COVER
COMBINED ANNUAL REPORT FOR
Marketvest Equity Fund
Marketvest International Equity Fund
Marketvest Pennsylvania Intermediate Municipal Bond Fund
Marketvest Short-Term Bond Fund
Marketvest Intermediate U.S. Government Bond Fund
February 1998
MARKETVEST FUNDS
(logo)
President's Message 1
Investment Reviews 3
Portfolios of Investments 13
Statements of Assets and Liabilities 27
Statements of Operations 28
Statements of Changes in Net Assets 29
Financial Highlights 31
Notes to Financial Statements 33
Report of Ernst & Young LLP, Independent Auditors 38
Directors/Trustees and Officers 39
President's Message
Dear Shareholders:
I am pleased to present the final Annual Report of the Marketvest Group of
Funds, which covers the 12-month period from March 1, 1997 through February 28,
1998. As you know, in late March the Marketvest Group of Funds merged with the
ARK Funds. This event, a corresponding result of a merger between the Funds'
advisers, Dauphin Deposit Bank and First Maryland Bank, has created a larger
fund family with more opportunities to serve you.
This report begins with a discussion with each Marketvest fund portfolio
manager, followed by a list of fund holdings and the financial statements.
Listed below are the highlights for each Marketvest fund over the 12-month
reporting period:
. In a stock market environment that continued to soar to new heights,
Marketvest Equity Fund achieved an extremely strong total return for the one
year period ended February 28, 1998 of 31.64%, or 25.43% adjusted for the
fund's sales charge.* Contributing to this total return were capital gains
totaling $1.36 per share, income totaling $0.15 per share, and a net asset
value increase from $11.91 to $14.00. By the end of the reporting period, the
fund's net assets totaled more than $577 million.
. Marketvest International Equity Fund invested primarily in other mutual funds
that invest in foreign stocks.** The fund began operations on April 1, 1997,
and by February 28, 1998, it achieved a cumulative total return of 12.95%, or
11.28% adjusted for the sales charge.* The total return was the result of
capital gains totaling $0.19 per share, income totaling $0.23 per share, and
a net asset value increase from $10.00 to $10.85. By the end of the reporting
period, the fund's highly diversified portfolio of international stocks had
attracted more than $35 million from investors seeking long-term capital
appreciation.
. Marketvest Pennsylvania Intermediate Municipal Bond Fund rewarded
tax-sensitive Pennsylvania investors with double-tax-free dividends totaling
$0.40 per share.*** The fund's dividends, along with a $0.19 increase in
share price, produced a total return for the one year period ended February
28, 1998 of 6.68%, or 2.91% adjusted for the fund's sales charge.* Tax-
sensitive Pennsylvania residents had invested more than $195 million in the
fund by the end of the reporting period.
. The relatively conservative approach to bonds offered by Marketvest Short-
Term Bond Fund resulted in dividend stream that totaled $0.57 per share. The
fund's dividends, along with a $0.01 share price increase, produced a total
return for the one year period ended February 28, 1998 of 5.98%, or 2.28%
adjusted for the fund's sales charge.* Net assets totaled $133 million at the
end of the reporting period.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost
** Foreign investing involves special risks including currency risks, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
*** Income may be subject to the federal alternative minimum tax.
. Marketvest Intermediate U.S. Government Bond Fund, a portfolio of
intermediate-maturity government securities, paid dividends totaling $0.67
per share. The fund's dividends, along with a $0.03 increase in share price,
produced a total return for the one year period ended February 28, 1998 of
7.40%, or 3.61% adjusted for the fund's sales charge.* By the end of the
reporting period, the fund's net assets reached $264 million.
Thank you for pursuing your financial goals through the Marketvest Group of
Funds.
As an ARK Funds shareholder, you will continue to have all the benefits of
mutual fund investing--with more choices than ever.
Sincerely,
Edward C. Gonzales
President
April 15, 1998
* Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
Investment Reviews
Marketvest Equity Fund
Q During 1997, the Dow Jones Industrial Average ("DJIA")* broke several records
for closing values, but not without volatility as the market experienced days of
large declines and advances. How did the Marketvest Equity Fund perform in this
environment versus the market overall and other growth funds?
A For the 12 months ended February 28, 1998, Marketvest Equity Fund trailed the
Standard & Poor's 500 Index ("S&P 500")*, but bested the DJIA. On February 28,
1998 the fund reported a total return based on net asset value of 31.64% versus
total returns of 34.99% for the S&P 500 and 26.51% for the DJIA.** Although
extreme volatility was prevalent for most of the year, the 4th quarter of 1997
saw especially large gyrations.
Q Where did you find value in this highly valued market?
A Although valuations appeared to be at extreme levels, we continued to acquire
elective shares in the technology, health-care, and energy sectors from mid-1997
through the first quarter of 1998.
Q What notable holdings were either added to the portfolio or significantly
changed the fund's position?
A Positions that were substantially reduced during late 1997, subsequent to the
technology melt-down in late October, were second tier office equipment issues,
semi-conducter and related companies, and electronics shares.
Q Overall, 1997 offered an ideal economic climate for stocks and the market
marches on. What are your thoughts on the market at the outset of 1998?
A Although currently in uncharted territory, the equity market continues to
behave amazingly well. Excessive speculation and huge cash reserves flowing into
stock mutual funds are driving equity valuations to new highs almost on a daily
basis. Accordingly, we are cautious on the near-term, and consequently have been
in the process of redeploying sector weightings to more closely coincide with
S&P 500 allocations. We will continue to look for value opportunities with a
cash balance of between 5.5% and 7.5%.
* The DJIA is an unmanaged index which represents share prices of selected blue
chip industrial corporations as well as public utility and transportation
companies. The DJIA indicates daily changes in the average price of stocks in
any of its categories. It also reports total sales for each group of
industries. Because it represents the top corporations of America, the DJIA's
index movements are leading economic indicators for the stock market as a
whole. The S&P 500 is an unmanaged broad-based index measuring changes in
stock market conditions based on the average performance of 500 widely held
common stocks. Investments cannot be made in an index.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principle value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost. The quoted total return for the fund does not reflect
the sales charge some customers may incur.
Marketvest Equity Fund
Growth of $10,000 Invested in Marketvest Equity Fund
The graph below illustrates the hypothetical investment of $10,000* in the
Marketvest Equity Fund (the "Fund") from April 1, 1996 (start of performance) to
February 28, 1998, compared to the Standard & Poor's 500 Index (S&P 500)+and the
Lipper Growth Fund Average.++
[GRAPH APPEARS HERE-SEE APPENDIX]
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 4.75% ($10,000 investment minus $475 sales charge
= $9,525). The Fund's performance assumes the reinvestment of all dividends
and distributions. The S&P 500 and the Lipper Growth Fund Average have been
adjusted to reflect reinvestment of dividends on securities in the index and
average.
** Total return quoted reflects all applicable sales charges.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. This
index is unmanaged.
++ The Lipper Growth Funds Average represents the average of the total returns
reported by all of the mutual funds designated by Lipper Analytical
Services, Inc. as falling into the respective category and is not adjusted
to reflect any sales charges. However, these total returns are reported net
of expenses or other fees that the SEC requires to be reflected in the
Fund's performance.
Marketvest International Equity Fund
Q The turbulence in the Pacific Rim markets led to a very difficult year. What
is your analysis of the international stock market?
A The Southeast Asian financial crisis has certainly impaired that region of the
world. The problems incurred by these countries are serious in nature and depth.
These problems were not recent in development but have evolved over many years
of financial management. Likewise the solutions to the problems will not be
arrived at quickly. Reviving these economies will require superior leadership to
achieve the necessary economic, governmental and social changes.
The ripple effects of the crisis have been felt worldwide. The timing and
intensity of these effects upon the rest of the world continues to unfold. Japan
and China have received the most direct impact. Other "emerging market" nations
have been affected as they have been "painted with the same brush" as Southeast
Asia. The effect on the world's developed markets should be minimal in terms of
lower Gross Domestic Product growth as these regions participate in very
favorable global economic and market conditions.
Q As a "fund of funds," Marketvest International Equity Fund invests its assets
in international mutual funds, which offers an extremely high level of
diversification. How were the fund's holdings weighted among different regions?
A As of December 31, 1997, the regional diversification was as follows:
63.46% Europe
13.15% Pacific Rim
9.20% Japan
7.17% Latin America
7.02% Other
Q At the outset of 1998, what type of climate do you see for international
stocks?
A The investment climate for the developed nations remains favorable. Globally,
these nations are experiencing ideal conditions of moderate growth and low
inflation. Investment opportunities in Europe are attractive as the continent
prepares for the start of the Economic and Monetary Union in 1999. Also,
corporate restructuring and merger activity have boosted stock prices.
Share prices in Southeast Asian countries have rebounded as bargain hunters have
begun entering the marketplace. Many feel however, that there are still too many
unknowns with respect to the region to commit to large scale investments. These
opportunities must be evaluated in light of the characteristics each possesses
in terms of the strong potential and risk.
Marketvest International Equity Fund
Growth of $10,000 Invested in Marketvest International Equity Fund
The graph below illustrates the hypothetical investment of $10,000* in the
Marketvest International Equity Fund (the "Fund") from April 1, 1997 (start of
performance)** to February 28, 1998, compared to the Europe, Australia and Far
East Index+ and the Lipper International Funds Average.++
[GRAPH APPEARS HERE-SEE APPENDIX]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 1.5% ($10,000 investment minus $150 sales charge =
$9,850). The Fund's performance assumes thereinvestment of all dividends and
distributions. The Europe, Australia and Far East Index and the Lipper
International Funds Average have been adjusted to reflect reinvestment of
dividends on securities in theindex and average.
** The Marketvest International Equity Fund is the successor to a collective
trust fund. The quoted performance data includes performance of the
collective trust fund for period from 5/31/91 (inception date of collective
trust fund) to 4/1/97 when the Fund's registration statement became
effective, as adjusted to reflect the Fund's anticipated expenses. The
collective trust fund was not registered under the Investment Company Act of
1940 ("1940 Act") and therefore was not subject to certain investment
restrictions imposed by the 1940 Act. If the collective trust fund had been
registered under the 1940 Act, the performance may have been adversely
affected.
*** Total return quoted reflects all applicable sales charges.
+ The Europe, Australia and Far East Index is not adjusted to reflect sales
charges, expenses, or other fees that the SEC requires to be reflected in
the Fund's performance. This index is unmanaged.
++ The Lipper International Funds Average represents the average of the total
returns reported by all of the mutual funds designated by Lipper Analytical
Services, Inc. as falling into the respective category and is not adjusted
to reflect any sales charges. However, these total returns are reported net
of expenses or other fees that the SEC requires to be reflected in the
Fund's performance.
Marketvest Pennsylvania Intermediate Municipal Bond
Q With municipal interest rates and yields on municipal bonds so low, is now the
right time to buy tax-exempt bonds or municipal bonds? What about concerns of
investors who can barely get 5% on municipal bonds?
