<PAGE>
[GRAPHICS OF CLOCK AND DOLLAR BILL APPEAR AS BACKGROUND]
- -----------------------
Semi-Annual Report
May 31, 1998
- -----------------------
Money Market Portfolio
Treasury Money Market Portfolio
Tax-Exempt Money Market Portfolio
Growth & Income Equity Portfolio
Small Cap Equity Portfolio
International Equity Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Equity Portfolio
Balanced Portfolio
Government & Corporate Bond Portfolio
U.S. Government Securities Portfolio
Short-Intermediate Municipal Portfolio
Missouri Tax-Exempt Bond Portfolio
National Municipal Bond Portfolio
Intermediate Corporate Bond Portfolio
Bond Index Portfolio
[LOGO OF THE ARCH
FUNDS APPEARS HERE]
The ARCH Funds
<PAGE>
THE ARCH FUND, INC.
MESSAGE FROM YOUR CHAIRMAN
DEAR SHAREHOLDERS,
We are pleased to present this report for The ARCH Fund, Inc. for the six
months ended May 31, 1998. During the period, the assets of the ARCH family of
mutual funds increased to more than $3.9 billion.
The financial markets continued to deliver strong returns during the period.
However, even in the most promising environment, it is important to remember
that the financial markets carry risks as well as potential rewards. It's worth
reminding ourselves of a basic investment principle: The rewards may come to
investors who are patient and disciplined, and who take a long-term approach to
investing--which may involve adding to your equity investments during periods
when the stock market declines.
If you are a customer of the ARCH Asset Adviser Program, you are aware that
your investment adviser, Mississippi Valley Advisors Inc., rebalanced and
reallocated six of its model portfolios during the recent period. The moderate
tax-advantaged model portfolio increased its investment in the ARCH Growth &
Income Equity Portfolio from 30% to 35% of its assets. It also reduced its
investment in the ARCH Tax-Exempt Money Market Portfolio from 10% to 5%.
The investment adviser also made changes in the conservative model portfolio,
increasing its investment in the ARCH Growth & Income Equity Portfolio from 15%
to 20%, and reducing its investment in the ARCH U.S. Government Securities
Portfolio from 75% to 70%. We will continue to monitor the financial markets,
allocating shareholder assets in the ARCH portfolios according to opportunities
that arise.
Regardless of how financial markets behave, we believe that investors should
maintain broadly diversified portfolios. In that way, they may be less
vulnerable to the temporary fluctuations of the financial markets, or to losses
in any one sector of those markets. The ARCH family of mutual funds offers the
tools to create a diversified, long-term portfolio to help you achieve your
financial goals.
You will find a discussion of each portfolio of The ARCH Fund, Inc. in the
following pages. These discussions will help you understand your investments,
their recent performances and their current prospects. If you would like more
information about any of the portfolios, please call your investment
representative or the ARCH Shareholder Servicing Center at 1-800-452-ARCH.
THE ARCH FUNDS ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL
AGENCY, ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, THE DISTRIBUTOR OR ANY OF THEIR AFFILIATES, AND INVOLVE
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
-1-
<PAGE>
MESSAGE FROM YOUR INVESTMENT ADVISER,
MISSISSIPPI VALLEY ADVISORS INC.
During the six-month period ended May 31, 1998, the U.S. economy was
characterized by strong growth, declining interest rates, increased consumer
spending and continued low levels of inflation. The stock and bond markets
benefited from these positive economic conditions.
Large-company shares continued to outperform shares of smaller firms, with
the Standard & Poor's 500 Index of stock prices gaining 15.07% during the
period. Although such gains are welcome, it means that large-company stocks are
near record highs by all financial measurements. We believe it is likely that
shares of mid-sized and small companies will eventually catch up. Foreign
shares in several European markets such as Germany, Italy and Spain also
performed well, due to lower interest rates and unemployment in the region.
Bond prices fell early in the period, but rebounded and moved slightly higher
due to signs that the Asian economic crisis may slow the U.S. economy. We
believe that a more modest rate of economic growth in this country would keep
inflation low, thereby staving off an increase in short-term interest rates by
the Federal Reserve.
AN ECONOMY DRIVEN BY CONSUMERS AND TECHNOLOGY
Investments by corporations in information technology such as computers and
software have helped fuel economic and productivity growth in the United
States. Spending on computers in real dollar terms has increased during the
past four years. Such investments have contributed to higher worker
productivity, lower inflation and strong real wage growth.
In addition, technology stocks have been some of the best performers on Wall
Street over the past several years. We believe that capital spending on
technology will continue to be strong during 1998, helping to maintain a
positive balance between economic growth and inflation.
Strong consumer spending also boosted economic growth during the recent
period. That spending reflected growth in real income and continued gains in
the stock market, record-high levels of consumer confidence and a record-low
unemployment rate.
LOOKING AHEAD
We estimate that the economy will grow at a 3% annual rate in 1998. Despite a
tight labor market, corporate earnings may likely grow at a rate of 4% to 8%
this year, due to increasing worker productivity and other factors. We expect
inflation to remain low.
It is possible that the Asian economic crisis is reducing U.S. economic
growth by around 1%, due to competition from cheap Asian exports. We feel that
decline is unlikely to lead to a recession, however, and any signs of a serious
economic slowdown would likely cause the Federal Reserve to cut short-term
rates by the end of the year in order to spur economic growth.
Despite these positive factors, it is worth noting that strong economic
growth and historically low levels of unemployment could eventually lead to
higher labor costs and higher inflation. Although we do not feel such a
scenario is likely to unfold in the near future, we will watch carefully for
signs of rising inflation.
In addition, we are well into the fourth consecutive year of strong stock
market performance. At such times, it is important to remind ourselves of the
risks inherent in investing. Many of the largest companies' shares may be
overvalued. At the same time, we are looking for opportunities in shares of
small and mid-sized firms, which have underperformed large-cap stocks.
Regardless of which stocks will be in favor in the months ahead, it is
important for investors to build well-diversified portfolios with exposure to a
mix of different financial assets, including stocks, bonds and cash. Such
portfolios may be less likely to suffer significant losses when one or more
sectors of the financial markets perform poorly.
-2-
<PAGE>
THE ARCH MONEY MARKET PORTFOLIO+
Q. WHAT IS THE OBJECTIVE OF THIS PORTFOLIO?
A. The ARCH Money Market Portfolio seeks current income with liquidity and
stability of principal. The net assets of the Portfolio on May 31, 1998 were
approximately $1.2 billion.
Q. WHAT WERE THE CONDITIONS IN THE MONEY MARKETS DURING THE SIX MONTHS ENDED
MAY 31, 1998?
A. The money markets were relatively flat. Signs of economic growth that
could trigger a rate increase by the Federal Reserve were countered by
conflicting evidence during the period. Therefore, short-term rates remained
stable at around 5.5%.
Q. HOW DID YOU MANAGE THE PORTFOLIO IN THAT ENVIRONMENT?
A. We maintained the average maturity of the Portfolio at roughly 40 days
during most of the period. However, we temporarily extended that average
maturity to 58 days in April in order to pick up extra yield. Near the end of
fiscal quarters, many issuers often clean up their balance sheets and offer
securities with attractive yields. The average maturity of the Portfolio as of
May 31, 1998 was 40 days.
Q. WHAT TYPES OF SECURITIES CONSTITUTED THE LARGEST HOLDINGS OF THE PORTFOLIO
DURING THE PERIOD?
A. Commercial paper remained the largest holding of the Portfolio. The
Portfolio also held floating rate notes, bank certificates of deposit and U.S.
Government agency issues.*
Q. HOW WILL YOU MANAGE THE PORTFOLIO GOING FORWARD?
A. We expect that short-term rates will remain relatively stable, and that
the Fed will not increase rates in the near future. We will target an average
maturity for the Portfolio of around 45 days. We will lengthen that average
maturity if rates increase, since we expect that any such increase will be
temporary.
- ------
+ An investment in the Portfolio is neither insured nor guaranteed by the U. S.
Government. Yields will fluctuate, and there can be no assurance that the
Portfolio will be able to maintain a stable net asset value of $1.00 per
share.
* Portfolio composition is subject to change.
-3-
<PAGE>
THE ARCH TREASURY MONEY MARKET PORTFOLIO+
Q. WHAT IS THE OBJECTIVE OF THE PORTFOLIO?
A. The ARCH Treasury Money Market Portfolio seeks a high level of current
income exempt from state income tax, consistent with liquidity and security of
principal. The net assets of the Portfolio on May 31, 1998, were approximately
$270 million.
Q. WHAT WAS YOUR STRATEGY DURING THE SIX MONTHS ENDED MAY 31, 1998?
A. We maintained the average maturity of the Portfolio at 45 to 55 days
during most of the period. We extended the average maturity of the Portfolio at
the end of April to 58 days because we had a large amount of cash to reinvest,
and short-term securities were expensive.
Q. HOW WAS THE PORTFOLIO DIVIDED BETWEEN VARIOUS TYPES OF TREASURY
SECURITIES?
A. Treasury bills constituted 68% of the Portfolio's net assets as of May 31,
1998, with the remaining 32% in Treasury notes. Treasury bills mature every
week and therefore trade in higher volumes. That makes them more attractive for
the Portfolio.*
Q. HOW WILL YOU MANAGE THE PORTFOLIO GOING FORWARD?
A. We will continue to target the average maturity in the mid to upper 50-day
range. The Portfolio must maintain an average maturity of less than 60 days to
keep its AAA credit rating by Standard & Poor's. We also will maintain the
laddered approach, including a series of different maturities, to accommodate
cash flows in and out of the Portfolio.
- ------
+ An investment in the Portfolio is neither insured nor guaranteed by the U. S.
Government. Yields will fluctuate, and there can be no assurance that the
Portfolio will be able to maintain a stable net asset value of $1.00 per
share.
* Portfolio composition is subject to change.
-4-
<PAGE>
THE ARCH TAX-EXEMPT MONEY MARKET PORTFOLIO+, ++
Q. HOW DID THE TAX-EXEMPT MONEY MARKETS PERFORM DURING THE SIX MONTHS ENDED
MAY 31, 1998?
A. Yields remained relatively stable during the period, with some impact from
seasonal fluctuations in supply. Taxable issues such as Treasury bills and
other taxable money market securities remained attractive relative to tax-
exempt issues in the money markets.
Q. HOW DID YOU MANAGE THE PORTFOLIO IN THAT ENVIRONMENT?
A. The Portfolio seeks as high a level of current income exempt from federal
income tax as is consistent with liquidity and stability of principal. The
Portfolio attempts to achieve this objective while maintaining strict credit
quality standards. The average maturity of the Portfolio during the recent
period was in the 45-day range.
Q. HOW WILL YOU MANAGE THE PORTFOLIO IN MONTHS AHEAD?
A. As long as the economy continues to grow slowly and steadily, we see no
need for significant shifts in the strategy of the Portfolio. We will attempt
to increase our positions in tax-exempt commercial paper and notes, as new
issues become available. We also will look for ways to extend the average
maturity of the Portfolio if tax-exempt note yields become more attractive
relative to Treasury yields.*
- ------
+ An investment in the Portfolio is neither insured nor guaranteed by the U. S.
Government. Yields will fluctuate, and there can be no assurance that the
Portfolio will be able to maintain a stable net asset value of $1.00 per
share.
++ The portfolio's income may be subject to certain state and local taxes and,
depending on your tax status, the federal alternative minimum tax.
* Portfolio composition is subject to change.
-5-
<PAGE>
THE ARCH GROWTH & INCOME EQUITY PORTFOLIO
Q. WHAT WERE CONDITIONS IN THE STOCK MARKET DURING THE SIX-MONTH PERIOD ENDED
MAY 31, 1998.
A. Stocks continued to perform very well. That performance was due in part to
continued low levels of inflation and moderate economic growth, which helped
create good conditions for equities. Some investors were concerned that the
developing economic crisis in Asia might crimp corporate profits in the United
States, but that fear did not materialize. Asia's problems did have an impact
on some leading technology companies. The slowdown in that region, however, may
have helped the U.S. stock market by forestalling the possibility that the
Federal Reserve would raise interest rates here.
Growth stocks outpaced value stocks during the period, as investors seem to
favor shares of companies with strong potential earnings growth. Large-company
shares also continued to attract investors, and these posted higher gains than
small-company shares. The Growth & Income Equity Portfolio has a value focus
and tended to avoid shares of the largest companies; thus, the Portfolio did
not keep pace with the S&P 500 Index.
Q. HOW DID YOU MANAGE THE PORTFOLIO IN THAT ENVIRONMENT, AND WHAT TYPES OF
STOCKS DID YOU EMPHASIZE?
A. We take a stock-picker approach to investing in the market. Rather than
attempting to predict which sectors or types of companies will perform well, we
select individual securities that we believe offer especially good value.*
That said, we sometimes find special opportunities and risks among individual
issues that are grouped in certain sectors of the market. During the recent
period, we avoided companies with problems resulting from the crises in Asia.
In addition, we steered clear of deeply cyclical companies whose profits are
directly tied to the fluctuations of the business cycle.
We also took advantage of the relatively poor performance of many value
stocks, which were overshadowed by growth-oriented issues. The discrepancy
between growth and value shares allowed us to acquire some value shares at
attractive prices.
Q. WHAT INDUSTRIES OFFERED INDIVIDUAL STOCKS WITH GOOD VALUE?
A. The Portfolio held a significant stake in health care stocks during most
of the period, but reduced that investment as those stocks posted gains. We
also reduced the Portfolio's exposure to bank stocks after those shares
delivered strong returns. The Portfolio maintained its investment in the retail
sector and also held select energy stocks. That sector is starting to benefit
from consolidation.
Q. WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET, AND HOW WILL YOU MANAGE THE
PORTFOLIO GOING FORWARD?
A. We do not try to guess what the market is going to do. Instead, we will
continue to look for attractively-priced individual issues of companies with
strong potential. We think there will be opportunities in areas that have been
under pressure, such as energy and technology. As always, we will seek to take
advantage of such opportunities as they occur, by buying undervalued shares of
companies with good growth prospects.
- ------
* Portfolio composition is subject to change.
-6-
<PAGE>
THE ARCH GROWTH & INCOME EQUITY PORTFOLIO
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Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Investor A (No Load) Investor A (Load)* INVESTOR B (CDSC)** INVESTOR B (NO CDSC) S&P 500 Index
---- -------------------- ------------------ ------------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
Jun-88 10,000 9,551 10,000 10,000 10,000
Nov-88 10,346 9,882 9,846 10,346 10,620
Nov-89 13,151 12,561 12,751 13,151 13,912
Nov-90 12,973 12,390 12,673 12,973 13,439
Nov-91 15,228 14,545 14,928 15,228 16,167
Nov-92 18,364 17,539 18,164 18,364 19,142
Nov-93 20,135 19,267 20,035 20,135 21,075
Nov-94 20,176 19,305 20,176 20,176 21,307
Nov-95 26,622 25,473 26,472 26,472 29,188
Nov-96 32,743 31,274 32,371 32,371 37,366
Nov-97 40,569 38,748 39,829 39,829 48,019
May-98 44,618 42,616 43,615 43,615 55,255
</TABLE>
* Reflects 4.50% sales charge.
** Reflects applicable contingent deferred sales charge. (Maximum 5.00%)
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (6/2/88)
- --------------------------------------------------------------------------------
Investor A (No Load) 9.99% 23.31% 17.81% 16.14%
- --------------------------------------------------------------------------------
Investor A* 5.02% 17.76% 16.74% 15.61%
- --------------------------------------------------------------------------------
Investor B (No CDSC) 9.61% 22.42% 17.30% 15.88%
- --------------------------------------------------------------------------------
Investor B (CDSC)** 5.06% 17.42% 17.20% 15.88%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Trust Institutional S&P 500 Index
---- ----- ------------- --------------
Jun-88 10,000 10,000 10,000
Nov-88 10,345 10,346 10,620
Nov-89 13,150 13,151 13,912
Nov-90 12,971 12,973 13,439
Nov-91 15,227 15,228 16,167
Nov-92 18,362 18,364 19,142
Nov-93 20,134 20,135 21,075
Nov-94 20,206 20,173 21,307
Nov-95 26,727 26,604 29,188
Nov-96 32,994 32,745 37,366
Nov-97 41,093 40,571 48,019
May-98 45,211 44,613 55,255
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (6/2/88)
- --------------------------------------------------------------------------------
Trust 10.14% 23.91% 18.15% 16.29%
- --------------------------------------------------------------------------------
Institutional 10.00% 23.25% 17.81% 16.14%
- --------------------------------------------------------------------------------
The performance of the ARCH Growth & Income Equity Portfolio is measured
against the Standard & Poor's 500 Index, an unmanaged index generally
representative of the U.S. stock market. Investors are unable to purchase the
Index directly, although they can invest in the underlying securities. The
performance of the Index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees. By
contrast, the performance of the Portfolio shown on the graph reflects the
deduction of these value-added services, as well as the deduction of a 4.50%
sales charge on Investor A shares and the applicable contingent deferred sales
charge (CDSC) on Investor B shares.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Investor B shares were initially offered on March 1, 1995. The performance
figures for Investor B shares for periods prior to such date represent the
performance for Investor A shares of the Portfolio, which has been restated to
reflect the contingent deferred sales charges payable by holders of Investor B
shares who redeem within six years of the date of purchase. Investor B shares
are also subject to distribution and service fees at a maximum annual rate of
1.00%. Had these distribution and service fees been reflected, performance
would have been reduced.
Institutional shares were initially offered on January 3, 1994. The
performance figures for Institutional shares for periods prior to such a date
represent the performance for Investor A shares of the Portfolio.
-7-
<PAGE>
THE ARCH SMALL CAP EQUITY PORTFOLIO+
Q. WHAT WAS THE OVERALL ENVIRONMENT FOR SMALL-COMPANY STOCKS DURING THE SIX
MONTHS ENDED MAY 31, 1998?
A. Small-cap stocks continued to trail large-cap stocks during the period, in
part due to concerns about profit growth. Economic turmoil in Asia also caused
investors to seek safety and liquidity in large-company shares, which could
prove to be a mistake, however, since large companies generally have more
exposure to Asian markets than smaller firms.
Q. WHAT WAS YOUR STRATEGY IN THAT ENVIRONMENT?
A. Our strategy does not change: we continued to look for the best relative
values regardless of the industry. Over the past six months, we have seen
superb opportunities in certain sectors such as technology, which was hurt by
the Asian crisis and the effect of lower capital spending in the electronics
industry. For example, we invested in PRI Automation (1.18%), which is a
leading supplier of advanced robotics technology used in complex semiconductor
manufacturing. We also held shares of Phototronics (1.07%), which is a leading
manufacturer of photomask equipment used in the fabrication of semiconductors.
We also found value in medical stocks. We added Maxxim Medical (1.19%), which
is the leading supplier of disposable hospital products such as non-latex
gloves and custom procedure trays.*
Q. WHAT IS YOUR OUTLOOK FOR SMALL-COMPANY STOCKS, AND HOW WILL YOU MANAGE THE
PORTFOLIO GOING FORWARD?
A. We believe that small-company stocks continue to offer good value, with
lower price-to-earnings and price-to-book ratios than large company shares, as
well as better earnings growth. We expect that the trend that has favored
large-company stocks over small-company shares for the past few years will
reverse at some point. We believe the Portfolio is well positioned to take
advantage of such a reversal should it occur.
- ------
+ Small-capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure. Historically, small
company stocks have experienced a greater degree of market volatility than
large company stocks on average.
* Portfolio composition is subject to change.
-8-
<PAGE>
THE ARCH SMALL CAP EQUITY PORTFOLIO+
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Investor A (No Load) Investor A (Load) Investor B (CDSC)** Investor B (No CDSC) Russell 2000 Index
---- -------------------- ----------------- -------------------- -------------------- ------------------
<S> <C> <C> <C> <C> <C>
May-92 10,000 9,551 10,000 10,000 10,000
Nov-92 11,255 10,750 10,755 11,255 11,032
Nov-93 13,478 12,873 13,078 13,478 13,128
Nov-94 14,473 13,823 14,172 14,472 12,981
Nov-95 17,579 16,790 17,187 17,487 16,680
Nov-96 19,049 18,193 18,622 18,822 19,434
Nov-97 22,754 21,733 22,226 22,326 23,984
May-98 24,135 23,052 23,493 23,593 25,553
</TABLE>
* Reflects a 4.50% sales charge.
** Reflects applicable contingent deferred sales charge. (Maximum 5.00%)
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (5/6/92)
- --------------------------------------------------------------------------------
Investor A (No Load) 6.07% 17.83% 14.38% 15.63%
- --------------------------------------------------------------------------------
Investor A* 1.28% 12.51% 13.33% 14.75%
- --------------------------------------------------------------------------------
Investor B (No CDSC) 5.68% 16.95% 13.87% 15.19%
- --------------------------------------------------------------------------------
Investor B (CDSC)** 0.83% 11.95% 13.75% 15.11%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Trust Institutional Russell 2000 Index
---- ----- ------------- ------------------
May-92 10,000 10,000 10,000
Nov-92 11,255 11,255 11,032
Nov-93 13,478 13,478 13,128
Nov-94 14,497 14,436 12,981
Nov-95 17,642 17,531 16,680
Nov-96 19,181 19,002 19,434
Nov-97 22,973 22,691 23,984
May-98 24,392 24,056 25,553
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (5/6/92)
- --------------------------------------------------------------------------------
Trust 6.15% 18.07% 14.63% 15.83%
- --------------------------------------------------------------------------------
Institutional 6.02% 17.73% 14.31% 15.56%
- --------------------------------------------------------------------------------
The ARCH Small Cap Equity Portfolio is measured against the Russell 2000
Index, an unmanaged Index generally representative of the total return of small
to mid-sized companies. Investors are unable to purchase the Index directly,
although they can invest in the underlying securities. The performance of the
Index does not reflect the deduction of expenses associated with a mutual fund,
such as, investment management and fund accounting fees. By contrast, the
performance of the Portfolio shown on the graph reflects the deduction of these
value-added services, as well as the deduction of a 4.50% sales charge on
Investor A shares and the applicable contingent deferred sales charge (CDSC) on
Investor B shares.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Investor B shares were initially offered on March 1, 1995. The performance
figures for Investor B shares for periods prior to such date represent the
performance for Investor A shares of the Portfolio, which has been restated to
reflect the contingent deferred sales charges payable by holders of Investor B
shares who redeem within six years of the date of purchase. Investor B shares
are also subject to distribution and service fees at a maximum annual rate of
1.00%. Had these distribution and service fees been reflected, performance
would have been reduced.
Institutional shares were initially offered on January 3, 1994. The
performance figures for Institutional shares for periods prior to such date
represent the performance for Investor A shares in the Portfolio.
-9-
<PAGE>
THE ARCH INTERNATIONAL EQUITY PORTFOLIO+
Q. HOW DID THE GLOBAL EQUITY MARKETS PERFORM DURING THE SIX-MONTH PERIOD
ENDED MAY 31, 1998?
A. Fallout from the Asian economic crisis continued to cause many stock
markets to underperform during the period. The Japanese market (down 9.45%) was
weak. Hong Kong (down 21%), Singapore (down 27%) and Malaysia (down 10%) also
suffered quite severely. The emerging Asian markets, such as China (down
25.6%), Indonesia (down 66.6%) and Pakistan (down 46%), continued to deliver
especially low returns. European stock markets, supported by a wide range of
factors, performed well. Those factors included corporate restructuring,
economic recovery, reduced unemployment, lower interest rates and the advent of
a single currency.*
The central Europe (Germany, France, the Netherlands and Switzerland) portion
of the Morgan Stanley EAFE Index climbed 34%. Italy, Spain and Portugal as a
group did even better, gaining 49%.
Q. HOW DID YOU MANAGE THE PORTFOLIO IN THAT ENVIRONMENT?
A. We greatly reduced our holdings in Japan to 11% of the Portfolio, versus
21% for the EAFE Index. We also reduced our remaining Asian holdings in
Singapore, Hong Kong and India from 3.9% at the beginning of the period to 1.6%
by the end. In addition, we trimmed our holdings in the UK, where our weighting
at the end of the period was 15%, versus 21% for the EAFE Index. We increased
our investments in France, Germany, the Netherlands and Switzerland from 31.3%
at the beginning of the period to 38.6% at the end. We also increased our
holdings in Spain, Italy and Portugal from 7.6% to 16.6%. In addition, we
increased the Portfolio's investment in the strong Australian stock market from
1.2% to 2.8%.*
Q. HOW DID THE REGIONAL AND COUNTRY ALLOCATIONS AFFECT THE PERFORMANCE OF THE
PORTFOLIO?
A. Our decision to underweight our holdings in Japan helped the Portfolio
outperform the EAFE Index. We had some dissapointing results at the beginning
of the year in Hong Kong, but our relatively small position in Asia was a big
help overall. Although the Portfolio was underweighted in the UK stock market,
we benefited from good stock selection that performed strongly in the market.
Moreover, our decision to overweight Australia, Italy and Spain helped the
Portfolio.
Q. WHAT IS YOUR OUTLOOK FOR OVERSEAS MARKETS DURING THE NEXT SEVERAL MONTHS,
AND HOW WILL YOU MANAGE THE PORTFOLIO IN THAT ENVIRONMENT?
A. Looking forward, we feel that Japan's market is going to remain difficult,
but we do see some positive signs. For example, two of the major banks have
sorted out their debt problems. We are very cautious about prospects for the
rest of Asia. In fact, we currently are selling our position in India. The
nuclear race between that country and Pakistan has led to U.S. sanctions, which
are bound to affect the Indian market.
Europe has been a strong performer this period, and we believe the region
will continue to present excellent investment opportunities. The coming of the
single currency will be one positive factor, as will continued restructuring
efforts in many industries across the Continent. Regardless of which countries
we over- or underweight in the Portfolio, we will continue to emphasize shares
of large, well-positioned firms trading at attractive valuations.
- ------
+ International investing involves increased risk and volatility.
* Portfolio composition is subject to change.
-10-
<PAGE>
THE ARCH INTERNATIONAL EQUITY PORTFOLIO+
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Morgan Stanley Europe,
Date Investor A (No Load) Investor A (Load)* Investor B (CDSC)** Investor B (No CDSC) Australia & Far East Index
---- -------------------- ------------------ ------------------- -------------------- --------------------------
<S> <C> <C> <C> <C> <C>
Apr-94 10,000 9,551 10,000 10,000 10,000
Nov-94 9,900 9,456 9,405 9,900 10,370
Nov-95 10,780 10,296 10,330 10,730 11,189
Nov-96 12,072 11,530 11,622 11,922 12,543
Nov-97 12,384 11,828 11,838 12,138 12,528
May-98 14,978 14,306 14,435 14,635 14,560
</TABLE>
Average Annual Total Return
as of 5/31/98
-------------------------------------------------------
Since
Inception
6 Mo. 1 Year (4/4/94)
-------------------------------------------------------
Investor A (No Load) 20.99% 16.70% 10.21%
-------------------------------------------------------
Investor A* 15.59% 11.42% 9.00%
-------------------------------------------------------
Investor B (No CDSC) 20.57% 15.94% 9.60%
-------------------------------------------------------
Investor B (CDSC)** 15.57% 10.94% 9.23%
-------------------------------------------------------
* Reflects 4.50% sales charge.
** Reflects applicable contingent deferred sales charge.
(Maximum 5.00%)
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Morgan Stanley Europe,
Date Trust Institutional Australia & Far East Index
---- ----- ------------- --------------------------
Apr-94 10,000 10,000 10,000
Nov-94 9,920 9,900 10,370
Nov-95 10,810 10,770 11,189
Nov-96 12,142 12,052 12,543
Nov-97 12,495 12,364 12,528
May-98 15,138 14,960 14,560
Average Annual Total Return
as of 5/31/98
------------------------------------------------
Since
Inception
6 Mo. 1 Year (4/4/94)
------------------------------------------------
Trust 21.16% 16.97% 10.49%
------------------------------------------------
Institutional 21.03% 16.74% 10.18%
------------------------------------------------
The ARCH International Equity Portfolio is measured against the Morgan
Stanley EAFE (Europe, Australia and Far East) Index, an unmanaged index
representative of the performance of international stocks. Investors are unable
to purchase the Index directly, although they can invest in the underlying
securities. The performance of the Index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management and fund
accounting fees. By contrast, the performance of the Portfolio shown on the
graph reflects the deduction of these value-added services, as well as the
deduction of a 4.50% sales charge on Investor A shares and the applicable
contingent deferred sales charge (CDSC) on Investor B shares.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Investor B shares were initially offered on March 1, 1995. The performance
figures for Investor B shares for periods prior to such date represent the
performance for Investor A shares of the Portfolio, which has been restated to
reflect the contingent deferred sales charges payable by holders of Investor B
shares who redeem within six years of the date of purchase. Investor B shares
are also subject to distribution and service fees at a maximum annual rate of
1.00%. Had these distribution and service fees been reflected, performance
would have been reduced.
Institutional shares were initially offered on April 24, 1994. The
performance figures for Institutional shares for periods prior to such date
represent the performance of Trust shares of the Portfolio.
-11-
<PAGE>
THE ARCH EQUITY INCOME PORTFOLIO
Q. WHAT WAS THE ENVIRONMENT IN THE STOCK MARKET DURING THE SIX MONTHS ENDED
MAY 31, 1998?
A. Stocks performed well. The economic environment of low inflation and
moderate economic growth provided ideal conditions for equities. Some investors
were concerned that the economic crisis in Asia might reduce corporate
profitability in the United States. While Asia's problems did have an impact on
some leading technology companies, the region's slowdown may have helped the
U.S. stock market in at least one way: It reduced the risk that the Federal
Reserve would need to raise interest rates.
Growth stocks outpaced value stocks during the period. That bias toward
growth did not help the Portfolio, which takes a disciplined, value-oriented
approach to choosing stocks. Generally, we focus on shares that are paying
attractive yields and selling at low prices compared to their intrinsic values.
At the same time, the Portfolio benefited from the fact that large-company
shares continue to attract investors and posted higher gains than small-company
shares. The Portfolio consists primarily of high-quality, large-company stocks,
with the Russell 1000 Value Index as our benchmark.
Q. HOW DID YOU MANAGE THE PORTFOLIO IN THAT ENVIRONMENT?
A. The Portfolio has benefited from its large stake in the financial services
sector. We have reduced our weighting in that sector as the prices of those
shares have increased. Specifically, the Portfolio invested in Core-States and
sold the shares after the firm was acquired by First Union. We also sold
BankAmerica on the NationsBank offer, and we cut back on our positions in Chase
Manhattan (1.79%), U.S. Bancorp (2.06%) and Mellon (2.07%) in the banking
sector.
In the health-care sector, the Portfolio sold some of its investments in
leading firms such as American Home Products and Bristol-Myers Squibb, and we
added shares of less well-known firms such as CR Bard (1.27%) and Allergan
(1.53%).*
Q. WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET GOING FORWARD, AND HOW WILL YOU
MANAGE THE PORTFOLIO WITH THAT IN MIND?
A. Much of this value-oriented Portfolio's strong performance has been due to
above- average sector and stock selection in an environment that has tended to
favor the kind of growth stocks that don't suit its investment style. As long-
term investors, however, we will stick to our value-oriented approach in the
expectation that value stocks eventually will take a turn leading the stock
market for a period.
The Portfolio likely would benefit from such a shift toward value-oriented
shares. Meanwhile, we continue to seek out individual stocks that may offer
opportunities regardless of short-term market or style trends.
- ------
* Portfolio composition is subject to change.
-12-
<PAGE>
THE ARCH EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Investor A (No Load) Investor A (Load)* INVESTOR B (NO CDSC)** INVESTOR B (CDSC) Russell 1000 Value Index
---- ------------------- ------------------ ---------------------- ----------------- ------------------------
<S> <C> <C> <C> <C> <C>
2/27/97 10,000 9,551 9,500 10,000 10,000
11/30/97 11,742 11,215 11,175 11,675 12,013
5/31/98 13,298 12,701 13,179 12,779 14,103
</TABLE>
* Reflects 4.50% sales charge.
** Reflects applicable contingent deferred sales charge. (Maximum 5.00%)
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year (2/27/97)
- --------------------------------------------------------------------------------
Investor A (No Load) 13.26% 30.91% 25.50%
- --------------------------------------------------------------------------------
Investor A* 8.21% 24.98% 20.99%
- --------------------------------------------------------------------------------
Investor B (No CDSC) 12.89% 29.93% 24.55%
- --------------------------------------------------------------------------------
Investor B (CDSC)** 8.36% 24.93% 21.53%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Russell 1000
Date Trust Institutional Value Index
---- ----- ------------- -----------
2/27/97 10,000 10,000 10,000
11/30/97 11,764 11,764 12,013
5/31/98 13,352 13,334 14,103
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year (2/27/97)
- --------------------------------------------------------------------------------
Trust 13.51% 31.41% 25.91%
- --------------------------------------------------------------------------------
Institutional 13.36% 31.22% 25.77%
- --------------------------------------------------------------------------------
The ARCH Equity Income Portfolio is measured against the Russell 1000 Value
Index, an unmanaged index generally representative of those securities in the
the Russell 1000 Index with certain valuation and historical growth
characteristics indicative of value-based stocks. Companies in this index
generally have low price-to-book and price-to-earnings ratios, higher dividend
yields and lower forecasted growth values. Investors are unable to purchase the
Index directly, although they can invest in the underlying securities. The
performance of the Index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees. By
contrast, the performance of the Portfolio shown on the graph reflects the
deduction of these value-added services, as well as the deduction of a 4.50%
sales charge on Investor A shares and the applicable contingent deferred sales
charge (CDSC) on Investor B shares.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
-13-
<PAGE>
THE ARCH EQUITY INDEX PORTFOLIO
Q. WHAT IS THE ROLE OF AN INDEX FUND SUCH AS THIS PORTFOLIO IN AN INVESTOR'S
OVERALL PORTFOLIO?
A. Index funds can serve a wide variety of purposes for different investors.
The funds' major goal is simple: They each attempt to mimic, before the
deduction of operating expenses, the performance of a particular market Index,
or benchmark. For example, the ARCH Equity Index Portfolio attempts to
duplicate the performance of the Standard & Poor's 500 Index, the domestic
stock market's most widely used benchmark. The Index tracks the performance of
500 large-company stocks in a variety of economic and industry sectors.
Investors who put their money to work in the ARCH Equity Index Portfolio may
avoid the uncertainty of investing in an actively managed fund. They can be
reasonably sure that their investment will come close to matching the
performance of the S&P 500 and the large- company stocks that compose it. By
contrast, managers of actively managed funds attempt to choose securities and
market sectors that may perform especially well. The funds' performance depends
upon the outcome of those choices, and its returns may be considerably higher
or lower than the returns of the Index.
Q. DISCUSS THE PERFORMANCE OF THE PORTFOLIO DURING THE SIX MONTHS ENDED MAY 31,
1998.
A. During the recent period, the Portfolio's return was marginally higher
than that of its benchmark. Assets increased from $32 million to $49 million
during the period.
Q. WHAT ACCOUNTS FOR THE DIFFERENCE BETWEEN THE RETURN OF THE PORTFOLIO AND THE
RETURN OF THE INDEX?
A. Normally, index funds tend to lag their benchmarks by a small margin,
reflecting the funds' transaction costs. Moreover, Index funds tend to hold
small amounts of cash unless they rebalance their portfolios every day. That
can reduce performance when the stock market is rising--or increase it when the
market is falling. Thus, the timing of cash flows into the ARCH Equity Index
Portfolio can result in modest performance gaps between our Portfolio and its
benchmark. The Portfolio's performance should be very close to that of the S&P
500 going forward, just as it has been since its inception.
-14-
<PAGE>
THE ARCH EQUITY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Investor A (No Load) Investor A (Load)* Trust Institutional S&P 500 Index
---- -------------------- ------------------ ----- ------------- -------------
<S> <C> <C> <C> <C> <C>
5/1/97 $10,000 $9,747 $10,000 $10,000 $10,000
11/30/97 $12,014 $11,710 $12,040 $12,040 $11,964
5/31/98 $13,782 $13,433 $13,831 $13,815 $13,767
</TABLE>
* Reflects 2.50% sales charge.
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year (5/1/97)
- --------------------------------------------------------------------------------
Investor A (No Load) 14.71% 29.92% 34.50%
- --------------------------------------------------------------------------------
Investor A* 11.81% 26.69% 31.35%
- --------------------------------------------------------------------------------
Trust 14.87% 30.36% 34.94%
- --------------------------------------------------------------------------------
Institutional 14.73% 30.20% 34.80%
- --------------------------------------------------------------------------------
The ARCH Equity Index Portfolio is measured against the Standard & Poor's 500
Index, an unmanaged index generally representative of the U.S. stock market.
Investors are unable to purchase the Index directly, although they can invest
in the underlying securities. The performance of the Index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. By contrast, the performance of the
Portfolio shown on the graph reflects the deduction of fees for these value-
added services, as well as the deduction of a 2.50% sales charge on Investor A
shares.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
-15-
<PAGE>
THE ARCH GROWTH EQUITY PORTFOLIO
Q. HOW DID THE STOCK MARKET ENVIRONMENT AFFECT THE PORTFOLIO DURING THE SIX-
MONTH PERIOD ENDED MAY 31, 1998?
A. Low inflation and modest economic growth provided an excellent environment
for stocks, resulting in continued gains. Some investors early in the period
worried that Asia's economic problems might reduce corporate profits in the
U.S. and adversely affect the U.S. stock market. But while Asia's problems did
have an impact on a number of leading technology companies as well as other
firms, the region's slowdown also may have helped our stock market by reducing
the likelihood that the Federal Reserve would raise interest rates to slow the
U.S. economy. Growth stocks did better than value stocks during the period,
which was good news for many of the stocks in our growth-oriented Portfolio.
The Portfolio's performance also benefited from the strong performance of
large-company shares, which posted higher gains than stocks of small companies.
Q. HOW DID YOU MANAGE THE PORTFOLIO IN THAT ENVIRONMENT?
A. Thanks in part to the uncertainty about the Asian crisis, there was
considerable volatility in the market. This was especially true in the
technology sector.
Technology stocks account for a significant portion of the Portfolio's
assets, and we took advantage of the sector's volatility to purchase shares of
a number of technology firms at lower prices. Our strategy was to buy select
shares of higher quality companies. For example, early in the period we added
shares of companies such as Ascend Communications (1.82%) and Applied Materials
(0.88%).
We reduced our stake in banking stocks when their prices rose due to industry
consolidation trends. We also reduced the Portfolio's investment in
pharmaceutical stocks, which had become less attractive at their current
prices. We added to the Portfolio's stake in shares of high-quality retail
companies, as well as stocks of media companies such as The Tribune Company
(1.27%).*
Q. WHAT IS THE PORTFOLIO'S STRATEGY GOING FORWARD?
A. We will continue to search for opportunities to buy shares of attractive
large growth companies in a variety of sectors. In particular, we will look to
increase the Portfolio's weighting in the technology sector when we have the
opportunity to invest in high-quality stocks at attractive prices. Although
there are some fundamental concerns in the sector, and it is dangerous to pay
too much for the most popular technology shares, we believe that the use and
development of new technologies will continue to generate a large portion of
this country's economic growth and corporate profits. Thus, investment in
technology will remain an essential part of our long-term growth-oriented
investment strategy.
- ------
* Portfolio composition is subject to change.
-16-
<PAGE>
THE ARCH GROWTH EQUITY PORTFOLIO+
[LINE CHART APPEARS HERE]
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
Investor A Investor A Investor B Investor B
Date (No Load) (Load)* (No Load) (Load)* S&P 500
- ---- ---------- ---------- ---------- ---------- -------
1/4/93 $10,000 $ 9,551 $10,000 $10,000 $10,000
11/30/93 9,870 9,427 9,870 9,378 10,787
11/30/94 9,643 9,287 9,725 9,342 10,903
11/30/95 14,179 13,655 14,296 13,996 14,296
11/30/96 17,086 16,455 17,225 16,925 19,084
11/30/97 20,440 19,685 20,621 20,421 24,531
May-98 23,226 22,183 23,174 23,074 28,227
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year (1/4/93) +
- --------------------------------------------------------------------------------
Investor A (No Load) 12.69% 25.51% 16.88%
- --------------------------------------------------------------------------------
Investor A* 7.60% 19.83% 15.89%
- --------------------------------------------------------------------------------
Investor B (No Load) 12.38% 25.24% 16.83%
- --------------------------------------------------------------------------------
Investor B** 7.38% 20.24% 16.74%
- --------------------------------------------------------------------------------
* Reflects 4.50% sales charge.
** Reflects applicable contingent deferred sales charge. (Maximum 5.00%)
[LINE CHART APPEARS HERE]
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
Date Institutional Trust S&P 500
- ---- ------------- -------- -------
1/4/93 $10,000 $10,000 $10,000
11/30/93 9,870 9,870 10,787
11/30/94 9,725 9,724 10,903
11/30/95 14,296 14,297 14,926
11/30/96 17,226 17,228 19,084
11/30/97 20,610 20,610 24,531
May-98 23,221 23,233 28,227
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year (1/4/93) +
- --------------------------------------------------------------------------------
Institutional 12.67% 25.49% 16.87%
- --------------------------------------------------------------------------------
Trust 12.73% 25.55% 16.89%
- --------------------------------------------------------------------------------
The ARCH Growth Equity Portfolio is measured against the Standard & Poor's
500 Index, an unmanaged Index generally representative of the U.S. stock
market. Investors are unable to purchase the Index directly, although they can
invest in the underlying securities. The performance of the Index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. By contrast, the performance
of the Portfolio shown on the graph reflects the deduction of fees for these
value-added services, as well as the deduction of a 4.50% sales charge on
Investor A Shares and the applicable contingent deferred sales (CDSC) on
Investor B shares.
+ The portfolio commenced operations as a portfolio of Arrow Equity Fund ("the
Predecessor Portfolio"). On 11/24/97, the Predecessor Portfolio was
reorganized as a new portfolio of The ARCH Fund, Inc. Performance figures
for periods prior to 11/24/97 represent the performance for the Predecessor
Portfolio.
Institutional shares were initially offered on 11/24/97. The performance
figures for Institutional Shares for periods prior to such date represent
the performance for the Arrow Equity Fund.
Trust shares were initially offered on 11/24/97. The performance figures for
Trust Shares for periods prior to such date represent the performance for
the Arrow Equity Fund.
Investor B shares were initially offered on 11/24/97. The performance
figures for Investor B shares for periods prior to such date represent the
performance for the Arrow Equity Fund, which has been restated to reflect
the contingent deferred sales charges payable by holders of Investor B
shares who redeem within six years of the date of purchase. Investor B
shares are also subject to distribution and service fees at a maximum annual
rate of 1.00%. Had these distribution and service fees been reflected,
performance would have been reduced.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
-17-
<PAGE>
THE ARCH BALANCED PORTFOLIO
Q. WHAT MARKET CONDITIONS AFFECTED THE PERFORMANCE OF THE PORTFOLIO DURING
THE SIX MONTHS ENDED MAY 31, 1998?
A. The Portfolio is designed for investors who want exposure to both the
stock and bond markets, so gains in both of those markets affected its
performance. Stocks posted strong gains, with large-company shares
outperforming shares of smaller firms. Long-term bonds also did well due to
slow and steady economic growth and continued low inflation.
Q. WHAT WAS YOUR GENERAL STRATEGY IN THAT ENVIRONMENT?
A. The Portfolio typically invests about 50% to 60% of its assets in stocks,
with the rest in bonds. During the period, we maintained the stock allocation
at around 60%. Another 34% of the assets of the Portfolio was invested in
bonds, with the remaining 6% in cash equivalents.*
Q. WHAT TYPES OF STOCKS DID YOU FAVOR?
A. The stock investments of the Portfolio include undervalued shares of firms
with strong earnings potential. We found some attractive opportunities among
financial services and health-care firms. However, as their share prices rose,
we reduced the investments in those sectors.
Q. WHAT TYPES OF BONDS DID THE PORTFOLIO HOLD?
A. The bond portion of the Portfolio is based on the Lehman Brothers
Aggregate Bond Index, an unmanaged index comprised of the Lehman Brothers
Government/Corporate Bond Index and two Lehman Brothers asset-backed securities
indices. The Portfolio invested mainly in high-quality Treasury securities and
mortgage-backed securities, as well as in some bonds issued by corporations.
Q. HOW WILL YOU INVEST THE PORTFOLIO GOING FORWARD?
A. We will continue to monitor the relative values and risks associated with
stocks and bonds, and adjust the Portfolio accordingly seeking to enhance
shareholder return potential while seeking to manage investment risk.
- ------
* Portfolio composition is subject to change.
-18-
<PAGE>
THE ARCH BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Investor A Investor A Investor B Investor B S & P Lehman Brothers
Date (No Load) (Load)* (CDSC)** (No CDSC) 500 Index Aggregate Bond Index
---- --------- ------- -------- --------- --------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Apr-93 $10,000 $9,551 $10,000 $10,000 $10,000 $10,000
Nov-93 $10,386 $9,920 $10,174 $10,674 $10,421 $10,529
Nov-94 $10,188 $9,730 $9,950 $10,335 $10,536 $10,207
Nov-95 $12,719 $12,148 $12,506 $12,806 $14,433 $12,007
Nov-96 $14,640 $13,983 $14,134 $14,434 $18,477 $12,736
Nov-97 $16,892 $16,134 $16,339 $16,537 $23,745 $13,698
May-98 $18,149 $17,334 $17,606 $17,706 $27,323 $14,258
</TABLE>
* Reflects 4.50% sales charge.
** Reflects applicable contingent deferred sales charge. (Maximum 5.00%)
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (4/1/93)
- --------------------------------------------------------------------------------
Investor A (No Load) 7.45% 17.41% 12.37% 12.23%
- --------------------------------------------------------------------------------
Investor A* 2.65% 12.12% 11.33% 11.24%
- --------------------------------------------------------------------------------
Investor B (No CDSC) 7.08% 16.60% 11.82% 11.70%
- --------------------------------------------------------------------------------
Investor B (CDSC)** 2.35% 11.60% 11.69% 11.58%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
S & P 500 Lehman Brothers
Date Trust Institutional Index Aggregate Bond Index
---- ----- ------------- ------ ---------------------
Apr-93 10,000 10,000 10,000 10,000
Nov-93 10,387 10,386 10,421 10,529
Nov-94 10,199 10,179 10,536 10,207
Nov-95 12,744 12,690 14,433 12,007
Nov-96 14,727 14,601 18,477 12,736
Nov-97 17,054 16,868 23,745 13,698
May-98 18,348 18,128 27,323 14,258
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (4/1/93)
- --------------------------------------------------------------------------------
Trust 7.61% 17.84% 12.62% 12.47%
- --------------------------------------------------------------------------------
Institutional 7.48% 17.47% 12.34% 12.21%
- --------------------------------------------------------------------------------
The ARCH Balanced Portfolio is measured against the Standard & Poor's 500
Index, an unmanaged index generally representative of the U.S. stock market,
and the Lehman Brothers Aggregate Bond Index, an unmanaged Index comprised of
the Lehman Brothers Government/Corporate Bond Index and two Lehman Brothers
asset-backed securities indices. Investors are unable to purchase any of these
indices directly, although they can invest in the underlying securities. The
performance of the Indices does not reflect the deduction of expenses
associated with a mutual fund, such as investment management and fund
accounting fees. By contrast, the performance of the Portfolio shown on the
graph reflects the deduction of these value-added services, as well as the
deduction of a 4.50% sales charge on Investor A shares and the applicable
contingent deferred sales charge (CDSC) on Investor B shares.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Investor B shares were initially offered on March 1, 1995. The performance
figures for Investor B shares for periods prior to such date represent the
performance for Investor A shares which has been restated to reflect the
contingent deferred sales charges payable by holders of Investor B shares who
redeem within six years of the date of purchase. Investor B shares are also
subject to distribution and service fees at a maximum annual rate of 1.00%. Had
these distribution and service fees been reflected, performance would have been
reduced.
