Rule 497(e)
File Nos. 333-53690; 811-07310
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CORPORATE CLASS
PROSPECTUS
APRIL 21, 2000
U.S. TREASURY CASH MANAGEMENT PORTFOLIO
U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
PRIME CASH MANAGEMENT PORTFOLIO
TAX-FREE CASH MANAGEMENT PORTFOLIO
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[Logo Omitted] CORPORATE CLASS PROSPECTUS APRIL 21, 2000
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.
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 PORTFOLIOS TRY TO MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS
NO GUARANTEE THAT THESE PORTFOLIOS WILL ACHIEVE THIS GOAL.
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 2
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U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO 4
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PRIME CASH MANAGEMENT PORTFOLIO 6
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TAX-FREE CASH MANAGEMENT PORTFOLIO 8
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ADDITIONAL INFORMATION ABOUT RISK 10
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EACH PORTFOLIO'S OTHER INVESTMENTS 11
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INVESTMENT ADVISOR 12
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PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES 13
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DISTRIBUTION OF PORTFOLIO SHARES 15
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DIVIDENDS AND DISTRIBUTIONS 15
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TAXES 15
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HOW TO OBTAIN MORE INFORMATION
ABOUT ARK FUNDS BACK COVER
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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>
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
PRINCIPAL 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.
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 CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
The Portfolio's U.S. Treasury securities are not guaranteed against price
movements due to changing interest rates.
PERFORMANCE INFORMATION
As of the date of this prospectus the Portfolio has not yet commenced operations
and does not have a full calendar year of performance.
2 PROSPECTUS
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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)
CORPORATE
CLASS
Investment Advisory Fees 0.15%
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Distribution and Shareholder
Service (12b-1) Fees None
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Other Expenses 0.18%*
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TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.33%
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Fee Waivers and
Expense Reimbursements 0.09%
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NET TOTAL OPERATING EXPENSES 0.24%**
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* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** THE PORTFOLIO'S ADVISOR HAS AGREED TO CONTRACTUALLY WAIVE FEES AND
REIMBURSE EXPENSES IN ORDER TO KEEP TOTAL OPERATING EXPENSES FROM EXCEEDING
0.24% UNTIL APRIL 30, 2001.
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
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$25 $97
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PROSPECTUS 3
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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
PRINCIPAL 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.
In selecting securities for the Portfolio, the Advisor considers factors such as
current yield, the anticipated level of interest rates, and the maturity of the
instrument relative to the maturity of the entire Portfolio. In addition, the
Portfolio may only purchase securities that meet certain SEC requirements
relating to maturity, diversification and credit quality. Under these
requirements, the Portfolio's securities must have remaining maturities of 397
days or less, and the Portfolio must have a dollar-weighted average maturity of
90 days or less.
PRINCIPAL RISKS OF INVESTING IN THE U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
The Portfolio's U.S. government securities are not guaranteed against price
movements due to changing interest rates. Obligations issued by some U.S.
government agencies are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
PERFORMANCE INFORMATION
As of the date of this prospectus the Portfolio has not yet commenced operations
and does not have a full calendar year of performance.
4 PROSPECTUS
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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)
CORPORATE
CLASS
Investment Advisory Fees 0.15%
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Distribution and Shareholder
Service (12b-1) Fees None
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Other Expenses 0.18%*
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TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.33%
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Fee Waivers and
Expense Reimbursements 0.09%
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NET TOTAL OPERATING EXPENSES 0.24%**
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* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** THE PORTFOLIO'S ADVISOR HAS AGREED TO CONTRACTUALLY WAIVE FEES AND
REIMBURSE EXPENSES IN ORDER TO KEEP TOTAL OPERATING EXPENSES FROM EXCEEDING
0.24% UNTIL APRIL 30, 2001.
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
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$25 $97
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PROSPECTUS 5
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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
PRINCIPAL 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.
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 PRIME CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
The Portfolio's securities are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
PERFORMANCE INFORMATION
As of the date of this prospectus the Portfolio has not yet commenced operations
and does not have a full calendar year of performance.
6 PROSPECTUS
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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)
CORPORATE
CLASS
Investment Advisory Fees 0.15%
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Distribution and Shareholder
Service (12b-1) Fees None
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Other Expenses 0.18%*
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TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.33%
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Fee Waivers and
Expense Reimbursements 0.09%
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NET TOTAL OPERATING EXPENSES 0.24%**
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* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** THE PORTFOLIO'S ADVISOR HAS AGREED TO CONTRACTUALLY WAIVE FEES AND
REIMBURSE EXPENSES IN ORDER TO KEEP TOTAL OPERATING EXPENSES FROM EXCEEDING
0.24% UNTIL APRIL 30, 2001.
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
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$25 $97
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PROSPECTUS 7
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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
PRINCIPAL 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.
In selecting securities for the Portfolio, the Advisor considers factors such as
current yield, the anticipated level of interest rates, and the maturity of the
instrument relative to the maturity of the entire Portfolio. In addition, the
Portfolio may only purchase securities that meet certain SEC requirements
relating to maturity, diversification and credit quality. Under these
requirements, the Portfolio's securities must have remaining maturities of 397
days or less, and the Portfolio must have a dollar-weighted average maturity of
90 days or less.
PRINCIPAL RISKS OF INVESTING IN THE TAX-FREE CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
PERFORMANCE INFORMATION
The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.
8 PROSPECTUS
<PAGE>
PORTFOLIO FEES AND EXPENSES
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
CORPORATE
CLASS
Investment Advisory Fees 0.15%
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Distribution and Shareholder
Service (12b-1) Fees None
- --------------------------------------------------------------------------------
Other Expenses 0.18%*
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TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.33%
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Fee Waivers and
Expense Reimbursements 0.09%
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NET TOTAL OPERATING EXPENSES 0.24%**
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* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** THE PORTFOLIO'S ADVISOR HAS AGREED TO CONTRACTUALLY WAIVE FEES AND
REIMBURSE EXPENSES IN ORDER TO KEEP TOTAL OPERATING EXPENSES FROM EXCEEDING
0.24% UNTIL APRIL 30, 2001.
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
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$25 $97
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PROSPECTUS 9
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<TABLE>
<CAPTION>
ADDITIONAL INFORMATION ABOUT RISK
RISKS PORTFOLIOS AFFECTED BY THE RISKS
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<S> <C>
MUNICIPAL ISSUER RISK - There may be economic or political changes that Tax-Free Cash Management Portfolio
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.
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YEAR 2000 RISK - The Portfolios depend on the smooth functioning of All Portfolios
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. Since January 1, 2000, the
Portfolios and their mission-critical service providers have not experienced any
material adverse consequences to the computer systems affecting the Portfolios.
The Portfolios and their shareholders may experience losses if any computer
difficulties are experienced in the future by issuers of portfolio securities or
third parties, such as custodians, banks, broker-dealers or others with which
the Portfolios do business.
</TABLE>
10 PROSPECTUS
<PAGE>
EACH PORTFOLIO'S OTHER INVESTMENTS
This prospectus describes the Portfolios' primary strategies, and each Portfolio
will invest at least 80% of its total assets in the types of securities
described in this prospectus. However, each Portfolio also may invest in other
securities, use other strategies and engage in other investment practices. These
investments and strategies, as well as those described in this prospectus, are
described in detail in our Statement of Additional Information. Of course, there
is no guarantee that any Portfolio will achieve its investment goal.
PROSPECTUS 11
<PAGE>
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 March 31, 2000, AIA had approximately $14.7
billion in assets under management. Under the advisory contract between ARK
Funds and AIA, AIA is entitled to receive advisory fees of:
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U.S. Treasury Cash Management Portfolio 0.15%*
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U.S. Government Cash Management Portfolio 0.15%*
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Prime Cash Management Portfolio 0.15%*
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Tax-Free Cash Management Portfolio 0.15%*
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* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIOS HAVE NOT YET COMMENCED
OPERATIONS AND HAVE NOT PAID ANY ADVISORY FEES. THE BOARD OF TRUSTEES HAS
APPROVED AN INVESTMENT ADVISORY FEE OF 0.15%, HOWEVER, THE PORTFOLIO'S ADVISOR
HAS AGREED TO CONTRACTUALLY WAIVE FEES AND REIMBURSE EXPENSES IN ORDER TO KEEP
TOTAL OPERATING EXPENSES FROM EXCEEDING 0.24% UNTIL APRIL 30, 2001. WITH THESE
FEE WAIVERS, THE ACTUAL ADVISORY FEES RECEIVED BY AIA WILL BE LOWER THAN
0.15%.
PORTFOLIO MANAGER
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. Since 1987 he
has served in several capacities at Allfirst and currently is a Vice President.
Prior to 1987 he served as the Treasurer for the city of Hyattsville, Maryland.
12 PROSPECTUS
<PAGE>
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.
Purchases of Corporate Class Shares are subject to minimum investment
requirements, which are described below. For information call 1-888-427-5386.
