<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Check the appropriate box:
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ARK FUNDS
(Name of Registrant as Specified In Its Charter)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
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<PAGE> 2
ARK FUNDS
INTERNATIONAL EQUITY SELECTION PORTFOLIO
ONE FREEDOM VALLEY DRIVE
OAKS, PA 19456
July 14, 2000
Dear Shareholder:
The Board of Trustees ("Board") of the ARK Funds ("Trust") has voted to
amend the investment policies of the International Equity Selection Portfolio
("Portfolio"), a series of the Trust. As you are aware, the Portfolio currently
seeks to achieve its investment objective of long-term capital appreciation by
investing primarily in shares of mutual funds that purchase common stock and
other equity securities of companies located outside of the United States. Under
the proposal approved by the Board, the Portfolio would redeem its investments
in the mutual fund companies and directly invest primarily in the securities of
non-U.S. issuers.
The Board believes that the proposed change in investment policy would
benefit the Portfolio and its shareholders. By investing directly in equity
securities of foreign markets, the Portfolio would be more efficient to manage
and administer. Shareholders will be asked to approve a change in the
Portfolio's investment policy whereby the Portfolio would invest primarily in
the securities of companies located in countries other than the United States.
Shareholders will also be asked to approve a related increase in the investment
advisory fee payable by the Portfolio and an investment subadvisory contract.
Accordingly, a special meeting of shareholders ("Meeting") will be held on
August 8, 2000. Attached are the Notice and Proxy Statement for the Meeting,
which describe the proposals on which you are being asked to vote. THE BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH OF THESE PROPOSALS.
Your vote is important. Please take a moment now to sign and return your
proxy card(s) in the enclosed postage-paid envelope.
Thank you for your attention to this matter and for your continued
investment in the Portfolio.
Very truly yours,
/s/ WILLIAM H. COWIE, JR.
WILLIAM H. COWIE, JR.
Chairman of the Board
<PAGE> 3
ARK FUNDS
INTERNATIONAL EQUITY SELECTION PORTFOLIO
ONE FREEDOM VALLEY DRIVE
OAKS, PA 19456
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 8, 2000
To Our Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of the
International Equity Selection Portfolio (the "Portfolio") of ARK Funds (the
"Trust") will be held at 3:00 p.m. Eastern time on August 8, 2000 at Allfirst
Trust Company N.A., 25 S. Charles Street, 16th Floor, Baltimore, Maryland, for
the following purposes:
1. To approve a change in investment policy whereby the Portfolio would
seek its investment objective by investing directly in the securities of
companies located in countries other than the United States, rather than in
shares of mutual funds investing in these companies.
2. To approve an increase in the investment advisory fee payable by the
Portfolio to Allied Investment Advisors, Inc.
3. To approve an investment subadvisory contract with AIB Govett, Inc.
4. To consider and act upon any other business that may properly come
before the meeting and any adjournments thereof.
Shareholders of record of the Portfolio as of the close of business on June
30, 2000 are entitled to notice of and to vote at the meeting and any
adjournments thereof.
By Order of the Board of Trustees,
/s/ THOMAS R. RUS
THOMAS R. RUS
Secretary
July 14, 2000
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN.
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
ANY SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED FORM OF PROXY, DATE AND SIGN IT,
AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE
UNITED STATES.
TO AVOID THE ADDITIONAL EXPENSE TO THE TRUST OF FURTHER SOLICITATION, WE ASK
YOUR COOPERATION IN MAILING YOUR PROXY PROMPTLY, NO MATTER HOW LARGE OR SMALL
YOUR HOLDINGS MAY BE.
<PAGE> 4
ARK FUNDS
INTERNATIONAL EQUITY SELECTION PORTFOLIO
ONE FREEDOM VALLEY DRIVE
OAKS, PA 19456
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 8, 2000
This proxy statement is being furnished to shareholders in connection with
the solicitation of proxies by the Board of Trustees ("Board") of ARK Funds (the
"Trust"). These proxies are to be used at the Special Meeting of Shareholders of
the Trust's International Equity Selection Portfolio ("Portfolio") and at any
adjournment thereof ("Meeting") to be held at 3:00 p.m. Eastern time on August
8, 2000 at Allfirst Trust Company N.A., 25 S. Charles Street, 16th Floor,
Baltimore, Maryland. The purpose of the Meeting and the matters to be acted upon
are set forth in the accompanying Notice of Special Meeting of Shareholders.
The close of business on June 30, 2000 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
Meeting. As of the record date, the Portfolio had 239,699 Retail Class A and
2,987,871 Institutional Class shares outstanding and entitled to vote.
Each share will be entitled to one vote for each proposal at the Meeting.
It is expected that the Notice of Special Meeting of Shareholders, Proxy
Statement and form of Proxy will first be mailed to shareholders on or about
July 17, 2000.
The Trust's most recent Annual Report has previously been sent to
shareholders and may be obtained without charge by calling toll-free 1-888-
4ARK-FUND or by writing to ARK Funds, P.O. Box 8525, Boston, MA 02266-8525.
If the accompanying form of Proxy is properly executed and returned, shares
represented by it will be voted at the Meeting, or any adjournments thereof, in
accordance with the instructions on the Proxy. However, if no instructions are
specified, shares will be voted FOR all proposals. A Proxy may be revoked at any
time prior to the time it is voted by written notice to the Secretary of the
Trust, by execution of a subsequent Proxy or by attendance at the Meeting. If
sufficient votes to approve one or more of the proposed items are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of Proxies. Any
<PAGE> 5
such adjournment will require the affirmative vote of a majority of the votes
cast, provided a quorum is present. In such case, the persons named as proxies
will vote those Proxies, which they are entitled to vote for any such item in
favor of such an adjournment, and will vote those Proxies required to be voted
against any such item against any such adjournment. In the event that the
Meeting is adjourned, the same procedures will apply at a later Meeting date.
Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and with respect to which the broker does not
have discretionary voting authority. Abstentions and broker non-votes will be
counted as shares present for purposes of determining whether a quorum is
present but will not be voted for or against any adjournment. Accordingly,
abstentions and broker non-votes effectively will be a vote against adjournment.
In addition, abstentions and broker non-votes will not be counted as votes cast
for purposes of determining whether sufficient votes have been received to
approve a proposal, and therefore abstentions and broker non-votes effectively
will be a vote against any proposal where the required vote is a percentage of
the shares present.
