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As filed with the Securities and Exchange Commission on February 24, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
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POST-EFFECTIVE AMENDMENT NO. [ ]
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(Check Appropriate Box or Boxes.)
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ARK FUNDS*
(Exact Name of Registrant as Specified in Charter)
1 Freedom Valley Drive
Oaks, PA 19456
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (610) 676-1000
Kathryn L. Stanton
Vice President and Secretary
ARK Funds
1 Freedom Valley Drive
Oaks, PA 19456
(Name and Address of Agent for Service)
Copies to:
Alan C. Porter, Esq.
Piper & Marbury L.L.P.
1200 Nineteenth Street, N.W.
Washington, DC 20036-2430
It is proposed that this filing will become effective on March 26, 1998
pursuant to Rule 488.
No filing fee is required because an indefinite number of shares have
previously been registered pursuant to Rule 24f-2 under the Investment Company
Act of 1940. Pursuant to Rule 429, this Registration Statement relates to
shares previously registered on Form N-1A (File No. 33-53690).
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* Relating to Institutional Class shares of the ARK Value Equity Portfolio.
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ARK FUNDS
CROSS REFERENCE SHEET
PART A
Item No. Heading
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1. Beginning of Registration Statement and
Outside Front Cover Page of Prospectus . . . . . . . . . . . . . Cover Page
2. Beginning and Outside Back Cover Page
of Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . Fees and Expenses
3. Fee Table, Synopsis Information, and
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Comparative Fee Table;
Risk Factors
4. Information About the Transaction . . . . . . . . . . . . . . . Summary; Risk Factors;
Information Relating to the
Proposed Reorganization
5. Information About the Registrant . . . . . . . . . . . . . . . . Summary; Risk Factors;
Additional Information
6. Information About the Company
Being Acquired . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Risk Factors;
Additional Information
7. Voting Information . . . . . . . . . . . . . . . . . . . . . . . Summary; Information Relating
to Voting Matters
8. Interest of Certain Persons and Experts . . . . . . . . . . . . Not Applicable
9. Additional Information Required for Reoffering
by Persons Deemed to be Underwriters . . . . . . . . . . . . . . Not Applicable
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ARK FUNDS
Oaks, Pennsylvania 19456
March __, 1998
Dear Shareholder:
On November 7, 1997, the Board of Trustees of ARK Funds met to consider
and approve a proposal for reorganizing the ARK Stock Portfolio with the ARK
Value Equity Portfolio. After carefully studying the merits of the proposal,
the Board determined that the reorganization is in the best interest of the
shareholders of both portfolios.
Since the Board has approved combining the portfolios, you and your fellow
shareholders are being asked to approve the proposal at a special meeting of
shareholders to be held at _______ on ________ __, 1998. A proxy card is
enclosed for use in the special meeting. This card represents shares you held
as of the record date, _______ __, 1998. IT IS IMPORTANT THAT YOU COMPLETE,
SIGN AND RETURN YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE.
If you and the other shareholders of the ARK Stock Portfolio approve the
proposed reorganization and certain other conditions are satisfied, you will be
able to continue your investment program through ownership in the ARK Value
Equity Portfolio, another ARK Funds' portfolio with a similar investment
objective and policies.
I encourage you to review the attached materials in detail. Some of your
questions are answered on the next page. Some important facts about the
proposed reorganization are outlined below.
- The reorganization will not affect the value of your account.
There are no sales charges in the reorganization.
- The reorganization is not expected to result in any federal income
tax to the ARK Stock Portfolio or its shareholders.
Because the Board believes the proposed reorganization will benefit all
shareholders, we encourage you to vote for the proposal. Should you have any
additional questions, we invite you to call ARK Funds toll free at
1-800-624-4116.
Sincerely,
[signature]
William H. Cowie, Jr.
Chairman
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Q. WHY HAVE I RECEIVED THIS PACKAGE?
A. The ARK Stock Portfolio has entered into an Agreement and Plan of
Reorganization to merge into the ARK Value Equity Portfolio. Under the
agreement, the assets of the ARK Stock Portfolio and the assets of ARK Value
Equity Portfolio will be combined, and your ARK Stock Portfolio shares will be
exchanged for shares of the ARK Value Equity Portfolio which has a similar
investment objective and policies. The Board of Trustees of ARK Funds has
approved the proposed reorganization. You, as an ARK Stock Portfolio
shareholder, are now being asked to approve the proposed reorganization.
Q. HOW WILL THIS AFFECT ME AS AN ARK STOCK PORTFOLIO
SHAREHOLDER?
A. If the proposed merger is approved, you will become a shareholder of
the ARK Value Equity Portfolio. The investment objective and policies of the
ARK Value Equity Portfolio are similar to those of the ARK Stock Portfolio.
There are no sales charges in this transaction. The shares of the ARK Value
Equity Portfolio that you receive will have a total value equal to the value of
the ARK Stock Portfolio shares you held immediately before the transaction.
Q. WILL THE REORGANIZATION RESULT IN ANY TAXES?
A. The reorganization is not expected to result in any federal income tax
to the ARK Stock Portfolio or its shareholders.
Q. HOW DOES THE BOARD RECOMMEND THAT I VOTE?
A. After careful consideration, the Board unanimously recommends that you
vote "FOR" the proposed reorganization.
Q. HOW DO I CONTACT YOU?
A. If you have any questions, call ARK Funds toll free at 1-800-624-4116,
Monday through Friday, 8:00 a.m. to 8:00 p.m. (Eastern Time), or Saturday and
Sunday, 9:00 a.m. to 4:00 p.m. (Eastern Time).
PLEASE VOTE.
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
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ARK FUNDS
Oaks, Pennsylvania 19456
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders will be
held at 25 South Charles Street, Baltimore, Maryland, on _______ __, 1998 at
___, Eastern Time, for the following purposes:
ITEM 1. To consider and act upon a proposal to approve an Agreement
and Plan of Reorganization (the "Reorganization Agreement"),
between the ARK Stock Portfolio (the "Acquired Fund") and the
ARK Value Equity Portfolio (the "Acquiring Fund"), and the
transactions contemplated thereby, including: (a) the
transfer of all of the assets and stated liabilities of the
Acquired Fund to the Acquiring Fund in exchange for shares of
the Acquiring Fund; (b) the distribution of the Acquiring Fund
shares so received by an Acquired Fund pro rata to
shareholders of the Acquired Fund; and (c) the termination of
the Acquired Fund.
ITEM 2. To transact such other business as may properly come before
the meeting and any adjournment thereof.
The proposed reorganization and related matters are described in the
attached Prospectus/Proxy Statement. A copy of the Reorganization Agreement is
attached to the Prospectus/Proxy Statement as Appendix A.
Only shareholders of the Acquired Fund of record on _______ __, 1998 are
entitled to notice of and to vote at the special meeting and any adjournment
thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD. THIS IS IMPORTANT TO ENSURE A QUORUM AT
THE MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR
BY ATTENDING THE MEETING AND VOTING IN PERSON.
KATHRYN L. STANTON
Secretary
March __, 1998
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PROSPECTUS/PROXY STATEMENT
Dated March __, 1998
ARK FUNDS
Oaks, Pennsylvania 19456
Telephone 1-800-624-4116
This Prospectus/Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Trustees of ARK Funds in connection
with the special meeting (the "Meeting") of shareholders to be held at 25 South
Charles Street, Baltimore, Maryland, on _______ __, 1998 at ___, Eastern Time,
at which shareholders will be asked to consider and approve a proposed
Agreement and Plan of Reorganization, dated as of February 23, 1998 (the
"Reorganization Agreement"), by and between the ARK Stock Portfolio and the ARK
Value Equity Portfolio of ARK Funds.
In reviewing the proposed reorganization (the "Reorganization"), the Board
of Trustees considered, among other things, that the Reorganization would
constitute a tax-free reorganization and that the interests of shareholders
would not be diluted as a result of the Reorganization.
This Prospectus/Proxy Statement constitutes the proxy statement for the
Meeting and the prospectus for the Institutional Class shares of the ARK Value
Equity Portfolio that have been registered with the Securities and Exchange
Commission ("SEC") and are to be issued in connection with the Reorganization.
The Reorganization Agreement provides that the ARK Stock Portfolio (the
"Acquired Fund") will transfer substantially all of its assets and stated
liabilities to the ARK Value Equity Portfolio (the "Acquiring Fund"). In
exchange for the transfer of assets and liabilities, shareholders will receive
Institutional Class shares of the Acquiring Fund. The Acquired Fund will then
make a liquidating distribution to its shareholders of the Acquiring Fund
shares, so that a shareholder of an Acquired Fund at the time of the
Reorganization will receive shares of the Acquiring Fund with the same
aggregate net asset value as the shareholder had in the Acquired Fund
immediately before the Reorganization. Following the Reorganization, the
Acquired Fund will be terminated as described in the Reorganization Agreement.
The Acquiring Fund has been recently organized for the purpose of
continuing the investment operations of the Marketvest Equity Fund, a separate
series of Marketvest Funds, Inc., and is not expected to commence operations
until the closing of its reorganization with Marketvest Equity Fund which is
expected to occur on March __, 1998. Marketvest Funds entered into an
Agreement and Plan of Reorganization with ARK Funds following the
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acquisition of Dauphin Deposit Bank and Trust Company, the investment adviser
of the Marketvest Equity Fund.
