ARK FUNDS/MA, 485APOS, 2000-11-22

ARK FUNDS/MA
485APOS, 2000-11-22

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 2000.
FILE NO. 33-53690
FILE NO. 811-7310

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT / /
POST-EFFECTIVE AMENDMENT NO. 30 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/

AMENDMENT NO. 28 /X/

ARK FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

ONE FREEDOM VALLEY DRIVE
OAKS, PA 19456
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

REGISTRANT'S TELEPHONE NUMBER
1-610-676-1000

THOMAS R. RUS
SECRETARY
ARK FUNDS
ONE FREEDOM VALLEY DRIVE
OAKS, PA 19456
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPIES TO:
ALAN C. PORTER, ESQ.
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036-1800

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:

/ / IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
/ / ON SEPTEMBER 1, 2000 PURSUANT TO PARAGRAPH (b)
/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a) (1)
/X / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a) (2)
/ / ON [DATE] PURSUANT TO PARAGRAPH (a) OF RULE 485

IF APPROPRIATE, CHECK THE FOLLOWING BOX:
<PAGE>

/ / THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR
A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.

<PAGE>

ARK FUNDS

PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO
SMALL-CAP EQUITY PORTFOLIO

RETAIL

CLASS A AND CLASS B

PROSPECTUS
FEBRUARY ___, 2001

INVESTMENT ADVISOR:
ALLIED INVESTMENT ADVISORS, INC.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR
PASSED UPON THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

HOW TO READ THIS PROSPECTUS

ARK Funds is a mutual fund family that offers different classes of shares in
separate investment portfolios (Portfolios). The Portfolios have individual
investment goals and strategies. This prospectus gives you important information
about the Retail Class A and Class B Shares of the Portfolios that you should
know before investing. Please read this prospectus and keep it for future
reference.

Class A and Class B Shares have different expenses and other characteristics,
allowing you to choose the class that best suits your needs. You should consider
the amount you want to invest, how long you plan to have it invested, and
whether you plan to make additional investments.

THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT THE PORTFOLIOS. FOR MORE DETAILED INFORMATION
ABOUT EACH PORTFOLIO, PLEASE SEE:

PAGE
ARK PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO.................4
ARK SMALL-CAP EQUITY PORTFOLIO...................................7
ADDITIONAL INFORMATION ABOUT PRINCIPAL RISK.....................12
EACH PORTFOLIO'S OTHER INVESTMENTS..............................14
INVESTMENT ADVISOR..............................................14
PURCHASING, SELLING, EXCHANGING AND DISTRIBUTION OF
PORTFOLIO SHARES.............................................15
DIVIDENDS AND DISTRIBUTIONS.....................................26
TAXES...........................................................27
FINANCIAL HIGHLIGHTS............................................28
HOW TO OBTAIN MORE INFORMATION ABOUT ARK FUNDS.......Inside Back Cover

Page 2 of 28
<PAGE>

INTRODUCTION - INFORMATION COMMON TO ALL PORTFOLIOS

Each Portfolio is a mutual fund. A mutual fund pools shareholders' money and,
using professional investment managers, invests it in securities.

Each Portfolio has its own investment goal and strategies for reaching that
goal. The investment advisor invests each Portfolio's assets in a way that it
believes will help a Portfolio achieve its goal. Still, investing in each
Portfolio involves risk, and there is no guarantee that a Portfolio will achieve
its goal. The investment advisor's judgments about the markets, the economy, or
companies may not anticipate actual market movements, economic conditions or
company performance, and these judgments may affect the return on your
investment. In fact, no matter how good a job the investment advisor does, you
could lose money on your investment in a Portfolio, just as you could with other
investments. A Portfolio share is not a bank deposit and it is not insured or
guaranteed by the FDIC or any government agency.

The value of your investment in a Portfolio (other than the Pennsylvania
Tax-Free Money Market Portfolio) is based on the market prices of the securities
the Portfolio holds. These prices change daily due to economic and other events
that affect particular companies and other issuers. These price movements,
sometimes called volatility, may be greater or lesser depending on the types of
securities a Portfolio owns and the markets in which they trade. The effect on a
Portfolio of a change in the value of a single security will depend on how
widely the Portfolio diversifies its holdings.

THE PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO TRIES TO MAINTAIN A CONSTANT
PRICE PER SHARE OF $1.00, BUT THERE IS NO GUARANTEE THAT THE PORTFOLIO WILL
ACHIEVE THIS GOAL. PLEASE CALL 1-800-ARK-FUND (1-800-275-3863) TO OBTAIN CURRENT
7-DAY YIELD INFORMATION FOR THIS PORTFOLIO.

Page 3 of 28

<PAGE>

ARK PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

PORTFOLIO SUMMARY

INVESTMENT GOAL Maximizing current income
exempt from Federal and
Pennsylvania state income taxes
and providing liquidity and
security of principal

INVESTMENT FOCUS Short-term, high-quality
Pennsylvania municipal money
market obligations

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Investing in Pennsylvania
municipal money market
securities

INVESTOR PROFILE Conservative investors seeking
income exempt from Federal
and Pennsylvania state income
taxes through a low-risk,
liquid investment

PRINCIPAL INVESTMENT STRATEGY OF THE PENNSYLVANIA TAX-FREE MONEY MARKET
PORTFOLIO

The Pennsylvania Tax-Free Money Market Portfolio seeks its investment goal by
investing substantially all of its assets in high-quality, short-term municipal
money market instruments that pay interest exempt from Federal and Pennsylvania
state income taxes. The principal issuers of these securities may be state and
local governments and agencies located in Pennsylvania, as well as the District
of Columbia, Puerto Rico and other U.S. territories and possessions. The
Portfolio is comprised only of short-term debt securities that are rated in the
two highest categories by nationally recognized statistical rating organizations
or determined by the Advisor to be of equal credit quality. Normally, the
Portfolio will not invest in securities subject to the Alternative Minimum Tax
or in taxable municipal securities.

In selecting securities for the Portfolio, the Advisor considers factors such as
current yield, the anticipated level of interest rates, and the maturity of the
instrument relative to the maturity of the entire Portfolio. In addition, the
Portfolio may only purchase securities that meet certain SEC requirements. Under
these requirements, the Portfolio's securities must have remaining maturities of
397 days or less, and the Portfolio must have a dollar-weighted average maturity
of 90 days or less.

PRINCIPAL RISKS OF INVESTING IN THE PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

Page 4 of 28

<PAGE>

money market fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Portfolio.

There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.

The Portfolio's concentration of investments in securities of issuers located in
Pennsylvania subjects the Portfolio to the effects of economic and government
policies of Pennsylvania.

PERFORMANCE INFORMATION

Performance information for the Portfolio will be available after the Portfolio
has completed its first calendar year of operations.

PORTFOLIO FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>

CLASS A
SHARES
---------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering None
price)
Maximum Deferred Sales Charge (Load) (as a percentage of offering
price) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and
other Distributions (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None(1)
Exchange Fee None

ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)

CLASS A
SHARES
--------------------------------------------------------------------------------------------
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees 0.25%
Other Expenses 0.38%(2)
-----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 0.88%
Fee Waivers and Expense Reimbursements 0.19%
-----
TOTAL NET OPERATING EXPENSES 0.69%(3)
-----
-------------------------------------------------------------------------------------
<FN>
(1) If redemption proceeds are wired to a bank account, a $10 fee is applicable.
(2) Other Expenses are based on estimated amounts for the current fiscal year.
(3) The Portfolio's Advisor has agreed contractually to waive fees and
reimburse expenses in order to keep total operating expenses for Class A
Shares from exceeding 0.69% until August 31, 2001.
</FN>
</TABLE>

For more information about fees, see "Investment Advisor" and "Purchasing,
Selling, Exchanging and Distribution of Portfolio Shares."

Page 5 of 28

<PAGE>

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:

1 YEAR 3 YEARS
$70 $262

Page 6 of 28

<PAGE>

ARK SMALL-CAP EQUITY PORTFOLIO

PORTFOLIO SUMMARY

INVESTMENT GOAL
Long-term capital appreciation

INVESTMENT FOCUS
Common stock of small-capitalization U.S. issuers

SHARE PRICE VOLATILITY
High

PRINCIPAL INVESTMENT STRATEGY
Investing in stocks of smaller companies with long-term
earnings growth potential

INVESTOR PROFILE
Investors seeking long-term capital appreciation who can
tolerate the share price volatility of small-cap equity
investing
</TABLE>

PRINCIPAL INVESTMENT STRATEGY OF THE SMALL-CAP EQUITY PORTFOLIO

The Small-Cap Equity Portfolio seeks its investment goal by investing primarily
in common stocks and other equity securities of U.S. issuers. The Portfolio's
Advisor purchases stocks of smaller companies that are in the early stages of
development and which the Advisor believes have the potential to achieve
substantial long-term earnings growth. The Portfolio invests primarily in
companies with market capitalizations of $2 billion or less at the time of
investment. The Portfolio may also invest a limited percentage of its assets in
securities rated below investment grade ("junk bonds") and in foreign
securities.

In selecting investments for the Portfolio, the Advisor purchases securities of
small-cap U.S. companies with strong earnings growth potential. The Advisor may
also purchase stocks of companies that are experiencing unusual, non-repetitive
"special" situations (such as mergers or spin-offs) or that have valuable fixed
assets whose value is not fully reflected in a stock's price. The Advisor may
also purchase stocks of smaller companies that it believes are undervalued
relative to their assets, earnings or growth potential.

Due to its investment strategy, the Portfolio may buy and sell securities
frequently. This may result in higher transaction costs and additional capital
gains tax liabilities, and may adversely affect the Portfolio's performance.

PRINCIPAL RISKS OF INVESTING IN THE SMALL-CAP EQUITY PORTFOLIO

An investment in the Portfolio is not guaranteed; you may lose money by
investing in the Portfolio.

Since it purchases equity securities, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Portfolio's equity
securities may fluctuate significantly from day to day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may

Page 7 of 28

<PAGE>

suffer a decline in response.These factors contribute to price volatility, which
is the principal risk of investing in the Portfolio.

The smaller capitalization companies the Portfolio invests in may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these companies may have limited product lines,
markets and financial resources, and may depend upon a relatively small
management group. Therefore, small-cap stocks may be more volatile than those of
larger companies. These securities may be traded over-the-counter or listed on
an exchange and may or may not pay dividends.

The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers. Generally, the Portfolio's
fixed income securities will decrease in value if interest rates rise. The
volatility of lower rated securities is even greater than that of higher rated
securities. Also, securities with longer maturities are generally more volatile,
so the average maturity of the Portfolio's securities affects risk.

Junk bonds involve greater risks of default or downgrade and are more volatile
than investment-grade securities. Junk bonds involve a greater risk of price
declines than investment-grade securities due to actual or perceived changes in
an issuer's creditworthiness. In addition, issuers of junk bonds may be more
susceptible than other issuers to economic downturns. Junk bonds are subject to
the risk that the issuer may not be able to pay interest and ultimately to repay
principal upon maturity. Discontinuation of these payments could substantially
adversely affect the market value of the security.

Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.

PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.

This bar chart shows changes in the performance of the Portfolio's Class A
Shares for each year for five calendar years. Class A commenced operations on
May 16, 1996. The Portfolio's Institutional Class, which is not offered in this
prospectus, began offering its shares on July 13, 1995. In the bar chart below,
performance results before May 16, 1996 are for the Institutional Class and have
been adjusted for the total annual operating expenses applicable to Class A
Shares.

The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.

1996 ______%
1997 ______%
1998 ______%
1999 ______%

Page 8 of 28

<PAGE>

2000 ______%

BEST QUARTER WORST QUARTER
------% ------%
(--/--/--) (--/--/--)

THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE RUSSELL 2000 GROWTH INDEX, THE RUSSELL
2000 INDEX, AND THE LIPPER MID-CAP GROWTH FUNDS CLASSIFICATION. LIPPER HAS
RECLASSIFIED THE PORTFOLIO INTO ITS NEW MID-CAP COMPARISON CATEGORY.

1 YEAR SINCE INCEPTION
------------------------------------------------------------------ -------------
SMALL-CAP EQUITY PORTFOLIO- CLASS A SHARES [____]% [____]%*
SMALL-CAP EQUITY PORTFOLIO- CLASS B SHARES [____]% [____]%**
RUSSELL 2000 GROWTH INDEX [____]% [____]%***
RUSSELL 2000 INDEX [____]% [____]%***
LIPPER MID-CAP GROWTH FUNDS CLASSIFICATION [____]% [____]%***

* Since July 13, 1995. Class A Shares of the Portfolio were offered
beginning May 16, 1996. Performance results shown before that date are
for the Portfolio's Institutional Class and have been adjusted for the
maximum sales charge and total annual operating expenses applicable to
Class A Shares. The Portfolio's Institutional Class, which is not
offered by this prospectus, commenced operations on July 13, 1995. The
Class A annual returns would have been substantially similar to those of
the Institutional Class because shares of each class are invested in the
same portfolio of securities.
** Since July 13, 1995. As of the date of this prospectus, the Class B
Shares did not have a full calendar year of performance. Performance
results shown are for the Portfolio's Institutional Class and have been
adjusted for the maximum contingent deferred sales charge and total
annual operating expenses applicable to Class B Shares. The Portfolio's
Institutional Class, which is not offered by this prospectus, commenced
operations on July 13, 1995. The Class B annual returns would have been
substantially similar to those of the Institutional Class because shares
of each class are invested in the same portfolio of securities.
*** Since July 31, 1995.

WHAT IS AN INDEX?

An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Russell 2000 Growth Index is a widely
recognized, capitalization-weighted (companies with larger market
capitalizations have more influence than those with smaller market
capitalizations) index of large U.S. companies with high growth rates and
price-to-book ratios. The Russell 2000 Index is a widely recognized,
capitalization-weighted index, which measures the performance of the 2,000
smallest companies in the Russell 3000 index.

WHAT IS A CLASSIFICATION?

A classification measures the share prices of a specific group of mutual funds
with a particular investment objective. You cannot invest directly in a
classification. The Lipper Mid-Cap Growth Funds Classification is a composite of
mutual funds with goals similar to the Portfolio's goals.

Page 9 of 28

<PAGE>

PORTFOLIO FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>

CLASS A SHARES CLASS B SHARES
-------------------------------------------------------------------------------------------------------- ----------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.75%(1) None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None 5.00%(2)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None(3) None(3)
Exchange Fee None None
</TABLE>

ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
<TABLE>
<CAPTION>

CLASS A SHARES CLASS B SHARES
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.80% 0.80%
Distribution (12b-1) Fees 0.40% 0.75%
Other Expenses 0.41% 0.51%(4)
----- -----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.61% 2.06%
Fee Waivers and Expense Reimbursements 0.22%
-----
TOTAL NET OPERATING EXPENSES 1.39%(5)
-----
--------------------------------------------------------------------- ----------------- ------------------
<FN>
(1) This sales charge varies depending upon how much you invest. See "Purchasing
Portfolio Shares."
(2) A sales charge is imposed if you sell Class B Shares within six years of
your purchase. See "Selling Portfolio Shares."
(3) If redemption proceeds are wired to a bank account, a $10 fee is applicable.
(4) Other Expenses are based on estimated amounts for the current fiscal year.
(5) The Portfolio's Advisor has agreed contractually to waive fees and reimburse
expenses in order to keep total operating expenses for Class A Shares from
exceeding 1.39% 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, in addition to its contractual commitment, the Advisor
is voluntarily reimbursing expenses in order to keep total operating
expenses at a specified level. The Advisor may discontinue all or part of
these reimbursements at any time. With the expense reimbursements, the
Portfolio's actual total operating expenses were as follows:
</FN>
</TABLE>

Small-Cap Equity Portfolio - Class A Shares 1.30%

For more information about fees, see "Investment Advisor" and "Purchasing,
Selling, Exchanging and Distribution of Portfolio Shares."

EXAMPLE

IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $610 $938 $1,290 $2,278
CLASS B SHARES $709 $946 $1,308 $2,275
</TABLE>

Page 10 of 28

<PAGE>

IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $610 $938 $1,290 $2,278
CLASS B SHARES $209 $646 $1,108 $2,275
</TABLE>

Page 11 of 28

<PAGE>

ADDITIONAL INFORMATION ABOUT PRINCIPAL RISK
<TABLE>
<CAPTION>
<S> <C> <C>

RISKS PORTFOLIOS AFFECTED BY THE RISKS

EQUITY RISK-- Equity securities include publicly and privately Small-Cap Equity Portfolio
issued equity securities, common and preferred stocks, warrants,
rights to subscribe to common stock and convertible securities, as
well as instruments that attempt to track the price movement of
equity indices. Investments in equity securities and equity
derivatives in general are subject to market risks that may cause
their prices to fluctuate over time. Equity derivatives may be
more volatile and increase portfolio risk. The value of
securities convertible into equity securities, such as warrants or
convertible debt, is also affected by prevailing interest rates,
the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which a mutual
fund invests will cause its portfolio's net asset value to
fluctuate. An investment in a Portfolio of equity securities may
be more suitable for long-term investors who can bear the risk of
these share price fluctuations.

FIXED INCOME RISK-- The market values of fixed income investments Small-Cap Equity Portfolio
change in response to interest rate changes and other factors.
During periods of falling interest rates, the values of
outstanding fixed income securities generally rise. Moreover,
while securities with longer maturities tend to produce higher
yields, the prices of longer maturity securities are also subject
to greater market fluctuations as a result of changes in interest
rates.

MUNICIPAL ISSUER RISK-- There may be economic or political changes Pennsylvania Tax-Free Money Market
that impact the ability of municipal issuers to repay principal Portfolio
and to make interest payments on municipal securities. Changes to
the financial condition or credit rating of municipal issuers may
also adversely affect the value of a Portfolio's municipal
securities. Constitutional or legislative limits on borrowing by
municipal issuers may result in reduced supplies of municipal
securities. Moreover, certain municipal securities are backed
only by a municipal issuer's ability to levy and collect taxes.

In addition, a Portfolio's concentration of investments in issuers
located in a single state makes the Portfolio more susceptible
to adverse political or economic developments affecting that state.
Such a Portfolio also may be riskier than mutual funds that buy
securities of issuers in numerous states.
</TABLE>
Page 12 of 28

FOREIGN SECURITY RISK -- Investments in securities of foreign Small-Cap Equity Portfolio
companies or governments can be more volatile than investments in
U.S. companies or governments. Diplomatic, political, or economic
developments, including nationalization or appropriation, could
affect investments in foreign countries. Foreign securities
markets generally have less trading volume and less liquidity than
U.S. markets. In addition, the value of securities denominated in
foreign currencies, and of dividends from such securities, can
change significantly when foreign currencies strengthen or weaken
relative to the U.S. dollar. Foreign companies or governments
generally are not subject to uniform accounting, auditing, and
financial reporting standards comparable to those applicable to
U.S. companies or governments. Transaction costs are generally
higher than those in the U.S. and expenses for custodial
arrangements of foreign securities may be somewhat greater than
typical expenses for custodial arrangements of similar U.S.
securities. Some foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a portion of
these taxes are recoverable, the non-recovered portion will reduce
the income received from the securities comprising the Portfolio.

In addition to these risks, certain foreign securities may be subject
to the following additional risks factors:

CURRENCY RISK -- Investments in foreign securities denominated in Small-Cap Equity Portfolio
foreign currencies involve additional risks, including:

o The value of a Portfolio's assets measured in U.S.
dollars may be affected by changes in currency rates
and in exchange control regulations.
o A Portfolio may incur substantial costs in
connection with conversions between various
currencies.
o A Portfolio may be unable to hedge against
possible variations in foreign exchange rates
or to hedge a specific security transaction or
portfolio position.
o A limited market currently exists for hedging
transactions relating to currencies in certain
emerging markets.

Page 13 of 28

</TABLE>

<PAGE>

EACH PORTFOLIO'S OTHER INVESTMENTS

This prospectus describes the Portfolios' primary strategies. The Small-Cap
Equity Portfolio and the Pennsylvania Tax-Free Money Market Portfolio will
normally invest at least 65% and 80%, respectively, of their total assets in the
types of securities described in this prospectus. However, each Portfolio also
may invest in other securities, use other strategies and engage in other
investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, there is no guarantee that any Portfolio will
achieve its investment goal.

The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, each Portfolio may invest up to
100% of its assets in cash and short-term securities that may not ordinarily be
consistent with a Portfolio's objectives. A Portfolio will do so only if the
Portfolio's Advisor believes that the risk of loss outweighs the opportunity for
capital gains or higher income. The Portfolio may not be able to meet its
investment goal when it is employing a temporary defensive strategy.

INVESTMENT ADVISOR

The Portfolios' Investment Advisor makes investment decisions for the Portfolios
and continuously reviews, supervises and administers the Portfolios' respective
investment programs. The Board of Trustees of ARK Funds supervises the Advisor
and establishes policies that the Advisor must follow in its management
activities.

Allied Investment Advisors, Inc. (AIA), a wholly-owned subsidiary of Allfirst
Bank (Allfirst), serves as the Advisor to the Portfolios. As of September 30,
2000, AIA had approximately $14.6 billion in assets under management. For the
fiscal year ended April 30, 2000, AIA received advisory fees of:

PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO 0.25%*
SMALL-CAP EQUITY PORTFOLIO 0.79%
--------------------------------------------------------------------------------
* The Portfolio has not paid any advisory fees for the fiscal year ended April
30, 2000. The Board of Trustees has approved an investment advisory fee of 0.25%
for the Portfolio. The Portfolio's Advisor has agreed contractually to waive
fees and reimburse expenses in order to keep total operating expenses from
exceeding 0.69% for Class A Shares until August 31, 2001. With these fee
waivers, the actual advisory fees received by AIA would be lower than those
shown in the table above.

AIA and Allfirst are indirect wholly-owned subsidiaries of Allied Irish Banks,
p.l.c. (AIB). AIB is the largest bank in the Republic of Ireland, with assets of
approximately $71 billion at June 30, 2000.

PORTFOLIO MANAGERS

James M. Hannan is a Principal of AIA and manager of the PENNSYLVANIA TAX-FREE
MONEY MARKET PORTFOLIO. He is also manager of other ARK Funds Portfolios and is
responsible for several separately managed institutional portfolios that he has
managed since 1992. He has served as a Vice President of Allfirst since 1987.
Prior to 1987 he served as the Treasurer for the city of Hyattsville, Maryland.

H. Giles Knight is a Principal of AIA and manager of the SMALL-CAP EQUITY
PORTFOLIO. Prior to joining Allfirst, Mr. Knight was with ASB Capital
Management, a subsidiary of Nations Bank, from 1990 to 1994. He was Director of
Special Equity Investments, Capital Markets Division,

Page 14 of 28

<PAGE>

where he was responsible for one mutual fund and six employee benefit and
personal trust common stock funds. Mr. Knight has nearly 30 years of investment
experience.

PURCHASING, SELLING, EXCHANGING AND DISTRIBUTION OF PORTFOLIO SHARES

This section tells you how to purchase, sell (sometimes called "redeem") or
exchange Class A and Class B Shares of the Portfolios.

The classes have different expenses and other characteristics.

CLASS A SHARES OF THE PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO
o NO SALES CHARGE
o 12B-1 FEES AND SHAREHOLDER SERVICING FEES

CLASS A SHARES OF THE SMALL-CAP EQUITY PORTFOLIO
o FRONT-END SALES CHARGE
o 12B-1 FEES AND SHAREHOLDER SERVICING FEES

CLASS B SHARES OF THE SMALL-CAP EQUITY PORTFOLIO
o CONTINGENT DEFERRED SALES CHARGE
o HIGHER 12B-1 FEES AND SHAREHOLDER SERVICING FEES

Class A and Class B Shares are for individual investors and businesses.

There are three ways to invest in the Portfolios:

o Through Authorized Brokers or Other Institutions
o Directly with ARK Funds
o Through the ARK Funds Employee Investment Program

GENERAL INFORMATION

You may purchase shares on any day that the New York Stock Exchange (NYSE) and
the Federal Reserve Bank of New York (Federal Reserve) are open for business (a
Business Day). Shares cannot be purchased by Federal Reserve wire on days when
either the NYSE or the Federal Reserve is closed.

A Portfolio may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Portfolio or its shareholders.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Portfolio receives your purchase order plus, in
the case of Class A Shares, the applicable front-end sales charge.

The Pennsylvania Tax-Free Money Market Portfolio calculates NAV each Business
Day at 12:00 noon Eastern time and 4:00 p.m. Eastern time. So, for you to be
eligible to receive dividends declared on the day you submit your purchase
order, generally the Portfolio must receive your order and Federal funds
(readily available funds) before 12:00 noon Eastern time. For orders

Page 15 of 28

<PAGE>

received and accepted after 12:00 noon Eastern time but before 4:00 p.m. Eastern
time, you will begin earning dividends on the next Business Day.

The Small-Cap Equity Portfolio calculates its NAV each Business Day at the close
of the NYSE (normally 4:00 p.m. Eastern time). So, for you to be eligible to
receive dividends declared on the day you submit your purchase order, generally
the Portfolio must receive your order and Federal funds before 4:00 p.m. Eastern
time.

When the NYSE or the Federal Reserve close early, the Portfolio will advance the
time on any such day by which purchase orders must be received.

HOW WE CALCULATE NAV

NAV for one Portfolio share is the value of that share's portion of all of the
net assets in the Portfolio.

In calculating NAV, the Small-Cap Equity Portfolio generally values its
securities at market price. If market prices are unavailable or the Portfolio
thinks that they are unreliable, fair value prices may be determined in good
faith using methods approved by the Board of Trustees.

In calculating NAV for the Pennsylvania Tax-Free Money Market Portfolio, we
generally value its investment portfolio using the amortized cost valuation
method, which is described in detail in our Statement of Additional Information.
If this method is determined to be unreliable during certain market conditions
or for other reasons, the Portfolio may value its securities at market price or
fair value prices may be determined in good faith using methods approved by the
Board of Trustees.

The Small-Cap Equity Portfolio may hold securities that are listed on foreign
exchanges. These securities may trade on weekends or other days when the
Portfolio does not calculate NAV. As a result, the market value of the
Portfolio's investments may change on days when you cannot purchase or sell
Portfolio shares.

SALES CHARGES

ALTERNATIVE SALES CHARGE OPTIONS

You may purchase Class A Shares of the Pennsylvania Tax-Free Money Market and
Small-Cap Equity Portfolios or Class B Shares of the Small-Cap Equity Portfolio
at a price equal to their net asset value per share plus any applicable sales
charge. Class A Shares include an initial sales charge. Class B Shares may pay a
contingent deferred sales charge (CDSC). The classes have the same rights and
are identical in all respects except that: (i) Class B Shares may pay deferred
sales charges and pay higher distribution and service fees; (ii) each class has
exclusive voting rights with respect to approvals of its Rule 12b-1 plan
(although Class B shareholders may be entitled to vote on any distribution fees
imposed on Class A Shares so long as Class B Shares convert into Class A
Shares); (iii) only Class B Shares carry a conversion feature; and (iv) each
class has different exchange privileges.

FRONT-END SALES CHARGES -- CLASS A SHARES

The offering price of Class A Shares is the NAV next calculated after a
Portfolio receives your request, plus the applicable front-end sales load.

Page 16 of 28

<PAGE>

The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:

SMALL-CAP EQUITY PORTFOLIO
YOUR SALES CHARGE AS A YOUR SALES CHARGE AS A
IF YOUR INVESTMENT IS: PERCENTAGE OF OFFERING PERCENTAGE OF YOUR NET DEALER CONCESSION AS
PRICE INVESTMENT % OF THE OFFERING PRICE
-------------------------------- ------------------------ -------------------------- ------------------------
<S> <C> <C> <C> <C>
LESS THAN $50,000 4.75% 4.99% 4.28%
$50,000 BUT LESS THAN $100,000 4.50% 4.71% 4.05%
$100,000 BUT LESS THAN $250,000 3.50% 3.63% 3.15%
$250,000 BUT LESS THAN $500,000 2.50% 2.56% 2.25%
$500,000 BUT LESS THAN $1,000,000 2.00% 2.04% 1.80%
$1,000,000 AND ABOVE 0.00% 0.00% 0.00%

</TABLE>

No initial sales charge applies to purchases of Class A Shares of $1 million or
more. However, you will pay a redemption fee of 1.00% if you sell your shares
within one year of the date of purchase, or of 0.50% if you sell your shares
between one and two years of the date of purchase.

WAIVER OF FRONT-END SALES CHARGE -- CLASS A SHARES

The front-end sales charge will be waived on Class A Shares purchased:

(1) by a bank trust officer, registered representative, or other employee
(or a member of their immediate families) of authorized institutions;

(2) by a charitable organization (as defined in Section 501(c)(3) of the
Internal Revenue Code) investing $100,000 or more;

(3) for a charitable remainder trust or life income pool established for
the benefit of a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code);

(4) for an account affiliated with Allfirst, with the proceeds of a
distribution from certain employee benefit plans;

(5) for any state, county or city, or any governmental instrumentality,
department, authority or agency;

(6) with redemption proceeds from other mutual fund complexes on which you
have previously paid an initial or contingent deferred sales charge;

(7) for use in a broker-dealer managed account program, provided the broker
-dealer has executed a participation agreement with the Portfolios'
distributor specifying certain qualifications;

(8) as part of an employee benefit plan having more than 25 eligible
employees or a minimum of $250,000 of plan assets invested
in the Portfolios;

(9) as part of an employee benefit plan through an intermediary that has
signed a participation agreement with the Portfolios' distributor
specifying certain qualifications; and

(10) on a discretionary basis by a registered investment advisor that is not
part of an organization primarily engaged in the brokerage business and
that has executed a participation agreement with the Portfolios'
distributor specifying certain qualifications.

Page 17 of 28

<PAGE>

REPURCHASE OF CLASS A SHARES

You may repurchase any amount of Class A Shares of the Portfolios at NAV
(without the normal front-end sales charge), up to the limit of the value of any
amount of Class A Shares (other than those that were purchased with reinvested
dividends and distributions) that you redeemed within the past 30 days. In
effect, this allows you to reacquire shares that you have redeemed, without
paying the front-end sales charge a second time. To exercise this privilege, the
Portfolio must receive your purchase order within 30 days of your redemption. IN
ADDITION, YOU MUST NOTIFY THE PORTFOLIO WHEN YOU SEND IN YOUR PURCHASE ORDER
THAT YOU ARE REPURCHASING SHARES.

REDUCED SALES CHARGES -- CLASS A SHARES

RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this
right allows you to add the value of the Class A Shares you already own to the
amount that you are currently purchasing. The Portfolio will combine the value
of your current purchases with the current value of any Class A Shares you
purchased previously for (i) your account, (ii) your spouse's account, (iii) a
joint account with your spouse, or (iv) your minor children's trust or custodial
accounts. A fiduciary purchasing shares for the same fiduciary account, trust or
estate may also use this right of accumulation. The Portfolio will consider the
value of Class A Shares purchased previously only if they were sold subject to a
sales charge. TO BE ENTITLED TO A REDUCED SALES CHARGE BASED ON SHARES ALREADY
OWNED, YOU MUST ASK US FOR THE REDUCTION AT THE TIME OF PURCHASE. You must
provide the Portfolio with your account number(s) and, if applicable, the
account numbers for your spouse and/or children (and provide the children's
ages). The Portfolio may amend or terminate this right of accumulation at any
time. Rights of accumulation do not apply to purchases of Class A Shares of the
Pennsylvania Tax-Free Money Market Portfolio.

LETTER OF INTENT. You may purchase Class A Shares at the sales charge rate
applicable to the total amount of the purchases you intend to make over a
13-month period. In other words, a Letter of Intent allows you to purchase Class
A Shares of a Portfolio over a 13-month period and receive the same sales charge
as if you had purchased all the shares at the same time. The Portfolio will only
consider the value of Class A Shares sold subject to a sales charge. As a
result, Class A Shares purchased with dividends or distributions will not be
included in the calculation. To be entitled to a reduced sales charge based on
shares you intend to purchase over the 13-month period, you must send the
Portfolio a Letter of Intent. In calculating the total amount of purchases, you
may include in your Letter purchases made up to 90 days before the date of the
Letter. The 13-month period begins on the date of the first purchase, including
those purchases made in the 90-day period before the date of the Letter. Please
note that the purchase price of these prior purchases will not be adjusted.

You are not legally bound by the terms of your Letter of Intent to purchase the
amount of your shares stated in the Letter. The Letter does, however, authorize
the Portfolio to hold in escrow 5% of the total amount you intend to purchase.
If you do not complete the total intended purchase at the end of the 13-month
period, the Portfolio's transfer agent will redeem the necessary portion of the
escrowed shares to make up the difference between the reduced rate sales charge
(based on the amount you intended to purchase) and the sales charge that would
normally apply (based on the actual amount you purchased).

COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate
sales charge rate, the Portfolio will combine same-day purchases of Class A
Shares (that are subject to a sales charge) made by you, your spouse and your
minor children (under age 21). This combination also applies to Class A Shares
you purchase with a Letter of Intent.

Page 18 of 28

<PAGE>

CONTINGENT DEFERRED SALES CHARGES -- CLASS B SHARES

You do not pay a sales charge when you purchase Class B Shares. The offering
price of Class B Shares is simply the next calculated NAV. But if you sell your
shares within six years after your purchase, you will pay a contingent deferred
sales charge as described in the table below for either (1) the NAV of the
shares at the time of purchase, or (2) NAV of the shares next calculated after
the Portfolio receives your sale request, whichever is less. The sales charge
does not apply to shares you purchase through reinvestment of dividends or
distributions. So, you never pay a deferred sales charge on any increase in your
investment above the initial offering price. This sales charge does not apply to
exchanges of Class B Shares of one Portfolio for Class B Shares of another
Portfolio.