HOW TO PURCHASE PORTFOLIO SHARES
You may purchase Corporate Class Shares by placing orders with the Fund's
transfer agent (or its authorized agent). 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.
Investors who deal directly with a financial institution or financial
intermediary (investor representative) will have to follow the institution's or
intermediary's procedures for transacting with the Fund. For more information
about how to purchase or sell Fund shares through your financial institution,
you should contact your financial institution directly. Investors may be charged
a fee for purchase and/or redemption transactions effectuated through certain of
these broker-dealers or other financial intermediaries.
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 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.
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.
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 you purchase or sell Corporate Class Shares through certain financial
institutions (rather than directly from the Fund), you may have to transmit your
purchase and sale requests to your financial institution at an earlier time for
your transaction to become effective that day. This allows your financial
institution time to process your requests and transmit them to the Fund.
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.
PROSPECTUS 13
<PAGE>
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
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 (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 financial institutions or intermediaries when you
open your account.
HOW TO SELL YOUR PORTFOLIO SHARES
Holders of Corporate Class Shares may sell shares by telephone or by mail on any
Business Day. If you have questions, call 1-888-427-5386 or your investor
representative.
BY MAIL. To redeem by mail, send a written request to ARK Funds, P.O. Box 8525,
Boston, MA 02266-8525, or to your correspondent bank and follow their
procedures.
BY TELEPHONE. To redeem by telephone, call 1-888-427-5386 or your investor
representative.
RECEIVING YOUR MONEY
Normally, if we receive your redemption request by 12:00 noon Eastern time for
the U.S. Treasury Cash Management and Tax-Free Cash Management Portfolios or
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. 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
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.
HOW TO EXCHANGE YOUR SHARES
You may exchange your Corporate Class Shares on any Business Day by contacting
us directly by telephone by calling 1-888-427-5386 or your investor
representative.
When you exchange shares, you are really selling your shares and buying other
Portfolio shares. So, your sale price and purchase price will be based on the
NAV next calculated after the Portfolio receives your exchange request. The
Portfolios reserve the right to modify or suspend this exchange privilege. An
exchange between the Corporate Class and another class of any Portfolio is
generally not permitted.
If your account drops below the minimum level 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.
14 PROSPECTUS
<PAGE>
DIVIDENDS AND DISTRIBUTIONS/TAXES
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
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 your financial institution or intermediary in writing prior to the
date of the distribution. Your election will be effective for dividends and
distributions paid after your notice is received. 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.
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.
PROSPECTUS 15
<PAGE>
NOTES
<PAGE>
HOW TO OBTAIN MORE INFORMATION ABOUT ARK FUNDS
INVESTMENT ADVISOR
Allied Investment Advisors, Inc.
100 E. Pratt Street
Baltimore, MD 21202
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
LEGAL COUNSEL
Piper Marbury Rudnick & Wolfe LLP
6225 Smith Avenue
Baltimore, MD 21209
INDEPENDENT AUDITORS
KPMG LLP
99 High Street
Boston, MA 02110
[Logo Omitted]
More information about the Portfolios is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated April 21, 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
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 1-888-427-5386
By Mail: Write to us at:
ARK Funds
P.O. Box 8525
Boston, MA 02266-8525
From the SEC: You can also obtain the SAI or the Annual and
Semi-Annual Reports, as well as other information about ARK Funds, from the
SEC's website (http://www.sec.gov). You may review and copy documents at the SEC
Public Reference Room in Washington, DC (for information call (202) 942-8090).
You may request documents by mail from the SEC, upon payment of a duplicating
fee, by (1) writing to: Securities and Exchange Commission, Public Reference
Section, Washington, DC 20549-6009 or (2) sending an electronic request to
[email protected]. ARK Funds' Investment Company Act registration number is
811-7310.
<PAGE>
[Logo Omitted]
[Graphic omitted]
[Logo Omitted]
- --------------------------------------------------------------------------------
[Graphic Omitted]
CORPORATE II CLASS
PROSPECTUS
APRIL 21, 2000
U.S. TREASURY CASH MANAGEMENT PORTFOLIO
U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
PRIME CASH MANAGEMENT PORTFOLIO
TAX-FREE CASH MANAGEMENT PORTFOLIO
<PAGE>
[Logo Omitted] CORPORATE II CLASS PROSPECTUS APRIL 21, 2000
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.
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 PORTFOLIOS TRY TO MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS
NO GUARANTEE THAT THESE PORTFOLIOS WILL ACHIEVE THIS GOAL.
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 2
- --------------------------------------------------------------------------------
U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO 4
- --------------------------------------------------------------------------------
PRIME CASH MANAGEMENT PORTFOLIO 6
- --------------------------------------------------------------------------------
TAX-FREE CASH MANAGEMENT PORTFOLIO 8
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT RISK 10
- --------------------------------------------------------------------------------
EACH PORTFOLIO'S OTHER INVESTMENTS 11
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR 12
- --------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES 13
- --------------------------------------------------------------------------------
DISTRIBUTION OF PORTFOLIO SHARES 15
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS 15
- --------------------------------------------------------------------------------
TAXES 15
- --------------------------------------------------------------------------------
HOW TO OBTAIN MORE INFORMATION
ABOUT ARK FUNDS BACK COVER
- --------------------------------------------------------------------------------
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>
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
PRINCIPAL 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.
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 CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
The Portfolio's U.S. Treasury securities are not guaranteed against price
movements due to changing interest rates.
PERFORMANCE INFORMATION
As of the date of this prospectus the Portfolio has not yet commenced operations
and does not have a full calendar year of performance.
2 PROSPECTUS
<PAGE>
PORTFOLIO FEES AND EXPENSES
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
CORPORATE II
CLASS
Investment Advisory Fees 0.15%
- --------------------------------------------------------------------------------
Distribution and Shareholder
Service (12b-1) Fees 0.25%
- --------------------------------------------------------------------------------
Other Expenses 0.18%*
- --------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.58%
- --------------------------------------------------------------------------------
Fee Waivers and
Expense Reimbursements 0.09%
- --------------------------------------------------------------------------------
NET TOTAL OPERATING EXPENSES 0.49%**
- --------------------------------------------------------------------------------
* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** 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 APRIL 30, 2001.
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
- --------------------------------------------------------------------------------
$50 $177
- --------------------------------------------------------------------------------
PROSPECTUS 3
<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
PRINCIPAL 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.
In selecting securities for the Portfolio, the Advisor considers factors such as
current yield, the anticipated level of interest rates, and the maturity of the
instrument relative to the maturity of the entire Portfolio. In addition, the
Portfolio may only purchase securities that meet certain SEC requirements
relating to maturity, diversification and credit quality. Under these
requirements, the Portfolio's securities must have remaining maturities of 397
days or less, and the Portfolio must have a dollar-weighted average maturity of
90 days or less.
PRINCIPAL RISKS OF INVESTING IN THE U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
The Portfolio's U.S. government securities are not guaranteed against price
movements due to changing interest rates. Obligations issued by some U.S.
government agencies are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
PERFORMANCE INFORMATION
As of the date of this prospectus the Portfolio has not yet commenced operations
and does not have a full calendar year of performance.
4 PROSPECTUS
<PAGE>
PORTFOLIO FEES AND EXPENSES
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
CORPORATE II
CLASS
Investment Advisory Fees 0.15%
- --------------------------------------------------------------------------------
Distribution and Shareholder
Service (12b-1) Fees 0.25%
- --------------------------------------------------------------------------------
Other Expenses 0.18%*
- --------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.58%
- --------------------------------------------------------------------------------
Fee Waivers and
Expense Reimbursements 0.09%
- --------------------------------------------------------------------------------
NET TOTAL OPERATING EXPENSES 0.49%**
- --------------------------------------------------------------------------------
* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** 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 APRIL 30, 2001.
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
- --------------------------------------------------------------------------------
$50 $177
- --------------------------------------------------------------------------------
PROSPECTUS 5
<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
PRINCIPAL 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.
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 PRIME CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
The Portfolio's securities are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
PERFORMANCE INFORMATION
As of the date of this prospectus the Portfolio has not yet commenced operations
and does not have a full calendar year of performance.
6 PROSPECTUS
<PAGE>
PORTFOLIO FEES AND EXPENSES
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
CORPORATE II
CLASS
Investment Advisory Fees 0.15%
- --------------------------------------------------------------------------------
Distribution and Shareholder
Service (12b-1) Fees 0.25%
- --------------------------------------------------------------------------------
Other Expenses 0.18%*
- --------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.58%
- --------------------------------------------------------------------------------
Fee Waivers and
Expense Reimbursements 0.09%
- --------------------------------------------------------------------------------
NET TOTAL OPERATING EXPENSES 0.49%**
- --------------------------------------------------------------------------------
* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** 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 APRIL 30, 2001.
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
- --------------------------------------------------------------------------------
$50 $177
- --------------------------------------------------------------------------------
PROSPECTUS 7
<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
PRINCIPAL 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.