This Prospectus/Proxy Statement sets forth the information that a
shareholder should know before voting on the Reorganization Agreement (and
related transactions) and should be retained for future reference. The
Prospectus dated February 13, 1998, relating to the Institutional Class shares
of the Acquiring Fund, which describes the operations of the Acquiring Fund,
the ARK Funds' Annual Report for the fiscal year ended April 30, 1997 and
Semi-Annual Report for the six-months ended October 31, 1997 are incorporated
herein by reference and accompany this Prospectus/Proxy Statement. Additional
information is contained in: (i) the Statement of Additional Information
relating to this Prospectus/Proxy Statement and (ii) the Statement of
Additional Information of ARK Funds dated February 13, 1998. Each of these
documents is on file with the SEC and is available without charge upon request
by writing or calling ARK Funds at its address or telephone number set forth
above. The SEC also maintains a Web site (http://www.sec.gov) that contains
these documents, materials incorporated by reference, and other information
regarding the ARK Funds.
This Prospectus/Proxy Statement is expected to be first sent to
shareholders on or about _______ __, 1998.
THE SECURITIES OF ARK FUNDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF ARK FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FIRST NATIONAL BANK OF MARYLAND OR ANY DEPOSITORY INSTITUTION, AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTING IN SHARES OF ARK
FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY ARK FUNDS.
TABLE OF CONTENTS
Page
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Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Proposed Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Reasons For Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Overview of Acquired Fund and Acquiring Fund . . . . . . . . . . . . . . . . . . . . 1
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . 1
Arrangements with Service Providers . . . . . . . . . . . . . . . . . . . . . . 2
Comparative Fee Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Expense Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Redemption Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Voting Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Practices and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Information Relating to the Proposed Reorganization . . . . . . . . . . . . . . . . . . . . 13
Description of the Reorganization Agreement . . . . . . . . . . . . . . . . . . . . . 14
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Information Relating to Voting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 16
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Shareholder and Board Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Page
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Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Shareholder Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
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SUMMARY
The following is a summary of certain information relating to the proposed
Reorganization, the parties thereto and the related transactions, and is
qualified by reference to the more complete information contained elsewhere in
this Prospectus/Proxy Statement, the Statement of Additional Information
relating to this Prospectus/Proxy Statement, the Prospectus and Statement of
Additional Information of ARK Funds, and the Reorganization Agreement attached
to this Prospectus/Proxy Statement as Appendix A.
PROPOSED REORGANIZATION. Based upon their evaluation of the relevant
information presented to them, and in light of their fiduciary duties under
federal and state law, the Board of Trustees of ARK Funds, including the
trustees who are not "interested persons" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), has determined
that the proposed Reorganization is in the best interests of shareholders of
the Acquired Fund and the Acquiring Fund, and that the interests of existing
shareholders of the Acquired Fund and the Acquiring Fund will not be diluted as
a result of such Reorganization.
REASONS FOR THE REORGANIZATION. The primary reasons for the proposed
Reorganization are: (a) the fact that the Acquiring Fund was organized by ARK
Funds in connection with the combination of the Marketvest Equity Fund with ARK
Funds; (b) the similarity of the investment objectives and policies of the
Acquired Fund and the Acquiring Fund; (c) the fact that shareholder interests
would not be diluted in the proposed Reorganization; and (d) the status of the
Reorganization as a tax-free reorganization.
FEDERAL INCOME TAX CONSEQUENCES. Shareholders of the Acquired Fund will
not recognize any gain or loss for federal income tax purposes on their receipt
of shares of the Acquiring Fund. Neither the Acquiring Fund nor Acquired Fund
will incur any gain or loss for federal tax purposes as a result of the
Reorganization. See "Information Relating to the Proposed Reorganization -
Federal Income Tax Consequences."
OVERVIEW OF ACQUIRED FUND AND ACQUIRING FUND. The following summarizes
the investment objectives and policies, arrangements with service providers,
fees and expenses, purchase, redemption and dividend and distribution
procedures of the Acquired Fund and the Acquiring Fund. See the Prospectus and
the Statement of Additional Information of ARK Funds, which are incorporated
herein by reference, for a further description of the Acquired Fund and the
Acquiring Fund.
Investment Objectives and Policies
The investment objectives of the Acquired Fund and the Acquiring Fund are
substantially similar. The Acquired Fund seeks to provide long-term capital
appreciation while the Acquiring Fund seeks to provide growth of principal.
The Acquired Fund invests primarily in common stocks, seeking capital
appreciation from a broadly diversified portfolio and investing in growth-
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oriented companies and market leaders in various industries. The Acquiring
Fund pursues its investment objective by investing primarily in the equity
securities of high quality companies, placing emphasis on stocks where the
market price of the stock appears low when compared to present and/or future
earnings cash flow. See "Risk Factors" below and the Prospectus of ARK Funds,
which is incorporated herein by reference, for a further description of the
similarities and differences between the investment objectives and policies of
the Acquired Fund and the Acquiring Fund.
Arrangements with Service Providers
Allied Investment Advisors, Inc. (the "Advisor") serves as investment
adviser of both the Acquired Fund and the Acquiring Fund and is entitled to
receive investment advisory fees, which are accrued daily and paid monthly,
from the Acquired Fund and the Acquiring Fund (as described in the fee table
below). See "Management" in the Prospectus of ARK Funds accompanying this
Prospectus/Proxy Statement, which is incorporated herein by reference, for
additional information on the Advisor.
SEI Investments Distribution Co., a wholly-owned subsidiary of SEI
Investments Company, serves as the distributor for shares of the Acquired Fund
and the Acquiring Fund.
Under a shareholder services plan in effect with respect to the
Institutional Class of each of the Acquired Fund and the Acquiring Fund,
shareholder services fees may be paid to securities dealers and other financial
institutions (including affiliates of First Maryland Bancorp), at an annual
rate of up to 0.15% of the average net assets of the Institutional Class shares
attributable to their customers, for providing ongoing shareholder support
services to their customers with accounts in such class. The Board has
approved an annual shareholder services fee rate of 0.06% of the average net
assets of the Institutional Class of each of the Acquired Fund and the
Acquiring Fund.
SEI Fund Resources ("SFR") provides administrative services to each of the
Acquired Fund and the Acquiring Fund. SEI Investment Management Corporation, a
wholly-owned subsidiary of SEI Investment Company, is the owner of all
beneficial interest in SFR. For its services, SFR receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.13% of the aggregate
net assets of the Acquired Fund and the Acquiring Fund. SFR may voluntarily
waive all or a portion of its fee from time to time in its sole discretion.
Pursuant to a separate agreement with SFR, FMB Trust Company, National
Association performs sub-administration services on behalf of the Acquired Fund
and the Acquiring Fund, for which it receives a fee from SFR at the annual rate
of up to 0.0275% of the aggregate daily net assets of the funds. See
"Management" in the Prospectus of ARK Funds accompanying this Prospectus/Proxy
Statement, which is incorporated herein by reference, for additional
information about SFR.
FMB Trust Company, National Association is custodian for the securities
and cash of the Acquired Fund and the Acquiring Fund. SFR provides transfer
agent and related services for
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each of the Acquired Fund and the Acquiring Fund and has subcontracted the
transfer agency services to State Street Bank and Trust Company which maintains
shareholder accounts and records for the funds.
Comparative Fee Table
The table set forth below shows (a) shareholder transaction expenses and
estimated annual operating expenses for the Institutional Class of the Acquired
Fund and the Acquiring Fund as of April 30, 1997 for the fiscal year ended on
such date, in each case restated to reflect expenses the Institutional Class of
the Acquired Fund and the Acquiring Fund, respectively, expect to incur during
the current fiscal year, and (b) pro forma information for the Institutional
Class of the Acquiring Fund assuming the Reorganization had taken place on
October 31, 1997. Unless otherwise noted, the information in the expense table
and the example reflects voluntary fee waivers and/or reimbursements. The
assumption in the example of a 5% annual return is required by the SEC for all
mutual funds, and is not a prediction of any fund's future performance. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF
ANY FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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Pro Forma
ARK Stock ARK Value Equity ARK Value Equity
Portfolio Portfolio Portfolio
--------- --------- ---------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases and
reinvested dividends None None None
Deferred sales charges imposed on redemptions
None None None
Redemption Fee None None None
Exchange Fee None None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage of average net assets)
Advisory Fees (after waivers) (1) 0.60% 0.87% %
---
Shareholder Services Fees (after waivers) (2) 0.06% 0.06% %
---
Other Expenses 0.25% 0.13% %
---
Total Fund Operating Expenses (after waivers) (3) 0.91% 1.06% %
---
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment on all dividends, and redemption of
the shares after the number of year indicated:
1 Year 3 Years 5 Years 10 Years
------- ------- ------- --------
ARK Stock Portfolio $ 9 $29 $50 $112
ARK Value Equity Portfolio $11 $34 $58 $129
Pro Forma ARK Value Equity Portfolio $ $ $ $
- -------------------
(1) Absent waivers, Advisory Fees would be 0.70% for the ARK Stock Portfolio
and 1.00% for the ARK Value Equity Portfolio.
(2) Absent waivers, Shareholder Services Fees would be 0.15%.
(3) Absent fee waivers, Total Fund Operating Expenses would be 1.10%, 1.28%
and ___%, respectively.
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Expense Ratios
The following table sets forth (a) the ratio of operating expenses to
average net assets of the Institutional Class of the Acquired Fund for the
fiscal year ended April 30, 1997, (i) after fee waivers and expense
reimbursements, and (ii) absent fee waivers and expense reimbursements, and (b)
the annualized ratios of operating expenses to average net assets of the
Institutional Class of the Acquired Fund for the six months ended October 31,
1997, (i) after fee waivers and expense reimbursements, and (ii) absent fee
waivers and expense reimbursements.