As of the record date, June 30, 2000, there is no person who, to the
knowledge of management, owned beneficially more than 5% of the outstanding
shares of the Portfolio. To the knowledge of management, the executive officers
and Trustees of the Trust, as a group, owned less than 1% of the outstanding
shares of the Portfolio as of June 30, 2000.
2
<PAGE> 6
PROPOSAL NO. 1:
APPROVAL OF A CHANGE IN INVESTMENT POLICY WHEREBY THE PORTFOLIO WOULD INVEST
PRIMARILY IN THE SECURITIES OF COMPANIES LOCATED IN COUNTRIES OTHER THAN THE
UNITED STATES, RATHER THAN IN SHARES OF MUTUAL FUNDS INVESTING IN THESE
COMPANIES.
BACKGROUND
The Portfolio currently seeks to achieve its investment objective of long-
term capital appreciation by operating as a "fund of funds" whereby the
Portfolio invests primarily in the shares of other mutual funds ("underlying
funds"). The portfolios of the underlying funds consist primarily of equity
securities of non-U.S. issuers. Under normal market conditions, the Portfolio
normally invests at least 65% of its total assets in underlying funds that are
international equity funds. International equity funds are those investment
companies which invest primarily in equity securities of companies located in
three or more countries outside the United States.
DESCRIPTION OF CHANGE IN INVESTMENT POLICY
The Board believes that changing the Portfolio's investment policy would be
beneficial to the Portfolio and its shareholders. Under the proposal, the Fund
would redeem its investments in the underlying funds and directly invest
primarily in the securities of non-U.S. issuers. This increased investment
flexibility may enable the Portfolio to enhance the Portfolio's investment
performance through consolidation of its strategy, decisionmaking, and trading
activity within a single investment management organization. However, there can
be no assurance that the proposal will lead to better performance. Control over
investment strategy and trading would thus move directly to portfolio managers
employed by the Portfolio's investment advisor or subadvisor.
The proposed change would not involve any change to the Portfolio's
investment objective. In order to effect the proposal, however, shareholders of
the Portfolio need to approve certain changes to the Portfolio's operations.
These changes are (1) the approval of a change in investment policy whereby the
Portfolio would invest primarily in the securities of companies located in
countries other than the United States, rather than in shares of mutual funds
investing in these companies, described in this Proposal 1; (2) the approval of
an increase in the investment advisory fee payable by the Portfolio to Allied
Investment Advisors, Inc., which is described in Proposal 2; and (3) the
3
<PAGE> 7
approval of an investment subadvisory contract with AIB Govett, Inc., which is
described in Proposal 3.
BOARD CONSIDERATIONS
At a meeting on December 10, 1999, the Board determined that it would be in
the best interest of the Portfolio and its shareholders to change the investment
policy of the Portfolio from a fund of funds to a direct investment structure
whereby the Portfolio would directly invest in the securities of non-U.S.
issuers. During this meeting, the anticipated effects of the proposal on the
Portfolio were described, including the potential improvement in the Portfolio's
performance and marketability. In connection with its review of the proposal,
the Board considered the performance of the Portfolio, the potentially
beneficial impact of the restructuring on the Portfolio and its shareholders;
comparative information about other funds and their fees and expenses; and the
likely costs associated with the restructuring (including shareholder
solicitation costs and brokerage costs related to the Portfolio's initial
investments in equity securities). The Board also considered the fact that the
sales load applicable to the Retail Class A Shares of the Portfolio would be
increased to a level comparable to the Trust's other equity portfolios upon
implementation of the proposed change.
The Board noted that changing the investment policy of the Portfolio would
result in a more simple structure, which would greatly enhance the Portfolio's
ability to manage the direct investment of its assets in particular industries
and issuers in which the underlying funds were invested. Additionally, as the
Portfolio is currently structured, there is no uniformity of investment analysis
and management style on the underlying fund level because each underlying fund
performs these functions differently. The proposed change in investment policy
would promote uniformity of analysis and management style because analysis and
management would occur on the Portfolio level. As a result, the Portfolio would
have an increased need for direct investment management services, including
fundamental and other investment analyses as well as trade execution services.
The Board also considered that investors generally prefer to invest in an
individually managed Portfolio rather than a fund of funds. An individually
managed Portfolio is better able to manage issuer and industry diversification
and selection.
The Board considered each of the foregoing factors. Based upon these
considerations, the Board, including its members who are not interested persons
of the Portfolio (as that term is defined in the 1940 Act) ("Independent
Trustees"), unanimously approved the proposed change in the Portfolio's
4
<PAGE> 8
investment policy whereby the Portfolio would invest primarily in the
securities of companies located in countries other than the United States and
recommended approval by the shareholders.
VOTE REQUIRED
Approval of Proposal 1 requires the affirmative vote of the holders of the
lesser of (1) 67% or more of the shares of the Portfolio present at the Meeting,
if the holders of more than 50% of the outstanding Portfolio shares are present
or represented by proxy at the Meeting, or (2) more than 50% of the outstanding
shares of the Portfolio entitled to vote at the Meeting.
THE BOARD RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL 1.
PROPOSAL NO. 2:
APPROVAL OF AN INCREASE IN THE INVESTMENT ADVISORY FEE PAYABLE BY THE PORTFOLIO
TO ALLIED INVESTMENT ADVISORS, INC.
Shareholders are being asked to approve an amendment to the Investment
Advisory Agreement between Allied Investment Advisors, Inc. ("AIA") and the
Trust with respect to the Portfolio. The amendment will authorize an increase in
the AIA's fee with respect to advisory services provided to the Portfolio. Under
the proposed restructuring explained in Proposal 1, to the extent that the
Portfolio directly invests all of its assets in the securities of non-U.S.
issuers, and not in other mutual funds, the Portfolio would have an increased
need for direct investment management services by AIA. For this reason, the
Trust's current advisory agreement's compensation schedule with respect to the
Portfolio would be revised to increase the advisory fee paid on behalf of the
Portfolio, from an annual rate of 0.65% of the Portfolio's average daily net
assets to an annual rate of 1.00% of the Portfolio's average daily net assets.
AIA does not currently serve as investment advisor to another international
equity mutual fund. However, AIA will serve as investment advisor to the ARK
Emerging Markets Equity Portfolio, which is expected to commence operations in
August 2000. The investment advisory fee payable by the ARK Emerging Markets
Equity Portfolio will be 1.00%.
