ARK FUNDS/MA, 485APOS, 2000-01-04

ARK FUNDS/MA
485APOS, 2000-01-04

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
January 4, 2000.

FILE NO. 33-53690
FILE NO. 811-7310

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

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT / /
POST-EFFECTIVE AMENDMENT NO. 23 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/

AMENDMENT NO. 21 /X/

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

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

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

LYNDA J. STRIEGEL, ESQ.
VICE PRESIDENT AND SECRETARY
ARK FUNDS
ONE FREEDOM VALLEY DRIVE
OAKS, PA 19456
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPIES TO:
ALAN C. PORTER, ESQ.
PIPER MARBURY RUDNICK & WOLFE L.L.P.
36 SOUTH CHARLES STREET
BALTIMORE, MARYLAND 21201

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:

/ / IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
/ / ON [DATE] PURSUANT TO PARAGRAPH (b)
/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a) (1)

/X/ 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)
/ / ON [DATE] PURSUANT TO PARAGRAPH (a) OF RULE 485

IF APPROPRIATE, CHECK THE FOLLOWING BOX:

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

<PAGE>

ARK Funds

Retail Shares

Class A and Class B

Prospectus

March _____, 2000

U.S. Treasury Money Market Portfolio
U.S. Government Money Market Portfolio
Money Market Portfolio
Tax-Free Money Market Portfolio
PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO
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
International Equity Portfolio
Emerging Markets Equity Portfolio

Investment Advisors:
Allied Investment Advisors, Inc.
AIB Govett Asset Management Limited

Page 1 of 128
<PAGE>

(subadviser to the International Equity Portfolio
and Emerging Markets Equity Portfolio)

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 crime offense.

Page 2 of 128
<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............ XXX
U.S. Government Money Market Portfolio.......... XXX
Money Market Portfolio.......................... XXX
Tax-Free Money Market Portfolio................. XXX
Tax-Free Money Market Portfolio................. XXX
Pennsylvania Tax-Free Money Market Portfolio.....XXX
Short-Term Treasury Portfolio................... XXX
Maryland Tax-Free Portfolio..................... XXX
Pennsylvania Tax-Free Portfolio................. XXX
Intermediate Fixed Income Portfolio............. XXX
U.S. Government Bond Portfolio.................. XXX
Income Portfolio................................ XXX
Balanced Portfolio.............................. XXX
Equity Income Portfolio......................... XXX
Value Equity Portfolio.......................... XXX
Equity Index Portfolio.......................... XXX
Blue Chip Equity Portfolio...................... XXX
Capital Growth Portfolio........................ XXX
Mid-Cap Equity Portfolio........................ XXX
Small-Cap Equity Portfolio...................... XXX
International Equity Selection Portfolio........ XXX
International Equity Portfolio.................. XXX
Emerging Markets Equity Portfolio............... XXX

Page 3 of 128
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More information about risk.......................... XXX
Each Portfolio's other investments................... XXX
Investment Advisor................................... XXX
Purchasing, Selling and Exchanging Portfolio shares.. XXX
Distribution of Portfolio Shares..................... XXX
Dividends and Distributions.......................... XXX
Taxes................................................ XXX
Financial Highlights................................. XXX
How to obtain more information about ARK Funds....... Back Cover

Page 4 of 128
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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, Tax-Free Money Market Portfolio and
Pennsylvania 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.

Page 5 of 128
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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.

Page 6 of 128
<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.

This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year for four years.

1996 4.77%
1997 4.77%
1998 4.55%
1999 ____%

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the IBC/Financial Data 100% U.S. Treasury
Average.

Class A Shares 1 Year Since Inception
- - -------------------------------------------------------------------------------
U.S. Treasury Money Market Portfolio % %*
IBC/Financial Data 100% U.S. Treasury Average % %**

* 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.

Page 7 of 128
<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% until September 1, 2000. 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

Page 8 of 128
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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.

Principal Risks of Investing in the U.S. Government Money Market 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.

Page 9 of 128
<PAGE>

Performance Information

This bar chart shows the performance of the Portfolio's Class A Shares from year
to year for two years.

1998 4.96%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the IBC/Financial Data U.S. Government and
Agencies Average.

<TABLE>
<CAPTION>
Class A Shares 1 Year Since Inception
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government Money Market Portfolio % %*
IBC/Financial Data U.S. Government and Agencies Average % %**
</TABLE>

* 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.

Page 10 of 128
<PAGE>

Portfolio Fees and Expenses

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% until
September 1, 2000. 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

1 Year 3 Years 5 Years 10 Years
$67 $248 $444 $1,010

Page 11 of 128
<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 are rated in the highest rating category by two or more nationally
recognized statistical rating organizations.

Principal Risks of Investing in the Money Market 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.

Page 12 of 128
<PAGE>

Performance Information

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 five years. The Portfolio's Class B Shares
commenced operations on January 22, 1999 and do not have a full calendar year of
performance.

1995 5.65%
1996 5.04%
1997 5.21%
1998 5.12%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the IBC/Financial Data First Tier Average.

* 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.

Page 13 of 128
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Class A Shares Class B 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, until September 1, 2000.
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."

Page 14 of 128
<PAGE>

Example
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated.

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."

Page 15 of 128
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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.

Principal Risks of Investing in the Tax-Free Money Market Portfolio

Page 16 of 128
<PAGE>

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

This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year for five years.

1995 3.55%
1996 3.08%
1997 3.14%
1998 2.92%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the IBC/Financial Data Stockbroker &
General Purpose Average.

<TABLE>
<CAPTION>
Class A Shares 1 Year 5 Years Since Inception
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Free Money Market Portfolio % %* %*
IBC/Financial Data Stockbroker & General Purpose Average % %** %**
</TABLE>

* 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.

Page 17 of 128
<PAGE>

ARK PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

Portfolio Summary

Investment Goal Maximizing current income exempt from Federal
and Pennsylvania state income taxes and
providing liquidity and security of principal

Investment Focus Short-term, high-quality Pennsylvania
municipal money market obligations

Share Price Volatility Very low

Principal Investment Strategy Investing in tax-exempt U.S. dollar-
denominated money market securities of
Pennsylvania issuers

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

Investment Strategy of the Pennsylvania Tax-Free Money Market Portfolio

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

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

Principal Risks of Investing in the Pennsylvania Tax-Free Money Market Portfolio

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

Page 18 of 128
<PAGE>

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

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

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% until September 1, 2000. 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 Money Market Portfolio - Class 0.60%
A Shares

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

Example

Page 19 of 128
<PAGE>

1 Year 3 Years 5 Years 10 Years
$ $ $ $

Page 20 of 128
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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.

Page 21 of 128
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year for three years.

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Lehman 1-3 Year Government Bond Index.

Class A Shares 1 Year Since Inception
- - ------------------------------------------------------------------------------
Short-Term Treasury Portfolio % %*
Lehman 1-3 Year Government Bond Index % %**

* Since September 9, 1996.
** Since August 31, 1996.

What is an Index?

Page 22 of 128
<PAGE>

Portfolio Fees and Expenses

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% until September 1, 2000. 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

1 Year 3 Years 5 Years 10 Years
$94 $338 $602 $1,356

Page 23 of 128
<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.

Page 24 of 128
<PAGE>

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 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 from year to year for two years. The Portfolio's
Class B Shares commenced operations on September 1, 1999, 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.

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Lehman 10 Year Municipal Bond Index and
the Lehman 7 Year Municipal Bond Index.

Page 25 of 128
<PAGE>

1 Year Since Inception
- - --------------------------------------------------------------------------------
Maryland Tax-Free Portfolio - Class A Shares % %*
Lehman 10 Year Municipal Bond Index % %**
Lehman 7 Year Municipal Bond Index % %**
Maryland Tax-Free Portfolio - Class B Shares % %***
Lehman 10 Year Municipal Bond Index % %****
Lehman 7 Year Municipal Bond Index % %****

* 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?

Page 26 of 128
<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.

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>

* 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."

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Class A Shares Class B 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, until September
1, 2000. 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."

Page 27 of 128
<PAGE>

Example

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

Page 28 of 128
<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.

Principal Risks of Investing in the Pennsylvania Tax-Free Portfolio

Page 29 of 128
<PAGE>

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

Performance Information

The performance of Class A and Class B Shares will differ due to differences in
expenses. The bar chart shows changes in the performance of the Portfolio's
Class A Shares for the most recent year. The Portfolio's Class B Shares
commenced operations on September 1, 1999, 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.

Best Quarter Worst Quarter
% %

Page 30 of 128
<PAGE>

1 Year Since Inception
- - -------------------------------------------------------------------------------
Pennsylvania Tax-Free Portfolio - Class A Shares %* %*
Pennsylvania Tax-Free Portfolio - Class B Shares %** %**
Lehman 10 Year Municipal Bond Index % %***
Lehman 7 Year Municipal Bond Index % %***

* 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?

Page 31 of 128
<PAGE>

obligation bonds, revenue bonds, insured bonds and prefunded bonds with
maturities between six and eight years.

Page 32 of 128
<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.

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Class A Shares Class B 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% until September 1, 2000. 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 Shares 1.10%

** 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."

Page 33 of 128
<PAGE>

Example

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

Page 34 of 128
<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 comparable 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.

Page 35 of 128
<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 note 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 three years. The Portfolio's Class A shares
have not commenced operations.

Best Quarter Worst Quarter
% %

The table which follows compares the Portfolio's average annual total returns
for the periods ended December 31, 1999, to those of the Lehman Intermediate
Government/Corporate Bond Index.

Class A Shares 1 Year Since Inception
- - --------------------------------------------------------------------------------
Intermediate Fixed Income Portfolio % %*
Lehman Intermediate Government/Corporate Bond Index % %**

* 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

Page 36 of 128
<PAGE>

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.

<TABLE>
<CAPTION>
Class A Shares
- - -----------------------------------------------------------------------------------------------
<S> <C>
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
</TABLE>

* 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.

Page 37 of 128
<PAGE>

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% until September 1, 2000. 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

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

Page 38 of 128
<PAGE>

ARK U.S. GOVERNMENT BOND PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

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 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.

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.

Page 39 of 128

<PAGE>

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.

Performance Information

This bar chart shows changes in 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.

1997 6.70%
1998 15.36%
1999 %

Best Quarter Worst Quarter
% %

Page 40 of 128
<PAGE>

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Lehman Intermediate
Government/Corporate Bond Index.

<TABLE>
<CAPTION>
Class A Shares 1 Year Since Inception
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government Bond Portfolio %* %*
Lehman Intermediate Government/Corporate Bond Index % %**
</TABLE>

* 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.

Page 41 of 128
<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.

<TABLE>
<CAPTION>
Class A Shares
- - ---------------------------------------------------------------------------------------------------------
<S> <C>
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
</TABLE>

* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."

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% until September 1, 2000. 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."

Page 42 of 128
<PAGE>

Example

The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$566 $851 $1,158 $2,027
</TABLE>

Page 43 of 128
<PAGE>

ARK INCOME PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

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.

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.

Page 44 of 128
<PAGE>

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.

Performance Information

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 five years and the Portfolio's Class B
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.

1995 17.99%
1996 2.60%
1997 9.22%
1998 6.66%
1999 %

Best Quarter Worst Quarter
% %

Page 45 of 128
<PAGE>

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Lehman Aggregate Bond Index.

<TABLE>
<CAPTION>
1 Year 5 Year Since Inception
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Portfolio Class A Shares % % %*
Lehman Aggregate-Bond Index % % %**
Income Portfolio Class B Shares %*** %*** %***
Lehman Aggregate Bond Index % % %****
</TABLE>

* 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?

Page 46 of 128
<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.

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.60% 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%*
----
</TABLE>

________________________________________________________________________________

* 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% until September 1, 2000. 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:

Page 47 of 128
<PAGE>

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

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:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares $552 $810 $1,087 $1,876
Class B Shares $683 $866 $1,175 $1,904
</TABLE>

If you do not sell your shares at the end of the period:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares $552 $810 $1,087 $1,876
Class B Shares $183 $566 $ 975 $1,904
</TABLE>

Page 48 of 128
<PAGE>

ARK BALANCED PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

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 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

Page 49 of 128
<PAGE>

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

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.

Performance Information

The performance of Class A and Class B Shares will differ due to differences in
expenses. The bar chart shows changes in the performance of the Portfolio's
Class A Shares from year to year for five years and the Portfolio's Class B
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.

1995 21.29%
1996 7.83%
1997 22.30%
1998 24.61%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, 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.

Page 50 of 128
<PAGE>

<TABLE>
<CAPTION>
1 Year 5 Years Since Inception
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Portfolio Class A Shares % %*
S&P 500 Composite Index % % %**
Lehman Aggregate Bond Index % % %**
60/40 Hybrid of the S&P 500 and Lehman Aggregate Bond % % %**
Balanced Portfolio Class B Shares %*** %*** %***
S&P 500 Composite Index % % %****
Lehman Aggregate Bond Index % % %****
60/40 Hybrid of the S&P 500 and Lehman Aggregate Bond % % %****
</TABLE>

* 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 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. 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.

Page 51 of 128
<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.

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>

* 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."

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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%*
----
</TABLE>

________________________________________________________________________________

* 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% until September 1, 2000. 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%

Balanced Portfolio - Class B Shares 1.77%

Page 52 of 128
<PAGE>

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

Example

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:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares $583 $872 $1,182 $2,061
Class B Shares $689 $885 $1,206 $2,008
</TABLE>

If you do not sell your shares at the end of the period:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares $583 $872 $1,182 $2,061
Class B Shares $189 $585 $1,006 $2,008
</TABLE>

Page 53 of 128
<PAGE>

ARK EQUITY INCOME PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

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.

Page 54 of 128
<PAGE>

Performance Information

This bar chart shows 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.

1998 8.43%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 500 Composite Index.

Class A Shares 1 Year Since Inception
- - --------------------------------------------------------------------------------
Equity Income Portfolio % %*
S&P 500 Composite Index % %**

* Since May 9, 1997.
** Since April 30, 1997.

What is an Index?

Page 55 of 128
<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.

<TABLE>
<CAPTION>
Class A Shares
- - --------------------------------------------------------------------------------------------------------
<S> <C>
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
</TABLE>

* 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 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)

<TABLE>
<CAPTION>
Class A Shares
- - -----------------------------------------------------------------------------------------
<S> <C>
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%*
----
</TABLE>

________________________________________________________________________________

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
1.16% until September 1, 2000. 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."

Page 56 of 128
<PAGE>

Example

The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$588 $881 $1,195 $2,085
</TABLE>

Page 57 of 128
<PAGE>

ARK VALUE EQUITY PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

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.

Page 58 of 128
<PAGE>

Performance Information

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 and Class B 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.

1999 %

Best Quarter Worst Quarter
% %

Page 59 of 128
<PAGE>

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 500 Composite Index.

<TABLE>
<CAPTION>
1 Year Since Inception
- - ----------------------------------------------------------------------------------------
<S> <C> <C>
Value Equity Portfolio - Class A Shares % %*
Value Equity Portfolio - Class B Shares %** %**
S&P 500 Composite Index % %***
</TABLE>

* 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?

Page 60 of 128
<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.

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>

* 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."

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
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%*
---- ----
- - ----------------------------------------------------------------------------------------------------------
</TABLE>

* 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, until September 1, 2000.
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:

<TABLE>
<S> <C>
Value Equity Portfolio - Class A Shares 1.31%
Value Equity Portfolio - Class B Shares 2.06%
</TABLE>

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

Page 61 of 128
<PAGE>

Example

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:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares $611 $965 $1,344 $2,402
Class B Shares $718 $981 $1,371 $2,354
</TABLE>

If you do not sell your shares at the end of the period:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares $611 $965 $1,344 $2,402
Class B Shares $218 $681 $1,171 $2,354
</TABLE>

Page 62 of 128
<PAGE>

ARK EQUITY INDEX PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

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.

Page 63 of 128
<PAGE>

Performance Information

This bar chart shows 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.

1998 29.01%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 500 Composite Index.

Class A Shares 1 Year Since Inception
- - ------------------------------------------------------------------------------
Equity Index Portfolio % %*
S&P 500 Composite Index % % **

* Since November 3, 1997.
** Since October 31, 1997.

What is an Index?

Page 64 of 128
<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.

<TABLE>
<CAPTION>
Class A Shares
- - -------------------------------------------------------------------------------------------------
<S> <C>
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
</TABLE>

* This sales charge varies depending upon how much you invest. See
"Purchasing Portfolio Shares."

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% until September 1, 2000. 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."

Page 65 of 128
<PAGE>

Example

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

Page 66 of 128
<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.

Page 67 of 128
<PAGE>

Performance Information

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 three years and the Portfolio's Class B
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.

1997 32.75%
1998 26.26%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 500 Composite Index.

1 Year Since Inception
- - --------------------------------------------------------------------------------
Blue Chip Equity Portfolio - Class A Shares % %*
S&P 500 Composite Index % %**
Blue Chip Equity Portfolio - Class B Shares %*** %***
S&P 500 Composite Index % %****

* 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.

Page 68 of 128
<PAGE>

What is an Index?

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.

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>

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.

Page 69 of 128
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Class A Shares Class B 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, until September
1, 2000. 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

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

Page 70 of 128
<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.

Page 71 of 128
<PAGE>

Performance Information

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 five years and the Portfolio's Class B
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.

1995 22.85%
1996 17.64%
1997 29.07%
1998 40.93%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 500 Composite Index.

<TABLE>
<CAPTION>
1 Year 5 Years Since Inception
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Growth Portfolio Class A Shares % %*
S&P 500 Composite Index % % %**
Capital Growth Portfolio Class B Shares %*** %*** %***
S&P Composite Index % % %****
</TABLE>

* 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.

Page 72 of 128
<PAGE>

What is an Index?

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.

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>

* 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."

Page 73 of 128
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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%*
----
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>

* 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% until September 1, 2000. 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%

Capital Growth Portfolio - Class B Shares 1.87%

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

Example

If you sell your shares at the end of the period:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares $592 $893 $1,216 $2,128
Class B Shares $695 $903 $1,237 $2,072
</TABLE>

If you do not sell your shares at the end of the period:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares $592 $893 $1,216 $2,128
Class B Shares $195 $603 $1,037 $2,072
</TABLE>

Page 74 of 128
<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

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.

Page 75 of 128
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class Shares from year to year for three years.

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

1997 31.39%
1998 22.07%
1999 %

Best Quarter Worst Quarter
% %

The table which follows compares the Portfolio's average annual total returns
for the periods ended December 31, 1999, to those of the S&P 400 Mid-Cap Index.

<TABLE>
<CAPTION>
Class A Shares 1 Year Since Inception
- - ---------------------------------------------------------------------------
<S> <C> <C>
Mid-Cap Equity Portfolio %* %*
S&P 400 Mid-Cap Index % %**
</TABLE>

* 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?

Page 76 of 128
<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.

* 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)

<TABLE>
<CAPTION>
Class A Shares
- - -------------------------------------------------------------------------------------------------
<S> <C>
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%*
----
- - -------------------------------------------------------------------------------------------------
</TABLE>

* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 1.32% until
September 1, 2000. 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."

Page 77 of 128
<PAGE>

Example

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$603 $928 $1,275 $2,253
</TABLE>

Page 78 of 128
<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

Page 79 of 128
<PAGE>

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

This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year for three years.

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

1997 5.36%
1998 19.05%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Russell 2000 Growth Index.

<TABLE>
<CAPTION>
Class A Shares 1 Year Since Inception
- - --------------------------------------------------------------------------
<S> <C> <C>
Small-Cap Equity Portfolio % %*
Russell 2000 Growth Index % %**
</TABLE>

* Since May 16, 1996.
** Since May 31, 1996.

Page 80 of 128
<PAGE>

What is an Index?

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.

<TABLE>
<CAPTION>
Class A Shares
- - ------------------------------------------------------------------------------------------------------------------
<S> <C>
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
</TABLE>

* This sales charge varies depending upon how much you invest. See "Purchasing
Portfolio Shares."

Page 81 of 128
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Class A Shares
- - ----------------------------------------------------------------------------------------
<S> <C>
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%*
----
- - ----------------------------------------------------------------------------------------
</TABLE>

* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 1.44% until
September 1, 2000. 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

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$615 $953 $1,315 $2,329
</TABLE>

Page 82 of 128
<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 in countries 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

Page 83 of 128
<PAGE>

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.

Performance Information

This bar chart shows changes in 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.

1999 %

Best Quarter Worst Quarter
% %

Page 84 of 128
<PAGE>

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Morgan Stanley Capital International
(MSCI) EAFE Index.

<TABLE>
<CAPTION>
Class A Shares 1 Year 5 Years Since Inception
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Equity Selection Portfolio %* %* %*
MSCI EAFE Index % % %**
</TABLE>

* 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 the 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?

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.

<TABLE>
<CAPTION>
Class A Shares
- - -------------------------------------------------------------------------------------------------
<S> <C>
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
</TABLE>

Page 85 of 128
<PAGE>

Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>

* This sales charge varies depending upon how much you invest. See "Purchasing
Portfolio Shares."

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Class A Shares

- - ------------------------------------------------------------------------------------
<S> <C>
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%*
- - ------------------------------------------------------------------------------------
</TABLE>

* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 1.14% until
September 1, 2000. 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

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$264 $572 $901 $1,833
</TABLE>

Page 86 of 128
<PAGE>

ARK INTERNATIONAL EQUITY PORTFOLIO

Portfolio Summary

Investment Goal Long-term capital appreciation

Investment Focus Equity securities of non-U.S. issuers

Share Price Volatility High

Principal Investment Strategy Investing in equity securities of foreign
issuers located in countries other than 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 Portfolio

The International Equity Portfolio seeks its investment goal by investing
primarily in equity securities of companies located throughout the world. The
Portfolio invests in common stocks and other equity securities of issuers
located in at least three countries other than the U.S. The Portfolio invests in
issuers located in any country other than the U.S. and may invest in issuers of
any size.

The Portfolio's Subadvisor applies a blend of "top-down" and "bottom-up"
decision making in selecting portfolio investments. It first looks at trends in
the global economy and attempts to identify countries and sectors that offer
high growth potential. Then it uses extensive research and analysis to select
stocks in those countries and sectors with attractive valuations and good growth
potential.

Do 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 International Equity Portfolio

Page 87 of 128
<PAGE>

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. 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.

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

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.

<TABLE>
<CAPTION>
Class A Shares
- - ------------------------------------------------------------------------------------------------
<S> <C>
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
</TABLE>

* This sales charge varies depending upon how much you invest. See "Purchasing
Portfolio Shares."

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Class A Shares
- - ------------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 1.00%
Distribution (12b-1) Fees 0.40%
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Total Net Operating Expenses %*
----
</TABLE>

The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding _____% until
September 1, 2000. 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

Page 88 of 128
<PAGE>

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 Portfolio - Class A Shares _____%

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

Example

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
$ $ $ $

Page 89 of 128
<PAGE>

ARK EMERGING MARKETS EQUITY PORTFOLIO

Investment Goal Long-term capital appreciation

Investment Focus Equity securities located in emerging
markets

Share Price Volatility High

Principal Investment Strategy Investing in equity securities of issuers
located in emerging or developing markets
throughout the world

Investor Profile Investors seeking long-term capital
appreciation who want to diversify their
portfolio by investing overseas and who
can tolerate the risks of investing in
emerging markets

Investment Strategy of the Emerging Markets Equity Portfolio

The Emerging Markets Equity Portfolio seeks its investment goal by investing
primarily in equity securities of issuers located in emerging markets. The
Portfolio invests in common stocks and other equity securities of issuers
located in at least three emerging market countries. The Portfolio's Subadvisor
uses the World Bank's classification system to determine the potential universe
of emerging markets. The Portfolio may invest in issuers of any size.

The Subadvisor applies a blend of "top-down" and "bottom-up" decision making in
selecting portfolio investments. It first looks at trends in the global economy
and attempts to identify countries and sectors that offer high growth potential.
Then it uses extensive research and analysis to select stocks in those countries
and sectors with attractive valuations and good 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 Emerging Markets Equity Portfolio

Page 90 of 128
<PAGE>

value of those currencies compared to the U.S. dollar may affect (positively or
negatively) the value of the Portfolio's investments. 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.

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

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. The table which follows describes
the fees and expenses that you may pay if you buy and hold shares of the
Portfolio.

Page 91 of 128
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Class A Shares
- - -----------------------------------------------------------------------------
Investment Advisory Fees 1.00%
Distribution (12b-1) Fees 0.40%
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----

* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding _____% until
September 1, 2000. 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:

Emerging Markets Equity Portfolio -- Institutional Class _____%

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

Example

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
$ $ $ $

Page 92 of 128
<PAGE>

More Information About Risk

<TABLE>
<CAPTION>
Risks Portfolios Affected by the Risks

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

Fixed Income Risk -- The market values of fixed income Short-Term Treasury Portfolio
investments change in response to interest rate changes Maryland Tax-Free Portfolio
and other factors. During periods of falling interest Pennsylvania Tax-Free Portfolio
rates, the values of outstanding fixed income Intermediate Fixed Income Portfolio
securities generally rise. Moreover, while securities U.S. Government Bond Portfolio
with longer maturities tend to produce higher yields, Income Portfolio
the prices of longer maturity securities are also Balanced Portfolio
subject to greater market fluctuations as a result of
changes in interest rates. In addition to these
fundamental risks, different types of fixed income
securities may be subject to the following additional
risks:

Call Risk -- During periods of falling interest Maryland Tax-Free Portfolio
rates, certain debt obligations with high interest Pennsylvania Tax-Free Portfolio
rates may be prepaid (or "called") by the issuer Intermediate Fixed Income Portfolio
prior to maturity. This may cause a Portfolio's U.S. Government Bond Portfolio
average weighted maturity to fluctuate, and may Income Portfolio
require a Portfolio to invest the resulting Balanced Portfolio
proceeds at lower interest rates.
</TABLE>

Page 93 of 128
<PAGE>

<TABLE>
<S> <C>
Credit Risk -- The possibility that an
issuer will be unable to make timely payments of Maryland Tax-Free Portfolio
either principal or interest. Pennsylvania Tax-Free Portfolio
Intermediate Fixed Income Portfolio
U.S. Government Bond Portfolio
Income Portfolio
Balanced Portfolio

Event Risk -- Securities may suffer declines in Maryland Tax-Free Portfolio
credit quality and market value due to issuer Pennsylvania Tax-Free Portfolio
restructurings or other factors. This risk should Intermediate Fixed Income Portfolio
be reduced because of a Portfolio's multiple U.S. Government Bond Portfolio
holdings. Income Portfolio
Balanced Portfolio0

Mortgage-Backed Securities Risk -- Mortgage-backed Intermediate Fixed Income Portfolio
securities are fixed income securities representing U.S. Government Bond Portfolio
an interest in a pool of underlying mortgage loans. Income Portfolio
They are sensitive to changes in interest rates, Balanced Portfolio
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.
</TABLE>

Page 94 of 128
<PAGE>

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

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

page 95 of 128

<PAGE>

<TABLE>

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

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

Currency Risk -- Investments in foreign securities Small Cap Equity Portfolio
denominated in foreign currencies involve International Equity Selection Portfolio
additional risks, including: International Equity Portfolio
Emerging Markets Equity Portfolio
. 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.
</TABLE>

Page 96 of 128
<PAGE>

<TABLE>
<S> <C>
Tracking Error Risk -- Factors such as Portfolio Equity Index 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.

Year 2000 Risk -- The Portfolios depend on the smooth All Portfolios
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.

Furthermore, many foreign countries are not as prepared Small-Cap Equity Portfolio
as the U.S. for the year 2000 transition. As a result, International Equity Selection Portfolio
computer difficulties in foreign markets and with International Equity Portfolio
foreign institutions as a result of the year 2000 may Emerging Markets Equity Portfolio
add to the possibility of losses to the Portfolio and
its shareholders.
</TABLE>

Page 97 of 128
<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
Portfolio's advisor believes that the risk of loss outweighs the opportunity for
capital gains or higher income. The Portfolio may not be able to meet its
investment goal when it is employing a temporary defensive strategy.

Investment Advisor

The Portfolio's Investment Advisor makes (or supervises any subadvisor who
makes) investment decisions for the Portfolios and continuously reviews,
supervises and administers the Portfolios' respective investment programs. The
Board of Trustees of ARK Funds supervises the Advisor and any subadvisor and
establishes policies that the Advisor and any subadvisor 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 December 31, 1999, AIA had approximately
$_______ 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%
Pennsylvania Tax-Free Money Market Portfolio 0.25%*
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%

Page 98 of 128
<PAGE>

Mid-Cap Equity Portfolio 0.74%
Small-Cap Equity Portfolio 0.79%
International Equity Selection Portfolio 0.55%
International Equity Portfolio 1.00%*
Emerging Markets Equity Portfolio 1.00%*

* The Portfolios commenced operations on the date of this prospectus and have
not paid any advisory fees. The Board of Directors has approved an investment
advisory fee of 0.25% for the Pennsylvania Tax-Free Money Market Portfolio and
1.00% for the International Equity Portfolio and Emerging Markets Equity
Portfolio. The Portfolios' Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.63% for the Pennsylvania Tax-Free Money Market Portfolio, _____% for the
International Equity Portfolio and _____% for the Emerging Markets Equity
Portfolio until September 1, 2000. With these fee waivers, the actual advisory
fees received by AIA would be lower than those shown in the table above.

AIA and Allfirst are indirect wholly owned subsidiaries of Allied Irish Banks,
p.l.c. (AIB). AIB is the largest bank in the Republic of Ireland, with assets of
approximately $___ billion at December 31, 1999.

Investment Subadvisor

AIB Govett Asset Management Limited (AIB Govett), an indirect majority owned
subsidiary of AIB, is the Subadvisor for the International Equity Portfolio and
the Emerging Markets Equity Portfolio. It provides day-to-day management
services and makes investment decisions on behalf of these Portfolios in
accordance with their respective investment policies. In accordance with an
investment subadvisory agreement, AIA pays AIB Govett subadvisory fees from the
fees it receives from the International Equity Portfolio and the Emerging
Markets Equity Portfolio.

A money manager since the 1920s, AIB Govett has developed special expertise in
investing in emerging markets and smaller companies worldwide. AIB Govett had,
as of December 31, 1999, approximately $___ billion under management, primarily
in non-U.S. funds. AIB Govett is part of a broad network of offices worldwide,
with principal offices located in London, Dublin, San Francisco, and Singapore.
These offices are supported by a global network of investment/research offices
in Baltimore, Budapest, Rio de Janeiro, Poznan and Taipei. AIB Govett serves as
investment subadvisor to two other U.S. mutual fund portfolios.

James M. Hannan is a Principal of AIA and manager of the U.S. Treasury Money
Market Portfolio, U.S. Government Money Market Portfolio, Money Market
Portfolio, Tax-Free Money Market Portfolio, Pennsylvania Tax-Free Money Market
Portfolio, Short-Term Treasury Portfolio, U.S. Treasury Cash Management
Portfolio, U.S. Government Cash Management Portfolio, Prime Cash Management
Portfolio and Tax-Free Cash Management 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.

Page 99 of 128

<PAGE>

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 Funds
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 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.

Page 100 0f 128

<PAGE>

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. He earned his B.S. degree from
University of Richmond School of Business Administration.

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 4 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.

The International Equity Portfolio and the Emerging Markets Equity Portfolio are
managed by a portfolio management team under the supervision of John Murray, the
Managing Director of Investments of AIB Govett. Each team's investment process
is based on interaction among regional specialist desks. The Global Investment
Policy Committee, consisting of the Chief Investment Officers of the principal
offices, sets overall investment policies and strategy for AIB Govett group and
coordinates implementation in accordance with each Portfolio's investment goals,
policies and regulatory requirements. With this structure, the firm seeks
consistent implementation of process and continuity of investment management
staff for each Portfolio.

Mr. Murray graduated with a BA in finance and business studies from the
University of the South Bank. Prior to joining AIB Govett as a Director in
1994, he was a Director at Henderson Administration from 1990, most recently
responsible for managing pension funds in excess of (Pounds)400 million. He
also served as a fund manager at Crown Financial Management and as Head of
Research at Provident Life.

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.

Class A Shares of the Money Market Fund Portfolios

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. 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

The classes have different expenses and other characteristics.

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

There are four ways to invest in the ARK Funds:

. Through Allfirst Brokerage Corporation
. Through the ARK Funds Employee Investment Program
. Directly with the Fund
. Through Authorized Brokers or Other Institutions

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, Tax-Free Money Market Portfolio, and
Pennsylvania 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. For orders received and
accepted after 12:00 noon Eastern time but before 4:00 p.m. Eastern time, you
will begin earning dividends on the next Business Day.

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

Page 102 of 128
<PAGE>

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 4:00 p.m. Eastern time. So, for you to be eligible to receive dividends
declared on the day you submit your purchase order, generally the Portfolio must
receive your order and Federal funds before 4:00 p.m. Eastern time.

When the NYSE or the Federal Reserve Bank of New York (for the money market fund
Portfolios only) close early, the Portfolios will advance the time on any such
day by which purchase orders must be received.

How We Calculate NAV

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

In calculating NAV, each 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, Money Market Portfolio and Pennsylvania Tax-Free
Money Market Portfolio, 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.

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.

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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:

<TABLE>
<CAPTION>
U.S. Government Bond, Income, Maryland Tax-Free and Pennsylvania Tax-Free Portfolios
Your Sales Charge as a Percentage of Your Sales Charge as a Percentage of Your Net
If Your Investment is: Offering Price Investment
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 4.50% 4.71%
$50,000 but less than $100,000 4.00% 4.17%
$100,000 but less than $250,000 3.00% 3.09%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1,000,000 2.00% 2.04%
$1,000,000 and above 0.00% 0.00%
</TABLE>

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

Balanced, Equity Income, Equity Index, Blue Chip Equity, Value Equity, Capital Growth,
Mid-Cap Equity, Small-Cap Equity, International Equity and Emerging Markets Equity Portfolios
Your Sales Charge as a Percentage of Your Sales Charge as a Percentage of Your Net
If Your Investment is: Offering Price Investment
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 $1,000,000 2.00% 2.04%
$1,000,000 and above 0.00% 0.00%
</TABLE>

<TABLE>
<CAPTION>
International Equity Selection Portfolio
Your Sales Charge as a Percentage of Your Sales Charge as a Percentage of Your Net
If Your Investment is: Offering Price Investment
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 $1,000,000 0.50% 0.50%
$1,000,000 and above 0.00% 0.00%
</TABLE>

Waiver of Front-End Sales Charge -- Class A Shares

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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

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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, Pennsylvania 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 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

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<PAGE>

either (1) the NAV of the shares at the time of purchase, or (2) NAV of the
shares next calculated after the Portfolio receives your sale request, whichever
is less. The sales charge does not apply to shares you purchase through
reinvestment of dividends or distributions. So, you never pay a deferred sales
charge on any increase in your investment above the initial offering price. This
sales charge does not apply to exchanges of Class B Shares of one Portfolio for
Class B Shares of another Portfolio.

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

<TABLE>
<CAPTION>
Year Since Contingent Deferred Sales Charge as a Percentage of Dollar Amount
Purchase Subject to Charge

- - ---------------------------------------------------------------------------------------------
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and after 0%
</TABLE>

The contingent deferred sales charge will be waived if you sell your Class B
Shares for the following reasons:
. 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
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.

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<PAGE>

Through Allfirst Brokerage Corporation

How to Purchase Portfolio Shares

To set up an account through an Allfirst Brokerage Corporation representative,
visit your local Allfirst Bank branch or call 1-800-ARK-FUND. Regular
investment accounts and IRA accounts are available. You will need to complete
an Allfirst Brokerage Corporation application and other documents.

The minimum investment in a Portfolio through Allfirst Brokerage Corporation is
$500. An Automatic Investment Plan and checkwriting on the money market fund
Portfolios are also available. Contact your Allfirst Brokerage Corporation
representative for details.

How to Sell Your Portfolio Shares

Contact your Allfirst Brokerage Corporation representative at your local
Allfirst Bank branch or call 1-800-ARK-FUND.

How to Exchange Your Portfolio Shares

To exchange your Portfolio shares, contact your Allfirst Brokerage Corporation
representative. Exchange requests must be for an amount of at least $500 per
Portfolio.

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

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.

Before making an exchange, shareholders should consider the investment
objective, policies and restrictions of the Portfolio into which they are
exchanging, as set forth in the prospectus. Any

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telephone exchange must satisfy the requirements relating to the minimum initial
investment amounts of the Portfolio involved. The Fund reserves the right to
reject any telephone exchange request and to modify or terminate the telephone
exchange privilege at any time, upon 60 days' written notice.

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.

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.

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

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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). You may not close your account by telephone.

Redemption By Checkwriting

Checkwriting is available for accounts investing in Class A Shares of a money
market fund Portfolio. 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. You 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 NAV, a sufficient number of shares to cover the amount of
the check. Checks will be returned by the clearing bank if there are not
sufficient shares available. 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
25/th/ 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.

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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 a
Portfolio is $500. Unless you arrange to pay by wire, write your check to "ARK
Funds" and include the name of the appropriate Portfolio(s) on the check. A
Portfolio cannot accept third-party checks, credit cards, credit card checks, or
cash.

You can buy shares by sending a completed Account Application along with a check
and investment instructions to:

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

All purchases made by check should be in U.S. dollars and made payable to ARK
Funds or, for an IRA account, to ARK Funds FBO (account holder's name).
Redemptions of shares purchased 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 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.

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.

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Redemption by Mail

Receiving Your Money

Normally, we send your sale proceeds within three Business Days after we receive
your request. Your proceeds can be wired to your bank account (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).

Redemption By Checkwriting

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.

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<PAGE>

How to Exchange Your Portfolio Shares

To exchange your Portfolio shares, contact the Fund directly at 1-888-4ARKFUND.

Before making an exchange, shareholders should consider the investment
objective, policies and restrictions of the Portfolio into which they are
exchanging, as set forth in the prospectus. Any telephone exchange must satisfy
the requirements relating to the minimum initial investment amounts of the
Portfolio involved. The Fund reserves the right to reject any telephone
exchange request and to modify or terminate the telephone exchange privilege at
any time, upon 60 days' written notice.

Through Authorized Brokers or Other Institutions

How to Purchase Portfolio Shares

You may also 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 per Portfolio.

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<PAGE>

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

Other Policies

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.

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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

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

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

<TABLE>
<S> <C>
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%
Pennsylvania Tax-Free Money Market 0.25%
Portfolio
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%
International Equity Portfolio 0.40%
Emerging Markets Equity Portfolio 0.40%
</TABLE>

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<PAGE>

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 services fees, as a
percentage of average daily net assets, may be up to 0.25%.

The Distributor may, from time to time at its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of a Portfolio.

Dividends and Distributions

Dividends are declared and paid according to the following schedules:

<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------
Frequency of Frequency of
Declaration of Payment of
Portfolio Dividends Dividends
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
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
- - -----------------------------------------------------------------------------------------
Pennsylvania 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
- - -----------------------------------------------------------------------------------------
</TABLE>

Page 116 of 128
<PAGE>

<TABLE>
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Small-Cap Equity Portfolio Annually Annually
- - -----------------------------------------------------------------------------------------
International Equity Selection Portfolio Annually Annually
- - -----------------------------------------------------------------------------------------
International Equity Portfolio Annually Annually
- - -----------------------------------------------------------------------------------------
Emerging Markets Portfolio Annually Annually
- - -----------------------------------------------------------------------------------------
</TABLE>

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

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

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. Each sale or exchange of shares is a taxable event.