FISCAL YEAR ENDED APRIL 30, 1997
Ratio of Operating Expenses Ratio of Operating Expenses
to Average Net Assets to Average Net Assets
After Absent
Fee Waivers and Expense Reimbursements Fee Waivers and Expense Reimbursements
- -------------------------------------- --------------------------------------
0.90% 0.95%
SIX MONTHS ENDED OCTOBER 31, 1997
Ratio of Operating Expenses Ratio of Operating Expenses
to Average Net Assets to Average Net Assets
After Absent
Fee Waivers and Expense Reimbursements Fee Waivers and Expense Reimbursements
- -------------------------------------- --------------------------------------
0.89% 0.94%
The Acquiring Fund has recently been organized for the purpose of
continuing the investment operations of Marketvest Equity Fund and had not
commenced operations as of October 31, 1997, and is not expected to commence
operations until the consummation of its reorganization with Marketvest Equity
Fund which is expected to occur on March __, 1998.
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Purchases
Institutional Class shares of the Acquired Fund and the Acquiring Fund
are sold to individuals, institutions and other entities that have established
trust, custodial or money management relationships with First National Bank of
Maryland ("First National") or its affiliates. Institutional Class shares of
the Acquired Fund and the Acquiring Fund are sold at their net asset value
without a sales charge. Share purchases may be made Monday through Friday,
except on certain holidays. The net asset value of the Acquired Fund and the
Acquiring Fund is calculated as of the close of regular trading (normally 4:00
p.m. Eastern Time) on the New York Stock Exchange. The following minimum
investments apply to Institutional Class shares of the Acquired Fund and the
Acquiring Fund unless they are waived:
To open an account............................ $100,000
To add to an account.......................... N/A
Minimum account balance.......................... $250,000
Exchanges
All or a portion of Institutional Class shares of the Acquired Fund and
the Acquiring Fund may be exchanged on any business day at their net asset
value for shares of the same class of any other ARK Funds portfolio.
Dividends and Distributions
The Acquired Fund and the Acquiring Fund each pay dividends from net
investment income quarterly. Each of the Acquired Fund and the Acquiring Fund
distributes net realized capital gains, if any, at least annually. Income
dividends on the Acquiring Fund and the Acquired Fund are declared daily and
paid quarterly. Shareholders of the Acquired Fund and the Acquiring Fund may
elect to have their dividends and distributions automatically reinvested in
additional shares of the same class at the net asset value next determined
after payment, to receive their dividends and distributions in cash, or to
receive a combination of additional shares and cash. If a shareholder fails to
select an option, all dividends and distributions are reinvested in additional
shares.
Redemption Procedures
Institutional Class shares of the Acquired Fund and the Acquiring Fund are
redeemable on any business day at a price equal to the net asset value of the
shares the next time it is calculated after receipt of a redemption request in
good order.
VOTING INFORMATION. This Prospectus/Proxy Statement is being furnished in
connection with the solicitation of proxies by the Board of Trustees of ARK
Funds in connection with the
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special meeting of shareholders to be held at 25 South Charles Street,
Baltimore, Maryland, on _______ __, 1998, at ___, Eastern Time, (such meeting
and any adjournment thereof hereinafter referred to as the "Meeting"). Only
shareholders of record at the close of business on _______ __, 1998 will be
entitled to notice of and to vote at the Meeting. Each share or fraction
thereof is entitled to one vote or fraction thereof. Shares represented by a
properly executed proxy will be voted in accordance with the instructions
thereon, or if no instruction is made, the persons named as proxies will vote
in favor of each proposal set forth in the Notice of Meeting. Proxies may be
revoked at any time before they are exercised by submitting a written notice of
revocation or a subsequently executed proxy or by attending the Meeting and
voting in person. For additional information, including a description of the
shareholder vote required for approval of the Reorganization Agreement and
related transactions contemplated thereby, see "Information Relating to Voting
Matters."
RISK FACTORS
The following discussion summarizes some of the more significant
similarities and differences in the investment objectives, policies, practices
and risk factors of the Acquired Fund and the Acquiring Fund and is qualified
in its entirety by the Prospectus and Statement of Additional Information of
ARK Funds, which are incorporated herein by reference.
INVESTMENT OBJECTIVES AND POLICIES. The investment objective and
policies of the Acquired Fund are substantially similar to those of the
Acquiring Fund. There are, however, certain material differences.
The investment objective of the Acquired Fund is to provide long-term
capital appreciation. The investment objective of the Acquiring Fund is to
provide growth of principal. The Acquired Fund invests primarily in common
stocks, seeking capital appreciation from a broadly diversified portfolio and
investing in growth-oriented companies and market leaders in various
industries. Under normal circumstances, at least 65% of the value of the
Acquired Fund's total assets will be invested in common stocks. The Acquiring
Fund pursues its investment objective by investing primarily in the equity
securities of high quality companies, placing emphasis on stocks where the
market price of the stock appears low when compared to present and/or future
earnings cash flow. Under normal market conditions, the Acquiring Fund intends
to invest at least 65% of its total assets in equity securities of U.S.
companies. In most market conditions, the stocks comprising the portfolio's
assets will exhibit traditional value characteristics, such as higher than
average sales growth, higher than average return on equity, above average free
cash flow, and stocks of companies with high return on their invested capital.
See the Prospectus of ARK Funds, which is incorporated herein by
reference, for a further description of the similarities and differences
between the investment objectives and policies of the Acquired Fund and the
Acquiring Fund.
INVESTMENT PRACTICES AND RISKS. This section describes certain practices
and risks that are generally common to the Acquired Fund and the Acquiring
Fund.
- 7 -
17
Equity Securities Generally. Investments in equity securities are subject
to market risks which may cause their prices to fluctuate. Accordingly, the
Acquired Fund and the Acquiring Fund, which invest in equity securities, may be
more suitable for long-term investors who can bear the risk of short-term
fluctuations. Changes in the value of portfolio securities will not
necessarily affect income derived from those securities but will affect the net
asset value of the fund's shares. Equity securities held by a fund may not
perform well during certain market cycles and may not respond to general market
movements to the same extent as other securities.
Fixed-Income Securities. The market value of fixed-income securities will
change in response to interest rate changes and other factors. During periods
of falling interest rates, the value of outstanding fixed-income securities
generally rises. Conversely, during periods of rising interest rates, the
value of such securities generally declines. Moreover, while securities with
longer maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the credit rating
of any fixed-income security and in the ability of an issuer to make payments
of interest and principal also affect the value of these investments. Changes
in the value of portfolio securities will not necessarily affect cash income
derived from those securities but will affect the net asset value of the fund's
shares. Each of the Acquired Fund and the Acquiring Fund may invest in
fixed-income securities consistent with its investment objective and policies.
Foreign Securities. Both the Acquired Fund and Acquiring Fund may invest
in foreign securities to the extent permitted by their investment policies.
Investing in the securities of foreign issuers involves special risks not
typically associated with investing in U.S. companies. These risks include
differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investment in foreign countries, and potential restrictions on the
flow of international capital and currencies. Foreign issuers may also be
subject to less government regulation than U.S. companies. Moreover, the
dividends and interest payable on foreign securities may be subject to foreign
withholding taxes, thus reducing the net amount of income available for
distribution to a fund's shareholders. Further, foreign securities often trade
with less frequency and volume than domestic securities and, therefore, may
exhibit greater price volatility. Investing in emerging markets involves
special considerations (in addition to those relating to foreign investment
generally) which include, among others, greater political uncertainty, an
economy's dependence on revenues from particular commodities or on
international aid or development assistance, currency transfer restrictions, a
limited number of potential buyers for securities, and delays and disruptions
in securities settlement procedures. Changes in foreign exchange rates will
affect, favorably or unfavorably, the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar.
Delayed Delivery or Purchases on a When-Issued Basis. Delayed delivery or
purchases of securities on a when-issued basis are transactions where the price
of the securities is fixed at
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18
the time of commitment and the delivery and payment ordinarily takes place
beyond customary settlement time. The interest rate to be realized on these
securities is fixed as of the purchase date and no interest accrues to the
buyer before settlement. The securities are subject to market fluctuation due
to changes in market interest rates; the securities are also subject to
fluctuation in value pending settlement based upon public perception of the
creditworthiness of the issuer of these securities. Liquid assets sufficient
to make payments for the securities to be purchased are segregated at the trade
date. Both the Acquired Fund and Acquiring Fund may purchase securities on a
delayed delivery or when-issued basis and may dispose of the when-issued
commitment prior to settlement which may result in short-term profits or
losses.
Repurchase Agreements. A repurchase agreement is an agreement where a
person buys a security and simultaneously commits to sell the security to the
seller at an agreed-upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. A fund which buys
the security bears a risk of loss in the event the other party defaults on its
obligations and the fund is delayed or prevented from exercising its right to
dispose of the collateral securities or if the fund realizes a loss on the sale
of the collateral securities. Both the Acquired Fund and Acquiring Fund may
enter into repurchase agreements. Both the Acquired Fund and Acquiring Fund
will only enter into repurchase agreements with banks and other recognized
financial institutions which are deemed by its investment adviser to be
creditworthy pursuant to guidelines established by the Board of Trustees.
Reverse Repurchase Agreements. Both the Acquired Fund and the Acquiring
Fund may enter into reverse repurchase agreements. Reverse repurchase
agreements involve the sale of securities held by a fund and the agreement by
the fund to repurchase the securities at an agreed-upon price, date and
interest payment. When a fund enters into reverse repurchase transactions, it
will maintain appropriate liquid assets in a segregated custodial account to
cover the value of the securities subject to the agreement. The segregation of
assets could impair the fund's ability to meet its current obligations or
impede investment management if a large portion of the fund's assets are
involved. Reverse repurchase agreements are considered to be a form of
borrowing.