At the end of eight years from the date of purchase, Class B Shares convert to
Class A Shares based on their relative net asset value. Class A Shares pay lower
expenses than Class B Shares.
<TABLE>
<CAPTION>

Year Since Contingent Deferred Sales Charge as a Percentage of
Purchase Dollar Amount Subject to Charge
----------------------------------------------------------------------------------------
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and after 0%
</TABLE>

The contingent deferred sales charge will be waived if you sell your Class B
Shares for the following reasons:
o to make certain withdrawals from a retirement plan (not including IRAs);
o because of death or disability; or
o for certain payments under the Automatic Withdrawal Plan (which is discussed
later).

GENERAL INFORMATION ABOUT SALES CHARGES

Your securities dealer is paid a commission when you buy your shares and is paid
a servicing fee as long as you hold your shares. Your securities dealer or
servicing agent may receive different levels of compensation depending on which
class of shares you buy.

From time to time, some financial institutions including brokerage firms
affiliated with Allfirst may be reallowed up to the entire sales charge. Firms
that receive a reallowance of the entire sales charge may be considered
underwriters for the purpose of Federal securities law.

No CDSC is imposed on redemptions of Class B Shares received from the
reinvestment of distributions on Class B Shares or exchanged for shares of
another Portfolio. However, Class B Shares acquired in exchanges will continue
to remain subject to the CDSC, if applicable, until the applicable holding
period expires. Class B Shares not subject to a CDSC will always be redeemed
first.

The CDSC will be computed using the schedule of the Portfolio with the highest
CDSC owned by you. In computing the CDSC, the length of time you owned the
shares will be measured from

Page 19 of 28

<PAGE>

the date of original purchase and will not be affected by exchanges. To
exchange into another Portfolio, you must meet the $500 minimum initial
investment.

DISTRIBUTION OF PORTFOLIO SHARES

Each Portfolio has adopted a distribution plan that allows the Portfolios to pay
distribution and service fees for the sale and distribution of its shares, and
for services provided to shareholders. Because these fees are paid out of a
Portfolio's assets continuously, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales charges.

Distribution fees, as a percentage of average daily net assets, may be up to
0.75%. The Board has set the distribution fees as follows:

For Class A Shares

Pennsylvania Tax-Free Money Market Portfolio 0.25%
Small-Cap Equity Portfolio 0.40%

For Class B Shares

Small-Cap Equity Portfolio 0.75%

In addition, for Class A and Class B Shares, shareholder services fees, as a
percentage of average daily net assets, may be up to 0.25%.

The Distributor may, from time to time at its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide cash or non-cash
compensation as recognition for past sales or encouragement for future sales
that may include the following: merchandise, travel expenses, prizes, meals and
lodging, and gifts that do not exceed $100 per year, per individual.

THROUGH AUTHORIZED BROKERS OR OTHER INSTITUTIONS

HOW TO PURCHASE PORTFOLIO SHARES

You may buy shares through accounts with brokers and other institutions that are
authorized to place trades in Portfolio shares for their customers. If you
invest through an authorized institution, you will have to follow its
procedures. Your institution may charge a fee for its services, in addition to
the fees charged by the Portfolio. You will also generally have to address your
correspondence or questions regarding a Portfolio to your institution. For more
information, contact the broker or institution directly.

HOW TO SELL YOUR PORTFOLIO SHARES

If you own shares through an account with a broker or other institution, contact
that broker or institution to sell your shares.

Page 20 of 28

<PAGE>

HOW TO EXCHANGE YOUR PORTFOLIO SHARES

You may exchange your shares on any Business Day. If you own shares through an
account with a broker or other institution, contact that broker or institution
to exchange your shares. Exchange requests must be for an amount of at least
$500 per Portfolio.

When you exchange shares, you are really selling your shares and buying other
Portfolio shares. So, your sale price and purchase price will be based on the
NAV next calculated after the Portfolios receive your exchange request.

DIRECTLY WITH ARK FUNDS

HOW TO PURCHASE PORTFOLIO SHARES

To purchase shares directly from us, please call 1-800-ARK-FUND
(1-800-275-3863), or complete and send in a Direct Investment Account
Application. The minimum investment in a Portfolio is $500. Unless you arrange
to pay by wire, write your check to "ARK Funds" and include the name of the
appropriate Portfolio(s) on the check. A Portfolio cannot accept third-party
checks, credit cards, credit card checks, or cash.

You can buy shares by sending a completed Account Application along with a check
and investment instructions 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, to ARK Funds FBO (account holder's name).
Redemptions of shares purchased either by check or through the Automatic
Investment Plan will be delayed until the investment has been in the account for
15 calendar days.

PURCHASES BY WIRE

You can buy shares by wiring money to:

State Street Bank and Trust Company
Boston, MA
ABA 011000028
Account Number: 99051609
Attention: [ARK Portfolio Name]
Further Credit to: [Account Name and Number]

To insure proper crediting of your investment, you should notify ARK Funds'
transfer agent at 1-800-ARK-FUND by 12:00 noon Eastern time if you plan to wire
money. This way, an order to purchase shares by wire will be deemed to have been
received on the day of the wire.

You may purchase shares by Automated Clearing House (ACH) funds transfer. In
order to do so, complete the bank information section on the Account
Application. Attach a voided check or

Page 21 of 28

<PAGE>

deposit slip to the Account Application. Only domestic member banks may be used.
It takes about 15 days to set up an ACH account. Currently, ARK Funds do not
charge a fee for ACH transfers. You may purchase shares through ACH by calling
1-800-ARK-FUND to effect the transfer.

HOW TO SELL YOUR PORTFOLIO SHARES

If you own shares directly, you may sell your shares on any Business Day by
contacting ARK Funds directly by mail at ARK Funds, P.O. Box 8525, Boston, MA
02266-8525, or by telephone at 1-800-ARK-FUND (1-800-275-3863). There is no
minimum amount for telephone redemptions. The redemption price is based on the
next calculation of NAV after your request is received.

You may not close your account by telephone.

REDEMPTION BY MAIL

Along with your written request, the transfer agent will require a signature
guarantee if: (a) the redemption request is for $25,000 or more; (b) you ask us
to send redemption proceeds to a name and/or address that differs from the name
or address of record; or (c) you request a transfer of registration.

RECEIVING YOUR MONEY

Normally, we send your sale proceeds within three Business Days after we receive
your request. Your proceeds can be wired to your bank account (subject to a $10
fee) or sent to you by check. If you recently purchased your shares by check,
redemption proceeds may not be available until your check has cleared (which may
take up to 15 days from the date of your purchase).

If you established ACH instructions on your account, you can receive your
redemption proceeds by ACH wire. Sale proceeds sent via ACH will not be posted
to your bank account until the second Business Day following the transaction.

REDEMPTION BY CHECKWRITING

Checkwriting is available for accounts investing in Class A Shares of a money
market fund Portfolio. You will be required to sign a signature card and will be
subject to the applicable rules and regulations of the clearing bank.

Checks in the amount of $500 or more drawn on one of the money market fund
Portfolios may be made payable to the order of any payee. You should be aware
that, as the case with regular bank checks, certain banks may not provide cash
at the time of deposit, but will wait until they have received payment from the
clearing bank. When a check is presented to the clearing bank for payment,
subject to ARK Funds' acceptance of the check, the clearing bank causes ARK
Funds to redeem, at the next NAV, a sufficient number of shares to cover the
amount of the check. Checks will be returned by the clearing bank if there are
not sufficient shares available. If you wish to use this checkwriting feature,
you should check the appropriate box on the Account Application, which includes
a signature card, and mail the completed form to ARK Funds, P.O. Box 8525,
Boston, MA 02266-8525. There is no charge for the checks, although the clearing
bank will impose its customary overdraft fee in connection with checks returned
for insufficient funds. As of the date of this prospectus, the overdraft fee is
$20.

Page 22 of 28

<PAGE>

AUTOMATIC WITHDRAWAL PLAN (AWP)

The AWP may be used by investors who wish to receive regular distributions from
their accounts. Upon commencement of the AWP, an account must have a current
value of $5,000 or more. Investors may elect to receive automatic payments of
$100 or more via check or direct deposit to a checking account on a monthly,
quarterly or annual basis. Automatic withdrawals are normally processed on the
25th day of the month (or on the next Business Day). To arrange an AWP, you must
complete the appropriate section of an Account Change Form.

If you withdraw 10% or less of your Class B Shares in one year pursuant to the
AWP, your redemptions will not be subject to the CDSC. Because automatic
withdrawals of Class B Shares in amounts greater than 10% of the initial value
of the account will be subject to the CDSC, Class B shareholders should not
participate in the AWP.

HOW TO EXCHANGE YOUR PORTFOLIO SHARES

To exchange your Portfolio shares, contact ARK Funds directly at 1-800-ARK-FUND
(1-800-275-3863). You may exchange your shares on any Business Day.

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. If you recently purchased shares by check, you may not be
able to exchange your shares until your check has cleared (which may take up to
15 days from your date of purchase). ARK Funds reserve 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.

THROUGH THE ARK FUNDS EMPLOYEE INVESTMENT PROGRAM

HOW TO PURCHASE PORTFOLIO SHARES

Class A Shares of the Portfolios may be purchased without a sales charge in an
ARK Funds Employee Investment Account. Employees are defined as current and
former trustees and officers of ARK Funds, current and retired officers,
directors and regular employees of Allied Irish Banks, p.l.c., and its direct
and indirect subsidiaries, including Allfirst and its affiliates, and their
spouses and minor children. Employees may open an account directly with ARK
Funds by making a lump sum investment of $100 or more in Class A Shares of any
Portfolio or $50 per Portfolio per month if they participate in the Automatic
Investment Plan. Call 1-888-4ARK-FUND to request an information kit, which
includes an Account Application. Regular and IRA accounts are available.

Page 23 of 28

<PAGE>

AUTOMATIC INVESTMENT PLAN (AIP)

Employees and investors may arrange on any Business Day for periodic investment
in a Portfolio through automatic deductions from a checking or savings account
by completing the appropriate section of the Account Application.

HOW TO SELL YOUR PORTFOLIO SHARES

You may sell your shares on any Business Day by contacting ARK Funds directly by
mail at ARK Funds, P.O. Box 8525, Boston, MA 02266-8525, or by telephone at
1-888-4ARKFUND. There is no minimum amount for telephone redemptions. The
redemption price is based on the next calculation of NAV after your request is
received.

You may not close your account by telephone.

REDEMPTION BY MAIL

RECEIVING YOUR MONEY

Normally, we send your sale proceeds within three Business Days after we receive
your request. Your proceeds can be wired to your bank account or sent to you by
check. If you recently purchased your shares by check, redemption proceeds may
not be available until your check has cleared (which may take up to 15 days from
the date of your purchase).

REDEMPTION BY CHECKWRITING

Page 24 of 28

<PAGE>

AUTOMATIC WITHDRAWAL PLAN (AWP)

HOW TO EXCHANGE YOUR PORTFOLIO SHARES

To exchange your Portfolio shares, contact ARK Funds directly at
1-888-4ARK-FUND. You may exchange your shares on any Business Day.

If you recently purchased shares by check, you may not be able to exchange your
shares until your check has cleared (which may take up to 15 days from your date
of purchase). This exchange privilege may be changed or canceled at any time
upon 60 days notice.

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.

OTHER POLICIES

SHARE EXCHANGES

CLASS A SHARES

You may exchange Class A Shares of any Portfolio for Class A Shares of any other
Portfolio. If you exchange shares that you purchased without a sales charge, or
with a lower sales charge, into a Portfolio with a sales charge or with a higher
sales charge, the exchange is subject to an incremental sales charge (e.g., the
difference between the lower and higher applicable sales charges). If you
exchange your shares into a Portfolio with the same, lower or no sales charge,
there is not an incremental sales charge for the exchange.

CLASS B SHARES

You may exchange Class B Shares of the Small-Cap Equity Portfolio for Class B
Shares of any other Portfolio. No contingent deferred sales charge is imposed on
redemptions of shares you acquire in an exchange, provided you hold your shares
for at least six years from your initial purchase. Upon redemption, CDSC charges
may apply. For purposes of computing CDSC, the length of time the investor owned
the shares will be measured from the date of the original purchase and will not
be affected by any exchange.

An exchange between classes of a particular Portfolio is generally not
permitted, unless a shareholder becomes eligible to purchase shares of another
class. ARK Funds reserve the right to require shareholders to complete an
Account Application or other documentation in connection with the exchange. ARK
Funds has received a private letter ruling from the Internal Revenue

Page 25 of 28

<PAGE>

Service, which provides that exchanges of shares of one class of a Portfolio
for shares of another class of the same Portfolio will not constitute a taxable
event.

TELEPHONE TRANSACTIONS

Purchasing, selling and exchanging Portfolio shares over the telephone is
extremely convenient but not without risk. Although ARK Funds has certain
safeguards and procedures to confirm the identity of the callers and the
authenticity of instructions, ARK Funds is not responsible for any losses or
costs incurred by following telephone instructions we reasonably believe to be
genuine. If you or your financial institution transact with ARK Funds over the
telephone, you will generally bear the risk of any loss.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

A Portfolio may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in our Statement of Additional Information.

INVOLUNTARY SALES OF YOUR SHARES

For direct investors, if your account drops below $500 because of redemptions,
you may be required to sell your shares. But, we will always give you at least
30 days written notice to give you time to add to your account and avoid the
sale of your shares.

REDEMPTION IN KIND

The Portfolios reserve the right to make redemptions "IN KIND" - payment of
redemption proceeds in portfolio securities rather than cash - if the portfolio
deems that it is in the Portfolio's best interest to do so.

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid according to the following schedules:
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------
FREQUENCY OF
DECLARATION OF FREQUENCY OF PAYMENT
PORTFOLIO DIVIDENDS OF DIVIDENDS
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pennsylvania Tax-Free Money Market Portfolio Daily Monthly
-------------------------------------------------------------------------------------------------
Small-Cap Equity Portfolio Annually Annually
-------------------------------------------------------------------------------------------------
</TABLE>

Each Portfolio makes distributions of capital gains, if any, at least annually.
If you own Portfolio shares on a Portfolio's record date, you will be entitled
to receive the distribution.

You may elect to receive dividends and distributions in the form of additional
Portfolio shares or in cash. You must notify the Portfolio in writing prior to
the date of the distribution. Your election will be effective for dividends and
distributions paid after the Portfolio receives your written notice. To cancel
your election, simply send the Portfolio written notice.

Page 26 of 28

<PAGE>

TAXES

PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Portfolios and their shareholders. This summary is based on
current tax laws, which may change.

Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
Federal, state and local taxation, depending upon your tax situation.
Distributions you receive from a Portfolio may be taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income tax
rates. Capital gains distributions are generally taxable at the rates applicable
to long-term capital gains, but vary depending on how long the Portfolio has
held its assets. EACH SALE OR EXCHANGE OF SHARES IS GENERALLY A TAXABLE EVENT.

The Pennsylvania Tax-Free Money Market Portfolio intends to distribute Federally
tax-exempt income. This Portfolio may invest a portion of its assets in
securities that generate taxable income for Federal or state income taxes.
Income exempt from Federal tax may be subject to state and local taxes. Any
capital gains distributed by this Portfolio may be taxable.

MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.

Page 27 of 28

<PAGE>

FINANCIAL HIGHLIGHTS

The table that follows presents performance information about Class A of the
Small-Cap Equity Portfolio. This information is intended to help you understand
the Portfolio's financial performance for the period of the Portfolio's
operations. Some of this information reflects financial information for a single
Portfolio share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in a Portfolio, assuming you
reinvested all of your dividends and distributions. This information has been
audited by KPMG LLP, independent auditors. Their Report, along with the
Portfolio's financial statements, is included in our Annual Report, which
accompanies our Statement of Additional Information and is available upon
request at no charge.

For a Share Outstanding Throughout the Period Ended April 30,
<TABLE>
<CAPTION>

Net Realized Distri- Distri- Net
Asset Net and butions butions Net Asset Assets
Value, Investment Unrealized from Net from Value, Total End of
Beginning Income Gains on Investment Capital End of Return Period
of Period (Loss) Investments Income Gains Period (A) (000)

Small-Cap Equity Portfolio
Retail Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $12.59 (0.05) 15.25 -- (4.72) $23.07 126.13% $ 11,292
1999 11.83 (0.07) 1.16 -- (0.33) 12.59 9.66 2,248
1998 8.53 (0.06) 3.98 -- (0.62) 11.83 47.57 1,853
1997 (1) 15.47 (0.01) (3.72) -- (3.21) 8.53 (27.14)+ 1,075

</TABLE>

Ratio of Ratio
Ratio of Net of
Expenses Investment Expenses
to Income to Average
Average (Loss) Net Assets Portfolio
Net to Average (Excluding Turnover
Assets Net Assets Waivers) Rate

Small-Cap Equity Portfolio
Retail Class A
2000 1.30% (0.49)% 1.61% 753.31%
1999 1.32 (0.64) 1.63 733.14
1998 1.21 (0.46) 1.36 410.72
1997 (1) 1.11* (0.13)* 1.21* 704.41

+ Returns are for the period indicated and have not been annualized.
* Annualized.
(A) Total return for the retail class does not include the one-time sales
charge.
(1) Commenced operations on May 16, 1996.

Page 28 of 28

<PAGE>

HOW TO OBTAIN MORE INFORMATION ABOUT ARK FUNDS

INVESTMENT ADVISOR

Allied Investment Advisors, Inc.
100 E. Pratt Street
Baltimore, MD 21202

DISTRIBUTOR

SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456

LEGAL COUNSEL

Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036

INDEPENDENT AUDITORS

KPMG LLP
99 High Street
Boston, MA 02110

More information about the Portfolios is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI dated February ___, 2001 includes detailed information about the
Portfolios. The SAI is on file with the SEC and is incorporated by reference
into this prospectus. This means that the SAI, for legal purposes, is a part of
this prospectus.

ANNUAL AND SEMI-ANNUAL REPORTS

These reports list the holdings of the ARK Funds Portfolios' and contain
information from the Portfolios' managers about strategies and recent market
conditions and trends and their impact on performance. The reports also contain
detailed financial information about the Portfolios.

TO OBTAIN MORE INFORMATION:

BY TELEPHONE: Call 1-800-ARK-FUND (1-800-275-3863)

BY MAIL: Write to us
ARK Funds
P.O. Box 8525
Boston, MA 02266-8525

INSIDE BACK COVER
<PAGE>

FROM OUR WEBSITE: www.arkfunds.com

AUTOMATED PRICE, YIELD, AND PERFORMANCE INFORMATION-
24 HOURS A DAY, 7 DAYS A WEEK: Call 1-800-ARK-FUND (1-800-275-3863)

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual Reports,
as well as other information about ARK Funds, from the SEC's website
(http://www.sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call (202) 942-8090). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
(1) writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-0102 or (2) sending an electronic request to
[email protected]. ARK Funds' Investment Company Act registration number is
811-7310.

<PAGE>

ARK FUNDS

PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

INSTITUTIONAL CLASS

PROSPECTUS
FEBRUARY __, 2001

INVESTMENT ADVISOR:
ALLIED INVESTMENT ADVISORS, INC.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR
PASSED UPON THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

HOW TO READ THIS PROSPECTUS

ARK Funds is a mutual fund family that offers Institutional Class shares in
separate investment portfolios. The portfolios have individual investment goals
and strategies. This prospectus gives you important information about the
Institutional Class Shares of the Pennsylvania Tax-Free Money Market Portfolio
(Portfolio) that you should know before investing. Please read this prospectus
and keep it for future reference.

THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. FOR MORE DETAILED INFORMATION ABOUT THE
PORTFOLIO, PLEASE SEE:

PAGE

ARK PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO.....................4
ADDITIONAL INFORMATION ABOUT PRINCIPAL RISK..........................7
THE PORTFOLIO'S OTHER INVESTMENTS....................................8
INVESTMENT ADVISOR...................................................8
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES..................8
DISTRIBUTION OF PORTFOLIO SHARES....................................11
DIVIDENDS AND DISTRIBUTIONS.........................................11
TAXES...............................................................12
HOW TO OBTAIN MORE INFORMATION ABOUT ARK FUNDS.......Inside Back Cover

Page 2 of 12

<PAGE>

INTRODUCTION

The Portfolio is a mutual fund. A mutual fund pools shareholders' money and,
using professional investment managers, invests it in securities.

The Portfolio has its own investment goal and strategies for reaching that goal.
The investment advisor invests the Portfolio's assets in a way that he or she
believes will help the Portfolio achieve its goal. Still, investing in the
Portfolio involves risk, and there is no guarantee that the Portfolio will
achieve its goal. The investment advisor's judgments about the markets, the
economy, or companies may not anticipate actual market movements, economic
conditions or company performance, and these judgments may affect the return on
your investment. In fact, no matter how good a job the investment advisor does,
you could lose money on your investment in the Portfolio, just as you could with
other investments. A Portfolio share is not a bank deposit and it is not insured
or guaranteed by the FDIC or any government agency.

THE PORTFOLIO TRIES TO MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE
IS NO GUARANTEE THAT THE PORTFOLIO WILL ACHIEVE THIS GOAL.

Page 3 of 12

<PAGE>

ARK PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

PORTFOLIO SUMMARY

INVESTMENT GOAL Maximizing current income
exempt from Federal and
Pennsylvania state income taxes
and providing liquidity and
security of principal

INVESTMENT FOCUS Short-term, high-quality
Pennsylvania municipal money
market obligations

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Investing in Pennsylvania
municipal money market securities

INVESTOR PROFILE Conservative investors seeking
income exempt from Federal
and Pennsylvania state income
taxes through a low-risk,
liquid investment

PRINCIPAL INVESTMENT STRATEGY OF THE PENNSYLVANIA TAX-FREE MONEY MARKET
PORTFOLIO

PRINCIPAL RISKS OF INVESTING IN THE PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

Page 4 of 12

<PAGE>

although a money market fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Portfolio.

The Portfolio's concentration of investments in securities of issuers located in
Pennsylvania subjects the Portfolio to the effects of economic and government
policies of Pennsylvania.

PERFORMANCE INFORMATION

Performance information for the Portfolio will be available after the Portfolio
has completed its first calendar year of operations.

PORTFOLIO FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>

INSTITUTIONAL
CLASS
----------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering None
price)
Maximum Deferred Sales Charge (Load) (as a percentage of offering None
price)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and
other Distributions (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

</TABLE>
<TABLE>
<CAPTION>

ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)

INSTITUTIONAL CLASS
---------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees None
Other Expenses 0.48%(1)
----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 0.73%
Fee Waivers and Expense Reimbursements 0.15%
----
NET TOTAL OPERATING EXPENSES 0.58%(2)
----
----------------------------------------------------------------------------------------------
<FN>
(1) Other Expenses are based on estimated amounts for the current fiscal year.
(2) The Portfolio's Advisor has agreed contractually to waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 0.58% until
August 31, 2001.
</FN>
</TABLE>

For more information about fees, see "Investment Advisor" and "Distribution of
Portfolio Shares."

Page 5 of 12

<PAGE>

EXAMPLE

1 YEAR 3 YEARS
$59 $218

Page 6 of 12

<PAGE>

ADDITIONAL INFORMATION ABOUT PRINCIPAL RISK

RISKS

MUNICIPAL ISSUER RISK -- There may be economic or political changes that impact
the ability of municipal issuers to repay principal and to make interest
payments on municipal securities. Changes to the financial condition or credit
rating of municipal issuers may also adversely affect the value of a Portfolio's
municipal securities. Constitutional or legislative limits on borrowing by
municipal issuers may result in reduced supplies of municipal securities.
Moreover, certain municipal securities are backed only by a municipal issuer's
ability to levy and collect taxes.

In addition, a Portfolio's concentration of investments in issuers located in a
single state makes the Portfolio more susceptible to adverse political or
economic developments affecting that state. Such Portfolio also may be riskier
than mutual funds that buy securities of issuers in numerous states.

Page 7 of 12

<PAGE>

THE PORTFOLIO'S OTHER INVESTMENTS

This prospectus describes the Portfolio's primary strategies, and the Portfolio
will normally invest at least 80% of its total assets in the types of securities
described in this prospectus. However, the Portfolio also may invest in other
securities, use other strategies and engage in other investment practices. These
investments and strategies, as well as those described in this prospectus, are
described in detail in our Statement of Additional Information. Of course, there
is no guarantee that the Portfolio will achieve its investment goal.

The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, the Portfolio may invest up to
100% of its assets in cash and short-term securities that may not ordinarily be
consistent with the Portfolio's objectives. The Portfolio will do so only if the
Advisor believes that the risk of loss outweighs the opportunity for capital
gains or higher income. The Portfolio may not be able to meet its investment
goal when the Advisor is employing a temporary defensive strategy.

INVESTMENT ADVISOR

The Portfolio's Investment Advisor makes investment decisions for the Portfolio
and continuously reviews, supervises and administers the Portfolio's respective
investment programs. The Board of Trustees of the ARK Funds supervises the
Advisor and establishes policies that the Advisor must follow in its management
activities.

Allied Investment Advisors, Inc. (AIA), a wholly-owned subsidiary of Allfirst
Bank (Allfirst), serves as the Advisor to the Portfolio. As of September 30,
2000, AIA had approximately $14.6 billion in assets under management. Under an
investment advisory agreement with ARK Funds, AIA is entitled to receive
advisory fees of:

PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO 0.25%*
--------------------------------------------------------------------------------
* The Board of Trustees has approved an investment advisory fee of 0.25% for the
Portfolio. The Portfolio's Advisor has agreed contractually to waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.58% until August 31, 2001. With these fee waivers, the actual advisory fees
received by AIA would be lower than those shown in the table above.

AIA and Allfirst are indirect wholly owned subsidiaries of Allied Irish Banks,
p.l.c. (AIB). AIB is the largest bank in the Republic of Ireland, with assets of
approximately $71 billion at June 30, 2000.

PORTFOLIO MANAGER

James M. Hannan is a Principal of AIA and manager of the Portfolio. He is also
manager of other ARK Fund Portfolios and is responsible for several separately
managed institutional portfolios that he has managed since 1992. He has served
as a Vice President of Allfirst since 1987. Prior to 1987 he served as the
Treasurer for the city of Hyattsville, Maryland.

PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES

This section tells you how to purchase, sell (sometimes called "redeem") or
exchange Institutional Class Shares of the Portfolio.

Page 8 of 12

<PAGE>

Institutional Class Shares are for individuals, financial institutions,
corporations and other entities that have established trust, custodial, sweep or
money management relationships with Allfirst or its affiliates or correspondent
banks. Before you can buy Institutional Class Shares, you must establish a
qualified account. If you are a shareholder who obtained Institutional Class
Shares through a financial institution that has been purchased by Allfirst, you
may have to follow special procedures to transact in Fund shares. For
information on fee schedules and agreements for opening qualified accounts, call
1-800-624-4116 to speak with an investor representative.

HOW TO PURCHASE PORTFOLIO SHARES

Generally, you must make payment to Allfirst or a correspondent bank, who will
forward your purchase orders. You may purchase shares of the Portfolio directly
by Federal funds, wire or other funds immediately available to the Portfolio. A
Portfolio cannot accept checks, third-party checks, credit cards, credit card
checks, or cash.

You will have to follow the procedures applicable to qualified accounts. Your
qualified account agreement may require you to pay a fee that is in addition to
the fees charged by the Portfolio.

It is expected that Allfirst or a correspondent bank will be the record owner of
Institutional Class Shares held through qualified accounts. Allfirst or a
correspondent bank will supply clients with quarterly statements showing all
account activity.

Shareholders may instruct Allfirst to purchase Institutional Class Shares
automatically at preset intervals. Allfirst or a correspondent bank may charge
additional fees for this and other services, including cash sweeps. For more
information, please call 1-800-624-4116 to speak with an investor
representative.

GENERAL INFORMATION

You may purchase shares on any day that the New York Stock Exchange (NYSE) and
the Federal Reserve Bank of New York (Federal Reserve) are open for business (a
Business Day). Shares of the Portfolio cannot be purchased by Federal Reserve
wire on days when either the NYSE or the Federal Reserve is closed.

A Portfolio or its distributor may reject any purchase order if it is determined
that accepting the order would not be in the best interests of the Portfolio or
its shareholders.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Portfolio receives your purchase order. For the
Portfolio, NAV is expected to remain constant at $1.00 per share.

The Portfolio calculates its NAV each Business Day at 12:00 noon Eastern time
and 4:00 p.m. Eastern time. So, for you to be eligible to receive dividends
declared on the day you submit your purchase order, generally the Portfolio must
receive and accept your order and receive Federal funds (readily available
funds) before 12:00 noon Eastern time. For orders received and accepted after
12:00 noon Eastern time but before 4:00 p.m. Eastern time, you will begin
earning dividends on the next Business Day.

Page 9 of 12

<PAGE>

When the NYSE or the Federal Reserve close early, the Portfolio will advance the
time on any such day by which purchase orders must be received.

HOW WE CALCULATE NAV

NAV for one Portfolio share is the value of that share's portion of all of the
net assets in the Portfolio.

In calculating NAV for the Portfolio, we generally value its investment
portfolio using the amortized cost valuation method, which is described in
detail in our Statement of Additional Information. If this method is determined
to be unreliable during certain market conditions or for other reasons, the
Portfolio may value its securities at market price or fair value prices may be
determined in good faith using methods approved by the Board of Trustees.

MINIMUM PURCHASES

To purchase shares for the first time, you must invest in the Portfolio at least
$100,000. Within six months, you must achieve and maintain an aggregate balance
of $250,000. Accounts of individual investors or other master accounts may be
aggregated for this purpose. There may be other minimums or restrictions
established by Allfirst or a correspondent bank when you open your account.

Your subsequent investments in the Portfolio may be made in any amount.

HOW TO SELL YOUR PORTFOLIO SHARES

Generally, you must request a redemption through Allfirst or a correspondent
bank, who will forward your redemption request to the Fund.

If you hold Institutional Class Shares directly with the Fund, you may sell
shares by telephone or mail by following procedures established when you opened
your qualified account. If you have questions, call 1-800-624-4116 or your
investor representative at Allfirst or your correspondent bank. The redemption
price is based on the next calculation of NAV after your request is received.

BY MAIL. To redeem by mail, send a written request to Allfirst Bank Trust
Division Banc #101-624, P. O. Box 1596, Baltimore, Maryland 21201, or to your
correspondent bank.

BY TELEPHONE. To redeem by telephone, call 1-800-624-4116 or your investor
representative at Allfirst or your correspondent bank.

RECEIVING YOUR MONEY

Normally, if we receive your redemption request by 12:00 noon Eastern time on
any Business Day, we will send your sale proceeds on that day.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

Page 10 of 12

<PAGE>

HOW TO EXCHANGE YOUR SHARES

You may exchange your Institutional Class Shares on any Business Day by
contacting us directly by telephone by calling 1-800-624-4116 or your investment
representative at Allfirst or a correspondent bank.

Investors who are currently Allfirst Personal Trust customers who will be
receiving a distribution from their Trust account and are ineligible to hold
Institutional Class Shares will have their Institutional Class Shares exchanged
for Class A Shares of the same Portfolio. ARK Funds has received a private
letter ruling from the Internal Revenue Service, which provides that exchanges
of shares of one class of a Portfolio for shares of another class of the same
Portfolio will not be a taxable event.

TELEPHONE TRANSACTIONS

Purchasing, selling and exchanging Portfolio shares over the telephone is
extremely convenient, but not without risk. Although ARK Funds has certain
safeguards and procedures to confirm the identity of callers and the
authenticity of instructions, ARK Funds is not responsible for any losses or
costs incurred by following telephone instructions we reasonably believe to be
genuine. If you or your financial institution transact with ARK Funds over the
telephone, you will generally bear the risk of any loss.

DISTRIBUTION OF PORTFOLIO SHARES

The Distributor receives no compensation for its distribution of Institutional
Class Shares. For Institutional Class Shares, shareholder service fees, as a
percentage of average daily net assets, may be up to 0.25%.

REDEMPTION IN KIND

The Portfolio reserve the right to make redemptions "IN KIND" - payment of
redemption proceeds in portfolio securities rather than cash - if the portfolio
deems that it is in the Portfolio's best interest to do so.

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid according to the following schedule:
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FREQUENCY OF FREQUENCY OF PAYMENT
DECLARATION OF OF DIVIDENDS
DIVIDENDS
PORTFOLIO
-------------------------------------------------------------------------------------------------
Pennsylvania Tax-Free Money Market Portfolio Daily Monthly
-------------------------------------------------------------------------------------------------
</TABLE>

The Portfolio makes distributions of capital gains, if any, at least annually.
If you own Portfolio shares on a Portfolio's record date, you will be entitled
to receive the distribution.

Page 11 of 12

<PAGE>

You will receive dividends and distributions in the form of additional Portfolio
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify Allfirst or your correspondent bank in writing prior to the date of
the distribution. Your election will be effective for dividends and
distributions paid after the Portfolio receives your written notice. To cancel
your election, simply send Allfirst or your correspondent bank written notice.

TAXES

PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Portfolio and its shareholders. This summary is based on current
tax laws, which may change.

The Portfolio will distribute substantially all of its income and capital gains,
if any. The dividends and distributions you receive may be subject to Federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from a Portfolio may be taxable whether or not you reinvest them. Income
distributions are generally taxable at ordinary income tax rates. Capital gains
distributions are generally taxable at the rates applicable to long-term capital
gains, but vary depending on how long the Portfolio has held its assets. A SALE
OR EXCHANGE OF SHARES IS GENERALLY A TAXABLE EVENT.

The Portfolio intends to distribute Federally tax-exempt income. This Portfolio
may invest a portion of its assets in securities that generate taxable income
for Federal or state income taxes. Income exempt from Federal tax may be subject
to state and local taxes. Any capital gains distributed by the Portfolio may be
taxable.

MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.

Page 12 of 12

<PAGE>

HOW TO OBTAIN MORE INFORMATION ABOUT ARK FUNDS

INVESTMENT ADVISOR

Allied Investment Advisors, Inc.
100 E. Pratt Street
Baltimore, MD 21202

DISTRIBUTOR

SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456

LEGAL COUNSEL

Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036

INDEPENDENT AUDITORS

KPMG LLP
99 High Street
Boston, MA 02110

More information about the Portfolio is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI dated February ___, 2001 includes detailed information about the
Portfolio. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.