The Tax-Free Money Market, Pennsylvania 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 these Portfolios may be taxable.

More information about taxes is in the Statement of Additional Information.

Page 117 of 128
<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. The information for the six months ended October 31, 1999
(unaudited) appears in the Portfolios' Semi-Annual Report. The Annual Report
and the Semi-Annual Report, along with each Portfolio's financial statements,
accompanies our Statement of Additional Information. You can obtain the
Portfolios' Annual Report and the Semi-Annual Report, which contain more
performance information, at no charge by calling 1-888-4ARK-FUND.

Page 118 of 128
<PAGE>

For the Period ended October 31,

Realized and
Net Asset Unrealized Distributions Ratio of
Value, Net Gains or from Net Distributions Net Asset Net Assets, Expenses
Beginning Investment (Losses) Investment from Capital Value, End Total End of to Average
of Period Income on Investments Income Gains of Period Return(A) Period (000) Net Assets
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Money Market Portfolio
Retail Class A
1999 -- --
1998 -- --
1997 -- --
1996 (1) -- --

U.S. Government Money Market Portfolio
Retail Class A
1999 -- --
1998 (2) -- --

Money Market Portfolio
Retail Class A
1999 -- --
1998 -- --
1997 -- --
1996 -- --
1995 (3) -- --
Retail Class B
1999 (4) -- --

<CAPTION>
Ratio of Ratio
Net of Expenses
Investment to Average
Income to Net Assets Portfolio
Average (Excluding Turnover
Net Assets Waivers) Rate
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Money Market Portfolio
Retail Class A
1999 --
1998 --
1997 --
1996 (1) --

U.S. Government Money Market Portfolio
Retail Class A
1999 --
1998 (2) --

Money Market Portfolio
Retail Class A
1999 --
1998 --
1997 --
1996 --
1995 (3) --
Retail Class B
1999 (4) --
</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.
(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.
(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.

Page 119 of 128
<PAGE>

For the Period ended October 31,

Realized and
Net Asset Unrealized Distributions Ratio of
Value, Net Gains or from Net Distributions Net Asset Net Assets, Expenses
Beginning Investment (Losses) Investment from Capital Value, End Total End of to Average
of Period Income on Investments Income Gains of Period Return(A) Period (000) Net Assets
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Free Money Market Portfolio
Retail Class A
1999 -- --
1998 -- --
1997 -- --
1996 -- --
1995 (5) -- --

Short-Term Treasury Portfolio
Retail Class A
1999
1998
1997 (6)

Maryland Tax-Free Portfolio
Retail Class A
1999
1998
1997(7) --

<CAPTION>
Ratio of Ratio
Net of Expenses
Investment to Average
Income to Net Assets Portfolio
Average (Excluding Turnover
Net Assets Waivers) Rate
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Free Money Market Portfolio
Retail Class A
1999 --
1998 --
1997 --
1996 --
1995 (5) --

Short-Term Treasury Portfolio
Retail Class A
1999
1998
1997 (6)

Maryland Tax-Free Portfolio
Retail Class A
1999
1998
1997(7)
</TABLE>

Page 120 of 128
<PAGE>

For the Period ended October 31,
<TABLE>
<CAPTION>
Net Asset Realized and Distributions Net Asset
Value, Net Unrealized from Net Distributions Value, End
Beginning Investment Gains or (Losses) Investment from Capital of
of Period Income on Investments Income Gains Period
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania Tax-Free Portfolio
Retail Class A
1999
1998 (8) -

U.S. Government Bond Portfolio
Retail Class A
1999 -
1998 (9) -

Income Portfolio
Retail Class A
1999 -
1998 -
1997 -
1996 -
1995 (10)
Retail Class B
1999 (11) -
</TABLE>

<TABLE>
<CAPTION>
Ratio of Ratio
Net of Expenses
Ratio of Investment to Average
Net Assets, Expenses Income to Net Assets Portfolio
Total End of to Average Average (Excluding Turnover
Return(A) Period (000) Net Assets Net Assets Waivers) Rate
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania Tax-Free Portfolio
Retail Class A
1999
1998 (8)

U.S. Government Bond Portfolio
Retail Class A
1999
1998 (9)

Income Portfolio
Retail Class A
1999
1998
1997
1996
1995 (10)
Retail Class B
1999 (11)
</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.
(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.
(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.

Page 121 of 128
<PAGE>

For the Period ended October 31,

Realized and
Net Asset Unrealized Distributions Ratio of
Value, Net Gains or from Net Distributions Net Asset Net Assets, Expenses
Beginning Investment (Losses) Investment from Capital Value, End Total End of to Average
of Period Income on Investments Income Gains of Period Return(A) Period (000) Net Assets
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balanced Portfolio
Retail Class A
1999
1998
1997
1996
1995 (12)
Retail Class B
1999 (11)

<CAPTION>
Ratio of Ratio
Net of Expenses
Investment to Average
Income to Net Assets Portfolio
Average (Excluding Turnover
Net Assets Waivers) Rate
- - ------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Portfolio
Retail Class A
1999
1998
1997
1996
1995 (12)
Retail Class B
1999 (11)
</TABLE>

Page 122 of 128
<PAGE>

<TABLE>
<CAPTION>
For the Period ended October 31,

Net Asset Net Realized and Distributions
Value, Investment Unrealized from Net Distributions Net Asset
Beginning Income Gains or (Losses) Investments from Capital Value,End
of Period (Loss) on Investment Income Gains of Period
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Income Portfolio
Retail Class A
1999
1998 (13)

Value Equity Portfolio
Retail Class A
1999
1998 (9) -- -- --
Retail Class B
1999 (11)

Equity Index Portfolio
Retail Class A
1999
1998 (14) --

<CAPTION>
Ratio of
Net Ratio
Investment of Expenses
Ratio of Income to Average
Net Assets, Expenses (Loss) Net Assets Portfolio
Total End of to to Average (Excluding Turnover
Return(A) Period (000) Average Net Waivers) Rate
Net Assets
Assets
- - ------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>

Equity Income Portfolio
Retail Class A

1999
1998 (13)

Value Equity Portfolio
Retail Class A
1999
1998 (9)
Retail Class B
1999 (11)

Equity Index Portfolio
Retail Class A
1999
1998 (14)
</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.
(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.
(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.

Page 123 of 128
<PAGE>

<TABLE>
<CAPTION>
For the Period ended October 31,

Net Asset Net Realized and Distributions
Value, Investment Unrealized from Net Distributions Net Asset Net Assets
Beginning Income Gains or (Losses) Investment from Capital Value, End Total End of
of Period (Loss) on Investments Income Gains of Period Return(A) Period
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Blue Chip Equity Portfolio
Retail Class A
1999
1998
1997 (15)
Retail Class B
1999 (16)

Capital Growth Portfolio
Retail Class A
1999
1998
1997
1996
1995 (12)
Retail Class B
1999 (11)

<CAPTION>
Ratio of
Net Ratio
Investment of Expenses
Ratio of Income to Average
Net Assets Expenses (Loss) Net Assets Portfolio
Total End of to Average to Average (Excluding Turnover
Return(A) Period (000) Net Assets Net Assets Waivers) Rate
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Blue Chip Equity Portfolio
Retail Class A
1999
1998
1997 (15)
Retail Class B
1999 (16)

Capital Growth Portfolio
Retail Class A
1999
1998
1997
1996
1995 (12)
Retail Class B
1999 (11)
</TABLE>

Page 124 of 128
<PAGE>

<TABLE>
<CAPTION>
For the Period ended October 31,

Net Asset Net Realized and Distributions
Value, Investment Unrealized from Net Distributions Net Asset
Beginning Income Gains or (Losses) Investment from Capital Value, End
of Period (Loss) on Investments Income Gains of Period
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small-Cap Equity Portfolio
Retail Class A
1999 --
1998 --
1997 (15) --

International Equity Selection Portfolio
Retail Class A
1999 -- -- --
1998 (9)

Ratio of
Net Ratio
Ratio of Investment of Expenses
Expenses Income to Average
Total Net Assets, to Average (Loss) Net Assets Portfolio
Return(A) End of Net Assets to Average (Excluding Turnover
Period (000) Net Assets Waivers) Rate
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small-Cap Equity Portfolio
Retail Class A
1999
1998
1997 (15)

International Equity Selection Portfolio
Retail Class A
1999
1998 (9)
</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.
(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.
(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.

page 125 of 128
<PAGE>

ARK Funds

Investment Advisor

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

Investment Subadvisor
(to the International Equity Portfolio and Emerging Markets Equity Portfolio)

AIB Govett Asset Management Limited
Shackleton House
4 Battle Bridge Lane
London, England SE1 2HR

Distributor

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

Legal Counsel

Piper Marbury Rudnick & Wolfe LLP
36 South Charles Street
Baltimore, MD 21201

Independent Auditors

KPMG LLP
99 High Street
Boston, MA 02210

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

Statement of Additional Information (SAI)

The SAI dated March _____, 2000, 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

Page 126 of 128
<PAGE>

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

Page 127 of 128
<PAGE>

From the SEC: You can also obtain the SAI or the Annual and Semi-Annual
Reports, as well as other information about ARK Funds, from the SEC's website
(http://www.sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. ARK Funds' Investment Company Act registration
number is 811-7310.

Page 128 of 128
<PAGE>

ARK Funds

Institutional Class

Prospectus
March _____, 2000

U.S. Treasury Money Market Portfolio
U.S. Government Money Market Portfolio
Money Market Portfolio
Tax-Free Money Market Portfolio
PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO
Short-Term Treasury Portfolio
Short-Term Bond Portfolio
Maryland Tax-Free Portfolio
Pennsylvania Tax-Free Portfolio
Intermediate Fixed Income Portfolio
U.S. Government Bond Portfolio
Income Portfolio
Balanced Portfolio
Equity Income Portfolio
Value Equity Portfolio
Equity Index Portfolio
Blue Chip Equity Portfolio
Capital Growth Portfolio
Mid-Cap Equity Portfolio
Small-Cap Equity Portfolio
International Equity Selection - Portfolio
International Equity Portfolio
Emerging Markets Equity Portfolio

Investment Advisors:
Allied Investment Advisors, Inc.
AIB Govett Asset Management Limited
(subadvisor to the International Equity Portfolio
and Emerging Markets Equity Portfolio)

Page 1 of 99
<PAGE>

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 2 of 99
<PAGE>

How to Read This Prospectus

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

This prospectus has been arranged into different sections so that you can easily
review this important information. For more detailed information about each
Portfolio, please see:

U.S. Treasury Money Market Portfolio................................ XXX
U.S. Government Money Market Portfolio.............................. XXX
Money Market Portfolio.............................................. XXX
Tax-Free Money Market Portfolio..................................... XXX
Pennsylvania Tax-Free Money Market Portfolio........................ XXX
Short-Term Treasury Portfolio....................................... XXX
Short-Term Bond Portfolio........................................... XXX
Maryland Tax-Free Portfolio......................................... XXX
Pennsylvania Tax-Free Portfolio..................................... XXX
Intermediate Fixed Income Portfolio................................. XXX
U.S. Government Bond Portfolio...................................... XXX
Income Portfolio.................................................... XXX
Balanced Portfolio.................................................. XXX
Equity Income Portfolio............................................. XXX
Value Equity Portfolio.............................................. XXX
Equity Index Portfolio.............................................. XXX
Blue Chip Equity Portfolio.......................................... XXX
Capital Growth Portfolio............................................ XXX
Mid-Cap Equity Portfolio............................................ XXX
Small-Cap Equity Portfolio.......................................... XXX
International Equity Selection Portfolio............................ XXX
International Equity Portfolio...................................... XXX
Emerging Markets Equity Portfolio................................... XXX
More information about risk......................................... XXX
Each Portfolio's other investments.................................. XXX
Investment Advisor.................................................. XXX
Purchasing, Selling and Exchanging Portfolio shares................. XXX
Distribution of Portfolio Shares.................................... XXX
Dividends and Distributions......................................... XXX
Taxes............................................................... XXX
Financial highlights................................................ XXX
How to obtain more information about ARK Funds...................... Back Cover
</TABLE>

Page 3 of 99
<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 each 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 value of the securities the Portfolio holds.
These prices change daily due to economic and other events that affect
particular companies and other issuers. These price movements, sometimes called
volatility, may be greater or lesser depending on the types of securities a
Portfolio owns and the markets in which they trade. The effect on a Portfolio
of a change in the value of a single security will depend on how widely the
Portfolio diversifies its holdings.

Page 4 of 99
<PAGE>

ARK U.S. TREASURY MONEY MARKET PORTFOLIO

Portfolio Summary

<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>

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.

Principal Risks of Investing in the U.S. Treasury Money Market Portfolio

The Portfolio's U.S. Treasury securities are not guaranteed against price
movements due to changing interest rates.

Page 5 of 99
<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 six years.

<TABLE>
<S> <C>
1994 3.75%
1995 5.48%
1996 5.00%
1997 5.09%
1998 4.82%
1999 %

Best Quarter Worst Quarter
% %
</TABLE>

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the IBC/Financial Data 100% U.S. Treasury
Average.

<TABLE>
<CAPTION>
Institutional Class 1 Year 5 Years Since Inception
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Money Market Portfolio % % %*
IBC/Financial Data 100% U.S. Treasury Average % % %**
</TABLE>

* Since June 14, 1993.
** Since May 31, 1993.

What is an Average?

Portfolio Fees and Expenses

Page 6 of 99
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Institutional Class
- - --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees None
Other Expenses 0.34%
----
Total Annual Portfolio Operating Expenses 0.59%
Fee Waivers and Expense Reimbursements 0.10%
----
Net Total Operating Expenses 0.49%*
----
</TABLE>

________________________________________________________________________________

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.49% until September 1, 2000. 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 -- Institutional Class 0.46%

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

Example

The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$50 $179 $319 $728
</TABLE>

Page 7 of 99
<PAGE>

ARK U.S. GOVERNMENT MONEY MARKET PORTFOLIO

Portfolio Summary

<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>

Investment Strategy of the U.S. Government Money Market Portfolio

Principal Risks of Investing in the U.S. Government Money Market 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.

Page 8 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for six years.

<TABLE>
<S> <C>
1994 4.13%
1995 5.83%
1996 5.24%
1997 5.39%
1998 5.22%
1999 %

Best Quarter Worst Quarter
% %
</TABLE>

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the IBC/Financial Data Government Only
Institutions Only Average.

<TABLE>
<CAPTION>
Institutional Class 1 Year 5 Years Since Inception
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Money Market Portfolio % % %*
IBC/Financial Data Government Only Institutions Only Average % % %**
</TABLE>

* Since June 14, 1993.
** Since May 31, 1993.

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 Government Only Institutions Only Average is a composite of
money market mutual funds with investment goals similar to the Portfolio's
goals.

Page 9 of 99
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Institutional Class
- - --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees None
Other Expenses 0.33%
----
Total Annual Portfolio Operating Expenses 0.58%
Fee Waivers and Expense Reimbursements 0.15%
----
Net Total Operating Expenses 0.43%*
----
</TABLE>

________________________________________________________________________________

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.43% until September 1, 2000. 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 -- Institutional Class 0.40%

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

Example

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
$44 $171 $309 $711

Page 10 of 99
<PAGE>

ARK MONEY MARKET PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

Investment Strategy of the Money Market Portfolio

Principal Risks of Investing in the Money Market 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.

Page 11 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for six years.

<TABLE>
<S> <C>
1994 4.26%
1995 5.97%
1996 5.37%
1997 5.53%
1998 5.38%
1999 %

Best Quarter Worst Quarter
% %
</TABLE>

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
Institutions Only Average.

<TABLE>
<CAPTION>
Institutional Class 1 Year 5 Years Since Inception
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Portfolio % % %*
IBC/Financial Data First Tier Institutions Only Average % % %**
</TABLE>

* Since June 14, 1993.
** Since May 31, 1993.

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 Institutions Only Average is a composite of money
market mutual funds with investment goals similar to the Portfolio's goals.

Page 12 of 99
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Institutional Class
- - --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees None
Other Expenses 0.32%
----
Total Annual Portfolio Operating Expenses 0.57%
Fee Waivers and Expense Reimbursements 0.18%
----
Net Total Operating Expenses 0.39%*
----
</TABLE>

________________________________________________________________________________

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.39% until September 1, 2000. 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 -- Institutional Class 0.36%

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

Example

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
$40 $164 $300 $696

Page 13 of 99
<PAGE>

ARK TAX-FREE MONEY MARKET PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

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.
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

Page 14 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for six years.

<TABLE>
<S> <C>
1994 2.74%
1995 3.76%
1996 3.30%
1997 3.46%
1998 3.18%
1999 %

Best Quarter Worst Quarter
% %
</TABLE>

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the IBC/Financial Data Tax-Free
Institutions Only Average.

<TABLE>
<CAPTION>
Institutional Class 1 Year 5 Years Since Inception
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Free Money Market Portfolio % % %*
IBC/Financial Data Tax-Free Institutions Only Average % % %**
</TABLE>

* Since June 14, 1993.
** Since May 31, 1993.

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 Tax-Free Institutions Only Average is a composite of money
market mutual funds with investment goals similar to the Portfolio's goals.

Page 15 of 99
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Institutional Class
- - -------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees None
Other Expenses 0.35%
------
Total Annual Portfolio Operating Expenses 0.60%
Fee Waivers and Expense Reimbursements 0.20%
------
Net Total Operating Expenses 0.40%*
------
</TABLE>
________________________________________________________________________________

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.40% until September 1, 2000. 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 -- Institutional Class 0.37%

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

Example

1 Year 3 Years 5 Years 10 Years
$41 $172 $315 $731

Page 16 of 99
<PAGE>

ARK PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
Investment Goal Maximizing current income exempt from Federal and
Pennsylvania state income taxes and providing
liquidity and security of principal

Investment Focus Short-term, high-quality Pennsylvania municipal money
market obligations

Share Price Volatility Very low

Principal Investment Strategy Investing in tax-exempt U.S. dollar-denominated money
market securities of Pennsylvania issuers

Investor Profile Conservative investors seeking income exempt from
Federal and Pennsylvania state income taxes through a
low-risk, liquid investment
</TABLE>

Investment Strategy of the Pennsylvania Tax-Free Money Market Portfolio

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

Principal Risks of Investing in the Pennsylvania Tax-Free Money Market Portfolio

Page 17 of 99
<PAGE>

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
of more of these issuers, and may experience increased volatility due to its
investments in those securities.

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Institutional Class
- - ----------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees None
Other Expenses %
------
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
------
Net Total Operating Expenses %*
------
</TABLE>

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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 Money Market Portfolio -- Institutional Class _____%

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

Example

Page 18 of 99
<PAGE>

1 Year 3 Years 5 Years 10 Years
- - - -

Page 19 of 99
<PAGE>

ARK SHORT-TERM TREASURY PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

Investment Strategy of the Short-Term Treasury Portfolio

In selecting securities for the Portfolio, the Advisor considers a security's
current yield, 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 Portfolio's U.S. Treasury securities are not guaranteed against price
movements due to changing interest rates.

Page 20 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for three years.

1997 5.95%
1998 6.50%
1999 _____%

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Lehman 1-3 Year Government Bond Index.

<TABLE>
<CAPTION>
Institutional Class 1 Year Since Inception
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Treasury Portfolio % %*
Lehman 1-3 Year Government Bond Index % %**
</TABLE>

* Since March 20, 1996.
** Since March 31, 1996.

What is an Index?

Page 21 of 99
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Institutional Class
- - -----------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.35%
Distribution (12b-1) Fees None
Other Expenses 0.38%
----
Total Annual Portfolio Operating Expenses 0.73%
Fee Waivers and Expense Reimbursements 0.06%
----
Net Total Operating Expenses 0.67%*
----
</TABLE>

________________________________________________________________________________

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.67% until September 1, 2000. 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 -- Institutional Class 0.64%

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

Example

1 Year 3 Years 5 Years 10 Years
$68 $227 $400 $901

Page 22 of 99
<PAGE>

ARK SHORT-TERM BOND PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
Investment Goal Current income

Investment Focus Short-term fixed income securities

Share Price Volatility Low

Principal Investment Strategy Investing in short-term investment-grade fixed income
securities of U.S. issuers

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

Investment Strategy of the Short-Term Bond Portfolio

The Short-Term Bond Portfolio seeks its investment goal by investing primarily
in U.S. corporate and government securities, including mortgage- and asset-
backed securities. The Portfolio's Advisor will select investment-grade
securities and unrated securities determined to be of comparable quality. The
dollar-weighted average maturity of the Portfolio's investments will vary
depending on market conditions, but will typically be between one and three
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 Short-Term Bond 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

Page 23 of 99
<PAGE>

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

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for three years.

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Lehman 1-3 Year Government Bond Index.

<TABLE>
<CAPTION>
Institutional Class 1 Year Since Inception
- - -----------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Bond Portfolio % %*
Lehman 1-3 Year Government Bond Index % %**
</TABLE>

* Performance presented prior to March 23, 1998 reflects the performance of
the Marketvest Short-Term Bond Fund shares, which were offered beginning
April 1, 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.
** Since March 31, 1996.

What is an Index?

Portfolio Fees and Expenses

Page 24 of 99
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Institutional Class
- - --------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.75%
Distribution (12b-1) Fees None
Other Expenses 0.37%
----
Total Annual Portfolio Operating Expenses 1.12%
Fee Waivers and Expense Reimbursements 0.11%
----
Net Total Operating Expenses 1.01%*
----
</TABLE>

________________________________________________________________________________

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
1.01% until September 1, 2000. 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 Bond Portfolio -- Institutional Class 0.98%

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

Example

1 Year 3 Years 5 Years 10 Years
$103 $345 $606 $1,353

Page 25 of 99
<PAGE>

ARK MARYLAND TAX-FREE PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

Investment Strategy of the Maryland Tax-Free Portfolio

Principal Risks of Investing in the Maryland Tax-Free Portfolio

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.

Page 26 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for three years.

<TABLE>
<S> <C>
1997 8.12%
1998 5.64%
1999 ____%

Best Quarter Worst Quarter
% %
</TABLE>

<TABLE>
<CAPTION>
Institutional Class 1 Year Since Inception
- - ------------------------------------------------------------------------------
<S> <C> <C>
Maryland Tax-Free Portfolio % %*
Lehman 10 Year Municipal Bond Index % %**
Lehman 7 Year Municipal Bond Index % %**
</TABLE>

* Since November 18, 1996.
** Since November 30, 1996.

What is an Index?

Page 27 of 99
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Institutional Class
- - ----------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.65%
Distribution (12b-1) Fees None
Other Expenses 0.35%
------
Total Annual Portfolio Operating Expenses 1.00%
Fee Waivers and Expense Reimbursements 0.16%
------
Net Total Operating Expenses 0.84%*
------
</TABLE>

________________________________________________________________________________

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.84% until September 1, 2000. 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 Bond Portfolio -- Institutional Class 0.81%

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

Example

1 Year 3 Years 5 Years 10 Years
$86 $302 $537 $1,210

Page 28 of 99
<PAGE>

ARK PENNSYLVANIA TAX-FREE PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

Investment Strategy of the Pennsylvania Tax-Free Portfolio

Principal Risks of Investing in the Pennsylvania Tax-Free Portfolio

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

Page 29 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for three years.

<TABLE>
<S> <C>
1997 6.63%
1998 5.24%
1999 ____%

Best Quarter Worst Quarter
% %

</TABLE>

<TABLE>
<CAPTION>
Institutional Class 1 Year Since Inception
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pennsylvania Tax-Free Portfolio % %*
Lehman 10 Year Municipal Bond Index % %**
Lehman 7 Year Municipal Bond Index % %**
</TABLE>

* Performance presented prior to March 23, 1998 reflects the performance of
the Marketvest Pennsylvania Intermediate Municipal Bond Fund shares, which
were offered beginning April 1, 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.
** Since March 31, 1996.

What is an Index?

Page 30 of 99
<PAGE>

obligation bonds, revenue bonds, insured bonds and prefunded bonds with
maturities between six and eight years.

Page 31 of 99
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional Class
- - -------------------------------------------------------------------------------
Investment Advisory Fees 0.65%
Distribution (12b-1) Fees None
Other Expenses 0.35%
----
Total Annual Portfolio Operating Expenses 1.00%
Fee Waivers and Expense Reimbursements 0.01%
----
Total Net Operating Expenses 0.99%*
----
- - -------------------------------------------------------------------------------

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep the total operating expenses from exceeding
0.99% until September 1, 2000. 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 Bond Portfolio -- Institutional Class 0.96%

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

Example

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
$101 $317 $551 $1,224

Page 32 of 99
<PAGE>

ARK INTERMEDIATE FIXED INCOME PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

Investment Strategy of the Intermediate Fixed Income Portfolio

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 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

Page 33 of 99
<PAGE>

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

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for three years.

1997 7.58%
1998 7.63%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Lehman Intermediate
Government/Corporate Bond Index.

<TABLE>
<CAPTION>
Institutional Class 1 Year Since Inception
- - --------------------------------------------------------------------------------------------------
<S> <C> <C>
Intermediate Fixed Income Portfolio % %*
Lehman Intermediate Government/Corporate Bond Index % %**
</TABLE>

* Since November 18, 1996.
** 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, fixed-rate nonconvertible corporate debt securities,
Yankee bonds and 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.

Page 34 of 99
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional Class
- - --------------------------------------------------------------------------------
Investment Advisory Fees 0.60%
Distribution (12b-1) Fees None
Other Expenses 0.36%
----
Total Annual Portfolio Operating Expenses 0.96%
Fee Waivers and Expense Reimbursements 0.12%
----
Net Total Operating Expenses 0.84%*
----
- - --------------------------------------------------------------------------------

Intermediate Fixed Income Portfolio -- Institutional Class 0.81%

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

Example

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
$86 $294 $519 $1,167

Page 35 of 99
<PAGE>

ARK U.S. GOVERNMENT BOND PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

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 intermediate-term securities, 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.

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.

Page 36 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for three years.

1997 6.70%
1998 7.02%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Lehman Intermediate
Government/Corporate Bond Index.

<TABLE>
<CAPTION>
Institutional Class 1 Year Since Inception
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government Bond Portfolio % %*
Lehman Intermediate Government/Corporate Bond Index % %**
</TABLE>

* Performance presented prior to March 23, 1998 reflects the performance of
the Marketvest Intermediate U.S. Government Bond Fund shares, which were
offered beginning April 1, 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.

* 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 securities, Yankee bonds and 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.

Page 37 of 99
<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. 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)

Institutional Class
- - --------------------------------------------------------------------------------
Investment Advisory Fees 0.75%
Distribution (12b-1) Fees None
Other Expenses 0.34%
----
Total Annual Portfolio Operating Expenses 1.09%
Fee Waivers and Expense Reimbursements 0.10%
----
Net Total Operating Expenses 0.99%*
----
- - --------------------------------------------------------------------------------

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.99% until September 1, 2000. 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 -- Institutional Class 0.96%

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

Example

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
$101 $337 $591 $1,320

Page 38 of 99

<PAGE>

ARK INCOME PORTFOLIO

Portfolio Summary

<TABLE>
<S> <C>
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
</TABLE>

Investment Strategy of the Income Portfolio

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.

Page 39 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for six years.

1994 -1.90%
1995 18.00%
1996 2.75%
1997 9.60%
1998 6.76%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Lehman Aggregate Bond Index.

Institutional Class 1 Year 5 Years Since Inception
- - --------------------------------------------------------------------------------
Income Portfolio % % %*
Lehman Aggregate Bond Index % % %**

* Since July 16, 1993.
** Since July 31, 1993.

Page 40 of 99
<PAGE>

What is an Index?

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional Class
- - ----------------------------------------------------------------------------
Investment Advisory Fees 0.60%
Distribution (12b-1) Fees None
Other Expenses 0.35%
----
Total Annual Portfolio Operating Expenses 0.95%
Fee Waivers and Expense Reimbursements 0.09%
----
Net Total Operating Expenses 0.86%*
----
- - ----------------------------------------------------------------------------

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.86% until September 1, 2000. 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 -- Institutional Class 0.83%

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

Page 41 of 99

<PAGE>

Example

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
$88 $294 $517 $1,158

Page 42 of 99

<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

Page 43 of 99
<PAGE>

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.

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for six years.

1994 -4.65%
1995 21.92%
1996 8.12%
1997 22.59%
1998 24.83%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 500 Composite Index, the Lehman
Aggregate Bond Index and 60/40 Hybrid of the S&P 500 Composite and Lehman
Aggregate Bond indices.

<TABLE>
<CAPTION>
Institutional Class 1 Year 5 Years Since Inception
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Portfolio % % %*
S&P 500 Composite Index % % %**
Lehman Aggregate Bond Index % % %**
60/40 Hybrid of the S&P 500 and Lehman Aggregate % % %**
</TABLE>

* Since July 16, 1993.
** Since July 31, 1993.

Page 44 of 99
<PAGE>

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 indices, 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.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional Class
- - --------------------------------------------------------------------------------
Investment Advisory Fees 0.65%
Distribution (12b-1) Fees None
Other Expenses 0.36%
----
Total Annual Portfolio Operating Expenses 1.01%
Fee Waivers and Expense Reimbursements 0.07%
----
Net Total Operating Expenses 0.94%*
----

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

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.94% until September 1, 2000. 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 -- Institutional Class 0.91%

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

Page 45 of 99
<PAGE>

Example

1 Year 3 Years 5 Years 10 Years
$96 $315 $551 $1,230

Page 46 of 99
<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

In selecting securities for the Portfolio, the Advisor purchases stocks of high-
quality 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

Page 47 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for three years.

1997 32.28%
1998 8.62%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 500 Composite Index.

Institutional Class 1 Year Since Inception
- - --------------------------------------------------------------------------------
Equity Income Portfolio % %*
S&P 500 Composite Index % %**

* Since November 18, 1996.
** Since November 30, 1996.

What is an Index?

Portfolio Fees and Expenses

Page 48 of 99
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional Class
- - ------------------------------------------------------------------------------
Investment Advisory Fees 0.70%
Distribution (12b-1) Fees None
Other Expenses 0.33%
Total Annual Portfolio Operating Expenses 1.03%
Fee Waivers and Expense Reimbursements 0.04%
Net Total Operating Expenses 0.99%*

______________________________________________________________________________

Equity Income Portfolio -- Institutional Class 0.96%

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

Example

1 Year 3 Years 5 Years 10 Years
$101 $324 $565 $1,256

Page 49 of 99
<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

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

Performance Information

Page 50 of 99
<PAGE>

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for three years.

1997 29.40%
1998 19.63%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 500 Composite Index.

Institutional Class 1 Year Since Inception
- - --------------------------------------------------------------------------------
Value Equity Portfolio % %*
S&P 500 Composite Index % %**

* Performance presented prior to March 30, 1998 reflects the performance of
the Marketvest Equity Fund shares, which were offered beginning April 1,
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.
** Since March 31, 1996.

What is an Index?

Portfolio Fees and Expenses

Page 51 of 99
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional Class
- - --------------------------------------------------------------------------------
Investment Advisory Fees 1.00%
Distribution (12b-1) Fees None
Other Expenses 0.34%
Total Annual Portfolio Operating Expenses 1.34%
Fee Waivers and Expense Reimbursements 0.11%
Net Total Operating Expenses 1.23%*

________________________________________________________________________________

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
1.23% until September 1, 2000. 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 -- Institutional Class 1.20%

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

Example

1 Year 3 Years 5 Years 10 Years
$125 $414 $724 $1,603

Page 52 0f 99
<PAGE>

ARK EQUITY INDEX PORTFOLIO

Portfolio Summary

Investment Goal Investment results that correspond to
the performance of the Standard &
Poor's 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.

Principal Risks of Investing in the Equity Index Portfolio

The Advisor may not be able to match the performance of the Portfolio's
benchmark.

Performance Information

Page 53 of 99
<PAGE>

This bar chart shows the performance of the Portfolio's Institutional Class
shares from year to year for two years.

1998 29.34%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 500 Composite Index.

Institutional Class 1 Year Since Inception
- - --------------------------------------------------------------------------------
Equity Index Portfolio % %*
S&P 500 Composite Index % %**

* Since October 1, 1997.
** Since September 30, 1997.

What is an Index?

Portfolio Fees and Expenses

Page 54 of 99
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional Class
- - ------------------------------------------------------------------------------
Investment Advisory Fees 0.20%
Distribution (12b-1) Fees None
Other Expenses 0.43%
------
Total Annual Portfolio Operating Expenses 0.63%
Fee Waivers and Expense Reimbursements 0.35%
------
Net Total Operating Expenses 0.28%*
------
- - ------------------------------------------------------------------------------

* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 0.28% until
September 1, 2000. 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 -- Institutional Class 0.25%

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

Example

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
$29 $166 $317 $753

Page 55 of 99

<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

Principal Risks of Investing in the Blue Chip Equity Portfolio

Performance Information

Page 56 of 99
<PAGE>

This bar chart shows changes in the performance of the Portfolio's
Institutional Class shares from year to year for three years.

1997 32.98%
1998 26.54%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 500 Composite Index.

Institutional Class 1 Year Since Inception
- - -------------------------------------------------------------------------------
Blue Chip Equity Portfolio % %*
S&P 500 Composite Index % %**

* Since April 1, 1996.
* Since March 31, 1996.

What is an Index?

Portfolio Fees and Expenses

Page 57 of 99
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional Class
- - -------------------------------------------------------------------------------
Investment Advisory Fees 0.70%
Distribution (12b-1) Fees None
Other Expenses 0.38%
------
Total Annual Portfolio Operating Expenses 1.08%
Fee Waivers and Expense Reimbursements 0.08%
------
Net Total Operating Expenses 1.00%*
------
- - --------------------------------------------------------------------------------

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
1.00% until September 1, 2000. 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 -- Institutional Class 0.97%

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

Example

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
$102 $336 $588 $1,310

Page 58 of 99

<PAGE>

ARK CAPITAL GROWTH PORTFOLIO

Portfolio Summary

Investment Goal Long-term capital appreciation

Investment Focus U.S common stocks of various maket 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

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.

Page 59 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for six years.

1994 -9.88%
1995 23.27%
1996 17.82%
1997 29.33%
1998 41.21%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the
periods ended December 31, 1999, to those of the S&P 500 Composite Index.

Institutional Class 1 Year 5 Years Since Inception
- - --------------------------------------------------------------------------------
Capital Growth Portfolio % % %*
S&P 500 Composite Index % % %**

Since July 16, 1993.
Since July 31, 1993.

What is an Index?

Portfolio Fees and Expenses

Page 60 of 99
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)
Institutional Class
- - ------------------------------------------------------------------------------
Investment Advisory Fees 0.70%
Distribution (12b-1) Fees None
Other Expenses 0.37%
------
Total Annual Portfolio Operating Expenses 1.07%
Fee Waivers and Expense Reimbursements 0.03%
------
Net Total Operating Expenses 1.04%*
------
- - ------------------------------------------------------------------------------

Capital Growth Portfolio -- Institutional Class 1.01%

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

Example

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
$106 $337 $587 $1,303

Page 61 of 99
<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

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.

Page 62 of 99
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for three years.

1997 31.39%
1998 22.07%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the S&P 400 Mid-Cap Index.

Institutional Class 1 Year Since Inception
- - ---------------------------------------------------------------------------
Mid-Cap Equity Portfolio % %*
S&P 400 Mid-Cap Index % %**

* Since November 18, 1996.
** Since November 30, 1996.

What is an Index?

Portfolio Fees and Expenses

Page 63 of 99
<PAGE>

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
1.15% until September 1, 2000. 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 -- Institutional Class 1.12%

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

Example

1 Year 3 Years 5 Years 10 Years
$117 $ 374 $650 $1,440

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<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 goal by investing primarily
in common stocks and other equity securities of U.S. issuers. The Portfolio's
Advisor purchases stocks of smaller companies that are in the early stages of
development and which the Advisor believes have the potential to achieve
substantial long-term earnings growth. 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.

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.

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<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
Class shares from year to year for four years.

1996 14.82%
1997 5.55%
1998 9.31%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Russell 2000 Growth Index.

Institutional Class 1 Year Since Inception
- - ----------------------------------------------------------------
Small-Cap Equity Portfolio % %*
Russell 2000 Growth Index % %**

* Since July 13, 1995.
* Since June 30, 1995.

What is an Index?

Page 66 of 99
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional Class
- - ------------------------------------------------------------------------------
Investment Advisory Fees 0.80%
Distribution (12b-1) Fees None
Other Expenses 0.46%
------
Total Annual Portfolio Operating Expenses 1.26%*
------
- - ------------------------------------------------------------------------------
* 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 -- Institutional Class 1.24%

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

Example

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
$128 $400 $692 $1,523

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<PAGE>

ARK INTERNATIONAL EQUITY SELECTION PORTFOLIO

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 Portfolio

Principal Risks of Investing in the International Equity 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.

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<PAGE>

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.

Performance Information

The bar chart shows the performance of the Portfolio's Institutional Class
Shares from year to year for eight years.

1992 -4.58%
1993 37.76%
1994 1.80%
1995 11.55%
1996 17.22%
1997 7.05%
1998 8.21%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the Morgan Stanley Capital International
(MSCI) EAFE Index.

Institutional Class 1 Year 5 Years Since Inception
- - -------------------------------------------------------------------------------
International Equity Selection Portfolio % % %*
MSCI EAFE Index % % %**

* Shares of the International Equity Selection Portfolio were offered
beginning March 29, 1998. The performance information shown prior to that
date represents 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
for the period May 31, 1991 (the inception date of the collective trust
fund), to March 31, 1997, when the Fund's registration statement became
effective. The investment objectives and policies of the collective trust
fund were substantially the same as those of the Marketvest fund.

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<PAGE>

** Since May 31, 1991.

What is an Index?

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. 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)

Institutional Class
________________________________________________________________________________
Investment Advisory Fees 0.65%
Distribution (12b-1) Fees None
Other Expenses 0.40%
------
Total Annual Portfolio Operating Expenses 1.05%
Fee Waivers and Expense Reimbursements 0.08%
------
Net Total Operating Expenses 0.97%*

________________________________________________________________________________

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.97% until September 1, 2000. 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 -- Institutional Class 0.94%

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

The expenses set forth above do not reflect the costs of the underlying funds
that are borne by the Portfolio and its shareholders.

Example

Page 70 of 99
<PAGE>

1 Year 3 Years 5 Years 10 Years
$99 $326 $572 $1,275

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<PAGE>

ARK INTERNATIONAL EQUITY PORTFOLIO

Investment Goal Long-term capital appreciation

Investment Focus Equity securities of non-U.S. issuers

Share Price Volatility High

Principal Investment Strategy Investing in equity securities of foreign
issuers located in countries other than 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 Portfolio

The International Equity Portfolio seeks its investment goal by investing
primarily in equity securities of companies located throughout the world. The
Portfolio invests in common stocks and other equity securities of issuers
located in any country other than the U.S. Normally, the Portfolio invests in
issuers located in at least three countries. The Portfolio may invest in issuers
of any size.

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 International Equity Portfolio

Since it purchases 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. 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

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<PAGE>

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.