Institutional shares were initially offered on January 3, 1994. The
performance figures for Institutional shares for periods prior to such date
represent the performance for Investor A shares of the Portfolio.
-19-
<PAGE>
THE ARCH GOVERNMENT & CORPORATE BOND PORTFOLIO
Q. WHAT WERE THE CONDITIONS OF THE ECONOMY AND THE MARKETS DURING THE SIX-
MONTH PERIOD ENDED MAY 31, 1998?
A. At the beginning of the period, investors were concerned that strong
economic growth and low unemployment would force the Fed to raise interest
rates as a preemptive move against inflation. Later, it appeared that the
continuing effects of the Asian economic crisis would help slow the growth of
the U.S. economy. Therefore, investors' inflation concerns appeared to abate,
and the Fed kept interest rates stable. These factors, combined with a flight
to quality in the U.S. Treasury market, helped the bond market rally near the
end of the period.
Interest rates fluctuated during the past six months because of shifting
investor sentiment, but the fluctuations occurred within a tight trading
range. For example, the 30-year U.S. Treasury began the period at 6.05% and
fell to as low as 5.75%. On May 31, 1998, the yield stood at 5.78%.
Q. HOW DID YOU MANAGE THE PORTFOLIO IN THAT ENVIRONMENT?
A. Because we believed that the Asian crisis would keep inflation in check,
we increased the Portfolio's average maturity from 8.1 years in early December
to 10.27 years on May 31, 1998. This change was effected through the purchase
of 10-year and 30-year Treasury bonds, which accounted for 20% of the overall
portfolio. This lengthening particularly benefited the Portfolio when interest
rates fell near the end of the period, boosting prices of long-term bonds.
Corporate bonds accounted for 25% of the Portfolio during the period. We
held mostly high-quality issues rated A or higher with average maturities of 3
to 4 years. The Portfolio also held a 39% stake in mortgage pass-through
securities, which primarily provide current income.*
Q. WHAT IS YOUR OUTLOOK FOR THE BOND MARKET AND THE PORTFOLIO?
We believe the outlook for the bond market and this Portfolio is very
positive. The U.S. Treasury has reduced the number of new bond issuances
scheduled for the remainder of the year, which should further boost the prices
of existing long-term Treasury bonds in the Portfolio. In addition, indicators
suggest the economy may grow between 2.5% and 3% in 1998--right in the Fed's
range of acceptable growth. Economic troubles in Asia will continue to affect
the U.S. markets. Therefore, we expect that corporate earnings growth and
domestic exports will slow, inflation will remain low, and interest rates will
stay relatively stable.
In that environment, we will not make significant changes to the investment
strategy and asset allocation of the Portfolio. We will continue to look for
opportunities to buy long-term Treasury bonds during temporary price
fluctuations.
- ------
* Portfolio composition is subject to change.
-20-
<PAGE>
THE ARCH GOVERNMENT & CORPORATE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers
Date Investor A (No Load) Investor A (Load)* Investor B (CDSC)** Investor B (No CDSC) Aggregate Bond Index
---- -------------------- ------------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
Jun-88 10,000 9,551 10,000 10,000 10,000
Nov-88 10,266 9,805 9,770 10,266 10,265
Nov-89 11,476 10,960 11,076 11,476 11,738
Nov-90 12,045 11,504 11,754 12,045 12,627
Nov-91 13,586 12,976 13,286 13,586 14,447
Nov-92 14,647 13,989 14,447 14,647 15,727
Nov-93 16,145 15,367 16,045 16,145 17,441
Nov-94 15,609 14,857 15,609 15,609 16,907
Nov-95 18,104 17,232 17,994 17,994 19,889
Nov-96 18,920 18,070 18,675 18,675 21,096
Nov-97 20,013 19,114 19,658 19,658 22,689
May-98 20,729 19,798 20,288 20,288 23,617
</TABLE>
* Reflects 4.50% sales charge.
** Reflects applicable contingent deferred sales charge. (Maximum 5.00%)
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (6/15/98)
- --------------------------------------------------------------------------------
Investor A (No Load) 3.76% 9.90% 5.99% 7.59%
- --------------------------------------------------------------------------------
Investor A* -0.93% 4.98% 5.01% 7.10%
- --------------------------------------------------------------------------------
Investor B (No CDSC) 3.39% 9.24% 5.53% 7.36%
- --------------------------------------------------------------------------------
Investor B (CDSC)** -1.61% 4.24% 5.37% 7.36%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Lehman Brothers
Date Trust Institutional Aggregate Bond Index
---- ----- ------------- ---------------------
Jun-88 10,000 10,000 10,000
Nov-88 10,266 10,266 10,265
Nov-89 11,476 11,476 11,738
Nov-90 12,045 12,045 12,627
Nov-91 13,616 13,586 14,447
Nov-92 14,724 14,647 15,727
Nov-93 16,278 16,145 17,441
Nov-94 15,785 15,609 16,907
Nov-95 18,359 18,104 19,889
Nov-96 19,244 18,920 21,096
Nov-97 20,460 20,055 22,689
May-98 21,197 20,770 23,617
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (6/15/98)
- --------------------------------------------------------------------------------
Trust 3.81% 10.34% 6.32% 7.84%
- --------------------------------------------------------------------------------
Institutional 3.75% 10.11% 6.03% 7.62%
- --------------------------------------------------------------------------------
The ARCH Government & Corporate Bond Portfolio is measured against the Lehman
Brothers Aggregate Bond Index, an unmanaged index comprised of the Lehman
Brothers Government/Corporate Bond Index and two Lehman Brothers asset-backed
securities indices. Investors are unable to purchase the Index directly,
although they can invest in the underlying securities. The performance of the
Index does not reflect the deduction of expenses associated with a mutual fund,
such as investment management and fund accounting fees. By contrast, the
performance of the Portfolio shown on the graph reflects the deduction of fees
for these value-added services, as well as the deduction of a 4.50% sales
charge on Investor A shares and the applicable contingent deferred sales charge
(CDSC) on Investor B shares.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Investor B shares were initially offered on March 1, 1995. The performance
figures for Investor B shares for periods prior to such date represent the
performance for Investor A shares of the Portfolio, which has been restated to
reflect the contingent deferred sales charges payable by holders of Investor B
shares who redeem within six years of the date of purchase. Investor B shares
are also subject to distribution and service fees at a maximum annual rate of
1.00%. Had these distribution and service fees been reflected, performance
would have been reduced.
Institutional shares were initially offered on January 3, 1994. The
performance figures for Institutional shares for periods prior to such date
represent the performance for Investor A shares of the Portfolio.
-21-
<PAGE>
THE ARCH U.S. GOVERNMENT SECURITIES PORTFOLIO
Q. WHAT WERE THE CONDITIONS IN THE TREASURY MARKET DURING THE RECENT SIX-
MONTH PERIOD ENDED MAY 31, 1998?
A. The Treasury market was relatively stable over the past six months.
Concerns about the continuing Asian economic crisis caused many investors to
look to the quality of U.S. Treasury securities. In addition, investors' belief
that the Asian crisis would affect U.S. economic growth forestalled any
increase in short-term interest rates by the Federal Reserve. In this
environment, interest rates generally declined by around 20 to 25 basis points.
For example, the yield on a five-year Treasury fell from 5.82% at the start of
the period to 5.55% on May 31, 1998.
Q. HOW DID YOU MANAGE THE PORTFOLIO UNDER THESE CONDITIONS?
A. We extended the duration and average maturity of the Portfolio somewhat
during the bond market rally. Duration increased from 2.26 years to 2.54 years,
and average maturity increased from 3.3 years to 3.9 years.
We also added to our position in U.S. agency securities to increase the total
yield of the Portfolio. These securities now account for 5.5% of the Portfolio,
up from 41% at the beginning of the period.*
Q. WHAT IS YOUR OUTLOOK FOR THE BOND MARKET DURING THE NEXT SEVERAL MONTHS?
A. The Federal Reserve recently began again to look at the possibility of
raising interest rates. U.S. economic growth remains strong, and unemployment
figures remain low, creating the potential for inflation to heat up. However,
Asian economic problems may continue to affect our economy during the next
several months. These conditions create a degree of uncertainty over the
direction of interest rates during the rest of the year. We intend to maintain
the Portfolio's current average maturity and duration, or perhaps shorten them
slightly in anticipation of any interest rate increase.
- ------
* Portfolio composition is subject to change.
-22-
<PAGE>
THE ARCH U.S. GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Lehman Brothers
Date Investor A (No Load) Investor A (Load)* Investor B (CDSC)** Investor B (No CDSC) Aggregate Bond Index
---- -------------------- ------------------ ------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
Jun-88 10,000 9,551 10,000 10,000 10,000
Nov-88 10,305 10,044 9,808 10,305 10,374
Nov-89 11,336 11,048 10,939 11,339 11,666
Nov-90 12,429 12,114 12,135 12,435 12,644
Nov-91 13,963 13,609 13,672 13,972 14,281
Nov-92 14,964 14,586 14,778 14,978 15,442
Nov-93 16,463 16,046 16,380 16,480 16,849
Nov-94 15,946 15,542 15,962 15,962 16,512
Nov-95 18,279 17,816 18,012 18,012 18,833
Nov-96 19,112 18,628 18,705 18,705 19,899
Nov-97 20,133 19,230 19,541 19,541 21,149
May-98 20,695 20,171 20,021 20,021 21,896
</TABLE>
* Reflects 2.50% sales charge.
** Reflects applicable contingent deferred sales charge. (Maximum 5.00%)
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (6/2/88)
- --------------------------------------------------------------------------------
Investor A (No Load) 2.93% 7.08% 5.50% 7.55%
- --------------------------------------------------------------------------------
Investor A* 0.38% 4.39% 4.97% 7.27%
- --------------------------------------------------------------------------------
Investor B (No CDSC) 2.57% 6.34% 4.80% 7.19%
- --------------------------------------------------------------------------------
Investor B (CDSC)** -2.43% 1.34% 4.64% 7.19%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
Lehman Intermediate
Date Trust Institutional Government Bond Index
---- ----- ------------- ----------------------
Jun-88 10,000 10,000 10,000
Nov-88 10,305 10,305 10,374
Nov-89 11,339 11,339 11,666
Nov-90 12,435 12,435 12,644
Nov-91 14,004 13,972 14,281
Nov-92 15,056 14,978 15,442
Nov-93 16,616 16,480 16,849
Nov-94 16,142 15,910 16,512
Nov-95 18,564 18,247 18,833
Nov-96 19,469 19,077 19,899
Nov-97 20,543 20,050 21,149
May-98 21,146 20,609 21,896
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (6/2/88)
- --------------------------------------------------------------------------------
Trust 3.08% 7.40% 5.81% 7.78%
- --------------------------------------------------------------------------------
Institutional 2.93% 7.09% 5.41% 7.50%
- --------------------------------------------------------------------------------
The ARCH U.S. Government Securities Portfolio is measured against the
unmanaged Lehman Brothers Intermediate Government Bond Index, which is
generally representative of the total return of intermediate-term U.S.
Government securities. Investors are unable to purchase the Index directly,
although they can invest in the underlying securities. The performance of the
Index does not reflect the deduction of expenses associated with a mutual fund,
such as investment management and fund accounting fees. By contrast, the
performance of the Portfolio shown on the graph reflects the deduction of fees
for these value-added services, as well as the deduction of a 2.50% sales
charge on Investor A shares and the applicable contingent deferred sales charge
(CDSC) on Investor B shares.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Investor B shares were initially offered on March 1, 1995. The performance
figures for Investor B shares for periods prior to such date represent the
performance for Investor A shares of the Portfolio, which has been restated to
reflect the contingent deferred sales charges payable by holders of Investor B
shares who redeem within six years of the date of purchase. Investor B shares
are also subject to distribution and service fees at a maximum annual rate of
1.00%. Had these distribution and service fees been reflected, performance
would have been reduced.
Institutional shares were initially offered on June 7, 1994. The performance
figures for Institutional shares for periods prior to such date represent the
performance for Investor A shares of the Portfolio.
-23-
<PAGE>
THE ARCH SHORT-INTERMEDIATE MUNICIPAL PORTFOLIO
Q. WHAT WERE CONDITIONS LIKE IN THE MUNICIPAL BOND MARKET DURING THE SIX
MONTHS ENDED MAY 31, 1998?
A. The overall bond market performed well as investors' fears of inflation
abated. Those fears arose early in the period as investors worried that the
Federal Reserve would raise interest rates to keep the economy from
overheating. But evidence that the economic crisis in Asia might dampen U.S.
exports and that a strong U.S. dollar might hurt U.S. companies' profits
overseas allowed the Fed to refrain from such a rate hike. As the Fed's neutral
position became clear, bond yields fell, and prices rose. Municipal bond prices
also benefited from limited supplies during the period. Municipal bonds with
relatively long maturities outperformed shorter-term municipals as well as
longer-term Treasuries.
Q. HOW DID YOU MANAGE THE PORTFOLIO IN THAT ENVIRONMENT?
A. The Portfolio remained fully invested to take advantage of the relatively
positive environment for bonds and for municipal issues in particular. Its
average maturity was about 4.5 years at the beginning of the period, and we
increased that figure to almost 4.9 years at the end of May as opportunities in
the market appeared to justify that extension.
Q. WHAT WAS THE PORTFOLIO'S AVERAGE CREDIT RATING?
A. The Portfolio's credit rating increased to AA1, in keeping with its bias
toward high credit quality and our view that such issues offer the best trade-
off between potential risk and return. Investors as a group continued to favor
higher quality issues, reflecting the fact that yields on lower quality issues
were not high enough to justify their additional risk.*
Q. HOW WILL YOU MANAGE THE PORTFOLIO GOING FORWARD?
A. We will continue to manage the Portfolio with an eye toward providing
attractive returns while reducing shareholder risk. We do not anticipate major
shifts in interest rates that would call for significant shifts in the
Portfolio's average maturity. At the same time, we anticipate that supplies in
the tax-exempt market are likely to remain low, helping to support prices of
municipal issues.
In that environment, we will maintain the average maturity of the Portfolio
at around 4.75 years. We will also continue to hold high quality issues,
reflecting the fact that lower quality issues, do not offer the significant
yield advantage that would be needed to compensate for their extra risk.
- ------
* Portfolio composition is subject to change.
-24-
<PAGE>
THE ARCH SHORT-INTERMEDIATE MUNICIPAL PORTFOLIO
- --------------------------------------------------------------------------------
Value of $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Lehman Municipal Bond
Date Investor A (No Load) Investor A (Load)* Index-3 year
---- -------------------- ----------------- ------------
Jul-95 10,000 9,747 10,000
Nov-95 10,080 9,825 10,220
Nov-96 10,485 10,220 10,713
Nov-97 10,918 10,641 11,229
May-98 11,171 10,888 11,512
-----------------------------------------------------
Average Annual Total Return
as of 5/31/98
-----------------------------------------------------
Since
Inception
6 Mo. 1 Year (7/10/95)
-----------------------------------------------------
Investor A (No Load) 2.32% 5.27% 3.90%
-----------------------------------------------------
Investor A* -0.25% 2.60% 2.99%
-----------------------------------------------------
* Reflects 2.50% sales charge.
- --------------------------------------------------------------------------------
Value of $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Lehman Municipal
Date Trust Bond Index-3-Year
---- ----- -----------------
Jul-95 10,000 10,000
Nov-95 10,213 10,220
Nov-96 10,636 10,713
Nov-97 11,103 11,229
May-98 11,375 11,512
-----------------------------------------------------
Average Annual Total Return
as of 5/31/98
-----------------------------------------------------
Since
Inception
6 Mo. 1 Year (7/10/95)
-----------------------------------------------------
Trust 2.46% 5.55% 4.56%
-----------------------------------------------------
The ARCH Short-Intermediate Municipal Portfolio is measured against the
Lehman Brothers Municipal Bond Index-3 year, an unmanaged index representative
of the total return of municipal bonds with remaining maturities of 3 years or
less. Investors are unable to purchase the Index directly, although they can
invest in the underlying securities. The performance of the Index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. By contrast, the performance of
the Portfolio shown on the graph reflects the deduction of fees for these
value-added services, as well as the deduction of a 2.50% sales charge on
Investor A shares. The Portfolio may be subject to certain state and local
taxes and, depending on an investor's tax status, the federal alternative
minimum tax.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
-25-
<PAGE>
THE ARCH MISSOURI TAX-EXEMPT BOND PORTFOLIO
Q. WHAT WERE THE CONDITIONS IN THE MISSOURI MUNICIPAL BOND MARKET DURING THE
SIX MONTHS ENDED MAY 31, 1998?
A. As always, conditions in the Missouri municipal market were affected by
the overall climate for bonds. Investors early in the period worried that the
Federal Reserve would raise interest rates to keep the economy from overheating
and triggering higher inflation. But then it became clear that the economic
crisis in Asia might dampen U.S. exports and that a strong U.S. dollar might
hurt U.S companies' profits overseas. That meant the Fed was able to refrain
from boosting interest rates, and the bond market reacted positively, with
yields falling and prices rising.
The broad municipal bond market also benefited from limited supplies of new
issues and strong investor demands. Municipal bonds with relatively long
maturities outperformed shorter term municipals as well as longer term
Treasuries. The Missouri municipal market also benefited from a scant supply of
new issues and solid investor demand.
Q. HOW DID YOU STRUCTURE THE PORTFOLIO IN THAT ENVIRONMENT?
A. We were able to find attractive opportunities in the Missouri market
despite low supplies. We purchased 18- and 20-year bonds to increase the
average maturity of the Portfolio, which rose from 6.01 years to almost 7.57
years. That strategy seemed appropriate given the positive environment in the
Missouri municipal market and the bond market as a whole. It is worth noting
that the Portfolio's assets rose from around $101 million to $106 million
during the period. The flow of cash into the Portfolio played a role in
preventing its average maturity from rising even further.*
Q. WHAT WAS THE AVERAGE CREDIT RATING OF THE PORTFOLIO'S HOLDINGS?
A. We continued to favor high-quality issues, and the Portfolio's average
credit rating remained AA1. We believe that high-quality investment-grade
municipals are appropriate vehicles for safeguarding shareholders' assets from
the risk inherent in lower-rated securities. Moreover, such low-quality issues
offered relatively modest yield advantages over higher quality bonds. In our
view, the low-quality issues did not offer sufficient additional yield to
compensate for their risk.
Q. WHAT IS YOUR OUTLOOK FOR THE MISSOURI MUNICIPAL BOND MARKET GOING FORWARD?
A. Low inflation and continued modest economic growth, as well as the supply-
demand balance in the Missouri municipal market suggest that the state's
municipal issues may continue to offer solid returns to judicious investors. We
will continue to invest new cash in longer-term issues to boost the average
maturity of the Portfolio. In addition, we will maintain the focus of the
Portfolio on high quality issues, with an eye toward protecting shareholder
assets in the event that lower-quality issues perform poorly during the coming
period.
- ------
* Portfolio composition is subject to change.
-26-
<PAGE>
THE ARCH MISSOURI TAX-EXEMPT BOND PORTFOLIO
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers
Investor A (No Load) Investor A (Load)* Investor B (No CDSC) Investor B (CDSC)** Municipal Bond Index
<S> <C> <C> <C> <C> <C>
Jul-88 10,000 9,551 10,000 9,500 10,000
Nov-88 10,523 10,050 10,523 10,023 10,341
Nov-89 11,622 11,100 11,622 11,222 11,480
Nov-90 12,320 11,767 12,320 12,020 12,363
Nov-91 13,493 12,887 13,493 13,193 13,632
Nov-92 14,833 14,166 14,760 14,560 14,999
Nov-93 16,393 15,657 16,313 16,213 16,662
Nov-94 15,387 14,696 15,312 15,312 15,787
Nov-95 18,221 17,403 18,007 18,007 18,770
Nov-96 19,024 18,170 18,634 18,634 19,874
Nov-97 20,217 19,309 19,645 19,645 21,299
May-98 20,805 19,871 20,280 20,280 22,104
</TABLE>
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (7/15/88)
- --------------------------------------------------------------------------------
Investor A (No Load) 3.10% 7.99% 5.69% 7.70%
- --------------------------------------------------------------------------------
Investor A* -1.54% 3.10% 4.73% 7.20%
- --------------------------------------------------------------------------------
Investor B (No CDSC) 2.78% 7.23% 5.13% 7.42%
- --------------------------------------------------------------------------------
Investor B (CDSC)** -2.22% 2.23% 4.97% 7.42%
- --------------------------------------------------------------------------------
* Reflexes 4.50% sales charge.
** Reflexes applicable contingent deferred sales charge.
(Maximum 5.00%)
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Lehman Brothers
Trust Municipal Bond Index
Jul-88 10,000 10,000
Nov-88 10,523 10,341
Nov-89 11,622 11,480
Nov-90 12,353 12,363
Nov-91 13,546 13,632
Nov-92 14,915 14,999
Nov-93 16,517 16,662
Nov-94 15,535 15,787
Nov-95 18,430 18,770
Nov-96 19,281 19,874
Nov-97 20,531 21,299
May-98 21,164 22,104
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year 5 Year (7/15/88)
- --------------------------------------------------------------------------------
Trust 3.29% 8.29% 5.92% 7.89%
- --------------------------------------------------------------------------------
The ARCH Missouri Tax-Exempt Bond Portfolio is measured against the Lehman
Brothers Municipal Bond Index, an unmanaged index representative of the total
return of municipal bonds. Investors are unable to purchase the Index directly,
although they can invest in the underlying securities. The performance of the
Index does not reflect the deduction of expenses associated with a mutual fund,
such as investment management and fund accounting fees. By contrast, the
performance of the Portfolio shown on the graph reflects the deduction of fees
for these value-added services, as well as the deduction of a 4.50% sales
charge on Investor A shares and the applicable contingent deferred sales charge
(CDSC) on Investor B shares. The portfolio may be subject to certain state and
local taxes and, depending on an investor's tax status, the federal alternative
minimum tax.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Investor B shares were initially offered on March 1, 1995. The performance
figures for Investor B shares for periods prior to such date represent the
performance for Investor A shares in the Portfolio, which has been restated to
reflect the contingent deferred sales charges payable by holders of Investor B
shares who redeem within six years of the date of purchase. Investor B shares
are also subject to distribution and service fees at a maximum annual rate of
1.00%. Had these distribution and service fees been reflected, performance
would have been reduced.
-27-
<PAGE>
THE ARCH NATIONAL MUNICIPAL BOND PORTFOLIO
Q. WHAT WERE THE CONDITIONS IN THE MUNICIPAL BOND MARKET DURING THE SIX
MONTHS ENDED MAY 31, 1998?
A. Investors early in the period worried that the Federal Reserve would raise
interest rates to keep the economy from overheating and triggering higher
inflation. However, it became clear that the economic crisis in Asia might
dampen U.S. exports and that a strong U.S. dollar might hurt U.S. companies'
profits overseas. Thus, the Fed was able to refrain from boosting interest
rates. Once that became clear, bond yields fell, and prices rose. The municipal
bond market also benefited from limited supplies and strong demand. Municipal
bonds with relatively long maturities outperformed shorter term municipals as
well as longer term Treasuries.
Q. HOW DID YOU MANAGE THE PORTFOLIO IN THAT ENVIRONMENT?
A. We maintained the average maturity of the Portfolio at around 10 years to
take advantage of the favorable conditions in the municipal market. We did so
by purchasing securities with 10-year maturities as well as a mix of shorter
and longer maturities.*
Q. WHAT WAS THE AVERAGE CREDIT RATING OF THE PORTFOLIO'S HOLDINGS?
A. The average credit rating of the Portfolio remained AA1. The Portfolio
seeks to maintain a high average credit rating as a matter of policy. Moreover,
lower-quality issues during the period did not offer sufficient extra yield to
investors to justify accepting the additional risk.
Q. WHAT IS YOUR STRATEGY GOING FORWARD?
A. We will seek to continue to maintain the average maturity of the Portfolio
at around 10 years in the current environment to capitalize on continued
opportunities for solid performance in the municipal market. We also will
maintain the Portfolio's policy of investing in high-quality issues to reduce
the potential for losses related to excessive credit risk.
- ------
* Portfolio composition is subject to change.
-28-
<PAGE>
THE ARCH NATIONAL MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Municipal
Date Investor A (No Load) Investor A (Load)* Investor B (No CDSC) Investor B (CDSC)** Bond Index 10-year
---- ------------------- ------------------ -------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
11/18/96 10,000 9,551 10,000 9,500 10,000
11/30/96 10,073 9,620 10,070 9,570 10,566
11/30/97 10,839 10,352 10,775 10,275 11,311
5/31/98 11,257 10,751 11,145 10,745 11,741
</TABLE>
Average Annual Total Return
as of 5/31/98
-------------------------------------------------------
Since
Inception
6 Mo. 1 Year (11/18/96)
-------------------------------------------------------
Investor A (No Load) 3.85% 9.88% 8.04%
-------------------------------------------------------
Investor A* -0.78% 4.93% 4.84%
-------------------------------------------------------
Investor B (No CDSC) 3.43% 9.13% 7.33%
-------------------------------------------------------
Investor B (CDSC)** -1.47% 4.13% 4.80%
-------------------------------------------------------
* Reflects 4.50% sales charge.
** Reflects applicable contingent deferred sales charge.
(Maximum 5.00%)
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Lehman Municipal
Date Trust Bond Index 10-Year
---- ----- ------------------
11/18/96 10,000 10,000
11/30/96 10,074 10,566
11/30/97 10,876 11,311
5/31/98 11,306 11,741
Average Annual Total Return
as of 5/31/98
------------------------------------------------
Since
Inception
6 Mo. 1 Year (11/18/96)
------------------------------------------------
Trust 3.95% 10.11% 8.34%
------------------------------------------------
The ARCH National Municipal Bond Portfolio is measured against the Lehman
Brothers Municipal Bond Index-10 year, an unmanaged Index representative of the
total return of municipal bonds with remaining maturities of 10 years or less.
Investors are unable to purchase the Index directly, although they can invest
in the underlying securities. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. By contrast, the performance of the
Portfolio shown on the graph reflects the deduction of these value-added
services, as well as the deduction of a 4.50% sales charge on Investor A shares
and the applicable contingent deferred sales charge (CDSC) on Investor B
shares. The Portfolio may be subject to certain state and local taxes and,
depending on an investor's tax status, the federal alternative minimum tax.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
-29-
<PAGE>
THE ARCH INTERMEDIATE CORPORATE BOND PORTFOLIO
Q. WHAT ECONOMIC AND MARKET FACTORS AFFECTED INTERMEDIATE BONDS DURING THE
SIX-MONTH PERIOD ENDED MAY 31, 1998?
A. Interest rates declined throughout the bond market during most of the
period, with some of the most significant declines occurring in the
intermediate-term sector. For example, the yield on a 10-year U.S. Treasury
bond fell 30 basis points, from 5.85% to 5.55%. That decline was the result of
the Fed's return to a neutral stance from a tightening basis. The Asian
financial crisis helped slow economic growth in this country enough to keep
inflation under control, and the Fed did not have to raise interest rates.
Q. WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO IN THAT ENVIRONMENT?
A. We did not make significant changes to either the Portfolio's average
maturity or duration. The average maturity declined slightly, from 6.6 years to
6.4 years, and duration decreased from 4.73 years to 4.65 years. We did not try
to anticipate any interest rate changes because income--not capital gains--is
the primary objective of this Portfolio.
Q. WHERE DID YOU FIND THE BEST INVESTMENT OPPORTUNITIES IN THE CORPORATE BOND
MARKET DURING THE PERIOD?
A. We focused primarily on bonds issued by high-quality U.S. industrial
corporations such as General Motors (0.99%) and Ford (1.55%). We also purchased
securities of such companies as Ameritech (3.66%) and Southwest Bell (1.88%).
We avoided bonds issued by large banks because we are concerned about the
credit they have extended to foreign corporations and governments in this time
of global economic uncertainty. The average credit rating of the Portfolio
remains unchanged at AA2.*
Q. WHAT IS YOUR OUTLOOK FOR THE PORTFOLIO AND THE CORPORATE BOND MARKET GOING
FORWARD?
A. We will continue to look for securities with an A rating or higher.
Currently, lower rated securities do not offer enough yield advantage to
justify taking additional credit risk. We generally do not try to forecast
interest rate changes, so we do not foresee making any major adjustments to the
Portfolio's average maturity and duration.
- ------
* Portfolio composition is subject to change.
-30-
<PAGE>
THE ARCH INTERMEDIATE CORPORATE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Intermediate
Date Investor A (No Load) Investor A (Load)* Trust Institutional Corporate Bond Index
---- -------------------- ------------------ ----- ------------- ---------------------
<S> <C> <C> <C> <C> <C>
2/10/97 10,000 9,551 10,000 10,000 10,000
11/30/97 10,648 10,170 10,665 10,660 10,711
5/31/98 11,062 10,566 11,097 11,086 11,132
</TABLE>
* Reflects 4.50% sales charge.
** Reflects applicable contingent deferred sales charge. (Maximum 5.00%)
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mos. 1 Year (2/10/97)
- --------------------------------------------------------------------------------
Investor A (No Load) 3.90% 10.33% 8.07%
- --------------------------------------------------------------------------------
Investor A* -0.81% 5.40% 4.32%
- --------------------------------------------------------------------------------
Trust 4.05% 10.76% 8.33%
- --------------------------------------------------------------------------------
Institutional 4.00% 10.58% 8.25%
- --------------------------------------------------------------------------------
The ARCH Intermediate Corporate Bond Portfolio is measured against the Lehman
Brothers Intermediate Corporate Bond Index, an unmanaged Index comprised of the
Lehman Brothers Intermediate Index, including intermediate and long-term
components, and sub-indices covering AAA Corporates, AA Corporates, A
Corporates and BAA Corporates, each of which also include intermediate and
long-term components. Investors are unable to purchase the Index directly,
although they can invest in the underlying securities. The performance of the
Index does not reflect the deduction of expenses associated with a mutual fund,
such as investment management and fund accounting fees. By contrast, the
performance of the Portfolio shown on the graph reflects the deduction of fees
for these value-added services, as well as the deduction of a 4.50% sales
charge on Investor A shares.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
-31-
<PAGE>
THE ARCH BOND INDEX PORTFOLIO
Q. WHAT WERE CONDITIONS LIKE IN THE BOND MARKET DURING THE SIX MONTHS ENDED
MAY 31, 1998?
A. Early in the period, investors were concerned that strong economic growth
in the United States might cause the Federal Reserve to raise interest rates to
ward off inflation. Such a move would have been bad news for the bond market.
But those concerns faded as investors began to suspect that the economic crisis
in Asia would put a damper on U.S. exports. The Fed was able to remain neutral,
and the bond market rebounded as yields declined. For example, the yields on a
30-year U.S. Treasury Bond fell from 6.04% at the start of the period to 5.80%
on May 31, 1998.
Q. HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
A. The Portfolio holds roughly 125 securities in the same percentage
weighting as the Lehman Brothers Aggregate Bond Index across market sectors and
maturities. Our objective is to track the performance of that Index very
closely, and we were able to do so during the period. The Portfolio's return
for the period was 3.89% (Investor A shares without the deduction of any sales
charge), which was close to the Index's 4.09% return.*
Q. WHAT CHANGES OCCURRED IN THE INDEX AND THE PORTFOLIO OVER THE SIX MONTHS
ENDED MAY 31, 1998?
A. The U.S. Treasury has reduced the number of new bond issuances for the
year. Therefore, U.S. agencies such as the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation have begun to issue
more bonds to fill the vacancy left in the market. We have increased the
Portfolio's exposure to U.S. agency debt, as those bonds became benchmark
securities.
Q. WHAT IS YOUR OUTLOOK FOR THE BOND MARKET?
A. We expect favorable conditions for the bond market, with economic growth
staying strong and inflation remaining low. Such an environment is promising
for the Portfolio. However, the Federal Reserve may raise interest rates later
this year if it sees any indication of inflation heating up; in that case, we
believe the bond market and the Portfolio could suffer a temporary setback. We
will continue to track any changes in the sector or maturity components of our
benchmark to help ensure that we can fulfill the Portfolio's long-term
objective regardless of short-term market conditions.
- ------
* Portfolio composition is subject to change.
-32-
<PAGE>
THE ARCH BOND INDEX PORTFOLIO
- --------------------------------------------------------------------------------
Value of a $10,000 Investment
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Investor A (No Load) Investor A (Load)* Trust Institutional Lehman Aggregate Bond Index
---- ------------------- ------------------ ----- ------------- ---------------------------
<S> <C> <C> <C> <C> <C>
2/10/97 10,000 9,747 10,000 10,000 10,000
11/30/97 10,693 10,422 10,715 10,720 10,823
5/31/98 11,109 10,828 11,149 11,146 11,266
</TABLE>
* Reflects 2.50% sales charge.
- --------------------------------------------------------------------------------
Average Annual Total Return
as of 5/31/98
- --------------------------------------------------------------------------------
Since
Inception
6 Mo. 1 Year (2/10/97)
- --------------------------------------------------------------------------------
Investor A (No Load) 3.89% 10.55% 8.42%
- --------------------------------------------------------------------------------
Investor A* 1.30% 7.81% 6.30%
- --------------------------------------------------------------------------------
Trust 4.05% 10.86% 8.72%
- --------------------------------------------------------------------------------
Institutional 3.99% 10.81% 8.69%
- --------------------------------------------------------------------------------
The ARCH Bond Index Portfolio is measured against the Lehman Brothers
Aggregate Bond Index, an unmanaged Index comprised of the Lehman Brothers
Government/Corporate Bond Index and two Lehman Brothers asset-backed securities
indices. Investors are unable to purchase the Index directly, although they can
invest in the underlying securities. The performance of the Index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. By contrast, the performance of
the Portfolio shown on the graph reflects the deduction of fees for these
value-added services, as well as the deduction of a 2.50% sales charge on
Investor A Shares.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES OF A PARTICULAR CLASS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
-33-
<PAGE>
TABLE OF CONTENTS
Statements of Assets and Liabilities
Page 35
Statements of Operations
Page 40
Statements of Changes in Net Assets
Page 45
Statements of Cash Flows
Page 54
Schedules of Portfolio Investments
Page 56
Notes to Financial Statements
Page 112
Financial Highlights
Page 135
-34-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
TREASURY TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost
$1,248,423,490; $269,698,968; and
$146,829,803, respectively)........ $1,248,423,490 $269,698,968 $146,829,803
Cash................................ 873 388 128
Interest and dividends receivable... 4,994,900 1,552,399 1,130,713
Receivable for capital shares is-
sued............................... 2,483 -- --
Prepaid expenses and other assets... 20,310 20,580 10,877
-------------- ------------ ------------
Total Assets..................... 1,253,442,056 271,272,335 147,971,521
-------------- ------------ ------------
LIABILITIES:
Distributions payable............... 5,299,501 977,058 399,083
Accrued expenses and other payables:
Investment advisory fees........... 373,695 76,185 43,696
Administration fees................ 21,102 4,323 2,420
Distribution and administrative
services fees..................... 148,428 19,952 8,402
Directors' fees.................... 4,712 698 755
Other liabilities.................. 21,733 1,232 3,292
-------------- ------------ ------------
Total Liabilities................ 5,869,171 1,079,448 457,648
-------------- ------------ ------------
NET ASSETS:
Capital............................. 1,247,570,310 270,173,929 147,501,713
Undistributed (distributions in ex-
cess of) net investments income.... 7,451 6,076 12,160
Undistributed (distributions in ex-
cess of) net realized gains........ (4,876) 12,882 --
-------------- ------------ ------------
Net Assets....................... $1,247,572,885 $270,192,887 $147,513,873
============== ============ ============
Investor A Shares
Net Assets......................... $ 159,530,996 $ 17,432,701 $ 12,367,555
Shares............................. 159,530,776 17,432,426 12,367,517
Offering and redemption price per
share............................. $ 1.00 $ 1.00 $ 1.00
============== ============ ============
Investor B Shares
Net Assets......................... $ 70,143 $ -- $ --
Shares............................. 70,143 -- --
Offering and redemption price per
share............................. $ 1.00 $ -- $ --
============== ============ ============
Trust Shares
Net Assets......................... $1,063,210,739 $252,528,469 $135,146,318
Shares............................. 1,063,208,452 252,512,210 135,146,285
Offering and redemption price per
share............................. $ 1.00 $ 1.00 $ 1.00
============== ============ ============
Institutional Shares
Net Assets......................... $ 24,761,007 $ 231,717 $ --
Shares............................. 24,760,939 231,709 --
Offering and redemption price per
share............................. $ 1.00 $ 1.00 $ --
============== ============ ============
</TABLE>
See notes to financial statements
-35-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH &
INCOME SMALL CAP INTERNATIONAL
EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost
$442,044,284; $292,334,600; and
$63,505,893, respectively).......... $543,744,273 $324,366,874 $80,900,143
Cash................................. 55,486 71,513 --
Foreign currency, at value (cost $0;
$0; and $216,229, respectively)..... -- -- 212,343
Interest and dividends receivable.... 462,812 120,509 51,841
Receivable for capital shares issued. 9,749 11,973 --
Receivable for investments sold...... 1,075,676 4,590,169 532,555
Tax reclaim receivable............... -- -- 76,584
Deferred organization costs.......... -- -- 4,674
Prepaid expenses and other assets.... 6,528 5,518 4,985
------------ ------------ -----------
Total Assets...................... 545,354,524 329,166,556 81,783,125
------------ ------------ -----------
LIABILITIES:
Payable to custodian................. -- -- 121,051
Distributions payable................ 320,538 -- --
Payable for investments purchased.... 413,762 812,342 338,766
Payable for capital shares redeemed.. 7,415 -- 61
Payable for return of collateral
received............................ 52,872,017 67,632,037 --
Accrued expenses and other payables:
Investment advisory fees............ 235,988 173,470 69,249
Administration fees................. 8,125 4,283 1,344
Distribution and administrative
services fees...................... 48,561 14,527 3,503
Directors' fees..................... 1,621 1,336 269
Other liabilities................... 92,744 48,662 40,453
------------ ------------ -----------
Total Liabilities................. 54,000,771 68,686,657 574,696
------------ ------------ -----------
NET ASSETS:
Capital.............................. 322,255,193 211,502,125 61,554,475
Undistributed (distributions in
excess of) net investments income... (2,634) (320,958) 50,529
Undistributed (distributions in
excess of) net realized gains....... 67,401,205 17,266,458 2,218,862
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities denominated in foreign
currencies.......................... 101,699,989 32,032,274 17,384,563
------------ ------------ -----------
Net Assets........................ $491,353,753 $260,479,899 $81,208,429
============ ============ ===========
Investor A Shares
Net Assets.......................... $ 50,761,949 $ 15,697,190 $ 3,434,577
Shares.............................. 2,628,223 1,071,170 246,193
Redemption price per share.......... $ 19.31 $ 14.65 $ 13.95
============ ============ ===========
Maximum Sales Charge................. 4.50% 4.50% 4.50%
Maximum Offering Price Per Share
(100%/(100% -- Maximum Sales Charge)
of net asset value adjusted to the
nearest cent) per share............. $ 20.22 $ 15.34 $ 14.61
============ ============ ===========
Investor B Shares
Net Assets.......................... $ 8,284,277 $ 1,664,947 $ 633,455
Shares.............................. 434,278 116,478 46,387
Offering price per share*........... $ 19.08 $ 14.29 $ 13.66
============ ============ ===========
Trust Shares
Net Assets.......................... $324,529,928 $209,713,952 $68,959,777
Shares.............................. 16,738,468 14,150,595 4,897,038
Offering and redemption price per
share.............................. $ 19.39 $ 14.82 $ 14.08
============ ============ ===========
Institutional Shares
Net Assets.......................... $107,777,599 $ 33,403,810 $ 8,180,620
Shares.............................. 5,580,310 2,287,904 587,404
Offering and redemption price per
share.............................. $ 19.31 $ 14.60 $ 13.93
============ ============ ===========
</TABLE>
- ------
* Redemption price of Investor B Shares varies based on length of time held.
See notes to financial statements
-36-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH
INCOME INDEX EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(cost $101,621,944;
$51,325,977;
$80,960,638; and
$118,335,797,
respectively).......... $126,192,278 $60,162,247 $112,779,174 $135,771,442
Cash.................... 12,958 12,470 19,549 7,746
Interest and dividends
receivable............. 205,847 77,356 43,221 628,032
Receivable for capital
shares issued.......... 8,821 2,925 28 14,752
Receivable for
investments sold....... 1,183,325 1,698 544,382 --
Deferred organization
costs.................. 26,808 21,987 -- --
Prepaid expenses and
other assets........... 20,615 18,894 88,302 4,461
------------ ----------- ------------ ------------
Total Assets......... 127,650,652 60,297,577 113,474,656 136,426,433
------------ ----------- ------------ ------------
LIABILITIES:
Distributions payable... 161,659 60,095 -- 228,881
Payable for investments
purchased.............. 348,521 -- -- 50,354
Payable for capital
shares redeemed........ -- -- 362 --
Payable for return of
collateral received.... 12,359,500 11,247,798 17,869,000 6,917,800
Accrued expenses and
other payables:
Investment advisory
fees.................. 74,271 12,532 62,613 83,758
Administration fees.... 1,893 808 1,576 2,130
Distribution and
administrative
services fees......... 402 2,374 67,325 22,257
Directors' fees........ 503 90 180 539
Other liabilities...... 15,070 8,817 18,146 28,421
------------ ----------- ------------ ------------
Total Liabilities.... 12,961,819 11,332,514 18,019,202 7,334,140
------------ ----------- ------------ ------------
NET ASSETS:
Capital................. 60,029,432 39,434,980 50,022,896 102,879,881
Undistributed
(distributions in
excess of) net
investments income..... 20,306 3,202 (88,101) 31,473
Undistributed
(distributions in
excess of) net realized
gains.................. 30,068,761 690,611 13,702,123 8,745,294
Net unrealized
appreciation
(depreciation) from
investments............ 24,570,334 8,836,270 31,818,536 17,435,645
------------ ----------- ------------ ------------
Net Assets........... $114,688,833 $48,965,063 $ 95,455,454 $129,092,293
============ =========== ============ ============
Investor A Shares
Net Assets............. $ 894,404 $ 541,686 $ 3,705,017 $ 10,849,319
Shares................. 85,529 39,835 202,302 864,144
Redemption price per
share................. $ 10.46 $ 13.60 $ 18.31 $ 12.55
============ =========== ============ ============
Maximum Sales Charge.... 4.50% 2.50% 4.50% 4.50%
Maximum Offering Price
Per Share
(100%/(100% -- Maximum
Sales Charge) of net
asset value adjusted to
the nearest cent) per
share.................. $ 10.95 $ 13.95 $ 19.17 $ 13.14
============ =========== ============ ============
Investor B Shares
Net Assets............. $ 215,021 $ -- $ 81,558 $ 688,758
Shares................. 20,572 -- 4,462 55,389
Offering price per
share*................ $ 10.45 $ -- $ 18.28 $ 12.43
============ =========== ============ ============
Trust Shares
Net Assets............. $113,577,295 $39,945,586 $ 85,401,068 $ 45,172,299
Shares................. 10,853,449 2,936,126 4,661,854 3,596,264
Offering and
redemption price per
share................. $ 10.46 $ 13.60 $ 18.32 $ 12.56
============ =========== ============ ============
Institutional Shares
Net Assets............. $ 2,113 $ 8,477,791 $ 6,267,811 $ 72,381,917
Shares................. 202 623,303 342,377 5,782,913
Offering and
redemption price per
share................. $ 10.46 $ 13.60 $ 18.31 $ 12.52
============ =========== ============ ============
</TABLE>
- ------
* Redemption price of Investor B Shares varies based on length of time held.
See notes to financial statements
-37-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
GOVERNMENT & U.S. SHORT-
CORPORATE GOVERNMENT INTERMEDIATE
BOND SECURITIES MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost
$205,822,601; $127,919,172; and
$40,615,949, respectively)........... $212,439,198 $128,667,971 $41,016,431
Cash.................................. 11,284 24,876 --
Interest receivable................... 2,032,022 1,237,270 542,756
Receivable for capital shares issued.. 23,302 -- --
Deferred organization costs........... -- -- --
Prepaid expenses and other assets..... 5,409 3,542 646
------------ ------------ -----------
Total Assets....................... 214,511,215 129,933,659 41,559,833
------------ ------------ -----------
LIABILITIES:
Payable to custodian.................. -- -- 181
Distributions payable................. 989,558 505,164 128,602
Payable for capital shares redeemed... -- -- 239
Payable for return of collateral re-
ceived............................... 10,513,520 23,784,130 --
Accrued expenses and other payables:
Investment advisory fees............. 77,227 40,201 19,143
Administration fees.................. 3,332 1,736 679
Distribution and administrative
services fees....................... 6,496 3,261 --
Directors' fees...................... 494 332 255
Other liabilities.................... 26,877 14,885 32,584
------------ ------------ -----------
Total Liabilities.................. 11,617,504 24,349,709 181,683
------------ ------------ -----------
NET ASSETS:
Capital............................... 196,882,333 105,135,254 40,961,663
Undistributed (distributions in excess
of) net investments income........... 75,019 258,001 --
Undistributed (distributions in excess
of) net realized gains............... (680,238) (558,104) 16,005
Net unrealized appreciation (deprecia-
tion) from investments............... 6,616,597 748,799 400,482
------------ ------------ -----------
Net Assets............................ $202,893,711 $105,583,950 $41,378,150
============ ============ ===========
Investor A Shares
Net Assets........................... $ 4,598,969 $ 4,725,784 $ 1,111
Shares............................... 440,199 444,153 109
Redemption price per share........... $ 10.45 $ 10.64 $ 10.16
============ ============ ===========
Maximum Sales Charge.................. 4.50% 4.50% 4.50%
Maximum Offering Price Per Share
(100%/(100% -- Maximum Sales Charge)
of net asset value adjusted to the
nearest cent) per share.............. $ 10.94 $ 11.14 $ 10.67
============ ============ ===========
Investor B Shares
Net Assets........................... $ 578,043 $ 497,219 $ --
Shares............................... 55,214 46,759 --
Offering price per share*............ $ 10.47 $ 10.63 $ --
============ ============ ===========
Trust Shares
Net Assets........................... $178,245,781 $ 94,109,527 $41,377,039
Shares............................... 17,034,374 8,844,367 4,077,347
Offering and redemption price per
share............................... $ 10.46 $ 10.64 $ 10.15
============ ============ ===========
Institutional Shares
Net Assets........................... $ 19,470,918 $ 6,251,420 $ --
Shares............................... 1,860,433 589,562 --
Offering and redemption price per
share............................... $ 10.47 $ 10.60 $ --
============ ============ ===========
</TABLE>
- ------
* Redemption price of Investor B Shares varies based on length of time held.
