-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OYLIfA6/WSqPGKwmTBocyiF6jamV2bAMM9GHc3df1LdYxSz5e4QKdGbMk2fkAy0c s/UpFpkdj3id2dvULIfhXA== 0000898432-02-000907.txt : 20021213 0000898432-02-000907.hdr.sgml : 20021213 20021213152705 ACCESSION NUMBER: 0000898432-02-000907 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030115 FILED AS OF DATE: 20021213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARK FUNDS/MA CENTRAL INDEX KEY: 0000893658 IRS NUMBER: 541834572 STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: 1934 Act SEC FILE NUMBER: 811-07310 FILM NUMBER: 02857055 BUSINESS ADDRESS: STREET 1: 2 PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101 BUSINESS PHONE: 6102541000 MAIL ADDRESS: STREET 1: 2 PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101 PRE 14A 1 a545431.txt SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant /x/ Filed by a Party other than the Registrant / / Check the appropriate box: /x/ Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) / / Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 ARK FUNDS - ------------------------------------------------------------------------------ (Name of Registrant as Specified In Its Charter) - ------------------------------------------------------------------------------ (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /x/ No fee required. / / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: ARK FUNDS TWO PORTLAND SQUARE PORTLAND, ME 04101 December 23, 2002 Dear Shareholders: The enclosed proxy materials relate to a Special Meeting of Shareholders of ARK Funds (the "Fund") to be held on January __, 2003. As discussed in more detail in the Proxy Statement, on September 26, 2002, M&T Bank Corporation entered into an agreement with Allied Irish Banks, p.l.c. to acquire Allfirst Financial Inc., the parent corporation of Allfirst Bank and indirect parent corporation of Allied Investment Advisors, Inc. ("AIA"), the Fund's investment adviser (the "Proposed Acquisition"). The Proposed Acquisition would result in changes to AIA's ownership structure. In connection therewith, you are being asked to vote on one or more of the following proposals: (i) approval of a new investment advisory agreement between AIA and the Fund (the "New Advisory Agreement") with respect to each series of the Fund (each a "Portfolio"); (ii) approval of a new investment sub-advisory agreement among AIA, AIB Investment Managers Limited and the Fund to provide certain sub-advisory services to the Fund's International Equity Portfolio; and (iii) approval of a new investment sub-advisory agreement among AIA, Govett Investment Management Limited and the Fund to provide certain sub-advisory services to the Fund's Emerging Markets Equity Portfolio (collectively, the two new sub-advisory agreements are referred to as the "New Sub-Advisory Agreements"). The terms of the New Advisory Agreement and the New Sub-Advisory Agreements are unchanged in all material respects. The agreements do not call for any increase in either the fees any Portfolio of the Fund is obligated to pay or the expenses it is obligated to bear. The Board of Trustees of the Fund unanimously recommends that you vote "FOR" all proposals that apply to your Portfolio(s). Your vote is important. Please take a moment now to review the proxy materials and complete, sign, date and return the enclosed Form of Proxy in the enclosed postage-paid envelope. Thank you for your attention to this matter and for your continued investment in the Fund. Sincerely, /s/ William H. Cowie, Jr. William H. Cowie, Jr. Chairman of the Board ARK FUNDS TWO PORTLAND SQUARE PORTLAND, ME 04101 ------------------------- NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS ------------------------- Dear Shareholders: Notice is hereby given that a Special Meeting of Shareholders (the "Special Meeting") of ARK Funds (the "Fund") will be held at 10:00 a.m. Eastern Time on January __, 2003, at Allfirst Trust Company, N.A., 25 South Charles Street, 16th Floor, Baltimore, Maryland 21201. As discussed in more detail in the enclosed Proxy Statement, on September 26, 2002, M&T Bank Corporation entered into an agreement with Allied Irish Banks, p.l.c. to acquire Allfirst Financial Inc., the parent corporation of Allfirst Bank and indirect parent corporation of Allied Investment Advisors, Inc. ("AIA"), the Fund's investment adviser (the "Proposed Acquisition"). The Proposed Acquisition would result in changes to AIA's ownership structure. In connection therewith, shareholders are being asked to consider and act upon the following proposals at the Special Meeting: (i) To approve a new investment advisory agreement between AIA and the Fund (the "New Advisory Agreement"). The New Advisory Agreement provides that AIA will provide investment advisory services to each series of the Fund (each a "Portfolio") on the same terms and for the same compensation under which it currently operates; (ii) To approve a new investment sub-advisory agreement among AIA, AIB Investment Managers Limited ("AIBIM") and the Fund (the "New AIBIM Sub-Advisory Agreement"). The New AIBIM Sub-Advisory Agreement provides that AIBIM will provide sub-advisory services to the Fund's International Equity Portfolio on the same terms and for the same compensation under which it currently operates; (iii) To approve a new investment sub-advisory agreement among AIA, Govett Investment Management Limited ("Govett") and the Fund (the "New Govett Sub-Advisory Agreement"). The New Govett Sub-Advisory Agreement provides that Govett will provide sub-advisory services to the Fund's Emerging Markets Equity Portfolio on the same terms and for the same compensation under which it currently operates; and (iv) To transact any other business that may properly come before the Board of Trustees, or any adjournment thereof, in the discretion of the proxies or their substitutes. Only holders of shares of beneficial interest of the Fund of record at the close of business on December 13, 2002, are entitled to notice of, and to vote at, the Special Meeting and any adjournments thereof. By Order of the Board of Trustees, /s/ Thomas R. Rus Thomas R. Rus Secretary December 23, 2002 ----------------------------------------------------------------------- YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. PLEASE RETURN YOU FORM OF PROXY PROMPTLY. ANY SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED FORM OF PROXY, DATE AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. TO AVOID THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATION, WE ASK YOUR COPPOERATION IN MAILING YOUR PROXY PROMPTLY, NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. ----------------------------------------------------------------------- QUESTIONS & ANSWERS ABOUT THE SPECIAL MEETING Q: WHY IS ARK FUNDS (THE "FUND") SENDING ME THIS PROXY STATEMENT? A: As you may know, M&T Bank Corporation ("M&T") has entered into an agreement with Allied Irish Banks, p.l.c. to acquire Allfirst Financial Inc., the direct parent corporation of Allfirst Bank and indirect parent corporation of Allied Investment Advisors, Inc. ("AIA"), which is the Fund's investment adviser (the "Proposed Acquisition"). As a result of the Proposed Acquisition, a change in control of the Fund's investment adviser will occur that will automatically terminate the agreement between the Fund and its investment adviser and sub-advisers. A new investment advisory agreement and new investment sub-advisory agreements are being proposed to enable the adviser and sub-advisers to continue to provide services to the Fund. Q: WHAT AM I BEING ASKED TO VOTE ON? A: The proposals you are being asked to vote on are: o approval of a new investment advisory agreement between AIA and the Fund with respect to each series of the Fund (each a "Portfolio"); o approval of a new investment sub-advisory agreement among AIA, AIB Investment Managers Limited and the Fund to provide certain sub-advisory services to the Fund's International Equity Portfolio; and o approval of a new investment sub-advisory agreement among AIA, Govett Investment Management Limited and the Fund to provide certain sub-advisory services to the Fund's Emerging Markets Equity Portfolio. The agreements contain terms substantially identical to those in the current agreements. Q: WHY AM I BEING ASKED TO VOTE ON NEW ADVISORY AND SUB-ADVISORY AGREEMENTS? A: The Investment Company Act of 1940 (the "1940 Act"), which regulates investment companies such as the Fund, requires a shareholder vote to approve a new advisory or sub-advisory agreement following certain types of business transactions such as the Proposed Acquisition. The new advisory and sub-advisory agreements are substantially identical to the current advisory and sub-advisory agreements, except for the dates of execution and termination. The Board of Trustees has already approved the new advisory and sub-advisory agreements and now needs your approval of this matter. Q: HOW WILL THE PROPOSED ACQUISITION AFFECT ME? A: The Proposed Acquisition will have no immediate impact on the operations of the Fund. The Fund and the investment objective of each Portfolio will not change as a result of the transaction. You will still own the same shares in the Fund after the Proposed Acquisition. M&T has told the Board of Trustees that it does not intend to make any changes in the level or quality of the advisory services provided to the Fund and that no fees will be changed as a result of the transaction. Q: HOW DOES THE BOARD OF TRUSTEES RECOMMEND THAT I VOTE? A: The Board of Trustees unanimously recommends that you vote "FOR" the proposals on the enclosed Form of Proxy. Q: WHO IS ELIGIBLE TO VOTE? A: Shareholders of record of the Fund at the close of business on December 13, 2002, are entitled to notice of, and to vote at, the Special Meeting or at any adjournments of the Special Meeting. Shareholders of record will be entitled to one vote for each full share and a proportionate fractional vote for each fractional share that they hold on each matter presented at the Special Meeting. Q: HOW DO I VOTE MY SHARES? A: You may vote your shares (i) in person, by attending the Special Meeting, or (ii) by mail. To vote by mail, please sign, date and return the Form of Proxy in the enclosed postage-paid envelope. Q: WHY ARE MULTIPLE FORMS OF PROXY ENCLOSED? A: If you are a shareholder of more than one Portfolio, you have been sent a Form of Proxy for each Portfolio you own because each requires a separate vote. Please sign, date and return each Form of Proxy in the enclosed postage-paid envelope. Q: IF I SEND MY PROXY IN NOW AS REQUESTED, CAN I CHANGE MY VOTE LATER? A: You may revoke your proxy at any time before it is voted by (i) sending to the Secretary of the Fund a written revocation, or (ii) forwarding a later-dated proxy that is received by the Fund at or prior to the Special Meeting, or (iii) attending the Special Meeting and voting in person. Even if you plan to attend the Special Meeting, we ask that you return the enclosed Form of Proxy. This will help us ensure that an adequate number of shares are present for the Special Meeting to be held. ARK FUNDS TWO PORTLAND SQUARE PORTLAND, ME 04101 --------------------------- PROXY STATEMENT This Proxy Statement is furnished by the Board of Trustees of ARK Funds (the "Fund") in connection with its solicitation of proxies for use at the Special Meeting of Shareholders (the "Special Meeting") of the Fund to be held at 10:00 a.m. Eastern Time on January __, 2003, at Allfirst Trust Company, N.A. ("Allfirst Trust"), 25 South Charles Street, 16th Floor, Baltimore, Maryland 21201. The purpose of the Special Meeting and the matters to be acted upon are set forth in the accompanying Notice of Special Meeting of Shareholders. The close of business on December 13, 2002, has been fixed as the record date for the determination of shareholders entitled to notice of, and to vote at, the Special Meeting. As of the record date, the Fund had the following shares of beneficial interest outstanding and entitled to vote: SHARES OF BENEFICIAL INTEREST OUTSTANDING ON DECEMBER 13, 2002
INSTITUTIONAL INSTITUTIONAL ------------- ------------- PORTFOLIO CLASS A CLASS B CLASS C CLASS CLASS II --------- ------- ------- ------- ----- -------- U.S. Treasury Money Market U.S. Government Money Market Money Market Pennsylvania Tax-Free Money Market Tax-Free Money Market Short-Term Treasury Short-Term Bond Maryland Tax-Free Pennsylvania Tax-Free Intermediate Fixed Income U.S. Government Bond Income Balanced Equity Income Value Equity Equity Index Blue Chip Equity Capital Growth Mid-Cap Equity Small-Cap Equity International Equity Emerging Markets Equity
SHARES OF BENEFICIAL INTEREST OUTSTANDING ON DECEMBER 13, 2002 PORTFOLIO CORPORATE CLASS CORPORATE II CORPORATE III CLASS CLASS --------- --------------- ------------ ------------- U.S. Government Cash Management U.S. Treasury Cash Management Prime Cash Management Tax-Free Cash Management SHARES OF BENEFICIAL INTEREST OUTSTANDING ON DECEMBER 13, 2002 PORTFOLIO INSTITUTIONAL --------- ------------- CLASS ----- Social Issues Intermediate Fixed Income Social Issues Blue Chip Equity Social Issues Capital Growth Social Issues Small-Cap Equity Each share will be entitled to one vote for each proposal at the Special Meeting. It is expected that the Notice of Special Meeting of Shareholders, Proxy Statement and Form of Proxy will first be mailed to shareholders on or about December 23, 2002. If the accompanying Form of Proxy is properly executed and returned, shares represented by it will be voted at the Special Meeting, or any adjournments thereof, in accordance with the instructions on the proxy. However, if no instructions are specified, shares will be voted for the proposals. A proxy may be revoked at any time prior to the time it is voted by written notice to the Secretary of the Fund, by execution of a subsequent proxy or by attendance at the Special Meeting. If a quorum is not present at the Special Meeting, or if sufficient votes to approve one or more of the proposed items are not received, the persons named as proxies may propose one or more adjournments of the Special Meeting to permit further solicitation of proxies. Any such adjournment will require the affirmative vote of a majority of those shares represented at the Special Meeting in person or by proxy. In such case, the persons named as proxies will vote those proxies which they are entitled to vote for any such item in favor of such an adjournment, and will vote those proxies required to be voted against any such item against any such adjournment. In the event that the Special Meeting is adjourned, the same procedures will apply at a later meeting date. Broker non-votes are shares held in street name for which the broker indicates that instructions have not been received from the beneficial owners or other persons entitled to vote and with respect to which the broker does not have discretionary voting authority. Abstentions and broker non-votes will be counted as shares present for purposes of determining whether a quorum is present but will have the same effect as votes cast against any proposal. Abstentions and broker non-votes will have no effect on the outcome of a vote for adjournment. 