<PAGE>
Retail Shares Class A and Class B Prospectus
The ARK Family of Mutual Funds
September 1, 1999
as revised May 1, 2000
We are pleased to send you the 1999 Prospectus for the Retail Shares Class A and
Class B of ARK Funds. The prospectus is updated annually, and contains valuable
information about your investments in ARK Funds. Since we are required by law to
send a prospectus to each person listed as a shareholder, you (or your
household) may receive more than one prospectus.
We hope you find this information helpful.
MONEY MARKET
PORTFOLIOS
FIXED INCOME
PORTFOLIOS
EQUITY
PORTFOLIOS
[LOGO OF ARK FUNDS]
<PAGE>
[LOGO OF ARK FUNDS]
Retail Class A
and Class B Shares
Prospectus
September 1, 1999
as revised May 1, 2000
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
MONEY MARKET PORTFOLIO
TAX-FREE MONEY MARKET PORTFOLIO
SHORT-TERM TREASURY 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 SELECTION PORTFOLIO
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
U.S. TREASURY MONEY MARKET PORTFOLIO 4
U.S. GOVERNMENT MONEY MARKET PORTFOLIO 6
MONEY MARKET PORTFOLIO 8
TAX-FREE MONEY MARKET PORTFOLIO 10
SHORT-TERM TREASURY PORTFOLIO 12
MARYLAND TAX-FREE PORTFOLIO 14
PENNSYLVANIA TAX-FREE PORTFOLIO 18
INTERMEDIATE FIXED INCOME PORTFOLIO 22
U.S. GOVERNMENT BOND PORTFOLIO 24
INCOME PORTFOLIO 28
BALANCED PORTFOLIO 32
EQUITY INCOME PORTFOLIO 36
VALUE EQUITY PORTFOLIO 38
EQUITY INDEX PORTFOLIO 42
BLUE CHIP EQUITY PORTFOLIO 44
CAPITAL GROWTH PORTFOLIO 48
MID-CAP EQUITY PORTFOLIO 52
SMALL-CAP EQUITY PORTFOLIO 54
INTERNATIONAL EQUITY SELECTION PORTFOLIO 56
MORE INFORMATION ABOUT RISK 60
EACH PORTFOLIO'S OTHER INVESTMENTS 64
INVESTMENT ADVISOR 65
PURCHASING, SELLING AND EXCHANGING
PORTFOLIO SHARES 67
DISTRIBUTION OF PORTFOLIO SHARES 76
DIVIDENDS AND DISTRIBUTIONS 77
TAXES 77
FINANCIAL HIGHLIGHTS 78
HOW TO OBTAIN MORE INFORMATION
ABOUT ARK FUNDS BACK COVER
<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 a money market fund
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 U.S. Treasury Money Market Portfolio, U.S. Government Money Market
Portfolio, Money Market Portfolio and Tax-Free Money Market Portfolio try to
maintain a constant price per share of $1.00, but there is no guarantee that
these Portfolios will achieve this goal.
PROSPECTUS 3
<PAGE>
- --------------------------------------------------------------------------------
ARK U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Maximizing current income and providing liquidity and security of principal
Investment Focus
Short-term U.S. Treasury securities
Share Price Volatility
Very low
Principal Investment Strategy
Investing in U.S. Treasury obligations
Investor Profile
Conservative investors seeking current income through a low-risk, liquid
investment
Investment Strategy of the U.S. Treasury Money Market Portfolio
The U.S. Treasury Money Market Portfolio seeks its investment goal by investing
exclusively in U.S. Treasury obligations.
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
relating to maturity, diversification and credit quality. 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 U.S. Treasury 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.
The Portfolio's U.S. Treasury securities are not guaranteed against price
movements due to changing interest rates.
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 from year to year for three years.
[GRAPH]
1996 1997 1998
----- ----- -----
4.77% 4.77% 4.55%
- --------------------------------------------------------------------------------
BEST QUARTER 1.20% (3/31/96)
- --------------------------------------------------------------------------------
WORST QUARTER 1.03% (12/31/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's total
return was 1.98%.
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the IBC/Financial Data 100% U.S. Treasury
Average.
- --------------------------------------------------------------------------------
Since
Class A Shares 1 Year Inception
- --------------------------------------------------------------------------------
U.S. Treasury Money
Market Portfolio 4.55% 4.71%*
- --------------------------------------------------------------------------------
IBC/Financial Data 100%
U.S. Treasury Average 4.63% 4.71%**
- --------------------------------------------------------------------------------
* Since December 15, 1995.
** Since November 30, 1995.
WHAT IS AN AVERAGE?
An average measures the share prices of a specific group of mutual funds with a
particular investment objective. You cannot invest directly in an average. The
IBC/Financial Data 100% U.S. Treasury Average is a composite of money market
mutual funds with investment goals similar to the Portfolio's goals.
4 PROSPECTUS
<PAGE>
Portfolio Fees and Expenses
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
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 0.34%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 0.84%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.12%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 0.72%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 0.72% for a
period of one year. The Portfolio's total actual annual operating expenses
for the most recent fiscal year were less than the amount shown above because
the Advisor is waiving a portion of the fees in order to keep total operating
expenses at a specified level. The Advisor may discontinue all or part of
these waivers at any time. With these fee waivers, the Portfolio's actual
total operating expenses are as follows:
U.S. Treasury Money Market Portfolio -
Class A Shares 0.69%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$74 $256 $454 $1,026
- --------------------------------------------------------------------------------
PROSPECTUS 5
<PAGE>
- --------------------------------------------------------------------------------
ARK U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Maximizing current income and providing liquidity and security of principal
Investment Focus
Short-term U.S. government securities
Share Price Volatility
Very low
Principal Investment
Strategy
Investing in U.S. government obligations and repurchase agreements
Investor Profile
Conservative investors seeking current income through a low-risk, liquid
investment
Investment Strategy of the U.S. Government Money Market Portfolio
The U.S. Government Money Market Portfolio seeks its investment goal by
investing exclusively in obligations issued by the U.S. government and its
agencies and instrumentalities and in repurchase agreements.
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
relating to maturity, diversification and credit quality. 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 U.S. Government 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.
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.
Performance Information
The bar chart and the performance table which follow 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 the performance of the Portfolio's Class A Shares for the
most recent year.
[GRAPH]
1998
-----
4.96%
- --------------------------------------------------------------------------------
BEST QUARTER 1.26% (9/30/98)
- --------------------------------------------------------------------------------
WORST QUARTER 1.15% (12/31/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's total
return was 2.17%.
6 PROSPECTUS
<PAGE>
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the IBC/Financial Data U.S. Government and
Agencies Average.
Since
Class A Shares 1 Year Inception
- --------------------------------------------------------------------------------
U.S. Government
Money Market Portfolio 4.96% 5.06%*
- --------------------------------------------------------------------------------
IBC/Financial Data
U.S.Government and
Agencies Average 5.10% 4.95%**
- --------------------------------------------------------------------------------
* Since July 7, 1997.
** Since June 30, 1997.
WHAT IS AN AVERAGE?
An average measures the share prices of a specific group of mutual funds with a
particular investment objective. You cannot invest directly in an average. The
IBC/Financial Data U.S. Government and Agencies Average is a composite of money
market mutual funds with investment goals similar to the Portfolio's goals.
Portfolio Fees and Expenses
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
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 0.33%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 0.83%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.17%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 0.66%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 0.66% for a
period of one year. The Portfolio's total actual annual operating expenses for
the most recent fiscal year were less than the amount shown above because the
Advisor is waiving a portion of the fees in order to keep total operating
expenses at a specified level.
The Advisor may discontinue all or part of these waivers at any time. With these
fee waivers, the Portfolio's actual total operating expenses are as follows:
U.S. Government Money Market Portfolio -
Class A Shares 0.63%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$67 $248 $444 $1,010
- --------------------------------------------------------------------------------
PROSPECTUS 7
<PAGE>
- --------------------------------------------------------------------------------
ARK MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Maximizing current income and providing liquidity and security of principal
Investment Focus
Short-term money market instruments
Share Price Volatility
Very low
Principal Investment Strategy
Investing in high-quality U.S. dollar-denominated money market securities
Investor Profile
Conservative investors seeking current income through a low-risk, liquid
investment
Investment Strategy of the Money Market Portfolio
The Money Market Portfolio seeks its investment goal by investing primarily in
high-quality, short-term U.S. dollar-denominated debt securities issued by
corporations, the U.S. government and banks, including U.S. and foreign branches
of U.S. banks and U.S. branches of foreign banks. At least 95% of such
securities will be rated in the highest ratings category by two or more
nationally recognized statistical rating organizations.
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
relating to maturity, diversification and credit quality. 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 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.
The Portfolio's 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.
Performance Information
The bar chart and the performance table which follow 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.
The performance of Class A and Class B Shares will differ due to differences in
expenses. This bar chart shows changes in the performance of the Portfolio's
Class A Shares from year to year for four years. The Portfolio's Class B Shares
commenced operations on January 22, 1999, and do not have a full calendar year
of performance.
[GRAPH]
1995 1996 1997 1998
---- ---- ---- ----
5.65% 5.04% 5.21% 5.12%
- --------------------------------------------------------------------------------
BEST QUARTER 1.41% (6/30/95)
- --------------------------------------------------------------------------------
WORST QUARTER 1.21% (6/30/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was 2.25%.
8 PROSPECTUS
<PAGE>
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the IBC/Financial Data First Tier Average.
- --------------------------------------------------------------------------------
Since
1 Year Inception
- --------------------------------------------------------------------------------
Money Market Portfolio
Class A Shares 5.12% 5.01%*
- --------------------------------------------------------------------------------
IBC/Financial Data
First Tier Average 4.96% 4.87%**
- --------------------------------------------------------------------------------
* Since March 2, 1994.
** Since February 28,1994.
WHAT IS AN AVERAGE?
An average measures the share prices of a specific group of mutual funds with a
particular investment objective. You cannot invest directly in an average. The
IBC/Financial Data First Tier Average is a composite of money market mutual
funds with investment goals similar to the Portfolio's goals.
Portfolio Fees and Expenses
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.25% 0.25%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.32% 0.42%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 0.82% 1.42%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.20% 0.11%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 0.62%* 1.31%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses of the Class A and Class B Shares in order to keep total operating
expenses from exceeding 0.62% and 1.31%, respectively, for a period of one
year. The Portfolio's total actual annual operating expenses for the most
recent fiscal year were less than the amount shown above because the Advisor
is waiving a portion of the fees in order to keep total operating expenses at
a specified level.
The Advisor may discontinue all or part of these waivers at any time. With these
fee waivers, the Portfolio's actual total operating expenses are as follows:
Money Market Portfolio - Class A Shares 0.59%
Money Market Portfolio - Class B Shares 1.28%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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.
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:
If you sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 Year 3 Years 5 years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $63 $242 $435 $995
- --------------------------------------------------------------------------------
Class B Shares* $633 $739 $966 $1,452
- --------------------------------------------------------------------------------
If you do not sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 Year 3 Years 5 years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $63 $242 $435 $995
- --------------------------------------------------------------------------------
Class B Shares* $133 $439 $766 $1,452
- --------------------------------------------------------------------------------
* In certain circumstances involving redemptions of Class B Shares that were
obtained by exchanging Class B Shares of another Portfolio for Class B Shares of
the Money Market Portfolio, a contingent deferred sales charge will apply. The
contingent deferred sales charge applied will be equal to the charge that would
have applied had Class B Shares of another Portfolio not been exchanged for
Class B Shares of the Money Market Portfolio. See "Selling Fund Shares."
PROSPECTUS 9
<PAGE>
- --------------------------------------------------------------------------------
ARK TAX-FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Maximizing current income exempt from Federal income taxes and providing
liquidity and security of principal
Investment Focus
Short-term, high-quality municipal money market obligations
Share Price Volatility
Very low
Principal Investment Strategy
Investing in tax-exempt U.S. dollar-denominated money market securities
Investor Profile
Conservative investors seeking tax-exempt income through a low-risk, liquid
investment
Investment Strategy of the Tax-Free Money Market Portfolio
The Tax-Free Money Market Portfolio seeks its investment goal by investing
substantially all of its assets in a broad range of high-quality, short-term
municipal money market instruments that pay interest that is exempt from Federal
income taxes. The issuers of these securities may be state and local governments
and agencies located in any of the 50 states, the District of Columbia, Puerto
Rico and other U.S. territories and possessions. The Portfolio is well
diversified among issuers and 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.
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
relating to maturity, diversification and credit quality. 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 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 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.
Performance Information
The bar chart and the performance table which follow 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 from year to year for four years.
[GRAPH]
1995 1996 1997 1998
---- ---- ---- ----
3.55% 3.08% 3.14% 2.92%
- --------------------------------------------------------------------------------
BEST QUARTER 0.94% (6/30/95)
- --------------------------------------------------------------------------------
WORST QUARTER 0.69% (12/31/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's total
return was 1.26%.
10 PROSPECTUS
<PAGE>
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the IBC/Financial Data Stockbroker &
General Purpose Average.
- --------------------------------------------------------------------------------
Since
Class A Shares 1 Year Inception
- --------------------------------------------------------------------------------
Tax-Free Money Market
Portfolio 2.92% 3.02%*
- --------------------------------------------------------------------------------
IBC/Financial Data
Stockbroker & General
Purpose Average 2.92% 2.96%**
- --------------------------------------------------------------------------------
* Since March 15, 1994.
** Since February 28, 1994.
WHAT IS AN AVERAGE?
An average measures the share prices of a specific group of mutual funds with a
particular investment objective. You cannot invest directly in an average. The
IBC/Financial Data Stockbroker & General Purpose Average is a composite of
mutual funds with goals similar to the Portfolio's goals.
Portfolio Fees and Expenses
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
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 0.35%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 0.85%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.22%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 0.63%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 0.63% for a
period of one year. The Portfolio's total actual annual operating expenses for
the most recent fiscal year were less than the amount shown above because the
Advisor is waiving a portion of the fees in order to keep total operating
expenses at a specified level. The Advisor may discontinue all or part of
these waivers at any time. With these fee waivers, the Portfolio's actual
total operating expenses are as follows:
Tax-Free Money Market Portfolio - Class A Shares 0.60%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$64 $249 $450 $1,029
- --------------------------------------------------------------------------------
PROSPECTUS 11
<PAGE>
- --------------------------------------------------------------------------------
ARK SHORT-TERM TREASURY PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Current income with relative stability of principal
Investment Focus
Short-term U.S. Treasury securities
Share Price Volatility
Low
Principal Investment Strategy
Investing in short-term fixed income securities issued or guaranteed by the U.S.
Treasury
Investor Profile
Investors seeking to preserve principal and earn current income
Investment Strategy of the Short-Term Treasury Portfolio
The Short-Term Treasury Portfolio seeks its investment goal by investing
exclusively in fixed income securities issued directly by the U.S. Treasury. The
Portfolio's Advisor will select securities that are backed by the U.S. Treasury
that pay interest that is exempt from state and local taxes. The Portfolio has
no maturity restrictions, and the average maturity of the Portfolio's
investments will vary depending on market conditions. The Portfolio normally
invests in short-term securities, and the Portfolio will typically have a
dollar-weighted average maturity of approximately two years.