ANNUAL AND SEMI-ANNUAL REPORTS

TO OBTAIN MORE INFORMATION:

BY TELEPHONE: Call 1-800-624-4116

BY MAIL: Write to us at:

ARK Funds
c/o Allfirst Bank Trust Division

INSIDE BACK COVER
<PAGE>

Banc #101-624
P.O. Box 1596
Baltimore, MD 21201

FROM OUR WEBSITE: www.arkfunds.com

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual Reports,
as well as other information about ARK Funds, from the SEC's website
(http://www.sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, D.C. (for information call (202) 942-8090). You
may request documents by mail from the SEC, upon payment of a duplicating fee,
by (1) writing to: Securities and Exchange Commission, Public Reference Section,
Washington, D.C. 20549-0102 or (2) sending an electronic request to publicinfo@
sec.gov. ARK Funds' Investment Company Act registration number is 811-7310.

<PAGE>

ARK FUNDS

SOCIAL ISSUES INTERMEDIATE FIXED INCOME PORTFOLIO
SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO
SOCIAL ISSUES CAPITAL GROWTH PORTFOLIO
SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO

INSTITUTIONAL CLASS

PROSPECTUS
FEBRUARY __, 2001

INVESTMENT ADVISOR:
ALLIED INVESTMENT ADVISORS, INC.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

HOW TO READ THIS PROSPECTUS

ARK Funds is a mutual fund family that offers Institutional Class shares in
separate investment portfolios. This prospectus gives you important information
about the Institutional Class Shares of the Social Issues Intermediate Fixed
Income Portfolio, Social Issues Blue Chip Equity Portfolio, Social Issues
Capital Growth Portfolio, and Social Issues Small-Cap Equity Portfolio
(Portfolios) that you should know before investing. The Portfolios have
individual investment goals and strategies. Each Portfolio's investments are
subject to broad based social screens designed to meet the needs of many
socially responsible investors. Please read this prospectus and keep it for
future reference.

THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. FOR MORE DETAILED INFORMATION ABOUT EACH
PORTFOLIO, PLEASE SEE:
<TABLE>
<CAPTION>

PAGE

<S> <C>
ARK SOCIAL ISSUES INTERMEDIATE FIXED INCOME PORTFOLIO...............................................4

ARK SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO........................................................7

ARK SOCIAL ISSUES CAPITAL GROWTH PORTFOLIO.........................................................10

ARK SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO.......................................................13

THE ARK FUNDS' APPROACH TO SOCIAL ISSUES INVESTING.................................................16

EACH PORTFOLIO'S OTHER INVESTMENTS.................................................................16

ADDITIONAL INFORMATION ABOUT PRINCIPAL RISK........................................................18

INVESTMENT ADVISOR.................................................................................20

PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES................................................21

DISTRIBUTION OF PORTFOLIO SHARES...................................................................23

DIVIDENDS AND DISTRIBUTIONS........................................................................24

TAXES..............................................................................................25

HOW TO OBTAIN MORE INFORMATION ABOUT ARK FUNDS......................................INSIDE BACK COVER

</TABLE>

Page 2 of 25

<PAGE>

INTRODUCTION

Each Portfolio is a mutual fund. A mutual fund pools shareholders' money and,
using professional investment managers, invests it in securities.

Each Portfolio has its own investment goal and strategies for reaching that
goal. The Portfolios are screened for attention to social factors, meaning that
they seek to avoid investment in securities and obligations of issuers that
manufacture tobacco products or alcoholic beverages, derive revenues from
gambling enterprises, provide weapons-related services, or fail to uphold life
ethics standards.

In selecting securities for the Portfolios, the investment advisor will apply
social screens provided by Kinder, Lydenberg, Domini & Co., Inc. ("KLD"). KLD
determines the social criteria used by the investment advisor in selecting
securities for the Portfolios. The application of the social screens excludes
securities of issuers that do not meet the criteria described. All Portfolios
may hold investments in U.S. government securities, to which the investment
advisor does not intend to apply the social screens described above. The
investment advisor's application of the social screens, and judgments about the
markets, the economy, or companies may not anticipate actual market movements,
economic conditions or company performance, and this may affect the return on
your investment.

Each Portfolio's manager invests its assets in a way that he or she believes
will help the Portfolio achieve its goal. Still, investing in each Portfolio
involves risk, and there is no guarantee that a Portfolio will achieve its goal.
In fact, no matter how good a job the investment advisor does, you could lose
money on your investment in a Portfolio, just as you could with other
investments. A Portfolio share is not a bank deposit and it is not insured or
guaranteed by the FDIC or any government agency.

The value of your investment in a Portfolio is based on the market value of the
securities the Portfolio holds. These prices change daily due to economic and
other events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities a Portfolio owns and the markets in which they trade.
The effect on a Portfolio of a change in the value of a single security will
depend on how widely the Portfolio diversifies its holdings.

Page 3 of 25

<PAGE>

ARK SOCIAL ISSUES INTERMEDIATE FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>

<S> <C>
PORTFOLIO SUMMARY

INVESTMENT GOAL Current income

INVESTMENT FOCUS Intermediate-term investment-grade fixed income
securities

SHARE PRICE VOLATILITY Low to medium

PRINCIPAL INVESTMENT STRATEGY Investing in intermediate-term corporate and U.S
government fixed income securities that meet the
Portfolio's social criteria

INVESTOR PROFILE Investors seeking current income who are willing to
accept the risks of investing in fixed income securities
</TABLE>

PRINCIPAL INVESTMENT STRATEGY OF THE SOCIAL ISSUES INTERMEDIATE FIXED INCOME
PORTFOLIO

The Social Issues Intermediate Fixed Income Portfolio seeks its investment goal
by investing primarily in U.S. investment-grade corporate and government fixed
income securities, including mortgage-backed securities, that meet the
Portfolio's social criteria. The Portfolio's Advisor will select
investment-grade fixed income securities and unrated securities determined to be
of comparable quality. The Portfolio normally invests in securities with
intermediate maturities, and the Portfolio will typically have a dollar-weighted
average maturity of 3 to 10 years. However, the Portfolio has no maturity
restrictions, and the average maturity of the Portfolio's investments will vary
depending on market conditions.

In selecting securities for the Portfolio that meet the Portfolio's social
criteria, the Advisor also considers factors such as current yield, credit
quality, capital appreciation potential, maturity and yield to maturity. The
Advisor will monitor changing economic conditions and trends, including interest
rates, and may sell securities in anticipation of an increase in interest rates
or purchase securities in anticipation of a decrease in interest rates.

PRINCIPAL RISKS OF INVESTING IN THE SOCIAL ISSUES INTERMEDIATE FIXED INCOME
PORTFOLIO

An investment in the Portfolio is not guaranteed; you may lose money by
investing in the Portfolio.

Page 4 of 25

<PAGE>

rated securities. Also, securities with longer maturities are generally more
volatile, so the average maturity of the Portfolio's securities affects risk.

The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Portfolio may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.

The Portfolio's U.S. government securities are not guaranteed against price
movements due to changing interest rates. Obligations issued by some U.S.
government agencies are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.

The Portfolio's investments are subject to social screens. Because of these
screens, Portfolio management may forego opportunities to buy certain securities
when it is otherwise advantageous to do so, or may sell certain securities for
social reasons when it is otherwise disadvantageous to do so.

PERFORMANCE INFORMATION

Performance information for the Portfolio will be available after it has
completed a full calendar year of operations.

PORTFOLIO FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>

INSTITUTIONAL
CLASS
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of offering price) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and
other Distributions (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)

INSTITUTIONAL CLASS
-----------------------------------------------------------------------------------------------
Investment Advisory Fees 0.60%
Distribution (12b-1) Fees None
Other Expenses 0.40%(1)
------
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.00%
Fee Waivers and Expense Reimbursements 0.13%
-----
NET TOTAL OPERATING EXPENSES 0.87%(2)

Page 5 of 25

<PAGE>
amount shown above because the Advisor will voluntarily reimburse expenses in
order to keep total operating expenses at a specified level. The Advisor may
discontinue all or part of these reimbursements at any time. With the expense
reimbursements, the Portfolio's total operating expenses would be as follows:
<TABLE>
<CAPTION>
<S> <C>
Social Issues Intermediate Fixed Income Portfolio - Institutional Class 0.84%
</TABLE>

For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."

EXAMPLE

1 YEAR 3 YEARS
$89 $305

Page 6 of 25

<PAGE>

ARK SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO
<TABLE>
<CAPTION>

PORTFOLIO SUMMARY

<S> <C> <C>
INVESTMENT GOAL Long-term capital appreciation

INVESTMENT FOCUS Large capitalization U.S. common stocks

SHARE PRICE VOLATILITY Medium to high

PRINCIPAL INVESTMENT STRATEGY Investing in stocks of established large capitalization
companies that meet the Portfolio's social criteria

INVESTOR PROFILE Investors seeking capital appreciation who can tolerate
the share price volatility of equity investing

</TABLE>

PRINCIPAL INVESTMENT STRATEGY OF THE SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO

The Social Issues Blue Chip Equity Portfolio seeks its investment goal by
investing primarily in common stocks and other equity securities of established
U.S. companies with market capitalizations in excess of $5 billion that meet the
Portfolio's social criteria. The Portfolio's Advisor generally purchases stocks
of companies with at least 10 years of operating history that are recognized
leaders in their respective markets. The Portfolio also may, to a limited
extent, purchase stocks of rapidly growing companies in developing industries,
convertible and preferred stocks, and investment-grade fixed income securities.

In selecting investments for the Portfolio, the Advisor will purchase securities
of large companies with strong balance sheets and prospects for above-average
growth that meet the Portfolio's social criteria. The Advisor will also purchase
securities of issuers based on their current financial strength and their market
valuations relative to their competitors.

PRINCIPAL RISKS OF INVESTING IN THE SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO

An investment in the Portfolio is not guaranteed; you may lose money by
investing in the Portfolio.

The medium capitalization companies the Portfolio invests in may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these mid-sized companies may have limited product
lines, markets and financial resources,

Page 7 of 25

<PAGE>

and may depend upon a relatively small management group. Therefore, mid-cap
stocks may be more volatile than those of larger companies.

PERFORMANCE INFORMATION

Performance information for the Portfolio will be available after it has
completed a full calendar year of operations.

PORTFOLIO FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>

INSTITUTIONAL
CLASS
-----------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of offering price) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and
other Distributions (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>

ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
<TABLE>
<CAPTION>

INSTITUTIONAL CLASS
---------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.70%
Distribution (12b-1) Fees None
Other Expenses 0.39%(1)
------
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.09%
Fee Waivers and Expense Reimbursements 0.06%
-----
NET TOTAL OPERATING EXPENSES 1.03%(2)

-----------------------------------------------------------------------------------------------
<FN>
(1) Other Expenses are based on estimates for the current fiscal year.
(2) The Portfolio's Advisor has agreed contractually to waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 1.03% until
August 31, 2001. The Portfolio's total annual operating expenses would be less
than the amount shown above because, in addition to its contractual waiver, the
Advisor will voluntarily reimburse expenses in order to keep total operating
expenses at a specified level. The Advisor may discontinue all or part of these
reimbursements at any time. With the expense reimbursements, the Portfolio's
total operating expenses would be as follows:
</FN>
</TABLE>

Social Issues Blue Chip Equity Portfolio - Institutional Class 1.00%

For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."

Page 8 of 25

<PAGE>

EXAMPLE

1 YEAR 3 YEARS
$105 $341

Page 9 of 25

<PAGE>

ARK SOCIAL ISSUES CAPITAL GROWTH PORTFOLIO

PORTFOLIO SUMMARY
<TABLE>
<CAPTION>

<S> <C> <C>
INVESTMENT GOAL Long-term capital appreciation

INVESTMENT FOCUS U.S. common stocks of various market capitalizations

SHARE PRICE VOLATILITY Medium to high

PRINCIPAL INVESTMENT STRATEGY Investing in stocks that offer above-average growth
potential and satisfy the Portfolio's social criteria

INVESTOR PROFILE Investors seeking capital appreciation who can tolerate the
share price volatility of equity investing
</TABLE>

PRINCIPAL INVESTMENT STRATEGY OF THE SOCIAL ISSUES CAPITAL GROWTH PORTFOLIO

The Social Issues Capital Growth Portfolio seeks its investment goal by
investing primarily in common stocks and other equity securities that meet the
Portfolio's social criteria. The Portfolio's Advisor will build a broadly
diversified portfolio of stocks with above-average capital growth potential.

In selecting securities for the Portfolio, the Advisor purchases securities of
well-known, established companies and small- and mid-size companies (companies
with market capitalizations of $8 billion or less) that meet the Portfolio's
social criteria. In evaluating securities for the Portfolio, the Advisor
considers each company's current financial strength, as well as its revenue and
earnings growth and the valuation of its stock.

PRINCIPAL RISKS OF INVESTING IN THE SOCIAL ISSUES CAPITAL GROWTH PORTFOLIO

An investment in the Portfolio is not guaranteed; you may lose money by
investing in the Portfolio.

Page 10 of 25

<PAGE>

The smaller and medium capitalization companies the Portfolio invests in may be
more vulnerable to adverse business or economic events than larger, more
established companies. In particular, these small and mid-size companies may
have limited product lines, markets and financial resources, and may depend upon
a relatively small management group. Therefore, small-cap and mid-cap stocks may
be more volatile than those of larger companies. These securities may be traded
over-the-counter or listed on an exchange and may or may not pay dividends.

PERFORMANCE INFORMATION

Performance information for the Portfolio will be available after it has
completed a full calendar year of operations.

PORTFOLIO FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
<S> <C>

INSTITUTIONAL
CLASS
------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of offering price) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and
other Distributions (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)

INSTITUTIONAL CLASS
---------------------------------------------------------------------------------------------
Investment Advisory Fees 0.70%
Distribution (12b-1) Fees None
Other Expenses 0.39%(1)
-----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.09%
Fee Waivers and Expense Reimbursements 0.02%
-----
NET TOTAL OPERATING EXPENSES 1.07%(2)

-----------------------------------------------------------------------------------------------
<FN>
(1) Other Expenses are based on estimates for the current fiscal year.
(2) The Portfolio's Advisor has agreed contractually to waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 1.07% until
August 31, 2001. The Portfolio's total annual operating expenses would be less
than the amount shown above because, in addition to its contractual waiver, the
Advisor will voluntarily reimburse expenses in order to keep total operating
expenses at a specified level. The Advisor may discontinue all or part of these
reimbursements at any time. With the expense reimbursements, the Portfolio's
total operating expenses would be as follows:

Social Issues Capital Growth Portfolio - Institutional Class 1.04%
</FN>
</TABLE>

Page 11 of 25

<PAGE>
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."

EXAMPLE

1 YEAR 3 YEARS
$109 $345

Page 12 of 25

<PAGE>

ARK SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO
<TABLE>
<CAPTION>
<S> <C> <C>
PORTFOLIO SUMMARY

INVESTMENT GOAL Long-term capital appreciation

INVESTMENT FOCUS Common stock of small-capitalization U.S. issuers

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Investing in stocks of smaller companies with long-term
earnings growth potential that meet the Portfolio's social
criteria

INVESTOR PROFILE Investors seeking long-term capital appreciation who can
tolerate the share price volatility of small-cap equity
investing
</TABLE>

PRINCIPAL INVESTMENT STRATEGY OF THE SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO

The Social Issues Small-Cap Equity Portfolio seeks its investment goal by
investing primarily in common stocks and other equity securities of U.S. issuers
that meet the Portfolio's social criteria. The Portfolio's Advisor purchases
stocks of smaller companies that are in the early stages of development and
which the Advisor believes have the potential to achieve substantial long-term
earnings growth. The Portfolio invests primarily in companies with market
capitalizations of $2 billion or less at the time of investment. The Portfolio
may also invest a limited percentage of its assets in securities rated below
investment-grade ("junk bonds") and in foreign securities.

In selecting investments for the Portfolio, the Advisor purchases securities of
small-cap U.S. companies with strong earnings growth potential that meet the
Portfolio's social criteria. The Advisor may also purchase stocks of companies
that are experiencing unusual, non-repetitive "special" situations (such as
mergers or spin-offs) or that have valuable fixed assets whose value is not
fully reflected in a stock's price. The Advisor may also purchase stocks of
smaller companies that it believes are undervalued relative to their assets,
earnings or growth potential.

PRINCIPAL RISKS OF INVESTING IN THE SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO

An investment in the Portfolio is not guaranteed; you may lose money by
investing in the Portfolio.

Since it purchases equity securities, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in

Page 13 of 25
<PAGE>
cycles, and the value of the Portfolio's equity securities may fluctuate
significantly from day to day. Individual companies may report poor results or
be negatively affected by industry and/or economic trends and developments. The
prices of securities issued by such companies may suffer a decline in response.
These factors contribute to price volatility, which is the principal risk of
investing in the Portfolio.

The smaller capitalization companies the Portfolio invests in may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these small companies may have limited product lines,
markets and financial resources, and may depend upon a relatively small
management group. Therefore, small-cap stocks may be more volatile than those of
larger companies. These securities may be traded over-the-counter or listed on
an exchange and may or may not pay dividends.

Junk bonds involve greater risks of default or downgrade and are more volatile
than investment-grade securities. Junk bonds involve a greater risk of price
declines than investment-grade securities due to actual or perceived changes to
an issuer's creditworthiness. In addition, issuers of junk bonds may be more
susceptible than other issuers to economic downturns. Junk bonds are subject to
the risk that the issuer may not be able to pay interest and ultimately to repay
principal upon maturity. Discontinuation of these payments could substantially
adversely affect the market value of the securtiy.

PERFORMANCE INFORMATION

Performance information for the Portfolio will be available after it has
completed a full calendar year of operations.

PORTFOLIO FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.

Page 14 of 25
<PAGE>

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
<S> <C>

INSTITUTIONAL
CLASS
----------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of offering price) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and
other Distributions (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)

INSTITUTIONAL CLASS
-----------------------------------------------------------------------------------------------
Investment Advisory Fees 0.80%
Distribution (12b-1) Fees None
Other Expenses 0.42%(1)
-----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.22%
-----------------------------------------------------------------------------------------------
<FN>
(1) Other Expenses are based on estimates for the current fiscal year.
(2) The Portfolio's total annual operating expenses would be less than the
amount shown above because the Advisor will voluntarily reimburse expenses in
order to keep total operating expenses at a specified level. The Advisor may
discontinue all or part of these reimbursements at any time. With the expense
reimbursements, the Portfolio's total operating expenses would be as follows:

Social Issues Small-Cap Equity Portfolio - Institutional Class 1.19%

</FN>
</TABLE>

For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."

EXAMPLE

1 YEAR 3 YEARS
$124 $387

Page 15 of 25

<PAGE>

THE ARK FUNDS' APPROACH TO SOCIAL ISSUES INVESTING

Socially responsible investors factor social issues criteria into their
investment decisions. Investors want the social issues criteria used to reflect
their values. In addition, in the course of seeking growth in their investments,
they look for opportunities to use their investments to improve the lives of
others.

Typically, socially responsible investors avoid companies that manufacture
products, or employ practices, that they believe have harmful effects on
society. This process of avoidance has also been referred to as called "SOCIAL
SCREENING."

In selecting securities for the Portfolios, the Advisor uses social research
from KLD. KLD determines the social criteria used in establishing the research.
KLD provides social research on U.S. and foreign corporations to the investment
community. KLD maintains a database of social research, covering approximately
1,700 publicly traded U.S. and foreign corporations. KLD does not provide
investment advice. As a matter of practice, evaluation of a particular
organization in the context of these criteria may involve subjective judgment by
KLD. The Investment Advisor may modify or remove any social criteria and may
impose additional social criteria at any time without shareholder approval.

The social screens adopted by the investment advisor will seek to exclude the
following types of companies:

o Tobacco and Alcohol - companies that manufacture tobacco products or
alcoholic beverages;
o Gambling - companies that receive identifiable revenues from gambling
enterprises;
o Nuclear Power - companies that have an ownership share in, or operate,
nuclear power plants;
o Weapons - companies that receive more than 2% of their gross revenues
from the sale of military weapons; and
o Abortion and Contraceptives - companies that receive identifiable
revenues from the development or manufacture of abortifacients and
contraceptives.

EACH PORTFOLIO'S OTHER INVESTMENTS

This prospectus describes the Portfolios' primary strategies, and the Portfolios
will normally invest at least 65% of their total assets in the types of
securities described in this prospectus. However, each Portfolio also may invest
in other securities, use other strategies and engage in other investment
practices. These investments and strategies, as well as those described in this
prospectus, are described in detail in our Statement of Additional Information.
Of course, there is no guarantee that any Portfolio will achieve its investment
goal.

Page 16 of 25
<PAGE>

A Portfolio will do so only if the Advisor believes that the risk of loss
outweighs the opportunity for capital gains or higher income. The Portfolio may
not be able to meet its investment goal when the Advisor is employing a
temporary defensive strategy.

Page 17 of 25

<PAGE>

ADDITIONAL INFORMATION ABOUT PRINCIPAL RISK
<TABLE>
<CAPTION>
<S> <C> <C>

PORTFOLIOS AFFECTED BY THE RISKS
RISKS

EQUITY RISK -- Equity securities include publicly and privately Social Issues Blue Chip Equity Portfolio
issued equity securities, common and preferred stocks, warrants, Social Issues Capital Growth Portfolio
rights to subscribe to common stock and convertible securities, as Social Issues Small-Cap Equity Portfolio
well as instruments that attempt to track the price movement of
equity indices. Investments in equity securities and equity
derivatives in general are subject to market risks that may cause
their prices to fluctuate over time. Equity derivatives may be
more volatile and increase portfolio risk. The value of
securities convertible into equity securities, such as warrants or
convertible debt, is also affected by prevailing interest rates,
the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which a mutual
fund invests will cause its portfolio's net asset value to
fluctuate. An investment in a portfolio of equity securities may
be more suitable for long-term investors who can bear the risk of
these share price fluctuations.

FIXED INCOME RISK -- The market values of fixed income investments Social Issues Intermediate Fixed Income
change in response to interest rate changes and other factors. Portfolio
During periods of falling interest rates, the values of
outstanding fixed income securities generally rise. Moreover,
while securities with longer maturities tend to produce higher
yields, the prices of longer maturity securities are also subject
to greater market fluctuations as a result of changes in interest
rates. In addition to these fundamental risks, different types of
fixed income securities may be subject to the following additional
risks:

CALL RISK -- During periods of falling interest rates, Social Issues Intermediate Fixed Income
certain debt obligations with high interest rates may be Portfolio
prepaid (or "called") by the issuer prior to
maturity. This may cause a Portfolio's average weighted
maturity to fluctuate, and may require a Portfolio to
invest the resulting proceeds at lower interest rates.

CREDIT RISK -- The possibility that an issuer will be Social Issues Intermediate Fixed Income
unable to make timely payments of either principal or Portfolio
interest.

Page 18 of 25
<PAGE>

EVENT RISK -- Securities may suffer declines in credit Social Issues Intermediate Fixed Income
quality and market value due to issuer restructurings or Portfolio
other factors. This risk should be reduced because of
a Portfolio's multiple holdings.

MORTGAGE-BACKED SECURITIES RISK -- Mortgage-backed Social Issues Intermediate Fixed Income
securities are fixed income securities representing an Portfolio
interest in a pool of underlying mortgage loans. They
are sensitive to changes in interest rates, but may
respond to these changes differently from other fixed
income securities due to the possibility of prepayment of
the underlying mortgage loans. As a result, it may not
be possible to determine in advance the actual maturity
date or average life of a mortgage-backed security.
Rising interest rates tend to discourage refinancings,
with the result that the average life and volatility of
the security will increase, exacerbating its decrease
in market price. When interest rates fall, however,
mortgage-backed securities may not gain as much in market
value because of the expectation of additional mortgage
prepayments that must be reinvested at lower interest
rates. Prepayment risk may make it difficult to
calculate the average maturity of a Portfolio of
mortgage-backed securities and, therefore, to assess
the volatility risk of that Portfolio.

FOREIGN SECURITY RISKS-- Investments in securities of Social Issues Small-Cap Equity Portfolio
foreign companies or governments can be more volatile
than investments in U.S. companies or governments.
Diplomatic, political, or economic developments,
including nationalization or appropriation, could affect
investments in foreign countries. Foreign securities
markets generally have less trading volume and less
liquidity than U.S. markets. In addition, the value of
securities denominated in foreign currencies, and of
dividends from such securities, can change significantly
when foreign currencies strengthen or weaken relative to
the U.S. dollar. Foreign companies or governments
generally are not subject to uniform accounting, auditing,
and financial reporting standards comparable to those
applicable to U.S. companies or governments.
Transaction costs are generally higher than those in the
U.S. and expenses for custodial arrangements of foreign
securities may be somewhat greater than typical expenses
for custodial arrangements of similar U.S. securities.
Some foreign governments levy withholding taxes against
dividend and interest income. Although in some countries
a portion of these taxes are recoverable, the non-recovered
portion will reduce the income received from the securities
comprising the Portfolio.

In addition to these risks, certain foreign securities may
be subject to the following additional risks factors:

CURRENCY RISK -- Investments in foreign Social Issues Small-Cap Equity Portfolio
securities denominated in foreign currencies
involve additional risks, including:

o The value of a Portfolio's assets measured in
U.S. dollars may be affected by changes in
currency rates and in exchange control
regulations.
o A Portfolio may incur substantial costs in
connection with conversions between various
currencies.
o A Portfolio may be unable to hedge against
possible variations in foreign exchange rates
or to hedge a specific security transaction
or portfolio position.
o Only a limited market currently exists for
hedging transactions relating to currencies
in certain emerging markets.

SOCIAL INVESTMENT RISK -- The Portfolios' social screens All Portfolios
could cause them to underperform similar funds that do
not have social policies. Among the reasons for this is
stocks that do not meet the social criteria could
outperform those that do.

In addition, Portfolio management may forego certain
investments for social reasons when it would otherwise be
advantageous to make the investment.
</TABLE>

Page 19 of 25

<PAGE>

INVESTMENT ADVISOR

The Portfolios' Investment Advisor makes (or supervises any subadvisor who
makes) investment decisions for the Portfolios and continuously reviews,
supervises and administers the Portfolios' respective investment programs. The
Board of Trustees of the ARK Funds supervises the Advisor and establishes
policies that the Advisor must follow in its management activities.

Allied Investment Advisors, Inc. (AIA), a wholly-owned subsidiary of Allfirst
Bank (Allfirst), serves as the Advisor to the Portfolios. As of September 30,
2000, AIA had approximately $14.6 billion in assets under management. Under an
investment advisory agreement with ARK Funds, AIA is entitled to receive
advisory fees of:

SOCIAL ISSUES INTERMEDIATE FIXED INCOME PORTFOLIO 0.60%*
SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO 0.70%*
SOCIAL ISSUES CAPITAL GROWTH PORTFOLIO 0.70%*
SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO 0.80%
--------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed contractually to waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 0.87% for the
Social Issues Intermediate Fixed Income Portfolio, 1.03% for the Social Issues
Blue Chip Equity Portfolio, and 1.07% for the Social Issues Capital Growth
Portfolio until August 31, 2001. With these fee waivers, the actual advisory
fees received by AIA may be lower than those shown in the table above.

PORTFOLIO MANAGER

Susan L. Schnaars is a Principal of AIA and manager of the SOCIAL ISSUES
INTERMEDIATE FIXED INCOME PORTFOLIO. Ms. Schnaars is also manager of other ARK
Funds Portfolios and is responsible for managing several large institutional
accounts. Prior to 1992, Ms. Schnaars managed institutional and commingled fixed
income portfolios, including the RAF Fixed Income Fund for PNC Investment
Management and Research (formerly known as Provident National Bank). Ms.
Schnaars is a Chartered Financial Analyst and a Certified Public Accountant.

Clyde L. Randall II is a Principal of AIA and co-manager, with Mr. Ashcroft, of
the SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO and is co-manager of other ARK
Funds Portfolios. Prior to March 1995, Mr. Randall was an equity analyst and
portfolio manager for more than five years at Mercantile Safe Deposit and Trust
Company, Baltimore, Maryland. He has more than 16 years of experience in
investment research and equity analysis. Mr. Randall is a Chartered Financial
Analyst.

Allen J. Ashcroft, Jr. is a Principal of AIA and co-manager, with Mr. Randall,
of the SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO and is co-manager of other ARK
Funds Portfolios. Prior to joining Allfirst, Mr. Ashcroft was an equity analyst
and portfolio manager for McGlinn Capital Management, Wyomissing, Pennsylvania,
for 12 years. Mr. Ashcroft has more than 21 years of experience in investment
research and equity analysis.

The SOCIAL ISSUES CAPITAL GROWTH PORTFOLIO is managed by a portfolio management
team under the supervision of J. Eric Leo. Mr. Leo is the Chief Investment
Officer of AIA and

Page 20 of 25

<PAGE>

Managing Director of Equity Research. He is responsible for overseeing AIA's
equity investment process. Through the team approach, the firm seeks consistent
implementation of process and continuity in investment management staff for the
Portfolio.

H. Giles Knight is a Principal of AIA and manager of the SOCIAL ISSUES SMALL-CAP
EQUITY PORTFOLIO and is manager of another ARK Funds Portfolio. Prior to joining
Allfirst, Mr. Knight was with ASB Capital Management, a subsidiary of Nations
Bank, from 1990 to 1994. He was Director of Special Equity Investments, Capital
Markets Division, where he was responsible for one mutual fund and six employee
benefit and personal trust common stock funds. Mr. Knight has nearly 30 years of
investment experience.

PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES

This section tells you how to purchase, sell (sometimes called "redeem") or
exchange Institutional Class Shares of the ARK Social Issues Portfolios.
Depending on whether you are a client of Allfirst or Allied Irish America, there
are different procedures for purchasing, selling, and exchanging shares. See the
section below that is appropriate for you.

GENERAL INFORMATION

You may purchase shares on any day that the New York Stock Exchange (NYSE) and
the Federal Reserve Bank of New York (Federal Reserve) are open for business (a
Business Day).

A Portfolio or its distributor may reject any purchase order if it is determined
that accepting the order would not be in the best interests of the Portfolio or
its shareholders.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Portfolio receives your purchase order. The fixed
income and equity Portfolios each calculate their NAV each Business Day at the
close of the NYSE (normally, 4:00 p.m.) Eastern time. So, for your order to be
effective the day you submit your purchase order, generally the Portfolio must
receive your order and Federal funds before 4:00 p.m. Eastern time.

When the NYSE or the Federal Reserve close early, the Portfolios will advance
the time on any such day by which purchase orders must be received.

HOW WE CALCULATE NAV

NAV for one Portfolio share is the value of that share's portion of all of the
net assets in the Portfolio.

In calculating NAV, each Portfolio generally values its investment portfolio at
its market price. If market prices are unavailable or the Portfolios think that
they are unreliable, fair value prices may be determined in good faith using
methods approved by the Board of Trustees.

Some Portfolios hold securities that are listed on foreign exchanges. These
securities may trade on weekends or other days when the Portfolios do not
calculate NAV. As a result, the market value of these Portfolios' investments
may change on days when you cannot purchase or sell Portfolio shares.

Page 21 of 25
<PAGE>

MINIMUM PURCHASES

To purchase shares for the first time, you must invest in any Portfolio at least
$50,000. Your subsequent investments in any Portfolio may be made in amounts of
$5,000 or more. Related accounts or other master accounts may be aggregated for
this purpose. There may be other minimums or restrictions established by
Allfirst, Allied Irish America, or a correspondent bank when you open your
account.

CLIENTS OF ALLFIRST

HOW TO PURCHASE PORTFOLIO SHARES

Institutional Class Shares of the ARK Social Issues Portfolios are for
individuals, financial institutions, corporations and other entities that have
established trust, custodial, sweep or money management relationships with
Allfirst or its affiliates or correspondent banks. Before you can buy
Institutional Class Shares, you must establish a qualified account. For
information on fee schedules and agreements for opening qualified accounts, call
1-800-624-4116 to speak with an investor representative.

Generally, you must make payment to Allfirst or a correspondent bank, which will
forward your purchase orders. You will have to follow the procedures applicable
to qualified accounts. Your qualified account agreement may require you to pay a
fee that is in addition to the fees charged by the Portfolios.

HOW TO SELL YOUR PORTFOLIO SHARES

Generally, you must request a redemption through Allfirst or a correspondent
bank, which will forward your redemption request to the Fund. If you have
questions, call 1-800-624-4116 or your investor representative at Allfirst or
your correspondent bank. The redemption price is based on the next calculation
of NAV after your request is received.

BY MAIL. To redeem by mail, send a written request to Allfirst Trust, Mailcode
#101-624, P. O. Box 1596, Baltimore, Maryland 21201, or to your correspondent
bank.

BY TELEPHONE. To redeem by telephone, call 1-800-624-4116 or your investor
representative at Allfirst or your correspondent bank.

Page 22 of 25
<PAGE>

RECEIVING YOUR MONEY

Normally, if we receive your redemption request before 4:00 p.m. Eastern time,
we will wire your redemption proceeds via Federal funds wire on the next
Business Day. Currently, Allfirst pays the costs of these wires. Allfirst or a
correspondent bank reserves the right to charge wire fees to investors.

HOW TO EXCHANGE YOUR SHARES

You may exchange your Institutional Class Shares on any Business Day by calling
Allfirst at 1-800-624-4116 or your investment representative at Allfirst or a
correspondent bank.

CLIENTS OF ALLIED IRISH AMERICA

HOW TO PURCHASE PORTFOLIO SHARES

Institutional Class Shares of the ARK Social Issues Portfolios are for financial
institutions, corporations and other entities, including, but not limited to,
501(c)(3) organizations and 401(k) plan administrators, that have established
trust, custodial, sweep or money management relationships with Allied Irish
America or its affiliates or correspondent banks. Before you can buy
Institutional Class Shares, you must establish an account. To do so, call
1-800-ARK-FUND (1-800-275-3863) to speak with an investor representative.