Under the Trust's current arrangement, AIA has contractually agreed to
waive its advisory fees and/or reimburse the Portfolio to the extent necessary
to ensure that the Portfolio's total annual operating expenses do not exceed
5
<PAGE> 9
1.14% for Retail Class A Shares and 0.97% for Institutional Class Shares. In
addition, AIA is voluntarily waiving a portion of the fees in order to keep
total operating expenses from exceeding 1.05% for Retail Class A Shares and
0.94% for Institutional Class Shares. If the Portfolio invests all of its assets
in the securities of non-U.S. issuers, as proposed, AIA has contractually agreed
to waive fees and reimburse expenses for the Retail Class A and Institutional
Class Shares in order to keep total operating expenses from exceeding 1.50% and
1.40%, respectively, until August 31, 2001.
A description of the proposed amendment to the advisory agreement is
provided below under "The Proposed Amendment to the Investment Advisory
Agreement." A summary of the Board's considerations is provided below under
"Board Considerations."
CURRENT INVESTMENT ADVISORY AGREEMENT
AIA currently serves as investment advisor to the Portfolio pursuant to an
Investment Advisory Agreement between the Trust and AIA dated February 12, 1998
("Advisory Agreement"). The Advisory Agreement was approved by the shareholders
of the Portfolio on or about February 4, 1998. Pursuant to the Advisory
Agreement, with the Trust, AIA, subject to the control and supervision of the
Trust's Board and in conformance with the stated investment objectives and
policies of the Portfolio, actively manages the investment and reinvestment of
the assets of the Portfolio. In this regard, it is the responsibility of AIA to
make investment decisions for the Portfolio and to place the Portfolio's
purchase and sales orders or, subject to any approvals required by the 1940 Act,
to delegate its duty to make investment decisions and to place purchase and
sales orders to one or more investment subadvisors with respect to some or all
of the Portfolio's assets. In the event of such a delegation, AIA is obligated
to monitor the activities of the subadvisors, review the activities of the
subadvisors to ensure compliance with applicable investment objectives and
guidelines, render such reports to the Board as may be requested and provide to
the subadvisors such advice as they may reasonably request. AIA has not
exercised its authority to delegate certain duties with respect to all of the
Portfolio's assets.
Under the Advisory Agreement, AIA bears all expenses incurred by it in
performing its duties as investment advisor. The Trust bears all expenses, not
specifically assumed by AIA, incurred in the conduct of its operations,
including, without limitation, the following: (a) the cost (including brokerage
commissions) of securities purchased or sold by the Portfolio and any losses
incurred in connection therewith; (b) fees payable to, and expenses incurred
6
<PAGE> 10
on behalf of the Trust by, AIA; (c) expenses of organizing the Trust; (d) filing
fees and expenses relating to the registration and qualification of the Trust's
shares and the Trust under federal and/or state securities laws and maintaining
such registrations and qualifications; (e) fees and salaries payable to the
Trust's trustees and officers; (f) taxes (including any income or franchise
taxes) and governmental fees; (g) costs of any liability, uncollectible items of
deposit and other insurance or fidelity bonds; (h) any costs, expenses or losses
arising out of a liability of or claim for damages or other relief asserted
against the Trust for violation of any law; (i) legal, accounting and auditing
expenses, including legal fees of special counsel at any time retained for those
members of the Board who are not interested persons of the Trust and expenses
relating to the use of consulting services by the Trust provided that the use of
such services is approved by the Trust's trustees; (j) charges of custodians,
transfer agents and other agents; (k) costs of preparing share certificates; (l)
expenses of setting in type and printing prospectuses and supplements thereto
for existing shareholders, reports, shareholder reports, and proxy materials;
(m) costs of mailing prospectuses, statements of additional information and
supplements thereto to existing shareholders as well as shareholder reports and
proxy material; (n) any extraordinary expenses (including fees and disbursements
of counsel) incurred by the Trust; (o) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (p) costs of mailing and tabulating proxies and costs of
shareholders and trustees meetings; and (q) the cost of investment company
literature and other publications provided by the Trust to its trustees and
officers. All expenses are allocated among the Trust's portfolios in accordance
with the Trust's Agreement and Declaration of Trust and the provisions of the
1940 Act.
The Advisory Agreement provides that, with respect to the Portfolio,
neither AIA nor its personnel shall not be liable for any error of judgment or
mistake of law or for any act or omission in the performance of its duties to
the Portfolio, except a loss resulting from the willful misfeasance, bad faith
or gross negligence of AIA in the performance of its duties or from reckless
disregard by it of its obligations and duties under the Advisory Agreement. It
also provides that AIA may render services to others.
The Advisory Agreement continues in effect for a period of one year from
the date of the Agreement, and thereafter for successive one-year periods, only
if each renewal is specifically approved by (a) a vote of a majority of those
members of the Board who are not parties to the agreement or "interested
persons" (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such approval; and (b) all of the
7
<PAGE> 11
members of the Board or by vote of the holders of a majority of the outstanding
voting securities of the Trust. The Advisory Agreement is terminable with
respect to a Portfolio without penalty on 60 days' written notice when
authorized either by a vote of the shareholders of the Portfolio or by a vote of
a majority of the trustees, or by AIA, on 60 days' written notice, and will
terminate automatically in the event of its assignment.
As compensation for the services rendered by AIA under the Advisory
Agreement, the Trust pays AIA, monthly, an advisory fee calculated by applying
an annual rate equal to 0.65% of the Portfolio's average daily net assets.
AIA -- and not the Trust -- is solely responsible for paying the fees of any
subadvisors to whom AIA delegates any duties as described above. AIA has
contractually agreed to waive its advisory fees and reimburse the Portfolio's
operating expenses to the extent necessary to ensure that the Portfolio's total
operating expenses do not exceed 1.14% for Retail Class A shares and 0.97% for
Institutional Class shares until August 31, 2001. Any waivers and/or
reimbursements will have the effect of lowering the overall expense ratio for
the Portfolio and increasing its overall return to investors at the time any
such amounts are waived and/or reimbursed.
PROPOSED AMENDMENT TO THE ADVISORY AGREEMENT
The amended Advisory Agreement will be identical to the current Advisory
Agreement described above with the exception of the proposed revision to the
compensation schedule. Under the proposed amendment, the Advisory Agreement's
compensation schedule would be revised to increase the advisory fee paid under
the agreement from an annual rate of 0.65% of the Portfolio's average daily net
assets to an annual rate of 1.00% of the Portfolio's average daily net assets.
The Board of Trustees has approved the proposed increase in connection with the
portfolio-restructuring proposal described under Proposal 1.