A Even though investors can barely get a 5% coupon on a municipal bond without
paying a premium, tax-exempt bonds are very attractive when you consider other
fixed income alternatives. The ratios of municipal yields to treasury yields
continue to be at historically wide levels. This means that even for an investor
paying a 28% marginal tax rate there is a definite advantage to owning and
buying municipal bonds. If you are a Pennsylvania resident, paying both income
tax and a personal property tax, the advantage is even greater. As for interest
rates being so low . . . it is a sign of the times. Interest rates have
continued to fall in response to moderate economic growth while experiencing
very low inflation rates. When investing in bonds, one of our goals should be to
maintain your purchasing power, while earning a real after tax return. Real
rates are at the upper end of the historical range thanks to low inflation. So,
to answer the question, we believe now is a great time to buy municipal bonds.
We feel that municipal bonds should perform well going forward as demand picks-
up when investors begin to realize the after-tax advantage to owning tax-exempt
bonds, even if they are yielding below 5%.
Q Where do you see the most value in the municipal market place?
A As interest rates have continued their steady decline over the past several
years, we have seen investors extending beyond their normal investment
parameters to reach for higher yields. Investors have stepped down into the
lower credit quality categories to secure these higher yields. This added demand
for lower rated securities has resulted in a compression of spreads between
triple-A issuers and lower quality issuers. While it is true that municipalities
generally are in the best financial condition that they have been in for the
last several decades, we do not necessarily believe that the extra 20-40 basis
points warrants a reduction in credit standards. We continue to emphasize issues
with higher quality credits and insurance.
Q With your expectations for modestly lower interest rates, how is the fund
positioned?
A We continue to have a long-intermediate term bias in the fund, focusing new
purchases in the 15-20 year sector of the yield curve. Changes to the portfolio
reflect the bias to maximize after-tax total return, while providing a high
level of current income. Moderate fluctuation in principal should be expected as
interest rates change. As of February 28, 1998, the effective duration of the
portfolio was 6.2 years. Effective duration is a measurement of the sensitivity
of the portfolio to changes in interest rate. As noted previously, we remain
focused on maintaining a high credit quality profile, insulating performance if
quality spreads begin to widen.
Marketvest Pennsylvania Intermediate Municipal Bond
Growth of $10,000 Invested in Marketvest Pennsylvania Intermediate Municipal
Bond Fund
The graph below illustrates the hypothetical investment of $10,000* in the
Marketvest Pennsylvania Intermediate Municipal Bond Fund (the "Fund") from April
1, 1996 (start of performance) to February28,1998, compared to the Lehman
Brothers Five-Year State General Obligations Bond Index+ and the Lipper
Pennsylvania Intermediate Municipal Debt Funds Average.++
[GRAPH APPEARS HERE-SEE APPENDIX]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 3.50% ($10,000 investment minus $350 sales charge
= $9,650). The Fund's performance assumes the reinvestment of all dividends
and distributions. The Lehman Brothers Five-Year State General Obligations
Bond Index and the Lipper Pennsylvania Intermediate Municipal Debt Funds
Average have been adjusted to reflect reinvestment of dividends on securities
in the index and average.
** Total return quoted reflects all applicable sales charges.
+ The Lehman Brothers Five-Year State General Obligations Bond Index is not
adjusted to reflect sales loads, expenses, or other fees that the SEC
requires to be reflected in the Fund's performance. This index is unmanaged.
++ The Lipper Pennsylvania Intermediate Municipal Debt Funds Average represents
the average of the total returns reported by all of the mutual funds
designated by Lipper Analytical Services, Inc. as falling into the
respective category and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that
the SEC requires to be reflected in the Fund's performance.
Marketvest Short-Term Bond Fund
Q What is your analysis of the bond market during the 12-month reporting period?
A The 12-month period ended February 28, 1998 produced positive returns for all
sectors of the fixed-income markets. The economy's underlying pace of activity
was strong. Overall, the yield curve flattened during the period. In the 2-year
or less maturity range, rates fell between 8 and 10 basis points. In contrast,
in the 3- to 5-year range rates fell nearly 35 basis points. Looking forward, on
the price front, the story remains favorable, with no signs of pending
inflationary pressures. The bond market continues to believe that the Federal
Reserve Board will leave interest rates unchanged over the next three months.
Q How did Marketvest Short Term Bond Fund perform in terms of income and total
return in this environment?
A With the bond market rallying through the reporting period, the 30-day yield
for the fund declined to 5.17% on February 28, 1998.* On a total return basis,
the fund produced a total return based on net asset value on February 28, 1998
of 5.98%.* At the period-end, the fund's duration was 1.44 years and the average
life of the holdings was 6.58 years.
Q How were the fund's assets allocated among the various fixed income sectors at
the end of the period?
A As of February 28, 1998, the allocation was as follows:
1.5% Treasuries
14.4% Agencies and Mortgage-Backed
19.6% Asset-Backed
48.1% Corporate Bonds and Notes
15.0% Cash Equivalents
Q What is your outlook for the fixed income markets for early 1998?
A As we enter 1998, we are constructive on the domestic bond market. We expect
that interest rates will remain stable to slightly lower based on our outlook
for slowing domestic growth and low inflation, as well as continued demand for
U.S. dollar denominated securities in response to continued instability in the
Asian markets. With the expectation for a relatively flat yield curve, we
anticipate holding duration at a level neutral to slightly long to the Lehman
benchmark, as the advantage to extend is limited. Emphasis will remain on
selectively overweighting the corporate sector, particularly in the financial,
telecommunication and energy industries, but as the economy slows and corporate
balance sheets come under pressure, the trade of choice will be to upgrade
credit quality. Until we begin to see signs of stability in Asia, we expect that
the downward course of interest rates will cause mortgages to underperform the
other sectors of the market.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost. The quoted total return for the fund does not reflect the sales
charge some customers may incur.
Marketvest Short-Term Bond Fund
Growth of $10,000 Invested in Marketvest Short-Term Bond Fund
The graph below illustrates the hypothetical investment of $10,000* in the
Marketvest Short-Term Bond Fund (the "Fund") from April 1, 1996 (start of
performance) to February 28, 1998, compared to the Lehman Brothers 1-3 Year
Government Index+and the Lipper Short-Term Investment Grade Debt Average.++
[GRAPH APPEARS HERE]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 3.50% ($10,000 investment minus $350 sales charge
= $9,650). The Fund's performance assumes the reinvestment of all dividends
and distributions. The Lehman Brothers 1-3 Year Government Index and the
Lipper Short-Term Investment Grade Debt Average have been adjusted to reflect
reinvestment of dividends on securities in the index and average.
** Total return quoted reflects all applicable sales charges.
+ The Lehman Brothers 1-3 Year Government Index is not adjusted to reflect
sales charges, expenses, or other fees that the SEC requires to be reflected
in the Fund's performance. This index is unmanaged.
++ The Lipper Short-Term Investment Grade Average represents the average of the
total returns reported by all of the mutual funds designated by Lipper
Analytical Services, Inc. as falling into the respective category and is not
adjusted to reflect any sales charges. However, these total returns are
reported net of expenses or other fees that the SEC requires to be reflected
in the Fund's performance.
Marketvest Intermediate U.S. Government Bond Fund
Q What is your analysis of the bond market during the 12-month reporting period?
A The 12-month period ended February 28, 1998 produced positive returns for all
sectors of the fixed-income markets. The economy's underlying pace of activity
was strong. Rates continued to decline in the intermediate to longer end of the
yield curve. We were neutral to the Lipper peer group and long to the Lehman
benchmark as measured by duration. Looking forward, on the price front, the
story remains favorable, with no signs of pending inflationary pressures. The
bond market continues to believe that the Federal Reserve Board will leave
interest rates unchanged over the next three months.
Q How did Marketvest Intermediate U.S. Government Bond Fund perform in terms of
income and total return in this environment?
A With the bond market rallying through the reporting period, the 30-day yield
for the fund declined to 5.22% on February 28, 1998.* On a total return basis,
the fund produced a total return based on net asset value of 7.40% on February
28, 1998.* At the period-end, the fund's duration was 3.19 years and the average
life of the holdings was 14.95 years.
Q How were the fund's assets allocated among the various fixed income sectors at
the end of the period?
A As of February 28, 1998, the allocation was as follows:
33.5% Treasuries
16.2% Agencies
16.3% Mortgage-Backed & CMOs
4.9% Asset-Backed
21.1% Corporate Bonds
1.0% Municipals
1.7% Preferred Stocks
6.2% Cash Equivalents
Q What is your outlook for the fixed income markets for early 1998?
A As we enter 1998, we are constructive on the domestic bond market. We expect
that interest rates will remain stable to slightly lower based on our outlook
for slowing domestic growth and low inflation, as well as continued demand for
U.S. dollar denominated securities in response to continued instability in the
Asian markets. With the expectation for a relatively flat yield curve, we
anticipate holding duration at a level neutral to slightly long to the Lehman
benchmark index, as the advantage to extend is limited. Emphasis will remain on
selectively overweighting the corporate sector, particularly in the financial,
telecommunication and energy industries, but as the economy slows and corporate
balance sheets come under pressure, the trade of choice will be to upgrade
credit quality. Until we begin to see signs of stability in Asia, we expect that
the downward course of interest rates will cause mortgages to underperform the
other sectors of the market.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost. The quoted total return for the fund does not reflect the sales
charge some custormers may incur.
Marketvest Intermediate U.S. Government Bond Fund
Growth of $10,000 Invested in Marketvest Intermediate U.S. Government Bond Fund
The graph below illustrates the hypothetical investment of $10,000* in the
Marketvest Intermediate Government Bond Fund (the "Fund") from April 1, 1996
(start of performance) to February 28, 1998, compared to the Lehman Brothers
Intermediate Government/Corporate Bond Index+ and the Lipper Intermediate U.S.
Government Funds Average.++
[GRAPH APPEARS HERE-SEE APPENDIX]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 3.50% ($10,000 investment minus $350 sales charge
= $9,650). The Fund's performance assumes the reinvestment of all dividends
and distributions. The Lehman Brothers Intermediate Government/Corporate Bond
Index and the Lipper Intermediate U.S. Government Funds Average have been
adjusted to reflect reinvestment of dividends on securities in the index and
average.
** Total return quoted reflects all applicable sales charges.
+ The Lehman Brothers Intermediate Government/Corporate Bond Index is not
adjusted to reflect sales charges, expenses, or other fees that the SEC
requires to be reflected in the Fund's performance. This index is unmanaged.
++ The Lipper Intermediate U.S. Government Funds Average represents the average
of the total returns reported by all of the mutual funds designated by
Lipper Analytical Services, Inc. as falling into the respective category and
is not adjusted to reflect any sales charges. However, these total returns
are reported net of expenses or other fees that the SEC requires to be
reflected in the Fund's performance.