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

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. 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)

Institutional Class
Investment Advisory Fees 1.00%
Distribution (12b-1) Fees None
Other Expenses %
------
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
------
Net Total Operating Expenses %*
------

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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 Portfolio -- Institutional Class _____%

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

Example

1 Year 3 Years 5 Years 10 Years
$ $ $ $

Page 73 of 99
<PAGE>

ARK EMERGING MARKETS EQUITY PORTFOLIO

Investment Goal Long-term capital appreciation

Investment Focus Equity securities located in emerging
markets

Share Price Volatility High

Principal Investment Strategy Investing in equity securities of issuers
located in emerging or developing markets
throughout the world

Investor Profile Investors seeking long-term capital
appreciation who want to diversify their
portfolio by investing overseas and who
can tolerate the risks of investing in
emerging markets

Investment Strategy of the Emerging Markets Equity Portfolio

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 Emerging Markets Equity Portfolio

Investing in foreign countries poses additional risks since political 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 the Portfolio's investments. 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

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<PAGE>

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.

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

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. 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)

Institutional Class
- - --------------------------------------------------------------------------------
Investment Advisory Fees 1.00%
Distribution (12b-1) Fees None
Other Expenses %
-------
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
-------
Net Total Operating Expenses %*
-------

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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:

Emerging Markets Equity Portfolio -- Institutional Class _______%

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

Example

1 Year 3 Years 5 Years 10 Years
$ $ $ $

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<PAGE>

More Information About Risk

<TABLE>
Risks Portfolios Affected by the Risks
<S> <C>

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

Fixed Income Risk -- The market values of fixed income Short-Term Treasury Portfolio
investments change in response to interest rate changes Short-Term Bond Portfolio
and other factors. During periods of falling interest Maryland Tax-Free Portfolio
rates, the values of outstanding fixed income Pennsylvania Tax-Free Portfolio
securities generally rise. Moreover, while securities Intermediate Fixed Income Portfolio
with longer maturities tend to produce higher yields, U.S. Government Bond Portfolio
the prices of longer maturity securities are also Income Portfolio
subject to greater market fluctuations as a result of Balanced Portfolio
changes in interest rates. In addition to these
fundamental risks, different types of fixed income
securities may be subject to the following additional
risks:

Call Risk -- During periods of falling interest Short-Term Bond Portfolio
rates, certain debt obligations with high interest Maryland Tax-Free Portfolio
rates may be prepaid (or "called") by the issuer Pennsylvania Tax-Free Portfolio
prior to maturity. This may cause a Portfolio's Intermediate Fixed Income Portfolio
average weighted maturity to fluctuate, and may U.S. Government Bond Portfolio
require a Portfolio to invest the resulting Income Portfolio
proceeds at lower interest rates. Balanced Portfolio

Credit Risk -- The possibility that an issuer will be Short-Term Bond Portfolio
unable to make timely payments of either principal or Maryland Tax-Free Portfolio
interest. Pennsylvania Tax-Free Portfolio
Intermediate Fixed Income Portfolio
U.S. Government Bond Portfolio
Income Portfolio
Balanced Portfolio
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
Event Risk -- Securities may suffer declines in Short-Term Bond Portfolio
credit quality and market value due to issuer Maryland Tax-Free Portfolio
restructurings or other factors. This risk should Pennsylvania Tax-Free Portfolio
be reduced because of a Portfolio's multiple Intermediate Fixed Income Portfolio
holdings. U.S. Government Bond Portfolio
Income Portfolio
Balanced Portfolio

Mortgage-Backed Securities Risk -- Mortgage-backed Short-Term Bond Portfolio
securities are fixed income securities Intermediate Fixed Income Portfolio
representing an interest in a pool of underlying U.S. Government Bond Portfolio
mortgage loans. They are sensitive to changes in Income Portfolio
interest rates, but may respond to these changes Balanced Portfolio
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.

Municipal Issuer Risk -- There may be economic or Tax-Free Money Market Portfolio
political changes that impact the ability of Pennsylvania Tax-Free Money Market
municipal issuers to repay principal and to make Portfolio
interest payments on municipal securities. Maryland Tax-Free Portfolio
Changes to the financial condition or credit Pennsylvania Tax-Free Portfolio
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.
</TABLE>

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<PAGE>

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

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

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

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<PAGE>

Currency Risk -- Investments in foreign Small Cap Equity Portfolio
securities denominated in foreign currencies International Equity Selection Portfolio
involve additional risks, including: International Equity Portfolio
Emerging Markets Equity Portfolio
</TABLE>

. 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.

Page 79 of 99
<PAGE>

Page 80 of 99
<PAGE>

Each Portfolio's Other Investments

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.

Investment Advisor

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

Allied Investment Advisors, Inc. (AIA), a wholly-owned subsidiary of Allfirst
Bank (formerly, First National Bank of Maryland) (Allfirst), serves as the
Advisor to the Portfolios. As of December 31, 1999, AIA had approximately
$______ billion in assets under management. For the fiscal year ended April 30,
1999, AIA received advisory fees of:

<TABLE>
<S> <C>
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%
Pennsylvania Tax-Free Money Market Portfolio 0.25%*
Short-Term Treasury Portfolio 0.35%
Short-Term Bond Portfolio 0.70%
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%
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
International Equity Selection Portfolio 0.55%
International Equity Portfolio 1.00%*
Emerging Markets Equity Portfolio 1.00%*
</TABLE>

* The Portfolios commenced operations on the date of this prospectus and have
not paid any advisory fees. The Board of Directors has approved an investment
advisory fee of 0.25% for the Pennsylvania Tax-Free Money Market Portfolio and
1.00% for the International Equity Portfolio and Emerging Markets Equity
Portfolio. The Portfolios' Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% for the Pennsylvania Tax-Free Money Market Portfolio, _____% for the
International Equity Portfolio and _____% for the Emerging Markets Equity
Portfolio until September 1, 2000. With these fee waivers, the actual advisory
fees received by AIA would be lower than those shown in the table above.

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<PAGE>

AIA and Allfirst are indirect wholly owned subsidiaries of Allied Irish Banks,
p.l.c. (AIB). AIB is the largest bank in the Republic of Ireland, with assets
of approximately $___ billion at December 31, 1999.

Investment Subadvisor

James M. Hannan is a Principal of AIA and manager of the U.S. Treasury Money
Market, U.S. Government Money Market, Money Market, Tax-Free Money Market and
Pennsylvania Tax-Free Money Market Portfolios, Short-Term Treasury Portfolio,
U.S. Treasury Cash Management Portfolio, U.S. Government Cash Management
Portfolio, Prime Cash Management Portfolio and Tax-Free Cash Management
Portfolio. He is also 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, Maryland Tax-Free Portfolio and 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, with Mr. Stith, of
the 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.

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<PAGE>

Wilmer C. Stith, III is a Vice President of AIA and co-manager, with Mr. Gradow,
of the Short-Term Bond Portfolio. He manages separate account money market
accounts, assists in the management of the money market portfolios, and is
responsible for analyzing and trading various fixed income securities. Prior to
joining AIA he was an investment executive with the Treasury Banking Group of
Allfirst.

Clyde L. Randall is a Principal of AIA and co-manager, with Mr. Ashcroft, of the
Equity Income Portfolio and Blue Chip Equity 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, Baltimore, Maryland. Mr. Randall is a
Chartered Financial Analyst.

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 over 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.

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<PAGE>

Hastings created and sold indexed products as part of the marketing unit. Mr.
Hastings has four years of investment experience.

Purchasing, Selling and Exchanging Portfolio Shares

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

Institutional Class Shares are for individuals, financial institutions,
corporations and other entities that have established trust, custodial, sweep or
money management relationships with Allfirst or its affiliates or correspondent
banks. Before you can buy Institutional Class Shares, you must establish a
qualified account. If you are a shareholder who obtained Institutional Class
Shares through a financial institution that has been purchased by Allfirst, you
may have to follow special procedures to transact in Fund shares. For
information on fee schedules and agreements for opening qualified accounts, call
1-800-624-4116 (inside Maryland 1-800-638-7751) to speak with an investor
representative.

How to Purchase Portfolio Shares

Generally, you must make payment to Allfirst or a correspondent bank, who will
forward your purchase orders. You may purchase shares of the money market fund
Portfolios directly by Federal funds, wire or other funds immediately available
to the Portfolios. For the other Portfolios, payment must be received within
three Business Days (as defined below). A Portfolio cannot accept checks,
third-party checks, credit cards, credit card checks or cash.

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

Page 85 of 99
<PAGE>

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

Shareholders may instruct Allfirst to purchase Institutional Class Shares
automatically at preset intervals. Allfirst or a correspondent bank may charge
additional fees for this and other services, including cash sweeps. For more
information, please call 1-800-624-4116 (inside Maryland 1-800-638-7751) to
speak with an investor representative.

General Information

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

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

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

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

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 and accept your order and receive
Federal funds before 5:00 p.m. Eastern time.

The fixed income and equity Portfolios each calculate its NAV each Business Day
at 4:00 p.m. Eastern time. So, for your order to be effective the day you
submit your purchase order, generally the Portfolio must receive your order and
Federal funds before 4:00 p.m. Eastern time.

How We Calculate NAV

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

Page 86 of 99
<PAGE>

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

In calculating NAV for the U.S. Treasury Money Market, U.S. Government Money
Market, Money Market, Tax-Free Money Market and Pennsylvania Tax-Free Money
Market Portfolios, we generally values 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.

Minimum Purchases

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

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

How to Sell Your Portfolio Shares

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

If you hold Institutional Class Shares directly with the Fund, you may sell
shares by telephone or mail by following procedures established when they opened
their qualified account. If you have questions, call 1-800-624-4116 (inside
Maryland 1-800-638-7751) or your investor representative at Allfirst or your
correspondent bank.

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

By Telephone. To redeem by telephone, call 1-800-624-4116 (inside Maryland 1-
800-638-7751) or your investor representative at Allfirst or your correspondent
bank.

Receiving Your Money

Normally, if we receive your redemption request by 12:00 noon Eastern time for
the U.S. Treasury Money Market and Tax-Free Money Market Portfolios (1:30 p.m.
Eastern time for the

Page 87 of 99
<PAGE>

U.S. Government Money Market and Money Market Portfolios) on any Business Day,
we will send your sale proceeds on that day. For the other Portfolios, if we
receive your redemption request before 4:00 p.m. Eastern time, we will wire your
redemption proceeds via Federal funds wire on the next Business Day. Currently,
Allfirst pays the costs of these wires. Allfirst or a correspondent bank
reserves the right to charge wire fees to investors.

Suspension of Your Right to Sell Your Shares

How to Exchange Your Shares

You may exchange your Institutional Class Shares on any Business Day by
contacting us directly by telephone by calling 1-800-624-4116 (inside Maryland
1-800-638-7751) or your investment representative at Allfirst or a correspondent
bank.

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

Telephone Transactions

Purchasing, selling and exchanging Portfolio shares over the telephone is
extremely convenient, but not without risk. Although the Fund has certain
safeguards and procedures to confirm the identity of 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.

Page 88 of 99
<PAGE>

Distribution of Portfolio Shares

The Distributor receives no compensation for its distribution of Institutional
Class Shares. For Institutional Class Shares, shareholder service fees, as a
percentage of average daily net assets, may be up to 0.15%.

Dividends and Distributions

Dividends are declared and paid according to the following schedule:

<TABLE>
<CAPTION>
___________________________________________________________________________________________
Frequency of
Declaration of Frequency of Payment
Portfolio Dividends of Dividends
- - --------------------------------------------------------------------------------------------
<S> <C> <C>
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
- - --------------------------------------------------------------------------------------------
Pennsylvania Tax-Free Money Market Daily Monthly
Portfolio
- - --------------------------------------------------------------------------------------------
Short-Term Treasury Portfolio Daily Monthly
- - --------------------------------------------------------------------------------------------
Short-Term Bond 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
- - --------------------------------------------------------------------------------------------
International Equity Portfolio Annually Annually
- - --------------------------------------------------------------------------------------------
Emerging Markets Equity Portfolio Annually Annually
- - --------------------------------------------------------------------------------------------
</TABLE>

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

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

Page 89 of 99
<PAGE>

Taxes

Please consult your tax advisor regarding your specific questions about Federal,
state and local income taxes. Below we have summarized some important tax
issues that affect the Portfolios and their shareholders. This summary is based
on current tax laws, which may change.

Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
Federal, state and local taxation, depending upon your tax situation.
Distributions you receive from a Portfolio may be taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income
tax rates. Capital gains distributions are generally taxable at the rates
applicable to long-term capital gains. A sale or exchange of shares is
generally a taxable event.

The Tax-Free Money Market, Pennsylvania Tax-Free Money Market, Pennsylvania Tax-
Free and Maryland 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.
<PAGE>

Financial Highlights

The table that follows presents performance information about Institutional
Class Shares of each Portfolio. 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. The information for the six months ended October 31, 1999 (unaudited)
appears in the Portfolios' Semi-Annual Report. The Annual Report and the Semi-
Annual Report along with each Portfolio's financial statements, accompanies our
Statement of Additional Information. You can obtain the Portfolios' Annual
Report and Semi-Annual Report, which contain more performance information, at no
charge by calling 1-800-624-4116 (inside Maryland 1-800-638-7751).

Page 91 of 99
<PAGE>

For the Period Ended October 31,
Realized and
Net Asset Unrealized Distributions
Value, Net Gains or from Net Distributions Net Asset Net Assets,
Beginning Investment (Losses) Investment from Capital Value, End Total End of
of Period Income on Investments Income Gains of Period Return Period (000)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Money Market Portfolio
Institutional Class
1999 - -
1998 - -
1997 - -
1996 - -
1995(1) - -

U.S. Government Money Market Portfolio
Institutional Class
1999 - -
1998 - -
1997 - -
1996 - -
1995(1) - -

Money Market Portfolio
Institutional Class
1999 - -
1998 - -
1997 - -
1996 - -
1995(1) - -

Tax-Free Money Market Portfolio
Institutional Class
1999 - -
1998 - -
1997 - -
1996 - -
1995(1) - -

<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Expenses Income Net Assets Portfolio
to Average to Average (Excluding Turnover
Net Assets Net Assets Waivers) Rate
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Money Market Portfolio
Institutional Class
1999 -
1998 -
1997 -
1996 -
1995(1) -

U.S. Government Money Market Portfolio
Institutional Class
1999 -
1998 -
1997 -
1996 -
1995(1) -

Money Market Portfolio
Institutional Class
1999 -
1998 -
1997 -
1996 -
1995(1) -

Tax-Free Money Market Portfolio
Institutional Class
1999 -
1998 -
1997 -
1996 -
1995(1) -
</TABLE>

(1) Commenced operations on June 14, 1993.

Page 92 of 99
<PAGE>

For the Period Ended October 31,
Realized and
Net Asset Unrealized Distributions
Value, Net Gains or from Net Distributions Net Asset Net Assets,
Beginning Investment (Losses) Investment from Capital Value, End Total End of
of Period Income on Investments Income Gains of Period Return Period (000)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term Treasury Portfolio
Institutional Class
1999
1998
1997 -
1996(2) -

Short-Term Bond Portfolio
Institutional Class
1999 -
1998 -
1998++ -
1997++ (3) -

Maryland Tax-Free Portfolio
Institutional Class
1999
1998
1997(4) -

Pennsylvania Tax-Free Portfolio
Institutional Class
1999
1998 -
1998++ -
1997++(3) -

Intermediate Fixed Income Portfolio
Institutional Class
1999
1998
1997(4) -

<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Expenses Income (Loss) Net Assets Portfolio
to Average to Average (Excluding Turnover
Net Assets Net Assets Waivers) Rate
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Treasury Portfolio
Institutional Class
1999
1998
1997
1996(2) -

Short-Term Bond Portfolio
Institutional Class
1999
1998
1998++
1997++ (3)

Maryland Tax-Free Portfolio
Institutional Class
1999
1998
1997(4)

Pennsylvania Tax-Free Portfolio
Institutional Class
1999
1998
1998++
1997++(3)

Intermediate Fixed Income Portfolio
Institutional Class
1999
1998
1997(4)
</TABLE>

+ Returns are for the period indicated and have not been annualized.
++ Period ended February 28. See Note 9 of Notes to Financial Statements
regarding fund mergers.
* Annualized.
(2) Commenced operations on March 20, 1996.
(3) Commenced operations on April 1, 1996.
(4) Commenced operations on November 18, 1996.

Page 93 of 99
<PAGE>

For the Period Ended October 31,
Realized and
Net Asset Unrealized Distributions
Value, Net Gains or from Net Distributions Net Asset Net Assets,
Beginning Investment (Losses) Investment from Capital Value, End Total End of
of Period Income on Investments Income Gains of Period Return Period (000)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Bond Portfolio
Institutional Class
1999 -
1998 - -
1998++ -
1997++(3) -

Income Portfolio
Institutional Class
1999 -
1998 -
1997 -
1996 -
1995(5)

Balanced Portfolio
Institutional Class
1999
1998
1997
1996
1995(5)

Equity Income Portfolio
Institutional Class
1999
1998
1997(4) -

Value Equity Portfolio
Institutional Class
1999
1998
1998++
1997++ (3)

<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Expenses Income Net Assets Portfolio
to Average to Average (Excluding Turnover
Net Assets Net Assets Waivers) Rate
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Bond Portfolio
Institutional Class
1999
1998
1998++
1997++(3)

Income Portfolio
Institutional Class
1999
1998
1997
1996
1995(5)

Balanced Portfolio
Institutional Class
1999
1998
1997
1996
1995(5)

Equity Income Portfolio
Institutional Class
1999
1998
1997(4)

Value Equity Portfolio
Institutional Class
1999
1998
1998++
1997++ (3)
</TABLE>

+ Returns are for the period indicated and have not been annualized.
++ Period ended February 28. See Note 9 of Notes to Financial Statements
regarding fund mergers.
* Annualized.
(3) Commenced operations on April 1, 1996.
(4) Commenced operations on November 18, 1996.
(5) Commenced operations on July 16, 1993.

Page 94 of 99
<PAGE>

For the Period Ended October 31,
Realized and
Net Asset Net Unrealized Distributions
Value, Investment Gains or from Net Distributions Net Asset Net Assets,
Beginning Income (Losses) Investment from Capital Value, End Total End of
of Period (Loss) on Investments Income Gains of Period Return Period (000)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Index Portfolio
Institutional Class
1999
1998(6) -

Blue Chip Equity Portfolio
Institutional Class
1999
1998
1997
1996(3) - - -

Capital Growth Portfolio
Institutional Class
1999 -
1998
1997
1996
1995(5)

Mid-Cap Equity Portfolio
Institutional Class
1999
1998
1997(4) -

Small-Cap Equity Portfolio
Institutional Class
1999 -
1998 -
1997 -
1996(7) -

<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Expenses Income Net Assets Portfolio
to Average to Average (Excluding Turnover
Net Assets Net Assets Waivers) Rate
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Index Portfolio
Institutional Class
1999
1998(6)

Blue Chip Equity Portfolio
Institutional Class
1999
1998
1997
1996(3)

Capital Growth Portfolio
Institutional Class
1999
1998
1997
1996
1995(5)

Mid-Cap Equity Portfolio
Institutional Class
1999
1998
1997(4)

Small-Cap Equity Portfolio
Institutional Class
1999
1998
1997
1996(7)
</TABLE>

+ Returns are for the period indicated and have not been annualized.
* Annualized.
(3) Commenced operations on April 1, 1996.
(4) Commenced operations on November 18, 1996.
(5) Commenced operations on July 16, 1993.
(6) Commenced operations on October 1, 1997.
(7) Commenced operations on July 13, 1995.

Page 95 of 99
<PAGE>

For the Period Ended October 31,
Realized and
Net Asset Unrealized Distributions
Value, Net Gains or from Net Distributions Net Asset Net Assets,
Beginning Investment (Losses) Investment from Capital Value, End Total End of
of Period Income on Investments Income Gains of Period Return Period (000)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Equity Selection Portfolio
Institutional Class
1999
1998 - - -
1998++(8)

<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Expenses Income Net Assets Portfolio
to Average to Average (Excluding Turnover
Net Assets Net Assets Waivers) Rate
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Equity Selection Portfolio
Institutional Class
1999
1998
1998++(8)
</TABLE>

Page 96 of 99
<PAGE>

ARK Funds

Investment Advisor

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

Investment Subadvisor
(to the Institutional Equity Portfolio and Emerging Markets Equity Portfolio)

AIB Govett Asset Management Limited
Shackleton House
4 Battle Bridge Lane
London, England SE1 2HR

Distributor

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

Legal Counsel

Piper Marbury Rudnick & Wolfe LLP
36 South Charles Street
Baltimore, MD 21201

Independent Auditors

KPMG LLP
99 High Street
Boston, MA 02110

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

Statement of Additional Information (SAI)

Annual and Semi-Annual Reports

Page 97 of 99
<PAGE>

To Obtain More Information:

By Telephone: Call 1-800-624-4116 (inside Maryland 1-800-638-7751)

By Mail: Write to us at:

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

Page 98 of 99
<PAGE>

From the SEC: You can also obtain the SAI or the Annual and Semi-Annual Reports,
as well as other information about ARK Funds, from the SEC's website
(http://www.sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. ARK Funds' Investment Company Act registration number
is 811-7310.

Page 99 of 99
<PAGE>

ARK Funds

Institutional II Class

Prospectus

March _____, 2000

U.S. Treasury Money Market Portfolio
U.S. Government Money Market Portfolio
Money Market Portfolio
Tax-Free Money Market Portfolio
Pennsylvania Tax-Free Money Market Portfolio

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 1 of 28
<PAGE>

How to Read This Prospectus

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

This prospectus has been arranged into different sections so that you can easily
review this important information. For more detailed information about each
Portfolio, please see:

Page
U.S. Treasury Money Market Portfolio...................... XXX
U.S. Government Money Market Portfolio.................... XXX
Money Market Portfolio.................................... XXX
Tax-Free Money Market Portfolio........................... XXX
Pennsylvania Tax-Free Money Market Portfolio.............. XXX
More information about risk............................... XXX
Each Portfolio's Other Investments........................ XXX
Investment Advisor........................................ XXX
Purchasing, Selling and Exchanging Portfolio Shares....... XXX
Distribution of Portfolio Shares.......................... XXX
Dividends and Distributions............................... XXX
Taxes..................................................... XXX
Financial Highlights...................................... XXX
How To Obtain More Information About ARK Funds............ Back Cover

Page 2 of 28
<PAGE>

INTRODUCTION - INFORMATION COMMON TO ALL PORTFOLIOS

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

The Portfolios try to maintain a constant price per share of $1.00, but there is
no guarantee that these Portfolios will achieve this goal.

Page 3 of 28
<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.

Principal Risks of Investing in the U.S. Treasury Money Market Portfolio

The Portfolio's U.S. Treasury securities are not guaranteed against price
movements due to changing interest rates.

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
II Class Shares from year to year for four years.

Page 4 of 28
<PAGE>

1996 4.90%
1997 4.98%
1998 4.77%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the IBC/Financial Data 100% U.S. Treasury
Average.

Institutional II Class 1 Year Since Inception
- - -------------------------------------------------------------------------------
U.S. Treasury Money Market Portfolio % %*
IBC/Financial Data 100% U.S. Treasury % %**
Average

* Since July 28, 1995.
** Since July 31, 1995.

What is an Average?

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional II Class
- - --------------------------------------------------------------------------------
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees 0.15%
Other Expenses 0.19%
----
Total Annual Portfolio Operating Expenses 0.59%
Fee Waivers and Expense Reimbursements 0.03%
----
Net Total Operating Expenses 0.56%*
----
- - --------------------------------------------------------------------------------

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.56% until September 1, 2000. 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

Page 5 of 28
<PAGE>

waivers at any time. With these fee waivers, the Portfolio's actual total
operating expenses are as follows:

U.S. Treasury Money Market Portfolio -- Institutional II Class 0.53%

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

Example

1 Year 3 Years 5 Years 10 Years
$57 $186 $326 $735

Page 6 of 28

<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

Principal Risks of Investing in the U.S. Government Money Market Portfolio

Page 7 of 28
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
II Class Shares from year to year for four years.

1996 5.13%
1997 5.28%
1998 5.18%
1999 %

Best Quarter Worst Quarter
% 1.20%

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the IBC/Financial Data Government Only
Institutions Only Average.

Institutional II Class 1 Year Since Inception
- - --------------------------------------------------------------------------------
U.S. Government Money Market Portfolio % %*
IBC/Financial Data Government Only Institutions
Only Average % %**

* Since July 28, 1995.
** Since July 31, 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 Government Only Institutions Only Average is a composite of
money market mutual funds with investment goals similar to the Portfolio's
goals.

Page 8 of 28
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional II Class
- - ------------------------------------------------------------------------------
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees 0.15%
Other Expenses 0.18%
----
Total Annual Portfolio Operating Expenses 0.58%
Fee Waivers and Expense Reimbursements 0.08%
----
Net Total Operating Expenses 0.50%*
----
- - ------------------------------------------------------------------------------

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.50% until September 1, 2000. 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 -- Institutional II Class 0.47%

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

Example

1 Year 3 Years 5 Years 10 Years
$51 $178 $316 $718

Page 9 of 28
<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

In selecting securities for 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

Page 10 of 28
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
II Class Shares from year to year for four years.

1996 5.26%
1997 5.43%
1998 5.34%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of IBC/Financial Data First Tier Institutions
Only Average.

Institutional II Class 1 Year Since Inception
- - --------------------------------------------------------------------------------
Money Market Portfolio % %*
IBC/Financial Data First Tier Institutions
Only Average % %**

* Since July 21, 1995.
** Since July 31, 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 First Tier Institutions Only Average is a composite of money
market mutual funds with investment goals similar to the Portfolio's goals.

Page 11 of 28
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional II Class
- - --------------------------------------------------------------------------------
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees 0.15%
Other Expenses 0.17%
----
Total Annual Portfolio Operating Expenses 0.57%
Fee Waivers and Expense Reimbursements 0.11%
----
Net Total Operating Expenses 0.46%*
----
- - --------------------------------------------------------------------------------

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
0.46% until September 1, 2000. 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 -- Institutional II Class 0.43%

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

Example

1 Year 3 Years 5 Years 10 Years
$47 $172 $307 $703

Page 12 of 28
<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 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.

Principal Risks of Investing in the Tax-Free Money Market Portfolio

Page 13 of 28
<PAGE>

Performance Information

This bar chart shows changes in the performance of the Portfolio's Institutional
II Class Shares from year to year for four years.

1996 3.20%
1997 3.36%
1998 3.14%
1999 %

Best Quarter Worst Quarter
% %

This table compares the Portfolio's average annual total returns for the periods
ended December 31, 1999, to those of the IBC/Financial Data Tax-Free
Institutions Only Average.

Institutional II Class 1 Year Since Inception
- - --------------------------------------------------------------------------------
Tax-Free Money Market Portfolio % %*
IBC/Financial Data Tax-Free Institutions
Only Average % %**

* Since July 28, 1995.
** Since July 31, 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 Tax-Free Institutions Only Average is a composite of money
market mutual funds with investment goals similar to the Portfolio's goals.

Page 14 of 28
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional II Class
- - -----------------------------------------------------------------------------
Investment Advisory Fees 0.25%
Distribution (12b-1) Fees 0.15%
Other Expenses 0.20%
----
Total Annual Portfolio Operating Expenses 0.60%
Fee Waivers and Expense Reimbursements 0.13%
----
Net Total Operating Expenses 0.47%*
----

________________________________________________________________________________

* Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 0.47% until
September 1, 2000. 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 -- Institutional II Class 0.44%

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

Example

1 Year 3 Years 5 Years 10 Years
$48 $179 $322 $738

Page 15 of 28
<PAGE>

ARK PENNSYLVANIA TAX-FREE MONEY MARKET PORTFOLIO

Portfolio Summary

Investment Goal Maximizing current income exempt from
Federal and Pennsylvania state income
taxes and providing liquidity and
security of principal

Investment Focus Short-term, high-quality Pennsylvania
municipal money market obligations

Share Price Volatility Very low

Principal Investment Strategy Investing in tax-exempt U.S. dollar-
denominated money market securities of
Pennsylvania issuers

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

Investment Strategy of the Pennsylvania Tax-Free Money Market Portfolio

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

Principal Risks of Investing in the Pennsylvania Tax-Free Money Market Portfolio

Page 16 of 28
<PAGE>

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

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Institutional II Class
- - --------------------------------------------------------------------------------

Investment Advisory Fees 0.25%
Distribution (12b-1) Fees 0.20%
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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 Money Market Portfolio -- ____%
Institutional II Class

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

Example

1 Year 3 Years 5 Years 10 Years

Page 17 of 28
<PAGE>

More Information About Risk

Risks Portfolios Affected by the Risks

Municipal Issuer Risk -- There may Tax-Free Money Market Portfolio
be economic or political changes Pennsylvania Tax-Free Money Market
that impact the ability of municipal Portfolio
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 the 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.

Year 2000 Risk -- The Portfolios All 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 mission-critical
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 obtained, 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.

Page 18 of 28
<PAGE>

Each Portfolio's Other Investments

This prospectus describes the Portfolios' primary strategies, and each Portfolio
will invest at least 80% of its 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.

Investment Advisor

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

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

Allied Investment Advisors, Inc. (AIA), a wholly-owned subsidiary of Allfirst
Bank (formerly, First National Bank of Maryland) (Allfirst) serves as the
Advisor to the Portfolios. As of December 31, 1999, AIA had approximately
$__________ billion in assets under management. For the fiscal year ended April
30, 1999, AIA received advisory fees of:

_____________________

* The Portfolio commenced operations on the date of this prospectus and has
not paid any advisory fees. The Board of Directors has approved an investment
advisory fee of 0.25%, however, the Portfolio's Advisor has agreed to
contractually waive fees and reimburse expenses in order to keep total operating
expenses from exceeding _____% until September 1, 2000. With these fee waivers,
the actual advisory fees received by AIA would be lower than 0.25%.

James M. Hannan is a Principal of AIA and manager of each Portfolio. He is also
manager of the ARK Short-Term Treasury Portfolio, U.S. Treasury Cash Management
Portfolio, U.S. Government Cash Management Portfolio, Prime Cash Management
Portfolio and Tax-Free Cash Management Portfolio and 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.

Purchasing, Selling and Exchanging Portfolio Shares

Page 19 of 28
<PAGE>

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

Institutional II Class Shares are for individuals, financial institutions,
corporations and other entities that have established trust relationships with
Allfirst or its affiliates or correspondent banks. Before you can buy
Institutional II Class Shares, you must establish a qualified account. For
information on fee schedules and agreements for opening qualified accounts, call
1-800-624-4116 (inside Maryland 1-800-638-7751) to speak with an investor
representative.

How to Purchase Portfolio Shares

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

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

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

Shareholders may instruct Allfirst or a correspondent bank to purchase
Institutional II Class Shares automatically at preset intervals. Allfirst or a
correspondent bank may charge additional fees for this and other services,
including cash sweeps. For more information, please call 1-800-624-4116 (inside
Maryland 1-800-638-7751) to speak with an investor representative.

General Information

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

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

Page 20 of 28
<PAGE>

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

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

How We Calculate NAV

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

In calculating NAV for the Portfolios, we generally value a Portfolio's
investment portfolio using the amortized cost valuation method, which is
described in detail in our Statement of Additional Information. If this method
is determined to be unreliable during certain market conditions or for other
reasons, 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.

Minimum Purchases

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

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

How to Sell Your Portfolio Shares

Holders of Institutional II Class Shares may sell shares by telephone or by mail
on any Business Day by following procedures established when they opened their
qualified account. If you have questions, call 1-800-624-4116 (inside Maryland
1-800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

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

By Telephone. To redeem by telephone, call 1-800-624-4116 (inside Maryland
1-800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

Receiving Your Money

Normally, if we receive your redemption request by 12:00 noon Eastern time (1:30
p.m. Eastern time for the U.S. Government Money Market and Money Market
Portfolios) on any Business Day, we will send your sale proceeds on that day.
Your proceeds can be wired to your bank

Page 21 of 28
<PAGE>

account. For Allfirst clients, currently Allfirst bank pays the costs of these
wires. The Portfolios reserve the right to charge wire fees to investors. You
may not close your account by telephone.

Suspension of Your Right to Sell Your Shares

Page 22 of 28
<PAGE>

How to Exchange Your Shares

You may exchange your Institutional II Class Shares on any Business Day by
contacting us directly by telephone by calling 1-800-624-4116 (inside Maryland
1-800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

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

Telephone Transactions

Distribution of Portfolio Shares

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

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

U.S. Treasury Money Market Portfolio 0.15%
U.S. Government Money Market Portfolio 0.15%
Money Market Portfolio 0.15%
Tax-Free Money Market Portfolio 0.15%
Pennsylvania Tax-Free Money Market Portfolio 0.15%

Page 23 of 28
<PAGE>

Dividends and Distributions

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

Taxes

Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
Federal, state and local taxation, depending upon your tax situation.
Distributions you receive from a Portfolio may be taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income tax
rates. Capital gains distributions are generally taxable at the rates applicable
to long-term capital gains. A sale or exchange of shares is generally a taxable
event.

The Tax-Free Money Market Portfolio and Pennsylvania Tax-Free Money Market
Portfolio 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.

Page 24 of 28
<PAGE>

Financial Highlights

The table that follows presents performance information about Institutional II
Class Shares of each Portfolio. 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. The information for the six months
ended October 31, 1999 (unaudited) appears in the Portfolios' Semi-Annual
Report. The Annual Report and the Semi-Annual Report, along with each
Portfolio's financial statements, accompanies our Statement of Additional
Information. You can obtain the Portfolios' Annual Report and the Semi-Annual
Report, which contain more performance information, at no charge by calling 1-
800-624-4116 (inside Maryland 1-800-638-7751).

Page 25 of 28
<PAGE>

For the period ended October 31,

<TABLE>
<CAPTION>
Net Asset Realized and Distributions
Value, Net Unrealized from Net Distributions Net Asset
Beginning Investment Gains or (Losses) Investment from Capital Value,
of Period Income on Investments Income Gains End Period
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Money Market Portfolio
Institutional II Class
1999 -- --
1998 -- --
1997 -- --
1996 (1) -- --

U.S. Government Money Market Portfolio
Institutional II Class
1999 -- --
1998 -- --
1997 -- --
1996 (1) -- --

Money Market Portfolio
Institutional II Class
1999 -- --
1998 -- --
1997 -- --
1996 (2) -- --

Tax-Free Money Market Portfolio
Institutional II Class
1999 -- --
1998 -- --
1997 -- --
1996 (1) -- --

<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Net Assets, Expenses Income Net Assets
Total End of to Average to Average (Excluding
Return Period (000) Net Assets Net Assets Waivers)
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Money Market Portfolio
Institutional II Class
1999
1998
1997
1996 (1)

U.S. Government Money Market Portfolio
Institutional II Class
1999
1998
1997
1996 (1)

Money Market Portfolio
Institutional II Class
1999
1998
1997
1996 (2)

Tax-Free Money Market Portfolio
Institutional II Class
1999
1998
1997
1996 (1)
</TABLE>

+ Returns are for the period indicated and have not been annualized.
* Annualized.
(1) Commenced operations on July 28, 1995.
(2) Commenced operations on July 21, 1995.

Page 26 of 28
<PAGE>

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

Piper Marbury Rudnick & Wolfe LLP
36 South Charles Street
Baltimore, MD 21201

Independent Auditors

KPMG LLP
99 High Street
Boston, MA 02110

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

Statement of Additional Information (SAI)

Annual and Semi-Annual Reports

To Obtain More Information:

By Telephone: Call 1-800-624-4116 (inside Maryland 1-800-638-7751)

By Mail: Write to us at:
ARK Funds
c/o Allfirst Bank Trust Division

Page 27 of 28
<PAGE>

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

From the SEC: You can also obtain the SAI or the Annual and Semi-Annual Reports,
as well as other information about ARK Funds, from the SEC's website
(http://www.sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. ARK Funds' Investment Company Act registration number
is 811-7310.

Page 28 of 28
<PAGE>

ARK Funds

Corporate Class

Prospectus
March _____, 2000

U.S. Treasury Cash Management Portfolio
U.S. Government Cash Management Portfolio
Prime Cash Management Portfolio
Tax-Free Cash Management 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 1 of 20
<PAGE>

How to Read This Prospectus

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

This prospectus has been arranged into different sections so that you can easily
review this important information. For more detailed information about each
Portfolio, please see:

Page
U.S. Treasury Cash Management Portfolio....................... XXX
U.S. Government Cash Management Portfolio..................... XXX
Prime Cash Management Portfolio............................... XXX
Tax-Free Cash Management Portfolio............................ XXX
More information about risk................................... XXX
Each Portfolio's Other Investments............................ XXX
Investment Advisor............................................ XXX
Purchasing, Selling and Exchanging Portfolio Shares........... XXX
Distribution of Portfolio Shares.............................. XXX
Dividends and Distributions................................... XXX
Taxes......................................................... XXX
How To Obtain More Information About ARK Funds................ Back Cover

Page 2 of 20
<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.

The Portfolios try to maintain a constant price per share of $1.00, but there is
no guarantee that these Portfolios will achieve this goal.

Page 3 of 20
<PAGE>

ARK U.S. TREASURY CASH MANAGEMENT PORTFOLIO
<TABLE>
<CAPTION>

Portfolio Summary
<S> <C>
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
</TABLE>

Investment Strategy of the U.S. Treasury Cash Management Portfolio

The U.S. Treasury Cash Management Portfolio is a money market fund that seeks
its investment goal by investing exclusively in U.S. Treasury obligations.

Principal Risks of Investing in the U.S. Treasury Cash Management Portfolio

The Portfolio's U.S. Treasury securities are not guaranteed against price
movements due to changing interest rates.

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Page 4 of 20
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Corporate Class
- - --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.08%
Distribution (12b-1) Fees None
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----
</TABLE>

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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 Cash Management Portfolio - Corporate Class Shares _____%

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

Example

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
- - - -

Page 5 of 20
<PAGE>

ARK U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO

Portfolio Summary
<S> <C>
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
</TABLE>

Investment Strategy of the U.S. Government Cash Management Portfolio

The U.S. Government Cash Management Portfolio is a money market fund that seeks
its investment goal by investing exclusively in obligations issued by the U.S.
government and its agencies and instrumentalities and in repurchase agreements.

Principal Risks of Investing in the U.S. Government Cash Management Portfolio

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Page 6 of 20
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Corporate Class
- - ---------------------------------------------------------------------------------------------
<S> <C>

Investment Advisory Fees 0.08%
Distribution (12b-1) Fees None
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----
</TABLE>

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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 Cash Management Portfolio - Corporate Class Shares _____%

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

Example

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
- - - -

Page 7 of 20
<PAGE>

ARK PRIME CASH MANAGEMENT PORTFOLIO

Portfolio Summary
<S> <C>
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
</TABLE>

Investment Strategy of the Prime Cash Management Portfolio

The Prime Cash Management Portfolio is a money market fund that 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 are rated in the highest rating
category by two or more nationally recognized statistical rating organizations.

Principal Risks of Investing in the Prime Cash Management 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.

Page 8 of 20
<PAGE>

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Corporate Class
- - ---------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.08%
Distribution (12b-1) Fees None
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----
</TABLE>

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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:

Prime Cash Management Portfolio - Corporate Class Shares _____%

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

Example

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
- - - -

Page 9 of 20
<PAGE>

ARK TAX-FREE CASH MANAGEMENT PORTFOLIO

<TABLE>
<CAPTION>
Portfolio Summary
<S> <C>
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
</TABLE>

Investment Strategy of the Tax-Free Cash Management Portfolio

The Tax-Free Cash Management Portfolio is a money market fund that 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.