In selecting securities for the Portfolio, the Advisor considers a security's
current yield, as well as its 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.
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.
Principal Risks of Investing in the Short-Term Treasury Portfolio
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes. Generally, the Portfolio's
fixed income securities will decrease in value if interest rates rise. Also,
securities with longer maturities are generally more volatile, so the average
maturity of the Portfolio's securities affects risk.
The Portfolio's U.S. Treasury securities are not guaranteed against
price movements due to changing interest rates.
Performance Information
The bar chart and the performance table which follow 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 from year to year for two years.
[GRAPH]
1997 1998
---- ----
5.71% 6.20%
- --------------------------------------------------------------------------------
BEST QUARTER 3.02% (9/30/98)
- --------------------------------------------------------------------------------
WORST QUARTER 0.47% (12/31/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was 0.67%.
12 PROSPECTUS
<PAGE>
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the Lehman 1-3 Year Government Bond Index.
- --------------------------------------------------------------------------------
Since
Class A Shares 1 Year Inception
- --------------------------------------------------------------------------------
Short-Term Treasury
Portfolio 6.20% 6.09%*
- --------------------------------------------------------------------------------
Lehman 1-3 Year
Government Bond Index 6.97% 7.08%**
- --------------------------------------------------------------------------------
* Since September 9, 1996.
** Since August 31, 1996.
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 Lehman 1-3 Year Government Bond Index is a
widely recognized index of U.S. government obligations with maturities of
between one and three years.
Portfolio Fees and Expenses
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.35%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.40%
- --------------------------------------------------------------------------------
Other Expenses 0.38%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.13%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.21%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 0.92%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 0.92% for a
period of one year. The Portfolio's total actual annual operating expenses for
the most recent fiscal year were less than the amount shown above because the
Advisor is waiving a portion of the fees in order to keep total operating
expenses at a specified level.
The Advisor may discontinue all or part of these waivers at any time. With these
fee waivers, the Portfolio's actual total operating expenses are as follows:
Short-Term Treasury Portfolio - Class A Shares 0.83%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$94 $338 $620 $1,356
- --------------------------------------------------------------------------------
PROSPECTUS 13
<PAGE>
- --------------------------------------------------------------------------------
ARK MARYLAND TAX-FREE PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Current income exempt from Federal and Maryland state and local income taxes
Investment Focus
Maryland municipal securities
Share Price Volatility
Low to medium
Principal Investment Strategy
Investing in attractively priced Maryland municipal securities
Investor Profile
Investors seeking income exempt from Federal and Maryland state and local income
taxes
Investment Strategy of the Maryland Tax-Free Portfolio
The Maryland Tax-Free Portfolio seeks its investment goal by investing primarily
in municipal securities that generate income exempt from Federal and Maryland
state and local income taxes. The principal issuers of these securities are
state and local governments and agencies located in Maryland, as well as the
District of Columbia, Puerto Rico and other U.S. territories and possessions.
The Portfolio normally invests in securities with long and intermediate
maturities, and the Portfolio will typically have a dollar-weighted average
maturity of seven to 12 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, the Portfolio's Advisor considers the future direction
of interest rates and the shape of the yield curve, as well as credit quality
and sector allocation issues. Normally, the Portfolio's assets will be invested
in securities that are not subject to Federal taxes, including the Alternative
Minimum Tax.
Principal Risks of Investing in the Maryland Tax-Free Portfolio
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, including governments.
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.
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
Maryland subjects the Portfolio to the effects of economic and government
policies of Maryland.
The Portfolio is non-diversified, which means that it may invest in the
securities of relatively few issuers. As a result, the Portfolio may be more
susceptible to a single adverse economic or political occurrence affecting one
or more of these issuers, and may experience increased volatility due to its
investments in those securities.
Performance Information
The bar chart and the performance table which follow 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.
The performance of Class A and Class B Shares will differ due to differences in
expenses. The bar chart which follows shows changes in the performance of the
Portfolio's Class A Shares for the most recent year.
14 PROSPECTUS
<PAGE>
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1998
----
5.46%
- --------------------------------------------------------------------------------
BEST QUARTER 2.84% (9/30/98)
- --------------------------------------------------------------------------------
WORST QUARTER 0.36% (12/31/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was -1.68%.
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the Lehman 10 Year Municipal Bond Index and
the Lehman 7 Year Municipal Bond Index.
- --------------------------------------------------------------------------------
Since
1 Year Inception
- --------------------------------------------------------------------------------
Maryland Tax-Free Portfolio -
Class A Shares 0.74% 4.35%*
- --------------------------------------------------------------------------------
Lehman 10 Year
Municipal Bond Index 6.76% 7.99%**
- --------------------------------------------------------------------------------
Lehman 7 Year
Municipal Bond Index 6.23% 6.96%**
- --------------------------------------------------------------------------------
Maryland Tax-Free Portfolio -
Class B Shares 0.64%*** 5.34%***
- --------------------------------------------------------------------------------
Lehman 10 Year
Municipal Bond Index 6.76% 7.42%****
- --------------------------------------------------------------------------------
Lehman 7 Year
Municipal Bond Index 6.23% 6.52%****
- --------------------------------------------------------------------------------
* Since January 2, 1997.
** Since December 31, 1996.
*** Class B Shares of the Portfolio were offered beginning September 1, 1999.
The performance information shown prior to that date represents performance
of the Portfolio's Institutional Class Shares, which were offered beginning
November 15, 1996. Institutional Class Shares are not offered by this
prospectus; however, because they are invested in the same portfolio of
securities, the annual returns for the two classes would be substantially
similar. The performance of the Institutional Class Shares has been
adjusted for the maximum contingent deferred sales charge applicable to
Class B Shares in year one only, but does not reflect the Class B Shares'
Rule 12b-1 fees and expenses. With those adjustments, performance would be
lower than that shown.
**** Since November 30, 1996.
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 Lehman 10 Year Municipal Bond Index is a widely
recognized index of long-term investment-grade tax-exempt bonds. The index
includes general obligation bonds, revenue bonds, insured bonds and prefunded
bonds with maturities between eight and 12 years. The Lehman 7 Year Municipal
Bond Index is a widely recognized index of long-term investment-grade tax-exempt
bonds. The index includes general obligation bonds, revenue bonds, insured bonds
and prefunded bonds with maturities between six and eight years.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.50%* None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%**
- --------------------------------------------------------------------------------
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 None
- --------------------------------------------------------------------------------
Exchange Fee None None
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
** A sales charge is imposed if you sell Class B Shares within six years of
your purchase. See "Selling Fund Shares."
PROSPECTUS 15
<PAGE>
- --------------------------------------------------------------------------------
ARK MARYLAND TAX-FREE PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.65% 0.65%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.30% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.35% 0.45%**
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.30% 1.85%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.27% 0.07%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.03%* 1.78%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses of the Class A and Class B Shares in order to keep total
operating expenses from exceeding 1.03% and 1.78%, respectively, for a
period of one year. The Portfolio's total actual annual operating expenses
for the most recent fiscal year were less than the amount shown above
because the Advisor is waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Advisor may discontinue all or
part of these waivers at any time. With these fee waivers, the Portfolio's
actual total operating expenses are as follows:
Maryland Tax-Free Portfolio - Class A Shares 0.94%
Maryland Tax-Free Portfolio - Class B Shares 1.69%
** Other Expenses for Class B Shares are estimated for the current fiscal
year.
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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.
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:
If you sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $550 $818 $1,106 $1,925
- --------------------------------------------------------------------------------
Class B Shares $681 $875 $1,194 $1,953
- --------------------------------------------------------------------------------
If you do not sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $550 $818 $1,106 $1,925
- --------------------------------------------------------------------------------
Class B Shares $181 $575 $994 $1,953
- --------------------------------------------------------------------------------
16 PROSPECTUS
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
- --------------------------------------------------------------------------------
ARK PENNSYLVANIA TAX-FREE PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Current income exempt from Federal and Pennsylvania state income taxes
Investment Focus
Pennsylvania municipal securities
Share Price Volatility
Low to medium
Principal Investment
Strategy
Investing in attractively priced Pennsylvania municipal securities
Investor Profile
Investors seeking income exempt from Federal and Pennsylvania state income taxes
Investment Strategy of the Pennsylvania Tax-Free Portfolio
The Pennsylvania Tax-Free Portfolio seeks its investment goal by investing
primarily in municipal securities that generate income exempt from Federal and
Pennsylvania state income taxes. The principal issuers of these securities are
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 normally invests in securities with long and intermediate
maturities, and the Portfolio will typically have a dollar-weighted average
maturity of seven to 12 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, the Portfolio's Advisor considers the future direction
of interest rates and the shape of the yield curve, as well as credit quality
and sector allocation issues. Normally, the Portfolio's assets will be invested
in securities that are not subject to Federal taxes, including the Alternative
Minimum Tax.
Principal Risks of Investing in the Pennsylvania Tax-Free Portfolio
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, including governments.
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.
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.
The Portfolio is non-diversified, which means that it may invest in the
securities of relatively few issuers. As a result, the Portfolio may be more
susceptible to a single adverse economic or political occurrence affecting one
or more of these issuers, and may experience increased volatility due to its
investments in those securities.
Performance Information The bar chart and the performance table which follow
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.
The performance of Class A and Class B Shares will differ due to differences in
expenses. The bar chart which follows shows changes in the performance of the
Portfolio's Institutional Class Shares from year to year for two years. The
Portfolio's Class A Shares commenced operations on March 23, 1998, and do not
have a full calendar year of performance.
18 PROSPECTUS
<PAGE>
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1997 1998
---- ----
6.63% 5.09%
- --------------------------------------------------------------------------------
BEST QUARTER 3.03% (9/30/98)
- --------------------------------------------------------------------------------
WORST QUARTER -0.29% (3/31/97)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was -2.13%.
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the Lehman 10 Year Municipal Bond Index and
the Lehman 7 Year Municipal Bond Index.
- --------------------------------------------------------------------------------
Since
1 Year Inception
- --------------------------------------------------------------------------------
Pennsylvania Tax-Free
Portfolio - Class A Shares 0.39%* 3.95%*
- --------------------------------------------------------------------------------
Pennsylvania Tax-Free
Portfolio - Class B Shares 0.24%** 4.76%**
- --------------------------------------------------------------------------------
Lehman 10 Year
Municipal Bond Index 6.76% 7.73%***
- --------------------------------------------------------------------------------
Lehman 7 Year
Municipal Bond Index 6.23% 6.80%***
- --------------------------------------------------------------------------------
* Class A Shares of the Pennsylvania Tax-Free Portfolio were offered
beginning March 23, 1998. The performance information shown prior to that
date represents performance of the Portfolio's Institutional Class Shares.
For Institutional Class Shares, performance presented prior to March 22,
1998, reflects the performance of the Marketvest Pennsylvania Intermediate
Municipal Bond Fund shares, which were offered beginning March 31, 1996.
The assets of the Marketvest fund were reorganized into the Portfolio in
1998 following the acquisition by Allfirst of Dauphin Deposit Bank and
Trust Company. Institutional Class Shares are not offered by this
prospectus; however, because they are invested in the same portfolio of
securities, the annual returns for the two classes would be substantially
similar.
The performance of the Institutional Class Shares has been adjusted for the
sales charge applicable to Class A Shares, but does not reflect the Class A
Shares' Rule 12b-1 fees and expenses. With those adjustments, performance
would be lower than that shown.
** Class B Shares of the Portfolio were offered beginning September 1, 1999.
The performance information shown prior to that date represents performance
of the Portfolio's Institutional Class Shares. For Institutional Class
Shares, performance presented prior to March 22, 1998, reflects the
performance of the Marketvest Pennsylvania Intermediate Municipal Bond Fund
shares, which were offered beginning March 31, 1996. The assets of the
Marketvest fund were reorganized into the Portfolio in 1998 following the
acquisition by Allfirst of Dauphin Deposit Bank and Trust Company.
Institutional Class Shares are not offered by this prospectus; however,
because they are invested in the same portfolio of securities, the annual
returns for the two classes would be substantially similar. The performance
for the Institutional Class Shares has been adjusted for the maximum
contingent deferred sales charge applicable to Class B shares in year one
only, but does not reflect the Class B Shares' Rule 12b-1 fees and
expenses. With those adjustments, performance would be lower than that
shown.
*** Since March 31, 1996.
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 Lehman 10 Year Municipal Bond Index is a widely
recognized index of long-term investment-grade tax-exempt bonds. The index
includes general obligation bonds, revenue bonds, insured bonds and prefunded
bonds with maturities between eight and 12 years. The Lehman 7 Year Municipal
Bond Index is a widely recognized index of long-term investment-grade tax-exempt
bonds. The index includes general obligation bonds, revenue bonds, insured bonds
and prefunded bonds with maturities between six and eight years.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.50%* None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%**
- --------------------------------------------------------------------------------
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 None
- --------------------------------------------------------------------------------
Exchange Fee None None
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
** A sales charge is imposed if you sell Class B Shares within six years of
your purchase. See "Selling Fund Shares."
PROSPECTUS 19
<PAGE>
- --------------------------------------------------------------------------------
ARK PENNSYLVANIA TAX-FREE PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.65% 0.65%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.30% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.35% 0.45%**
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.30% 1.85%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.11%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.19%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses of the Class A Shares in order to keep total operating
expenses from exceeding 1.19% for a period of one year. The Portfolio's
total actual annual operating expenses for the most recent fiscal year were
less than the amount shown above because the Advisor is waiving a portion
of the fees in order to keep total operating expenses at a specified level.
The Advisor may discontinue all or part of these waivers at any time. With
these fee waivers, the Portfolio's actual total operating expenses are as
follows:
Pennsylvania Tax-Free Portfolio - Class A 1.10% Shares
** Other Expenses for Class B Shares are estimated for the current fiscal
year.
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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.
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:
If you sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $566 $833 $1,121 $1,938
- --------------------------------------------------------------------------------
Class B Shares $688 $882 $1,201 $1,958
- --------------------------------------------------------------------------------
If you do not sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $566 $833 $1,121 $1,938
Class B Shares $188 $582 $1,001 $1,958
20 PROSPECTUS
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
- --------------------------------------------------------------------------------
ARK INTERMEDIATE FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
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 U.S. intermediate-term government and corporate fixed income
securities
Investor Profile
Investors seeking current income who are willing to accept the risks of
investing in fixed income securities
Investment Strategy of the Intermediate Fixed Income Portfolio
The 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. The Portfolio's Advisor will
select investment-grade fixed income securities and unrated securities
determined to be of com- parable quality. The Portfolio normally invests in
securities with intermediate maturities, and the Portfolio will typically have a
dollar-weighted average maturity of three 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, the Advisor considers a security's
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 decline
in interest rates.