Options. The Acquiring Fund and the Acquired Fund may engage in options
transactions from time to time. A put option gives a fund, in return for a
premium, the right (but not the obligation) to sell the underlying security to
the writer or seller of the option at a specified price during the term of the
option. A call option gives a fund, in return for a premium, the right (but
not the obligation) to buy the underlying securities from the seller at a
specified price during the term of the option. Under normal conditions, the
Acquiring Fund and the Acquired Fund will not hedge more than 25% of its total
assets by engaging in options transactions and futures (see "Futures and
Options on Futures" below). In addition, the Acquiring Fund will not write
puts where the value of the underlying investment exceeds 25% (including the
value of futures held by the fund) of its total assets and will not buy calls
with a value exceeding 5% of its total assets. There are risks associated with
options transactions, including that the success of a hedging strategy will
depend on the ability of the investment adviser to predict movements in the
prices of individual securities, market fluctuations and movements in interest
rates; there may be an
- 9 -
19
imperfect correlation between the movement in prices of securities held by a
fund and price movements of the related options; and there may not be a liquid
secondary market for options.
Futures and Options on Futures. Futures contracts provide for the future
sale by one party and purchase by another party of a specified amount of a
specified security at a specified future time and at a specified price. An
option on a futures contract gives the purchaser the right, in exchange for a
premium, to assume a position in a futures contract at a specified exercise
price during the term of the option. Each of the Acquiring Fund and the
Acquired Fund may enter into futures contracts and options on futures
contracts, provided that, the sum of its initial margin deposits on open
futures contracts plus the amount paid for premiums for unexpired options on
futures contracts does not exceed 5% of the liquidation value of its net assets
after taking into account unrealized profits and unrealized losses on any such
contracts and excluding the value of any options that are "in-the-money" at the
time of purchase. In every other instance, each of the Acquiring Fund and the
Acquired Fund use futures contracts and related options, within their
respective investment limitations noted in "Options" above, only for bona fide
hedging purposes, i.e., to offset unfavorable changes in the value of
securities otherwise held or expected to be acquired for investment purposes.
There are risks associated with these hedging activities. See "Options" above.
Other Considerations. Certain other investments and investment techniques
permitted for the Acquired Fund and the Acquiring Fund pose special risks in
addition to those described above. See the Prospectus and Statement of
Additional Information of ARK Funds for more information. By itself no fund
constitutes a balanced investment plan. There is no assurance that a fund will
achieve its investment objective. Investors should review the investment
objective, policies and practices of a fund and carefully consider their
ability to assume the risks involved.
For a complete discussion of the investment policies and risks of the
Acquired Fund and the Acquiring Fund refer to the Statement of Additional
Information of ARK Funds which is incorporated herein by reference.
INVESTMENT LIMITATIONS. Neither the Acquired Fund nor the Acquiring Fund
may change its fundamental investment limitations without the affirmative vote
of the holders of a majority of the outstanding voting securities (as defined
in the Investment Company Act). However, investment limitations that are not
fundamental policies may be changed by the Board of Trustees without
shareholder approval. The investment limitations of the Acquired Fund and the
Acquiring Fund are similar, but not identical.
Concentration of Investments. As a fundamental policy, neither the
Acquiring Fund nor the Acquired Fund may purchase any securities which would
cause more than 25% of the total assets of such fund to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry. This limitation does not apply to investments
in obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities.
- 10 -
20
Loans. As a fundamental policy, neither the Acquiring Fund nor the
Acquired Fund may make loans, except that either fund may (a) purchase or hold
debt instruments; (b) enter into repurchase agreements; and (c) engage in
securities lending, in each case where permitted by its investment objective,
policies and limitations.
Diversification of Investments. As a fundamental policy, neither the
Acquiring Fund nor the Acquired Fund may acquire more than 10% of the voting
securities of any one issuer (except, for securities issued or guaranteed by
the United States, its agencies or instrumentalities, or invest more than 5% of
its total assets in the securities of an issuer (except for cash, cash items or
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities); provided that the foregoing limitation does not apply to
25% of the total assets of the Acquired Fund or the Acquiring Fund.
Issuing Senior Securities or Borrowing Money. As a fundamental policy,
neither the Acquiring Fund nor the Acquired Fund may borrow or issue senior
securities, except that (a) the Acquiring Fund may borrow money from banks and
may enter into reverse repurchase agreements and (b) the Acquired Fund may
borrow money in an amount not to exceed 33 1/3% of its total assets as a
temporary measure for extraordinary or emergency purposes (which may include
the need to meet shareholder redemption requests). Neither the Acquiring Fund
nor the Acquired Fund will purchase any securities for its portfolio at any
time at which its borrowings equal or exceed 5% of its total assets. Neither
fund will borrow for investment purposes.
Selling Short or Buying on Margin. As a non-fundamental policy, neither
the Acquiring Fund nor the Acquired Fund may make short sales of securities,
maintain a short position or purchase securities on margin, except that a Fund
may sell securities short if they own or have the right to obtain securities
equivalent in kind and amount to the securities sold short. For both the
Acquiring Fund and the Acquired Fund, transactions in futures contracts and
options are not deemed to constitute selling securities short.
Underwriting. As a fundamental policy, neither the Acquiring Fund nor the
Acquired Fund may act as an underwriter of securities of other issuers, except
as it may deemed an underwriter under federal securities laws in selling a
security held by it.
Investing in Securities of Other Investment Companies. As a
non-fundamental policy, neither the Acquiring Funds or the Acquired Funds may
purchase securities of other investment companies except as permitted by the
1940 Act and the rules and regulations thereunder. Under these rules and
regulations, each of the funds is prohibited from acquiring the securities of
other investment companies if, as a result of such acquisition, (a) such fund
owns more than 3% of the total voting stock of the investment company; (b)
securities issued by any one investment company represent more than 5% of the
total assets of such fund; or (c) securities (other than treasury stock) issued
by all investment companies represent more than 10% of the total assets of such
fund.
- 11 -
21
Puts, Calls or Other Options. The Acquiring Fund and the Acquired Fund
may write or purchase puts, calls or other options or combinations thereof
subject to compliance with other investment policies. Under normal conditions
neither fund will hedge more than 25% of its total assets by engaging in
options transactions and futures. In addition, each fund will not write puts
where the value of the underlying investment exceeds 25% (including the value
of futures held by the fund) of its total assets and will not buy calls with a
value exceeding 5% of its total assets. See "Risk Factors - Options" and "-
Futures and Options on Futures".
Restricted and Illiquid Securities. As a non-fundamental policy, neither
the Acquiring Fund nor Acquired Fund will invest in illiquid securities in an
amount exceeding, in the aggregate, 15% of its net assets. Repurchase
agreements providing for settlement in more than seven days after notice are
counted toward the percentage limitation and over-the-counter options,
non-negotiable time deposits with maturities over seven days, and certain
restricted securities not determined by the Board of Trustees to be liquid, are
also be counted toward such percentage limitation.
The foregoing limitation does not apply to restricted securities held by
either the Acquiring Fund or the Acquired Fund if it is determined by or under
procedures established by the Board of Trustees that, based on trading markets
for the specific restricted security in question, such security is not
illiquid.
The absence of a trading market for restricted or illiquid securities can
make it difficult to ascertain a market value for these securities. Disposing
of illiquid securities may involve time-consuming negotiation and legal
expense, and it may be difficult or impossible to sell restricted or illiquid
securities promptly at an acceptable price.
Commodities and Futures Contracts. The Acquired Fund, as a matter of
fundamental policy, may not purchase or sell commodities unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent the portfolio from purchasing or selling futures contracts or options
on such contracts for the purpose of managing its exposure to changing interest
rates, security prices, and currency exchange rates). The Acquiring Fund, as a
matter of fundamental policy, may engage in transactions involving financial
and stock index futures contracts or options on such futures contracts.
Investing in Real Estate. As a non-fundamental policy, the Acquired Fund
may invest in securities of real estate investment trusts that are not readily
marketable, or to invest in securities of real estate limited partnerships that
are not listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System. The Acquiring Fund does not have
a fundamental policy regarding investing in real estate.
Warrants. As a non-fundamental policy, the Acquired Fund may invest up to
5% of its net assets in warrants, except that this limitation does not apply to
warrants acquired in units or attached to securities. Included in this
limitation for the Acquired Fund, but not to exceed 2% of its net assets, may
be warrants not listed on the New York Stock Exchange or American Stock
- 12 -
22
Exchange. The Acquiring Fund does not have a fundamental policy regarding
investment in warrants.
OTHER INFORMATION. ARK Funds is registered as an open-end management
investment company under the Investment Company Act. Currently ARK Funds
offers twenty-two investment portfolios, including the Acquired Fund and the
Acquiring Fund.
Shares of each portfolio of ARK Funds: (i) are entitled to one vote for
each full share held and a proportionate fractional vote for each fractional
share held; (ii) will vote in the aggregate and not by class or series except
as otherwise expressly required by law or when class voting is permitted by the
Board of Trustees; and (iii) are entitled to participate equally in the
dividends and investment income and in the net distributable assets of the
respective class and series on liquidation. In addition, shares have no
preemptive rights and only such conversion and exchange rights as the Board of
Trustees may grant in its discretion. When issued for payment as described in
the prospectus, such shares are fully paid and non-assessable except as
required under Massachusetts law.* ARK Funds is not required under applicable
law to hold annual shareholder meetings and intends to do so only if required
by the Investment Company Act. Shareholders have the right to remove trustees.