Principal Risks of Investing in the Tax-Free Cash Management Portfolio

Page 10 of 20
<PAGE>

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Corporate Class
- - ------------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.08%
Distribution (12b-1) Fees None
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----
</TABLE>

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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 Cash Management Portfolio - Corporate Class Shares _____%

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

Example

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
- - - -

Page 11 of 20
<PAGE>

More Information About Risk

<TABLE>
<CAPTION>
Risks Portfolios Affected by the
Risks
<S> <C>
Municipal Issuer Risk -- There may be economic or Tax-Free Cash Management Portfolio
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 the
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.

Year 2000 Risk -- The Portfolios depend on the smooth All Portfolios
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 mission-critical 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, or are subject to other date recognition or
similar systems issues. 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 obtained, 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.
</TABLE>

Page 12 of 20
<PAGE>

Each Portfolio's Other Investments

This prospectus describes the Portfolios' primary strategies, and each Portfolio
will invest at least 80% of its 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.

Investment Advisor

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

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

Allied Investment Advisors, Inc. (AIA), a wholly-owned subsidiary of Allfirst
Bank (formerly, First National Bank of Maryland) (Allfirst) serves as the
Advisor to the Portfolios. As of December 31, 1999, AIA had approximately
$_____ billion in assets under management. Under the advisory contract between
ARK Funds and AIA, AIA is entitled to receive advisory fees of:

<TABLE>
<S> <C>
U.S. Treasury Cash Management Portfolio 0.08%*
U.S. Government Cash Management Portfolio 0.08%*
Prime Cash Management Portfolio 0.08%*
Tax-Free Cash Management Portfolio 0.08%*
</TABLE>
___________________
* The Portfolios commenced operations on the date of this prospectus and have
not paid any advisory fees. The Board of Directors has approved an investment
advisory fee of 0.08%, however, the Portfolio's Advisor has agreed to
contractually waive fees and reimburse expenses in order to keep total operating
expenses from exceeding _____% until September 1, 2000. With these fee waivers,
the actual advisory fees received by AIA would be lower than 0.08%.

James M. Hannan is a Principal of AIA and manager of each Portfolio. He is also
manager of the ARK U.S. Treasury Money Market Portfolio, the ARK U.S. Government
Money Market Portfolio, the ARK Money Market Portfolio, the ARK Tax-Free Money
Market Portfolio, the ARK Pennsylvania Tax-Free Money Market Portfolio, and the
ARK Short-Term Treasury Portfolio and 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.

Purchasing, Selling and Exchanging Portfolio Shares

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

Page 13 of 20
<PAGE>

Corporate Class Shares are for individuals, financial institutions, corporations
and other entities that have established trust relationships with Allfirst or
its affiliates or correspondent banks. Before you can buy Corporate Class
Shares, you must establish a qualified account. In addition, purchases of
Corporate Class Shares are subject to minimum investment requirements, which are
described below. For information on fee schedules and agreements for opening
qualified accounts, call 1-800-624-4116 (inside Maryland 1-800-638-7751) to
speak with an investor representative.

How to Purchase Portfolio Shares

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

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

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

Shareholders may instruct Allfirst or a correspondent bank to purchase Corporate
Class Shares automatically at preset intervals. Allfirst or a correspondent
bank may charge additional fees for this and other services, including cash
sweeps. For more information, please call 1-800-624-4116 (inside Maryland 1-
800-638-7751) to speak with an investor representative.

General Information

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

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

Page 14 of 20
<PAGE>

The Prime Cash Management Portfolio and U.S. Government Cash Management
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 and accept your order and
receive Federal funds before 5:00 p.m. Eastern time.

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

How We Calculate NAV

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

Minimum Purchases

To purchase shares for the first time, you must invest (through one or more
accounts) at least $10,000,000 in any Portfolio. Your subsequent investments in
any Portfolio may be made in any amount. There may be other minimums or
restrictions established by Allfirst or a correspondent bank when you open your
account.

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

How to Sell Your Portfolio Shares

Holders of Corporate Class Shares may sell shares by telephone or by mail on
any Business Day by following procedures established when they opened their
qualified account. If you have questions, call 1-800-624-4116 (inside Maryland
1-800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

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

By Telephone. To redeem by telephone, call 1-800-624-4116 (inside Maryland 1-
800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

Receiving Your Money

Normally, if we receive your redemption request by 12:00 noon Eastern time (1:30
p.m. Eastern time for the U.S. Government Cash Management and Prime Cash
Management Portfolios) on any Business Day, we will send your sale proceeds on
that day. Your proceeds can be wired to your bank account. For Allfirst
clients, currently Allfirst bank pays the costs of these wires. The Portfolios
reserve the right to charge wire fees to investors. You may not close your
account by telephone.

Suspension of Your Right to Sell Your Shares

Page 15 of 20
<PAGE>

Page 16 of 20
<PAGE>

How to Exchange Your Shares

You may exchange your Corporate Class Shares on any Business Day by contacting
us directly by telephone by calling 1-800-624-4116 (inside Maryland 1-800-638-
7751) or your investor representative at Allfirst or a correspondent bank.

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

Telephone Transactions

Purchasing, selling and exchanging Portfolio shares over the telephone is
extremely convenient, but not without risk. Although the Fund has certain
safeguards and procedures to confirm the identity of 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 is over
the telephone, you will generally bear the risk of any loss.

Distribution of Portfolio Shares

SEI Investments Distribution Co., the distributor of ARK Funds, receives no
compensation for its distribution of Corporate Class Shares.

Dividends and Distributions

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

Page 17 of 20
<PAGE>

Taxes

Please consult your tax advisor regarding your specific questions about Federal,
state and local income taxes. Below we have summarized some important tax
issues that affect the Portfolios and their shareholders. This summary is based
on current tax laws, which may change.

Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
Federal, state and local taxation, depending upon your tax situation.
Distributions you receive from a Portfolio may be taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income
tax rates. Capital gains distributions are generally taxable at the rates
applicable to long-term capital gains. A sale or exchange of shares is
generally a taxable event.

The Tax-Free Cash Management Portfolio intends to distribute Federally tax-
exempt income. Income exempt from Federal tax may be subject to state and local
taxes. Any capital gains distributed by the Portfolio may be taxable.

More information about taxes is in the Statement of Additional Information.

Page 18 of 20
<PAGE>

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

Piper Marbury Rudnick & Wolfe LLP
36 South Charles Street
Baltimore, MD 21201

Independent Auditors

KPMG LLP
99 High Street
Boston, MA 02110

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

Statement of Additional Information (SAI)

Annual and Semi-Annual Reports

To Obtain More Information:

By Telephone: Call 1-800-624-4116 (inside Maryland 1-800-638-7751)

By Mail: Write to us at:
ARK Funds
c/o Allfirst Bank
Banc #101-624

Page 19 of 20
<PAGE>

P.O. Box 1596
Baltimore, MD 21201

Page 20 of 20
<PAGE>

ARK Funds

Corporate II Class

Prospectus
March _____, 2000

U.S. Treasury Cash Management Portfolio
U.S. Government Cash Management Portfolio
Prime Cash Management Portfolio
Tax-Free Cash Management 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 1 of 19
<PAGE>

How to Read This Prospectus

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

This prospectus has been arranged into different sections so that you can easily
review this important information. For more detailed information about each
Portfolio, please see:

Page 2 of 19
<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.

The Portfolios try to maintain a constant price per share of $1.00, but there is
no guarantee that these Portfolios will achieve this goal.

Page 3 of 19
<PAGE>

ARK U.S. TREASURY CASH MANAGEMENT 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 Cash Management Portfolio

The U.S. Treasury Cash Management Portfolio is a money market fund that seeks
its investment goal by investing exclusively in U.S. Treasury obligations.

Principal Risks of Investing in the U.S. Treasury Cash Management Portfolio

The Portfolio's U.S. Treasury securities are not guaranteed against price
movements due to changing interest rates.

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Page 4 of 19
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Corporate II Class
- - --------------------------------------------------------------------------
Investment Advisory Fees 0.08%
Distribution (12b-1) Fees 0.25%
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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 Cash Management Portfolio - Corporate II Class Shares _____%

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

Example

1 Year 3 Years 5 Years 10 Years
- - - -

Page 5 of 19
<PAGE>

ARK U.S. GOVERNMENT CASH MANAGEMENT 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 Cash Management Portfolio

Principal Risks of Investing in the U.S. Government Cash Management Portfolio

Page 6 of 19
<PAGE>

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Corporate II Class
- - ------------------------------------------------------------------------
Investment Advisory Fees 0.08%
Distribution (12b-1) Fees 0.25%
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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 Cash Management Portfolio - Corporate II Class Shares_____%

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

Example

1 Year 3 Years 5 Years 10 Years
- - - -

Page 7 of 19
<PAGE>

ARK PRIME CASH MANAGEMENT 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 Prime Cash Management Portfolio

Principal Risks of Investing in the Prime Cash Management Portfolio

Page 8 of 19
<PAGE>

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Corporate II Class
- - ----------------------------------------------------------------------
Investment Advisory Fees 0.08%
Distribution (12b-1) Fees 0.25%
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1, 2000. 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:

Prime Cash Management Portfolio - Corporate II Class Shares _____%

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

Example

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
- - - -

Page 9 of 19
<PAGE>

ARK TAX-FREE CASH MANAGEMENT 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 Cash Management Portfolio

The Tax-Free Cash Management Portfolio is a money market funds that 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.

Principal Risks of Investing in the Tax-Free Cash Management Portfolio

Page 10 of 19
<PAGE>

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

Corporate II Class
- - -----------------------------------------------------------------------
Investment Advisory Fees 0.08%
Distribution (12b-1) Fees 0.25%
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----

* The Portfolio's Advisor has agreed to contractually waive fees and
reimburse expenses in order to keep total operating expenses from exceeding
_____% until September 1,2000. 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 Cash Management Portfolio - Corporate II Class Shares _____%

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

Example

1 Year 3 Years 5 Years 10 Years
- - - -

Page 11 of 19
<PAGE>

More Information About Risk

Risks Portfolios Affected by the
Risks

Municipal Issuer Risk -- There may be Tax-Free Cash Management
economic or political changes that impact Portfolio
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 the 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.

Year 2000 Risk -- The Portfolios depend on All Portfolios
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 mission-critical 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, or are
subject to other date recognition or similar
systems issues. 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 obtained, 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.

Page 12 of 19
<PAGE>

Each Portfolio's Other Investments

Investment Advisor

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

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

Allied Investment Advisors, Inc. (AIA), a wholly-owned subsidiary of Allfirst
Bank (formerly, First National Bank of Maryland) (Allfirst) serves as the
Advisor to the Portfolios. As of December 31, 1999, AIA had approximately $_____
billion in assets under management. Under the advisory contract between ARK
Funds and AIA, AIA is entitled to receive advisory fees of:

U.S. Treasury Cash Management Portfolio 0.08%*
U.S. Government Cash Management Portfolio 0.08%*
Prime Cash Management Portfolio 0.08%*
Tax-Free Cash Management Portfolio 0.08%*
___________________________

* The Portfolios commenced operations on the date of this prospectus and have
not paid any advisory fees. The Board of Directors has approved an investment
advisory fee of 0.08%, however, the Portfolio's Advisor has agreed to
contractually waive fees and reimburse expenses in order to keep total operating
expenses from exceeding _____% until September 1, 2000. With these fee waivers,
the actual advisory fees received by AIA would be lower than 0.08%.

James M. Hannan is a Principal of AIA and manager of each Portfolio. He is also
manager of the ARK U.S. Treasury Money Market Portfolio, the ARK U.S. Government
Money Market Portfolio, the ARK Money Market Portfolio, the ARK Tax-Free Money
Market Portfolio, the ARK Pennsylvenia Tax-Free Money Market Portfolio, and the
ARK Short-Term Treasury Portfolio and 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.

Purchasing, Selling and Exchanging Portfolio Shares

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

Corporate II Class Shares are for individuals, financial institutions,
corporations and other entities that have established trust relationships with
Allfirst or its affiliates or correspondent banks. Before you

Page 13 of 19
<PAGE>

can buy Corporate II Class Shares, you must establish a qualified account. In
addition, purchases of Corporate II Class Shares are subject to minimum
investment requirements, which are described below. For information on fee
schedules and agreements for opening qualified accounts, call 1-800-624-4116
(inside Maryland 1-800-638-7751) to speak with an investor representative.

How to Purchase Portfolio Shares

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

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

Shareholders may instruct Allfirst or a correspondent bank to purchase Corporate
II Class Shares automatically at preset intervals. Allfirst or a correspondent
bank may charge additional fees for this and other services, including cash
sweeps. For more information, please call 1-800-624-4116 (inside Maryland 1-800-
638-7751) to speak with an investor representative.

General Information

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

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

Page 14 of 19
<PAGE>

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

How We Calculate NAV

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

Minimum Purchases

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

How to Sell Your Portfolio Shares

Holders of Corporate II Class Shares may sell shares by telephone or by mail on
any Business Day by following procedures established when they opened their
qualified account. If you have questions, call 1-800-624-4116 (inside Maryland
1-800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

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

By Telephone. To redeem by telephone, call 1-800-624-4116 (inside Maryland
1-800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

Receiving Your Money

Normally, if we receive your redemption request by 12:00 noon Eastern time (1:30
p.m. Eastern time for the U.S. Government Cash Management and Prime Cash
Management Portfolios) on any Business Day, we will send your sale proceeds on
that day. Your proceeds can be wired to your bank account. For Allfirst clients,
currently Allfirst bank pays the costs of these wires. The Portfolios reserve
the right to charge wire fees to investors. You may not close your account by
telephone.

Suspension of Your Right to Sell Your Shares

Page 15 of 19
<PAGE>

How to Exchange Your Shares

You may exchange your Corporate II Class Shares on any Business Day by
contacting us directly by telephone by calling 1-800-624-4116 (inside Maryland
1-800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

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

Telephone Transactions

Distribution of Portfolio Shares

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

U.S. Treasury Cash Management Portfolio 0.25%
U.S. Government Cash Management 0.25%
Prime Cash Management Portfolio 0.25%
Tax-Free Cash Management Portfolio 0.25%

Page 16 of 19
<PAGE>

Dividends and Distributions

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

Taxes

Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
Federal, state and local taxation, depending upon your tax situation.
Distributions you receive from a Portfolio may be taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income tax
rates. Capital gains distributions are generally taxable at the rates applicable
to long-term capital gains. A sale or exchange of shares is generally a taxable
event.

More information about taxes is in the Statement of Additional Information.

Page 17 of 19
<PAGE>

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

Piper Marbury Rudnick & Wolfe LLP
36 South Charles Street
Baltimore, MD 21201

Independent Auditors

KPMG LLP
99 High Street
Boston, MA 02110

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

Statement of Additional Information (SAI)

Annual and Semi-Annual Reports

To Obtain More Information:

By Telephone: Call 1-800-624-4116 (inside Maryland 1-800-638-7751)

By Mail: Write to us at:

Page 18 of 19
<PAGE>

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

Page 19 of 19
<PAGE>

ARK Funds

Corporate III Class

Prospectus

March _____, 2000

U.S. Treasury Cash Management Portfolio
U.S. Government Cash Management Portfolio
Prime Cash Management Portfolio
Tax-Free Cash Management 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 1 of 19
<PAGE>

How to Read This Prospectus

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

This prospectus has been arranged into different sections so that you can easily
review this important information. For more detailed information about each
Portfolio, please see:

<TABLE>
<CAPTION>
Page
<S> <C>
U.S. Treasury Cash Management Portfolio..................... XXX
U.S. Government Cash Management Portfolio................... XXX
Prime Cash Management Portfolio............................. XXX
Tax-Free Cash Management Portfolio.......................... XXX
More information about risk................................. XXX
Each Portfolio's Other Investments.......................... XXX
Investment Advisor.......................................... XXX
Purchasing, Selling and Exchanging Portfolio Shares......... XXX
Distribution of Portfolio Shares............................ XXX
Dividends and Distributions................................. XXX
Taxes....................................................... XXX
How To Obtain More Information About ARK Funds.............. Back Cover
</TABLE>

Page 2 of 19
<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.

The Portfolios try to maintain a constant price per share of $1.00, but there is
no guarantee that these Portfolios will achieve this goal.

Page 3 of 19
<PAGE>

ARK U.S. TREASURY CASH MANAGEMENT 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 Cash Management Portfolio

The U.S. Treasury Cash Management Portfolio is a money market fund that seeks
its investment goal by investing exclusively in U.S. Treasury obligations.

Principal Risks of Investing in the U.S. Treasury Cash Management Portfolio

The Portfolio's U.S. Treasury securities are not guaranteed against price
movements due to changing interest rates.

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Page 4 of 19
<PAGE>

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

<TABLE>
<CAPTION>
Corporate III Class
- - --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.08%
Distribution (12b-1) Fees 0.40%
Other Expenses %
----
Total Annual Portfolio Operating Expenses %
Fee Waivers and Expense Reimbursements %
----
Net Total Operating Expenses %*
----
</TABLE>

* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding _____% until
September 1, 2000. 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 Cash Management Portfolio - Corporate III Class Shares _____%

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

Example

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
- - - -

Page 5 of 19
<PAGE>

ARK U.S. GOVERNMENT CASH MANAGEMENT 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 Cash Management Portfolio

Principal Risks of Investing in the U.S. Government Cash Management Portfolio

Page 6 of 19
<PAGE>

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding _____% until
September 1, 2000. 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 Cash Management Portfolio - Corporate III Class Shares _____%

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

Example

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
- - - -

Page 7 of 19
<PAGE>

ARK PRIME CASH MANAGEMENT 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 Prime Cash Management Portfolio

The Prime Cash Management Portfolio is a money market fund that 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 is rated in the highest rating
category by two or more nationally recognized statistical rating organizations.

Principal Risks of Investing in the Prime Cash Management 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.

Page 8 of 19
<PAGE>

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding _____% until
September 1, 2000. 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:

Prime Cash Management Portfolio - Corporate III Class Shares _____%

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

Example

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
- - - -

Page 9 of 19
<PAGE>

ARK TAX-FREE CASH MANAGEMENT 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 Cash Management Portfolio

The Tax-Free Cash Management Portfolio is a money market funds that 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.

Principal Risks of Investing in the Tax-Free Cash Management Portfolio

Page 10 of 19
<PAGE>

Performance Information

The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.

Portfolio Fees and Expenses

Annual Portfolio Operating Expenses (expenses deducted from Portfolio assets)

</TABLE>

* The Portfolio's Advisor has agreed to contractually waive fees and reimburse
expenses in order to keep total operating expenses from exceeding _____% until
September 1, 2000. 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 Cash Management Portfolio - Corporate II Class Shares _____%

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

Example

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
- - - -

Page 11 of 19
<PAGE>

More Information About Risk

Risks Portfolios Affected by the
Risks

Municipal Issuer Risk -- There may be Tax-Free Cash Management Portfolio
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 the
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.

Year 2000 Risk -- The Portfolios depend on All Portfolios
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
mission-critical 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,
or are subject to other date recognition
or similar systems issues. 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 obtained, 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.

Page 12 of 19
<PAGE>

Each Portfolio's Other Investments

This prospectus describes the Portfolios' primary strategies, and each Portfolio
will invest at least 80% of its 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.

Investment Advisor

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

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

Allied Investment Advisors, Inc. (AIA), a wholly-owned subsidiary of Allfirst
Bank (formerly, First National Bank of Maryland) (Allfirst) serves as the
Advisor to the Portfolios. As of December 31, 1999, AIA had approximately
$_____ billion in assets under management. Under the advisory contract between
ARK Funds and AIA, AIA is entitled to receive advisory fees of:

Purchasing, Selling and Exchanging Portfolio Shares

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

Page 13 of 19
<PAGE>

Corporate III Class Shares are for individuals, financial institutions,
corporations and other entities that have established trust relationships with
Allfirst or its affiliates or correspondent banks. Before you can buy Corporate
III Class Shares, you must establish a qualified account. In addition,
purchases of Corporate III Class Shares are subject to minimum investment
requirements, which are described below. For information on fee schedules and
agreements for opening qualified accounts, call 1-800-624-4116 (inside Maryland
1-800-638-7751) to speak with an investor representative.

How to Purchase Portfolio Shares

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

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

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

Shareholders may instruct Allfirst or a correspondent bank to purchase Corporate
III Class Shares automatically at preset intervals. Allfirst or a correspondent
bank may charge additional fees for this and other services, including cash
sweeps. For more information, please call 1-800-624-4116 (inside Maryland 1-
800-638-7751) to speak with an investor representative.

General Information

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

Page 14 of 19
<PAGE>

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

How We Calculate NAV

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

Minimum Purchases

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

How to Sell Your Portfolio Shares

Holders of Corporate III Class Shares may sell shares by telephone or by mail
on any Business Day by following procedures established when they opened their
qualified account. If you have questions, call 1-800-624-4116 (inside Maryland
1-800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

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

By Telephone. To redeem by telephone, call 1-800-624-4116 (inside Maryland 1-
800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

Receiving Your Money

Suspension of Your Right to Sell Your Shares

Page 15 of 19
<PAGE>

How to Exchange Your Shares

You may exchange your Corporate Class III Shares on any Business Day by
contacting us directly by telephone by calling 1-800-624-4116 (inside Maryland
1-800-638-7751) or your investor representative at Allfirst or a correspondent
bank.

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

Telephone Transactions

Distribution of Portfolio Shares

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

U.S. Treasury Cash Management Portfolio 0.40%
U.S. Government Cash Management 0.40%
Prime Cash Management Portfolio 0.40%
Tax-Free Cash Management Portfolio 0.40%

Page 16 of 19
<PAGE>

Dividends and Distributions

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

Taxes

Please consult your tax advisor regarding your specific questions about Federal,
state and local income taxes. Below we have summarized some important tax
issues that affect the 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.

More information about taxes is in the Statement of Additional Information.

Page 17 of 19
<PAGE>

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

Piper Marbury Rudnick & Wolfe LLP
36 South Charles Street
Baltimore, MD 21201

Independent Auditors

KPMG LLP
99 High Street
Boston, MA 02110

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

Statement of Additional Information (SAI)

Annual and Semi-Annual Reports

To Obtain More Information:

By Telephone: Call 1-800-624-4116 (inside Maryland 1-800-638-7751)

By Mail: Write to us at:

ARK Funds

Page 18 of 19
<PAGE>

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

Page 19 of 19
<PAGE>

ARK FUNDS

STATEMENT OF ADDITIONAL INFORMATION

March ___, 2000

This Statement of Additional Information is not a prospectus but should be
read in conjunction with the current prospectuses dated March __, 2000, for
Retail Class A, Retail Class B, Institutional Class. Institutional II Class,
Corporate Class, Corporate II Class and Corporate III Class shares of ARK Funds
(the "Fund"). Please retain this document for future reference. Capitalized
terms used by not defined herein have the meanings given them in the
prospectuses. The Fund's Annual Report (including financial statements for the
fiscal year ended April 30, 1999) and Semi-Annual Report (including financial
statements for the six months ended October 31, 1999) are incorporated herein by
reference. To obtain additional copies of the prospectuses, Annual Report,
Semi-Annual Report or this Statement of Additional Information, please call 1-
800-624-4116 (inside Maryland 1-800-638-7751).

<TABLE>
<CAPTION>
Table of Contents Page
- - ----------------- ----
<S> <C>
INVESTMENT GOALS AND STRATEGIES 2
INVESTMENT POLICIES AND LIMITATIONS 16
INVESTMENT PRACTICES 28
SPECIAL CONSIDERATIONS 55
PORTFOLIO TRANSACTIONS 72
VALUATION OF PORTFOLIO SECURITIES 75
PORTFOLIO PERFORMANCE 77
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION 88
TAXES 91
TRUSTEES AND OFFICERS 98
INVESTMENT ADVISOR 102
ADMINISTRATOR AND DISTRIBUTOR 105
TRANSFER AGENT 111
DESCRIPTION OF THE FUND 111
CUSTODIAN 122
INDEPENDENT AUDITORS 122
FINANCIAL STATEMENTS 122
Appendix A - Description of Indices and Rating........................ A-1
Appendix B - 2000 Tax Rates........................................... B-1
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INVESTMENT GOALS AND STRATEGIES

The Fund consists of separate investment portfolios with a variety of
investment objectives and policies. A Portfolio's investment advisor is
responsible for providing a continuous investment program in accordance with its
investment objective and policies. Except for its investment objective and
those policies identified as fundamental, the investment policies of the
Portfolios are not fundamental and may be changed by the Board of Trustees of
the Fund without shareholder approval. The investment objectives and policies
of the Portfolios are set forth below. Additional information regarding the
types of securities in which the Portfolios may invest and certain investment
transactions is provided in the Fund's prospectuses and elsewhere in this
Statement of Additional Information. See "Investment Policies and
Limitations."

Money Market Fund Portfolios

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

The investment goal of the U.S. Treasury Money Market Portfolio and the
U.S. Treasury Cash Management Portfolio is to maximize current income and
provide liquidity and security of principal by investing in instruments which
are issued or guaranteed as to principal and interest by the U.S. government and
thus constitute direct obligations of the United States. As a non-fundamental
operating policy, each Portfolio invests 100% of its total assets in U.S.
Treasury bills, notes and bonds, and limits its investments to U.S. Treasury
obligations that pay interest which is specifically exempt from state and local
taxes under federal law.

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The investment goal of the U.S. Government Money Market Portfolio and the
U.S. Government Cash Management Portfolio is to maximize current income and
provide liquidity and security of principal by investing in instruments which
are issued or guaranteed as to principal and interest by the U.S. government or
any of its agencies or instrumentalities ("U.S. Government Securities"), or in
repurchase agreements backed by such instruments. As a non-fundamental policy,
each Portfolio invests 100% of its assets in U.S. Government Securities and in
repurchase agreements backed by such instruments. Each Portfolio normally may
not invest more than 5% of its total assets in the securities of any single
issuer (other than the U.S. government). Under certain conditions, however,
each Portfolio may invest up to 25% of its total assets in first-tier securities
of a single issuer for up to three days.

The investment goal of the Money Market Portfolio and the Prime Cash
Management Portfolio is to maximize current income and provide liquidity and
security of principal by investing in abroad range of short-term, high-quality
U.S. dollar-denominated debt securities ("Money Market Instruments"). At least
95% of the assets of each Portfolio will be invested in securities that have
received the highest rating assigned by any two nationally recognized
statistical rating organizations ("NRSROs") or, if only one such rating
organization has assigned a rating, such single organization. Up to 5% of each
Portfolio's assets may be invested in securities that have received ratings in
the second highest category by any two NRSROs or, if only one such rating
organization has assigned a rating, such single organization. Each Portfolio
may also acquire unrated securities determined by the advisor to be comparable
in quality to rated securities in accordance with guidelines adopted by the
Board of Trustees. Each Portfolio may invest in U.S. dollar-denominated
obligations of U.S. banks and foreign branches of U.S. banks ("Eurodollars"),
U.S. branches and agencies of foreign banks ("Yankee dollars"), and foreign
branches of foreign banks. Each Portfolio may also invest more than 25% of its
total assets in certain obligations of domestic banks and normally may not
invest more than 5% of its total assets in the securities of any single issuer
(other than the U.S. government). Under certain conditions, however, each
Portfolio may invest up to 25% of its total assets in first-tier securities of a
single issuer for up to three days.

The investment goal of the Tax-Free Money Market Portfolio and the Tax-Free
Cash Management Portfolio is to provide a high level of interest income by
investing primarily in high-quality municipal obligations that are exempt from
federal income taxes. Each Portfolio attempts to invest 100% of its assets in
securities exempt from Federal income tax (not including the alternative minimum
tax), and maintains a fundamental policy that at least 80% of its income will,
under normal market conditions, be exempt from Federal income tax, including the
Federal alternative minimum tax. Each Portfolio invests in high-quality, short-
term municipal securities but may also invest in high-quality, long-term fixed,
variable, or floating rate instruments (including tender option bonds) which
have demand features or interest rate adjustment features that result in
interest rates, maturities, and

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

The investment goal of the Pennsylvania Tax-Free Money Market Portfolio is
to maximize current income exempt from Federal and Pennsylvania state income
taxes and provide liquidity and security of principal. The Portfolio attempts
to invest 100% of its securities exempt from Federal (not including the
alternative minimum tax) and Pennsylvania state income taxes. The Portfolio has
a fundamental policy that at least 80% of its income will, under normal market
conditions, be exempt from Federal income tax, including the Federal alternative
minimum tax, and Pennsylvania state income tax. The principal issuers of these
securities may be state and local governments and agencies located in
Pennsylvania, as well as the District of Columbia, Puerto Rico and other U.S.
territories and possessions.

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

The Portfolios' advisor anticipates that the Tax-Free Money Market
Portfolio, the Tax-Free Cash Management Portfolio and the Pennsylvania Tax-Free
Money Market Portfolio will be as fully invested as is practicable in municipal
obligations. However, each Portfolio reserves the right for temporary defensive
purposes to invest without limitation in taxable Money Market Instruments.
There may be occasions when, as a result of maturities of portfolio securities
or sales of portfolio shares, or in order to meet anticipated redemption
requests, the Portfolios may hold cash which is not earning income.

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

Short-Term Treasury Portfolio

The investment goal of the Short-Term Treasury Portfolio is to provide
current income, with a secondary objective of stability of principal.

The Portfolio invests 100% of its total assets in instruments which are
issued or guaranteed by the U.S. government and thus constitute direct
obligations of the United States, and in repurchase agreements backed by such
instruments. As a non-fundamental policy, the Portfolio will invest 100% of its
total assets in U.S. Treasury bills, notes and bonds, and will limit its
investments to U.S. Treasury obligations that pay interest that is specifically
exempt from state and local taxes under federal law.

Short-Term Bond Portfolio

The investment goal of the Short-Term Bond Portfolio is to provide current
income.

The Portfolio invests primarily in investment-grade debt securities, U.S.
Government Securities, and mortgage-backed and asset-backed securities. In
addition, the Portfolio may invest in taxable municipal obligations. The
securities in which the Portfolio invests include, but are not limited to: U.S.
Government Securities; corporate obligations; mortgage-backed securities; asset-
backed securities; and Money Market Instruments. The Portfolio may invest up to
5% of its total assets in securities rated below investment grade ("junk
bonds"). Under normal market conditions, the Portfolio will invest at least 65%
of its total assets in bonds.

Intermediate Fixed Income Portfolio

The investment goal of the Intermediate Fixed Income Portfolio is to
provide current income.

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

U.S. Government Bond Portfolio

The investment goal of the U.S. Government Bond Portfolio is to provide
current income.

The securities in which the Portfolio invests include, but are not limited
to: U.S. Government Securities; mortgage-backed securities; asset-backed
securities; corporate obligations; taxable municipal obligations; and Money
Market Instruments. The Portfolio may also invest up to 5% of its total assets
in securities rated below investment grade ("junk bonds").

Under normal market conditions, the Portfolio will invest at least 65% of
the value of its total assets in U.S. Government Securities. For purposes of
this policy, the Portfolio will consider collateralized mortgage obligations
issued by U.S. government agencies or instrumentalities to be U.S. Government
Securities. In addition, under normal market conditions, the Portfolio will
invest at least 65% of its total assets in bonds. The Portfolio's remaining
assets may be invested in any of the securities listed above.

Income Portfolio

The investment goal of the Income Portfolio is to provide current income
and capital growth.

Under normal circumstances, at least 65% of the value of the Portfolio's
total assets will be invested in fixed-income securities. The Portfolio may
invest in income-producing securities of all types, including bonds, notes,
mortgage securities, government and government agency obligations, zero coupon
securities, convertible securities, foreign securities, indexed securities and
asset-backed securities. The Portfolio normally will invest

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in investment-grade debt securities (including convertible securities) and
unrated securities determined by the advisor to be of comparable quality. The
Portfolio may also invest up to 15% of its total assets in securities rated
below investment grade ("junk bonds"). Common stocks acquired through exercise
of conversion rights or warrants or acceptance of exchange or similar offers
ordinarily will not be retained by the Portfolio. An orderly disposition of
these stocks will be effected consistent with the advisor's judgment as to the
best price available.

Maryland Tax-Free Portfolio

The investment goal of the Maryland Tax-Free Portfolio is to provide high
current income exempt from federal and Maryland state and local income taxes.

Under normal circumstances, at least 65% of the value of the Portfolio's
total assets will be invested in Maryland municipal securities. In addition, as
a matter of fundamental policy, the Portfolio's assets will be invested during
periods of normal market conditions so that at least 80% of its income will not
be subject to Federal income tax, including the Federal alternative minimum
tax.

The Portfolio normally invests primarily in investment-grade debt
securities (and unrated securities determined by the advisor to be of comparable
quality), but may also invest up to 5% of its total assets in securities rated
below investment grade ("junk bonds").

If you are subject to the Federal alternative minimum tax, you should note
that the Portfolio may invest some of its assets in municipal securities issued
to finance private activities. The interest from these investments is a tax-
preference item for purposes of the tax.

The advisor normally invests the Portfolio's assets according to its
investment strategy and does not expect to invest in Federally or state taxable
obligations. However, the Portfolio reserves the right to invest without
limitation in short-term instruments, to hold a substantial amount of uninvested
cash, and to invest more than normally permitted in taxable obligations for
temporary defensive purposes.

Pennsylvania Tax-Free Portfolio

The investment goal of the Pennsylvania Tax-Free Portfolio is to provide
current income exempt from Federal and Pennsylvania state income taxes.

Under normal circumstances, at least 65% of the value of the Portfolio's
total assets will be invested in Pennsylvania municipal securities. In
addition, as a matter of fundamental

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policy, the Portfolio's assets will be invested during periods of normal market
conditions so that at least 80% of its income will not be subject to Federal
income tax, including the Federal alternative minimum tax. The Portfolio invests
primarily in investment-grade debt securities (and unrated securities determined
by the advisor to be of comparable quality), but also may invest up to 5% of its
total assets in securities rated below investment grade ("junk bonds").

Balanced Portfolio

The investment goal of the Balanced Portfolio is long-term total returns.

The Portfolio's common stock investments may include foreign and domestic
issues of larger, well-established companies, as well as medium-sized and
smaller companies. The Portfolio may invest in preferred stock and convertible
securities. Debt securities acquired by the Portfolio may include mortgage or
asset-backed securities, corporate issues, indexed securities and U.S.
Government Securities. The Portfolio normally will invest in investment-grade
debt securities (including convertible securities) and unrated securities
determined by the advisor to be of comparable quality, but may also invest up to
5% of its total assets in securities rated below investment grade ("junk
bonds"). The Portfolio maintains at least 25% of its total assets infixed-
income senior securities.

The Portfolio emphasizes long-term total return from capital appreciation
and current income. Although it is not a policy of the Portfolio to engage in
short-term trading, the advisor may dispose of securities without regard to the
length of time they are held if it believes such action will benefit the
Portfolio. Although the advisor will consider the potential for income in
selecting investments for the Portfolio, the Portfolio is generally not intended
to achieve a level of income comparable to fixed-income portfolios.

Equity Income Portfolio

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The investment goal of the Equity Income Portfolio is current income and
growth of capital.

The Portfolio seeks capital appreciation from a broadly diversified
portfolio of common stocks which, in general, have above-average dividend yields
relative to the stock market as measured by the S&P 500. Under normal
circumstances, at least 65% of the value of the Portfolio's total assets will be
invested in dividend-paying common stocks. The Portfolio may invest up to 35%
of its total assets in other types of securities, including preferred stock,
which may be convertible into common stock, and investment-grade debt securities
(including convertible debt securities) and unrated securities determined by the
advisor to be of comparable quality. The Portfolio may invest up to 5% of its
total assets in securities rated below investment grade ("junk bonds").

The advisor considers many factors when evaluating a security for
investment by the Portfolio, including the company's current financial strength
and relative value. Although the advisor will consider the potential for income
in selecting investments for the Portfolio, the Portfolio is generally not
intended to achieve a level of income comparable to fixed-income
portfolios.

Equity Index Portfolio

The investment goal of the Equity Index Portfolio is to provide investment
results that correspond to the performance of the S&P 500.

The advisor believes that the Portfolio's objective can best be achieved by
investing in the common stocks of approximately 250 to 500 of the companies
included in the S&P 500, depending upon the size of the Portfolio.

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 includes a stock in
the order of its weighting in the S&P 500, starting with the most heavily
weighted stock. Thus, the proportion of the Portfolio's assets invested in a
stock or industry closely approximates the percentage of the S&P 500 represented
by that stock or industry. Portfolio turnover is expected to be well below that
of actively managed mutual funds.

Although the Portfolio will not duplicate 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 Portfolio will attempt to achieve a correlation of at least
95%,without taking into account expenses of the Portfolio. A perfect
correlation would be indicated by a figure of 100%, which would be achieved if
the Portfolio's

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net asset value, including the value of its dividends and capital gains
distributions, increased or decreased in exact proportion to changes in the S&P
500. The Portfolio's ability to replicate the performance of the S&P 500 may be
affected by, among other things, changes in securities markets, the manner in
which Standard & Poor's calculates the S&P 500, and the amount and timing of
cash flows into and out of the Portfolio. Although cash flows into and out of
the Portfolio will affect the Portfolio's ability to replicate the S&P 500's
performance as well as its portfolio turnover rate, investment adjustments will
be made, as practicable, to account for these circumstances. The Board of
Trustees will monitor the targeted correlation of the Portfolio and, in the
event that it is not achieved, will consider alternative methods for replicating
the composition of the S&P 500.

The Portfolio may invest up to 20% of its total assets in stock index
futures contracts, options on stock indices, options on stock index futures, and
index participation contracts based on the S&P 500. The Portfolio may also
invest up to 5% of its total assets in Standard & Poor's Depositary Receipts
("SPDRs"). The Portfolio will not invest in these types of contracts and
options for speculative purposes, but rather to maintain sufficient liquidity to
meet redemption requests, to increase the level of Portfolio assets devoted to
replicating the composition of the S&P 500, and to reduce transaction
costs.

Standard & Poor's designates the stocks included in the S&P 500 on a
statistical basis. A particular stock's weighting in the S&P 500 is based on
its total market value (that is, its market price per share times the number of
shares outstanding) relative to the total market value of all stocks included in
the S&P 500. From time to time, Standard & Poor's may add or delete stocks to
or from the S&P 500. Inclusion of a particular stock in the S&P 500 does not
imply any opinion by Standard & Poor's as to its merits as an investment. "S&P
500 Index" is a registered service mark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Equity Index Portfolio.

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Blue Chip Equity Portfolio

The investment goal of the Blue Chip Equity Portfolio is capital
appreciation.

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

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

Mid-Cap Equity Portfolio

The investment goal of the Mid-Cap Equity Portfolio is long-term capital
appreciation.

The Portfolio seeks capital appreciation from a broadly diversified
portfolio of common stocks of medium-sized companies. Under normal
circumstances, at least 65% of the value of the Portfolio's total assets will be
invested in equity securities of companies with a market capitalization of $500
million to $8 billion. Companies with market capitalizations in this range are
considered "mid cap" and are represented by the Standard & Poor's Mid Cap 400
Index. As of December 31, 1999, the market capitalizations of the companies
included in the S&P Mid Cap 400 Index ranged from $___ million to $__
billion.

Assets not invested in equity securities of medium-sized companies as
described above may be invested in equity securities of larger, more established
companies or in investment-grade fixed-income securities (and unrated securities
determined by the advisor to be of comparable quality).

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Value Equity Portfolio

The investment goal of the Value Equity Portfolio is growth of principal.