In selecting securities for the Portfolio, the Advisor considers factors such as
current yield, the anticipated level of interest rates, and the maturity of the
instrument relative to the maturity of the entire Portfolio. In addition, the
Portfolio may only purchase securities that meet certain SEC requirements
relating to maturity, diversification and credit quality. Under these
requirements, the Portfolio's securities must have remaining maturities of 397
days or less, and the Portfolio must have a dollar-weighted average maturity of
90 days or less.
PRINCIPAL RISKS OF INVESTING IN THE TAX-FREE CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
PERFORMANCE INFORMATION
The Portfolio commenced operations on the date of this prospectus and does not
have a full calendar year of performance.
8 PROSPECTUS
<PAGE>
PORTFOLIO FEES AND EXPENSES
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
CORPORATE II
CLASS
Investment Advisory Fees 0.15%
- --------------------------------------------------------------------------------
Distribution and Shareholder
Service (12b-1) Fees 0.25%
- --------------------------------------------------------------------------------
Other Expenses 0.18%*
- --------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.58%
- --------------------------------------------------------------------------------
Fee Waivers and
Expense Reimbursements 0.09%
- --------------------------------------------------------------------------------
NET TOTAL OPERATING EXPENSES 0.49%**
- --------------------------------------------------------------------------------
* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** 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 APRIL 30, 2001.
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
- --------------------------------------------------------------------------------
$50 $177
- --------------------------------------------------------------------------------
PROSPECTUS 9
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL INFORMATION ABOUT RISK
<S> <C>
RISKS PORTFOLIOS AFFECTED BY THE RISKS
MUNICIPAL ISSUER RISK - There may be economic or political changes that Tax-Free Cash Management Portfolio
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 functioning of All Portfolios
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. Since January 1, 2000, the
Portfolios and their mission-critical service providers have not experienced any
material adverse consequences to the computer systems affecting the Portfolios.
The Portfolios and their shareholders may experience losses if any computer
difficulties are experienced in the future by issuers of portfolio securities or
third parties, such as custodians, banks, broker-dealers or others with which
the Portfolios do business.
</TABLE>
10 PROSPECTUS
<PAGE>
EACH PORTFOLIO'S OTHER INVESTMENTS
This prospectus describes the Portfolios' primary strategies, and each Portfolio
will invest at least 80% of its total assets in the types of securities
described in this prospectus. However, each Portfolio also may invest in other
securities, use other strategies and engage in other investment practices. These
investments and strategies, as well as those described in this prospectus, are
described in detail in our Statement of Additional Information. Of course, there
is no guarantee that any Portfolio will achieve its investment goal.
PROSPECTUS 11
<PAGE>
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 March 31, 2000, AIA had approximately $14.7
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 0.15%*
- --------------------------------------------------------------------------------
U.S. Government Cash Management Portfolio 0.15%*
- --------------------------------------------------------------------------------
Prime Cash Management Portfolio 0.15%*
- --------------------------------------------------------------------------------
Tax-Free Cash Management Portfolio 0.15%*
- --------------------------------------------------------------------------------
* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIOS HAVE NOT YET COMMENCED
OPERATIONS AND HAVE NOT PAID ANY ADVISORY FEES. THE BOARD OF DIRECTORS HAS
APPROVED AN INVESTMENT ADVISORY FEE OF 0.15%, HOWEVER, 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 APRIL 30, 2001. WITH THESE
FEE WAIVERS, THE ACTUAL ADVISORY FEES RECEIVED BY AIA WILL BE LOWER THAN
0.15%.
PORTFOLIO MANAGER
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. Since 1987 he
has served in several capacities at Allfirst and currently is a Vice President.
Prior to 1987 he served as the Treasurer for the city of Hyattsville, Maryland.
12 PROSPECTUS
<PAGE>
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.
Purchases of Corporate II Class Shares are subject to minimum investment
requirements, which are described below. For information call 1-888-427-5386.
HOW TO PURCHASE PORTFOLIO SHARES
You may purchase Corporate II Class Shares by placing orders with the Fund's
transfer agent (or its authorized agent). 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.
Investors who deal directly with a financial institution or financial
intermediary (investor representative) will have to follow the institution's or
intermediary's procedures for transacting with the Fund. For more information
about how to purchase or sell Fund shares through your financial institution,
you should contact your financial institution directly. Investors may be charged
a fee for purchase and/or redemption transactions effectuated through certain of
these broker-dealers or other financial intermediaries.
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 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.
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.
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 you purchase or sell Corporate II Class Shares through certain financial
institutions (rather than directly from the Fund), you may have to transmit your
purchase and sale requests to your financial institution at an earlier time for
your transaction to become effective that day. This allows your financial
institution time to process your requests and transmit them to the Fund.
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.
PROSPECTUS 13
<PAGE>
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
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 (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 financial institutions or intermediaries when you
open your account.
HOW TO SELL YOUR PORTFOLIO SHARES
Holders of Corporate II Class Shares may sell shares by telephone or by mail on
any Business Day. If you have questions, call 1-888-427-5386 or your investor
representative.
BY MAIL. To redeem by mail, send a written request to ARK Funds, P.O.Box 8525,
Boston, MA 02266-8525, or to your correspondent bank and follow their
procedures.
BY TELEPHONE. To redeem by telephone, call 1-888-427-5386 or your investor
representative.
RECEIVING YOUR MONEY
Normally, if we receive your redemption request by 12:00 noon Eastern time for
the U.S. Treasury Cash Manage-ment and Tax-Free Cash Management Portfolios or
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. 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
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.
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 1-888-427-5386 or your investor
representative.
When you exchange shares, you are really selling your shares and buying other
Portfolio shares. So, your sale price and purchase price will be based on the
NAV next calculated after the Portfolio receives your exchange request. The
Portfolios reserve the right to modify or suspend this exchange privilege. An
exchange between the Corporate II Class and another class of any Portfolio is
generally not permitted.
If your account drops below the minimum level 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.
14 PROSPECTUS
<PAGE>
DIVIDENDS AND DISTRIBUTIONS/TAXES
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.
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 of each
Portfolio, are 0.25%.
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 your financial institution or intermediary in writing prior to the
date of the distribution. Your election will be effective for dividends and
distributions paid after your notice is received. 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.
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.
PROSPECTUS 15
<PAGE>
NOTES
<PAGE>
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
6225 Smith Avenue
Baltimore, MD 21209
INDEPENDENT AUDITORS
KPMG LLP
99 High Street
Boston, MA 02110
[Logo Omitted]
More information about the Portfolios is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated April 21, 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
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 1-888-427-5386
By Mail: Write to us at:
ARK Funds
P.O. Box 8525
Boston, MA 02266-8525
From the SEC: You can also obtain the SAI or the Annual and Semi-Annual Reports,
as well as other information about ARK Funds, from the SEC's website
(http://www.sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call (202) 942-8090). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
(1) writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009 or (2) sending an electronic request to
[email protected]. ARK Funds' Investment Company Act registration number is
811-7310.
<PAGE>
[Logo omitted]
[Graphic omitted]
[ARK Logo Omitted]
- --------------------------------------------------------------------------------
[Graphic Omitted]
CORPORATE III CLASS
PROSPECTUS
APRIL 21, 2000
U.S. TREASURY CASH MANAGEMENT PORTFOLIO
U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
PRIME CASH MANAGEMENT PORTFOLIO
TAX-FREE CASH MANAGEMENT PORTFOLIO
<PAGE>
[LOGO OMITTED] CORPORATE CLASS III PROSPECTUS APRIL 21, 2000
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.
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 PORTFOLIOS TRY TO MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS
NO GUARANTEE THAT THESE PORTFOLIOS WILL ACHIEVE THIS GOAL.
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 2
- --------------------------------------------------------------------------------
U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO 4
- --------------------------------------------------------------------------------
PRIME CASH MANAGEMENT PORTFOLIO 6
- --------------------------------------------------------------------------------
TAX-FREE CASH MANAGEMENT PORTFOLIO 8
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT RISK 10
- --------------------------------------------------------------------------------
EACH PORTFOLIO'S OTHER INVESTMENTS 11
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR 12
- --------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES 13
- --------------------------------------------------------------------------------
DISTRIBUTION OF PORTFOLIO SHARES 15
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS 15
- --------------------------------------------------------------------------------
TAXES 15
- --------------------------------------------------------------------------------
HOW TO OBTAIN MORE INFORMATION
ABOUT ARK FUNDS BACK COVER
- --------------------------------------------------------------------------------
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>
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
PRINCIPAL 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.
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 CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
The Portfolio's U.S. Treasury securities are not guaranteed against price
movements due to changing interest rates.
PERFORMANCE INFORMATION
As of the date of this prospectus the Portfolio has not yet commenced operations
and does not have a full calendar year of performance.