2 Information about persons who, to the knowledge of management, owned beneficially more than 5% of the outstanding shares of a Portfolio as of November 30, 2002 is set forth in Appendix A. To the knowledge of management, as of November 30, 2002, the executive officers and Trustees of the Fund, as a group, except as indicated in Appendix A, owned less than 1% of the outstanding shares of each Portfolio. All expenses associated with the preparation and mailing of this Proxy Statement and the solicitation of proxies will be borne by Allied Irish Banks, p.l.c. ("AIB") and will include reimbursement of brokerage firms and others for expenses in forwarding proxy solicitation materials to beneficial owners. The solicitation of proxies will be largely by mail. Certain officers and regular agents of the Fund, who will receive no additional compensation for their services, may use their efforts, by telephone or otherwise, to request the return of proxies. PROPOSAL 1. APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN IA AND THE FUND. THE NEW INVESTMENT ADVISORY AGREEMENT PROVIDES THAT AIA WILL PROVIDE INVESTMENT ADVISORY SERVICES TO THE FUND ON THE SAME TERMS AND FOR THE SAME COMPENSATION UNDER WHICH IT CURRENTLY OPERATES. BACKGROUND AIA serves as investment adviser to the Fund on behalf of each series of the Fund (each a "Portfolio") pursuant to an investment advisory agreement dated February 12, 1998, as amended ("Current Advisory Agreement"). The Current Advisory Agreement was last approved by shareholders with respect to the International Equity Portfolio on August 8, 2000 for the purpose of increasing the advisory fee paid to AIA with respect to that Portfolio. The Current Advisory Agreement was last approved by shareholders with respect to the Income, Maryland Tax-Free, Pennsylvania Tax-Free, Balanced, Blue Chip Equity, Mid-Cap Equity, Capital Growth and Small-Cap Equity Portfolios on February 4, 1998 for the purpose of increasing the advisory fee paid to AIA with respect to those Portfolios. With respect to the remaining Portfolios, the Current Advisory Agreement was approved by their initial shareholders prior to the commencement of operations of those Portfolios. As explained in more detail below, shareholders of all Portfolios of the Fund are being asked to approve a new investment advisory agreement between AIA and the Fund (the "New Advisory Agreement"). The Current Advisory Agreement, as required by the Investment Company Act of 1940 (the "1940 Act"), contains a provision requiring that the agreement terminate in the event of an "assignment." Under the 1940 Act, a change in control of an investment adviser results in an assignment and termination of the adviser's investment advisory contracts. As described below, AIA will undergo a change in control upon consummation of a proposed acquisition. Such a change in control may be deemed to result in the assignment of, and therefore the termination of, the Current Advisory Agreement. To avoid any uncertainty about the status of the Current Advisory Agreement, the Board of Trustees believes that it is prudent and in the best interest of each Portfolio to obtain shareholder approval of the New Advisory Agreement. As discussed below, neither the level or quality of the advisory services provided to each Portfolio nor the compensation paid for those services will change under the New Advisory Agreement. THE NEW ADVISORY AGREEMENT CONTAINS TERMS SUBSTANTIALLY IDENTICAL TO THOSE IN THE CURRENT ADVISORY AGREEMENT. 3 SUMMARY OF THE PROPOSED ACQUISITION On September 26, 2002, M&T Bank Corporation ("M&T"), located at One M&T Plaza, Buffalo, New York 14203, entered into an agreement with AIB, located at Bankcenter, Ballsbridge, Dublin 4 Ireland, to acquire AIB's wholly-owned subsidiary, Allfirst Financial Inc. ("Allfirst"), located at 25 South Charles Street, Baltimore, Maryland 21201 (the "Proposed Acquisition"). Upon consummation of the Proposed Acquisition, M&T will acquire control of Allfirst and its subsidiaries. Allfirst's wholly-owned subsidiary, Allfirst Bank, located at 25 South Charles Street, Baltimore, Maryland 21201, would be merged into M&T's wholly-owned subsidiary, Manufacturers and Traders Trust Company ("M&T Bank"), located at One M&T Plaza, Buffalo, New York 14203. AIA, a wholly-owned subsidiary of Allfirst Bank, would become an indirect wholly-owned subsidiary of M&T. The Proposed Acquisition, if consummated, may be deemed to constitute an "assignment," as defined in the 1940 Act, of the Fund's Current Advisory Agreement with AIA. As required by the 1940 Act, the Current Advisory Agreement provides for automatic termination in the event of an assignment. Accordingly, the Current Advisory Agreement will terminate upon the consummation of the Proposed Acquisition. The New Advisory Agreement is being proposed to enable AIA to continue to manage the Fund. No change in the Fund's portfolio managers or portfolio management teams is anticipated to occur as a result of the Proposed Acquisition. Appendix B lists the current executive officers and directors of AIA. M&T is the nation's 26th largest bank holding company, with total assets of over $34 billion as of September 30, 2002. Its principal banking subsidiary, M&T Bank, is one of the nation's strongest and most highly regarded regional banks with over 470 branches throughout New York, Pennsylvania, Maryland and West Virginia. M&T Asset Management, a department of M&T Bank, is the investment adviser to the VISION Group of Funds. As of September 30, 2002, M&T Bank had $8.3 billion in assets under management. It is anticipated that the Proposed Acquisition would benefit AIA and the Fund in a number of ways, including the following: (a) the affiliation with M&T would expand the Fund's opportunities for asset growth and related benefits; (b) the combined resources of M&T and Allfirst would improve their ability to compete in the evolving and competitive financial services industry; and (c) AIA's access to greater resources would provide for continued innovation and improved services. In approving the New Advisory Agreement, the Board of Trustees took into account that there are no material differences between the provisions of the Current and the New Advisory Agreements. The Board of Trustees also noted that neither the Portfolios nor their shareholders will pay any of the costs and expenses incurred by the Portfolios associated with the Proposed Acquisition. Further, the Board of Trustees considered that M&T does not intend to make any material changes to AIA's human or other resources that would aversely impact AIA's ability to provide the same quality of advisory services it has provided in the past. Following consummation of the Proposed Acquisition, M&T intends to carefully study the investment performance of each of the Portfolios, as well as the combined resources of M&T and Allfirst, in order to determine what steps, if any, may be taken to ensure strong investment performance of the Portfolios into the future. It is anticipated that as a result of such study, M&T may recommend, among other things, various actions such as reorganizations or mergers involving certain Portfolios, as well as changes in or adjustments to the investment personnel assigned to manage certain Portfolios. Any proposals involving 4 reorganizations or mergers of Portfolios would be presented to the Board of Trustees for its approval. Moreover, implementation of certain of these proposals also may require shareholder approval. At a meeting of the Board of Trustees held on December 13, 2002, the Board of Trustees, including all of the trustees who are not "interested persons" of the Fund as defined in the 1940 Act (the "Independent Trustees") unanimously concluded that the New Advisory Agreement is in the best interests of the Fund and its shareholders, and approved, and voted to recommend to the shareholders of each Portfolio that they approve, the New Advisory Agreement. THE CURRENT AND NEW ADVISORY AGREEMENTS Except for differences in the effective and renewal dates, the Current and New Advisory Agreements are the same in all material respects. A form of the New Advisory Agreement is attached to this Proxy Statement as Exhibit A. Pursuant to both agreements, AIA serves as investment adviser to the Fund and is responsible for providing a continuous investment program for the Portfolios, including the provision of investment research and management with respect to all securities and investments and cash equivalents purchased, sold or held in the Portfolios, and the selection of brokers and dealers through which securities transactions for the Portfolios are executed. AIA performs its responsibilities subject to the supervision of, and policies established by, the Board of Trustees. Under both agreements, AIA bears all expenses incurred by it in performing its duties as investment adviser. The Fund bears all expenses, not specifically assumed by AIA, incurred in the conduct of its operations, including, without limitation, the following: (a) the cost (including brokerage commissions) of securities purchased or sold by the Portfolios and any losses incurred in connection therewith; (b) fees payable to, and expenses incurred on behalf of the Fund by, AIA; (c) expenses of organizing the Fund; (d) filing fees and expenses relating to the registration and qualification of the Fund's shares and the Fund under federal and/or state securities laws and maintaining such registrations and qualifications; (e) fees and salaries payable to the Fund's trustees and officers; (f) taxes (including any income or franchise taxes) and governmental fees; (g) costs of any liability, uncollectible items of deposit and other insurance or fidelity bonds; (h) any costs, expenses or losses arising out of liability of or claim for damages or other relief asserted against the Fund for violation of any law; (i) legal, accounting and auditing expenses, including legal fees of special counsel at any time retained for those members of the Board of Trustees who are not interested persons of the Fund and expenses relating to the use of consulting services by the Fund provided that the use of such services is approved by the Fund's Board of Trustees; (j) charges of custodians, transfer agents and other agents; (k) costs of preparing share certificates; (l) expenses of setting in type and printing prospectuses and supplements thereto for existing shareholders as well as shareholder reports and proxy material; (m) costs of mailing prospectuses, statements of additional information and supplements thereto to existing shareholders as well as shareholder reports and proxy material; (n) any extraordinary expenses (including fees and disbursements of counsel) incurred by the Fund; (o) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (p) costs of mailing and tabulating proxies and costs of shareholders' and trustees' meetings; and (q) the cost of investment company literature and other publications provided by the Fund to its trustees and officers. All expenses are allocated among the Portfolios in 5 accordance with the Fund's Agreement and Declaration of Trust and the provisions of the 1940 Act. Both agreements provide that AIA is entitled to receive a fee, payable monthly, at an annual rate based on the average daily net assets of each Portfolio. The fee for each Portfolio under the New Advisory Agreement is the same as under the Current Advisory Agreement as set forth in the table below. The table also sets forth the individual fee paid (or reimbursed) on behalf of each Portfolio for the fiscal year ended April 30, 2002. During that period, the aggregate fee paid by the Fund to AIA for services on behalf of the Portfolios was approximately $21,737,798. FEE UNDER CURRENT FEE PAID AND NEW ADVISORY (FISCAL YEAR ENDED PORTFOLIO AGREEMENTS APRIL 30, 2002) --------- ---------- --------------- U.S. Treasury Money Market 0.25% $ 849,123 U.S. Government Money Market 0.25% 2,476,521 Money Market 0.25% 2,020,158 Pennsylvania Tax-Free Money Market 0.25% 40,251 Tax-Free Money Market 0.25% 132,772 Short-Term Treasury 0.35% 145,451 Short-Term Bond 0.75% 511,637 Maryland Tax-Free 0.65% 587,164 Pennsylvania Tax-Free 0.65% 1,065,255 Intermediate Fixed Income 0.60% 663,713 U.S. Government Bond 0.75% 787,851 Income 0.60% 1,790,724 Balanced 0.65% 1,866,103 Equity Income 0.70% 488,291 Value Equity 1.00% 2,474,537 Equity Index 0.20% 50,455 Blue Chip Equity 0.70% 1,789,908 Capital Growth 0.70% 1,376,454 Mid-Cap Equity 0.80% 709,490 Small-Cap Equity 0.80% 1,175,776 International Equity 1.00% 234,290 Emerging Markets Equity 1.00% (34,090) U.S. Government Cash Management 0.15% 570,811 U.S. Treasury Cash Management 0.15% (439) Prime Cash Management 0.15% (22,127) Tax-Free Cash Management 0.15% 12,341 Social Issues Intermediate Fixed Income 0.60% 1,397 Social Issues Blue Chip Equity 0.70% (2,512) Social Issues Capital Growth 0.70% (11,959) Social Issues Small-Cap Equity 0.80% (11,543) Each agreement provides that AIA shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or any of its Portfolios in connection with the matters to which the contract relates including, without limitation, losses that may be sustained in connection with 6 the purchase, holding, redemption or sale of any security on behalf of any Portfolio of the Fund, except a loss resulting from the willful misfeasance, bad faith or gross negligence of AIA in the performance of its duties or from reckless disregard by it of its obligations and duties under the agreement. Both agreements are renewable annually with respect to a Portfolio (a) by the vote of a majority of those members of the Board of Trustees who are not parties to the agreement or "interested persons" of any such party as defined in the 1940 Act, cast in person at a meeting called for the purpose of voting on such approval; and (b) by all of the members of the Board of Trustees or by vote of the holders of "a majority of the outstanding voting securities" of a Portfolio (as defined in the 1940 Act). Both agreements terminate automatically if assigned (as defined in the 1940 Act) and may be terminated with respect to a Portfolio at any time, without penalty, on 60 days' written notice. CONSIDERATION BY THE BOARD OF TRUSTEES The Board of Trustees determined that the terms of the New Advisory Agreement are fair and reasonable and that approval of the New Advisory Agreement on behalf of each Portfolio is in the best interests of the Portfolio and its shareholders. At a series of meetings held from September through December 2002, the Fund's Board of Trustees met and conferred with representatives of AIA, Allfirst, Allfirst Trust, M&T and M&T Bank. The representatives discussed with the Board of Trustees the anticipated effects of the Proposed Acquisition on the advisory, sub-advisory and related relationships with the Portfolios. These representatives provided information to the Board of Trustees concerning: (a) the specific terms of the Proposed Acquisition; (b) the anticipated advisory and sub-advisory relationships with the Portfolios; and (c) the proposed plans for ongoing management, distribution and operation of the Portfolios. Throughout this period, the Independent Trustees and their counsel requested and received additional information from M&T, and held telephone conferences regarding the Proposed Acquisition and its potential impact on the Portfolios and their shareholders. In evaluating the New Advisory Agreement, the Board of Trustees obtained substantial information regarding: (a) the management, financial position and business of M&T and its affiliates' business and operations; (b) the performance of the investment companies advised by M & T; (c) the impact of the Proposed Acquisition on the Portfolios and their shareholders; and (d) the current plans of M&T and its affiliates with respect to AIA and the Portfolios. The Board of Trustees also received information regarding M&T's plans for the retention of personnel currently employed by AIA who currently provide services to the Portfolios. The Board of Trustees evaluated the above-referenced information and considered, among other things, the following: (a) that the terms of the New Advisory Agreement are substantially identical to those of the Current Advisory Agreement, except for the dates of execution and termination; (b) the financial strength and resources of M&T and its commitment to asset management growth; (c) the favorable history, reputation, qualifications and background of AIA and M&T, as well as the qualifications of each company's personnel; (d) the expectation that the investment objectives, policies and management strategies of the Portfolios after the Proposed Acquisition will not materially change; (e) the expectation that substantially the same investment teams and management personnel will manage the Portfolios on a day-to-day basis; (f) the expectation that the investment expertise available to the Portfolios will be enhanced by the combined M&T and AIA management team; (g) the fact that shareholders of the 7 Portfolios will have access to a more diversified mutual fund product line through the anticipated exchange privilege with the investment companies managed by M&T Bank; (h) the enhanced distribution potential for the Portfolios through M&T's sales network; (i) statements from M&T as to its intention and belief that it does not intend to make any material changes to AIA's financial, human and other resources that would adversely impact AIA's ability to provide the same level and quality of advisory services that it has provided in the past; (j) the statement of M&T as to its intention and belief that the Proposed Acquisition would have no material adverse effect on the advisory services provided to the Fund by AIA; and (k) the commitment of AIB to pay the expenses of the Fund in connection with the Proposed Acquisition so that shareholders of the Fund's Portfolios would not have to bear such expenses. SECTION 15(F) OF THE 1940 ACT [M&T has agreed to use its best efforts to assure compliance with the conditions of Section 15(f) of the 1940 Act.] Section 15(f) provides a non-exclusive safe harbor for an investment adviser or any affiliated persons thereof to receive any amount or benefit in connection with a transaction that results in a change in control of or identity of the investment adviser to an investment company as long as two conditions are met. First, no "unfair burden" may be imposed on the investment company as a result of the transaction relating to the change of control, or any express or implied terms, conditions or understandings applicable thereto. As defined in the 1940 Act, the term "unfair burden" includes any arrangement during the two-year period after the change in control whereby the investment adviser (or predecessor or successor adviser), or any interested person of any such adviser, receives or is entitled to receive any compensation, directly or indirectly, from the investment company or its security holders (other than fees for bona fide investment advisory or other services), or from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company (other than bona fide ordinary compensation as principal underwriter of the investment company). Second, during the three-year period immediately following the change of control, at least 75% of an investment company's board of trustees must not be "interested persons" of the investment adviser or the predecessor investment adviser within the meaning of the 1940 Act. M&T and Allfirst have advised the Board that they are aware of no circumstances arising from the Proposed Acquisition that might result in an "unfair burden" being imposed on the Fund. RECOMMENDATION OF THE BOARD OF TRUSTEES The Board of Trustees, including the Independent Trustees, considered the proposal at meetings held on November 1, 2002 and December 13, 2002. The Board of Trustees, including the Independent Trustees, unanimously concluded that the terms of the New Advisory Agreement for the Fund are reasonable, fair and in the best interests of each Portfolio of the Fund and its shareholders, and that the fees provided therein are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality. The Board of Trustees based this decision on its evaluation of the information presented and other information made available to them, its experience with AIA, and M&T's assurances that there were no planned changes in the advisory services provided to the Fund. The Board, by a vote cast at the December 13, 2002 meeting, unanimously approved and voted to recommend to the shareholders of each Portfolio that they approve, the New Advisory Agreement. 