The securities in which the Portfolio invests include, but are not limited
to: common stocks; convertible securities; securities of foreign issuers traded
on the New York or American Stock Exchanges or in the over-the-counter market,
including American Depositary Receipts ("ADRs"); futures and options; U.S.
Government Securities; corporate obligations; mortgage-backed securities; and
Money Market Instruments.

Under normal market conditions, the Portfolio intends to invest at least
65% of its total assets in equity securities of U.S. companies. In most market
conditions, the stocks comprising the Portfolio's assets will exhibit
traditional value characteristics, such as higher than average sales growth,
higher than average return on equity, above average free cash flow, and high
return on the company's invested capital.

Capital Growth Portfolio

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

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

Small-Cap Equity Portfolio

The investment goal of the Small-Cap Equity Portfolio is long-term capital
appreciation.

Under normal circumstances, at least 65% of the value of the Portfolio's
total assets will be invested in equity securities of companies with a market
capitalization of $1.2 billion or less at the time of investment. The advisor
will seek to identify companies with above-average growth potential or companies
experiencing an unusual or possibly non-repetitive

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development taking place in the company, i.e., a "special situation". See
"Investment Practices - Special Situations" below for more information.

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

The Portfolio spreads investment risk by limiting its holdings in any one
company or industry. The advisor may use various investment techniques to hedge
the Portfolio's risks, but there is no guarantee that these strategies will work
as intended.

International Equity Selection Portfolio

The investment goal of the International Equity Selection Portfolio is
long-term capital appreciation. The Portfolio invests primarily in shares of
other mutual funds ("underlying funds"), the portfolios of which consist
primarily of equity securities of non-U.S. issuers.

Under normal market conditions, and as an investment policy, the Portfolio
will invest at least 65% of its total assets in underlying funds that are
international equity funds. However, as an operational policy, the Portfolio
anticipates investing substantially all of its assets in international equity
funds. International equity funds are those which invest primarily in equity
securities of companies located in three or more countries outside the United
States. The advisor will attempt to identify and select a varied portfolio of
international equity funds which presents the greatest long-term capital growth
potential based on the advisor's analysis of many factors. The selection of
international equity funds may include international equity funds that invest
primarily in emerging markets or focus their investments on geographic regions.
The selection of underlying funds involves an initial peer group screening
process which assesses fund investment style, investment objectives and
policies, and fund management. Rankings of certain independent rating services
are also considered. Potential underlying funds which, in the advisor's view,
meet these criteria will then be subject to further evaluation of investment
policies, historical total return, size, volatility, manager tenure and
operating expenses over various time periods. Also, on a macroeconomic

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level, a fund's geographical diversification is also considered. The underlying
funds may be subject to more, less, the same or different investment
restrictions than the Portfolio, and the advisor will consider these
similarities and differences when making investment decisions.

The Investment Company Act of 1940, as amended (the "1940 Act"), currently
provides that the Portfolio may not purchase the securities of an underlying
fund if, as a result, the Portfolio together with any of its affiliates would
own more than 3% of the total outstanding securities of that underlying fund.
Thus, the Portfolio's ability to invest in shares of certain underlying funds
could be restricted and the adviser may have to select alternative investments.
By investing in the Portfolio, investors bear not only the Portfolio's total
operating expenses, but the operating expenses of the underlying funds as well.
An investor in the Portfolio should recognize that investments may be made
directly in underlying funds and that, by investing in underlying funds
indirectly through the Portfolio, investors will bear not only a proportionate
share of the expenses of the Portfolio, but also, indirectly, similar expenses
of the underlying funds, including distribution expenses and sales charges.
Finally, investors should recognize that, as a result of the Portfolio's
policies of investing in other mutual funds, investors may receive taxable
capital gains distributions to a greater extent than would be the case if an
investment were made directly in the underlying funds.

Assets not invested in international equity funds may be invested in
underlying funds other than international equity funds, such as global funds
(funds that invest primarily in securities of issuers throughout the world,
including the United States), individual country funds, and domestic equity and
debt funds to the extent consistent with the Portfolio's goal of long-term
capital appreciation. As described in more detail below, the Portfolio may also
make direct investments in the securities held by these underlying funds,
including, but not limited to: domestic and foreign equity securities (such as
equity or debt securities of foreign issuers traded on the New York or American
Stock Exchanges or in the over-the-counter market in the form of sponsored or
unsponsored ADRs, Global Depositary Receipts ("GDRs"), and European Depositary
Receipts ("EDRs") (collectively, "Depositary Receipts"); fixed income
securities, which include preferred stock, bonds, notes or other debt securities
of U.S. and foreign companies or governments; short-term debt securities,
including U.S. Treasury bills and other short-term U.S. government securities,
commercial paper, certificates of deposit and bankers' acceptances; warrants;
and unit investment trusts. The Portfolio and underlying funds may also invest
in variable rate demand notes, invest in restricted securities, invest up to 15%
of their net assets in illiquid securities, engage in repurchase agreements,
when-issued and delayed delivery transactions and forward commitments, invest in
foreign currency exchange transactions (including forward foreign currency
exchange transactions), enter into futures contracts and foreign currency
futures contracts and trade in options on foreign currencies, stock index and
financial futures contracts, portfolio securities and stock indices.

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The Portfolio and underlying funds may also lend their portfolio securities, and
borrow for investment purposes.

Underlying funds may be authorized to invest up to 100% of their respective
assets in the securities of foreign issuers and engage in foreign currency
transactions (including forward foreign currency exchange transactions) with
respect to these investments; invest primarily in either the securities of
emerging market countries or in the securities of a single country; invest 35%
or more of their respective assets in high yield securities (i.e., "junk
bonds"); invest in warrants; sell securities short; engage in leveraged
borrowing; and enter into interest rate swaps, currency swaps, and other types
of swap agreements such as caps, collars and floors. The Portfolio will not
concentrate its assets (i.e., invest more than 25% of its total assets) in any
industry or in underlying funds which concentrate their assets in any industry.
However, under certain unusual circumstances, the Portfolio could be indirectly
concentrated in one or more industries. If this were to occur, the advisor would
consider whether to maintain or change its investments in underlying funds.

Although the Portfolio will normally invest in open-end, management
investment companies, or "mutual funds," it also may invest in closed-end
management investment companies and/or unit investment trusts. Unlike open-end
funds that offer and sell their shares at net asset value plus any applicable
sales charge, the shares of closed-end funds and unit investment trusts may
trade at a market value that represents a premium, discount or spread to net
asset value.

International Equity Portfolio

The investment goal of the International Equity Portfolio is long-term
capital appreciation. The Portfolio invests primarily in equity securities of
non-U.S. issuers.

The Portfolio invests primarily in equity securities of companies located
in some or all of the following countries: Argentina, Austria, Australia,
Belgium, Brazil, Canada, Croatia (indirect investment only), Czech Republic,
Denmark, Finland, France, Germany, Hong Kong, India, Indonesia, Israel, Italy,
Japan, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Poland,
Portugal, Russia, Singapore, Slovakia, South Africa, South Korea, Spain, Sweden,
Switzerland, Taiwan, Thailand, Turkey and the United Kingdom. This list of
countries may change from time to time.

Under normal market conditions, the Portfolio will invest at least 65% of
its total assets in issuers located in not less than three different countries
(other than the U.S.). In addition, the Portfolio will normally invest at least
65% of its total assets in common and preferred stocks, and warrants to acquire
such stocks. The Portfolio typically invests in equity securities listed on
recognized foreign securities exchanges, but it may hold securities which are
not so

-15-
<PAGE>

listed. The Portfolio may invest in debt obligations convertible into equity
securities, and in non-convertible debt securities when its advisor believes
these non-convertible securities present favorable opportunities for capital
appreciation.

Emerging Markets Equity Portfolio

The investment goal of the Emerging Markets Equity Portfolio is long-
term capital appreciation. The Portfolio invests primarily in equity securities
of issuers located in emerging markets.

The Portfolio seeks its investment goal by providing investors with broadly
diversified, direct access to equity markets in those developing nations
anticipated to rank among the world's top-performing economies in the future.
An emerging or developing market is broadly defined as one with low-to-middle
range per capita income. A country is considered to have an "emerging market"
if it has a relatively low gross national product per capita compared to the
world's major economies, and the potential for rapid economic growth. The
Portfolio's advisor uses the classification system developed by the World Bank
to determine the potential universe of emerging markets for investments, but
limits Portfolio investments to those countries it believes have potential for
significant growth and development. The Portfolio typically invests in
securities listed on recognized securities exchanges, but it may hold securities
that are listed on other exchanges or that are not listed. The Portfolio
currently expects to invest in issues located in some or all of the following
emerging or developing market countries: Argentina, Brazil, Chile, Colombia,
Croatia (indirect investment only), Czech Republic, Greece, Hong Kong, Hungary,
India, Indonesia, Israel, Jordan, Lebanon, Malaysia, Mexico, Morocco, Pakistan,
Peru, the Philippines, Poland, Portugal, Russia, Singapore, Slovakia, South
Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey, Venezuela and
Zimbabwe. The list of countries in which the Portfolio invests may change from
time to time.

The Portfolio typically invests in equity securities listed on recognized
foreign securities exchanges, but the Portfolio may also hold securities that
are not so listed. The Portfolio may invest in debt obligations convertible
into equity securities, and in non-convertible debt securities when its advisor
believes these non-convertible securities present favorable opportunities for
capital appreciation. Under normal market conditions, at least 65% of the
Portfolio's total assets will be invested in securities of issuers located in at
least three different countries (other than the U.S.). Additionally, at least
65% of the Portfolio's total assets will normally be invested in common and
preferred stocks, and warrants to acquire such stocks.

INVESTMENT POLICIES AND LIMITATIONS

The following policies and limitations supplement those set forth in

-16-
<PAGE>

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

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

<TABLE>
<CAPTION>
Fundamental Policies: Portfolios to which the
Policy Applies:
<S> <C>
The Portfolio may not issue senior securities, except as All Portfolios
permitted under the 1940 Act.
</TABLE>

-17-
<PAGE>

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

The Portfolio may not with respect to 75% of its total assets, All Portfolios (other than
purchase the securities of any issuer (other than securities Maryland Tax-Free Portfolio
issued or guaranteed by the U.S. government or any of its and Pennsylvania Tax-Free
agencies or instrumentalities) if, as a result, (a) more than Portfolio)/1/
5% of the Portfolio's total assets would be invested in the
securities of that issuer, or (b) the Portfolio would hold more
than 10% of the outstanding voting securities of that issuer.
</TABLE>

____________________________

/1/ For the Maryland Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio,
the Portfolios' advisor identifies the issuer of a security depending on its
terms and conditions. In identifying the issuer, the advisor will consider the
entity or entities responsible for payment and repayment of principal and the
source of such payments; the way in which assets and revenues of an issuing
political subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.

-18-
<PAGE>

<TABLE>
<CAPTION>
Fundamental Policies: Portfolios to which the
Policy Applies:
<S> <C>
The Portfolio may not underwrite securities issued by others, Money Market Fund
except to the extent that the Portfolio may be considered an Portfolios, Short-Term
underwriter within the meaning of the Securities Act of 1933 Treasury Portfolio,
in the disposition of portfolio securities. Short-Term Bond Portfolio,
Intermediate Fixed Income
Portfolio, U.S. Government
Bond Portfolio, Income
Portfolio, Balanced
Portfolio, Equity Income
Portfolio, Value Equity
Portfolio, Capital Growth
Portfolio, International
Equity Selection Portfolio,
International Equity
Portfolio and Emerging
Markets Equity Portfolio

The Portfolios may not underwrite securities issued by others, Maryland Tax-Free Portfolio,
except to the extent that the Portfolio may be considered an Pennsylvania Tax-Free
underwriter within the meaning of the Securities Act of 1933 Portfolio, Equity Index
in the disposition of restricted securities. Portfolio, Blue Chip Equity
Portfolio, Mid-Cap Equity
Portfolio and Small-Cap
Equity Portfolio

The Portfolio may not purchase the securities of any issuer International Equity
(other than securities issued or guaranteed by the U.S. Selection Portfolio
government or any of its agencies or instrumentalities) if, as
a result, more than 25% of the Portfolio's total assets would
be invested in the securities of companies whose principal
business activities are in the same industry, except that the
Portfolio will invest in other investment companies.
</TABLE>

-19-
<PAGE>

<TABLE>
<CAPTION>
Fundamental Policies: Portfolios to which the
Policy Applies:
<S> <C>
The Portfolios may not purchase the securities of any issuer All Portfolios (other than
(other than securities issued or guaranteed by the U.S. Money Market Portfolio,
government or any of its agencies or instrumentalities) if, as Tax-Free Money Market
a result, more than 25% of the Portfolio's total assets would Portfolio, Pennsylvania
be invested in the securities of companies whose principal
business activities are in the same industry.
</TABLE>

-20-
<PAGE>

<TABLE>
<S> <C>
- Tax-Free Money Market
Portfolio, Prime Cash
Management Portfolio and
Tax-Free Cash Management
Portfolio)/2/

Money Market Portfolio and
Prime Cash Management
The Portfolio may not purchase the securities of any issuer Portfolio
(other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as
a result, more than 25% of the Portfolio's total assets would
be invested in the securities of companies whose principal
business
</TABLE>

_____________________________________
/2/ For the Pennsylvania Tax-Free Money Market Portfolio, Maryland
Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio, the Portfolios' advisor
identifies the issuer of a security depending on its terms and conditions. In
identifying the issuer, the advisor will consider the entity or entities
responsible for payment and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and whether a
governmental body is guaranteeing the security.

-21-
<PAGE>

<TABLE>
<S> <C>
activities are in the same industry, except that the
Portfolio may invest 25% or more of its assets in obligations
of domestic banks.

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

The Portfolios may not purchase or sell commodities unless Money Market Fund Portfolios
acquired as a result of ownership of securities or other
instruments.
</TABLE>

-22-
<PAGE>

<TABLE>
<S> <C>
Fundamental Policies: Portfolios to which the
Policy Applies:

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

[The Portfolio may engage in transactions involving financial [Value Equity Portfolio,
and stock index futures contracts or options on such futures International Equity
contracts, and the International Equity Selection Portfolio, Selection Portfolio,
International Equity Portfolio and Emerging Markets Equity International Equity
Portfolio may engage in foreign currency transactions, invest Portfolio and Emerging
in options and futures on foreign currencies, and purchase or Markets Equity Portfolio]
sell forward contracts with respect to foreign currencies and
related options.]

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

The Following Investment Limitations Are Not Fundamental and May be Changed
Without Shareholder Approval:

<TABLE>
<S> <C>
Non-Fundamental Policies: Portfolios to which the
Policy Applies:

The Portfolio does All Portfolios
</TABLE>

-23-
<PAGE>

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

<TABLE>
<S> <C>
Non-Fundamental Policies: Portfolios to which the
Policy Applies:

The Portfolio does not currently intend to purchase a security U.S. Government Money Market
(other than a security issued or guaranteed by the U.S. Portfolio, Money Market
government or any of its agencies or instrumentalities) if, as Portfolio, U.S. Government
a result, more than 5% of a Portfolio's total assets would be Cash Management Portfolio
invested in the securities of a single issuer; provided that and Prime Cash Management
the Portfolio may invest up to 25% of its total assets in the Portfolio
first tier securities of a single issuer for up to three
business days.

The Portfolio, in order to meet Federal tax requirements for Pennsylvania Tax-Free Money
qualification as a "regulated investment company," limits its Market Portfolio, Maryland
investments so that at the close of each quarter of its Tax-Free Portfolio and
taxable year: (a) with regard to at least 50% of total Pennsylvania Tax-Free
assets, no more than 5% of total assets are invested in the Portfolio/3/
securities of a single issuer, and (b) no more than 25% of
total assets are invested in the securities of a single
issuer. Limitations (a) and (b) do not apply to "Government
securities" as defined for Federal tax purposes.
</TABLE>

___________________________
/3/ For the Pennsylvania Tax-Free Money Market Portfolio, Maryland Tax-Free
Portfolio and Pennsylvania Tax-Free Portfolio, the Portfolios' advisor
identifies the issuer of a security depending on its terms and conditions. In
identifying the issuer, the adviser will consider the entity or entities
responsible for payment and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and whether a
governmental body is guaranteeing the security.

-24-
<PAGE>

<TABLE>
<S> <C>
The Portfolio does not currently intend, with respect to International Equity
securities comprising 75% of the value of its total assets, to Selection Portfolio
invest more than 5% in securities of any one issuer (other
than cash, cash items, securities of investment companies or
securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities) if,
as a result, more than 5% of the value of its total assets
would be invested in the securities of that issuer, and will
not acquire more than 10% of the outstanding voting securities
of any one issuer.

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

Non-Fundamental Policies: Portfolios to which the
Policy Applies:

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

The Portfolio does not currently intend to engage in repurchase U.S. Treasury Money Market
agreements or make loans, but this limitation does not apply Portfolio, Tax-Free Money
to purchases of debt securities. Market Portfolio,
Pennsylvania Tax-Free Money
Market Portfolio, U.S.
Treasury Cash Management
Portfolio and Tax-Free Cash
Management Portfolio
</TABLE>

-25-
<PAGE>

<TABLE>
<S> <C>
The Portfolio does not currently intend to purchase securities All Portfolios
of other investment companies, except to the extent permitted
by the 1940 Act.

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

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

-26-
<PAGE>

<TABLE>
<S> <C>
Non-Fundamental Policies: Portfolios to which the
Policy Applies:

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

-27-
<PAGE>

INVESTMENT PRACTICES

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

Depository Receipts

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

Delayed Delivery Transactions

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

When purchasing securities on a delayed-delivery or when-issued basis, the
Portfolio assumes the rights and risks of ownership, including the risk of price
and yield fluctuations. Because the Portfolio is not required to pay for
securities until the delivery date, these risks are in addition to the risks
associated with the Portfolio's other investments. If the Portfolio remains
substantially fully invested at a time when delayed-delivery or when-issued
purchases

-28-
<PAGE>

are outstanding, such purchases may result in a form of leverage.
When delayed-delivery or when-issued purchases are outstanding, the Portfolio
will set aside appropriate liquid assets in a segregated custodial account to
cover its purchase obligations. When the Portfolio has sold a security on a
delayed-delivery basis, the Portfolio does not participate in further gains or
losses with respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the Portfolio could miss
a favorable price or yield opportunity, or could suffer a loss.

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

Emerging Markets Considerations

The risks of investing in foreign securities are increased if the
Portfolio's investments are in emerging markets. An emerging market is broadly
defined as a market with low- to middle-range per capita income. The advisor
uses the World Bank's classification system to identify the potential universe
of emerging markets. However, the advisor limits the Portfolio's investments to
those countries it believes have potential for significant growth and
development.

Investments in emerging markets involve special risks not present in the
U.S. or in mature foreign markets, such as Germany and the United Kingdom. For
example, settlement of securities trades may be subject to extended delays so
that the Portfolio may not receive securities purchased or the proceeds of sales
of securities on a timely basis. Emerging markets generally have smaller, less
developed trading markets and exchanges, and the Portfolio may not be able to
dispose of those securities quickly and at reasonable price affecting the
Portfolio's liquidity. These markets may also experience greater volatility,
which can materially affect the value of the Portfolio and its net asset value.
Emerging market countries may have relatively unstable governments. In such
environments, the risk of nationalization of business or of prohibitions on
repatriations of assets is greater than in more stable, developed political and
economic circumstances. The economy of an emerging market country may be
predominately based on only a few industries, and it may be highly vulnerable to
changes in local or global trade conditions. The legal and accounting systems,
and mechanisms for protecting property rights, may not be as well developed as
those in more mature economies. In addition, some emerging markets countries
have restrictions on foreign ownership that may limit or eliminated the
Portfolio's opportunity to acquire desirable securities.

Emerging Markets Sovereign Debt

-29-
<PAGE>

Investments in sovereign debt securities of emerging market governments
involve special risks. The issuer of the debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal or interest when due in accordance with the terms of the debt
especially if such debt is denominated in a currency other than that
government's home currency. Periods of economic uncertainty may result in the
volatility of market prices of sovereign debt, and in turn the Portfolio's net
asset value, to a greater extent than the volatility inherent in domestic debt
securities.

A sovereign debtor's willingness or ability to repay principal, especially
if such debt is denominated in a currency other than that government's home
currency, and pay interest in a timely manner may be affected by, among other
factors, its cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward international lenders and the political
constraints to which a sovereign debtor may be subject. Governments of emerging
markets could default on their sovereign debt. Such sovereign debtors also may
be dependent on expected disbursements from foreign governments, multilateral
agencies and other entities abroad to reduce principal and interest arrearages
on their debt. The commitment on the part of these governments, agencies and
others to make such disbursements may be conditioned on a sovereign debtor's
implementation of economic reforms and/or economic performance and the timely
service of such debtor's obligations. Failure to implement such reforms,
achieve such levels of economic performance or repay principal or interest when
due, could result in the cancellation of such third parties' commitments to lend
funds to the sovereign debtor, which may further impair such debtor's ability or
willingness timely to service its debt.

If reliable market quotations are not available, the Portfolio values such
securities in accordance with procedures established by the Board of Trustees.
The advisor's judgment and credit analysis plays a greater role in valuing
sovereign debt obligations than for securities where external sources for
quotations and last sale information are available.

European Monetary Union and the Euro

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

-30-
<PAGE>

Federally Taxable Obligations

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

Should the Portfolio invest in taxable obligations, it would purchase
securities that, in the advisor's judgment, are of high quality. This would
include obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, obligations of domestic banks and repurchase agreements. The
Portfolios' standards for high-quality taxable obligations are essentially the
same as those described by Moody's in rating corporate obligations within its
two highest ratings of Prime-1 and Prime-2, and those described by S&P in rating
corporate obligations within its two highest ratings of A-1 and A-2. The
Portfolios may also acquire unrated securities determined by the advisor to be
of comparable quality in accordance with guidelines adopted by the Board of
Trustees.

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

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

-31-
<PAGE>

Foreign Currency Exchange Transactions

The International Equity Selection Portfolio, International Equity
Portfolio and Emerging Markets Equity Portfolio may conduct foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market, or by entering into forward contracts
to purchase or sell foreign currencies at a future date and price (i.e., a
"forward foreign currency contract" or "forward contract"). The Portfolio will
convert currency on a spot basis from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer. Forward contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The parties to a forward
contract may agree to offset or terminate the contract before maturity, or may
hold the contract to maturity and complete the contemplated currency exchange.

The International Equity Selection Portfolio, International Equity
Portfolio and Emerging Markets Equity Portfolio may use currency forward
contracts for any purpose consistent with its respective investment objectives.
The Small-Cap Equity Portfolio may invest in currency forward contracts to
manage exchange rate risks and to facilitate transactions in foreign securities.
The following discussion summarizes some, but not all, of the possible currency
management strategies involving forward contracts that could be used by the
Portfolios. The Portfolios may also use options and futures contracts relating
to foreign currencies for the same purposes.

When the Portfolio agrees to buy or sell a security denominated in a
foreign currency, it may desire to "lock in" the U.S. dollar price of the
security. By entering into a forward contract for the purchase or sale, for a
fixed amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, the Portfolio will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment on the underlying
security is made or received. The Portfolio may also enter into forward
contracts to purchase or sell a foreign currency in anticipation of future
purchases or sales of securities denominated in foreign currency, even if the
specific investments have not yet been selected by the advisor.

The Portfolio may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For example,
if the Portfolio owned securities denominated in French francs, it could enter
into a forward contract to sell francs in return for U.S. dollars to hedge
against possible declines in the value of the French franc. Such a hedge
(sometimes referred to as a "position hedge") will tend to offset both positive
and

-32-
<PAGE>

negative currency fluctuations, but will not offset changes in security
values caused by other factors. The Portfolio could also hedge the position by
selling another currency expected to perform similarly to the franc, for
example, by entering into a forward contract to sell Deutsche marks in exchange
for U.S. dollars. This type of strategy, sometimes known as a "proxy hedge",
may offer advantages in terms of cost, yield or efficiency, but generally will
not hedge currency exposure as effectively as a simple hedge into U.S. dollars.
Proxy hedges may result in losses to the Portfolio if the currency used to hedge
does not perform similarly to the currency in which the hedged securities are
denominated.

The Portfolio may enter into forward contracts to shift their investment
exposure from one currency into another currency that is expected to perform
better relative to the U.S. dollar. For example, if the Portfolio held
investments denominated in Deutsche marks, it could enter into forward contracts
to sell Deutsche marks and purchase Swiss francs. This type of strategy,
sometimes known as a "cross-hedge", will tend to reduce or eliminate exposure to
the currency that is sold, and increase exposure to the currency that is
purchased, much as if the Portfolio had sold a security denominated in one
currency and purchased an equivalent security denominated in another. Cross-
hedges protect against losses resulting from a decline in the hedged currency,
but will cause the Portfolio to assume the risk of fluctuations in the value of
the currency it purchases.

Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover forward
contracts. As required by SEC guidelines, the Portfolio will segregate assets
to cover forward contracts, if any, whose purpose is essentially speculative.
The Portfolio will not segregate assets to cover forward contracts entered into
for hedging purposes, including settlement hedges, position hedges, and proxy
hedges.

Successful use of forward contracts will depend on the advisor's skill in
analyzing and predicting currency values. Forward contracts may substantially
change the Portfolio's investment exposure to changes in currency exchange
rates, and could result in losses to the Portfolio if currencies do not perform
as the advisor anticipates. For example, if a currency's value rose at a time
when the advisor had hedged a Portfolio by selling that currency in exchange for
dollars, the Portfolio would be unable to participate in the currency's
appreciation. If the advisor hedges currency exposure through proxy hedges, the
Portfolio could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly, if the
advisor increases a Portfolio's exposure to a foreign currency, and that
currency's value declines, the Portfolio will realize a loss. There is no
assurance that the advisor's use of forward contracts will be advantageous to
the Portfolio or that they will hedge at an appropriate time.

Foreign Investments

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Foreign investments can involve significant risks in addition to the risks
inherent in U.S. investments. The Small-Cap Equity Portfolio, International
Equity Selection Portfolio, International Equity Portfolio and Emerging Markets
Equity Portfolio may invest in foreign investments. The Small-Cap Equity
Portfolio may invest up to 35% of its total assets in foreign securities of all
types. The International Equity Selection Portfolio primarily invests in
underlying funds that are international equity funds investing in foreign
securities. The International Equity Portfolio primarily invests in equity
securities of issuers located in any country other than the U.S. The Emerging
Markets Equity Portfolio primarily invests in equity securities of issuers
located in emerging markets. The value of securities denominated in or indexed
to foreign currencies, and of dividends and interest from such securities, can
change significantly when foreign currencies strengthen or weaken relative to
the U.S. dollar. Foreign securities markets generally have less trading volume
and less liquidity than U.S. markets, and prices on some foreign markets can be
highly volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be more
difficult to obtain reliable information regarding an issuer's financial
condition and operations. In addition, the costs of foreign investing,
including withholding taxes, brokerage commissions, and custodial costs, are
generally higher than for U.S. investments.

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

Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility
of default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic or social instability, military action or unrest, or adverse diplomatic
developments. There is no assurance that the Portfolios' advisor will be able
to anticipate these potential events or counter their effects.

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

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

Illiquid Investments

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

Restricted Securities

Restricted securities are securities that generally can only be sold in
privately negotiated transactions, pursuant to an exemption from registration
under the Securities Act of 1933, or in

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a registered public offering. Where registration is required, the Portfolio may
be obligated to pay all or part of the registration expense and a considerable
period may elapse between the time it decides to seek registration and the time
it may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the Portfolio might obtain a less favorable price than prevailed when it decided
to seek registration of the security.

Indexed Securities

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

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

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<PAGE>

Loans and Other Direct Debt Instruments

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

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

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

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

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Portfolio might incur certain costs and delays in realizing payment on the loan
or loan participation and could suffer a loss of principal or interest.

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

Lower-Quality Municipal Securities

The Maryland Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio may
invest a portion of their assets in lower-quality municipal securities as
described in the prospectus. While the markets for Maryland and Pennsylvania
municipal securities are considered to be adequate, adverse publicity and
changing investor perceptions may affect the ability of outside pricing services
used by the Portfolios to value their portfolio securities, and a Portfolio's
ability to dispose of lower-quality bonds. The outside pricing services are
monitored by a Portfolios' advisor to determine whether the services are
furnishing prices that accurately reflect fair value. The impact of changing
investor perceptions may be especially pronounced in markets where municipal
securities are thinly traded.

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

Lower-Rated Debt Securities

Lower-rated debt securities (i.e., securities rated Ba1 or lower by Moody's
or BB+ or lower by S&P, or having comparable ratings by other NRSROs) may have
poor protection with respect to the payment of interest and repayment of
principal. These securities are often considered to be speculative and involve
greater risk of

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<PAGE>

loss or price changes due to changes in the issuer's capacity to pay. The market
prices of lower-rated debt securities may fluctuate more than those of higher-
rated debt securities and may decline significantly in periods of general
economic difficulty, which may follow periods of rising interest rates.

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

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

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

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

Municipal Lease Obligations

Municipal leases and participation interests therein, which may take the
form of a lease, an installment purchase, or a

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<PAGE>

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

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

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

Market Disruption Risk

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

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

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<PAGE>

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

Portfolios' Rights as Shareholders

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

Real-Estate-Related Instruments

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

Refunding Contracts

Refunding obligations require the issuer to sell and the Portfolio to buy
refunded municipal obligations at a stated price and yield on a settlement date
that may be several months or years in the future. The Portfolio generally will
not be obligated to pay the full purchase price if it fails to perform under a
refunding contract. Instead, refunding contracts

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<PAGE>

generally provide for payment of liquidated damages to the issuer (currently 15%
to 20% of the purchase price). The Portfolio may secure its obligations under a
refunding contract by depositing collateral or a letter of credit equal to the
liquidated damages provisions of the refunding contract. When required by SEC
guidelines, the Portfolio will place liquid assets in a segregated custodial
account equal in amount to its obligations under refunding contracts.

Repurchase Agreements

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

Reverse Repurchase Agreements

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

Securities Lending

The Board of Trustees has authorized securities lending for the following
Portfolios: Short-Term Treasury Portfolio, Short-Term Bond Portfolio,
Intermediate Fixed Income Portfolio, U.S. Government Bond Portfolio and Income
Portfolio. These Portfolios may lend securities to parties such as broker-
dealers or institutional investors. Securities lending allows

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<PAGE>

the Portfolio to retain ownership of the securities loaned and, at the same
time, to earn additional income. Since there may be delays in the recovery of
loaned securities, or even a loss of rights in collateral supplied should the
borrower fail financially, loans will be made only to parties whose
creditworthiness has been reviewed and found satisfactory by the Portfolio's
advisor.

It is the current view of the SEC that the Portfolios may engage in loan
transactions only under the following conditions: (1) the Portfolio must
receive 100% collateral in the form of cash or cash equivalents (e.g., U.S.
Treasury bills or notes) from the borrower; (2) the borrower must increase the
collateral whenever the market value of the securities loaned (determined on a
daily basis) rises above the value of the collateral; (3) after giving notice,
the Portfolio must be able to terminate the loan at any time; (4) the Portfolio
must receive reasonable interest on the loan or a flat fee from the borrower, as
well as amounts equivalent to any dividends, interest, or other distributions on
the securities loaned and to any increase in market value; (5) the Portfolio may
pay only reasonable custodian fees in connection with the loan; and (6) the
Portfolio must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with the
borrower. Cash received through loan transactions may be invested in any
security in which the Portfolio is authorized to invest. Investing this cash
subjects that investment, as well as the security loaned, to market forces
(i.e., capital appreciation or depreciation).

Sovereign Debt Obligations

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

The International Equity Selection Portfolio may invest in underlying funds
that invest in Sovereign debt obligations.

Special Situations

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<PAGE>

The Small-Cap Equity Portfolio may invest in companies experiencing an
unusual or possibly non-repetitive development or "special situation." An
unusual or possibly non-repetitive development or special situation may involve
one or more of the following characteristics:

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

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

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

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

Standard & Poor's Depositary Receipts ("SPDRs")

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

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

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<PAGE>

The price of SPDRs is derived and based upon the securities held by the
UIT. Accordingly, the level of risk involved in the purchase or sale of a SPDR
is similar to the risk involved in the purchase or sale of a traditional common
stock, with the exception that the pricing mechanism for SPDRs is based on a
basket of stocks. Disruptions in the markets for the securities underlying
SPDRs purchased or sold by a Portfolio could result in losses on SPDRs. Trading
in SPDRs involves risks similar to those risks, described below under "Hedging
Strategies" relating to options, involved in the writing of options on
securities.

Standby Commitments

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

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

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

Swap Agreements

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

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<PAGE>

agreement if its advisor determines it is consistent with the Portfolio's
investment objective and policies.

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

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

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

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

Tender Option Bonds

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

Variable or Floating Rate Instruments

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

Variable or Floating Rate Demand Obligations

The Money Market Fund Portfolios (other than the U.S. Treasury Money Market
Portfolio and U.S. Treasury Cash Management Portfolio) may invest in variable or
floating rate demand obligations (VRDOs/FRDOs). These obligations are tax-
exempt obligations that bear variable or floating interest rates and carry
rights that permit

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holders to demand payment of the unpaid principal balance plus accrued interest
from the issuers or certain financial intermediaries. Floating rate obligations
have interest rates that change whenever there is a change in a designated base
rate while variable rate obligations provide for a specified periodic adjustment
in the interest rate. These formulas are designed to result in a market value
for the VRDO or FRDO that approximates its par value.

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

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

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

Warrants

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

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volatile investments than the underlying securities and may offer greater
potential for capital appreciation as well as capital loss.

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

Hedging Strategies

Futures Transactions

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

Futures Contracts

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

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

Futures Margin Payments

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

Purchasing Put and Call Options Relating to Securities or Futures Contracts

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

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

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

Writing Put And Call Options

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

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

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

Combined Positions

A Portfolio may purchase and write options in combination with each other,
or in combination with futures contracts or forward contracts, to adjust the
risk and return characteristics of the overall position. For example, a
Portfolio may purchase a put option and write a call option on the same
underlying instrument, in order to construct a combined position whose risk and
return characteristics are similar to selling a futures contract. Another
possible combined position would involve writing a call option at one strike
price and buying a call option at a lower strike price, in order to reduce the
risk of the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.

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Correlation of Price Changes

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

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

Liquidity of Options and Futures Contracts

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

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result, the Portfolio's access to other assets held to cover its options or
futures positions could also be impaired.

OTC Options

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

Options and Futures Contracts Relating to Foreign Currencies

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

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

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Asset Coverage For Futures and Options Positions

The Portfolios will comply with guidelines established by the SEC with
respect to coverage of options and futures strategies by mutual funds, and if
the guidelines so require, will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option position is
outstanding, unless they are replaced with other appropriate liquid assets. As
a result, there is a possibility that segregation of a large percentage of a
Portfolio's assets could impede portfolio management or the Portfolio's ability
to meet redemption requests or other current obligations.

Short Sales

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

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

Health Care Industry

The health care industry is subject to regulatory action by a number of
private and governmental agencies, including Federal, state, and local
governmental agencies. A major source of revenues for the health care industry
is payments from Medicare and Medicaid programs. As a result, the industry is
sensitive to legislative changes and reductions in governmental spending for
such programs. Numerous other factors may affect the industry, such as general
and local economic conditions; demands for services; expenses (including
malpractice insurance premiums); and competition among health care providers.
In the future, the following elements may adversely affect health care facility
operations: adoption of legislation proposing a national health insurance
program; medical and technological advances that dramatically alter the need for
health services or the way in which such services are delivered; and efforts by
employers, insurers, and governmental agencies to reduce the costs of health
insurance and health care services.

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Transportation

Transportation debt may be issued to finance the construction of airports,
toll roads, and highways. Airport bonds are dependent on the general stability
of the airline industry and stability of a specific carrier which uses the
airport as a hub. Air traffic generally follows broader economic trends and is
also affected by the price and availability of fuel. Toll-road bonds are also
affected by the cost and availability of fuel as well as toll levels, the
presence of competing roads and the general economic health of an area. Fuel
costs and availability also affect other transportation-related services, as do
the presence of alternate forms of transportation, such as public
transportation.

SPECIAL CONSIDERATIONS

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

Maryland Tax-Free Portfolio

According to 1990 Census reports, Maryland's population in that year was
4,780,800, reflecting an increase of 13.4% from the 1980 Census. Maryland's
population in 1998 was 5,134,808. Maryland's population is concentrated in
urban areas: the eleven counties and Baltimore City located in the Baltimore-
Washington Corridor contain 50.4% of the State's land area and 87.2% of its
population. The estimated 1990 population for the Baltimore Primary
Metropolitan Statistical Area was 2,382,172 and for the Maryland portion of the
Washington Primary Metropolitan Statistical Area, 1,788,314. Overall,
Maryland's population per square mile in 1990 was 489.1.

Per capita personal income in Maryland, which had grown at rates no lower
than 6.4% for the period from 1972 to 1989, grew at a rate of 4.7% in 1990 and
only 1.7% in 1991. Subsequently, per capita personal income has grown at annual
rates of between 2.9% and 5.0% in each of the years 1992 through 1997.
Unemployment in Maryland peaked in 1992 at 6.7% in 1992, before dropping to 6.2%
in 1993. The unemployment rate in Maryland has been between 5.1% and 4.5% in
each of the years 1994 through 1998. In April 1999, the Maryland unemployment
rate was 3.4%.

Since 1991, retail sales in Maryland have grown in each year. Most
recently, retail sales in Maryland have grown at annual rates of 2.9% in 1996,
4.7% in 1997 and 3.1% in 1998.

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Services (including mining), wholesale and retail trade, government and
manufacturing (primarily printing and publishing, food and kindred products,
instruments and related products, industrial machinery, electronic equipment and
chemical and allied products) are the leading areas of employment in the State
of Maryland. In contrast to the nation as a whole, more people in Maryland are
employed in services than in manufacturing (33.3% versus 7.8% in 1997).

In April 1998, the General Assembly approved a $16.6 billion fiscal year
1999 budget. This budget includes, among other things, (i) sufficient funds to
meet all specific statutory funding requirements; (ii) sufficient funds to meet
the actuarial recommended contributions for the State's seven retirement
systems, determined on a basis consistent with prior years' practice; (iii)
sufficient general funds to enable the State to maintain the State property tax
rate at $.21 per $100 of assessed valuation; (iv) $3.3 billion in aid to local
governments (reflecting a $169.1 million increase over fiscal year 1998); and
(v) $75.5 million in general fund deficiency appropriations, which include $25
million for computer programming modifications to address the "year 2000"
problem. The fiscal year 1999 budget also incorporates the first full year of a
five-year phase-in of the 10% reduction in personal income taxes, accelerated by
legislation enacted by the 1998 General Assembly, estimated to result in a
reduction of revenues of approximately $300 million in fiscal year 1999.
Legislation was also enacted making the State's existing earned income tax
credit refundable, with an estimated reduction in fiscal 1999 revenues of $17.5
million. The reduction in fiscal 1999 revenues resulting from the reductions in
income taxes enacted by the 1998 General Assembly will be mitigated by a
transfer of $185.2 million to the General Fund from the Revenue Stabilization
Account of the State Reserve Fund. The 1999 budget includes $50 million for the
funding to Baltimore City Public Schools related to a consent decree and $61.5
million to provide funding for a statewide public education proposal targeted
primarily to at-risk students. The 1999 budget also includes $76 million ($29
million in general funds and $47 million in federal funds) to provide medical
coverage to low income children and pregnant women currently without coverage.