Principal Risks of Investing in the Intermediate Fixed Income Portfolio
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.
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.
Performance Information
The bar chart and the performance table which follow 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 Institutional
Class Shares from year to year for two years.
[GRAPH]
1997 1998
---- ----
7.58% 7.63%
- --------------------------------------------------------------------------------
BEST QUARTER 4.67% (9/30/98)
- --------------------------------------------------------------------------------
WORST QUARTER -0.49% (12/31/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's
Institutional Class total return was -1.31%.
The table which follows compares the Portfolio's average annual total returns
for the periods ended December 31, 1998, to those of the Lehman Intermediate
Government/Corporate Bond Index.
22 PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
Since
Class A Shares 1 Year Inception
- --------------------------------------------------------------------------------
Intermediate Fixed
Income Portfolio 2.79%* 4.76%*
- --------------------------------------------------------------------------------
Lehman Intermediate
Government/Corporate
Bond Index 8.47% 7.48%**
- --------------------------------------------------------------------------------
* The performance information shown represents performance of the
Intermediate Fixed Income Portfolio's Institutional Class Shares, which
were offered beginning November 18, 1996. Class A Shares are not currently
being offered. Institutional Class Shares are not offered by this
prospectus; however, because they are invested in the same portfolio of
securities, the annual returns for the two classes would be substantially
similar. The performance of the Institutional Class Shares has been
adjusted for the sales charge applicable to Class A Shares, but does not
reflect the Class A Shares' Rule 12b-1 fees and expenses. With these
adjustments, performance would be lower than that shown.
** Since November 30, 1996.
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 Lehman Intermediate Government/Corporate Bond
Index is a widely recognized, market value-weighted (higher market value bonds
have more influence than lower market value bonds) index of U.S. Treasury
securities, U.S. government agency obligations, corporate debt securities backed
by the U.S. government and fixed-rate nonconvertible corporate debt securities
backed by the U.S. government, fixed-rate nonconvertible debt securities issued
by or guaranteed by foreign governments and agencies. All securities in the
index are rated investment grade (BBB) or higher, with maturities of one to 10
years.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.50%*
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) (as a percentage of net
asset value) 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
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. The table below describes the fees
and expenses that you may pay if you buy and hold shares of the Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.60%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.30%
- --------------------------------------------------------------------------------
Other Expenses 0.36%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.26%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.22%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.04%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
1.04% for a period of one year. The Portfolio's total actual annual
operating expenses for the most recent fiscal year were less than the
amount shown above because the Advisor is waiving a portion of the fees in
order to keep total operating expenses at a specified level. The Advisor
may discontinue all or part of these waivers at any time. With these fee
waivers, the Portfolio's actual total operating expenses are as follows:
Intermediate Fixed Income Portfolio - Class A Shares 0.95%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$551 $811 $1,090 $1,886
- --------------------------------------------------------------------------------
PROSPECTUS 23
<PAGE>
- --------------------------------------------------------------------------------
ARK U.S. GOVERNMENT BOND PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Current income
Investment Focus
U.S. government securities
Share Price Volatility
Low to medium
Principal Investment
Strategy
Investing in U.S. government fixed income securities
Investor Profile
Investors seeking current income who are willing to accept the risks of
investing in fixed income securities
Investment Strategy of the U.S. Government Bond Portfolio
The U.S. Government Bond Portfolio seeks its investment goal by investing
primarily in fixed income securities issued or guaranteed by the U.S. government
and its agencies or instrumentalities, including mortgage-backed securities. The
Portfolio also invests in a range of investment-grade corporate fixed income
securities. The Portfolio normally invests in securities with intermediate
maturities, and the Portfolio will typically have a dollar- weighted average
maturity of between three and 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, the Advisor considers a security's
current yield, as well as its 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.
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.
Principal Risks of Investing in the U.S. Government Bond Portfolio
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.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how the securities 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.
24 PROSPECTUS
<PAGE>
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 Institutional
Class Shares from year to year for two years. The Portfolio's Class A Shares
commenced operations on April 1, 1998, and do not have a full calendar year of
performance.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1997 1998
---- ----
6.70% 15.36%
- --------------------------------------------------------------------------------
BEST QUARTER 10.01% (6/30/98)
- --------------------------------------------------------------------------------
WORST QUARTER -1.28% (3/31/97)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was -1.29%.
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the Lehman Intermediate
Government/Corporate Bond Index.
- --------------------------------------------------------------------------------
Since
Class A Shares 1 Year Inception
- --------------------------------------------------------------------------------
U.S. Government Bond
Portfolio 10.12%* 7.59%*
- --------------------------------------------------------------------------------
Lehman Intermediate
Government/Corporate
Bond Index 8.42% 7.72%**
- --------------------------------------------------------------------------------
* Class A Shares of the U.S. Government Bond Portfolio were offered beginning
April 1, 1998. The performance information shown prior to that date
represents performance of the Portfolio's Institutional Class Shares. For
Institutional Class Shares, performance presented prior to March 22, 1998
reflects the performance of the Marketvest U.S. Government Bond Fund
shares, which were offered beginning March 31, 1996. The assets of the
Marketvest fund were reorganized into the Portfolio in 1998 following the
acquisition by Allfirst of Dauphin Deposit Bank and Trust Company.
Institutional Class Shares are not offered by this prospectus; however,
because they are invested in the same portfolio of securities, the annual
returns for the two classes would be substantially similar. The performance
of the Institutional Class Shares has been adjusted for the sales charge
applicable to Class A Shares, but does not reflect the Class A Shares' Rule
12b-1 fees and expenses. With those adjustments, performance would be lower
than that shown.
** Since March 31, 1996.
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 Lehman Intermediate Government/Corporate Bond
Index is a widely recognized, market value-weighted (higher market value bonds
have more influence than lower market value bonds) index of U.S. Treasury
securities, U.S. government agency obligations, corporate debt securities,
fixed-rate nonconvertible corporate debt securities, Yankee bonds and
nonconvertible corporate debt securities issued by or guaranteed by foreign
governments and agencies. All securities in the index are rated investment-grade
(BBB) or higher, with maturities of one to 10 years.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.50%*
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) (as a percentage of
net asset value) 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
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
PROSPECTUS 25
<PAGE>
- --------------------------------------------------------------------------------
ARK U.S. GOVERNMENT BOND PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.75%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.30%
- --------------------------------------------------------------------------------
Other Expenses 0.34%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.39%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.20%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.19%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
1.19% for a period of one year. The Portfolio's total actual annual
operating expenses for the most recent fiscal year were less than the
amount shown above because the Advisor is waiving a portion of the fees in
order to keep total operating expenses at a specified level. The Advisor
may discontinue all or part of these waivers at any time. With these fee
waivers, the Portfolio's actual total operating expenses are as follows:
U.S. Government Bond Portfolio - Class A Shares 1.10%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$566 $851 $1,158 $2,027
26 PROSPECTUS
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
- --------------------------------------------------------------------------------
ARK INCOME PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Current income and capital growth
Investment Focus
Investment-grade fixed income securities
Share Price Volatility
Medium
Principal Investment Strategy
Investing in U.S. government and corporate fixed income securities with varying
maturities
Investor Profile
Investors seeking current income and growth of capital who are willing to accept
the risks of investing in fixed income securities
Investment Strategy of the Income Portfolio
The Income Portfolio seeks its investment goal by investing primarily in U.S.
investment-grade corporate and government fixed income securities, including
mortgage-backed securities. The Portfolio's Advisor will generally select
investment-grade fixed income securities and unrated securities determined to be
of comparable quality, but also may invest a limited percentage of the
Portfolio's assets in lower rated debt securities (or "junk bonds"). The
dollar-weighted average maturity of the Portfolio's investments will vary
depending on market conditions, but will typically be between five and 20 years.
In selecting securities for the Portfolio, the Advisor considers a security's
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 decline
in interest rates.
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.
Principal Risks of Investing in the Income Portfolio
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.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how the securities 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.
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.
28 PROSPECTUS
<PAGE>
Performance Information
The bar chart and the performance table which follow 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.
The performance of Class A and Class B Shares will differ due to differences in
expenses. This bar chart shows changes in the performance of the Portfolio's
Class A Shares from year to year for four years. The Class B Shares commenced
operations on September 14, 1998, and do not have a full calendar year of
performance.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1995 1996 1997 1998
---- ---- ---- ----
17.99% 2.60% 9.22% 6.66%
- --------------------------------------------------------------------------------
BEST QUARTER 6.58% (6/30/95)
- --------------------------------------------------------------------------------
WORST QUARTER -2.24% (3/31/96)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was -2.19%, and its Class B total return was -2.44%.
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the Lehman Aggregate Bond Index.
- --------------------------------------------------------------------------------
Since
1 Year 5 Year Inception
- --------------------------------------------------------------------------------
Income Portfolio
Class A Shares 1.85% -- 6.50%*
- --------------------------------------------------------------------------------
Lehman Aggregate
Bond Index 8.67% 7.27% 8.34%**
- --------------------------------------------------------------------------------
Income Portfolio
Class B Shares 1.84%*** 6.54%*** 6.62%***
- --------------------------------------------------------------------------------
Lehman Aggregate
Bond Index 8.67% 7.27% 7.10%****
- --------------------------------------------------------------------------------
* Since April 12, 1994.
** Since March 31, 1994
*** Class B Shares of the Income Portfolio were offered beginning September 14,
1998. The performance information shown prior to that date represents
performance of the Portfolio's Institutional Class Shares, which were
offered beginning July 16, 1993. Institutional Class Shares are not offered
by this prospectus; however, because they are invested in the same
portfolio of securities, the annual returns for the two classes would be
substantially similar. The performance of the Institutional Class Shares
has been adjusted for the maximum contingent deferred sales charge
applicable to Class B Shares in year one only, but does not reflect the
Class B Shares' Rule 12b-1 fees and expenses. With those adjustments,
performance would be lower than that shown.
**** Since July 31, 1993.
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 Lehman Aggregate Bond Index is a widely
recognized, market value-weighted (higher market value bonds have more influence
than lower market value bonds) index of U.S. government obligations, corporate
debt securities, and AAA-rated mortgage-backed securities. All securities in the
index are rated investment- grade (BBB) or higher, with maturities of at least
one year.
PROSPECTUS 29
<PAGE>
- --------------------------------------------------------------------------------
ARK INCOME PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.50%* None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%**
- --------------------------------------------------------------------------------
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 None
- --------------------------------------------------------------------------------
Exchange Fee None None
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
** A sales charge is imposed if you sell Class B Shares within six years of
your purchase. See "Selling Portfolio Shares."
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.60% 0.60%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.30% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.35% 0.45%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.25% 1.80%**
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.20%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.05%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses of the Class A Shares in order to keep total operating
expenses from exceeding 1.05% for a period of one year. The Portfolio's
total actual annual operating expenses for the most recent fiscal year were
less than the amount shown above because the Advisor is waiving a portion
of the fees in order to keep total operating expenses at a specified level.
The Advisor may discontinue all or part of these waivers at any time. With
these fee waivers, the Portfolio's actual total operating expenses are as
follows:
Income Portfolio - Class A Shares 0.96%
** The Portfolio's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is
waiving a portion of the fees in order to keep total operating expenses at
a specified level. The Advisor may discontinue all or part of these waivers
at any time. With these fee waivers, the Portfolio's actual total operating
expenses are as follows:
Income Portfolio - Class B Shares 1.71%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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.
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:
If you sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $552 $810 $1,087 $1,876
- --------------------------------------------------------------------------------
Class B Shares $683 $866 $1,175 $1,904
- --------------------------------------------------------------------------------
If you do not sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $552 $810 $1,087 $1,876
- --------------------------------------------------------------------------------
Class B Shares $183 $566 $975 $1,904
- --------------------------------------------------------------------------------
30 PROSPECTUS
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
- --------------------------------------------------------------------------------
ARK BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Long-term total return
Investment Focus
Common stocks and fixed income securities
Share Price Volatility
Medium
Principal Investment Strategy
Investing in stocks and bonds to generate total return
Investor Profile
Investors seeking total return by investing in a balanced portfolio of fixed
income and equity securities with lower volatility than an all equity portfolio
Investment Strategy of the Balanced Portfolio
The Balanced Portfolio seeks its investment goal by investing primarily in a
diverse portfolio of common stocks and investment-grade fixed income securities.
The Portfolio's Advisor will select common stocks of established companies and
mid-size and large companies. In evaluating securities for the Portfolio, the
Advisor considers each company's current financial strength, revenue, earnings
growth, and relative valuation of its stock. The Advisor will also purchase
investment-grade fixed income securities with varying maturities, including
corporate and government securities and mortgage-backed securities. The Advisor
will adjust the Portfolio's asset mix based on its analysis of the relative
attractiveness and risk of bonds and stocks in connection with economic,
financial and other market trends.
In selecting securities for the Portfolio, the Advisor attempts to maximize
total return by purchasing a combination of common stocks and fixed income
securities of U.S. issuers. The Advisor will also attempt to minimize price
declines during equity market downturns by reallocating assets to fixed income
securities. The dollar-weighted average maturity of the Portfolio's fixed income
securities may vary depending on market conditions, but will typically be
between five and 20 years.
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.
Principal Risks of Investing in the Balanced 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 suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
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, including governments.
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.
The Portfolio is also subject to the risk that the Advisor's asset allocation
decisions will not anticipate market trends successfully. For example, investing
too heavily in common stocks during a stock market decline may result in a
failure to preserve capital. Conversely, investing too heavily in fixed income
securities during a period of stock market appreciation may result in lower
total return.
32 PROSPECTUS
<PAGE>
Performance Information
The bar chart and the performance table which follow 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.
The performance of Class A and Class B Shares will differ due to differences in
expenses. The bar chart below shows changes in the performance of the
Portfolio's Class A Shares from year to year for four years. The Class B Shares
commenced operations on September 14, 1998, and do not have a full calendar year
of performance.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1995 1996 1997 1998
---- ---- ---- ----
21.29% 7.83% 22.30% 24.61%
- --------------------------------------------------------------------------------
BEST QUARTER 18.25% (12/31/98)
- --------------------------------------------------------------------------------
WORST QUARTER -7.74% (9/30/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was 7.95%, and its Class B total return was 7.56%
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the S&P 500 Composite Index, Lehman
Aggregate Bond Index and 60/40 Hybrid of the S&P 500 and Lehman Aggregate
indices.