See notes to financial statements
-38-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MISSOURI NATIONAL INTERMEDIATE
TAX-EXEMPT MUNICIPAL CORPORATE BOND
BOND BOND BOND INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(cost $99,626,179;
$352,117,088;
$56,123,997; and
$164,028,202,
respectively).......... $104,589,798 $365,871,413 $57,645,470 $169,306,283
Cash.................... 221 937 3,966 15,741
Interest receivable..... 1,526,574 5,911,740 803,735 1,730,089
Deferred organization
costs.................. -- 24,644 16,785 11,837
Prepaid expenses and
other assets........... 3,302 5,378 28 8,170
------------ ------------ ----------- ------------
Total Assets......... 106,119,895 371,814,112 58,469,984 171,072,120
------------ ------------ ----------- ------------
LIABILITIES:
Distributions payable... 401,554 1,358,348 278,357 808,491
Payable for capital
shares redeemed........ -- 6,830 -- --
Payable for return of
collateral received.... -- -- 3,335,500 14,170,360
Accrued expenses and
other payables:
Investment advisory
fees.................. 39,712 170,890 25,234 39,511
Administration fees.... 1,736 6,069 1,643 7,133
Distribution and
administrative
services fees......... 5,721 327 267 1,536
Directors' fees........ 492 1,612 219 690
Other liabilities...... 17,289 21,209 29,049 2,870
------------ ------------ ----------- ------------
Total Liabilities.... 466,504 1,565,285 3,670,269 15,030,591
------------ ------------ ----------- ------------
NET ASSETS:
Capital................. 100,535,750 352,898,333 53,227,505 150,620,423
Undistributed
(distributions in
excess of) net
investments income..... -- -- 7,399 (184,726)
Undistributed
(distributions in
excess of) net realized
gains.................. 154,022 3,596,169 43,338 327,751
Net unrealized
appreciation
(depreciation) from
investments............ 4,963,619 13,754,325 1,521,473 5,278,081
------------ ------------ ----------- ------------
Net Assets........... $105,653,391 $370,248,827 $54,799,715 $156,041,529
============ ============ =========== ============
Investor A Shares
Net Assets............. $ 23,607,855 $ 1,159,801 $ 250,528 $ 161,346
Shares................. 1,971,512 115,125 24,877 15,798
Redemption price per
share................. $ 11.97 $ 10.07 $ 10.07 $ 10.21
============ ============ =========== ============
Maximum Sales Charge.... 4.50% 4.50% 4.50% 2.50%
Maximum Offering Price
Per Share
(100%/(100% -- Maximum
Sales Charge) of net
asset value adjusted to
the nearest cent) per
share.................. $ 12.54 $ 10.55 $ 10.55 $ 10.47
============ ============ =========== ============
Investor B Shares
Net Assets............. $ 2,045,943 $ 371,785 $ -- $ --
Shares................. 170,954 36,855 -- --
Offering price per
share*................ $ 11.97 $ 10.09 $ -- $ --
============ ============ =========== ============
Trust Shares
Net Assets............. $ 79,999,593 $368,717,241 $53,479,160 $150,234,323
Shares................. 6,679,147 36,570,955 5,312,987 14,730,371
Offering and
redemption price per
share................. $ 11.98 $ 10.08 $ 10.07 $ 10.20
============ ============ =========== ============
Institutional Shares
Net Assets............. $ -- $ -- $ 1,070,027 $ 5,645,860
Shares................. -- -- 106,282 553,056
Offering and
redemption price per
share................. $ -- $ -- $ 10.07 $ 10.21
============ ============ =========== ============
</TABLE>
- ------
* Redemption price of Investor B Shares varies based on length of time held.
See notes to financial statements
-39-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
TREASURY TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income......................... $36,298,277 $6,659,102 $2,958,718
Dividend income......................... -- -- 34,018
----------- ---------- ----------
Total income......................... 36,298,277 6,659,102 2,992,736
----------- ---------- ----------
EXPENSES:
Investment advisory fees................ 2,550,322 507,917 344,335
Administration fees..................... 1,275,173 253,961 86,083
Distribution and services fees, Investor
A Shares............................... 202,238 12,499 17,775
Distribution and services fees, Investor
B Shares............................... 355 -- --
Administrative services fees, Trust
Shares................................. 1,360,957 304,660 197,434
Administrative services fees, Institu-
tional Shares.......................... 30,665 288 --
Accounting and custodian fees........... 80,715 17,559 11,725
Legal and audit fees.................... 84,350 23,464 10,344
Directors' fees and expenses............ 7,913 1,969 969
Transfer agent fees..................... 118,019 33,596 20,745
Registration and filing fees............ 599 3,199 3,236
Other fees.............................. 123,705 59,100 17,622
----------- ---------- ----------
Total expenses before voluntary fee re-
ductions............................... 5,835,011 1,218,212 710,268
Expenses voluntarily reduced............ (1,664,064) (397,637) (200,992)
----------- ---------- ----------
Net expenses......................... 4,170,947 820,575 509,276
----------- ---------- ----------
Net investment income................... 32,127,330 5,838,527 2,483,460
----------- ---------- ----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gain (loss) from investment
transactions........................... 31 12,770 --
----------- ---------- ----------
Change in net assets resulting from op-
erations............................... $32,127,361 $5,851,297 $2,483,460
=========== ========== ==========
</TABLE>
See notes to financial statements
-40-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH & SMALL CAP INTERNATIONAL
INCOME EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ----------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income....................... $ 645,295 $ 227,379 $ 68,480
Dividend income....................... 3,051,686 724,176 819,545
Income from securities lending........ 20,588 71,671 --
Foreign tax withholding............... -- -- (198,730)
------------ ----------- -----------
Total income....................... 3,717,569 1,023,226 689,295
------------ ----------- -----------
EXPENSES:
Investment advisory fees.............. 1,313,960 1,000,333 363,869
Administration fees................... 477,639 266,758 72,774
Distribution and services fees, In-
vestor A Shares...................... 73,405 22,813 4,699
Distribution and services fees, In-
vestor B Shares...................... 36,969 7,974 3,014
Administrative services fees, Trust
Shares............................... 481,820 323,909 92,372
Administrative services fees, Institu-
tional Shares........................ 150,136 51,020 11,185
Accounting and custodian fees......... 77,650 44,927 63,920
Legal and audit fees.................. 39,094 22,327 7,102
Directors' fees and expenses.......... 3,458 1,638 364
Transfer agent fees................... 84,459 43,257 10,738
Registration and filing fees.......... 582 75 2,730
Other fees............................ 21,829 16,439 8,009
------------ ----------- -----------
Total expenses before voluntary fee
reductions........................... 2,761,001 1,801,470 640,776
Expenses voluntarily reduced.......... (720,620) (457,286) (158,783)
------------ ----------- -----------
Net expenses....................... 2,040,381 1,344,184 481,993
------------ ----------- -----------
Net investment income (loss).......... 1,677,188 (320,958) 207,302
------------ ----------- -----------
REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS:
Net realized gain (loss) from foreign
currency transactions................ -- -- (145,522)
Net realized gain (loss) from invest-
ment transactions.................... 68,665,720 17,739,015 2,364,794
Net change in unrealized gain (loss)
from translation of assets and lia-
bilities denominated in foreign cur-
rencies.............................. -- -- 30,411
Net change in unrealized gain (loss)
from investment transactions......... (24,508,128) (686,054) 11,348,139
------------ ----------- -----------
Net realized/unrealized gains (losses)
from investments..................... 44,157,592 17,052,961 13,597,822
------------ ----------- -----------
Change in net assets resulting from
operations........................... $ 45,834,780 $16,732,003 $13,805,124
============ =========== ===========
</TABLE>
See notes to financial statements.
-41-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH
INCOME INDEX EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income............ $ 202,562 $ 14,013 $ 83,481 $ 1,674,779
Dividend income............ 1,285,895 304,591 436,725 500,561
Income from securities
lending................... 3,203 1,112 1,788 8,395
Foreign tax withholding.... -- (2,126) -- --
------------ ---------- ----------- -----------
Total income............ 1,491,660 317,590 521,994 2,183,735
------------ ---------- ----------- -----------
EXPENSES:
Investment advisory fees... 427,889 59,309 358,277 476,311
Administration fees........ 114,105 39,538 95,541 127,018
Distribution and services
fees, Investor A Shares... 879 632 5,439 15,512
Distribution and services
fees, Investor B Shares... 771 -- 119 2,833
Administrative services
fees, Trust Shares........ 170,044 54,060 129,926 77,096
Administratvie services
fees, Institutional
Shares.................... 2 4,617 7,911 97,068
Accounting and custodian
fees...................... 19,707 19,042 17,312 31,643
Legal and audit fees....... 11,294 10,002 9,649 14,718
Directors' fees and ex-
penses.................... 817 207 787 728
Transfer agent fees........ 16,326 4,518 6,458 18,200
Registration and filing
fees...................... 6,097 4,281 5,868 2,366
Other fees................. 18,710 8,023 17,687 2,931
------------ ---------- ----------- -----------
Total expenses before vol-
untary fee reductions..... 786,641 204,229 654,974 866,424
Expenses voluntarily re-
duced..................... (535,271) (113,301) (92,879) (140,604)
------------ ---------- ----------- -----------
Net expenses............ 251,370 90,928 562,095 725,820
------------ ---------- ----------- -----------
Net investment income
(loss):................... 1,240,290 226,662 (40,101) 1,457,915
------------ ---------- ----------- -----------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS:
Net realized gain (loss)
from investment transac-
tions..................... 30,068,746 691,470 13,702,123 8,788,884
Net change in unrealized
gain (loss) from invest-
ment transactions......... (16,466,504) 3,990,217 (3,214,156) (1,093,385)
------------ ---------- ----------- -----------
Net realized/unrealized
gains (losses) from in-
vestments................. 13,602,242 4,681,687 10,487,967 7,695,499
------------ ---------- ----------- -----------
Change in net assets re-
sulting from operations... $ 14,842,532 $4,908,349 $10,447,866 $ 9,153,414
============ ========== =========== ===========
</TABLE>
See notes to financial statements
-42-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
GOVERNMENT & U.S. SHORT-
CORPORATE GOVERNMENT INTERMEDIATE
BOND SECURITIES MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ---------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................... $6,418,136 $3,086,654 $ 780,461
Dividend Income.......................... 23,609 22,837 17,040
Income from securities lending........... 30,795 14,423 --
---------- ---------- ---------
Total income.......................... 6,472,540 3,123,914 797,501
---------- ---------- ---------
EXPENSES:
Investment advisory fees................. 452,505 219,505 99,562
Administration fees...................... 201,114 97,558 36,205
Distribution and services fees, Investor
A Shares................................ 7,151 7,688 34
Distribution and services fees, Investor
B Shares................................ 2,599 2,590 --
Administrative services fees, Trust
Shares.................................. 265,788 127,960 54,272
Administrative services fees, Institu-
tional Shares........................... 27,951 9,911 --
Accounting and custodian fees............ 42,999 23,915 10,399
Legal and audit fees..................... 17,037 9,828 13,908
Directors' fees and expenses............. 1,613 546 182
Transfer agent fees...................... 28,645 13,650 4,172
Registration and filing fees............. 1,645 1,820 1,523
Other fees............................... 16,196 9,283 9,058
---------- ---------- ---------
Total expenses before voluntary fee re-
ductions................................ 1,065,243 524,254 229,315
Expenses voluntarily reduced............. (366,343) (176,738) (134,803)
---------- ---------- ---------
Net expenses.......................... 698,900 347,516 94,512
---------- ---------- ---------
Net investment income.................... 5,773,640 2,776,398 702,989
---------- ---------- ---------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gain (loss) from investment
transactions............................ 767,111 46,659 16,005
Net change in unrealized gain (loss) from
investment transactions................. 1,061,698 80,776 128,115
---------- ---------- ---------
Net realized/unrealized gains (losses)
from investments........................ 1,828,809 127,435 144,120
---------- ---------- ---------
Change in net assets resulting from oper-
ations.................................. $7,602,449 $2,903,833 $ 847,109
========== ========== =========
</TABLE>
See notes to financial statements
-43-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MISSOURI NATIONAL INTERMEDIATE
TAX-EXEMPT MUNICIPAL CORPORATE BOND
BOND BOND BOND INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income.............. $2,635,850 $ 9,281,398 $1,732,993 $4,918,378
Dividend Income.............. 70,899 47,709 25,435 29,250
Income from securities
lending..................... -- -- 3,677 19,259
---------- ----------- ---------- ----------
Total income.............. 2,706,749 9,329,107 1,762,105 4,966,887
---------- ----------- ---------- ----------
EXPENSES:
Investment advisory fees..... 229,117 998,795 140,290 219,450
Administration fees.......... 101,831 363,201 51,015 146,301
Distribution and services
fees, Investor A Shares..... 37,522 1,465 382 157
Distribution and services
fees, Investor B Shares..... 8,575 1,920 -- --
Administrative services fees,
Trust Shares................ 112,650 542,756 75,902 215,803
Administrative services fees,
Institutional Shares........ -- -- 238 3,491
Accounting and custodian
fees........................ 22,918 63,033 13,726 35,872
Legal and audit fees......... 10,230 29,666 5,164 9,046
Directors' fees and expenses. 728 2,366 207 885
Transfer agent fees.......... 16,744 63,700 39 24,273
Registration and filing fees. 1,820 11,102 5,792 2,480
Other fees................... 7,964 37,128 15,849 11,982
---------- ----------- ---------- ----------
Total expenses before
voluntary fee reductions.... 550,099 2,115,132 308,604 669,740
Expenses voluntarily reduced. (176,072) (1,478,552) (205,250) (446,739)
---------- ----------- ---------- ----------
Net expenses.............. 374,027 636,580 103,354 223,001
---------- ----------- ---------- ----------
Net investment income........ 2,332,722 8,692,527 1,658,751 4,743,886
---------- ----------- ---------- ----------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS:
Net realized gain (loss) from
investment transactions..... 272,590 3,596,137 43,336 327,741
Net change in unrealized gain
(loss) from investment
transactions................ 663,009 1,960,343 306,881 752,205
---------- ----------- ---------- ----------
Net realized/unrealized gains
(losses) from investments... 935,599 5,556,480 350,217 1,079,946
---------- ----------- ---------- ----------
Change in net assets
resulting from operations... $3,268,321 $14,249,007 $2,008,968 $5,823,832
========== =========== ========== ==========
</TABLE>
See notes to financial statements
-44-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET TREASURY MONEY
PORTFOLIO MARKET PORTFOLIO
------------------------------ --------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997
-------------- -------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVI-
TIES:
Operations:
Net investment income.. $ 32,127,330 $ 48,679,735 $ 5,838,527 $ 7,771,484
Net realized gain
(loss) from investment
transactions.......... 31 1,631 12,770 14,390
-------------- -------------- ------------ ------------
Change in net assets
from operations........ 32,127,361 48,681,366 5,851,297 7,785,874
-------------- -------------- ------------ ------------
DISTRIBUTIONS TO
INVESTOR A
SHAREHOLDERS:
From net investment in-
come.................. (3,986,958) (5,589,497) (220,740) (282,566)
From net realized gain
on investment transac-
tions................. -- -- (432) (469)
DISTRIBUTIONS TO
INVESTOR B
SHAREHOLDERS:
From net investment in-
come.................. (1,484) (2,942) -- --
DISTRIBUTIONS TO TRUST
SHAREHOLDERS:
From net investment in-
come.................. (27,534,476) (42,036,602) (5,612,671) (7,473,431)
From net realized gain
on investment transac-
tions................. -- -- (13,834) (8,023)
DISTRIBUTIONS TO
INSTITUTIONAL
SHAREHOLDERS:
From net investment in-
come.................. (604,412) (1,050,694) (5,116) (15,487)
From net realized gain
on investment transac-
tions................. -- -- (12) (18)
-------------- -------------- ------------ ------------
Change in net assets
from shareholder dis-
tributions............. (32,127,330) (48,679,735) (5,852,805) (7,779,994)
-------------- -------------- ------------ ------------
Change in net assets
from capital transac-
tions.................. 18,549,675 404,628,989 (22,100,349) 153,000,904
-------------- -------------- ------------ ------------
Change in net assets.... 18,549,706 404,630,620 (22,101,857) 153,006,784
NET ASSETS:
Beginning of period.... 1,229,023,179 824,392,559 292,294,744 139,287,960
-------------- -------------- ------------ ------------
End of period.......... $1,247,572,885 $1,229,023,179 $270,192,887 $292,294,744
============== ============== ============ ============
</TABLE>
See notes to financial statements
-45-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TAX-EXEMPT GROWTH & INCOME
MONEY MARKET PORTFOLIO EQUITY PORTFOLIO
-------------------------- --------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVI-
TIES:
Operations:
Net investment income.. $ 2,483,460 $ 4,462,657 $ 1,677,188 $ 3,514,224
Net realized gain
(loss) from investment
transactions.......... -- -- 68,665,720 78,993,806
Net change in
unrealized gain (loss)
from investment trans-
actions............... -- -- (24,508,128) 9,568,676
------------ ------------ ------------ ------------
Change in net assets
from operations........ 2,483,460 4,462,657 45,834,780 92,076,706
------------ ------------ ------------ ------------
DISTRIBUTIONS TO IN-
VESTOR A SHAREHOLDERS:
From net investment in-
come.................. (192,940) (476,137) (57,959) (285,613)
In excess of net in-
vestment income....... -- -- (81,071) (66,559)
From net realized gain
on investment
transactions.......... -- -- (7,816,180) (2,994,148)
DISTRIBUTIONS TO IN-
VESTOR B SHAREHOLDERS:
From net investment in-
come.................. -- -- -- (19,623)
In excess of net in-
vestment income....... -- (7,014)
From net realized gain
on investment
transactions.......... -- -- (1,082,825) (278,321)
DISTRIBUTIONS TO TRUST
SHAREHOLDERS:
From net investment in-
come.................. (2,290,520) (3,986,520) (1,311,589) (3,247,480)
From net realized gain
on investment
transactions.......... -- -- (54,343,714) (27,210,627)
DISTRIBUTIONS TO INSTI-
TUTIONAL SHAREHOLDERS:
From net investment in-
come.................. -- -- (104,372) (539,466)
In excess of net in-
vestment income....... -- -- (181,771) (149,417)
From net realized gain
on investment transac-
tions................. -- -- (15,645,712) (5,714,817)
------------ ------------ ------------ ------------
Change in net assets
from shareholder dis-
tributions............. (2,483,460) (4,462,657) (80,632,207) (40,506,071)
------------ ------------ ------------ ------------
Change in net assets
from capital transac-
tions.................. (11,792,200) 45,596,094 58,611,292 (46,929,826)
------------ ------------ ------------ ------------
Change in net assets.... (11,792,200) 45,596,094 23,813,865 4,640,809
NET ASSETS:
Beginning of period.... 159,306,073 113,709,979 467,539,888 462,899,079
------------ ------------ ------------ ------------
End of period.......... $147,513,873 $159,306,073 $491,353,753 $467,539,888
============ ============ ============ ============
</TABLE>
See notes to financial statements
-46-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL CAP INTERNATIONAL
EQUITY PORTFOLIO EQUITY PORTFOLIO
-------------------------- -------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997
------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVI-
TIES:
Operations:
Net investment income
(loss)................. $ (320,958) $ (131,925) $ 207,302 $ 24,596
Net realized gain (loss)
from foreign exchange
transactions........... -- -- (145,522) (170,822)
Net realized gain (loss)
from investment
transactions........... 17,739,015 20,891,156 2,364,794 2,787,030
Net change in unrealized
gain (loss) from
foreign exchange
transactions........... -- -- 30,411 (1,301,985)
Net change in unrealized
gain (loss) from
investment
transactions........... (686,054) 21,069,188 11,348,139 238,656
------------ ------------ ----------- -----------
Change in net assets from
operations.............. 16,732,003 41,828,419 13,805,124 1,577,475
------------ ------------ ----------- -----------
DISTRIBUTIONS TO INVESTOR
A SHAREHOLDERS:
From net investment
income................. -- (4,444) -- (11,517)
In excess of net
investment income...... -- -- (10,138) --
From net realized gain
on investment
transactions........... (1,237,432) (848,322) (102,677) (67,022)
DISTRIBUTIONS TO INVESTOR
B SHAREHOLDERS:
From net investment
income................. -- -- -- (1,047)
In excess of net
investment income...... -- -- (1,057) --
From net realized gain
on investment
transactions........... (124,532) (78,682) (20,585) (11,381)
DISTRIBUTIONS TO TRUST
SHAREHOLDERS:
From net investment
income................. -- (128,362) (234,555) (156,995)
In excess of net
investment income...... -- -- -- (109,629)
From net realized gain
on investment
transactions........... (17,064,987) (10,472,317) (1,964,807) (1,335,713)
DISTRIBUTIONS TO
INSTITUTIONAL
SHAREHOLDERS:
From net investment
income................. -- (2,874) (13,308) (26,541)
In excess of net
investment income...... -- -- (10,942) --
From net realized gain
on investment
transactions........... (2,804,840) (1,844,024) (245,038) (156,272)
------------ ------------ ----------- -----------
Change in net assets from
shareholder
distributions........... (21,231,791) (13,379,025) (2,603,107) (1,876,117)
------------ ------------ ----------- -----------
Change in net assets from
capital transactions.... 3,225,790 16,766,967 4,754,056 4,300,938
------------ ------------ ----------- -----------
Change in net assets..... (1,273,998) 45,216,361 15,956,073 4,002,296
NET ASSETS:
Beginning of period..... 261,753,897 216,537,536 65,252,356 61,250,060
------------ ------------ ----------- -----------
End of period........... $260,479,899 $261,753,897 $81,208,429 $65,252,356
============ ============ =========== ===========
</TABLE>
See notes to financial statements
-47-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
EQUITY INCOME EQUITY INDEX
PORTFOLIO PORTFOLIO
-------------------------- -------------------------
SIX MONTHS PERIOD SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 (a) 1998 1997 (b)
------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVI-
TIES:
Operations:
Net investment income... $ 1,240,290 $ 2,288,136 $ 226,662 $ 252,124
Net realized gain (loss)
from investment
transactions........... 30,068,746 26,171,918 691,470 56,897
Net change in unrealized
gain (loss) from
investment
transactions........... (16,466,504) (7,875,618) 3,990,217 4,846,053
------------ ------------ ----------- -----------
Change in net assets from
operations.............. 14,842,532 20,584,436 4,908,349 5,155,074
------------ ------------ ----------- -----------
DISTRIBUTIONS TO INVESTOR
A SHAREHOLDERS:
From net investment in-
come................... (5,113) (1,695) (1,766) (378)
In excess of net invest-
ment income............ (1,011) (68) (399) (81)
From net realized gain
on investment
transactions........... (34,436) -- (374) --
DISTRIBUTIONS TO INVESTOR
B SHAREHOLDERS:
From net investment in-
come................... (641) (267) -- --
In excess of net invest-
ment income............ (379) (200) -- --
From net realized gain
on investment transac-
tions.................. (26,125) -- -- --
DISTRIBUTIONS TO TRUST
SHAREHOLDERS:
From net investment in-
come................... (1,300,440) (2,205,201) (216,420) (243,890)
From net realized gain
on investment
transactions........... (26,111,109) -- (57,368) --
DISTRIBUTIONS TO INSTITU-
TIONAL SHAREHOLDERS:
From net investment in-
come................... (15) (19) (11,932) (31)
In excess of net invest-
ment income............ (1) -- (4,691) --
From net realized gain
on investment transac-
tions.................. (233) -- (14) --
------------ ------------ ----------- -----------
Change in net assets from
shareholder distribu-
tions................... (27,479,503) (2,207,450) (292,964) (244,380)
------------ ------------ ----------- -----------
Change in net assets from
share transactions...... (4,898,883) 113,847,701 12,349,130 27,089,854
------------ ------------ ----------- -----------
Change in net assets..... (17,535,854) 132,224,687 16,964,515 32,000,548
NET ASSETS:
Beginning of period..... 132,224,687 -- 32,000,548 --
------------ ------------ ----------- -----------
End of period........... $114,688,833 $132,224,687 $48,965,063 $32,000,548
============ ============ =========== ===========
</TABLE>
- ------
(a) Period commenced February 27, 1997.
(b) Period commenced May 1, 1997.
See notes to financial statements
-48-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH EQUITY BALANCED
PORTFOLIO PORTFOLIO
---------------------------------------- --------------------------
SIX MONTHS PERIOD YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, SEPTEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 (a) 1997 (b) 1998 1997
----------- ------------ ------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income
(loss)................ $ (40,101) $ (30,253) $ 275,232 $ 1,457,915 $ 3,173,268
Net realized gain
(loss) from investment
transactions.......... 13,702,123 3,407,020 4,917,751 8,788,884 14,346,475
Net change in
unrealized gain (loss)
from investment
transactions.......... (3,214,156) (4,228,822) 13,265,621 (1,093,385) (420,214)
----------- ----------- ----------- ------------ ------------
Change in net assets
from operations........ 10,447,866 (852,055) 18,458,604 9,153,414 17,099,529
----------- ----------- ----------- ------------ ------------
DISTRIBUTIONS TO INVESTOR A
SHAREHOLDERS:
From net investment
income................ -- -- (330,048) (109,241) (303,011)
In excess of net
investment income..... (685) -- -- (6,178) (1,886)
From net realized gain
on investment
transactions.......... -- (8,120,294) (3,886,419) (1,098,018) (528,296)
DISTRIBUTIONS TO INVESTOR B
SHAREHOLDERS:
From net investment
income................ -- -- -- (2,322) (8,541)
In excess of net
investment income..... -- -- -- (2,254) (1,786)
From net realized gain
on investment
transactions.......... -- -- -- (58,233) (18,182)
DISTRIBUTIONS TO TRUST
SHAREHOLDERS:
From net investment
income................ -- -- -- (637,901) (1,722,814)
In excess of net
investment income..... (44,963) -- -- -- --
From net realized gain
on investment
transactions.......... -- -- -- (5,997,694) (3,475,261)
DISTRIBUTIONS TO INSTITUTIONAL
SHAREHOLDERS:
From net investment
income................ -- -- -- (569,026) (1,749,881)
In excess of net
investment income..... (2,352) -- -- (152,495) (126,370)
From net realized gain
on investment
transactions.......... -- -- -- (6,839,335) (3,086,347)
----------- ----------- ----------- ------------ ------------
Change in net assets
from shareholder
distributions......... (48,000) (8,120,294) (4,216,467) (15,472,697) (11,022,375)
----------- ----------- ----------- ------------ ------------
Change in net assets
from capital
transactions.......... 17,802,579 7,260,241 (849,772) 9,012,199 (5,878,946)
----------- ----------- ----------- ------------ ------------
Change in net assets... 28,202,445 (1,712,108) 13,392,365 2,692,916 198,208
NET ASSETS:
Beginning of period.... 67,253,009 68,965,117 55,572,752 126,399,377 126,201,169
----------- ----------- ----------- ------------ ------------
End of period.......... $95,455,454 $67,253,009 $68,965,117 $129,092,293 $126,399,377
=========== =========== =========== ============ ============
</TABLE>
- ------
(a) Period commenced October 1, 1997.
(b)Formerly the Arrow Equity Portfolio.
See notes to financial statements
-49-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GOVERNMENT & CORPORATE U.S. GOVERNMENT
BOND PORTFOLIO SECURITIES PORTFOLIO
-------------------------- --------------------------
YEAR YEAR
SIX MONTHS ENDED SIX MONTHS ENDED
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
MAY 31, 1998 1997 MAY 31, 1998 1997
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 5,773,640 $ 9,597,659 $ 2,776,398 $ 4,610,849
Net realized gain
(loss) from investment
transactions.......... 767,111 (18,762) 46,659 (202,303)
Net change in
unrealized gain (loss)
from investment trans-
actions............... 1,061,698 653,623 80,776 17,120
------------ ------------ ------------ -----------
Change in net assets
from operations........ 7,602,449 10,232,520 2,903,833 4,425,666
------------ ------------ ------------ -----------
DISTRIBUTIONS TO
INVESTOR A
SHAREHOLDERS:
From net investment in-
come.................. (130,558) (259,040) (138,932) (323,804)
DISTRIBUTIONS TO
INVESTOR B
SHAREHOLDERS:
From net investment in-
come.................. (12,413) (26,993) (12,243) (21,080)
DISTRIBUTIONS TO TRUST
SHAREHOLDERS:
From net investment in-
come.................. (5,119,905) (8,442,748) (2,446,149) (3,973,203)
DISTRIBUTIONS TO
INSTITUTIONAL
SHAREHOLDERS:
From net investment in-
come.................. (510,764) (868,878) (179,074) (292,762)
------------ ------------ ------------ -----------
Change in net assets
from shareholder dis-
tributions............. (5,773,640) (9,597,659) (2,776,398) (4,610,849)
------------ ------------ ------------ -----------
Change in net assets
from capital transac-
tions.................. 6,155,026 32,534,114 20,007,878 15,810,160
------------ ------------ ------------ -----------
Change in net assets.... 7,983,835 33,168,975 20,135,313 15,624,977
NET ASSETS:
Beginning of period.... 194,909,876 161,740,901 85,448,637 69,823,660
------------ ------------ ------------ -----------
End of period.......... $202,893,711 $194,909,876 $105,583,950 $85,448,637
============ ============ ============ ===========
</TABLE>
See notes to financial statements
-50-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE MISSOURI TAX-EXEMPT
MUNICIPAL PORTFOLIO BOND PORTFOLIO
------------------------- --------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997
----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVI-
TIES:
OPERATIONS:
Net investment income... $ 702,989 $ 1,165,256 $ 2,332,722 $ 4,330,896
Net realized gain (loss)
from investment trans-
actions................ 16,005 -- 272,590 (31)
Net change in unrealized
gain (loss) from in-
vestment transactions.. 128,115 64,888 663,009 1,604,104
----------- ----------- ------------ ------------
Change in net assets from
operations.............. 847,109 1,230,144 3,268,321 5,934,969
----------- ----------- ------------ ------------
DISTRIBUTIONS TO INVESTOR
A SHAREHOLDERS:
From net investment in-
come................... (410) (2,039) (555,964) (1,104,237)
DISTRIBUTIONS TO INVESTOR
B SHAREHOLDERS:
From net investment in-
come................... -- -- (31,356) (36,663)
DISTRIBUTIONS TO TRUST
SHAREHOLDERS:
From net investment in-
come................... (702,579) (1,163,217) (1,745,402) (3,189,996)
----------- ----------- ------------ ------------
Change in net assets from
shareholder distribu-
tions................... (702,989) (1,165,256) (2,332,722) (4,330,896)
----------- ----------- ------------ ------------
Change in net assets from
capital transactions.... 10,763,883 882,174 4,167,417 17,222,577
----------- ----------- ------------ ------------
Change in net assets..... 10,908,003 947,062 5,103,016 18,826,650
NET ASSETS:
Beginning of period..... 30,470,147 29,523,085 100,550,375 81,723,725
----------- ----------- ------------ ------------
End of period........... $41,378,150 $30,470,147 $105,653,391 $100,550,375
=========== =========== ============ ============
</TABLE>
See notes to financial statements
-51-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE
NATIONAL MUNICIPAL CORPORATE
BOND PORTFOLIO BOND PORTFOLIO
-------------------------- -------------------------
SIX MONTHS YEAR SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997 (a)
------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income... $ 8,692,527 $ 17,725,009 $ 1,658,751 $ 2,185,317
Net realized gain (loss)
from investment
transactions........... 3,596,137 12,555,443 43,336 502,907
Net change in unrealized
gain (loss) from
investment
transactions........... 1,960,343 (4,335,052) 306,881 (131,490)
------------ ------------ ----------- -----------
Change in net assets from
operations.............. 14,249,007 25,945,400 2,008,968 2,556,734
------------ ------------ ----------- -----------
DISTRIBUTIONS TO INVESTOR
A SHAREHOLDERS:
From net investment
income................. (22,154) (22,941) (7,902) (7,181)
From net realized gain
on investment
transactions........... (23,279) (183) (294) --
In excess of net
realized gains......... (1,168) -- (2,807) --
DISTRIBUTIONS TO INVESTOR
B SHAREHOLDERS:
From net investment
income................. (7,286) (2,703) -- --
From net realized gain
on investment
transactions........... (5,469) (25) -- --
In excess of net
realized gains......... (8,458) -- -- --
DISTRIBUTIONS TO TRUST
SHAREHOLDERS:
From net investment
income................. (8,663,087) (17,699,373) (1,646,004) (2,177,609)
From net realized gain
on investment
transactions........... (12,517,075) (115,079) (497,257) --
DISTRIBUTIONS TO
INSTITUTIONAL
SHAREHOLDERS:
From net investment
income................. -- -- (4,845) (527)
From net realized gain
on investment
transactions........... -- -- (53) --
In excess of net
realized gains......... -- -- (255) --
------------ ------------ ----------- -----------
Change in net assets from
shareholder
distributions........... (21,247,976) (17,840,304) (2,159,162) (2,185,317)
------------ ------------ ----------- -----------
Change in net assets from
capital transactions.... 9,233,710 49,494,347 10,202,943 44,375,804
------------ ------------ ----------- -----------
Change in net assets..... 2,234,741 57,599,443 10,052,749 44,747,221
NET ASSETS:
Beginning of period..... 368,014,086 310,414,643 44,747,221 --
------------ ------------ ----------- -----------
End of period........... $370,248,827 $368,014,086 $54,799,970 $44,747,221
============ ============ =========== ===========
</TABLE>
- ------
(a) Period commenced February 10, 1997.
See notes to financial statements
-52-
<PAGE>
THE ARCH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BOND INDEX
PORTFOLIO
--------------------------
SIX MONTHS PERIOD
ENDED ENDED
MAY 31, NOVEMBER 30,
1998 1997 (a)
------------ ------------
(UNAUDITED)
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................. $ 4,743,886 $ 7,163,574
Net realized gain (loss) from investment transac-
tions............................................ 327,741 279,085
Net change in unrealized gain (loss) from invest-
ment transactions................................ 752,205 1,574,992
------------ ------------
Change in net assets from operations............... 5,823,832 9,017,651
------------ ------------
DISTRIBUTIONS TO INVESTOR A SHAREHOLDERS:
From net investment income........................ (3,159) (1,698)
In excess of net investment income................ (73)
From net realized gain on investment transactions. (171) --
In excess of net realized gains................... (16)
DISTRIBUTIONS TO TRUST SHAREHOLDERS:
From net investment income........................ (4,484,692) (7,161,244)
In excess of net investment income................ (184,616)
From net realized gain on investment transactions. (472,456) --
DISTRIBUTIONS TO INSTITUTIONAL SHAREHOLDERS:
From net investment income........................ (71,309) (632)
In excess of net investment income................ (37)
From net realized gain on investment transactions. (94) --
------------ ------------
Change in net assets from shareholder distribu-
tions............................................. (5,216,623) (7,163,574)
------------ ------------
Change in net assets from capital transactions..... 17,033,249 136,546,994
------------ ------------
Change in net assets............................... 17,640,458 138,401,071
NET ASSETS:
Beginning of period............................... 138,401,071 --
------------ ------------
End of period..................................... $156,041,529 $138,401,071
============ ============
</TABLE>
- ------
(a) Period commenced February 10, 1997.
See notes to financial statements
-53-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SMALL CAP EQUITY GROWTH
EQUITY INDEX EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVI-
TIES:
Interest and dividend income..... $ 1,023,226 $ 317,590 $ 521,994
Net expenses..................... (1,344,184) (90,928) (562,095)
------------- ------------ -------------
Net investment income.......... (320,958) 226,662 (40,101)
ADJUSTMENTS TO RECONCILE NET IN-
VESTMENT INCOME TO NET CASH PRO-
VIDED BY OPERATING ACTIVITIES:
Amortization of
discount/premium................ (197,004) (14,012) (83,480)
Change in interest and dividend
receivable...................... (484) (19,622) 14,526
Change in accrued expenses and
other payables.................. 25,411 (8,284) 44,912
------------- ------------ -------------
Total adjustments................ (172,077) (41,918) (24,042)
------------- ------------ -------------
Net cash provided by operating
activities.................... (493,035) 184,744 (64,143)
CASH FLOWS FROM INVESTING ACTIVI-
TIES:
Proceeds from securities lend-
ing............................. 70,665 11,752 18,671
Proceeds from sales of invest-
ments........................... 988,804,656 66,318,476 375,785,027
Purchases of investments......... (970,296,306) (78,577,730) (379,726,651)
------------- ------------ -------------
Net cash provided by investing
activities.................... 18,579,015 (12,247,502) (3,922,953)
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Proceeds from shares issued...... 53,356,630 13,846,113 20,973,313
Cost of shares redeemed.......... (69,196,338) (1,758,436) (16,925,383)
Distributions paid to sharehold-
ers............................. (21,231,791) (271,594) (48,000)
Dividends reinvested............. 19,056,373 258,308 6,513
------------- ------------ -------------
Net cash used by financing ac-
tivities...................... (18,015,126) 12,074,391 4,006,443
------------- ------------ -------------
Net increase (decrease) in cash.. 70,854 11,633 19,347
Cash at beginning of period...... 659 837 202
------------- ------------ -------------
Cash at end of period............ $ 71,513 $ 12,470 $ 19,549
============= ============ =============
</TABLE>
- ------
* The Statements of Cash Flows are provided for the Funds that have
significantly participated in securities lending during the period.
See notes to financial statements
-54-
<PAGE>
THE ARCH FUND, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
GOVERNMENT & U.S.
CORPORATE GOVERNMENT BOND
BOND SECURITIES INDEX
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVI-
TIES:
Interest and dividend income...... $ 6,472,540 $ 3,123,914 $ 4,966,887
Net expenses...................... (698,900) (347,516) (223,001)
------------- ------------ ------------
Net Investment Income........... 5,773,640 2,776,398 4,743,886
ADJUSTMENTS TO RECONCILE NET IN-
VESTMENT INCOME TO NET CASH PRO-
VIDED BY OPERATING ACTIVITIES:
Amortization of discount/premium.. -- -- (78,501)
Change in interest receivable..... 13,284 (321,400) (365,031)
Change in accrued expenses and
other payables................... 13,780 14,551 11,540
------------- ------------ ------------
Total adjustments................. 27,064 (306,849) (431,992)
------------- ------------ ------------
Net cash provided by operating
activities..................... 5,800,704 2,469,549 4,311,894
CASH FLOWS FROM INVESTING ACTIVI-
TIES:
Proceeds from securities lending.. 10,985 24,851 14,806
Proceeds from sales of invest-
ments............................ 105,883,017 53,688,420 52,090,756
Purchases of investments.......... (112,150,867) (73,496,093) (68,274,841)
------------- ------------ ------------
Net cash provided by investing
activities..................... (6,256,865) (19,782,822) (16,169,279)
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Proceeds from shares issued....... 22,611,168 25,486,075 29,467,459
Cost of shares redeemed........... (19,184,753) (6,785,651) (12,553,493)
Distributions paid to sharehold-
ers.............................. (5,633,711) (2,669,941) (5,160,214)
Dividends reinvested.............. 2,674,291 1,307,454 119,283
------------- ------------ ------------
Net cash used by financing ac-
tivities....................... 466,995 17,337,937 11,873,035
------------- ------------ ------------
Net increase (decrease) in cash.... 10,834 24,664 15,650
Cash at beginning of period....... 450 212 91
------------- ------------ ------------
Cash at end of period............. $ 11,284 $ 24,876 $ 15,741
============= ============ ============
</TABLE>
- ------
* The Statements of Cash Flows are provided for the Funds that have
significantly participated in securities lending during the period.
See notes to financial statements
-55-
<PAGE>
THE ARCH FUND, INC.
MONEY MARKET PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ------------------------------------- --------------
<C> <S> <C>
CERTIFICATES OF DEPOSIT (11.1%):
$20,000,000 Bayerische Landesbank Co., 5.78%,
7/27/98............................. $ 19,998,147
40,000,000 Harris Trust, 5.53%, 6/30/98......... 40,000,000
34,000,000 Rabobank, 5.71%, 10/06/98............ 34,022,517
25,000,000 Wilmington Trust, 5.51%, 6/18/98..... 25,000,000
20,000,000 Wilmington Trust, 5.60%, 9/3/98...... 20,000,000
--------------
Total Certificates of Deposit
(Amortized cost $139,020,664) 139,020,664
--------------
COMMERCIAL PAPER (70.6%):
Auctions (1.4%):
17,000,000 Sotheby's Holdings, Inc., 5.62%*,
6/25/98............................. 16,937,213
--------------
Automotive (6.8%):
44,525,000 Daimler-Benz AG, 5.60%*, 6/12/98..... 44,449,902
40,000,000 General Motors Corp., 5.63%*,
6/26/98............................. 39,845,833
--------------
84,295,735
--------------
Beverages (6.1%):
47,650,000 Anheuser-Busch Cos., Inc., 5.53%*,
12/9/98............................. 46,272,187
30,000,000 Coca-Cola Co., 5.58%*, 6/25/98....... 29,890,000
--------------
76,162,187
--------------
Electrical & Electronic (2.9%):
18,100,000 CSC Enterprises, 5.62%*, 6/8/98...... 18,080,502
18,000,000 CSC Enterprises, 5.61%*, 6/5/98...... 17,988,940
--------------
36,069,442
--------------
Financial Services (25.5%):
30,000,000 General Electric Capital Corp.,
5.58%*, 6/17/98..................... 29,926,667
20,000,000 General Electric Capital Corp.,
5.57%*, 6/30/98..................... 19,911,550
50,000,000 Household Finance Corp., 5.73%*,
6/1/98.............................. 50,000,000
8,901,000 Merrill Lynch & Co., 5.66%*, 6/11/98. 8,887,203
32,000,000 Morgan Stanley Dean Witter, 5.58%*,
6/26/98............................. 31,877,778
30,000,000 Newell, Inc., 5.58%*, 6/12/98........ 29,949,583
50,000,000 Norwest Corp., 5.58%*, 6/30/98....... 49,778,471
50,000,000 Prudential Funding Corp, 5.76%*,
6/1/98.............................. 50,000,000
48,404,000 Transamerica Corp., 5.59%*, 6/4/98... 48,381,775
--------------
318,713,027
--------------
Food Products (1.5%):
19,000,000 H. J. Heinz, 5.70%*, 6/22/98......... 18,937,712
--------------
Insurance (3.9%):
18,550,000 Aetna Services, Inc., 5.63%*,
6/12/98............................. 18,518,542
30,000,000 General American Life Insurance Co.,
5.86%**, 6/1/98..................... 30,000,000
--------------
48,518,542
--------------
Leasing (4.0%):
50,000,000 International Lease Finance, 5.73%*,
6/1/98.............................. 50,000,000
--------------
Miscellaneous (4.0%):
50,000,000 Ciesco LP, 5.73%*, 6/1/98............ 50,000,000
--------------
Natural Gas Utility (2.0%):
25,000,000 Colonial Pipeline, 5.57%*, 6/5/98.... 24,984,750
--------------
Photography (2.7%):
33,460,000 Xerox Credit Corp., 5.59%*, 6/11/98.. 33,408,788
--------------
Printing & Publishing (2.8%):
17,000,000 McGraw-Hill, 5.51%*, 9/14/98......... 16,730,763
18,500,000 McGraw-Hill, 5.51%*, 8/18/98......... 18,282,347
--------------
35,013,110
--------------
Toys, Games, Children's Vehicles (4.0%):
50,000,000 Hasbro Corp., 5.75%*, 6/1/98......... 50,000,000
--------------
</TABLE>
Continued
-56-
<PAGE>
THE ARCH FUND, INC.
MONEY MARKET PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ------------------------------------- --------------
<C> <S> <C>
COMMERCIAL PAPER, CONTINUED:
Transportation & Shipping (3.0%):
$12,400,000 Matson Navigation, 5.59%*, 7/30/98... $ 12,288,025
25,000,000 Matson Navigation, 5.60%*, 6/18/98... 24,934,833
--------------
37,222,858
--------------
Total Commercial Paper
(Amortized cost $880,263,365).................. 880,263,364
--------------
CORPORATE BONDS (8.0%):
Banking (2.0%):
25,000,000 Bank of America National Trust &
Savings Association, 5.67%**,
6/1/98.............................. 24,995,423
--------------
Financial Services (6.0%):
25,000,000 Bear Stearns Co., Inc., 5.63%**,
6/2/98, MTN......................... 25,000,001
25,000,000 IBM Credit Corp., 5.66%**, 6/1/98,
MTN................................. 24,998,510
25,000,000 Merrill Lynch & Co., 5.74%**, 6/1/98,
MTN................................. 24,999,212
--------------
74,997,723
--------------
Total Corporate Bonds
(Amortized cost $99,993,146)................... 99,993,146
--------------
U.S. GOVERNMENT AGENCIES (10.4%):
Federal Farm Credit Bank (2.4%):
10,000,000 5.60%, 6/1/98........................ 10,000,000
20,000,000 5.50%, 6/1/98........................ 20,000,000
--------------
30,000,000
--------------
Federal Home Loan Bank (1.2%):
14,305,000 5.57%, 3/9/99........................ 14,295,976
--------------
Federal National Mortgage Assoc. (5.1%):
30,000,000 5.52%**, 6/1/98, MTN................. 29,997,650
10,000,000 5.71%, 9/9/98, MTN................... 9,996,329
23,900,000 5.52%, 3/26/99, MTN.................. 23,884,975
--------------
63,878,954
--------------
Student Loan Marketing Association (1.7%):
21,000,000 5.40%, 2/10/99, MTN.................. 20,971,386
--------------
Total U.S. Government Agencies
(Amortized cost $129,146,316).................. 129,146,316
--------------
Total Investments
(Amortized cost $1,248,423,490)(a) (100.1%).... 1,248,423,490
Liabilities in excess of other assets
(-0.1%)........................................ (850,605)
--------------
Total Net Assets (100.0%)....................... $1,247,572,885
==============
</TABLE>
- ------
* Effective yield at date of purchase.
** Variable rate investments. The rate presented on the Schedule of Portfolio
Investments is the rate in effect at May 31, 1998. The date presented
reflects the next rate change date.
(a) Cost for federal income tax and financial reporting purposes are the same.
MTN--Medium Term Note
See notes to financial statements
-57-
<PAGE>
THE ARCH FUND, INC.
TREASURY MONEY MARKET PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ---------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY BILLS (68.0%):
$29,538,000 6/11/98................................. $ 29,497,617
39,038,000 6/18/98................................. 38,950,930
24,282,000 6/25/98................................. 24,199,072
20,000,000 7/16/98................................. 19,874,125
10,000,000 7/23/98................................. 9,931,678
2,497,000 8/13/98................................. 2,471,557
34,931,000 8/20/98................................. 34,540,209
18,137,000 9/3/98.................................. 17,897,060
6,614,000 9/10/98................................. 6,520,200
------------
Total U.S. Treasury Bills
(Amortized cost $183,882,448)..................... 183,882,448
------------
U.S. TREASURY NOTES (31.8%):
$42,224,000 6.25%, 6/30/98.......................... 42,260,348
43,470,000 6.00%, 9/30/98.......................... 43,556,172
------------
Total U.S. Treasury Notes
(Amortized cost $85,816,520) 85,816,520
------------
Total Investments
(Amortized cost $269,698,968)(a) (99.8%) 269,698,968
Other assets in excess of liabilities (0.2%) 493,919
------------
Total Net Assets (100.0%) $270,192,887
============
</TABLE>
- ------
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements
-58-
<PAGE>
THE ARCH FUND, INC.