You can buy shares by sending a completed Account Application along with your
check in U.S. dollars made payable to "ARK Funds" to the address below. Include
the name of the appropriate Portfolio(s) on your check. A Portfolio cannot
accept third-party checks, credit cards, credit card checks, or cash.
Redemptions of shares purchased either by check will be delayed until the
investment has been in the account for 15 calendar days.

ARK Funds
P.O. Box 8525
Boston, MA 02266-8525

PURCHASES BY WIRE

You can also buy shares by wiring money to:

State Street Bank and Trust Company
Boston, MA
ABA 011000028
Account Number: 99051609
Attention: [ARK Portfolio Name]
Further Credit to: [Account Name and Number*]

Page 23 of 25

<PAGE>

*Prior to wiring money for your first purchase, you must establish an account.
To open a new account, call 1-800-ARK-FUND (1-800-275-3863) to speak with an
investment representative.

To insure proper crediting of your investment, you should notify ARK Funds'
transfer agent at 1-800-ARK-FUND by 12:00 noon Eastern time if you plan to wire
money.

You may purchase shares by Automated Clearing House (ACH) funds transfer. To do
so, complete the bank information section on the Account Application. Attach a
voided check or deposit slip to the Account Application. Only domestic member
banks may be used. It takes about 15 days to set up an ACH account. Currently,
ARK Funds do not charge a fee for ACH transfers. You may purchase shares through
ACH by calling 1-800-ARK-FUND to effect the transfer.

HOW TO SELL YOUR PORTFOLIO SHARES

You may sell your shares on any Business Day by contacting ARK Funds directly by
mail at ARK Funds, P.O. Box 8525, Boston, MA 02266-8525, or by telephone at
1-800-ARK-FUND (1-800-275-3863). There is no minimum amount for telephone
redemptions. The redemption price is based on the next calculation of NAV after
your request is received.

You may not close your account by telephone.

REDEMPTION BY MAIL

RECEIVING YOUR MONEY

Normally, we send your sale proceeds within three Business Days after we receive
your request. Your proceeds can be wired to your bank account or sent to you by
check. We reserve the right to charge a $10 wire fee. If you recently purchased
your shares by check, redemption proceeds may not be available until your check
has cleared (which may take up to 15 days from the date of your purchase).

HOW TO EXCHANGE YOUR PORTFOLIO SHARES

To exchange your Portfolio shares, contact ARK Funds directly at 1-800-ARK-FUND
(1-800-275-3863). You may exchange your shares on any Business Day.

TELEPHONE TRANSACTIONS

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

DISTRIBUTION OF PORTFOLIO SHARES

Page 24 of 25

<PAGE>

REDEMPTION IN KIND

The Portfolios reserve the right to make redemptions "IN KIND" - payment of
redemption proceeds in portfolio securities rather than cash - if the Portfolios
deem that it is in the Portfolio's best interest to do so.

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid according to the following schedule:
<TABLE>
<CAPTION>

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

FREQUENCY OF FREQUENCY OF
DECLARATION OF PAYMENT OF
PORTFOLIO DIVIDENDS DIVIDENDS
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Social Issues Intermediate Fixed Income Portfolio Daily Monthly
-------------------------------------------------------------------------------------------------
Social Issues Blue Chip Portfolio Quarterly Quarterly
-------------------------------------------------------------------------------------------------
Social Issues Capital Growth Portfolio Annually Annually
-------------------------------------------------------------------------------------------------
Social Issues Small-Cap Equity Portfolio Annually Annually
-------------------------------------------------------------------------------------------------
</TABLE>
Each Portfolio makes distributions of capital gains, if any, at least annually.
If you own Portfolio shares on a Portfolio's record date, you will be entitled
to receive the distribution.

TAXES

Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
Federal, state and local taxation, depending upon your tax situation.
Distributions you receive from a Portfolio may be taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income tax
rates. Capital gains distributions are generally taxable at the rates applicable
to long-term capital gains, but vary depending on how long the Portfolio has
held its assets. A SALE OR EXCHANGE OF SHARES IS GENERALLY A TAXABLE EVENT.

MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.

Page 25 of 25

<PAGE>

HOW TO OBTAIN MORE INFORMATION ABOUT ARK FUNDS

INVESTMENT ADVISOR

Allied Investment Advisors, Inc.
100 E. Pratt Street
Baltimore, MD 21202

SOCIAL RESEARCH PROVIDER

Kinder, Lydenberg, Domini & Co., Inc.
530 Atlantic Avenue
7th Floor
Boston, MA 02210

DISTRIBUTOR

SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456

LEGAL COUNSEL

Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036

INDEPENDENT AUDITORS

KPMG LLP
99 High Street
Boston, MA 02110

More information about the Portfolio is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

ANNUAL AND SEMI-ANNUAL REPORTS

TO OBTAIN MORE INFORMATION:

INSIDE BACK COVER

<PAGE>

BY TELEPHONE: Call 1-800-ARK-FUND (1-800-275-3863)

BY MAIL: Write to us at:

ARK Funds
c/o Allfirst Bank Trust Division
Banc #101-624
P.O. Box 1596
Baltimore, MD 21201

FROM OUR WEBSITE: www.arkfunds.com

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual
Reports, as well as other information about ARK Funds, from the SEC's website
(http://www.sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, D.C. (for information call (202) 942-8090). You
may request documents by mail from the SEC, upon payment of a duplicating fee,
by (1) writing to: Securities and Exchange Commission, Public Reference Section,
Washington, D.C. 20549-0102 or (2) sending an electronic request to publicinfo
@sec.gov. ARK Funds' Investment Company Act registration number is 811-7310.

<PAGE>

ARK FUNDS

PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

INSTITUTIONAL II CLASS

PROSPECTUS
FEBRUARY ___, 2001

INVESTMENT ADVISOR:
ALLIED INVESTMENT ADVISORS, INC.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR
PASSED UPON THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

HOW TO READ THIS PROSPECTUS

ARK Funds is a mutual fund family that offers shares in separate investment
Portfolios. The Portfolios have individual investment goals and strategies. This
prospectus gives you important information about the Institutional II Class
Shares of the Pennsylvania Tax-Free Money Market Portfolio (Portfolio) that you
should know before investing. Please read this prospectus and keep it for future
reference.

THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. FOR MORE DETAILED INFORMATION ABOUT THE
PORTFOLIO, PLEASE SEE:

PAGE
ARK PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO..................... 4
ADDITIONAL INFORMATION ABOUT PRINCIPAL RISK.......................... 7
THE PORTFOLIO'S OTHER INVESTMENTS.................................... 8
INVESTMENT ADVISOR................................................... 8
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES.................. 8
DISTRIBUTION OF PORTFOLIO SHARES.....................................11
DIVIDENDS AND DISTRIBUTIONS..........................................11
TAXES................................................................12
HOW TO OBTAIN MORE INFORMATION ABOUT ARK FUNDS........Inside Back Cover

Page 2 of 12

<PAGE>

INTRODUCTION

The Portfolio is a mutual fund. A mutual fund pools shareholders' money and,
using professional investment managers, invests it in securities.

The Portfolio has its own investment goal and strategies for reaching that goal.
The investment advisor invests the Portfolio's assets in a way that it believes
will help the Portfolio achieve its goal. Still, investing in the Portfolio
involves risk, and there is no guarantee that the Portfolio will achieve its
goal. The investment advisor's judgments about the markets, the economy, or
companies may not anticipate actual market movements, economic conditions or
company performance, and these judgments may affect the return on your
investment. In fact, no matter how good a job the investment advisor does, you
could lose money on your investment in the Portfolio, just as you could with
other investments. A Portfolio share is not a bank deposit and it is not insured
or guaranteed by the FDIC or any government agency.

THE PORTFOLIO TRIES TO MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE
IS NO GUARANTEE THAT THE PORTFOLIO WILL ACHIEVE THIS GOAL.

Page 3 of 12

<PAGE>

ARK PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

PORTFOLIO SUMMARY

INVESTMENT GOAL Maximizing current income
exempt from Federal and
Pennsylvania state income taxes
and providing liquidity and
security of principal

INVESTMENT FOCUS Short-term, high-quality
Pennsylvania municipal money
market obligations

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Investing in Pennsylvania
municipal money market securities

INVESTOR PROFILE Conservative investors seeking
income exempt from Federal
and Pennsylvania state income taxes
through a low-risk, liquid
investment

PRINCIPAL INVESTMENT STRATEGY OF THE PENNSYLVANIA TAX-FREE MONEY MARKET
PORTFOLIO

PRINCIPAL RISKS OF INVESTING IN THE PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.

There may be economic or political changes that impact the ability of municipal
issuers to repay

Page 4 of 12

<PAGE>

principal and to make interest payments on municipal securities. Changes in the
financial condition or credit rating of municipal issuers also may adversely
affect the value of the Portfolio's securities.

The Portfolio's concentration of investments in securities of issuers located in
Pennsylvania subjects the Portfolio to the effects of economic and government
policies of Pennsylvania.

PERFORMANCE INFORMATION

Performance information for the Portfolio will be available after the Portfolio
has completed its first calendar year of operations.

PORTFOLIO FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>

INSTITUTIONAL II
CLASS
---------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of None
offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of offering None
price)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and None
other Distributions (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
</TABLE>

INSTITUTIONAL II CLASS
---------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees 0.15%
Other Expenses 0.43%(1)
-----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 0.83%
Fee Waivers and Expense Reimbursements 0.25%
-----
NET TOTAL OPERATING EXPENSES 0.58%(2)

-------------------------------------------------------------------------------------
<FN>
(1) Other Expenses are based on estimated amounts for the current fiscal year.
(2) The Portfolio's Advisor has agreed contractually to waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 0.58% until
August 31, 2001.
</FN>
</TABLE>

For more information about fees, see "Investment Advisor" and "Distribution of
Portfolio Shares."

Page 5 of 12

<PAGE>

EXAMPLE

1 YEAR 3 YEARS
$59 $240

Page 6 of 12

<PAGE>

ADDITIONAL INFORMATION ABOUT PRINCIPAL RISK

RISKS

In addition, a Portfolio's concentration of investments in issuers located in a
single state makes the Portfolio more susceptible to adverse political or
economic developments affecting that state. Such Portfolio also may be riskier
than mutual funds that buy securities of issuers in numerous states.

Page 7 of 12

<PAGE>

THE PORTFOLIO'S OTHER INVESTMENTS

This prospectus describes the Portfolio's primary strategies, and the Portfolio
will invest at least 80% of its total assets in the types of securities
described in this prospectus. However, the Portfolio also may invest in other
securities, use other strategies and engage in other investment practices. These
investments and strategies, as well as those described in this prospectus, are
described in detail in our Statement of Additional Information. Of course, there
is no guarantee that the Portfolio will achieve its investment goal.

INVESTMENT ADVISOR

The Portfolio's Investment Advisor makes investment decisions for the Portfolio
and continuously reviews, supervises and administers the Portfolio's respective
investment programs.

The Board of Trustees of the ARK Funds supervises the Advisor and establishes
policies that the Advisor must follow in its management activities.

PORTFOLIO MANAGER

PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES

This section tells you how to purchase, sell (sometimes called "redeem") or
exchange Institutional II Class Shares of the Portfolio.

Institutional II Class Shares are for individuals, financial institutions,
corporations and other entities that have established trust relationships with
Allfirst or its affiliates or correspondent banks. Before you can buy
Institutional II Class Shares, you must establish a qualified account.

Page 8 of 12

<PAGE>

For information on fee schedules and agreements for opening qualified accounts,
call 1-800-624-4116 (inside Maryland 1-800-638-7751) to speak with an investor
representative.

HOW TO PURCHASE PORTFOLIO SHARES

Generally, you must make payment to Allfirst or a correspondent bank, who will
forward your purchase orders. You may purchase shares directly by Federal funds,
wire or other funds immediately available to the Portfolio. The Portfolio cannot
accept checks, third-party checks, credit cards, credit card checks, or cash.

You will have to follow the procedures applicable to qualified accounts. Your
qualified account agreement may require you to pay a fee that is in addition to
the fees charged by the Portfolio.

It is expected that Allfirst, or a correspondent bank, will be the record owner
of Institutional II Class Shares held through qualified accounts. Allfirst, or a
correspondent bank, will supply clients with quarterly statements showing all
account activity.

Shareholders may instruct Allfirst or a correspondent bank to purchase
Institutional II Class Shares automatically at preset intervals. Allfirst or a
correspondent bank may charge additional fees for this and other services,
including cash sweeps. For more information, please call 1-800-624-4116 to speak
with an investor representative.

GENERAL INFORMATION

The Portfolio or its distributor may reject any purchase order if it is
determined that accepting the order would not be in the best interests of the
Portfolio or its shareholders.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Portfolio receives your purchase order. We expect
that the NAV of the Portfolio will remain constant at $1.00 per share.

When the NYSE or Federal Reserve close early, the Portfolio will advance the
time on any such day by which purchase orders must be received.

HOW WE CALCULATE NAV

NAV for one Portfolio share is the value of that share's portion of all of the
net assets in the Portfolio.

Page 9 of 12

<PAGE>

In calculating NAV for the Portfolio, we generally value its investment
portfolio using the amortized cost valuation method, which is described in
detail in our Statement of Additional Information. If this method is determined
to be unreliable during certain market conditions or for other reasons, the
Portfolio may value its securities at market price, or fair value prices may be
determined in good faith using methods approved by the Board of Trustees.

MINIMUM PURCHASES

To purchase shares for the first time, you must invest at least $500 in the
Portfolio. There may be other minimums or restrictions established by Allfirst
or a correspondent bank when you open your account.

HOW TO SELL YOUR PORTFOLIO SHARES

Holders of Institutional II Class Shares may sell shares by telephone or by mail
on any Business Day by following procedures established when they opened their
qualified account. If you have questions, call 1-800-624-4116 or your investor
representative at Allfirst or a correspondent bank. The redemption price is
based on the next calculation of NAV after your request is received.

BY MAIL. To redeem by mail, send a written request to Allfirst Bank Trust
Division Banc #101-624, P.O. Box 1596, Baltimore, Maryland 21201, or to your
correspondent bank and follow their procedures.

BY TELEPHONE. To redeem by telephone, call 1-800-624-4116 or your investor
representative at Allfirst or a correspondent
bank.

RECEIVING YOUR MONEY

Normally, if we receive your redemption request by 12:00 noon Eastern time on
any Business Day, we will send your sale proceeds on that day. Your proceeds can
be wired to your bank account. For Allfirst clients, currently Allfirst Bank
pays the costs of these wires. The Portfolio reserves the right to charge wire
fees to investors. You may not close your account by telephone.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

HOW TO EXCHANGE YOUR SHARES

You may exchange your Institutional II Class Shares on any Business Day by
contacting us directly by telephone by calling 1-800-624-4116 or your investor
representative at Allfirst or a correspondent bank.

Page 10 of 12

<PAGE>

An exchange between the Institutional II Class and another class of any other
ARK Funds Portfolio is generally not permitted, except that an exchange to Class
A Shares of a Portfolio will occur if an investor becomes ineligible to hold
Institutional II Class Shares. ARK Funds will provide 30 days notice of any such
exchange. ARK Funds have received a private letter ruling from the Internal
Revenue Service that provides that exchanges of shares of one class of an ARK
Funds Portfolio for another class of the same Portfolio will not be a taxable
event.

TELEPHONE TRANSACTIONS

DISTRIBUTION OF PORTFOLIO SHARES

The Portfolio has adopted a distribution plan that allows the Portfolio to pay
distribution and service fees for the sale and distribution of its shares, and
for services provided to shareholders. Because these fees are paid out of the
Portfolio's assets continuously, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales charges.

Distribution fees, as a percentage of average daily net assets, may be up to
0.75%. The Board has set the distribution fees as follows:

Pennsylvania Tax-Free Money Market Portfolio 0.15%

REDEMPTION IN KIND

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared daily and paid monthly. The Portfolio makes distributions
of capital gains, if any, at least annually. If you own Portfolio shares on the
Portfolio's record date, you will be entitled to receive the distribution.

Page 11 of 12
<PAGE>

for dividends and distributions paid after Allfirst receives your written
notice. To cancel your election, simply send written notice.

TAXES

PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Portfolio and its shareholders. This summary is based on current
tax laws, which may change.

The Portfolio will distribute substantially all of its income and capital gains,
if any. The dividends and distributions you receive may be subject to Federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from the Portfolio may be taxable whether or not you reinvest them.
Income distributions are generally taxable at ordinary income tax rates. Capital
gains distributions are generally taxable at the rates applicable to long-term
capital gains, but vary depending on how long the Portfolio has held its assets.
A SALE OR EXCHANGE OF SHARES IS GENERALLY A TAXABLE EVENT.

The Portfolio intends to distribute Federally tax-exempt income. The Portfolio
may invest a portion of its assets in securities that generate taxable income
for Federal or state income taxes. Income exempt from Federal tax may be subject
to state and local taxes. Any capital gains distributed by the Portfolio may be
taxable.

MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.

Page 12 of 12

<PAGE>

HOW TO OBTAIN MORE INFORMATION ABOUT ARK FUNDS

INVESTMENT ADVISOR

Allied Investment Advisors, Inc.
100 E. Pratt Street
Baltimore, MD 21202

DISTRIBUTOR

SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456

LEGAL COUNSEL

Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036

INDEPENDENT AUDITORS

KPMG LLP
99 High Street
Boston, MA 02110

More information about the Portfolio is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

ANNUAL AND SEMI-ANNUAL REPORTS

TO OBTAIN MORE INFORMATION:

BY TELEPHONE: Call 1-800-624-4116

BY MAIL: Write to us at:
ARK Funds

Inside Back Cover

<PAGE>

c/o Allfirst Bank Trust Division
Banc #101-624
P.O. Box 1596
Baltimore, MD 21201

FROM OUR WEBSITE: www.arkfunds.com

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual Reports,
as well as other information about ARK Funds, from the SEC's website
(http://www.sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call (202) 942-8090). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
(1) writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-0102 or (2) sending an electronic request to publicinfo@
sec.gov. ARK Funds' Investment Company Act registration number is 811-7310.

<PAGE>

ARK FUNDS

PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO
SMALL-CAP EQUITY PORTFOLIO
SOCIAL ISSUES INTERMEDIATE FIXED INCOME PORTFOLIO
SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO
SOCIAL ISSUES CAPITAL GROWTH PORTFOLIO
SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO

STATEMENT OF ADDITIONAL INFORMATION

FEBRUARY ___, 2001

This Statement of Additional Information is not a prospectus but
should be read in conjunction with the current prospectuses dated February ___,
2001, for the Retail Class A and Class B shares of Pennsylvania Tax-Free Money
Market Portfolio and Small-Cap Equity Portfolio, the Institutional Class Shares
of Pennsylvania Tax-Free Money Market Portfolio, Social Issues Intermediate
Fixed Income Portfolio, Social Issues Blue Chip Equity Portfolio, Social Issues
Capital Growth Portfolio and Social Issues Small-Cap Equity Portfolio and the
Institutional II Class Shares of the Pennsylvania Tax-Free Money Market
Portfolio of the ARK Funds (the "Fund"). Please retain this document for future
reference. Capitalized terms used but not defined herein have the meanings given
them in the prospectuses. The Fund's Annual Report (including financial
statements for the fiscal year ended April 30, 2000) is incorporated herein by
reference. To obtain additional copies of the prospectuses, Annual Report or
this Statement of Additional Information, please call 1-800-624-4116 (inside
Maryland 1-800-638-7751).

TABLE OF CONTENTS PAGE

INVESTMENT GOALS AND STRATEGIES.............................................3

INVESTMENT POLICIES AND LIMITATIONS.........................................7

INVESTMENT PRACTICES.......................................................10

SPECIAL CONSIDERATIONS.....................................................29

PORTFOLIO TRANSACTIONS.....................................................37

VALUATION OF PORTFOLIO SECURITIES..........................................39

PORTFOLIO PERFORMANCE......................................................40

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................42

TAXES .....................................................................43

TRUSTEES AND OFFICERS......................................................48

INVESTMENT ADVISOR.........................................................50

ADMINISTRATOR AND DISTRIBUTOR..............................................52

TRANSFER AGENT.............................................................55

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CUSTODIAN..................................................................55

CODE OF ETHICS.............................................................55

DESCRIPTION OF THE FUND....................................................56

INDEPENDENT AUDITORS.......................................................58

FINANCIAL STATEMENTS.......................................................58

Appendix A - Description of Indices and Ratings...........................A-1
Appendix B - 2000 Tax Rates...............................................B-1

2
<PAGE>

INVESTMENT GOALS AND STRATEGIES

The Fund consists of separate investment portfolios with a variety of
investment goals and strategies. A Portfolio's investment advisor is responsible
for providing a continuous investment program in accordance with its investment
goal and strategies. Except for its investment goal and those strategies
identified as fundamental, the investment policies of the Portfolios are not
fundamental and may be changed by the Board of Trustees of the Fund without
shareholder approval. The investment policies of the Pennsylvania Tax-Free Money
Market Portfolio, Small-Cap Equity Portfolio, Social Issues Intermediate Fixed
Income Portfolio, Social Issues Blue Chip Portfolio, Social Issues Capital
Growth Portfolio and Social Issues Small-Cap Equity Portfolio (Portfolios) are
set forth below. Additional information regarding the types of securities in
which the Portfolios may invest and certain investment transactions is provided
in the Fund's prospectuses and elsewhere in this Statement of Additional
Information. See "Investment Policies and Limitations."

PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

The PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO invests in
high-quality, short-term, U.S. dollar-denominated instruments determined by the
Advisor to present minimal credit risks in accordance with guidelines adopted by
the Board of Trustees. The Portfolio seeks to maintain a net asset value per
share of $1.00, limit its investments to securities with remaining maturities of
397 days or less, and maintain a dollar-weighted average maturity of 90 days or
less. Estimates may be used in determining a security's maturity for purposes of
calculating average maturity. An estimated maturity can be substantially shorter
than a stated final maturity. Although the Portfolio's policies are designed to
help maintain a stable $1.00 share price, all money market instruments can
change in value when interest rates or issuers' creditworthiness change, or if
an issuer or guarantor of a security fails to pay interest or principal when
due. If these changes in value are large enough, the Portfolio's share price
could fall below $1.00. In general, securities with longer maturities are more
vulnerable to price changes, although they may provide higher yields.

The investment goal of the PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO
is to maximize current income exempt from Federal and Pennsylvania state income
taxes and provide liquidity and security of principal. The Portfolio attempts to
invest 100% of its assets in securities exempt from Federal (including the
alternative minimum tax) and Pennsylvania state income taxes. The Portfolio has
a fundamental policy that at least 80% of its income will, under normal market
conditions, be exempt from Federal income tax, including the Federal alternative
minimum tax, and Pennsylvania state income tax. The principal issuers of these
securities may be state and local governments and agencies located in
Pennsylvania, as well as the District of Columbia, Puerto Rico, and other U.S.
territories and possessions.

The Portfolio invests in high-quality, short-term municipal money
market instruments but may also invest in high-quality, long-term fixed,
variable or floating rate instruments (including tender option bonds) which have
demand features or interest rate adjustment features that result

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<PAGE>

in interest rates, maturities and prices similar to short-term instruments. The
Portfolio's investments in municipal securities may include tax, revenue or bond
anticipation notes; tax-exempt commercial paper; general obligation or revenue
bonds (including municipal lease obligations and resource recovery bonds); and
zero coupon bonds. At least 95% of the assets of the Portfolio will be invested
in securities that have received the highest rating assigned by any two NRSROs
or, if only one such rating organization has assigned a rating, such single
organization. The Portfolio may also acquire unrated securities determined by
the Advisor to be of comparable quality in accordance with guidelines adopted by
the Board of Trustees.

The Advisor anticipates that the PENNSYLVANIA TAX-FREE MONEY MARKET
PORTFOLIO will be as fully invested as is practicable in municipal obligations.
However, the Portfolio reserves the right for temporary defensive purposes to
invest without limitation in taxable money market instruments. There may be
occasions when, as a result of maturities of portfolio securities or sales of
Portfolio shares, or in order to meet anticipated redemption requests, the
Portfolio may hold cash which is not earning income.

The PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO may invest up to 25%
of its net assets in a single issuer's securities. The Portfolio may invest any
portion of its assets in industrial revenue bonds ("IRBs") backed by private
companies, and may invest up to 25% of its total assets in IRBs related to a
single industry. The Portfolio also may invest 25% or more of its total assets
in tax-exempt securities whose revenue sources are from similar types of
projects (E.G., education, electric utilities, health care, housing,
transportation, water, sewer, and gas utilities). There may be economic,
business or political developments or changes that affect all securities of a
similar type. Therefore, developments affecting a single issuer or industry, or
securities financing similar types of projects, could have a significant effect
on the Portfolio's performance.

SOCIAL ISSUES INTERMEDIATE FIXED INCOME PORTFOLIO

The investment goal of the SOCIAL ISSUES INTERMEDIATE FIXED INCOME
PORTFOLIO is to provide current income.

The Portfolio may invest in income-producing securities of all types,
including bonds, notes, mortgage securities, government and government agency
obligations, zero coupon securities, convertible securities, foreign securities,
indexed securities and asset-backed securities. The Portfolio normally will
invest in investment-grade debt securities (including convertible securities)
and unrated securities determined by the Advisor to be of comparable quality.
The Portfolio may also invest up to 5% of its total assets in securities rated
below investment grade ("junk bonds"). Common stocks acquired through the
exercise of conversion rights or warrants, or the acceptance of exchange or
similar offers, ordinarily will not be retained by the Portfolio. An orderly
disposition of these stocks will be effected consistent with the judgment of the
Advisor as to the best price available. Under normal circumstances, at least 65%
of the value of the Portfolio's total assets will be invested in fixed-income
securities.

4
<PAGE>

SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO

The investment goal of the SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO is
capital appreciation.

The Portfolio seeks capital appreciation from a broadly diversified
portfolio of common stocks of established, large capitalization companies. The
Portfolio may also seek capital by investing up to 35% of its total assets in
other types of securities, including preferred stock and debt securities,
securities convertible into common stock and asset-backed securities. The
Portfolio normally invests in investment-grade debt securities (including
convertible securities) and unrated securities determined by the Advisor to be
of comparable quality, but may also invest up to 5% of its total assets in
securities rated below investment grade ("junk bonds").

Under normal circumstances, at least 65% of the value of the
Portfolio's total assets will be invested in equity securities of companies with
operating histories of ten years or more and market capitalizations in excess of
$5 billion. It is expected that the companies in which the Portfolio invests
will be based primarily in the United States and will be recognized market
leaders with strong financial positions.

SOCIAL ISSUES CAPITAL GROWTH PORTFOLIO

The investment goal of SOCIAL ISSUES CAPITAL GROWTH PORTFOLIO is
long-term capital appreciation. The Portfolio is expected to produce modest
dividend or interest income. This income will be incidental to the Portfolio's
primary goal.

The Portfolio seeks capital appreciation from a broadly diversified
portfolio of primarily common stocks and securities convertible into common
stock. The Portfolio may also seek capital appreciation by investing up to 35%
of its total assets in other types of securities, including preferred stock,
debt securities, asset-backed securities and indexed securities. Debt securities
(including convertible securities) in which the Portfolio invests will normally
be investment grade or unrated securities determined by the Advisor to be of
comparable quality. The Portfolio may, however, invest up to 5% of its total
assets in securities rated below investment grade ("junk bonds").

SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO AND SMALL-CAP EQUITY PORTFOLIO

The investment goal of the SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO AND
THE SMALL-CAP EQUITY PORTFOLIO is long-term capital appreciation.

Under normal circumstances, at least 65% of the value of the
Portfolios' total assets will be invested in equity securities of companies with
a market capitalization of $2 billion or less at the time of investment. The
Advisor will seek to identify companies with above-average growth

5
<PAGE>

potential or companies experiencing an unusual or possibly non-repetitive
development taking place in the company, I.E., a "special situation".

The SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO AND THE SMALL-CAP EQUITY
PORTFOLIO may invest in companies experiencing an unusual or possibly
non-repetitive development or "special situation." An unusual or possibly
non-repetitive development or special situation may involve one or more of the
following characteristics:

o a technological advance or discovery, the offering of a new
or unique product or service, or changes in consumer demand
or consumption forecasts

o changes in the competitive outlook or growth potential of an
industry or a company within an industry, including changes in
the scope or nature of foreign competition or the development
of an emerging industry

o new or changed management, or material changes in management
policies or corporate structure

o significant economic or political occurrences abroad,
including changes in foreign or domestic import and tax laws
or other regulations or other events, including natural
disasters, favorable litigation settlements, or a major change
in demographic patterns

The Advisor intends to invest primarily in common stocks and
securities that are convertible into common stocks; however, the Portfolios may
also invest up to 35% of its total assets in debt securities of all types and
quality if the Advisor believes that investing in these securities will result
in capital appreciation. The Portfolios may invest up to 35% of its total assets
in securities rated below investment grade ("junk bonds"). The Portfolios may
also invest up to 35% of its total assets in foreign securities of all types and
may enter into forward currency contracts for the purpose of managing exchange
rate risks and to facilitate transactions in foreign securities. The Portfolios
may purchase or engage in indexed securities, illiquid instruments, loans and
other direct debt instruments, options and futures contracts, repurchase
agreements, securities loans, restricted securities, swap agreements, warrants,
real estate-related instruments and zero coupon bonds.

The Portfolios spread investment risk by limiting their holdings in any
one company or industry. The Advisor may use various investment techniques to
hedge the Portfolios' risks, but there is no guarantee that these strategies
will work as intended.

SOCIAL ISSUES PORTFOLIOS

With respect to the SOCIAL ISSUES INTERMEDIATE FIXED INCOME PORTFOLIO,
SOCIAL ISSUES BLUE CHIP EQUITY PORTFOLIO, SOCIAL ISSUES CAPITAL GROWTH
PORTFOLIO, and SOCIAL ISSUES SMALL-CAP EQUITY PORTFOLIO ("SOCIAL ISSUES
PORTFOLIOS"), the Advisor will apply social screens

<PAGE>

licensed from Kinder, Lydenberg, Domini & Co., Inc. ("KLD"), an investment
management consultant with expertise in social investing, in selecting the
securities for these Portfolios in addition to utilizing the investment criteria
set forth above.

INVESTMENT POLICIES AND LIMITATIONS

The following policies and limitations supplement those set forth in
the prospectuses. Unless otherwise expressly noted, whenever an investment
policy or limitation states a maximum percentage of a Portfolio's assets that
may be invested in any security or other asset, or sets forth a policy regarding
quality standards, such percentage or standard will be determined immediately
after and as a result of the Portfolio's acquisition of such security or other
asset. Accordingly, any subsequent change in value, net assets, or other
circumstances will not be considered when determining whether the investment
complies with the Portfolio's investment policies and limitations.

The Portfolios' investment limitations are listed in the following
tables. Fundamental investment policies cannot be changed without approval by a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
a Portfolio.

PORTFOLIOS TO WHICH THE POLICY
FUNDAMENTAL POLICIES: APPLIES:

The Portfolio may not issue senior securities, except as permitted under the All Portfolios
1940 Act.

The Portfolio may not borrow money, except that the Portfolio may (i) borrow All Portfolios
money from a bank for temporary or emergency purposes (not for leveraging or
investment) and (ii) engage in reverse repurchase agreements for any purpose;
provided that (i) and (ii) in combination do not exceed 33 1/3% of the value of
the Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that come to exceed this amount will be
reduced within three business days to the extent necessary to comply with the 33
1/3% limitation.

<PAGE>

The Portfolio may not with respect to 75% of its total assets, purchase the Pennsylvania Tax-Free Money Market Portfolio,
securities of any issuer (other than securities issued or guaranteed by the U.S. Small-Cap Equity Portfolio,
government or any of its agencies or instrumentalities) if, as a result, (a) Social Issues Intermediate Fixed
more than 5% of the Portfolio's total assets would be invested in the securities Income, Social Issues Blue Chip
of that issuer, or (b) the Portfolio would hold more than 10% of the outstanding Portfolio, Social Issues Capital
voting securities of that issuer. Growth Portfolio, Social Issues
Small-Cap Equity Portfolio

The Portfolio may not underwrite securities issued by others, except to the Pennsylvania Tax-Free Money
extent that the Portfolio may be considered an underwriter within the meaning of Market Portfolio, Small-Cap
the Securities Act of 1933 in the disposition of portfolio securities. Equity Portfolio, Social Issues
Intermediate Fixed Income
Portfolio, Social Issues Blue
Chip Portfolio, Social Issues
Capital Growth Portfolio, Social
Issues Small-Cap Equity Portfolio

The Portfolios may not purchase the securities of any issuer (other than Small-Cap Equity Portfolio,
securities issued or guaranteed by the U.S. government or any of its agencies or Social Issues Intermediate Fixed
instrumentalities) if, as a result, more than 25% of the Portfolio's total Income Portfolio, Social Issues
assets would be invested in the securities of companies whose principal business Blue Chip Portfolio, Social
activities are in the same industry. Issues Capital Growth Portfolio,
Social Issues Small-Cap Equity
Portfolio

The Portfolios may not purchase or sell real estate unless acquired as a result All Portfolios
of ownership of securities or other instruments (but this shall not prevent the
Portfolios from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business).

The Portfolios may not purchase or sell commodities unless acquired as a result All Portfolios
of ownership of securities or other instruments (but this shall not prevent the
Portfolio from purchasing or selling futures contracts or options on such
contracts for the purpose of managing its exposure to changing interest rates,
security prices, and currency exchange rates).

8
<PAGE>

The Portfolio may not lend any security or make any other loan if, as a result, All Portfolios
more than 33 1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.

THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL POLICIES AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL:

NON-FUNDAMENTAL POLICIES: PORTFOLIOS TO WHICH THE POLICY
APPLIES:

The Portfolio does not currently intend to sell securities short, unless it owns All Portfolios
or has the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts and
options are not deemed to constitute selling securities short.

The Portfolio, in order to meet Federal tax requirements for qualification as a All Portfolios
"regulated investment company," limits its investments so that at the close of
each quarter of its taxable year: (a) with regard to at least 50% of total
assets, no more than 5% of total assets are invested in the securities of a
single issuer, and (b) no more than 25% of total assets are invested in the
securities of a single issuer. Limitations (a) and (b) do not apply to
"Government securities" as defined for Federal tax purposes.

The Portfolio will not purchase any security while borrowings (including reverse All Portfolios
repurchase agreements) representing more than 5% of its total assets are
outstanding.

The Portfolio does not currently intend to purchase securities on margin, except All Portfolios
that the Portfolio may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.

The Portfolio does not currently intend to purchase securities of All Portfolios

9
<PAGE>

other investment companies, except to the extent permitted by the 1940 Act.

The Portfolio does not currently intend to purchase any security if, as a All Portfolios (other than
result, more than 15% of its net assets would be invested in securities that are Pennsylvania Tax-Free
deemed to be illiquid because they are subject to legal or contractual Money Market Portfolio)
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.

The Portfolio does not currently intend to purchase any security if, as a Pennsylvania Tax-Free
result, more than 10% of its net assets would be invested in securities that are Money Market Portfolio
deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.

The Portfolio does not currently intend to invest more than 25% of its total Pennsylvania Tax-Free
assets in industrial revenue bonds issued by entities whose principal business Money Market Portfolio
activities are in the same industry.
</TABLE>

INVESTMENT PRACTICES

The Portfolios may engage in the following investment practices
consistent with their investment policies and limitations. Please refer to the
current prospectuses and the section "Investment Policies and Limitations"
contained in this Statement of Additional Information for a further description
of each Portfolio's investment policies and limitations.

DEPOSITARY RECEIPTS

American Depositary Receipts and European Depositary Receipts ("ADRs"
and "EDRs") are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed for
use in the United States and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.

DELAYED DELIVERY TRANSACTIONS

Buying securities on a delayed-delivery or when-issued basis and
selling securities on a delayed-delivery basis involve a commitment by the
Portfolio to purchase or sell specific securities at a predetermined price
and/or yield, with payment and delivery taking place after the customary
settlement period for that type of security (and more than seven days in the
future). Typically, no interest accrues to the purchaser until the security is
delivered. The Portfolio may receive fees for entering into delayed-delivery
transactions.

10
<PAGE>

When purchasing securities on a delayed-delivery or when-issued basis,
the Portfolio assumes the rights and risks of ownership, including the risk of
price and yield fluctuations. Because the Portfolio is not required to pay for
securities until the delivery date, these risks are in addition to the risks
associated with the Portfolio's other investments. If the Portfolio remains
substantially fully invested at a time when delayed-delivery or when-issued
purchases are outstanding, such purchases may result in a form of leverage. When
delayed-delivery or when-issued purchases are outstanding, the Portfolio will
set aside appropriate liquid assets in a segregated custodial account to cover
its purchase obligations. When the Portfolio has sold a security on a
delayed-delivery basis, the Portfolio does not participate in further gains or
losses with respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the Portfolio could miss
a favorable price or yield opportunity, or could suffer a loss.

The Portfolio may renegotiate delayed-delivery or when-issued
transactions after they are entered into, and may sell underlying securities
before they are delivered, which may result in capital gains or losses.

EUROPEAN MONETARY UNION AND THE EURO

On January 1, 1999, the European Monetary Union ("EMU") introduced a
new single currency, the Euro, which replaces the national currencies of the
participating member nations. Until 2002, the national currencies will continue
to exist, but exchange rates will be pegged to the Euro. In addition, the 11
participating countries will share a single official interest rate and will
adhere to agreed upon guidelines on government borrowing. Although budgetary
decisions remain in the hands of each participating country, the European
Central Bank is responsible for setting the official interest rate to maintain
price stability within the Euro group.

FEDERALLY TAXABLE OBLIGATIONS

The Pennsylvania Tax-Free Money Market Portfolio generally does not
intend to invest in securities whose interest is taxable; however, from time to
time the Portfolio may invest on a temporary basis in fixed-income obligations
whose interest is subject to Federal income tax. For example, the Portfolio may
invest in obligations whose interest is taxable pending the investment or
reinvestment in municipal securities of proceeds from the sale of its shares or
sales of portfolio securities.

Should the Portfolio invest in taxable obligations, it would purchase
securities that, in the Advisor's judgment, are of high quality. This would
include obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, obligations of domestic banks and repurchase agreements. The
Portfolio's standards for high-quality taxable obligations are essentially the
same as those described by Moody's in rating corporate obligations within its
two highest ratings of Prime-1 and Prime-2, and those described by S&P in rating
corporate

11
<PAGE>

obligations within its two highest ratings of A-1 and A-2. The Portfolio may
also acquire unrated securities determined by the Advisor to be of comparable
quality.

The Supreme Court of the United States has held that Congress may
subject the interest on municipal obligations to Federal income tax. Proposals
to restrict or eliminate the Federal income tax exemption for interest on
municipal obligations are introduced before Congress from time to time.
Proposals may also be introduced before state legislatures that would affect the
state tax treatment of the Portfolio's distributions. If such proposals were
enacted, the availability of municipal obligations and the value of the
Portfolio's holdings would be affected and the Board of Trustees would
reevaluate the Portfolio's investment objectives and policies.

The Pennsylvania Tax-Free Money Market Portfolio anticipates being as
fully invested in municipal securities as is practicable; however, there may be
occasions when as a result of maturities of portfolio securities, or sales of
portfolio shares, or in order to meet redemption requests, the Portfolio may
hold cash that is not earning income. In addition, there may be occasions when,
in order to raise cash to meet redemptions or to preserve credit quality, the
Portfolio may be required to sell securities at a loss.

FOREIGN INVESTMENTS

Foreign investments can involve significant risks in addition to the
risks inherent in U.S. investments. The value of securities denominated in or
indexed to foreign currencies, and of dividends and interest from such
securities, can change significantly when foreign currencies strengthen or
weaken relative to the U.S. dollar. Foreign securities markets generally have
less trading volume and less liquidity than U.S. markets, and prices on some
foreign markets can be highly volatile. Many foreign countries lack uniform
accounting and disclosure standards comparable to those applicable to U.S.
companies, and it may be more difficult to obtain reliable information regarding
an issuer's financial condition and operations. In addition, the costs of
foreign investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.

Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal rights
in foreign countries.

Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign

12
<PAGE>

countries also involve a risk of local political, economic or social
instability, military action or unrest, or adverse diplomatic developments.
There is no assurance that the Portfolios' Advisor will be able to anticipate
these potential events or counter their effects.

The considerations noted above generally are intensified for
investments in developing countries. Developing countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that trade a small number of securities.

The Portfolios may invest in foreign securities that impose
restrictions on transfer within the United States or to U.S. persons. Although
securities subject to transfer restrictions may be marketable abroad, they may
be less liquid than foreign securities of the same class that are not subject to
such restrictions.

ILLIQUID INVESTMENTS

Illiquid investments cannot be sold or disposed of in the ordinary
course of business at approximately the prices at which they are valued. Under
the supervision of the Board of Trustees, the Portfolios' Advisor determines the
liquidity of the Portfolio's investments and, through reports from the Advisor,
the Board monitors investment in illiquid instruments. In determining the
liquidity of the Portfolios' investments, the Advisor may consider various
factors including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer undertakings
to make a market, (4) the nature of the security (including any demand or tender
features), (5) the nature of the marketplace for trades (including the ability
to assign or offset the Portfolio's rights and obligations relating to the
investment), and (6) general credit quality. Investments currently considered by
the Portfolios to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days, non-government
stripped fixed-rate mortgage-backed securities and government stripped
fixed-rate mortgage-backed securities, loans and other direct debt instruments,
over-the-counter options and swap agreements. Although restricted securities and
municipal lease obligations are sometimes considered illiquid, the Portfolios'
Advisor may determine certain restricted securities and municipal lease
obligations to be liquid. In the absence of market quotations, illiquid
investments are valued for purposes of monitoring amortized cost valuation
(Pennsylvania Tax-Free Money Market Portfolio) and priced (Small-Cap Equity
Portfolio, Social Issues Intermediate Fixed Income Portfolio, Social Issues
Blue Chip Portfolio, Social Issues Capital Growth Portfolio and Social Issues
Small-Cap Equity Portfolio) at fair value as determined in good faith by a
committee appointed by the Board of Trustees. If, as a result of a change in
values, net assets or other circumstances, the Portfolio were in a position
where more than 10% (Pennsylvania Tax-Free Money Market Portfolio) or 15%
(Small-Cap Equity Portfolio, Social Issues Intermediated Fixed Income Portfolio,
Social Issues Blue Chip Portfolio, Social Issues Capital Growth Portfolio and
Social Issues Small-Cap Equity Portfolio) of its assets were invested in
illiquid securities, it would seek to take appropriate steps to protect
liquidity.

13
<PAGE>

RESTRICTED SECURITIES

Restricted securities are securities that generally can only be sold in
privately negotiated transactions, pursuant to an exemption from registration
under the Securities Act of 1933, or in a registered public offering. Where
registration is required, the Portfolio may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.

INDEXED SECURITIES

The Portfolios may purchase securities whose prices are indexed to the
prices of other securities, securities indices, currencies, precious metals or
other commodities, or other financial indicators. Indexed securities typically,
but not always, are debt securities or deposits whose value at maturity or
coupon rate is determined by reference to a specific instrument or statistic.
Gold-indexed securities, for example, typically provide for a maturity value
that depends on the price of gold, resulting in a security whose price tends to
rise and fall together with gold prices. Currency-indexed securities typically
are short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed securities
may be positively or negatively indexed; that is, their maturity value may
increase when the specified currency value increases, resulting in a security
that performs similarly to a foreign-denominated instrument, or their maturity
value may decline when foreign currencies increase, resulting in a security
whose price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values of a
number of different foreign currencies relative to each other.

The performance of indexed securities depends to a great extent on the
performance of the security, currency or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the United
States and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values may
decline substantially if the issuer's creditworthiness deteriorates. Recent
issuers of indexed securities have included banks, corporations and certain U.S.
government agencies. Indexed securities may be more volatile than the underlying
instruments.

LOANS AND OTHER DIRECT DEBT INSTRUMENTS

Direct debt instruments are interests in amounts owed by a corporate,
governmental or other borrower to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or other
receivables), or to other parties. Direct debt instruments are subject to the
Portfolio's policies regarding the quality of debt securities.

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Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any NRSRO. If the
Portfolio does not receive scheduled interest or principal payments on such
indebtedness, its share price and yield could be adversely affected. Loans that
are fully secured offer the Portfolio more protections than an unsecured loan in
the event of non-payment of scheduled interest or principal. However, there is
no assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral can be liquidated.
Indebtedness of borrowers whose creditworthiness is poor involves substantially
greater risks, and may be highly speculative. Borrowers that are in bankruptcy
or restructuring may never pay off their indebtedness, or may pay only a small
fraction of the amount owed. Direct indebtedness of developing countries also
will involve a risk that the governmental entities responsible for the repayment
of the debt may be unable, or unwilling, to pay interest and repay principal
when due.

Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional risks to
the Portfolio. For example, if a loan is foreclosed, the Portfolio could become
part owner of any collateral, and would bear the costs and liabilities
associated with owning and disposing of the collateral. In addition, it is
conceivable that under emerging legal theories of lender liability, the
Portfolio could be held liable as a co-lender. Direct debt instruments also may
involve a risk of insolvency of the lending bank or other intermediary. Direct
debt instruments that are not in the form of securities may offer less legal
protection to the Portfolio in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, the Portfolio's Advisor will conduct
research and analysis in an attempt to avoid situations where fraud or
misrepresentation could adversely affect the Portfolio.

A loan is often administered by a bank or other financial institution
which acts as agent for all holders. The agent administers the terms of the
loan, as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, the Portfolio has direct recourse against the borrower, it
may have to rely on the agent to apply appropriate credit remedies against the
borrower. If assets held by the agent for the benefit of the Portfolio were
determined to be subject to the claims of the agent's general creditors, the
Portfolio might incur certain costs and delays in realizing payment on the loan
or loan participation and could suffer a loss of principal or interest.

The Portfolios limit the amount of total assets that they will invest
in any one issuer or in issuers within the same industry (see fundamental
limitations for the Portfolios). For purposes of these limitations, the
Portfolio generally will treat the borrower as the "issuer" of indebtedness held
by the Portfolio. In the case of loan participations where a bank or other
lending institution serves as financial intermediary between the Portfolio and
the borrower, if the participation does not shift to the Portfolio the direct
debtor-creditor relationship with the borrower, SEC interpretations require the
Portfolio, in appropriate circumstances, to treat both the lending bank or other
lending institution and the borrower as "issuers" for the purposes of
determining whether the Portfolio has invested more than 5% of its total assets
in a single issuer. Treating a financial intermediary as an issuer of
indebtedness may restrict the Portfolio's ability to invest in

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indebtedness related to a single financial intermediary, or a group of
intermediaries engaged in the same industry, even if the underlying borrowers
represent many different companies and industries.

LOWER-RATED DEBT SECURITIES

Lower-rated debt securities (I.E., securities rated Ba1 or lower by
Moody's or BB+ or lower by S&P, or having comparable ratings by other NRSROs)
may have poor protection with respect to the payment of interest and repayment
of principal. These securities are often considered to be speculative and
involve greater risk of loss or price changes due to changes in the issuer's
capacity to pay. The market prices of lower-rated debt securities may fluctuate
more than those of higher-rated debt securities and may decline significantly in
periods of general economic difficulty, which may follow periods of rising
interest rates.

While the market for lower-rated, high-yield corporate debt securities
has been in existence for many years and has weathered previous economic
downturns, the 1980s brought a dramatic increase in the use of such securities
to fund highly leveraged corporate acquisitions and restructurings. Past
experience may not provide an accurate indication of the future performance of
the high-yield bond market, especially during periods of economic recession. In
fact, from 1989 to 1991, the percentage of lower-rated securities that defaulted
rose significantly above prior levels, although the default rate decreased in
1992.

The market for lower-rated debt securities may be thinner and less
active than that for higher-rated debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not available,
lower-rated debt securities will be valued in accordance with procedures
established by the Board of Trustees, including the use of outside pricing
services. Judgment plays a greater role in valuing these debt securities than is
the case for securities for which more external sources for quotations and
last-sale information are available. Adverse publicity and changing investor
perceptions may affect the ability of outside pricing services to value, and of
the Portfolio to dispose of, lower-rated debt securities.

Since the risk of default is higher for lower-rated debt securities,
the research and credit analysis of the Portfolio's Advisor are an especially
important part of managing the Portfolio's investment in securities of this
type. In considering investments in such securities for the Portfolio, its
Advisor will attempt to identify those issuers whose financial condition are
adequate to meet future obligations, have improved, or are expected to improve
in the future. The Advisor's analysis focuses on relative values based on such
factors as interest or dividend coverage, asset coverage, earnings prospects,
and the experience and managerial strength of the issuer.

The Portfolio may choose, at its own expense or in conjunction with
others, to pursue litigation or otherwise to exercise its rights as a security
holder to seek to protect the interests of security holders if it determines
this to be in the best interest of the Portfolio's shareholders.

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MUNICIPAL LEASE OBLIGATIONS

Municipal leases and participation interests therein, which may take
the form of a lease, an installment purchase, or a conditional sale contract,
are issued by state and local governments and authorities to acquire land and a
wide variety of equipment and facilities, such as fire and sanitation vehicles,
telecommunications equipment, and other capital assets. Generally, the
Portfolios will not hold such obligations directly as a lessor of the property,
but will purchase a participation interest in a municipal obligation from a bank
or other third party. A participation interest gives the Portfolio a specified,
undivided interest in the obligation in proportion to its purchased interest in
the total amount of the obligation.

Municipal leases frequently have risks distinct from those associated
with general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt. These
may include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, or conditional sale contracts (which normally
provide for title to the leased asset to pass to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for the issuance
of debt. Many leases and contracts include "non-appropriation" clauses providing
that the governmental issuer has no obligation to make future payments under the
lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance obligations.

In determining the liquidity of a municipal lease obligation, the
Portfolio's Advisor will differentiate between direct municipal leases and
municipal lease-backed securities, the latter of which may take the form of a
lease-backed revenue bond, a tax-exempt asset-backed security, or any other
investment structure using a municipal lease-purchase agreement as its base.
While the former may present liquidity issues, the latter are based on a
well-established method of securing payment of a municipal lease obligation.

MARKET DISRUPTION RISK

The value of municipal securities may be affected by uncertainties in
the municipal market related to legislation or litigation involving the taxation
of municipal securities or the rights of municipal securities holders in the
event of a bankruptcy. Municipal bankruptcies are relatively rare, and certain
provisions of the U.S. Bankruptcy Code governing such bankruptcies are unclear
and remain untested. Further, the application of state law to municipal issuers
could produce varying results among the states or among municipal securities
issuers within a state. These legal uncertainties could affect the municipal
securities market generally, certain specific segments of the market, or the
relative credit quality of particular securities.

Any of these effects could have a significant impact on the prices of
some or all of the municipal securities held by the Portfolio. For the
Pennsylvania Tax-Free Money Market

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Portfolio, investing in these securities may make it more difficult to maintain
a stable net asset value per share.

PORTFOLIOS' RIGHTS AS SHAREHOLDERS

The Portfolios do not intend to direct or administer the day-to-day
operations of any company whose shares they hold. A Portfolio, however, may
exercise its rights as a shareholder and may communicate its views on important
matters of policy to management, the board of directors or trustees, and the
shareholders of a company when its Advisor determines that such matters could
have a significant effect on the value of the Portfolio's investment in the
company. The activities that a Portfolio may engage in, either individually or
in conjunction with other shareholders, may include, among others, supporting or
opposing proposed changes in a company's corporate structure or business
activities; seeking changes in a company's board of directors or trustees, or
management; seeking changes in a company's direction or policies; seeking the
sale or reorganization of the company or a portion of its assets; or supporting
or opposing third-party takeover efforts. This area of corporate activity is
increasingly prone to litigation and it is possible that a Portfolio could be
involved in lawsuits related to such activities. The Portfolio's Advisor will
monitor such activities with a view to mitigating, to the extent possible, the
risk of litigation against the Portfolio and the risk of actual liability if the
Portfolio is involved in litigation. There is no guarantee, however, that
litigation against a Portfolio will not be undertaken or liabilities incurred.

REAL-ESTATE-RELATED INSTRUMENTS

Real-estate-related instruments include real estate investment trusts
(REITs), commercial and residential mortgage-backed securities and real estate
financings. Real-estate-related instruments are sensitive to factors such as
changes in real estate values and property taxes, interest rates, cash flow of
underlying real assets, overbuilding and the management and creditworthiness of
the issuer. Real-estate-related instruments may also be affected by tax and
regulatory requirements, such as those relating to the environment.

REFUNDING CONTRACTS

Refunding obligations require the issuer to sell and the Portfolio to
buy refunded municipal obligations at a stated price and yield on a settlement
date that may be several months or years in the future. The Portfolio generally
will not be obligated to pay the full purchase price if it fails to perform
under a refunding contract. Instead, refunding contracts generally provide for
payment of liquidated damages to the issuer (currently 15% to 20% of the
purchase price). The Portfolio may secure its obligations under a refunding
contract by depositing collateral or a letter of credit equal to the liquidated
damages provisions of the refunding contract. When required by SEC guidelines,
the Portfolio will place liquid assets in a segregated custodial account equal
in amount to its obligations under refunding contracts.

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REPURCHASE AGREEMENTS

In a repurchase agreement, the Portfolio purchases a security and
simultaneously commits to resell it to the seller at an agreed upon price on an
agreed upon date. The resale price reflects the purchase price plus an
agreed-upon incremental amount which is unrelated to the coupon rate or maturity
of the purchased security. A repurchase agreement involves the obligation of the
seller to pay the agreed-upon price, which obligation is in effect secured by
the value (at least equal to the amount of the agreed-upon resale price and
marked to market daily) of the underlying security. The risk associated with
repurchase agreements is that a Portfolio may be unable to sell the collateral
at its full value in the event of the seller's default. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the underlying
securities, as well as delays and costs to the Portfolio in connection with
bankruptcy proceedings), it is each Portfolio's current policy to limit
repurchase agreements to those parties whose creditworthiness has been reviewed
and found satisfactory by its Advisor.

REVERSE REPURCHASE AGREEMENTS

In a reverse repurchase agreement, the Portfolio sells a portfolio
instrument to another party, such as a bank or broker-dealer, in return for cash
and agrees to repurchase the instrument at a particular price and time. While a
reverse repurchase agreement is outstanding, the Portfolio will maintain
appropriate liquid assets in a segregated custodial account to cover its
obligation under the agreement. The Portfolio will enter into reverse repurchase
agreements only with parties whose creditworthiness has been found satisfactory
by its Advisor. These transactions may increase fluctuations in the market value
of the Portfolio's assets and may be viewed as a form of leverage.

SECURITIES LENDING

The Board of Trustees has authorized securities lending for the Social
Issues Intermediate Fixed Income Portfolio. This Portfolio may lend securities
to parties such as broker-dealers or institutional investors. Securities lending
allows the Portfolio to retain ownership of the securities loaned and, at the
same time, to earn additional income. Since there may be delays in the recovery
of loaned securities, or even a loss of rights in collateral supplied should the
borrower fail financially, loans will be made only to parties whose
creditworthiness has been reviewed and found satisfactory by the Portfolio's
Advisor.

It is the current view of the SEC that the Portfolio may engage in loan
transactions only under the following conditions: (1) the Portfolio must receive
100% collateral in the form of cash or cash equivalents (E.G., U.S. Treasury
bills or notes) from the borrower; (2) the borrower must increase the collateral
whenever the market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the Portfolio
must be able to terminate the loan at any time; (4) the Portfolio must receive
reasonable interest on the loan or a flat fee from the borrower, as well as
amounts equivalent to any dividends, interest, or

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other distributions on the securities loaned and to any increase in market
value; (5) the Portfolio may pay only reasonable custodian fees in connection
with the loan; and (6) the Portfolio must be able to vote proxies on the
securities loaned, either by terminating the loan or by entering into an
alternative arrangement with the borrower. Cash received through loan
transactions may be invested in any security in which the Portfolio is
authorized to invest. Investing this cash subjects that investment, as well as
the security loaned, to market forces (I.E., capital appreciation or
depreciation).

SOVEREIGN DEBT OBLIGATIONS

Sovereign debt instruments are securities issued or guaranteed by
foreign governments or their agencies, including debt of Latin American nations
or other developing countries. Sovereign debt may be in the form of conventional
securities or other types of debt instruments, such as loans or loan
participations. Sovereign debt of developing countries may involve a high degree
of risk, and may be in default or present the risk of default. Governmental
entities responsible for repayment of the debt may be unable or unwilling to
repay principal and interest when due, and may require negotiations or
rescheduling of debt payments. In addition, prospects for repayment of principal
and interest may depend on political as well as economic factors. Although some
sovereign debt, such as Brady Bonds, is collateralized by U.S. government
securities, repayment of principal and interest is not guaranteed by the U.S.
government.

STANDARD & POOR'S DEPOSITARY RECEIPTS ("SPDRS")

SPDRs are interests in a unit investment trust ("UIT") that may be
obtained from the UIT or purchased in the secondary market as SPDRs are listed
on the American Stock Exchange. The UIT will issue SPDRs in aggregations of
50,000 known as "Creation Units" in exchange for a "Portfolio Deposit"
consisting of (a) a portfolio of securities substantially similar to the
component securities ("Index Securities") of the S&P 500, (b) a cash payment
equal to a pro rata portion of the dividends accrued to the UIT's portfolio
securities since the last dividend payment by the UIT, net of expenses and
liabilities, and (c) a cash payment or credit ("Balancing Amount") designed to
equalize the net asset value of the S&P 500 and the net asset value of a
Portfolio Deposit.

SPDRs are not individually redeemable, except upon termination of the
UIT. To redeem, the Portfolio must accumulate enough SPDRs to reconstitute a
Creation Unit. The liquidity of small holdings of SPDRs, therefore, will depend
upon the existence of a secondary market. Upon redemption of a Creation Unit,
the Portfolio will receive Index Securities and cash identical to the Portfolio
Deposit required of an investor wishing to purchase a Creation Unit that day.

The price of SPDRs is derived and based upon the securities held by the
UIT. Accordingly, the level of risk involved in the purchase or sale of a SPDR
is similar to the risk involved in the purchase or sale of a traditional common
stock, with the exception that the

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pricing mechanism for SPDRs is based on a basket of stocks. Disruptions in the
markets for the securities underlying SPDRs purchased or sold by a Portfolio
could result in losses on SPDRs. Trading in SPDRs involves risks similar to
those risks, described below under "Hedging Strategies" relating to options,
involved in the writing of options on securities.

STANDBY COMMITMENTS

The Pennsylvania Tax-Free Money Market Portfolio may invest in standby
commitments. These obligations are puts that entitle holders to same day
settlement at an exercise price equal to the amortized cost of the underlying
security plus accrued interest, if any, at the time of exercise. The Portfolio
may acquire standby commitments to enhance the liquidity of portfolio securities
when the issuers of the commitments present minimal risk of default.

Ordinarily the Portfolio will not transfer a standby commitment to a
third party, although it could sell the underlying municipal security to a third
party at any time. The Portfolio may purchase standby commitments separate from
or in conjunction with the purchase of securities subject to such commitments.
In the latter case, the Portfolio would pay a higher price for the securities
acquired, thus reducing their yield to maturity. Standby commitments will not
affect the dollar-weighted average maturity of the Portfolio, or the valuation
of the securities underlying the commitments.

Standby commitments are subject to certain risks, including the ability
of issuers of standby commitments to pay for securities at the time the
commitments are exercised, the fact that standby commitments are not marketable
by the Portfolio and the possibility that the maturities of the underlying
securities may be different from those of the commitments.

SWAP AGREEMENTS

Swap agreements can be individually negotiated and structured to
include exposure to a variety of different types of investments or market
factors. Depending on their structure, swap agreements may increase or decrease
the Portfolio's exposure to long- or short-term interest rates (in the United
States or abroad), foreign currency values, mortgage securities, corporate
borrowing rates, or other factors such as security prices or inflation rates.
Swap agreements can take many different forms and are known by a variety of
names. A Portfolio is not limited to any particular form of swap agreement if
its Advisor determines it is consistent with the Portfolio's investment
objective and policies.

In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
rights to receive payments to the extent that a specified interest rate exceeds
an agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.

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Swap agreements will tend to shift the Portfolio's investment exposure
from one type of investment to another. For example, if the Portfolio agreed to
exchange payments in dollars for payments in foreign currency, the swap
agreement would tend to decrease the Portfolio's exposure to U.S. interest rates
and increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on how
they are used, swap agreements may increase or decrease the overall volatility a
Portfolio's investments and its share price and yield.

The most significant factor in the performance of swap agreements is
the change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from a Portfolio. If a swap
agreement calls for payments by a Portfolio, the Portfolio must be prepared to
make such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline, potentially
resulting in losses. The Portfolios expect to be able to reduce their exposure
under swap agreements either by assignment or other disposition, or by entering
into an offsetting swap agreement with the same party or a similarly
creditworthy party.

The Portfolio will maintain appropriate liquid assets in segregated
custodial accounts to cover its current obligations under swap agreements. If a
Portfolio enters into a swap agreement on a net basis, it will segregate assets
with a daily value at least equal to the excess, if any, of the Portfolio's
accrued obligations under the swap agreement over the accrued amount the
Portfolio is entitled to receive under the agreement. If a Portfolio enters into
a swap agreement on other than a net basis, it will segregate assets with a
value equal to the full amount of the Portfolio's accrued obligations under the
agreement.

TENDER OPTION BONDS

The Pennsylvania Tax-Free Money Market Portfolio may invest in tender
option bonds. These bonds are created by coupling an intermediate- or long-term
fixed-rate tax-exempt bond (generally held pursuant to a custodial agreement)
with a tender agreement that gives the holder the option to tender the bond at
its face value. As consideration for providing the tender option, the sponsor
(usually a bank, broker-dealer, or other financial institution) receives
periodic fees equal to the difference between the bond's fixed coupon rate and
the rate (determined by a remarketing or similar agent) that would cause the
bond, coupled with the tender option, to trade at par on the date of such
determination. After payment of the tender option fee, the Portfolio effectively
holds a demand obligation that bears interest at the prevailing short-term
tax-exempt rate. Subject to applicable regulatory requirements, the Pennsylvania
Tax-Free Money Market Portfolio may buy tender option bonds if the agreement
gives the Portfolio the right to tender the bond to its sponsor no less
frequently than once every 397 days. In selecting tender option bonds for a
Portfolio, the Advisor will, pursuant to procedures established by the Board of
Trustees, consider the creditworthiness of the issuer of the underlying bond,
the custodian, and the third-party provider of the tender option. In certain
instances, a sponsor may terminate a tender option if, for example, the issuer
of the underlying bond defaults on interest payments.

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VARIABLE OR FLOATING RATE INSTRUMENTS

The Pennsylvania Tax-Free Money Market Portfolio may invest in variable
or floating rate instruments that ultimately mature in more than 397 days, if
the Portfolio acquires a right to sell the securities that meet certain
requirements set forth in Rule 2a-7 under the 1940 Act. Variable rate
instruments (including instruments subject to a demand feature) that mature in
397 days or less may be deemed to have maturities equal to the period remaining
until the next readjustment of the interest rate. Other variable rate
instruments with demand features may be deemed to have a maturity equal to the
longer of the period remaining until the next readjustment of the interest rate
or the period remaining until the principal amount can be recovered through
demand. A floating rate instrument subject to a demand feature may be deemed to
have a maturity equal to the period remaining until the principal amount can be
recovered through demand.

VARIABLE OR FLOATING RATE DEMAND OBLIGATIONS

The Pennsylvania Tax-Free Money Market Portfolio may invest in variable
or floating rate demand obligations (VRDOs/FRDOs). These obligations are
tax-exempt obligations that bear variable or floating interest rates and carry
rights that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial intermediaries.
Floating rate obligations have interest rates that change whenever there is a
change in a designated base rate while variable rate obligations provide for a
specified periodic adjustment in the interest rate. These formulas are designed
to result in a market value for the VRDO or FRDO that approximates its par
value.

A demand obligation with a conditional demand feature must have
received both a short-term and a long-term high quality rating from a NRSRO or,
if unrated, have been determined by the Portfolio's Advisor to be of comparable
quality pursuant to procedures adopted by the Board of Trustees. A demand
obligation with an unconditional demand feature may be acquired solely in
reliance upon a short-term high quality rating or, if unrated, upon finding of
comparable short-term quality pursuant to procedures adopted by the Board.

A Portfolio may invest in fixed-rate bonds that are subject to third
party puts and in participation interests in such bonds held by a bank in trust
or otherwise. These bonds and participation interests have tender options or
demand features that permit a Portfolio to tender (or put) the bonds to an
institution at periodic intervals of up to one year and to receive the principal
amount thereof. A Portfolio considers variable rate obligations structured in
this way (participating VRDOs) to be essentially equivalent to other VRDOs that
it may purchase. The Internal Revenue Service (the "IRS") has not ruled whether
or not the interest on participating VRDOs is tax-exempt and, accordingly, the
Portfolios intend to purchase these obligations based on opinions of bond
counsel.

A variable rate instrument that matures in 397 or fewer days may be
deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate. A variable

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rate obligation that matures in more than 397 days but that is subject to a
demand feature that is 397 days or fewer may be deemed to have a maturity equal
to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand. A floating rate obligation that is subject to a demand
feature may be deemed to have a maturity equal to the period remaining until the
principal amount may be recovered through demand. The Pennsylvania Tax-Free
Money Market Portfolio may purchase a demand obligation with a remaining final
maturity in excess of 397 days only if the demand feature can be exercised on no
more than 30 days' notice (a) at any time or (b) at specific intervals not
exceeding 397 days.

WARRANTS

Warrants are securities that give a Portfolio the right to purchase
equity securities from an issuer at a specific price (the "strike price") for a
limited period of time. The strike price of a warrant is typically much lower
than the current market price of the underlying securities, yet a warrant is
subject to greater price fluctuations. As a result, warrants may be more
volatile investments than the underlying securities and may offer greater
potential for capital appreciation as well as capital loss.

Warrants do not entitle a holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in the
assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to the expiration date. These
factors can make warrants more speculative than other types of investments.

HEDGING STRATEGIES

FUTURES TRANSACTIONS

A Portfolio may use futures contracts and options on such contracts for
bona fide hedging purposes within the meaning of regulations promulgated by the
Commodity Futures Trading Commission ("CFTC"). A Portfolio may also establish
positions for other purposes provided that the aggregate initial margin and
premiums required to establish such positions will not exceed 5% of the
liquidation value of the Portfolio after taking into account unrealized profits
and unrealized losses on any such instruments.

FUTURES CONTRACTS

When a Portfolio purchases a futures contract, it agrees to purchase a
specified underlying instrument at a specified future date. When a Portfolio
sells a futures contract, it agrees to sell the underlying instrument at a
specified future date. The price at which the purchase and sale will take place
is fixed when a Portfolio enters into the contract. Some currently available
futures contracts are based on specific securities, such as U.S. Treasury bonds
or notes, and some are based on indices of securities prices, such as the S&P
500. A futures

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contract can be held until its delivery date, or can be closed out prior to its
delivery date if a liquid secondary market is available.

The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore, purchasing
futures contracts will tend to increase a Portfolio's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a Portfolio sells a futures
contract, by contrast, the value of its futures position will tend to move in a
direction contrary to the market. Selling futures contracts, therefore, will
tend to offset both positive and negative market price changes, much as if the
underlying instrument had been sold.