The foregoing is only a summary. Shareholders may obtain copies of the
declaration of trust and bylaws of ARK Funds upon written request at the
address shown on the cover page of this Prospectus/Proxy Statement.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
The Agreement and Plan of Reorganization (the "Reorganization Agreement")
provides that the Acquired Fund is to be acquired by the Acquiring Fund.
Significant provisions of the Reorganization Agreement are summarized below;
however, this summary is qualified in its entirety by reference to the
Reorganization Agreement, a copy of which is attached as Appendix A to this
Prospectus/Proxy Statement.
- ----------------------------------
* Under Massachusetts law, shareholders of a business trust could, under
certain circumstances, be held personally liable for the obligations of
the business trust. However, the declaration of trust of ARK Funds
disclaims shareholder liability for acts or obligations of the fund and
requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the fund or its
trustees. The declaration of trust of ARK Funds provides for
indemnification out of the property of the portfolio for all losses and
expenses of any shareholder held personally liable for the obligations of
the portfolio. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is considered remote since it is
limited to circumstances in which a disclaimer is inoperative and the
portfolio or the trust itself would be unable to meet its obligations.
- 13 -
23
DESCRIPTION OF THE REORGANIZATION AGREEMENT. The Reorganization Agreement
provides that at the Closing (as defined in the Reorganization Agreement),
substantially all of the assets and stated liabilities of such Acquired Fund
will be acquired by the Acquiring Fund and the shareholders of the Acquired
Fund shall receive the shares (which shall be of the same class owned by the
shareholder of the Acquired Fund) of the Acquiring Fund.
In exchange for the transfer of the assets and the assumption of the
stated liabilities of the Acquired Fund, at the Closing, a number of full and
fractional shares of the Acquiring Fund will be issued to the Acquired Fund.
The number of shares of the Acquiring Fund so issued will have an aggregate net
asset value equal to the value of the assets of the Acquired Fund. In
determining the value of the assets of the Acquired Fund, each security will be
priced in accordance with the policies and procedures of the Acquired Fund as
described in the then current prospectus and statement of additional
information of ARK Funds and in accordance with applicable provisions of the
Investment Company Act.
The Reorganization Agreement provides that the Acquired Fund will declare
a dividend prior to the Closing Date in order to distribute to its shareholders
all of its net investment income earned, and all of its net capital gains
realized, up to and including the Closing Date.
On the Closing Date, the Acquired Fund will liquidate and distribute pro
rata to the record holders its shares on the Closing Date the shares of the
Acquiring Fund received by the Acquired Fund. All of the issued and
outstanding shares of the Acquired Fund will be canceled on the books of ARK
Funds, on the Closing Date and will thereafter represent only the right to
receive the shares of the Acquiring Fund and the Acquired Fund's transfer books
will be closed permanently. After the Closing Date, the Acquired Fund will not
conduct any business, and after the Reorganization has been consummated, the
Acquired Fund will not conduct any business, except in connection with its
liquidation and termination.
The expenses of the Acquired Fund and the Acquiring Fund incurred in
connection with the Reorganization will be borne by First Maryland Bancorp or
its subsidiary.
The consummation of the Reorganization is subject to certain conditions.
The Reorganization will be contingent upon the approval of the Reorganization
Agreement by a majority of the shareholders (as described below) of the
Acquired Fund. The Reorganization is also conditioned upon the issuance of an
order by the SEC permitting the transactions contemplated by the Reorganization
Agreement. The order was requested as a result of the ownership by First
National Bank of Maryland or its affiliates of 5% or more of the shares of the
Acquired Fund and the Acquiring Fund. In addition, the Reorganization will be
contingent upon: (a) the receipt of certain legal opinions described in the
Reorganization Agreement (see Appendix A attached hereto); (b) the continuing
accuracy of the representations and warranties in the Reorganization Agreement;
and (c) the performance in all material respects of the agreements in the
Reorganization Agreement.
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24
The Reorganization Agreement may be terminated by the Board of Trustees at
or prior to the Closing Date.
The Board of Trustees has approved the Reorganization based upon the
belief that it would be in the best interest of the Acquired Fund and the
Acquiring Fund and their respective shareholders. In approving the
Reorganization Agreement, the Board considered the following factors, among
others: (a) the fact that the Acquiring Fund was organized by ARK Funds in
connection with the combination of the Marketvest Equity Fund with ARK Funds;
(b) the similarity of the investment objectives and policies of the Acquired
Fund and the Acquiring Funds; (c) the fact that shareholder interests would not
be diluted in the proposed Reorganization; and (d) the status of the
Reorganization as a tax-free reorganization.
After consideration of the foregoing factors and other relevant
information, the Board of Trustees unanimously approved the Reorganization
Agreement and directed that it be submitted to the shareholders of the Acquired
Fund for approval. THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
REORGANIZATION AGREEMENT.
CAPITALIZATION. The following table sets forth as of October 31, 1997:
(a) the capitalization of the Institutional Class of the Acquired Fund and the
Acquiring Fund, and (b) the pro forma capitalization of the Institutional Class
of the Acquiring Fund as adjusted to give effect to the Reorganization. If
consummated, the capitalization of the Institutional Class of the Acquired Fund
and the Acquiring Fund is likely to be different at the Closing Date as a
result of daily share purchase and redemption activity.
Pro Forma
ARK Stock ARK Value Equity ARK Value Equity
Portfolio Portfolio Portfolio
--------- --------- ---------
Total Net Assets $ $100 $
Shares Outstanding 10
Net Asset Value Per Share $ $ 10 $
FEDERAL INCOME TAX CONSEQUENCES. The consummation of the Reorganization
is conditioned upon the receipt of an opinion of Piper & Marbury L.L.P.
substantially to the effect that for federal income tax purposes: (a) the
transfer of all of the assets of the Acquired Fund, and the assumption by the
Acquiring Fund of stated liabilities of the Acquired Fund, in exchange for
shares of the Acquiring Fund, and the distribution of said shares to the
shareholders of the Acquired Fund, as provided in the Reorganization Agreement,
will constitute a reorganization within the meaning of Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"), and, with respect to
the Reorganization, the Acquired Fund and the Acquiring Fund will each be
considered "a party to a reorganization" within the meaning of Section 368(b)
of the Code; (b) in accordance with Sections 361(a), 361(c)(1) and 357(a) of
the Code, no gain or loss will be recognized by the Acquired Fund as a result
of such transactions; (c) in accordance with Section 1032 of the Code, no gain
or loss will be recognized by the Acquiring Fund as a result of
- 15 -
25
such transactions; (d) in accordance with Section 354(a)(1) of the Code, no
gain or loss will be recognized by the shareholders of the Acquired Fund on the
distribution to them by the Acquired Fund of shares of any class of the
Acquiring Fund in exchange for their shares of the Acquired Fund; (e) in
accordance with Section 358(a)(1) of the Code, the aggregate basis of Acquiring
Fund shares received by each shareholder of the Acquired Fund will be the same
as the aggregate basis of the shareholder's Acquired Fund shares immediately
prior to the transaction; (f) in accordance with Section 362(b) of the Code,
the basis of the assets of the Acquired Fund in the hands of the Acquiring Fund
will be the same as the basis of such assets of the Acquired Fund in the hands
of the Acquired Fund immediately prior to the exchange; (g) in accordance with
Section 1223 of the Code, a shareholder's holding period for Acquiring Fund
shares will be determined by including the period for which the shareholder
held the shares of the Acquired Fund exchanged therefor, provided that the
shareholder held such shares of such Acquired Fund as a capital asset; and (h)
in accordance with Section 1223 of the Code, the holding period of the
Acquiring Fund with respect to the assets of the Acquired Fund will include the
period for which such assets were held by the Acquired Fund.
ARK Funds has not sought a tax ruling from the Internal Revenue Service
(the "IRS"), but is acting in reliance upon the opinion of counsel discussed
above. Such opinion of counsel will rely, as to certain factual matters, on
certificates of officers of ARK Funds. The opinion is not binding on the IRS
and does not preclude the IRS from adopting a contrary position. Shareholders
should consult their own advisers concerning the potential tax consequences to
them, including state and local income taxes.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Prospectus/Proxy Statement is being provided in
connection with the solicitation of proxies by the Board of Trustees of ARK
Funds in connection with the Meeting. Solicitation of proxies will occur
principally by mail, but officers and service contractors of ARK Funds may also
solicit proxies by telephone, telegraph or personal interview. Any shareholder
giving a proxy may revoke it at any time before it is exercised by submitting
to the Secretary of ARK Funds a written notice of revocation or a subsequently
executed proxy or by attending the Meeting and voting in person.
Only shareholders of the Acquired Fund of record at the close of business
on _______ __, 1998 will be entitled to vote at the Meeting. On that date,
there were outstanding and entitled to be voted _____ Institutional Class
shares of the Acquired Fund.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting or any adjournment
thereof. For information on adjournments of the Meeting, see "Quorum" below.
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement, and the
transactions contemplated thereby, are being submitted for approval at the
Meeting by the
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26
holders of a "majority of the outstanding voting securities" of the Acquired
Fund in accordance with the provisions of the declaration of trust of ARK Funds
and the requirements of the Investment Company Act. The term "majority of the
outstanding voting securities" of the Acquired Fund as used herein means the
vote (a) of 67% of the shares present at the Meeting, if the holders of more
than 50% of the outstanding shares of the Acquired Fund are present or
represented by proxy, or (b) of more than 50% of the outstanding shares of the
Acquired Fund, whichever is the less.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a
proposal because instructions have not been received from the beneficial
owners) will be counted for purposes of determining whether or not a quorum is
present for purposes of convening the Meeting. With respect to the
Reorganization proposal, abstentions and broker non-votes will have the same
effect as votes cast against the proposal.