Portfolios of Investments
Marketvest Group of Funds
February 28, 1998
MARKETVEST EQUITY FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS--92.0%
BASIC INDUSTRY--3.7%
135,200 Alcan Aluminum, Ltd. $ 4,199,650
48,800 Georgia-Pacific Corp. 1,113,250
106,000 Lubrizol Corp. 4,087,625
107,800 PPG Industries, Inc. 6,986,788
101,500 Weyerhaeuser Co. 5,068,656
Total 21,455,969
Consumer Durables--7.7%
149,500 Chrysler Corp. 5,821,156
55,700 Eaton Corp. 5,350,681
130,300 Echlin, Inc. 6,588,294
80,800 Goodyear Tire & Rubber Co. 5,585,300
119,000 Newell Co. 5,459,125
92,400 Snap-On Tools Corp. 3,927,000
108,600 TRW, Inc. 5,952,638
83,300 Whirlpool Corp. 5,565,481
Total 44,249,675
Consumer Non-Durables--8.8%
173,400 Anheuser-Busch Cos., Inc. 8,128,125
93,800 Colgate-Palmolive Co. 7,615,388
62,600 Heinz (H.J.) Co. 3,525,163
106,000 Kimberly-Clark Corp. 5,902,875
124,600 Nike, Inc., Class B 5,466,825
139,600 PepsiCo, Inc. 5,104,125
67,600 Sara Lee Corp. 3,819,400
83,800 Unilever N.V., ADR 5,389,388
123,600 V.F. Corp. 5,894,175
Total 50,845,464
Energy Minerals--8.6%
80,900 Amoco Corp. 6,876,500
113,400 Atlantic Richfield Co. 8,816,850
84,400 Chevron Corp. 6,846,950
104,900 Mobil Corp. 7,598,694
152,100 Phillips Petroleum Co. 7,452,900
167,800 Sun Co., Inc. 6,701,513
144,000 Unocal Corp. 5,427,000
Total 49,720,407
Finance--10.1%
152,020 Banc One Corp. $ 8,589,130
50,500 Bankers Trust
New York Corp. 5,971,625
31,500 CIGNA Corp. 6,016,500
47,600 Chase Manhattan Corp. 5,905,375
35,700 Citicorp 4,730,250
89,800 Federal National
Mortgage Association 5,730,363
52,000 J.P. Morgan & Co., Inc. 6,214,000
200,000 Norwest Corp. 8,187,500
126,150 Travelers Group, Inc. 7,032,863
Total 58,377,606
Health Care--11.1%
79,400 Abbott Laboratories 5,940,113
87,200 American Home
Products Corp. 8,175,000
158,300 Amgen, Inc. 8,409,688
133,900 Bausch & Lomb, Inc. 6,000,390
108,600 Baxter International, Inc. 6,149,475
148,000 Becton, Dickinson & Co. 9,416,500
109,900 Johnson & Johnson 8,297,450
91,400 Medtronic, Inc. 4,855,625
321,500 Mylan Laboratories, Inc. 6,550,563
Total 63,794,804
Producer Manufacturing--10.8%
124,000 Allied-Signal, Inc. 5,277,750
109,900 Deere & Co. 6,168,138
150,400 Dresser Industries, Inc. 6,721,000
74,100 Emerson Electric Co. 4,728,506
70,800 General Electric Co. 5,504,700
85,600 Honeywell, Inc. 6,783,800
180,600 Ingersoll-Rand Co. 8,601,075
92,600 Johnson Controls, Inc. 5,145,088
134,600 Tenneco, Inc. 5,535,425
90,000 Xerox Corp. 7,981,875
Total 62,447,357
Retail Trade--3.4%
76,000 Albertsons, Inc. 3,557,750
86,200 Lowe's Cos., Inc. 5,037,313
COMMON STOCKS--continued
Retail Trade--continued
58,600 May Department Stores Co. $ 3,559,950
107,900 Penney (J.C.) Co., Inc. 7,627,181
Total 19,782,194
Services--0.9%
95,600 McDonald's Corp. 5,234,100
Technology--17.1%
185,300 Applied Materials, Inc. 6,821,356
86,100 Avnet, Inc. 5,488,875
289,100 Compaq Computer Corp. 9,269,264
150,500 Computer Associates
International, Inc. 7,092,313
38,200 Dell Computer Corp. 5,343,225
122,500 Hewlett-Packard Co. 8,207,500
103,000 Intel Corp. 9,237,813
73,900 International Business
Machines Corp. 7,717,931
55,537 Lockheed Martin Corp. 6,480,474
104,600 Motorola, Inc. 5,831,450
120,400 Raytheon Co., Class B 7,081,025
98,400 Rockwell International Corp. 5,953,200
155,000 (a)Sterling Software, Inc. 8,166,563
105,400 Texas Instruments, Inc. 6,100,025
Total 98,791,014
Transportation--1.3%
42,500 Burlington Northern
Santa Fe 4,234,063
64,000 Union Pacific Corp. 3,264,000
Total 7,498,063
Utilities--8.5%
127,000 BellSouth Corp. 7,747,000
101,192 Duke Energy Corp. 5,622,481
52,606 El Paso Natural Gas 3,491,723
117,500 GTE Corp. 6,359,688
168,900 Questar Corp. 7,178,250
117,200 SBC Communications, Inc. 8,863,250
80,700 Sprint Corp. 5,326,200
84,700 U.S. West, Inc. 4,409,694
Total 48,998,286
Total Common Stocks
(identified cost $362,836,684) 531,194,939
MUTUAL FUND--0.0%
4,842 Temporary Investment
Fund, Inc.
(at net asset value) $ 4,842
(b) REPURCHASE
AGREEMENT--7.8%
45,067,597 Dean Witter Reynolds, Inc.,
5.54%, dated 2/27/1998,
due 3/2/1998
(at amortized cost) 45,067,597
Total Investments
(identified cost
$407,909,123) $576,267,378
</TABLE>
(See Notes to Portfolios of Investments)
MARKETVEST INTERNATIONAL
EQUITY FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
LONG-TERM MUTUAL
FUNDS--97.1%
387,742 American Advantage
International Equity Fund $ 6,696,310
234,640 American EuroPacific Growth
Fund 6,680,213
71,240 GAM International Fund 2,197,764
214,636 Harbor International Fund 8,355,783
170,250 Hotchkis & Wiley
International Fund 4,177,933
635,808 Templeton Foreign Fund, Class I 6,695,060
Total Long-Term Mutual Funds
(identified cost $32,128,510) 34,803,063
SHORT-TERM MUTUAL
FUND--0.0%
1,279 Temporary Investment Fund, Inc.
(at net asset value) 1,279
Principal
Amount Value
(b)REPURCHASE
AGREEMENT--2.2%
$ 774,195 Dean Witter Reynolds, Inc., 5.54%,
dated 2/27/1998, due 3/2/1998
(at amortized cost) $ 774,195
Total Investments (identified cost
$32,903,984) $35,578,537
</TABLE>
(See Notes to Portfolios of Investments)
MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Credit
Principal Rating
Amount (c)(d) Value
<S> <C> <C> <C>
LONG-TERM MUNICIPAL
SECURITIES--97.8%
PENNSYLVANIA--97.8%
$1,790,000 Allegheny County, PA
HDA, Refunding Revenue
Bonds, 5.70% (Magee
Womens Hospital)/
(Original Issue
Yield: 5.85%), 10/1/2001 AAA $ 1,883,519
1,000,000 Allegheny County, PA
HDA, Revenue Bonds, 5.20% (Magee Womens Hospital)/(FGIC INS)/
(Original Issue Yield:
5.30%), 10/1/2005 AAA 1,047,842
3,500,000 Allegheny County, PA
IDA,Refunding Revenue
Bond, 6.80% (MBIA INS),
3/1/2015 AAA 3,840,641
5,000,000 Allegheny County, PA,
GO UT Bonds (Series
C-45), 5.10% (FGIC INS),
10/1/2007 AAA 5,288,360
5,000,000 Allegheny County, PA,
Revenue Refunding
Bonds, 5.00% (Pittsburgh
International Airport)/
(MBIA INS)/(Original
Issue Yield: 5.41%),
1/1/2019 AAA 4,929,630
2,665,000 Allentown, PA Area
Hospital Authority,
Refunding Revenue
Bonds, 6.50% (Original
Issue Yield: 6.65%),
11/15/2008 BBB 2,871,167
1,390,000 Bensalem Township, PA,
GO UT Bonds, 5.55%
(FGIC INS), 12/1/2010 AAA 1,477,250
1,000,000 Bethlehem, PA Area School District, GO UT BONDS, 5.70% (MBIA INS),
3/1/2009, Pre-refunded
@ 100 AAA 1,091,196
$1,000,000 Bethlehem, PA Area School
District, GO UT BONDS,
5.75% (MBIA INS)/
(Original Issue Yield:
5.80%), 3/1/2010,
Pre-refunded AAA $ 1,094,550
3,000,000 Bethlehem, PA Area School
District, GO UT Bonds,
5.50% (FGIC INS),
9/1/2008 AAA 3,227,634
1,635,000 Bethlehem, PA Area School
District, GO UT Bonds,
5.85% (MBIA INS)/
(Original Issue Yield:
5.90%), 3/1/2012,
Pre-refunded AAA 1,800,552
4,000,000 Burrell, PA School District,
GO UT School
Improvements, 5.25%
(Original Issue Yield:
5.45%), 11/15/2010 AAA 4,189,888
2,245,000 Cambria County, PA, GO
UT, 5.00% (FGIC INS),
8/15/2023 AAA 2,203,726
3,045,000 Chester County, PA HEFA,
Refunding Revenue
Bonds, 5.30% (Main Line
Health Systems)/(MBIA
INS)/(Original Issue
Yield: 5.40%), 5/15/2007 AAA 3,210,566
965,000 Chester County, PA HEFA,
Refunding Revenue
Bonds, 5.50% (Chester
County Hospital, PA)/
(MBIA INS)/(Original
Issue Yield: 5.70%),
7/1/2007 AAA 1,042,306
1,675,000 Chester County, PA HEFA,
Refunding Revenue
Bonds, 5.625% (Chester
County Hospital, PA)/
(MBIA INS)/(Original
Issue Yield: 5.90%),
7/1/2010 AAA 1,778,498
$1,985,000 Chester County, PA HEFA,
Refunding Revenue
Bonds, 5.625% (MBIA
INS)/(Original Issue
Yield: 5.85%), 7/1/2009 AAA $2,123,194
4,000,000 Commonwealth of
Pennsylvania, GO UT
Bonds, 5.375% (FGIC
INS), 5/15/2004 AAA 4,278,292
5,000,000 Commonwealth of
Pennsylvania, GO UT
Refunding Bonds, 5.375%
(FGIC INS), 11/15/2007 AAA 5,423,195
4,000,000 Commonwealth of
Pennsylvania, GO UT,
6.00% (Original Issue
Yield: 6.20%), 7/1/2009 AA 4,578,060
2,300,000 Cumberland County, PA
Municipal Authority,
Revenue Bond, 5.125%
(Original Issue Yield:
5.50%), 10/1/2015 AAA 2,315,785
5,000,000 Dauphin County, PA
General Authority,
Revenue Bonds, 5.00%
(AMBAC INS),
Mandatory Put 6/1/2001 AAA 5,146,565
830,000 Dauphin County, PA
General Authority,
Revenue Refunding
Bonds, 5.10% (Pinnacle
Health System)/(MBIA
INS)/(Original Issue
Yield: 5.20%), 5/15/2008 AAA 860,727
910,000 Dauphin County, PA
General Authority,
Revenue Refunding
Bonds, 5.20% (Pinnacle
Health System)/(MBIA
INS)/(Original Issue
Yield: 5.30%), 5/15/2009 AAA 945,223
$4,000,000 Delaware County, PA,
Revenue Bond, 6.00%
(Original Issue Yield:
6.21%), 12/15/2020 BBB+ $4,179,220
2,000,000 Delaware Valley, PA
Regional Finance
Authority, Revenue Bonds
(Series A), 5.90% (AMBAC
INS)/(Original Issue
Yield: 6.00%), 4/15/2016 AAA 2,109,376
1,500,000 Erie County, PA Prison
Authority, Revenue
Bonds, 6.30% (United
States Treasury COL)/
(MBIA INS), 11/1/1999 AAA 1,557,569
3,000,000 Geisinger Authority, PA
Health System, Revenue
Bonds, 6.50% (Original
Issue Yield: 7.591%),
7/1/2007 AA 3,148,641
3,550,000 Hazleton, PA Area School
District, GO UT
Refunding Bonds, 5.25%
(FGIC INS), 3/1/2010 AAA 3,777,981
1,000,000 Lancaster County, PA
Hospital Authority,
Health Center Refunding
Revenue Bonds, 4.75%
(Masonic Homes),
11/15/2002 A+ 1,017,683
1,000,000 Lehigh County, PA General
Purpose Authority, GO
UT Refunding Bonds
(Series A), 6.60%
(AMBAC INS)/(United
States Treasury PRF),
10/15/2000 (@100) AAA 1,045,659
1,270,000 Lehigh County, PA General
Purpose Authority,
Hospital Refunding
Revenue Bonds (Series
1996A), 5.75%
(Muhlenberg Hospital
Center)/(Original Issue
Yield: 5.85%), 7/15/2010 A 1,325,418
$1,730,000 Lehigh County, PA General
Purpose Authority,
Revenue Bonds, 5.75%
(Muhlenberg Hospital
Center)/(Original Issue
Yield: 5.85%), 7/15/2010 A $1,805,490
2,000,000 Lehigh County, PA, GO UT
Bonds (Series A), 5.50%
(Original Issue Yield:
5.60%), 11/15/2011 Aa3 2,085,704
2,100,000 Lehigh County, PA, GO UT Bonds (Series A), 5.55% (Original Issue
Yield:
5.65%), 11/15/2002 Aa3 2,189,804
2,070,000 Montgomery County, PA
Higher Education and
Health Authority,
Revenue Refunding
Bonds, 5.25% (Holy
Redeemer Health Care)/
(AMBAC INS), 10/1/2004 AAA 2,176,936
1,275,000 Montgomery County, PA
Higher Education and
Health Authority,
Revenue Refunding
Bonds, 5.50% (Holy
Redeemer Health Care),
10/1/2008 AAA 1,371,426
1,550,000 Northampton County, PA
Higher Education
Authority, Refunding
Revenue Bonds, 6.75%
(Lehigh University)/
(MBIA INS), 11/15/1999 AAA 1,623,597
2,710,000 Northampton County, PA
Higher Education
Authority, Revenue
Bonds, 5.75% (Lehigh
University)/(MBIA INS),
8/15/2003 AAA 2,917,342
1,000,000 Pennridge, PA School
District, GO UT Bonds,
6.40%, 3/15/2001 Baa1 1,059,988
$1,500,000 Pennsylvania Housing
Finance Authority,
Refunding Revenue
Bonds, 6.00%, 10/1/2013 AA+ $1,595,661
2,720,000 Pennsylvania Infrastructure
Investment Authority,
Revenue Bonds, 5.25%
(MBIA INS), 9/1/2007 AAA 2,900,273
1,000,000 Pennsylvania Infrastructure
Investment Authority,
Revenue Bonds, 6.00%
(MBIA INS), 9/1/2006 AAA 1,113,311
2,145,000 Pennsylvania
Intergovernmental Coop
Authority, Refunding
Revenue Bonds, 5.40%
(FGIC INS), 6/15/2009 AAA 2,284,976
3,300,000 Pennsylvania
Intergovernmental Coop
Authority, Revenue
Bonds, 5.50%
(Philadelphia Funding
Program)/(FGIC INS)/
(Original Issue Yield:
5.65%), 6/15/2011 AAA 3,491,083
5,020,000 Pennsylvania State Higher
Education Assistance
Agency, Revenue
Refunding Bonds, 6.80%
(FGIC INS), 12/1/2000 AAA 5,324,222
3,000,000 Pennsylvania State Higher
Education Facilities
Authority, Refunding
Revenue Bonds (Series A),
5.50% (University of
Pennsylvania)/(Original
Issue Yield: 5.55%),
1/1/2009 AA 3,211,245
3,500,000 Pennsylvania State Higher
Education Facilities
Authority, Revenue
Bonds, 4.50% (Original
Issue Yield: 4.85%),
7/15/2017 AA 3,275,951
$3,750,000 Pennsylvania State Higher
Education Facilities
Authority, Revenue
Refunding Bonds, 5.35%
(Presbyterian Medical
Center)/(Original Issue
Yield: 5.45%), 1/1/2008 AA $4,005,454
3,035,000 Pennsylvania State Higher
Education Facilities
Authority, Revenue
Refunding Bonds, 5.75%
(Drexel University)/
(MBIA INS), 5/1/2003 AAA 3,256,048
3,000,000 Pennsylvania State IDA,
Revenue Bonds, 6.00%
(AMBAC INS), 7/1/2006 AAA 3,334,224
5,000,000 Pennsylvania State IDA,
Revenue Refunding
Bonds, 6.00% (AMBAC
INS), 7/1/2007 AAA 5,595,005
5,000,000 Pennsylvania State
University, Refunding
Revenue Bonds, 5.30%
(Original Issue Yield:
5.40%), 8/15/2003 AA 5,271,075
2,000,000 Philadelphia Authority for
Industrial Development,
Revenue Bonds, 5.50%
(Girard Estate Coal
Mining Project)/(Original
Issue Yield: 5.75%),
11/15/2016 AA 2,054,148
1,365,000 Philadelphia Authority for
Industrial Development,
Revenue Bonds, 6.00%
(City of Philadelphia
Project)/(MBIA INS),
2/15/2007 AAA 1,516,807
$3,250,000 Philadelphia, PA Hospitals
& Higher Education
Facilities Authority,
Refunding Revenue
Bonds (Series A), 5.25%
(Childrens Hospital of
Philadelphia)/(Original
Issue Yield: 5.55%),
2/15/2007 AA $3,392,360
1,350,000 Philadelphia, PA Hospitals
& Higher Education
Facilities Authority,
Revenue Refunding
Bonds, 7.625% (Albert
Einstein Medical Center,
PA)/(Original Issue
Yield: 7.767%), 4/1/2011 BBB+ 1,419,081
3,100,000 Philadelphia, PA IDA,
Revenue Bonds, 5.20%
(Franklin Institute)/
(Original Issue Yield:
5.346%), 6/15/2026 Baa2 3,050,102
4,095,000 Philadelphia, PA Municipal
Authority, Lease Revenue
Bonds, 7.10% (MBIA INS),
11/15/2006 AAA 4,578,574
5,000,000 Philadelphia, PA School District, GO UT Bonds (Series A), 5.35%
(MBIA
INS), 7/1/2003 AAA 5,292,040
2,000,000 Philadelphia, PA School District, GO UT Bonds (Series A), 5.85%,
7/1/2009 AAA 2,166,298
3,500,000 Philadelphia, PA School
District, GO UT
Refunding Bonds, 5.30%
(MBIA INS)/(Original
Issue Yield: 5.40%),
7/1/2004 AAA 3,704,288
1,000,000 Philadelphia, PA Water &
Wastewater System,
Refunding Revenue
Bonds, 5.50% (Original
Issue Yield: 5.61%),
6/15/2006 AAA 1,072,850
$3,000,000 Philadelphia, PA Water &
Wastewater System,
Refunding Revenue
Bonds, 6.25% (MBIA INS),
8/1/2007 AAA $3,402,105
2,150,000 Philadelphia, PA Water &
Wastewater System,
Revenue Refunding
Bonds, 6.25% (MBIA INS),
8/1/2008 AAA 2,433,523
2,000,000 Philadelphia, PA, Series A
Revenue Bonds, 6.00%
(FGIC INS), 6/15/2004 AAA 2,192,684
3,000,000 Pittsburgh, PA, GO UT,
5.00% (AMBAC INS),
9/1/2010 AAA 3,056,844
2,000,000 Scranton-Lackawanna, PA
Health & Welfare
Authority, Refunding
Revenue Bonds, 5.625%
(Mercy Health Care
Systems)/(MBIA INS)/
(Original Issue Yield:
5.75%), 1/1/2016 AAA 2,075,528
$1,350,000 Scranton-Lackawanna, PA
Health & Welfare
Authority, Revenue
Bonds, 5.45% (Moses
Taylor Hospital Project),
7/1/2003 BBB $ 1,378,088
3,440,000 University of Pittsburgh,
Refunding Revenue
Bonds, 5.50% (MBIA
LOC), 6/1/2002 AAA 3,624,931
Total Long-Term
Municipal Securities
(identified cost
$184,084,166) 191,108,979
MUTUAL FUND--1.2%
2,339,754 Compass Capital
Pennsylvania Municipal
Money Market Fund
(at net asset value) 2,339,754
Total Investments
(identified cost
$186,423,920) $ 193,448,733
</TABLE>
(See Notes to Portfolios of Investments)
MARKETVEST SHORT-TERM
BOND FUND
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
ASSET-BACKED
SECURITIES--19.6%
FINANCE--19.6%
$1,392,815 AFG Receivables Trust
1996-C, 6.950%, 7/15/2001 $ 1,407,049
2,039,383 AFG Receivables Trust
1996-D, 6.650%, 10/15/2001 2,057,747
1,250,000 Amresco Residential Securities
Mortgage Loan Trust 1996-5,
6.60%, 1/25/2018 1,255,144
2,000,000 Capital Equipment
Receivables Trust 1996-1,
6.110%, 7/15/1999 2,004,130
2,374,757 Green Tree Home
Improvement Loan Trust
1995-B, 8.150%, 3/15/2015 2,445,917
2,000,000 Green Tree Home
Improvement Loan Trust
1995-F, 6.750%, 1/15/2021 2,001,640
2,000,000 Green Tree Home
Improvement Loan Trust
1996-F, 7.250%, 11/15/2027 2,063,520
625,000 Key Auto Finance Trust
1997-1, 6.400%, 4/15/2004 631,047
4,098,733 Securitized Asset Sales, Inc.