2 PROSPECTUS
<PAGE>
PORTFOLIO FEES AND EXPENSES
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
- --------------------------------------------------------------------------------
CORPORATE III
CLASS
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.15%
- --------------------------------------------------------------------------------
Distribution and Shareholder
Service (12b-1) Fees 0.40%
- --------------------------------------------------------------------------------
Other Expenses 0.18%*
================================================================================
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.73%
- --------------------------------------------------------------------------------
Fee Waivers and
Expense Reimbursements 0.09%
================================================================================
NET TOTAL OPERATING EXPENSES 0.64%**
- --------------------------------------------------------------------------------
* AS OF THE DATE OF THIS PROSPECTUS, THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** THE PORTFOLIO'S ADVISOR HAS AGREED TO CONTRACTUALLY WAIVE FEES AND REIMBURSE
EXPENSES IN ORDER TO KEEP TOTAL OPERATING EXPENSES FROM EXCEEDING 0.64% UNTIL
APRIL 30, 2001.
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
- --------------------------------------------------------------------------------
$65 $224
- --------------------------------------------------------------------------------
PROSPECTUS 3
<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
PRINCIPAL 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.
In selecting securities for the Portfolio, the Advisor considers factors such as
current yield, the anticipated level of interest rates, and the maturity of the
instrument relative to the maturity of the entire Portfolio. In addition, the
Portfolio may only purchase securities that meet certain SEC requirements
relating to maturity, diversification and credit quality. Under these
requirements, the Portfolio's securities must have remaining maturities of 397
days or less, and the Portfolio must have a dollar-weighted average maturity of
90 days or less.
PRINCIPAL RISKS OF INVESTING IN THE U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
The Portfolio's U.S. government securities are not guaranteed against price
movements due to changing interest rates. Obligations issued by some U.S.
government agencies are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
PERFORMANCE INFORMATION
As of the date of this prospectus the Portfolio has not yet commenced operations
and does not have a full calendar year of performance.
4 PROSPECTUS
<PAGE>
PORTFOLIO FEES AND EXPENSES
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
- --------------------------------------------------------------------------------
CORPORATE III
CLASS
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.15%
- --------------------------------------------------------------------------------
Distribution and Shareholder
Service (12b-1) Fees 0.40%
- --------------------------------------------------------------------------------
Other Expenses 0.18%*
================================================================================
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.73%
- --------------------------------------------------------------------------------
Fee Waivers and
Expense Reimbursements 0.09%
================================================================================
NET TOTAL OPERATING EXPENSES 0.64%**
- --------------------------------------------------------------------------------
* AS OF THE DATE OF THIS PROSPECTUS, THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** THE PORTFOLIO'S ADVISOR HAS AGREED TO CONTRACTUALLY WAIVE FEES AND
REIMBURSE EXPENSES IN ORDER TO KEEP TOTAL OPERATING EXPENSES FROM EXCEEDING
0.64% UNTIL APRIL 30, 2001.
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
- --------------------------------------------------------------------------------
$65 $224
- --------------------------------------------------------------------------------
PROSPECTUS 5
<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
PRINCIPAL 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.
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 PRIME CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
The Portfolio's securities are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
PERFORMANCE INFORMATION
As of the date of this prospectus the Portfolio has not yet commenced operations
and does not have a full calendar year of performance.
6 PROSPECTUS
<PAGE>
PORTFOLIO FEES AND EXPENSES
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
- --------------------------------------------------------------------------------
CORPORATE III
CLASS
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.15%
- --------------------------------------------------------------------------------
Distribution and Shareholder
Service (12b-1) Fees 0.40%
- --------------------------------------------------------------------------------
Other Expenses 0.18%*
================================================================================
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.73%
- --------------------------------------------------------------------------------
Fee Waivers and
Expense Reimbursements 0.09%
================================================================================
NET TOTAL OPERATING EXPENSES 0.64%**
- --------------------------------------------------------------------------------
* AS OF THE DATE OF THIS PROSPECTUS, THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** THE PORTFOLIO'S ADVISOR HAS AGREED TO CONTRACTUALLY WAIVE FEES AND
REIMBURSE EXPENSES IN ORDER TO KEEP TOTAL OPERATING EXPENSES FROM EXCEEDING
0.64% UNTIL APRIL 30, 2001.
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
- --------------------------------------------------------------------------------
$65 $224
- --------------------------------------------------------------------------------
PROSPECTUS 7
<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
PRINCIPAL 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.
In selecting securities for the Portfolio, the Advisor considers factors such as
current yield, the anticipated level of interest rates, and the maturity of the
instrument relative to the maturity of the entire Portfolio. In addition, the
Portfolio may only purchase securities that meet certain SEC requirements
relating to maturity, diversification and credit quality. Under these
requirements, the Portfolio's securities must have remaining maturities of 397
days or less, and the Portfolio must have a dollar-weighted average maturity of
90 days or less.
PRINCIPAL RISKS OF INVESTING IN THE TAX-FREE CASH MANAGEMENT PORTFOLIO
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
PERFORMANCE INFORMATION
As of the date of this prospectus the Portfolio has not yet commenced operations
and does not have a full calendar year of performance.
8 PROSPECTUS
<PAGE>
PORTFOLIO FEES AND EXPENSES
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, distribution, administration and custody
services and other costs of doing business. This table describes the fees and
expenses that you may pay if you buy and hold shares of the Portfolio.
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
- --------------------------------------------------------------------------------
CORPORATE III
CLASS
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.15%
- --------------------------------------------------------------------------------
Distribution and Shareholder
Service (12b-1) Fees 0.40%
- --------------------------------------------------------------------------------
Other Expenses 0.18%*
================================================================================
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 0.73%
- --------------------------------------------------------------------------------
Fee Waivers and
Expense Reimbursements 0.09%
================================================================================
NET TOTAL OPERATING EXPENSES 0.64%**
- --------------------------------------------------------------------------------
* AS OF THE DATE OF THIS PROSPECTUS, THE PORTFOLIO HAS NOT YET COMMENCED
OPERATIONS AND OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL
YEAR.
** THE PORTFOLIO'S ADVISOR HAS AGREED TO CONTRACTUALLY WAIVE FEES AND
REIMBURSE EXPENSES IN ORDER TO KEEP TOTAL OPERATING EXPENSES FROM EXCEEDING
0.64% UNTIL APRIL 30, 2001.
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
- --------------------------------------------------------------------------------
$65 $224
- --------------------------------------------------------------------------------
PROSPECTUS 9
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
<TABLE>
<CAPTION>
<S> <C>
RISKS PORTFOLIOS AFFECTED BY THE RISKS
MUNICIPAL ISSUER RISK - There may be economic or political changes that Tax-Free Cash Management Portfolio
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 functioning of All Portfolios
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. Since January 1, 2000, the
Portfolios and their mission-critical service providers have not experienced any
material adverse consequences to computer systems affecting the Portfolios. The
Portfolios and their shareholders may experience losses if any computer
difficulties are experienced in the future by issuers of portfolio securities or
third parties, such as custodians, banks, broker-dealers or others with which
the Portfolios do business.
</TABLE>
10 PROSPECTUS
<PAGE>
EACH PORTFOLIO'S OTHER INVESTMENTS
This prospectus describes the Portfolios' primary
strategies, and each Portfolio will invest at
least 80% of its total assets in the types of
securities described in this prospectus. However,
each Portfolio also may invest in other securities,
use other strategies and engage in other investment
practices. These investments and strategies, as
well as those described in this prospectus, are
described in detail in our Statement of Additional
Information. Of course, there is no guarantee that
any Portfolio will achieve its investment goal.
PROSPECTUS 11
<PAGE>
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 March 31, 2000, AIA had approximately $14.7
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 0.15%*
- --------------------------------------------------------------------------------
U.S. Government Cash Management Portfolio 0.15%*
- --------------------------------------------------------------------------------
Prime Cash Management Portfolio 0.15%*
- --------------------------------------------------------------------------------
Tax-Free Cash Management Portfolio 0.15%*
- --------------------------------------------------------------------------------
* AS OF THE DATE OF THIS PROSPECTUS THE PORTFOLIOS HAVE NOT YET COMMENCED
OPERATIONS AND HAVE NOT PAID ANY ADVISORY FEES. THE BOARD OF DIRECTORS HAS
APPROVED AN INVESTMENT ADVISORY FEE OF 0.15%, HOWEVER, THE PORTFOLIO'S
ADVISOR HAS AGREED TO CONTRACTUALLY WAIVE FEES AND REIMBURSE EXPENSES IN ORDER
TO KEEP TOTAL OPERATING EXPENSES FROM EXCEEDING 0.64% UNTIL APRIL 30, 2001.
WITH THESE FEE WAIVERS, THE ACTUAL ADVISORY FEES RECEIVED BY AIA WILL BE LOWER
THAN 0.15%.
PORTFOLIO MANAGER
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. Since 1987 he
has served in several capacities at Allfirst and currently is a Vice President.
Prior to 1987 he served as the Treasurer for the city of Hyattsville, Maryland.