The vote of the shareholders of the Acquiring Fund is not being solicited
because their approval or consent is not necessary for the Reorganization to be
consummated.
At _______ __, 1998, First Maryland Bancorp and its affiliates held of
record ___% of the shares of the Acquired Fund. As a result, First Maryland
Bancorp may be deemed to be a "controlling person" of the Acquired Fund under
the Investment Company Act.
At _______ __, 1998, the name, address and share ownership of the persons
who beneficially owned 5% or more of the shares of the Acquired Fund are as
follows:
After giving effect to the Reorganization, First Maryland Bancorp and its
affiliates and the above-mentioned 5% shareholders will own of record the
following percentages of the outstanding shares of the Acquiring Fund:
At _______ __, 1998, the name, address and share ownership of the persons
who beneficially owned 5% or more of the Acquiring Fund's outstanding shares
are as follows:
At _______ __, 1998, the trustees and officers of ARK Funds, as a group,
owned less than 1% of the outstanding shares of the Acquired Fund and the
Acquiring Fund.
- 17 -
27
QUORUM. In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient votes to
approve the Reorganization Agreement and the transactions contemplated thereby
are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a majority of those
shares affected by the adjournment that are represented at the Meeting in
person or by proxy. If a quorum is present, the persons named as proxies will
vote in favor of such adjournments if they determine that adjournment and
additional solicitation is reasonable and in the best interest of shareholders.
A quorum is constituted by the presence in person or by proxy of the holders of
more than 50% of the outstanding shares of the Acquired Fund entitled to vote
at the Meeting.
ANNUAL MEETING. ARK Funds does not presently intend to hold annual
meetings of shareholders for the election of trustees and other business unless
and until such time as less than a majority of the trustees holding office have
been elected by the shareholders, at which time the trustees then in office
will call a shareholders' meeting for the purpose of electing trustees.
Shareholders have the right to call a meeting of shareholders to consider the
removal of one or more trustees or to act on other matters and such meetings
will be called when requested in writing by the holders of record of 10% or
more of ARK Funds' outstanding shares. To the extent required by law, ARK
Funds will assist in shareholder communications on such matters.
ADDITIONAL INFORMATION
Additional information about the Acquired Fund and the Acquiring Fund is
included in the Prospectus of ARK Funds which accompanies this Prospectus/Proxy
Statement and is incorporated by reference herein. Additional information may
also be obtained from the Statement of Additional Information relating to this
Prospectus/Proxy Statement, the Statement of Additional Information of ARK
Funds, and the Annual Report for the fiscal year ended April 30, 1997 and
Semi-Annual Report for the six months ended October 31, 1997, which have been
filed with the SEC. A copy of the Statements of Additional Information, the
Annual Report and the Semi-Annual Report may be obtained without charge by
calling ARK Funds at 1-800-624-4116. ARK Funds is subject to the informational
requirements of the Securities Exchange Act of 1934 and the Investment Company
Act, as applicable, and in accordance with such requirements must file reports,
proxy statements and other information with the SEC. These materials can be
inspected and copied at the public reference facilities maintained by the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048 and at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can also be obtained from the Public
Reference Section, at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates by the SEC or from the SEC's Internet Web site at
http://www.sec.gov.
OTHER BUSINESS
The Board of Trustees of ARK Funds knows of no other business to be
brought before the Meeting. However, if any other matters come before the
Meeting, it is the intention that
- 18 -
28
proxies which do not contain specific restrictions to the contrary will be
voted on such matters in accordance with the judgment of the persons named in
the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to ARK Funds in writing at the
address on the cover page of this Prospectus/Proxy Statement or by calling toll
free at 1-800-624-4116.
***
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- 19 -
29
Appendix A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") made as of
February 23, 1998, by ARK Funds, a Massachusetts business trust (the "Trust"),
for and on behalf of the ARK Stock Portfolio (the "Acquired Fund") and the ARK
Value Equity Portfolio (the "Acquiring Fund").
W I T N E S S E T H:
WHEREAS, the parties desire that substantially all of the assets and
stated liabilities of the Acquired Fund be transferred to, and be acquired and
assumed by, the Acquiring Fund in exchange for shares of the Acquiring Fund
which shall thereafter be distributed to the shareholders of the Acquired Fund,
all upon the terms and conditions hereinafter set forth (the "Reorganization");
and
WHEREAS, the Acquiring Fund will continue the investment operations of
the Acquired Fund after the Reorganization; and
WHEREAS, the parties wish to enter into a definitive agreement setting
forth the terms and conditions of the foregoing transactions and to adopt this
Agreement as a "plan of reorganization" within the meaning of Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I
TRANSFER OF ASSETS IN EXCHANGE FOR SHARES; ASSUMPTION
OF LIABILITIES; LIQUIDATION OF ACQUIRED FUND
Subject to the terms and conditions of this Agreement, the parties
agree to effect the following transactions in respect of the Reorganization:
1.1 Transfer of Acquired Fund Assets; Issuance of Acquiring Fund
Shares. At the Closing (as defined in Section 1.5), the Acquired Fund shall
transfer to the Acquiring Fund all of its assets, net of appropriate reserves
and adjustments as provided in Section 1.2, in exchange for and against
delivery of a number of shares (including fractional shares) of the
corresponding class of the Acquiring Fund having an aggregate net asset value
equal to the value of the assets of the Acquired Fund so transferred (the
"Acquiring Fund Shares"), in each case determined as
30
provided in Section 1.3. It is expressly agreed that no sales charge will be
imposed upon issuance of the Acquiring Fund Shares or their distribution to
shareholders of the Acquired Fund as provided in Section 1.6.
1.2 Acquired Fund Assets. The assets of the Acquired Fund to be
acquired by the Acquiring Fund hereunder shall consist of all property of the
Acquired Fund, including, without limitation, all cash, securities, commodities
and futures interests, dividends or interest receivable, and any deferred or
prepaid expenses shown as an asset on the statement of assets and liabilities
of the Acquired Fund delivered pursuant to Section 2.5; provided, however, that
there shall be deducted from such assets an amount of cash or other liquid
assets estimated to be sufficient to pay all current liabilities of the
Acquired Fund, including, without limitation, (i) amounts owed to any current
or former shareholders in respect of declared but unpaid dividends on or
redemptions of shares of the Acquired Fund, and (ii) accounts payable and other
accrued and unpaid expenses incurred in the normal operation of business up to
and including the Closing Date.
1.3 Valuation. The value of the assets of the Acquired Fund to be
acquired by the Acquiring Fund shall be computed as of the close of regular
trading on the New York Stock Exchange, Inc. (the "Exchange") on the Closing
Date, using the valuation policies and procedures set forth in the then-current
prospectus and statement of additional information of the Trust. The aggregate
net asset value of the Acquiring Fund Shares shall be computed using the net
asset value per share of the Acquiring Fund as of the close of regular trading
on the Exchange on the Closing Date. The share transfer books of the Trust in
respect of the Acquired Fund shall be permanently closed as of the close of
business on the day immediately preceding the Closing Date and no transfer of
shares of the Acquired Fund shall thereafter be made on such books. The Trust
shall only accept purchase orders or redemption requests for shares of the
Acquired Fund received prior to the close of regular trading on the Exchange on
the day immediately preceding the Closing Date; purchase orders or redemption
requests received thereafter shall be deemed to be orders to purchase or
requests for redemption of shares of the Acquiring Fund, as the case may be,
and shall be executed at the net asset value per share determined as set forth
in the then current prospectus and statement of additional information of the
Acquiring Fund, provided that the Reorganization is consummated.
1.4 Acquired Fund Liabilities. At the Closing the Acquiring Fund
shall assume all liabilities, expenses, costs, charges and reserves of the
Acquired Fund reflected on the statement of assets and liabilities of the
Acquired Fund delivered pursuant to Section 2.5. The Acquiring Fund shall
assume only such liabilities of the Acquired Fund and shall not assume any
other liabilities, whether absolute or contingent, known or unknown, accrued or
unaccrued.
1.5 Closing; Closing Date. The closing of the Reorganization shall
take place beginning after the close of business on March 13, 1998, at the
offices of Piper & Marbury L.L.P., 36 South Charles Street, Baltimore,
Maryland, or at such other time and place as may be agreed upon by the parties.
In the event that on such date (i) the Exchange is closed or trading thereon is
A-2
31
restricted, or (ii) trading or the reporting of trading on the Exchange or
elsewhere is disrupted so that accurate appraisal of the value of the assets of
the Acquired Fund or the aggregate net asset value of the Acquiring Fund Shares
is impractical, the Reorganization shall be postponed until the business day
next following the day on which trading shall have been fully resumed and
reporting shall have been restored, or such other day as may be agreed upon by
the parties. The closing of the Reorganization is referred to herein as the
"Closing" and the date on which the Closing shall take place is referred to
herein as the "Closing Date."