8 REQUIRED VOTE As provided under the 1940 Act, approval of the New Advisory Agreement with respect to a Portfolio will require the affirmative vote of a majority of the outstanding voting securities of the Portfolio. In accordance with the 1940 Act and as used in this Proposal 1, a "majority of the outstanding voting securities" of a Portfolio means the lesser of (a) 67% or more of the shares of the Portfolio present at the Special Meeting if the owners of more than 50% of the outstanding shares of the Portfolio are present in person or by proxy, or (b) more than 50% of the outstanding shares of the Portfolio. If the shareholders of a Portfolio approve the New Advisory Agreement, it will become effective upon termination of the Current Advisory Agreement in accordance with its terms, which would occur upon consummation of the Proposed Acquisition. If the Proposed Acquisition is not consummated, the Current Advisory Agreement will remain in effect until otherwise terminated in accordance with its terms. If shareholders of a Portfolio do not approve the New Advisory Agreement, the Current Advisory Agreement will remain in effect until terminated in accordance with its terms and the Board of Trustees will consider what further action to take consistent with its fiduciary duties to the Fund. THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 1 ---------------------- PROPOSAL 2. APPROVAL OF A NEW INVESTMENT SUB-ADVISORY AGREEMENT AMONG AIA, AIB INVESTMENT MANAGERS LIMITED ("AIBIM") AND THE FUND. THE NEW INVESTMENT SUB-ADVISORY AGREEMENT PROVIDES THAT AIBIM WILL PROVIDE SUB-ADVISORY SERVICES TO THE FUND'S INTERNATIONAL EQUITY PORTFOLIO ON THE SAME TERMS AND FOR THE SAME COMPENSATION UNDER WHICH IT CURRENTLY OPERATES. BACKGROUND AIBIM serves as the sub-adviser to the Fund's International Equity Portfolio pursuant to a sub-advisory agreement entered into among AIA, AIB Govett, Inc. ("AIB Govett") and the Fund dated June 30, 2000 (the "Current Sub-Advisory Agreement"). The Current Sub-Advisory Agreement was approved by shareholders on [August 8, 2000]. AIBIM and AIB Govett are direct wholly-owned subsidiaries of AIB Asset Management Holdings Limited ("AIBAMH") and indirect majority-owned subsidiaries of AIB. Due to an internal reorganization of AIBAMH effective September 1, 2002, AIB Govett transferred to AIBIM its duties and responsibilities under the Current Sub-Advisory Agreement with respect to the International Equity Portfolio. The transfer did not cause an "assignment," as defined in the 1940 Act, of the Current Sub-Advisory Agreement, because there was no change in actual control or management of the sub-adviser to the International Equity Portfolio. Appendix B lists the current executive officers and directors of AIBIM. 9 As discussed in Proposal 1, AIA will undergo a change in control upon consummation of the Proposed Acquisition by M&T. Under the 1940 Act, a change in control of an investment adviser results in an assignment and termination of the adviser's investment advisory contracts. The Current Sub-Advisory Agreement contains a provision requiring its automatic termination in the event the Current Advisory Agreement between AIA and the Fund terminates for any reason. As a result, the Board of Trustees believes that it is prudent and in the best interest of the International Equity Portfolio to obtain shareholder approval of a new sub-advisory agreement among AIA, AIBIM and the Fund with respect to the International Equity Portfolio (the "New AIBIM Sub-Advisory Agreement"). THE NEW AIBIM SUB-ADVISORY AGREEMENT CONTAINS TERMS SUBSTANTIALLY IDENTICAL TO THOSE IN THE CURRENT SUB-ADVISORY AGREEMENT. THE CURRENT AND NEW AIBIM SUB-ADVISORY AGREEMENTS Except for differences in the effective and renewal dates, the Current Sub-Advisory Agreement and New AIBIM Sub-Advisory Agreement are the same in all material respects. A form of the New AIBIM Sub-Advisory Agreement is attached to this Proxy Statement as Exhibit B. Pursuant to both agreements, AIBIM manages the International Equity Portfolio and is responsible for placing all orders for the purchase and sale of portfolio securities, subject to the supervision of the Board of Trustees and AIA. As compensation, under both agreements, AIBIM is paid a monthly sub-advisory fee by AIA (not by the Fund) at an annual rate equal to [0.50%] of the International Equity Portfolio's average daily net assets. Both agreements provide that AIBIM will not be liable for any error of judgment or mistake of law or for any losses suffered by the International Equity Portfolio or AIA in connection with the matters to which both agreements relate including, without limitation, losses that may be sustained in connection with the purchase, holding, redemption, or sale of any security, except that AIBIM may be held liable to the extent that such losses resulted from AIBIM's willful misfeasance, bad faith or gross negligence or by reason of the reckless disregard by AIBIM of its duties. Both agreements are renewable annually (a) by the vote of a majority of those members of the Board of Trustees who are not "interested persons" of the Fund, AIA or AIBIM as defined in the 1940 Act, cast in person at a meeting called for the purpose of voting on such approval; and (b) by the vote of a majority of the Fund's Board of Trustees or, by the vote of the holders of "a majority of the outstanding voting securities," (as defined in the 1940 Act), of the International Equity Portfolio. Both agreements may be terminated at any time, without penalty, on 60 days' written notice. Both agreements terminate automatically upon termination of the investment advisory agreement between AIA and the Fund and also terminate automatically and immediately in the event of their assignment (as defined in the 1940 Act). 10 CONSIDERATION BY THE BOARD OF TRUSTEES The Board of Trustees determined that the terms of the New AIBIM Sub-Advisory Agreement are fair and reasonable and that approval of the New AIBIM Sub-Advisory Agreement on behalf of the International Equity Portfolio is in the best interests of the International Equity Portfolio and its shareholders. At a series of meetings held from September through December 2002, the Fund's Board of Trustees met and conferred with representatives of AIA, Allfirst, Allfirst Trust, M&T and M&T Bank. The representatives discussed with the Board of Trustees the anticipated effects of the Proposed Acquisition on the advisory, sub-advisory and related relationships with the Fund. The representatives provided information to the Board of Trustees concerning: (a) the specific terms of the Proposed Acquisition; (b) the anticipated advisory and sub-advisory relationships with the Fund; and (c) the proposed plans for ongoing management, distribution and operation of the Fund. Throughout this period, the Board of Trustees and its counsel requested and received additional information from M&T, and held telephone conferences regarding the Proposed Acquisition and its potential impact on the Fund and its shareholders. In evaluating the New AIBIM Sub-Advisory Agreement, the Board of Trustees obtained substantial information regarding: (a) the management, financial position and business of M&T and the business and operations of its affiliates; (b) the performance of the investment companies advised by M & T; (c) the impact of the Proposed Acquisition on the International Equity Portfolio and its shareholders; and (d) the current plans of M&T and its affiliates with respect to AIA and the International Equity Portfolio. The Board of Trustees also received information regarding M&T's plans for the retention of personnel currently employed by AIA who currently provide services to the International Equity Portfolio. In addition, the Board of Trustees received information regarding AIBIM. In connection with their deliberations, the Board of Trustees evaluated the above-referenced information and considered, among other things, the following: (a) that the terms of the New AIBIM Sub-Advisory Agreement are substantially identical to those of the Current Sub-Advisory Agreement, except for the dates of execution and termination; (b) the investment performance of AIBIM; (c) the favorable history, reputation, qualifications and background of AIBIM, as well as the qualifications of its personnel; (d) the statement of M&T as to its intention and belief that the Proposed Acquisition would have no material adverse effect on the sub-advisory services provided to the International Equity Portfolio by AIBIM; (e) the expectation that the investment objectives, policies and management strategies of the International Equity Portfolio after the Proposed Acquisition will not materially change; (f) the expectation that substantially the same investment team and management personnel will manage the International Equity Portfolio on a day-to-day basis; and (g) the commitment of AIB to pay the expenses of the International Equity Portfolio in connection with the Proposed Acquisition so that shareholders of the International Equity Portfolio would not have to bear such expenses. 11 RECOMMENDATION OF THE BOARD OF TRUSTEES The Board of Trustees, including the Independent Trustees, considered the proposal at meetings held on November 1, 2002 and December 13, 2002. The Board of Trustees, including the Independent Trustees, unanimously concluded that the terms of the New AIBIM Sub-Advisory Agreement are reasonable, fair and in the best interests of the International Equity Portfolio and its shareholders, and that the fees provided therein are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality. The Board of Trustees based this decision on its evaluation of the information presented and other information made available to them, its experience with AIA and AIBIM, and M&T's assurances that there were no planned changes in the level or quality of the advisory or sub-advisory services provided to the International Equity Portfolio. The Board, by a vote cast at the December 13, 2002, meeting, unanimously approved and voted to recommend to the shareholders of the International Equity Portfolio that they approve the New AIBIM Sub-Advisory Agreement. REQUIRED VOTE As provided under the 1940 Act, approval of the New AIBIM Sub-Advisory Agreement will require the affirmative vote of a majority of the outstanding voting securities of the International Equity Portfolio. In accordance with the 1940 Act and as used in this Proposal 2, a "majority of the outstanding voting securities" of the International Equity Portfolio means the lesser of (a) 67% or more of the shares of the International Equity Portfolio present at the Special Meeting if the owners of more than 50% of the outstanding shares of the International Equity Portfolio are present in person or by proxy, or (b) more than 50% of the outstanding shares of the International Equity Portfolio. If the shareholders of the International Equity Portfolio approve the New AIBIM Sub-Advisory Agreement, it will become effective upon termination of the Current Sub-Advisory Agreement in accordance with its terms, which would occur upon consummation of the Proposed Acquisition. If the Proposed Acquisition is not consummated, the Current Sub-Advisory Agreement will remain in effect until otherwise terminated in accordance with its terms. If shareholders do not approve the New AIBIM Sub-Advisory Agreement, the Current Sub-Advisory Agreement will remain in effect until terminated in accordance with its terms and the Board of Trustees will consider what further action to take consistent with its fiduciary duties to the International Equity Portfolio. THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2 ---------------------- 12 PROPOSAL 3. APPROVAL OF A NEW INVESTMENT SUB-ADVISORY AGREEMENT AMONG AIA, GOVETT INVESTMENT MANAGEMENT LIMITED ("GOVETT") AND THE FUND. THE NEW INVESTMENT SUB-ADVISORY AGREEMENT PROVIDES THAT GOVETT WILL PROVIDE SUB-ADVISORY SERVICES TO THE FUND'S EMERGING MARKETS EQUITY PORTFOLIO ON THE SAME TERMS AND FOR THE SAME COMPENSATION UNDER WHICH IT CURRENTLY OPERATES. BACKGROUND Govett serves as the sub-adviser to the Fund's Emerging Markets Equity Portfolio pursuant to a sub-advisory agreement entered into among AIA, AIB Govett and the Fund dated June 30, 2000 (the "Current Sub-Advisory Agreement"). The Current Sub-Advisory Agreement was approved by the initial shareholders of the Emerging Markets Equity Portfolio prior to commencement of operations of that Portfolio. Govett and AIB Govett are direct wholly-owned subsidiaries of AIBAMH and indirect majority-owned subsidiaries of AIB. Due to an internal reorganization of AIBAMH effective September 1, 2002, AIB Govett transferred to Govett its duties and responsibilities under the Current Sub-Advisory Agreement with respect to the Emerging Markets Equity Portfolio. The transfer did not cause an "assignment" as defined in the 1940 Act, of the Current Sub-Advisory Agreement, because there was no change in actual control or management of the sub-adviser to the Emerging Markets Equity Portfolio. Appendix B lists the current executive officers and directors of Govett. As discussed in Proposal 1, AIA will undergo a change in control upon consummation of the Proposed Acquisition by M&T. Under the 1940 Act, a change in control of an investment adviser results in an assignment and termination of the adviser's investment advisory contracts. The Current Sub-Advisory Agreement contains a provision requiring its automatic termination in the event the Current Advisory Agreement between AIA and the Fund terminates for any reason. As a result, the Board of Trustees believes that it is prudent and in the best interest of the Emerging Markets Equity Portfolio to obtain shareholder approval of a new sub-advisory agreement among AIA, Govett and the Fund with respect to the Emerging Markets Equity Portfolio (the "New Govett Sub-Advisory Agreement"). THE NEW GOVETT SUB-ADVISORY AGREEMENT CONTAINS TERMS SUBSTANTIALLY IDENTICAL TO THOSE IN THE CURRENT SUB-ADVISORY AGREEMENT. THE CURRENT AND NEW GOVETT SUB-ADVISORY AGREEMENTS Except for differences in the effective and renewal dates, the Current Sub-Advisory Agreement and New Govett Sub-Advisory Agreement are the same in all material respects. A form of the New Govett Sub-Advisory Agreement is attached to this Proxy Statement as Exhibit C. Pursuant to both agreements, Govett manages the Emerging Markets Equity Portfolio and is responsible for placing all orders for the purchase and sale of portfolio securities, subject to the supervision of the Board of Trustees and AIA. As compensation, under both agreements, Govett is paid a monthly 13 sub-advisory fee by AIA (not by the Fund) at an annual rate equal to [0.50%] of the Emerging Markets Equity Portfolio's average daily net assets. Both agreements provide that Govett will not be liable for any error of judgment or mistake of law or for any losses suffered by the Emerging Markets Equity Portfolio or AIA in connection with the matters to which both agreements relate including, without limitation, losses that may be sustained in connection with the purchase, holding, redemption, or sale of any security, except that Govett may be held liable to the extent that such losses resulted from Govett's willful misfeasance, bad faith or gross negligence or by reason of the reckless disregard by Govett of its duties. Both agreements are renewable annually (a) by the vote of a majority of those members of the Board of Trustees who are not "interested persons" of the Fund, AIA, or Govett as defined in the 1940 Act, cast in person at a meeting called for the purpose of voting on such approval; and (b) by the vote of a majority of the Fund's Board of Trustees, or by the vote of the holders of "a majority of the outstanding voting securities," as defined in the 1940 Act, of the Emerging Markets Equity Portfolio. Both agreements may be terminated at any time, without penalty, on 60 days' written notice. Both agreements terminate automatically upon termination of the investment advisory agreement between AIA and the Fund and also terminate automatically and immediately in the event of their assignment (as defined in the 1940 Act). CONSIDERATION BY THE BOARD OF TRUSTEES The Board of Trustees determined that the terms of the New Govett Sub-Advisory Agreement are fair and reasonable and that approval of the New Govett Sub-Advisory Agreement on behalf of the Emerging Markets Equity Portfolio is in the best interests of the Emerging Markets Equity Portfolio and its shareholders. At a series of meetings held from September through December 2002, the Fund's Board of Trustees met and conferred with representatives of AIA, Allfirst, Allfirst Trust, M&T and M&T Bank. The representatives discussed with the Board of Trustees the anticipated effects of the Proposed Acquisition on the advisory, sub-advisory and related relationships with the Fund. These representatives provided information to the Board of Trustees concerning: (a) the specific terms of the Proposed Acquisition; (b) the anticipated advisory and sub-advisory relationships with the Fund; and (c) the proposed plans for ongoing management, distribution and operation of the Fund. Throughout this period, the Board of Trustees and its counsel requested and received additional information from M&T, and held telephone conferences regarding the Proposed Acquisition and its potential impact on the Fund and its shareholders. In evaluating the New Govett Sub-Advisory Agreement, the Board of Trustees obtained substantial information regarding: (a) the management, financial position and business of M&T and the business and operations of its affiliates; (b) the performance of the investment companies advised by M&T; (c) the impact of the Proposed Acquisition on the Emerging Markets Equity Portfolio and its shareholders; and (d) the current plans of M&T and its affiliates with respect to AIA and the Emerging Markets Equity Portfolio. The Board of Trustees also received information regarding the terms of the Proposed Acquisition and M&T's plans for the retention of personnel currently employed by AIA who currently provide services to the Emerging Markets Equity Portfolio. In addition, the Board of Trustees received information regarding Govett. 14 In connection with their deliberations, the Board of Trustees evaluated the above-referenced information and considered, among other things, the following: (a) that the terms of the New Govett Sub-Advisory Agreement are substantially identical to those of the Current Sub-Advisory Agreement, except for the dates of execution and termination; (b) the investment performance of Govett; (c) the favorable history, reputation, qualifications and background of Govett, as well as the qualifications of its personnel; (d) the statement of M&T as to its intention and belief that the Proposed Acquisition would have no material adverse effect on the sub-advisory services provided to the Emerging Markets Equity Portfolio by Govett; (e) the expectation that the investment objectives, policies and management strategies of the Emerging Markets Equity Portfolio after the Proposed Acquisition will not materially change; (f) the expectation that substantially the same investment team and management personnel will manage the Emerging Markets Equity Portfolio on a day-to-day basis; and (g) the commitment of AIB to pay the expenses of the Emerging Markets Equity Portfolio in connection with the Proposed Acquisition so that shareholders of the Emerging Markets Equity Portfolio would not have to bear such expenses. RECOMMENDATION OF THE BOARD OF TRUSTEES The Board of Trustees, including the Independent Trustees, considered the proposal at meetings held on November 1, 2002 and December 13, 2002. The Board of Trustees, including the Independent Trustees, unanimously concluded that the terms of the New Govett Sub-Advisory Agreement are reasonable, fair and in the best interests of the Emerging Markets Equity Portfolio and its shareholders, and that the fees provided therein are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality. The Board of Trustees based this decision on its evaluation of the information presented and other information made available to them, its experience with AIA and Govett, and M&T's assurances that there were no planned changes in the advisory or sub-advisory services provided to the Emerging Markets Equity Portfolio. The Board, by a vote cast at the December 13, 2002 meeting, unanimously approved and voted to recommend to the shareholders of the Emerging Markets Equity Portfolio that they approve the New Govett Sub-Advisory Agreement. REQUIRED VOTE As provided under the 1940 Act, approval of the New Govett Sub-Advisory Agreement will require the affirmative vote of a majority of the outstanding voting securities of the Emerging Markets Equity Portfolio. In accordance with the 1940 Act and as used in this Proposal 3, a "majority of the outstanding voting securities" of the Emerging Markets Equity Portfolio means the lesser of (a) 67% or more of the shares of the Emerging Markets Equity Portfolio present at the Special Meeting if the owners of more than 50% of the outstanding shares of the Emerging Markets Equity Portfolio are present in person or by proxy, or (b) more than 50% of the outstanding shares of the Emerging Markets Equity Portfolio. If the shareholders of the Emerging Markets Equity Portfolio approve the New Govett Sub-Advisory Agreement, it will become effective upon termination of the Current Sub-Advisory Agreement in accordance with its terms, which would occur upon consummation of the Proposed Acquisition. If the Proposed Acquisition is not consummated, the Current Sub-Advisory Agreement will remain in effect until otherwise terminated in accordance with its terms. 15 If shareholders do not approve the New Govett Sub-Advisory Agreement, the Current Sub-Advisory Agreement will remain in effect until terminated in accordance with its terms and the Board of Trustees will consider what further action to take consistent with its fiduciary duties to the Emerging Markets Equity Portfolio. THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 3 ---------------------- INVESTMENT ADVISORY AND OTHER SERVICES INVESTMENT ADVISER The investment adviser of the Fund is Allied Investment Advisors, Inc. ("AIA"), located at 100 E. Pratt Street, 17th Floor, Baltimore, Maryland 21202. AIA provides (or supervises the sub-advisers who provide) the Portfolios with day-to-day management services and makes investment decisions on behalf of the Portfolios in accordance with each Portfolio's investment policies. SUB-ADVISERS AIB Investment Managers Limited, located at Percy Place, Dublin 4 Ireland, serves as the sub-adviser to the Fund's International Equity Portfolio. Govett Investment Management Limited, located at Shackleton House, 4 Battle Bridge Lane, London, SEI 2H, serves as the sub-adviser to the Fund's Emerging Markets Equity Portfolio. The sub-advisers furnish an investment program in respect of, and make investment decisions for, all assets of the Portfolios that they sub-advise and place all orders for the purchase and sale of securities on behalf of those Portfolios. DISTRIBUTION, ADMINISTRATIVE, TRANSFER AGENCY AND CUSTODY SERVICES ARK Funds Distributors, LLC, located at Two Portland Square, Portland, Maine 04101, serves as the distributor of the Fund's shares. Allfirst Trust, N.A. ("Allfirst Trust"), an affiliate of AIA, located at 25 South Charles Street, Baltimore, Maryland 21201, is currently responsible for providing the following services to the Portfolios. It is anticipated that Allfirst Trust will continue to be responsible for providing the services after approval of the New Advisory Agreement, the New AIBIM Sub-Advisory Agreement and the New Govett Sub-Advisory Agreement. Allfirst Trust serves as the Fund's administrator. Forum Administrative Services, LLC, located at Two Portland Square, Portland, Maine 04101, also provides administrative services to the Fund pursuant to a sub-administration agreement with Allfirst Trust. 16 Allfirst Trust serves as the Fund's transfer agent and has sub-contracted transfer agency services to Boston Financial Data Services, Inc., located at Two Heritage Drive, North Quincy, Massachusetts 02171. Allfirst Trust also serves as the Fund's custodian. Appendix C provides information regarding the fees paid by the Fund to Allfirst Trust for the fiscal year ended April 30, 2002. SOLICITATION OF PROXIES [The Fund] has retained ADP Investor Communications ("ADP"), a professional proxy solicitation firm, to assist in the solicitation of proxies. You may receive a telephone call from this firm concerning this proxy solicitation. [The Fund] estimates that ADP will be paid fees of approximately $___________. [In addition, ADP will be paid for its expenses incurred; the amount of these expenses will depend on the nature and extent of the services provided in connection with the solicitation.] OTHER MATTERS No business other than as set forth herein is expected to come before the Special Meeting, but should any other matter requiring a vote of shareholders arise, including any question as to an adjournment of the Special Meeting, the persons named as proxies in the enclosed Form of Proxy will vote thereon according to their best judgment in the interests of the Fund. SHAREHOLDER PROPOSALS A shareholder's proposal intended to be presented at any subsequent meeting of shareholders of the Fund must be received by the Fund a reasonable time before the Board of Trustees makes the solicitation relating to such meeting, in order to be included in the Fund's proxy statement and form of proxy relating to such meeting. Shareholder proposals that are submitted in a timely manner will not necessarily be included in the Fund's proxy materials. Inclusion of such proposals is subject to limitations under the federal securities laws. The Fund is not required to hold annual meetings of shareholders if the election of Board of Trustees members is not required under the 1940 Act. It is the present intention of the Board of Trustees not to hold annual meetings of shareholders unless such shareholder action is required. SHAREHOLDER REPORTS The Fund's most recent Annual and Semi-Annual Reports have previously been sent to shareholders and may be obtained without charge by calling toll-free 1-800-ARK-FUND (1-800-275-3863) or by writing to the Fund at ARK Funds, P.O. Box 8525, Boston, MA 02266-8525. Dated: December 23, 2002 17 APPENDIX A ---------- 5% SHAREHOLDERS OF A PORTFOLIO (As of December 9, 2002)
NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- BALANCED - ---------------------------------------------------------------------------------------------- Allfirst Financial Pension Plan 8,0479,954.130 63.87% Allfirst Bank Attention: Linda Thomas 109-810 110 S. Paca Street Baltimore, MD 21201 U of MD Med Pen 2,960,449.290 23.49% Michelle-Wiles, Dir Compensation-U of MD 29 S Greene Street - Room Baltimore, MD 21201 Smithco Profit Sharing 885,913.510 7.03% L. B. Smith, Inc. Attn: Robert Sherwood 2001 State Road Camp Hill, PA 17011 - ---------------------------------------------------------------------------------------------- BLUE CHIP EQUITY - ---------------------------------------------------------------------------------------------- Allfirst Financial Pension Plan 1,406,513.740 11.45% Allfirst Bank Attention: Linda Thomas 109-810 110 S. Paca Street Baltimore, MD 21201 - ---------------------------------------------------------------------------------------------- CAPITAL GROWTH - ---------------------------------------------------------------------------------------------- Allfirst Financial Pension Plan 950,765.430 17.78% Allfirst Bank Attention: Linda Thomas 109-810 110 S. Paca Street Baltimore, MD 21201 - ---------------------------------------------------------------------------------------------- EQUITY INDEX - ---------------------------------------------------------------------------------------------- S&G Pollack Trust 1,050,640.110 14.27% Mrs. S Wilson Pollack 333 N 26th Street Camp Hill, PA 17011 1 NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- Md Med Comp Ins - Equity 889,038.940 12.08% MD Medicine Comp Ins Program Attn: Jane C McConnell 11 South Paca St Suite 200 Baltimore, MD 21201 Pollack Foundation 639,129.940 8.68% Mrs. S Wilson Pollack 333 N 26th Street Camp Hill, PA 17011 Lane Enterprises, Inc. 401K 498,375.760 6.77% Lane Enterprises Inc. Attn: Daniel N Gallagher 3905 Hartzdale Dr - Suite 514 Camp Hill, PA 17011 Wolf Organization - Pen - York 471,698.110 6.41% Bank Wolf Supply Co Attn: Thomas-Wolf, President 20 W Market St York, PA 17401-1203 Pollock, Doug T/A 440,376.800 5.98% Douglas W Pollock 1358 Pieffers Lane Oberlin, PA 17113 AMP Inc Supp Ben Tr 421,781.470 5.73% AMP Inc Attn: Lisa Durborow PO Box 3608 MS 161-04 Harrisburg, PA 17105-3608 - ---------------------------------------------------------------------------------------------- INTERNATIONAL EQUITY - ---------------------------------------------------------------------------------------------- Health Alliance of Pennsylvania 117,764.200 5.61% Hospital Association of PA Attn: Michael A. Suchanick, CPA P O Box 8600 Harrisburg, PA 17105-8600 Kline Foundation 117,955.750 5.62% J W & Bessie H. Kline Foundation 515 S 29th Street Harrisburg, PA 17104 - ---------------------------------------------------------------------------------------------- 2 NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- MARYLAND TAX FREE - ---------------------------------------------------------------------------------------------- Charles R Fulton Revocable 524,636.940 5.4% Trust Charles R. Fulton P O Box 67 Snow Hill, MD 21863-0067 - ---------------------------------------------------------------------------------------------- MID CAP - ---------------------------------------------------------------------------------------------- Allfirst Financial Pension Plan 984,560.680 14.52% See above - ---------------------------------------------------------------------------------------------- PENNSYLVANIA TAX FREE - ---------------------------------------------------------------------------------------------- S & G Pollack Trust 1,450,317.880 9.35% Grace M Pollock 333 N 26th Street Camp Hill, PA 17011 - ---------------------------------------------------------------------------------------------- SHORT TERM BOND - ---------------------------------------------------------------------------------------------- York Container Profit Sharing 454,242.970 7.98% William Ludwig York Container Co PO Box 3008 York, PA 17402-0008 - ---------------------------------------------------------------------------------------------- SMALL-CAP EQUITY - ---------------------------------------------------------------------------------------------- Allfirst Financial Pension Plan 960,529.890 29.80% See above - ---------------------------------------------------------------------------------------------- US GOVERNMENT BOND - ---------------------------------------------------------------------------------------------- Tyco Electronics Foundation 708,380.060 7.48% The AMP Foundation Attn: Jacqueline Heisse P O Box 3608 MS 140-41 Harrisburg, PA 17105-3608 - ---------------------------------------------------------------------------------------------- VALUE EQUITY - ---------------------------------------------------------------------------------------------- Pinnacle Health System 1,540,710.560 7.48% Attn: Fredrick G. Fetters, CFO PO Box 8700 Harrisburg, PA 17105-8700 - ---------------------------------------------------------------------------------------------- SOCIAL ISSUES SMALL CAP - ---------------------------------------------------------------------------------------------- Michael Odlum IRA 6,646.980 42.27% Michael G. Odlum 6 Fox Ridge Drive Malvern, PA 19355-2876 3 NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- Marion Diehl Trust/St. Paul UM 2,173.170 13.82% Church St. Paul United Methodist Church c/o Jack Kane 750 Norland Avenue Chambersburg, PA 17201 St Paul/Methodist Agency 2,056.450 13.08% same as above - Marion Diehl Trust Neighborhood Center 917.780 5.84% Dale Laninga, President Neighborhood Center Endowment Fund 2435 North Third Street Harrisburg, PA 17110 Shelby T. White - Lindsay T/A 812.350 5.17% Lindsay Caldwell Bridges 17 Russell Street Asheville, NC 28806 - ---------------------------------------------------------------------------------------------- SOCIAL ISSUES CAP GROWTH - ---------------------------------------------------------------------------------------------- Michael Odlum IRA 8,568.140 32.50% See above Marion Diehl Trust 6,237.190 23.66% See above St Paul/Methodist Agency 3,835.170 14.55% same as above - Marion Diehl Trust Neighborhead Center 6,718.970 25.49% See above - ---------------------------------------------------------------------------------------------- SOCIAL ISSUES BLUE CHIP - ---------------------------------------------------------------------------------------------- Marion Diehl Trust 11,174.190 10.44% See above St Paul/Methodist Agency 9,176.450 8.58% same as above - Marion Diehl Trust Neighborhood Center 7,186.850 6.72% See above 4 NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- Convent of the Sisters of Mercy 67,567.410 63.16% Convent of the Sisters of Mercy Attn: Sister Dorothy Flynn, RSM 273 Willoughby Ave Brooklyn, NY 11205-1418 Shelby T. White - Lindsay T/A 6,576.880 6.15% Lindsay Caldwell Bridges 17 Russell Street Asheville, NC 28806 - ---------------------------------------------------------------------------------------------- SOCIAL ISSUES INTERMEDIATE - ---------------------------------------------------------------------------------------------- Lindsay Caldwell Bridges Rev Tr 18,482.490 6.06% Lindsay Caldwell Bridges 17 Russell Street Asheville, NC 28806 Marion Diehl Trust 26,048.300 8.55% See above Convent of the Sisters of Mercy 40,778.650 13.38% See above Missionary Sisters of Our Lady 131,656.230 43.20% Apostle See above Rockhurst High School 72,322.890 23.73% Rockhurst High School Attn: Dana Brack, CFO 9301 Stateline Road Kansas City, MO 64114 - ---------------------------------------------------------------------------------------------- MONEY MARKET PORTFOLIO RETAIL CLASS - ---------------------------------------------------------------------------------------------- Chesnut/Blakehurst Waitlist 876,060.000 25.08% Phase I Blakehurst Attn: roland De Vasher 1055 West Joppa Rd. Towson, MD 21204 Chesnut/Blakehurst Capital 941,339.220 26.95% Replacement Blakehurst Attn: Roland De Vasher 1055 West Joppa Rd. Towson, MD 21204 Augsburg Luthern Village 942,387.200 26.98% Augsburg Lutheran Village, Inc. 5 NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- Attn: Pamela E. Spencer 6825 Campfield Road Baltimore, MD 21207-4657 Chesnut/Blakehurst Adm Fee 360,503.900 6.43% Phase 1 Blakehurst Attn: Roland De Vasher 1055 West Joppa Rd. Towson, MD 21204 MIDFA Genvec 1999 224,411.190 6.43% Mr. Jeffrey W. Church Genvec, Inc. 65 W. Watkins Mill Road Gaithersburg, MD 20878 - ---------------------------------------------------------------------------------------------- MONEY MARKET PORTFOLIO - ---------------------------------------------------------------------------------------------- Cap Bond Proc Series 02 A&B DC 158,697,533.000 17.13% Gov Joseph Heyward, Jr. Suite 360 441 4th Street, N.W. Washington, DC 20001-2700 Emergency Reserve Fd DC Gov 69,172,073.100 7.47% Joseph Heyward, Jr. Suite 360 441 4th Street NW Washington, DC 20001-2700 Montgomery Co Board of Ed 61,589,529.750 6.65% Active Emp Girlingwes G. Wesley-Girling, Director INS/Ret Montgomery County Public Schools 850 Hungerford Drive Rockville, MD 20850-1747 - ---------------------------------------------------------------------------------------------- MONEY MARKET PORTFOLIO II - ---------------------------------------------------------------------------------------------- Piper Marbury Rudnick & Wolfe 54,100,954.910 14.23% IC c/o Karen R. Pasko 6225 Smith Ave Baltimore, MD 21209-3600 NYC Deferred Comp GIC 44,888,489.780 11.81% New York City Deferred Comp Plan Attn: Joan Barrow, Chief Accountant 40 Rector Street - 3rd Floor New York, NY 10212-0331 6 NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- Anne Arundel Medical Center 25,549,661.660 6.72% Anne Arundel Medical Center Attn: Sandra L Huffer, CPA 64 Franklin Street Annapolis, MD 21401-2777 World Wildlife Fund 21,309,642.940 5.61% Jewish Commty Fdn of Metrowest Attention: Howard Rabner 901 Route 10 Whippany, NJ 07981-1156 - ---------------------------------------------------------------------------------------------- PRIME CASH MANAGEMENT CORPORATE CASH I - ---------------------------------------------------------------------------------------------- Allfirst Financial Pension Plan 3,316,153.290 87.38% See above Wellspan 2002 Project Fund 478,928.450 12.62% Richard A. Harley Gettysburg Hospital 147 Gettys St Gettysburg, PA 17325 - ---------------------------------------------------------------------------------------------- TAX FREE MONEY MARKET FUND - ---------------------------------------------------------------------------------------------- M L Clark 5,798,894.070 7.11% Jeffrey M. Clark 1 N Minster Drive White Plains, NY 10604 - ---------------------------------------------------------------------------------------------- TAX FREE MONEY MARKET FUND II - ---------------------------------------------------------------------------------------------- Merchants Investments LLC 7,881,154.660 19.50% Merchants Terminal Corporation Mr. Harry D. Halpert 501 North Kresson Street Baltimore, MD 21224 Gaye G. Haynes Revocable Trust 4,887,169.470 12.09% Gaye G. Haynes Revocable Trust G Haynes W Haynes J Beaty Co-ttees 327 Ponte Vedra Blvd Ponte Vedra, FL 32082-1813 William S Abell Marital Trust 2,766,416.690 6.84% William S. Abell Marital Trust W S Abell & A F Abell Co-Trustees 8401 Connecticut Ave Suite 1100 Chevy Chase, MD 20815-5803 - ---------------------------------------------------------------------------------------------- 7 NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- US GOVERNMENT MONEY MARKET - ---------------------------------------------------------------------------------------------- Allfirst Bank Film 1,129,680,000.000 9.39% Gale Schaeffer First Bank Center M/C 499 Mitchell Street Millsboro, DE 19966 - ---------------------------------------------------------------------------------------------- US GOVERNMENT MONEY MARKET II - ---------------------------------------------------------------------------------------------- MWAA 2002 Series A 46,922,741.300 16% Attn: Nancy Edwards 1 Aviation Circle Washington, DC 20001-6000 NLC Mutual InsCo - Neuberger 14,467,994.880 4.93% NLC Mutual Insurance Company Mr. Michael McCord, Controller 1301 Pennsylvania Ave NW Suite 550 Washington, DC 20004-1701 Balt Life Ins Co Alliance 57,568,346.110 19.63% The Baltimore Life Companies Attn: Ora Pindrik 10075 Red Run Blvd. Owings Mills, MD 21117-4871 - ---------------------------------------------------------------------------------------------- US GOVERNMENT CASH MANAGEMENT CORPORATE CASH II - ---------------------------------------------------------------------------------------------- MHEFA PL 1985 Loan Repayment 47,976,797.890 5.50% MD. H. & H. Ed. Fac. Auth. Attn: Barbara Nichols 401 E Pratt Street, Suite 1224 Baltimore, MD 21202 - ---------------------------------------------------------------------------------------------- US GOVERNMENT CASH MANAGEMENT CORPORATE CASH III - ---------------------------------------------------------------------------------------------- AA Co NBP Project 2000 Project 3,427,199.670 39.79% Fund Anne Arundel County Attn: Mr. Jim Lawrence P O Box 2700 MS 1309 Annapolis, MD 21404 PH Glatfelter Escrow 2,009,959.320 23.34% P.H. Glatfelter Company Attention: John R. Anke 96 South George St., Suite York, PA 17401-1434 8 NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- AA Co NBP Project 2000 Reserve 1,408,587.530 16.35% Fund Anne Arundel County Attn: Mr. Jim Lawrence P O Box 2700 MIS 1309 Annapolis, MD 21404 HAPGCO SF 2000A General Fund 840,923.090 9.76% Housing Authority of PG County Attn: Valencia Scott, Suite 210B 9400 Peppercorn Place Largo, MD 20774 - ---------------------------------------------------------------------------------------------- US GOVERNMENT MONEY MARKET PORTFOLIO RETAIL - ---------------------------------------------------------------------------------------------- York County Solid Waste 12,068,061.840 16.13% York Co Solid Waste & Refuse Auth Attn: William A. Ehrman 2700 Black Bridge Road York, PA 17402-7901 MCC Balt Parking 97B Const Fund 6,184,799.700 8.26% City of Baltimore Bureau of Treasury Management 100 Guilford Ave Baltimore, MD 21202-3421 Fred Co Urbana Monocacy 4,942,098.750 6.60% Infrastruct Frederick County, MD Attn: Ms. Patricia Barney 12 E Church St, Winchester Hall Frederick, MD 21701 York Co Solid Waste 97 Oper & 4,862,017.610 6.50% Maint same as above BG&E Unit 2 Fixed Income Stw 4,022,241.260 5.37% Baltimore Gas & Electric PO Box 1475 Baltimore, MD 21203-1475 STW Fixed Income Management Attn: Cherie Cooper, Suite 100 200 East Carrillo Street Santa Barbara, CA 93101 9 NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- US TREASURY CASH MANAGEMENT CORPORATE CASH II - ---------------------------------------------------------------------------------------------- St. Mary's County 02 Facility 10,319,071.740 27.94% Fund St. Mary's Hospital Paul Barber, CFO 25500 Point Lookout Road Leonardtown, MD 20650 HOC Housing Relacement Reserve 5,927,404.150 16.04% Fund HOC of Montgomery County, Maryland Attn: Cash Manager-Claire Kim 10400 Detrick Avenue Kensington, MD 20895-2484 IDB Oak Ridge 2002 Series Con 7,796,461.630 21.11% Industrial Development Board of City of Oak Ridge, Tennessee 200 S Tulane Oak Ridge, TN 37830 Bethesda Place Tenant/Lease 2,250,000.000 6.09% Escrow Bethesda Place Limited Partnership Attn: Arnold Polinger 5530 Wisconsin Avenue Ste 1000 Chevy Chase, MD 20815-4330 - ---------------------------------------------------------------------------------------------- US TREASURY MONEY MARKET PORTFOLIO RETAIL - ---------------------------------------------------------------------------------------------- Cianbro - SHA Escrow 1,026,547.680 17.37% Cianbro Corporation Hunnewell Square Pittsfield, Maine 04967 Medco Univ Vill 2001 Revenue 831,631.080 14.07% Fund Collegiate Housing Foundation Attn: Lee Covey 3613 Stein St Mobile, AL 36608 Balto Co Maryvale 1998 Pledged 548,860.490 9.3% Maryvale Preparatory School Attn: Sister Shawn Marie Maguire 11300 Falls Road Brooklandville, Maryland 21022 Medco Univ Courtyard 1999 452,818.550 7.66% Revenue Collegiate Housing Foundation Attn: Lee Covey 3613 Stein St Mobile, AL 36608 10 NAME AND ADDRESS OF NUMBER OF PERCENT OF ------------------- --------- ---------- PORTFOLIO SHAREHOLDER SHARES PORTFOLIO --------- ----------- ------ --------- - ---------------------------------------------------------------------------------------------- Medco Univ Courtyard 1999 387,170.430 6.55% Revenue Collegiate Housing Foundation Attn: Lee Covey 3613 Stein St Mobile, AL 36608 Medco Univ Courtyard 1999 425,948,760 7.21% Interest Collegiate Housing Foundation Attn: Lee Covey 3613 Stein St Mobile, AL 36608 - ---------------------------------------------------------------------------------------------- US TREASURY MONEY MARKET FUND II - ---------------------------------------------------------------------------------------------- Calvert Co Govt General 24,614,526.900 13.98% Operating a/c Terry Shannon Dept. of Admin & Finance 175 Main Street, Courthouse Prince Frederick, MD 20678 Kaiser Foundation Hospital 11,274,477.380 6.40% Kaiser Foundation Hospitals zttn: William M. Hansen, DOF One Kaiser Plaza 26th Floor Oakland, CA 94612 Calvert Co Govt - 2002 Bond 11,712,695.990 6.65% Issue Terry Shannon Dept. of Admin & Finance 175 Main Street, Courthouse Prince Frederick, MD 20678 Kaiser Foundation Hospital 11,274,477.380 6.40% Kaiser Foundation Hospitals Attn: William M. Hansen, DOF One Kaiser Plaza 26th Floor Oakland, CA 94612
11 APPENDIX B ---------- EXECUTIVE OFFICERS AND DIRECTORS OF AIA NAME AND POSITION(S) WITH AIA* PRINCIPAL OCCUPATION(S) ------------------------------ ----------------------- Rick A. Gold** Executive Vice President - Asset Management Chief Executive Officer and Allfirst Financial, Inc. Director Timothy J. Hynes III Senior Vice President - Asset Management Assistant Secretary and Director Allfirst Financial, Inc. Kathy A. Jackson President - Asset Management Director Allfirst Financial, Inc. Michael G. Odlum President and Director President and Director Allied Investment Advisors, Inc. Jerome A. Ratliffe Corporate Secretary Secretary Allfirst Financial, Inc. Mark A. Mullican President Director Allfirst Brokerage Corporation Robert T. Sweet Managing Director and Principal Managing Director and Principal Allied Investment Advisors, Inc. John E. Leo Chief Investment Officer Chief Investment Officer Allied Investment Advisors, Inc. Jessica Wait Jennings Managing Director and Principal Managing Director and Principal Allied Investment Advisors, Inc. Brett A. Hoffacker Managing Director and Principal Managing Director and Principal Allied Investment Advisors, Inc. James M. Hannan Managing Director and Principal Managing Director and Principal Allied Investment Advisors, Inc. * Rick A. Gold, AIA's principal executive officer, also is the President and a Trustee of the Fund. ** The address of each executive officer and director of AIA is 100 E. Pratt Street, 17th Floor, Baltimore, Maryland 21202. 1 EXECUTIVE OFFICERS AND DIRECTORS OF AIBIM NAME, POSITION(S) WITH AIBIM AND PRINCIPAL OCCUPATION ADDRESS -------------------------------- -------------------- Martina Dolan Group Compliance Officer Director AIB Asset Management Holdings Limited Shackleton House 4 Battle Bridge Lane London SEI 2HR, England Patrick K. Cunneen General Manager Director AIB Capital Markets AIB International Centre IFSC Dublin 1, Ireland John J. Costello Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland James C. Doyle Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland Kieran P. Corcoran Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland Eileen M. Fitzpatrick Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland Noel Minogue Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland 2 Niall P. Markey Director and Secretary Director and Secretary AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland Louis M. McGuigan Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland Paul A. Brophy Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland Lore Hayes Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland Frank O'Riordan Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland Barry Rogers Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland Noel McEvoy Director Director AIB Investment Managers Limited AIB Investment House Percy Place Dublin 4, Ireland 3 EXECUTIVE OFFICERS AND DIRECTORS OF GOVETT NAME AND POSITION(S) WITH GOVETT* PRINCIPAL OCCUPATION(S) --------------------------------- ----------------------- Peter Kysel Director Director Portfolio Management Portfolio Management Govett Investment Management Limited John W. Murray Managing Director of Investments Managing Director of Investments Chief Investment Officer, Portfolio Chief Investment Officer, Portfolio Management Management Govett Investment Management Limited Noel McEvoy Chairman and Chief Executive Officer Chairman and Chief Executive Officer Strategic Director, Business Manager Strategic Director, Business Manager Govett Investment Management Limited Thomas C. Dangerfield Director Director Portfolio Management Portfolio Management Govett Investment Management Limited Colm E. Doherty Director Director Portfolio Management Portfolio Management Govett Investment Management Limited John A. MacLean Director Director Portfolio Management Portfolio Management Govett Investment Management Limited Martina Dolan Chief Compliance Officer Chief Compliance Officer Govett Investment Management Limited Paul Downing Managing Director of Operations Managing Director of Operations Operations Management Operations Management Govett Investment Management Limited Charles E. Lillis Managing Director Funds Managing Director Funds Marketing Sales Marketing Sales Govett Investment Management Limited * The address of each executive officer and director of Govett is 4 Battle Bridge Lane, Shackleton House, London SEI 2HR, England. 