Set forth below are tables which show the fees and expenses for the
Portfolio for the current fiscal year and a pro forma adjustment thereof which
reflects the restructuring of the Portfolio from a fund of funds to a direct
investment structure. The Portfolio's current structure is subject to a
limitation in the 1940 Act that restricts the maximum sales charge applicable to
the Portfolio's shares to 1.50% of the offering price. If the proposed change in
the investment policy of the Portfolio is implemented, this restriction would no
longer be applicable. In such case, the maximum sales charge applicable to the
Portfolio's Retail Class A Shares would be increased to 4.75% so that it is
8
<PAGE> 12
comparable to the sales charges applicable to the Retail Class A Shares of the
Trust's other equity portfolios. This increase is reflected in the table below.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
CURRENT PRO FORMA CURRENT PRO FORMA
RETAIL RETAIL INSTITUTIONAL INSTITUTIONAL
CLASS A CLASS A CLASS CLASS
------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering
price)....................... 1.50% 4.75% None None
Maximum Deferred Sales Charge
(Load) (as a percentage of
net asset value)............. None None None None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends and other
Distributions (as a
percentage of offering
price)....................... None None None None
Redemption Fee (as a percentage
of amount redeemed, if
applicable).................. None(1) None(1) None(1) None(1)
Exchange Fee................... None None None None
</TABLE>
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
<TABLE>
<CAPTION>
CURRENT PRO FORMA CURRENT PRO FORMA
RETAIL RETAIL INSTITUTIONAL INSTITUTIONAL
CLASS A(2) CLASS A(3) CLASS(2) CLASS(3)
---------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Investment Advisory
Fees.................... 0.65% 1.00% 0.65% 1.00%
Distribution (12b-1)
Fees.................... 0.40% 0.40% None None
Other Expenses............ 0.40% 0.45% 0.40% 0.45%
---- ---- ---- ----
Total Annual Portfolio
Operating Expenses........ 1.45% 1.85% 1.05% 1.45%
Fee Waivers and Expense
Reimbursements.......... 0.31% 0.35% 0.08% 0.05%
---- ---- ---- ----
Total Net Operating
Expenses.................. 1.14% 1.50% 0.97% 1.40%
==== ==== ==== ====
</TABLE>
---------------
(1) If redemption proceeds are wired to a bank account, a $10 fee is applicable.
(2) Currently, AIA has agreed to contractually waive fees and reimburse expenses
in order to keep total operating expenses from exceeding 1.14% for Retail
Class A and 0.97% for Institutional Class Shares until August 31, 2001. The
Portfolio's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because AIA is waiving a
portion of the fees in order to keep total operating expenses at a specified
level.
9
<PAGE> 13
AIA may discontinue all or part of these waivers at any time. With these fee
waivers, the Portfolio's actual total operating expenses are as follows:
<TABLE>
<S> <C>
International Equity Selection Portfolio -- Retail Class A
(Current)................................................. 1.04%
International Equity Selection Portfolio -- Institutional
Class (Current)........................................... 0.93%
</TABLE>
(3) If the changes to the Portfolio's investment objectives and policies are
approved by the shareholders and implemented, AIA has agreed contractually
to waive fees and reimburse expenses in order to keep total operating
expenses from exceeding 1.50% for Retail Class A Shares and 1.40% for
Institutional Class Shares until August 31, 2001.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns might
be different, your approximate costs of investing $10,000 in the Portfolio would
be:
<TABLE>
<CAPTION>
CURRENT PRO FORMA CURRENT PRO FORMA
RETAIL RETAIL INSTITUTIONAL INSTITUTIONAL
CLASS A CLASS A CLASS CLASS
------- --------- ------------- -------------
<S> <C> <C> <C> <C>
1 Year............... $ 264 $ 620 $ 99 $ 143
3 Years.............. $ 572 $ 997 $ 326 $ 454
5 Years.............. $ 901 $1,397 $ 572 $ 787
10 Years............. $1,833 $2,514 $1,275 $1,731
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For the fiscal year ended April 30, 2000, the aggregate fees paid by the
Trust to AIA, with respect to the Portfolio, were approximately $223,000. The
amount waived was approximately $34,000. If the proposed fee (after contractual
waivers) had been in effect during the same year, AIA would have received
$325,000, which equals a 0.30% increase.
10
<PAGE> 14
INFORMATION ABOUT AIA
AIA is a wholly-owned subsidiary of Allfirst Bank (formerly, First National
Bank of Maryland). AIA was organized in 1995 and provides investment management
and advisory services to individuals, corporate and institutional clients,
pension plans, common and collective trust funds, and mutual funds. As of March
31, 2000, AIA had approximately $14.7 billion in assets under management. AIA's
principal business address is 100 E. Pratt Street, Baltimore, MD 21202.
The following is a list of the directors and principal executive officers
of AIA. The business address of each individual listed below is 100 E. Pratt
Street, Baltimore, MD 21202.
<TABLE>
<CAPTION>
NAME POSITION WITH AIA PRINCIPAL OCCUPATION
---- ----------------- --------------------
<S> <C> <C>
Jeremiah E. Casey Director and Chairman of Retired
the Board
Rick A. Gold Director, Interim Executive Vice President,
President Asset Management Group,
Allfirst Financial Inc.
Timothy J. Hynes, III Director Senior Vice President,
Allfirst Bank
Kathy A. Jackson Director President, Allfirst Trust
Co., N.A.
Mark A. Mullican Director President, Allfirst
Brokerage Corp.
J. Eric Leo CIO, Managing Director Head of Equity Investments,
Allied Investment Advisors,
Inc.
Steven M. Gradow Managing Director Head of Fixed Income
Investments, Allied
Investment Advisors, Inc.
Charles E. Knudsen, III Managing Director Head of Institutional
Portfolio Management, Allied
Investment Advisors, Inc.
Robert T. Sweet Managing Director Chief Economist, Allied
Investment Advisors, Inc.
</TABLE>
BOARD CONSIDERATIONS
On December 10, 1999, the Board, including the Independent Trustees,
unanimously approved, subject to the required shareholder approval described
herein, an amendment to the Compensation Schedule of the Advisory Agreement
between AIA and the Trust with respect to the Portfolio. In determining to
recommend the amended Advisory Agreement to sharehold-
11
<PAGE> 15
ers, the Board considered, among other factors, that the proposed advisory fee
increase superficially appears disadvantageous to the Portfolio's shareholders.