The State's fiscal year 1999 capital budget is to be funded with $430
million general obligation bonds (net of $13 million of prior year
authorizations to be deauthorized), $156.7 million general funds appropriated in
the operating budget, $1,244.5 million in special and federal funds (of which
$572 million is appropriated to the Department of Transportation) and $46.5
million in revenue bonds. In the fiscal year 1999 general obligation bond
program, $21.8 million is reserved as an allotment for legislative initiatives,
private hospitals and independent colleges and universities.

Based on the 1999 budget, the State estimates that the General Fund surplus
on a budgetary basis at June 30, 1999 will approximately $249.5 million, in
addition to which the State projects that there will be $635.8 million in the
Revenue Stabilization Account of the State Reserve Fund.

In April 1999, the General Assembly approved a $17.6 billion fiscal year
2000 budget. This budget includes, among other things, (i) sufficient funds to
meet all specific statutory funding requirements; (ii) sufficient funds to meet
the actuarial recommended contributions for

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the State's seven retirement systems, determined on a basis consistent with
prior years' practice; and (iii) sufficient general funds to enable the State to
maintain the State property tax rate at $.21 per $100 of assessed valuation. The
fiscal year 2000 budget also contains funds needed to continue management and
correction of the State's "year 2000" problem. Legislation was passed creating
the Cigarette Restitution Fund designed to utilize payments to the State under
the November 1998 settlement between the State and the tobacco industry. It is
estimated that the General Fund balance on a budgetary basis at June 30, 2001,
will be approximately $12.7 million. In addition, the balance in the Revenue
Stabilization Fund of the State Reserve Fund is estimated to be $578.3 million
at June 30, 2001.

The State of Maryland and its various political subdivisions issue a number
of different kinds of municipal obligations, including general obligation bonds
supported by tax collections, revenue bonds payable from certain identified tax
levies or revenue streams, conduit revenue bonds payable from the repayment of
certain loans to authorized entities such as hospitals and universities, and
certificates of participation in tax-exempt municipal leases.

The State of Maryland issues general obligation bonds, which are payable
from ad valorem property taxes. The State Constitution prohibits the
contracting of State debt unless the debt is authorized by law levying an annual
tax or taxes sufficient to pay the debt service within 15 years and prohibiting
the repeal of the tax or taxes or their use for another purpose until the debt
has been paid. The State also enters into lease-purchase agreements, in which
participation interests are often sold publicly as individual securities.

As of March 1999, the State's general obligation bonds were rated "Aaa" by
Moody's, "AAA" by S&P, and "AAA" by Fitch IBCA ("Fitch").

The Maryland Department of Transportation issues Consolidated
Transportation Bonds, which are payable out of specific excise taxes, motor
vehicle taxes, and corporate income taxes, and from the general revenues of the
Department. Issued to finance highway, port, transit, rail or aviation
facilities, these bonds are rated "Aa" by Moody's, "AA" by S&P, and "AA" by
Fitch. The Maryland Transportation Authority, a unit of the Department, issues
its own revenue bonds for transportation facilities, which are payable from
certain highway, bridge and tunnel tolls. These bonds are rated "A+" by S&P.

Other State agencies which issue municipal obligations include the Maryland
Stadium Authority, which has issued bonds payable from sports facility and other
lease revenues and certain lottery revenues and convention center lease revenue
bonds; the Maryland Water Quality Financing Administration, which issues bonds
to provide loans to local governments or private entities for wastewater control
and drinking water projects; the Community Development Administration of the
Department of Housing and Community Development, which issues mortgage revenue
bonds for housing; the Maryland Environmental Service, which issues bonds
secured by the revenues from its various water supply, wastewater treatment and
waste management projects; and the various public institutions of higher
education in Maryland (which include the University System of Maryland, Morgan
State University and St. Mary's College of

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Maryland) which issue their own revenue bonds. None of these bonds constitute
debts or pledges of the full faith and credit of the State of Maryland. The
issuers of these obligations are subject to various economic risks and
uncertainties, and the credit quality of the securities issued by them may vary
considerably from the quality of obligations backed by the full faith and credit
of the State.

In addition, the Maryland Health and Higher Educational Facilities
Authority, the Maryland Industrial Development Financing Authority, the
Northeast Maryland Waste Disposal Authority, the Maryland Economic Development
Corporation and the Maryland Energy Financing Administration issue conduit
revenue bonds, the proceeds of which are lent to borrowers eligible under
relevant state and federal law. Conduit revenue bonds of these issuers are
payable solely from the loan payments made by borrowers and other financing
participants, and their credit quality varies with the financial strengths of
these entities.

Maryland has 24 geographical subdivisions, composed of 23 counties plus the
independent City of Baltimore, which functions much like a county. Some of the
counties and the City of Baltimore operate pursuant to the provisions of codes
of their own adoption, while others operate pursuant to State-approved charters
and State statutes.

Maryland counties and municipalities and the City of Baltimore receive most
of their revenues from ad valorem taxes on real and personal property,
individual income taxes, transfer taxes, miscellaneous taxes and aid from the
State. Their expenditures include public safety, public works, health, public
welfare, court and correctional services, education, and general governmental
costs.

The economic factors affecting the State, as discussed above, also have
affected the counties, municipalities and the City of Baltimore. In addition,
reductions in State aid caused by State budget deficits have caused the local
governments to trim expenditures and, in some cases, raise taxes.

According to recent available ratings, general obligation bonds of
Montgomery County (abutting Washington, D.C.) are rated "Aaa" by Moody's and
"AAA" by S&P. Prince George's County, also in the Washington, D.C. suburbs,
issues general obligation bonds rated "Aa3" by Moody's and "AA-" by S&P, while
Baltimore County, a separate political subdivision surrounding the City of
Baltimore, issues general obligation bonds rated "Aaa" by Moody's and "AAA" by
S&P and Anne Arundel County issues general obligation bonds which are rated
"AA+" by both Fitch and S&P and "Aa2" by Moody's. The City of Baltimore's
general obligation bonds are rated "A1" by Moody's and "A" by S&P. The other
counties in Maryland all have general obligation bond ratings of "A" or better,
except for Allegany County and Garrett County, the bonds of which are rated
"Baa2" and "Baa3", respectively, by Moody's and Kent County and Somerset County
which are not rated. The Washington Suburban Sanitary District, a bi-county
agency providing water and sewerage services in Montgomery and Prince George's
counties, issues general obligation bonds rated "Aa1" by Moody's and "AA" by
S&P. Additionally, some of the large municipal corporations in Maryland (such
as the cities of

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Rockville, Annapolis and Frederick) have issued general obligation bonds. There
can be no assurance that these ratings will continue.

Many of Maryland's counties and the City of Baltimore have established
subsidiary agencies with bond issuing powers, such as housing authorities,
parking revenue authorities, and industrial development authorities. In
addition, all Maryland municipalities have the authority under State law to
issue conduit revenue bonds. These entities are subject to various economic
risks and uncertainties and the credit quality of the securities issued by them
may vary considerably from the credit quality of obligations backed by the full
the faith and credit of the State.

Pennsylvania Tax-Free Money Market Portfolio and Pennsylvania Tax-free
Portfolio

General

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

In 1998, the population of Pennsylvania was 12.0 million people. According
to the U.S. Department of Commerce, Bureau of the Census, Pennsylvania's
population experienced a slight increase from the 1989 estimate of 11.87
million. Pennsylvania has a high proportion of persons 65 years of age or
older. The Commonwealth is highly urbanized, with 79% of the 1990 census
population residing in metropolitan statistical areas. The cities of
Philadelphia and Pittsburgh, the Commonwealth's largest metropolitan statistical
areas, together comprise approximately 44% of the Commonwealth's total
population.

Pennsylvania's average annual unemployment rate remained below the national
average between 1986 and 1990. Slower economic growth caused the rate to rise
to 6.9% in 1991 and 7.5% in 1992. The resumption of faster economic growth
resulted in a decrease in the Commonwealth's unemployment rate to 7.1% in 1993.
In 1994 and 1995, Pennsylvania's annual average unemployment rate was below the
overall rate in the Mid-Atlantic region, but slightly higher than in the United
States as a whole. Seasonally adjusted data for March 1999, the most recent
month for which data is available, shows an unemployment rate of 4.4%, which is
the same rate for the United States.

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Financial Accounting

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

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

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

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

Revenues and Expenditures

Pennsylvania's Governmental Fund Types receive over 57% of their revenues
from taxes levied by the Commonwealth. Interest earnings, licenses and fees,
lottery ticket sales, liquor store profits, miscellaneous revenues,
augmentations and federal government grants supply the balance of the receipts
of these funds. Revenues not required to be deposited in another fund are
deposited in the General Fund. The major tax sources for the General Fund are
the 6% sales and use tax (33.9% of General Fund revenues in fiscal 1998), the
2.8%

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personal income tax (34.4% of General Fund revenues in fiscal 1998) and the
9.99% corporate net income tax (9.4% of General Fund revenues in fiscal 1998).
Tax and fee proceeds relating to motor fuels and vehicles are constitutionally
dedicated to highway purposes and are deposited into the Motor License Fund. The
major sources of revenue for the Motor License Fund include the liquid fuels
tax, the oil company franchise tax, aviation taxes and revenues from fees levied
on heavy trucks. These revenues are restricted to the repair and construction of
highway bridges and aviation programs. Lottery ticket sales revenues are
deposited in the State Lottery Fund and are reserved by statute for programs to
benefit senior citizens.

Pennsylvania's major expenditures include funding for education ($7.5
billion of fiscal 1998 expenditures, the projected $7.85 billion of the fiscal
1999 budget and the proposed almost $8.05 billion of the fiscal 2000 budget) and
public health and human services ($13.5 billion of fiscal 1998 expenditures, the
projected $15.1 billion of the fiscal 1999 budget and the proposed increase of
the fiscal 2000 $15.2 billion budget).

Governmental Fund Types: Financial Condition/results of Operations (GAAP
BASIS)

Assets in the Commonwealth's governmental fund types rose during fiscal
1998 by 16.1 percent to $7,635.6 million. Liabilities for the governmental fund
types during fiscal 1998 increased by 4.6 percent to $3,843.8 million. A larger
gain in assets than in liabilities during fiscal 1998 for governmental fund
types produced a 30.7 percent increase in equity and other credits at June 30,
1998. Equity and other credits at the end of fiscal 1998 totaled $3,791.8
million, up from $2,900.9 million at the end of fiscal 1997. The five-year
period ending with fiscal 1998 was a time of economic growth with modest growth
rates at the beginning of the period and faster increased during the most recent
years. Throughout the period inflation has remained relatively low, helping to
restrain expenditure growth. Favorable economic conditions have helped total
revenues and other sources rise at an annual average 4.2 percent rate during the
five-year period. The growth rate for taxes of 4.3 percent almost matched the
total revenue rate. License and fee revenues expanded at a 7.9 percent rate,
largely because of various motor vehicle fees effective for fiscal 1998. Other
revenues, mostly charges for sales and services and investment income, increased
an average 17.6 percent during the period. Expenditure and other uses during
the fiscal 1994 through fiscal 1998 period rose at a 3.8 percent average rate,
led by a 10.2 percent average increase for protection of person and property
costs. Though still high, the growth rate for this program is declining as the
increased costs to acquire, staff and operate expanded prison facilities becomes
part of the expenditure base. Public health and welfare programs, the largest
single category of expenditures, have experienced a 5.5 percent average growth
rate for expenditure, slightly above the average for total expenditures. A
departmental restructuring in fiscal 1996 resulted in a re-categorization of
expenditures from conservation of natural resources to other categories and is
responsible for the decline of expenditures in that category beginning in fiscal
1996.

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General Fund: Financial Conditions/results of Operations

Five-year Overview (GAAP BASIS)

For the five-year period from fiscal 1994 through fiscal 1998, total
revenues and other sources rose at a 5.0% average annual rate while total
expenditures and other uses grew by 5.0% annually. Tax revenues from this same
period increased by an average of 4.2% per year. The largest rate of growth for
any single revenue source during this period came from intergovernmental
revenues, which increased by 6.7% per year. As indicated above, this growth was
largely due to an accounting change that made food stamp coupon revenue from the
Federal government an item of intergovernmental revenue to the Commonwealth.

Expenditures and other uses rose at a slightly higher percentage than
revenues during the period from fiscal 1994 through fiscal 1998, at a rate of
5.0% per year. Program costs for protection of persons and property increased
at an average rate of 11.8% per year, due to the high amounts expended to
acquire, staff and operate expanded prison facilities for Pennsylvania's
increased inmate population. Public health and welfare costs increased at an
average annual rate of 5.8% during this period, the second-highest rate of
percentage increase among Commonwealth programs. The amount and growth of these
costs has been restrained by efforts to control costs for various social
programs and by generally favorable economic conditions throughout the
Commonwealth.

The fund balance at June 30, 1998 totaled $1,958.9 million, an increase of
$594 million over the $1,364.9 million balance at June 30, 1997. The fund
balance has a $1,144 million unreserved-designated component, of which almost
one-half is represented by the Tax Stabilization Reserve Fund. The increase in
the fund balance at June 30, 1998 also includes a return of an unreserved-
undesignated balance, of $497.6 million is the largest balance recorded since
fiscal 1984.

Fiscal 1994 Budget (GAAP BASIS)

The fund balance of the General Fund increased by $194.0 million due
largely to an increased reserve for encumbrances and an increase in other
designated funds. The fund balance for June 30, 1994 was restated for the
fiscal 1995 financial statements. That restatement totals $116.7 million to
recognize previously unreported revenues and expenditures for fiscal 1994. The
fund balance for June 30, 1994, as restated, was $776.5 million and the
unreserved-undesignated balance totaled $79.1 million. A continuing recovery of
the Commonwealth's financial condition from the effects of the national economic
recession of 1990 and 1991 is demonstrated by this increase in the balance and a
return to a positive unreserved-undesignated balance. For the third consecutive
fiscal year the increase in the

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unreserved-undesignated balance exceeded the increase recorded in the budgetary
basis unappropriated surplus during the fiscal year.

Fiscal 1995 Budget (GAAP BASIS)

Revenues and other sources totaled $23,771.6 million, an increase of
$1,135.0 million (0.5%) over the prior fiscal year. The largest increase was
$817.9 million in taxes which represents a 5.6% increase over taxes in the prior
fiscal year. Expenditures and other uses rose by $1,364.1 million to $23,821.4
million, an increase over the prior fiscal year of 6.1%. Consequently, an
operating deficit of $49.8 million was recorded for the fiscal year and led to a
fund balance decline to $688.3 million at June 30, 1995. Two items
predominately contributed to the fund balance decline. First, a more
comprehensive procedure was used for fiscal 1995 to compute the liabilities for
certain public welfare programs leading to an increase for the year-end
accruals. Second, a change to the methodology to calculate the year-end accrual
for corporate tax payables increased the tax refund liability by $72 million for
the 1995 fiscal year when compared to the previous fiscal year.

Fiscal 1996 Budget (GAAP BASIS)

Revenues and other sources totaled $25,850.3 million, an 8.0% increase from
the previous fiscal year. The fund balance for fiscal 1996 was drawn down $53.1
million from the balance at the end of fiscal 1995 to $635.2 million.
Expenditures and other uses exceeded revenues and other sources by $28.0
million. Consequently, the unreserved fund balance declined by $61.1 million,
reducing the balance to $381.8 million at the end of fiscal 1996. Total revenues
and other sources increased by 8.7%, led by a 24.2% increase in
intergovernmental revenues due to the aforementioned accounting change to count
Federal food-stamp coupon revenue as income to the Commonwealth. Expenditures
and other uses increased by 8.6% for the fiscal year, including a 24.8% increase
for protection of persons and property program costs due to higher correctional
program costs and re-categorization of expenditures. Costs for the conservation
of natural resources programs declined as a result of the abolishment of one
department, the creation of new departments in its place and the re-
classification of expenditures for natural resources programs of several
organizations and/or appropriations. The consolidated programs were absorbed
within existing organizations. Savings of $5.2 million are anticipated to result
from these consolidations and eliminations.

Fiscal 1997 Budget (GAAP BASIS)

Assets for fiscal 1997 increased $563.4 million and liabilities declined
$166.3 million to produce a $729.7 million increase in the fund balance at June
30, 1997. The fund balance increase during fiscal 1997 has brought a
restoration of an undesignated-unreserved balance, which totaled $187.3 million
in fiscal 1997. Total revenues and other sources rose 3.5% for

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fiscal 1997. An increase of 5.5% in tax revenue from an improving state economy
was partially offset by a $175.2 million decline in intergovernmental revenues.
Expenditures and other uses increased by 1.0% for the fiscal year led, again, by
costs associated with the program for the protection of persons and property.
These prison construction- and staffing-related costs increased by 4.7% in
fiscal 1997, well below the average 17.1% annual increase that occurred over the
four previous fiscal years. General government program costs for fiscal 1997
declined by 14.3% from fiscal 1996, largely due to a reduction in estimated
expenditures for maintaining Pennsylvania's self-insured worker's compensation
program.

Fiscal 1998 Budget (GAAP Basis)

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

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

Adopted Fiscal 1999 Budget (Budgetary Basis)

The budget for fiscal 1999 was enacted in April 1998 at which time the
official revenue estimate for the 1999 fiscal year was established at $18,456.6
million. Enactment of tax legislation in November 198 reduced estimated
revenues by a net $2.4 million. Only Commonwealth funds are included in the
official revenue estimate. The official revenue estimate is based on an
economic forecast for national gross domestic product, on a year-to-year basis,
to slow from an estimated annualized 3.9 percent rate in the fourth quarter of
1997 to a projected 1.8 percent annualized growth rate by the second quarter of
1999. The forecast of slowing economic activity is based on the expectation
that consumers will reduce their pace of spending, particularly on motor
vehicles, housing and other durable goods. Business is also expected to trim
its spending on fixed investments. Foreign demand for domestic goods is
expected to decline in reaction to economic difficulties in Asia and Latin
America, while an economic recovery in Europe is expected to proceed slowly.
The underlying growth rate, excluding any effect of scheduled or proposed tax
changes, for the General Fund fiscal 1999 official revenue estimate is 3.0
percent over actual fiscal 1998 revenues. When adjusted to

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include the estimated effect of enacted tax changes, fiscal 1999 Commonwealth
revenues are projected to increase by 1.6 percent over actual Commonwealth
revenues for fiscal 1998.

Tax reductions enacted with the 1999 fiscal year budget totaled an
estimated $241.0 million for fiscal 1999. The major components of the enacted
tax reductions and their estimated fiscal 1999 cost are: (i) reduce the capital
stock and franchise tax rate from 12.75 mills to 11.99 mills ($72.5 million);
(ii) increase the eligibility income limit for qualification for personal income
tax forgiveness ($57.1 million); (iii) eliminate personal income tax on gains
from the sale of an individual's residence ($30.0 million); (iv) extend the time
period from three to ten years over which net operating loss deductions may be
taken for the corporate net income tax ($17.8); (v) expand various sales tax
exemption ($40.4 million); and (vi) reduce various other miscellaneous items
($23.2 million). The major tax changes were enacted with January 1, 1998
effective dates. Consequently, the cost of these changes during fiscal 1999 may
be above the expected annualized cost of the changes.

Appropriations enacted for fiscal 1999 when the budget was adopted in April
1998 were 4.1 percent ($713.2 million) above the appropriations enacted for
fiscal 1998 (including supplemental appropriations). Major increase in
expenditures budgeted for fiscal 1999 at that time included: (i) $249.5 million
in direct support of local school district education costs (local school
districts will also benefit from an estimated $104 million of reduced
contributions by school districts to their worker's retirement costs from a
reduced employer contribution rate); (ii) $60.4 million for higher education,
including scholarship grants; (iii) $56.5 million to fund the correctional
system, including $21.0 million to operate a new correctional facility; (iv)
$121.1 million for long-term care medical assistance costs; (v) $14.4 million
for technology and Year 2000 investments; (vi) $55.9 million to fund the first
year's cost of a July 1, 1998 annuitant cost of living increase for state and
school district employees; and (v) $20 million to replace bond funding for
equipment loans for volunteer fire and rescue companies. The balance of the
increase is spread over many departments and program operations. In May 1999,
along with the adoption of the fiscal 2000 budget, supplemental fiscal 1999
appropriations totaling $357.8 million were enacted. Of this amount, $200
million was appropriated for general obligations debt service that will be
available for possible use to retire outstanding debt; $59.0 million to accrue
the fourth quarterly Commonwealth contribution to the School Employees'
Retirement System; and $90.0 million is proposed for the Public Welfare
department to pay additional medical assistance costs anticipated to occur in
the current fiscal year. With these additional amounts, total appropriation for
fiscal 1998 represent a 6.2 percent increase over fiscal 1998 appropriations.
An anticipated $180 million of appropriation lapses and anticipated additional
revenues provide the funding for the additional appropriations. Appropriation
lapses in fiscal 1998 and 1997 were $161.8 million and $200.6 million,
respectively.

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Reserves for tax refunds for fiscal 1999 total $631.0 million, a $26.2
million increase over the budget as enacted. This amount includes $33.1 million
of tax refunds anticipated from the enacted fiscal 1999 tax changes and included
in the estimated cost of those changes. Reserves for tax refunds for fiscal
1999 are $279.0 million below the reserve established for fiscal 1998. The
fiscal 1998 amount includes a one-time addition intended to fund all fiscal 1998
tax refund liabilities, including that portion to be paid during fiscal 1999.
Without the necessity to pay fiscal 1998 tax refund liabilities from fiscal 1999
reserves, the fiscal 1999 reserve need only be in an amount equal to the
estimated fiscal 1999 estimate for tax refund liabilities.

Current revenue estimates for fiscal 1999 anticipated $722 million of
receipts above the official estimate used in the enactment of the fiscal 1999
budget. As of the fiscal year through April 1999, revenues are $547 million
over the official estimate, principally due to receipts from the sales tax and
the personal income tax. The higher revenues, if maintained during the
remainder of the fiscal year, will more than offset the planned draw down of the
$265.4 million beginning unappropriated balance. Using the most recent fiscal
1999 estimates for revenues and expenditures, the fiscal year-end unappropriated
surplus is projected to rise by $364.3 million to $629.7 million, before
transfers to the Tax Stabilization Reserve Fund. The transfer to the Tax
Stabilization Reserve Fund for fiscal 1999 is currently estimated at $244.5
million, including a $150 million one-time transfer authorized by the general
assembly in May 1999. With this transfer, the Tax Stabilization Reserve Fund
will total approximately $932 million and represent 4.9% of General Fund
revenues.

Fiscal 2000 Budget (Budgetary Basis)

The General Fund budget for the 1999-2000 fiscal year was approved by the
General Assembly in May 1999. The adopted budget includes estimated spending of
$19,103.8 million and estimated revenues (net of estimated tax refunds and
enacted tax changes) of $18,718.5 million. Funds to cover the $342.1 million
difference between estimated revenues and projected spending will be obtained
from a draw down of the projected fiscal 1999 year-end balance. The level of
proposed spending represents an increase of 3.8 percent over the revised
spending authorized for fiscal 1999 of $18,360.3 million. Enacted tax changes
effective for fiscal 2000 total a net reduction of $380.2 million for the
General Fund.

The estimate of Commonwealth revenues for fiscal 1999 is based on an
economic forecast for real gross domestic product to grow at a 1.4 percent rate
from the second quarter of 1999 to the second quarter of 2000. Growth of real
gross domestic product is expected to be restrained by a slowing of the rate of
consumer spending to a level consistent with personal income gains and by
smaller gains in business investment in response to falling capacity utilization
and profits. Slowing economic growth is expected to cause the unemployment rate
to rise through the fiscal year but inflation is expected to remain quite
moderate. Trends for

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the Pennsylvania economy are expected to maintain their close association with
national economic trends. Personal income growth is anticipated to remain
slightly below that of the U.S. while the Pennsylvania unemployment rate is
anticipated to be very close to the national rate.

Commonwealth Debt

Current constitutional provisions permit Pennsylvania to issue the
following types of debt: (i) debt to suppress insurrection or rehabilitate areas
affected by disaster, (ii) electorate approved debt, (iii) debt for capital
projects subject to an aggregate debt limit of 1.75 times the annual average tax
revenues of the preceding five fiscal years, and (iv) tax anticipation notes
payable in the fiscal year of issuance. All debt except tax anticipation notes
must be amortized in substantial and regular amounts.

General obligation debt totaled $4,724.5 million at June 30, 1998, a
decrease of $70.6 million from June 30, 1997. Over the 10-year period ended
June 30, 1998, total outstanding general obligation debt increased at an annual
rate of 0.1%. For the most recent five years, total outstanding general
obligation debt decreased at an annual rate of 1.3%. All outstanding general
obligation bonds of the Commonwealth are rated AA by S & P's, Aa3 by Moody's and
AA by Fitch. The ratings reflect only the views of the rating agencies.

Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes which must mature within
the fiscal year of issuance. The principal amount issued, when added to that
already outstanding, may not exceed in aggregate 20% of the revenues estimated
to accrue to the appropriate fund in the fiscal year. The Commonwealth is not
permitted to fund deficits between fiscal years with any form of debt. All
year-end deficit balances must be fielded within the succeeding fiscal year's
budget. Currently, the Commonwealth has no tax anticipation notes outstanding.
The fiscal 1999 budget includes the issuance of $560 million of tax anticipation
notes. The Commonwealth has no plans to issue tax anticipation notes for fiscal
1999.

Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years. Currently, $60 million of bond anticipation notes are authorized to be
issued in the form of commercial paper notes. As of April 30, 1999, $21.4
million was issued and outstanding.

State-related Obligations

Certain state-created agencies have statutory authorization to incur debt
for which no legislation providing for state appropriations to pay debt service
thereon is required. The debt

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of these agencies is supported by assets of, or revenues derived from, the
various projects financed and the debt of such agencies is not an obligation of
Pennsylvania although some of the agencies are indirectly dependent on
Commonwealth appropriations. In addition, Pennsylvania may choose to take action
to financially assist these organizations. The following agencies had debt
currently outstanding as of June 30, 1998: Delaware River Joint Toll Bridge
Commission ($51.4 million), Delaware River Port Authority ($504.1 million),
Pennsylvania Economic Development Financing Authority ($1,106.4 million),
Pennsylvania Energy Development Authority ($43.1 million), Pennsylvania Higher
Education Assistance Agency ($1,633.8 million), Pennsylvania Higher Educational
Facilities Authority ($3,057.6 million), Pennsylvania Industrial Development
Authority ($394.5 million), Pennsylvania Infrastructure Investment Authority
($196.4 million), Pennsylvania Turnpike Commission ($1,127.9 million),
Philadelphia Regional Port Authority ($59.5 million), and the State Public
School Building Authority ($343.3 million). In addition, the Governor is
statutorily required to place in the budget of the Commonwealth an amount
sufficient make up any deficiency in the capital reserve fund created for, or to
avoid default on, bonds issued by the Pennsylvania Housing Finance Agency
($2,716.4 million of revenue bonds outstanding as of June 30, 1998), and an
amount of funds sufficient to alleviate any deficiency that may arise in the
debt service reserve fund for bonds issued by The Hospitals and Higher Education
Facilities Authority of Philadelphia ($1.1 million of the loan principal was
outstanding as of June 30, 1998). The budget as finally adopted by the
legislation may or may not include the amounts requested by the Governor.

Litigation

Certain litigation is pending against the Commonwealth that could adversely
affect the ability of the Commonwealth to pay debt service on its obligations,
including suits relating to the following matters: (a) approximately 3,500
suits are pending against the Commonwealth pursuant to the General Assembly's
1978 approval of a limited waiver of sovereign immunity which permits recovery
of damages for any loss up to $250,000 per person and $1,000,000 per accident
($27.0 million has been appropriated from the Motor License Fund in fiscal
1998); (b) the ACLU filed suit in April 1990 in federal court demanding
additional funding for child welfare services (no available estimates of
potential liability), the Commonwealth then sought dismissal based on, among
other things, the settlement in a similar Commonwealth court action that
provided for more funding in fiscal 1991 as well as a commitment to pay to
counties $30.0 million over five years (In January 1992, the U.S. District
Court, per Judge Kelly, denied the ACLU's motion for class certification,
following which the Commonwealth filed a motion for summary judgment on most of
the counts in the ACLU's complaints. After the filing of the motion for summary
judgment, the ACLU filed a renewed motion to certify sub-classes of plaintiffs.
In December of 1994, the U.S. Court of Appeals for the Third Circuit reversed
Judge Kelly's ruling, finding that he erred in refusing to certify the class.
Consistent with the Third Circuit's ruling, the district court recently
certified the class, and the parties have

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resumed discovery. In July 1998, the plaintiffs entered into a settlement
agreement with the City of Philadelphia and related parties and submitted the
agreement to the district court for approval. The district court has
preliminarily approved the settlement. Recently, the remaining parties,
including the Commonwealth, have agreed to settle the claims made against them.
The Commonwealth has agreed to pay $100,000 to settle plaintiffs' $1.4 million
claim for attorneys' fees and to take other actions in exchange for a full and
final release and dismissal of the case against the Commonwealth parties. The
settlement was approved by the district court on February 1, 1999, and dismissed
the case.); (c) in 1987, the Supreme Court of Pennsylvania held that the
statutory scheme for county funding of the judicial system was in conflict with
the Pennsylvania Constitution but stayed judgment pending enactment by the
legislature of funding consistent with the opinion (In response to an action in
mandamus seeking to compel the Commonwealth to comply with the 1987 decision, on
July 26, 1996, the Supreme Court appointed retired Justice Montemuro as special
master to devise a plan and submit it for implementation by January 1, 1998. On
January 28, 1997, the Supreme Court announced the establishment of a tripartite
committee, including representatives of the Commonwealth Executive and
Legislative Departments and Justice Montemuro, to develop an implementation
plan. On July 26, 1997, Justice Montemuro filed an interim report wherein he
recommended a transition to state funding of a unified judicial system in four
phases, during each of which specified court employees would transfer into the
Commonwealth payroll system. Justice Montemuro recommended implementation of the
system effective July 1, 1998, with completion of the first phase early in the
next century. Objections to the report were due by September 1, 1997. Although
the General Assembly is yet to enact legislation implementing the Supreme
Court's decision, the Governor has proposed an appropriation of $15.6 million to
implement Phase I of Justice Montemuro's report as part of his proposed fiscal
1999 budget.); (d) several banks have filed suit against the Commonwealth
contesting the constitutionality of a 1989 law imposing a bank shares tax on
banking institutions (Pursuant to a Settlement Agreement dated as of April 2,
1995, the Commonwealth agreed to enter a credit in favor of one plaintiff bank
in the amount of $4,100,000 in settlement of the constitutional and non-
constitutional issues including interest. Pursuant to a separate Settlement
Agreement dated as of April 21, 1995, the Commonwealth settled with the
intervening banks, referred to as "New Banks." As part of the settlement, the
Commonwealth agreed neither to assess nor attempt to recoup any New Bank tax
credits which had been granted or taken by any of the intervening banks. Certain
other banks have filed petitions in the same matter that are currently pending
with the Commonwealth Court, and one of these banks proceeded forward on behalf
of the other banks to litigate the same issues involved in the Settlement
Agreements. A panel of the Commonwealth Court, by a decision dated January 8,
1998, found no constitutional violations by the Commonwealth. Royal Bank filed
exceptions. On July 30, 1998, the Commonwealth Court, en banc, denied those
exceptions. Royal Bank has appealed to the Pennsylvania Supreme Court and
briefing has been completed. The Court has not schedule oral argument.); (f)
litigation has been filed in both state and federal court by an association of
rural and small schools and several individual school districts and parents

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<PAGE>

challenging the constitutionality of the Commonwealth's system for funding local
school districts (The federal case has been stayed pending resolution of the
state case. The state case is assigned to Judge Pellegrini. Judge Pellegrini
heard oral argument on September 8, 1997 and has taken the case under
advisement. After a lengthy trail, Judge Dan Pellegrini on July 9, 1998, issued
an opinion and decree nisi dismissing the petitioners' claim in its entirely.
Judge Pellegrini held that Pennsylvania's system for funding public school is
constitutional under both the education clause and the equal protection clause
of the Pennsylvania Constitution. On July 20, 1998, the petitioners filed a
timely motion for post-trial relief, taking exception of Judge Pellegrini's
findings of fact that conclusions of law, and again asking Commonwealth Court to
declare Pennsylvania' public school funding system to be unconstitutional. Also,
the petitioners on July 21, 1998, filed an application asking the Supreme Court
of Pennsylvania to assume extraordinary, plenary jurisdiction over the case to
decide one legal issue - whether the petitioners' constitutional claims are
justiciable in the courts of the Commonwealth. The petitioners have asked the
court to consider the issue in conjunction with a separate appeal in another
case, Marrero v. Commonwealth of Pennsylvania, involving the same provisions of
the Constitution and a similar issue of justiciability. On September 2, 1998,
the Supreme Court granted the petitioners' application and directed the filing
of briefs. The respondents asked the Supreme Court to clarify its assumption of
jurisdiction. Specifically, the respondents asked the Court to state expressly
that it will consider only the issue of justiciability, as requested in the
petitioners' application and not other issues presented in petitioners' motion
for post-trial relief pending in the Commonwealth Court. The Supreme Court
denied the respondents' motion and, therefore, the parties have addressed in
their briefs all of the issues presented in the petitioners' motion for post-
trial relief. The Supreme Court has indicated that it will not hear oral
argument in the case but will decide the petitioners' motion based on the briefs
alone.); (g) on November 3, 1995, the Commonwealth and the Governor, along with
the Mayor and City of Philadelphia, were joined as additional respondents in an
enforcement action commenced in Commonwealth Court in 1973 against the School
District of Philadelphia, to remedy unintentional conditions of segregation in
the Philadelphia public schools. The Governor and Commonwealth were joined in
the remedial phase of the proceeding to determine their liability, if any, to
pay additional costs necessary to remedy the unlawful conditions of segregation
found to exist in Philadelphia public schools. On February 28, 1996, the School
District of Philadelphia and certain public interest intervenors each filed
third-party actions against the Commonwealth to require the Commonwealth to
supply the funding necessary to fully comply with the remedial orders of the
Commonwealth Court. Following denial of the Commonwealth's preliminary
objections seeking dismissal of the claims against it, the Commonwealth asserted
numerous defenses and filed a cross-claim against the City of Philadelphia
claiming that sole liability rests with the City or, in the alternative, that
the Commonwealth has a right of indemnity or contribution against the City if
liability exists (Trial commenced on May 30, 1996 in the Commonwealth Court, but
the Supreme Court of Pennsylvania assumed extraordinary plenary jurisdiction on
July 3, 1996 for a resolution of the case before Judge Smith. On August 20,
1996, Judge Smith issued an opinion and order and

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<PAGE>

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

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<PAGE>

Philadelphia

Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist Philadelphia in
remedying fiscal emergencies was enacted by the General Assembly and approved by
the Governor in June 1991. PICA is designed to provide assistance through the
issuance of funding debt and to make factual findings and recommendations to the
assisted city concerning its budgetary and fiscal affairs. At this time,
Philadelphia is operating under a five-year fiscal plan approved by PICA on June
9, 1998.

To date, PICA has issued $2,371.7 million of its Special Tax Revenue Bonds.
This financial assistance has included the refunding of certain city general
obligation bonds, funding of capital projects and the liquidation of the
Cumulative General Fund balance deficit of $224.9 million as of June 30, 1992.
The audited General Fund balance of the city as of June 30, 1998 showed a
surplus of approximately $169.2 million.

No further bonds are to be issued by PICA for the purpose of financing a
capital project or deficit as the authority for such bond sales expired December
31, 1994. PICA's authority to issue debt for the purpose of financing a cash
flow deficit expires on December 31, 1996.

PORTFOLIO TRANSACTIONS

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

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

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<PAGE>

For each Portfolio, the advisor (or subadvisor) places all orders for the
purchase and sale of Portfolio securities and buys and sells securities for the
Portfolio through a number of brokers and dealers.

It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research, statistical, and quotation services from broker-dealers
that execute Portfolio transactions for the clients of such advisers. Consistent
with this practice, a Portfolio's advisor (or subadvisor) may receive research,
statistical, and quotation services from broker-dealers with which it places the
Portfolio's portfolio transactions. These services, which in some cases may also
be purchased for cash, include such matters as general economic and security
market reviews, industry and company reviews, evaluations of securities, and
recommendations as to the purchase and sale of securities. Some of these
services are of value to the advisor (or subadvisor) and its affiliates in
advising various of their clients (including the Portfolios), although not all
of these services are necessarily useful and of value in managing the
Portfolios. The fee paid by a Portfolio to the advisor is not reduced because
the advisor (or subadvisor) and its affiliates receive such services.

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

Certain investments may be appropriate for a Portfolio and for other
clients advised by the advisor (or subadvisor). Investment decisions for a
Portfolio and other clients are made with a view to achieving their respective
investment objectives and after consideration of such factors as their current
holdings, availability of cash for investment, and the size of their investments
generally. A particular security may be bought or sold for only one client or in
different amounts and at different times for more than one but fewer than all
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the security. In addition, purchases
or sales of the same security may be made for two or more clients of the advisor
(or subadvisor) on the same day. In each of these

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<PAGE>

situations, the transactions will be allocated among the clients in a manner
considered by the advisor (or subadvisor) to be equitable to each. In some
cases, this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a Portfolio. Purchase and sale orders for a
Portfolio may be combined with those of other clients in the interest of
achieving the most favorable execution for the Portfolio.

For the fiscal year ended April 30, 1997, the Balanced Portfolio, Capital
Growth Portfolio, Small-Cap Equity Portfolio, Blue Chip Equity Portfolio, Equity
Income Portfolio and Mid-Cap Equity Portfolio paid brokerage commissions of
$251,132, $204,310, $274,131, $61,450, $65,133, and $14,645, respectively. For
the fiscal year ended April 30, 1998, the Balanced Portfolio, Capital Growth
Portfolio, Small-Cap Equity Portfolio, Blue Chip Equity Portfolio, Equity Income
Portfolio, Mid-Cap Equity Portfolio, Equity Index Portfolio and Value Equity
Portfolio paid brokerage commissions of $121,443, $178,598, $210,728, $83,365,
$127,244, $52,089, $33,683 and $87,444, respectively. For the fiscal year ended
April 30, 1999, the U.S. Government Bond Portfolio, Balanced Portfolio, Equity
Income Portfolio, Equity Index Portfolio, Blue Chip Equity Portfolio, Mid-Cap
Equity Portfolio, Value Equity Portfolio, Capital Growth Portfolio and Small-Cap
Equity Portfolio paid brokerage commission of $1,400, $138,610, $176,499,
$38,056, $182,928, $74,796, $587,947, $236,101 and $249,580, respectively.

For the fiscal year ended April 30, 1997, the Small-Cap Equity Portfolio,
Blue Chip Equity Portfolio and Stock Portfolio paid brokerage commissions of
$28, $112 and $350 to affiliated brokers. For the fiscal year ended April 30,
1998, the Portfolios paid no brokerage commissions to affiliated brokers. For
the fiscal year ended April 30, 1999, the Portfolios paid no brokerage
commissions to affiliated brokers.