- --------------------------------------------------------------------------------
Since
1 Year 5 Years Inception
- --------------------------------------------------------------------------------
Balanced Portfolio
Class A Shares 18.65% -- 12.93%*
- --------------------------------------------------------------------------------
S&P 500
Composite Index 28.60% 24.05% 24.83%**
- --------------------------------------------------------------------------------
Lehman Aggregate
Bond Index 8.67% 7.27% 7.63%**
- --------------------------------------------------------------------------------
60/40 Hybrid of the
S&P 500 and Lehman
Aggregate Bond 20.99% 17.31% 17.91%**
- --------------------------------------------------------------------------------
Balanced Portfolio
Class B Shares 19.50%*** 13.68%*** 14.03%***
- --------------------------------------------------------------------------------
S&P 500
Composite Index 28.60% 24.05% 23.19%****
- --------------------------------------------------------------------------------
Lehman Aggregate
Bond Index 8.67% 7.27% 7.10%****
- --------------------------------------------------------------------------------
60/40 Hybrid of the
S&P 500 and Lehman
Aggregate Bond 20.99% 17.31% 16.73%****
- --------------------------------------------------------------------------------
* Since March 9, 1994.
** Since February 28, 1994.
*** Class B Shares of the Portfolio were offered beginning September 14, 1998.
The performance information shown prior to that date represents performance
of the Portfolio's Institutional Class Shares which commenced operations on
July 16, 1993. Institutional Class Shares are not offered by this
prospectus; however, because they are invested in the same portfolio of
securities, the annual returns for the two classes would be substantially
similar. The performance of the Institutional Class Shares has been
adjusted for the maximum contingent deferred sales change applicable to
Class B Shares in year one only, but does not reflect the Class B Shares'
Rule 12b-1 fees and expenses. With those adjustments, performance would be
lower than that shown.
**** Since July 31, 1993
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 S&P 500 Composite Index is a widely recognized,
market value-weighted (higher market value stocks have more influence than lower
market value stocks) index of 500 stocks designed to mimic the overall equity
market's industry weightings. The Lehman Aggregate Bond Index is a widely
recognized, market value-weighted (higher market value bonds have more influence
than lower market value bonds) index of U.S. government obligations, corporate
debt securities, and AAA-rated mortgage-backed securities. All securities in the
index are rated investment-grade (BBB) or higher, with maturities of at least
one year. The 60/40 Hybrid of the S&P 500 and Lehman Aggregate benchmark is
comprised of two unmanaged indexes, weighted 60% S&P 500 Composite Index and 40%
Lehman Aggregate Bond Index. The Portfolio uses a blended index because it is
better suited to the Portfolio's objective.
PROSPECTUS 33
<PAGE>
- --------------------------------------------------------------------------------
ARK BALANCED PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.75%* None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%**
- --------------------------------------------------------------------------------
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 None
- --------------------------------------------------------------------------------
Exchange Fee None None
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
** A sales charge is imposed if you sell Class B Shares within six years of
your purchase. See "Selling Portfolio Shares."
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.65% 0.65%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.40% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.36% 0.46%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.41% 1.86%**
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.30%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.11%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses of the Class A Shares in order to keep total operating
expenses from exceeding 1.11% for a period of one year. The Portfolio's
total actual annual operating expenses for the most recent fiscal year were
less than the amount shown above because the Advisor is waiving a portion
of the fees in order to keep total operating expenses at a specified level.
The Advisor may discontinue all or part of these waivers at any time. With
these fee waivers, the Portfolio's actual total operating expenses are as
follows:
Balanced Portfolio - Class A Shares 1.02%
** The Portfolio's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is
waiving a portion of the fees in order to keep total operating expenses at
a specified level. The Advisor may discontinue all or part of these waivers
at any time. With these fee waivers, the Portfolio's actual total operating
expenses are as follows:
Balanced Portfolio - Class B Shares 1.77%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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.
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:
If you sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $583 $872 $1,182 $2,061
- --------------------------------------------------------------------------------
Class B Shares $689 $885 $1,206 $2,008
- --------------------------------------------------------------------------------
If you do not sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $583 $872 $1,182 $2,061
- --------------------------------------------------------------------------------
Class B Shares $189 $585 $1,006 $2,008
- --------------------------------------------------------------------------------
34 PROSPECTUS
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
- --------------------------------------------------------------------------------
ARK EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Current income and growth of capital
Investment Focus
Dividend-paying U.S. common stocks
Share Price Volatility
Medium to high
Principal Investment Strategy
Investing in stocks which have an above-average dividend yield relative to the
broad stock market
Investor Profile
Investors seeking current income and growth of capital who can tolerate the
share price volatility of equity investing
Investment Strategy of the Equity Income Portfolio
The Equity Income Portfolio seeks its investment goal by investing primarily in
dividend-paying U.S. common stocks and other equity securities. The Portfolio
may, to a limited extent, purchase convertible and preferred stocks and
investment-grade fixed income securities. The Portfolio's Advisor will build a
broadly diversified portfolio of stocks of mid-size and large companies that
have an above-average dividend yield relative to the broad stock market.
In selecting securities for the Portfolio, the Advisor purchases stocks of
companies that have consistently paid dividends. In addition, the Advisor will
generally invest in stocks of companies whose securities are attractively valued
relative to comparable investments.
Principal Risks of Investing in the Equity Income 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 suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
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 the performance of the Portfolio's Class A Shares for the
most recent year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1998
----
8.43%
- --------------------------------------------------------------------------------
BEST QUARTER 11.49% (12/31/98)
- --------------------------------------------------------------------------------
WORST QUARTER -8.21% (9/30/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was 5.35%.
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the S&P 500 Composite Index.
- --------------------------------------------------------------------------------
Class A Shares 1 Year Since Inception
- --------------------------------------------------------------------------------
Equity Income Portfolio 3.24% 13.76%*
- --------------------------------------------------------------------------------
S&P 500 Composite Index 28.60% 31.38%**
- --------------------------------------------------------------------------------
* Since May 9, 1997.
** Since April 30, 1997.
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 S&P 500 Composite Index is a widely recognized,
market value-weighted (higher market value stocks have more influence than
lower market value stocks) index of 500 stocks designed to mimic the overall
equity market's industry weightings.
36 PROSPECTUS
<PAGE>
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.75%*
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) 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
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. The table which follows describes
the fees and expenses that you may pay if you buy and hold shares of the
Portfolio.
Annual Portfolio Operating Expenses (expenses deducted from Portfolio
assets)
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.70%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.40%
- --------------------------------------------------------------------------------
Other Expenses 0.33%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.43%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.27%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.16%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
1.16% for a period of one year. The Portfolio's total actual annual
operating expenses for the most recent fiscal year were less than the
amount shown above because the Advisor is waiving a portion of the fees in
order to keep total operating expenses at a specified level. The Advisor
may discontinue all or part of these waivers at any time. With these fee
waivers, the Portfolio's actual total operating expenses are as follows:
Equity Income Portfolio - Class A Shares 1.07%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$588 $881 $1,195 $2,085
- --------------------------------------------------------------------------------
PROSPECTUS 37
<PAGE>
- --------------------------------------------------------------------------------
ARK VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Growth of principal
Investment Focus
U.S. common stocks
Share Price Volatility
Medium to high
Principal Investment Strategy
Investing in undervalued stocks of U.S. companies
Investor Profile
Investors seeking long-term growth of principal who can tolerate the share price
volatility of equity investing
Investment Strategy of the Value Equity Portfolio
The Value Equity Portfolio seeks its investment goal by investing primarily in a
diversified portfolio of common stocks and other equity securities of U.S.
issuers. The Portfolio's Advisor purchases stocks whose prices appear low when
compared to measures such as present and/or future earnings and cash flows, as
well as other out-of-favor stocks that the Advisor believes are undervalued by
the market.
In selecting investments for the Portfolio, the Advisor emphasizes stocks with
higher-than-average sales growth, higher-than-average return on equity,
above-average free cash flow, and return on invested capital that exceeds the
cost of capital. The Advisor will also weigh corporate management's ability to
adjust to the dynamics of rapidly changing economic and business conditions. The
Advisor's investment approach is based on the conviction that, over the long
term, broad-based economic growth will be reflected in the growth of the
revenues and earnings of publicly held corporations.
Principal Risks of Investing in the Value Equity 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 suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
Performance Information
The bar chart and the performance table which follow 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.
The performance of Class A and Class B Shares will differ due to differences in
expenses. This bar chart shows changes in the performance of the Portfolio's
Institutional Class Shares from year to year for two years. The Portfolio's
Class A Shares commenced operations on April 1, 1998, and do not have a full
calendar year of performance. The Portfolio's Class B Shares commenced
operations on September 14, 1998, and do not have a full calendar year of
performance.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1997 1998
---- ----
29.40% 19.63%
- --------------------------------------------------------------------------------
BEST QUARTER 18.95% (12/31/98)
- --------------------------------------------------------------------------------
WORST QUARTER -10.68% (9/30/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was 8.33%, and its Class B total return was 7.93%.
38 PROSPECTUS
<PAGE>
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the S&P 500 Composite Index.
- --------------------------------------------------------------------------------
1 Year Since Inception
- --------------------------------------------------------------------------------
Value Equity Portfolio -
Class A Shares 13.88% 21.06%*
- --------------------------------------------------------------------------------
Value Equity Portfolio -
Class B Shares 14.28%** 22.37%**
- --------------------------------------------------------------------------------
S&P 500 Composite Index 28.60% 28.69%***
- --------------------------------------------------------------------------------
* Class A Shares of the Value Equity Portfolio were offered beginning April
1, 1998. The performance information shown prior to that date represents
performance of the Portfolio's Institutional Class Shares. For
Institutional Class Shares, performance presented prior to March 29, 1998
reflects the performance of the Marketvest Equity Fund shares, which were
offered beginning March 31, 1996. The assets of the Marketvest fund were
reorganized into the Portfolio in 1998 following the acquisition by
Allfirst of Dauphin Deposit Bank and Trust Company. Institutional Class
Shares are not offered by this prospectus; however, because they are
invested in the same portfolio of securities, the annual returns for the
two classes would be substantially similar. The performance of the
Institutional Class Shares has been adjusted for the sales charge
applicable to Class A Shares, but does not reflect the Class A Shares' Rule
12b-1 fees and expenses. With those adjustments, performance would be lower
than that shown.
** Class B Shares of the Portfolio were offered beginning September 14, 1998.
The performance information shown prior to that date represents performance
of the Portfolio's Institutional Class Shares. For Institutional Class
Shares, performance presented prior to March 29, 1998 reflects the
performance of the Marketvest Equity Fund shares, which were offered
beginning March 31, 1996. The performance of the Institutional Class Shares
has been adjusted for the maximum contingent deferred sales charge
applicable to Class B Shares in year one only, but does not reflect the
Class B Shares' Rule 12b-1 fees and expenses. With those adjustments,
performance would be lower than that shown.
*** Since March 31, 1996.
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 S&P 500 Composite Index is a widely recognized,
market value-weighted (higher market value stocks have more influence than
lower market value stocks) index of 500 stocks designed to mimic the overall
equity market's industry weightings.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.75%* None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%**
- --------------------------------------------------------------------------------
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 None
- --------------------------------------------------------------------------------
Exchange Fee None None
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
** A sales charge is imposed if you sell Class B Shares within six years of
your purchase. See "Selling Portfolio Shares."
PROSPECTUS 39
<PAGE>
- --------------------------------------------------------------------------------
ARK VALUE EQUITY PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.00% 1.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.40% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.34% 0.44%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.74% 2.19%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.34% 0.04%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.40%* 2.15%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses of the Class A and Class B Shares in order to keep total operating
expenses from exceeding 1.40% and 2.15%, respectively, for a period of one
year. The Portfolio's total actual annual operating expenses for the most
recent fiscal year were less than the amount shown above because the Advisor
is waiving a portion of the fees in order to keep total operating expenses at
a specified level. The Advisor may discontinue all or part of these waivers at
any time. With these fee waivers, the Portfolio's actual total operating
expenses are as follows:
Value Equity Portfolio - Class A Shares 1.31%
Value Equity Portfolio - Class B Shares 2.06%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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.
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:
If you sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $611 $965 $1,344 $2,402
- --------------------------------------------------------------------------------
Class B Shares $718 $981 $1,371 $2,354
- --------------------------------------------------------------------------------
If you do not sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $611 $965 $1,344 $2,402
- --------------------------------------------------------------------------------
Class B Shares $218 $681 $1,171 $2,354
- --------------------------------------------------------------------------------
40 PROSPECTUS
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
- --------------------------------------------------------------------------------
ARK EQUITY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Investment results that correspond to the performance of the S&P 500 Composite
Index (S&P 500)
Investment Focus
U.S. common stocks
Share Price Volatility
Medium to high
Principal Investment Strategy
Attempts to replicate the performance of the S&P 500
Investor Profile
Investors seeking growth of capital who can tolerate the share price volatility
of equity investing
Investment Strategy of the Equity Index Portfolio
The Equity Index Portfolio seeks its investment goal by investing exclusively in
securities listed in the S&P 500, which is comprised of 500 selected securities
(mostly common stocks). The Portfolio is managed by utilizing a computer program
that identifies which stocks should be purchased or sold in order to replicate,
as closely as practicable, the composition of the S&P 500. The Portfolio will
approximate the industry and sector weightings of the S&P 500 by matching the
weightings of the stocks included in the S&P 500.
Although the Portfolio will not replicate the performance of the S&P 500
precisely, it is anticipated that there will be a close correlation between the
Portfolio's performance and that of the S&P 500 in both rising and falling
markets. The size and timing of cash flows and the level of expenses are the
principal factors that contribute to the lack of precise correlation between the
S&P 500 and the Portfolio.
Principal Risks of Investing in the Equity Index 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 suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
The Advisor may not be able to match the performance of the Portfolio's
benchmark.
Performance Information
The bar chart and the performance table which follow 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 the performance of the Portfolio's Class A Shares for the
most recent year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1998
----
29.01%
- --------------------------------------------------------------------------------
BEST QUARTER 21.14% (12/31/98)
- --------------------------------------------------------------------------------
WORST QUARTER -9.48% (9/30/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was 12.00%.
42 PROSPECTUS
<PAGE>
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the S&P 500 Composite Index.
- --------------------------------------------------------------------------------
Class A Shares 1 Year Since Inception
- --------------------------------------------------------------------------------
Equity Index Portfolio 22.92% 23.12%*
- --------------------------------------------------------------------------------
S&P 500 Composite Index 28.60% 30.85%**
- --------------------------------------------------------------------------------
* Since November 3, 1997.
** Since October 31, 1997.
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 S&P500 Composite Index is a widely recognized,
market value-weighted (higher market value stocks have more influence than
lower market value stocks) index of 500 stocks designed to mimic the overall
equity market's industry weightings.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.75%*
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) 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
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. The table which follows describes
the fees and expenses that you may pay if you buy and hold shares of the
Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.20%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.40%
- --------------------------------------------------------------------------------
Other Expenses 0.43%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.03%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.44%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 0.59%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.59% for a period of one year. The Portfolio's total actual annual operating
expenses for the most recent fiscal year were less than the amount shown above
because the Advisor is waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Advisor may discontinue all or
part of these waivers at any time. With these fee waivers, the Portfolio's
actual total operating expenses are as follows:
Equity Index Portfolio - Class A Shares 0.50%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$532 $746 $976 $1,637
PROSPECTUS 43
<PAGE>
- --------------------------------------------------------------------------------
ARK BLUE CHIP EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
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
Investor Profile
Investors seeking capital appreciation who can tolerate the share price
volatility of equity investing
Investment Strategy of the Blue Chip Equity Portfolio
The 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. 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. 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 Blue Chip Equity 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 suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
Performance Information
The bar chart and the performance table which follow 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.
