------------------
An investor in Institutional Class shares would pay the following expenses
on a $1,000 investment assuming (1) 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
---- ----- ----- ------
<S> <C> <C> <C> <C>
Balanced Portfolio................................. 8 24 42 93
Equity Income Portfolio............................ 8 26 -- --
Blue Chip Equity Portfolio......................... 9 27 47 105
Mid-Cap Equity Portfolio........................... 9 29 -- --
Stock Portfolio.................................... 9 29 -- --
</TABLE>
The example assumes that all dividends and distributions are reinvested and that
the amounts listed under "Total Operating Expenses" remain the same in the years
shown. The example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than shown.
2. The information under "Purchases, Exchanges and
Redemptions -- Purchasing Shares" in the Prospectus at page 26 is revised to
reflect that an order for the purchase of shares of the Money Market Portfolio
and the U.S. Government Money Market Portfolio will become effective and the
shares purchased will be entitled to dividends on the day of receipt if the
order is received, together with available funds, by 5:00 p.m.
The following becomes the second paragraph under "Purchases, Exchanges and
Redemptions -- Purchasing Shares."
Investors who wish to receive same-day acceptance of investments in the
Money Market Portfolio and U.S. Government Money Market Portfolio must contact
the Fund's transfer agent (or its authorized agent) before 5:00 p.m. Eastern
time to place the trade. In order for an investor to begin earning dividends on
the Business Day the investment is made, the transfer agent must receive the
wire before 5:00 p.m. Eastern time.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
June 27, 1997
AK2222-697
<PAGE> 10
Supplement to Institutional Class II Prospectus dated September 1, 1996
This supplement provides new and additional information beyond that
contained in the Institutional Class II Prospectus, and should be retained and
read in conjunction with the Prospectus.
The information under "Purchases, Exchanges and Redemptions -- Purchasing
Shares" in the Prospectus at page 10 is revised to reflect that an order for the
purchase of shares of the Money Market Portfolio and the U.S. Government Money
Market Portfolio will become effective and the shares purchased will be entitled
to dividends on the day of receipt if the order is received, together with
available funds, by 5:00 p.m.
The following becomes the second paragraph under "Purchases, Exchanges and
Redemptions -- Purchasing Shares."
Investors who wish to receive same-day acceptance of investments in the
Money Market Portfolio and U.S. Government Money Market Portfolio must contact
the Fund's transfer agent (or its authorized agent) before 5:00 p.m. Eastern
time to place the trade. In order for an investor to begin earning dividends on
the Business Day the investment is made, the transfer agent must receive the
wire before 5:00 p.m. Eastern time.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
June 27, 1997
AK2222B-697