12 PROSPECTUS
<PAGE>
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.
Purchases of Corporate III Class Shares are subject to minimum investment
requirements, which are described below. For information call 1-888-427-5386.
HOW TO PURCHASE PORTFOLIO SHARES
You may purchase Corporate III Class Shares by placing orders with the Fund's
transfer agent (or its authorized agent). 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.
Investors who deal directly with a financial institution or financial
intermediary (investor representative) will have to follow the institution's or
intermediary's procedures for transacting with the Fund. For more information
about how to purchase or sell Fund shares through your financial institution,
you should contact your financial institution directly. Investors may be charged
a fee for purchase and/or redemption transactions effectuated through certain of
these broker-dealers or other financial intermediaries.
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 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.
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.
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 you purchase or sell Corporate III Class Shares through certain financial
institutions (rather than directly from the Fund), you may have to transmit your
purchase and sale requests to your financial institution at an earlier time for
your transaction to become effective that day. This allows your financial
institution time to process your requests and transmit them to the Fund.
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.
PROSPECTUS 13
<PAGE>
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
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 (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 financial institutions or intermediaries when you
open your account.
HOW TO SELL YOUR PORTFOLIO SHARES
Holders of Corporate III Class Shares may sell shares by telephone or by mail on
any Business Day. If you have questions, call 1-888-427-5386 or your investor
representative.
BY MAIL. To redeem by mail, send a written request to ARK Funds, P.O. Box 8525,
Boston, MA 02266-8525, or to your correspondent bank and follow their
procedures.
BY TELEPHONE. To redeem by telephone, call 1-888-427-5386 or your investor
representative.
RECEIVING YOUR MONEY
Normally, if we receive your redemption request by 12:00 noon Eastern time for
the U.S. Treasury Cash Management and Tax-Free Cash Management Portfolios or
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. 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
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.
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 1-888-427-5386 or your investor
representative.
When you exchange shares, you are really selling your shares and buying other
Portfolio shares. So, your sale price and purchase price will be based on the
NAV next calculated after the Portfolio receives your exchange request. The
Portfolios reserve the right to modify or suspend this exchange privilege. An
exchange between the Corporate III Class and another class of any Portfolio is
generally not permitted.
If your account drops below the minimum level 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.
14 PROSPECTUS
<PAGE>
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.
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 of each
Portfolio, are 0.40%.
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 your financial institution or intermediary in writing prior to the
date of the distribution. Your election will be effective for dividends and
distributions paid after your notice is received. 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.
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.
PROSPECTUS 15
<PAGE>
NOTES
<PAGE>
HOW TO OBTAIN MORE INFORMATION ABOUT ARK FUNDS
INVESTMENT ADVISOR
Allied Investment Advisors, Inc.
100 E. Pratt Street
Baltimore, MD 21202
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
LEGAL COUNSEL
Piper Marbury Rudnick & Wolfe LLP
6225 Smith Avenue
Baltimore, MD 21209
INDEPENDENT AUDITORS
KPMG LLP
99 High Street
Boston, MA 02110
[Logo Omitted] More information about the Portfolios is
available without charge through the following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated April 21, 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
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 1-888-427-5386
By Mail: Write to us at:
ARK Funds
P.O. Box 8525
Boston, MA 02266-8525
From the SEC: You can also obtain the SAI or the
Annual and Semi-Annual Reports, as well as other
information about ARK Funds, from the SEC's
website (http://www.sec.gov). You may review and
copy documents at the SEC Public Reference Room
in Washington, DC (for information call
(202) 942-8090). You may request documents by
mail from the SEC, upon payment of a duplicating
fee, by (1) writing to: Securities and Exchange
Commission, Public Reference Section, Washington,
DC 20549-6009 or (2) sending an electronic
request to [email protected]. ARK Funds'
Investment Company Act registration number is
811-7310.
<PAGE>
[Logo Omitted]
[Graphic Omitted]
ARK FUNDS
STATEMENT OF ADDITIONAL INFORMATION
CORPORATE CLASS - CORPORATE II CLASS - CORPORATE III CLASS
APRIL 21, 2000
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the current prospectuses dated April 21, 2000, for
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. To obtain additional copies of the prospectuses or this Statement
of Additional Information, please call 1-888-427-5386.
TABLE OF CONTENTS PAGE
INVESTMENT GOALS AND STRATEGIES................................................1
INVESTMENT POLICIES AND LIMITATIONS............................................3
INVESTMENT PRACTICES...........................................................7
PORTFOLIO TRANSACTIONS........................................................17
VALUATION OF PORTFOLIO SECURITIES.............................................18
PORTFOLIO PERFORMANCE.........................................................19
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................19
TAXES.........................................................................21
TRUSTEES AND OFFICERS.........................................................25
CODE OF ETHICS................................................................28
INVESTMENT ADVISOR............................................................29
ADMINISTRATOR AND DISTRIBUTOR.................................................30
TRANSFER AGENT................................................................33
DESCRIPTION OF THE FUND.......................................................33
CUSTODIAN.....................................................................35
INDEPENDENT AUDITORS..........................................................36
APPENDIX A - 2000 TAX RATES..................................................A-1
<PAGE>
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."
The U.S. TREASURY CASH MANAGEMENT PORTFOLIO, U.S. GOVERNMENT CASH
MANAGEMENT PORTFOLIO, PRIME CASH MANAGEMENT PORTFOLIO, and TAX-FREE CASH
MANAGEMENT PORTFOLIO (the "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
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 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 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 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, the Portfolio invests
exclusively 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.
The investment goal of 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, the Portfolio invests
1
<PAGE>
exclusively in U.S. Government Securities and in repurchase agreements backed by
such instruments. The 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, the 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 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 the
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 the 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. The 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. The 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. The 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, the 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 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. The 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.
The 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
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
2
<PAGE>
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 CASH MANAGEMENT
PORTFOLIO will be as fully invested as is practicable in municipal obligations.
However, the Portfolio reserves the right for temporary defensive purposes to
invest without limitation in taxable Money Market Instruments. There may be
occasions when, as a result of maturities of portfolio securities or sales of
portfolio shares, or in order to meet anticipated redemption requests, the
Portfolios may hold cash which is not earning income.
The TAX-FREE CASH MANAGEMENT PORTFOLIO may invest up to 25% of its net
assets in a single issuer's securities. The Portfolio may invest any portion of
its assets in industrial revenue bonds ("IRBs") backed by private companies, and
may invest up to 25% of its total assets in IRBs related to a single industry.
The Portfolio also may invest 25% or more of its total assets in tax-exempt
securities whose revenue sources are from similar types of projects (E.G.,
education, electric utilities, health care, housing, transportation, water,
sewer, and gas utilities). There may be economic, business or political
developments or changes that affect all securities of a similar type. Therefore,
developments affecting a single issuer or industry, or securities financing
similar types of projects, could have a significant effect on the Portfolios'
performance.
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in
the prospectuses. Unless otherwise expressly noted, whenever an investment
policy or limitation states a maximum percentage of a Portfolio's assets that
may be invested in any security or other asset, or sets forth a policy regarding
quality standards, such percentage or standard will be determined immediately
after and as a result of the Portfolio's acquisition of such security or other
asset. Accordingly, any subsequent change in value, net assets, or other
circumstances will not be considered when determining whether the investment
complies with the Portfolio's investment policies and limitations.
3
<PAGE>
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 permitted under the All Portfolios
1940 Act.
The Portfolio may not borrow money, except that the Portfolio may (i) borrow All Portfolios
money from a bank for temporary or emergency purposes (not for leveraging or
investment) and (ii) engage in reverse repurchase agreements for any purpose;
provided that (i) and (ii) in combination do not exceed 33 1/3% of the value of
the Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings) Any borrowings that come to exceed this amount will be
reduced within three business days to the extent necessary to comply with the 33
1/3% limitation.
The Portfolio may not with respect to 75% of its total assets, purchase the All Portfolios
securities of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result, (a)
more than 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>
4
<PAGE>
<TABLE>
<CAPTION>
FUNDAMENTAL POLICIES: PORTFOLIOS TO WHICH THE POLICY
APPLIES:
<S> <C>
The Portfolio may not underwrite securities issued by others, except to the All Portfolios
extent that the Portfolio may be considered an underwriter within the meaning of
the Securities Act of 1933 in the disposition of portfolio securities.
The Portfolios may not purchase the securities of any issuer (other than U.S. Treasury Cash
securities issued or guaranteed by the U.S. government or any of its agencies or Management Portfolio and
instrumentalities) if, as a result, more than 25% of the Portfolio's total Cash U.S. Government Cash
assets would be invested in the securities of companies whose principal business Management Portfolio
activities are in the same industry.
The Portfolio may not purchase the securities of any issuer (other than Prime Cash Management
securities issued or guaranteed by the U.S. government or any of its agencies or Portfolio
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 may invest 25% or
more of its assets in obligations of domestic banks.