1995-7, 7.000%, 1/25/2026 4,114,452
3,000,000 TMS Home Equity Trust
1996-C, 7.400%, 6/15/2021 3,054,390
3,500,000 The Money Store Home
Equity Trust 1997-A, 6.345%,
11/15/2021 3,500,560
1,590,000 The Money Store Home
Equity Trust 1997-A, 6.675%,
4/15/2012 1,598,324
Total Asset Backed Securities
(identified cost $26,066,153) 26,133,920
CORPORATE BONDS--40.5%
BANKING--1.5%
2,000,000 Bankers Trust New York
Corp., 6.625%, 7/30/1999 2,018,840
Total 2,018,840
Brokerage--6.8%
$ 2,000,000 Goldman Sachs Group, LP
Floating Rate Note, 5.766%,
2/23/2000 $ 2,000,000
3,000,000 Goldman Sachs Group,
LP, 6.056%, 12/22/2000 3,011,319
2,000,000 Lehman Brothers Holdings,
Inc., 6.500%, 10/1/2002 2,008,334
2,000,000 Lehman Brothers Holdings,
Inc., 6.625%, 11/15/2000 2,021,982
Total 9,041,635
Energy--3.8%
3,000,000 Husky Oil Ltd., 6.875%,
11/15/2003 3,018,630
2,000,000 Williams Cos., Inc. (The),
6.500%, 11/15/2002 2,019,702
Total 5,038,332
Finance--12.4%
2,000,000 American General Finance
Corp., 7.250%, 3/1/1998 2,000,000
1,000,000 American General Finance
Corp., 7.290%, 3/20/1998 1,000,558
1,000,000 Associates Corp. of North
America, 7.500%, 5/15/1999 1,017,108
3,000,000 Beneficial Corp., 6.250%,
2/18/2003 2,989,923
1,000,000 Chrysler Financial Corp.,
7.500%, 3/16/1998 1,000,465
1,500,000 General Motors Acceptance
Corp., 5.875%, 1/22/2003 1,484,691
2,000,000 General Motors Acceptance
Corp., 6.625%, 3/22/1999 2,010,924
2,000,000 New England Educational
Loan Marketing Corp.,
6.125%, 7/17/1998 2,001,876
3,000,000 Spieker Properties, Inc.,
6.875%, 2/1/2005 3,032,358
Total 16,537,903
Insurance--3.0%
2,000,000 Conseco, Inc., 6.400%,
2/10/2003 1,981,658
2,000,000 Travelers Property & Casualty
Corp., 6.750%, 4/15/2001 2,041,396
Total 4,023,054
CORPORATE BONDS--
CONTINUED
Media--0.7%
$1,000,000 E.W. Scripps Co., 6.375%,
10/15/2002 $ 1,009,804
Retail Trade--1.5%
2,000,000 Rite Aid Corp., 6.700%,
12/15/2001 2,031,132
Services--3.8%
3,000,000 Hertz Corp., 7.000%,
4/15/2001 3,070,632
2,000,000 Time Warner, Inc., 6.100%,
12/30/2001 1,972,420
Total 5,043,052
Utilities--7.0%
3,500,000 360 Communications Co.,
7.125%, 3/1/2003 3,604,062
2,000,000 Salomon, Inc., 6.625%,
7/1/2002 2,024,284
3,500,000 WorldCom, Inc., 7.550%,
4/1/2004 3,697,379
Total 9,325,725
Total Corporate Bonds
(identified cost $53,930,809) 4,069,477
CORPORATE NOTES--6.8%
Finance--6.8%
3,000,000 Comdisco, Inc., 6.500%,
4/30/1999 3,018,135
3,000,000 Ford Motor Credit Corp.,
7.000%, 9/25/2001 3,086,043
3,000,000 Xerox Credit Corp., 7.125%,
4/1/1998 3,002,292
Total Corporate Notes
(identified cost $9,028,170) 9,106,470
MORTGAGE BACKED
SECURITIES--3.9%
FINANCE--3.9%
2,800,000 Contimortgage Home Equity
Loan Trust 1997-2, 6.770%,
1/15/2012 2,831,990
1,865,668 Prudential Home Mortgage
Securities 1992-45, 6.500%,
1/25/2000 1,868,308
$499,213 Prudential Home Mortgage
Securities, 6.250%, 3/25/2000 $ 497,817
Total Mortgage Backed
Securities (identified cost
$5,144,390) 5,198,115
U.S. GOVERNMENT
AGENCIES--10.5%
FEDERAL HOME LOAN MORTGAGE
CORPORATION--2.2%
961,356 5.500%, 10/1/1998 960,962
2,000,000 7.000%, 8/7/2000 2,011,066
Total 2,972,028
Federal Home Loan
Mortgage Corporation
REMIC--3.1%
1,123,685 6.500%, 10/15/2000 1,129,646
3,000,000 7.000%, 6/15/2020 3,023,145
Total 4,152,791
Federal National
Mortgage Association--3.8%
2,000,000 6.580%, 10/26/2001 2,015,246
3,000,000 7.020%, 9/17/2001 3,053,283
Total 5,068,529
Federal National Mortgage
Association ARM--0.1%
26,382 6.703%, 4/1/2027 26,690
3,942 5.154%, 9/1/2027 3,998
Total 30,688
Federal National Mortgage
Association REMIC--1.3%
1,714,632 8.000%, 7/25/2018 1,736,097
Total U.S. Government
Agencies (identified cost
$13,887,746) 13,960,133
U.S. TREASURY--1.5%
U.S. Treasury Notes--1.5%
2,000,000 United States Treasury Note,
6.750%, 6/30/1999
(identified cost $2,009,531) 2,031,876
MUTUAL FUNDS--0.0%
$ 2,131 Temporary Investment Fund,
Inc. (at net asset value) $ 2,131
(b)REPURCHASE
AGREEMENT--15.0%
20,084,078 Dean Witter Reynolds, Inc.,
5.540%, dated 2/27/1998,
due 3/2/1998
(at amortized cost) 20,084,079
Total Investments
(identified cost $130,153,009) $ 130,586,201
</TABLE>
(See Notes to Portfolios of Investments)
Marketvest Intermediate U.S. Government Bond Fund
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--16.2%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION--16.2%
$10,000,000 6.030%, 7/2/1999 $10,039,180
10,000,000 6.030%, 7/7/1999 10,039,590
7,500,000 6.470%, 9/25/2012 7,827,900
7,500,000 7.125%, 4/30/2026 8,279,828
5,000,000 9.500%, 7/1/2017 6,786,090
Total U.S. Government
Agency Obligations
(identified cost $42,362,856) 42,972,588
ASSET-BACKED
SECURITIES--4.9%
FINANCE--4.9%
3,000,000 Amresco Residential Securities
Mortgage Loan Trust 1996-5,
6.275%, 4/25/2018 2,995,395
1,886,018 Fleet Finance, Inc. 1993-1,
7.300%, 3/20/2023 1,907,585
4,000,000 TMS Home Equity Trust
1996-C, 7.400%, 6/15/2021 4,072,520
4,000,000 The Money Store Home
Equity Trust 1997-A,
6.345%, 11/15/2021 4,000,640
Total Asset-Backed Securities
(identified cost $12,982,027) 12,976,140
MORTGAGE BACKED
CMO--16.3%
3,000,000 6.250%, 1/15/2020 2,976,258
5,000,000 6.250%, 9/15/2023 4,969,625
8,500,000 6.500%, 10/25/2023 8,489,307
15,000,000 6.500%, 12/1/2099 14,850,000
11,711,042 7.000%, 9/1/2027 11,853,682
Total Mortgage Backed CMO
(identified cost $42,747,500) 43,138,872
CORPORATE BONDS--21.1%
Basic Industry--0.4%
1,000,000 Fort James Corp.,
6.625%, 9/15/2004 1,010,371
Consumer Non-
Durables--0.9%
$2,500,000 Coca Cola Enterprises, Inc.,
6.750%, 1/15/2038 $ 2,464,933
Energy--4.7%
4,500,000 Husky Oil Ltd.,
7.550%, 11/15/2016 4,587,885
1,000,000 Occidental Petroleum Corp.,
8.270%, 12/2/2002 1,036,306
4,000,000 Saga Petroleum A.S.,
9.125%, 7/15/2014 4,729,700
2,000,000 Williams Cos., Inc. (The),
6.625%, 11/15/2004 2,024,296
Total 12,378,187
Finance--7.0%
1,000,000 Banco Santander, 7.875%,
4/15/2005 1,077,196
3,000,000 Conseco, Inc., 6.400%,
2/10/2003 2,972,487
2,000,000 Conseco, Inc., 8.125%,
2/15/2003 2,129,442
3,000,000 Ford Motor Credit Corp.,
8.375%, 1/15/2000 3,123,774
2,000,000 Green Tree Financial Corp.,
10.250%, 6/1/2002 2,195,858
3,000,000 Green Tree Financial Corp.,
6.500%, 9/26/2002 2,876,763
1,000,000 Societe Generale, New York,
7.400%, 6/1/2006 1,041,715
3,000,000 Spieker Properties, Inc.,
6.750%, 1/15/2008 2,972,673
Total 18,389,908
Services--2.3%
3,000,000 Royal Caribbean Cruises,
Ltd., 8.250%, 4/1/2005 3,285,972
3,000,000 Time Warner, Inc., 6.950%,
1/15/2028 2,917,353
Total 6,203,325
Utilities--5.8%
3,000,000 360 Communications Co.,
7.600%, 4/1/2009 3,192,012
3,850,000 Bell Atlantic Corp., 9.375%,
7/15/2031 4,340,552
CORPORATE BONDS--
CONTINUED
$2,500,000 GTE Florida, Inc., 6.860%,
2/1/2028 $ 2,477,735
2,000,000 Union Electric Co., 8.750%,
12/1/2021 2,208,860
3,000,000 WorldCom, Inc., 7.550%,
4/1/2004 3,169,182
Total 15,388,341
Total Corporate Bonds
(identified cost $56,651,814) 55,835,065
MUNICIPALS--1.0%
GENERAL OBLIGATION--1.0%
2,500,000 New York City, NY,
6.400%, 3/15/2001
(identified cost $2,519,225) 2,519,100
PREFERRED
STOCKS--1.7%
FINANCE--1.7%
20,000 Bank of New York Capital
Trust II, 7.800% 515,000
80,000 Simon DeBartolo Group, Inc.
Multicoupon Rate, 7.890% 3,992,560
Total Preferred Stocks
(identified cost $4,532,000) 4,507,560
U.S. TREASURY
OBLIGATIONS--33.5%
U.S. TREASURY BONDS--12.3%
25,000,000 United States Treasury
Bond, 7.500%, 5/15/2002 26,757,825
5,000,000 United States Treasury
Bond, 9.125%, 5/15/2009 5,865,630
Total 32,623,455
U.S. Treasury Notes--21.2%
24,000,000 United States Treasury Note,
8.000%, 8/15/1999 24,817,512
3,000,000 United States Treasury Note,
9.000%, 5/15/1998 3,022,503
$27,000,000 United States Treasury Note,
9.125%, 5/15/1999 $ 28,113,776
Total 55,953,791
Total U.S. Treasury
Obligations
(identified cost $88,997,813) 88,577,246
MUTUAL FUND--0.0%
5,612 Temporary Investment Fund,
Inc. (at net asset value) 5,612
(b)REPURCHASE
AGREEMENT--6.2%
16,307,091 Dean Witter Reynolds, Inc.,
5.540%, dated 2/27/1998,
due 3/2/1998
(at amortized cost) 16,307,091
Total Investments
(identified cost
$267,105,938) $ 266,839,274
</TABLE>
(See Notes to Portfolios of Investments)
Notes to Portfolios of Investments
Marketvest Group of Funds
February 28, 1998
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
(c) Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings.