The performance of Class A and Class B Shares will differ due to differences in
expenses. This bar chart shows changes in the performance of the Portfolio's
Class A Shares from year to year for two years. The Class B Shares commenced
operations on July 31, 1998, and do not have a full calendar year of
performance.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1997 1998
------ ------
32.75% 26.26%
- --------------------------------------------------------------------------------
BEST QUARTER 21.66% (12/31/98)
- --------------------------------------------------------------------------------
WORST QUARTER -11.76% (9/30/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was 7.95%, and its Class B total return was 7.56%.
44 PROSPECTUS
<PAGE>
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the S&P 500 Composite Index.
- --------------------------------------------------------------------------------
1 Year Since Inception
- --------------------------------------------------------------------------------
Blue Chip Equity Portfolio -
Class A Shares 20.25% 24.28%*
- --------------------------------------------------------------------------------
S&P 500 Composite Index 28.60% 29.00%**
- --------------------------------------------------------------------------------
Blue Chip Equity Portfolio -
Class B Shares 21.00%*** 26.08%***
- --------------------------------------------------------------------------------
S&P 500 Composite Index 28.60% 28.69%****
- --------------------------------------------------------------------------------
* Since May 16, 1996.
** Since April 30, 1996.
*** Class B Shares of the Portfolio were offered beginning July 31, 1998. The
performance information shown prior to that date represents performance of
the Portfolio's Institutional Class Shares, which were offered beginning
April 1, 1996. Institutional Class Shares are not offered by this
prospectus; however, because they are invested in the same portfolio of
securities, the annual returns for the two classes would be substantially
similar. The performance of the Institutional Class Shares has been
adjusted for the maximum contingent deferred sales charge applicable to
Class B Shares in year one only, but does not reflect the Class B Shares'
Rule 12b-1 fees and expenses. With those adjustments, performance would be
lower than that shown.
**** Since March 31, 1996
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 S&P 500 Composite Index is a widely recognized,
market value-weighted (higher market value stocks have more influence than
lower market value stocks) index of 500 stocks designed to mimic the overall
equity market's industry weightings.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.75%* None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%**
- --------------------------------------------------------------------------------
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 None
- --------------------------------------------------------------------------------
Exchange Fee None None
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
** A sales charge is imposed if you sell Class B Shares within six years of
your purchase. See "Selling Portfolio Shares."
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. The table which follows describes
the fees and expenses that you may pay if you buy and hold shares of the
Portfolio.
PROSPECTUS 45
<PAGE>
- --------------------------------------------------------------------------------
ARK BLUE CHIP EQUITY PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.70% 0.70%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.55% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.38% 0.48%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.63% 1.93%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.46% 0.01%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.17%* 1.92%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses of the Class A and Class B Shares in order to keep total operating
expenses from exceeding 1.17% and 1.92%, respectively, for a period of one
year. The Portfolio's total actual annual operating expenses for the most
recent fiscal year were less than the amount shown above because the Advisor
is waiving a portion of the fees in order to keep total operating expenses at
a specified level. The Advisor may discontinue all or part of these waivers at
any time. With these fee waivers, the Portfolio's actual total operating
expenses are as follows:
Blue Chip Equity Portfolio - Class A Shares 1.08%
Blue Chip Equity Portfolio - Class B Shares 1.83%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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.
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:
If you sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $589 $922 $1,278 $2,279
- --------------------------------------------------------------------------------
Class B Shares $695 $905 $1,241 $2,139
- --------------------------------------------------------------------------------
If you do not sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $589 $922 $1,278 $2,279
- --------------------------------------------------------------------------------
Class B Shares $195 $605 $1,041 $2,139
- --------------------------------------------------------------------------------
46 PROSPECTUS
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
- --------------------------------------------------------------------------------
ARK CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
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
Investor Profile
Investors seeking capital appreciation who can tolerate the share price
volatility of equity investing
Investment Strategy of the Capital Growth Portfolio
The Capital Growth Portfolio seeks its investment goal by investing primarily in
common stocks and other equity securities. 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. 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.
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.
Principal Risks of Investing in the Capital Growth 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 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.
Performance Information
The bar chart and the performance table which follow 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.
The performance of Class A and Class B Shares will differ due to differences in
expenses. The bar chart below shows changes in the performance of the
Portfolio's Class A Shares from year to year for four years. The Class B Shares
commenced operations on September 14, 1998, and do not have a full calendar year
of performance.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1995 1996 1997 1998
---- ---- ---- ----
22.85% 17.64% 29.07% 40.93%
- --------------------------------------------------------------------------------
BEST QUARTER 34.98% (12/31/98)
- --------------------------------------------------------------------------------
WORST QUARTER -14.17% (9/30/98)
- --------------------------------------------------------------------------------
48 PROSPECTUS
<PAGE>
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was 14.41%, and its Class B total return was 14.01%.
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the S&P 500 Composite Index.
- --------------------------------------------------------------------------------
Since
1 Year 5 Years Inception
- --------------------------------------------------------------------------------
Capital Growth Portfolio
Class A Shares 34.27% -- 18.20%*
- --------------------------------------------------------------------------------
S&P 500
Composite Index 28.60% 24.05% 24.84%**
- --------------------------------------------------------------------------------
Capital Growth Portfolio
Class B Shares 35.82%*** 18.77%*** 19.06%***
- --------------------------------------------------------------------------------
S&P 500
Composite Index 28.60% 24.05% 23.19%****
- --------------------------------------------------------------------------------
* Since March 9, 1994.
** Since February 28, 1994.
*** Class B Shares of the Capital Growth Portfolio were offered beginning
September 14, 1998. The performance information shown prior to that date
represents performance of the Portfolio's Institutional Class Shares, which
were offered beginning July 16, 1993. Institutional Class Shares are not
offered by this prospectus; however, because they are invested in the same
portfolio of securities, the annual returns for the two classes would be
substantially similar. The performance of the Institutional Class Shares
has been adjusted for the maximum contingent deferred sales charge
applicable to Class B Shares in year one only, but does not reflect the
Class B Shares' Rule 12b-1 fees and expenses. With those adjustments,
performance would be lower than that shown.
**** Since July 31, 1993.
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 S&P 500 Composite Index is a widely recognized,
market value-weighted (higher market value stocks have more influence than
lower market value stocks) index of 500 stocks designed to mimic the overall
equity market's industry weightings.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.75%* None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%**
- --------------------------------------------------------------------------------
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 None
- --------------------------------------------------------------------------------
Exchange Fee None None
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
** A sales charge is imposed if you sell Class B Shares within six years of
your purchase. See "Selling Portfolio Shares."
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. The table which follows describes
the fees and expenses that you may pay if you buy and hold shares of the
Portfolio.
PROSPECTUS 49
<PAGE>
- --------------------------------------------------------------------------------
ARK CAPITAL GROWTH PORTFLIO CONTINUED
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.70% 0.70%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.40% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.37% 0.47%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.47% 1.92%**
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.26%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.21%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses of the Class A Shares in order to keep total operating
expenses from exceeding 1.21% for a period of one year. The Portfolio's
total actual annual operating expenses for the most recent fiscal year were
less than the amount shown above because the Advisor is waiving a portion
of the fees in order to keep total operating expenses at a specified level.
The Advisor may discontinue all or part of these waivers at any time. With
these fee waivers, the Portfolio's actual total operating expenses are as
follows:
Capital Growth Portfolio - Class A Shares 1.12%
** The Portfolio's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is
waiving a portion of the fees in order to keep total operating expenses at
a specified level. The Advisor may discontinue all or part of these waivers
at any time. With these fee waivers, the Portfolio's actual total operating
expenses are as follows:
Capital Growth Portfolio - Class B Shares 1.87%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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.
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:
If you sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $592 $893 $1,216 $2,128
- --------------------------------------------------------------------------------
Class B Shares $695 $903 $1,237 $2,072
- --------------------------------------------------------------------------------
If you do not sell your shares at the end of the period:
- --------------------------------------------------------------------------------
1 year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A Shares $592 $893 $1,216 $2,128
- --------------------------------------------------------------------------------
Class B Shares $195 $603 $1,037 $2,072
- --------------------------------------------------------------------------------
50 PROSPECTUS
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
- --------------------------------------------------------------------------------
ARK MID-CAP EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Long-term capital appreciation
Investment Focus
Medium capitalization U.S. common stocks
Share Price Volatility
High
Principal Investment Strategy
Investing in stocks of mid-sized companies that have significant growth
potential
Investor Profile
Investors seeking growth of capital who can tolerate the share price volatility
of mid-cap equity investing
Investment Strategy of the Mid-Cap Equity Portfolio
The Mid-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 chooses stocks of companies with market capitalizations of between
$500 million and $8 billion that have significant growth potential.
In selecting securities for the Portfolio, the Advisor purchases securities of
companies that have not reached full maturity, but which have above-average
sales and earnings growth. The Advisor also looks for medium-sized companies
with relatively low or unrecognized market valuations.
Principal Risks of Investing in the Mid-Cap Equity 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 suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of 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, and may depend upon a relatively small
management group. Therefore, 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
The bar chart and the performance table which follow 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 Institutional
Class Shares from year to year for two years.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1997 1998
---- ----
31.39% 22.07%
- --------------------------------------------------------------------------------
BEST QUARTER 30.57% (12/31/98)
- --------------------------------------------------------------------------------
WORST QUARTER-15.35% (9/30/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's total
return was 6.51%.
The table which follows compares the Portfolio's average annual total returns
for the periods ended December 31, 1998, to those of the S&P 400 Mid-Cap Index.
52 PROSPECTUS
<PAGE>
Class A Shares 1 Year Since Inception
- --------------------------------------------------------------------------------
Mid-Cap Equity Portfolio 16.29%* 22.57%*
- --------------------------------------------------------------------------------
S&P 400 Mid-Cap Index 19.12% 24.43%**
- --------------------------------------------------------------------------------
* The performance information shown represents performance of the Mid-Cap
Equity Portfolio's Institutional Class Shares, which were offered beginning
November 18, 1996. Class A Shares of the Portfolio were offered beginning
September 1, 1999. Institutional Class Shares are not offered by this
prospectus; however, because they are invested in the same portfolio of
securities, the annual returns for the two classes would be substantially
similar. The performance of the Institutional Class Shares has been
adjusted for the sales charge applicable to Class A Shares, but does not
reflect the Class A Shares' Rule 12b-1 fees and expenses. With those
adjustments, performance would be lower than that shown.
** Since November 30, 1996.
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 S&P 400 Mid-Cap Index is a widely recognized,
market value-weighted (higher market value stocks have more influence than lower
market value stocks) index of 400 medium capitalization stocks.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.75%*
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) 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
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. The table which follows describes
the fees and expenses that you may pay if you buy and hold shares of the
Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.80%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.40%
- --------------------------------------------------------------------------------
Other Expenses 0.39%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.59%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.27%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.32%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
1.32% for a period of one year. The Portfolio's total actual annual
operating expenses for the most recent fiscal year were less than the
amount shown above because the Advisor is waiving a portion of the fees in
order to keep total operating expenses at a specified level. The Advisor
may discontinue all or part of these waivers at any time. With these fee
waivers, the Portfolio's actual total operating expenses are as follows:
Mid-Cap Equity Portfolio - Class A Shares 1.23%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$603 $928 $1,275 $2,253
PROSPECTUS 53
<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
Investment Strategy of the Small-Cap Equity Portfolio
The Small-Cap Equity Portfolio seeks its investment strategy 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. Generally, the Portfolio invests
in companies with market capitalizations of $2.0 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.
Principal Risks of Investing in the Small-Cap Equity 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 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.
Performance Information
The bar chart and the performance table which follow 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 from year to year for two years.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1997 1998
---- ----
5.36% 19.05%
- --------------------------------------------------------------------------------
BEST QUARTER 25.95% (12/31/98)
- --------------------------------------------------------------------------------
WORST QUARTER-18.54% (9/30/98)
- --------------------------------------------------------------------------------
<PAGE>
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was 13.71%.
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the Russell 2000 Growth Index.
Class A Shares 1 Year Since Inception
- --------------------------------------------------------------------------------
Small-Cap Equity Portfolio 13.40% 1.31%*
- --------------------------------------------------------------------------------
Russell 2000 Growth Index 1.23% 2.38%**
* Since May 16, 1996.
** Since May 31, 1996.
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.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
Class A
Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.75%*
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) 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
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. The table which follows describes
the fees and expenses that you may pay if you buy and hold shares of the
Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.80%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.40%
- --------------------------------------------------------------------------------
Other Expenses 0.46%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.66%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.22%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.44%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
1.44% for a period of one year. The Portfolio's total actual annual
operating expenses for the most recent fiscal year were less than the
amount shown above because the Advisor is waiving a portion of the fees in
order to keep total operating expenses at a specified level. The Advisor
may discontinue all or part of these waivers at any time. With these fee
waivers, the Portfolio's actual total operating expenses are as follows:
Small-Cap Equity Portfolio - Class A Shares 1.35%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$615 $953 $1,315 $2,329
55 PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
ARK INTERNATIONAL EQUITY SELECTION PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
Investment Goal
Long-term capital appreciation
Investment Focus
Investment companies that invest in equity securities of non-U.S. issuers
Share Price Volatility
High
Principal Investment Strategy
Investing in investment companies that purchase stocks of companies located
outside the U.S.
Investor Profile
Investors seeking capital appreciation who want to diversify their portfolio by
investing overseas and who can tolerate the risks of international investing
Investment Strategy of the International Equity Selection Portfolio
The International Equity Selection Portfolio seeks its investment goal by
investing primarily in shares of mutual funds that purchase common stocks and
other equity securities of companies located outside the United States. The
Portfolio's Advisor will attempt to build a managed portfolio of international
equity funds which presents the greatest long-term capital growth potential by
investing in various funds managed by different advisors. In addition to
investing in funds that purchase securities of companies in developed foreign
countries, the Portfolio may also purchase shares of funds that invest in
emerging market countries and individual country funds and, to a limited extent,
in global funds and domestic equity and debt funds.
In selecting funds for the Portfolio to purchase, the Advisor attempts to
develop a portfolio offering investors exposure to different global markets and
equity investment styles. To achieve this diversity, the Advisor selects
international funds based on screening criteria such as fund investment styles,
investment objectives and policies, and fund management methodology and
consistency. The Advisor also considers past performance, rankings by
independent third parties, fund size, historic volatility, manager tenure, and
operating and transaction expenses, as well as geographic diversity and current
global economic conditions.