FUTURES MARGIN PAYMENTS

The purchaser or seller of a futures contract is not required to
deliver or pay for the underlying instrument unless the contract is held until
the delivery date. However, both the purchaser and seller are required to
deposit "initial margin" with a futures broker, known as a futures commission
merchant ("FCM"), when the contract is entered into. Initial margin deposits are
typically equal to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make additional
"variation margin" payments to settle the change in value on a daily basis. The
party that has a gain may be entitled to receive all or a portion of this
amount. Initial and variation margin payments do not constitute purchasing
securities on margin for purposes of a Portfolio's investment limitations. In
the event of the bankruptcy of a FCM that holds margin on behalf of a Portfolio,
the Portfolio may be entitled to return of margin owed to it only in proportion
to the amount received by the FCM's other customers, potentially resulting in
losses to the Portfolio.

PURCHASING PUT AND CALL OPTIONS RELATING TO SECURITIES OR FUTURES
CONTRACTS

By purchasing a put option, a Portfolio obtains the right (but not the
obligation) to sell the option's underlying instrument at a fixed price (strike
price). In return for this right, a Portfolio pays the current market price for
the option (known as the option premium). Options have various types of
underlying instruments, including specific securities, indices of securities
prices, and futures contracts. A Portfolio may terminate its position in a put
option it has purchased by allowing it to expire or by exercising the option. If
the option is allowed to expire, the Portfolio will lose the entire premium it
paid. If a Portfolio exercises the option, it completes the sale of the
underlying instrument at the strike price. A Portfolio may also terminate a put
option position by closing it out in the secondary market at its current price,
if a liquid secondary market exists.

The buyer of a typical put option can expect to realize a gain if the
price of the underlying security falls substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of purchasing the
option, a put-buyer can expect to suffer a loss (limited to the amount of the
premium paid, plus related transaction costs).

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The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price. A call-buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to suffer
a loss if the price of the underlying instrument does not rise sufficiently to
offset the cost of the option.

WRITING PUT AND CALL OPTIONS

When a Portfolio writes a put option, it takes the opposite side of the
transaction from the option's purchaser. In return for receipt of the premium,
the Portfolio assumes the obligation to pay the strike price for the option's
underlying instrument if the other party to the option chooses to exercise it.
When writing an option on a futures contract a Portfolio will be required to
make margin payments to a FCM as described above for futures contracts. A
Portfolio may seek to terminate its position in a put option it writes before
exercise by closing out the option in the secondary market at its current price.
If the secondary market is not liquid for a put option a Portfolio has written,
however, the Portfolio must continue to be prepared to pay the strike price
while the option is outstanding, regardless of price changes, and must continue
to set aside assets to cover its position.

If the price of the underlying instrument rises, a put-writer would
generally expect to profit, although its gain would be limited to the amount of
the premium it received. If the price of the underlying instrument remains the
same over time, it is likely that the writer will also profit, because it should
be able to close out the option at a lower price. If the price of the underlying
instrument falls, the put-writer would expect to suffer a loss. This loss should
be less than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should mitigate the
effects of the decline.

Writing a call option obligates a Portfolio to sell or deliver the
option's underlying instrument, in return for the strike price, upon exercise of
the option. The characteristics of writing call options are similar to those of
writing put options, except that writing a call option is generally a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call-writer mitigates the effects of a price decline. At the same
time, because a call-writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call-writer gives up some ability to participate in security price increases.

COMBINED POSITIONS

A Portfolio may purchase and write options in combination with each
other, or in combination with futures contracts or forward contracts, to adjust
the risk and return characteristics of the overall position. For example, a
Portfolio may purchase a put option and write a call option on the same
underlying instrument, in order to construct a combined position whose risk and
return characteristics are similar to selling a futures contract. Another
possible

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combined position would involve writing a call option at one strike price and
buying a call option at a lower strike price, in order to reduce the risk of the
written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.

CORRELATION OF PRICE CHANGES

Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts available
will not match a Portfolio's current or anticipated investments exactly. A
Portfolio may invest in options and futures contracts based on securities with
different issuers, maturities, or other characteristics than those of the
securities in which it typically invests - for example, by hedging
intermediate-term securities with a futures contract on an index of long-term
bond prices, or by hedging stock holdings with a futures contract on a
broad-based stock index such as the S&P 500 - which involves a risk that the
options or futures position will not track the performance of the Portfolio's
other investments.

Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Portfolio's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect the price of the underlying security the same way.
Imperfect correlation may also result from differing levels of demand in the
options and futures markets and the securities markets, from structural
differences in the trading of options, futures and securities, or from
imposition of daily price fluctuation limits or trading halts. A Portfolio may
purchase or sell options and futures contracts with a greater or lesser value
than the securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price changes
in a Portfolio's options or futures positions are poorly correlated with its
other investments, the positions may fail to produce anticipated gains or may
result in losses that are not offset by gains in other investments.

LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS

There is no assurance that a liquid secondary market will exist for any
particular options or futures contract at any particular time. Options may have
relatively-low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges may
establish daily price fluctuation limits for options and futures contracts, and
may halt trading if the price of an option or futures contract moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached or a trading halt is imposed, it may be
impossible for a Portfolio to enter into new positions or close out existing
positions. If the secondary market for a contract is not liquid because of price
fluctuation limits or otherwise, it could prevent prompt liquidation of
unfavorable positions, and potentially could require a Portfolio to continue to
hold a position

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until delivery or expiration regardless of changes in its value. As a result,
the Portfolio's access to other assets held to cover its options or futures
positions could also be impaired.

OTC OPTIONS

Unlike exchange-traded options, which are standardized with respect to
the underlying instrument, expiration date, contract size and strike price, the
terms of over-the-counter ("OTC") options (options not traded on exchanges)
generally are established through negotiation with the other party to the
option. While this type of arrangement allows a Portfolio greater flexibility to
tailor an option to its needs, OTC options generally involve greater credit risk
than exchange-traded options, which are guaranteed by the clearing organization
of the exchanges upon which they are traded.

OPTIONS AND FUTURES CONTRACTS RELATING TO FOREIGN CURRENCIES

Currency futures contracts are similar to forward currency exchange
contracts, except that they are traded on exchanges (and have margin
requirements) and are standardized as to contract size and delivery date. Most
currency futures contracts call for payment or delivery in U.S. dollars. The
underlying instrument of a currency option may be a foreign currency, which
generally is purchased or delivered in exchange for U.S. dollars, or may be a
futures contract. The purchaser of a currency call option obtains the right to
purchase the underlying currency, and the purchaser of a currency put option
obtains the right to sell the underlying currency.

The uses and risks of currency options and futures contracts are
similar to options and futures contracts relating to securities or securities
indices, as discussed above. A Portfolio may purchase and sell currency futures
and may purchase and write currency options to increase or decrease its exposure
to different foreign currencies. A Portfolio may also purchase and write
currency options in conjunction with each other or with currency futures or
forward contracts. Currency futures and option values can be expected to
correlate with exchange rates, but may not reflect other factors that affect the
value of the Portfolio's investments. A currency hedge, for example, should
protect a yen-denominated security from a decline in the yen, but will not
protect the Portfolio against a price decline resulting from deterioration in
the issuer's creditworthiness. Because the value of the Portfolio's
foreign-denominated investments changes in response to many factors other than
exchange rates, it may not be possible to match exactly the amount of currency
options and futures held by the Portfolio to the value of its investments over
time.

ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS

The Portfolios will comply with guidelines established by the SEC with
respect to coverage of options and futures strategies by mutual funds, and if
the guidelines so require, will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option position is
outstanding, unless they are replaced with other appropriate liquid assets. As a
result, there is a

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possibility that segregation of a large percentage of a Portfolio's assets could
impede portfolio management or the Portfolio's ability to meet redemption
requests or other current obligations.

SHORT SALES

A Portfolio may enter into short sales with respect to securities it
owns, or with respect to stocks underlying its convertible bond holdings (short
sales "against the box"). For example, if the Portfolio's Advisor anticipates a
decline in the price of the stock underlying a convertible security it holds,
the Portfolio may sell the stock short. If the stock price substantially
declines, the proceeds of the short sale could be expected to offset all or a
portion of the effect of the stock's decline on the value of the convertible
security.

When a Portfolio enters into a short sale against the box, it will be
required to set aside securities equivalent in kind and amount to those sold
short (or securities convertible or exchangeable into such securities) and will
be required to continue to hold them while the short sale is outstanding. A
Portfolio will incur transaction costs, including interest expense, in
connection with opening, maintaining and closing short sales against the box.

SPECIAL CONSIDERATIONS

The following information as to certain Pennsylvania risk factors has
been provided in view of the policy of the Pennsylvania Tax-Free Money Market
Portfolio of concentrating in Pennsylvania municipal securities. This
information constitutes only a brief summary, does not purport to be a complete
description of risk factors and is principally drawn from official statements
relating to securities offerings of the Commonwealth of Pennsylvania that were
available as of the date of this Statement of Additional Information.

PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

GENERAL

Pennsylvania has historically been dependent on heavy industry,
although declines over the past thirty years in the coal, steel and railroad
industries have led to diversification of the Commonwealth's economy. Recent
sources of economic growth in Pennsylvania are in the service sector, including
trade, medical and health services, education and financial institutions.
Agriculture continues to be an important component of the Commonwealth's
economic structure, with nearly one-third of the Commonwealth's total land area
devoted to cropland, pasture and farm woodlands.

In 1999, the population of Pennsylvania was 11.9 million people.
According to the U.S. Department of Commerce, Bureau of the Census,
Pennsylvania's population experienced a slight increase from the 1990 estimate
of 11.89 million. Pennsylvania has a high proportion of persons

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65 years of age or older. The Commonwealth is highly urbanized, with 79% of the
1990 census population residing in metropolitan statistical areas.

Pennsylvania's average annual unemployment rate remained below the
national average between 1986 and 1990. Slower economic growth caused the rate
to rise to 7.0% in 1991 and 7.6% in 1992. The resumption of faster economic
growth resulted in a decrease in the Commonwealth's unemployment rate to 4.3% in
1999. From 1994 through 1998, Pennsylvania's annual average unemployment rate
was below the overall rate in the Mid-Atlantic region, but slightly higher than
in the United States as a whole. Seasonally adjusted data for June 2000, the
most recent month for which data is available, shows an unemployment rate of
4.1%, which is slightly higher than the rate for the United States.

FINANCIAL ACCOUNTING

Pennsylvania utilizes the fund method of accounting and over 150 funds
have been established for the purpose of recording receipts and disbursements,
of which the General Fund is the largest. Most operating and administrative
expenses are payable from the General Fund. The Motor License Fund is a special
revenue fund that receives tax and fee revenues relating to motor fuels and
vehicles (except one-half cent per gallon of the liquid fuels tax which is
deposited in the Liquid Fuels Tax Fund for distribution to local municipalities)
and all such revenues are required to be used for highway purposes. Other
special revenue funds have been established to receive specified revenues
appropriated to specific departments, boards, and/or commissions. These funds
include the Game, Fish, Boat, Banking Department, Milk Marketing, State Farm
Products Show, State Racing and State Lottery Funds. The General Fund, all
special revenue funds, the Debt Service Funds and the Capital Project Funds
combine to form the Governmental Fund Types.

Enterprise funds are maintained for departments or programs operated
like private enterprises. The largest of the Enterprise funds is the State
Stores Fund, which is used for the receipts and disbursements of the
Commonwealth's liquor store system. Sale and distribution of all liquor within
Pennsylvania is a government enterprise.

Financial information for the funds is maintained on a budgetary basis
of accounting ("Budgetary"). Since 1984, the Commonwealth has also prepared
financial statements in accordance with generally accepted accounting principles
("GAAP"). The GAAP statements have been audited jointly by the Auditor General
of the Commonwealth and an independent public accounting firm. The Budgetary
information is adjusted at fiscal year end to reflect appropriate accruals for
financial reporting in conformity with GAAP. The Commonwealth maintains a June
30th fiscal year end.

The Constitution of Pennsylvania provides that operating budget
appropriations may not exceed the actual and estimated revenues and available
surplus in the fiscal year for which funds are appropriated. Annual budgets are
enacted for the General Fund and for certain special revenue funds which
represent the majority of expenditures of the Commonwealth.

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REVENUES AND EXPENDITURES

Pennsylvania's Governmental Fund Types receive over 57% of their
revenues from taxes levied by the Commonwealth. Interest earnings, licenses and
fees, lottery ticket sales, liquor store profits, miscellaneous revenues,
augmentations and federal government grants supply the balance of the receipts
of these funds. Revenues not required to be deposited in another fund are
deposited in the General Fund. The major tax sources for the General Fund are
the 6% sales and use tax (34.4% of General Fund revenues in fiscal 1999), the
2.8% personal income tax (34.8% of General Fund revenues in fiscal 1999) and the
9.99% corporate net income tax (9.0% of General Fund revenues in fiscal 1999).
Tax and fee proceeds relating to motor fuels and vehicles are constitutionally
dedicated to highway purposes and are deposited into the Motor License Fund. The
major sources of revenue for the Motor License Fund include the liquid fuels
tax, the oil company franchise tax, aviation taxes and revenues from fees levied
on heavy trucks. These revenues are restricted to the repair and construction of
highway bridges and aviation programs. Lottery ticket sales revenues are
deposited in the State Lottery Fund and are reserved by statute for programs to
benefit senior citizens.

Pennsylvania's major expenditures include funding for education ($7.83
billion of fiscal 1999 expenditures and the projected $8.05 billion of the
fiscal 2000 budget) and public health and human services ($14.9 billion of
fiscal 1999 expenditures and the projected $15.3 billion of the fiscal 2000
budget).

GOVERNMENTAL FUND TYPES: FINANCIAL CONDITION/RESULTS OF OPERATIONS (GAAP BASIS)

Assets in the Commonwealth's governmental fund types rose during fiscal
1999 by 21.0 percent to $9,238.6 million. Liabilities for the governmental fund
types during fiscal 1999 increased by 6.3 percent to $4068.8 million. A larger
gain in assets than in liabilities during fiscal 1999 for governmental fund
types produced a 5.9 percent increase in equity and other credits at June 30,
1999. Equity and other credits at the end of fiscal 1999 totaled $5,151.8
million, up from $3,791.8 million at the end of fiscal 1998. The five-year
period ending with fiscal 1999 was a time of economic growth with modest growth
rates at the beginning of the period and faster increased during the most recent
years. Throughout the period inflation has remained relatively low, helping to
restrain expenditure growth. Favorable economic conditions have helped total
revenues and other sources rise at an annual average 5.8 percent rate during the
five-year period. The growth rate for taxes of 4.3 percent almost matched the
total revenue rate. License and fee revenues expanded at a 7.1 percent rate,
largely because of various motor vehicle fees effective for fiscal 1999. Other
revenues, mostly charges for sales and services and investment income, increased
an average 20.3 percent during the period. Expenditure and other uses during the
fiscal 1995 through fiscal 1999 period rose at a 4.8 percent average rate, led
by a 9.6 percent average increase for protection of person and property costs.
Though still high, the growth rate for this program is declining as the
increased costs to acquire, staff and operate expanded prison facilities becomes
part of the expenditure base. Public health and welfare programs, the largest
single category of expenditures, have experienced a 5.8 percent average

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growth rate for expenditure, slightly above the average for total expenditures.
A departmental restructuring in fiscal 1996 resulted in a re-categorization of
expenditures from conservation of natural resources to other categories and is
responsible for the decline of expenditures in that category beginning in fiscal
1996.

GENERAL FUND: FINANCIAL CONDITIONS/RESULTS OF OPERATIONS

FIVE-YEAR OVERVIEW (GAAP BASIS)

For the five-year period from fiscal 1995 through fiscal 1999, total
revenues and other sources rose at a 6.0% average annual rate while total
expenditures and other uses grew by 5.0% annually. Tax revenues from this same
period increased by an average of 4.2% per year. The largest rate of growth for
any single revenue source during this period came from other revenues, which
increased by 24.4% per year.

Expenditures and other uses rose at a slightly higher percentage than
revenues during the period from fiscal 1995 through fiscal 1999, at a rate of
5.0% per year. Program costs for economic development and assistance increased
at an average rate of 12.1% per year. Protection of persons and property costs
increased at an average annual rate of 10.3% during this period, the
second-highest rate of percentage increase among Commonwealth programs. The
amount and growth of these costs has been restrained by efforts to control costs
for various social programs and by generally favorable economic conditions
throughout the Commonwealth.

The fund balance at June 30, 1999 totaled $2,863.9 million, an increase
of $905 million over the $958.9 million balance at June 30, 1998.

FISCAL 1998 BUDGET (GAAP BASIS)

GAAP Basis: For fiscal 1998, general fund (including the tax
stabilization reserve fund) assets increased $705.1 million and liabilities rose
by $111.1 million during the fiscal year. These changes contributed to a $310.3
million rise in the undesignated-unreserved balance for June 30, 1998 to $497.6
million, the highest level achieved since audited GAAP reporting was instituted
in 1984 for the Commonwealth. Fiscal 1998 total revenues and other sources rose
4.3 percent led by an 11.1 percent increase in other revenues, largely charges
for sales and services and investment income. Tax revenues rose 4.2 percent.

Expenditures and other uses during fiscal 1998 rose by 4.5 percent.
Program areas with the largest percentage increase for the fiscal year were
economic development and assistance (21.3 percent), transportation (19.3
percent) and general government (14.3 percent). A drop in general government
expenditures for fiscal 1997 exaggerates the increase for fiscal 1998.

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FISCAL 1999 BUDGET (BUDGETARY BASIS)

For fiscal 1999, assets increased $1,024 million, 20.6 percent over the
prior fiscal year. An increase of $1,118 million of temporary investments
represented the largest asset increase for the period. Liabilities rose $119.5
million representing a 4 percent increase over the prior period. The increase of
assets over liabilities for fiscal 1999 caused the fund balance as of June 30,
1999 to increase by $904.5 million over the fund balance as of June 30, 1998.
The total fund balance as of June 30, 1999 was $2,863.4 million, the largest
fund balance achieved since audited GAAP reporting was instituted in 1994 for
the Commonwealth.

The increase to fund balance resulted from a $2,057.4 million increase
in revenues and other sources offset by $1,766.8 million of higher expenditures,
other uses and equity transfers. Tax revenues increased 4.2 percent for the
fiscal year while other revenues, largely investment income and charges for
sales and services, increased by 24.4 percent. Public health and welfare program
expenses accounted for the largest expenditures increase for the fiscal year,
$943.3 million representing a 5.9 percent increase. The largest percentage
increases in expenditures for the fiscal year were in capital outlay (19.8
percent), economic development and assistance programs (12.1 percent), and
protection of persons and property programs (10.3 percent).

FISCAL 2000 BUDGET (BUDGETARY BASIS)

The General Fund budget for the 1999-2000 fiscal year was approved by
the General Assembly in May 1999. The adopted budget includes estimated spending
of $19,061.5 million and estimated revenues (net of estimated tax refunds and
enacted tax changes) of $18,699.9 million. Funds to cover the difference between
estimated revenues and projected spending will be obtained from a draw down of
the projected fiscal 1999 year-end balance.

The estimate of Commonwealth revenues for fiscal 1999 is based on an
economic forecast for real gross domestic product to grow at a 1.4 percent rate
from the second quarter of 1999 to the second quarter of 2000. Growth of real
gross domestic product is expected to be restrained by a slowing of the rate of
consumer spending to a level consistent with personal income gains and by
smaller gains in business investment in response to falling capacity utilization
and profits. Slowing economic growth is expected to cause the unemployment rate
to rise through the fiscal year but inflation is expected to remain quite
moderate. Trends for the Pennsylvania economy are expected to maintain their
close association with national economic trends. Personal income growth is
anticipated to remain slightly below that of the U.S. while the Pennsylvania
unemployment rate is anticipated to be very close to the national rate.

COMMONWEALTH DEBT

Current constitutional provisions permit Pennsylvania to issue the
following types of debt: (i) debt to suppress insurrection or rehabilitate areas
affected by disaster, (ii) electorate approved debt, (iii) debt for capital
projects subject to an aggregate debt limit of 1.75 times the annual average tax
revenues of the preceding five fiscal years, and (iv) tax anticipation notes

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payable in the fiscal year of issuance. All debt except tax anticipation notes
must be amortized in substantial and regular amounts.

General obligation debt totaled $4,924.5 million at June 30, 1999, a
decrease of $197.0 million from June 30, 1998. Over the 10-year period ended
June 30, 1999, total outstanding general obligation debt increased at an annual
rate of 0.5%. For the most recent five years, total outstanding general
obligation debt decreased at an annual rate of 0.6%. All outstanding general
obligation bonds of the Commonwealth are rated AA by S & P's, Aa3 by Moody's and
AA by Fitch. The ratings reflect only the views of the rating agencies.

Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes which must mature within
the fiscal year of issuance. The principal amount issued, when added to that
already outstanding, may not exceed in aggregate 20% of the revenues estimated
to accrue to the appropriate fund in the fiscal year. The Commonwealth is not
permitted to fund deficits between fiscal years with any form of debt. All
year-end deficit balances must be fielded within the succeeding fiscal year's
budget. Currently, the Commonwealth has no tax anticipation notes outstanding.
The fiscal 2000 budget includes the issuance of $560 million of tax anticipation
notes. The Commonwealth has no plans to issue tax anticipation notes for fiscal
2000.

Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years. Currently, $60 million of bond anticipation notes are authorized to be
issued in the form of commercial paper notes. As of January 10, 2000, $47.6
million was issued and outstanding.

STATE-RELATED OBLIGATIONS

Certain state-created agencies have statutory authorization to incur
debt for which no legislation providing for state appropriations to pay debt
service thereon is required. The debt of these agencies is supported by assets
of, or revenues derived from, the various projects financed and the debt of such
agencies is not an obligation of Pennsylvania although some of the agencies are
indirectly dependent on Commonwealth appropriations. In addition, Pennsylvania
may choose to take action to financially assist these organizations. The
following agencies had debt currently outstanding as of June 30, 1999: Delaware
River Joint Toll Bridge Commission ($51.4 million), Delaware River Port
Authority ($623.2 million), Pennsylvania Economic Development Financing
Authority ($1,239.7 million), Pennsylvania Energy Development Authority ($42.1
million), Pennsylvania Higher Education Assistance Agency ($1,783.8 million),
Pennsylvania Higher Educational Facilities Authority ($3,522.5 million),
Pennsylvania Industrial Development Authority ($373.8 million), Pennsylvania
Infrastructure Investment Authority ($186.9 million), Pennsylvania Turnpike
Commission ($1,573.1 million), Philadelphia Regional Port Authority ($57.9
million), and the State Public School Building Authority ($347.5 million). In
addition, the Governor is statutorily required to place in the budget of the
Commonwealth an amount sufficient to make up any deficiency in the capital
reserve fund created for, or to avoid default on,

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bonds issued by the Pennsylvania Housing Finance Agency ($2,749.3 million of
revenue bonds outstanding as of June 30, 1999), and an amount of funds
sufficient to alleviate any deficiency that may arise in the debt service
reserve fund for bonds issued by The Hospitals and Higher Education Facilities
Authority of Philadelphia ($1.0 million of the loan principal was outstanding as
of June 30, 1999). The budget as finally adopted by the legislation may or may
not include the amounts requested by the Governor.

LITIGATION

Certain litigation is pending against the Commonwealth that could
adversely affect the ability of the Commonwealth to pay debt service on its
obligations, including suits relating to the following matters: (a)
approximately 3,500 suits are pending against the Commonwealth pursuant to the
General Assembly's 1978 approval of a limited waiver of sovereign immunity which
permits recovery of damages for any loss up to $250,000 per person and
$1,000,000 per accident ($20.0 million has been appropriated from the Motor
License Fund in fiscal 1998); (b) in 1987, the Supreme Court of Pennsylvania
held that the statutory scheme for county funding of the judicial system was in
conflict with the Pennsylvania Constitution but stayed judgment pending
enactment by the legislature of funding consistent with the opinion (In response
to an action in mandamus seeking to compel the Commonwealth to comply with the
1987 decision, on July 26, 1996, the Supreme Court appointed retired Justice
Montemuro as special master to devise a plan and submit it for implementation by
January 1, 1998. On January 28, 1997, the Supreme Court announced the
establishment of a tripartite committee, including representatives of the
Commonwealth Executive and Legislative Departments and Justice Montemuro, to
develop an implementation plan. On July 26, 1997, Justice Montemuro filed an
interim report wherein he recommended a transition to state funding of a unified
judicial system in four phases, during each of which specified court employees
would transfer into the Commonwealth payroll system. Justice Montemuro
recommended implementation of the system effective July 1, 1998, with completion
of the first phase early in the next century. Objections to the report were due
by September 1, 1997. Although the General Assembly is yet to enact legislation
implementing the Supreme Court's decision, the Governor has proposed an
appropriation of $15.6 million to implement Phase I of Justice Montemuro's
report as part of his proposed fiscal 1999 budget.); (c) on November 3, 1995,
the Commonwealth and the Governor, along with the Mayor and City of
Philadelphia, were joined as additional respondents in an enforcement action
commenced in Commonwealth Court in 1973 against the School District of
Philadelphia, to remedy unintentional conditions of segregation in the
Philadelphia public schools. The Governor and Commonwealth were joined in the
remedial phase of the proceeding to determine their liability, if any, to pay
additional costs necessary to remedy the unlawful conditions of segregation
found to exist in Philadelphia public schools. On February 28, 1996, the School
District of Philadelphia and certain public interest intervenors each filed
third-party actions against the Commonwealth to require the Commonwealth to
supply the funding necessary to fully comply with the remedial orders of the
Commonwealth Court. Following denial of the Commonwealth's preliminary
objections seeking dismissal of the claims against it, the Commonwealth asserted
numerous defenses and filed a cross-claim against the City of Philadelphia
claiming that sole liability rests with the City or, in the alternative, that
the Commonwealth has a right of indemnity

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or contribution against the City if liability exists (Trial commenced on May 30,
1996 in the Commonwealth Court, but the Supreme Court of Pennsylvania assumed
extraordinary plenary jurisdiction on July 3, 1996 for a resolution of the case
before Judge Smith. On August 20, 1996, Judge Smith issued an opinion and order
and entered judgment in favor of the School District and the intervenors against
the Commonwealth and Governor; entered judgment in favor of the City and Mayor
on the intervenors' claim and on the Commonwealth's and Governor's cross-claim;
and required the Commonwealth and Governor to submit a plan to the Court within
30 days to effect a transfer of funds to enable the School District to comply
with the remedial order. The Governor and Commonwealth moved to vacate Judge
Smith's order, and on September 10, 1996, the Supreme Court granted the motion
to vacate, retaining further jurisdiction in the case. On January 28, 1997, the
Supreme Court issued an order directing the parties to brief, among other
issues, whether the lower court erred in its opinion joining the Commonwealth
and Governor and City and Mayor as additional respondents. Oral argument was
heard in the case on February 3, 1998, and the Supreme Court took the matter
under advisement.); (d) on December 29, 1993, a former judge of the Allegheny
Court of Common Pleas filed a complaint for declaratory judgment in the
Commonwealth Court against the State Employees' Retirement Board, alleging that
its use of gender distinct actuarial factors for benefits based on service prior
to August 1, 1983 violated the equal protection and equal rights provisions of
the Pennsylvania Constitution. Due to the constitutional nature of the claims,
it is possible that a decision adverse to the State Employees' Retirement Board
would also be applicable to other Commonwealth retirement systems which paid
lower benefits to some participants on the basis of their gender or the gender
of their survivor annuitants (The Commonwealth Court granted the State
Employees' Retirement Board's preliminary objections to the plaintiff's claims
for all damages except for a recalculation of his pension benefits should he
prevail. On February 13, 1997, the Commonwealth Court en banc denied the
plaintiff's motion for judgment and the pleadings.); and (e) five residents of
the City of Philadelphia, on their own behalf and that of their school-aged
children, together with a number of public interest organizations, filed an
action for declaratory judgment in the Commonwealth Court on February 24, 1997,
against the Commonwealth, the General Assembly, the Governor and numerous other
Legislative and Executive Branch officials. The plaintiffs claim that
Pennsylvania's statutory education financing system violates the Pennsylvania
Constitution as applied in Philadelphia, and that they were denied their
constitutional right to a "thorough and efficient" system of public education in
the financial and administrative circumstances faced by the School District of
Philadelphia. The plaintiffs sought a declaration that the present funding
system is unconstitutional and that the legislature must amend the present or
enact new education legislation so as to assure that future funding for the
School District of Philadelphia makes adequate provision for the special needs
of its students (The respondents filed preliminary objections seeking dismissal
of the action and the Commonwealth Court heard oral argument on the matter on
September 10, 1997. The Commonwealth Court subsequently dismissed the case on
the grounds that it presented non-justiciable issues. An appeal is presently
expected.).
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PHILADELPHIA

The Pennsylvania Intergovernmental Cooperation Authority ("PICA") was
created by Commonwealth legislation in 1991 to assist Philadelphia, the
Commonwealth's largest city, in remedying its fiscal emergencies. PICA is
designed to provide assistance through the issuance of funding debt and to make
factual findings and recommendations to Philadelphia concerning its budgetary
and fiscal affairs. The financial assistance has included the refunding of
certain city general obligations bonds, funding of capital projects and the
liquidation of the cumulative general fund balance deficit of Philadelphia as of
June 30, 1992, of $224.9 million. At this time, Philadelphia is operating under
a five-year fiscal plan approved by PICA on June 15, 1999.

No further bonds are to be issued by PICA for the purpose of financing
a capital project or deficit as the authority for such bond sales expired
December 31, 1994. PICA's authority to issue debt for the purpose of financing a
cash flow deficit expired on December 31, 1996. Its ability to refund existing
outstanding debt is unrestricted. PICA has $1,014.1 million in special revenue
bonds outstanding as of June 30, 1999. Neither the taxing power nor the credit
of the Commonwealth is pledged to pay debt service on PICA's bonds.

PORTFOLIO TRANSACTIONS

The Portfolios' Advisor seeks the most favorable price and execution
with respect to portfolio transactions. In seeking the most favorable price and
execution, the Advisor, having in mind a Portfolio's best interest, considers
all factors it deems relevant, including, by way of illustration: price; the
size of the transaction; the nature of the market for the security; the amount
of the commission; the timing of the transaction, taking into account market
process and trends; the reputation, experience and financial stability of the
broker-dealer involved; and the quality of service rendered by the broker-dealer
in other transactions.

Transactions on U.S. stock exchanges and other agency transactions
involve the payment by a Portfolio of negotiated brokerage commissions. Such
commissions vary by the price and the size of the transaction along with the
quality of service. Transactions in foreign securities often involve the payment
of fixed brokerage commissions, that are generally higher than those in the
United States. There is generally no stated commission in the case of securities
traded in the OTC markets, but the price paid by a Portfolio usually includes an
undisclosed dealer commission or mark-up. In underwritten offerings, the price
paid by a Portfolio includes a disclosed, fixed commission or discount retained
by the underwriter or dealer.

For each Portfolio, the Advisor places all orders for the purchase and
sale of Portfolio securities and buys and sells securities for the Portfolio
through a number of brokers and dealers.

It has for many years been a common practice in the investment advisory
business for advisors of investment companies and other institutional investors
to receive research, statistical, and quotation services from broker-dealers
that execute portfolio transactions for the clients of such advisors. Consistent
with this practice, a Portfolio's Advisor may receive research, statistical, and
quotation services from broker-dealers with which it places the Portfolio's

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portfolio transactions. These services, which in some cases may also be
purchased for cash, include such matters as general economic and security market
reviews, industry and company reviews, evaluations of securities, and
recommendations as to the purchase and sale of securities. Some of these
services are of value to the Advisor and its affiliates in advising various of
their clients (including the Portfolios), although not all of these services are
necessarily useful and of value in managing the Portfolios. The fee paid by a
Portfolio to the Advisor is not reduced because the Advisor and its affiliates
receive such services.

As permitted by Section 28(e) of the Securities Exchange Act of 1934,
as amended, the Advisor may cause a Portfolio to pay a broker-dealer that
provides brokerage and research services to the Advisor a commission in excess
of the commission charged by another broker-dealer for effecting a particular
transaction. To cause a Portfolio to pay higher commissions, the Advisor must
determine in good faith that such commissions are reasonable in relation to the
value of the brokerage or research service provided by such executing
broker-dealers viewed in terms of a particular transaction or the Advisor's
overall responsibilities to the Portfolio or its other clients. In reaching this
determination, the Advisor will not attempt to place a specific dollar value on
the brokerage or research services provided or to determine what portion of the
compensation should be related to those services.

Certain investments may be appropriate for a Portfolio and for other
clients advised by the Advisor. Investment decisions for a Portfolio and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment, and the size of their investments generally. A
particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but fewer than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients of the Advisor on the
same day. In each of these situations, the transactions will be allocated among
the clients in a manner considered by the Advisor to be equitable to each. In
some cases, this procedure could have an adverse effect on the price or amount
of the securities purchased or sold by a Portfolio. Purchase and sale orders for
a Portfolio may be combined with those of other clients in the interest of
achieving the most favorable execution for the Portfolio.

For the fiscal years ended April 30, 1998, April 30, 1999 and April 30,
2000, the Small-Cap Equity Portfolio paid brokerage commissions of $210,728,
$249,580, and $480,274 respectively.

The Fund is required to identify any securities of its "regular brokers
or dealers" (as such term is defined in the 1940 Act) which the Fund has
acquired during its most recent fiscal year. As of April 30, 2000, the Small-Cap
Equity Portfolio held repurchase agreements issued by First Boston valued at
$22,355,000.

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VALUATION OF PORTFOLIO SECURITIES

PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

As a money market fund, the Pennsylvania Tax-Free Money Market
Portfolio, values its investments on the basis of amortized cost. This method
involves valuing an instrument at its cost as adjusted for amortization of
premium or accretion of discount rather than its value based on current market
quotations or appropriate substitutes which reflect current market conditions.
The amortized cost value of an instrument may be higher or lower than the price
the Portfolio would receive if it sold the instrument.