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
---------- ------------------------ ------------
<C> <S> <C>
COMMERCIAL PAPER (11.9%):
Minnesota (2.7%):
$4,000,000 Becker, Pollution
Control Revenue,
Northern States Power
Co., Series A, 3.75%,
5/20/98**.............. $ 4,000,000
------------
Tennessee (3.4%):
5,000,000 Tennessee School
District, 3.65%,
10/21/98............... 5,000,000
------------
Texas (2.4%):
3,600,000 Houston, 3.50%,
09/22/98............... 3,600,000
------------
Washington (3.4%):
5,000,000 King County Sewer
Authority, 3.50%,
8/19/98................ 5,000,000
------------
Total Commercial Paper
(Amortized Cost $17,600,000) 17,600,000
------------
MUNICIPAL BONDS (86.6%):
Alabama (2.0%):
3,000,000 Parrish Industrial
Development Board,
Pollution Control
Revenue, Alabama Power
Co. Project, 3.95%*,
6/1/98................. 3,000,000
------------
Arizona (2.4%):
975,000 Chandler Industrial
Development Authority,
Multifamily Housing
Revenue, Southpark
Apartments Project,
3.60%*, 6/3/98,
Callable on 7/1/08 @
100 (LOC-CitiBank
N.A.).................. 975,000
2,500,000 Maricopa County,
Pollution Control
Revenue, Arizona Public
Service, Co., Series F,
4.00%*, 6/1/98 (LOC-
Bank of America
Northern Trust &
Savings Association)... 2,500,000
------------
3,475,000
------------
Delaware (3.4%):
5,000,000 Delaware State Economic
Development Authority,
Pollution Control
Revenue, Ciba-Geigy
Corp. Project, Series
A, 4.00%*, 6/1/98 AMT
(LOC-Union Bank of
Switzerland)........... 5,000,000
------------
Georgia (3.7%):
2,000,000 Burke County Development
Authority, Pollution
Control Revenue,
Georgia Power Co.,
4.00%*, 6/1/98, AMT.... 2,000,000
1,700,000 Burke County Development
Authority, Pollution
Control Revenue,
Georgia Power Co., 2nd
Series, 3.95%*, 6/1/98. 1,700,000
1,720,000 Polk School District,
G.O., 4.25%, 02/01/99.. 1,727,296
------------
5,427,296
------------
Idaho (2.0%):
3,000,000 Idaho State, Tax
Anticipation Notes,
G.O., 4.63%, 6/30/98... 3,001,709
------------
Illinois (3.9%):
5,800,000 Chicago, O'Hare
International Airport
Revenue, American
Airlines, Inc., 4.00%*,
6/1/98 (LOC-Royal Bank
of Canada)............. 5,800,000
------------
Iowa (7.3%):
2,000,000 Iowa Finance Authority,
Solid Waste Disposal
Revenue, Cedar River
Paper Co., Series A,
4.00%*, 6/1/98 AMT
(LOC-Swiss Bank Corp.). 2,000,000
4,000,000 Iowa Finance Authority,
Solid Waste Disposal
Revenue, Cedar River
Paper Co., Series A,
4.00%*, 6/1/98 AMT
(LOC-Swiss Bank Corp.). 4,000,000
500,000 Iowa Financial
Authority, Solid Waste
Disposal Revenue, Cedar
River Paper Co.,
4.00%*, 6/1/98,
Callable on 12/1/07 @
100, AMT (LOC-Swiss
Bank Corp.)............ 500,000
4,275,000 Iowa State, School Cash
Anticipation Program,
Series B, 4.25%,
01/28/99 (FSA Insured). 4,294,044
------------
10,794,044
------------
</TABLE>
Continued
-59-
<PAGE>
THE ARCH FUND, INC.
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
---------- ----------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Kentucky (6.1%):
$2,200,000 Daviess County, Solid
Waste Disposal
Facilities Revenue,
Scott Paper Co.,
Series A, 4.00%*,
6/1/98, AMT
(LOC-Kimberly Clark
Corp.)................ $ 2,200,000
4,250,000 Daviess County, Solid
Waste Disposal
Facilities Revenue,
Scott Paper Co.,
Series B, 4.00%*,
6/1/98, AMT........... 4,250,000
2,500,000 Lexington-Fayette Urban
County Airport, Series
A, 4.05%, 7/1/28, AMT. 2,500,000
------------
8,950,000
------------
Louisiana (0.7%):
1,000,000 Calcasieu Parish
Industrial Development
Board, Olin Corp.
Project, Series B,
3.95%*, 6/1/98
(LOC-Wachovia Bank)... 1,000,000
------------
Minnesota (1.7%):
2,450,000 Minneapolis Community
Development Agency,
Pollution Control
Revenue, Northern
States Power Co.
Project, 3.90%*,
6/3/98................ 2,450,000
------------
Missouri (9.8%):
1,000,000 Missouri State
Environmental
Improvement and Energy
Resource Authority,
Pollution Control
Revenue, Monsanto Co.
Project, 3.75%*,
6/3/98................ 1,000,000
3,500,000 Missouri State
Environmental
Improvement and Energy
Resource Authority,
Pollution Control
Revenue, Union
Electric Co., Series
B, 3.75%, 6/1/98**,
Callable 6/1/99 @ 100
(LOC-Union Bank of
Switzerland).......... 3,500,000
1,100,000 Missouri State Health &
Educational Facilities
Authority, Educational
Facilities Revenue,
St. Louis University,
4.05%*, 12/1/05 (FGIC
Insured).............. 1,100,000
1,000,000 Missouri State Health &
Educational Facilities
Authority, Educational
Facilities Revenue,
Washington University
Project, Series B,
3.75%*, 6/3/98......... 1,000,000
4,900,000 Missouri State Health &
Educational Facilities
Authority, Health
Facilities Revenue,
Barnes Hospital
Project, 3.75%*, 6/3/98
(LOC-Morgan Guaranty
Trust)................. 4,900,000
3,000,000 Missouri State Health &
Educational Facilities
Authority, Health
Facilities Revenue, St.
Anthony Medical Center,
Series B, 3.85%*,
6/3/98 (ABN AMRO Bank
Insured)............... 3,000,000
------------
14,500,000
------------
Montana (2.6%):
2,200,000 Forsyth, Pollution
Control Revenue,
Portland General
Electric, Series B,
3.75%*, 6/3/98 (LOC-
Swiss Bank Corp.)...... 2,200,000
1,600,000 Forsyth, Pollution
Control Revenue,
Portland General
Electric, Series D,
3.85%*, 6/3/98 (LOC-
Swiss Bank-Corp.)...... 1,600,000
------------
3,800,000
------------
New York (5.4%):
8,000,000 New York City, Revenue
Anticipation Notes,
Series A, G.O., 4.50%,
06/30/98 (LOC-Morgan
Guaranty Trust,
Westdeutsche
Landesbank)............ 8,006,176
------------
Oregon (1.0%):
1,500,000 Oregon State, Series 73
G, G.O., 3.75%*, 6/3/98
(LOC-Morgan Guaranty
Trust)................. 1,500,000
------------
</TABLE>
Continued
-60-
<PAGE>
THE ARCH FUND, INC.
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
---------- ------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Pennsylvania (4.1%):
$6,000,000 Pennsylvania State
Higher Education
Facilities Authority,
College & University
Revenue, Carnegie
Mellon University,
Series C, 4.00%*,
6/1/98................. $ 6,000,000
------------
South Carolina (3.4%):
5,000,000 Charleston County School
District, Bond
Anticipation Notes,
G.O., 4.00%, 6/30/98
(SCSDE Insured)........ 5,001,773
------------
Tennessee (3.4%):
5,000,000 Memphis, Series A, G.O.,
3.90%*, 6/3/98......... 5,000,000
------------
Texas (19.7%):
6,000,000 Harris County, Health
Facilities Development
Corp., Health, Hospital
& Nursing Home Revenue,
Methodist Hospital,
4.00%*, 6/1/98......... 6,000,000
3,800,000 North Central Texas
Health Facilities
Development Corp.,
Health, Hospital &
Nursing Home Revenue,
Methodist Hospital of
Dallas, Series B,
4.10%*, 6/1/98 (MBIA
Insured)............... 3,800,000
2,200,000 Port Corpus Christi,
Port, Airport & Marina
Revenue, Reynolds
Metals Co., 3.80%*,
6/3/98
(LOC-Westdeutsche
Landesbank)............ 2,200,000
$6,000,000 Sabine River Authority,
Pollution Control
Revenue, Texas
Utilities Electric Co.,
Series C, 4.10%*,
6/1/98, AMT (LOC-Union
Bank of Switzerland)... $ 6,000,000
6,000,000 Texas State, Multi-
Modal-Water Development
Board, Series A,
4.00%*, 6/1/98......... 6,000,000
5,000,000 Texas State, Tax &
Revenue Anticipation
Notes, Series A, 4.75%,
8/31/98................ 5,010,805
------------
29,010,805
------------
Utah (4.1%):
6,000,000 Salt Lake County,
Pollution Control
Revenue, SVC Station
Holdings Project,
British Petroleum Co.,
Series B, 4.00%*,
6/1/98................. 6,000,000
------------
Total Municipal Bonds
(Amortized cost $127,716,803) 127,716,803
------------
INVESTMENT COMPANIES (1.0%):
1,512,000 Federated Tax-Free Fund. 1,512,000
1,000 Nuveen Tax Exempt Fund.. 1,000
------------
Total Investment Companies
(Amortized cost $1,513,000) 1,513,000
------------
Total Investments
(Amortized cost $146,829,803)(a)
(99.5%) 146,829,803
Other assets in excess of
liabilities (0.5%) 684,070
------------
Total Net Assets (100.0%) $147,513,873
============
</TABLE>
- ------
* Variable rate investments. The rate presented on the Schedule of Portfolio
Investments is the rate in effect at May 31, 1998. The date presented
reflects the next rate change date.
** Put and demand features exist allowing the fund to require the repurchase
of the investment within variable time periods ranging from daily, weekly,
monthly or semi-annually. Maturity date reflects the next put date.
(a) Cost for federal income tax and financial reporting purposes are the same.
AMT--Alternative Minimum Tax
FSA--Financial Securities Assurance, Inc.
FGIC--Financial Guaranty Insurance Corp.
G.O.--General Obligation
LOC--Letter of Credit
MBIA--Municipal Bond Insurance Association
SCSDE--South Carolina School District Enhancement
See notes to financial statements
-61-
<PAGE>
THE ARCH FUND, INC.
GROWTH & INCOME EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
----------- ---------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER (5.1%):
Electrical & Electronic (1.1%):
$ 5,104,000 Oge Energy, 5.50%, 6/8/98............... $ 5,098,492
------------
Financial Services (4.0%):
19,702,000 New Center Asset Trust, 5.70%, 6/1/98... 19,702,000
------------
Total Commercial Paper
(Cost $24,800,492) 24,800,492
------------
COMMON STOCKS (94.4%):
Automotive (1.0%):
198,400 Republic Industries, Inc.(b)(c)......... 4,885,600
------------
Banking (7.2%):
179,405 Banc One Corp.(c)....................... 9,889,700
72,900 Chase Manhattan Corp. .................. 9,909,843
100,900 Crestar Financial Corp. ................ 5,795,444
174,950 First Union Corp. ...................... 9,676,922
------------
35,271,909
------------
Building Products (1.6%):
241,100 Sherwin-Williams Co. ................... 8,016,575
------------
Business Services (2.2%):
325,000 First Data Corp. ....................... 10,806,250
------------
Chemicals (5.3%):
196,600 Ecolab, Inc. ........................... 6,070,025
212,350 Praxair, Inc. .......................... 10,471,509
344,000 Solutia, Inc. .......................... 9,438,500
------------
25,980,034
------------
Commercial Services (1.8%):
200,000 Cendant Corp.(b)........................ 4,337,500
100,000 H & R Block, Inc.(c).................... 4,400,000
------------
8,737,500
------------
Computer & Computer Software (6.1%):
345,000 Adaptec, Inc.(b)........................ 5,239,688
171,300 Computer Associates International,
Inc. .................................. 8,993,249
50,000 Microsoft Corp.(b)...................... 4,240,625
94,000 Network Associates, Inc.(b)(c).......... 5,757,500
235,825 Oracle Corp.(b)......................... 5,571,366
------------
29,802,428
------------
Containers & Packaging (2.6%):
93,350 Crown Cork & Seal Co., Inc. ........ 4,842,531
150,000 Sealed Air Corp.(b)(c).............. 8,025,000
------------
12,867,531
------------
Electrical & Electronic (6.3%):
187,000 Analog Devices(b)(c)................ 4,616,563
100,500 General Electric Co. ............... 8,379,188
250,774 Millipore Corp. .................... 8,369,582
94,052 W.W. Grainger, Inc. ................ 9,928,364
------------
31,293,697
------------
Financial Services (4.8%):
100,000 H. F. Ahmanson & Co. ............... 7,625,000
282,000 Heller Financial, Inc.(b)........... 7,860,750
203,728 SLM Holding Corp. .................. 8,136,387
------------
23,622,137
------------
Food & Beverages (3.7%):
447,200 IBP, Inc. .......................... 8,664,500
237,700 PepsiCo, Inc. ...................... 9,701,131
------------
18,365,631
------------
Health Care (3.2%):
142,550 Allergan, Inc. ..................... 5,987,100
300,000 Columbia/HCA Healthcare Corp. ...... 9,806,250
------------
15,793,350
------------
Manufacturing - Consumer Goods (2.1%):
217,627 Newell Co. ......................... 10,500,503
------------
Medical Equipment & Services (1.0%):
139,600 C. R. Bard, Inc. ................... 4,842,375
------------
Office Equipment & Services (2.2%):
210,004 Avery Dennison Corp. ............... 10,880,832
------------
Oil & Exploration Products & Services (10.2%):
100,000 Atlantic Richfield Co. ............. 7,887,500
260,000 Baker Hughes, Inc. ................. 9,360,000
194,800 Murphy Oil Corp. ................... 9,800,874
440,000 Ocean Energy, Inc.(b)(c)............ 8,827,500
260,500 USX-Marathon Group.................. 9,117,500
113,100 Vastar Resources, Inc. ............. 5,061,225
------------
50,054,599
------------
Paper & Related (0.9%):
142,800 Mead Corp. ......................... 4,444,650
------------
</TABLE>
Continued
-62-
<PAGE>
THE ARCH FUND, INC.
GROWTH & INCOME EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
----------- ---------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Pharmaceuticals (7.1%):
93,916 Bristol-Myers Squibb Co. ............... $ 10,095,970
63,400 Eli Lilly & Co. ........................ 3,895,138
81,000 Merck & Co., Inc. ...................... 9,482,063
134,856 Schering-Plough Corp. .................. 11,285,761
------------
34,758,932
------------
Printing & Publishing (1.0%):
76,300 Tribune Co. ............................ 5,102,563
------------
Restaurants (1.1%):
167,820 Tricon Global Restaurants, Inc.(b)...... 5,212,909
------------
Retail Stores (6.9%):
239,517 Consolidated Stores Corp.(b)............ 9,146,556
39,042 Dillards, Inc., Class A................. 1,642,204
98,800 Nordstrom, Inc.(c)...................... 7,119,775
348,000 Pep Boys--Manny, Moe & Jack............. 7,743,000
150,000 Wal-Mart Stores, Inc.(c)................ 8,278,125
------------
33,929,660
------------
Semiconductors (1.6%):
127,200 Applied Materials, Inc.(b)(c)........... 4,070,400
110,000 KLA-Tencor Corp.(b)..................... 3,726,250
------------
7,796,650
------------
Telecommunications (6.3%):
110,000 Ascend Communications, Inc.(b)(c)....... 4,750,625
554,700 DSC Communications Corp.(b)(c).......... 9,481,903
233,000 Frontier Corp. ......................... 7,091,938
140,000 Tellabs, Inc.(b)(c)..................... 9,620,625
------------
30,945,091
------------
Tobacco (1.4%):
185,500 Philip Morris Companies, Inc. .......... 6,933,063
------------
Transportation & Shipping (2.0%):
96,500 Burlington Northern Santa Fe(c)......... 9,601,750
------------
Utilities - Gas & Electric (2.9%):
174,500 Consolidated Natural Gas Co. ........... 9,870,156
94,000 New Century Energies, Inc. ............. 4,324,000
------------
14,194,156
------------
Wholesale Distribution (1.9%):
400,070 Sysco Corp. .......................... 9,326,632
------------
Total Common Stocks
(Cost $362,267,018)............................. 463,967,007
------------
INVESTMENT COMPANIES (0.4%):
2,160,000 Cash Assets Trust Money
Market Fund.......................... 2,160,000
------------
Total Investment Companies
(Cost $2,160,000)............................... 2,160,000
------------
SHORT-TERM SECURITIES HELD AS COLLATERAL
(10.7%):
16,882,280 Solomon Brothers, 5.65%,
6/1/98 (Purchased on
5/29/98, proceeds at
maturity $16,890,228,
collateralized by
$37,309,270 U.S. Treasury
Notes and Strips, 0.00%-
11.75%, 11/30/98-8/15/27,
market value $17,257,066)............ 16,882,280
17,967,247 Greenwich Capital, 5.65%,
6/1/98 (Purchased on
5/29/98, proceeds at
maturity $17,975,706,
collateralized by
$39,525,334 various U.S.
Government Agency
securities, 0.00%-7.75%,
5/15/06-5/15/28, market
value $18,326,592)................... 17,967,247
17,967,247 Bear Stearns Co., Inc.,
5.69%, 6/1/98 (Purchased on
5/29/98, proceeds at
maturity $17,975,767,
collateralized by $19,911,881
various FNMA Remics, 6.50%-
9.50%, 2/18/04-9/20/24,
market value $18,326,592)............ 17,967,247
------------
Total Short-Term Securities Held as
Collateral (Cost $52,816,774)................... 52,816,774
------------
Total Investments
(Cost $442,044,284)(a) (110.6%)................. 543,744,273
Liabilities in excess of other assets (-
10.6%).......................................... (52,390,520)
------------
Total Net Assets (100.0%)........................ $491,353,753
============
</TABLE>
Continued
-63-
<PAGE>
THE ARCH FUND, INC.
GROWTH AND INCOME EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
- ------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................... $117,641,865
Unrealized depreciation................... (15,941,876)
------------
Net unrealized appreciation............... $101,699,989
============
</TABLE>
(b) Represents non-income producing securities.
(c) A portion of this security was loaned as of May 31, 1998.
See notes to financial statements
-64-
<PAGE>
THE ARCH FUND, INC.
SMALL CAP EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER (0.6%):
Financial Services (0.6%):
$1,531,000 New Center Asset Trust, 5.70%, 6/1/98.... $ 1,531,000
------------
Total Commercial Paper
(Cost $1,531,000) 1,531,000
------------
COMMON STOCKS (98.0%):
Advertising (0.6%):
80,000 Think New Ideas, Inc.(b)(c).............. 1,600,000
------------
Automotive Parts (1.9%):
131,200 Aftermarket Technology Corp.(b).......... 2,246,800
95,000 Superior Industries International, Inc. . 2,766,875
------------
5,013,675
------------
Banking (5.9%):
61,200 Associated Banc-Corp. ................... 3,029,400
74,000 Bank United Corp., Class A............... 3,700,000
85,000 Commercial Federal Corp.(c).............. 2,831,563
180,000 Sovereign Bancorp, Inc.(c)............... 3,183,750
105,000 St. Paul Bancorp, Inc.(c)................ 2,651,250
------------
15,395,963
------------
Business Services (7.0%):
110,000 Condor Technology Solutions, Inc.(b)..... 1,543,438
121,424 Cotelligent Group, Inc.(b)(c)............ 2,443,658
120,963 Hub Group, Inc., Class A(b).............. 2,585,584
90,000 Interim Services, Inc.(b)................ 2,615,625
141,500 National Data Corp.(c)................... 5,306,250
110,000 SunGard Data Systems, Inc.(b)(c)......... 3,753,750
------------
18,248,305
------------
Chemicals (6.8%):
55,200 Cytec Industries, Inc.(b)................ 2,704,800
202,135 M. A. Hanna Co. ......................... 4,055,333
90,736 Minerals Technologies, Inc. ............. 4,803,337
64,500 OM Group, Inc. .......................... 2,676,750
200,000 RPM, Inc.(c)............................. 3,400,000
------------
17,640,220
------------
Coal (1.1%):
164,000 Zeigler Coal Holding Co. ................ 2,982,750
------------
Commercial Services (1.1%):
67,828 Iron Mountain, Inc.(b)................... 2,816,982
------------
Computer & Computer Software (6.8%):
200,000 Cognos, Inc.(b)(c)...................... 5,150,000
158,510 Komag, Inc.(b).......................... 1,565,286
159,000 SPSS, Inc.(b)........................... 3,547,688
236,565 Systemsoft Corp.(b)..................... 443,559
143,751 Vanstar Corp.(b)(c)..................... 2,093,374
130,088 Zebra Technologies Corp.(b)(c).......... 4,992,127
------------
17,792,034
------------
Consumer Goods & Services (2.2%):
160,000 Ballantyne of Omaha, Inc.(b)............ 2,930,000
85,000 Kellwood Co.(c)......................... 2,810,313
------------
5,740,313
------------
Electrical & Electronic (7.2%):
235,000 Amkor Technologies, Inc.(b)(c).......... 2,438,125
132,517 Barnett, Inc.(b)........................ 2,401,871
160,395 CFM Technologies, Inc.(b)............... 1,824,493
185,000 General Scanning, Inc.(b)............... 2,798,125
199,792 Kulicke & Soffa Industries, Inc.(b)..... 3,421,437
150,000 PRI Automation, Inc.(b)(c).............. 3,042,188
105,000 SBS Technologies, Inc.(b)............... 2,887,500
------------
18,813,739
------------
Financial Services (8.3%):
132,500 Aames Financial Corp.(c)................ 1,912,969
30,000 CCB Financial Corp.(c).................. 3,285,000
68,000 CMAC Investment Corp.(c)................ 4,113,999
76,000 Finova Group, Inc. ..................... 4,203,749
173,350 Resource Bancshares Mortgage Group,
Inc.(c)................................ 3,022,791
149,500 Southern Pacific Funding Corp.(b)(c).... 2,298,563
155,000 Unicapital Corp.(b)(c).................. 2,693,125
------------
21,530,196
------------
Food & Beverages (3.1%):
63,767 Canandaigua Wine, Inc., Class A(b)(c)... 2,941,252
70,000 Hormel Foods Corp. ..................... 2,353,750
146,754 Performance Food Group Co.(b)........... 2,751,638
------------
8,046,640
------------
Health Care (2.5%):
110,000 Allergan, Inc. ......................... 4,620,000
59,100 Ocular Sciences, Inc.(b)................ 1,736,063
------------
6,356,063
------------
</TABLE>
Continued
-65-
<PAGE>
THE ARCH FUND, INC.
SMALL CAP EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
---------- ----------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Insurance (1.4%):
169,600 HCC Insurance Holdings, Inc.(c).......... $ 3,625,200
------------
Investment Companies (1.0%):
100,766 Sirrom Capital Corp.(c).................. 2,682,895
------------
Machinery & Equipment (1.8%):
90,000 DT Industries, Inc. ..................... 2,607,188
83,340 Rental Service Corp.(b).................. 2,161,631
------------
4,768,819
------------
Manufacturing - Consumer Goods (2.3%):
42,928 AptraGroup, Inc. ........................ 2,782,271
100,000 Blyth Industries, Inc.(b)(c)............. 3,068,750
------------
5,851,021
------------
Medical Equipment & Services (8.0%):
165,000 Dentsply International, Inc.(c).......... 5,568,749
129,650 Hanger Orthopedic Group, Inc.(b)......... 2,511,969
131,000 Maxxim Medical, Inc.(b).................. 3,062,125
178,400 Penederm, Inc.(b)(c)..................... 2,218,850
63,500 R.P. Scherer Corp.(b).................... 5,242,719
60,100 ResMed, Inc.(b)(c)....................... 2,133,550
------------
20,737,962
------------
Medical Services (7.4%):
75,020 Alternative Living Services, Inc.(b)(c).. 2,034,918
193,136 American Oncology Resources, Inc.(b)(c).. 2,462,484
210,000 Beverly Enterprises, Inc.(b)(c).......... 3,005,625
36,000 Emeritus Corp.(b)(c)..................... 391,500
114,000 Integrated Health Services, Inc.(b)(c)... 4,239,374
195,571 Pharmerica, Inc.(b)...................... 2,383,522
285,032 Sun Healthcare Group, Inc.(b)(c)......... 4,792,100
------------
19,309,523
------------
Oil & Exploration Products & Services (7.3%):
262,000 EEX Corp.(b)............................. 2,587,250
130,000 Global Industries Ltd.(b)................ 2,770,625
242,000 IRI International Corp.(b)............... 3,130,875
174,157 Ocean Energy, Inc. (b)................... 3,494,025
147,983 Swift Energy Co.(b)(c)................... 2,672,943
158,000 Union Texas Petroleum Holdings, Inc.(c).. 4,344,999
------------
19,000,717
------------
Paper & Related (0.7%):
60,000 Caraustar Industries, Inc. ............... $ 1,841,250
-----------
Pharmaceuticals (3.0%):
92,500 ChiRex, Inc.(b)(c)........................ 1,965,625
145,000 Shire Pharmaceuticals Group PLC ADR(b)(c). 2,827,500
85,000 Zonagen, Inc.(b)(c)....................... 3,102,500
-----------
7,895,625
-----------
Restaurants (1.1%):
90,000 Brinker International, Inc.(b)(c)......... 1,957,500
100,000 Ryan's Family Steak Houses, Inc.(b)....... 1,018,750
-----------
2,976,250
-----------
Retail Stores (3.3%):
73,000 Discount Auto Parts, Inc.(b)(c)........... 1,875,188
115,000 Marks Bros. Jewelers, Inc.(b)............. 2,055,625
166,153 Petco Animal Supplies, Inc.(b)............ 3,219,214
330,072 The Bombay Company, Inc.(b)............... 1,444,065
-----------
8,594,092
-----------
Semiconductors (1.1%):
104,246 Photronics, Inc.(b)(c).................... 2,749,488
-----------
Steel (1.5%):
179,000 AK Steel Holding Corp.(c)................. 3,333,875
100,397 J&L Specialty Steel, Inc. ................ 702,779
-----------
4,036,654
-----------
Telecommunications (1.9%):
110,000 IXC Communications, Inc.(b)(c)............ 4,795,313
-----------
Transportation (0.8%):
175,000 Dynamex, Inc.(b)(c)....................... 2,187,500
-----------
Utility - Electricity (0.9%):
75,000 Cleco Corp. .............................. 2,245,313
-----------
Total Common Stocks
(Cost $223,242,228) 255,274,502
-----------
</TABLE>
Continued
-66-
<PAGE>
THE ARCH FUND, INC.
SMALL CAP EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
----------- ---------------------------------------------------- -----------
<C> <S> <C>
SHORT-TERM SECURITIES HELD AS COLLATERAL (25.9%)
21,595,222 Solomon Brothers, 5.65%. 6/1/98 (Purchased on
5/29/98, proceeds at maturity $21,605,390,
collateralized by $47,724, 715 U.S. Treasury Notes
and Strips. 0.00%, 11.75%, 11/30/98-8/15/27, market
value $22,074,636.................................. $21,595,222
22,983,075 Greenwich Capital, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $22,993,896,
collateralized by $50,559,427 various U.S.
Government Agency securities, 0.00%-7.75%, 5/15/06-
5/15/28, market value $23,442,736)................. 22,983,075
22,983,075 Bear Stearns Co., Inc., 5.69%, 8/1/98 (Purchased on
5/29/98, proceeds at maturity $22,993,973,
collateralized by $25,470,583 various FNMA Remics,
6.50%-9.50%, 2/18/04-9/20/24, market value
$23,442,736....................................... $ 22,983,075
------------
Total Short-Term Securities Held as Collateral (Cost
$67,561,372) 67,561,372
------------
Total Investments
(Cost $292,334,600)(a) (124.5%) 324,366,874
Liabilities in excess of other assets
(- 24.5%) 63,886,975
------------
Total Net Assets (100.0%) $260,479,899
============
</TABLE>
- ------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................. $ 49,153,942
Unrealized depreciation.................. (17,121,668)
------------
Net Unrealized appreciation.............. $ 32,032,274
============
</TABLE>
(b) Represents non-income producing securities.
(c) A portion of this security was loaned as of May 31, 1998.
ADR--American Depositary Receipt
PLC--Public Limited Company
See notes to financial statements
-67-
<PAGE>
THE ARCH FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- --------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (95.8%):
AUSTRALIA (2.8%):
Banking (0.8%):
92,800 Australia & New Zealand Banking Group Ltd. .............. $ 659,162
-----------
Diversified Operations (0.7%):
159,000 Southcorp Holdings, Ltd.................................. 571,962
-----------
Oil & Gas Exploration, Production, & Services (0.8%):
363,000 Oil Search Limited....................................... 673,022
-----------
Telecommunications (0.5%):
164,000 Telstra Corp. Ltd.(b).................................... 386,245
-----------
Total Australia 2,290,391
-----------
FINLAND (3.3%):
Banking (1.5%):
190,000 Merita Ltd. ............................................. 1,195,829
-----------
Telecommunications (1.8%):
22,400 Nokia Oyj, Class A....................................... 1,475,969
-----------
Total Finland 2,671,798
-----------
FRANCE (12.5%):
Banking (1.2%):
5,000 Societe Generale......................................... 990,339
-----------
Computer Software (0.9%):
5,796 Cerg Finance(b).......................................... 736,271
-----------
Electrical & Electronic (1.6%):
15,500 Schneider SA(b).......................................... 1,310,924
-----------
Financial Services (0.9%):
7,500 Paribas.................................................. 764,692
-----------
Hotels & Lodging (1.6%):
4,750 Accor SA(b).............................................. 1,302,860
-----------
Insurance (1.5%):
11,000 Axa Uap.................................................. 1,252,089
-----------
Metals - Fabrication (1.3%):
2,020 Compagnie Generale D'Industrie Participations............ 1,053,420
-----------
Oil Companies - Integrated (1.5%):
9,500 Total SA, Class B........................................ 1,179,799
-----------
Telecommunications (2.0%):
7,500 Alcatel-Alsthom (Cie Gen El)(b).......................... 1,604,599
-----------
Total France 10,194,993
-----------
GERMANY (9.8%):
Automotive (1.6%):
13,000 Daimler-Benz AG.......................................... 1,311,084
-----------
Banking (0.7%):
6,600 Deutsche Bank AG......................................... 568,634
-----------
Computer Software (1.9%):
2,700 SAP AG................................................... 1,499,327
-----------
Diversified Operations (1.3%):
16,500 Veba AG.................................................. 1,084,698
-----------
Insurance (1.4%):
101 Allianz AG New(b)........................................ 31,669
3,450 Allianz AG, Registered(b)................................ 1,091,429
-----------
1,123,098
-----------
Machinery & Equipment (2.2%):
1,840 Mannesmann AG(b)......................................... 1,800,987
-----------
Telecommunications (0.7%):
685 Mobilcom AG.............................................. 541,376
-----------
Total Germany 7,929,204
-----------
GREECE (0.7%):
Telecommunications (0.7%):
19,400 Hellenic Telecommunication Organization.................. 570,213
-----------
Total Greece 570,213
-----------
HONG KONG (1.3%):
Banking (0.6%):
20,000 HSBC Holdings PLC........................................ 485,224
-----------
Construction (0.5%):
168,000 Cheung Kong Infrastructure............................... 372,900
-----------
Diversified - Conglomerates, Holding Companies (0.2%):
70,000 Citic Pacific Ltd. ...................................... 170,280
-----------
Financial Services (0.0%):
418,200 Peregrine Investment Holdings Ltd. ...................... --
-----------
Total Hong Kong 1,028,404
-----------
ITALY (8.2%):
Banking (1.5%):
219,600 Credito Italiano Spa..................................... 1,225,625
-----------
Financial Services (1.3%):
170,000 Banca Fideuram Spa....................................... 1,064,919
-----------
Insurance (1.7%):
453,000 Istituto Nazionale Delle Assicurazioni (INA)(b).......... 1,411,757
-----------
</TABLE>
Continued
-68-
<PAGE>
THE ARCH FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- --------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
ITALY, CONTINUED:
Miscellaneous Manufacturing (1.4%):
338,000 Pirelli Spa.............................................. $ 1,115,893
-----------
Oil & Gas Exploration, Production, & Services (0.6%):
70,000 Eni Spa(b)............................................... 493,761
-----------
Telecommunications (1.7%):
177,800 Telecom Italia Spa(b).................................... 1,344,532
-----------
Total Italy 6,656,487
-----------
JAPAN (11.0%):
Automotive Parts & Equipment (0.4%):
12,000 Autobacs Seven Co. Ltd. ................................. 355,934
-----------
Banking (0.7%):
96,000 Sakura Bank Ltd. ........................................ 284,747
60,000 Toyo Trust & Banking..................................... 313,932
-----------
598,679
-----------
Computer Services (0.4%):
15,800 CSK Corp. ............................................... 351,200
-----------
Computer Software (1.1%):
12,100 Meitec................................................... 413,041
12 NTT Data Corp. .......................................... 481,507
-----------
894,548
-----------
Cosmetics & Toiletries (0.4%):
12,000 Aderans Co. Ltd. ........................................ 292,715
-----------
Electrical & Electronic (3.0%):
54,000 Fujikura Ltd. ........................................... 246,296
22,000 Minebea Co. Ltd. ........................................ 225,613
5,000 Rohm Co. Ltd. ........................................... 519,611
6,000 Secom Co. Ltd. .......................................... 340,779
8,700 Shinko Electric Industries............................... 365,417
4,900 Sony Corp. .............................................. 413,741
28,000 Taiyo Yuden Co. Ltd. .................................... 329,376
-----------
2,440,833
-----------
Financial Services (1.7%):
113,000 Daiwa Securities Co. Ltd. ............................... 429,769
5,000 JAFCO Co. Ltd. .......................................... 153,358
2,860 Nichiei Co. Ltd. ........................................ 191,953
5,100 Orix Corp. .............................................. 331,621
1,100 Shohkoh Fund & Co. Ltd. ................................. 281,817
-----------
1,388,518
-----------
Metals - Fabrication (0.4%):
196,000 Sumitoma Metal Industries................................ 304,117
Office Automation & Equipment (0.5%):
17,000 Canon, Inc. ............................................. 404,864
-----------
Paper Products (0.4%):
7,600 Uni-Charm Corp. ......................................... 282,467
-----------
Real Estate (0.4%):
72,000 Sumitomo Realty & Development Co. Ltd. .................. 338,267
-----------
Recreation (0.5%):
4,300 Nintendo Co. Ltd. ....................................... 401,869
-----------
Retail Stores (0.7%):
5,900 Ryohin Keikaku Co. Ltd. ................................. 527,983
-----------
Telecommunications (0.4%):
39 Nippon Telegraph & Telephone Corp. ...................... 320,860
-----------
Total Japan 8,902,854
-----------
NETHERLANDS (7.6%):
Consumer Goods & Services (1.4%):
25,000 Hagemeyer NV............................................. 1,122,393
-----------
Electrical & Electronic (1.8%):
15,500 Philips Electronics...................................... 1,474,316
-----------
Financial Services (1.6%):
19,400 ING Groep NV............................................. 1,333,503
-----------
Office Furnishings (1.2%):
30,500 Koninklijke Ahrend NV.................................... 980,688
-----------
Paper Products (1.6%):
44,000 Koninklijke KNP BT....................................... 1,281,171
-----------
Total Netherlands 6,192,071
-----------
NEW ZEALAND (0.4%):
Oil & Gas Exploration, Production, & Services (0.4%):
115,000 Fletcher Challenge Energy................................ 363,242
-----------
Total New Zealand 363,242
-----------
PORTUGAL (1.6%):
Telecommunications (1.6%):
25,300 Portugal Telecom S.A., Registered........................ 1,331,214
-----------
Total Portugal 1,331,214
-----------
SINGAPORE (0.3%):
Banking (0.3%):
46,200 Development Bank of Singapore Ltd. ...................... 278,746
-----------
Total Singapore 278,746
-----------
</TABLE>
Continued
-69-
<PAGE>
THE ARCH FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- --------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
SPAIN (6.8%):
Banking (2.2%):
55,125 Banco Central Hispanoamericano S.A. ..................... $ 1,808,780
-----------
Diversified - Conglomerates, Holding Companies (1.0%):
57,000 Corp Financiera Reunida S.A.(b).......................... 824,968
-----------
Oil Companies - Integrated (1.6%):
23,700 Repsol S.A. ............................................. 1,318,799
-----------
Telecommunications (2.0%):
36,109 Telefonica S.A. ......................................... 1,615,556
-----------
Total Spain 5,568,103
-----------
SWEDEN (1.3%):
Pharmacueticals (1.3%):
51,600 Astra AB, A Shares....................................... 1,037,812
-----------
Total Sweden 1,037,812
-----------
SWITZERLAND (8.7%):
Banking (1.4%):
670 Union Bank of Switzerland, Bearer........................ 1,128,297
-----------
Engineering (1.7%):
800 Abb AG, Bearer........................................... 1,358,041
-----------
Health Care - Drugs (2.5%):
590 Novartis AG Registered................................... 1,000,757
101 Roche Holding AG......................................... 1,040,671
-----------
2,041,428
-----------
Insurance (3.1%):
1,400 Swiss Life, Bearer(b).................................... 1,132,423
2,200 Zurich Versicherungs-Gesellschaft........................ 1,376,302
-----------
2,508,725
-----------
Total Switzerland 7,036,491
-----------
UNITED KINGDOM (15.0%):
Automotive Parts & Equipment (1.8%):
95,800 GKN PLC.................................................. 1,423,251
-----------
Banking (1.3%):
58,000 Abbey National PLC....................................... 1,033,823
-----------
Business Services (1.2%):
270,000 Corporate Services Group PLC............................. 1,003,914
-----------
Computer Software (1.3%):
27,000 SEMA Group PLC........................................... 1,056,751
-----------
Computer Software & Services (1.4%):
18,600 Misys PLC................................................ 1,125,342
-----------
Diversified Operations (1.7%):
195,600 Rentokil Initial PLC..................................... 1,367,637
-----------
Electrical & Electronic (1.1%):
98,400 Electrocomponents PLC(b)................................. 912,270
-----------
Financial Services (1.2%):
69,000 Lloyds TSB Group PLC..................................... 1,001,468
-----------
Oil & Gas Exploration, Production, & Services (0.4%):
46,000 Shell Transport & Trading Co. PLC........................ 339,449
-----------
Telecommunications (1.4%):
99,200 Cable & Wireless PLC..................................... 1,121,905
-----------
Transportation & Shipping (2.2%):
134,000 FirstBus PLC............................................. 942,938
37,896 Stagecoach Holdings PLC.................................. 835,850
-----------
1,778,788
-----------
Total United Kingdom 12,164,598
-----------
UNITED STATES (4.5%):
Health Care (1.4%):
18,500 Elan Corp. PLC, Sponsored ADR(b)......................... 1,135,438
-----------
Investment Companies (0.4%):
30,000 Polish Investment Co.(b)................................. 337,200
-----------
Oil & Gas Exploration, Production, & Services (0.6%):
15,700 MOL Magyar Olaj GDR(b)................................... 360,315
4,900 MOL Magyar Olaj GDR(b)(c)................................ 112,455
-----------
472,770
-----------
Telecommunications (1.4%):
26,900 Matav RT, Sponsored ADR(b)............................... 744,794
3,450 Telebras ADR............................................. 379,931
-----------
1,124,725
-----------
Transportation & Shipping (0.7%):
45,000 Laidlaw, Inc. ........................................... 559,688
-----------
Total United States 3,629,821
-----------
Total Common Stocks
(Cost $60,291,696) 77,846,442
-----------
</TABLE>
Continued
-70-
<PAGE>
THE ARCH FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (2.9%):
Student Loan Marketing Assoc. (2.9%):
$2,334,000 5.45%, 6/1/98......................................... $ 2,333,647
-----------
Total U.S. Government Agencies
(Cost $2,334,000) 2,333,647
-----------
CLOSED END INVESTMENT COMPANIES (0.9%):
18,400 Argentinian Investment Co.(b)......................... 424,304
8,450 India Magnum Fund(b).................................. 295,750
-----------
Total Closed End Investment Companies
(Cost $880,197) 720,054
-----------
Total Investments
(Cost $63,505,893)(a) (99.6%) 80,900,143
Other assets in excess of liabilities (0.4%) 308,286
-----------
Total Net Assets (100.0%) $81,208,429
===========
</TABLE>
- ------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................... $20,468,272
Unrealized depreciation.................... (3,074,022)
-----------
Net unrealized appreciation................ $17,394,250
===========
</TABLE>
(b) Represents non-income producing securities.
(c) Rule 144A security which is restricted as to resale to institutional
investors.
ADR--American Depositary Receipt
PLC--Public Limited Company
GDR--Global Depositary Receipt
See notes to financial statements
-71-
<PAGE>
THE ARCH FUND, INC.
EQUITY INCOME PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER (4.4%):
Financial Services (4.4%):
$5,087,000 New Center Asset Trust, 5.70%, 6/1/98................ $ 5,087,000
------------
Total Commercial Paper
(Cost $5,087,000) 5,087,000
------------
COMMON STOCKS (90.9%):
Automotive (1.7%):
15,000 Cooper Industries, Inc.(c)........................... 965,625
30,000 Genuine Parts Co.(c)................................. 1,018,125
------------
1,983,750
------------
Banking (22.0%):
43,617 Banc One Corp.(c).................................... 2,404,386
15,000 Chase Manhattan Corp. ............................... 2,039,063
28,500 Comerica, Inc. ...................................... 1,873,875
23,525 Crestar Financial Corp. ............................. 1,351,217
31,600 First Union Corp. ................................... 1,747,875
50,262 MBNA Corp. .......................................... 1,592,677
35,000 Mellon Bank Corp.(c)................................. 2,360,313
22,800 National City Corp. ................................. 1,544,700
32,300 NationsBank Corp.(c)................................. 2,446,724
39,500 PNC Financial Corp. ................................. 2,281,125
60,000 U.S. Bancorp......................................... 2,347,500
27,600 Wachovia Corp.(c).................................... 2,209,725
3,000 Wells Fargo & Co. ................................... 1,084,500
------------
25,283,680
------------
Building Products (0.8%):
28,000 Sherwin-Williams Co. ................................ 931,000
------------
Business Services (1.7%):
60,000 First Data Corp. .................................... 1,995,000
------------
Chemicals (7.9%):
30,000 Arco Chemical Co.(c)................................. 1,672,500
42,600 Ecolab, Inc. ........................................ 1,315,275
20,000 FMC Corp.(b)......................................... 1,528,750
40,000 Praxair, Inc. ....................................... 1,972,499
48,750 RPM, Inc. ........................................... 828,750
63,000 Solutia, Inc. ....................................... 1,728,563
------------
9,046,337
------------
Containers & Packaging (0.8%):
17,500 Crown Cork & Seal Co., Inc. ......................... 907,813
------------
Diversified Operations (1.7%):
26,900 PPG Industries, Inc.(c).............................. 1,960,338
------------
Electrical & Electronic (3.1%):
25,000 Hubbell, Inc., Class B............................... $ 1,176,563
30,700 Millipore Corp. ..................................... 1,024,613
12,570 W.W. Grainger, Inc. ................................. 1,326,920
------------
3,528,096
------------
Financial Services (7.5%):
45,000 Fannie Mae........................................... 2,694,375
30,000 H. F. Ahmanson & Co. ................................ 2,287,500
72,000 Heller Financial, Inc.(b)............................ 2,007,000
39,454 SLM Holding Corp. ................................... 1,575,694
------------
8,564,569
------------
Food & Beverages (2.9%):
56,100 IBP, Inc. ........................................... 1,086,938
37,400 Sara Lee Corp.(c).................................... 2,201,925
------------
3,288,863
------------
Health Care (2.8%):
41,400 Allergan, Inc. ...................................... 1,738,800
45,000 Columbia/HCA Healthcare Corp. ....................... 1,470,938
------------
3,209,738
------------
Manufacturing - Consumer Goods (2.2%):
51,300 Newell Co. .......................................... 2,475,225
------------
Medical Equipment & Services (1.3%):
41,600 C. R. Bard, Inc. .................................... 1,443,000
------------
Metals & Mining (0.9%):
15,000 Aluminum Co. of America(c)........................... 1,040,625
------------
Office Equipment & Services (1.4%):
31,600 Avery Dennison Corp. ................................ 1,637,275
------------
Oil & Exploration Products & Services (9.0%):
20,000 Atlantic Richfield Co. .............................. 1,577,500
65,000 Baker Hughes, Inc. .................................. 2,339,999
35,000 Murphy Oil Corp. .................................... 1,760,937
26,400 National Fuel Gas Co. ............................... 1,118,700
35,000 Phillips Petroleum Co.(c)............................ 1,752,188
50,000 USX-Marathon Group................................... 1,750,000
------------
10,299,324
------------
Paper & Related (2.1%):
85,000 Consolidated Papers, Inc. ........................... 2,459,688
------------
Pharmaceuticals (4.0%):
30,000 Abbott Laboratories.................................. 2,225,625
54,000 Pharmacia & UpJohn, Inc.(c).......................... 2,386,125
------------
4,611,750
------------
</TABLE>
Continued
-72-
<PAGE>
THE ARCH FUND, INC.
EQUITY INCOME PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Retail Stores (3.9%):
33,199 Dillards, Inc., Class A.............................. $ 1,396,433
30,000 May Department Stores Co.(c)......................... 1,929,375
50,000 Pep Boys--Manny, Moe & Jack.......................... 1,112,500
------------
4,438,308
------------
Telecommunications (2.6%):
99,500 Frontier Corp. ...................................... 3,028,531
------------
Tobacco (2.4%):
47,400 Philip Morris Companies, Inc. ....................... 1,771,575
35,000 UST, Inc. ........................................... 931,875
------------
2,703,450
------------
Transportation & Shipping (1.4%):
16,200 Burlington Northern Santa Fe(c)...................... 1,611,900
------------
Utilities - Gas & Electric (6.9%):
28,400 Ameren Corp.(c)...................................... 1,111,150
49,000 Baltimore Gas & Electric Co. ........................ 1,491,438
20,000 Consolidated Natural Gas Co. ........................ 1,131,250
20,000 New Century Energies, Inc. .......................... 920,000
57,700 Scana Corp. ......................................... 1,662,481
45,000 Unicom Corp. ........................................ 1,546,875
------------
7,863,194
------------
Total Common Stocks
(Cost $81,135,833) 104,311,454
------------
CONVERTIBLE BONDS (0.8%):
Financial Services (0.8%):
$1,000,000 Southern Pacific Funding, 6.75%, 10/15/06(c)......... 891,250
------------
Total Convertible Bonds
(Cost $1,015,418) 891,250
------------
CONVERTIBLE PREFERRED STOCK (1.9%):
Banking (1.9%):
30,000 Union Planters Corp. ................................ 2,130,000
------------
Total Convertible Preferred Stock
(Cost $768,125) 2,130,000
------------
REAL ESTATE INVESTMENT TRUST (1.2%):
Health Care (1.0%):
47,700 Nationwide Health Properties, Inc. ................ 1,144,800
------------
Office Property (0.2%):
11,000 Prentiss Properties Trust.......................... 281,188
------------
Total Real Estate Investment Trust
(Cost $1,268,982) 1,425,988
------------
SHORT-TERM SECURITIES HELD AS COLLATERAL (10.8%):
3,946,446 Salomon Brothers, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $3,948,304,
collateralized by $8,721,512 U.S. Treasury Notes
and Strips, 0.00%-11.75%, 11/30/98-8/15/27, market
value $4,034,057)................................. 3,946,446
4,200,070 Greenwich Capital, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $4,202,048,
collateralized by $9,239,545 various U.S.