The Fund is required to identify any securities of its "regular brokers or
dealers" (as such term is defined in the 1940 Act) which the Fund has acquired
during its most recent fiscal year. As of April 30, 1999, the Portfolios held
securities of the Fund's "regular brokers or dealers" as follows: the U.S.
Government Money Market Portfolio held repurchase agreements issued by Morgan
Stanley valued at $300,000,000, repurchase agreements issued by Goldman Sachs
valued at $312,535,000; the Money Market Portfolio held corporate obligations
issued by Bear Stearns valued at $12,027,000, corporate obligations issued by
Goldman Sachs valued at $22,000,402, corporate obligations issued by Lehman
Brothers valued at $2,004,000, corporate obligations issued by Merrill Lynch
valued at $3,011,000, corporate obligations issued by Morgan Stanley, Dean
Witter valued at $10,007,000, corporate obligations issued by Salomon Smith
Barney valued at $34,081,000, and repurchase agreements issued by Goldman Sachs
valued at $40,616,598; the Short-Term Bond Portfolio held corporate obligations
issued by Goldman Sachs valued at $5,001,000, corporate obligations issued by
Lehman Brothers valued at $5,518,000, and repurchase agreements issued by First
Boston valued at $5,370,000; the Income Portfolio held corporate obligations

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<PAGE>

issued by Merrill Lynch valued at $9,991,000, corporate obligations issued by
Morgan Stanley, Dean Witter valued at $7,374,000, and repurchase agreements
issued by First Boston valued at $18,157,000; the Intermediate Fixed Income
Portfolio held corporate obligations issued by Merrill Lynch valued at
$1,534,000, and repurchase agreements issued by First Boston valued at
$1,973,000; the U.S. Government Bond Portfolio held repurchase agreements valued
at $6,192,000; the Balanced Portfolio held equity securities issued by Morgan
Stanley, Dean Witter valued at $1,984,000, and repurchase agreements issued by
First Boston valued at $6,975,000; the Equity Income Portfolio held repurchase
agreements issued by First Boston valued at $1,802,000; the Value Equity
Portfolio held repurchase agreements issued by First Boston valued at
$10,367,000; the Equity Index Portfolio held equity securities issued by Bear
Stearns valued at $34,000, equity securities issued by Lehman Brothers valued at
$52,000, equity securities issued by Merrill Lynch valued at $230,000, equity
securities issued by Morgan Stanley, Dean Witter valued at $464,000, and
repurchase agreements issued by First Boston valued at $2,356,000; the Blue Chip
Equity Portfolio held equity securities issued by Morgan Stanley, Dean Witter
valued at $4,959,000, and repurchase agreements issued by First Boston valued at
$6,375,000; the Capital Growth Portfolio held equity securities issued by
Merrill Lynch valued at $1,679,000, equity securities issued by Morgan Stanley
Dean Witter valued at $2,728,000, equity securities issued by Paine Webber
valued at $1,408,000, and repurchase agreements issued by First Boston valued at
$2,747,000; the Mid-Cap Equity Portfolio held equity securities issued by Bear
Stearns valued at $294,000, equity securities issued by Paine Webber valued at
$584,000, and repurchase agreements issued by First Boston valued at $6,000; the
Small-Cap Equity Portfolio held repurchase agreements issued by First Boston
valued at $1,230,000; and the International Equity Selection Portfolio held
repurchase agreements issued by First Boston valued at $1,230,000.

VALUATION OF PORTFOLIO SECURITIES

Money Market Fund Portfolios

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

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

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<PAGE>

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

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

Short-Term Treasury Portfolio, Short-Term Bond Portfolio, Intermediate Fixed
Income Portfolio, U.S. Government Bond Portfolio, Income Portfolio, Maryland
Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio

Valuations of portfolio securities furnished by the pricing service
utilized by the Fund are based upon a computerized matrix system and/or
appraisals by the pricing service, in each case in reliance upon information
concerning market transactions and quotations from recognized securities
dealers. The methods used by the pricing service and the quality of valuations
so established are reviewed by officers of the Fund and each Portfolio's
respective pricing agent under general supervision of the Board of Trustees.
There are a number of pricing services available, and the Board, on the basis of
evaluation of these services, may use other pricing services or discontinue the
use of any pricing service in whole or in part.

Balanced Portfolio, Equity Income Portfolio, Equity Index Portfolio, Blue Chip
Equity Portfolio, Mid-Cap Equity Portfolio, Value Equity Portfolio, Capital
Growth Portfolio,

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<PAGE>

Small-Cap Equity Portfolio, International Equity Selection Portfolio,
International Equity Portfolio and Emerging Markets Equity Portfolio

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

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

PORTFOLIO PERFORMANCE

Yield Calculations

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

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<PAGE>

For shares of Portfolios (other than the Money Market Fund Portfolios),
yields used in advertising are computed by dividing the interest income for a
given 30-day or one-month period, net of the Portfolio's expenses, by the
average number of shares entitled to receive dividends during the period,
dividing this figure by the Portfolio's NAV at the end of the period and
annualizing the result (assuming compounding of income) in order to arrive at an
annual percentage rate. Income is calculated for purposes of the yield
quotations in accordance with standardized methods applicable to all stock and
bond funds. In general, interest income is reduced with respect to bonds trading
at a premium over their par value by subtracting a portion of the premium from
income on a daily basis, and is increased with respect to bonds trading at a
discount by adding a portion of the discount to daily income. Capital gains and
losses generally are excluded from the calculation.

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

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

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

For the seven-day period ended October 31, 1999, the yields and effective
yields for the Money Market Fund Portfolios were:

<TABLE>
<CAPTION>
Name of Portfolio and Class Yield Effective Yield
- - --------------------------- ----- ---------------
<S> <C> <C>
U.S. Treasury Money Market
Portfolio
Retail Class A
Institutional Class
Institutional II Class
</TABLE>

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<PAGE>

<TABLE>

<S> <C> <C>
U.S. Government Money
Market Portfolio
Retail Class A
Institutional Class
Institutional II Class

Money Market Portfolio
Retail Class A
Institutional Class
Retail Class B
Institutional II Class
</TABLE>

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<PAGE>

<TABLE>
<S> <C> <C>
Tax-Free Money Market
Portfolio
Retail Class A
Institutional Class
Institutional II Class
</TABLE>

For the 30-day period ended October 31, 1999, the yields for the Portfolios
(other than the Money Market Fund Portfolios) were as follows:

<TABLE>
<CAPTION>
Name of Portfolio and Class Yield
--------------------------- -----
<S> <C>
Short-Term Treasury Portfolio
Retail Class A
Institutional Class

Short-Term Bond Portfolio
Institutional Class

Intermediate Fixed Income Portfolio
Institutional Class

U.S. Government Bond Portfolio
Retail Class A
Institutional Class

Income Portfolio
Retail Class A
Retail Class B
Institutional Class

Maryland Tax-Free Portfolio
Retail Class A
Institutional Class

Pennsylvania Tax-Free Portfolio
</TABLE>

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<PAGE>

Retail Class A
Institutional Class %

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<PAGE>

<TABLE>
<S> <C> <C>
Balanced Portfolio
Retail Class A
Retail Class B
Institutional Class

Equity Income Portfolio
Retail Class A
Institutional Class

Equity Index Portfolio
Retail Class A
Institutional Class

Blue Chip Equity Portfolio
Retail Class A
Retail Class B
Institutional Class

Mid-Cap Equity Portfolio
Institutional Class

Value Equity Portfolio
Retail Class A
Retail Class B
Institutional Class

Capital Growth Portfolio
Retail Class A
Retail Class B
Institutional Class

Small-Cap Equity Portfolio
Retail Class A
Institutional Class

International Equity Selection Portfolio
Retail Class A
</TABLE>

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<PAGE>

Institutional Class %

Total Return

The average annual total returns for the one-year period and five-year
period ended October 31, 1999 and since inception are shown in the table below.
The performance shown for Retail Class A and Retail Class B includes applicable
sales charges. The returns shown since inception for Retail Class B shares is
cumulative and has not been annualized.

<TABLE>
<CAPTION>
Name of Portfolio
and Class One-year Five-year Since Inception
----------------- -------- --------- ---------------
<S> <C> <C> <C>
Income Portfolio
Retail Class A
Retail Class B -
Institutional Class
(April 12, 1994)
(September 14, 1998)
(July 16, 1993)

Balanced Portfolio
Retail Class A
Retail Class B -
Institutional Class
-

(March 9, 1994)
(September 14, 1998)
(July 16, 1993)

Small-Cap Equity
Portfolio
Retail Class A
Institutional Class
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
-
-

(May 16, 1996)
(July 13, 1995)
Blue Chip Equity
Portfolio
Retail Class A
Retail Class B
Institutional Class -

-
-
-

(May 16, 1996)
(July 31, 1998)
(April 1, 1996)

Short-Term
Treasury Portfolio
Retail Class A
Institutional Class
-
-

(September 9, 1996)
(March 20, 1996)

Short-Term Bond
Portfolio
Institutional Class/4/ -

(April 1, 1996)

Capital Growth
</TABLE>
__________________________

/4/ Performance presented from inception reflects the performance of the
Marketvest Short-Term Bond Fund shares, which were offered beginning April 1,
1996.

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<PAGE>

<TABLE>
<S> <C>
Portfolio
Retail Class A
Retail Class B
Institutional Class -
-
(March 9, 1994)
(September 14, 1998)
(July 16, 1993)

Maryland Tax-Free
Portfolio
Retail Class A
Institutional Class -
-

(January 2, 1997)
(November 18, 1996)

Pennsylvania Tax-Free
Portfolio
Retail Class A
Institutional Class/5/
-
-

(March 23, 1998)
(April 1, 1996)

Intermediate Fixed
Income Portfolio
</TABLE>

_____________________

/5/ Performance presented from inception reflects the performance of the
Marketvest Pennsylvania Intermediate Municipal Bond Fund shares, which were
offered beginning April 1, 1996.

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<PAGE>

<TABLE>
<S> <C>
Institutional Class
-
(November 18, 1996)

Equity Income
Portfolio
Retail Class A
Institutional Class
-
-

(May 9, 1997)
(November 18, 1996)

Mid-Cap Equity
Portfolio
Institutional Class
-

(November 18, 1996)
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
Value Equity
Portfolio
Retail Class A -
Retail Class B
Institutional Class/6/
-
-
-

(April 1, 1998)
(September 14, 1998)
(April 1, 1996)

International Equity
Selection Portfolio
Retail Class A
Institutional Class/7/
-
(April 1, 1998)
(May 31, 1991)
U.S. Government
Bond Portfolio
Retail Class A
Institutional Class/8/
-
-

(April 1, 1998)
</TABLE>

____________________________

/6/ Performance presented from inception reflects the performance of the
Marketvest Equity Fund shares, which were offered beginning April 1, 1996.

/7/ Performance presented from inception reflects the performance of the
Marketvest International Equity Fund shares, which is the successor to a
collective trust fund for the period from May 31, 1991 to April 1, 1997 when the
Marketvest International Equity Fund's registration statement became effective,
as adjusted to reflect the Marketvest International Equity Fund's anticipated
expenses.

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<PAGE>

<TABLE>
<S> <C>
(April 1, 1996)

Equity Index
Portfolio
Retail Class A
Institutional Class
-
-
(November 3, 1997)
(October 1, 1997)
</TABLE>

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

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

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

The NAV per share of Retail Class A, Retail Class B, Institutional Class,
Institutional II Class, Corporate Class, Corporate II Class and Corporate III
Class shares of a

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

/8/ Performance presented from inception reflects the performance of the
Marketvest Intermediate U.S. Government Bond Fund shares, which were offered
beginning April 1, 1996.

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<PAGE>

Portfolio are determined as of the close of business of the NYSE on each day
that the NYSE is open, by dividing the value of the Portfolio's net assets
attributable to that class by the number of shares of that class outstanding.

The NAV of the Short-Term Treasury Portfolio, Short-Term Bond Portfolio,
Intermediate Fixed Income Portfolio, U.S. Government Bond Portfolio, Income
Portfolio, Maryland Tax-Free Portfolio, Pennsylvania Tax-Free Portfolio,
Balanced Portfolio, Equity Income, Equity Index Portfolio, Blue Chip Equity
Portfolio, Mid-Cap Equity Portfolio, Value Equity Portfolio, Capital Growth
Portfolio, Small-Cap Equity Portfolio, International Equity Selection Portfolio,
International Equity Portfolio and Emerging Markets Equity Portfolio is
determined as of the close of regular trading on the NYSE, normally 4:00 p.m.,
Eastern Time ("4:00 p.m."). Shares purchased at 4:00 p.m. begin to earn
dividends on the following Business Day.

The NAV of the U.S. Treasury Money Market Portfolio, U.S. Treasury Cash
Management Portfolio, Tax-Free Money Market Portfolio, Tax-Free Cash Management
Portfolio and Pennsylvania Tax-Free Money Market Portfolio are determined at
12:00 noon, Eastern Time ("12:00 noon"), and as of the close of regular trading
on the NYSE, normally 4:00 p.m. The NAV of the U.S. Government Money Market
Portfolio, U.S. Government Cash Management Portfolio, Money Market Portfolio and
Prime Cash Money Market Portfolio are determined at 5:00 p.m., Eastern Time
("5:00 p.m.").

The following holiday closings have been scheduled for 2000 and the Fund
expects the schedule to be the same in the future: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day. The
NYSE or FRB may also close on other days. When the NYSE or the FRB is closed, or
when trading is restricted for any reason other than its customary weekend or
holiday closings, or under emergency circumstances as determined by the SEC to
merit such action, each Portfolio will determine its NAV at the close of
business, the time of which will coincide with the closing of the NYSE. To the
extent that securities held by a Portfolio are traded in other markets on days
the NYSE or FRB is closed (when investors do not have access to the Portfolio to
purchase or redeem shares), the Portfolio's NAV may be significantly
affected.

If, in the opinion of the Board of Trustees, conditions exist which make
cash payment undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the NAV of the Portfolio. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes and will
incur any costs of sale as well as the associated inconveniences.

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<PAGE>

Retail Class B shares will automatically convert into Retail Class A shares
at the end of the month eight years after the purchase date. Retail Class B
shares acquired by exchanging Retail Class B shares of another Portfolio will
convert into Retail Class A shares based on the time of the initial purchase.
Retail Class B shares acquired through reinvestment of distributions will
convert into Retail Class A shares based on the date of the initial purchase to
which such shares relate. For this purpose, Retail Class B shares acquired
through reinvestment of distributions will be attributed to particular purchases
of Retail Class B shares in accordance with such procedures as the Board of
Trustees may determine from time to time. The conversion of Retail Class B
shares to Retail Class A shares is subject to the condition that such
conversions will not constitute taxable events for Federal tax purposes.

Retail Class A Sales Charges

The offering price (price to buy one share) is the net asset value of a
Retail Class A share, divided by the sum of one minus the applicable sales
charge percentage. There are no sales charges imposed on purchases of Retail
Class A shares of the Money Market Fund Portfolios and the Short-Term Treasury
Portfolio. The following table shows the total sales charges applicable to
purchases of Retail Class A shares:

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<PAGE>

<TABLE>
<CAPTION>
Balanced, Equity Income,
Equity Index, Blue Chip Equity,
U.S. Government Bond, Value Equity, Capital Growth, Mid-Cap
Income, Maryland Tax-Free, Equity, Small-Cap Equity, International International Equity
Pennsylvania Tax-Free Portfolios Equity, Emerging Markets Equity Portfolios Selection Portfolio
------------------------------------------------------------------------------------------------------------------

Sales Charge Professional Sales Charge Professional Sales Charge Professional
as a % of Concession as a % of Concession as a % of Concession
---------------------- -------------------------- --------------------
Net as a % of Net as a % of Net as a % of
Offering Amount Offering Offering Amount Offering Offering Amount Offering
Price Invested Price Price Invested Price Price Invested Price
-------- ---------- ------- ------------ ------------ ------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Less than $50,000. 4.50 4.71 4.05 4.75 4.99 4.28 1.50 1.52 1.40
$50,000 but less
than $100,000.... 4.00 4.17 3.60 4.50 4.71 4.05 1.50 1.52 1.40
$100,000 but less
than $250,000.... 3.00 3.09 2.70 3.50 3.63 3.15 1.00 1.01 0.90
$250,000 but less
than $500,000.... 2.50 2.56 2.25 2.50 2.56 2.25 0.75 0.76 0.65
$500,000 but less
than $1,000,000.. 2.00 2.04 1.80 2.00 2.04 1.80 0.50 0.50 0.40
$1,000,000 and
above(1)......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

_________________________
(1) No initial sales charge applies to purchases of Retail 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 the purchase.

All questions regarding the applicability of sales charges to share
purchases will be determined by the Fund's distributor.

TAXES

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

The following discussion of Federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New

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<PAGE>

legislation, as well as administrative changes or court decisions, may
significantly change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated herein.

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

Taxation of The Portfolios

Each Portfolio intends to qualify as a regulated investment company ("RIC")
under Subchapter M of the Code. In order to qualify as a RIC for any taxable
year, a Portfolio must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans and gains from the
sale or other disposition of stock, securities or foreign currencies and other
income (including, but not limited to gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "Income Requirement"). In addition, at the close
of each quarter of the Portfolio's taxable year, (1) at least 50% of the value
of its assets must consist of cash and cash items, U.S. government securities,
securities of other RICs, and securities of other issuers (as to which the
Portfolio has not invested more than 5% of the value of its total assets in
securities of any one such issuer and as to which the Portfolio does not hold
more than 10% of the outstanding voting securities of any one such issuer), and
(2) no more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. government securities and
securities of other RICs), or in two or more issuers that the Portfolio controls
and that are engaged in the same or similar trades or businesses or related
trades or businesses (the "Asset Diversification Test"). Generally, a Portfolio
will not lose its status as a RIC if it fails to meet the Asset Diversification
Test solely as a result of a fluctuation in value of Portfolio assets not
attributable to a purchase.

Under Subchapter M of the Code, a Portfolio is not subject to Federal
income tax on the portion of its taxable net investment income and net capital
gains that it distributes to shareholders, provided generally that it
distributes at least 90% of its investment company taxable income (net
investment income and the excess of net short-term capital gains over net long-
term capital loss) for the year and at least 90% of the excess of its tax-exempt
interest income over related expenses (the "Distribution Requirement") and
complies with the other requirements of the Code described above. The
Distribution Requirement for any year may be waived if a RIC establishes to the
satisfaction of the Internal Revenue Service that it is unable to satisfy the
Distribution Requirement by reason of distributions previously made for the
purpose of avoiding liability for Federal excise tax (discussed below).

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<PAGE>

If for any taxable year a Portfolio does not qualify as a RIC, all of its
taxable income will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions generally
will be taxable as ordinary dividends to the extent of the Portfolio's current
and accumulated earnings and profits. However, in the case of corporate
shareholders, such distributions generally will be eligible for the 70%
dividends received deduction for "qualifying dividends."

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

Taxation of Shareholders

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

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<PAGE>

Pennsylvania Tax-Free Portfolio that are exempt from Federal income taxes. It is
suggested that shareholders keep all statements received to assist in personal
record keeping.

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

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

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

International Equity and Emerging Markets Equity Portfolios

Income that the International Equity Selection Portfolio, International
Equity Portfolio and Emerging Markets Equity Portfolio receive from sources
within various foreign countries may be subject to foreign income taxes withheld
at the source. If a Portfolio has more than 50% of its assets invested in
foreign securities at the end of its taxable year, it may elect to pass through
the foreign tax credit to its shareholders. It is expected that the
International Equity Selection Portfolio will not have more than 50% of the
value of its total assets at the close of its taxable year invested in foreign
securities, and therefore will not be permitted to make this election and "pass
through" to its shareholders. Each shareholder's respective pro rata share of
foreign taxes the Portfolio pays will, therefore in effect, be netted against
their share of the Portfolio's gross income.

The Portfolios may invest in non-U.S. corporations which could be treated
as passive foreign investment companies ("PFICs"). This could result in adverse
tax consequences upon the disposition of, or the receipt of "excess
distributions" with respect to,

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<PAGE>

such equity investments. To the extent a Portfolio does invest in PFICs, it may
adopt certain tax strategies to reduce or eliminate the adverse effects of
certain Federal tax provisions governing PFIC investments. Some of these
strategies may require the Portfolio to distribute amounts in excess of its
realized income and gains. Many non-U.S. banks and insurance companies may not
be treated as PFICs if they satisfy certain technical requirements under the
Code. To the extent that a Portfolio does invest in foreign securities which are
determined to be PFIC securities and is required to pay a tax on such
investments, a credit for this tax would not be allowed to be passed through to
its shareholders. Therefore, the payment of this tax would reduce the
Portfolio's economic return from its PFIC shares, and excess distributions
received with respect to such shares are treated as ordinary income rather than
capital gains.

In the case of the International Equity Selection Portfolio, an underlying
fund may inadvertently invest in non-U.S. corporations which would be treated as
PFICs or become a PFIC under the Code. This could result in adverse tax
consequences upon the disposition of, or the receipt of "excess distributions"
with respect to, such equity investments. To the extent an underlying fund does
invest in PFICs, it may elect to treat the PFIC as a "qualified electing fund"
or mark-to-market its investments in PFICs annually. In either case, the
underlying fund may be required to distribute amounts in excess of its realized
income and gains. To the extent that the underlying fund itself is required to
pay a tax on income or gain from investment in PFICs, the payment of this tax
would reduce the Portfolio's economic return.

Tax-Free Money Market Portfolio, Pennsylvania Tax-Free Money Market Portfolio,
Tax-Free Cash Management Portfolio, Maryland Tax-free Portfolio and Pennsylvania
Tax-free Portfolio

Dividends (i) designated by these Portfolios as exempt-interest dividends
and (ii) paid to shareholders out of tax-exempt interest income earned by the
Portfolios (exempt-interest dividends) generally will not be subject to Federal
income tax paid by the Portfolios' shareholders. However, persons who are
"substantial users" or "related persons" of facilities financed by private
activity bonds held by the Portfolios may be subject to tax on their pro-rata
share of the interest income from such bonds and should consult their tax
advisors before purchasing shares of the Portfolios. Realized market discount
on tax-exempt obligations purchased after April 30, 1993 is treated as ordinary
income and not as a capital gain. Dividends paid by a Portfolio out of its
taxable net investment income (including realized net short-term capital gains,
if any) are taxable to shareholders as ordinary income notwithstanding that such
dividends are reinvested in additional shares of the Portfolio. The "exempt
interest dividend" portion of a distribution is determined by the ratio of the
net tax-exempt income realized by a Portfolio for the entire year to the
aggregate amount of distributions for such year and, thus, is an annual average,
rather than a day-to-day determination for each shareholder. Distributions of
long-term capital gains, if any, are taxable as long-term capital gains to
the

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<PAGE>

shareholder receiving them regardless of the length of time he or she may have
held his or her shares. Under current tax law (1) interest on certain private
activity bonds is treated as an item of tax preference for purposes of the
Federal Alternative Minimum Tax imposed on individuals and corporations,
although for regular Federal income tax purposes such interest remains fully
tax-exempt, and (2) interest on all tax-exempt obligations is included in
"adjusted current earnings" of corporations for Federal Alternative Minimum Tax
purposes. Because the Portfolios expect to purchase private activity bonds, a
portion (not expected to exceed 20%) of each Portfolio's exempt-interest
dividends may constitute an item of tax preference for those shareholders
subject to the Federal Alternative Minimum Tax.

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

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

Receipt of tax-exempt income may result in collateral tax consequences to
certain taxpayers, including, without limitation, financial institutions,
property and casualty insurance companies, certain foreign corporations doing
business in the United States, certain S corporations with excess passive
income, individual recipients of social security or railroad retirement benefits
and individuals otherwise eligible for the earned income credit. For example,
shareholders who receive social security benefits may be subject to Federal
income tax on up to 85% of such benefits to the extent that their income,
including tax-exempt income, exceeds certain base amounts. Prospective
purchasers of Portfolio shares should consult their own tax advisors as to the
applicability of any such collateral consequences.

The Portfolios purchase municipal obligations based on opinions of bond
counsel regarding the Federal income tax status of the obligations. These
opinions generally

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<PAGE>

will be based upon covenants by the issuers regarding continuing compliance with
Federal tax requirements. If the issuer of an obligation fails to comply with
its covenant at any time, interest on the obligation could become federally
taxable retroactive to the date the obligation was issued.

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

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

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

Maryland Tax Matters

To the extent that dividends paid by the Portfolios qualify as exempt-
interest dividends of a regulated investment company, the portion of exempt-
interest dividends that represents interest received by the Portfolios (a) on
obligations of Maryland or its political subdivisions and authorities, (b) on
obligations of the United States, or (c) obligations of certain authorities,
commissions, instrumentalities, possessions or territories of the United States,
will be exempt from Maryland state and local income taxes when allocated or
distributed to a shareholder of the Portfolios.

In addition, gains realized by the Portfolios from the sale or exchange of
a bond issued by Maryland or a political subdivision of Maryland, will not be
subject to Maryland state and local income taxes. To the extent that
distributions of the Portfolios are attributable to sources other than those
described in the preceding sentences, such as interest received by the
Portfolios on obligations issued by states other than Maryland or capital gains
realized on obligations issued by U.S. territories and possessions and from
states other than Maryland, and income earned on repurchase agreements, such
distributions will be subject to Maryland state

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and local income taxes. Income earned on certain private activity bonds (other
than obligations of the State of Maryland or a political subdivision or
authority thereof) which the Portfolios might hold will constitute a Maryland
tax preference for individual shareholders. In addition, capital gains realized
by a shareholder upon a redemption or exchange of portfolio shares will be
subject to Maryland state and local income taxes.

Pennsylvania Tax Matters

To the extent that dividends paid by the Portfolios qualify as exempt-
interest dividends of a regulated investment company, the portion of exempt-
interest dividends that represents interest received by the Portfolios on
obligations (a) of Pennsylvania or its political subdivisions and authorities,
or (b) of the United States or an authority, commission, instrumentality,
possession or territory of the United States, will be exempt from Pennsylvania
state and local income taxes when allocated or distributed to a shareholder of
the Portfolios.

In addition, gains realized by the Portfolios from the sale or exchange of
a bond issued by Pennsylvania or a political subdivision of Pennsylvania, or by
the United States or an authority, commission or instrumentality of the United
States, will not be subject to Pennsylvania state and local income taxes. To
the extent that distributions of the Portfolios are attributable to sources
other than those described in the preceding sentences, such as interest received
by the Portfolios on obligations issued by states other than Pennsylvania or
capital gains realized on obligations issued by U.S. territories and possessions
and from states other than Pennsylvania, and income earned on repurchase
agreements, such distributions will be subject to Pennsylvania state and local
income taxes. Income earned on certain private activity bonds which the
Portfolios might hold will constitute a Pennsylvania tax preference for
individual shareholders. In addition, capital gains realized by a shareholder
upon a redemption or exchange of portfolio shares will be subject to
Pennsylvania state and local income taxes.

Other Tax Information

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

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

TRUSTEES AND OFFICERS

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

William H. Cowie, Jr., 1408 Ruxton Road, Baltimore, MD 21204. Date of
Birth: 1/24/31. Trustee since 1993. Prior to retirement, Mr. Cowie was Chief
Financial Officer (1991-1995) of Pencor, Inc. (developers of environmental
projects). Prior to 1991, Mr. Cowie was Vice Chairman of Signet Banking
Corporation.

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

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

Thomas Schweizer, 6 Betty Bush Lane, Baltimore, MD 21212. Date of Birth:
8/21/22. Trustee since 1993. Prior to his retirement in 1987, Mr. Schweizer
was self-employed. He currently is a board member of various charity
organizations and hospitals.

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

James F. Volk. Date of Birth: 8/28/62. Controller, Treasurer and Chief
Financial Officer since March 1997. Mr. Volk is Director of Investment
Accounting Operations. He joined SEI Investments Mutual Fund Services in
February 1996 and is co-director of the International Fund Accounting Group.
From December 1993 to January 1996, Mr. Volk was Assistant Chief Accountant of
the Securities and Exchange Commission's Division of Investment Management.
Prior to December 1993, Mr. Volk spent nine years with Coopers & Lybrand L.L.P.,
most recently as a senior manager.

Lynda J. Striegel. Date of Birth: 10/30/48. Vice President and Secretary
since June 1998. Ms. Striegel is Vice President and Assistance Secretary of SEI
Investments, since 1998. Prior to 1998, Ms. Striegel was Senior Assets
Management Counsel, Barnet Banks from 1997 to 1998; Partners, Groom and
Nordberg, Chartered from 1996 to 1997; Associate General Counsel, Riggs Bank,
N.A. from 1991 to 1995.

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Lydia A. Gavalis. Date of Birth: 6/5/64. Vice President and Assistant
Secretary since 1998. Vice President and Assistant Secretary of SEI Investments
Company since 1998. Assistant General Counsel and Director of Arbitration,
Philadelphia Stock Exchange from 1989 to 1998.

Kathy Heilig. Date of Birth: 12/21/58. Vice President and Assistant
Secretary since 1998. Treasurer of SEI Investments Company since 1997.
Assistant Controller of SEI Investments Company since 1995; Vice President of
SEI Investments Company since 1991; Director of Taxes of SEI Investments Company
from 1987 to 1991; Tax Manager - Arthur Anderson LLP prior to 1987.

Kevin P. Robins. Date of Birth: 4/15/61. Vice President and Assistant
Secretary since November 1995. Mr. Robins is Senior Vice President, General
Counsel and Secretary of SEI Investments since 1994. Prior to 1994, Mr. Robins
was Vice President and Assistant Secretary of SEI Investments. Prior to 1992,
Mr. Robins was an Associate with Morgan Lewis & Bockius (law firm) since 1988.

Todd Cipperman. Date of Birth: 2/14/66. Vice President and Assistant
Secretary since November 1995. Mr. Cipperman is Vice President and Assistant
Secretary of SEI Investments since 1995. From 1994 to May 1995, Mr. Cipperman
was an Associate with Dewey Ballantine (law firm). Prior to 1994, Mr. Cipperman
was an Associate with Winston & Strawn (law firm) since 1991.

James R. Foggo. Date of Birth: 6/30/64. Vice President and Assistant
Secretary since 1998. Mr. Foggo is Vice President and Assistant Secretary of
the Administrator and the Distributor since 1998. In 1998, Mr. Foggo was an
Associate with Paul Weiss, Rifkind, Wharton & Garrison. From 1995 to 1998, Mr.
Foggo was an Associate with Baker & McKenzie. From 1993 to 1995, Mr. Foggo was
an Associate with Battle Fowler L.L.P. Prior to 1990, Mr. Foggo was Operations
Manager with The Shareholder Services Group, Inc. since 1986.

The following table sets forth information describing the compensation of
each current trustee of the Fund for his or her services as trustee for the
fiscal year ended April 30, 1999.

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Trustee Compensation Table

<TABLE>
<CAPTION>
Pension or Estimated
Retirement Annual Total
Aggregate Benefits Accrued Retirement Compensation
Compensation from the Fund from the Fund from the Fund
Name of Trustee from the Fund Complex* Complex* Complex*
--------------- ------------- -------- -------- --------
<S> <C> <C> <C> <C>
William H. Cowie, Jr. $16,000 -- -- $16,000
David D. Downes 13,500 -- -- 13,500
Charlotte R. Kerr 13,500 -- -- 13,500
Thomas Schweizer 13,500 -- -- 13,500
Richard B. Seidel 11,750 -- -- 11,750
</TABLE>

*The Fund's trustees do not receive any pension or retirement benefits from
the Fund as compensation for their services as trustees of the Fund. The Fund,
a Massachusetts business trust, is the sole investment company in the fund
complex.

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INVESTMENT ADVISOR

The investment advisor of the Fund is Allied Investment Advisors, Inc.
("AIA"). AIA provides (or supervises any subadvisor who provides) the
Portfolios with day-to-day management services and makes investment decisions on
the Portfolios' behalf in accordance with each Portfolio's investment policies.
AIB Govett Asset Management Limited ("AIB Govett") serves as subadvisor to the
International Equity Portfolio and Emerging Markets Equity Portfolio.

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

Pursuant to an investment advisory agreement with the Fund dated as of
February 12, 1998, AIA furnishes, at its own expense, all services, facilities
and personnel necessary to manage each applicable Portfolio's investments and
effect portfolio transactions on its behalf. Pursuant to an investment
subadvisory agreement with the Fund and AIA dated as of [_____], 2000, AIB
Govett furnishes, at its own expense, all services, facilities and personnel
necessary to manage the International Equity Portfolio's and Emerging Markets
Equity Portfolio's investments and effect portfolio transactions on its
behalf.

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

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<PAGE>

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

For the fiscal year ended April 30, 1999, the advisory fee payable to AIA
with respect to the U.S. Treasury Money Market Portfolio was $1,076,083 of which
$258,255 was waived; with respect to the U.S. Government Money Market Portfolio
was $4,172,358 of which $1,835,842 was waived; with respect to the Money Market
Portfolio was $1,959,252 of which $1,097,179 was waived; with respect to the
Tax-Free Money Market Portfolio was $391,788 of which $250,747 was waived; with
respect to the Short-Term Treasury Portfolio was $152,294 of which $0 was
waived; with respect to the Short-Term Bond Portfolio was $983,974 of which
$65,598 was waived; with respect to the Maryland Tax-Free Portfolio was $761,925
of which $187,552 was waived; with respect to the Pennsylvania Tax-Free
Portfolio was $1,442,998 of which $0 was waived; with respect to the
Intermediate Fixed Income Portfolio was $563,525 of which $103,313 was waived;
with respect to the U.S. Government Bond Portfolio was $1,986,405 of which
$238,374 was waived; with respect to the Income Portfolio was $2,086,212 of
which $312,937 was waived; with respect to the Balanced Portfolio was $820,804
of which $113,652 was waived; with respect to the Equity Income Portfolio was
$724,219 of which $62,075 was waived; with respect to the Value Equity Portfolio
was $5,913,639 of which $768,762 was waived; with respect to the Equity Index
Portfolio was $134,964 of which $95,275 was waived; with respect to the Blue
Chip Equity Portfolio was $981,292 of which $140,183 was waived; with respect to
the Capital Growth Portfolio was $591,773 of which $42,271 was waived; with
respect to the Mid-Cap Equity Portfolio was $444,981 of which $33,373 was
waived; with respect to the Small-Cap Equity Portfolio was $221,721 of which
$2,772 was waived; and with respect to the International Equity Selection
Portfolio was $232,924 of which $35,834 was waived.

For the fiscal year ended April 30, 1998, the advisory fee payable to AIA
with respect to the U.S. Treasury Money Market Portfolio was $950,471 of which
$228,108 was waived; with respect to the U.S. Government Money Market Portfolio
was $3,419,050 of which $1,504,386 was waived; with respect to the Money Market
Portfolio was $1,340,587 of which $750,727 was waived; with respect to the Tax-
Free Money Market Portfolio was $363,632 of which $232,727 was waived; with
respect to the Short-Term Treasury Portfolio was $142,899 of which $7,217 was
waived; with respect to the Short-Term Bond Portfolio was $173,712 of which
$26,223 was waived; with respect to the U.S. Government Bond Portfolio was
$333,031 of which $49,534 was waived; with respect to the Intermediate Fixed
Income Portfolio was $470,633 of which $114,918 was waived; with respect to the
Income Portfolio was $1,430,536

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<PAGE>

of which $24,176 was waived; with respect to the Maryland Tax-Free Portfolio was
$523,716 of which $60,920 was waived; with respect to the Pennsylvania Tax-Free
Portfolio was $232,022 of which $22,998 was waived; with respect to the Balanced
Portfolio was $537,057 of which $8,299 was waived; with respect to the Equity
Income Portfolio was $691,714 of which $95,123 was waived; with respect to the
Equity Index Portfolio was $39,637 of which $37,626 was waived; with respect to
the Blue Chip Equity Portfolio was $473,707 of which $27,150 was waived; with
respect to the Mid-Cap Equity Portfolio was $286,418 of which $20,587 was
waived; with respect to the Value Equity Portfolio was $997,541 of which
$162,273 was waived; with respect to the Capital Growth Portfolio was $304,120
of which $2,637 was waived; with respect to the Small-Cap Equity Portfolio was
$150,514 of which $238 was waived; and with respect to the International Equity
Selection Portfolio was $42,205 of which $23,706 was waived. Prior to February
12, 1998, the fees set forth above were payable pursuant to an advisory
agreement with AIA which provided a different fee schedule.

For the fiscal year ended April 30, 1997, the advisory fee payable to AIA
with respect to the U.S. Treasury Money Market Portfolio was $868,468 of which
$208,427 was waived; with respect to the U.S. Government Money Market Portfolio
was $2,979,910 of which $1,311,172 was waived; with respect to the Money Market
Portfolio was $1,152,587 of which $668,387 was waived; with respect to the Tax-
Free Money Market Portfolio was $293,764 of which $188,010 was waived; with
respect to the Income Portfolio was $1,065,590; with respect to the Balanced
Portfolio was $534,609; with respect to the Capital Growth Portfolio was
$230,061 of which $171,884 was waived; with respect to the Small-Cap Equity
Portfolio was $149,991; with respect to the Short-Term Treasury Portfolio was
$113,265 of which $16,181 was waived; with respect to the Blue Chip Equity
Portfolio was $155,125 of which $51,706 was waived; with respect to the
Intermediate Fixed Income Portfolio was $210,973 of which $52,655 was waived;
with respect to the Maryland Tax-Free Portfolio was $190,624 of which $18,909
was waived; with respect to the Pennsylvania Tax-Free Portfolio was $52,803 of
which $13,698 was waived; and with respect to the Equity Income Portfolio was
$262,270 of which $37,287 was waived; and with respect to the Mid-Cap Equity
Portfolio was $83,933 of which $5,948 was waived.

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

Each Portfolio has, under its advisory contract, confirmed its obligation
to pay all expenses, including interest charges, taxes, brokerage fees and
commissions; certain insurance premiums; fees, interest charges and expenses of
the custodian, transfer agent and dividend

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<PAGE>

disbursing agent; telecommunications expenses; auditing, legal and compliance
expenses; organization costs and costs of maintaining existence; costs of
preparing and printing the Portfolios' prospectuses, statements of additional
information and shareholder reports and delivering them to existing and
prospective shareholders; costs of maintaining books of original entry for
portfolio accounting and other required books and accounts of calculating the
NAV of shares of the Portfolios; costs of reproduction, stationery and supplies;
compensation of trustees and officers of the Fund and costs of other personnel
performing services for the Fund who are not officers of the Administrator or
Distributor, or their respective affiliates; costs of shareholder meetings; SEC
registration fees and related expenses; state securities laws registration fees
and related expenses; fees payable under the advisory contracts and under the
administration agreement, and all other fees and expenses paid by the
Portfolios.

ADMINISTRATOR AND DISTRIBUTOR

Administrator and Sub-administrator

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

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

The Administrator, a Delaware business trust, has its principal business
offices at 1 Freedom Valley Drive, Oaks, PA 19456. SEI Investments Management
Corporation, a wholly-owned subsidiary of SEI Investments Company ("SEI"), is
the owner of all beneficial interest in the Administrator. SEI and its
subsidiaries and affiliates are leading providers of funds evaluation services,
trust accounting systems, and brokerage and information services to financial
institutions, institutional investors and money managers. The Administrator
also serves as administrator or sub-administrator to the following mutual funds:
SEI Daily Income Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, SEI Index
Funds, SEI Institutional Managed Trust, SEI Institutional International Trust,
The Advisors' Inner Circle Fund, The Pillar Funds, CUFUND, STI Classic Funds,
First American Funds, Inc., First American Investment Funds, Inc., The Arbor
Fund, Boston 1784 Funds, The PBHG Funds, Inc.,

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<PAGE>

Morgan Grenfell Investment Trust, The Achievement Funds Trust, Bishop Street
Funds, CrestFunds, Inc., STI Classic Variable Trust, Huntington Funds, SEI Asset
Allocation Trust, TIP Funds, SEI Institutional Investments Trust, First American
Strategy Funds, Inc., HighMark Funds, PBHG Insurance Series Fund, Inc.,
Expedition Funds, Alpha Select Funds, Oak Associates Funds, The Nevis Fund,
Inc., The Parkstone Group of Funds, CNI Charter Funds and The Parkstone
Advantage Fund.