Principal Risks of Investing in the International Equity Selection Portfolio
Since it purchases shares of funds that buy equity securities, the Portfolio is
subject to the risk that stock prices will decline over short or extended
periods of time. Historically, the equity markets have moved in cycles, and the
value of the mutual fund shares that the Portfolio owns 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.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Portfolio's investments in fund
shares. These currency movements may happen separately from and in response to
events that do not otherwise affect the value of the security in the issuer's
home country. These various risks will be even greater for investments in
emerging market countries since political turmoil and rapid changes in economic
conditions are more likely to occur in these countries.
Since the Portfolio purchases shares of other funds, shareholders will bear the
costs of the underlying funds and the costs of the Portfolio.
56 PROSPECTUS
<PAGE>
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 Institutional
Class Shares from year to year for seven years. The Portfolio's Class A Shares
commenced operations on April 1, 1998, and do not have a full calendar year of
performance.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
[GRAPH]
1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ----
-4.58% 37.76% 1.80% 11.55% 17.22% 7.05% 8.11%
- --------------------------------------------------------------------------------
BEST QUARTER 14.83% (12/31/98)
- --------------------------------------------------------------------------------
WORST QUARTER -15.10% (9/30/98)
- --------------------------------------------------------------------------------
For the period from January 1, 1999, to June 30, 1999, the Portfolio's Class A
total return was 7.14%.
This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1998, to those of the Morgan Stanley Capital International
EAFE Index.
- --------------------------------------------------------------------------------
Class A Shares 1 Year 5 Years Since Inception
- --------------------------------------------------------------------------------
International Equity
Selection Portfolio 6.53%* 8.70%* 9.71%*
- --------------------------------------------------------------------------------
Morgan Stanley
Capital International
EAFE Index 20.00% 9.20% 8.44%**
- --------------------------------------------------------------------------------
* Class A Shares of the International Equity Selection Portfolio were offered
beginning April 1, 1998. The performance information shown prior to that
date represents performance of the Portfolio's Institutional Class Shares.
For Institutional Class Shares, performance presented prior to March 29,
1998, reflects the performance of the Marketvest International Equity Fund
shares, which is the successor to a collective trust fund. The assets of
the Marketvest fund were reorganized into the Portfolio in 1998 following
the acquisition by Allfirst of Dauphin Deposit Bank and Trust Company. The
performance information shown includes performance of the collective trust
fund for the period from May 31, 1991 (the inception date of the collective
trust fund), to March 31, 1997, when the Portfolio's registration statement
became effective. The investment objective and policies of the collective
trust fund were substantially the same as those of the Marketvest fund.
Institutional Class Shares are not offered by this prospectus; however,
because they are invested in the same portfolio of securities, the annual
returns for the two classes would be substantially similar. The performance
of the Institutional Class Shares has been adjusted for the sales charge
applicable to Class A Shares, but does not reflect the Class A Shares' Rule
12b-1 fees and expenses. With those adjustments, performance would be lower
than that shown.
** Since May 31, 1991.
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 Morgan Stanley Capital International EAFE Index
is a widely recognized, capitalization-weighted (companies with larger market
capitalizations have more influence than those with smaller market
capitalizations) index of over 900 securities listed on stock exchanges in
Europe, Australia, New Zealand and the Far East.
Portfolio Fees and Expenses
This table describes the shareholder fees that you may pay if you purchase or
sell Portfolio shares. You would pay these fees directly from your investment in
the Portfolio.
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 1.50%*
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) 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
- --------------------------------------------------------------------------------
* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."
PROSPECTUS 57
<PAGE>
- --------------------------------------------------------------------------------
ARK INTERNATIONAL EQUITY SELECTION PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Class A
Shares
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.65%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.40%
- --------------------------------------------------------------------------------
Other Expenses 0.40%
- --------------------------------------------------------------------------------
Total Annual Portfolio
Operating Expenses 1.45%
- --------------------------------------------------------------------------------
Fee Waivers and Expense
Reimbursements 0.31%
- --------------------------------------------------------------------------------
Total Net Operating Expenses 1.14%*
- --------------------------------------------------------------------------------
* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 1.14% for a
period of one year. The Portfolio's total actual annual operating expenses
for the most recent fiscal year were less than the amount shown above because
the Advisor is waiving a portion of the fees in order to keep total operating
expenses at a specified level. The Advisor may discontinue all or part of
these waivers at any time. With these fee waivers, the Portfolio's actual
total operating expenses are as follows:
International Equity Selection Portfolio -
Class A Shares 1.05%
For more information about these fees, see "Investment Advisor" and
"Distribution of Portfolio Shares."
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 5 Years 10 Years
- --------------------------------------------------------------------------------
$264 $572 $901 $1,833
- --------------------------------------------------------------------------------
58 PROSPECTUS
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
- --------------------------------------------------------------------------------
MORE INFORMATION ABOUT RISK
- --------------------------------------------------------------------------------
Risks
Equity Risk - Equity securities include publicly and privately 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.
Portfolios Affected by the Risks
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 Selection Portfolio
- --------------------------------------------------------------------------------
Fixed Income Risk - The market values of fixed income investments 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. In addition to
these fundamental risks, different types of fixed income securities may be
subject to the following additional risks:
Short-Term Treasury Portfolio
Maryland Tax-Free Portfolio
Pennsylvania Tax-Free Portfolio
Intermediate Fixed Income Portfolio
U.S. Government Bond Portfolio
Income Portfolio
Balanced Portfolio
- --------------------------------------------------------------------------------
Call Risk - During periods of falling interest rates, certain debt obligations
with high interest rates may be 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.
Maryland Tax-Free Portfolio
Pennsylvania Tax-Free Portfolio
Intermediate Fixed Income Portfolio
U.S. Government Bond Portfolio
Income Portfolio
Balanced Portfolio
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Maryland Tax-Free Portfolio
Pennsylvania Tax-Free Portfolio
Intermediate Fixed Income Portfolio
U.S. Government Bond Portfolio
Income Portfolio
Balanced Portfolio
- --------------------------------------------------------------------------------
Event Risk - Securities may suffer declines in credit quality and market value
due to issuer restructurings or other factors. This risk should be reduced
because of a Portfolio's multiple holdings.
Maryland Tax-Free Portfolio
Pennsylvania Tax-Free Portfolio
Intermediate Fixed Income Portfolio
U.S. Government Bond Portfolio
Income Portfolio
Balanced Portfolio
60 PROSPECTUS
<PAGE>
Risks
Mortgage-Backed Securities Risk - Mortgage-backed securities are fixed income
securities representing an 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.
- --------------------------------------------------------------------------------
Portfolios Affected by the Risks
Intermediate Fixed Income Portfolio
U.S. Government Bond Portfolio
Income Portfolio
Balanced Portfolio
- --------------------------------------------------------------------------------
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.
Tax-Free Money Market Portfolio
Maryland Tax-Free Portfolio
Pennsylvania Tax-Free Portfolio
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 maybe riskier
than mutual funds that buy securities of issuers in numerous states.
Maryland Tax-Free Portfolio
Pennsylvania Tax-Free Portfolio
- --------------------------------------------------------------------------------
Foreign Security Risks - Investments in securities of 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
Small-Cap Equity Portfolio
International Equity Selection Portfolio
PROSPECTUS 61
<PAGE>
- --------------------------------------------------------------------------------
MORE INFORMATION ABOUT RISK
- --------------------------------------------------------------------------------
Risks
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:
Portfolios Affected by the Risks
- --------------------------------------------------------------------------------
Currency Risk - Investments in foreign securities denominated in foreign
currencies involve additional risks, including:
. 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.
. A Portfolio may incur substantial costs in connection with conversions
between various currencies.
. A Portfolio may be unable to hedge against possible variations in foreign
exchange rates or to hedge a specific security transaction or portfolio
position.
. Only a limited market currently exists for hedging transactions relating to
currencies in certain emerging markets.
Small-Cap Equity Portfolio
International Equity Selection Portfolio
- --------------------------------------------------------------------------------
Tracking Error Risk - Factors such as Portfolio expenses, imperfect correlation
between the Portfolio's investments and those of their benchmarks,
rounding of share prices, changes to the benchmark, regulatory policies,
and leverage, may affect their ability to achieve perfect correlation. The
magnitude of any tracking error may be affected by a higher portfolio
turnover rate. Because an index is just a composite of the prices of the
securities it represents rather than an actual portfolio of those securities,
an index will have no expenses. As a result, a Portfolio, which will have
expenses such as custody, management fees and other operational costs,
and brokerage expenses, may not achieve its investment objective of accurately
correlating to an index.
Equity Index Portfolio
62 PROSPECTUS
<PAGE>
Risks
Year 2000 Risk - The Portfolios depend on the smooth functioning of
computer systems in almost every aspect of their business. Like other
mutual funds, businesses and individuals around the world, the Portfolios
could be adversely affected if the computer systems used by their service
providers do not properly process dates on and after January 1, 2000,
and do not distinguish between the year 2000 and the year 1900. The
Portfolios have asked their mission-critical service providers whether they
expect to have their computer systems adjusted for the year 2000
transition, and have sought and received assurances from such service
providers that they are devoting significant resources to prevent material
adverse consequences to the Portfolios. While such assurances have been
received, the Portfolios and their shareholders may experience losses if
these assurances prove to be incorrect or as a result of year 2000
computer difficulties experienced by issuers of portfolio securities or third
parties, such as custodians, banks, broker-dealers or others with which the
Portfolios do business.
Portfolios Affected by the Risks
All Portfolios
Furthermore, many foreign countries are not as prepared as the U.S. for the year
2000 transition. As a result, computer difficulties in foreign markets and with
foreign institutions as a result of the year 2000 may add to the possibility of
losses to the Portfolio and its shareholders.
Small-Cap Equity Portfolio
International Equity Selection Portfolio
PROSPECTUS 63
<PAGE>
- --------------------------------------------------------------------------------
EACH PORTFOLIO'S OTHER INVESTMENTS
- --------------------------------------------------------------------------------
This prospectus describes the Portfolios' primary strategies, and the Portfolios
will normally invest at least 65% (80% for the money market fund Portfolios) of
their 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
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.
64 PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
The 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 (formerly, First National Bank of Maryland) (Allfirst), serves as the
Advisor to the Portfolios. As of June 30, 1999, AIA had approximately $13.143
billion in assets under management. For the fiscal year ended April 30, 1999,
AIA received advisory fees of:
- --------------------------------------------------------------------------------
U.S. Treasury Money Market Portfolio 0.19%
- --------------------------------------------------------------------------------
U.S. Government Money Market Portfolio 0.14%
- --------------------------------------------------------------------------------
Money Market Portfolio 0.11%
- --------------------------------------------------------------------------------
Tax-Free Money Market Portfolio 0.09%
- --------------------------------------------------------------------------------
Short-Term Treasury Portfolio 0.35%
- --------------------------------------------------------------------------------
Maryland Tax-Free Portfolio 0.49%
- --------------------------------------------------------------------------------
Pennsylvania Tax-Free Portfolio 0.65%
- --------------------------------------------------------------------------------
Intermediate Fixed Income Portfolio 0.49%
- --------------------------------------------------------------------------------
U.S. Government Bond Portfolio 0.66%
- --------------------------------------------------------------------------------
Income Portfolio 0.51%
- --------------------------------------------------------------------------------
Balanced Portfolio 0.56%
- --------------------------------------------------------------------------------
Equity Income Portfolio 0.64%
- --------------------------------------------------------------------------------
Value Equity Portfolio 0.87%
- --------------------------------------------------------------------------------
Equity Index Portfolio 0.06%
- --------------------------------------------------------------------------------
Blue Chip Equity Portfolio 0.60%
- --------------------------------------------------------------------------------
Capital Growth Portfolio 0.65%
- --------------------------------------------------------------------------------
Mid-Cap Equity Portfolio 0.74%
- --------------------------------------------------------------------------------
Small-Cap Equity Portfolio 0.79%
- --------------------------------------------------------------------------------
International Equity Selection Portfolio 0.55%
- --------------------------------------------------------------------------------
James M. Hannan is a Principal of AIA and manager of the U.S. Treasury Money
Market Portfolio, the U.S. Government Money Market Portfolio, the Money Market
Portfolio, the Tax-Free Money Market Portfolio and the Short-Term Treasury
Portfolio. He is responsible for several separately managed institutional
portfolios which 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.
Susan L. Schnaars is a Principal of AIA and manager of the Intermediate Fixed
Income Portfolio, the Maryland Tax-Free Portfolio and the Pennsylvania Tax-Free
Portfolio. Ms. Schnaars is also 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.
Steven M. Gradow is a Managing Director of, and Director of Fixed Income
Investments for, AIA and manager of the Income Portfolio, co-manager, with Ms.
Volk, of the U.S. Government Bond Portfolio, and co-manager of the ARK Fund
Institutional Class Short-Term Bond Portfolio. Prior to joining Allfirst in
January 1996, Mr. Gradow was responsible for the management of $15 billion of
fixed income pension assets for Washington State Investment Board in Seattle for
four years. Mr. Gradow's experience also includes five years fixed income
management for the Public Employees Retirement System of California (CALPERS).
N. Beth Volk is a Principal of AIA and Senior Fixed Income Credit Analyst
responsible for leading the corporate research efforts of the Fixed Income
Group. Ms. Volk is co-manager, with Mr. Gradow, of the U.S. Government Bond
Portfolio. Prior to 1996, she was the head of corporate fixed income research at
Alex. Brown & Sons. Ms. Volk has over 18 years experience in the industry and is
a Chartered Financial Analyst.
Charles E. Knudsen is a Managing Director of AIA and manager of the Balanced
Portfolio. He follows several equity industry groups. In addition, he is a
senior portfolio
PROSPECTUS 65
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
manager for key, tax-free institutional accounts, including pension and
profit-sharing plans, foundations, and endowments. Mr. Knudsen has more than 10
years of investment management experience with Allfirst. Mr. Knudsen is a
Chartered Financial Analyst.
Clyde L. Randall is a Principal of AIA and co-manager, with Mr. Ashcroft, of the
Blue Chip Equity Portfolio and manager of the Equity Income Portfolio. 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. Mr. Randall is a Chartered Financial Analyst.
Allen J. Ashcroft, Jr. is a Principal of AIA and co-manager, with Mr. Randall,
of the Blue Chip Equity Portfolio and manager of the Equity Income Portfolio.
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 18 years of experience in investment research and
equity analysis.
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, 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.
Christopher E. Baggini is a Principal of AIA and manager of the Mid-Cap Equity
Portfolio and the Capital Growth Portfolio. Prior to joining Allfirst, Mr.
Baggini served as portfolio manager and research analyst for First Metropolitan
Development Corporation. He has more than 12 years of experience in investment
management, including more than four years at Salomon Brothers with
responsibilities in equity research, sales and trading. Mr. Baggini is a
Chartered Financial Analyst.
J. Eric Leo is the Chief Investment Officer of AIA and Managing Director of
Equity Research responsible for overseeing the equity investment process for the
organization. Mr. Leo is the manager of the Value Equity Portfolio and the
Equity Index Portfolio. He has over 26 years experience managing portfolios and
equity assets, most recently as Executive Vice President and Chief Investment
Officer of Legg Mason Capital Management.