Government Agency securities, 0.00%-7.75%,
5/15/06-5/15/28, market value $4,284,072)......... 4,200,070
4,200,070 Bear Stearns, 5.69% 6/1/98 (Purchased on 5/29/98,
proceeds at maturity $4,202,062, collateralized by
$4,654,653 various FNMA Remics, 6.50%-9.50%,
2/18/04-9/20/24, market value $4,284,072)......... 4,200,070
------------
Total Short-Term Securities Held as Collateral (Cost
$12,346,586) 12,346,586
------------
Total Investments
(Cost $101,621,944 (110.0%) 126,192,278
Liabilities in excess of other assets
(-10.0%) (11,503,445)
------------
Total Net Assets (100.0%) $114,688,833
============
</TABLE>
- ------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation.................... $26,219,813
Unrealized depreciation.................... (1,649,479)
-----------
Net unrealized appreciation................ $24,570,334
===========
(b) Represents non-income producing securities.
(c) A portion of this security was loaned as of May 31, 1998.
See notes to financial statements
-73-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMERCIAL PAPER (0.6%):
Financial Services (0.6%):
$276,000 New Center Asset Trust, 5.70%, 6/1/98.................. $ 276,000
-----------
Total Commercial Paper
(Cost $276,000) 276,000
-----------
COMMON STOCKS (98.5%):
Advertising (0.1%):
916 Omnicom Group.......................................... 42,880
-----------
Aerospace/Defense (1.4%):
5,626 Boeing Co. ............................................ 267,937
716 General Dynamics Corp. ................................ 31,817
1,062 Lockheed Martin Corp.(c)............................... 119,210
361 Northrop Grumman Corp. ................................ 38,695
1,889 Raytheon Co., Class B(c)............................... 103,305
1,294 United Technologies Corp. ............................. 121,636
-----------
682,600
-----------
Aircraft Engines & Engine Parts (0.3%):
3,210 AlliedSignal, Inc. .................................... 137,228
-----------
Airlines (0.4%):
472 AMR Corp.(b)........................................... 72,659
449 Delta Air Lines........................................ 51,635
1,250 Southwest Airlines Co. ................................ 33,359
537 US Airways Group, Inc.(b).............................. 37,590
-----------
195,243
-----------
Apparel/Shoes (0.6%):
389 Fruit of the Loom, Class A(b)(c)....................... 13,980
2,185 Gap, Inc. ............................................. 117,989
392 Liz Claiborne, Inc. ................................... 19,870
1,628 Nike, Inc. ............................................ 74,888
302 Reebok International Ltd.(b)........................... 8,683
206 Russell Corp. ......................................... 5,614
695 VF Corp. .............................................. 36,965
-----------
277,989
-----------
Automotive (2.1%):
3,694 Chrysler Corp. ........................................ 205,479
691 Cooper Industries, Inc.(c)............................. 44,483
211 Cummins Engine Co. .................................... 10,972
566 Dana Corp. ............................................ 29,503
330 Echlin, Inc. .......................................... 15,675
6,767 Ford Motor Co. ........................................ 351,038
4,012 General Motors Corp.(c)................................ 288,613
1,013 Genuine Parts Co. ..................................... 34,379
400 Navistar International Corp.(b)........................ 12,075
Automotive, continued:
418 PACCAR, Inc. ........................................... 23,081
-----------
1,015,298
-----------
Banking (8.3%):
3,682 Banc One Corp. ......................................... 202,970
2,102 Bank of New York, Inc.(c)............................... 128,485
3,955 BankAmerica Corp. ...................................... 327,029
825 BankBoston Corp. ....................................... 86,934
534 Bankers Trust New York Corp. ........................... 65,949
812 BB & T Corp. ........................................... 53,744
2,417 Chase Manhattan Corp. .................................. 328,560
2,617 Citicorp................................................ 390,259
896 Comerica, Inc. ......................................... 58,912
1,297 Fifth Third Bancorp..................................... 63,877
1,627 First Chicago NBD Corp. ................................ 142,261
5,459 First Union Corp. ...................................... 301,927
1,074 Huntington BancShares, Inc. ............................ 35,174
2,517 KeyCorp................................................. 95,489
2,797 MBNA Corp. ............................................. 88,630
1,408 Mellon Bank Corp. ...................................... 94,952
711 Mercantile Bancorp Capital.............................. 36,350
1,812 National City Corp. .................................... 122,763
5,309 NationsBank Corp.(c).................................... 402,157
643 Northern Trust Corp. ................................... 45,352
4,274 Norwest Corp. .......................................... 166,152
1,695 PNC Financial Corp. .................................... 97,886
301 Republic New York Corp. ................................ 38,660
908 State Street Corp. ..................................... 62,595
961 Summit Bancorp.......................................... 48,170
1,186 Sun Trust Banks, Inc. .................................. 93,694
1,524 Synovus Financial Corp. ................................ 34,184
4,192 U.S. Bancorp............................................ 164,012
1,125 Wachovia Corp. ......................................... 90,070
503 Wells Fargo & Co. ...................................... 181,835
-----------
4,049,032
-----------
Beverages (0.5%):
230 Adolph Coors Co. ....................................... 8,625
2,739 Anheuser-Busch Co. ..................................... 125,823
407 Brown-Forman Corp. ..................................... 23,453
1,964 Seagram Co. Ltd. ....................................... 86,293
-----------
244,194
-----------
Building Products (0.2%):
930 Masco Corp.............................................. 52,312
288 Owens Corning........................................... 10,800
</TABLE>
Continued
-74-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
-------- -------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Building Products, continued:
926 Sherwin-Williams Co. ................................... $ 30,790
-----------
93,902
-----------
Business Services (0.7%):
1,668 Automatic Data Processing, Inc. ........................ 106,127
407 Ceridian Corp.(b)....................................... 21,978
849 Computer Science Corp.(b)............................... 44,095
920 Dun & Bradstreet Corp. ................................. 31,050
813 Equifax, Inc. .......................................... 29,573
2,453 First Data Corp. ....................................... 81,563
721 Interpublic Group Cos., Inc. ........................... 42,764
-----------
357,150
-----------
Capital Equipment (0.2%):
1,387 Illinois Tool Works, Inc. .............................. 91,542
-----------
Chemicals (2.4%):
631 Air Products & Chemicals, Inc. ......................... 54,897
1,267 Dow Chemical Co. ....................................... 122,741
6,398 E. I. duPont de Nemours & Co.(c)........................ 492,646
417 Eastman Chemical Co. ................................... 27,939
728 Ecolab, Inc. ........................................... 22,477
787 Engelhard Corp. ........................................ 16,379
177 FMC Corp.(b)............................................ 13,529
321 Great Lakes Chemical Corp. ............................. 12,840
518 Hercules, Inc. ......................................... 22,824
3,377 Monsanto Co.(c)......................................... 187,002
706 Morton International, Inc. ............................. 21,489
350 Nalco Chemical Co. ..................................... 13,125
889 Praxair, Inc. .......................................... 43,839
336 Rohm & Haas Co. ........................................ 36,918
583 Sigma-Aldrich Corp. .................................... 21,280
670 Union Carbide Corp. .................................... 33,458
400 W.R. Grace & Co.(b)..................................... 7,425
-----------
1,150,808
-----------
Commercial Services (0.3%):
1,095 Browning-Ferris Industries, Inc.(c)..................... 38,941
4,600 Cendant Corp.(b)........................................ 99,763
600 H & R Block, Inc.(c).................................... 26,400
-----------
165,104
-----------
Computer & Computer Software (3.1%):
375 Adobe Systems, Inc. .................................... 14,977
3,049 Computer Associates International, Inc. ................ 160,073
13,703 Microsoft Corp.(b)...................................... $ 1,162,185
1,938 Novell, Inc.(b)......................................... 20,349
5,554 Oracle Corp.(b)......................................... 131,213
1,442 Parametric Technology Corp.(b)(c)....................... 44,206
-----------
1,533,003
-----------
Computers (5.0%):
1,969 3Com Corp.(b)........................................... 49,963
759 Apple Computer, Inc.(b)(c).............................. 20,208
861 Cabletron Systems(b).................................... 11,085
5,752 Cisco Systems, Inc.(b)(c)............................... 434,995
8,587 Compaq Computer Corp. .................................. 234,532
263 Data General Corp.(b)(c)................................ 4,011
3,710 Dell Computer Corp.(b).................................. 305,727
792 Digital Equipment Corp.(b).............................. 43,461
2,833 EMC Corp.(b)(c)......................................... 117,392
873 Gateway 2000, Inc.(b)................................... 39,340
5,892 Hewlett-Packard Co. .................................... 366,041
5,503 IBM Corp. .............................................. 645,915
1,360 Seagate Technology, Inc.(b)............................. 31,450
1,020 Silicon Graphics, Inc.(b)............................... 12,240
2,178 Sun Microsystems, Inc.(b)............................... 87,256
1,389 Unisys Corp.(b)......................................... 34,031
-----------
2,437,647
-----------
Construction (0.2%):
244 Armstrong World Industries, Inc. ....................... 20,527
311 Centex Corp. ........................................... 11,118
895 Ingersoll-Rand Co. ..................................... 40,330
234 Kaufman & Broad Home Corp. ............................. 6,011
95 Pulte Corp. ............................................ 5,065
-----------
83,051
-----------
Consumer Goods & Services (1.9%):
560 Black & Decker Corp. ................................... 32,690
597 Clorox Co. ............................................. 49,850
1,650 Colgate-Palmolive Co. .................................. 143,550
970 Fortune Brands, Inc. ................................... 37,284
233 Jostens, Inc. .......................................... 5,883
7,550 Procter & Gamble Co.(c)................................. 633,728
812 Rubbermaid, Inc. ....................................... 26,492
-----------
929,477
-----------
Containers & Packaging (0.3%):
175 Ball Corp. ............................................. 6,902
289 Bemis Co. .............................................. 12,192
674 Crown Cork & Seal Co., Inc. ............................ 34,964
</TABLE>
Continued
-75-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
-------- -------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Containers & Packaging, continued:
910 Owens-Illinois, Inc.(b)................................. $ 40,893
424 Sealed Air Corp.(b)..................................... 22,684
580 Stone Container Corp.(b)................................ 10,295
-----------
127,930
-----------
Cosmetics & Toiletries (0.9%):
303 Alberto-Culver Co. ..................................... 9,014
718 Avon Products, Inc. .................................... 58,741
3,116 Gillette Co. ........................................... 364,962
626 International Flavors & Fragrances...................... 30,048
-----------
462,765
-----------
Diversified Operations (2.1%):
140 Aeroquip-Vickers, Inc. ................................. 8,645
4,042 CBS Corp.(c)............................................ 128,333
920 Cognizant Corp. ........................................ 48,990
1,309 Corning, Inc. .......................................... 51,624
263 Crane Co. .............................................. 13,857
133 Eastern Enterprises..................................... 5,337
390 Eaton Corp. ............................................ 35,027
633 ITT Industries, Inc. ................................... 23,342
2,257 Minnesota Mining & Manufacturing(c)..................... 209,054
235 National Service Industries, Inc. ...................... 11,985
974 PPG Industries, Inc. ................................... 70,981
489 Raychem Corp. .......................................... 18,399
972 Tenneco, Inc. .......................................... 40,460
926 Textron, Inc. .......................................... 68,698
3,641 Unilever NV, New York Shares(c)......................... 287,410
-----------
1,022,142
-----------
Electrical & Electronic (3.7%):
1,197 Amp, Inc. .............................................. 45,486
2,476 Emerson Electric Co.(c)................................. 150,417
18,448 General Electric Co. ................................... 1,538,101
229 General Signal Corp. ................................... 9,418
252 Millipore Corp. ........................................ 8,411
551 Tandy Corp.(c).......................................... 24,382
277 Tektronix, Inc. ........................................ 10,595
292 Thomas & Betts Corp. ................................... 15,604
267 W.W. Grainger, Inc. .................................... 28,185
-----------
1,830,599
-----------
Engineering (0.1%):
493 Fluor Corp. ............................................ 23,510
241 Foster Wheeler Corp. ................................... 6,115
-----------
29,625
-----------
Entertainment (1.9%):
577 Brunswick Corp. ........................................ 18,139
545 Harrah's Entertainment, Inc.(b)(c)...................... 13,625
468 Harris Corp. ........................................... 22,552
1,190 HBO & Co. .............................................. 68,685
431 King World Productions, Inc. ........................... 10,991
294 Meredith Corp. ......................................... 11,687
3,857 The Walt Disney Co. .................................... 436,323
3,222 Time Warner, Inc. ...................................... 250,712
1,945 Viacom, Inc., Class B(b)(c)............................. 106,975
-----------
939,689
-----------
Environmental Services (0.2%):
2,600 Waste Management, Inc.(c)............................... 84,500
-----------
Financial Services (5.4%):
2,660 American Express Co.(c)................................. 272,982
1,949 Associates First Capital................................ 145,810
296 Beneficial Corp. ....................................... 39,664
580 Countrywide Credit Industries, Inc. .................... 26,825
5,960 Fannie Mae.............................................. 356,854
3,946 Federal Home Loan Mortgage Corp. ....................... 179,543
1,496 Fleet Financial Group, Inc. ............................ 122,672
1,384 Franklin Resources, Inc. ............................... 67,643
309 Golden West Financial Corp. ............................ 33,372
736 Green Tree Financial Corp. ............................. 29,578
631 H. F. Ahmanson & Co. ................................... 48,114
571 Household International, Inc.(c)........................ 77,263
1,006 J. P. Morgan & Co., Inc.(c)............................. 124,933
550 Lehman Brothers Holding, Inc.(c)........................ 39,016
529 MBIA, Inc. ............................................. 39,444
1,871 Merrill Lynch & Co.(c).................................. 167,455
657 MGIC Investment Corp.(c)................................ 39,379
3,390 Morgan Stanley Dean Witter & Co. ....................... 264,632
558 Providian Financial Corp.(c)............................ 35,503
1,496 Schwab (Charles) Corp. ................................. 49,368
6,467 Travelers Group, Inc. .................................. 394,486
1,405 Washington Mutual, Inc.(c).............................. 99,228
-----------
2,653,764
-----------
Food & Beverages (5.2%):
3,178 Archer-Daniels Midland Co. ............................. 59,985
1,599 Bestfoods............................................... 90,244
2,608 Campbell Soup Co. ...................................... 142,136
13,937 Coca-Cola Co.(c)........................................ 1,092,311
2,662 ConAgra, Inc. .......................................... 77,864
</TABLE>
Continued
-76-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
-------- -------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Food & Beverages, continued:
860 General Mills, Inc. .................................... $ 58,695
2,104 H. J. Heinz Co. ........................................ 111,644
777 Hershey Foods Corp. .................................... 53,807
2,272 Kellogg Co. ............................................ 93,862
8,595 PepsiCo, Inc. .......................................... 350,783
1,333 Pioneer Hi-Bred International, Inc. .................... 50,737
780 Quaker Oats Co. ........................................ 44,996
584 Ralston Purina Group.................................... 65,007
2,640 Sara Lee Corp. ......................................... 155,430
323 SUPERVALU, Inc. ........................................ 13,526
625 Wm. Wrigley Jr. Co. .................................... 60,156
-----------
2,521,183
-----------
Funeral Services (0.1%):
1,413 Service Corp. International............................. 57,756
-----------
Health Care (2.0%):
342 Allergan, Inc. ......................................... 14,364
7,316 American Home Products Corp. ........................... 353,454
302 Bausch & Lomb, Inc.(c).................................. 15,043
3,692 Columbia/HCA Healthcare Corp. .......................... 120,682
2,261 HEALTHSOUTH Corp.(b).................................... 64,156
889 Humana, Inc.(b)(c)...................................... 27,615
332 Manor Care, Inc. ....................................... 10,479
1,027 United Healthcare Corp. ................................ 65,728
4,599 Warner-Lambert Co. ..................................... 293,474
-----------
964,995
-----------
Hotels & Lodging (0.2%):
1,384 Hilton Hotels Corp.(c).................................. 43,510
1,400 Marriott International, Inc., Class A(c)................ 48,649
978 Mirage Resorts, Inc.(b)................................. 20,355
-----------
112,514
-----------
Household - Major Appliances (0.1%):
559 Maytag Corp. ........................................... 28,195
379 Whirlpool Corp.(c)...................................... 25,890
-----------
54,085
-----------
Instrumentation (0.3%):
243 EG&G, Inc. ............................................. 7,655
718 Honeywell, Inc. ........................................ 60,267
490 Johnson Controls, Inc. ................................. 29,155
631 Parker-Hannifin Corp. .................................. 25,910
278 Perkin-Elmer Corp. ..................................... 19,043
-----------
142,030
-----------
Insurance (3.9%):
991 Aetna, Inc. ............................................ 77,484
2,391 Allstate Corp. ......................................... 225,053
1,410 American General Corp. ................................. 94,646
3,877 American International Group, Inc. ..................... 480,020
963 Aon Corp. .............................................. 61,692
961 Chubb Corp. ............................................ 76,460
1,296 Cigna Corp. ............................................ 88,776
882 Cincinnati Financial Corp. ............................. 37,044
1,069 Conseco, Inc.(c)........................................ 49,842
411 General Re Corp. ....................................... 90,369
630 Hartford Financial Services Group....................... 69,339
621 Jefferson-Pilot Corp. .................................. 35,552
551 Lincoln National Corp. ................................. 49,521
620 Loews Corp. ............................................ 56,265
968 March & McLennan Cos., Inc. ............................ 84,761
384 Progressive Corp. ...................................... 52,944
815 SAFECO Corp. ........................................... 37,898
1,300 Saint Paul Companies, Inc. ............................. 57,688
1,110 SunAmerica, Inc. ....................................... 53,974
799 Torchmark Corp. ........................................ 34,257
346 Transamerica Corp. ..................................... 39,790
798 UNUM Corp. ............................................. 44,339
-----------
1,897,714
-----------
Machinery & Equipment (0.7%):
400 Case Corp. ............................................. 23,150
2,089 Caterpillar, Inc.(c).................................... 114,763
238 Cincinnati Milacron, Inc. .............................. 7,125
1,395 Deere & Co. ............................................ 72,365
1,218 Dover Corp. ............................................ 45,675
251 Harnischfeger Industries, Inc. ......................... 7,907
349 McDermott International, Inc. .......................... 13,327
33 Nacco Industries, Inc., Class A......................... 4,835
324 Snap-on, Inc. .......................................... 14,216
513 Stanley Works........................................... 24,368
860 Thermo Electron Corp.(b)................................ 30,208
-----------
357,939
-----------
Manufacturing (0.5%):
118 Briggs & Stratton....................................... 5,354
170 Fleetwood Enterprises................................... 6,800
714 Pall Corp. ............................................. 14,146
329 Tupperware Corp. ....................................... 8,883
3,187 Tyco International Ltd.(c).............................. 176,481
294 Western Atlas, Inc.(b).................................. 25,449
-----------
237,113
-----------
</TABLE>
Continued
-77-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
-------- -------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Manufacturing - Consumer Goods (0.1%):
849 Newell Co. ............................................. $ 40,964
-----------
Medical Equipment & Services (1.0%):
495 Alza Corp.(b)........................................... 23,946
1,565 Baxter International, Inc. ............................. 89,498
702 Becton Dickinson & Co. ................................. 49,667
642 Biomet, Inc. ........................................... 18,538
1,092 Boston Scientific Corp.(b).............................. 69,615
308 C. R. Bard, Inc. ....................................... 10,684
856 Guidant Corp. .......................................... 55,159
427 Mallinckrodt, Inc. ..................................... 13,157
2,610 Medtronic, Inc. ........................................ 145,180
456 St. Jude Medical, Inc.(b)(c)............................ 16,302
436 US Surgical Corp. ...................................... 17,331
-----------
509,077
-----------
Medical Services (0.1%):
121 Shared Medical Systems Corp.(c)......................... 8,803
1,680 Tenet Healthcare Corp.(b)............................... 58,800
-----------
67,603
-----------
Metals & Mining (0.4%):
1,274 Alcan Aluminum Ltd. .................................... 36,308
983 Aluminum Co. of America................................. 68,195
225 Asarco, Inc.(c)......................................... 5,105
531 Cyprus Amax Minerals Co. ............................... 8,430
1,089 Freeport McMoRan........................................ 18,241
962 Inco Ltd. .............................................. 13,829
315 Phelps Dodge Corp. ..................................... 19,215
397 Reynolds Metals......................................... 23,026
-----------
192,349
-----------
Office Equipment & Services (0.7%):
551 Avery Dennison Corp. ................................... 28,549
436 Deluxe Corp. ........................................... 14,633
775 IKON Office Solutions, Inc. ............................ 16,420
508 Moore Corp. Ltd. ....................................... 7,366
1,612 Pitney Bowes, Inc. ..................................... 75,764
1,826 Xerox Corp. ............................................ 187,622
-----------
330,354
-----------
Oil & Exploration Products & Services (2.9%):
318 Anadarko Petroleum Corp. ............................... 20,988
542 Apache Corp. ........................................... 18,530
1,766 Atlantic Richfield Co. ................................. 139,293
969 Baker Hughes, Inc. ..................................... 34,884
998 Burlington Resources.................................... 42,041
605 Coastal Corp. .......................................... 42,653
273 Kerr-McGee Corp. ....................................... 17,267
603 Oryx Energy Co.(b)...................................... 14,057
1,475 Phillips Petroleum Co. ................................. 73,842
499 Rowan Cos., Inc.(b) .................................... 12,756
12,156 Royal Dutch Petroleum-NY Shares......................... 681,495
2,837 Schlumberger Ltd. ...................................... 221,463
627 Sonat, Inc. ............................................ 24,571
1,420 Union Pacific Resources................................. 28,755
1,599 USX-Marathon Group...................................... 55,965
-----------
1,428,560
-----------
Oil & Gas Equipment/Services (0.2%):
993 Dresser Industries, Inc. ............................... 46,237
1,447 Halliburton Co.(c)...................................... 68,551
-----------
114,788
-----------
Oil Companies - Integrated (4.7%):
530 Amerada Hess Corp. ..................................... 28,653
5,487 Amoco Corp. ............................................ 229,425
403 Ashland, Inc. .......................................... 20,100
3,715 Chevron Corp.(c)........................................ 296,736
1,839 Enron Corp. ............................................ 92,180
13,943 Exxon Corp.(c).......................................... 982,981
279 Helmerich & Payne, Inc. ................................ 7,045
4,468 Mobil Corp. ............................................ 348,504
1,893 Occidental Petroleum Corp. ............................. 52,294
265 Pennzoil Co. ........................................... 15,320
373 Sun Co., Inc. .......................................... 15,853
3,060 Texaco, Inc. ........................................... 176,715
1,373 Unocal Corp.(c)......................................... 48,913
-----------
2,314,719
-----------
Paper & Related (1.1%):
298 Boise Cascade Corp. .................................... 9,946
565 Champion International Corp. ........................... 27,120
1,177 Fort James Corp. ....................................... 56,275
548 Georgia-Pacific Corp.(c)................................ 35,175
1,676 International Paper Co. ................................ 77,096
3,083 Kimberly-Clark Corp. ................................... 152,801
594 Louisiana-Pacific Corp. ................................ 11,843
601 Mead Corp. ............................................. 18,706
143 Potlatch Corp. ......................................... 6,265
301 Temple-Inland, Inc. .................................... 17,684
359 Union Camp Corp. ....................................... 19,633
591 Westvaco Corp. ......................................... 16,844
</TABLE>
Continued
-78-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
-------- -------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Paper & Related, continued:
1,135 Weyerhaeuser Co. ....................................... $ 57,672
602 Williamette Industries, Inc. ........................... 20,656
-----------
527,716
-----------
Pharmaceuticals (8.1%):
4,323 Abbott Laboratories..................................... 320,713
1,455 Amgen, Inc.(b).......................................... 88,028
5,616 Bristol-Myers Squibb Co. ............................... 603,721
6,258 Eli Lilly & Co. ........................................ 384,476
7,639 Johnson & Johnson....................................... 527,569
6,748 Merck & Co., Inc. ...................................... 789,937
7,266 Pfizer, Inc. ........................................... 761,569
2,825 Pharmacia & UpJohn, Inc. ............................... 124,830
4,143 Schering-Plough Corp. .................................. 346,717
-----------
3,947,560
-----------
Photography (0.3%):
1,811 Eastman Kodak Co.(c).................................... 129,260
236 Polaroid Corp.(c)....................................... 9,573
-----------
138,833
-----------
Precious Metals (0.2%):
2,084 Barrick Gold Corp. ..................................... 40,117
1,292 Battle Mountain Gold Co. ............................... 6,864
1,149 Homestake Mining Co.(c)................................. 12,495
836 Newmont Mining Corp. ................................... 20,848
1,378 Placer Dome, Inc. ...................................... 17,139
-----------
97,463
-----------
Printing & Publishing (0.7%):
381 American Greetings Class A.............................. 18,098
520 Dow Jones & Co., Inc. .................................. 25,025
1,577 Gannett Co., Inc. ...................................... 103,982
433 Knight-Ridder, Inc.(c).................................. 24,708
531 McGraw-Hill Cos., Inc. ................................. 41,518
545 New York Times Co. ..................................... 38,423
791 R.R. Donnelley Co. ..................................... 35,595
507 Times Mirror Co. ....................................... 32,448
703 Tribune Co. ............................................ 47,013
-----------
366,810
-----------
Restaurants (0.6%):
803 Darden Restaurants, Inc. ............................... 12,396
3,825 McDonald's Corp. ....................................... 251,016
854 Tricon Global Restaurants, Inc.(b)...................... 26,527
753 Wendy's International, Inc. ............................ 18,590
-----------
308,529
-----------
Retail General Merchandise (0.1%):
1,149 Federated Department Stores(b).......................... 59,533
-----------
Retail Stores (4.8%):
1,375 Albertson's, Inc. ...................................... 63,680
1,540 American Stores Co. .................................... 38,404
864 AutoZone, Inc.(b)(c).................................... 28,728
525 Circuit City Stores, Inc. .............................. 22,247
583 Consolidated Stores Corp.(b)............................ 22,263
1,082 CVS Corp. .............................................. 75,943
2,422 Dayton Hudson Corp. .................................... 112,320
639 Dillards, Inc., Class A................................. 26,878
320 Giant Food, Inc. ....................................... 13,760
231 Great Atlantic & Pacific Tea Co. ....................... 7,392
415 Harcourt General, Inc. ................................. 22,618
4,080 Home Depot, Inc. ....................................... 320,534
1,384 J.C. Penney, Inc. ...................................... 99,389
2,728 KMart Corp.(b).......................................... 52,855
1,430 Kroger Co.(b)........................................... 61,401
1,232 Limited, Inc. .......................................... 40,964
234 Longs Drug Stores, Inc. ................................ 7,093
982 Lowe's Cos.(c).......................................... 77,762
1,300 May Department Stores Co. .............................. 83,606
225 Mercantile Stores Co., Inc. ............................ 17,691
453 Nordstrom, Inc. ........................................ 32,644
347 Pep Boys--Manny, Moe & Jack............................. 7,721
1,427 Rite-Aid Corp.(c)....................................... 51,104
2,174 Sears, Roebuck & Co.(c)................................. 134,380
909 TJX Cos., Inc. ......................................... 42,496
1,586 Toys 'R' Us, Inc.(b).................................... 42,029
12,643 Wal-Mart Stores, Inc.(c)................................ 697,735
2,760 Walgreen Co. ........................................... 97,118
838 Winn-Dixie Stores, Inc. ................................ 34,096
772 Woolworth Corp.(b)(c)................................... 15,247
-----------
2,350,098
-----------
Semiconductors (2.0%):
808 Advanced Micro Devices(b)............................... 15,756
2,053 Applied Materials, Inc.(b).............................. 65,696
9,252 Intel Corp. ............................................ 660,939
444 KLA-Tencor Corp.(b)..................................... 15,041
799 LSI Logic Corp.(b)...................................... 17,029
1,156 Micron Technology, Inc.(b)(c)........................... 27,238
895 National Semiconductor Corp.(b)......................... 14,544
1,094 Rockwell International Corp. ........................... 60,170
2,181 Texas Instruments, Inc.(c).............................. 112,049
-----------
988,462
-----------
</TABLE>
Continued
-79-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
-------- -------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Steel (0.2%):
1,112 Alleghany Teledyne, Inc. ............................... $ 25,854
585 Armco, Inc.(b).......................................... 3,181
606 Bethlehem Steel Corp.(b)................................ 7,424
275 Inland Steel Industries, Inc. .......................... 7,872
508 Nucor Corp. ............................................ 26,162
496 USX-US Steel Group, Inc. ............................... 17,794
519 Worthington Industries, Inc. ........................... 9,147
-----------
97,434
-----------
Technology (0.4%):
245 Autodesk, Inc. ......................................... 10,413
3,321 Motorola, Inc.(c)....................................... 175,805
-----------
186,218
-----------
Telecommunications (4.2%):
3,148 AirTouch Communication, Inc.(b)(c)...................... 149,924
471 Andrew Corp.(b)......................................... 10,347
1,231 Bay Networks, Inc.(b)................................... 34,083
665 Clear Channel Communications, Inc.(b)................... 63,757
1,933 Comcast Corp.(c)........................................ 66,266
629 DSC Communications Corp.(b)............................. 10,752
894 Frontier Corp. ......................................... 27,211
834 General Instrument Corp.(b)............................. 19,860
7,312 Lucent Technologies, Inc.(c)............................ 518,694
3,947 MCI Communications...................................... 211,040
1,450 Nextel Communications, Inc. Class A(b).................. 34,166
2,910 Northern Telecom Ltd. .................................. 186,240
416 Scientific-Atlanta, Inc.(c)............................. 9,178
2,828 Tele-Communications--
TCI Class A(b)(c)...................................... 97,036
982 Tellabs, Inc.(b)........................................ 67,482
3,451 U.S. West Media Group(b)(c)............................. 127,903
2,758 US West Communications Group............................ 139,969
5,735 WorldCom, Inc.(b)(c).................................... 260,942
-----------
2,034,850
-----------
Textile Products (0.0%):
132 Springs Industries, Inc. ............................... 7,409
-----------
Tire & Rubber (0.3%):
419 B. F. Goodrich Co. ..................................... 21,474
461 Cooper Tire & Rubber.................................... 10,920
885 Goodyear Tire & Rubber Co. ............................. 63,609
669 TRW, Inc. .............................................. 35,833
-----------
131,836
-----------
Tobacco (1.1%):
13,653 Philip Morris Companies Inc. ........................... 510,281
1,035 UST, Inc. .............................................. 27,557
-----------
537,838
-----------
Toys (0.2%):
753 Hasbro, Inc. ........................................... 28,802
1,630 Mattel, Inc. ........................................... 61,737
-----------
90,539
-----------
Transportation & Shipping (0.7%):
850 Burlington Northern Santa Fe............................ 84,574
1,236 CSX Corp. .............................................. 58,865
844 FDX Corp.(b)............................................ 54,122
1,832 Laidlaw, Inc. .......................................... 22,671
2,158 Norfolk Southern Corp. ................................. 67,572
331 Timken Co. ............................................. 12,454
1,375 Union Pacific Corp. .................................... 66,516
-----------
366,774
-----------
Trucking & Leasing (0.0%):
410 Ryder Systems, Inc. .................................... 13,966
-----------
Utilities - Gas & Electric (2.7%):
742 Ameren Corp.(c)......................................... 29,031
1,065 American Electric Power, Inc. .......................... 48,324
803 Baltimore Gas & Electric Co. ........................... 24,441
818 Carolina Power & Light(c)............................... 33,538
1,161 Central & South West Corp. ............................. 30,694
894 CINergy Corp.(c)........................................ 28,887
300 Columbia Energy Group................................... 25,313
1,310 Consolidated Edison, Inc. .............................. 56,084
512 Consolidated Natural Gas Co. ........................... 28,960
1,086 Dominion Resources, Inc./VA............................. 43,101
818 DTE Energy Co. ......................................... 32,362
1,992 Duke Power Co.(c)....................................... 114,788
2,119 Edison International.................................... 62,511
1,368 Entergy Corp. .......................................... 35,996
1,300 FirstEnergy Corp.(b).................................... 38,594
1,022 FPL Group, Inc. ........................................ 62,789
717 GPU, Inc. .............................................. 27,605
1,552 Houston Industries, Inc. ............................... 44,426
815 Niagara Mohawk Power Corp.(b)........................... 10,086
253 NICOR, Inc. ............................................ 9,772
432 Northern States Power Co. .............................. 24,570
187 Oneok, Inc. ............................................ 7,305
447 Pacific Enterprises..................................... 17,014
1,653 PacifiCorp.............................................. 38,122
1,259 Peco Energy Co. ........................................ 35,567
</TABLE>
Continued
-80-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
-------- -------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Utilities - Gas & Electric, continued:
218 People's Energy Corp. .................................. $ 8,039
2,109 PG & E Corp. ........................................... 66,434
938 PP & L Resources, Inc. ................................. 20,753
1,299 Public Service Enterprise Group, Inc. .................. 42,948
3,926 Southern Co.(c)......................................... 104,283
1,380 Texas Utilities Co. .................................... 54,510
1,181 Unicom Corp. ........................................... 40,597
2,357 Williams Cos., Inc. .................................... 76,455
-----------
1,323,899
-----------
Utilities - Telephone (5.2%):
1,040 Alltel Corp. ........................................... 41,015
6,188 Ameritech Corp. ........................................ 262,603
9,192 AT&T Corp.(c)........................................... 559,564
4,418 Bell Atlantic Corp. .................................... 404,799
5,598 BellSouth Corp. ........................................ 361,071
5,428 GTE Corp. .............................................. 316,520
10,365 SBC Communications, Inc.(c)............................. 402,939
2,458 Sprint Corp. ........................................... 176,362
-----------
2,524,873
-----------
Wholesale Distribution (0.3%):
625 Cardinal Health, Inc. .................................. 55,703
1,207 Costo Companies, Inc.(b)................................ 69,856
1,892 Sysco Corp. ............................................ 44,107
-----------
169,666
-----------
Total Common Stocks
(Cost $39,405,250) 48,251,210
-----------
UNIT INVESTMENT TRUSTS (0.8%):
3,650 S&P 500 Depository Receipt.............................. 398,991
-----------
Total Unit Investment Trusts
(Cost $408,681) 398,991
-----------
SHORT-TERM SECURITIES HELD AS COLLATERAL (22.9%)
$3,591,474 Salomon Brothers, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $3,593,165,
collateralized by $7,937,037 U.S. Treasury Notes
and Strips, 0.00%-11.75%, 11/30/98-8/15/27, market
value $3,671,205).................................... 3,591,474
3,822,286 Greenwich Capital, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $3,824,086,
collateralized by $8,408,474 various U.S.
Government Agency securities, 0.00%-7.75%,
5/15/06-5/15/28, market value $3,898,732)............ 3,822,286
3,822,286 Bear Stearns Co., Inc., 5.69%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $3,824,098,
collateralized by $4,235,980 various FNMA Remics,
6.50%-9.50%, 2/18/04-9/20/24, market value
$3,898,732).......................................... 3,822,286
-----------
Total Short-Term Securities Held as Collateral (Cost
$11,236,046) 11,236,046
-----------
Total Investments
(Cost $51,325,977)(a) (122.8%)................................. 60,162,247
Liabilities in excess of other assets
(-22.8%) (11,197,184)
-----------
Total Net Assets (100.0%) 48,965,063
===========
</TABLE>
- --------------
(a) Cost for federal income tax purposes differs from value by the net
unrealized appreciation of securities as follows:
Unrealized appreciation..................... $9,763,656
Unrealized depreciation..................... (927,386)
----------
Net unrealized appreciation................. $8,836,270
==========
(b) Represents non-income producing securities.
(c) A portion of this security was loaned as of May 31, 1998.
See notes to financial statements
-81-
<PAGE>
THE ARCH FUND, INC.
GROWTH EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ -----------
<C> <S> <C>
COMMERCIAL PAPER (3.3%):
Financial Services (3.3%):
$3,147,000 New Center Asset Trust, 5.70%, 6/1/98................. $ 3,147,000
-----------
Total Commercial Paper
(Cost $3,147,000) 3,147,000
-----------
COMMON STOCKS (96.2%):
Automotive (1.0%):
40,000 Republic Industries, Inc.(b)(c)....................... 985,000
-----------
Banking (8.2%):
27,000 BankAmerica Corp. .................................... 2,232,562
13,000 Citicorp(c)........................................... 1,938,625
60,700 MBNA Corp. ........................................... 1,923,431
45,000 Norwest Corp. ........................................ 1,749,375
-----------
7,843,993
-----------
Business Services (2.1%):
60,000 First Data Corp. ..................................... 1,995,000
-----------
Capital Equipment (2.4%):
34,200 Illinois Tool Works, Inc. ............................ 2,257,200
-----------
Chemicals (1.5%):
30,000 Praxair, Inc. ........................................ 1,479,375
-----------
Commercial Services (1.9%):
42,000 Cendant Corp.(b)...................................... 910,875
20,000 H & R Block, Inc. .................................... 880,000
-----------
1,790,875
-----------
Computer & Computer Software (6.9%):
70,000 Adaptec, Inc.(b)...................................... 1,063,125
31,500 Computer Associates International, Inc. .............. 1,653,750
28,000 Microsoft Corp.(b).................................... 2,374,750
25,000 Network Associates, Inc.(b)(c)........................ 1,531,250
-----------
6,622,875
-----------
Computers (3.4%):
56,000 Compaq Computer Corp.(c).............................. 1,529,500
15,000 EMC Corp.(b)(c)....................................... 621,563
17,200 Hewlett-Packard Co. .................................. 1,068,550
-----------
3,219,613
-----------
Electrical & Electronic (4.2%):
30,500 Analog Devices(b)..................................... 752,969
38,600 General Electric Co. ................................. 3,218,275
-----------
3,971,244
-----------
Financial Services (9.8%):
26,000 Fannie Mae............................................ 1,556,750
46,500 Federal Home Loan Mortgage Corp. ..................... 2,115,750
35,000 Heller Financial, Inc.(b)............................. 975,625
15,100 Household International, Inc.(c)...................... 2,043,219
43,708 Travelers Group, Inc. ................................ 2,666,187
-----------
9,357,531
-----------
Food & Beverages (3.8%):
20,000 Coca-Cola Co.(c)...................................... 1,567,500
12,000 Kellogg Co.(c)........................................ 495,750
33,500 PepsiCo, Inc. ........................................ 1,367,219
4,000 Sara Lee Corp. ....................................... 235,500
-----------
3,665,969
-----------
Insurance (1.8%):
13,875 American International Group, Inc. ................... 1,717,898
-----------
Medical Equipment & Services (2.4%):
42,000 Medtronic, Inc. ...................................... 2,336,250
-----------
Office Equipment & Services (0.9%):
16,000 Avery Dennison Corp. ................................. 829,000
-----------
Oil & Exploration Products & Services (4.4%):
25,719 Baker Hughes, Inc. ................................... 925,884
80,000 Ocean Energy, Inc.(b)................................. 1,605,000
21,000 Schlumberger Ltd.(c).................................. 1,639,313
-----------
4,170,197
-----------
Pharmaceuticals (17.1%):
41,000 Abbott Laboratories................................... 3,041,687
19,600 Amgen, Inc.(b)........................................ 1,185,800
15,000 Bristol-Myers Squibb Co. ............................. 1,612,500
18,000 Eli Lilly & Co. ...................................... 1,105,875
12,000 Johnson & Johnson..................................... 828,750
25,000 Merck & Co., Inc. .................................... 2,926,563
25,000 Pfizer, Inc. ......................................... 2,620,313
36,000 Schering-Plough Corp. ................................ 3,012,749
-----------
16,334,237
-----------
Printing & Publishing (1.3%):
18,000 Tribune Co. .......................................... 1,203,750
-----------
Retail Stores (8.0%):
45,000 Consolidated Stores Corp.(b)(c)....................... 1,718,437
20,000 Dayton Hudson Corp. .................................. 927,500
20,312 Dollar General Corp.(c)............................... 774,395
</TABLE>
Continued
-82-
<PAGE>
THE ARCH FUND, INC.
GROWTH EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
---------- ------------------------------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Retail Stores, continued:
11,000 Fred Meyer, Inc.(b)(c)................................ $ 473,000
21,500 Home Depot, Inc. ..................................... 1,689,094
38,200 Wal-Mart Stores, Inc.(c).............................. 2,108,162
-----------
7,690,588
-----------
Retail Stores - Grocery (0.7%):
19,000 Safeway, Inc.(b)(c)................................... 692,313
-----------
Semiconductors (3.6%):
26,000 Applied Materials, Inc.(b)(c)......................... 832,000
25,000 Intel Corp. .......................................... 1,785,938
24,000 KLA-Tencor Corp.(b)................................... 813,000
-----------
3,430,938
-----------
Telecommunications (6.6%):
40,000 Ascend Communications, Inc.(b)(c)..................... 1,727,500
110,000 DSC Communications Corp.(b)........................... 1,880,312
13,348 Lucent Technologies, Inc.(c).......................... 946,874
26,000 Tellabs, Inc.(b)...................................... 1,786,688
-----------
6,341,374
-----------
Tobacco (2.5%):
63,000 Philip Morris Cos., Inc. ............................. 2,354,625
-----------
Wholesale Distribution (1.6%):
64,000 Sysco Corp. .......................................... 1,492,000
-----------
Total Common Stocks
(Cost $59,963,309) 91,781,845
-----------
SHORT-TERM SECURITIES HELD AS COLLATERAL (18.7%)
$5,705,653 Salomon Brothers, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $5,708,341,
collateralized by $12,609,304 U.S. Treasury Notes
and Strips, 0.00%-11.75%, 11/30/98-8/15/27, market
value $5,832,320).................................... 5,705,653
6,072,338 Greenwich Capital, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $6,075,197,
collateralized by $13,358,261 various U.S.
Government Agency securities 0.00%-7.75%, 5/15/06-
5/15/28, market value $6,193,784) ................... 6,072,338
6,072,338 Bear Stearns Co., Inc., 5.69%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $6,075,217,
collateralized by $6,729,560 various FNMA Remics,
6.50%-9.50%, 2/18/04-9/20/24, market value
$6,193,784).......................................... 6,072,338
-----------
Total Short-Term Securities Held as Collateral (Cost
$17,850,329)................................................... 17,850,329
-----------
Total Investments
(Cost $80,960,638) (a) (118.1%)................................ 112,779,174
Liabilities in excess of other assets
(-18.1%)....................................................... (17,323,720)
------------
Total Net Assets (100.0%) $ 95,455,454
============
</TABLE>
- ------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation.................... $34,201,535
Unrealized depreciation.................... (2,382,999)
-----------
Net unrealized appreciation................ $31,818,536
===========
(b) Represents non-income producing securities.
(c) A portion of this security was loaned as of May 31, 1998.
See notes to financial statements
-83-
<PAGE>
THE ARCH FUND, INC.
BALANCED PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER (5.8%):
Electrical & Electronic (1.9%):
$2,459,000 Oge Energy, 5.50%, 6/8/98............................ $ 2,456,346
------------
Financial Services (3.9%):
5,071,000 New Center Asset Trust, 5.70%, 6/1/98................ 5,071,000
------------
Total Commercial Paper
(Cost $7,527,346) 7,527,346
------------
COMMON STOCKS (59.8%):
Automotive (0.6%):
29,750 Republic Industries, Inc.(b)(c)...................... 732,594
------------
Banking (4.6%):
31,213 Banc One Corp. ...................................... 1,720,617
13,000 Chase Manhattan Corp. ............................... 1,767,187
15,600 Crestar Financial Corp. ............................. 896,025
28,524 First Union Corp. ................................... 1,577,734
------------
5,961,563
------------
Building Products (0.9%):
33,650 Sherwin-Williams Co. ................................ 1,118,863
------------
Business Services (1.1%):
41,200 First Data Corp. .................................... 1,369,900
------------
Chemicals (3.2%):
31,400 Ecolab, Inc. ........................................ 969,475
28,300 Praxair, Inc. ....................................... 1,395,544
63,000 Solutia, Inc. ....................................... 1,728,562
------------
4,093,581
------------
Commercial Services (1.3%):
45,000 Cendant Corp.(b)..................................... 975,938
15,100 H & R Block, Inc. ................................... 664,400
------------
1,640,338
------------
Computer & Computer Software (4.7%):
66,500 Adaptec, Inc.(b)..................................... 1,009,969
30,500 Computer Associates International, Inc. ............. 1,601,249
12,800 Microsoft Corp.(b)................................... 1,085,600
15,500 Network Associates, Inc.(b)(c)....................... 949,375
60,500 Oracle Corp.(b)...................................... 1,429,313
------------
6,075,506
------------
Containers & Packaging (1.7%):
15,100 Crown Cork & Seal Co., Inc. ......................... 783,313
25,500 Sealed Air Corp.(b).................................. 1,364,250
------------
2,147,563
------------
Electrical & Electronic (4.0%):
28,200 Analog Devices(b).................................... 696,188
19,880 General Electric Co. ................................ 1,657,495
32,300 Millipore Corp. ..................................... 1,078,013
16,300 W.W. Grainger, Inc. ................................. 1,720,668
------------
5,152,364
------------
Financial Services (3.5%):
24,000 H. F. Ahmanson & Co. ................................ 1,830,000
40,000 Heller Financial, Inc.(b)............................ 1,115,000
38,111 SLM Holding Corp. ................................... 1,522,058
------------
4,467,058
------------
Food & Beverages (2.2%):
62,000 IBP, Inc. ........................................... 1,201,250
40,200 PepsiCo, Inc. ....................................... 1,640,663
------------
2,841,913
------------
Health Care (1.5%):
23,000 Allergan, Inc. ...................................... 966,000
32,000 Columbia/HCA Healthcare Corp. ....................... 1,046,000
------------
2,012,000
------------
Manufacturing - Consumer Goods (1.3%):
35,000 Newell Co. .......................................... 1,688,750
------------
Medical Equipment & Services (0.5%):
20,400 C. R. Bard, Inc. .................................... 707,625
------------
Office Equipment & Services (1.4%):
34,252 Avery Dennison Corp. ................................ 1,774,682
------------
Oil & Exploration Products & Services (5.9%):
17,700 Atlantic Richfield Co. .............................. 1,396,088
40,300 Baker Hughes, Inc. .................................. 1,450,799
32,500 Murphy Oil Corp. .................................... 1,635,155
53,000 Ocean Energy, Inc.(b)................................ 1,063,313
37,000 USX-Marathon Group................................... 1,295,000
18,800 Vastar Resources, Inc. .............................. 841,300
------------
7,681,655
------------
Paper & Related (0.5%):
22,000 Mead Corp. .......................................... 684,750
------------
Pharmaceuticals (4.4%):
16,940 Bristol-Myers Squibb Co. ............................ 1,821,050
11,200 Eli Lilly & Co. ..................................... 688,100
12,500 Merck & Co., Inc. ................................... 1,463,281
20,644 Schering-Plough Corp. ............................... 1,727,645
------------
5,700,076
------------
</TABLE>
Continued
-84-
<PAGE>
THE ARCH FUND, INC.