The Portfolios may not purchase or sell real estate unless acquired as a result All Portfolios
of ownership of securities or other instruments (but this shall not prevent the
Portfolios from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business).
The Portfolios may not purchase or sell commodities unless acquired as a result All Portfolios
of ownership of securities or other instruments.
The Portfolio may not lend any security or make any other loan if, as a result, All Portfolios
more than 33 1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
</TABLE>
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THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL:
<TABLE>
<CAPTION>
NON-FUNDAMENTAL POLICIES: PORTFOLIOS TO WHICH THE POLICY
APPLIES:
<S> <C>
The Portfolio does not currently intend to sell securities short, unless it owns All Portfolios
or has the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts and
options are not deemed to constitute selling securities short.
The Portfolio does not currently intend to purchase a security (other than a U.S. Government
security issued or guaranteed by the U.S. government or any of its agencies or Cash Management Portfolio and
instrumentalities) if, as a result, more than 5% of a Portfolio's total assets Prime Cash Management
would be invested in the securities of a single issuer; provided that the Portfolio
Portfolio may invest up to 25% of its total assets in the first tier securities
of a single issuer for up to three business days.
The Portfolio will not purchase any security while borrowings (including reverse All Portfolios
repurchase agreements) representing more than 5% of its total assets are
outstanding.
The Portfolio does not currently intend to purchase securities on margin, except All Portfolios
that the Portfolio may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
The Portfolio does not currently intend to engage in repurchase agreements or U.S. Treasury Cash
make loans, but this limitation does not apply to purchases of debt securities. Management Portfolio and
Tax-Free Cash
Management Portfolio
The Portfolio does not currently intend to purchase securities of other All Portfolios
investment companies, except to the extent permitted by the 1940 Act.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NON-FUNDAMENTAL POLICIES: PORTFOLIOS TO WHICH THE POLICY
APPLIES:
<S> <C>
The Portfolio does not currently intend to purchase any security if, as a All Portfolios
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>
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.
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 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
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<PAGE>
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.
FEDERALLY TAXABLE OBLIGATIONS
The Tax-Free Cash Management Portfolio generally does not intend to
invest in securities whose interest is taxable; however, from time to time the
Portfolio may invest on a temporary basis in fixed-income obligations whose
interest is subject to Federal income tax. For example, the Portfolio may invest
in obligations whose interest is taxable pending the investment or reinvestment
in municipal securities of proceeds from the sale of its shares or sales of
portfolio securities.
Should the Portfolio invest in taxable obligations, it would purchase
securities that, in the advisor's judgment, are of high quality. This would
include obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, obligations of domestic banks and repurchase agreements. The
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 Cash Management Portfolio anticipates being as fully
invested in municipal securities as is practicable; however, there may be
occasions when as a result of maturities of portfolio securities, or sales of
portfolio shares, or in order to meet redemption requests, the Portfolio may
hold cash that is not earning income. In addition, there may be occasions when,
in order to raise cash to meet redemptions or to preserve credit quality, the
Portfolio may be required to sell securities at a loss.
8
<PAGE>
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 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% of its
assets were invested in illiquid securities, it would seek to take appropriate
steps to protect liquidity.
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
9
<PAGE>
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of developing countries also will involve a risk that the
governmental entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional risks to
the Portfolio. For example, if a loan is foreclosed, the Portfolio could become
part owner of any collateral, and would bear the costs and liabilities
associated with owning and disposing of the collateral. In addition, it is
conceivable that under emerging legal theories of lender liability, the
Portfolio could be held liable as a co-lender. Direct debt instruments also may
involve a risk of insolvency of the lending bank or other intermediary. Direct
debt instruments that are not in the form of securities may offer less legal
protection to the Portfolio in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, the Portfolio's advisor will conduct
research and analysis in an attempt to avoid situations where fraud or
misrepresentation could adversely affect the Portfolio.
A loan is often administered by a bank or other financial institution
which acts as agent for all holders. The agent administers the terms of the
loan, as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, the Portfolio has direct recourse against the borrower, it
may have to rely on the agent to apply appropriate credit remedies against the
borrower. If assets held by the agent for the benefit of the Portfolio were
determined to be subject to the claims of the agent's general creditors, the
Portfolio might incur certain costs and delays in realizing payment on the loan
or loan participation and could suffer a loss of principal or interest.
The Portfolios limit the amount of total assets that they will invest
in any one issuer or in issuers within the same industry (see fundamental
limitations for the Portfolios). For purposes of these limitations, the
Portfolio generally will treat the borrower as the "issuer" of indebtedness held
by the Portfolio. In the case of loan participations where a bank or other
lending institution serves as financial intermediary between the Portfolio and
the borrower, if the participation does not shift to the Portfolio the direct
debtor-creditor relationship with the borrower, SEC interpretations require the
Portfolio, in appropriate circumstances, to treat both the lending bank or other
lending institution and the borrower as "issuers" for the purposes of
determining whether the Portfolio has invested more than 5% of its total assets
in a single issuer. Treating a financial intermediary as an issuer of
indebtedness may restrict the Portfolio's ability to invest in 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.
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<PAGE>
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. Investing in
these securities may make it more difficult to maintain a stable net asset value
per share.
MUNICIPAL LEASE OBLIGATIONS
Municipal leases and participation interests therein, which may take
the form of a lease, an installment purchase, or a conditional sale contract,
are issued by state and local governments and authorities to acquire land and a
wide variety of equipment and facilities, such as fire and sanitation vehicles,
telecommunications equipment, and other capital assets. Generally, the
Portfolios will not hold such obligations directly as a lessor of the property,
but will purchase a participation interest in a municipal obligation from a bank
or other third party. A participation interest gives the Portfolio a specified,
undivided interest in the obligation in proportion to its purchased interest in
the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated
with general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt. These
may include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, or conditional sale contracts (which normally
provide for title to the leased asset to pass to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for the issuance
of debt. Many leases and contracts include "non-appropriation" clauses providing
that the governmental issuer has no obligation to make future payments under the
lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance obligations.
In determining the liquidity of a municipal lease obligation, the
Portfolio's advisor will differentiate between direct municipal leases and
municipal lease-backed securities, the latter of which may take the form of a
lease-backed revenue bond, a tax-exempt asset-backed security,
11
<PAGE>
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.
REFUNDING CONTRACTS
Refunding obligations require the issuer to sell and the Portfolio to
buy refunded municipal obligations at a stated price and yield on a settlement
date that may be several months or years in the future. The Portfolio generally
will not be obligated to pay the full purchase price if it fails to perform
under a refunding contract. Instead, refunding contracts generally provide for
payment of liquidated damages to the issuer (currently 15% to 20% of the
purchase price). The Portfolio may secure its obligations under a refunding
contract by depositing collateral or a letter of credit equal to the liquidated
damages provisions of the refunding contract. When required by SEC guidelines,
the Portfolio will place liquid assets in a segregated custodial account equal
in amount to its obligations under refunding contracts.
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.
RESTRICTED SECURITIES
Restricted securities are securities that generally can only be sold in
privately negotiated transactions, pursuant to an exemption from registration
under the Securities Act of 1933, or in a registered public offering. Where
registration is required, the Portfolio may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
12
<PAGE>
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.
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.
STANDBY COMMITMENTS
The Tax-Free Cash Management Portfolio may invest in standby
commitments. These obligations are puts that entitle holders to same day
settlement at an exercise price equal to the amortized cost of the underlying
security plus accrued interest, if any, at the time of exercise. The Portfolio
may acquire standby commitments to enhance the liquidity of portfolio securities
when the issuers of the commitments present minimal risk of default.
Ordinarily 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 Portfolio 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.
13
<PAGE>
Standby commitments are subject to certain risks, including the ability
of issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not marketable
by the Portfolio and the possibility that the maturities of the underlying
securities may be different from those of the commitments.
SWAP AGREEMENTS
Swap agreements can be individually negotiated and structured to
include exposure to a variety of different types of investments or market
factors. Depending on their structure, swap agreements may increase or decrease
the Portfolio's exposure to long- or short-term interest rates (in the United
States or abroad), foreign currency values, mortgage securities, corporate
borrowing rates, or other factors such as security prices or inflation rates.
Swap agreements can take many different forms and are known by a variety of
names. A Portfolio is not limited to any particular form of swap agreement if
its advisor determines it is consistent with the Portfolio's investment
objective and policies.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
rights to receive payments to the extent that a specified interest rate exceeds
an agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
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.
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<PAGE>
The Portfolio will maintain appropriate liquid assets in segregated
custodial accounts to cover its current obligations under swap agreements. If a
Portfolio enters into a swap agreement on a net basis, it will segregate assets
with a daily value at least equal to the excess, if any, of the Portfolio's
accrued obligations under the swap agreement over the accrued amount the
Portfolio is entitled to receive under the agreement. If a Portfolio enters into
a swap agreement on other than a net basis, it will segregate assets with a
value equal to the full amount of the Portfolio's accrued obligations under the
agreement.