(d) Unaudited
The following acronyms are used throughout this portfolio: ADR --American
Depository Receipt AMBAC--American Municipal Bond Assurance Corporation COL
- --Collateralized FGIC --Financial Guaranty Insurance Company GO --General
Obligation HDA --Hospital Development Authority HEFA --Health and Education
Facilities Authority IDA --Industrial Development Authority INS --Insured LOC
- --Letter of Credit LP --Limited Partnership MBIA --Municipal Bond Investors
Assurance PRF --Prerefunded REMIC --Real Estate Mortgage Investment Conduit UT
- --Unlimited Tax
<TABLE>
<CAPTION>
Cost of
Investments Net Gross Gross Total
Unrealized
For Federal Appreciation Unrealized Unrealized Net
Fund Tax Purposes (Depreciation) Appreciation Depreciation Assets*
<S> <C> <C> <C> <C> <C>
Marketvest Equity Fund $ 407,909,123 $168,358,255 $170,641,071 $ 2,282,816 $577,154,317
Marketvest International
Equity Fund $ 32,903,984 $ 2,674,553 $ 2,795,357 $ 120,804 $ 35,857,735
Marketvest Pennsylvania
Intermediate
Municipal Bond Fund $ 186,423,920 $ 7,024,813 $ 7,138,975 $ 114,162 $195,321,750
Marketvest Short-Term
Bond Fund $ 130,153,009 $ 433,192 $ 706,788 $ 273,596 $133,544,272
Marketvest Intermediate
U.S. Government
Bond Fund $ 267,134,688 $ (295,414) $ 1,253,039 $ 1,548,453 $264,565,602
</TABLE>
*The categories of investments are shown as a percentage of net assets at
February 28, 1998.
(See Notes which are an integral part of the Financial Statements)
Statements of Assets and Liabilities
Marketvest Group of Funds
February 28, 1998
<TABLE>
<CAPTION>
Marketvest Marketvest
Pennsylvania Intermediate
Marketvest Intermediate Marketvest U.S.
Marketvest International Municipal Short-Term Government
Equity Fund Equity Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
Assets:
Investments in
repurchase agreements $ 45,067,597 $ 774,195 $ -- $ 20,084,079 $ 16,307,091
Investments in
securities 531,199,781 34,804,342 193,448,733 110,502,122 250,532,183
Total investments in
securities, at value 576,267,378 35,578,537 193,448,733 130,586,201 266,839,274
Cash -- 4,819 702 929,540 681
Income receivable 1,307,759 250,295 2,578,523 1,579,465 3,535,051
Receivable for
investments sold -- -- -- -- 10,153,972
Receivable for shares
sold 64,000 540 -- 938,924 122,288
Prepaid expenses -- 18,222 -- -- --
Deferred organizational
costs 25,641 5,322 30,860 24,671 24,709
Total assets 577,664,778 35,857,735 196,058,818 134,058,801 280,675,975
Liabilities:
Payable for investments
purchased -- -- -- -- 14,866,094
Payable for shares
redeemed 67,686 -- -- 125,177 148,416
Income distribution
payable -- -- 611,097 283,080 919,460
Payable to bank 84,007 -- -- -- --
Accrued expenses 358,768 -- 125,971 106,272 176,403
Total liabilities 510,461 -- 737,068 514,529 16,110,373
Net Assets Consist of:
Paid in capital 375,819,872 32,912,932 187,190,228 133,384,056 266,689,146
Net unrealized
appreciation
(depreciation) of
investments 168,358,255 2,674,553 7,024,813 433,192 (266,664)
Accumulated net
realized gain (loss)
on investments 32,858,936 549,072 1,089,664 (320,255) (1,871,105)
Undistributed net
investment income/
distributions in excess
of net
investment income 117,254 (278,822) 17,045 47,279 14,225
Total Net Assets $ 577,154,317 $ 35,857,735 $195,321,750 $133,544,272 $264,565,602
Net Asset Value Per
Share, and
Redemption Proceeds Per
Share
(net assets 3 shares
outstanding) $14.00 $10.85 $10.28 $ 9.96 $ 9.85
Offering Price Per
Share**** $14.70* $11.02*** $10.65** $ 10.32** $ 10.21**
Shares Outstanding: 41,226,839 3,306,033 18,992,664 13,404,080 26,847,913
Investments, at
identified cost $ 407,909,123 $ 32,903,984 $186,423,920 $130,153,009 $267,105,938
Investments, at tax cost $ 407,909,123 $ 32,903,984 $186,423,920 $130,153,009 $267,134,688
</TABLE>
*Computation of offering price: 100/95.25 of net asset value.
**Computation of offering price: 100/96.50 of net asset value.
***Computation of offering price: 100/98.50 of net asset value.
****See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Statements of Operations
Marketvest Group of Funds
Year Ended February 28, 1998
<TABLE>
<CAPTION>
Marketvest Marketvest
Pennsylvania Intermediate
Marketvest Intermediate Marketvest U.S.
Marketvest International Municipal Short-Term Government
Equity Fund Equity Fund(a) Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 10,815,128 $ 809,650 $ -- $ -- $ 48,816
Interest 1,849,687 124,885 10,753,867 9,348,644 20,647,768
Total income 12,664,815 934,535 10,753,867 9,348,644 20,696,584
Expenses:
Investment advisory fee 5,823,743 245,375 1,566,750 1,062,137 2,022,537
Administrative 873,562 68,545 313,350 212,427 404,507
personnel and
services fee
Custodian fees 68,410 12,293 38,595 29,382 40,350
Transfer and
dividend
disbursing agent
fees and expenses 30,883 13,860 20,674 20,551 31,490
Directors'/Trustees'
fees 15,960 965 7,098 3,179 7,358
Auditing fees 24,160 12,106 24,160 24,160 27,718
Legal fees 11,576 8,614 8,183 8,207 9,844
Portfolio accounting
fees 97,051 37,567 80,513 44,787 76,237
Share registration costs 17,996 34,956 10,257 14,099 18,705
Printing and postage 8,063 9,876 11,564 6,517 10,406
Insurance premiums 5,840 2,505 582 5,129 1,068
Taxes -- -- -- 34 3,491
Miscellaneous 18,790 6,363 17,224 12,141 13,171
Total expenses 6,996,034 453,025 2,098,950 1,442,750 2,666,882
Waivers and
Reimbursements--
Waiver of (1,164,749) (56,625) (313,350) (212,427) (404,507)
investment
advisory fee
Waiver of administrative
personnel and services
fee -- (28,899) (93,423) (63,342) (120,670)
Waiver of custodian fees -- -- (13,144) -- --
Reimbursement
of other
operating
expenses -- (84,954) -- -- --
Total waivers (1,164,749) (170,478) (419,917) (275,769) (525,177)
and
reimbursements
Net expenses 5,831,285 282,547 1,679,033 1,166,981 2,141,705
Net investment income 6,833,530 651,988 9,074,834 8,181,663 18,554,879
Realized and
Unrealized Gain
(Loss)
on Investments:
Net realized 80,122,742 1,295,640 1,985,168 (316,674) (922,705)
gain (loss) on
investments
Net change in
unrealized
appreciation/
depreciation of
investments 71,490,145 2,674,553 2,424,443 584,453 2,239,247
Net realized
and unrealized
gain (loss)
on investments 151,612,887 3,970,193 4,409,611 267,779 1,316,542
Change in net
assets resulting
from operations $ 158,446,417 $ 4,622,181 $ 13,484,445 $ 8,449,442 $ 19,871,421
</TABLE>
(a) For the period from April 1, 1997 (date of initial public investment) to
February 28, 1998.