BALANCED PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Printing & Publishing (0.7%):
13,000 Tribune Co. ........................................ $ 869,375
------------
Restaurants (0.6%):
26,205 Tricon Global Restaurants, Inc.(b).................. 813,993
------------
Retail Stores (5.1%):
39,650 Consolidated Stores Corp.(b)........................ 1,514,134
24,831 Dillards, Inc., Class A............................. 1,044,454
13,600 Nordstrom, Inc. .................................... 980,050
53,000 Pep Boys--Manny, Moe & Jack......................... 1,179,250
35,193 Wal-Mart Stores, Inc. .............................. 1,942,213
------------
6,660,101
------------
Semiconductors (1.4%):
21,350 Applied Materials, Inc.(b).......................... 683,200
33,000 KLA-Tencor Corp.(b)................................. 1,117,875
------------
1,801,075
------------
Telecommunications (3.3%):
13,790 Ascend Communications, Inc.(b)(c)................... 595,556
77,500 DSC Communications Corp.(b)......................... 1,324,765
34,500 Frontier Corp. ..................................... 1,050,094
19,000 Tellabs, Inc.(b).................................... 1,305,656
------------
4,276,071
------------
Tobacco (1.0%):
33,800 Philip Morris Companies, Inc. ...................... 1,263,275
------------
Transportation & Shipping (1.2%):
15,300 Burlington Northern Santa Fe........................ 1,522,350
------------
Utilities - Gas & Electric (2.0%):
24,800 Consolidated Natural Gas Co. ....................... 1,402,750
26,000 New Century Energies, Inc. ......................... 1,196,000
------------
2,598,750
------------
Wholesale Distribution (1.2%):
65,338 Sysco Corp. ........................................ 1,523,192
------------
Total Common Stocks
(Cost $61,339,386) 77,178,963
------------
CORPORATE BONDS (3.9%):
Automotive (1.5%):
$1,000,000 General Motors Acceptance Corp., 6.60%, 1/17/01,
MTN................................................ 1,013,750
890,000 General Motors Acceptance Corp., 6.85%, 4/17/01,
MTN................................................ 908,913
------------
1,922,663
------------
Brokerage (0.9%):
1,100,000 Merrill Lynch & Co., Inc., Series B, 7.15%, 7/30/12,
MTN................................................ 1,134,375
------------
Finance (1.5%):
2,000,000 Federal Home Loan Bank, 5.35%, 2/7/01, MTN.......... 1,981,620
------------
Total Corporate Bonds
(Cost $4,798,926) 5,038,658
------------
U.S. GOVERNMENT AGENCIES (10.5%):
Federal Home Loan Mortgage Corp. (1.1%):
457,540 6.50%, 4/1/08, Pool
#E00225............................................ 460,825
231,916 7.00%, 4/1/08, Pool
#E46044............................................ 236,770
107,087 7.00%, 4/1/08, Pool
#E46076............................................ 109,328
631,853 6.50%, 1/1/09, Gold Pool #E55696.................... 636,390
------------
1,443,313
------------
Federal National Mortgage Assoc. (1.0%):
562,502 6.00%, 3/1/13, Pool
#418297............................................ 555,995
427,533 6.00%, 5/1/13, Pool
#425391............................................ 422,586
247,501 6.00%, 5/1/13, Pool
#251760............................................ 244,637
------------
1,223,218
------------
Government National Mortgage Assoc. (8.4%):
317,660 7.00%, 7/15/09, Pool #364246........................ 325,303
408,214 6.50%, 10/20/10, Pool
#2108.............................................. 409,104
1,930,660 6.50%, 7/15/11, Pool #436630........................ 1,949,347
</TABLE>
Continued
-85-
<PAGE>
THE ARCH FUND, INC.
BALANCED PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Government National Mortgage Assoc., continued:
$ 11,144 8.50%, 6/15/17, Pool #217380.......................... $ 11,771
397,605 8.00%, 7/15/22, Pool #328848.......................... 413,632
340,379 7.00%, 11/15/22, Pool #341287......................... 345,910
247,725 7.00%, 11/15/22, Pool #337961......................... 251,751
529,410 7.50%, 3/15/23, Pool #331533.......................... 545,954
6,535 8.50%, 3/15/23, Pool #350083.......................... 6,902
278,297 7.50%, 4/15/23, Pool #343195.......................... 286,994
461,380 8.50%, 8/15/24, Pool #365113.......................... 487,333
414,108 8.50%, 9/15/24, Pool #353354.......................... 437,401
105,419 8.50%, 9/15/24, Pool #375056.......................... 111,348
95,188 8.50%, 1/15/25, Pool #400165.......................... 100,542
76,413 8.50%, 2/15/25, Pool #406286.......................... 80,711
368,983 8.50%, 3/15/25, Pool #384593.......................... 389,739
111,196 8.50%, 4/15/25, Pool #346295.......................... 117,451
286,881 8.00%, 8/15/25, Pool #389312.......................... 298,445
22,415 7.50%, 9/15/25, Pool #394485.......................... 23,115
32,401 7.50%, 10/15/25, Pool #400096......................... 33,413
871,077 7.50%, 10/15/25, Pool #246633......................... 898,298
20,675 7.50%, 10/15/25, Pool #384783......................... 21,321
867,392 7.50%, 10/15/25, Pool #409725......................... 894,498
19,591 7.50%, 10/15/25, Pool #416975......................... 20,203
142,694 6.50%, 1/15/26, Pool #385123......................... 142,113
664,594 6.50%, 1/15/26, Pool #417525......................... 661,889
23,457 6.50%, 3/15/26, Pool #417294......................... 23,362
449,332 6.50%, 4/15/26, Pool #422323......................... 447,503
454,312 6.50%, 4/15/26, Pool #408279......................... 452,463
465,440 6.50%, 4/15/26, Pool #421399......................... 463,546
177,768 6.50%, 5/15/26, Pool #430798......................... 177,044
------------
10,828,406
------------
Total U.S. Government Agencies
(Cost $13,169,158) 13,494,937
------------
U.S. TREASURY BONDS (7.8%):
300,000 10.75%, 8/15/05(c)................................... 389,277
2,750,000 12.00%, 8/15/13, Callable on 8/15/08 @ 100(c)........ 4,057,020
1,000,000 8.13%, 5/15/21....................................... 1,277,800
1,000,000 8.13%, 8/15/21(c).................................... 1,279,130
1,200,000 8.00%, 11/15/21(b)(c)................................ 1,517,844
1,500,000 6.25%, 8/15/23(b)(c)................................. 1,570,275
------------
Total U.S. Treasury Bonds
(Cost $9,408,691) 10,091,346
------------
U.S. TREASURY NOTES (11.6%):
2,000,000 5.00%, 2/15/99....................................... 1,993,140
3,000,000 5.88%, 2/28/99....................................... 3,007,290
3,000,000 7.50%, 5/15/02(c).................................... 3,199,590
3,000,000 6.38%, 8/15/02(c).................................... 3,086,820
1,000,000 6.25%, 2/15/03(c).................................... 1,027,280
2,500,000 7.00%, 7/15/06(c).................................... 2,715,500
------------
Total U.S. Treasury Notes
(Cost $14,681,719) 15,029,620
------------
INVESTMENT COMPANIES (0.4%):
500,000 Cash Assets Trust Money Market Fund.................. 500,000
------------
Total Investment Companies
(Cost $500,000) 500,000
------------
</TABLE>
Continued
-86-
<PAGE>
THE ARCH FUND, INC.
BALANCED PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<C> <S> <C>
SHORT-TERM SECURITIES HELD AS COLLATERAL (5.4%):
$2,208,886 Salomon Brothers, 5.65%, 6/1/98, (Purchased on
5/29/98, proceeds at maturity $2,209,926,
collateralized by $4,881,563 U.S. Treasury Notes and
Strips, 0.00%-11.75%, 11/30/98-8/15/27, market value
$2,257,923).......................................... $ 2,208,886
2,350,843 Greenwich Capital, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $2,351,950,
collateralized by $5,171,514 various U.S. Government
Agency securities, 0.00%-7.75%, 5/15/06-5/15/28,
market value $2,397,860)............................. 2,350,843
$2,350,843 Bear Stearns Co., Inc., 5.69%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $2,351,958,
collateralized by $2,605,280 various FNMA Remics,
6.50%-9.50%, 2/18/04-9/20/24, market value
$2,397,860)......................................... 2,350,843
------------
Total Short-Term Securities Held as Collateral (Cost
$6,910,572)................................................... 6,910,572
------------
Total Investments
(Cost $118,335,797)(a)(105.2%) 135,771,442
Liabilities in excess of other assets
(-5.2%) (6,679,149)
------------
Total Net Assets (100.0%) $129,092,293
============
</TABLE>
- ------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation.................... $20,513,198
Unrealized depreciation.................... (3,077,553)
-----------
Net unrealized appreciation................ $17,435,645
===========
(b) Represents non-income producing securities.
(c) A portion of this security was loaned as of May 31, 1998.
MTN--Medium Term Note
See notes to financial statements
-87-
<PAGE>
THE ARCH FUND, INC.
GOVERNMENT & CORPORATE BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
CORPORATE BONDS (24.5%):
Automotive (6.4%):
$1,850,000 Ford Motor Credit, 6.80%, 4/23/01, MTN.............. $ 1,891,625
5,694,000 Ford Motor Credit Co., Global Bond, 6.50%,
2/28/02(b)......................................... 5,779,410
1,200,000 Ford Motor Credit Corp., 6.69%, 3/21/01, MTN........ 1,219,500
1,000,000 General Motors Acceptance Corp., 6.85%, 4/17/01,
MTN................................................ 1,021,250
1,400,000 General Motors Acceptance Corp., 6.70%, 4/30/01,
MTN................................................ 1,424,500
1,600,000 Genreal Motors Acceptance Corp., 6.25%, 1/16/01,
MTN................................................ 1,610,000
------------
12,946,285
------------
Banking (0.5%):
500,000 BankAmerica Corp., 7.50%, 10/15/02.................. 526,250
500,000 MBNA Corp., 6.88%, 10/1/99.......................... 505,000
------------
1,031,250
------------
Financial Services (10.6%):
5,000,000 CIT Group Holdings, 5.80%, 2/26/01, MTN............. 4,981,250
5,000,000 Household Finance Corp., 8.38%, 11/15/01............ 5,362,500
5,000,000 Merrill Lynch & Co., Series B, 6.38%, 10/1/01, MTN.. 5,043,750
1,000,000 Salomon Inc., Series D, 7.00%, 3/4/02, MTN.......... 1,031,250
2,000,000 Traveler's Group, Inc., 7.30%, 5/15/02.............. 2,080,000
3,000,000 Traveler's Group, Inc., 7.50%, 2/01/03.............. 3,142,500
------------
21,641,250
------------
Governments (Foreign) (0.3%):
500,000 Province of Ontario, Global Bond, 7.38%, 1/27/03.... 527,500
------------
Industrial Goods & Services (2.0%):
2,500,000 Raytheon Co, 5.95%, 3/15/01......................... 2,496,875
500,000 Rockwell International, 6.75%, 9/15/02.............. 514,375
$1,000,000 WMX Technologies, Inc., 7.13%, 6/15/01.............. 1,015,000
------------
4,026,250
------------
Manufacturing - Consumer Goods (1.0%):
2,000,000 Texaco Capital, 6.95%, 10/15/01, MTN................ 2,057,500
------------
Telecommunications (2.9%):
5,250,000 Southern New England Telecommunications, Series 2,
6.50%, 2/15/02, MTN................................ 5,328,750
500,000 United Telephone-Florida, 7.25%, 12/15/04........... 530,000
------------
5,858,750
------------
Utilities (0.8%):
1,500,000 Laclede Gas Co., 7.50%, 11/1/07..................... 1,633,125
------------
Total Corporate Bonds
(Cost $49,623,403) 49,721,910
------------
U.S. GOVERNMENT AGENCIES (39.0%):
Federal Home Loan Bank (0.2%):
500,000 6.32%, 2/1/00....................................... 504,890
------------
Federal Home Loan Mortgage Corp. (7.6%):
36,457 8.50%, 5/1/01, Pool
#200034............................................ 37,801
80,223 8.50%, 11/1/01, Pool #200058........................ 82,880
16,990 8.00%, 3/1/02, Pool
#215727............................................ 17,404
74,351 8.00%, 3/1/02, Pool
#215507............................................ 76,163
90,607 7.50%, 4/1/02, Pool
#200070............................................ 92,702
26,519 8.00%, 5/1/02, Pool
#216910............................................ 27,165
8,319 8.00%, 6/1/02, Pool
#219187............................................ 8,522
3,899 8.00%, 6/1/02, Pool
#217366............................................ 3,994
49,711 8.00%, 6/1/02, Pool
#218582............................................ 50,922
207,508 8.00%, 6/1/02, Pool
#218101............................................ 212,565
</TABLE>
Continued
-88-
<PAGE>
THE ARCH FUND, INC.
GOVERNMENT & CORPORATE BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal Home Loan Mortgage Corp., continued:
$ 23,184 8.00%, 7/1/02, Pool
#217891............................................. $ 23,749
131,762 8.00%, 7/1/02, Pool
#501214............................................. 134,973
80,446 8.50%, 3/1/05, Pool
#380084............................................. 83,111
6,714 8.50%, 4/1/05, Pool
#380085............................................. 6,937
1,000,000 7.46%, 8/3/05, Callable on 8/3/98 @ 100.............. 1,002,430
35,633 8.50%, 9/1/05, Pool
#503592............................................. 36,814
29,257 8.50%, 4/1/06, Gold Pool
#E00025............................................. 30,501
538,598 6.00%, 2/1/11, Gold Pool #E62600..................... 533,212
1,047,125 7.00%, 7/1/11, Gold Pool #E20252..................... 1,069,042
891,044 6.50%, 1/1/12, Gold Pool #E00465..................... 897,441
2,559,904 6.00%, 2/1/12, Gold Pool #E00472..................... 2,534,304
1,797,474 8.00%, 1/1/23, Gold Pool #C00225..................... 1,866,551
319,361 8.00%, 1/1/23, Gold Pool #D29451..................... 331,634
3,538,292 6.00%, 12/1/25, Gold Pool #G00427.................... 3,442,085
2,935,176 6.00%, 9/1/27, Gold Pool #C00565..................... 2,855,368
------------
15,458,270
------------
Federal National Mortgage Assoc. (18.1%):
1,049,545 6.00%, 11/1/00, Pool #190070......................... 1,045,935
1,000,000 7.55%, 6/10/04, Callable 6/10/99 @ 100............... 1,018,230
2,000,000 6.00%, 5/15/08(b).................................... 2,017,800
4,376,154 6.00%, 5/1/11, Pool
#345652............................................. 4,325,522
3,959,841 7.00%, 7/1/11, Pool
#351021............................................. 4,039,038
3,144,086 6.50%, 12/1/11, Pool #367838......................... 3,162,731
892,485 6.50%, 7/1/12, Pool
#393667............................................. 897,777
629,368 6.50%, 7/1/12, Pool
#370716............................................. 633,101
918,203 6.50%, 8/1/12, Pool
#251165............................................. 923,648
5,868,245 6.00% 1/1/13, Pool
#251501............................................. 5,800,349
2,325,567 8.00%, 7/1/24, Pool
#190264............................................. 2,415,683
2,812,242 6.00%, 2/1/26, Pool
#336918............................................. 2,729,619
1,455,376 6.00%, 10/1/26, Pool #368935......................... 1,412,617
1,977,246 6.50%, 8/1/27, Pool
#397372............................................. 1,966,727
1,994,414 6.50%, 8/1/27, Pool
#395219............................................. 1,983,804
2,358,417 6.50%, 9/1/27, Pool
#399040............................................. 2,345,870
------------
36,718,451
------------
Government National Mortgage Assoc. (13.1%):
11,872 9.50%, 2/15/01, Pool #149206......................... 12,603
30,659 9.50%, 9/15/05, Pool #290435......................... 32,546
125,949 8.00%, 1/15/02, Pool #188653......................... 130,593
21,524 8.00%, 3/15/02, Pool #199167......................... 22,318
133,536 8.00%, 4/15/02, Pool #180980......................... 138,460
94,959 8.00%, 7/15/02, Pool #209779......................... 98,460
74,032 9.50%, 10/15/02, Pool #232514........................ 78,590
57,947 9.50%, 1/15/06, Pool #298829......................... 61,514
129,093 8.00%, 5/15/06, Pool #303851......................... 133,852
64,254 9.50%, 7/15/07, Pool #331878......................... 68,210
356,233 8.00%, 11/15/07, Pool #339329........................ 369,367
355,486 8.00%, 12/15/07, Pool #338551........................ 368,593
550,662 9.50%, 8/15/09, Pool #400219......................... 584,560
</TABLE>
Continued
-89-
<PAGE>
THE ARCH FUND, INC.
GOVERNMENT & CORPORATE BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Government National Mortgage Assoc., continued:
$ 167,250 9.50%, 9/15/09, Pool #377317.......................... $ 177,546
460,589 9.50%, 2/15/10, Pool #392932.......................... 488,943
33,473 8.00%, 5/15/10, Pool #398424.......................... 34,707
156,172 6.50%, 8/15/10, Pool #387094.......................... 157,684
894,476 8.00%, 11/15/10, Pool #410294......................... 927,455
284,599 8.00%, 11/15/10, Pool #414827......................... 295,092
197,809 8.00%, 11/15/10, Pool #405524......................... 205,102
102,270 6.50%, 3/15/11, Pool #408253.......................... 103,260
424,306 6.50%, 4/15/11, Pool #421831.......................... 428,413
103,529 6.50%, 4/15/11, Pool #418274.......................... 104,531
350,911 6.50%, 4/15/11, Pool #402546.......................... 354,308
550,699 6.50%, 5/15/11, Pool #408304.......................... 556,030
73,728 6.50%, 5/15/11, Pool #430822.......................... 74,442
287,335 6.50%, 6/15/11, Pool #423833.......................... 290,117
566,122 6.50%, 6/15/11, Pool #345631.......................... 571,602
101,969 6.50%, 6/15/11, Pool #421731.......................... 102,956
661,542 6.50%, 6/15/11, Pool #430820.......................... 667,946
320,609 6.50%, 7/15/11, Pool #345749.......................... 323,713
360,458 6.50%, 8/15/11, Pool #426911.......................... 363,948
2,014,870 8.50%, 4/15/17, Pool #212112.......................... 2,128,206
1,213,355 8.00%, 4/15/22, Pool #320818.......................... 1,262,266
3,060,349 7.50%, 1/15/23, Pool #331839.......................... 3,155,985
1,749,976 8.00%, 1/15/23, Pool #331841.......................... 1,820,518
834,891 7.50%, 4/15/23, Pool #343195......................... 860,981
1,024,460 9.00%, 3/15/25, Pool #404067......................... 1,098,733
958,397 6.50%, 4/15/26, Pool #422323......................... 954,496
959,645 6.50%, 4/15/26, Pool #415721......................... 955,739
947,910 6.50%, 5/15/26, Pool #417388......................... 944,052
4,684,427 6.50%, 6/15/26, Pool #423801......................... 4,665,361
393,239 7.00%, 9/15/27, Pool #455304......................... 399,629
------------
26,573,427
------------
Total U.S. Government Agencies
(Cost $77,832,606) 79,255,038
------------
U.S. TREASURY BONDS (19.9%):
1,375,000 9.25%, 2/15/16....................................... 1,884,135
3,000,000 7.50%, 11/15/16...................................... 3,542,760
1,675,000 8.75%, 5/15/17....................................... 2,219,911
2,865,000 8.88%, 8/15/17....................................... 3,844,343
4,150,000 8.88%, 2/15/19(b).................................... 5,620,221
2,183,000 8.75%, 8/15/20(b).................................... 2,947,225
2,000,000 8.00%, 11/15/21(b)(c)................................ 2,529,740
8,650,000 6.25%, 8/15/23(b)(c)................................. 9,055,252
1,500,000 6.50%, 11/15/26(b)................................... 1,627,680
6,500,000 6.63%, 2/15/27(b).................................... 7,176,325
------------
Total U.S. Treasury Bonds
(Cost $35,882,936) 40,447,592
------------
U.S. TREASURY NOTES (15.4%):
2,250,000 6.38%, 1/15/99(b).................................... 2,262,645
2,750,000 6.13%, 7/31/00....................................... 2,782,120
5,670,000 6.25%, 8/31/02(b).................................... 5,804,889
19,045,000 6.63%, 5/15/07(b).................................... 20,307,493
------------
Total U.S. Treasury Notes
(Cost $30,626,145) 31,157,147
------------
INVESTMENT COMPANIES (0.7%):
1,354,976 Federated Money Market Trust......................... 1,354,976
------------
Total Investment Companies
(Cost $1,354,976) 1,354,976
------------
</TABLE>
Continued
-90-
<PAGE>
THE ARCH FUND, INC.
GOVERNMENT & CORPORATE BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
SHORT-TERM SECURITIES HELD AS COLLATERAL (5.2%):
$3,357,015 Salomon Brothers, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $3,358,596,
collateralized by $7,418,891 U.S. Treasury Notes
and Strips, 0.00%-11.75%, 11/30/98-8/15/27, market
value $3,431,541).................................. $ 3,357,015
3,572,760 Greenwich Capital, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $3,574,442,
collateralized by $7,859,552 various U.S.
Government Agency securities, 0.00%-7.75%, 5/15/06-
5/15/28, market value $3,644,215).................. 3,572,760
3,572,760 Bear Stearns Co., Inc., 5.69%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $3,574,454,
collateralized by $3,959,447 various FNMA Remics,
6.50%-9.50%, 2/18/04-9/20/24, market value
$3,644,215)........................................ 3,572,760
------------
Total Short-Term Securities Held as Collateral (Cost
$10,502,535)................................................. 10,502,535
------------
Total Investments
(Cost $205,822,601)(a)(104.7%)............................... 212,439,198
Liabilities in excess of other assets
(-4.7%)...................................................... (9,545,487)
------------
Total Net Assets (100.0%)..................................... $202,893,711
============
</TABLE>
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation..................... $6,809,573
Unrealized depreciation..................... (192,976)
----------
Net unrealized appreciation................. $6,616,597
==========
(b) All or a portion of this security was loaned as of May 31, 1998.
MTN--Medium Term Note
See notes to financial statements
-91-
<PAGE>
THE ARCH FUND, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
----------- ---------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (54.6%):
Federal Home Loan Bank (4.7%):
$ 5,000,000 5.52%, 4/9/01, Series 3101.......................... $ 4,972,850
------------
Federal Home Loan Mortgage Corp. (20.9%):
14,304 9.50%, 9/1/04, Pool
#380053............................................ 15,096
500,000 7.46%, 8/3/05, Callable on 8/3/98 @ 100............. 501,215
211,421 8.50%, 3/1/06, Gold Pool #E00022.................... 220,407
351,942 7.50%, 4/1/08, Gold Pool #E45929.................... 362,940
2,000,000 5.75%, 4/15/08(b)................................... 1,982,160
461,655 6.00%, 2/1/11, Gold Pool #E62600.................... 457,039
735,323 6.50%, 2/1/11, Gold Pool #E00419.................... 740,602
695,388 7.00%, 7/1/11, Gold Pool #E20252.................... 709,943
463,887 7.00%, 11/1/11, Gold Pool #E65619................... 473,596
899,954 6.50%, 1/1/12, Gold Pool #E00465.................... 906,416
1,424,973 6.00%, 2/1/12, Gold Pool #E66284.................... 1,410,723
750,166 6.50%, 2/1/12, Gold Pool #E66272.................... 755,552
621,050 6.50%, 2/1/12, Gold Pool #E66172.................... 625,509
956,879 6.00%, 3/1/12, Gold Pool #E66474.................... 947,310
7,355,334 5.50%, 12/1/12, Gold Pool #E68353................... 7,136,953
993,376 6.00%, 3/1/13, Gold Pool #E69338.................... 983,442
1,993,196 6.00%, 4/1/13, Pool
#E00543............................................ 1,973,264
996,513 6.00%, 4/1/13, Pool
#E70028............................................ 986,548
994,603 6.00%, 3/1/28, Gold Pool #D87129.................... 967,560
------------
22,156,275
------------
Federal National Mortgage Assoc. (19.1%):
4,000,000 6.11%, 9/20/00...................................... 4,032,759
524,773 6.00%, 11/1/00, Pool #190070........................ 522,967
922,859 6.00%, 3/1/11, Pool
#340503............................................ 912,182
863,417 6.50%, 5/1/11, Pool
#335713............................................ 868,537
657,145 6.50%, 5/1/11, Pool
#346276............................................ 661,042
816,855 6.50%, 7/1/11, Pool
#351761............................................ 821,699
1,690,786 6.50%, 7/1/11, Pool
#250613............................................ 1,700,813
322,194 7.00%, 11/1/11, Pool #349630........................ 328,638
323,680 7.00%, 11/1/11, Pool #250738........................ 330,153
220,721 7.00%, 11/1/11, Pool #351122........................ 225,135
929,943 6.50%, 12/1/11, Pool #368127........................ 935,458
935,305 6.50%, 12/1/11, Pool #367868........................ 940,852
1,749,654 6.50%, 12/1/11, Pool #250781........................ 1,760,029
1,963,338 5.50%, 3/1/13, Pool
#420158............................................ 1,901,984
1,162,784 8.00%, 7/1/24, Pool
#190264............................................ 1,207,842
2,980,366 6.50%, 10/1/27, Pool #400141........................ 2,964,510
------------
20,114,600
------------
Government National Mortgage Assoc. (9.8%):
153,370 8.00%, 1/15/07, Pool #315126........................ 159,025
60,705 6.50%, 5/15/08, Pool #340791........................ 61,293
276,058 9.00%, 7/15/09, Pool #390782........................ 290,463
279,866 9.00%, 11/15/09, Pool #359559....................... 294,469
605,325 8.00%, 10/15/10, Pool #414750....................... 627,643
97,716 6.50%, 11/15/10, Pool #414786....................... 98,662
335,401 6.50%, 2/15/11, Pool #373569........................ 338,647
316,671 6.50%, 3/15/11, Pool #344973........................ 319,736
</TABLE>
Continued
-92-
<PAGE>
THE ARCH FUND, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
----------- ---------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Government National Mortgage Assoc., continued:
$ 612,408 6.50%, 3/15/11, Pool #410935........................ $ 618,336
379,974 6.50%, 3/15/11, Pool #406466........................ 383,652
379,327 6.50%, 3/15/11, Pool #408253........................ 382,999
55,700 6.50%, 3/15/11, Pool #416179........................ 56,239
664,559 6.50%, 4/15/11, Pool #416060........................ 670,992
367,356 6.50%, 4/15/11, Pool #422652........................ 370,912
54,175 6.50%, 5/15/11, Pool #422814........................ 54,700
132,426 6.50%, 5/15/11, Pool #433036........................ 133,708
319,485 6.50%, 5/15/11, Pool #408304........................ 322,577
110,974 6.50%, 6/15/11, Pool #432993........................ 112,048
240,114 6.50%, 6/15/11, Pool #421731........................ 242,438
779,894 6.50%, 7/15/11, Pool #433088........................ 787,443
372,727 6.50%, 7/15/11, Pool #424521........................ 376,335
127,485 8.50%, 5/15/17, Pool #219152........................ 134,656
172,483 8.50%, 6/15/21, Pool #307921........................ 182,185
1,047,465 7.50%, 12/15/22, Pool #347332....................... 1,080,197
495,269 8.00%, 5/15/23, Pool #352469........................ 515,234
205,456 9.50%, 1/15/25, Pool #384421........................ 222,277
298,628 9.50%, 2/15/25, Pool #401796........................ 323,077
8,546 9.50%, 2/15/25, Pool #392967........................ 9,246
491,354 9.50%, 2/15/25, Pool #365292........................ 531,581
168,594 9.50%, 3/15/25, Pool #407257........................ 182,397
142,244 9.50%, 4/15/25, Pool #386741........................ 153,889
294,929 7.00%, 9/15/27, Pool #455304........................ 299,722
-----------
10,336,778
-----------
Total U.S. Government Agencies
(Cost $56,828,725) 57,580,503
-----------
U.S. TREASURY NOTES (44.0%):
1,700,000 7.13%, 10/15/98(b).................................. 1,711,458
15,850,000 6.38%, 1/15/99(b)................................... 15,939,077
3,600,000 7.00%, 4/15/99(b)................................... 3,646,224
6,750,000 6.38%, 5/15/99(b)................................... 6,800,895
6,650,000 7.75%, 11/30/99(b).................................. 6,857,347
1,250,000 7.75%, 12/31/99..................................... 1,291,025
275,000 6.13%, 7/31/00...................................... 278,212
1,250,000 6.25%, 2/28/02(b)................................... 1,276,938
4,600,000 6.25%, 8/31/02(b)................................... 4,709,434
400,000 5.75%, 8/15/03(b)................................... 403,172
350,000 7.25%, 5/15/04(b)................................... 378,889
2,960,000 6.63%, 5/15/07(b)................................... 3,156,218
-----------
Total U.S. Treasury Notes
(Cost $46,451,868) 46,448,889
-----------
INVESTMENT COMPANIES (0.8%):
879,300 Federated Trust for U.S. Treasury Obligations....... 879,300
-----------
Total Investment Companies
(Cost $879,300) 879,300
-----------
SHORT-TERM SECURITIES HELD AS COLLATERAL (22.5%):
7,594,383 Salomon Brothers, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $7,597,958,
collateralized by $16,783,330 U.S. Treasury Notes
and Strips, 0.00%-11.75%, 11/30/98-8/15/27,
market value $7,762,978)........................... 7,594,383
8,082,448 Greenwich Capital, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $8,086,254,
collateralized by $17,780,212 various U.S.
Government Agency securities, 0.00%-7.75%,
5/15/06-5/15/28, market value $8,244,097).......... 8,082,448
</TABLE>
Continued
-93-
<PAGE>
THE ARCH FUND, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------------------------------- ------------
<C> <S> <C>
SHORT-TERM SECURITIES HELD AS COLLATERAL, CONTINUED:
$8,082,448 Bear Stearns Co., Inc., 5.69%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $8,086,281,
collateralized by $8,957,229 various FNMA Remics,
6.50%-9.50%, 2/18/04-9/20/24, market value
$8,244,097)....................................... $ 8,082,448
------------
Total Short-Term Securities Held as Collateral (Cost
$23,759,279) 23,759,279
------------
Total Investments
(Cost $127,919,172)(a) (121.9%) 128,667,971
Liabilities in excess of other assets (-21.9%) (23,084,021)
------------
Total Net Assets (100.0%) $105,583,950
============
</TABLE>
- ------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation..................... $ 966,126
Unrealized depreciation..................... (217,327)
---------
Net unrealized appreciation................. $ 748,799
=========
(b) All or a portion of this security was loaned as of May 31, 1998.
See notes to financial statements
-94-
<PAGE>
THE ARCH FUND, INC.
SHORT INTERMEDIATE MUNICIPAL PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------- -----------
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (98.1%):
Alabama (2.4%):
$1,000,000 Alabama State Public School & College
Authority,
4.40%, 12/1/00.......................... $ 1,012,500
-----------
Alaska (0.7%):
300,000 Anchorage, G.O., 5.40%, 8/1/98 (MBIA
Insured)................................ 300,768
-----------
Colorado (5.3%):
390,000 Aurora-Colorado Springs, Water Authority
Revenue,
5.40%, 6/1/98........................... 390,018
720,000 El Paso County School District No. 020,
G.O.,
5.15%, 12/15/99......................... 735,300
1,000,000 Jefferson County School District No. R-
001, Series A, G.O., 5.25%, 12/15/11,
Callable on 12/15/08 @101 (FGIC
Insured)................................ 1,050,000
-----------
2,175,318
-----------
Georgia (2.4%):
1,000,000 Burke County Development Authority,
Pollution Control Revenue, Georgia Power
Co., 3.95%*, 7/1/24..................... 1,000,000
-----------
Hawaii (3.9%):
600,000 Hawaii State Highway Revenue, 4.80%,
7/1/03.................................. 609,750
1,000,000 Hawaii State, Series CI, G.O., 4.10%,
11/1/01................................. 997,500
-----------
1,607,250
-----------
Illinois (8.9%):
500,000 Chicago Metropolitan Water Reclamation
District, G.O., 4.70%, 12/1/99.......... 506,250
1,000,000 Chicago, G.O., 5.50%, 1/1/13 (FSA
Insured)................................ 1,065,000
500,000 Du Page County, Forest Preservation
District, G.O., 5.90%, 11/1/01.......... 530,625
400,000 Illinois State, G.O., 5.60%, 10/1/99..... 409,000
400,000 Illinois State, G.O., 5.25%, 4/1/01...... 413,500
750,000 Illinois StateToll
Highway Authority, Toll
Highway Priority
Revenue, Series A,
4.75%, 1/1/02........................... 763,125
----------
3,687,500
----------
Indiana (3.6%):
500,000 Muncie School Building
Corp., 4.95%, 1/15/02
(MBIA Insured).......................... 512,500
1,000,000 St. Joseph County
Hospital Authority,
Memorial Health System,
4.75%, 8/15/12,
Callable on 2/15/08 @
101 (MBIA Insured)...................... 983,750
----------
1,496,250
----------
Iowa (2.5%):
600,000 Iowa Financial
Authority, Solid Waste
Disposal Revenue, Cedar
River Paper Co.,
4.00%*, 6/1/98,
Callable on 12/1/07 @
100, AMT (LOC-Swiss
Bank Corp.)............................. 600,000
425,000 Ottumwa Community School
District, G.O., 5.10%,
6/1/01 (FSA Insured).................... 437,750
----------
1,037,750
----------
Kansas (2.6%):
1,000,000 Kansas State Department
of Transportation
Highway Revenue, 5.50%,
9/1/10.................................. 1,085,000
----------
Kentucky (0.9%):
380,000 Kenton County Water
District No. 001,
Waterworks Revenue,
Series B, 5.60%, 2/1/99
(FGIC Insured).......................... 384,674
----------
Maine (2.0%):
800,000 Maine Municipal Bond
Bank, Series A, 4.90%,
11/1/02................................. 822,000
----------
Maryland (2.2%):
400,000 Maryland State,
Department of
Transportation, 2nd
Issue, 4.10%, 12/15/00.................. 402,000
</TABLE>
Continued
-95-
<PAGE>
THE ARCH FUND, INC.
SHORT INTERMEDIATE MUNICIPAL PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------ ----------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Maryland, continued:
$ 500,000 Washington Suburban
Sanitation District,
Sewer Disposal Revenue,
G.O., 5.00%, 6/1/00 ... $ 510,625
----------
912,625
----------
Massachusetts (2.7%):
1,000,000 Massachusetts State Port
Authority Revenue,
Series A, 5.75%,
7/1/12................. 1,101,250
----------
Michigan (6.6%):
400,000 Chelsea School District,
G.O., 5.25%, 5/1/01
(FGIC Q-SBLF Insured).. 413,500
1,000,000 Eaton Rapids Public
Schools, G.O., 5.38%,
5/1/07, Callable on
5/1/04 @ 101 (MBIA Q-
SBLF Insured).......... 1,056,250
800,000 Kent County Building
Authority, G.O., 4.50%,
12/1/01................ 811,000
450,000 Oakland County Building
Authority, 4.75%,
4/1/00, Callable on
4/1/99 @ 101.5......... 456,750
----------
2,737,500
----------
Minnesota (4.5%):
365,000 Duluth, Series A, G.O.,
4.65%, 2/1/02 (FSA
Insured)............... 372,756
1,000,000 Faribault Independant
School District, G.O.,
4.63%, 6/1/10, Callable
on 6/1/08 @ 100 (FSA
Insured)............... 1,003,750
500,000 Minnesota State, G.O.,
5.50%, 8/1/98.......... 501,410
----------
1,877,916
----------
Mississippi (1.2%):
500,000 Mississippi State,
Capital Improvement,
Series B, G.O., 5.00%,
8/1/99................. 506,875
----------
Missouri (0.8%):
320,000 Jefferson County School
District, G.O., 4.70%,
3/1/01 (MBIA Insured).. 327,200
----------
Nevada (3.5%):
900,000 Sparks, G.O., 4.80%,
3/1/04, Callable on
3/1/01 @ 101 (AMBAC
Insured)............... 919,125
500,000 Washoe County School
District, G.O., 5.30%,
8/1/00 (MBIA Insured).. 515,625
----------
1,434,750
----------
New Mexico (2.6%):
345,000 Albuquerque, Water &
Sewer Revenue, 4.40%,
7/1/00................. 348,019
700,000 New Mexico State,
Capital Projects, G.O.,
4.60%, 8/1/00, Callable
on 8/1/98 @ 101.5...... 711,312
----------
1,059,331
----------
New York (2.5%):
1,000,000 New York State,
Environmental
Facilities Revenue,
5.05%, 1/15/13,
Callable on 7/15/08 @
102.................... 1,015,000
----------
Ohio (2.3%):
1,000,000 Ohio State Building
Authority, 4.75%,
10/1/17, Callable on
10/1/08 @ 101.......... 961,250
----------
Pennsylvania (1.0%):
400,000 Delaware County, G.O.,
4.35%, 10/1/00
(Municipal Government
Guaranteed)............ 404,000
----------
Rhode Island (2.2%):
900,000 Rhode Island State,
Series A, G.O., 4.60%,
11/1/03, Callable on
11/1/02 @ 102.......... 911,250
----------
South Carolina (1.0%):
400,000 Charleston County School
District, Series B,
G.O., 4.50%, 2/1/00
(SCSDE Insured)........ 404,000
----------
South Dakota (1.6%):
640,000 South Dakota State
Building Authority,
Building Revenue,
Series A, 5.00%, 9/1/02
(FSA Insured).......... 660,800
----------
Texas (13.6%):
1,500,000 Brazos River Authority,
Pollution Control
Revenue, Series A,
Texas Utilities
Electric Co., 3.95%*,
2/1/32, AMT (MBIA
Insured)............... 1,500,000
</TABLE>
Continued
-96-
<PAGE>
THE ARCH FUND, INC.
SHORT INTERMEDIATE MUNICIPAL PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------ ----------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Texas, continued:
$ 450,000 Dallas Water Works & Sewer System Revenue,
4.60%, 4/1/01............................ $ 457,312
800,000 Houston, Series C, G.O., 5.50%, 4/1/01.... 828,000
1,000,000 Plano Independent School District, G.O.,
4.70%, 2/15/13, Callable on 2/15/08 @ 100
(PSF Guaranteed)......................... 976,250
400,000 San Antonio, G.O., 4.88%, 8/1/99.......... 405,500
450,000 Tarrant County Water Control and
Improvement District No. 001, Water
Revenue, 5.60%, 3/1/00................... 462,375
1,000,000 University of Texas Permanent University
Fund, College & University Revenue,
5.00%, 7/1/14, Callable on 7/1/08 @ 100
(PUFG Insured)........................... 1,001,250
----------
5,630,687
----------
Utah (3.1%):
675,000 Box Elder County School District, G.O.,
4.80%, 6/15/01 (AMBAC Insured)........... 693,563
560,000 North Davis County Sewer District, G.O.,
5.70%, 3/1/02 (FGIC Insured)............. 592,900
----------
1,286,463
----------
Vermont (0.7%):
270,000 Vermont Municipal Bond Bank, Series 2,
4.50%, 12/1/01 (AMBAC Insured)........... 274,388
----------
Virginia (2.0%):
400,000 Virginia Beach, G.O., 4.20%, 7/15/98...... 400,180
400,000 Virginia State Public Building Authority,
Building Revenue, Series A, 5.70%,
8/1/00................................... 414,500
----------
814,680
----------
Washington (7.1%):
500,000 Clark County Public
Utilities District No.
001, Electric Revenue,
4.60%, 1/1/01 (FGIC
Insured)................................. 506,250
500,000 Grant County Public
Utilities District No.
002, Electric Revenue,
Series F, 4.80%, 1/1/04
(MBIA Insured)........................... 511,875
1,000,000 King County School
District No. 414, G.O.,
5.00%, 12/1/08........................... 1,037,500
600,000 Seattle Municipal Light
& Power Revenue, 4.80%,
5/1/02................................... 618,750
250,000 Washington State, Series
R-92C, G.O., 5.75%,
9/1/02................................... 266,250
-----------
2,940,625
-----------
Wisconsin (1.7%):
325,000 Brown County, Series A,
G.O., 4.80%, 11/1/01,
Callable on 11/1/00 @
100...................................... 331,906
380,000 Milwaukee County, Series
A, G.O., 5.25%, 9/1/00................... 390,925
-----------
722,831
-----------
Total Municipal Bonds (Cost
$40,191,949)....................................... 40,592,431
-----------
INVESTMENT COMPANIES (1.0%):
300,000 Federated Tax-Free Fund................... 300,000
124,000 Nuveen Tax Exempt Fund.................... 124,000
-----------
Total Investment Companies
(Cost $424,000) 424,000
-----------
Total Investments
(Cost $40,615,949)(a) (99.1%)...................... 41,016,431
Other assets in excess of
liabilities (0.9%)................................. 361,719
-----------
Total Net Assets (100.0%)........................... $41,378,150
===========
</TABLE>
Continued
-97-
<PAGE>
THE ARCH FUND, INC.
SHORT INTERMEDIATE MUNICIPAL PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
- ------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation....................... $434,429
Unrealized depreciation....................... (33,947)
--------
Net unrealized appreciation................... $400,482
========
* Variable rate investments. The rate presented on the Schedule of Portfolio
Investments is the rate in effect at May 31, 1998.
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax
FGIC Financial Guaranty Insurance Corp.
FSA Financial Securities Assurance, Inc.
G.O. General Obligation
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
PSF Permanent School Fund
PUFG Permanent University Fund Guarantee
Q-SBLF Qualified-School Bond Loan Fund
SCSDE South Carolina School District Enhancement
See notes to financial statements
-98-
<PAGE>
THE ARCH FUND, INC.
MISSOURI TAX-EXEMPT BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS (94.9%):
Missouri (87.7%):
$3,325,000 Clayton School District, G.O., 5.00%, 3/1/17,
Callable on 3/1/07 @ 101........................... $ 3,316,687
1,255,000 Columbia, G.O., 5.50%, 10/1/03...................... 1,345,988
1,000,000 Columbia, Water & Electrical Revenue, Series A,
6.13%, 10/1/12, Callable on 10/1/02 @ 102.......... 1,096,250
750,000 Franklin County Reorganized School District, No. R-
XI, G.O., 5.75%, 3/1/13, Callable on 3/1/03 @ 100
(FGIC Insured)..................................... 787,500
1,000,000 Hazelwood School District, G.O., 5.85%, 3/1/09,
Callable on 3/1/04 @ 100........................... 1,083,750
2,000,000 Jackson County School District, G.O., 4.85%, 3/1/13,
Callable 3/1/08 @ 100.............................. 1,997,500
1,000,000 Jefferson City School District, Series A, 6.70%,
3/1/11............................................. 1,196,250
2,230,000 Kansas City School District Building, Capital
Improvement Project, 5.00%, 2/1/14, Callable on
2/1/04 @ 102 (FGIC Insured)........................ 2,224,425
2,415,000 Kansas City School District Building, Capital
Improvement Project, 5.15%, 2/1/08, Callable on
2/1/04 @ 102 (FGIC Insured)........................ 2,523,675
1,000,000 Kansas City School District Building, Elementary
School Project, Series D, 5.00%, 2/1/14, Callable
on 2/1/04 @ 102 (FGIC Insured)..................... 997,500
1,000,000 Kansas City School District Building, Series C,
5.38%, 7/1/05, Callable on 7/1/03 @ 101 (FGIC
Insured)........................................... 1,057,500
1,000,000 Kansas City Sewer Revenue, 5.75%, 3/1/01............ 1,045,000
2,200,000 Kansas City Water Revenue, Series B, 5.00%, 12/1/16,
Callable on 12/1/06 @ 101.......................... 2,249,500
700,000 Lincoln County Industrial Development Authority,
Industrial Development Revenue, Monsanto Co.
Project, 7.50%, 5/1/05, Callable on 11/1/98 @ 102.. 724,220
1,500,000 Mehlville School District No. 09, G.O., 6.00%,
2/15/13, Callable on 2/15/03 @ 102 (MBIA Insured).. 1,646,250
750,000 Missouri Southern State College Revenue, 5.25%,
12/1/12, Callable on 12/1/02 @ 100 (MBIA Insured).. 786,563
1,500,000 Missouri State Board of Public Buildings, 6.40%,
12/1/09, Callable on 12/1/01 @ 100................. 1,603,125
500,000 Missouri State Environmental Improvement & Energy
Resources Authority, Water Pollution Control
Revenue, Series A, 6.55%, 7/1/14, Callable on
7/1/02 @ 102....................................... 545,000
1,000,000 Missouri State Environmental Improvement & Energy
Resources Authority, Water Pollution Control
Revenue, Series A, 6.45%, 7/1/08, Callable on
7/1/02 @ 102....................................... 1,097,500
1,100,000 Missouri State Environmental Improvement & Energy
Resources Authority, Water Pollution Control
Revenue, Series A, 6.88%, 6/1/14, Callable on
12/1/01 @ 102...................................... 1,207,250
1,000,000 Missouri State Environmental Improvement & Energy
Resources Authority, Water Pollution Control
Revenue, Series D, 5.88%, 1/1/15, Callable on
1/1/06 @ 101....................................... 1,061,250
1,250,000 Missouri State Environmental Improvement & Energy
Resources Authority, Water Pollution Control
Revenue, Series E, 5.63%, 7/1/16, Callable on
7/1/06 @ 101....................................... 1,323,438
500,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, Barnes
Hospital, 7.13%, 12/15/12, Prerefunded 12/15/00 @
102................................................ 547,500
2,500,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, Barnes-Jewish
Inc., Series A, 5.25%, 5/15/21, Callable on 5/15/03
@ 102.............................................. 2,515,625
600,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, Bethesda Eye
Institute, 6.63%, 11/1/09, Callable on 11/1/01 @
102 (LOC-Credit Local de France)................... 661,500
1,000,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, BJC Health
Systems, Series A, 6.75%, 5/15/12.................. 1,186,250
1,200,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, Children's
Mercy Hospital Projects, 5.63%, 5/15/12, Callable
on 5/15/03 @ 101 (MBIA Insured).................... 1,246,500
1,000,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, Freeman
Hospital Project, Series A, 5.38%, 2/15/14,
Callable on 2/15/04 @ 102 (FSA Insured)............ 1,018,750
750,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, Sisters of
Mercy Health System, Series A, 6.25%, 6/1/15,
Callable on 6/1/02 @ 102 (MBIA Insured)............ 806,250
</TABLE>
Continued
-99-
<PAGE>
THE ARCH FUND, INC.