For the fiscal year ended April 30, 1999, the administration fee payable to
the Administrator with respect to the U.S. Treasury Money Market Portfolio was
$559,558; with respect to the U.S. Government Money Market Portfolio was
$2,169,604; with respect to the Money Market Portfolio was $1,018,801; with
respect to the Tax-Free Money Market Portfolio was $203,728; with respect to the
Short-Term Treasury Portfolio was $56,566; with respect to the Short-Term Bond
Portfolio was $170,554; with respect to the Maryland Tax-Free Portfolio was
$152,383; with respect to the Pennsylvania Tax-Free Portfolio was $288,596; with
respect to the Intermediate Fixed Income Portfolio was $122,095; with respect to
the U.S. Government Bond Portfolio was $344,307; with respect to the Income
Portfolio was $452,006; with respect to the Balanced Portfolio was $164,159;
with respect to the Equity Income Portfolio was $134,496; with respect to the
Value Equity Portfolio was $768,762; with respect to the Equity Index Portfolio
was $27,405; with respect to Blue Chip Equity Portfolio was $182,238; with
respect to the Capital Growth Portfolio was $109,899; with respect to the Mid-
Cap Equity Portfolio was $72,308; with respect to the Small-Cap Equity Portfolio
was $36,029; and with respect to the International Equity Selection Portfolio
was $46,584.

For the fiscal year ended April 30, 1998, the administration fee payable to
the Administrator with respect to the U.S. Treasury Money Market Portfolio was
$494,240; with respect to the U.S. Government Money Market Portfolio was
$1,777,888; with respect to the Money Market Portfolio was $697,098; with
respect to the Tax-Free Money Market Portfolio was $189,087; with respect to the
Income Portfolio was $364,951; with respect to the Balanced Portfolio was
$124,759; with respect to the Capital Growth Portfolio was $64,748; with respect
to the Small-Cap Equity Portfolio (formerly Special Equity Portfolio) was
$31,575; with respect to Blue Chip Equity Portfolio was $100,718; with respect
to the Short-Term Treasury Portfolio was $53,076; with respect to the
Intermediate Fixed Income Portfolio was $101,969; with respect to the Maryland
Tax-Free Portfolio was $132,656; with respect to the Pennsylvania Tax-Free
Portfolio was $30,476 (an additional $16,803 was paid to Federated Investors,
the administrator of the Marketvest Funds prior to the reorganizations
("Federated")); with respect to the Equity Income Portfolio was $128,459; with
respect to the Mid-Cap Equity Portfolio was $52,356; with respect to the Short-
Term Bond Portfolio was $18,456 (an additional $12,347 was paid to Federated);
with respect to the U.S. Government Bond Portfolio was $36,989 (an additional
$22,521 was paid to Federated); with respect to the Value Equity Portfolio was
$69,147 (an additional $86,672 was paid to Federated); and with

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<PAGE>

respect to the International Equity Selection Portfolio was $4,627 (an
additional $10,640 was paid to Federated).

For the fiscal year ended April 30, 1997, the administration fee payable to
the Administrator with respect to the U.S. Treasury Money Market Portfolio was
$451,599; with respect to the U.S. Government Money Market Portfolio was
$1,549,513; with respect to the Money Market Portfolio was $599,341 of which
$15,103 was waived; with respect to the Tax-Free Money Market Portfolio was
$153,254; with respect to the Income Portfolio was $277,052; with respect to the
Balanced Portfolio was $126,362; with respect to the Capital Growth Portfolio
was $49,846; with respect to the Small-Cap Equity Portfolio was $32,496; with
respect to Blue Chip Equity Portfolio was $34,734; with respect to the Short-
Term Treasury Portfolio was $42,070; with respect to the Intermediate Fixed
Income Portfolio was $45,699; with respect to the Maryland Tax-Free Portfolio
was $49,562; with respect to the Pennsylvania Tax-Free Portfolio was $13,729;
with respect to the Equity Income Portfolio was $48,707; and with respect to the
Mid-Cap Equity Portfolio was $15,587.

The administration agreement permits the Administrator to subcontract its
services thereunder, provided that the Administrator will not be relieved of its
obligations under the agreement by the appointment of a subcontractor and the
Administrator shall be responsible to the Fund for all acts of the subcontractor
as if such acts were its own, except for losses suffered by any Portfolio
resulting from willful misfeasance, bad faith or gross negligence by the
subcontractor in the performance of its duties or for reckless disregard by it
of its obligations and duties. Pursuant to a sub-administration agreement
between the Administrator and Allfirst Trust, Allfirst Trust performs services
which may include clerical, bookkeeping, accounting, stenographic, and
administrative services, for which it receives a fee, paid by the Administrator,
at the annual rate of up to 0.0275% of aggregate average net assets. For the
fiscal year ended April 30, 1998, the Administrator paid a sub-administration
fee to Allfirst Trust of $429,472.47. For the fiscal year ended April 30, 1999,
the Administrator paid a sub-administration fee to Allfirst Trust of $1,492,171.

Distributor

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

Distribution Plans

The Board of Trustees has adopted distribution plans (the "Plans") pursuant
to Rule 12b-1 under the 1940 Act (the "Rule") on behalf of the Retail Class A
and Retail Class B of each Portfolio, Institutional II Class of each Money
Market Fund Portfolio

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<PAGE>

and Corporate II Class and Corporate III Class shares of the U.S. Treasury Cash
Management Portfolio, U.S. Government Cash Management Portfolio, Prime Cash
Management Portfolio, and Tax-Free Cash Management Portfolio. The Plans allow
the Portfolios to pay the Distributor a distribution fee at the annual rate of
up to 0.75% of the average net assets of such class, or such lesser amount as
approved from time to time by the Board. These fees may be used to pay expenses
associated with the promotion and administration of activities primarily
intended to result in the sale of shares of the Portfolios, including, but not
limited to: advertising the availability of services and products; designing
material to send to customers and developing methods of making such materials
accessible to customers; providing information about the product needs of
customers; providing facilities to solicit sales and to answer questions from
prospective and existing investors about the Portfolios; receiving and answering
correspondence from prospective investors, including requests for sales
literature, prospectuses and statements of additional information; displaying
and making sales literature and prospectuses available; acting as liaison
between shareholders and the Portfolios, including obtaining information from
the Portfolios regarding the Portfolios and providing performance and other
information about the Portfolios; and providing additional distribution-related
services.

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

The Board has approved a distribution fee of 0.15% of the average net
assets of the Institutional II Class. For the fiscal year ended April 30, 1999,
the Institutional II Class of the U.S. Treasury Money Market Portfolio, U.S.
Government Money Market Portfolio, Money Market Portfolio and Tax-Free Money
Market Portfolio paid distribution fees of $138,487, $180,079, $203,976 and
$52,457, respectively.

The Board has approved distribution fees of 0.25% and 0.40% of the average
net assets of the Corporate II Class and Corporate III Class, respectively.

The Board has approved distribution fees based on the following percentages
of the average daily net assets of the Retail Class A: 0.25% for each Money
Market Fund Portfolio; 0.30% for the Short-Term Bond Portfolio, U.S. Government
Bond Portfolio, Intermediate Fixed Income Portfolio, Income Portfolio, Maryland
Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio; 0.40% for the Short-Term
Treasury Portfolio, Balanced Portfolio, Equity Income Portfolio, Equity Index
Portfolio, Mid-Cap Equity Portfolio, Value

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<PAGE>

Equity Portfolio, Capital Growth Portfolio, Small-Cap Equity Portfolio, and
International Equity Selection Portfolio; and 0.55% for the Blue Chip Equity
Portfolio. For the fiscal year ended April 30, 1999, the Retail Class A of the
Portfolios paid distribution fees in the following amounts: $69,823 for the U.S.
Treasury Money Market Portfolio, $228,796 for the U.S. Government Money Market
Portfolio, $541,144 for the Money Market Portfolio, $68,932 for the Tax-Free
Money Market Portfolio, $19,710 for the Income Portfolio, $49,428 for the
Balanced Portfolio, $43,220 for the Capital Growth Portfolio, $4,724 for the
Small-Cap Equity Portfolio, $117,918 for the Blue Chip Equity Portfolio, $35,889
for the Short-Term Treasury Portfolio, $71,337 for the Maryland Tax-Free
Portfolio, $7,866 for the Pennsylvania Tax-Free Portfolio, $2,110 for the U.S.
Government Bond Portfolio, $8,740 for the Equity Income Portfolio; $6,354 for
the Equity Index Portfolio, $5,851 for the Value Equity Portfolio and $2,970 for
the International Equity Selection Portfolio.

The Board has approved distribution fees of 0.75% of the average daily net
assets of the Retail Class B of each Portfolio. For the fiscal year ended April
30, 1999, the Retail Class B of the Portfolios paid distribution fees in the
following amounts: $45 for the Money Market Portfolio; $695 for the Income
Portfolio; $3,747 for the Balanced Portfolio; $5,719 for the Blue Chip Equity
Portfolio; $248 for the Value Equity Portfolio; and $3,107 for the Capital
Growth Portfolio.

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

Shareholder Services Plans

The Board of Trustees has adopted shareholder services plans on behalf of
the Retail Class A, Retail Class B and Institutional Class of the Portfolios to
compensate qualified

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

For the fiscal year ended April 30, 1999, Retail Class A of the U.S.
Treasury Money Market Portfolio, U.S. Government Money Market Portfolio, Money
Market Portfolio, Tax-Free Money Market Portfolio paid shareholder servicing
fees of $16,757, $54,910, $129,872 and $16,543, respectively.

For the fiscal year ended April 30, 1999, Retail Class B of the Money
Market Portfolio, Income Portfolio, Balanced Portfolio, Blue Chip Equity
Portfolio, Value Equity Portfolio and Capital Growth Portfolio paid shareholder
servicing fees of $15, $232, $1,249, $1,906, $83 and $1,035, respectively.

For the fiscal year ended April 30, 1999, Institutional Class of the U.S.
Treasury Money Market Portfolio, U.S. Government Money Market Portfolio, Money
Market Portfolio Tax-Free Money Market Portfolio, Short-Term Treasury Portfolio,
Short-Term Bond Portfolio, Maryland Tax-Free Portfolio, Pennsylvania Tax-Free
Portfolio, U.S. Government Bond Portfolio, Intermediate Fixed Income Portfolio,
Income Portfolio, Balanced Portfolio, Equity Income Portfolio, Value Equity
Portfolio, Blue Chip Equity Portfolio, Capital Growth Portfolio, Mid-Cap Equity
Portfolio, Small-Cap Equity Portfolio and International Equity Portfolio paid
shareholder servicing fees of $191,841, $965,908, $267,531, $56,305, $17,494,
$78,716, $71,626, $167,382, $201,067, $72,686, $272,899, $94,100, $86,044,
$504,823, $85,415, $49,329, $61,883, $22,948 and $27,969, respectively.

For the fiscal year ended April 30, 1998, Retail Class A of the U.S.
Treasury Money Market Portfolio, U.S. Government Money Market Portfolio, Money
Market Portfolio and Tax-Free Money Market Portfolio paid shareholder servicing
fees of $16,492, $19,162, $109,013 and $15,603, respectively.

For the fiscal year ended April 30, 1998, the Institutional Class of the
U.S. Treasury Money Market Portfolio, U.S. Government Money Market Portfolio,
Money Market Portfolio, Tax-Free Money Market Portfolio, Income Portfolio,
Balanced Portfolio, Capital Growth Portfolio, Small-Cap Equity Portfolio, Blue
Chip Equity Portfolio, Short-Term Treasury Portfolio, Intermediate Fixed Income
Portfolio, Maryland Tax-Free Portfolio, Pennsylvania Tax-Free Portfolio, Equity
Income Portfolio, Mid-Cap Equity Portfolio, International Equity Selection
Portfolio, U.S. Government Bond Portfolio, Value Equity Portfolio and Short-
Term
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<PAGE>

Bond Portfolio paid shareholder servicing fees of $59,751, $210,161, $52,733,
$19,720, $61,137, $18,509, $9,213, $4,891, $11,688, $4,700, $16,149, $16,836,
$13,905, $20,520, $9,987, $2,135, $17,071, $31,907 and $8,518, respectively.

For the fiscal year ended April 30, 1997, Retail Class A of the U.S.
Treasury Money Market Portfolio, Money Market Portfolio and Tax-Free Money
Market Portfolio paid shareholder servicing fees of $6,142, $69,190 and $10,416,
respectively.

TRANSFER AGENT

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

DESCRIPTION OF THE FUND

Trust Organization

The U.S. Treasury Money Market Portfolio, U.S. Government Money Market
Portfolio, Money Market Portfolio, Tax-Free Money Market Portfolio, Pennsylvania
Tax-Free Money Market Portfolio, U.S. Treasury Cash Management Portfolio, U.S.
Government Cash Management Portfolio, Prime Cash Management Portfolio, Tax-Free
Cash Management Portfolio, Short-Term Treasury Portfolio, Short-Term Bond
Portfolio, Maryland Tax-Free Portfolio, Pennsylvania Tax-Free Portfolio,
Intermediate Fixed Income Portfolio, U.S. Government Bond Portfolio, Income
Portfolio, Balanced Portfolio, Equity Income Portfolio, Value Equity Portfolio,
Equity Index Portfolio, Blue Chip Equity Portfolio, Capital Growth Portfolio,
Mid-Cap Equity Portfolio, Small-Cap Equity Portfolio, International Equity
Selection Portfolio, International Equity Portfolio and Emerging Markets Equity
Portfolio are series of ARK Funds, an open-end management investment company
organized as a Massachusetts business trust by a Declaration of Trust dated
October 22, 1992, and amended and restated on March 19, 1993. A supplement to
the Declaration of Trust was executed and filed on March 23, 1993. The
Declaration of Trust permits the Board to create additional series and classes
of shares.

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

-111-
<PAGE>

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

Banking Law Matters

Banking laws and regulations generally permit a bank or bank affiliate to
act as an investment advisor and to purchase shares of an investment company as
agent for and upon the order of a customer. However, banking laws and
regulations, including the Glass-Steagall Act as currently interpreted by the
Board of Governors of the Federal Reserve System, prohibit a bank holding
company registered under the Bank Holding Company Act of 1956 or any affiliate
thereof from sponsoring, organizing, controlling or distributing the shares of a
registered, open-end investment company continuously engaged in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities. Upon advice of legal counsel, AIA and AIB Govett each
believes that it may perform the advisory services described in the prospectuses
or this Statement of Additional Information for the Fund and its shareholders
without violating applicable Federal banking laws or regulations.

Judicial or administrative decisions or interpretations of, as well as
changes in, either Federal or state statutes or regulations relating to the
activities of banks and their affiliates could prevent a bank or bank affiliate
from continuing to perform all or a part of the activities contemplated by the
prospectuses or this Statement of Additional Information. If banks or bank
affiliates were prohibited from so acting, changes in the operating of the Fund
might occur. It is not anticipated, however, that any such change would affect
the net asset value of the shares of any Portfolio or result in any financial
loss to any shareholder.

Shareholder and Trustee Liability

The Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable for the obligations
of the trust. The Declaration of

-112-
<PAGE>

Trust provides that the Fund shall not have any claim against shareholders,
except for the payment of the purchase price of shares, and requires that each
agreement, obligation or instrument entered into or executed by the Fund or the
trustees shall include a provision limiting the obligations created thereby to
the Fund and its assets. The Declaration of Trust provides for indemnification
out of a Portfolio's property of any shareholders of the Portfolio held
personally liable for the obligations of the Portfolio. The Declaration of Trust
also provides that a Portfolio shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Portfolio
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss because of shareholder liability is limited to circumstances in
which the Portfolio itself would be unable to meet its obligations. In view of
the above, the risk of personal liability to shareholders is remote.

The Declaration of Trust further provides that the trustees, if they have
exercised reasonable care, will not be liable for any neglect or wrongdoing, but
nothing in the Declaration of Trust protects a trustee against any liability to
which he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office.

Shares of a Portfolio of any class are fully paid and non-assessable,
except as set forth under the heading "Shareholder and Trustee Liability" above.
Shareholders may, as set forth in the Declaration of Trust, call meetings for
any purpose related to the Fund, a Portfolio or a class, respectively, including
in the case of a meeting of the entire Fund, the purpose of voting on removal of
one or more trustees. The Fund or any Portfolio may be terminated upon the sale
of its assets to another open-end management investment company, or upon
liquidation and distribution of its assets, if approved by vote of the holders
of a majority of the outstanding shares of the Fund or the Portfolio. If not so
terminated, the Fund and the Portfolios will continue indefinitely.

Share Ownership

As of _______, 2000, the officers and trustees of the Fund owned less
than 1% of the outstanding shares of any Portfolio and the following persons
owned beneficially more than 5% of the outstanding shares of the Portfolios and
classes indicated. Unless otherwise indicated the address as of July 30, 1999
for the 5% shareholders listed below is: c/o Allfirst Bank, 110 South Paca
Street, Baltimore, Maryland 21201.

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<PAGE>

U.S. Treasury Money Market Portfolio

U.S. Government Money Market Portfolio

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<PAGE>

Money Market Portfolio

Tax-Free Money Market Portfolio

-115-
<PAGE>

Pennsylvania Tax-Free Money Market Portfolio

Short-Term Treasury Portfolio

-116-
<PAGE>

Maryland Tax-Free Portfolio

Pennsylvania Tax-Free Portfolio

U.S. Government Bond Portfolio

Income Portfolio

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<PAGE>

Balanced Portfolio

Equity Income Portfolio

Value Equity Portfolio

-118-
<PAGE>

Equity Index Portfolio

Mid-Cap Equity Portfolio

Capital Growth Portfolio

Small-Cap Equity Portfolio

-119-
<PAGE>

International Equity Selection Portfolio

International Equity Portfolio

Emerging Markets Equity Portfolio

U.S. Treasury Cash Management Portfolio

U.S. Government Cash Management Portfolio

Prime Cash Management Portfolio

Tax-Free Cash Management Portfolio

-120-
<PAGE>

A shareholder owning beneficially more than 25% of a particular Portfolio's
shares may be considered to be a "controlling person" of that Portfolio.
Accordingly, its vote could have a more significant effect on matters presented
at shareholder meetings than the votes of the Portfolio's other shareholders.
Allfirst Bank or its affiliates, however, may receive voting instructions from
certain underlying customer accounts and will vote the shares in accordance with
those instructions. In the absence of such instructions, Allfirst Bank or its
affiliates will vote those shares in the same proportion as it votes the shares
for which it has received instructions from its customers and fiduciary
accounts.

CUSTODIAN

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

INDEPENDENT AUDITORS

KPMG LLP, located at 99 High Street, Boston, Massachusetts 02110, are the
Fund's independent auditors, providing audit services and consultation in
connection with the review of various Securities and Exchange Commission
filings.

FINANCIAL STATEMENTS

The Portfolios' financial statements and financial highlights for the
fiscal year ended April 30, 1999 and for the six months ended October 31, 1999
are included in the Annual Report and the Semi-Annual Report, respectively,
which are supplied with this Statement of Additional Information. The
Portfolios' financial statements and financial highlights are incorporated
herein by reference.

-121-
<PAGE>

APPENDIX A

Description of Selected Indices

Dow Jones Industrial Average is an unmanaged index of common stock prices
representing stocks of major industrial companies and includes reinvestment of
dividends.

Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
common stock prices and includes reinvestment of dividends.

Standard & Poor's MidCap 400 Index is an unmanaged index of common stock prices
and includes reinvestment of dividends.

NASDAQ Composite Index is an unmanaged index of over-the-counter stock prices
and does not assume reinvestment of dividends.

Russell 2000 Index is an unmanaged index of Small-Capitalization stocks that
includes reinvestment of dividends.

Morgan Stanley Capital International Europe, Australia, Far East (EAFE) Index is
an unmanaged index of over 1,000 foreign securities in Europe, Australia and the
Far East, and includes reinvestment of dividends.

Morgan Stanley Capital World Index is an unmanaged index of over 1,500 foreign
securities, and includes reinvestment of dividends.

Lehman Brothers Aggregate Bond Index, an unmanaged index, is a broad measure of
bond performance and includes reinvestment of interest. It is comprised of
securities from the Lehman Brothers Government/Corporate Bond Index, Mortgage-
Backed Securities Index, and Yankee Bond Index.

Lehman Brothers Government Bond Index is an index comprised of all public
obligations of the U.S. Treasury, U.S. government agencies, quasi-federal
corporations, and of corporate debt guaranteed by the U.S. government. The
index excludes flower bonds, foreign targeted issues, and mortgage-backed
securities.

Lehman Brothers Corporate Bond Index is an index comprised of all public, fixed-
rate, non-convertible investment-grade domestic corporate debt. Issues included
in this index are rated at least Baa3 by Moody's or BBB- by S&P or, in the case
of unrated bonds, BBB by Fitch

A-1
<PAGE>

Investors Service. Collateralized mortgage obligations are not included in the
Corporate Bond Index.

The Lehman Brothers Government Bond Index and the Lehman Brothers Corporate Bond
Index combine to form the Lehman Government/Corporate Bond Index.

Lehman Brothers Intermediate Corporate Bond Index is an index comprised of all
public, fixed-rate, non-convertible investment-grade domestic corporate debt.
Issues included in this index have remaining maturities of one to ten years and
are rated at least Baa3 by Moody's or BBB- by S&P, or, in the case of unrated
bonds, BBB- by Fitch Investors Service.

Lehman Brothers Long-Term Corporate Bond Index is an index comprised of all
public, fixed-rate, non-convertible investment-grade domestic corporate debt.
Issues included in this index have remaining maturities greater than ten years
and are rated at least Baa3 by Moody's or BBB- by S&P, or, in the case of
unrated bonds, BBB- by Fitch Investors Service.

Salomon Brothers High-Grade Corporate Bond Index is an index of high-quality
corporate bonds with a minimum maturity of at least ten years and with total
debt outstanding of at least $50 million. Issues included in the index are
rated AA or better by Moody's or AA or better by S&P.

Merrill Lynch High and Medium Quality Intermediate-Term Corporate Index is an
index comprised of all public, fixed-rate, non-convertible corporate debt.
Issues included in this index have remaining maturities of between one year and
9.99 years. Issues included in the index are rated at least BBB by S&P.

Description of Moody's Ratings of State and Municipal Notes

Moody's ratings for state and municipal and other short-term obligations are
designated Moody's Investment Grade ("MIG," or "VMIG" for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk, long-
term secular trends for example, may be less important over the short run.
Symbols used will be as follows:

MIG-1/VMIG-1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.

MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection are
ample

A-2
<PAGE>

although not so large as in the preceding group.

Description of S&P'S Ratings of State and Municipal Notes

SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.

SP-2 - Satisfactory capacity to pay principal and interest.

Description of Moody's Municipal Bond Ratings

Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long- term risks appear somewhat larger than Aaa securities.

A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest may be present which suggest a susceptibility to
impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

A-3
<PAGE>

Description of S&P'S Municipal Bond Ratings

AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher categories.

The ratings from AA to BBB may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.

Description of Moody's Commercial Paper Ratings

Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:

Leading market positions in well-established industries.

High rates of return on funds employed.

Conservative capitalization structures with moderate reliance on
debt and ample asset protection.

Broad margins in earnings coverage of fixed financial charges and
with high internal cash generation.

Well established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the

A-4
<PAGE>

characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

Description of S&P'S Commercial Paper Ratings

A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2, and 3 to indicate the relative degree of safety.

A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.

A-2 - Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.

Description of Moody's Corporate Bond Ratings

Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.

A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

A-5
<PAGE>

Ba - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any long period of time may be small.

Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca - Bonds rated Ca represent obligations which are speculative to a high
degree. Such issues are often in default or have other marked short-comings.

C - Bonds rated C are the lowest rated class of bonds, and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.

Description of S&P'S Corporate Bond Ratings

AAA - Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only to a small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

A-6
<PAGE>

BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.

CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.

CI - The rating CI is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

The ratings from AA to CCC may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.

A-7
<PAGE>

APPENDIX B

2000 TAX RATES

The following tables show the effect of a shareholder's tax status on
effective yield under the Federal and applicable state and local income tax laws
for 2000. The second table shows the approximate yield a taxable security must
provide at various income brackets to produce after-tax yields equivalent to
those of hypothetical tax-exempt obligations yielding from 3% to 7%. Of course,
no assurance can be given that a Portfolio will achieve any specific tax-exempt
yield. While the Portfolios invest principally in obligations whose interest is
exempt from Federal income tax (and, in the case of the Maryland Tax-Free
Portfolio and the Pennsylvania Tax-Free Money Market Portfolio and Pennsylvania
Tax-Free Portfolio, from Maryland and Pennsylvania state income tax,
respectively, as well) other income received by a Portfolio may be taxable.

Use the first table to find your approximate effective tax bracket taking
into account Federal and state taxes for 2000.

<TABLE>
<CAPTION>
Combined Combined Combined
Maryland Pennsyl- Pennsyl-
Federal Maryland and Federal Pennsyl- vania and vania and
Single Return Joint Return Income Marginal Effective vania Federal Federal
Taxable Income Taxable Income Tax Rate Tax Marginal Effective Effective
Bracket Bracket** Rate Tax Tax
Bracket** Bracket**
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>

B-1
<PAGE>

* Net amount subject to Federal income tax after deductions and exemptions.
Assumes ordinary income only.

** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a

B-2
<PAGE>

taxpayer's marginal tax rate. An increase in a shareholder's marginal tax
rate would increase that shareholder's tax-equivalent yield.

*** Combined Maryland and Federal effective tax brackets take into account
the highest combined Maryland state and county income tax rate of ___%
(applicable to residents of Caroline County). The table below sets forth
the combined Maryland state and county income tax rate in descending
order for each county:

Combined
County Rate

Caroline
Somerset
Wicomico
Price George's
Montgomery
St. Mary's
Allegany
Baltimore
Carroll
Queen Anne's
Garrett
Charles
Calvert
Washington
Kent
Frederick
Dorchester
Harford
Cecil
Anne Arundel
Baltimore City
Howard
Talbot
Worcester

Figures are tax-effected to reflect the federal tax benefit for persons who
itemized deductions.

**** Combined Pennsylvania and Federal effective tax brackets take into
account the Pennsylvania state income tax rate of ___% and Philadelphia
school district investment income tax rate of ___%. Figures are tax-
effected to reflect the
B-3
<PAGE>

the Federal tax benefit for persons who itemized deductions. Having
determined your effective tax bracket above, use the following table to
determine the tax equivalent yield for a given tax-free yield.

***** Combined Pennsylvania and Federal effective tax brackets take into
account the highest Pennsylvania state income tax rate of ___% but does
not take into account any local income tax rate since only residents of
the school district of Philadelphia are subject to a local income tax on
the net income from the ownership, sale or other disposition of tangible
and intangible personal property. Figures are tax-effected to reflect the
Federal tax benefit for persons who itemized deductions.

If your combined effective Federal, Maryland state and county personal income
tax rate in 2000 is:

% % %

To match these tax free rates: Your taxable investment would have to earn the
following yield:

B-4
<PAGE>

% % % %

%
% % % % %
% % % % %
% % % % %
% % % % %

If your combined effective Federal, Pennsylvania state and Philadelphia school
district investment income tax rate in 2000 is:

% % %
%

Your taxable investment would have to earn the following yield:

B-5
<PAGE>

% % % %

%
% % % % %
% % % % %
% % % % %
% % % % %

If your combined effective Federal and Pennsylvania state income tax rate in
2000 is:

% % %

B-6
<PAGE>

Your taxable investment would have to earn the following yield:

% % % %

%
% % % % %
% % % % %
% % % % %
% % % % %

A Portfolio may invest a portion of its assets in obligations that are subject
to Federal, state, or county (or City of Baltimore) income taxes. When the
Portfolio invests in these obligations, its tax-equivalent yield will be lower.
In the table above, tax-equivalent yields are calculated assuming investments
are 100% Federal and state tax free.

Yield information may be useful in reviewing a Portfolio's performance and in
providing a basis for comparison with other investment alternatives. However,
each Portfolio's yield fluctuates, unlike investments that pay a fixed interest
rate over a stated period of time. When

B-7
<PAGE>

comparing investment alternatives, investors should also note the quality and
maturity of the portfolio securities of the respective investment companies that
they have chosen to consider.

Investors should recognize that in periods of declining interest rates a
Portfolio's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates a Portfolio's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to a Portfolio from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
Portfolio's holdings, thereby reducing the Portfolio's current yield. In
periods of rising interest rates, the opposite can be expected to occur. The
yields of the Retail Class A, Retail Class B, Institutional Class, Institutional
II Class, Corporate Class, Corporate II Class or Corporate III Class of a
Portfolio are each calculated separately. The yields of the Retail Class A,
Retail Class B and Institutional Class of a Portfolio will be lower than those
of the Institutional Class, Corporate Class, Corporate II Class or Corporate III
Class of the same Portfolio, due to higher expenses in general.

B-8
<PAGE>

Part C - Other Information Item

Item 23. Exhibits

(a) (1) Declaration of Trust dated October 22, 1992 is incorporated by
reference to Exhibit 1 to the Registration Statement.

(2) Amended and Restated Declaration of Trust dated March 19, 1993 is
incorporated by reference to Exhibit 1(b) to Pre-Effective Amendment
No. 2.

(3) Supplement dated March 23, 1993 to the Amended and Restated
Declaration of Trust dated March 19, 1993 is incorporated by reference
to Exhibit 1(c) to Pre-Effective Amendment No. 2.

(b) By-Laws of the Registrant are incorporated by reference to Exhibit
1(d) to Pre-Effective Amendment No. 2.

(d) (1) Investment Advisory Agreement dated February 12, 1998, between
the Registrant and Allied Investment Advisors, Inc. is incorporated
herein by reference to Exhibit 5(b) to Post-Effective Amendment No.
17.

(2) Investment Advisory Agreement, between the Registrant and AIB
Govett Asset Management Limited. *

(e) (1) Distribution Agreement dated November 1, 1995, between the
Registrant and SEI Investments Distribution Co. is incorporated herein
by reference to Exhibit 6(a) to Post-Effective Amendment No. 6.

(2) Administration Agreement dated November 1, 1995, between the
Registrant and SEI Investments Mutual Fund Services is incorporated
herein by reference to Exhibit 6(b) to Post-Effective Amendment No. 6.

(f) Not applicable.

(g) (1) Custody Agreement dated April 1, 1997, between the Registrant and
Allfirst Trust Company, National Association, is incorporated herein
by reference to Exhibit 8(a) to Post-Effective Amendment No. 17.

(2) Subcustody Agreement.*

(h) (1) Transfer Agency and Service Agreement dated November 1, 1995,
between the Registrant and SEI Investments Mutual Fund Services is
incorporated herein by reference to Exhibit 9 to Post-Effective
Amendment No. 6.

(2) Sub-Administration Agreement dated January 1, 1998, between SEI
Investments Management Corporation and Allfirst Trust Company,
National Association, is incorporated herein by reference to Exhibit
9(b) to Post-Effective Amendment No. 17.
<PAGE>

(i) Opinion and consent of legal counsel.*

(j) Consent of independent auditors.*

(k) Not applicable.

(l) Written assurance dated May 27, 1993 that purchase representing
initial capital was made for investment purposes without any present
intention of redeeming or reselling is incorporated herein by reference to
Exhibit 13 to Pre-Effective Amendment No. 3.

(m) (1) Distribution and Shareholder Services Plan is incorporated by
reference to Exhibit (m)(1) to Post-Effective Amendment No. 21.

(2) Distribution and Shareholder Services Plan with respect to Retail
Class B Shares is incorporated by reference to Exhibit (m) to Post-
Effective Amendment No. 21.

(3) Shareholder Services Plan for Institutional Class Shares is
incorporated by reference to Exhibit (m)(2) to Post-Effective
Amendment No. 21.

(4) Distribution and Service Plan with respect to Institutional II
Class Shares is incorporated by reference to Exhibit (m)(3) to Post-
Effective Amendment No. 21.

(5) Distribution and Service Plan with respect to Corporate II Class
Shares.*

(6) Distribution and Service Plan with respect to Corporate III Class
Shares.*

(n) Not applicable.

(o) Amended and Restated Rule 18f-3 Plan is incorporated herein by
reference to Exhibit 18 to Post-Effective Amendment No. 20.

____________________
*To be filed by amendment.

Item 24. Persons Controlled by or Under Common Control with Registrant

None.

Item 25. Indemnification
<PAGE>

Article XI, Section 2 of the Declaration of Trust sets forth the reasonable
and fair means for determining whether indemnification shall be provided to any
past or present trustee or officer. It states that the Registrant shall
indemnify any present or past trustee or officer to the fullest extent permitted
by law against liability and all expenses reasonably incurred by him in
connection with any claim, action, suit or proceeding in which he is involved by
virtue of his service as a trustee, an officer, or both. Additionally, amounts
paid or incurred in settlement of such matters are covered by this
indemnification. Indemnification will not be provided in certain circumstances,
however. These include instances of willful misfeasance, bad faith, gross
negligence, and reckless disregard of the duties involved in the conduct of the
particular office involved. Insofar as indemnification for liability arising
under the Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

Item 26. Business and Other Connections of Investment Adviser

Allied Investment Advisors, Inc. ("AIA") serves as investment adviser to
all Portfolios of the Registrant. A description of the directors and officers of
AIA and other required information is included in the Form ADV and schedules
thereto of AIA, as amended, on file with the Securities and Exchange Commission
(File No. 801-50883) and is incorporated herein by reference.

AIB Govett Asset Management Limited ("AIB Govett London", formerly John
Govett & Co. Limited) serves as investment subadviser to the International
Equity Portfolio and Emerging Markets Equity Portfolio. A description of the
directors and officers of AIB Govett London, and other required information, is
included in AIB Govett London's Form ADV and schedules thereto, as amended,
which is on file at the SEC (File No. 801-34730). AIB Govett London's Form ADV,
as amended, is incorporated herein by reference.

Item 27. Principal Underwriters

(a) SEI Investments Distribution Co. (the "Distributor") acts as
distributor for the Registrant. The Distributor also acts as distributor for:

SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
<PAGE>

STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
STI Classic Variable Trust August 18, 1995
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
TIP Institutional Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
The Parkstone Advantage Fund May 1, 1999
Amerindo Funds, Inc. July 13, 1999

The Distributor provides numerous financial services to investment managers,
pension plan sponsors and bank trust departments. These services include
portfolio evaluation, performance measurement and consulting services ("Funds
Evaluation") and automated execution, clearing and settlement of securities
transactions ("MarketLink").

(b) Directors, officers and partners of SEI Investments Distribution Co.
are as follows:

<TABLE>
<CAPTION>
Name and Principal Business Positions and Offices with Positions and Offices with
Address * Underwriter Registrant
<S> <C> <C>

Alfred P. West, Jr. Director, Chairman of the Board
of Directors
Richard B. Lieb Director and Executive Vice
President
Carmen V. Romeo Director
Mark J. Held President and Chief Operating
Officer
Gilbert L. Beebower Executive Vice President
Dennis J. McGonigle Executive Vice President
Robert M. Silvestri Chief Financial Officer and
Treasurer
Leo J. Dolan, Jr. Senior Vice President
</TABLE>
<PAGE>

<TABLE>
<S> <C>
Carl A. Guarino Senior Vice President
Larry Hutchinson Senior Vice President
Jack May Senior Vice President
Hartland J. McKeown Senior Vice President
Kevin P. Robins Senior Vice President and Vice President and Assistant
General Counsel Secretary
Patrick K. Walsh Senior Vice President
Robert Crudup Vice President and Managing
Director
Barbara Doyne Vice President
Vic Galef Vice President and Managing
Director
Kim Kirk Vice President and Managing
Director
John Krzeminski Vice President and Managing
Director
Carolyn McLaurin Vice President and Managing
Director
Lori White Vice President and Assistant
Secretary
Wayne M. Withrow Vice President and Managing
Director
Robert Aller Vice President
Gordon W. Carpenter Vice President
Todd Cipperman Vice President
S. Courtney E. Collier Vice President and Assistant
Secretary
Richard A. Deak Vice President and Assistant
Secretary
Jeff Drennen Vice President
James R. Foggo Vice President and Assistant
Secretary
Lydia A. Gavalis Vice President and Assistant Vice President and Assistant
Secretary Secretary
Greg Gettinger Vice President and Assistant
Secretary
Kathy Heilig Vice President
Jeff Jacobs Vice President
Samuel King Vice President
W. Kelso Morrill Vice President
Mark Nagle Vice President
Joanne Nelson Vice President
Cynthia M. Parrish Vice President and Secretary
Kim Rainey Vice President
Robert Redican Vice President
Maria Rinehart Vice President
Steve Smith Vice President
Kathryn L. Stanton Vice President
Lynda J. Striegel Vice President and Assistant Vice President and Secretary
</TABLE>
<PAGE>

Secretary
Daniel Spaventa Vice President

_______________________
* 1 Freedom Valley Drive, Oaks, PA 19456

Item 28. Location of Accounts and Records

The Registrant maintains the records required by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 inclusive thereunder at its
principal office located at One Freedom Valley Drive, Oaks, PA 19456. Certain
records, including records relating to the Registrant's shareholders, may be
maintained pursuant to Rule 31a-3 at the offices of the Registrant's investment
adviser, Allied Investment Advisors, Inc., located at 100 E. Pratt Street,
Baltimore, MD 21202; and its transfer agent, SEI Investments Mutual Fund
Services, located at One Freedom Valley Drive, Oaks, PA. 19456. Certain records
relating to the physical possession of the Registrant's securities may be
maintained at the offices of the Registrant's custodian, Allfirst Trust Company,
N.A., located at 25 S. Charles Street, Baltimore, MD 21201.

Item 29. Management Services Not applicable.

Item 30. Undertakings

(a) Not applicable.
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant duly caused this Post-Effective
Amendment No. 23 to be signed on its behalf by the undersigned, hereunto duly
authorized, in the City of Baltimore, and State of Maryland, on the 3/rd/ day of
January, 2000.

ARK FUNDS

By: /s/ David D. Downes
-------------------
David D. Downes
President

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 23 to the Registration Statement has been signed below
by the following persons in the capacities and on the date indicated.

<TABLE>
<S> <C> <C>
/s/ David D. Downes President (principal executive January 3, 2000
- - --------------------------------- officer) and Trustee
David D. Downes

/s/ James F. Volk Treasurer, Controller and Chief January 3, 2000
- - --------------------------------- Financial Officer
James F. Volk

* Trustee
- - ---------------------------------
William H. Cowie

* Trustee
- - ---------------------------------
Charlotte Kerr

* Trustee
- - ---------------------------------
Thomas Schweizer

* Trustee
- - ---------------------------------
Richard B. Seidel
</TABLE>

* By: /s/ Alan C. Porter January 3, 2000
--------------------
Alan C. Porter
Attorney-in-Fact

An original power-of-attorney authorizing Alan C. Porter to execute
amendments to this Registration Statement for each trustee of the Registrant on
whose behalf this amendment to the Registration Statement is filed has been
executed and filed with the Securities and Exchange Commission.