1.6 Distribution of Acquiring Fund Shares. As soon after the Closing
as is conveniently practicable, the Acquiring Fund Shares received by the
Acquired Fund hereunder shall be distributed pro rata to the shareholders of
the Acquired Fund of record as of the close of business on the Closing Date
(the "Acquired Fund Shareholders"). The distribution shall be accomplished by
a written instruction to the transfer agent for the Trust (the "Transfer
Agent"), directing the Transfer Agent to open accounts on the books of the
Trust in respect of the Acquiring Fund in the names of the Acquired Fund
Shareholders and to transfer to such accounts the respective pro rata interest,
in full and fractional (to three decimal places) shares, of each such
shareholder in the Acquiring Fund Shares then credited to the account of the
Acquired Fund on the books of the Trust. All issued and outstanding shares of
the Acquired Fund and all certificates, if any, indicating ownership of such
shares shall simultaneously be canceled on the books of the Trust, although
from and after the Closing each certificate which theretofore represented
shares of the Acquired Fund shall evidence ownership of the Acquiring Fund
Shares on the basis hereinabove set forth. No redemption or repurchase of any
Acquiring Fund Shares credited to Acquired Fund Shareholders and represented by
unsurrendered certificates shall be permitted until such certificates have been
surrendered for cancellation. Certificates representing Acquiring Fund Shares
shall not be issued in connection with such distribution. Promptly after the
distribution described above, the appropriate notification shall be mailed to
the Acquired Fund Shareholders informing each such shareholder of the number of
Acquiring Fund Shares credited to his account and confirming the registration
thereof in his name. All distributions on the Acquiring Fund Shares shall be
paid to the Acquired Fund Shareholders in cash or invested in additional shares
of the Acquiring Fund at the net asset thereof on the respective payment dates
in accordance with instructions previously given by such shareholders to the
Transfer Agent.
1.7 Payment of Transfer Taxes. Any transfer taxes payable upon
issuance of Acquiring Fund Shares in a name other than the name of an Acquired
Fund Shareholder shall, as a condition of such issuance and transfer, be paid
by the person to whom such Acquiring Fund Shares are to be issued and
transferred.
1.8 Liquidation of Acquired Fund. As soon as conveniently
practicable after the distribution required pursuant to Section 1.6 has been
made, the Trust shall pay or make provision for payment of all known
liabilities and obligations of the Acquired Fund not expressly assumed by the
Acquiring Fund in accordance with the terms hereof and shall distribute all
remaining assets of the Acquired Fund, if any, to the Acquired Fund
Shareholders. Thereafter,
A-3
32
the Trust shall take, in accordance with applicable law, all such action as may
be necessary to effect a complete liquidation and termination of the Acquired
Fund.
ARTICLE II
COVENANTS AND AGREEMENTS
2.1 Conduct of Business. After the date of this Agreement and on or
prior to the Closing Date, the Acquired Fund and the Acquiring Fund will
conduct their respective businesses only in the ordinary course, it being
understood that such ordinary course of business shall include the declaration
and payment of customary dividends and distributions.
2.2 Shareholders' Meeting. The Acquired Fund shall call, convene and
hold a meeting of its shareholders as soon as practicable in accordance with
applicable law, for the purpose of approving this Agreement and the
transactions herein contemplated, and for such other purposes as may be
necessary or desirable. The Acquired Fund shall solicit the proxies of its
shareholders to vote on the matters to be acted upon at such meeting.
2.3 Registration Statement; Combined Prospectus/Proxy Statement. The
Acquired Fund shall prepare preliminary proxy materials to be filed with the
Securities and Exchange Commission (the "Commission") under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), relating to the meeting of
shareholders referred to in Section 2.2, in the form of a combined
prospectus/proxy statement and related statement of additional information
included in a registration statement on Form N-14 of the Trust filed with the
Commission under the Securities Act of 1933, as amended (the "1933 Act"), in
connection with this Agreement. Such registration statement in the form in
which it shall become effective and, in the event any post-effective amendment
thereto becomes effective prior to the Closing Date, such registration
statement as amended, is referred to herein as the "Registration Statement."
The combined prospectus/proxy statement and related statement of additional
information in the form first filed with the Commission pursuant to Rule 497(c)
under the 1933 Act is referred to herein as the "Prospectus/Proxy Statement."
The parties will use their best efforts to cause the Registration Statement to
become effective under the 1933 Act as soon as practicable. Upon effectiveness
of the Registration Statement, the Prospectus/Proxy Statement shall be
delivered to shareholders of the Acquired Fund entitled to vote on this
Agreement and the transactions herein contemplated in accordance with
applicable law.
2.4 Final Dividend. On or before the Closing Date the Acquired Fund
shall declare a dividend or dividends on its shares which, together with all
previous dividends, shall have the effect of distributing to the shareholders
of the Acquired Fund all of the Acquired Fund's investment company taxable
income for the final taxable period of the Acquired Fund (computed without
regard to any deduction for dividends paid) and all of its net capital gains
realized in the final taxable period of the Acquired Fund (after reduction for
any capital loss carry-forward).
A-4
33
2.5 Financial Statements. At the Closing the Acquired Fund shall
deliver to the Acquiring Fund a statement of assets and liabilities of the
Acquired Fund together with a schedule of portfolio investments as at the
Closing Date. These financial statements shall be prepared in accordance with
generally accepted accounting principles.
ARTICLE III
CONDITIONS PRECEDENT
The obligations of the parties hereto to consummate the Reorganization
shall be subject to the fulfillment, prior to or at the Closing, of each of the
following conditions:
3.1 Shareholder Approval. The transactions contemplated by this
Agreement shall have been duly approved by the requisite affirmative vote of
the shareholders of the Acquired Fund.
3.2 Tax Opinion. The parties shall have received a legal opinion to
the effect that, if the transactions contemplated by this Agreement are
consummated in accordance with the terms hereof, for federal income tax
purposes:
(i) the transfer by the Acquired Fund of all of its assets
and stated liabilities to the Acquiring Fund in exchange for shares of
the Acquiring Fund, and the distribution of such shares to the
shareholders of the Acquired Fund, as provided in this Agreement, will
constitute a "reorganization" within the meaning of Section 368(a)(1)
of the Code and each such Fund will be "a party to the reorganization"
within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by the Acquired
Fund on the transfer of its assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption of the stated
liabilities of the Acquired Fund, and no gain or loss will be
recognized by the Acquired Fund on the distribution of the Acquiring
Fund Shares to the Acquired Fund Shareholders;
(iii) no gain or loss will be recognized by the Acquiring
Fund upon the receipt of the assets of the Acquired Fund in exchange
for the Acquiring Fund Shares and the assumption of the stated
liabilities of the Acquired Fund;
(iv) the adjusted basis of each asset of the Acquired Fund
in the hands of the Acquiring Fund will be the same as the adjusted
basis of such asset in the hands of the Acquired Fund immediately
prior to the Reorganization;
A-5
34
(v) the holding period of each asset of the Acquired Fund
in the hands of the Acquiring Fund will include the holding period of
such asset in the hands of the Acquired Fund immediately prior to the
Reorganization;
(vi) no gain or loss will be recognized by the Acquired
Fund Shareholders upon the receipt of the Acquiring Fund Shares
(including fractional shares) solely in exchange for shares of the
Acquired Fund;
(vii) the adjusted basis of the Acquiring Fund Shares
(including fractional shares) received by each Acquired Fund
Shareholder will be the same as the adjusted basis of the shares of
the Acquired Fund surrendered in exchange therefor; and
(viii) the holding period of the Acquiring Fund Shares
(including fractional shares) received by each Acquired Fund
Shareholder will include the holding period of the shares of the
Acquired Fund surrendered in exchange therefor, provided that such
shares were held as a capital asset in the hands of the Acquired Fund
Shareholder on the date of the exchange.
3.3 Exemptive Order. The Commission shall have issued an order
pursuant to Section 17(b) of the 1940 Act permitting consummation of the
transactions contemplated by this Agreement.
3.4 Governmental Approvals. All state securities law and all other
governmental approvals necessary or advisable in the opinion of counsel to
consummate the transactions contemplated by this Agreement shall have been
received and shall not contain any provision which is unduly burdensome.
3.5 No Litigation. No suit, action or other proceeding against the
Trust or its officers or trustees shall be threatened or pending before any
court or governmental agency in which it will be, or it is, sought to restrain
or prohibit any of the transactions contemplated by this Agreement or to obtain
damages or other relief in connection with this Agreement or the transactions
contemplated hereby.
ARTICLE IV
TERMINATION
4.1 Termination. The board of trustees of the Trust may terminate
this Agreement and abandon the transactions contemplated hereby at any time
prior to the Closing (notwithstanding any approval of this Agreement and the
transactions herein contemplated by the shareholders of the Acquired Fund).
A-6
35
4.2 Effect of Termination. If terminated as herein provided, this
Agreement shall forthwith become null and void and there shall be no liability
or obligation of either party (or any shareholder, trustee, officer, employee,
agent, consultant or representative thereof) to the other party.
ARTICLE V
MISCELLANEOUS
5.1 Amendment; Waiver. Any provision of this Agreement may be
amended or waived prior to the Closing if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by each party or,
in the case of a waiver, by the party against which the waiver is to be
effective; provided that after the adoption of this Agreement by the
shareholders of the Acquired Fund, no such amendment or waiver shall, without
the further approval of such shareholders, alter or change any of the terms or
conditions of this Agreement if such alteration or change would adversely
affect the shareholders of the Acquired Fund.
5.2 Successors. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other party hereto.
5.3 Expenses. The parties hereby acknowledge that First Maryland
Bancorp has agreed to pay all expenses incurred in connection with entering
into and carrying out the transactions contemplated by this Agreement, whether
or not the transactions contemplated hereby are consummated. Such expenses
include, without limitation, (i) expenses associated with the preparation and
filing of the Registration Statement; (ii) fees and expenses for registration
or qualification of the Acquiring Fund Shares under the 1933 Act and state
securities or "blue sky" laws; (iii) fees and disbursements of legal counsel
and accountants; and (iv) postage, printing and proxy solicitation costs.
5.4 Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Maryland.
5.5 Survival. The covenants and agreements of the parties
contained herein shall not survive, and shall be extinguished by, the Closing
of the Reorganization.