Valuing a Portfolio's instruments on the basis of amortized cost and
use of the term "money market portfolio" are permitted by Rule 2a-7 under the
1940 Act. The Pennsylvania Tax-Free Money Market Portfolio must adhere to
certain conditions under Rule 2a-7.

The Board of Trustees oversees the Advisor's adherence to SEC rules
concerning money market funds, and has established procedures designed to
stabilize the Pennsylvania Tax-Free Money Market Portfolio's net asset value per
share ("NAV") at $1.00. At such intervals as they deem appropriate, the trustees
consider the extent to which NAV calculated by using market valuations would
deviate from $1.00 per share. If the trustees believe that a deviation from the
Portfolio's amortized cost per share may result in material dilution or other
unfair results to shareholders, the trustees will take such corrective action,
if any, as they deem appropriate to eliminate or reduce, to the extent
reasonably practicable, such dilution or other unfair result. Such corrective
action could include selling portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity; withholding
dividends; redeeming shares in kind; establishing NAV by using available market
quotations; and such other measures as the trustees may deem appropriate.

During periods of declining interest rates, the Portfolio's yield based
on amortized cost may be higher than the yield based on market valuations. Under
these circumstances, a shareholder in the Portfolio would be able to obtain a
somewhat higher yield than would result if the Portfolio utilized market
valuations to determine its NAV. The converse would apply in a period of rising
interest rates.

OTHER PORTFOLIOS

Valuations of portfolio securities furnished by the pricing service
utilized by the Fund are based upon a computerized matrix system and/or
appraisals by the pricing service, in each case in reliance upon information
concerning market transactions and quotations from recognized securities
dealers. The methods used by the pricing service and the quality of valuations
so established are reviewed by officers of the Fund and the Portfolio's
respective pricing agent under general supervision of the Board of Trustees.

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<PAGE>

Securities owned by the Portfolios (other than Pennsylvania Tax-Free
Money Market Portfolio) are valued by various methods depending on the market or
exchange on which they trade. Securities traded on a national securities
exchange are valued at the last sale price, or if no sale has occurred, at the
closing bid price. Securities traded in the over-the-counter market are valued
at the last sale price, or if no sale has occurred, at the closing bid price.
Securities and other assets for which market quotations are not readily
available are valued at their fair value as determined under procedures
established by the Board of Trustees.

Generally, the valuation of foreign and domestic equity securities, as
well as corporate bonds, U.S. Government Securities, Money Market Instruments,
and repurchase agreements, is substantially completed each day at the close of
the NYSE. The values of any such securities held by a Portfolio are determined
as of such time for the purpose of computing a Portfolio's NAV. Foreign security
prices are furnished by independent brokers or quotation services which express
the value of securities in their local currency. The pricing agent gathers all
exchange rates daily at 2:00 p.m., Eastern Time, and using the last quoted price
of the security in the local currency, translates the value of foreign
securities from their local currency into U.S. dollars. Any changes in the value
of forward contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of NAV. If an extraordinary event that is expected
to affect materially the value of a portfolio security occurs after the close of
an exchange on which that security is traded, then the security will be valued
pursuant to the procedures established by the Board of Trustees.

PORTFOLIO PERFORMANCE

YIELD CALCULATIONS

In computing the yield of shares of Pennsylvania Tax-Free Money Market
Portfolio for a period, the net change in value of a hypothetical account
containing one share reflects the value of additional shares purchased with
dividends from the one original share and dividends declared on both the
original share and any additional shares. The net change is then divided by the
value of the account at the beginning of the period to obtain a base period
return. This base period return is annualized to obtain a current annualized
yield. The Portfolio may also calculate a compounded effective yield for its
shares by compounding the base period return over a one-year period. In addition
to the current yield, the Portfolio may quote yields in advertising based on any
historical seven-day period. Yields for the shares of the Portfolio is
calculated on the same basis as other money market funds, as required by
regulation.

For shares of Portfolios other than the Pennsylvania Tax-Free Money
Market Portfolio, yields used in advertising are computed by dividing the
interest income for a given 30-day or one-month period, net of the Portfolio's
expenses, by the average number of shares entitled to receive dividends during
the period, dividing this figure by the Portfolio's NAV at the end of the period
and annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of the yield
quotations in accordance with standardized methods applicable to all stock and
bond funds. In general, interest income is

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<PAGE>

reduced with respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and is
increased with respect to bonds trading at a discount by adding a portion of the
discount to daily income. Capital gains and losses generally are excluded from
the calculation.

Income calculated for the purposes of determining yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding of income assumed in
yield calculations, a Portfolio's yield may not equal its distribution rate, the
income paid to your account, or income reported in the Portfolio's financial
statements.

For the Pennsylvania Tax-Free Money Market Portfolio, a tax-equivalent
yield is the rate an investor would have to earn from a fully taxable investment
before taxes to equal the Portfolio's tax-free yield. Tax-equivalent yields are
calculated by dividing a Portfolio's yield by the result of one minus a stated
Federal or combined Federal, state and city tax rate. (If only a portion of a
Portfolio's yield was tax-exempt, only that portion is included in the
calculation.) If any portion of a Portfolio's income is derived from obligations
subject to state or Federal income taxes, its tax-equivalent yield will
generally be lower.

See Appendix B for tables showing the effect of a shareholder's tax
status on effective yield under the Federal income tax laws for 2000.

TOTAL RETURN

The average annual total returns for the one-year period and five-year
period ended April 30, 2000 and since inception are shown in the table below.
The performance shown for Retail Class A includes applicable sales charges.

NAME OF PORTFOLIO
AND CLASS ONE-YEAR FIVE-YEAR SINCE INCEPTION
------------------ -------- --------- ---------------

SMALL-CAP EQUITY
PORTFOLIO
Retail Class A 115.35% N/A 26.55% (May 16, 1996)
Institutional Class 126.42% N/A 34.81% (July 13, 1995)

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ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

CALCULATION OF NAV

Each Portfolio is open for business and its NAV is calculated each day
that the Federal Reserve Bank of New York ("FRB") and the New York Stock
Exchange ("NYSE") are open for trading (a "Business Day").

The calculation of the NAV, dividends and distributions of a
Portfolio's Retail Class A, Retail Class B, Institutional Class and
Institutional II Class shares recognizes two types of expenses. General expenses
that do not pertain specifically to any class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of such class to
the Portfolio's total assets, and then equally to each outstanding share within
a given class. Such general expenses include (i) management fees, (ii) legal,
bookkeeping and audit fees, (iii) printing and mailing costs of shareholder
reports, prospectuses, statements of additional information and other materials
for current shareholders, (iv) fees to independent trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up costs,
(viii) interest, taxes and brokerage commissions, and (ix) non-recurring
expenses, such as litigation costs. Other expenses that are directly
attributable to a class are allocated equally to each outstanding share within
that class. Such expenses include (i) distribution and/or other fees, (ii)
transfer and shareholder servicing agent fees and expenses, (iii) registration
fees, and (iv) shareholder meeting expenses to the extent that such expenses
pertain to a specific class rather than to a Portfolio as a whole.

The following holiday closings have been scheduled for 2001 and the
Fund expects the schedule to be the same in the future: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.
The NYSE or FRB may also close on other days. When the NYSE or the FRB is
closed, or when trading is restricted for any reason other than its customary
weekend or holiday closings, or under emergency circumstances as determined by
the SEC to merit such action, each Portfolio will determine its NAV at the close
of business, the time of which will coincide with the closing of the NYSE. To
the extent that securities held by a Portfolio are traded in other markets on
days the NYSE or FRB is closed (when investors do not have access to the
Portfolio to purchase or redeem shares), the Portfolio's NAV may be
significantly affected.

CONVERSION OF RETAIL CLASS B SHARES

Retail Class B shares will automatically convert into Retail Class A
shares at the end of the month eight years after the purchase date. Retail Class
B shares acquired by exchanging Retail Class B shares of another Portfolio will
convert into Retail Class A shares based on the time of the initial purchase.
Retail Class B shares acquired through reinvestment of distributions will
convert into Retail Class A shares based on the date of the initial purchase to
which such shares relate. For this purpose, Retail Class B shares acquired
through reinvestment of distributions will be attributed to particular purchases
of Retail Class B shares in accordance with

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such procedures as the Board of Trustees may determine from time to time. The
conversion of Retail Class B shares to Retail Class A shares is subject to the
condition that such conversions will not constitute taxable events for Federal
tax purposes.

REDEMPTION IN KIND

Under normal circumstances, the Portfolio will redeem shares in cash as
described in the prospectus. However, if the Board of Trustees determines that
it would be in the best interests of the remaining shareholders to make payment
of the redemption price in whole or in part by a distribution in kind of
portfolio securities in lieu of cash, in conformity with applicable rules of the
SEC, the Portfolio will make such distributions in kind. If shares are redeemed
in kind, the redeeming shareholder will incur brokerage costs in later
converting the assets into cash. The method of valuing portfolio securities is
described under "Calculation of Net Asset Value" and such valuation will be made
as of the same time the redemption price is determined. The Fund has elected to
be governed by Rule 18f-1 under the 1940 Act pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of a Portfolio during any 90-day period for any one
shareholder.

TAXES

The following is only a summary of certain additional Federal income
tax considerations generally affecting the Portfolios and their shareholders
that are not described in the prospectuses. No attempt is made to present a
detailed explanation of the Federal, state or local tax treatment of the
Portfolios or their shareholders, and the discussion here and in the
prospectuses is not intended as a substitute for careful tax planning.

The following discussion of Federal income tax consequences is based on
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.

Each Portfolio calculates dividend and capital gain distributions
separately, and is treated as a separate entity in all respects for tax
purposes.

TAXATION OF THE PORTFOLIOS

Each Portfolio intends to qualify as a regulated investment company
("RIC") under Subchapter M of the Code. In order to qualify as a RIC for any
taxable year, a Portfolio must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock, securities or foreign currencies
and other income (including, but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"). In addition, at the
close of each quarter of the Portfolio's taxable

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<PAGE>

year, (1) at least 50% of the value of its assets must consist of cash and cash
items, U.S. government securities, securities of other RICs, and securities of
other issuers (as to which the Portfolio has not invested more than 5% of the
value of its total assets in securities of any one such issuer and as to which
the Portfolio does not hold more than 10% of the outstanding voting securities
of any one such issuer), and (2) no more than 25% of the value of its total
assets may be invested in the securities of any one issuer (other than U.S.
government securities and securities of other RICs), or in two or more issuers
that the Portfolio controls and that are engaged in the same or similar trades
or businesses or related trades or businesses (the "Asset Diversification
Test"). Generally, a Portfolio will not lose its status as a RIC if it fails to
meet the Asset Diversification Test solely as a result of a fluctuation in value
of Portfolio assets not attributable to a purchase.

Under Subchapter M of the Code, a Portfolio is not subject to Federal
income tax on the portion of its taxable net investment income and net capital
gains that it distributes to shareholders, provided generally that it
distributes at least 90% of its investment company taxable income (net
investment income and the excess of net short-term capital gains over net
long-term capital loss) for the year and at least 90% of the excess of its
tax-exempt interest income over related expenses (the "Distribution
Requirement") and complies with the other requirements of the Code described
above. The Distribution Requirement for any year may be waived if a RIC
establishes to the satisfaction of the Internal Revenue Service (the "IRS") that
it is unable to satisfy the Distribution Requirement by reason of distributions
previously made for the purpose of avoiding liability for Federal excise tax
(discussed below).
If for any taxable year a Portfolio does not qualify as a RIC, all of
its taxable income will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions generally
will be taxable as ordinary dividends to the extent of the Portfolio's current
and accumulated earnings and profits. However, in the case of corporate
shareholders, such distributions generally will be eligible for the 70%
dividends received deduction for "qualifying dividends."

The Code imposes a nondeductible 4% excise tax on RICs that do not
distribute in each calendar year an amount equal to 98% of their ordinary income
for the calendar year plus 98% of their capital gains net income for the
one-year period ending on October 31 of such calendar year. The balance of such
income must be distributed during the next calendar year. For the foregoing
purposes, a RIC will include in the amount distributed any amount taxed to the
RIC as investment company taxable income or capital gains for any taxable year
ending in such calendar year. Each Portfolio intends to make sufficient
distributions of its ordinary income and capital gains net income prior to the
end of each calendar year to avoid liability for excise tax. However, a
Portfolio may in certain circumstances be required to liquidate portfolio
investments in order to make sufficient distributions to avoid excise tax
liability.

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TAXATION OF SHAREHOLDERS

Distributions from each Portfolio's taxable net investment income and
short-term capital gain are taxed as dividends. Distributions that are (i)
designated by a Portfolio as capital gains dividends and (ii) made out of the
"net capital gain" (the excess of net long-term capital gain over net short-term
capital loss), if any, of a Portfolio will be taxed to shareholders as net
capital gain, regardless of the length of time a shareholder has held shares,
whether such gain was reflected in the price paid for the shares, or whether
such gain was attributable to bonds bearing tax-exempt interest. Net capital
gain of a noncorporate taxpayer is generally taxed at a rate of 20%.
Distributions that are not net capital gain dividends or exempt-interest
dividends will generally be taxed at a maximum marginal rate of 39.6% in the
case of non-corporate taxpayers. Corporate taxpayers are currently taxed at the
same maximum marginal rates on both ordinary income and capital gains. A portion
of the dividends may qualify for the dividends received deduction for
corporations to the extent derived from dividend income received by the
Portfolio. The Portfolios' distributions are taxable when they are paid, whether
taken in cash or reinvested in additional shares, except that distributions
declared in October, November or December and payable to shareholders of record
in such month, if paid in January of the following year, will be taxed as though
paid on December 31. The Portfolios will send non-corporate shareholders a tax
statement by January 31 showing the tax status of the distributions received in
the prior year. Shareholders also will be notified as to the portion of
distributions from the Pennsylvania Tax-Free Money Market Portfolio that are
exempt from Federal income taxes. It is suggested that shareholders keep all
statements received to assist in personal record keeping.

Shareholders may realize a capital gain or loss when they redeem (sell)
or exchange shares of the Portfolios. For most types of accounts, the Portfolios
will report the proceeds of a shareholder's redemptions to the shareholder and
the IRS annually. However, because the tax treatment also depends on the
purchase price and the shareholder's personal tax position, shareholders should
keep their regular account statements for use in determining their tax. If a
shareholder receives a long-term capital gain distribution on shares of the
Portfolios, and such shares are held six months or less and are sold at a loss,
the portion of the loss equal to the amount of the long-term capital gain
distribution will be considered a long-term loss for tax purposes. Short-term
capital gains distributed by the Portfolios are taxable to shareholders as
dividends, not as capital gains.

Any gain or loss recognized on a sale or redemption of shares of a
Portfolio by a shareholder who is not a dealer in securities generally will be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise generally will be treated as a short-term
capital gain or loss. Any resultant net capital gain will be subject to the 20%
rate.

On the record date for a distribution or dividend, the applicable
Portfolio's share value is reduced by the amount of the distribution. If a
shareholder were to buy shares just before the record date ("buying a
dividend"), he would pay the full price for the shares and then receive a
portion of the price back as a taxable distribution.

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<PAGE>

PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

Dividends (i) designated by this Portfolio as exempt-interest dividends
and (ii) paid to shareholders out of tax-exempt interest income earned by the
Portfolio (exempt-interest dividends) generally will not be subject to Federal
income tax paid by the Portfolio's shareholders. However, persons who are
"substantial users" or "related persons" of facilities financed by private
activity bonds held by the Portfolio may be subject to tax on their pro-rata
share of the interest income from such bonds and should consult their tax
advisors before purchasing shares of the Portfolio. Realized market discount on
tax-exempt obligations purchased after April 30, 1993 is treated as ordinary
income and not as a capital gain. Dividends paid by a Portfolio out of its
taxable net investment income (including realized net short-term capital gains,
if any) are taxable to shareholders as ordinary income notwithstanding that such
dividends are reinvested in additional shares of the Portfolio. The "exempt
interest dividend" portion of a distribution is determined by the ratio of the
net tax-exempt income realized by a Portfolio for the entire year to the
aggregate amount of distributions for such year and, thus, is an annual average,
rather than a day-to-day determination for each shareholder. Distributions of
long-term capital gains, if any, are taxable as long-term capital gains to the
shareholder receiving them regardless of the length of time he or she may have
held his or her shares. Under current tax law (1) interest on certain private
activity bonds is treated as an item of tax preference for purposes of the
Federal Alternative Minimum Tax imposed on individuals and corporations,
although for regular Federal income tax purposes such interest remains fully
tax-exempt, and (2) interest on all tax-exempt obligations is included in
"adjusted current earnings" of corporations for Federal Alternative Minimum Tax
purposes. Because the Portfolio expects to purchase private activity bonds, a
portion (not expected to exceed 20%) of the Portfolio's exempt-interest
dividends may constitute an item of tax preference for those shareholders
subject to the Federal Alternative Minimum Tax.

Interest on indebtedness incurred by shareholders to purchase or carry
shares of a Portfolio generating exempt-interest dividends generally is not
deductible for Federal income tax purposes. Under IRS rules for determining when
borrowed funds are used for purchasing or carrying particular assets, shares of
the Portfolio may be considered to have been purchased or carried with borrowed
funds even though those funds are not directly linked to the shares.

The exemption for Federal income tax purposes of dividends derived from
interest on municipal securities does not necessarily result in an exemption
under the income or other tax laws of any state or local taxing authority.
Shareholders of the Portfolio may be exempt from state and local taxes on
distributions of tax-exempt interest income derived from obligations of the
state and/or municipalities of the state in which they reside but may be subject
to tax on income derived from the municipal securities of other jurisdictions.
Shareholders are advised to consult with their tax advisors concerning the
application of state and local taxes to investments in the Portfolio, which may
differ from the Federal income tax consequences described above.

Receipt of tax-exempt income may result in collateral tax consequences
to certain taxpayers, including, without limitation, financial institutions,
property and casualty insurance companies, certain foreign corporations doing
business in the United States, certain S

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<PAGE>

corporations with excess passive income, individual recipients of social
security or railroad retirement benefits and individuals otherwise eligible for
the earned income credit. For example, shareholders who receive social security
benefits may be subject to Federal income tax on up to 85% of such benefits to
the extent that their income, including tax-exempt income, exceeds certain base
amounts. Prospective purchasers of Portfolio shares should consult their own tax
advisors as to the applicability of any such collateral consequences.

The Portfolio purchases municipal obligations based on opinions of bond
counsel regarding the Federal income tax status of the obligations. These
opinions generally will be based upon covenants by the issuers regarding
continuing compliance with Federal tax requirements. If the issuer of an
obligation fails to comply with its covenant at any time, interest on the
obligation could become federally taxable retroactive to the date the obligation
was issued.

Corporate investors should note that the corporate Alternative Minimum
Tax base is increased by 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest not already included as a specified item of
tax preference) exceeds the alternative minimum taxable income of the
corporation (computed without regard to such increase and net operating loss
deductions).

If a shareholder receives an exempt-interest dividend and sells shares
at a loss after holding them for a period of six months or less, the loss will
be disallowed to the extent of the amount of exempt-interest dividend.

Shares of the Pennsylvania Tax-Free Money Market Portfolio would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and Individual
Retirement Accounts, because such plans and accounts are generally tax-exempt.
Therefore, such plans and accounts would not gain any additional benefit from
the tax-exempt status of the Portfolio's dividends and, moreover, such dividends
would be taxable when distributed to the beneficiary.

OTHER TAX INFORMATION

In addition to Federal taxes, shareholders may be subject to state or
local taxes on their investment, depending on state law.

The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of distributions payable to any shareholder who (1) has
provided the Fund either an incorrect tax identification number or no number at
all, (2) is subject to backup withholding by the IRS for failure to properly
report payments of interest or dividends, or (3) has failed to certify to the
Fund that such shareholder is not subject to backup withholding.

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TRUSTEES AND OFFICERS

The trustees and officers of the Fund and their principal occupations
during the past five years are set forth below. Each trustee who is an
"interested person" of the Fund (as defined in the 1940 Act) is indicated by an
asterisk (*). Unless otherwise indicated, the business address of each is One
Freedom Valley Drive, Oaks, PA 19456.

WILLIAM H. COWIE, JR., 1408 Ruxton Road, Baltimore, MD 21204. Date of
Birth: 1/24/31. Trustee since 1993. Prior to retirement, Mr. Cowie was Chief
Financial Officer (1991-1995) of Pencor, Inc. (developers of environmental
projects).

DAVID D. DOWNES, 210 Allegheny Ave., Towson, MD 21204. Date of Birth:
7/16/35. Trustee since 1995. Mr. Downes is an attorney in private practice
(since October 1996). Prior thereto he was a partner (1989-1995) and of counsel
(1995-Sept. 1996) of Venable, Baetjer & Howard (law firm).

SIR VICTOR GARLAND, 15 Wilton Place, Knightsbridge, London, SW1X 8RL.
Date of Birth: 5/5/34. Trustee since August 2000. He has been a private investor
since 1984. He is a director of a number of U.K. public companies. He is the
former Australian Ambassador to the U.K. and a former director of Prudential
Assurance Corporation in the U.K.

CHARLOTTE R. KERR, American City Building, 10227 Wincopin Circle, Suite
108, Columbia, MD 21044. Date of Birth: 9/26/46. Trustee since 1993. Ms. Kerr is
Practitioner and faculty member at the Traditional Acupuncture Institute.

THOMAS SCHWEIZER, 8626 Tower Bridge Way, Lutherville, MD 21093. Date of
Birth: 8/21/22. Trustee since 1993. Prior to his retirement in 1987, Mr.
Schweizer was self-employed. He currently is a board member of various
charitable organizations and hospitals.

RICHARD B. SEIDEL, 770 Hedges Lane, Wayne, Pennsylvania 19087. Date of
Birth: 4/20/41. Trustee since 1998. Mr. Seidel is a Director and President
(since 1994) of Girard Partners, Ltd. (a registered broker-dealer)

*RICK A. GOLD. Date of Birth: 8/4/49. President since March 2000 and
Trustee since June 2000. Mr. Gold is Executive Vice President of the Asset
Management Group of Allfirst Financial Inc., the parent company to Allfirst Bank
and AIA.

JAMES F. VOLK. Date of Birth: 8/28/62. Controller, Treasurer and Chief
Financial Officer since March 1997. Mr. Volk is Director of Investment
Accounting Operations. He joined SEI Investments Mutual Fund Services in
February 1996 and is co-director of the International Fund Accounting Group.
From December 1993 to January 1996, Mr. Volk was Assistant Chief Accountant of
the SEC's Division of Investment Management.

MICHELE L. DALTON. Date of Birth: 2/16/59. Vice President and Assistant
Secretary since March 2000. Ms. Dalton is a Senior Vice President of Allfirst
Financial Inc. since 1994.

48
<PAGE>

TODD CIPPERMAN. Date of Birth: 2/14/66. Vice President and Assistant
Secretary since November 1995. Mr. Cipperman is Senior Vice President and
General Counsel of SEI Investments since January 2000 and from 1995 to 1999, he
served as Vice President and Assistant Secretary.

LYDIA A. GAVALIS. Date of Birth: 6/5/64. Vice President and Assistant
Secretary since 1998. Ms. Gavalis is Vice President and Assistant Secretary of
SEI Investments Company since 1998. Prior to 1998, she was Assistant General
Counsel and Director of Arbitration for the Philadelphia Stock Exchange.

JAMES R. FOGGO. Date of Birth: 6/30/64. Vice President and Assistant
Secretary since 1998. Mr. Foggo is Vice President and Assistant Secretary of the
Administrator and the Distributor since 1998. In 1998, Mr. Foggo was an
Associate with Paul Weiss, Rifkind, Wharton & Garrison. From 1995 to 1998, Mr.
Foggo was an Associate with Baker & McKenzie.

TIMOTHY D. BARTO. Date of Birth: 3/28/68. Vice President and Assistant
Secretary since March 2000. Mr. Barto is Vice President and Assistant Secretary
of SEI Investments Company since November 1999. From 1997 to 1999, Mr. Barto was
an Associate at Dechert Price & Rhoads. From 1994 to 1997, he was an Associate
at Richter, Miller & Finn.

CHRISTINE M. MCCULLOUGH. Date of Birth: 12/5/60. Vice President and
Assistant Secretary since March 2000. Ms. McCullough is Vice President and
Assistant Secretary of SEI Investments Company since November 1999. From 1991 to
1999, Ms. McCullough was an Associate at White & Williams.

THOMAS R. RUS. Date of Birth: 10/11/59. Secretary since March 2000. Mr.
Rus is Vice President and Trust Counsel of Allfirst Trust Company, N.A. and
Allfirst Bank. He is also Compliance Officer of Allfirst Trust Company, N.A. and
ARK Funds. He has been with Allfirst Trust Company, N.A. since 1995.

The following table sets forth information describing the compensation
of each current trustee of the Fund for his or her services as trustee for the
fiscal year ended April 30, 2000.

49
<PAGE>

TRUSTEE COMPENSATION TABLE

PENSION OR
RETIREMENT ESTIMATED
BENEFITS ANNUAL TOTAL
ACCRUED RETIREMENT COMPENSATION
AGGREGATE FROM FROM FROM
COMPENSATION THE FUND THE FUND THE FUND
NAME OF TRUSTEE FROM THE FUND COMPLEX(1) COMPLEX(1) COMPLEX(1)
--------------- ------------- ---------- ---------- ------------

Cowie, Jr., William H. $ 25,000 -- -- $ 25,000
Downes, David D. $ 20,000 -- -- $ 20,000
Garland, Sir Victor $ 0 -- -- $ 0
Gold, Rick A. $ 0 -- -- $ 0
Kerr, Charlotte R.(2) $ 28,750 -- -- $ 28,750
Reynolds, III, George K.(3) $ 5,000 -- -- $ 5,000
Schweizer, Thomas $ 20,000 -- -- $ 20,000
Seidel, Richard B. $ 20,000 -- -- $ 20,000
-------------------

(1) The Fund's Trustees did not receive any pension or retirement benefits from
the Fund as compensation for the services as Trustees. The Fund adopted a
retirement policy at its June 1999 Board Meeting for the fiscal year ended
April 30, 2000. The policy calls for the retirement of Trustees when they
reach the age of 75, although Trustees who were 75 at the time of the June
1999 meeting will be allowed to serve an additional two years. The Fund is
the sole investment company in the fund complex.
(2) Ms. Kerr earned $8,750 in deferred compensation for Board service in
previous years.
(3) Mr. Reynolds resigned from the Board of Trustees on June 24, 1999.
Amounts shown represent compensation Mr.Reynolds received during fiscal
year ended April 30, 2000.

INVESTMENT ADVISOR

The investment advisor of the Fund is Allied Investment Advisors, Inc.
("AIA" or the "Advisor"). AIA provides the Portfolios with day-to-day management
services and makes investment decisions on the Portfolios' behalf in accordance
with each Portfolio's investment policies

Institutional and Institutional II Class shares of the Fund are offered
through Allfirst Trust Company, N.A. ("Allfirst Trust"), and Retail Class A and
Retail Class B shares are offered through Allfirst Brokerage Corporation
("Allfirst Brokerage") and other registered broker dealers. Allfirst Trust also
provides custodial and administrative services to the Fund. AIA, Allfirst Trust
and Allfirst Brokerage are wholly-owned subsidiaries of Allfirst Bank, a
Maryland-chartered Federal Reserve member bank based in Baltimore, Maryland.
Allfirst Bank is a wholly-owned subsidiary of Allfirst Financial Inc., which is
owned by Allied Irish Banks, p.l.c., an international financial services
organization based in Dublin, Ireland. SEI Investments Distribution Co., the
distributor of the Fund, is not affiliated with Allied Irish Banks, p.l.c. or
its affiliates.

<PAGE>

Pursuant to an investment advisory agreement with the Fund, AIA
furnishes, at its own expense, all services, facilities and personnel necessary
to manage each Portfolio's investments and effect portfolio transactions on its
behalf.

The advisory contracts have been approved by the Board of Trustees and
will continue in effect with respect to a Portfolio only if such continuance is
specifically approved at least annually by the Board or by vote of the
shareholders of the Portfolio, and in either case by a majority of the trustees
who are not parties to the advisory contract or interested persons of any such
party, at a meeting called for the purpose of voting on the advisory contract.
The advisory contracts are terminable with respect to a Portfolio without
penalty on 60 days written notice when authorized either by 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 automatically terminate in the event
of its assignment.

The advisory contracts provide that, with respect to each Portfolio,
neither AIA nor its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the performance of its duties to a
Portfolio, except for willful misfeasance, bad faith or gross negligence in the
performance by AIA of its duties or by reason of reckless disregard of its
obligations and duties under the advisory contract. The advisory contracts
provide that AIA may render services to others.

For the fiscal years ended April 30, 1998, April 30, 1999 and April 30,
2000, the advisory fee payable to AIA with respect to the Small-Cap Equity
Portfolio was $150,514 of which $238 was waived, $221,721 of which $2,772 was
waived, and $499,955 of which $6,249 was waived, respectively. Prior to February
12, 1998, the fee set forth above was payable pursuant to an advisory agreement
with AIA which provided a different fee schedule.

As of the date of this Statement of Additional Information, the
Pennsylvania Tax-Free Money Market Portfolio and Social Issues Portfolios have
not commenced operations. Accordingly, these Portfolios paid no advisory fees
for the fiscal year ended April 30, 2000.

In addition to receiving its advisory, AIA may also act and be
compensated as investment manager for clients with respect to assets, which are
invested in a Portfolio. In some instances AIA may elect to credit against any
investment management fee received from a client who is also a shareholder in a
Portfolio an amount equal to all or a portion of the fee received by AIA or its
affiliates, from a Portfolio with respect to the client's assets invested in the
Portfolio.

Each Portfolio has, under its advisory contract, confirmed its
obligation to pay all expenses, including interest charges, taxes, brokerage
fees and commissions; certain insurance premiums; fees, interest charges and
expenses of the custodian, transfer agent and dividend disbursing agent;
telecommunications expenses; auditing, legal and compliance expenses;
organization costs and costs of maintaining existence; costs of preparing and
printing the Portfolios' prospectuses, statements of additional information and
shareholder reports and delivering them to existing and prospective
shareholders; costs of maintaining books of original entry for portfolio
accounting and other required books and accounts of calculating the NAV of

<PAGE>

shares of the Portfolios; costs of reproduction, stationery and supplies;
compensation of trustees and officers of the Fund and costs of other personnel
performing services for the Fund who are not officers of the Administrator or
Distributor, or their respective affiliates; costs of shareholder meetings; SEC
registration fees and related expenses; state securities laws registration fees
and related expenses; fees payable under the advisory contracts and under the
administration agreement, and all other fees and expenses paid by the
Portfolios.

ADMINISTRATOR AND DISTRIBUTOR

ADMINISTRATOR AND SUB-ADMINISTRATOR

SEI Investments Mutual Funds Services serves as administrator (the
"Administrator") to the Fund. The Administrator assists in supervising all
operations of the Portfolios, except those performed by AIA under the advisory
contracts, by the Distributor under the distribution agreement and by Allfirst
Trust under the sub-administration and custodian agreements.

Under its administration agreement with the Fund, the Administrator has
agreed to maintain office facilities for the Fund. The Administrator prepares
annual and semi-annual reports to the SEC, prepares Federal and state tax
returns, prepares filings with state securities commissions, and generally
assists in all aspects of the Fund's operations other than those discussed
above. Under the administration agreement, the Administrator also provides fund
accounting and related accounting services. The Administrator may delegate its
responsibilities under the administration agreement with the Fund's written
approval.

The Administrator, a Delaware business trust, has its principal
business offices at 1 Freedom Valley Drive, Oaks, PA 19456. SEI Investments
Management Corporation, a wholly-owned subsidiary of SEI Investments Company
("SEI"), is the owner of all beneficial interest in the Administrator. SEI and
its subsidiaries and affiliates are leading providers of funds evaluation
services, trust accounting systems, and brokerage and information services to
financial institutions, institutional investors and money managers.

For the fiscal years ended April 30, 1998, April 30, 1999 and April 30,
2000, the administration fee payable to the Administrator with respect to the
Small-Cap Equity Portfolio was $31,575, $36,029, $81,242 respectively.

As of the date of this Statement of Additional Information, the
Pennsylvania Tax-Free Money Market Portfolio and Social Issues Portfolios have
not commenced operations. Accordingly, these the Portfolios paid no
administration fees for the fiscal year ended April 30, 2000.

The administration agreement permits the Administrator to subcontract
its services thereunder, provided that the Administrator will not be relieved of
its obligations under the agreement by the appointment of a subcontractor and
the Administrator shall be responsible to the Fund for all acts of the
subcontractor as if such acts were its own, except for losses suffered

<PAGE>

by any Portfolio resulting from willful misfeasance, bad faith or gross
negligence by the subcontractor in the performance of its duties or for reckless
disregard by it of its obligations and duties. Pursuant to a sub-administration
agreement between the Administrator and Allfirst Trust, Allfirst Trust performs
services which may include clerical, bookkeeping, accounting, stenographic, and
administrative services, for which it receives a fee, paid by the Administrator,
at the annual rate of up to 0.0275% of aggregate average net assets. For the
fiscal years ended April 30, 1998, April 30, 1999 and April 30, 2000, the
Administrator paid a sub-administration fee to Allfirst Trust of $429,472.47,
$1,492,171, $1,580,669 respectively.

DISTRIBUTOR

SEI Investments Distribution Co. (formerly SEI Financial Services
Company) serves as the distributor (the "Distributor") of the Fund. The
Distributor offers shares continuously and has agreed to use its best efforts to
solicit purchase orders.