Currently, the Portfolio is a fund of funds that invests only in other mutual
funds. As such, the investment advisory fee paid at the Portfolio level is in
addition to the investment advisory fees paid with respect to each of the
Portfolio's mutual fund holdings. A similar analysis applies to the other fees
that may be charged by the underlying funds. Under the proposed change in
investment policy described under Proposal 1, the Portfolio will invest directly
in foreign securities, and thus eliminate investment advisory and other fees
with respect to portfolio management and other expenses paid by the underlying
mutual funds. The Board also considered that while the expenses attributable to
the underlying mutual funds will be eliminated, the Portfolio will incur other
expenses such as custody fees or transaction expenses. When such a change in
investment policy is contemplated, an increase in these fees is expected as a
result of increased direct investment in foreign securities. The Board reasoned
that the change in the actual cost structure could be advantageous to the
Portfolio's shareholders.
The Board also considered a number of other factors relating to the
proposed fee increase, including the following: (1) the nature, quality and
scope of the services provided by AIA; (2) AIA's investment performance; (3) the
mutual-fund related revenues and expenses of AIA; (4) whether the Portfolio and
its shareholders benefit from any economies of scale; (5) the investment
advisory fees payable by comparable investment companies; and (6) the current
expense ratio of the Portfolio as compared to the anticipated pro forma expense
ratio of the Portfolio. The Board considered AIA's representation that the
proposed fee increase was comparable to advisory fees for other mutual funds
with similar objectives, size, and cost structures. The Board also considered
AIA's proposed contractual fee waiver with respect to the Portfolio and the fact
that AIA expected to continue waiving fees in order to maintain an expense ratio
at a level comparable to other such mutual funds. In addition, the Board
considered AIA's proposal to appoint AIB Govett, Inc. ("AIB Govett") as
subadvisor and pay AIB Govett a monthly subadvisory fee at an annual rate equal
to 0.50% of the Portfolio's average daily net assets. (See Proposal No. 3).
In particular, the Board considered that, as the Portfolio is currently
structured, the investment advisors of the underlying funds determine in which
securities the funds will invest. Under the restructuring, this function will be
performed by AIA (or a subadvisor). Thus, an increase in the investment advisory
fee is warranted based on the additional duties to be performed by AIA (or a
subadvisor) as well as the fact that the Portfolio will
12
<PAGE> 16
be managed individually rather than as a fund of funds. Additionally, the
Board noted that the higher fee is comparable to investment advisory fees paid
by other international equity funds in the Portfolio's peer group.
After consideration of these and other relevant factors, the Board
determined that the proposed amendment to the Advisory Agreement was in the best
interests of the Portfolio and its shareholders. Based on this determination,
the Board, including its Independent Trustees, unanimously approved the proposed
amendment to the Advisory Agreement and recommended approval by the
shareholders.
VOTE REQUIRED
Approval of Proposal 2 requires the affirmative vote of the holders of the
lesser of (1) 67% or more of the shares of the Portfolio present at the Meeting,
if the holders of more than 50% of the outstanding Portfolio shares are present
or represented by proxy at the Meeting, or (2) more than 50% of the outstanding
shares of the Portfolio entitled to vote at the Meeting. The proposed amendment
to the Advisory Agreement is completely contingent upon the approval of Proposal
1 and will not become effective unless Proposal 1 is approved. If Proposal 1 is
not approved, AIA will continue to perform its duties under the current advisory
agreement and the Portfolio will continue to invest in other mutual funds, until
the Board decides what further action to take with respect to the Portfolio.
THE BOARD RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL 2.
PROPOSAL NO. 3:
APPROVAL OF AN INVESTMENT SUBADVISORY CONTRACT WITH AIB GOVETT, INC.
INTRODUCTION
The Board and AIA propose that AIB Govett be appointed subadvisor of the
Portfolio. AIB Govett is an affiliate of AIA, since both companies are indirect
subsidiaries of Allied Irish Banks, plc ("AIB"). The proposed retention of AIB
Govett is based primarily on the desire of the Board and AIA to have AIB Govett
manage the Portfolio following the restructuring described under Proposal 1. AIB
Govett has been a global money manager for over 60 years with an emphasis on
capital growth through investments and a solid track record in global money
management. If AIB Govett is approved as subadvisor, AIA will allocate all of
the Portfolio's assets to AIB Govett
13
<PAGE> 17
subject to the oversight of the Board. AIB Govett will provide day-to-day
management services and make investment decisions on behalf of the Portfolio in
accordance with its investment policies. AIB Govett will utilize a portfolio
management team under the supervision of John Murray and Eileen Fitzpatrick,
Joint Chief Investment Officers of AIB Govett, to manage the Portfolio's
investments.
At a meeting held on December 10, 1999, the Board determined that it would
be in the best interest of the Portfolio and its shareholders to retain AIB
Govett as the Portfolio's investment subadvisor. In making this decision, the
Board considered, among other factors, the expertise that AIB Govett offers in
providing portfolio management services to other international equity
portfolios. The Board also considered the experience of the persons supervising
the management team, and the financial strength and quality of services offered
by AIB Govett.
Accordingly, the Board unanimously voted that (1) subject to shareholder
approval, AIB Govett be appointed as subadvisor to the Portfolio, and (2) the
proposed investment subadvisory agreement between AIA and AIB Govett
("Subadvisory Agreement") be approved and submitted for shareholder approval.
These decisions included the unanimous approval of the Independent Trustees of
the Trust.
DESCRIPTION OF SUBADVISORY AGREEMENT
Under the Subadvisory Agreement, AIB Govett will manage the investment of
the Portfolio and will be responsible for placing all orders for the purchase
and sale of portfolio securities, subject to the supervision of the Board and
AIA. As compensation for AIB Govett's services and for expenses borne by AIB
Govett under the Subadvisory Agreement, AIB Govett will be paid a monthly
subadvisory fee by AIA (not by the Trust) at an annual rate equal to 0.50% of
the Portfolio's average daily net assets.
The Subadvisory Agreement provides that AIB Govett will not be liable for
against any error of judgment or mistake of law or for any losses suffered by
the Portfolio or AIA in connection with the matters to which the Subadvisory
Agreement relates including, without limitation, losses that may be sustained in
connection with the purchase, holding, redemption, or sale of any security,
except that AIB Govett may be held liable to the extent that such losses
resulted from AIB Govett's willful misfeasance, bad faith or gross negligence or
by reason of the reckless disregard by AIB Govett of its duties.