TENDER OPTION BONDS
The Tax-Free Cash Management Portfolio may invest in tender option
bonds. These bonds are created by coupling an intermediate- or long-term
fixed-rate tax-exempt bond (generally held pursuant to a custodial agreement)
with a tender agreement that gives the holder the option to tender the bond at
its face value. As consideration for providing the tender option, the sponsor
(usually a bank, broker-dealer, or other financial institution) receives
periodic fees equal to the difference between the bond's fixed coupon rate and
the rate (determined by a remarketing or similar agent) that would cause the
bond, coupled with the tender option to trade at par on the date of such
determination. After payment of the tender option fee, the Portfolio effectively
holds a demand obligation that bears interest at the prevailing short-term
tax-exempt rate. Subject to applicable regulatory requirements, the Tax-Free
Cash Management 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 DEMAND OBLIGATIONS
The Prime Cash Management Portfolio and Tax-Free 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 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
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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 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.
VARIABLE OR FLOATING RATE INSTRUMENTS
The Portfolios 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.
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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.
PORTFOLIO TRANSACTIONS
The Portfolios' advisor 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, see "Investment
Advisor" below.
Certain investments may be appropriate for a Portfolio and for other
clients advised by the advisor. Investment decisions for a Portfolio and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment, and the size of their investments generally. A
particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but fewer than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients of the advisor on the
same day. In each of these situations, the transactions will be allocated among
the clients in a manner considered by the advisor to be equitable to each. In
some cases, this procedure could have an adverse effect on the price or amount
of the securities purchased or sold by a Portfolio. Purchase and sale orders for
a Portfolio may be combined with those of other clients in the interest of
achieving the most favorable execution for the Portfolio.
As of the date of this Statement of Additional Information, the
Portfolios have not yet commenced operations and have not paid any brokerage
commissions.
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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 the date of this Statement of
Additional Information, the Portfolios had not yet commenced operations and had
not acquired any securities of its "regular brokers or dealers."
VALUATION OF PORTFOLIO SECURITIES
Each 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 Portfolio must adhere to certain conditions under Rule 2a-7.
The Board of Trustees oversees the advisor's adherence to SEC rules
concerning money market funds, and has established procedures designed to
stabilize each 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.
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PORTFOLIO PERFORMANCE
YIELD CALCULATIONS
In computing the yield of shares of a 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 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 Portfolios may quote
yields in advertising based on any historical seven-day period. Yields for the
shares of the Portfolios are calculated on the same basis as other money market
funds, as required by regulation.
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 Cash Management 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 A for tables showing the effect of a shareholder's tax
status on effective yield under the Federal income tax laws for 2000.
As of the date of this Statement of Additional Information, the
Portfolios have not yet commenced operations and no calculations of yield are
available.
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").
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<PAGE>
The calculation of the NAV, dividends and distributions of a
Portfolio's 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 of the U.S. Treasury Cash Management Portfolio and Tax-Free
Cash Management Portfolio are determined at 12:00 noon, Eastern Time, and as of
the close of regular trading on the NYSE, normally 4:00 p.m. The NAV of the U.S.
Government Cash Management Portfolio and Prime Cash Money Market Portfolio are
determined at 5:00 p.m., Eastern Time.
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.
20
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TAXES
The following is only a summary of certain additional Federal income
tax considerations generally affecting the Portfolios and their shareholders
that are not described in the prospectuses. No attempt is made to present a
detailed explanation of the Federal, state or local tax treatment of the
Portfolios or their shareholders, and the discussion here and in the
prospectuses is not intended as a substitute for careful tax planning.
The following discussion of Federal income tax consequences is based on
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
Each Portfolio calculates dividend and capital gain distributions
separately, and is treated as a separate entity in all respects for tax
purposes.
TAXATION OF THE PORTFOLIOS
Each Portfolio intends to qualify as a regulated investment company
("RIC") under Subchapter M of the Code. In order to qualify as a RIC for any
taxable year, a Portfolio must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock, securities or foreign currencies
and other income (including, but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"). In addition, at the
close of each quarter of the Portfolio's taxable 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
21
<PAGE>
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).
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. 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
22
<PAGE>
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 Cash Management 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.
TAX-FREE CASH MANAGEMENT PORTFOLIO
Dividends (i) designated by this Portfolio as exempt-interest dividends
and (ii) paid to shareholders out of tax-exempt interest income earned by the
Portfolio (exempt-interest dividends) generally will not be subject to Federal
income tax by the Portfolio's shareholders. However, persons who are
"substantial users" or "related persons" of facilities financed by private
activity bonds held by the Portfolio may be subject to tax on their pro-rata
share of the interest income from such bonds and should consult their tax
advisors before purchasing shares of the Portfolio. Realized market discount on
tax-exempt obligations purchased after April 30, 1993 is treated as ordinary
income and not as a capital gain. Dividends paid by a Portfolio out of its
taxable net investment income (including realized net short-term capital gains,
if any) are taxable to shareholders as ordinary income notwithstanding that such
dividends are reinvested in additional shares of the Portfolio. The "exempt
interest dividend" portion of a distribution is determined by the ratio of the
net tax-exempt income realized by a Portfolio for the entire year to the
aggregate amount of distributions for such year and, thus, is an annual average,
rather than a day-to-day determination for each shareholder. Distributions of
long-term capital gains, if any, are taxable as long-term capital gains to the
shareholder receiving them regardless of the length of time he or she may have
held his or her shares. Under current tax law (1) interest on certain private
activity bonds is treated as an item of tax preference for purposes of the
Federal Alternative Minimum Tax imposed on individuals and corporations,
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<PAGE>
although for regular Federal income tax purposes such interest remains fully
tax-exempt, and (2) interest on all tax-exempt obligations is included in
"adjusted current earnings" of corporations for Federal Alternative Minimum Tax
purposes. Because the Portfolio expects to purchase private activity bonds, a
portion (not expected to exceed 20%) of the Portfolio's exempt-interest
dividends may constitute an item of tax preference for those shareholders
subject to the Federal Alternative Minimum Tax.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of Portfolio generating exempt-interest dividends generally is not
deductible for Federal income tax purposes. Under IRS rules for determining when
borrowed funds are used for purchasing or carrying particular assets, shares of
the Portfolio may be considered to have been purchased or carried with borrowed
funds even though those funds are not directly linked to the shares.
The exemption for Federal income tax purposes of dividends derived from
interest on municipal securities does not necessarily result in an exemption
under the income or other tax laws of any state or local taxing authority.
Shareholders of 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 Portfolio which may
differ from the Federal income tax consequences described above.
Receipt of tax-exempt income may result in collateral tax consequences
to certain taxpayers, including, without limitation, financial institutions,
property and casualty insurance companies, certain foreign corporations doing
business in the United States, certain S corporations with excess passive
income, individual recipients of social security or railroad retirement benefits
and individuals otherwise eligible for the earned income credit. For example,
shareholders who receive social security benefits may be subject to Federal
income tax on up to 85% of such benefits to the extent that their income,
including tax-exempt income, exceeds certain base amounts. Prospective
purchasers of Portfolio shares should consult their own tax advisors as to the
applicability of any such collateral consequences.
The Portfolio purchases municipal obligations based on opinions of bond
counsel regarding the Federal income tax status of the obligations. These
opinions generally will be based upon covenants by the issuers regarding
continuing compliance with Federal tax requirements. If the issuer of an
obligation fails to comply with its covenant at any time, interest on the
obligation could become Federally taxable retroactive to the date the obligation
was issued.
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<PAGE>
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 Cash Management Portfolio would not be suitable
for tax-exempt institutions and may not be suitable for retirement plans
qualified under Section 401 of the Code, H.R. 10 plans and Individual Retirement
Accounts, because such plans and accounts are generally tax-exempt. Therefore,
such plans and accounts would not gain any additional benefit from the
tax-exempt status of the Portfolio's dividends and, moreover, such dividends
would be taxable when distributed to the beneficiary.
OTHER TAX INFORMATION
In addition to Federal taxes, shareholders may be subject to state or
local taxes on their investment, depending on state law.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of distributions payable to any shareholder who (1) has
provided the Fund either an incorrect tax identification number or no number at
all, (2) is subject to backup withholding by the 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
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.
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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.
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.
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<PAGE>
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.
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT ESTIMATED
BENEFITS ANNUAL TOTAL
AGGREGATE ACCRUED FROM RETIREMENT COMPENSATION
COMPENSATION THE FUND FROM THE FUND FROM THE FUND
NAME OF TRUSTEE FROM THE FUND COMPLEX* COMPLEX* COMPLEX*
<S> <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.
27
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CODE OF ETHICS
The Board of Trustees of the Fund has adopted a Code of Ethics pursuant
to Rule 17j-1 under the 1940 Act. The Code of Ethics applies to the personal
investing activities of all trustees and officers of the Fund, as well as to
designated officers, directors and employees of AIA and the Distributor. As
described below, the Code of Ethics imposes significant restrictions on AIA's
investment personnel, including the portfolio managers and employees who execute
or help execute a portfolio manager's decisions or who obtain contemporaneous
information regarding the purchase or sale of a security by the Portfolios.