DISTRIBUTION PLANS

The Board of Trustees has adopted distribution plans (the "Plans")
pursuant to Rule 12b-1 under the 1940 Act (the "Rule") on behalf of the Retail
Class A of Pennsylvania Tax-Free Money Market Portfolio and Retail Class A and
Class B of Small-Cap Equity Portfolio. The Plans allow the Portfolios to pay the
Distributor a distribution fee at the annual rate of up to 0.75% of the average
net assets of such class, or such lesser amount as approved from time to time by
the Board. These fees may be used to pay expenses associated with the promotion
and administration of activities primarily intended to result in the sale of
shares of the Portfolios, including, but not limited to: advertising the
availability of services and products; designing material to send to customers
and developing methods of making such materials accessible to customers;
providing information about the product needs of customers; providing facilities
to solicit sales and to answer questions from prospective and existing investors
about the Portfolios; receiving and answering correspondence from prospective
investors, including requests for sales literature, prospectuses and statements
of additional information; displaying and making sales literature and
prospectuses available; acting as liaison between shareholders and the
Portfolios, including obtaining information from the Portfolios regarding the
Portfolios and providing performance and other information about the Portfolios;
and providing additional distribution-related services.

The Plans have been approved by the Board of Trustees, including the
majority of disinterested trustees, and where approved by the initial sole
shareholder of the classes. As required by the Rule, the Board considered all
pertinent factors relating to the implementation each of the Plans prior to its
approval, and the trustees have determined that there is a reasonable likelihood
that the Plans will benefit the classes and their respective shareholders. To
the extent that the Plans provide greater flexibility in connection with the
distribution of shares of the Portfolios, additional sales may result.

The Board has approved distribution fees based on the following
percentages of the average daily net assets of the Retail Class A: 0.25% for
Pennsylvania Tax-Free Money Market

<PAGE>

Portfolio and 0.30% for Small-Cap Equity Portfolio. For the fiscal year ended
April 30, 2000, the Retail Class A of the Small-Cap Equity Portfolio paid
$13,677 in distribution fees.

The Board has approved distribution fees of 0.75% of the average daily
net assets of the Retail Class B of Small-Cap Equity Portfolio. As of the date
of this Statement of Additional Information, Retail Class B shares of the
Small-Cap Equity Portfolio have not commenced operations. Accordingly, Retail
Class B of the Portfolio paid no Retail Class B distribution fees for the fiscal
year ended April 30, 2000.

As of the date of this Statement of Additional Information, the
Pennsylvania Tax-Free Money Market Portfolio and Social Issues Portfolios have
not commenced operations. According, the Retail Class A of these Portfolios paid
no distribution fees for the fiscal year ended April 30, 2000.

All distribution fees received by the Distributor under the Plans are
paid to qualified securities brokers or financial institutions or other
investment professionals in respect of their share accounts. The Plans are
compensation plans because the Distributor is paid a fixed fee and is given
discretion concerning what expenses are payable under the Plans. The Distributor
may spend more for marketing and distribution than it receives in fees. However,
to the extent fees received exceed expenses, including indirect expenses such as
overhead, the Distributor could be said to have received a profit. For example,
if the Distributor pays $1 for distribution-related expenses and receives $2
under the Plan, the $1 difference could be said to be a profit for the
Distributor. If, after payments by the Distributor for marketing and
distribution, there are any remaining fees, which have been paid under the Plan,
they may be used as the Distributor may elect. Since the amounts payable under
the Plan are commingled with the Distributor's general funds, including the
revenues it receives in the conduct of its business, it is possible that certain
of the Distributor's overhead expenses will be paid out of distribution fees and
that these expenses may include the costs of leases, depreciation,
communications, salaries, training and supplies.

SHAREHOLDER SERVICES PLANS

The Board of Trustees has adopted shareholder services plans on behalf
of the Retail Class A, Retail Class B and Institutional Class of the Portfolios
to compensate qualified recipients for individual shareholder services and
account maintenance. These functions include, but are not limited to, answering
shareholder questions and handling correspondence, assisting customers, and
account record-keeping and maintenance. For these services the participating
qualified recipients are paid a service fee at the annual rate of up to 0.25% of
average net assets of Retail Class A and Retail Class B of each Portfolio or
such lesser amount as may be approved by the Board and up to 0.15% of average
net assets of the Institutional Class of each Portfolio or such lesser amounts
as may be approved by the Board of Trustees.

For the fiscal years ended April 30, 1998, April 30, 1999 and April 30,
2000, Institutional Class of the Small-Cap Equity Portfolio paid $4,891,
$22,948, and $79,834, respectively, in

<PAGE>

shareholder servicing fees.

As of the date of this Statement of Additional Information, the
Pennsylvania Tax-Free Money Market Portfolio and Social Issues Portfolios have
not commenced operations. Accordingly, these Portfolios paid no shareholder
servicing fees for the fiscal year ended April 30, 2000.

TRANSFER AGENT

The Fund has a Transfer Agency and Services Agreement dated November 1,
1995, with SEI Investments Management Corporation. SEI Investments Management
Corporation has subcontracted transfer agency services to State Street Bank and
Trust Company ("State Street Bank"). State Street Bank maintains an account for
each shareholder, provides tax reporting for each Portfolio, performs other
transfer agency functions and acts as dividend disbursing agent for each
Portfolio.

CUSTODIAN

Allfirst Trust, 25 South Charles Street, Baltimore, Maryland 21201,
serves as custodian for the Portfolios. Under the custody agreement with the
Fund, Allfirst Trust holds the Fund's portfolio securities in safekeeping and
keeps all necessary records and documents relating to its duties. For the
services provided to the Fund pursuant to the custody agreement, the Fund pays
Allfirst Trust a monthly fee at the annual rate of 0.015% of the average net
assets of the Portfolios. Allfirst Trust also charges the Fund transaction
handling fees ranging from $5 to $75 per transaction and receives reimbursement
for out-of-pocket expenses. Foreign securities purchased by the Portfolios are
held by foreign banks participating in a network coordinated by Bankers Trust,
which serves as sub-custodian for the Portfolios holding foreign securities. All
expenses incurred through this network are paid by the Portfolios holding
foreign securities.

CODE OF ETHICS

The Board of Trustees of the Fund has adopted a Code of Ethics pursuant
to Rule 17j-1 under the 1940 Act. The Code of Ethics applies to the personal
investing activities of all trustees and officers of the Fund, as well as to
designated officers, directors and employees of AIA and the Distributor. As
described below, the Code of Ethics imposes significant restrictions of AIA's
investment personnel, including the portfolio mangers and employees who execute
or help execute a portfolio manager's decisions or who obtain contemporaneous
information regarding the purchase or sale of a security by the Portfolios.

The Code of Ethics requires that covered employees of AIA and trustees
who are "interested persons," preclear personal securities investments (with
certain exceptions, such as non-volitional purchases, purchases that are part of
an automatic dividend reinvestment plan or

<PAGE>

purchases of securities that are not eligible for purchase by the Portfolios).
The preclearance requirement and associated procedures are designed to identify
any substantive prohibition or limitation applicable to the proposed investment.
The substantive restrictions applicable to investment personnel include a ban on
acquiring any securities in an initial public offering, a prohibition from
profiting on short-term trading in securities and preclearance of the
acquisition of securities in private placements. Furthermore, the Code of Ethics
provides for trading "blackout periods" that prohibit trading by investment
personnel and certain other employees within periods of trading by the
Portfolios in the same security. Officers, directors and employees of AIA and
the Distributor may comply with codes instituted by those entities so long as
they contain similar requirements and restrictions.

DESCRIPTION OF THE FUND

TRUST ORGANIZATION

ARK Funds ("the Fund") is an open-end management investment company
organized as a Massachusetts business trust by a Declaration of Trust dated that
was amended and restated on March 19, 1993. Currently, the Fund is comprised of
the following thirty Portfolios: U.S. Treasury Money Market Portfolio, U.S.
Government Money Market Portfolio, Money Market Portfolio, Tax-Free Money Market
Portfolio, Pennsylvania Tax-Free Money Market Portfolio, U.S. Treasury Cash
Management Portfolio, U.S. Government Cash Management Portfolio, Prime Cash
Management Portfolio, Tax-Free Cash Management Portfolio, Short-Term Treasury
Portfolio, Short-Term Bond Portfolio, Maryland Tax-Free Portfolio, Pennsylvania
Tax-Free Portfolio, Intermediate Fixed Income Portfolio, U.S. Government Bond
Portfolio, Income Portfolio, Balanced Portfolio, Equity Income Portfolio, Value
Equity Portfolio, Equity Index Portfolio, Blue Chip Equity Portfolio, Capital
Growth Portfolio, Mid-Cap Equity Portfolio, Small-Cap Equity Portfolio,
International Equity Portfolio, Emerging Markets Equity Portfolio, Social Issues
Intermediate Fixed Income Portfolio, Social Issues Blue Chip Equity Portfolio,
Social Issues Capital Growth Portfolio, and Social Issues Small-Cap Equity
Portfolio. The Declaration of Trust permits the Board to create additional
series and classes of shares.

In the event that an affiliate of Allied Irish Banks, p.l.c. ceases to
be the investment advisor to the Portfolios, the right of the Fund and Portfolio
to use the identifying name "ARK" may be withdrawn.

The assets of the Fund received for the issue or sale of shares of a
Portfolio and all income, earnings, profits and proceeds thereof are allocated
to the Portfolio and constitute the underlying assets thereof. The underlying
assets of a Portfolio are segregated on the books of account and are charged
with the liabilities with respect to the Portfolio and with a share of the
general expenses of the Fund. General expenses of the Fund are allocated in
proportion to the asset value of the respective Portfolios, except where
allocations of direct expense can otherwise fairly be made. The officers of the
Fund, subject to the general supervision of the Board of Trustees, have the
power to determine which expenses are allocable to a given Portfolio, or

<PAGE>

which are general or allocable to all of the Portfolios. In the event of the
dissolution or liquidation of the Fund, shareholders of a Portfolio are entitled
to receive as a class the underlying assets of the Portfolio available for
distribution.

SHAREHOLDER AND TRUSTEE LIABILITY

The Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable for the obligations
of the trust. The Declaration of Trust provides that the Fund shall not have any
claim against shareholders, except for the payment of the purchase price of
shares, and requires that each agreement, obligation or instrument entered into
or executed by the Fund or the trustees shall include a provision limiting the
obligations created thereby to the Fund and its assets. The Declaration of Trust
provides for indemnification out of a Portfolio's property of any shareholders
of the Portfolio held personally liable for the obligations of the Portfolio.
The Declaration of Trust also provides that a Portfolio shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the Portfolio and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss because of shareholder liability is
limited to circumstances in which the Portfolio itself would be unable to meet
its obligations. In view of the above, the risk of personal liability to
shareholders is remote.

The Declaration of Trust further provides that the trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects a trustee against
any liability to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his or her office.

Shares of a Portfolio of any class are fully paid and non-assessable,
except as set forth under the heading "Shareholder and Trustee Liability" above.
Shareholders may, as set forth in the Declaration of Trust, call meetings for
any purpose related to the Fund, a Portfolio or a class, respectively, including
in the case of a meeting of the entire Fund, the purpose of voting on removal of
one or more trustees. The Fund or any Portfolio may be terminated upon the sale
of its assets to another open-end management investment company, or upon
liquidation and distribution of its assets, if approved by vote of the holders
of a majority of the outstanding shares of the Fund or the Portfolio. If not so
terminated, the Fund and the Portfolios will continue indefinitely.

SHARE OWNERSHIP

As of November 3, 2000, the officers and trustees of the Fund owned
less than 1% of the outstanding shares of any Portfolio and the following
persons owned beneficially more than 5% of the outstanding shares of the
Portfolios and classes indicated. Unless otherwise indicated the

<PAGE>

address as of November 3, 2000 for the 5% shareholders listed below is: c/o
Allfirst Bank, 110 South Paca Street, Baltimore, Maryland 21201.

SMALL-CAP EQUITY PORTFOLIO

-------------------------------------------------------------------------------
INSTITUTIONAL CLASS - Allfirst Financial Pension Plan - Michael Driscoll, Vice
President, Allfirst Bank - Mail code 109-810 (20.71%)

IBEW Intl Off Rep & Assts Pen Plan - IBEW, Attn: Jeff
Miller, 1125 15th Street, NW, Washington, DC 20005-2765
(17.93%)

IBEW Office Emp Pension Plan - IBEW, Attn: Jeff Miller,
1125 15th Street, NW, Washington, DC 20005-2765 (5.88%)

Health Alliance of Pennsylvania, Hospital Association of
Pennsylvania- Attn: Michael A. Suchanick, CPA, P.O. Box
8600, Harrisburg, PA 17105-8600 (6.42%)

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

A shareholder owning beneficially more than 25% of a particular
Portfolio's shares may be considered to be a "controlling person" of that
Portfolio. Accordingly, its vote could have a more significant effect on matters
presented at shareholder meetings than the votes of the Portfolio's other
shareholders. Allfirst Trust or its affiliates, however, may receive voting
instructions from certain underlying customer accounts and will vote the shares
in accordance with those instructions. In the absence of such instructions,
Allfirst Trust or its affiliates will vote those shares in the same proportion
as it votes the shares for which it has received instructions from its customers
and fiduciary accounts.

INDEPENDENT AUDITORS

KPMG LLP, located at 99 High Street, Boston, Massachusetts 02110, is
the ARK Funds' independent auditors, providing audit services and consultation
in connection with the review of various SEC filings.

FINANCIAL STATEMENTS

Financial statements and financial highlights for the Small-Cap Equity
Portfolio for the fiscal year ended April 30, 2000 are included in the Annual
Report. The ARK Funds' Annual Report is supplied with this Statement of
Additional Information. Financial statements and financial highlights for the
Small-Cap Equity Portfolio are incorporated herein by reference.

<PAGE>

APPENDIX A

DESCRIPTION OF SELECTED INDICES

Russell 2000 Index is an unmanaged index of Small-Capitalization stocks that
includes reinvestment of dividends.

Russell 2000 Growth Index is a widely recognized, capitalization-weighted
(companies with larger market capitalizations have more influence than those
with smaller market capitalizations) index of U.S. companies with high growth
rates and price-to-book ratios.

DESCRIPTION OF MOODY'S RATINGS OF STATE AND MUNICIPAL NOTES

Moody's ratings for state and municipal and other short-term obligations are
designated Moody's Investment Grade ("MIG," or "VMIG" for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short run.
Symbols used will be as follows:

MIG-1/VMIG-1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.

MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

DESCRIPTION OF S&P'S RATINGS OF STATE AND MUNICIPAL NOTES

SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.

SP-2 - Satisfactory capacity to pay principal and interest.

DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS

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

A-1

<PAGE>

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

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

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

Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

DESCRIPTION OF S&P'S MUNICIPAL BOND RATINGS

AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher categories.

The ratings from AA to BBB may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.

A-2

<PAGE>

DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS

Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:

- Leading market positions in well-established industries.

- High rates of return on funds employed.

- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.

- Broad margins in earnings coverage of fixed financial
charges and with high internal cash generation.

- Well established access to a range of financial markets and
assured sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

DESCRIPTION OF S&P'S COMMERCIAL PAPER RATINGS

A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2, and 3 to indicate the relative degree of safety.

A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.

A-2 - Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS

Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or exceptionally stable margin and
principal is secure. While the various protective

A-3

<PAGE>

elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.

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

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

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

Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.

B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any long period of time may be small.

Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca - Bonds rated Ca represent obligations which are speculative to a high
degree. Such issues are often in default or have other marked short-comings.

C - Bonds rated C are the lowest rated class of bonds, and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.

A-4

<PAGE>

DESCRIPTION OF S&P'S CORPORATE BOND RATINGS

AAA - Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only to a small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.

CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.

CI - The rating CI is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not

A-5

<PAGE>

expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

The ratings from AA to CCC may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.

A-6
<PAGE>

APPENDIX B

2000 TAX RATES

The following tables show the effect of a shareholder's tax status on
effective yield under the Federal and applicable state and local income tax laws
for 2000. The second table shows the approximate yield a taxable security must
provide at various income brackets to produce after-tax yields equivalent to
those of hypothetical tax-exempt obligations yielding from 3% to 7%. Of course,
no assurance can be given that a Portfolio will achieve any specific tax-exempt
yield. While the Pennsylvania Tax-Free Money Market Portfolio invests
principally in obligations whose interest is exempt from Federal income tax
(Pennsylvania state income tax, as well) other income received by the Portfolio
may be taxable.

Use the first table to find your approximate effective tax bracket
taking into account Federal and state taxes for 2000.

COMBINED
PENNSYLVANIA COMBINED
FEDERAL AND FEDERAL PENNSYLVANIA
INCOME PENNSYLVANIA EFFECTIVE AND FEDERAL
SINGLE RETURN JOINT RETURN TAX MARGINAL TAX EFFECTIVE TAX
TAXABLE INCOME* TAXABLE INCOME* BRACKET** RATE BRACKET*** BRACKET****

* Net amount subject to Federal income tax after deductions and
exemptions. Assumes ordinary income only.

** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.

*** Combined Pennsylvania and Federal effective tax brackets take into
account the Pennsylvania state income tax rate of 2.8% and Philadelphia
school district investment income tax rate of 4.6135%. Figures are
tax-effected to reflect the Federal tax benefit for

B-1

<PAGE>

persons who itemized deductions. Having determined your effective tax
bracket above, use the following table to determine the tax equivalent
yield for a given tax-free yield.

**** Combined Pennsylvania and Federal effective tax brackets take into
account the highest Pennsylvania state income tax rate of 2.8% but does
not take into account any local income tax rate since only residents of
the school district of Philadelphia are subject to a local income tax
on the net income from the ownership, sale or other disposition of
tangible and intangible personal property. Figures are tax-effected to
reflect the Federal tax benefit for persons who itemized deductions.

If your combined effective Federal, Pennsylvania state and Philadelphia school
district investment income tax rate in 2000 is:

33.34% 36.12% 40.74% 44.08%

Your taxable investment would have to earn the following yield:

3.00% 4.50% 4.70% 5.06% 5.36%
4.00% 6.00% 6.26% 6.75% 7.15%
5.00% 7.50% 7.83% 8.44% 8.94%
6.00% 9.00% 9.39% 10.13% 10.73%
7.00% 10.50% 10.96% 11.81% 12.52%

If your combined effective Federal and Pennsylvania state income tax rate in
2000 is:

30.02% 32.93% 37.79% 41.29%

Your taxable investment would have to earn the following yield:

3.00% 4.29% 4.47% 4.82% 5.11%
4.00% 5.72% 5.96% 6.43% 6.81%
5.00% 7.14% 7.46% 8.04% 8.52%
6.00% 8.57% 8.95% 9.65% 10.22%
7.00% 10.00% 10.44% 11.25% 11.92%

A Portfolio may invest a portion of its assets in obligations that are subject
to Federal, state, or county income taxes. When the Portfolio invests in these
obligations, its tax-equivalent yield will be lower. In the table above,
tax-equivalent yields are calculated assuming investments are 100% Federal and
state tax free.

Yield information may be useful in reviewing a Portfolio's performance and in
providing a basis for comparison with other investment alternatives. However,
each Portfolio's yield fluctuates,

B-2

<PAGE>

unlike investments that pay a fixed interest rate over a stated period of time.
When comparing investment alternatives, investors should also note the quality
and maturity of the portfolio securities of the respective investment companies
that they have chosen to consider.

Investors should recognize that in periods of declining interest rates a
Portfolio's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates a Portfolio's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to a Portfolio from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
Portfolio's holdings, thereby reducing the Portfolio's current yield. In periods
of rising interest rates, the opposite can be expected to occur. THE YIELDS OF
THE RETAIL CLASS A, RETAIL CLASS B, INSTITUTIONAL CLASS OR INSTITUTIONAL II
CLASS OF A PORTFOLIO ARE EACH CALCULATED SEPARATELY. THE YIELDS OF THE RETAIL
CLASS A, RETAIL CLASS B AND INSTITUTIONAL CLASS OF A PORTFOLIO WILL BE LOWER
THAN THOSE OF THE INSTITUTIONAL CLASS OF THE SAME PORTFOLIO, DUE TO HIGHER
EXPENSES IN GENERAL.

B-3

<PAGE>

Part C - Other Information Item

Item 23. Exhibits

(a) (1) Declaration of Trust dated October 22, 1992 is
incorporated by reference to Exhibit 1 to the Registration
Statement.

(2) Amended and Restated Declaration of Trust dated
March 19, 1993 is incorporated by reference to Exhibit 1(b)
to Pre-Effective Amendment No. 2.

(3) Supplement dated March 23, 1993 to the Amended and
Restated Declaration of Trust dated March 19, 1993 is
incorporated by reference to Exhibit 1(c) to Pre-Effective
Amendment No. 2.

(b) By-Laws of the Registrant are incorporated by reference to
Exhibit 1(d) to Pre-Effective Amendment No. 2.

(d) (1) Investment Advisory Agreement dated February 12, 1998,
between the Registrant and Allied Investment Advisors, Inc. is
incorporated herein by reference to Exhibit 5(b) to Post-
Effective Amendment No. 17.

(2) Form of Investment Subadvisory Agreement is
incorporated herein by reference to Exhibit (d)(2) to
Post-Effective Amendment No. 27.

(e) (1) Distribution Agreement dated November 1, 1995, between
the Registrant and SEI Investments Distribution Co. is
incorporated herein by reference to Exhibit 6(a) to Post-
Effective Amendment No. 6.

(2) Administration Agreement dated November 1, 1995,
between the Registrant and SEI Investments Mutual Fund
Services is incorporated herein by reference to Exhibit 6(b)
to Post-Effective Amendment No. 6.

(f) Not applicable.

(g) (1) Custody Agreement dated April 1, 1997, between the
Registrant and Allfirst Trust Company, National Association,
is incorporated herein by reference to Exhibit 8(a) to Post-
Effective Amendment No. 17.

(2) Subcustody Agreement dated November 9, 1995, between
First National Bank of Maryland and Bankers Trust Company is
incorporated herein by reference to Exhibit 8(b) to
Post-Effective Amendment No. 6.

(h) (1) Transfer Agency and Service Agreement dated November
1, 1995, between the Registrant and SEI Investments Mutual
Fund Services is incorporated herein by reference to
Exhibit 9 to Post-Effective Amendment No. 6.
<PAGE>

(2) Sub-Administration Agreement dated January 1, 1998,
between SEI Investments Management Corporation and Allfirst
Trust Company, National Association, is incorporated herein by
reference to Exhibit 9(b) to Post-Effective Amendment No. 17.

(i) Opinion and consent of legal counsel*

(j) Consent of KPMG LLP (filed herewith).

(k) Not applicable.

(l) Not applicable.

(m) (1) Distribution and Shareholder Services Plan with
respect to Retail Class A Shares is incorporated
herein by reference to Exhibit (m)(1) to Post-Effective
Amendment No. 21.

(2) Amended and Restated Distribution and Shareholder
Services Plan with respect to Retail Class B Shares*

(3) Shareholder Services Plan for Institutional Class
Shares is incorporated herein by reference to Exhibit (m)(2)
to Post-Effective Amendment No. 21.

(n) Amended and Restated Rule 18f-3 Plan*

(o) Reserved.

(p) (1) Fund Code of Ethics is incorporated herein by
reference to Exhibit (p)(1) to Post-Effective Amendment No.25.

(2) SEI Investments Code of Ethics and Insider Trading
Policy is incorporated herein by reference to Exhibit (p)
(2) to Post-Effective Amendment No. 25.
__________________________
*To be filed by Amendment

Item 24. Persons Controlled by or Under Common Control with Registrant

None.

Item 25. Indemnification

Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present trustee or officer. It states that the
Registrant shall indemnify any present or past trustee or officer to the fullest
extent permitted by law against liability and all expenses reasonably incurred
by him in connection with any claim, action, suit or proceeding in which he is
involved by virtue of his service as a trustee, an officer, or both.
Additionally, amounts paid or incurred in settlement of such matters are covered
by this indemnification. Indemnification will not be provided in certain
circumstances, however. These include instances of willful misfeasance, bad
faith, gross negligence, and reckless disregard of the duties involved in the
conduct of the particular office involved. Insofar as indemnification for
liability arising under the Securities Act of 1933 may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such

<PAGE>

liabilities (other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.

Item 26. Business and Other Connections of Investment Adviser

Allied Investment Advisors, Inc. ("AIA") serves as investment adviser
to all Portfolios of the Registrant. A description of the directors and officers
of AIA and other required information is included in the Form ADV and schedules
thereto of AIA, as amended, on file with the Securities and Exchange Commission
(File No. 801-50883) and is incorporated herein by reference.

AIB Govett, Inc. ("AIB Govett") serves as investment subadviser to the
International Equity Portfolio and Emerging Markets Equity Portfolio. A
description of the directors and officers of AIB Govett, and other required
information, is included in AIB Govett's Form ADV and schedules thereto, as
amended, which is on file at the SEC (File No. 801-54821). AIB Govett's Form
ADV, as amended, is incorporated herein by reference.

Item 27. Principal Underwriters

(a) SEI Investments Distribution Co. (the "Distributor") acts as
distributor for the Registrant. The Distributor also acts as distributor for:

SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
The PBHG Funds, Inc. July 16, 1993
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
STI Classic Variable Trust August 18, 1995
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997

<PAGE>

Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
The Armada Advantage Funds May 1, 1999
Amerindo Funds, Inc. July 13, 1999
Huntington VA Funds October 15, 1999
SEI Insurance Products Trust March 29, 1999
Friends Ivory Funds December 16, 1999
iShares Inc. January 28, 2000
iShares Trust April 25, 2000
Pitcarin Funds August 1, 2000

The Distributor provides numerous financial services to investment managers,
pension plan sponsors and bank trust departments. These services include
portfolio evaluation, performance measurement and consulting services ("Funds
Evaluation") and automated execution, clearing and settlement of securities
transactions ("MarketLink").
<TABLE>
<CAPTION>

(b) Directors, officers and partners of SEI Investments Distribution Co. are as follows:
<S> <C> <C> <C>

NAME AND PRINCIPAL BUSINESS POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
ADDRESS * UNDERWRITER REGISTRANT
------- ----------- ----------
Alfred P. West, Jr. Director, Chairman of the Board
of Directors
Richard B. Lieb Director and Executive Vice President
Carmen V. Romeo Director
Mark J. Held President and Chief Operating Officer
Dennis J. McGonigle Executive Vice President
Robert M. Silvestri Chief Financial Officer and Treasurer
Leo J. Dolan, Jr. Senior Vice President
Carl A. Guarino Senior Vice President
Jack May Senior Vice President
Hartland J. McKeown Senior Vice President
Kevin P. Robins Senior Vice President
Patrick K. Walsh Senior Vice President
Wayne M. Withrow Senior Vice President
Robert Crudup Vice President and Managing Director
Barbara Doyne Vice President
Vic Galef Vice President and Managing Director
</TABLE>

John Kirk Vice President and Managing Director
Kim Kirk Vice President and Managing Director
John Krzeminski Vice President and Managing Director
Carolyn McLaurin Vice President and Managing Director
Paul Lonergan Vice President and Managing Director
Steven Gardner Vice President and Managing Director
Scott Fanatico Vice President and Managing Director
Scott W. Dellorfano Vice President and Managing Director
John Andersen Vice President and Managing Director
Lori White Vice President and Assistant
Secretary
Robert Aller Vice President
Todd Cipperman Senior Vice President and General Vice President and Assistant
Counsel Secretary
Richard A. Deak Vice President and Assistant
Secretary
Jeff Drennen Vice President
Alan H. Lauder Vice President
Lydia A. Gavalis Vice President and Assistant Vice President and Assistant
Secretary Secretary
William E. Zitelli, Jr. Vice President and Assistant
Secretary
Greg Gettinger Vice President
Kathy Heilig Vice President
Jeff Jacobs Vice President
Samuel King Vice President
Mark Nagle Vice President
Joanne Nelson Vice President
Ellen Marquis Vice President
Timothy D. Barto Vice President and Assistant Vice President and Assistant
Secretary Secretary
Christine M. McCullough Vice President and Assistant Vice President and Assistant
Secretary Secretary
Cynthia M. Parrish Vice President and Secretary
Robert Redican Vice President
Maria Rinehart Vice President
Steve Smith Vice President
Kathryn L. Stanton Vice President
Daniel Spaventa Vice President
</TABLE>

<PAGE>

----------------------
* 1 Freedom Valley Drive, Oaks, PA 19456

Item 28. Location of Accounts and Records

The Registrant maintains the records required by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 inclusive thereunder at its
principal office located at One Freedom Valley Drive, Oaks, PA 19456. Certain
records, including records relating to the Registrant's shareholders, may be
maintained pursuant to Rule 31a-3 at the offices of the Registrant's investment
adviser, Allied Investment Advisors, Inc., located at 100 E. Pratt Street,
Baltimore, MD 21202; its sub-adviser, AIB Govett, Inc., located at 250
Montgomery Street, Suite 1200, San Francisco, CA 94104; and its transfer agent,
SEI Investments Mutual Fund Services, located at One Freedom Valley Drive, Oaks,
PA 19456. Certain records relating to the physical possession of the
Registrant's securities may be maintained at the offices of the Registrant's
custodian, Allfirst Trust Company, N.A., located at 25 S. Charles Street,
Baltimore, MD 21201.

Item 29. Management Services

(a) Not applicable.

Item 30. Undertakings

(a) Not applicable.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant duly caused this Post-Effective
Amendment No. 30 to be signed on its behalf by the undersigned, hereunto duly
authorized, in the City of Baltimore, and State of Maryland, on the 22nd day of
November, 2000.

ARK FUNDS

By: /s/ Rick A. Gold

--------------------
Rick A. Gold
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 30 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>

<S> <C>
/s/ Rick A. Gold President (principal executive November 22, 2000
----------------------------
Rick A. Gold officer)

/s/ James F. Volk Treasurer, Controller and Chief November 22, 2000
---------------------------------
James F. Volk Financial Officer

* Trustee
--------------------------------------
William H. Cowie

Trustee
*
------------------
David D. Downes

Trustee
*
------------------
Charlotte R. Kerr

Trustee
*
------------------
Thomas Schweizer

Trustee
*
------------------
Richard B. Seidel

* By: /s/ Alan C. Porter November 22, 2000
------------------------------------
Alan C. Porter
Attorney-in-Fact
</TABLE>

An original power-of-attorney authorizing Alan C. Porter to execute amendments
to this Registration Statement for each trustee of the Registrant on whose
behalf this amendment to the Registration Statement is filed has been executed
and filed with the Securities and Exchange Commission.

<PAGE>

EXHIBIT INDEX

(a) (1) Declaration of Trust 1/

(2) Amended and Restated Declaration of Trust 2/

(3) Supplement dated March 23, 1993 to the Amended and Restated
Declaration of Trust dated March 19, 1993 2/

(b) By-Laws 2/

(d) (1) Investment Advisory Agreement between the Registrant and
Allied Investment Advisors, Inc. dated February 12, 1998 4/

(2) Form of Investment Subadvisory Agreement between the
Registrant, Allied Investment Advisors, Inc., and AIB Govett
Inc. 8/

(e) (1) Distribution Agreement between the Registrant and SEI
Investments Distribution Co. dated November 1, 1995 3/

(2) Administration Agreement between the Registrant and SEI
Investments Mutual Fund Services dated November 1, 1995 3/

(f) Bonus or Profit Sharing Contracts- Not applicable

(g) (1) Custody Agreement between the Registrant and Allfirst Trust
Company, National Association dated April 1, 1997 4/

(2) Subcustody Agreement between First National Bank of Maryland
and Bankers Trust Company dated November 9, 1995 3/

(h) (1) Transfer Agency and Service Agreement between the Registrant
and SEI Investments Mutual Fund Services dated November 1,
1995 3/

(2) Sub-Administration Agreement between SEI Investments
Management Corporation and Allfirst Trust Company, National
Association dated January 1, 1998 4/

(i) Opinion and consent of legal counsel (to be filed by amendment)

(j) Consent of KPMG LLP (filed herewith)

(k) Omitted Financial Statements- Not applicable

(l) Initial Capital Agreements- Not applicable

(m) (1) Distribution and Shareholder Services Plan with respect to
Retail Class A Shares 5/

(2) Amended and Restated Distribution and Shareholder Services
Plan with respect to Retail Class B Shares (to be filed by
amendment)
<PAGE>
(3) Shareholder Services Plan for Institutional Class Shares 5/

(n) Amended and Restated Rule 18f-3 Plan (to be filed by amendment)

(o) Reserved.

(p) (1) Fund Code of Ethics 6/

(2) SEI Investments Code of Ethics and Insider Trading Policy 6/

-------------------------
1/ Incorporated by reference to the Registration Statement of the Trust on
Form N-1A as filed with the SEC on October 23, 1992.

2/ Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registration Statement of the Trust on Form N-1A as filed with the SEC
on May 4, 1993.

3/ Incorporated by reference to Post-Effective Amendment No. 6 to the
Registration Statement of the Trust on Form N-1A as filed with the SEC
on December 12, 1995.

4/ Incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement of the Trust on Form N-1A as filed with the SEC
on February 6, 1998.

5/ Incorporated by reference to Post-Effective Amendment No. 21 to the
Registration Statement of the Trust on Form N-1A as filed with the SEC
on June 29, 1999.

6/ Incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement of the Trust on Form N-1A as filed with the SEC
on April 13, 2000.

7/ Incorporated by reference to Post-Effective Amendment No. 26 to the
Registration Statement of the Trust on Form N-1A as filed with the SEC
on May 22, 2000.

8/ Incorporated by reference to Post-Effective Amendment No. 27 to the
Registration Statement of the Trust on Form N-1A as filed with the SEC
on June 29, 2000.

9/ Incorporated by reference to Post-Effective Amendment No. 28 to the
Registration Statement of the Trust on Form N-1A as filed with the SEC
on June 30, 2000.

10/ Incorporated by reference to Post-Effective Amendment No. 26 to The
Govett Funds, Inc. Registration Statement on Form N-1A as filed with
the SEC on May 9, 2000.

11/ Incorporated by reference to the Registrant's filing with the SEC
pursuant to Rule 30b-2 under the Investment Company Act of 1940.