4 APPENDIX C ---------- ADMINISTRATIVE, TRANSFER AGENCY AND CUSTODY FEES PAID BY THE FUND Allfirst Trust serves as the Fund's administrator, transfer agent and custodian. Pursuant to an administration agreement entered into with the Fund, Allfirst Trust is entitled to receive an administration fee from the Fund at the annual rate of $24,000 per Portfolio, plus 0.085% of the annual average daily net assets of the Portfolios and any out-of-pocket and related expenses. Under a separate agreement, Allfirst Trust has sub-contracted administrative services to Forum Administrative Services, LLC. Under this agreement, Allfirst Trust pays to Forum Administrative Services, LLC the fees it receives from the Fund, except that it retains a fee of 0.0275% of the annual average daily net assets of the Portfolios. Prior to January 1, 2002, Allfirst Trust served as sub-administrator of the Fund for a fee of 0.0275% of the annual average daily net assets of the Portfolios. The table below shows the administrative fees paid by each Portfolio of the Fund and retained by Allfirst Trust during the fiscal year ended April 30, 2002. Pursuant to an agreement entered into with the Fund, Allfirst Trust is entitled to receive from the Fund an annual fee of up to $16 per Portfolio account and activity-based fees ranging from $.50 to $12.50 per item and reimbursements for out-of-pocket expenses. Under a separate agreement, Allfirst Trust has sub-contracted transfer agency services to Boston Financial Data Services, Inc. Under this agreement, Allfirst Trust pays to Boston Financial Data Services, Inc. all of the transfer agency fees and expense reimbursements that it receives from the Fund. Allfirst Trust receives a custody fee from the Fund at the annual rate of 0.015% of the average daily net assets of the Portfolios. Allfirst Trust also charges the Portfolios transaction handling fees ranging from $5 to $75 per transaction and receives reimbursement for out-of-pocket expenses. Foreign securities held by the Portfolios are held by foreign banks participating in a network coordinated by Deutsche Bank Trust Company Americas, which serves as sub-custodian for the portfolio holding foreign securities. All expenses incurred through this network are paid by the Portfolios holding foreign securities. The table below shows the custody fees paid to Allfirst Trust by each Portfolio of the Fund during the fiscal year ended April 30, 2002. 1 ADMINISTRATIVE AND CUSTODY FEES PAID BY THE FUND PORTFOLIO ADMINISTRATIVE FEES CUSTODY FEES PAID --------- -------------------- ----------------- PAID* (FOR FISCAL (FOR FISCAL YEAR ----------------- ---------------- YEAR ENDED ENDED ----------------- ----- APRIL 30, 2002) APRIL 30, 2002) --------------- --------------- U.S. Treasury Money Market $ 428,922 $19,731 U.S. Government Money Market 1,655,307 261,407 Money Market 1,677,356 254,515 Tax-Free Money Market 159,618 31,398 Pennsylvania Tax-Free Money Market 37,719 6,678 Short-Term Treasury 46,726 9,123 Short-Term Bond 77,643 17,898 Maryland Tax-Free 125,128 15,722 Pennsylvania Tax-Free 171,580 25,255 Intermediate Fixed Income 137,851 24,664 U.S. Government Bond 127,316 10,872 Income 302,902 63,991 Balanced 354,006 55,448 Equity Income 82,294 15,030 Value Equity 307,032 43,704 Equity Index 80,230 29,135 Blue Chip Equity 311,466 46,843 Capital Growth 226,951 25,247 Mid-Cap Equity 103,363 25,277 Small-Cap Equity 158,381 55,596 International Equity 37,301 94,901 Emerging Markets Equity 6,778 106,570 U.S. Treasury Cash Management 14,314 4,993 U.S. Government Cash Management 351,606 77,393 Prime Cash Management 26,150 42,202 Tax-Free Cash Management 14,066 (1,618) Social Issues Intermediate Fixed Income 2,606 92 Social Issues Blue Chip Equity 1,537 227 Social Issues Capital Growth 73 12 Social Issues Small-Cap Equity 94 17 * This column reflects the administrative fees paid by each Portfolio of the Fund to, and retained by, Allfirst Trust. 2 EXHIBIT A --------- INVESTMENT ADVISORY AGREEMENT AGREEMENT made as of this __ day of __________, 2003, by and between ARK Funds, a Massachusetts business trust (the "Fund'), and Allied Investment Advisors, Inc., a Maryland corporation (the "Adviser"). WHEREAS, the Fund is registered as an open-end, management series investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and WHEREAS, the Fund currently offers __________ series of units of beneficial interest ("Shares"), each series representing interests in a separate investment portfolio, and may offer other series of Shares from time to time (all such series of Shares hereinafter collectively referred to as the "Portfolios"); and WHEREAS, the Fund desires to retain the Adviser to render investment advisory services to the Fund and to the Portfolios, subject to and in accordance with the requirements of the Investment Company Act; and WHEREAS, the Adviser is willing to render such services under the terms of this Agreement: NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows: 1. APPOINTMENT OF ADVISER. The Fund hereby appoints the Adviser to act as investment adviser to the Fund and its Portfolios for the period and on such terms as are set forth in this Agreement. The Adviser hereby accepts such appointment and agrees to render the services herein set forth for the compensation herein provided. 2. DUTIES AS INVESTMENT ADVISER. Subject to the supervision of the Fund's Board of Trustees ("Board"), the Adviser will be responsible for providing a continuous investment program for the Fund's Portfolios, including the provision of investment research and management with respect to all securities and investments and cash equivalents purchased, sold or held in the Portfolios and the selection of brokers and dealers through which securities transactions for the respective Portfolios will be executed. In carrying out its responsibilities under this Agreement, the Adviser will at all times act in accordance with the investment objectives, policies and restrictions of each Portfolio as stated in the Fund's registration statement as it may be amended from time to time ("Registration Statement") as well as all applicable rules and regulations of the Securities and Exchange Commission. The Adviser further agrees that it will: (a) promptly advise the Fund's custodian and accounting services agent of each purchase and sale, as the case may be, made on behalf of each of the Portfolios of any security or other investment specifying in each case: the name and quantity of the investment purchased or sold, the unit and aggregate purchase or sale price, commission paid, the market on which the transaction was effected, the trade date, the settlement date, the identity of the effecting broker or dealer and/or such other information as may be reasonably requested by the custodian and accounting services agent, all in such manner as may from time to time be reasonably requested by them; (b) provide, in a timely manner, such information as may be reasonably requested by the Fund or its authorized agent in connection with the computation of the net asset value and the net income of each Portfolio in accordance with the procedures prescribed in the Registration Statement or as more frequently requested by the Board; provided, however, that the Adviser shall not be responsible for any such computation or for the calculation of the net asset value per share of any of the Fund's Portfolios; and (c) render regular reports to the Board concerning the Adviser's performance of its responsibilities under this Agreement and such other periodic and special reports as the Board may request; in particular, the Adviser agrees that it will attend meetings of the Board or validly constituted committees thereof. A-1 3. BROKERAGE TRANSACTIONS. In placing orders with brokers and dealers, the Adviser shall obtain the most favorable execution of such orders. However, the Adviser may, in its discretion, purchase and sell portfolio securities to and from brokers and dealers who provide the Adviser with research, analysis, advice and similar services, and the Adviser may cause the Fund to pay to those brokers or dealers, in return for research and analysis, a higher commission or spread than may be charged by other brokers or dealers, provided that the Adviser determines in good faith that such commission or spread is reasonable in terms either of the particular transaction or of the overall responsibility of the Adviser to the Fund and any other accounts with respect to which the Adviser exercises investment discretion. In no instance will securities be purchased from or sold to the Adviser or any affiliated person of the Adviser except in accordance with the Investment Company Act. 4. DELEGATION. The Adviser may delegate any of its duties as described in, or derived from, the duties set forth in paragraph 2 of this Agreement, provided that any such delegation may be made only pursuant to written agreements which satisfy the requirements of the Investment Company Act and shall have been approved by the Fund's Board, and by the shareholders of each Portfolio to which such agreement applies, in accordance with the provisions of the Investment Company Act. 5. SERVICES NOT EXCLUSIVE. The services furnished by the Adviser hereunder are not to be deemed exclusive and the Adviser shall be free to furnish similar services to others so long as its services under this Agreement are not impaired thereby. 6. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under the Investment Company Act, the Adviser hereby agrees that all records which it maintains for the Fund and/or the Portfolios are the property of the Fund and further agrees to surrender promptly to the Fund any of such records upon request by the Fund. The Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the Investment Company Act the records required to be maintained by Rule 31a-1 under the Investment Company Act. 7. EXPENSES OF THE FUND. All expenses shall be allocated among the Portfolios in accordance with the Fund's Declaration of Trust and the provisions of the Investment Company Act. During the term of this Agreement, the Fund will bear all expenses, not specifically assumed by the Adviser, incurred in the conduct of its operations, including, without limitation, responsibility for the following: (a) the cost (including brokerage commissions) of securities purchased or sold by the Portfolios and any losses incurred in connection therewith; (b) fees payable to, and expenses incurred on behalf of the Fund by, the Adviser; (c) expenses of organizing the Fund; (d) filing fees and expenses relating to the registration and qualification of the Fund's shares and the Fund under federal and/or state securities laws and maintaining such registrations and qualifications; (e) fees and salaries payable to the Fund's trustees and officers; (f) taxes (including any income or franchise taxes) and governmental fees; (g) costs of any liability, uncollectible items of deposit and other insurance or fidelity bonds; (h) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against the Fund for violation of any law; (i) legal, accounting and auditing expenses, including legal fees of special counsel at any time retained for those members of the Board who are not interested persons of the Fund and expenses relating to the use of consulting services by the Fund provided that the use of such services is approved by the Fund's trustees; (j) charges of custodians, transfer agents and other agents; (k) costs of preparing share certificates; (l) expenses of setting in type and printing prospectuses and supplements thereto for existing shareholders, reports, shareholder reports, and proxy materials; (m) costs of mailing prospectuses, statements of additional information and supplements thereto to existing shareholders as well as shareholder reports and proxy materials; (n) any extraordinary expenses (including fees and disbursements of counsel) incurred by the Fund; (o) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (p) costs of mailing and tabulating proxies and costs of shareholders and trustees meetings; and (q) the cost of investment company literature and other publications provided by the Fund to its trustees and officers. The Fund may pay directly any expense incurred by it in its normal operations and, if any such payment is consented to by the Adviser and acknowledged as otherwise payable by the Adviser pursuant to this Agreement, the Fund may reduce the fee payable to the Adviser pursuant to this Agreement by such amount. To the extent that such deductions exceed the fee payable to the Adviser for any monthly payment period, such excess shall be carried forward and deducted in the same manner from the fee payable on succeeding monthly payment dates. A-2 8. EXPENSES OF ADVISER. The Adviser will bear all expenses incurred by it in performing its duties as investment adviser under this Agreement. The Adviser may, but is not required to, voluntarily assume any portion or all of the expenses that the Fund is required to pay under paragraph 7 hereof. In addition, if the expenses borne by the Fund in any fiscal year exceed the applicable expense limitations imposed by the securities regulations of any state in which shares are registered or qualified for sale to the public, the Adviser will reimburse the Fund for any excess up to the amount of the fee payable to it during that fiscal year pursuant to this Agreement. 9. COMPENSATION. For the services provided and the expenses assumed pursuant to this Agreement, the Fund will pay to the Adviser a fee in accordance with the compensation schedule appended to this Agreement. 10. LIMITATION OF LIABILITY OF ADVISER. The Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or any of its Portfolios in connection with the matters to which this Agreement relates including, without limitation, losses that may be sustained in connection with the purchase, holding, redemption, or sale of any security on behalf of any Portfolio of the Fund, except a loss resulting from the willful misfeasance, bad faith or gross negligence of the Adviser in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. 11. DURATION AND TERMINATION. This Agreement shall become effective upon the date first above written and, unless sooner terminated as provided herein, shall continue in effect automatically for successive periods of twelve months each, so long as such continuance is specifically approved with respect to each Portfolio at least annually by (a) the vote of a majority of those members of the Board who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval; and (b) all of the members of the Board or by vote of the holders of a majority of the outstanding voting securities of the Fund. Notwithstanding the foregoing, this Agreement may be terminated with respect to any Portfolio or the Fund at any time, without the payment of any penalty by the Fund, upon the vote of the Board or the vote of a majority of the outstanding voting securities of the Fund and on 60 days' written notice to the Adviser or by the Adviser at any time, without the payment of any penalty, on 60 days' written notice to the Fund. This Agreement will automatically and immediately terminate in the event of its assignment. As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meanings as such terms have in the Investment Company Act. In the event that this Agreement shall not be approved in the manner provided herein or shall have been terminated with respect to any Portfolio, the Adviser and the Fund shall continue to be bound by the terms of this Agreement with respect to any other Portfolio provided that this Agreement shall have been approved in the manner contemplated herein with respect to such Portfolio. 12. AMENDMENT OF THIS AGREEMENT. No material provision of this Agreement may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no amendment of any material term of this Agreement shall be effective until approved by the Board and by the holders of a majority of the Fund's outstanding voting securities. 13. NAME OF THE FUND. The Fund may use the name "ARK Fund" or any name derived from or using the word "ARK" only for so long as this Agreement or any extension, renewal or amendment hereof remains in effect. At such time as such agreement shall no longer be in effect, the Fund will (to the extent that it lawfully can) cease to use such a name or any other name similar thereto. 14. MISCELLANEOUS. The Adviser acknowledges that the Fund is a Massachusetts business trust, and that the Fund is required by its Declaration of Trust to limit its liability in all agreements to the assets of the Fund. Consequently, the Adviser agrees that any claims by it against the Fund may be satisfied only from the assets of the Fund, and no shareholders, trustees or officers of the Fund may be held personally liable or responsible for any obligations arising out of this Agreement. A-3 The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Maryland law. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated as of the day and year first above written. Attest: ARK FUNDS By: - -------------------------- ------------------------- Attest: ALLIED INVESTMENT ADVISORS, INC. By: - -------------------------- ------------------------- A-4 FEE SCHEDULE For the services provided, and the expenses assumed, by the Adviser to the Fund under the terms of the Agreement, the Fund shall pay to the Adviser a monthly fee at the following annual rates: PERCENTAGE OF AVERAGE DAILY NET ARK FUNDS PORTFOLIO ASSETS ------------------- ------ U.S. Treasury Money Market Portfolio 0.25% U.S. Government Money Market Portfolio 0.25% Money Market Portfolio 0.25% Pennsylvania Tax-Free Money Market Portfolio 0.25% Tax-Free Money Market Portfolio 0.25% Short-Term Treasury Portfolio 0.35% Short-Term Bond Portfolio 0.75% Maryland Tax-Free Portfolio 0.65% Pennsylvania Tax-Free Portfolio 0.65% Intermediate Fixed Income Portfolio 0.60% U.S. Government Bond Portfolio 0.75% Income Portfolio 0.60% Balanced Portfolio (formerly Growth and Income Portfolio) 0.65% Equity Income Portfolio 0.70% Value Equity Portfolio 1.00% Equity Index Portfolio 0.20% Blue Chip Equity Portfolio 0.70% Capital Growth Portfolio 0.70% Mid-Cap Equity Portfolio 0.80% Small-Cap Equity Portfolio (formerly Special Equity Portfolio) 0.80% International Equity Portfolio 1.00% Emerging Markets Equity Portfolio 1.00% Prime Cash Management Portfolio 0.15% U.S. Government Cash Management Portfolio 0.15% U.S. Treasury Cash Management Portfolio 0.15% Tax-Free Cash Management Portfolio 0.15% Social Issues Intermediate Fixed Income Portfolio 0.60% Social Issues Blue Chip Portfolio 0.70% Social Issues Capital Growth Portfolio 0.70% Social Issues Small-Cap Equity Portfolio 0.80% A-5 EXHIBIT B --------- INVESTMENT SUB-ADVISORY AGREEMENT AGREEMENT executed as of __________, ___, 2003, by and between Allied Investment Advisors, Inc., a Maryland corporation (the "Adviser"), AIB Investment Managers Limited, [a corporation organized under the laws of Ireland] (the "Sub-Adviser"), and ARK Funds, a Massachusetts business trust (the "Trust"). WHEREAS, the Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and offers for public sale distinct series of shares of beneficial interest (each a "Portfolio"); and WHEREAS, the Adviser is the investment adviser for each of the Portfolios of the Trust; and WHEREAS, the Adviser desires to retain the Sub-Adviser as its agent to furnish investment advisory services for each Portfolio listed in Schedule A (each a "Fund" and collectively, the "Funds"); NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. APPOINTMENT. The Adviser hereby appoints the Sub-Adviser to provide certain sub-investment advisory services to the Funds for the period and on the terms set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. 2. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with copies properly certified or authenticated of each of the following: (a) The Trust's Agreement and Declaration of Trust, as filed with the Secretary of State of the Commonwealth of Massachusetts on March 19, 1993, and all amendments and supplements thereto or restatements thereof (such Declaration, as presently in effect and as it shall from time to time be amended or restated, is herein called the "Declaration of Trust"); (b) The Trust's By-Laws and all amendments thereto; (c) Resolutions of the Trust's Board of Trustees authorizing the appointment of the Sub-Adviser and approving this Agreement; (d) The Trust's Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act"), (File No. 33-53690) and under the 1940 Act (File No. 811-7310), as filed with the Securities and Exchange Commission ("SEC") and all amendments thereto insofar as such Registration Statement and such amendments relate to the Funds; and (e) The Trust's most recent prospectus and statement of additional information for the Funds (such prospectus and statement of additional information, as presently in effect, and all amendments and supplements thereto, are herein collectively called the "Prospectus"). The Adviser will furnish the Sub-Adviser from time to time with copies of all amendments of or supplements to the foregoing. 3. MANAGEMENT. Subject to the supervision of the Trust's Board of Trustees and the Adviser, the Sub-Adviser will furnish an investment program in respect of, and make investment decisions for, all assets of the Funds and place all orders for the purchase and sale of securities, all on behalf of the Funds. In the performance of its duties, the Sub-Adviser will satisfy its fiduciary duties B-1 to the Funds (as set forth in Section 8, below), and will monitor the investments of each of the Funds, and will comply with the provisions of the Trust's Declaration of Trust and By-Laws, as amended from time to time, and the stated investment objectives, policies and restrictions of the respective Funds. The Sub-Adviser and the Adviser will each make its officers and employees available to the other from time to time at reasonable times to review investment policies of the Funds and to consult with each other regarding the investment affairs of the Funds. The Sub-Adviser shall also make itself available to the Board of Trustees at such times as the Board of Trustees shall reasonably request. The Sub-Adviser represents and warrants that it is in compliance with all applicable rules and regulations of the SEC pertaining to its investment advisory activities and agrees that it: (a) will use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities; (b) will conform with all applicable rules and regulations of the SEC pertaining to its investment advisory activities; (c) will place orders pursuant to its investment determinations for the Funds either directly with the issuer or with any broker or dealer. In placing orders with brokers or dealers, the Sub-Adviser will attempt to obtain the best combination of prompt execution of orders in an effective manner and at the most favorable price. Consistent with this obligation, when the execution and price offered by two or more brokers or dealers are comparable, the Sub-Adviser may, in its discretion, purchase and sell portfolio securities to and from brokers and dealers who provide the Sub-Adviser with research, analysis, advice and other services. In no instance will portfolio securities be purchased from or sold to any affiliated person of either the Trust, the Adviser, or the Sub-Adviser, except as may be permitted under the 1940 Act; (d) will report regularly to the Adviser and will make appropriate persons available for the purpose of reviewing at reasonable times with representatives of the Adviser and the Board of Trustees the management of each of the Funds, including, without limitation, review of the respective investment strategies of the Funds, the performance of the Funds in relation to standard industry indices, interest rate considerations and general conditions affecting the marketplace and will provide various other reports from time to time as reasonably requested by the Adviser; (e) will maintain books and records with respect to the Funds' securities transactions and will furnish the Adviser and the Trust's Board of Trustees such periodic and special reports as the Board of Trustees or the Adviser may request; and (f) will act upon instructions from the Adviser not inconsistent with the fiduciary duties hereunder. The Sub-Adviser shall have the right to execute and deliver, or cause its nominee to execute and deliver, all proxies and notices of meetings and other notices affecting or relating to the securities of each of the Funds. 4. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which it maintains for the Funds, on behalf of the Trust, are the property of the Trust and further agrees to surrender promptly to the Trust any of such records upon the Trust's request. The Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act. 5. EXPENSES. During the term of this Agreement, the Sub-Adviser will pay all expenses incurred by it in connection with its activities under this Agreement. 6. COMPENSATION. For the services to be provided by the Sub-Adviser pursuant to this Agreement, the Adviser will pay the Sub-Adviser, and the B-2 Sub-Adviser agrees to accept as full compensation therefor, a sub-advisory fee as set forth on Schedule A attached to this Agreement. 7. SERVICES TO OTHERS. The Adviser understands, and has advised the Trust's Board of Trustees, that the Sub-Adviser now acts, and may in the future act, as an investment adviser to fiduciary and other managed accounts, and as investment adviser, sub-investment adviser, and/or administrator to the other investment companies. The Adviser has no objection to the Sub-Adviser's acting in such capacities, provided that whenever the Fund and one or more other investment companies advised by the Sub-Adviser have available funds for investment, investments suitable and appropriate for each will be allocated in accordance with a formula believed by the Sub-Adviser to be equitable to each company. The Adviser recognizes, and has advised the Trust's Board of Trustees, that in some cases this procedure may adversely affect the size of the position that a Fund may obtain in a particular security. In addition, the Adviser understands, and has advised the Trust's Board of Trustees, that the persons employed by the Sub-Adviser to assist in the Sub-Adviser's duties under this Agreement will not devote their full time to such service and nothing contained in this Agreement will be deemed to limit or restrict the right of the Sub-Adviser or any of its affiliates to engage in and devote time and attention to other businesses or to render services of whatever kind or nature so long as its services under this Agreement are not impaired thereby. 8. LIMITATION OF LIABILITY OF SUB-ADVISER. The Sub-Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Funds or the Adviser in connection with the matters to which this Agreement relates including, without limitation, losses that may be sustained in connection with the purchase, holding, redemption, or sale of any security on behalf of the Funds, except a loss resulting from the willful misfeasance, bad faith or gross negligence of the Sub-Adviser in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. 9. DURATION AND TERMINATION. As to each Fund, this Agreement will become effective as of the date set forth on Schedule A provided that it has been approved by vote of a majority of the outstanding voting securities of the respective Fund in accordance with the requirements under the 1940 Act, and, unless sooner terminated as provided herein, will continue in effect for successive periods of 12 months, each ending on the day preceding the anniversary of the Agreement's effective date for such Fund in each year, PROVIDED that such continuation is specifically approved at least annually (a) by the vote of a majority of those members of the Trust's Board of Trustees who are not interested persons of the Trust, the Sub-Adviser, or the Adviser, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the vote of a majority of the Trust's Board of Trustees or, as to each Fund, by the vote of the holders of a majority of the outstanding voting securities of the Fund. Notwithstanding the foregoing, this Agreement may be terminated as to any or all Funds at any time, without the payment of any penalty, by the Adviser, by vote of the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of a Fund on sixty (60) days' written notice to the Sub-Adviser and by the Sub-Adviser on sixty (60) days' written notice to the Adviser and the Trust. This Agreement will terminate automatically upon termination of the investment advisory agreement between the Trust and the Adviser. This Agreement will automatically and immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" have the same meanings of such terms in the 1940 Act). Termination of this Agreement with respect to any Fund shall in no way affect the continued validity of this Agreement or the performance thereunder with respect to any other Fund. 10. AMENDMENT OF THIS AGREEMENT. No material provision of this Agreement may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 11. MISCELLANEOUS. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby. The names "ARK Funds" and "Trustees of ARK Funds" refer respectively to the Trust created by, and the Trustees, as trustees but not individually or B-3 personally, acting from time to time under, the Declaration of Trust, to which reference is hereby made and a copy of which is on file at the office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "ARK Funds" entered in the name or on behalf thereof by any of the Trustees, representatives or agents are made not individually but only in such capacities and are not binding upon any of the Trustees, shareholders or representatives of the Trust personally, but bind only the assets of the Trust. Persons dealing with a Fund must look solely to the assets of the Trust belonging to the Fund for the enforcement of any claims against the Trust. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written. ALLIED INVESTMENT ADVISORS, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ AIB INVESTMENT MANAGERS LIMITED By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ ARK FUNDS By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ B-4 SCHEDULE A For the services provided and the expenses assumed by the Sub-Adviser under the terms of the Agreement, the Adviser shall pay to the Sub-Adviser a monthly fee at the following annual rate: PERCENT OF AVERAGE DAILY EFFECTIVE FUND NET ASSETS DATE - ---- ---------- ---- ARK International Equity Portfolio 0.50% _____________ ___, 2003 B-5 EXHIBIT C --------- INVESTMENT SUB-ADVISORY AGREEMENT AGREEMENT executed as of _______________ ____, 2003, by and between Allied Investment Advisors, Inc., a Maryland corporation (the "Adviser"), Govett Investment Management Limited, [a corporation organized under the laws of England] (the "Sub-Adviser"), and ARK Funds, a Massachusetts business trust (the "Trust"). WHEREAS, the Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and offers for public sale distinct series of shares of beneficial interest (each a "Portfolio"); and WHEREAS, the Adviser is the investment adviser for each of the Portfolios of the Trust; and WHEREAS, the Adviser desires to retain the Sub-Adviser as its agent to furnish investment advisory services for each Portfolio listed in Schedule A (each a "Fund" and collectively, the "Funds"); NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. APPOINTMENT. The Adviser hereby appoints the Sub-Adviser to provide certain sub-investment advisory services to the Funds for the period and on the terms set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. 2. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with copies properly certified or authenticated of each of the following: (a) The Trust's Agreement and Declaration of Trust, as filed with the Secretary of State of the Commonwealth of Massachusetts on March 19, 1993, and all amendments and supplements thereto or restatements thereof (such Declaration, as presently in effect and as it shall from time to time be amended or restated, is herein called the "Declaration of Trust"); (b) The Trust's By-Laws and all amendments thereto; (c) Resolutions of the Trust's Board of Trustees authorizing the appointment of the Sub-Adviser and approving this Agreement; (d) The Trust's Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act"), (File No. 33-53690) and under the 1940 Act (File No. 811-7310), as filed with the Securities and Exchange Commission ("SEC") and all amendments thereto insofar as such Registration Statement and such amendments relate to the Funds; and (e) The Trust's most recent prospectus and statement of additional information for the Funds (such prospectus and statement of additional information, as presently in effect, and all amendments and supplements thereto, are herein collectively called the "Prospectus"). The Adviser will furnish the Sub-Adviser from time to time with copies of all amendments of or supplements to the foregoing. 