MISSOURI TAX-EXEMPT BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Missouri, continued:
$3,895,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, SSM Health
Care System, Series A, 5.00%, 6/1/18, Callable
6/1/08 @ 101 (MBIA Insured)......................... $ 3,817,098
390,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, SSM Health
Care System, Series AA, 6.25%, 6/1/16, Prerefunded
6/1/02 @ 102 (MBIA Insured)......................... 428,025
1,610,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, SSM Health
Care System, Series AA, 6.25%, 6/1/16, Callable
6/1/02 @ 102 (MBIA Insured)......................... 1,736,788
2,000,000 Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, St. Luke's
Health System, 5.10%, 11/15/13, Callable on 11/15/03
@ 102 (MBIA Insured)................................ 2,010,000
800,000 Missouri State Health & Educational Facilities
Authority, Revenue, St. Louis University, Series A,
7.75%, 6/1/07, Callable on 6/1/98 @ 102 (AMBAC
Insured)............................................ 824,216
1,000,000 Missouri State Higher Education Loan Authority,
Student Loan Revenue, Series A, 5.75%, 2/15/02...... 1,045,000
910,000 Missouri State Housing Development Revenue, 6.60%,
7/1/24, Callable on 1/1/03 @ 100 (FHA Insured)...... 962,325
500,000 Missouri State Housing Development Revenue, Series B,
7.00%, 9/1/10, Callable on 9/1/01 @ 102 (FHA
Insured)............................................ 536,250
480,000 Missouri State Housing Development Revenue, Series C,
6.90%, 7/1/18, Callable on 1/1/02 @102.............. 510,600
1,000,000 Missouri State Water Pollution Control Revenue,
Series A, G.O., 5.75%, 8/1/12, Callable on 8/1/02 @
100................................................. 1,041,250
2,085,000 Missouri State Water Pollution Control Revenue,
Series A, G.O., 5.75%, 8/1/18, Callable on 8/1/06 @
100................................................. 2,215,313
2,000,000 Missouri State, Fourth Street Building, Series A,
G.O., 5.40%, 8/1/09, Callable on 8/1/06 @ 100....... 2,130,000
1,000,000 Missouri State, Third Street Building, Series A,
G.O., 5.25%, 8/1/08, Callable on 8/1/02 @ 100....... 1,032,500
1,000,000 Missouri Western State College Revenue, 5.40%,
10/1/16, Callable on 10/1/03 @ 102 (MBIA Insured)... 1,016,250
1,000,000 Missouri, Series A, G.O., 5.13%, 8/1/09, Callable on
8/1/02 @ 100........................................ 1,026,250
570,000 O'Fallon, G.O., 5.75%, 3/1/10, Callable on 3/1/01 @
100 (MBIA Insured).................................. 586,388
600,000 Phelps County Hospital Revenue, Phelps County
Regional Medical Center, 8.20%, 3/1/05, Prerefunded
on 3/1/00 @ 102..................................... 654,750
1,000,000 Sikeston Electric Revenue, 5.00%, 6/1/22, Callable on
6/1/06 @ 101 (MBIA Insured)......................... 982,500
1,000,000 Sikeston Electric Revenue, 6.25%, 6/1/22, Prerefunded
on 6/1/02 @ 102 (MBIA Insured)...................... 1,095,000
500,000 Southeast Missouri Correctional Facilities Revenue,
5.75%, 10/15/08, Callable on 10/15/00 @ 102......... 521,875
500,000 Southeast Missouri Correctional Facilities Revenue,
5.75%, 10/15/16, Callable on 10/15/02 @ 100......... 519,375
2,000,000 Springfield School District No. R-12, Series A, G.O.,
5.25%, 3/1/11, Callable on 3/1/03 @ 100 (MBIA
Insured)............................................ 2,045,000
2,000,000 Springfield Water Works Revenue, Series A, 5.60%,
5/1/23, Callable on 5/1/03 @ 102.................... 2,160,000
1,000,000 St. Charles County Community College, G.O., 6.00%,
2/15/09, Callable on 2/15/01 @ 102 (AMBAC Insured).. 1,060,000
500,000 St. Charles County Public Facilities Authority,
Leasehold Revenue, 6.38%, 3/15/07, Callable on
3/15/02 @ 102 (FGIC Insured)........................ 543,750
800,000 St. Louis County Industrial Development Authority,
Health Facility Revenue, Lutheran Health Care
Association, Series A, 7.38%, 2/1/14, Callable on
6/1/07 @ 100........................................ 902,000
750,000 St. Louis County, Pattonville R-3 School District,
G.O., 6.25%, 2/1/10, Prerefunded on 2/1/02 @ 100
(FGIC Insured)...................................... 805,313
1,000,000 St. Louis County, Rockwood School District No. R-6,
G.O., 5.00%, 2/1/04, Callable on 2/1/02 @ 101....... 1,035,000
2,500,000 St. Louis County, Series B, G.O., 5.50%, 2/1/13,
Callable on 2/1/03 @ 100............................ 2,581,250
</TABLE>
Continued
-100-
<PAGE>
THE ARCH FUND, INC.
MISSOURI TAX-EXEMPT BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Missouri, continued:
$ 400,000 St. Louis Industrial Development Authority,
Pollution Control Revenue, Anheuser-Busch Co.
Project, 6.65%, 5/1/16............................. $ 477,000
500,000 St. Louis Water Revenue, 6.00%, 7/1/14, Callable on
7/1/04 @ 102 (FGIC Insured)........................ 541,250
1,740,000 St. Peters, G.O., 5.80%, 1/1/09, Callable on 1/1/02
@ 102.............................................. 1,842,225
1,065,000 St. Peters, G.O., 5.85%, 1/1/13, Callable on 1/1/02
@ 102.............................................. 1,123,575
1,400,000 University City Industrial Development Authority,
Multifamily Housing Revenue, Series A, 5.95%,
12/20/25, Callable on 12/20/05 @ 102............... 1,475,250
3,000,000 University Health Facilities Revenue, University of
Missouri Health System, Series A, 5.60%, 11/1/26,
Callable on 11/1/06 @ 102 (AMBAC Insured).......... 3,123,749
3,000,000 University of Missouri, University Revenue, 5.80%,
11/1/27, Callable on 11/1/07 @ 101................. 3,179,999
3,000,000 University of Missouri, University Revenue, 5.50%,
11/1/21, Callable on 11/1/07 @ 101................. 3,108,750
2,000,000 University of Missouri, University Revenue, 5.50%,
11/1/23, Callable on 11/1/03 @ 101................. 2,042,500
925,000 University of Missouri, University Revenue, Series
A, 6.50%, 11/1/11, Prerefunded on 11/1/00 @ 102
(AMBAC Insured).................................... 996,688
------------
92,633,548
------------
Puerto Rico (7.2%):
500,000 Puerto Rico Commonwealth, 6.45%, 7/1/17, Callable on
7/1/04 @ 101.5..................................... 568,750
1,000,000 Puerto Rico Commonwealth, Series A, G.O., 6.00%,
7/1/06, Callable on 7/1/02 @ 101.5................. 1,072,500
4,000,000 Puerto Rico Public Buildings Authority, Public
Education and Health Facilities Revenue, Series B,
5.00%, 7/1/27, Callable 7/1/07 @ 101.5 (AMBAC
Insured)........................................... 3,955,000
2,000,000 Puerto Rico Public Buildings Authority, Public
Education and Health Facilities Revenue, Series M,
5.50%, 7/1/21, Callable on 7/1/03 @ 101.5.......... 2,040,000
------------
7,636,250
------------
Total Municipal Bonds (Cost $95,306,179) 100,269,798
------------
INVESTMENT COMPANIES (4.1%):
4,095,000 Federated Tax-Free Fund............................. 4,095,000
225,000 Nuveen Tax Exempt Fund.............................. 225,000
------------
Total Investment Companies (Cost $4,320,000) 4,320,000
------------
Total Investments (Cost $99,626,179)(a) (99.0%) 104,589,798
Other assets in excess of liabilities (1.0%) 1,063,593
------------
Total Net Assets (100.0%) $105,653,391
============
</TABLE>
- ------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation..................... $4,966,119
Unrealized depreciation..................... (2,500)
----------
Net unrealized appreciation................. $4,963,619
==========
AMBAC--AMBAC Indemnity Corp.
FGIC --Financial Guaranty Insurance Corp.
FHA --Federal Housing Administration
FSA --Financial Securities Assurance, Inc.
G.O. --General Obligation
MBIA --Municipal Bond Insurance Association
See notes to financial statements
-101-
<PAGE>
THE ARCH FUND, INC.
NATIONAL MUNICIPAL BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS (97.6%):
Alaska (0.3%):
$1,000,000 Alaska State, Housing Finance Corp., Series A,
5.70%, 12/1/11, Callable on 12/1/05 @ 102 (MBIA
Insured)........................................... $ 1,061,250
------------
California (5.7%):
9,000,000 Sacramento Municipal Utility District, Electric
Power & Light Revenue, Series L, 5.10%, 7/1/13,
Callable on 7/1/07 @ 102 (AMBAC Insured)........... 9,135,000
5,000,000 San Francisco Bay Area Rapid Transit Tax Revenue,
5.25% 07/01/17, Callable on 7/1/08 @101............ 5,100,000
7,000,000 Southern California Public Power Authority, Electric
Power & Light Revenue, Palo Verde, Series A, 5.00%,
7/1/15, Callable on 7/1/03 @ 102 (AMBAC-TCRS
Insured)........................................... 6,921,250
------------
21,156,250
------------
Colorado (5.8%):
6,655,000 Adams County School District No. 012, G.O., 5.40%,
12/15/13, Callable on 12/15/07 @ 101 (FGIC
Insured)........................................... 6,946,156
6,160,000 Colorado Springs, Utilities Revenue, System
Improvement, Series A, 5.25%, 11/15/22, Callable on
11/15/07 @ 100..................................... 6,252,400
8,000,000 Jefferson County School District No. R-001, G.O.,
5.00%, 12/15/12, Callable on 12/15/07 @ 101........ 8,130,000
------------
21,328,556
------------
Connecticut (3.6%):
4,360,000 Connecticut State, Clean Water Foundation Revenue,
5.25%, 3/1/20, Callable on 3/1/08 @ 101............ 4,458,100
8,785,000 Connecticut State, Series A, G.O., 5.25%, 3/1/13,
Callable on 3/1/07 @ 101........................... 9,048,550
------------
13,506,650
------------
Delaware (1.2%):
4,315,000 Delaware State, Series A, G.O., 4.60%, 2/1/10,
Callable on 4/1/09 @ 100........................... 4,288,031
------------
District of Columbia (1.4%):
5,000,000 District of Columbia Water & Sewer Authority
Revenue, 5.50% 10/1/18, Callable on 4/1/09 @ 160
(FSA Insured)...................................... 5,306,250
------------
Florida (5.2%):
5,000,000 Florida State Department of Environmental
Preservation 2000, General Services Revenue,
Series A, 5.50%, 7/1/13, Callable on 7/1/06 @ 101
(MBIA Insured)..................................... 5,343,750
5,525,000 Florida State Department of Transportation, G.O.,
5.25%, 7/1/17, Callable on 7/1/06 @ 101............ 5,600,969
5,000,000 Palm Beach County, Park & Recreational Facilities
Revenue, 5.25%, 11/1/16, Callable on 11/1/06 @ 102
(FSA Insured)...................................... 5,156,250
3,000,000 Palm Beach County, Solid Waste Authority Revenue,
Series B, 5.38%, 10/1/11, Callable on 10/1/06 @ 101
(AMBAC Insured).................................... 3,146,250
------------
19,247,219
------------
Hawaii (4.0%):
8,000,000 Hawaii State, Series CN, G.O., 5.50%, 3/1/14,
Callable on 3/1/07 @ 102 (FGIC Insured)............ 8,320,000
5,815,000 Honolulu City & County, Series A, G.O., 6.00%,
1/1/09............................................. 6,505,531
------------
14,825,531
------------
Illinois (10.1%):
5,000,000 Chicago Metropolitan Water Reclamation District,
G.O., 5.25%, 12/1/14, Callable on 12/1/08 @ 102.... 5,131,250
9,090,000 Cook County, Series A, G.O., 6.25%, 11/15/12 (MBIA
Insured)........................................... 10,430,775
6,000,000 Cook County, Series B, G.O., 5.13% 11/15/16,
Callable on 11/15/07 @ 101 (MBIA Insured).......... 6,015,000
</TABLE>
Continued
-102-
<PAGE>
THE ARCH FUND, INC.
NATIONAL MUNICIPAL BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Illinois, continued:
$7,000,000 Illinois Health Facility Authority Revenue, Loyola
University Health System, Series A, 5.38%, 7/1/17,
Callable on 7/1/07 @ 101 (MBIA Insured)............ $ 7,131,250
8,400,000 Illinois State, G.O., 5.25%, 2/1/13, Callable on
2/1/07 @ 101 (FGIC Insured)........................ 8,631,000
------------
37,339,275
------------
Indiana (1.0%):
3,500,000 Indiana Transportation Finance Authority, Highway
Revenue, Series A, 5.75%, 6/1/12
(AMBAC Insured).................................... 3,876,250
------------
Maryland (2.0%):
7,000,000 Maryland State and Local Facilities, 2nd Series,
G.O., 5.00%, 8/1/08, Callable on 8/1/07 @ 101...... 7,350,000
------------
Massachusetts (5.3%):
6,165,000 Massachusetts Bay Transportation Authority, Series
A, 5.13%, 3/1/17, Callable on 3/1/07 @ 101 (FGIC
Insured)........................................... 6,203,531
5,795,000 Massachusetts Bay Transportation Authority, Series
A, 5.00%, 3/1/12, Callable on 3/1/07 @ 101 (FGIC
Insured)........................................... 5,889,169
7,115,000 Massachusetts State Water Pollution Abatement Trust,
Series 3, 5.63%, 2/1/15, Callable on 2/1/07 @ 101.. 7,559,688
------------
19,652,388
------------
Minnesota (4.4%):
5,000,000 Minnesota State, G.O., 4.90%, 8/1/14, Callable on
8/1/07 @ 100....................................... 5,018,750
6,000,000 Monticello Independent School District No. 882,
G.O., 5.40%, 2/1/15, Callable on 2/1/06 @ 100...... 6,195,000
5,000,000 Rochester Health Care Facilities, Mayo Foundation,
Series A, 5.38%, 11/15/18, Callable on 5/15/08
@101............................................... 5,087,500
------------
16,301,250
------------
Mississippi (1.9%):
6,835,000 Mississippi State, Series A, G.O., 5.13%, 7/1/14,
Callable on 7/1/07 @ 100........................... 6,920,438
------------
Nevada (4.6%):
5,000,000 Clark County School District, Series B, G.O., 5.50%,
6/15/11, Callable on 6/15/07 @ 101
(FGIC Insured)..................................... 5,293,750
6,745,000 Nevada State, 5.00%, 5/15/15........................ 6,736,569
5,000,000 Nevada State, Series A, G.O., 5.13%, 9/1/11,
Callable on 3/1/07 @ 101........................... 5,137,500
------------
17,167,819
------------
New Jersey (5.9%):
5,000,000 Camden County, Municipal Utilities Authority Sewer
Revenue, Series C, 5.10%, 7/15/12, Callable on
7/15/08 @ 101 (FGIC Insured)....................... 5,093,750
7,500,000 New Jersey State Transportation System, Series A,
5.00% 6/15/14, Callable on 6/15/08 @100............ 7,518,750
8,000,000 New Jersey State, Series E, G.O., 6.00%, 7/15/09.... 9,070,000
------------
21,682,500
------------
New York (1.4%):
5,000,000 New York State Thruway Authority, Series A, 5.25%,
4/1/14, Callable on 4/1/07 @ 102
(AMBAC Insured).................................... 5,093,750
------------
</TABLE>
Continued
-103-
<PAGE>
THE ARCH FUND, INC.
NATIONAL MUNICIPAL BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
North Carolina (2.2%):
$8,000,000 North Carolina State, Series A, G.O., 5.20%, 3/1/13,
Callable on 3/1/07 @ 102........................... $ 8,330,000
------------
North Dakota (1.4%):
5,250,000 Fargo Water Revenue, 5.13%, 1/1/17, Callable on
1/1/08 @ 100 (MBIA Insured)........................ 5,289,375
------------
Ohio (2.1%):
8,000,000 Ohio State Building Authority, 4.75%, 10/1/17,
Callable on 10/1/08 @ 101.......................... 7,690,000
------------
Oregon (1.8%):
6,110,000 Washington County, Unified Sewer Agency, Sewer
Revenue, Series 1, 5.75%, 10/1/10
(FGIC Insured)..................................... 6,805,013
------------
Pennsylvania (2.5%):
9,000,000 Pennsylvania State, G.O., 5.13%, 9/15/11, Callable
on 3/15/07 @ 101.5 (AMBAC Insured)................. 9,281,250
------------
Rhode Island (1.4%):
5,055,000 Rhode Island State, Series A, G.O., 5.13%, 8/1/12,
Callable on 8/1/07 @ 101 (MBIA Insured)............ 5,175,056
------------
Texas (11.1%):
8,000,000 Harris County Health Facilities Development Revenue,
Memorial Hospital Systems Project, Series A, 5.50%,
6/1/17, Callable on 6/1/07 @ 102 (MBIA Insured).... 8,229,999
6,000,000 San Antonio Independent School District, G.O.,
5.13%, 8/15/14, Callable on 8/15/08 @ 100
(PSF Guaranteed)................................... 6,067,500
5,000,000 San Antonio, Series A, G.O., 5.00%, 8/1/11, Callable
on 8/1/06 @ 100.................................... 5,081,250
6,750,000 Texas State, G.O., 5.40%, 8/1/21, Callable on 8/1/06
@ 100.............................................. 6,859,688
7,060,000 University of Texas Permanent University Fund,
College & University Revenue, 5.00%, 7/1/14,
Callable on 7/1/08 @ 100 (PUFG Insured)............ 7,068,825
7,500,000 University of Texas, College & University Revenue,
Series B, 5.10%, 8/15/13, Callable on 8/15/06 @
102................................................ 7,621,875
------------
40,929,137
------------
Utah (1.7%):
6,200,000 Utah State, Series F, G.O., 5.00%, 7/1/09, Callable
on 7/1/07 @ 100.................................... 6,440,250
------------
Virginia (1.4%):
4,920,000 Virginia State Transportation Board, Transportation
Contract Revenue, U.S. Route 58 Corridor, Series B,
5.13%, 5/15/12, Callable on 5/15/06 @ 101.......... 5,036,850
------------
Washington (5.9%):
4,050,000 King County School District No. 415, G.O., 5.35%,
12/1/16, Callable on 12/1/07 @ 100 (MBIA Insured).. 4,161,375
5,000,000 King County, Series F, G.O., 5.13%, 12/1/14,
Callable on 12/1/07 @ 100.......................... 5,056,250
8,000,000 Washington State Motor Vehicle Fuel Tax, Series D,
G.O., 5.38%, 1/1/22, Callable on 1/1/07
@ 100 (FGIC Insured)............................... 8,150,000
4,190,000 Washington State, Series C, G.O., 5.50%, 1/1/17,
Callable on 1/1/07 @ 100........................... 4,347,125
------------
21,714,750
------------
West Virginia (2.3%):
7,940,000 West Virginia School Building Authority Revenue,
5.40%, 7/1/10, Callable on 7/1/07 @ 102 (AMBAC
Insured)........................................... 8,426,325
------------
Total Municipal Bonds (Cost $347,467,088) 361,221,413
------------
</TABLE>
Continued
-104-
<PAGE>
THE ARCH FUND, INC.
NATIONAL MUNICIPAL BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
INVESTMENT COMPANIES (1.2%):
3,917,000 Federated Tax-Free Fund............................... $ 3,917,000
733,000 Nuveen Tax Exempt Fund................................ 733,000
------------
Total Investment Companies (Cost $4,650,000) 4,650,000
------------
Total Investments (Cost $352,117,088)(a) (98.8%) 365,871,413
Other assets in excess of liabilities (1.2%) 4,377,414
------------
Total Net Assets (100.0%) $370,248,827
============
</TABLE>
- ------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation.................... $13,912,864
Unrealized depreciation.................... (158,539)
-----------
Net Unrealized appreciation................ $13,754,325
===========
AMBAC--AMBAC Indemnity Corp.
FGIC --Financial Guaranty Insurance Corp.
FSA --Financial Securities Assurance, Inc.
G.O. --General Obligation
MBIA --Municipal Bond Insurance Association
PSF --Permanent School Fund
PUFG --Permanent University Fund Guarantee
TCRS --Transferrable Custodial Receipts
See notes to financial statements
-105-
<PAGE>
THE ARCH FUND, INC.
INTERMEDIATE CORPORATE BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS (75.8%):
Automotive (3.5%):
$ 800,000 Ford Motor Credit, 7.50%, 1/15/03.................... $ 844,000
500,000 General Motors Acceptance Corp., 8.50%, 2/4/02, MTN.. 538,125
500,000 General Motors Acceptance Corp., Global Bond, 6.75%,
2/7/02.............................................. 510,000
-----------
1,892,125
-----------
Banking (8.9%):
50,000 Banc One Dayton, N.A., 6.63%, 4/15/03................ 50,938
200,000 BankAmerica Corp., 8.13%, 2/1/02..................... 212,500
500,000 Bankers Trust New York, 7.25%, 1/15/03............... 519,375
500,000 Chase Manhattan Corp., 7.13%, 3/1/05................. 522,500
330,000 J.P. Morgan & Co., Inc., 7.63%, 11/15/98............. 332,237
145,000 National Westminster Bank--NY, 9.45%, 5/1/01......... 158,050
600,000 NationsBank Corp., 6.88%, 2/15/05.................... 621,000
500,000 NationsBank Corp., 7.75%, 8/15/04.................... 539,375
400,000 NationsBank Corp., 8.63%, 11/15/03................... 444,500
85,000 Norwest Corp., 6.25%, 3/15/01, MTN................... 85,638
750,000 Toronto-Dominion Bank-NY, 7.88%, 8/15/04............. 764,999
300,000 United Postal Savings, 9.00%, 7/26/99................ 310,125
300,000 Wells Fargo & Co., 8.38%, 5/15/02.................... 322,500
-----------
4,883,737
-----------
Beverages (6.6%):
200,000 Anheuser-Busch Cos., Inc., 8.75%, 12/1/99............ 208,500
1,000,000 Anheuser-Busch Cos., Inc., 6.75%, 8/1/03............. 1,036,250
1,000,000 Brown-Forman, Corp., 7.38%, 5/10/05, MTN............. 1,068,750
325,000 Coca-Cola Co., 7.88%, 9/15/98........................ 326,573
1,000,000 Pepsico Inc., 5.75%, 1/15/08(b)...................... 970,000
-----------
3,610,073
-----------
Entertainment (1.9%):
1,000,000 Walt Disney Co., Global Bond, Series B, 6.75%,
3/30/06(b).......................................... 1,042,500
-----------
Financial Services (16.7%):
2,000,000 Ameritech Capital Funding, 6.15%, 1/15/08(b)......... 2,004,999
50,000 Associates Corp., N.A., 6.88%, 2/1/03................ 51,502
100,000 Associates Corp., N.A., 8.80%, 8/1/98................ 100,439
1,000,000 Associates Corp., N.A., 7.23%, 5/17/06, MTN.......... 1,062,500
500,000 Bear Stearns Co., Inc., 8.25%, 2/1/02................ 533,750
1,000,000 CIT Group Holdings, 6.80%, 4/17/00, MTN.............. 1,013,750
100,000 General Electric Capital Corp., 7.13%, 12/15/98, MTN. 100,646
1,000,000 General Electric Capital Corp., 7.66%, 8/2/04, MTN... 1,083,750
745,000 General Electric Capital Corp., 8.30%, 9/20/09....... 868,856
500,000 Merrill Lynch & Co., 8.00%, 6/1/07................... 559,375
300,000 Merrill Lynch & Co., 7.75%, 3/1/99................... 304,200
50,000 Norwest Financial Inc., 6.13%, 8/1/03................ 50,063
1,000,000 Pitney Bowes Credit, 8.63%, 2/15/08.................. 1,177,500
50,000 St. Paul Companies, Inc., 7.50%, 12/20/02, MTN....... 52,625
50,000 St. Paul Companies, Inc., 8.25%, 9/15/98, MTN........ 50,334
70,000 St. Paul Companies, Inc., 7.60%, 4/22/99, MTN........ 71,029
25,000 St. Paul Companies, Inc., 7.49%, 11/6/02, MTN........ 26,508
-----------
9,111,826
-----------
Food Products (5.0%):
1,000,000 Campbell Soup Co., 6.90%, 10/15/06(b)................ 1,056,250
1,000,000 General Mills, 8.90%, 3/15/06, MTN................... 1,174,999
200,000 General Mills, 8.47%, 12/15/98, MTN.................. 202,306
</TABLE>
Continued
-106-
<PAGE>
THE ARCH FUND, INC.
INTERMEDIATE CORPORATE BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Food Products, continued:
$ 125,000 Quaker Oats Co., 9.00%, 12/10/01, MTN................. $ 135,313
150,000 Quaker Oats Co., 9.00%, 12/7/01, MTN.................. 163,604
-----------
2,732,472
-----------
Food Service (0.9%):
500,000 McDonald's Corp., 6.50%, 8/1/07, MTN.................. 516,250
-----------
Foreign Agency (0.1%):
50,000 Elf Aquitaine, 7.75%, 5/1/99.......................... 50,813
-----------
Health Care (4.2%):
150,000 Eli Lilly & Co., 6.75%, 11/15/99...................... 151,875
1,000,000 Eli Lilly & Co., 8.38%, 12/1/06(b).................... 1,150,000
1,000,000 SmithKline Beecham Corp., 6.63%, 10/1/01, MTN......... 1,022,500
-----------
2,324,375
-----------
Industrial Goods & Services (3.4%):
100,000 Clorox, 8.80%, 7/15/01................................ 107,875
1,000,000 E.I. duPont de Nemours, 8.13%, 3/15/04, Callable
2/15/01 @ 100........................................ 1,108,750
200,000 E.I. duPont de Nemours, 8.50%, 2/15/03................ 212,250
350,000 Kimberly-Clark, 8.63%, 5/1/01......................... 376,250
50,000 Proctor & Gamble Inc., 8.00%, 11/15/03................ 54,625
-----------
1,859,750
-----------
Oil & Exploration Products & Services (3.6%):
150,000 BP Amercia, Inc., 9.38%, 11/1/00...................... 161,625
200,000 BP America, Inc., 8.50%, 4/15/01...................... 213,500
100,000 Exxon Capital Corp., 6.63%, 8/15/02................... 102,750
300,000 Gannett Co., 5.85%, 5/1/00............................ 300,000
1,000,000 Texaco Capital, 7.09%, 2/1/07......................... 1,067,500
150,000 Warner Lambert, 8.00%, 9/1/98......................... 150,797
-----------
1,996,172
-----------
Retail Stores (4.6%):
1,000,000 J. C. Penney Inc., 7.60%, 4/1/07...................... 1,078,750
600,000 Wal-Mart Stores, Inc., 7.50%, 5/15/04................. 648,000
100,000 Wal-Mart Stores, Inc., 6.50%, 6/1/03.................. 102,750
650,000 Wal-Mart Stores, Inc., 8.63%, 4/1/01.................. 696,313
-----------
2,525,813
-----------
Technology (2.0%):
1,000,000 Motorola, Inc., 7.60%, 1/1/07......................... 1,101,250
-----------
Telecommunications (8.3%):
50,000 AT&T Corp., 7.13%, 1/15/02............................ 51,875
100,000 AT&T Corp., 7.00%, 5/15/05............................ 105,375
1,150,000 AT&T Corp., 6.75%, 4/1/04,(b)......................... 1,196,000
1,000,000 Lucent Technologies, Inc., 7.25%, 7/15/06(b).......... 1,072,500
1,065,000 SBC Communications, Inc., 7.25%, 7/1/02............... 1,112,925
1,000,000 Southwestern Bell Telephone, 6.56%, 11/15/05, MTN..... 1,028,750
-----------
4,567,425
-----------
Transportation & Shipping (0.4%):
200,000 Union Pacific Co., 7.88%, 2/15/02..................... 209,750
-----------
Utilities (5.7%):
190,000 Hydro Quebec, 7.65%, 11/30/98, MTN.................... 191,541
1,500,000 Laclede Gas Co., 7.50%, 11/1/07....................... 1,633,124
100,000 National Rural Utilities, 6.45%, 4/1/01............... 101,250
100,000 National Rural Utilities, 6.65%, 10/1/05.............. 102,875
50,000 Pacific Gas & Electric, 6.25%, 8/1/03................. 50,563
170,000 Southern California Edison, 6.75%, 1/15/00............ 172,338
810,000 Wisconsin Power & Light, 7.00%, 6/15/07(b)............ 859,612
-----------
3,111,303
-----------
Total Corporate Bonds
(Cost $40,288,226) 41,535,634
-----------
U.S. GOVERNMENT AGENCIES (18.0%):
Federal Farm Credit Bank (1.1%):
500,000 8.95%, 6/1/06......................................... 593,330
-----------
</TABLE>
Continued
-107-
<PAGE>
THE ARCH FUND, INC.
INTERMEDIATE CORPORATE BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal Home Loan Mortgage Corp. (5.0%):
$ 461,655 6.00%, 2/1/11, Gold Pool #E62600...................... $ 457,039
1,782,087 6.50%, 1/1/12, Gold Pool #E00465...................... 1,794,882
461,047 6.50%, 6/1/12, Pool #E67059........................... 464,358
-----------
2,716,279
-----------
Federal National Mortgage Assoc. (6.1%):
720,753 7.00%, 11/1/10, Pool #328614.......................... 735,168
910,000 7.00%, 6/1/11, Pool #349980........................... 928,199
842,639 6.50%, 3/1/12, Pool #372719........................... 847,636
844,590 6.50%, 3/1/12, Pool #372719........................... 849,599
-----------
3,360,602
-----------
Government National Mortgage Assoc. (5.8%):
990,185 6.00%, 4/15/26, Pool #345610.......................... 964,193
994,196 6.50%, 1/15/27, Pool #439817.......................... 990,150
927,482 7.00%, 1/15/27, Pool #442297.......................... 942,553
294,929 7.00%, 9/15/27, Pool #455304.......................... 299,722
-----------
3,196,618
-----------
Total U.S. Government Agencies
(Cost $9,610,234) 9,866,829
-----------
U.S. TREASURY NOTES (4.5%):
300,000 5.75%, 8/15/03(b)..................................... 302,379
1,500,000 5.88%, 11/15/05(b).................................... 1,521,165
600,000 6.63%, 5/15/07(b)..................................... 639,774
-----------
Total U.S. Treasury Notes
(Cost $2,445,848) 2,463,318
-----------
INVESTMENT COMPANIES (0.8%):
447,674 Federated Money Market Trust.......................... 447,674
-----------
Total Investment Companies
(Cost $447,674) 447,674
-----------
SHORT-TERM SECURITIES HELD AS COLLATERAL (6.1%):
1,065,041 Salomon Brothers, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $1,065,542,
collateralized by $2,353,704 U.S. Treasury Notes
and Strips, 0.00%-11.75%, 11/30/98-8/15/27, market
value $1,088,684).................................... 1,065,041
1,133,487 Greenwich Capital, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $1,134,021,
collateralized by $2,493,507 various
U.S.Government Agency securities, 0.00%-7.75%,
5/15/06-5/15/28, market value $1,156,157............. 1,133,487
1,133,487 Bear Stearns Co., Inc., 5.69%, 6/1/98 (Purchased on
5/29/98 proceeds at maturity $1,134,024,
collateralized by $1,256,167 various FNMA Remics,
6.50%-9.50%, 2/18/04-9/20/24, market value
$1,156,157).......................................... 1,133,487
-----------
Total Short-Term Securities Held as Collateral (Cost
$3,332,015).................................................... 3,332,015
-----------
Total Investments
(Cost $56,123,997)(a) (105.2%)................................. 57,645,470
Liabilities in excess of other assets
(-5.2%)........................................................ (2,845,755)
-----------
Total Net Assets (100.0%)....................................... $54,799,715
===========
</TABLE>
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation..................... $1,567,786
Unrealized depreciation..................... (46,313)
----------
Net unrealized appreciation................. $1,521,473
==========
(b) All or a portion of this security was loaned as of May 31, 1998.
MTN-Medium Term Note
See notes to financial statements
-108-
<PAGE>
THE ARCH FUND, INC.
BOND INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
CORPORATE BONDS (27.4%):
Automotive (3.4%):
$1,000,000 Ford Motor Credit Co., 7.75%, 11/15/02.............. $ 1,062,500
2,000,000 Ford Motor Credit Co., Global Bond, 7.00%, 9/25/01.. 2,060,000
2,000,000 General Motors Corp., 8.88%, 5/15/03................ 2,227,500
------------
5,350,000
------------
Beverages (2.0%):
3,000,000 PepsiCo, Inc., 6.80%, 5/15/00, MTN.................. 3,052,500
------------
Entertainment (1.3%):
1,000,000 Walt Disney Co., Global Bond, Series A, 6.38%,
3/30/01,(b)........................................ 1,015,000
1,000,000 Walt Disney Co., Global Bond, Series B, 6.75%,
3/30/06(b)......................................... 1,042,500
------------
2,057,500
------------
Financial Services (10.9%):
1,800,000 American Express Credit, 6.50%, 8/1/00.............. 1,820,250
3,000,000 CIT Group Holdings, 5.85%, 4/9/01, MTN.............. 2,996,250
1,000,000 Dean Witter Discover & Co., 6.25%, 3/15/00.......... 1,006,250
1,500,000 Dean Witter Discover & Co., 6.75%, 8/15/00.......... 1,526,250
2,000,000 General Electric Capital Corp., 8.85%, 4/1/05....... 2,325,000
1,000,000 General Electric Capital Corp., 8.50%, 7/24/08...... 1,178,750
1,000,000 Household Finance Corp., 7.45%, 4/1/00, Guaranteed
by Household International......................... 1,023,750
1,000,000 Household Finance Corp., 8.38%, 11/15/01............ 1,072,500
1,000,000 Household Finance Corp., 6.88%, 3/1/07.............. 1,041,250
2,000,000 Merrill Lynch & Co., 6.70%, 8/1/00.................. 2,032,500
1,000,000 Merrill Lynch & Co., 8.00%, 2/1/02.................. 1,062,500
------------
17,085,250
------------
Food Products (2.6%):
4,000,000 Sara Lee, 5.75%, 7/14/00, MTN....................... 3,995,000
------------
Industrial Goods & Services (0.7%):
1,000,000 E.I. duPont de Nemours, 6.75%, 9/1/07,(b)............ 1,043,750
------------
Oil & Exploration Products & Services (1.0%):
1,500,000 Texaco Capital, 9.45%, 3/1/00........................ 1,590,000
------------
Retail Stores (1.4%):
2,000,000 Wal-Mart Stores, Inc., 9.10%, 7/15/00................ 2,127,500
------------
Telecommunications (4.1%):
1,000,000 Bell Telephone Co. of Pennsylvania, 8.75%, 8/15/31... 1,305,000
3,000,000 Lucent Technologies, Inc., 6.90%, 7/15/01............ 3,082,500
1,000,000 Northern Telecom Ltd., 6.88%, 10/1/02................ 1,033,750
1,000,000 SBC Communications, Inc., 7.25%, 7/1/02,(b).......... 1,045,000
------------
6,466,250
------------
Total Corporate Bonds
(Cost $41,959,368) 42,767,750
------------
U.S. GOVERNMENT AGENCIES (38.5%):
Federal Home Loan Bank (3.2%):
4,000,000 5.52%, 4/9/01, Series 3101........................... 3,978,280
1,000,000 6.67%, 1/8/07, Series I-07........................... 1,050,940
------------
5,029,220
------------
Federal Home Loan Mortgage Corp. (18.4%):
36,040 8.50%, 10/1/01, Pool #200055......................... 37,233
4,970,000 7.50%, 2/11/02....................................... 5,258,559
136,503 9.00%, 3/1/03, Pool #380019.......................... 141,707
49,690 9.00%, 5/1/03, Pool #380021.......................... 51,584
3,000,000 5.75%, 4/15/08(b).................................... 2,973,241
325,660 7.00%, 11/1/10, Gold Pool #E20202.................... 332,476
410,849 7.00%, 11/1/10, Gold Pool #E62010.................... 419,448
461,655 6.00%, 2/1/11, Gold Pool #E62600..................... 457,039
856,961 6.00%, 3/1/11, Gold Pool #E63503..................... 848,391
877,627 6.00%, 4/1/11, Gold Pool #E63515..................... 868,850
</TABLE>
Continued
-109-
<PAGE>
THE ARCH FUND, INC.
BOND INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal Home Loan Mortgage Corp., continued:
$ 866,089 6.00%, 6/1/11, Gold Pool #E00439...................... $ 857,428
954,137 7.00%, 7/1/11, Gold Pool #E20252...................... 974,107
1,372,709 6.00%, 3/1/12, Gold Pool #E66538...................... 1,358,982
993,376 6.00%, 3/1/13, Gold Pool #E69338...................... 983,442
993,175 6.00%, 3/1/13, Pool #E69425........................... 983,243
996,513 6.00%, 4/1/13, Pool #E70028........................... 986,548
1,993,196 6.00%, 4/1/13, Pool #E00543........................... 1,973,264
232,265 6.00%, 2/1/26, Gold Pool #D68286...................... 225,950
2,197,514 6.00%, 3/1/26, Gold Pool #C80393...................... 2,137,765
350,667 6.00%, 4/1/26, Gold Pool #D70405...................... 341,132
410,947 6.00%, 4/1/26, Gold Pool #D70772...................... 399,774
111,939 6.00%, 4/1/26, Gold Pool #C80395...................... 108,896
325,707 8.00%, 11/1/26, Gold Pool #D76134..................... 338,224
26,882 6.00%, 12/1/26, Gold Pool #D76870..................... 26,151
847,858 6.00%, 12/1/26, Gold Pool #C80465..................... 824,805
382,489 8.00%, 12/1/26, Gold Pool #D76906..................... 397,188
771,779 8.00%, 12/1/26, Gold Pool #D76530..................... 801,438
847,753 7.00%, 1/1/27, Gold Pool #D77743...................... 861,258
1,898,408 7.00%, 1/1/27, Gold Pool #D77720...................... 1,928,649
720,268 8.00%, 1/1/27, Gold Pool #C00490...................... 747,948
-----------
28,644,720
-----------
Federal National Mortgage Assoc. (7.5%):
500,000 8.35%, 11/10/99....................................... 518,060
524,773 6.00%, 11/1/00, Pool #190070.......................... 522,967
883,577 6.00%, 5/1/11, Pool #337194........................... 873,354
921,667 6.00%, 2/1/12, Pool #250917........................... 911,003
949,915 6.00%, 3/1/12, Pool #359504........................... 938,925
953,751 6.00%, 3/1/12, Pool #373131........................... 942,717
872,456 6.00%, 3/1/12, Pool #374638........................... 862,362
993,710 6.00%, 4/1/13, Pool #414671........................... 982,213
1,455,376 6.00%, 10/1/26, Pool #368935.......................... 1,412,616
214,377 9.00%, 10/1/26, Pool #361800.......................... 227,239
350,435 9.00%, 10/1/26, Pool #353671.......................... 371,461
222,860 9.00%, 10/1/26, Pool #358137.......................... 236,231
459,470 9.00%, 11/1/26, Pool #364453.......................... 487,039
270,733 9.00%, 11/1/26, Pool #358703.......................... 286,977
272,270 9.00%, 12/1/26, Pool #368686.......................... 288,606
982,085 6.00%, 1/1/28, Pool #402874........................... 953,232
984,593 6.00%, 1/1/28, Pool #398195........................... 955,666
-----------
11,770,668
-----------
Government National Mortgage Assoc. (9.4%):
165,803 7.50%, 4/15/02, Pool #210173.......................... 171,553
23,068 7.50%, 7/15/02, Pool #216193.......................... 23,868
398,135 7.50%, 7/15/08, Pool #349404.......................... 411,942
117,869 7.50%, 8/15/10, Pool #413412.......................... 121,957
81,344 7.50%, 9/15/10, Pool #413117.......................... 84,165
425,754 7.50%, 11/15/10, Pool #415775......................... 440,519
49,605 6.00%, 3/15/11, Pool #425964.......................... 49,249
21,509 6.50%, 3/15/11, Pool #419123.......................... 21,718
57,523 6.00%, 4/15/11, Pool #421800.......................... 57,109
426,785 6.00%, 4/15/11, Pool #393849.......................... 423,716
457,253 6.00%, 4/15/11, Pool #429397.......................... 453,965
50,629 6.00%, 5/15/11, Pool #345647.......................... 50,265
570,299 6.00%, 5/15/11, Pool #421871.......................... 566,199
512,560 6.00%, 5/15/11, Pool #432659.......................... 508,875
548,924 6.50%, 5/15/11, Pool #412598.......................... 554,237
324,804 6.50%, 5/15/11, Pool #432640.......................... 327,948
257,853 6.00%, 6/15/11, Pool #406582.......................... 255,999
305,094 6.00%, 6/15/11, Pool #423828.......................... 302,900
514,866 6.50%, 6/15/11, Pool #426173.......................... 519,850
375,518 6.50%, 8/15/11, Pool #421746.......................... 379,153
460,528 6.50%, 2/15/12, Pool #393334.......................... 464,986
439,206 6.50%, 3/15/12, Pool #399161.......................... 443,458
1,353,514 7.50%, 7/15/12, Pool #447382.......................... 1,400,454
237,383 8.50%, 11/15/21, Pool #297863......................... 250,736
359,343 8.00%, 5/15/23, Pool #350495.......................... 373,829
426,075 9.00%, 5/15/25, Pool #386743.......................... 456,965
225,628 9.00%, 5/15/25, Pool #401372.......................... 241,986
253,651 9.50%, 8/15/25, Pool #414557.......................... 274,417
444,103 7.50%, 10/15/25, Pool #366152......................... 457,981
487,534 7.50%, 10/15/25, Pool #366154......................... 502,769
69,751 6.50%, 3/15/26, Pool #419578.......................... 69,467
946,265 6.50%, 4/15/26, Pool #422656.......................... 942,413
84,642 6.50%, 5/15/26, Pool #428852.......................... 84,298
</TABLE>
Continued
-110-
<PAGE>
THE ARCH FUND, INC.
BOND INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Government National Mortgage Assoc., continued:
$ 787,931 6.50%, 6/15/26, Pool #423801......................... $ 784,724
558,609 7.00%, 8/20/26, Pool #2266........................... 565,240
302,262 9.50%, 9/15/26, Pool #438724......................... 327,009
56,295 9.50%, 10/15/26, Pool #436991........................ 60,904
196,407 9.50%, 10/15/26, Pool #438728........................ 212,487
261,708 9.50%, 11/15/26, Pool #438731........................ 283,134
160,096 9.50%, 11/15/26, Pool #436994........................ 173,203
491,549 7.00%, 9/15/27, Pool #455304......................... 499,536
------------
14,595,183
------------
Total U.S. Government Agencies
(Cost $59,184,057) 60,039,791
------------
U.S. TREASURY BONDS (21.1%):
4,175,000 12.75%, 11/15/10, Callable on 11/15/05 @ 100......... 5,929,753
2,055,000 12.00%, 8/15/13, Callable on 8/15/08 @ 100(c)........ 3,031,700
1,250,000 7.50%, 11/15/16...................................... 1,476,150
1,500,000 8.75%, 5/15/17....................................... 1,987,980
6,000,000 8.13%, 8/15/19(b).................................... 7,602,360
2,000,000 8.75%, 8/15/20(b).................................... 2,700,160
4,600,000 7.63%, 11/15/22(b)................................... 5,620,188
4,500,000 6.00%, 2/15/26,(b)................................... 4,572,900
------------
Total U.S. Treasury Bonds
(Cost $29,569,148) 32,921,191
------------
U.S. TREASURY NOTES (12.1%):
5,700,000 6.00%, 10/15/99(b)................................... 5,737,448
200,000 6.13%, 7/31/00....................................... 202,336
1,000,000 5.75%, 10/31/00(b)................................... 1,004,630
3,000,000 5.50%, 12/31/00...................................... 2,995,530
500,000 6.38%, 9/30/01....................................... 511,570
2,100,000 5.88%, 9/30/02(b).................................... 2,121,714
2,930,000 5.75%, 8/15/03(b).................................... 2,953,235
300,000 7.25%, 5/15/04(b).................................... 324,762
1,700,000 6.50%, 5/15/05(b).................................... 1,785,068
1,250,000 6.63%, 5/15/07(b).................................... 1,332,863
------------
Total U.S. Treasury Notes
(Cost $18,707,234) 18,969,156
------------
INVESTMENT COMPANIES (0.3%):
452,841 Federated Money Market Trust......................... 452,841
------------
Total Investment Companies
(Cost $452,841) 452,841
------------
SHORT-TERM SECURITIES HELD AS COLLATERAL (9.1%):
4,524,662 Salomon Brothers, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $4,526,792,
collateralized by $9,999,350 U.S. Treasury Notes
and Strips, 0.00%-11.75%, 11/30/98-8/15/27, market
value $4,625,109)................................... 4,524,662
4,815,446 Greenwich Capital, 5.65%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $4,817,714,
collateralized by $10,593,283 various U.S.
Government Agency securities, 0.00%-7.75%,
5/15/06-5/15/28, market value $4,911,755)........... 4,815,446
4,815,446 Bear Stearns Co., Inc., 5.69%, 6/1/98 (Purchased on
5/29/98, proceeds at maturity $4,817,729,
collateralized by $5,336,632 various FNMA Remics,
6.50%-9.50%, 2/18/04-9/20/24, market value
$4,911,755)......................................... 4,815,446
------------
Total Short-Term Securities Held as Collateral (Cost
$14,155,554) 14,155,554
------------
Total Investments
(Cost $164,028,202)(a) (108.5%) 169,306,283
Liabilities in excess of other assets
(-8.5%) (13,264,754)
------------
Total Net Assets (100.0%)...................................... $156,041,529
============
</TABLE>
- ------
(a) Represents cost for federal income tax purposes and differs from value by
unrealized appreciation of securities as follows:
Unrealized appreciation..................... $5,384,318
Unrealized depreciation..................... (106,237)
----------
Net unrealized appreciation................. $5,278,081
==========
(b) All or a portion of this security was loaned as of May 31, 1998.
MTN--Medium Term Note
See notes to financial statements
-111-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998
(UNAUDITED)
1.ORGANIZATION
The ARCH Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. As of May 31, 1998, the Fund offered shares in the
following investment portfolios: Money Market, Treasury Money Market, Tax-
Exempt Money Market, Growth & Income Equity, Small Cap Equity,
International Equity, Equity Income, Equity Index, Growth Equity, Balanced,
Government & Corporate Bond, U.S. Government Securities, Short-Intermediate
Municipal, Missouri Tax-Exempt Bond, National Municipal Bond, Intermediate
Corporate Bond and Bond Index Portfolios (referred to individually as a
"Portfolio" and collectively as the "Portfolios"). The Fund was organized
as a Maryland corporation on September 9, 1982. The Kansas Tax-Exempt Bond
and Small Cap Equity Index Portfolios have not yet commenced operations.
The Portfolio's investment objectives are as follows:
Money Market Portfolio -- To seek current income with liquidity and
stability of principal. In pursuing its investment objective, the Portfolio
invests substantially all of its assets in a broad range of money market
instruments.
Treasury Money Market Portfolio -- To seek a high level of current income
exempt from state income tax consistent with liquidity and security of
principal. In pursuing its investment objective, the Portfolio invests in
selected money market obligations issued by the U.S. Government (or its
agencies and instrumentalities) that are guaranteed as to principal and
interest by the U.S. Government.
Tax-Exempt Money Market Portfolio -- To seek as high a level of current
interest income exempt from federal income tax as is consistent with
liquidity and stability of principal. The Portfolio invests substantially
all of its assets in short-term obligations issued by or on behalf of
states, territories and possessions of the United States, the District of
Columbia and their respective political subdivisions, agencies,
instrumentalities and authorities ("Municipal Obligations").