(See Notes which are an integral part of the Financial Statements)
Statements of Changes in
Net Assets
Marketvest Group of Funds
<TABLE>
<CAPTION>
Marketvest Marketvest Pennsylvania
Marketvest Equity International Intermediate Municipal
Fund Equity Fund Bond Fund
Period Ended Year Ended Period Ended Year Ended Period Ended
February 28, February 28, February 28, February 28, February 28,
1998 1997(a) 1998(b) 1998 1997(a)
<S> <C> <C> <C> <C> <C>
Increase
(Decrease) in
Net Assets
Operation:
Net investment income $ 6,833,530 $ 5,939,224 $ 651,988 $ 9,074,834 $ 9,060,687
Net realized
gain (loss) on
investment
transactions 80,122,742 21,301,868 1,295,640 1,985,168 (365,577)
Net change in
unrealized
appreciation/
depreciation 71,490,145 96,868,110 2,674,553 2,424,443 4,600,370
Change in net assets
resulting
from operations 158,446,417 124,109,202 4,622,181 13,484,445 13,295,480
Distributions to
Shareholders:
Distributions from net
investment
income (6,767,603) (5,887,897) (930,810) (9,057,789) (9,060,687)
Distributions from net
realized gain
on investments (59,361,856) (8,725,186) (746,568) (529,927) --
Change in net assets
resulting from
distributions to
shareholders (66,129,459) (14,613,083) (1,677,378) (9,587,716) (9,060,687)
Share Transactions:
Proceeds from sale of
shares 81,207,114 471,399,997 50,153,221 23,203,399 246,896,507
Net asset value of
shares issued to
shareholders in payment
of
distributions declared 32,139,057 6,978,053 1,438,541 16,936 5,376
Cost of shares
redeemed (169,397,536) (46,985,445) (18,678,830) (53,188,428) (29,843,562)
Change in net assets
resulting from
share transactions (56,051,365) 431,392,605 32,912,932 (29,968,093) 217,058,321
Change in net assets 36,265,593 540,888,724 35,857,735 (26,071,364) 221,293,114
Net Assets:
Beginning of period 540,888,724 -- -- 221,393,114 100,000
End of period $ 577,154,317 $540,888,724 $ 35,857,735 $195,321,750 $221,393,114
Undistributed $ 117,254 $ 51,327 $ (278,822) $ 17,045 $ --
net investment
income
Net realized
gain (loss) as
computed
for federal
income tax
purposes $ 80,122,742 $ 21,301,868 $ 1,295,640 $ 1,985,168 $ (365,577)
</TABLE>
(a) For the period from April 1, 1996 (date of initial public investment) to
February 28, 1997. (b) For the period from April 1, 1997 (date of initial public
investment) to February 28, 1998. (See Notes which are an integral part of the
Financial Statements)
Statements of Changes in Net Assets
Marketvest Group of Funds
<TABLE>
<CAPTION>
Marketvest Intermediate
Marketvest Short-Term U.S. Govemment
Bond Fund Bond Fund
Year Ended Period Ended Year Ended Period Ended
February 28, February 28, February 28, February 28,
1998 1997(a) 1998 1997(a)
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operation:
Net investment income $ 8,181,663 $ 6,513,471 $ 18,554,879 $ 13,729,812
Net realized gain (loss) on
investment transactions (316,674) (3,581) (922,705) (948,400)
Net change in unrealized
appreciation/depreciation 584,453 (151,261) 2,239,247 (2,505,911)
Change in net assets resulting
from operations 8,449,442 6,358,629 19,871,421 10,275,501
Distributions to Shareholders:
Distributions from net
investment income (8,139,747) (6,508,108) (18,542,241) (13,728,225)
Distributions from net
realized gain on investments -- -- -- --
Change in net assets resulting from
distributions to shareholders (8,139,747) (6,508,108) (18,542,241) (13,728,225)
Share Transactions:
Proceeds from
sale of shares 25,179,477 166,519,656 69,240,733 279,905,103
Net asset value of shares
issued to shareholders in
payment of distributions
declared 4,387,077 3,233,858 5,185,301 3,481,126
Cost of shares redeemed (42,509,794) (23,426,218) (70,231,435) (20,991,682)
Change in net assets resulting (12,943,240) 146,327,296 4,194,599 262,394,547
from share transactions
Change in net assets (12,633,545) 146,177,817 5,523,779 258,941,823
Net Assets:
Beginning of period 146,177,817 -- 259,041,823 100,000
End of period $133,544,272 $146,177,817 $264,565,602 $259,041,823
Undistributed net
investment income $ 47,279 $ 5,363 $ 14,225 $ 1,587
Net realized
gain (loss) as
computed for federal
income tax purposes $ (314,430) $ (3,581) $ (918,642) $ (923,712)
</TABLE>
(a) For the period from April 1, 1996 (date of initial public investment) to
February 28, 1997. (See Notes which are an integral part of the Financial
Statements)
Financial Highlights
(For a share outstanding
throughout the periods)
<TABLE>
<CAPTION>
Distributions Distributions
Unrealized to to Net
Net Asset Gain/(Loss) Shareholders Shareholders Asset
Value, Net on Total From From Net From Net Value,
Beginning Investment Investment Investment Investment Realized Gain Total End of
Period Ended of Period Income Transactions Operations Income on Investments Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marketvest Equity Fund
2/28/97(a) $10.00 0.14 2.10 2.24 (0.14) (0.19) (0.33) $11.91
2/28/98 $11.91 0.15 3.45 3.60 (0.15) (1.36) (1.51) $14.00
Marketvest International
Equity Fund
2/28/98(b) $10.00 0.15 1.12 1.27 (0.23) (0.19) (0.42) $10.85
Marketvest Pennsylvania
Intermediate Municipal
Bond Fund
2/28/97(a) $10.00 0.40 0.09 0.49 (0.40) -- (0.40) $10.09
2/28/98 $10.09 0.40 0.19 0.59 (0.40) -- (0.40) $10.28
Marketvest Short-Term
Bond Fund
2/28/97(a) $10.00 0.49 (0.05) 0.44 (0.49) -- (0.49) $ 9.95
2/28/98 $9.95 0.57 0.01 0.58 (0.57) -- (0.57) $ 9.96
Marketvest Intermediate
U.S. Government Bond
Fund
2/28/97(a) $10.00 0.59 (0.18) 0.41 (0.59) -- (0.59) $ 9.82
2/28/98 $9.82 0.67 0.03 0.70 (0.67) -- (0.67) $ 9.85
</TABLE>
(a) Reflects operations for the period from April 1, 1996 (date of initial
public investment) to February 28, 1997.
(b) Reflects operations for the period from April 1, 1997 (date of initial
public investment) to February 28, 1998.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) Computed on an annualized basis.
(e) This voluntary expense decrease is reflected in both the expenses and net
investment income ratios shown.
(f) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
<TABLE>
<CAPTION>
Ratios to Average Net Assets
Net Net Assets Portfolio Average
Total Investment Expense End of Period Turnover Commission
Return(c) Expenses Income Waiver(e) (000 omitted) Rate Rate Paid(f)
<S> <C> <C> <C> <C> <C> <C>
22.77% 1.05%(d) 1.48%(d) 0.21%(d) $540,889 37% $0.0616
31.64% 1.00% 1.17% 0.20% $577,154 30% $0.0632
12.95% 0.75%(d) 1.73%(d) 0.45%(d) $ 35,858 43% --
5.03% 0.83%(d) 4.41%(d) 0.19%(d) $221,393 86% --
6.68% 0.80% 4.43% 0.20% $195,322 57% --
4.49% 0.90%(d) 5.47%(d) 0.18%(d) $146,178 112% --
5.98% 0.82% 5.78% 0.19% $133,544 135% --
4.18% 0.85%(d) 6.54%(d) 0.18%(d) $259,042 255% --
7.40% 0.79% 6.88% 0.19% $264,198 431% $0.0600
</TABLE>
Notes to Financial Statements
Marketvest Group of Funds
February 28, 1998
(1) ORGANIZATION
The Marketvest Group of Funds consists of Marketvest Funds, Inc. (the
"Corporation") and Marketvest Funds (the "Trust") which are registered under the
Investment Company Act of 1940, as amended (the "Act"), as open-end management
investment companies. The Corporation and the Trust consist of five portfolios
(individually referred to as the "Fund" or collectively as the "Funds") which
are presented herein:
<TABLE>
<CAPTION>
Portfolio Name Diversification Investment Objective
<S> <C> <C>
Marketvest Equity Fund* diversified Provide growth of principal.
("Equity Fund")
Marketvest International Equity Fund** diversified Provide long-term capital appreciation
("International Equity Fund") by investing primarily in shares of
other mutual funds.
Marketvest Pennsylvania Intermediate Municipal Bond Fund** non-diversified
Provide current income which is ("Pennsylvania Intermediate Municipal Bond
Fund") exempt from federal regular income tax and the personal and corporate
income taxes imposed
by the Commonwealth of
Pennsylvania.
Marketvest Short-Term Bond Fund* diversified Provide current income.
("Short-Term Bond Fund")
Marketvest Intermediate U.S. Government Bond Fund* diversified Provide current income.
("Intermediate U.S. Government Bond Fund")
</TABLE>
*A portfolio of Marketvest Funds, Inc.
**A portfolio of Marketvest Funds.
The assets of each portfolio are segregated and a shareholder's interest is
limited to the portfolio in which shares are held.
In March of 1998, an Agreement and Plan of Reorganization were executed to
reorganize each portfolio of Marketvest FundsInc. and each portfolio of
Marketvest Funds with a portfolio of ARK Funds having similar investment
objectives and policies. All assets and liabilities were transferred to ARK
Funds. Marketvest Funds Inc. and Marketvest Funds were terminated and dissolved.
Marketvest Fund shareholders received shares of the following corresponding
ARKFunds portfolios. Unlike Marketvest Funds, each ARKFunds portfolio currently
has two classes of shares outstanding, Retail Class and Institutional Class.
Marketvest Funds shareholders received Institutional Class shares in the
reorganizations.
<TABLE>
<CAPTION>
Marketvest Funds ARKFunds
<S> <C>
Marketvest Short-Term Bond Fund ARKShort-Term Bond Portfolio
Marketvest Intermediate U.S. Government Bond Fund ARKU.S. Government Bond Portfolio
Marketvest Pennsylvania Intermediate Municipal Bond Fund ARKPennsylvania Tax-Free Portfolio
Marketvest Equity Fund ARKValue Equity Portfolio
Marketvest International Equity Fund ARKInternational Equity Selection Portfolio
</TABLE>
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
Investment Valuations--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
service deems relevant. U.S. government securities, listed corporate bonds,
other fixed income and asset-backed securities, and unlisted securities and
private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Listed
equity securities are valued at the last sale price reported on a national
securities exchange. Short-term debt securities are valued at the prices
provided by an independent pricing service. However, short-term debt
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value. Investments in other open-end regulated investment companies are
valued at net asset value.
Repurchase Agreements--It is the policy of the Funds to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Funds to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to
be paid under the repurchase agreement transaction.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Funds' adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors/Trustees (the
"Directors/ Trustees"). Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Funds could receive less than the repurchase price on the sale of
collateral securities.
Investment Income, Expenses and Distributions--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
Federal Taxes--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their income. Accordingly, no
provisions for federal tax arenecessary.
At February 28, 1998, the Funds, for federal tax purposes, had a capital loss
carryforward, as noted below, which will reduce the Funds' taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Funds of
any liability for federal tax.
<TABLE>
<CAPTION>
Total Capital
Tax Loss
Fund Carryforward
<S> <C>
Short-Term Bond Fund $ 318,011
Intermediate U.S. Government Bond Fund $1,842,354
</TABLE>
Pursuant to the Code, such capital loss carryforward will expire as follows:
<TABLE>
<CAPTION>
Short-Term Bond Fund Intermediate U.S. Government Bond Fund
Expiration Year Expiration Amount Expiration Year Expiration Amount
<S> <C> <C> <C>
2005 $ 3,581 2005 $ 923,712
2006 314,430 2006 918,642
</TABLE>
Additionally, net capital losses of $2,244, attributable to security
transactions incurred after October 31, 1997 are treated as arising on the
first day of Short-Term Bond Fund's next taxable year (March 1, 1998).
When-Issued and Delayed Delivery Transactions--The Funds may engage in when-
issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the settlement date.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
Other--Investment transactions are accounted for on the trade date.
(3) SHARE TRANSACTIONS
The Articles of Incorporation permit the Directors of the Corporation to issue
full and fractional shares of common stock in each Fund as follows:
<TABLE>
<CAPTION>
Fund Authorized Shares Par Value
<S> <C> <C>
Equity Fund 1,000,000,000 $0.0001
Short-Term Bond Fund 1,000,000,000 $0.0001
Intermediate U.S. Government Bond Fund 1,000,000,000 $0.0001
</TABLE>
The Declaration of Trust permits the Trustees of Pennsylvania Intermediate
Municipal Bond Fund and the International Equity Fund to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
International Pennsylvania Intermediate
Equity Fund Equity Fund Municipal Bond Fund
Year Ended Period Ended Period Ended Year Ended Period Ended
February 28, 1998 February 28, 1997* February 28, 1998** February 28, 1998 February 28, 1997*
<S> <C> <C> <C> <C> <C>
Shares sold 6,183,760 49,148,379 4,943,427 2,308,268 24,915,809
Shares issued to
shareholders in payment
of
distributions declared 2,486,729 626,699 140,013 1,677 535
Shares redeemed (12,877,294) (4,341,434) (1,777,407) (5,265,233) (2,978,392)
Net change resulting from
share transactions (4,206,805) 45,433,644 3,306,033 (2,955,288) 21,937,952
</TABLE>
*For the period from April 1, 1996 (date of initial public investment) to
February 28, 1997.
**For the period from April 1, 1997 (date of initial public investment) to
February 28, 1998.
<TABLE>
<CAPTION>
Intermediate U.S.