Clarence W. Woods, Jr. is a Principal of and Chief Equity Trader for AIA and
co-manager, with Mr. Hastings, of the Equity Index Portfolio. He heads the
equity-trading unit and oversees the management of $4.5 billion of indexed
portfolios. Prior to joining AIA, Mr. Woods was the Chief Equity Trader for
Mercantile Bankshares, Baltimore, Maryland for seven years. Mr. Woods has over
15 years experience in the investment industry.
Peter C. Hastings is a Vice President of AIA and co-manager, with Mr. Woods, of
the Equity Index Portfolio and the Value Equity Portfolio. His responsibilities
include trading and the management of $4.5 billion of indexed portfolios. Prior
to moving to the trading area, Mr. Hastings created and sold indexed products as
part of the marketing unit. Mr. Hastings has four years of investment
experience.
Brett A. Hoffacker is a Principal of AIA and the manager of the International
Equity Selection Portfolio. Prior to 1997, he was a Vice President of Dauphin
Deposit Bank and Trust Company responsible for managing four equity funds as
well as various individual, institutional, employee benefit and personal trust
portfolios. Mr. Hoffacker is a Certified Financial Planner and Certified
Retirement Plan Specialist.
66 PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING 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 Money Market Portfolios
. No sales charge
. 12b-1 fees and shareholder servicing fees
Class A Shares of the other Portfolios
. Front-end sales charge
. 12b-1 fees and shareholder servicing fees
Class B Shares
. Contingent deferred sales charge
. 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 ARK Funds:
. Through Authorized Brokers or Other Institutions
. Directly with the Fund
. 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 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 U.S. Treasury Money Market Portfolio and Tax-Free Money Market Portfolio
calculate 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.
The Money Market Portfolio and U.S. Government Money Market Portfolio
calculate their NAV each Business Day at 5:00 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 5:00 p.m. Eastern time.
The fixed income and equity Portfolios each calculate 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.
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 non-money market fund Portfolio generally values its
securities 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.
In calculating NAV for the U.S. Treasury Money Market, U.S. Government Money
Market, Tax-Free Money Market, and Money Market Portfolios, we generally value
their investment portfolios 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, a 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.
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.
PROSPECTUS 67
<PAGE>
- --------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
- --------------------------------------------------------------------------------
Sales Charges
Alternative Sales Charge Options
You may purchase Class A or Class B Shares of the Portfolios 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 front-end sales load.
The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:
U.S. Government Bond, Income,
Maryland Tax-Free and
Pennsylvania Tax-Free Portfolios
Your Sales Charge Your Sales Charge
as a Percentage of as a Percentage of
If Your Investment is: Offering Price Your Net Investment
- --------------------------------------------------------------------------------
Less than $50,000 4.50% 4.71%
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$50,000 but less than $100,000 4.00% 4.17%
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$100,000 but less than $250,000 3.00% 3.09%
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$250,000 but less than $500,000 2.50% 2.56%
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$500,000 but less than 2.00% 2.04%
$1,000,000
- --------------------------------------------------------------------------------
$1,000,000 and above 0.00% 0.00%
- --------------------------------------------------------------------------------
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.
Balanced, Equity Income, Equity Index,
Blue Chip Equity, Value Equity,
Capital Growth, Mid-Cap Equity and
Small-Cap Equity Portfolios
Your Sales Charge Your Sales Charge
as a Percentage of as a Percentage of
If Your Investment is: Offering Price Your Net Investment
- --------------------------------------------------------------------------------
Less than $50,000 4.75% 4.99%
- --------------------------------------------------------------------------------
$50,000 but less than $100,000 4.50% 4.71%
- --------------------------------------------------------------------------------
$100,000 but less than $250,000 3.50% 3.63%
- --------------------------------------------------------------------------------
$250,000 but less than $500,000 2.50% 2.56%
- --------------------------------------------------------------------------------
$500,000 but less than 2.00% 2.04%
$1,000,000
- --------------------------------------------------------------------------------
$1,000,000 and above 0.00% 0.00%
- --------------------------------------------------------------------------------
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.
International Equity Selection
Portfolio
Your Sales Charge Your Sales Charge
as a Percentage of as a Percentage of
If Your Investment is: Offering Price Your Net Investment
- --------------------------------------------------------------------------------
Less than $100,000 1.50% 1.52%
- --------------------------------------------------------------------------------
$100,000 but less than $250,000 1.00% 1.01%
- --------------------------------------------------------------------------------
$250,000 but less than $500,000 0.75% 0.76%
- --------------------------------------------------------------------------------
$500,000 but less than 0.50% 0.50%
$1,000,000
- --------------------------------------------------------------------------------
$1,000,000 and above 0.00% 0.00%
- --------------------------------------------------------------------------------
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.
68 PROSPECTUS
<PAGE>
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.
Repurchase of Class A Shares
You may repurchase any amount of Class A Shares of any Portfolio 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 which 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
U.S. Treasury Money Market, U.S. Government Money Market, Money Market, Tax-Free
Money Market and Short-Term Treasury Portfolios.
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
PROSPECTUS 69
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PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
- --------------------------------------------------------------------------------
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.
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.
Contingent Deferred Sales Charge as a
Year Since Purchase Percentage of Dollar Amount Subject to Charge
- --------------------------------------------------------------------------------
First 5%
- --------------------------------------------------------------------------------
Second 4%
- --------------------------------------------------------------------------------
Third 3%
- --------------------------------------------------------------------------------
Fourth 3%
- --------------------------------------------------------------------------------
Fifth 2%
- --------------------------------------------------------------------------------
Sixth 1%
- --------------------------------------------------------------------------------
Seventh and after 0%
- --------------------------------------------------------------------------------
The contingent deferred sales charge will be waived if you sell your Class B
Shares for the following reasons:
. to make certain withdrawals from a retirement plan (not including IRAs);
. because of death or disability; or
. 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 (including
shares of the Money Market Portfolio) 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
70 PROSPECTUS
<PAGE>
shares will be measured from 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.
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.
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.
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 the Fund
How to Purchase Portfolio Shares
To purchase shares directly from us, please call 1-888-4ARKFUND, or complete and
send in a Direct Investment Account Application. The minimum investment in the
Portfolios 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 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]
You should notify the Fund's transfer agent at 1-888-4ARKFUND 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 deposit slip to the Account Application.
Only domestic member banks may be used. It takes about 15 days to set up an
ACHaccount. Currently, the Fund does not charge a fee for ACH transfers.
PROSPECTUS 71
<PAGE>
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PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
- --------------------------------------------------------------------------------
How to Sell Your Portfolio Shares
If you own shares directly, you may sell your shares on any Business Day by
contacting the Fund 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.
You may not close your account by telephone.
Redemption by Mail
Along with your written request, the transfer agent may 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 the Fund's acceptance of the check, the clearing bank causes the Fund
to redeem, at the next net asset value, 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.
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 the Fund directly at 1-888-4ARKFUND.
You may exchange your shares on any Business Day.
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 Portfolio receives your exchange request.
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
72 PROSPECTUS
<PAGE>
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). The Fund reserves the right to reject any telephone exchange request
and to modify or terminate the telephone exchange privilege at any time, upon 60
day's 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 the Fund, 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 the
Fund 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 1-888-4ARKFUND to request an information kit which
includes an Account Application. Regular and IRA accounts are available.
Automatic Investment Plan (AIP)
Employees and investors may arrange on any Business Day for periodic investment
in the 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 the Fund 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.
You may not close your account by telephone.
Redemption by Mail
Along with your written request, the transfer agent may 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 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
Checkwriting is available for accounts investing in Class A Shares of a money
market 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 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 the
Fund's acceptance of the check, the clearing bank causes the Fund to redeem, at
the next net asset value, 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.
Automatic Withdrawal Plan (AWP)
The AWP may be used by investors who wish to receive
PROSPECTUS 73
<PAGE>
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
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.
How to Exchange Your Portfolio Shares
To exchange your Portfolio shares, contact the Fund directly at 1-888-4ARKFUND.
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 day's notice.
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 Portfolio receives your exchange request.
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 any 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. The Fund reserves the right to require shareholders to complete an
Account Application or other documentation in connection with the exchange. The
Fund 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 constitute a taxable event.
Telephone Transactions
Purchasing, selling and exchanging Portfolio shares over the telephone is
extremely convenient but not without risk. Although the Fund has certain
safeguards and procedures to confirm the identity of the callers and the
authenticity of instructions, the Fund 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 the Fund 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 day's written notice to give you time to add to your account and avoid the
sale of your shares.
74 PROSPECTUS
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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, are as follows:
For Class A Shares
- --------------------------------------------------------------------------------
U.S. Treasury Money Market Portfolio 0.25%
- --------------------------------------------------------------------------------
U.S. Government Money Market Portfolio 0.25%
- --------------------------------------------------------------------------------
Money Market Portfolio 0.25%
- --------------------------------------------------------------------------------
Tax-Free Money Market Portfolio 0.25%
- --------------------------------------------------------------------------------
Short-Term Treasury Portfolio 0.40%
- --------------------------------------------------------------------------------
Maryland Tax-Free Portfolio 0.30%
- --------------------------------------------------------------------------------
Pennsylvania Tax-Free Portfolio 0.30%
- --------------------------------------------------------------------------------
Intermediate Fixed Income Portfolio 0.30%
- --------------------------------------------------------------------------------
U.S. Government Bond Portfolio 0.30%
- --------------------------------------------------------------------------------
Income Portfolio 0.30%
- --------------------------------------------------------------------------------
Balanced Portfolio 0.40%
- --------------------------------------------------------------------------------
Equity Income Portfolio 0.40%
- --------------------------------------------------------------------------------
Value Equity Portfolio 0.40%
- --------------------------------------------------------------------------------
Equity Index Portfolio 0.40%
- --------------------------------------------------------------------------------
Blue Chip Equity Portfolio 0.55%
- --------------------------------------------------------------------------------
Capital Growth Portfolio 0.40%
- --------------------------------------------------------------------------------
Mid-Cap Equity Portfolio 0.40%
- --------------------------------------------------------------------------------
Small-Cap Equity Portfolio 0.40%
- --------------------------------------------------------------------------------
International Equity Selection Portfolio 0.40%
- --------------------------------------------------------------------------------
For Class B Shares
- --------------------------------------------------------------------------------
Money Market Portfolio 0.75%
- --------------------------------------------------------------------------------
Maryland Tax-Free Portfolio 0.75%
- --------------------------------------------------------------------------------
Pennsylvania Tax-Free Portfolio 0.75%
- --------------------------------------------------------------------------------
Income Portfolio 0.75%
- --------------------------------------------------------------------------------
Balanced Portfolio 0.75%
- --------------------------------------------------------------------------------
Value Equity Portfolio 0.75%
- --------------------------------------------------------------------------------
Blue Chip Equity Portfolio 0.75%
- --------------------------------------------------------------------------------
Capital Growth Portfolio 0.75%
- --------------------------------------------------------------------------------
In addition, for Class A and Class B Shares, shareholder service fees, of 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 incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of a Portfolio.
76 PROSPECTUS
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DIVIDENDS AND DISTRIBUTIONS/TAXES
Dividends and Distributions
Dividends are declared and paid according to the following schedules:
Frequency of Frequency of
Declaration Payment of
Portfolio of Dividends Dividends
- --------------------------------------------------------------------------------
U.S. Treasury Money Market Portfolio Daily Monthly
- --------------------------------------------------------------------------------
U.S. Government Money Market Portfolio Daily Monthly
- --------------------------------------------------------------------------------
Money Market Portfolio Daily Monthly
- --------------------------------------------------------------------------------
Tax-Free Money Market Portfolio Daily Monthly
- --------------------------------------------------------------------------------
Short-Term Treasury Portfolio Daily Monthly
- --------------------------------------------------------------------------------
Maryland Tax-Free Portfolio Daily Monthly
- --------------------------------------------------------------------------------
Pennsylvania Tax-Free Portfolio Daily Monthly
- --------------------------------------------------------------------------------
Intermediate Fixed Income Portfolio Daily Monthly
- --------------------------------------------------------------------------------
U.S. Government Bond Portfolio Daily Monthly
- --------------------------------------------------------------------------------
Income Portfolio Daily Monthly
- --------------------------------------------------------------------------------
Balanced Portfolio Quarterly Quarterly
- --------------------------------------------------------------------------------
Equity Income Portfolio Monthly Monthly
- --------------------------------------------------------------------------------
Value Equity Portfolio Quarterly Quarterly
- --------------------------------------------------------------------------------
Equity Index Portfolio Quarterly Quarterly
- --------------------------------------------------------------------------------
Blue Chip Equity Portfolio Quarterly Quarterly
- --------------------------------------------------------------------------------
Capital Growth Portfolio Annually Annually
- --------------------------------------------------------------------------------
Mid-Cap Equity Portfolio Quarterly Quarterly
- --------------------------------------------------------------------------------
Small-Cap Equity Portfolio Annually Annually
- --------------------------------------------------------------------------------
International Equity Selection Portfolio Annually Annually
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.
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. A sale or exchange of shares is generally a taxable
event.
The Tax-Free Money Market, Maryland Tax-Free and Pennsylvania Tax-Free
Portfolios intend to distribute Federally tax-exempt income. These Portfolios
may invest a portion of their 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 Portfolios may be
taxable.
More information about taxes is in the Statement of Additional Information.
PROSPECTUS 77
<PAGE>
FINANCIAL HIGHLIGHTS
The table that follows presents performance information about Class A and, if
applicable, Class B Shares of the Portfolios. This information is intended to
help you understand each Portfolio's financial performance for the past five
years, or, if shorter, 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 each Portfolio's financial
statements, appears in the Portfolios' Annual Report that accompanies our
Statement of Additional Information. You can obtain the Portfolios' Annual
Report, which contains more performance information, at no charge by calling 1-
888-4ARK-FUND.