3. MANAGEMENT. Subject to the supervision of the Trust's Board of Trustees and the Adviser, the Sub-Adviser will furnish an investment program in respect of, and make investment decisions for, all assets of the Funds and place all orders for the purchase and sale of securities, all on behalf of the Funds. In the performance of its duties, the Sub-Adviser will satisfy its fiduciary duties to the Funds (as set forth in Section 8, below), and will monitor the C-1 investments of each of the Funds, and will comply with the provisions of the Trust's Declaration of Trust and By-Laws, as amended from time to time, and the stated investment objectives, policies and restrictions of the respective Funds. The Sub-Adviser and the Adviser will each make its officers and employees available to the other from time to time at reasonable times to review investment policies of the Funds and to consult with each other regarding the investment affairs of the Funds. The Sub-Adviser shall also make itself available to the Board of Trustees at such times as the Board of Trustees shall reasonably request. The Sub-Adviser represents and warrants that it is in compliance with all applicable rules and regulations of the SEC pertaining to its investment advisory activities and agrees that it: (a) will use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities; (b) will conform with all applicable rules and regulations of the SEC pertaining to its investment advisory activities; (c) will place orders pursuant to its investment determinations for the Funds either directly with the issuer or with any broker or dealer. In placing orders with brokers or dealers, the Sub-Adviser will attempt to obtain the best combination of prompt execution of orders in an effective manner and at the most favorable price. Consistent with this obligation, when the execution and price offered by two or more brokers or dealers are comparable, the Sub-Adviser may, in its discretion, purchase and sell portfolio securities to and from brokers and dealers who provide the Sub-Adviser with research, analysis, advice and other services. In no instance will portfolio securities be purchased from or sold to any affiliated person of either the Trust, the Adviser, or the Sub-Adviser, except as may be permitted under the 1940 Act; (d) will report regularly to the Adviser and will make appropriate persons available for the purpose of reviewing at reasonable times with representatives of the Adviser and the Board of Trustees the management of each of the Funds, including, without limitation, review of the respective investment strategies of the Funds, the performance of the Funds in relation to standard industry indices, interest rate considerations and general conditions affecting the marketplace and will provide various other reports from time to time as reasonably requested by the Adviser; (e) will maintain books and records with respect to the Funds' securities transactions and will furnish the Adviser and the Trust's Board of Trustees such periodic and special reports as the Board of Trustees or the Adviser may request; and (f) will act upon instructions from the Adviser not inconsistent with the fiduciary duties hereunder. The Sub-Adviser shall have the right to execute and deliver, or cause its nominee to execute and deliver, all proxies and notices of meetings and other notices affecting or relating to the securities of each of the Funds. 4. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which it maintains for the Funds, on behalf of the Trust, are the property of the Trust and further agrees to surrender promptly to the Trust any of such records upon the Trust's request. The Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act. 5. EXPENSES. During the term of this Agreement, the Sub-Adviser will pay all expenses incurred by it in connection with its activities under this Agreement. 6. COMPENSATION. For the services to be provided by the Sub-Adviser pursuant to this Agreement, the Adviser will pay the Sub-Adviser, and the C-2 Sub-Adviser agrees to accept as full compensation therefor, a sub-advisory fee as set forth on Schedule A attached to this Agreement. 7. SERVICES TO OTHERS. The Adviser understands, and has advised the Trust's Board of Trustees, that the Sub-Adviser now acts, and may in the future act, as an investment adviser to fiduciary and other managed accounts, and as investment adviser, sub-investment adviser, and/or administrator to the other investment companies. The Adviser has no objection to the Sub-Adviser's acting in such capacities, provided that whenever the Fund and one or more other investment companies advised by the Sub-Adviser have available funds for investment, investments suitable and appropriate for each will be allocated in accordance with a formula believed by the Sub-Adviser to be equitable to each company. The Adviser recognizes, and has advised the Trust's Board of Trustees, that in some cases this procedure may adversely affect the size of the position that a Fund may obtain in a particular security. In addition, the Adviser understands, and has advised the Trust's Board of Trustees, that the persons employed by the Sub-Adviser to assist in the Sub-Adviser's duties under this Agreement will not devote their full time to such service and nothing contained in this Agreement will be deemed to limit or restrict the right of the Sub-Adviser or any of its affiliates to engage in and devote time and attention to other businesses or to render services of whatever kind or nature so long as its services under this Agreement are not impaired thereby. 8. LIMITATION OF LIABILITY OF SUB-ADVISER. The Sub-Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Funds or the Adviser in connection with the matters to which this Agreement relates including, without limitation, losses that may be sustained in connection with the purchase, holding, redemption, or sale of any security on behalf of the Funds, except a loss resulting from the willful misfeasance, bad faith or gross negligence of the Sub-Adviser in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. 9. DURATION AND TERMINATION. As to each Fund, this Agreement will become effective as of the date set forth on Schedule A provided that it has been approved by vote of a majority of the outstanding voting securities of the respective Fund in accordance with the requirements under the 1940 Act, and, unless sooner terminated as provided herein, will continue in effect for successive periods of 12 months, each ending on the day preceding the anniversary of the Agreement's effective date for such Fund in each year, PROVIDED that such continuation is specifically approved at least annually (a) by the vote of a majority of those members of the Trust's Board of Trustees who are not interested persons of the Trust, the Sub-Adviser, or the Adviser, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the vote of a majority of the Trust's Board of Trustees or, as to each Fund, by the vote of the holders of a majority of the outstanding voting securities of the Fund. Notwithstanding the foregoing, this Agreement may be terminated as to any or all Funds at any time, without the payment of any penalty, by the Adviser, by vote of the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of a Fund on sixty (60) days' written notice to the Sub-Adviser and by the Sub-Adviser on sixty (60) days' written notice to the Adviser and the Trust. This Agreement will terminate automatically upon termination of the investment advisory agreement between the Trust and the Adviser. This Agreement will automatically and immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" have the same meanings of such terms in the 1940 Act). Termination of this Agreement with respect to any Fund shall in no way affect the continued validity of this Agreement or the performance thereunder with respect to any other Fund. 10. AMENDMENT OF THIS AGREEMENT. No material provision of this Agreement may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 11. MISCELLANEOUS. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby. The names "ARK Funds" and "Trustees of ARK Funds" refer respectively to the Trust created by, and the Trustees, as trustees but not individually or personally, acting from time to time under, the Declaration of Trust, to which C-3 reference is hereby made and a copy of which is on file at the office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "ARK Funds" entered in the name or on behalf thereof by any of the Trustees, representatives or agents are made not individually but only in such capacities and are not binding upon any of the Trustees, shareholders or representatives of the Trust personally, but bind only the assets of the Trust. Persons dealing with a Fund must look solely to the assets of the Trust belonging to the Fund for the enforcement of any claims against the Trust. C-4 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written. ALLIED INVESTMENT ADVISORS, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ GOVETT INVESTMENT MANAGEMENT LIMITED By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ ARK FUNDS By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ C-5 SCHEDULE A For the services provided and the expenses assumed by the Sub-Adviser under the terms of the Agreement, the Adviser shall pay to the Sub-Adviser a monthly fee at the following annual rate: PERCENT OF AVERAGE DAILY EFFECTIVE FUND NET ASSETS DATE - ---- ---------- ---- ARK Emerging Markets Equity Portfolio 0.50% ____________ ___, 2003 C-6 ARK FUNDS [NAME OF PORTFOLIO] ("PORTFOLIO") SPECIAL MEETING OF SHAREHOLDERS JANUARY __, 2003 This proxy is being solicited on behalf of the Board of Trustees of ARK Funds (the "Fund") and relates to the proposal with respect to the Portfolio. The undersigned hereby appoints as proxies James Foggo, Laurie Brooks and Timothy Barto, each of them (with power of substitution) to vote for the undersigned all shares of beneficial interest of the undersigned in the Fund at the Special Meeting of Shareholders to be held at 10:00 a.m. Eastern Time on January __, 2003, at Allfirst Trust Company N.A., 25 South Charles Street, 16th Floor, Baltimore, Maryland 21201, and any adjournment thereof, with all the power the undersigned would have if personally present. The shares represented by this proxy will be voted as instructed. Unless indicated to the contrary, this proxy shall be deemed to grant authority to vote "FOR" the proposal relating to the [Name of Portfolio], with the Fund having discretionary power to vote upon such other business as may properly come before the Meeting. ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE SIGNING SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED, SUCH SHARES WILL BE VOTED FOR THE PROPOSAL. PLEASE DATE, SIGN AND RETURN PROMPTLY VOTE ON PROPOSAL FOR AGAINST ABSTAIN 1. Approval of a new investment advisory / / / / / / agreement between AIA and the Fund ("New Advisory Agreement"). The New Advisory Agreement provides that AIA will provide investment advisory services to the Fund on the same terms and for the same compensation under which it currently operates. Please sign within the box. If shares are held jointly, each shareholder named should sign. If only one signs, his or her signature will be binding. If the shareholder is a corporation, the President or a Vice President should sign in his or her own name indicating this. If the Shareholder is a partnership, a partner should sign, in his or her own name, that he or she is a "Partner." - ----------------------------------------------- --------------------------- - ----------------------------------------------- --------------------------- Signature Date - ----------------------------------------------- --------------------------- - ----------------------------------------------- --------------------------- Signature (Joint Owners) Date ARK FUNDS INTERNATIONAL EQUITY PORTFOLIO ("PORTFOLIO") SPECIAL MEETING OF SHAREHOLDERS JANUARY __, 2003 This proxy is being solicited on behalf of the Board of Trustees of ARK Funds (the "Fund") and relates to the proposals with respect to the Portfolio. The undersigned hereby appoints as proxies James Foggo, Laurie Brooks and Timothy Barto, each of them (with power of substitution) to vote for the undersigned all shares of beneficial interest of the undersigned in the Fund at the Special Meeting of Shareholders to be held at 10:00 a.m. Eastern Time on January __, 2003, at Allfirst Trust Company N.A., 25 South Charles Street, 16th Floor, Baltimore, Maryland 21201, and any adjournment thereof, with all the power the undersigned would have if personally present. The shares represented by this proxy will be voted as instructed. Unless indicated to the contrary, this proxy shall be deemed to grant authority to vote "FOR" all proposals relating to the Portfolio, with the Fund having discretionary power to vote upon such other business as may properly come before the Meeting. ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE SIGNING SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED, SUCH SHARES WILL BE VOTED FOR THE PROPOSALS. PLEASE DATE, SIGN AND RETURN PROMPTLY VOTE ON PROPOSALS FOR AGAINST ABSTAIN 1. Approval of a new investment advisory / / / / / / agreement between AIA and the Fund ("New Advisory Agreement"). The New Advisory Agreement provides that AIA will provide investment advisory services to the Fund on the same terms and for the same compensation under which it currently operates. 2. Approval of a new investment sub-advisory agreement among AIA, AIB Investment Managers Limited and the Fund (the "New AIBIM Sub-Advisory Agreement"). The New AIBIM Sub-Advisory Agreement provides that AIB Investment Managers Limited will provide sub-advisory services to the Portfolio on the same terms and for the same compensation under which it currently operates. Please sign within the box. If shares are held jointly, each shareholder named should sign. If only one signs, his or her signature will be binding. If the shareholder is a corporation, the President or a Vice President should sign in his or her own name indicating this. If the Shareholder is a partnership, a partner should sign, in his or her own name, that he or she is a "Partner." - ----------------------------------------------- --------------------------- - ----------------------------------------------- --------------------------- Signature Date - ----------------------------------------------- --------------------------- - ----------------------------------------------- --------------------------- Signature (Joint Owners) Date ARK FUNDS EMERGING MARKETS EQUITY PORTFOLIO ("PORTFOLIO") SPECIAL MEETING OF SHAREHOLDERS JANUARY __, 2003 This proxy is being solicited on behalf of the Board of Trustees of ARK Funds (the "Fund") and relates to the proposals with respect to the Portfolio. The undersigned hereby appoints as proxies James Foggo, Laurie Brooks and Timothy Barto, each of them (with power of substitution) to vote for the undersigned all shares of beneficial interest of the undersigned in the Fund at the Special Meeting of Shareholders to be held at 10:00 a.m. Eastern Time on January __, 2003, at Allfirst Trust Company N.A., 25 South Charles Street, 16th Floor, Baltimore, Maryland 21201, and any adjournment thereof, with all the power the undersigned would have if personally present. The shares represented by this proxy will be voted as instructed. Unless indicated to the contrary, this proxy shall be deemed to grant authority to vote "FOR" all proposals relating to the Portfolio, with the Fund having discretionary power to vote upon such other business as may properly come before the Meeting. ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE SIGNING SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED, SUCH SHARES WILL BE VOTED FOR THE PROPOSALS. PLEASE DATE, SIGN AND RETURN PROMPTLY VOTE ON PROPOSALS FOR AGAINST ABSTAIN 1. Approval of a new investment advisory / / / / / / agreement between AIA and the Fund ("New Advisory Agreement"). The New Advisory Agreement provides that AIA will provide investment advisory services to the Fund on the same terms and for the same compensation under which it currently operates. 2. Approval of a new investment sub-advisory agreement among AIA, Govett Investment Management Limited and the Fund (the "New Govett Sub-Advisory Agreement"). The New Govett Sub-Advisory Agreement provides that Govett Investment Management Limited will provide sub-advisory services to the Portfolio on the same terms and for the same compensation under which it currently operates. Please sign within the box. If shares are held jointly, each shareholder named should sign. If only one signs, his or her signature will be binding. If the shareholder is a corporation, the President or a Vice President should sign, in his or her own name indicating this. If the Shareholder is a partnership, a partner should sign in his or her own name, that he or she is a "Partner." - ----------------------------------------------- --------------------------- - ----------------------------------------------- --------------------------- Signature Date - ----------------------------------------------- --------------------------- - ----------------------------------------------- --------------------------- Signature (Joint Owners) Date -----END PRIVACY-ENHANCED MESSAGE-----