<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 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
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).................. .19% .14% .10% .09%
12b-1 Fees (after waivers) (2)..................... .31% .00% .31% .31%
Other Expenses (after fee waivers) (3)............. .18% .18% .17% .20%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (4)... .68% .32% .58% .60%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Retail Class shares of this Portfolio are not currently being offered.
(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. The Fund's distributor has agreed to waive, on a voluntary basis, all of
its distribution fee for the U.S. Government Money Market Portfolio. Absent such
waiver, the distribution fee for the U.S. Government Money Market Portfolio
would be .25%. Additionally, 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. The Fund's
administrator has agreed to waive, on a voluntary basis, .008% of its fee for
the Money Market Portfolio and the other expenses shown for that Portfolio
reflect the voluntary waiver. The administrator reserves the right to terminate
its fee waiver at any time in its sole discretion. Absent such waiver, other
expenses for the Money Market Portfolio would be .138%.
(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........................ 3 10 -- --
Money Market Portfolio........................................ 6 19 32 73
Tax-Free Money Market Portfolio............................... 6 19 33 75
</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.
<PAGE> 2
<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) (1)......... 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) (2).................. .30% .45% .50% .45% .37%
12b-1 Fees (after waivers) (3)..................... .25% .00% .25% .25% .25%
Other Expenses (after fee waivers) (4)............. .25% .23% .20% .23% .26%
- -----------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (5)... .80% .68% .95% .93% .88%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Retail Class shares of this Portfolio are not currently being offered.
(1) Sales loads of 4.50% are being waived on all purchases of Retail Class
shares of the Income Portfolio, Maryland Tax-Free Portfolio and
Pennsylvania Tax-Free Portfolio. These waivers will be in effect
at least through December 31, 1997.
(2) 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.
(3) 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 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.
(4) 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.
(5) 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>
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 -
<PAGE> 3
<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) (1)......... None -- None -- --
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............. None -- None -- --
Maximum Contingent Deferred Sales Charge........... None -- None -- --
Exchange Fee....................................... None -- None -- --
Redemption Fee..................................... None -- None -- --
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees (after waivers) (2).................. .55% .60% .40% .65% .65%
12b-1 Fees (after waivers) (3)..................... .25% .00% .25% .00% .00%
Other Expenses (after fee waivers) (4)............. .20% .23% .25% .25% .25%
- ---------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (5)... 1.00% .83% .90% .90% .90%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Formerly Growth and Income Portfolio.
* Retail Class shares of this Portfolio are not currently being offered.
(1) Sales loads of 4.75% are being waived on all purchases of Retail Class
shares of the Balanced Portfolio and Blue Chip Equity Portfolio. These waivers
will be in effect at least through December 31, 1997.
(2) The adviser has agreed to waive, on a voluntary basis, a portion of its fees
for the Equity Income Portfolio, Blue Chip Equity 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, Blue Chip Equity Portfolio, Mid-Cap Equity
Portfolio and Stock Portfolio would be .70%, .60%, .70% and .70%, respectively.
(3) 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 Balanced Portfolio
and .06% for the Equity Income Portfolio, Blue Chip Equity Portfolio, Mid-Cap
Equity Portfolio and Stock Portfolio.
(4) 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.
(5) 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%, 1.39%, 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....................................... 8 26 -- --
Blue Chip Equity Portfolio.................................... 9 29 50 111
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.
- 3 -
<PAGE> 4
<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)...................... None None None
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) (2)............................... .60% .60% .56%
Rule 12b-1 Fees (after waivers) (3)............................. .25% .25% .00%
Other Expenses (after fee waivers) (4).......................... .23% .27% .99%
- --------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (5)................ 1.08% 1.12% 1.55%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Sales loads of 4.75% are being waived on all purchases of Retail Class
shares of the Portfolios. These waivers will be in effect through at least
December 31, 1997.
(2) 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%.
(3) 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.
(4) 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.
(5) Absent the voluntary fee waivers described above, total operating expenses
for Retail Class shares of 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 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-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 and that sales
load waivers for the other non-money-market Portfolios will be in effect
at least through December 31, 1997.
3. 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
January 22, 1997
AK1111-197 - 4 -
<PAGE> 5
ARK FUNDS
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 Capital Growth Portfolio in the table
under "Fees and Expenses" at page 7 of the Prospectus:
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
-------------------
Capital Growth
Portfolio
-------------------
<S> <C>
Advisory Fees (after waivers) ....................................................... .60%
Other Expenses (after fee waivers) (1)............................................... .23%
---
.83%
Total Operating Expenses (after fee waivers) ........................................
</TABLE>
(1) 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.
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>
Capital Growth Portfolio...................................... 8 26 46 103
</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 "Management of the Fund-Portfolio Management" in the
Prospectus at pages 31 and 32 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
January 22, 1997
AK2222-197