<TABLE>
<CAPTION>
For the year ended April 30,
Realized and
Unrealized
Net Asset Gains or Distributions
Value, Net (Losses) from Net Distributions Net Asset
Beginning Investment on Investment from Capital Value, End Total
of Period Income Investments Income Gains of Period Return(A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Money Market Portfolio
- ------------------------------------
RETAIL CLASS A
1999 $1.00 0.04 -- (0.04) -- $1.00 4.33%
1998 1.00 0.05 -- (0.05) -- 1.00 4.77
1997 1.00 0.05 -- (0.05) -- 1.00 4.71
1996 (1) 1.00 0.02 -- (0.02) -- 1.00 1.82+
U.S. Government Money Market Portfolio
- --------------------------------------
RETAIL CLASS A
1999 $1.00 0.05 -- (0.05) -- $1.00 4.75%
1998 (2) 1.00 0.04 -- (0.04) -- 1.00 5.19*
Money Market Portfolio
- ----------------------
RETAIL CLASS A
1999 $1.00 0.05 -- (0.05) -- $1.00 4.91%
1998 1.00 0.05 -- (0.05) -- 1.00 5.25
1997 1.00 0.05 -- (0.05) -- 1.00 5.03
1996 1.00 0.05 -- (0.05) -- 1.00 5.44
1995 (3) 1.00 0.05 -- (0.05) -- 1.00 4.69
RETAIL CLASS B
1999 (4) $1.00 0.01 -- (0.01) -- $1.00 3.86%*
Tax-Free Money Market Portfolio
- -------------------------------
RETAIL CLASS A
1999 $1.00 0.03 -- (0.03) -- $1.00 2.74%
1998 1.00 0.03 -- (0.03) -- 1.00 3.16
1997 1.00 0.03 -- (0.03) -- 1.00 3.01
1996 1.00 0.03 -- (0.03) -- 1.00 3.53
1995 (5) 1.00 0.03 -- (0.03) -- 1.00 2.74
<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Net Assets, Expenses Income Net Assets Portfolio
End of to Average to Average (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Rate
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
U.S. Treasury Money Market Portfolio
- ------------------------------------
RETAIL CLASS A
1999 $ 19,632 0.69% 4.31% 0.84% --
1998 35,302 0.70 4.66 0.85 --
1997 13,673 0.64 4.62 0.83 --
1996 (1) 8,758 0.55* 4.71* 0.86* --
U.S. Government Money Market Portfolio
- --------------------------------------
RETAIL CLASS A
1999 $104,037 0.64% 4.62% 0.84% --
1998 (2) 78,265 0.67* 4.98* 0.87* --
Money Market Portfolio
- ----------------------
RETAIL CLASS A
1999 $246,496 0.62% 4.79% 0.85% --
1998 188,048 0.62 5.13 0.85 --
1997 128,693 0.59 4.92 0.83 --
1996 104,703 0.58 5.25 0.77 --
1995 (3) 51,081 0.45 4.88 0.97 --
RETAIL CLASS B
1999 (4) $ 22 1.30%* 3.76%* 1.44%* --
Tax-Free Money Market Portfolio
- -------------------------------
RETAIL CLASS A
1999 $ 33,509 0.60% 2.66% 0.85% --
1998 25,144 0.61 3.11 0.86 --
1997 16,495 0.55 2.97 0.84 --
1996 16,179 0.34 3.33 0.90 --
1995 (5) 2,491 0.75 2.68 2.94 --
</TABLE>
+ 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 December 15, 1995.
(2) Commenced operations on July 7, 1997.
(3) Commenced operations on March 2, 1994.
(4) Commenced operations on January 22, 1999.
(5) Commenced operations on March 15, 1994.
78 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
Realized and
Unrealized
Net Asset Gains or Distributions
Value, Net (Losses) from Net Distributions Net Asset
Beginning Investment on Investment from Capital Value, End Total
of Period Income Investments Income Gains of Period Return(A)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Treasury Portfolio
- -----------------------------
RETAIL CLASS A
1999 $10.05 0.47 0.03 (0.47) (0.05) $10.03 5.04%
1998 9.96 0.52 0.09 (0.51) (0.01) 10.05 6.23
1997(6) 9.95 0.27 0.03 (0.28) (0.01) 9.96 3.39+
Maryland Tax-Free Portfolio
- ---------------------------
RETAIL CLASS A
1999 $10.14 0.43 0.14 (0.43) (0.07) $10.21 5.69%
1998 9.87 0.44 0.34 (0.45) (0.06) 10.14 7.91
1997(7) 9.96 0.13 (0.07) (0.15) -- 9.87 0.63+
Pennsylvania Tax-Free Portfolio
- -------------------------------
RETAIL CLASS A
1999 $10.13 0.39 0.15 (0.39) (0.06) $10.22 5.39%
1998 (8) 10.26 0.04 (0.13) (0.04) -- 10.13 (0.94)+
U.S. Government Bond Portfolio
- ------------------------------
RETAIL CLASS A
1999 $ 9.85 0.54 (0.06) (0.54) -- $ 9.79 4.93%
1998 (9) 9.88 0.81 (0.03) (0.81) -- 9.85 7.86+
Income Portfolio
- ----------------
RETAIL CLASS A
1999 $10.37 0.58 (0.16) (0.59) -- $10.20 4.08%
1998 9.94 0.58 0.44 (0.59) -- 10.37 10.47
1997 9.91 0.59 0.01 (0.57) -- 9.94 6.32
1996 9.72 0.60 0.19 (0.60) -- 9.91 8.14
1995 (10) 9.62 0.55 0.05 (0.47) (0.03) 9.72 6.45
RETAIL CLASS B
1999 (11) $10.40 0.35 (0.32) (0.35) -- $10.08 0.35%+
Balanced Portfolio
- ------------------
RETAIL CLASS A
1999 $13.20 0.26 2.02 (0.26) (0.63) $14.59 17.97%
1998 11.40 0.27 3.04 (0.28) (1.23) 13.20 30.67
1997 11.35 0.28 0.56 (0.28) (0.51) 11.40 7.66
1996 10.04 0.31 1.68 (0.31) (0.37) 11.35 20.23
1995 (12) 10.15 0.27 0.05 (0.24) (0.19) 10.04 3.33
RETAIL CLASS B
1999 (11) $12.58 0.16 2.67 (0.18) (0.63) $14.60 23.13%+
<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Net Assets, Expenses Income Net Assets Portfolio
End of to Average to Average (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Rate
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Term Treasury Portfolio
- -----------------------------
RETAIL CLASS A
1999 $14,006 0.82% 4.61% 1.12% 70.64%
1998 14,410 0.78 5.02 1.07 124.24
1997(6) 22,937 0.67* 5.07* 0.91* 147.86
Maryland Tax-Free Portfolio
- ---------------------------
RETAIL CLASS A
1999 $32,395 0.93% 4.18% 1.29% 30.83%
1998 25,283 0.90 4.39 1.15 22.40
1997(7) 7,997 0.91* 4.70* 1.10* 11.13
Pennsylvania Tax-Free Portfolio
- -------------------------------
RETAIL CLASS A
1999 $ 3,820 1.10% 3.84% 1.30% 43.46%
1998 (8) 2,577 1.01* 3.72* 1.24* 3.50
U.S. Government Bond Portfolio
- ------------------------------
RETAIL CLASS A
1999 $ 2,240 1.12% 5.11% 1.41% 102.27%
1998 (9) 30 1.05* 6.02* 1.33* 13.77
Income Portfolio
- ----------------
RETAIL CLASS A
1999 $ 8,573 0.95% 5.59% 1.24% 50.41%
1998 6,889 0.95 5.82 1.16 154.87
1997 4,102 0.89 5.96 1.09 271.60
1996 4,184 1.02 5.54 1.37 107.33
1995 (10) 296 1.23 5.66 27.63 73.00
RETAIL CLASS B
1999 (11) $ 280 1.70%* 4.71%* 1.79%* 50.41%
Balanced Portfolio
- ------------------
RETAIL CLASS A
1999 $26,927 1.01% 1.94% 1.40% 56.70%
1998 15,074 1.02 2.20 1.33 71.58
1997 6,164 0.96 2.56 1.19 124.22
1996 3,323 1.09 2.51 1.55 107.56
1995 (12) 549 1.26 2.83 5.80 81.00
RETAIL CLASS B
1999 (11) $ 2,479 1.75%* 0.99%* 1.84%* 56.70%
</TABLE>
+ 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.
(6) Commenced operations on September 9, 1996.
(7) Commenced operations on January 2, 1997.
(8) Commenced operations on March 23, 1998.
(9) Commenced operations on April 1, 1998.
(10) Commenced operations on April 12, 1994.
(11) Commenced operations on September 14, 1998.
(12) Commenced operations on March 9, 1994.
PROSPECTUS 79
<PAGE>
FINANCIAL HIGHLIGHTS
The table that follows presents performance information about Class A and, if
applicable, Class B Shares of the Portfolios. This information is intended to
help you understand each Portfolio's financial performance for the past five
years, or, if shorter, 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 each Portfolio's financial
statements, appears in the Portfolios' Annual Report that accompanies our
Statement of Additional Information. You can obtain the Portfolios' Annual
Report, which contains more performance information, at no charge by calling
1-888-4ARK-FUND.
For the year ended April 30,
<TABLE>
<CAPTION>
Realized
and
Unrealized
Net Asset Net Gains or Distributions
Value, Investment (Losses) from Net Distributions Net Asset
Beginning Income on Investment from Capital Value, End Total
of Period (Loss) Investments Income Gains of Period Return(A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Income Portfolio
- -----------------------
RETAIL CLASS A
1999 $12.52 0.23 0.21 (0.23) (0.69) $12.04 3.92%
1998 (13) 11.01 0.28 2.73 (0.29) (1.21) 12.52 28.73+
Value Equity Portfolio
- ----------------------
RETAIL CLASS A
1999 $14.60 0.05 1.36 (0.07) (0.72) $15.22 10.29%
1998 (9) 14.55 -- 0.05 -- -- 14.60 0.34+
RETAILCLASS B
1999 (11) $12.93 0.01 2.97 (0.03) (0.72) $15.16 23.70%+
Equity Index Portfolio
- ----------------------
RETAIL CLASS A
1999 $11.57 0.11 2.40 (0.11) (0.13) $13.84 22.05%
1998 (14) 9.78 0.06 1.80 (0.07) -- 11.57 19.08+
Blue Chip Equity Portfolio
- --------------------------
RETAIL CLASS A
1999 $16.98 0.09 3.40 (0.09) (0.40) $19.98 20.96%
1998 12.38 0.10 4.69 (0.10) (0.09) 16.98 38.93
1997 (15) 10.33 0.16 2.06 (0.16) (0.01) 12.38 21.74+
RETAIL CLASS B
1999 (16) $17.07 0.01 3.28 (0.03) (0.40) $19.93 19.62%+
<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Net Assets, Expenses Income (Loss) Net Assets Portfolio
End of to Average to Average (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Rate
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Equity Income Portfolio
- -----------------------
RETAIL CLASS A
1999 $ 3,659 1.08% 1.93% 1.44% 56.03%
1998 (13) 3,428 1.07* 2.39* 1.45* 39.88
Value Equity Portfolio
- ----------------------
RETAIL CLASS A
1999 $ 3,553 1.31% 0.29% 1.74% 32.21%
1998 (9) 227 1.26* 0.62* 1.67* 4.34
RETAIL CLASS B
1999 (11) $ 164 2.07%* (0.67)%* 2.20%* 32.21%
Equity Index Portfolio
- ----------------------
RETAIL CLASS A
1999 $ 4,974 0.48% 0.92% 1.00% 34.04%
1998 (14) 1,417 0.45* 1.02* 1.08* 49.56
Blue Chip Equity Portfolio
- --------------------------
RETAIL CLASS A
1999 $56,771 1.07% 0.49% 1.62% 38.78%
1998 43,300 1.04 0.71 1.50 26.32
1997 (15) 13,211 0.86* 1.29* 1.25* 46.91
RETAIL CLASS B
1999 (16) $ 3,162 1.84%* (0.43)%* 1.94%* 38.78%
</TABLE>
+ 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.
(9) Commenced operations on April 1, 1998.
(11) Commenced operations on September 14, 1998.
(13) Commenced operations on May 9, 1997.
(14) Commenced operations on November 3, 1997.
(15) Commenced operations on May 16, 1996.
(16) Commenced operations on July 31, 1998.
80 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
Realized and
Net Asset Net Unrealized Distributions
Value, Investment Gains or from Net Distributions Net Asset
Beginning Income (Losses) Investment from Capital Value, End Total
of Period (Loss) on Investment Income Gains of Period Return(A)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Growth Portfolio
- ------------------------
RETAIL CLASS A
1999 $14.82 (0.03) 4.30 -- (0.51) $18.58 29.34%
1998 11.87 -- 4.93 (0.02) (1.96) 14.82 44.90
1997 11.56 0.09 1.41 (0.13) (1.06) 11.87 13.39
1996 10.18 0.12 2.15 (0.12) (0.77) 11.56 23.24
1995 (12) 10.18 0.08 0.18 (0.08) (0.18) 10.18 2.74
RETAILCLASS B
1999 (11) $13.53 (0.04) 5.63 -- (0.51) $18.61 41.88%+
Small-Cap Equity Portfolio
- --------------------------
RETAIL CLASS A
1999 $11.83 (0.07) 1.16 -- (0.33) $12.59 9.66%
1998 8.53 (0.06) 3.98 -- (0.62) 11.83 47.57
1997 (15) 15.47 (0.01) (3.72) -- (3.21) 8.53 (27.14)+
International Equity Selection Portfolio
RETAIL CLASS A
1999 $11.51 0.08 (0.17) (0.09) (0.17) $11.16 (0.59)%
1998 (9) 11.40 -- 0.11 -- -- 11.51 0.96+
<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Net Assets, Expenses Income (Loss) Net Assets Portfolio
End of to Average to Average (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Rate
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Growth Portfolio
- ------------------------
RETAIL CLASS A
1999 $23,035 1.09% (0.23)% 1.44% 118.46%
1998 14,401 1.06 (0.10) 1.37 174.55
1997 5,595 0.56 0.74 1.30 246.14
1996 2,111 0.50 1.05 1.65 578.57
1995 (12) 404 1.23 0.86 9.73 182.00
RETAILCLASS B
1999 (11) $ 2,162 1.87%* (1.09)%* 1.92%* 118.46%
Small-Cap Equity Portfolio
- --------------------------
RETAIL CLASS A
1999 $ 2,248 1.32% (0.64)% 1.63% 733.14%
1998 1,853 1.21 (0.46) 1.36 410.72
1997 (15) 1,075 1.11* (0.13)* 1.21* 704.41
International Equity Selection Portfolio
- ----------------------------------------
RETAIL CLASS A
1999 $ 1,496 1.05% 0.80% 1.30% 101.86%
1998 (9) 13 0.96* (0.63)* 1.19* 0.98
</TABLE>
+ 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.
(11) Commenced operations on September 14, 1998.
(12) Commenced operations on March 9, 1994.
(15) Commenced operations on May 16, 1996.
PROSPECTUS 81
<PAGE>
NOTES
<PAGE>
NOTES
<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, NW
Second Floor
Washington, DC 20036-1800
[LOGO]
ARK FUNDS
More information about the Portfolios is available without charge
through the following:
Statement of Additional Information (SAI)
The SAI dated September 1, 1999, includes detailed information about ARK Funds.
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 each Portfolio's holdings and contain information from the
Portfolio's 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 1-888-4ARK-FUND
By Mail: Write to us
ARK Funds
P.O. Box 8525
Boston, MA 02266-8525
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 SECOs 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 20549-6009 or (2) sending an electronic request to
[email protected]. ARK Funds' Investment Company Act registration number is
811-7310.
<PAGE>
[LOGO OF ARK FUNDS]
25 South Charles Street (101-624)
Baltimore, MD 21201