5.6 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter of this
Agreement. No representation, inducement, promise, understanding, condition or
warranty not set forth herein has been made or relied upon by either party
hereto.
A-7
36
5.7 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
5.8 Parties in Interest. Nothing expressed or implied herein is
intended or shall be construed to confer upon any person, other than the
parties hereto, any rights or remedies under or by reason of this Agreement or
the transactions contemplated hereby.
5.9 Limitation of Liability. (a) A copy of the Agreement and
Declaration of Trust of the Trust is on file with the Secretary of State of the
Commonwealth of Massachusetts, and it is expressly agreed that this instrument
is executed by the officers of the Trust in such capacities, and not
individually, and that the obligations of this instrument are not binding upon
any of the trustees, officers or shareholders of Trust personally, but are
binding only upon the assets and property of the Trust.
(b) The parties specifically acknowledge and agree that any
liability under this Agreement, or in connection with the transactions herein
contemplated, to the Trust in respect of the Acquiring Fund or the Acquired
Fund shall be discharged only out of the assets of the Acquiring Fund or the
Acquired Fund, as the case may be, and that no other series of the Trust shall
be liable with respect thereto.
***
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their authorized officers as of the day and year first
above written.
ARK FUNDS
for the ARK Stock Portfolio
ATTEST:
By
--------------------------------
- -------------------------
ARK FUNDS
for the ARK Value Equity Portfolio
ATTEST:
By
--------------------------------
- -------------------------
A-8
37
ARK FUNDS
CROSS REFERENCE SHEET
PART B
Item No. Heading
- -------- -------
10. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . Table of Contents
12. Additional Information about the Registrant . . . . . . . . . . Statement of Additional
Information of ARK Funds dated
February 13, 1998
13. Financial Statements . . . . . . . . . . . . . . . . . . . . . . Cover Page
38
ARK FUNDS
Oaks, Pennsylvania 19456
STATEMENT OF ADDITIONAL INFORMATION
(Special Meeting of Shareholders of ARK Stock Portfolio)
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Prospectus/Proxy Statement dated March __, 1998
for the special meeting of shareholders to be held on _______ __, 1998. Copies
of the Prospectus/Proxy Statement may be obtained without charge by calling ARK
Funds toll free at 1-800-624-4116.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the
Prospectus/Proxy Statement.
Further information about the Acquiring Fund and the Acquired Fund is
contained in and incorporated herein by reference to the Statement of
Additional Information of ARK Funds dated February 13, 1998, a copy of which is
included herewith. The audited financial statements and related independent
auditor's report for the Acquired Fund contained in the Annual Report for the
fiscal year ended April 30, 1997 are hereby incorporated herein by reference.
The unaudited financial statements of the Acquired Fund contained in the
Semi-Annual Report for the six months ended October 31, 1997 are hereby
incorporated herein by reference. No other parts of the Annual Report and
Semi-Annual Report are incorporated by reference herein.
The date of this Statement of Additional Information is March __, 1998.
39
GENERAL INFORMATION
The shareholders of the ARK Stock Portfolio of ARK Funds (the "Acquired
Fund") are being asked to approve or disapprove an Agreement and Plan of
Reorganization (the "Reorganization Agreement") dated as of February 23, 1998,
by and between the Acquired Fund and the ARK Value Equity Portfolio of ARK
Funds (the "Acquiring Fund") and the transactions contemplated thereby. The
Reorganization Agreement contemplates the transfer of substantially all of the
assets and stated liabilities of the Acquired Fund to the Acquiring Fund in
exchange for full and fractional Acquiring Fund shares of the same class (the
"Reorganization"). The Acquiring Fund shares issued pursuant to the
Reorganization Agreement will have an aggregate net asset value equal to the
aggregate net asset value of the shares of the Acquired Fund that are
outstanding immediately before the Closing Date (as defined in the
Reorganization Agreement) of the Reorganization.
Following the exchange, the Acquired Fund will make a liquidating
distribution of the Acquiring Fund shares to its shareholders. Each
shareholder of the Acquired Fund on the Closing Date will receive Acquiring
Fund shares of the same class and of equal value. Upon completion of the
Reorganization, the Acquired Fund will be terminated under state law.
The special meeting of shareholders to consider the Reorganization
Agreement and the related transactions will be held at ___ o'clock a.m.,
Eastern Time, on _______ __, 1998, at _____. For further information about the
transaction, see the Prospectus/Proxy Statement.
Banking laws and regulations generally permit a bank or bank affiliate to
act as an investment adviser 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, as amended, 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 such as shares of the Acquired
Fund and the Acquiring Fund. 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 First Maryland Bancorp or its affiliates from continuing to perform all
or a part of the activities described above. If banks or bank affiliates were
prohibited from so acting, changes in the operation of ARK Funds might occur.
It is not anticipated, however, that any such change would affect the net asset
value of the Acquiring Fund's shares or result in any financial loss to any
shareholder.
40
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article VIII of the Agreement and Declaration of Trust filed as Exhibit 1
to the Registration Statement is incorporated herein by reference. The
Registrant participates in a group liability policy under which the Registrant
and its trustees, officers and affiliated persons are insured against certain
liabilities.
ITEM 16. EXHIBITS
(1) (a) Declaration of Trust dated October 22, 1992 is
incorporated herein by reference to Exhibit 1 to
the Registrant's Registration Statement on Form
N-1A (File No. 33-53690) ("Form N-1A").
(b) Amended and Restated Declaration of Trust dated
March 19, 1993 is incorporated herein by reference
to Exhibit 1(b) to Form N-1A.
(c) Supplement dated March 23, 1993 to the Amended and
Restated Declaration of Trust dated March 19, 1993
is incorporated herein by reference to Exhibit 1(c)
to Form N-1A.
(2) By-Laws of the Registrant are incorporated herein
by reference to Exhibit 1(d) to Form N-1A.
(3) Not applicable.
(4) Agreement and Plan of Reorganization is included in
Part A.
(5) Not applicable.
(6) (a) Investment Advisory Agreement dated as of February
12, 1998 between the Registrant and Allied
Investment Advisors, Inc. is incorporated herein by
reference to Exhibit 5 to Form N-1A.
(7) Distribution Agreement dated November 1, 1995,
between the Registrant and SEI Investments
Distribution Co. is incorporated herein by
reference to Exhibit 6(a) to Form N-1A.
(8) Not applicable.
(9) Custody Agreement dated as of April 1, 1997,
between FMB Trust Company, National Association and
the Registrant is incorporated herein by reference
to Exhibit 8 to Form N-1A.
41
(10) (a) Shareholder Services Plan for the Institutional
Class is incorporated herein by reference to
Exhibit 15(c) to Form N-1A.
(b) Rule 18f-3 Plan is incorporated herein by reference
to Exhibit 18 to Form N-1A.
(11) Opinion and consent of legal counsel is
incorporated herein by reference to Registrant's
Form 24f-2 Notices filed with the SEC.
(12) Opinion and consent of Piper & Marbury L.L.P. as to
tax matters (to be filed by amendment).
(13) (a) Administration Agreement dated November 1, 1995,
between the Registrant and SEI Financial Management
Corporation is incorporated herein by reference to
Exhibit 6(b) to Form N-1A.
(b) Sub-Administration Agreement dated January 1, 1998,
between SEI Investment Management Corporation and
FMB Trust Company, National Association is
incorporated herein by reference to Exhibit 9 to
Form N-1A.
(c) Transfer Agency and Service Agreement dated
November 1, 1995, between the Registrant and SEI
Fund Resources incorporated herein by reference to
Exhibit 9 to Form N-1A.
(14) Consent of KPMG Peat & Marwick LLP, independent
auditors of the Registrant.*
(15) Not applicable.
(16) Powers of Attorney of Trustees of the Registrant.
(17) (a) Prospectus for Registrant is incorporated herein by
reference to Registrants 497 filing filed with the
SEC on February 20, 1998.
(b) Statement of Additional Information of Registrant
is incorporated herein by reference to Registrants
497 filing filed with the SEC on February 20, 1998.
(c) Annual Report to Shareholders of ARK Funds for the
fiscal year ended April 30, 1997 is incorporated
herein by reference to the Registrant's filing with
the SEC pursuant to Rule 30b-2 on June 27, 1997.
(d) Semi-Annual Report to Shareholders of the ARK Funds
for the six months ending October 31, 1997 is
incorporated herein by reference to
42
the Registrant's filing with the SEC pursuant to
Rule 30b-2 on December 29, 1997.
* Filed herewith.
43
ITEM 17. UNDERTAKINGS
(1) The Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is a part of this
Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the Registration
Statement and will not be used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new registration statement for the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
44
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant in the City of Baltimore, and State of
Maryland on the 24 day of February, 1998.
ARK FUNDS
By: /s/ David D. Downes
-----------------------------------
David D. Downes, President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
/s/ David D. Downes President (principal executive officer) and
- -------------------------------- Trustee
David D. Downes
/s/ James F. Volk Treasurer, Controller and Chief Financial Officer
- -------------------------------- (principal financial and accounting officer)
James F. Volk
* Trustee
- --------------------------------
William H. Cowie, Jr.
* Trustee
- --------------------------------
Charlotte Kerr
* Trustee
- --------------------------------
George K. Reynolds, III
* Trustee
- --------------------------------
Thomas Schweizer*
* By: /s/ Alan C. Porter February 24, 1998
-------------------------
Alan C. Porter
Attorney-in-Fact
An original power of attorney authorizing Alan C. Porter to execute this
Registration Statement for each trustee of the Registrant on whose behalf this
Registration Statement is filed has been executed and filed with the Securities
and Exchange Commission.