The Code of Ethics requires that covered employees of AIA and trustees
who are "interested persons", preclear personal securities investments (with
certain exceptions, such as non-volitional purchases, purchases that are part of
an automatic dividend reinvestment plan or purchases of securities that are not
eligible for purchase by the Portfolios). The preclearance requirement and
associated procedures are designed to identify any substantive prohibition or
limitation applicable to the proposed investment. The substantive restrictions
applicable to investment personnel include a ban on acquiring any securities in
an initial public offering, a prohibition from profiting on short-term trading
in securities and special preclearance of the acquisition of securities in
private placements. Furthermore, the Code of Ethics provides for trading
"blackout periods" that prohibit trading by investment personnel and certain
other employees within periods of trading by the Portfolios in the same
security. Officers, directors and employees of AIA and the Distributor may
comply with codes instituted by those entities so long as they contain similar
requirements and restrictions.
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<PAGE>
INVESTMENT ADVISOR
The investment advisor of the Fund is Allied Investment Advisors, Inc.
("AIA"). AIA provides the Portfolios with day-to-day management services and
makes investment decisions on the Portfolios' behalf in accordance with each
Portfolio's investment policies.
Corporate, Corporate II and Corporate III Class shares of the Fund are
available for individuals, financial institutions, corporations and other
entities that have established trust relationships with Allfirst or its
affiliates or correspondent banks. Allfirst Trust Company, N.A. ("Allfirst
Trust"). Allfirst Trust, an affiliate of Allfirst, also provides custodial and
administrative services to the Fund. AIA and Allfirst Trust are wholly-owned
subsidiaries of Allfirst Bank, a Maryland-chartered Federal Reserve member bank
based in Baltimore, Maryland. Allfirst Bank is a wholly-owned subsidiary of
Allfirst Financial Inc., which is owned by Allied Irish Banks, p.l.c., an
international financial services organization based in Dublin, Ireland. SEI
Investments Distribution Co., the distributor of the Fund, is not affiliated
with Allied Irish Banks, p.l.c. or its affiliates.
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.
The advisory contract has 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 contract is terminable with respect to a Portfolio without penalty
on 60 days' written notice when authorized either by vote of the shareholders of
the Portfolio or by a vote of a majority of the trustees, or by AIA, on 60 days'
written notice, and will automatically terminate in the event of its assignment.
The advisory contract provides that, with respect to each Portfolio,
neither AIA nor its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the performance of its duties to a
Portfolio, except for willful misfeasance, bad faith or gross negligence in the
performance by AIA of its duties or by reason of reckless disregard of its
obligations and duties under the advisory contract. The advisory contract
provides that AIA may render services to others.
As of the date of this Statement of Additional Information, the
Portfolios have not yet commenced operations and have not paid any advisory
fees.
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In addition to receiving its advisory fee, AIA may also act and be
compensated as investment manager for clients with respect to assets which are
invested in a Portfolio. In some instances AIA may elect to credit against any
investment management fee received from a client who is also a shareholder in a
Portfolio an amount equal to all or a portion of the fee received by AIA, or its
affiliates, from a Portfolio with respect to the client's assets invested in the
Portfolio.
Each Portfolio has, under its advisory contract, confirmed its
obligation to pay all expenses, including interest charges, taxes, brokerage
fees and commissions; certain insurance premiums; fees, interest charges and
expenses of the custodian, transfer agent and dividend disbursing agent;
telecommunications expenses; auditing, legal and compliance expenses;
organization costs and costs of maintaining existence; costs of preparing and
printing the Portfolios' prospectuses, statements of additional information and
shareholder reports and delivering them to existing and prospective
shareholders; costs of maintaining books of original entry for portfolio
accounting and other required books and accounts of calculating the NAV of
shares of the Portfolios; costs of reproduction, stationery and supplies;
compensation of trustees and officers of the Fund and costs of other personnel
performing services for the Fund who are not officers of the Administrator or
Distributor, or their respective affiliates; costs of shareholder meetings; SEC
registration fees and related expenses; state securities laws registration fees
and related expenses; fees payable under the advisory contracts and under the
administration agreement, and all other fees and expenses paid by the
Portfolios.
ADMINISTRATOR AND DISTRIBUTOR
ADMINISTRATOR AND SUB-ADMINISTRATOR
SEI Investments Mutual Funds Services serves as administrator (the
"Administrator") to the Fund. The Administrator assists in supervising all
operations of the Portfolios, except those performed by AIA under the advisory
contracts, by the Distributor under the distribution agreement and by Allfirst
Trust under the sub-administration and custodian agreements.
Under its administration agreement with the Fund, the Administrator has
agreed to maintain office facilities for the Fund. The Administrator prepares
annual and semi-annual reports to the SEC, prepares Federal and state tax
returns, prepares filings with state securities commissions, and generally
assists in all aspects of the Fund's operations other than those discussed
above. Under the administration agreement, the Administrator also provides fund
accounting and related accounting services. The Administrator may delegate its
responsibilities under the administration agreement with the Fund's written
approval.
The Administrator, a Delaware business trust, has its principal
business offices at 1 Freedom Valley Drive, Oaks, PA 19456. SEI Investments
Management Corporation, a wholly-owned subsidiary of SEI Investments Company
("SEI"), is the owner of all beneficial
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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., 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, The Armada Advantage Fund, Amerindo Funds, Inc.
Huntington VA Funds, Friends Ivory Funds and SEI Insurance Products.
As of the date of this Statement of Additional Information, the
Portfolios have not yet commenced operations and have not paid any
administration fees.
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.
As of the date of this Statement of Additional Information, the
Portfolios have not yet commenced operations and have not paid any
sub-administration fees.
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 and service plans (the
"Plans") pursuant to Rule 12b-1 under the 1940 Act (the "Rule") on behalf of the
Corporate II Class and
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Corporate III Class shares. The Plans allow the Portfolios to pay the
Distributor a distribution fee at the annual rate of up to 0.25% and 0.40% of
the average net assets of the Corporate II Class and Corporate III Class,
respectively, 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 distribution fees of 0.25% and 0.40% of the
average net assets of the Corporate II Class and Corporate III Class,
respectively.
As of the date of this Statement of Additional Information, the
Portfolios have not yet commenced operations and have not paid any distribution
fees.
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
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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.
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 Portfolios 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. The Fund has the following additional series: 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 and International Equity Selection Portfolio.
In the event that an affiliate of Allied Irish Banks, p.l.c. ceases to
be the investment advisor to the Portfolios, the right of the Fund and Portfolio
to use the identifying name "ARK" may be withdrawn.
The assets of the Fund received for the issue or sale of shares of a
Portfolio and all income, earnings, profits and proceeds thereof are allocated
to the Portfolio and constitute the underlying assets thereof. The underlying
assets of a Portfolio are segregated on the books of account and are charged
with the liabilities with respect to the Portfolio and with a share of the
general expenses of the Fund. General expenses of the Fund are allocated in
proportion to the
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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 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 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,
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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
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 April 20, 2000, the officers and trustees of the Fund owned less
than 1% of the outstanding shares of any Portfolio and no person owned
beneficially more than 5% of the outstanding shares of the Portfolios.
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
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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.
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.
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APPENDIX A
2000 TAX RATES
The following tables show the effect of a shareholder's tax status on
effective yield under the Federal 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 other income received by a Portfolio may be taxable.
Use the first table to find your approximate Federal effective tax
bracket for 2000.
SINGLE RETURN JOINT RETURN FEDERAL INCOME
TAXABLE INCOME* TAXABLE INCOME* TAX BRACKET**
26,251 -- 63,550 43,851 -- 105,950 28.00%
63,551 -- 132,600 105,951 -- 161,450 31.00%
132,601 -- 288,350 161,451 -- 288,350 36.00%
288,351 288,351 39.60%
* Net amount subject to Federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
*** Excludes the impact of state income taxes. It is likely that your
exempt-interest dividends from the Fund will be subject to state and
local income taxes, if any, imposed by your state of residence.
Having determined your effective tax bracket above, use the following table to
determine the tax equivalent yield for a given tax-free yield.
28.00% 31.00% 36.00% 39.60%
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To match these tax free rates: Your taxable investment would have to earn the
following yield:
3.00% 4.17% 4.35% 4.69% 4.97%
4.00% 5.56% 5.80% 6.25% 6.62%
5.00% 6.94% 7.25% 7.81% 8.28%
6.00% 8.33% 8.70% 9.38% 9.93%
7.00% 9.72% 10.14% 10.94% 11.59%
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 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 CORPORATE CLASS, CORPORATE II CLASS OR CORPORATE III CLASS OF A PORTFOLIO
ARE EACH CALCULATED SEPARATELY.
A-2