14
<PAGE> 18
If approved by shareholders, the Subadvisory Agreement would be executed
promptly by AIA and AIB Govett and become effective on or about August 8, 2000.
Unless sooner terminated, it would remain in effect for one year following its
effective date. Thereafter, it would continue automatically for successive
annual periods, provided that it is specifically approved at least annually (1)
by a vote of a majority of the Independent Trustees and (2) by the vote of a
majority of the Board or by a vote of a majority of the outstanding voting
securities of the Portfolio. The Trust may terminate the proposed Subadvisory
Agreement, without penalty, by a vote of the Board or a majority of its
outstanding voting securities of the Portfolio, on 60 days' written notice to
AIB Govett. AIA may at any time terminate the Subadvisory Agreement upon 60
days' written notice to AIB Govett, without penalty. AIB Govett may at any time
terminate the Subadvisory Agreement upon 60 days' written notice to AIA and the
Trust. The Subadvisory Agreement automatically will terminate without penalty in
the event of its assignment. For the Subadvisory Agreement, see Exhibit B.
INFORMATION ABOUT AIB GOVETT
AIB Govett is registered as an investment advisor under the Investment
Advisers Act of 1940, as amended ("Advisers Act"). AIB Govett is a wholly owned
subsidiary of AIB Asset Management Holdings Limited ("AIBAMH") which is a
majority-owned subsidiary of AIB. AIB owns 85.5% of AIBAMH and is Ireland's
largest banking and financial services institution. AIB Govett and its
affiliates AIB Govett Asset Management Limited and AIB Investment Managers
Limited are part of a broad network of offices worldwide, with principal offices
located in London, Dublin, San Francisco, and Singapore. These offices are
supported by a global network of investment/research offices in Baltimore,
Budapest, Rio de Janeiro, and Poznan. AIB Govett serves as investment subadvisor
to two other U.S. mutual fund portfolios. AIBAMH had, as of March 31, 2000,
approximately $16.97 billion under management, primarily in non-U.S. funds. For
a list of investment companies having a similar investment policy to the
Portfolio which are subadvised by AIB Govett, including AIB Govett's rates of
compensation, see Exhibit A. AIB Govett is located at 250 Montgomery Street,
Suite 1200, San Francisco, CA 94104. AIBAMH's principal business address is
Shackleton House, 4 Battle Bridge Lane, London, SE1 2HR, England.
15
<PAGE> 19
The names, titles, and principal occupations of the directors and executive
officers of AIB Govett are set forth in the following table:
<TABLE>
<CAPTION>
NAME POSITION WITH AIB GOVETT PRINCIPAL OCCUPATION
---- ------------------------ --------------------
<S> <C> <C>
Keith E. Mitchell Managing Director and Managing Director and
President President, AIB Govett, Inc.
Colm Doherty Chairman Head of AIB Capital
Markets -- Investment Banking,
Allied Irish Banks, p.l.c.
Noel McEnvoy Director Chief Executive Officer, AIB
Asset Management Holdings
Limited
John Murray Joint Chief Investment Joint Chief Investment Officer,
Officer AIB Govett, Inc.
Eileen Fitzpatrick Joint Chief Investment Joint Chief Investment Officer,
Officer AIB Govett, Inc.
Colin Kreidewolf Senior Vice President, Senior Vice President, Chief
Chief Financial Officer Financial Officer, AIB Govett,
Inc.
Paul Runge Senior Vice President Senior Vice President, AIB
Govett, Inc.
Lee Cook Senior Vice President Senior Vice President, AIB
Govett, Inc.
</TABLE>
The principal business address of each person listed above is 250
Montgomery Street, Suite 1200, San Francisco, CA 94104.
RECOMMENDATION OF THE BOARD OF TRUSTEES
The Board approved the appointment of AIB Govett as investment subadvisor
to the Portfolio and recommends that shareholders approve the proposed
Subadvisory Agreement. In approving the Subadvisory Agreement, the Board
analyzed the factors discussed above and other factors that would affect
positively or negatively the provision of portfolio management services.
The Board recommends that AIB Govett be retained as investment subadvisor
to the Portfolio. If Proposal 3 is not approved by shareholders, AIA will
continue as the Portfolio's investment advisor and will have investment
discretion with respect to 100% of the Portfolio's assets. The Trustees would
then consider whether any other arrangements for the provision of investment
advisory services are appropriate and in the best interests of the Portfolio's
shareholders.
16
<PAGE> 20
VOTE REQUIRED
Approval of Proposal 3 requires the affirmative vote of the holders of the
lesser of (1) 67% or more of the shares of the Portfolio present at the Meeting,
if the holders of more than 50% of the outstanding Portfolio shares are present
or represented by proxy at the Meeting, or (2) more than 50% of the outstanding
shares of the Portfolio entitled to vote at the Meeting. The retention of AIB
Govett, as investment subadvisor to the Portfolio, is completely contingent upon
the approval of Proposals 1 and 2, and will not become effective unless those
proposals are approved. If Proposals 1 and 2 are not approved, AIA will continue
to perform its duties under the current advisory agreement and the Portfolio
will continue to invest in other mutual funds, until the Board decides what
further action to take with respect to the Portfolio.
THE BOARD RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL 3.
GENERAL INFORMATION
DISTRIBUTION, ADMINISTRATIVE AND TRANSFER AGENCY SERVICES
SEI Investments Distribution Co., One Freedom Valley Drive, Oaks, PA 19456,
serves as the distributor of the Portfolio's shares. SEI Investments Mutual
Funds Services, One Freedom Valley Drive, Oaks, PA 19456, serves as the
Portfolio's administrator. Allfirst Trust Company N.A., 25 South Charles Street,
Baltimore, MD 21201, also provides administrative services to the Portfolio
pursuant to a sub-administration agreement with SEI Investments Mutual Funds
Services. The Portfolio's transfer agent is SEI Investments Management
Corporation, One Freedom Valley Drive, Oaks, PA 19456. SEI Investments
Management Corporation has subcontracted transfer agency services to State
Street Bank and Trust Company, One Heritage Drive, North Quincy, MA 02171.
SOLICITATION OF PROXIES
The Trust will request brokerage firms, custodians, nominees and
fiduciaries to forward proxy material to the beneficial owners of the shares
held of record by such persons. The Trust may reimburse such brokerage firms,
custodians, nominees and fiduciaries for their reasonable expenses incurred in
connection with such proxy solicitation. In addition to the solicitation of
proxies by mail, certain officers and regular agents of the Trust, who will
receive no additional compensation for their services, may use their efforts, by
17
<PAGE> 21
telephone or otherwise, to request the return of proxies. The costs associated
with such solicitation and the Meeting will be borne by AIB Govett.