Short-Term Bond Fund Government Bond Fund
Year Ended Period Ended Year Ended Period Ended
February 28, 1998 February 28, 1997* February 28, 1998 February 28, 1997*
<S> <C> <C> <C> <C>
Shares sold 2,528,189 16,727,339 7,072,224 28,154,162
Shares issued to
shareholders in
payment of distributions
declared 440,487 324,445 529,314 351,509
Shares redeemed (4,262,730) (2,353,650) (7,146,010) (2,123,286)
Net change resulting from
share transactions (1,294,054) 14,698,134 455,528 26,382,385
</TABLE>
* For the period from April 1, 1996 (date of initial public investment) to
February 28, 1997. **For the period from April 1, 1997 (date of initial public
investment) to February 28, 1998.
(4) INVESTMENT ADVISORY FEE AND OTHER
TRANSACTIONS WITH AFFILIATES
Investment Advisory Fee--Dauphin Deposit Bank and Trust Company, the Funds'
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee based on a percentage of each Fund's average daily net
assets as follows:
<TABLE>
<CAPTION>
Annual
Fund Rate
<S> <C>
Equity Fund 1.00%
International Equity Fund 0.65%
Pennsylvania Intermediate Municipal Bond Fund 0.75%
Short-Term Bond Fund 0.75%
Intermediate U.S. Government Bond Fund 0.75%
</TABLE>
The Adviser may voluntarily choose to waive a portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
Administrative Fee--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The fee paid to FAS is based
on a percentage of each Fund's average daily net assets. FAS may voluntarily
choose to waive a portion of its fee. FAS can modify or terminate this voluntary
waiver at any time at its sole discretion.
Transfer and Dividend Disbursing Agent Fees and Expenses--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the Funds.
The fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
Portfolio Accounting Fees--FServ maintains the Funds' accounting records for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets for the period, plus out-of-pocket expenses.
Custodian Fees--Dauphin Deposit Bank and Trust Company is the Funds' custodian.
The fee is based on the level of each Fund's average daily net assets for the
period, plus out-of-pocket expenses. The custodian may voluntarily choose to
waive a portion of its fee. The custodian can modify or terminate this voluntary
waiver at any time at its sole discretion.
Organizational Expenses--Organizational expenses were borne initially by FAS.
The Funds have reimbursed FAS for these expenses. These expenses have been
deferred and are being amortized over the five year period following the Fund's
effective date. Each Fund's initial organizational expenses and the portion
expensed for the year or period ended February 28, 1998, are asfollows:
(5) INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
Expenses of
Organizing Expenses
Fund the Funds Reimbursed
<S> <C> <C>
Equity Fund $32,052 $6,411
International Equity Fund $ 5,703 $ 381
Pennsylvania Intermediate Municipal Bond Fund $38,575 $7,715
Short-Term Bond Fund $30,839 $6,168
Intermediate U.S. Government Bond Fund $30,886 $6,177
</TABLE>
Interfund Transactions--During the period ended February 28, 1998, the
Corporation and Trust engaged in purchase transactions with trust funds that
have a common investment adviser (or affiliated investment advisers), common
Directors/Trustees, and/or common Officers. These purchase transactions were
made at current market value or cost pursuant to Rule 17a-7 under the Act.
Interfund transactions were as follows:
<TABLE>
<CAPTION>
Fund Purchases Sales
<S> <C> <C>
International Equity Fund $32,051,537 $0
</TABLE>
General--Certain of the Officers and Directors or Trustees of the Corporation
and Trust are Officers and Directors or Trustees of the above companies.
(6) CONCENTRATION OF CREDIT RISK
Purchases and sales of investments, excluding short-term securities, for the
period ended February 28, 1998, were as follows:
<TABLE>
<CAPTION>
Fund Purchases Sales
<S> <C> <C>
Equity Fund $ 164,752,622 $ 301,015,859
International Equity Fund $ 47,201,537 $ 16,368,667
Pennsylvania Intermediate Municipal Bond Fund $ 115,814,369 $ 145,907,213
Short-Term Bond Fund $ 172,726,853 $ 188,243,508
Intermediate U.S. Government Bond Fund $1,105,542,777 $1,100,925,937
</TABLE>
Since Pennsylvania Intermediate Municipal Bond Fund invests a substantial
portion of its assets in issuers located in one state, it will be more
susceptible to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to reduce
the credit risk associated with such factors, at February 28, 1998, 64.2% of the
securities in Pennsylvania Intermediate Municipal Bond Fund are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by or
supported (backed) by a letter of credit from any one institution or agency did
not exceed 32.4% of total investments.
International Equity Fund invests in regulated investment companies that invest
in equity and fixed income securities of non-U.S. issuers. Although the Fund
maintains a diversified investment portfolio, the political or economic
developments within a particular country or region may have an adverse effect on
the ability of domiciled issuers to meet their obligations. Additionally,
political or economic developments may have an effect on the liquidity and
volatility of the regulated investment companies' portfolio securities and
currency holdings.
Report of Ernst & Young LLP, Independent Auditors
To the Board of Directors, Trustees and Shareholders of
MARKETVESTFUNDS, INC. and MARKETVESTFUNDS:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Marketvest Funds, Inc., (Marketvest Equity
Fund, Marketvest Short-Term Bond Fund, and Marketvest Intermediate U.S.
Government Bond Fund, respectively) and Marketvest Funds (Marketvest
International Equity Fund and Marketvest Pennsylvania Intermediate Municipal
Bond Fund) as of February28, 1998, and the related statements of operations, the
statements of changes in net assets and the financial highlights for the period
presented therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
February 28, 1998, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also incudes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Marketvest Funds, Inc. (Marketvest Equity Fund, Marketvest Short-Term Bond Fund,
and Marketvest Intermediate U.S. Government Bond Fund, respectively) and
Marketvest Funds (Marketvest International Equity Fund and Marketvest
Pennsylvania Intermediate Municipal Bond Fund) at February 28, 1998, and the
results of their operations, changes in their net assets, and financial
highlights for the period presented therein, in conformity with generally
accepted accounting principles.
ERNST&YOUNGLLP
Pittsburgh, Pennsylvania
April 16, 1998
MARKETVEST GROUP OF FUNDS
Directors/Trustees and Officers
DIRECTORS/TRUSTEES
MARTIN B. EBBERT, JR.
EDWARD C. GONZALES
CLYDE M. MCGEARY
GEORGE A. OMINSKI
RICHARD SEIDEL
OFFICERS
Edward C. Gonzales
Chairman, President and Treasurer
Jeffrey W. Sterling
Vice President and Assistant Treasurer
Victor R. Siclari
Secretary
Timothy S. Johnson
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal amount invested.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Funds' prospectus which contains facts concerning
their objectives and policies, management fees, expenses and other information.
APPENDIX
A 1. The graphic presentation here displayed consists of a legend top left
corner indicating the components of the corresponding line graph. Marketvest
Equity Fund (the "Fund")is represented by solid line. The S&P 500 is represented
by a dotted line. The Lipper Growth Fund Average is represented by a broken
line. The line graph is a visual representation of a comparison of change in
value of a hypothetical $10,000 purchase in the Fund and the S&P 500 and Lipper
Growth Fund Average. The "y" axis reflects the cost of the investment. The "x"
axis reflects computation periods from the Fund's start of performance, 4/1/96,
through 2/28/98. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to S&P 500 and Lipper Growth Fund Average;
the ending values are $15,394, $16,871 and $15,490, respectively. There is also
a legend below the graphic presentation which indicates the Average Annual Total
Return for the period ended 2/28/98, beginning with the inception date of the
Fund 4/1/96, and the one-year period; the Average Annual Total Returns are
25.12% and 25.43%, respectively.
A 2. The graphic presentation here displayed consists of a legend top left
corner indicating the components of the corresponding line graph. Marketvest
International Equity Fund (the "Fund")is represented by solid line. The Europe,
Australia and Far East Index is represented by a dotted line. The Lipper
International Funds Average is represented by a broken line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$10,000 purchase in the Fund and the Europe, Australia and Far East Index and
Lipper International Funds Average. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the Fund's start of
performance, 5/31/91, through 2/28/98. The right margin reflects the ending
value of the hypothetical investment in the Fund as compared to EAFE Index and
Lipper International Funds Average; the ending values are $20,085, $15,500 and
$18,903, respectively. There is also a legend below the graphic presentation
which indicates the Average Annual Total Return for the period ended 2/28/98,
beginning with the inception date of the Fund 5/31/91, and the one-year
(cumulative) and five-year periods; the Average Annual Total Returns are 10.88%,
11.28% and 15.22%, respectively.
A 3. The graphic presentation here displayed consists of a legend top left
corner indicating the components of the corresponding line graph. Marketvest
Pennsylvania Intermediate Municipal Bond Fund (the "Fund")is represented by
solid line. The Lehman Brothers Five-Year State General Obligations Bond Index
(the "Index") is represented by a dotted line. The Lipper Pennsylvania
Intermediate Municipal Debt Funds Average (the "Average") is represented by a
broken line. The line graph is a visual representation of a comparison of change
in value of a hypothetical $10,000 purchase in the Fund and the Index and
Average. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of performance, 4/1/96, through
2/28/98. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to Index and Average; the ending values are
$10,812, $11,206 and $11,517, respectively. There is also a legend below the
graphic presentation which indicates the Average Annual Total Return for the
period ended 2/28/98, beginning with the inception date of the Fund 4/1/96, and
the one-year period; the Average Annual Total Returns are 4.15% and 2.91%,
respectively.
A. 4. The graphic presentation here displayed consists of a legend top left
corner indicating the components of the corresponding line graph. Marketvest
Short-Term Bond Fund (the "Fund")is represented by solid line. The Lehman
Brothers 1-3 Year Government Index (the "Index") is represented by a dotted
line. The Lipper Short Investment Grade Debt Average (the "Average") is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000 purchase in the Fund and
the Index and Average. The "y" axis reflects the cost of the investment. The "x"
axis reflects computation periods from the Fund's start of performance, 4/1/96,
through 2/28/98. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to Index and Average; the ending values are
$10,686, $11,248 and $11,176, respectively. There is also a legend below the
graphic presentation which indicates the Average Annual Total Return for the
period ended 2/28/98, beginning with the inception date of the Fund 4/1/96, and
the one-year period; the Average Annual Total Returns are 3.52% and 2.28%,
respectively.
A. 5. The graphic presentation here displayed consists of a legend top left
corner indicating the components of the corresponding line graph. Marketvest
Intermediate U.S. Government Bond Fund (the "Fund")is represented by solid line.
The Lehman Brothers Intermediate Government/Corporate Bond Index (the "Index")
is represented by a dotted line. The Lipper Intermediate U.S. Government Funds
Average (the "Average") is represented by a broken line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$10,000 purchase in the Fund and the Index and Average. The "y" axis reflects
the cost of the investment. The "x" axis reflects computation periods from the
Fund's start of performance, 4/1/96, through 2/28/98. The right margin reflects
the ending value of the hypothetical investment in the Fund as compared to Index
and Average; the ending values are $10,787, $11,377 and $11,428, respectively.
There is also a legend below the graphic presentation which indicates the
Average Annual Total Return for the period ended 2/28/98, beginning with the
inception date of the Fund 4/1/96, and the one-year period; the Average Annual
Total Returns are 4.08% and 3.61%, respectively.