OTHER BUSINESS
The Board does not know of any matters to be presented at the Meeting other
than those as set forth herein, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment of the Meeting,
the persons named as proxies in the enclosed Proxy will vote thereon according
to their best judgment in the interests of the Portfolio.
SHAREHOLDER PROPOSALS
A shareholder's proposal intended to be presented at any subsequent meeting
of shareholders of the Portfolio must be received by the Trust a reasonable time
before the Board of Trustees makes the solicitation relating to such meeting, in
order to be included in the Portfolio's proxy statement and form of proxy
relating to such meeting. Shareholders should send their written proposals to
the Secretary of the Trust, One Freedom Valley Drive, Oaks, PA 19456.
Shareholder proposals that are submitted in a timely manner will not necessarily
be included in the Portfolio's proxy materials. Inclusion of such proposals is
subject to limitations under the federal securities laws. Normally, there will
be no annual meeting of shareholders in any year, except as required under the
1940 Act.
Dated: July 14, 2000
18
<PAGE> 22
EXHIBIT A
FEE CHART FOR COMPARABLE FUNDS
SUBADVISED BY
AIB GOVETT
<TABLE>
<CAPTION>
TOTAL AVERAGE
NET ASSETS FOR THE
ADVISORY FEE MOST RECENTLY
(BASED ON AVERAGE DAILY COMPLETED
FUND NET ASSETS) FISCAL YEAR
---- ----------------------- ------------------
<S> <C> <C>
Govett International Equity
Fund........................ 1.50% $21,100,000
Govett Securities &
Investments
Limited -- International
Equity Portfolio -- Jersey
Channel Islands............. 1.50% $17,400,000
</TABLE>
19
<PAGE> 23
EXHIBIT B
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT executed as of ____________ __, 2000 by and between Allied
Investment Advisors, Inc., a Maryland corporation (the "Adviser"), AIB Govett,
Inc., a Maryland corporation (the "Sub-Adviser"), and ARK Funds, a Massachusetts
business trust (the "Trust"), on behalf of its International Equity Selection
Portfolio (the "Fund");
WHEREAS, the Adviser is the investment adviser for each of the portfolios
of the Trust, an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser as its agent to
furnish investment advisory services for the Fund;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser to
------------
provide certain sub-investment advisory services to the Fund for the period
and on the terms set forth in this Agreement. The Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Adviser has furnished the Sub-Adviser
----------------------
with copies properly certified or authenticated of each of the following:
(a) The Trust's Agreement and Declaration of Trust, as filed with
the Secretary of State of the Commonwealth of Massachusetts on March 19,
1993, and all amendments and supplements thereto or restatements thereof
(such Declaration, as presently in effect and as it shall from time to
time be amended or restated, is herein called the "Declaration of
Trust");
(b) The Trust's By-Laws and all amendments thereto;
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Sub-Adviser and approving this Agreement;
(d) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), (File No.
20
<PAGE> 24
33-53690) and under the 1940 Act (File No. 811-7310), as filed with the
Securities and Exchange Commission ("SEC") and all amendments thereto
insofar as such Registration Statement and such amendments relate to the
Fund; and
(e) The Trust's most recent prospectus and Statement of Additional
Information for the Fund (such prospectus and Statement of Additional
Information, as presently in effect, and all amendments and supplements
thereto, are herein collectively called the "Prospectus").
The Adviser will furnish the Sub-Adviser from time to time with copies of
all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Trust's Board of
-----------
Trustees and the Adviser, the Sub-Adviser will furnish an investment
program in respect of, and make investment decisions for, all assets of the
Fund and place all orders for the purchase and sale of securities, all on
behalf of the Fund. In the performance of its duties, the Sub-Adviser will
satisfy its fiduciary duties to the Fund (as set forth in Section 8,
below), and will monitor the investments of the Fund, and will comply with
the provisions of the Trust's Declaration of Trust and By-Laws, as amended
from time to time, and the stated investment objectives, policies and
restrictions of the Fund. The Sub-Adviser and the Adviser will each make
its officers and employees available to the other from time to time at
reasonable times to review investment policies of the Fund and to consult
with each other regarding the investment affairs of the Fund. The
Sub-Adviser shall also make itself available to the Board of Trustees at
such times as the Board of Trustees shall reasonably request.
The Sub-Adviser represents and warrants that it is in compliance with
all applicable rules and regulations of the SEC pertaining to its
investment advisory activities and agrees that it:
(a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(b) will conform with all applicable rules and regulations of the
SEC pertaining to its investment advisory activities;
(c) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or dealer.
In placing orders with brokers or dealers, the Sub-Adviser
21
<PAGE> 25
will attempt to obtain the best combination of prompt execution of
orders in an effective manner and at the most favorable price.
Consistent with this obligation, when the execution and price offered by
two or more brokers or dealers are comparable, the Sub-Adviser may, in
its discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Sub-Adviser with research, analysis,
advice and other services. In no instance will portfolio securities be
purchased from or sold to any affiliated person of either the Trust, the
Adviser, or the Sub-Adviser, except as may be permitted under the 1940
Act;
(d) will report regularly to the Adviser and will make appropriate
persons available for the purpose of reviewing at reasonable times with
representatives of the Adviser and the Board of Trustees the management
of the Fund, including, without limitation, review of the investment
strategies of the Fund, the performance of the Fund in relation to
standard industry indices, interest rate considerations and general
conditions affecting the marketplace and will provide various other
reports from time to time as reasonably requested by the Adviser;
(e) will maintain books and records with respect to the Fund's
securities transactions and will furnish the Adviser and the Trust's
Board of Trustees such periodic and special reports as the Board of
Trustees or the Adviser may request; and
(f) will act upon instructions from the Adviser not inconsistent
with the fiduciary duties hereunder.
The Sub-Adviser shall have the right to execute and deliver, or cause
its nominee to execute and deliver, all proxies and notices of meetings
and other notices affecting or relating to the securities of the Fund.
4. Books and Records. In compliance with the requirements of Rule
------------------
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records
which it maintains for the Fund, on behalf of the Trust, are the property
of the Trust and further agrees to surrender promptly to the Trust any of
such records upon the Trust's request. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
22
<PAGE> 26
5. Expenses. During the term of this Agreement, the Sub-Adviser will
---------
pay all expenses incurred by it in connection with its activities under
this Agreement.
6. Compensation. For the services to be provided by the Sub-Adviser
-------------
pursuant to this Agreement, the Adviser will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a sub-advisory
fee as set forth on the Fee Schedule attached to this Agreement.
7. Services to Others. The Adviser understands, and has advised the
-------------------
Trust's Board of Trustees, that the Sub-Adviser now acts, and may in the
future act, as an investment adviser to fiduciary and other managed
accounts, and as investment adviser, sub-investment adviser, and/or
administrator to other investment companies. The Adviser has no objection
to the Sub-Adviser's acting in such capacities, provided that whenever the
Fund and one or more other investment companies advised by the Sub-Adviser
have available funds for investment, investments suitable and appropriate
for each will be allocated in accordance with a formula believed by the
Sub-Adviser to be equitable to each company. The Adviser recognizes, and
has advised the Trust's Board of Trustees, that in some cases this
procedure may adversely affect the size of the position that the Fund may
obtain in a particular security. In addition, the Adviser understands, and
has advised the Trust's Board of Trustees, that the persons employed by the
Sub-Adviser to assist in the Sub-Adviser's duties under this Agreement will
not devote their full time to such service and nothing contained in this
Agreement will be deemed to limit or restrict the right of the Sub-Adviser
or any of its affiliates to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature so long
as its services under this Agreement are not impaired thereby.
8. Limitation of Liability of Sub-Adviser. The Sub-Adviser shall not
---------------------------------------
be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund or the Adviser in connection with the matters to which
this Agreement relates including, without limitation, losses that may be
sustained in connection with the purchase, holding, redemption, or sale of
any security on behalf of the Fund, except a loss resulting from the
willful misfeasance, bad faith or gross negligence of the Sub-Adviser in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
23
<PAGE> 27
9. Duration and Termination. This Agreement will become effective as
-------------------------
of the date hereof provided that it has been approved by vote of a majority
of the outstanding voting securities of the Fund in accordance with the
requirements under the 1940 Act, and, unless sooner terminated as provided
herein, will continue in effect for successive periods of 12 months, each
ending on the day preceding the anniversary of the Agreement's effective
date of each year, provided that such continuation is specifically approved
at least annually (a) by the vote of a majority of those members of the
Trust's Board of Trustees who are not interested persons of the Trust, the
Sub-Adviser, or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the vote of a majority of
the Trust's Board of Trustees or, as to each Fund, by the vote of the
holders of a majority of the outstanding voting securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated as to
the Fund at any time, without the payment of any penalty, by the Adviser,
by vote of the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the Fund on sixty (60) days' written
notice to the Sub-Adviser and by the Sub-Adviser on sixty (60) days'
written notice to the Adviser and the Trust. This Agreement will terminate
automatically upon termination of the investment advisory agreement between
the Trust and the Adviser. This Agreement will automatically and
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" have the same meaning of such terms in
the 1940 Act).
10. Amendment of this Agreement. No material provision of this
----------------------------
Agreement may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
11. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be
affected thereby.
The names "ARK Funds" and "Trustees of ARK Funds" refer respectively to the
Trust created by, and the Trustees, as trustees but not individually or
personally, acting from time to time under, the Declaration of Trust, to
24
<PAGE> 28
which reference is hereby made and a copy of which is on file at the office of
the Secretary of State of the Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "ARK Funds" entered in the name or on behalf thereof
by any of the Trustees, representatives or agents are made not individually but
only in such capacities and are not binding upon any of the Trustees,
shareholders or representatives of the Trust personally, but bind only the
assets of the Trust. Persons dealing with a Fund must look solely to the assets
of the Trust belonging to the Fund for the enforcement of any claims against the
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ALLIED INVESTMENT ADVISORS, INC.
By: ------------------
Name: ------------------
Title: ------------------
AIB GOVETT, INC.
By: ------------------
Name: ------------------
Title: ------------------
ARK FUNDS
By: ------------------
Name: ------------------
Title: ------------------
25
<PAGE> 29
ARK FUNDS
530 E. SWEDESFORD ROAD
WAYNE, PA 19087
ARK FUNDS
INTERNATIONAL EQUITY SELECTION PORTFOLIO
ONE FREEDOM VALLEY DRIVE
OAKS, PA 19456
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
AUGUST 8, 2000
This Proxy is Solicited on Behalf of the Board of Trustees of ARK Funds
The undersigned Shareholder(s) of the ARK International Equity Selection
Portfolio ("the Portfolio") hereby appoint(s) James Foggo, Laurie Brooks and
Timothy Barto, each of them (with full power of substitution), the proxy or
proxies of the undersigned to attend the Special Meeting of Shareholders ("the
Meeting") of the Portfolio to be held on Tuesday, August 8, 2000, and any
adjournment thereof, to vote all of the shares of the Portfolio that the signer
would be entitled to vote on the proposals set forth below if personally present
at the Meeting and on any matters brought before the Meeting, as is set forth in
the Notice of Special Meeting of Shareholders. Said proxies are directed to vote
or refrain from voting pursuant to the Proxy Statement as checked below.
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE SIGNING
SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR THE PROPOSAL.
PLEASE DATE, SIGN AND RETURN PROMPTLY
The undersigned acknowledges receipt with this proxy of a copy of the
Notice of Special Meeting of Shareholders and the Proxy Statement of the Board
of Trustees.
Your signature(s) on this proxy should be exactly as your name or names
appear on this proxy. If the shares are held jointly, each holder should sign.
If signing is by attorney, executor, administrator, trustee or guardian, please
print your full title below the signature.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X]
KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
ARK INTERNATIONAL EQUITY SELECTION PORTFOLIO
Vote On Proposals
<TABLE>
<S> <C> <C> <C>
1. To approve a change in investment policy FOR AGAINST ABSTAIN
whereby the Portfolio would invest directly [ ] [ ] [ ]
in the securities of companies located in
countries other than the United States, rather
than in shares of mutual funds investing in
these companies.
2. To approve an increase in the investment advisory fee
payable by the Portfolio to Allied Investment Advisors, [ ] [ ] [ ]
Inc.
3. To approve an investment subadvisory
contract with AIB Govett, Inc. [ ] [ ] [ ]
4. To transact such other business as may properly come
before the Special Meeting or any adjournment thereof.
</TABLE>
Date ------------
-------------------------------------------------------------
Shareholder sign here Co-owner sign here