Growth & Income Equity Portfolio -- To provide long-term capital growth,
with income a secondary consideration. In pursuing its investment
objective, the Portfolio normally invests substantially all of its assets
in common stock, preferred stock, rights, warrants and securities
convertible into common stock.
Small Cap Equity Portfolio -- To seek capital appreciation. Current income
is an incidental consideration in the selection of portfolio securities. In
pursuing its investment objective, the Portfolio normally invests at least
65% of its total assets in common stock of emerging or established small-
to medium-sized companies with above-average potential for price
appreciation.
International Equity Portfolio -- To provide capital growth consistent with
reasonable investment risk. The Portfolio seeks to achieve this objective
by investing principally in foreign equity securities, most of which will
be denominated in foreign currencies.
Equity Income Portfolio -- To seek to provide an above-average level of
income consistent with long-term capital appreciation. In pursuing its
investment objective, the Portfolio intends to invest, under normal market
and economic conditions, substantially all of its assets in common stock,
preferred stock, rights, warrants, and securities convertible into common
stock.
Equity Index Portfolio -- To seek to provide investment results that,
before deduction of operating expenses, approximate the price and yield
performance of U.S. publicly traded common stocks with large stock market
capitalizations, as represented by the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500"). The Portfolio will invest substantially
all of its total assets in securities listed in the S&P 500.
Continued
-112-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
Growth Equity Portfolio -- To seek capital appreciation by investing
primarily in equity securities of companies selected on the basis of
assessment of earnings and the risk and volatility of each company's
business.
Balanced Portfolio -- To maximize total return through a combination of
growth of capital and current income consistent with the preservation of
capital. The Portfolio seeks to achieve its objective by using a
disciplined approach of allocating assets primarily among three major
assets groups, i.e. equity securities, fixed income securities and cash
equivalents.
Government & Corporate Bond Portfolio -- To seek the highest level of
current income consistent with conservation of capital. In pursuing its
investment objective, the Portfolio intends to invest at least 65% of its
assets in fixed-income and related debt securities rated in one of the
three highest rating categories assigned by a rating agency at the time of
purchase or in unrated investments deemed by the investment advisor to be
of comparable quality pursuant to guidelines approved by the Fund's Board
of Directors.
U.S. Government Securities Portfolio -- To seek a high rate of current
income that is consistent with relative stability of principal. In pursuing
its investment objective, the Portfolio invests in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
normally having remaining maturities of 1 to 30 years and repurchase
agreements relating to such obligations.
Short-Intermediate Municipal Portfolio -- To seek as high a level of
current income, exempt from regular federal income tax, as is consistent
with preservation of capital. The Portfolio seeks to achieve its objective
by investing substantially all of its assets in investment grade Municipal
Obligations.
Missouri Tax-Exempt Bond Portfolio -- To seek as high a level of interest
income exempt from federal income tax as is consistent with conservation of
capital. In pursuing its investment objective, the Portfolio invests
substantially all of its assets in investment grade Missouri Municipal
Obligations, that are also exempt, to the extent possible, from Missouri
income tax.
National Municipal Bond Portfolio -- To seek as high a level of current
interest income exempt from federal income tax as is consistent with
conservation of capital. In pursuing its investments objective, the
Portfolio intends to invest, under normal market and economic conditions,
substantially all of its assets in investment grade Municipal Obligations.
Intermediate Corporate Bond Portfolio -- To seek as high a level of current
income as is consistent with preservation of capital. In pursuing its
investment objective, the Portfolio will invest, under normal market and
economic conditions, at least 65% of its total assets in non-convertible
corporate debt obligations.
Bond Index Portfolio -- To seek to provide investment results that, before
deduction of operating expenses, approximate the price and yield
performance of U.S. Government, mortgage-backed, asset-backed and corporate
debt securities as represented by the Lehman Brothers Aggregate Bond Index
(the "Lehman Aggregate"). The Portfolio will invest substantially all of
its total assets in securities listed in the Lehman Aggregate.
2.SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The
preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of income
and expenses for the period. Actual results could differ from these
estimates.
Continued
-113-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
SECURITIES VALUATION:
The securities of the Money Market, Treasury Money Market and Tax-Exempt
Money Market Portfolios (collectively, "the money market portfolios") are
valued at amortized cost. Amortized cost valuation involves valuing an
instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the
effect of fluctuating interest rates on the market value of the instrument.
In addition, the money market portfolios may not (a) purchase any
instrument with a remaining maturity greater than 397 days unless such
instrument is subject to a demand feature, or (b) maintain a dollar-
weighted-average portfolio maturity which exceeds 90 days. The securities
of the Growth & Income Equity, Small Cap Equity, International Equity,
Equity Income, Equity Index, Growth Equity, Balanced, Government &
Corporate Bond, U.S. Government Securities, Short-Intermediate Municipal,
Missouri Tax-Exempt Bond, National Municipal Bond, Intermediate Corporate
Bond and Bond Index Portfolios (collectively, "the variable net asset value
portfolios") that are traded on a recognized exchange are valued at the
last sale price on the national securities market. Securities traded only
on over-the-counter markets are valued on the basis of market value when
available. Securities for which there were no transactions are valued at
the mean of the most recent bid and asked prices. Securities maturing in 60
days or less are valued at amortized cost. Securities, including restricted
securities, for which market quotations are not readily available, are
valued at fair market value by the investment adviser (or the sub-
investment adviser) in accordance with guidelines approved by the Fund's
Board of Directors. Quotations of foreign securities in foreign currency
are converted to the U.S. dollar equivalent at the prevailing exchange rate
on the date of conversion. Investments in investment companies are valued
at their respective net asset values as reported by such companies. The
differences between cost and market values of the investments of the
variable net asset portfolios are reflected as unrealized appreciation or
depreciation.
REPURCHASE AGREEMENTS:
The Portfolios may engage in repurchase agreement transactions. Under the
terms of a typical repurchase agreement, a Portfolio takes possession of an
underlying debt obligation subject to an obligation of the seller to
repurchase, and the Portfolio to resell, the obligation at an agreed upon
price and time, thereby determining the yield during the Portfolio's
holding period. This arrangement results in a fixed rate of return that is
not subject to market fluctuations during the Portfolio's holding period.
The value of the collateral exceeds at all times the total amount of the
repurchase obligations, including interest. In the event of counterparty
default, the Portfolio has the right to use the collateral to offset losses
incurred. There is potential for loss to the Portfolio in the event the
Portfolio is delayed or prevented from exercising its rights to dispose of
the collateral securities, including the risk of a possible decline in the
value of the underlying securities during the period while the Portfolio
seeks to assert its rights. The Portfolios' investment adviser, acting
under the supervision of the Board of Directors, reviews the value of the
collateral and the creditworthiness of those banks and dealers with which
the Portfolios enter into repurchase agreements to evaluate potential
risks.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on the trade date. Realized gains and
losses on investments sold are recorded on the identified cost basis.
Interest income, including accretion of discount and amortization of
premium on investments, is accrued on a daily basis. Dividend income is
recorded on the ex-dividend date. Realized and unrealized gains and losses
are allocated based upon the relative net assets of each class of shares.
FOREIGN CURRENCY TRANSLATION:
The market value of investment securities, other assets and liabilities of
the International Equity, Equity Index and Growth Equity Portfolios
denominated in a foreign currency are translated into U.S. dollars at the
current exchange rate. Purchases and sales of securities, income receipts
and expense payments are translated into U.S. dollars at the exchange rate
on the dates of the transactions.
Continued
-114-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
The International Equity, Equity Index and Growth Equity Portfolios, to the
extent they invest in foreign-denominated securities, isolate that portion
of the results of operations resulting from changes in foreign exchange
rates on investments from the fluctuation arising from changes in market
prices of securities held.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of foreign securities, sales of foreign currencies, currency
exchange fluctuations between the trade and settlement dates on securities
transactions, and the difference between the amount of assets and
liabilities recorded and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities, including investments
in securities, resulting from changes in exchange rates.
RISKS ASSOCIATED WITH FOREIGN SECURITIES AND CURRENCIES:
Investments in securities of foreign issuers carry certain risks not
ordinarily associated with investments in securities of domestic issuers.
Such risks include future political and economic developments, and the
possible imposition of exchange controls or other foreign governmental laws
and restrictions. In addition, with respect to certain countries, there is
the possibility of expropriation of assets, confiscatory taxation,
political or social instability or diplomatic developments which could
adversely affect investments in those countries.
Certain countries may also impose substantial restrictions on investments
in their capital markets by foreign entities, including restrictions on
investments in issuers of industries deemed sensitive to relevant national
interests. These factors may limit the investment opportunities available
to the International Equity Portfolio or result in a lack of liquidity and
high price volatility with respect to securities of issuers from developing
countries.
FORWARD CURRENCY EXCHANGE CONTRACTS:
The International Equity Portfolio may enter into forward foreign currency
exchange contracts ("forwards"). A forward is an agreement between two
parties to buy and sell a currency at a set price on a future date. The
market value of the forward fluctuates with changes in currency exchange
rates. The forward is marked-to-market daily and the change in market value
is recorded by the Portfolio as unrealized appreciation or depreciation.
When the forward is closed, the Portfolio records a realized gain or loss
equal to the fluctuation in value during the period the forward was opened.
The Portfolio could be exposed to risk if a counterparty is unable to meet
the terms of a forward or if the value of the currency changes unfavorably.
SECURITIES LENDING:
To increase return, the Money Market, Treasury Money Market, Growth &
Income Equity, Small Cap Equity, International Equity, Equity Income,
Equity Index, Growth Equity, Balanced, Government & Corporate Bond, U.S.
Government Securities, Short-Intermediate Municipal, National Municipal
Bond, Intermediate Corporate Bond and Bond Index Portfolios may, from time
to time, lend portfolio securities to broker-dealers, banks or
institutional borrowers of securities pursuant to agreements requiring that
the loans be continuously secured by collateral equal, at all times, in
value to at least the market value of the securities loaned. Collateral for
such loans may include cash, securities of the U.S. Government, or its
agencies or instrumentalities, irrevocable letters of credit, or any
combination thereof. The collateral must be valued daily and, should the
market value of the loaned securities increase, the borrower must furnish
additional collateral to the lending Portfolio. By lending its securities,
a Portfolio can increase its income by continuing to receive interest or
dividends on the loaned securities as well as either investing the cash
collateral in short-term instruments or obtaining yield in the form of
interest paid by the borrower when U.S. Government securities are used as
collateral. Loans are subject to termination by the Portfolio or the
borrower at any time. The risks to the Portfolios of securities lending are
that the borrower may not provide additional collateral when required or
return the securities when due. In addition, if cash collateral invested by
a Portfolio is less than the amount
Continued
-115-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
required to be returned to the borrower as a result of a decrease in the
value of the cash collateral investments, the Portfolio must compensate the
borrower for the deficiency. At May 31, 1998, the following Portfolios had
securities with the following market values on loan:
<TABLE>
<CAPTION>
MARKET VALUE OF MARKET VALUE OF
PORTFOLIO COLLATERAL LOANED SECURITIES
--------- --------------- -----------------
<S> <C> <C>
Growth & Income Equity Portfolio........... $57,420,017 $54,984,073
Small Cap Equity Portfolio................. 67,632,037 65,163,566
Equity Income Portfolio.................... 12,546,000 12,284,315
Equity Index Portfolio..................... 11,247,798 10,958,323
Growth Equity Portfolio.................... 17,869,000 17,348,250
Balanced Portfolio......................... 19,138,940 18,752,724
Government & Corporate Bond Portfolio...... 57,260,120 56,237,137
U.S. Government Securities Portfolio....... 35,186,178 34,555,028
Intermediate Corporate Bond Portfolio...... 5,204,706 5,119,353
Bond Index Portfolio....................... 41,560,922 40,856,936
</TABLE>
The loaned securities were fully collateralized by cash and U.S. Government
securities.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends on each share of the Portfolios are determined in the same
manner, irrespective of class, except that shares of each class bear
separate fees under either a Distribution and Services Plan or an
Administrative Services Plan adopted for each class and enjoy certain
exclusive voting rights on matters relating to these fees. It is the policy
of the Money Market, Treasury Money Market, Tax-Exempt Money Market,
Government & Corporate Bond, U.S. Government Securities, Short-Intermediate
Municipal, Missouri Tax-Exempt Bond, National Municipal Bond, Intermediate
Corporate Bond, and Bond Index Portfolios to declare dividends daily from
net investment income and to pay such dividends no later than five business
days after the end of the month. Net investment income for the Growth &
Income Equity, Equity Income, Equity Index, Growth Equity and Balanced
Portfolios is declared and paid monthly as a dividend to shareholders of
record. The Small Cap Equity and International Equity Portfolios declare
and pay dividends from net investment income quarterly. Net realized
capital gains for each Portfolio, if any, are distributed at least
annually. Additional distributions of net investment income and capital
gains may be made at the discretion of the Board of Directors in order to
avoid the 4% excise tax to which a Portfolio is subject with respect to
certain undistributed amounts of net investment income and capital gains.
Distributions from net investment income and from net realized capital
gains are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles. These
"book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the composition of net assets based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Distributions to shareholders which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as distributions in excess of net
investment income or net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are
reported as distributions of capital.
FEDERAL INCOME TAXES:
It is the policy of each of the Portfolios to qualify, or to continue to
qualify, as a regulated investment company by complying with the provisions
available to certain investment companies, as defined in applicable
sections
Continued
-116-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
of the Internal Revenue Code, and to make distributions of net investment
income and net realized capital gains sufficient to relieve it from all, or
substantially all, federal income taxes.
For federal income tax purposes, the following Portfolios had capital loss
carryforwards as of November 30, 1997, which are available to offset future
capital gains, if any:
<TABLE>
<CAPTION>
AMOUNT EXPIRES
---------- -------
<S> <C> <C>
Money Market Portfolio.................................... $ 4,907 2003
Government & Corporate Bond Portfolio..................... $ 65,133 2002
1,171,567 2003
210,648 2005
----------
$1,447,348
==========
U.S. Government Securities Portfolio...................... $ 325,257 2004
279,506 2005
----------
$ 604,763
==========
Missouri Tax-Exempt Bond Portfolio........................ $ 118,537 2003
31 2005
----------
$ 118,568
==========
</TABLE>
ORGANIZATION COSTS:
The Portfolios bear all costs in connection with their organization,
including the fees and expenses of registering and qualifying shares for
distribution under federal and state securities laws. All such costs are
amortized using the straight-line method over a period of five years from
the dates each Portfolio commenced operations: from April 4, 1994 for the
International Equity Portfolio, from February 27, 1997 for the Equity
Income Portfolio, from May 1, 1997 for the Equity Index Portfolio, from
November 18, 1996 for the National Municipal Bond Portfolio, and from
February 10, 1997 for the Intermediate Corporate Bond Portfolio and the
Bond Index Portfolio. As of May 31, 1998, all costs were fully amortized
for the Money Market, Treasury Money Market, Tax-Exempt Money Market,
Growth & Income Equity, Small Cap Equity, Growth Equity, Balanced,
Government & Corporate Bond, U.S. Government Securities, Short-Intermediate
Municipal, and Missouri Tax-Exempt Bond Portfolios.
OTHER:
Operating expenses of the Fund not directly attributable to a Portfolio or
to any class of shares of a Portfolio are prorated among the Portfolios
based on the relative net assets of each Portfolio or other appropriate
basis. Operating expenses directly attributable to a Portfolio or class are
charged directly to that Portfolio's or class' operations. Fees paid under
either a Distribution and Services Plan or an Administrative Services Plan
are borne by the specific class of shares to which such Plan applies.
3.SHARES OF COMMON STOCK
The Fund is authorized to issue five classes of shares in each Portfolio
(except as noted): Investor A Shares, Investor B Shares (except the
Treasury Money Market, Tax-Exempt Money Market, Equity Index, Short-
Intermediate Municipal, Intermediate Corporate Bond, Bond Index and Small
Cap Equity Index Portfolios), Trust Shares, Institutional Shares (except
the Tax-Exempt Money Market, Missouri Tax-Exempt Bond, Short-Intermediate
Municipal, National Municipal Bond and Kansas Tax-Exempt Bond Portfolios),
and S Shares
Continued
-117-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
(except the Growth and Income Equity, Small Cap Equity, International
Equity, Equity Income, Equity Index, Growth Equity, Balanced, Government &
Corporate Bond, U.S. Government Securities, Short-Intermediate Municipal,
Missouri Tax-Exempt Bond, National Municipal Bond, Intermediate Corporate
Bond, Bond Index and Small Cap Equity Index Portfolios). Investor A shares
of the variable net asset value portfolios are sold with front-end sales
charges. Investor B Shares of the variable net asset value portfolios and
the Money Market Portfolio may be subject to contingent deferred sales
charges ("CDSC") on redemption based on the lesser of the net asset value
of the shares on the redemption date or the original cost of the shares
redeemed. The following table sets forth the time schedule of redemptions
of Investor B Shares subject to CDSC:
<TABLE>
<CAPTION>
CDSC
(PERCENTAGE OF
NUMBER OF YEARS AMOUNT SUBJECT
ELAPSED SINCE PURCHASE TO THE CHARGE)
---------------------- --------------
<S> <C>
One or less................................................... 5.0%
More than one, but less than two.............................. 4.0%
Two, but less than three...................................... 3.0%
Three, but less than four..................................... 3.0%
Four, but less than five...................................... 2.0%
Five, and up to and including six............................. 1.0%
More than six................................................. None
</TABLE>
Investor B Shares of the Money Market Portfolio are available for purchase
only by those investors participating in the ARCH Asset Advisor Program or
through exchanges of Investor B Shares of the variable net asset value
portfolios.
Continued
-118-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
Each class of shares in a Portfolio has identical rights and privileges
except with respect to the fees paid by the classes under either a
Distribution and Services Plan or an Administrative Services Plan, expenses
allocable exclusively to each class of shares, voting rights on matters
affecting a single class of shares, the exchange privilege of each class of
shares, and the automatic conversion of Investor B Shares of a Portfolio
into Investor A Shares of that Potfolio eight years after purchase. As of
May 31, 1998, the Fund's Articles of Incorporation authorize the Board of
Directors, in its discretion, to issue up to twenty billion full and
fractional shares of capital stock, $.001 par value per share, and to
classify or reclassify any unissued shares of the Fund into one or more
additional classes. Pursuant to such authority, as of May 31, 1998, the
Fund's shares were classified as follows:
<TABLE>
<CAPTION>
REPRESENT INTERESTS IN:
-------------------------------------------
CLASS SHARES (000) PORTFOLIO CLASS
------------------------ ------------ ---------------------------- -------------
<S> <C> <C> <C>
Class A Shares........ 550,000 Money Market Investor A
Class A -- Special
Series 1 Shares........ 1,800,000 Money Market Trust
Class A -- Special
Series 2 Shares........ 300,000 Money Market Investor B
Class A -- Special
Series 3 Shares........ 50,000 Money Market Institutional
Class A -- Special
Series 4 Shares........ 2,000,000 Money Market S
Class B Shares........ 100,000 Treasury Money Market Investor A
Class B -- Special
Series 1 Shares........ 1,000,000 Treasury Money Market Trust
Class B -- Special
Series 2 Shares........ 300,000 Treasury Money Market Institutional
Class B -- Special
Series 3 Shares........ 2,000,000 Treasury Money Market S
Class C Shares........ 5,000 Growth & Income Equity Investor A
Class C -- Special
Series 1 Shares........ 50,000 Growth & Income Equity Trust
Class C -- Special
Series 2 Shares........ 20,000 Growth & Income Equity Investor B
Class C -- Special
Series 3 Shares........ 50,000 Growth & Income Equity Institutional
Class D Shares........ 5,000 Government & Corporate Bond Investor A
Class D -- Special Se-
ries 1 Shares.......... 50,000 Government & Corporate Bond Trust
Class D -- Special Se-
ries 2 Shares.......... 20,000 Government & Corporate Bond Investor B
Class D -- Special Se-
ries 3 Shares.......... 50,000 Government & Corporate Bond Institutional
Class E Shares........ 5,000 U.S. Government Securities Investor A
Class E -- Special Se-
ries 1 Shares.......... 15,000 U.S. Government Securities Trust
Class E -- Special Se-
ries 2 Shares.......... 20,000 U.S. Government Securities Investor B
Class E -- Special Se-
ries 3 Shares.......... 50,000 U.S. Government Securities Institutional
Class F Shares........ 5,000 Small Cap Equity Investor A
Class F -- Special Se-
ries 1 Shares.......... 35,000 Small Cap Equity Trust
Class F -- Special Se-
ries 2 Shares.......... 20,000 Small Cap Equity Investor B
Class F -- Special Se-
ries 3 Shares.......... 50,000 Small Cap Equity Institutional
Class G Shares........ 5,000 Balanced Investor A
Class G -- Special Se-
ries 1 Shares.......... 15,000 Balanced Trust
Class G -- Special Se-
ries 2 Shares.......... 20,000 Balanced Investor B
Class G -- Special Se-
ries 3 Shares.......... 50,000 Balanced Institutional
Class H Shares........ 10,000 International Equity Investor A
Class H -- Special Se-
ries 1 Shares.......... 10,000 International Equity Trust
Class H -- Special Se-
ries 2 Shares.......... 10,000 International Equity Investor B
Class H -- Special Se-
ries 3 Shares.......... 50,000 International Equity Institutional
</TABLE>
Continued
-119-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
REPRESENT INTERESTS IN:
-------------------------------------------
CLASS SHARES (000) PORTFOLIO CLASS
------------------------ ------------ ---------------------------- -------------
<S> <C> <C> <C>
Class I Shares........ 25,000 Short-Intermediate Municipal Investor A
Class I -- Special Se-
ries 1 Shares.......... 25,000 Short-Intermediate Municipal Trust
Class J Shares........ 50,000 Tax-Exempt Money Market Investor A
Class J -- Special Se-
ries 1 Shares.......... 300,000 Tax-Exempt Money Market Trust
Class J -- Special Se-
ries 2 Shares.......... 2,000,000 Tax-Exempt Money Market S
Class K Shares........ 25,000 Missouri Tax-Exempt Bond Investor A
Class K -- Special Se-
ries 1 Shares.......... 25,000 Missouri Tax-Exempt Bond Trust
Class K -- Special Se-
ries 2 Shares.......... 10,000 Missouri Tax-Exempt Bond Investor B
Class L Shares........ 25,000 Kansas Tax-Exempt Bond Investor A
Class L -- Special Se-
ries 1 Shares.......... 25,000 Kansas Tax-Exempt Bond Trust
Class L -- Special Se-
ries 2 Shares.......... 10,000 Kansas Tax-Exempt Bond Investor B
Class M Shares........ 25,000 Equity Income Investor A
Class M -- Special Se-
ries 1 Shares.......... 50,000 Equity Income Trust
Class M -- Special Se-
ries 2 Shares.......... 25,000 Equity Income Investor B
Class M -- Special Se-
ries 3 Shares.......... 25,000 Equity Income Institutional
Class N Shares........ 25,000 National Municipal Bond Investor A
Class N -- Special Se-
ries 1 Shares.......... 50,000 National Municipal Bond Trust
Class N -- Special Se-
ries 2 Shares.......... 25,000 National Municipal Bond Investor B
Class O Shares........ 25,000 Intermediate Corporate Bond Investor A
Class O -- Special Se-
ries 1 Shares.......... 50,000 Intermediate Corporate Bond Trust
Class O -- Special Se-
ries 2 Shares.......... 25,000 Intermediate Corporate Bond Institutional
Class P Shares........ 25,000 Equity Index Investor A
Class P -- Special Se-
ries 1 Shares.......... 50,000 Equity Index Trust
Class P -- Special Se-
ries 2 Shares.......... 25,000 Equity Index Institutional
Class Q Shares........ 25,000 Bond Index Investor A
Class Q -- Special
Series 1 Shares........ 50,000 Bond Index Trust
Class Q -- Special
Series 2 Shares........ 25,000 Bond Index Institutional
Class R Shares........ 25,000 Small Cap Equity Index Investor A
Class R -- Special
Series 1 Shares........ 50,000 Small Cap Equity Index Trust
Class R -- Special
Series 2 Shares........ 25,000 Small Cap Equity Index Institutional
Class S Shares........ 25,000 Growth Equity Investor A
Class S -- Special
Series 1 Shares........ 50,000 Growth Equity Trust
Class S -- Special
Series 2 Shares........ 25,000 Growth Equity Investor B
Class S -- Special
Series 3 Shares........ 25,000 Growth Equity Institutional
Unclassified............ 8,010,000
</TABLE>
Each share of a Portfolio represents an equal, proportionate interest in
the Portfolio with respect to other shares outstanding, irrespective of
series. As of May 31, 1998, S Shares had not been offered.
Continued
-120-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
4.CAPITAL SHARE TRANSACTIONS
Transactions in portfolio shares of the Fund were as follows:
<TABLE>
<CAPTION>
MONEY MARKET TREASURY MONEY
PORTFOLIO MARKET PORTFOLIO
-------------------------------- ----------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997
--------------- --------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued................ $ 208,314,533 $ 309,755,097 $ 23,524,347 $ 18,452,906
Dividends reinvested... 3,952,611 5,145,284 184,396 276,548
Cost of shares re-
deemed................ (217,513,126) (241,289,100) (14,684,886) (17,987,741)
--------------- --------------- ------------- -------------
Investor A capital
transactions.......... $ (5,245,982) $ 73,611,281 $ 9,023,857 $ 741,713
--------------- --------------- ------------- -------------
INVESTOR B SHARES:
Proceeds from shares
issued................ $ 6,731 $ 46,996 $ -- $ --
Dividends reinvested... 1,464 2,791 -- --
Cost of shares re-
deemed................ (10,748) (18,022) -- --
--------------- --------------- ------------- -------------
Investor B capital
transactions.......... $ (2,553) $ 31,765 $ -- $ --
--------------- --------------- ------------- -------------
TRUST SHARES:
Proceeds from shares
issued................ $ 2,469,771,555 $ 4,112,502,624 $ 502,411,096 $ 974,965,197
Dividends reinvested... 9,930,298 15,379,414 1,743,945 3,220,851
Cost of shares re-
deemed................ (2,458,642,400) (3,802,997,661) (535,278,247) (825,860,764)
--------------- --------------- ------------- -------------
Trust capital transac-
tions................. $ 21,059,453 $ 324,884,377 $ (31,123,206) $ 152,325,284
--------------- --------------- ------------- -------------
INSTITUTIONAL SHARES:
Proceeds from shares
issued................ $ 41,766,774 $ 70,987,898 $ 34,170 $ 714,908
Dividends reinvested... 36,902 45,325 -- 276
Cost of shares re-
deemed................ (39,064,919) (64,931,657) (35,170) (781,277)
--------------- --------------- ------------- -------------
Institutional capital
transactions.......... $ 2,738,757 $ 6,101,566 $ (1,000) $ (66,093)
--------------- --------------- ------------- -------------
Total net increase
(decrease) from capital
transactions........... $ 18,549,675 $ 404,628,989 $ (22,100,349) $ 153,000,904
=============== =============== ============= =============
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued................. 208,314,533 309,755,097 23,524,347 18,452,906
Reinvested............. 3,952,611 5,145,284 184,396 276,548
Redeemed............... (217,513,126) (241,289,100) (14,684,886) (17,987,741)
--------------- --------------- ------------- -------------
Change in Investor A
Shares................ (5,245,982) 73,611,281 9,023,857 741,713
--------------- --------------- ------------- -------------
INVESTOR B SHARES:
Issued................. 6,731 46,996 -- --
Reinvested............. 1,464 2,791 -- --
Redeemed............... (10,748) (18,022) -- --
--------------- --------------- ------------- -------------
Change in Investor B
Shares................ (2,553) 31,765 -- --
--------------- --------------- ------------- -------------
TRUST SHARES:
Issued................. 2,469,771,555 4,112,502,624 502,411,096 974,965,197
Reinvested............. 9,930,298 15,379,414 1,743,945 3,220,851
Redeemed............... (2,458,642,400) (3,802,997,661) (535,278,247) (825,860,764)
--------------- --------------- ------------- -------------
Change in Trust Shares. 21,059,453 324,884,377 (31,123,206) 152,325,284
--------------- --------------- ------------- -------------
INSTITUTIONAL SHARES:
Issued................. 41,766,774 70,987,898 34,170 714,908
Reinvested............. 36,902 45,325 -- 276
Redeemed............... (39,064,919) (64,931,657) (35,170) (781,277)
--------------- --------------- ------------- -------------
Change in Institutional
Shares................ 2,738,757 6,101,566 (1,000) (66,093)
--------------- --------------- ------------- -------------
Total net increase
(decrease) from share
transactions........... 18,549,675 404,628,989 (22,100,349) 153,000,904
=============== =============== ============= =============
</TABLE>
Continued
-121-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
TAX-EXEMPT MONEY GROWTH & INCOME
MARKET PORTFOLIO EQUITY PORTFOLIO
---------------------------- ---------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997
------------- ------------- ------------ -------------
(UNAUDITED) (UNAUDITED)
CAPITAL TRANSACTIONS:
<S> <C> <C> <C> <C>
INVESTOR A SHARES:
Proceeds from shares
issued................ $ 6,512,682 $ 42,324,801 $ 4,740,999 $ 6,774,856
Dividends reinvested... 200,558 463,949 7,722,956 3,288,711
Cost of shares
redeemed.............. (10,134,395) (44,984,145) (4,666,184) (7,579,480)
------------- ------------- ------------ -------------
Investor A capital
transactions.......... $ (3,421,155) $ (2,195,395) $ 7,797,771 $ 2,484,087
------------- ------------- ------------ -------------
INVESTOR B SHARES:
Proceeds from shares
issued................ $ -- $ -- $ 1,605,397 $ 2,201,422
Dividends reinvested... -- -- 1,067,922 296,096
Cost of shares
redeemed.............. -- -- (297,650) (415,984)
------------- ------------- ------------ -------------
Investor B capital
transactions.......... $ -- $ -- $ 2,375,669 $ 2,081,534
------------- ------------- ------------ -------------
TRUST SHARES:
Proceeds from shares
issued................ $ 299,748,593 $ 335,656,279 $ 19,686,475 $ 68,543,364
Dividends reinvested... 238,379 377,277 31,171,248 22,757,271
Cost of shares
redeemed.............. (308,358,017) (288,242,067) (24,493,535) (151,166,803)
------------- ------------- ------------ -------------
Trust capital
transactions.......... $ (8,371,045) $ 47,791,489 $ 26,364,188 $ (59,866,168)
------------- ------------- ------------ -------------
INSTITUTIONAL SHARES:
Proceeds from shares
issued................ $ -- $ -- $ 14,232,241 $ 16,152,636
Dividends reinvested... -- -- 15,911,460 6,370,055
Cost of shares
redeemed.............. -- -- (8,070,037) (14,151,970)
------------- ------------- ------------ -------------
Institutional capital
transactions.......... $ -- $ -- $ 22,073,664 $ 8,370,721
------------- ------------- ------------ -------------
Total net increase
(decrease) from capital
transactions........... $ (11,792,200) $ 45,596,094 $ 58,611,292 $ (46,929,826)
============= ============= ============ =============
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued................. 6,512,682 42,324,801 247,423 358,479
Reinvested............. 200,558 463,949 431,319 191,757
Redeemed............... (10,134,395) (44,984,145) (245,910) (402,496)
------------- ------------- ------------ -------------
Change in Investor A
Shares................ (3,421,155) (2,195,395) 432,832 147,740
------------- ------------- ------------ -------------
INVESTOR B SHARES:
Issued................. -- -- 86,149 116,804
Reinvested............. -- -- 60,332 17,441
Redeemed............... -- -- (15,468) (21,377)
------------- ------------- ------------ -------------
Change in Investor B
Shares................ -- -- 131,013 112,868
------------- ------------- ------------ -------------
TRUST SHARES:
Issued................. 299,748,593 335,656,279 1,079,720 3,808,036
Reinvested............. 238,379 377,277 1,732,936 1,324,519
Redeemed............... (308,358,017) (288,242,067) (1,285,937) (8,530,932)
------------- ------------- ------------ -------------
Change in Trust Shares. (8,371,045) 47,791,489 1,526,719 (3,398,377)
------------- ------------- ------------ -------------
INSTITUTIONAL SHARES:
Issued................. -- -- 749,863 845,760
Reinvested............. -- -- 888,592 371,256
Redeemed............... -- -- (437,783) (744,988)
------------- ------------- ------------ -------------
Change in Institutional
Shares................ -- -- 1,200,672 472,028
------------- ------------- ------------ -------------
Total net increase
(decrease) from share
transactions .......... (11,792,200) 45,596,094 3,291,236 (2,665,741)
============= ============= ============ =============
</TABLE>
Continued
-122-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SMALL CAP INTERNATIONAL
EQUITY PORTFOLIO EQUITY PORTFOLIO
-------------------------- -------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997
------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
CAPITAL TRANSACTIONS:
<S> <C> <C> <C> <C>
INVESTOR A SHARES:
Proceeds from shares
issued................. $ 28,426,565 $ 8,477,400 $ 500,198 $ 713,643
Dividends reinvested.... 1,205,204 843,177 109,245 77,495
Cost of shares redeemed. (27,938,366) (10,564,564) (510,290) (510,586)
------------ ------------ ----------- -----------
Investor A capital
transactions........... $ 1,693,403 $ (1,243,987) $ 99,153 $ 280,552
------------ ------------ ----------- -----------
INVESTOR B SHARES:
Proceeds from shares
issued................. $ 192,630 $ 299,657 $ 42,941 $ 203,253
Dividends reinvested.... 121,308 78,176 21,431 12,225
Cost of shares redeemed. (107,018) (299,685) (84,263) (83,552)
------------ ------------ ----------- -----------
Investor B capital
transactions........... $ 206,920 $ 78,148 $ (19,891) $ 131,926
------------ ------------ ----------- -----------
TRUST SHARES:
Proceeds from shares
issued................. $ 20,879,769 $ 31,937,921 $ 8,064,735 $ 8,443,834
Dividends reinvested.... 14,925,021 9,158,530 1,176,895 829,252
Cost of shares redeemed. (34,389,382) (23,554,423) (4,808,099) (6,194,325)
------------ ------------ ----------- -----------
Trust capital
transactions........... $ 1,415,408 $ 17,542,028 $ 4,433,531 $ 3,078,761
------------ ------------ ----------- -----------
INSTITUTIONAL SHARES:
Proceeds from shares
issued................. $ 3,858,115 $ 7,060,546 $ 864,756 $ 2,118,356
Dividends reinvested.... 2,804,840 1,847,189 269,288 182,813
Cost of shares redeemed. (6,752,896) (8,516,957) (892,781) (1,491,470)
------------ ------------ ----------- -----------
Institutional capital
transactions........... $ (89,941) $ 390,778 $ 241,263 $ 809,699
------------ ------------ ----------- -----------
Total net increase
(decrease) from capital
transactions............ $ 3,225,790 $ 16,766,967 $ 4,754,056 $ 4,300,938
============ ============ =========== ===========
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued.................. 1,940,705 562,627 40,472 59,032
Reinvested.............. 86,209 66,550 9,192 6,635
Redeemed................ (1,901,342) (719,822) (41,527) (41,200)
------------ ------------ ----------- -----------
Change in Investor A
Shares................. 125,572 (90,645) 8,137 24,467
------------ ------------ ----------- -----------
INVESTOR B SHARES:
Issued.................. 13,006 21,436 3,411 16,938
Reinvested.............. 8,861 6,249 1,837 1,068
Redeemed................ (7,327) (21,821) (6,601) (6,957)
------------ ------------ ----------- -----------
Change in Investor B
Shares................. 14,540 5,864 (1,353) 11,049
------------ ------------ ----------- -----------
TRUST SHARES:
Issued.................. 1,402,041 2,220,381 611,058 687,342
Reinvested.............. 1,057,013 718,294 98,163 70,409
Redeemed................ (2,258,251) (1,691,027) (364,482) (510,626)
------------ ------------ ----------- -----------
Change in Trust Shares.. 200,803 1,247,648 344,739 247,125
------------ ------------ ----------- -----------
INSTITUTIONAL SHARES:
Issued.................. 263,752 517,342 65,758 171,752
Reinvested.............. 201,353 146,372 22,697 15,683
Redeemed................ (472,563) (620,536) (68,987) (123,206)
------------ ------------ ----------- -----------
Change in Institutional
Shares................. (7,458) 43,178 19,468 64,229
------------ ------------ ----------- -----------
Total net increase
(decrease) from share
transactions............ 333,457 1,206,045 370,991 346,870
============ ============ =========== ===========
</TABLE>
Continued
-123-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
EQUITY INCOME EQUITY INDEX
PORTFOLIO PORTFOLIO
-------------------------- -------------------------
SIX MONTHS FEBRUARY 27, SIX MONTHS MAY 1,
ENDED 1997 TO ENDED 1997 TO
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 (A) 1998 1997 (A)
------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued................. $ 707,704 $ 191,357 $ 522,003 $ 203,713
Dividends reinvested.... 12,983 556 1,788 113
Cost of shares redeemed. (19,006) (35,756) (241,352) (3,426)
------------ ------------ ----------- -----------
Investor A capital
transactions........... $ 701,681 $ 156,157 $ 282,439 $ 200,400
------------ ------------ ----------- -----------
INVESTOR B SHARES:
Proceeds from shares
issued................. $ 84,165 $ 131,061 $ -- $ --
Dividends reinvested.... 10,740 216 -- --
Cost of shares redeemed. -- (2,752) -- --
------------ ------------ ----------- -----------
Investor B capital
transactions........... $ 94,905 $ 128,525 $ -- $ --
------------ ------------ ----------- -----------
TRUST SHARES:
Proceeds from shares
issued................. $ 10,122,627 $125,128,668 $ 4,107,476 $26,727,245
Dividends reinvested.... 639,500 40,883 248,545 204,335
Cost of shares redeemed. (16,458,638) (11,607,549) (804,696) (49,547)
------------ ------------ ----------- -----------
Trust capital
transactions........... $ (5,696,511) $113,562,002 $ 3,551,325 $26,882,033
------------ ------------ ----------- -----------
INSTITUTIONAL SHARES:
Proceeds from shares
issued................. $ 792 $ 1,000 $ 9,219,559 $ 7,400
Dividends reinvested.... 250 17 7,975 21
Cost of shares redeemed. -- -- (712,168) --
------------ ------------ ----------- -----------
Institutional capital
transactions........... $ 1,042 $ 1,017 $ 8,515,366 $ 7,421
------------ ------------ ----------- -----------
Total net increase
(decrease) from capital
transactions........... $ (4,898,883) $113,847,701 $12,349,130 $27,089,854
============ ============ =========== ===========
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued.................. 71,175 18,368 39,995 17,532
Reinvested.............. 1,344 51 139 10
Redeemed................ (1,994) (3,415) (17,547) (294)
------------ ------------ ----------- -----------
Change in Investor A
Shares................. 70,525 15,004 22,587 17,248
------------ ------------ ----------- -----------
INVESTOR B SHARES:
Issued.................. 8,073 11,596 -- --
Reinvested.............. 1,116 19 -- --
Redeemed................ -- (232) -- --
------------ ------------ ----------- -----------
Change in Investor B
Shares................. 9,189 11,383 -- --
------------ ------------ ----------- -----------
TRUST SHARES:
Issued.................. 1,038,937 12,516,793 315,776 2,648,917
Reinvested.............. 66,344 3,805 19,598 18,011
Redeemed................ (1,662,022) (1,110,408) (61,916) (4,260)
------------ ------------ ----------- -----------
Change in Trust Shares.. (556,741) 11,410,190 273,458 2,662,668
------------ ------------ ----------- -----------
INSTITUTIONAL SHARES:
Issued.................. 74 100 673,531 667
Reinvested.............. 26 2 578 2
Redeemed................ -- -- (51,475) --
------------ ------------ ----------- -----------
Change in Institutional
Shares................. 100 102 622,634 669
------------ ------------ ----------- -----------
Total net increase
(decrease) from share
transactions........... (476,927) 11,436,679 918,679 2,680,585
============ ============ =========== ===========
</TABLE>
- ------
(a) Period from commencement of operations.
Continued
-124-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH EQUITY BALANCED
PORTFOLIO PORTFOLIO
-------------------------- --------------------------
SIX MONTHS OCTOBER 1, SIX MONTHS YEAR
ENDED 1997 TO ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 (A) 1998 1997
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued................ $ 356,311 $ 994,408 $ 1,261,558 $ 1,537,501
Dividends reinvested... 670 8,110,971 1,201,810 806,963
Cost of shares
redeemed.............. (540,256) (1,988,138) (1,032,172) (2,329,861)
Cost of shares
exchanged to Trust
Class................. -- (63,119,438) -- --
------------ ------------ ------------ ------------
Investor A capital
transactions.......... $ (183,275) $(56,002,197) $ 1,431,196 $ 14,603
------------ ------------ ------------ ------------
INVESTOR B SHARES:
Proceeds from shares
issued................ $ 83,506 $ 10 $ 219,908 $ 194,146
Dividends reinvested... -- -- 57,044 24,803
Cost of shares
redeemed.............. (362) -- (80,622) (51,667)
------------ ------------ ------------ ------------
Investor B capital
transactions.......... $ 83,144 $ 10 $ 196,330 $ 167,282
------------ ------------ ------------ ------------
TRUST SHARES:
Proceeds from shares
issued................ $ 28,075,362 $ 142,980 $ 2,511,484 $ 11,210,581
Cost of shares
exchanged from
Investor A Class...... -- 63,119,438 -- --
Dividends reinvested... 3,491 -- 6,307,423 4,843,545
Cost of shares
redeemed.............. (16,025,845) -- (15,489,756) (25,276,653)
------------ ------------ ------------ ------------
Trust capital
transactions.......... $ 12,053,008 $ 63,262,418 $ (6,670,849) $ (9,222,527)
------------ ------------ ------------ ------------
INSTITUTIONAL SHARES:
Proceeds from shares
issued................ $ 6,206,632 $ 10 $ 16,002,258 $ 13,196,103
Dividends reinvested... 2,352 -- 7,547,695 4,854,948
Cost of shares
redeemed.............. (359,282) -- (9,494,431) (14,889,355)
------------ ------------ ------------ ------------
Institutional capital
transactions.......... $ 5,849,702 $ 10 $ 14,055,522 $ 3,161,696
------------ ------------ ------------ ------------
Total net increase
(decrease) from
capital transactions.. $ 17,802,579 $ 7,260,241 $ 9,012,199 $ 5,878,946
============ ============ ============ ============
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued................. 19,253 53,783 99,687 126,661
Reinvested............. 40 502,850 100,319 67,585
Redeemed............... (30,223) (108,433) (83,921) (187,760)
Exchanged to Trust
Class................. -- (3,913,170) -- --
------------ ------------ ------------ ------------
Change in Investor A
Shares................ (10,930) (3,464,970) 116,085 6,486
------------ ------------ ------------ ------------
INVESTOR B SHARES:
Issued................. 4,461 1 17,594 15,906
Reinvested............. -- -- 4,812 2,094
Redeemed............... -- -- (6,715) (4,025)
------------ ------------ ------------ ------------
Change in Investor B
Shares................ 4,461 1 15,691 13,975
------------ ------------ ------------ ------------
TRUST SHARES:
Issued................. 1,648,844 8,833 202,055 881,762
Exchanged from Investor
A Class............... -- 3,913,170 -- --
Reinvested............. 209 -- 525,987 405,996
Redeemed............... (909,202) -- (1,223,916) (2,111,332)
------------ ------------ ------------ ------------
Change in Trust Shares. 739,851 3,922,003 (495,874) (823,574)
------------ ------------ ------------ ------------
INSTITUTIONAL SHARES:
Issued................. 362,327 1 1,263,799 1,083,548
Reinvested............. 141 -- 632,143 407,674
Redeemed............... (20,092) -- (773,946) (1,193,788)
------------ ------------ ------------ ------------
Change in Institutional
Shares................ 342,376 1 1,121,996 297,434
------------ ------------ ------------ ------------
Total net increase
(decrease) from share
transactions.......... 1,075,758 457,035 757,898 (317,919)
============ ============ ============ ============
</TABLE>
- ------
(a) Investor B, Trust and Institutional Shares commenced operations on November
24, 1997.
Continued
-125-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
GOVERNMENT & CORPORATE U.S. GOVERNMENT
BOND PORTFOLIO SECURITIES PORTFOLIO
-------------------------- -------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997
------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued................ $ 429,385 $ 27,165,642 $ 295,077 $ 168,375
Dividends reinvested... 100,129 209,221 116,059 283,177
Cost of shares re-
deemed................ (748,097) (27,531,566) (878,085) (2,371,476)
------------ ------------ ----------- ------------
Investor A capital
transactions.......... $ (218,583) $ (156,703) $ (466,949) $ (1,919,924)
------------ ------------ ----------- ------------
INVESTOR B SHARES:
Proceeds from shares
issued................ $ 135,421 $ 83,288 $ 75,964 $ 135,748
Dividends reinvested... 10,984 21,312 8,907 17,529
Cost of shares re-
deemed................ (119,122) (74,060) (54,744) (46,020)
------------ ------------ ----------- ------------
Investor B capital
transactions.......... $ 27,283 $ 30,540 $ 30,127 $ 107,257
------------ ------------ ----------- ------------
TRUST SHARES:
Proceeds from shares
issued................ $ 17,300,108 $ 51,290,657 $24,501,406 $ 23,128,193
Dividends reinvested... 2,065,855 4,152,833 1,000,637 2,017,395
Cost of shares re-
deemed................ (15,362,610) (24,790,124) (4,244,869) (12,278,294)
------------ ------------ ----------- ------------
Trust capital transac-
tions................. $ 4,003,353 $ 30,653,366 $21,257,174 $ 12,867,294
------------ ------------ ----------- ------------
INSTITUTIONAL SHARES:
Proceeds from shares
issued................ $ 4,798,437 $ 3,950,530 $ 613,628 $ 6,239,041
Dividends reinvested... 497,323 864,537 181,851 271,123
Cost of shares re-
deemed................ (2,952,787) (2,808,156) (1,607,953) (1,754,631)
------------ ------------ ----------- ------------
Institutional capital
transactions.......... $ 2,342,973 $ 2,006,911 $ (812,474) $ 4,755,533
------------ ------------ ----------- ------------
Total net increase
(decrease) from
capital transactions.. $ 6,155,026 $ 32,534,114 $20,007,878 $ 15,810,160
============ ============ =========== ============
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued................. 41,180 2,622,237 27,714 15,979
Reinvested............. 9,623 20,596 10,907 26,840
Redeemed............... (71,725) (2,657,122) (82,470) (225,337)
------------ ------------ ----------- ------------
Change in Investor A
Shares................ (20,922) (14,289) (43,849) (182,518)
------------ ------------ ----------- ------------
INVESTOR B SHARES:
Issued................. 12,975 8,280 7,145 12,926
Reinvested............. 1,054 2,096 838 1,663
Redeemed............... (11,396) (7,198) (5,147) (4,364)
------------ ------------ ----------- ------------
Change in Investor B
Shares................ 2,633 3,178 2,836 10,225
------------ ------------ ----------- ------------
TRUST SHARES:
Issued................. 1,658,378 4,998,391 2,296,543 2,196,909
Reinvested............. 198,191 408,777 94,045 191,147
Redeemed............... (1,472,544) (2,438,301) (398,788) (1,166,692)
------------ ------------ ----------- ------------
Change in Trust Shares. 384,025 2,968,867 1,991,800 1,221,364
------------ ------------ ----------- ------------
INSTITUTIONAL SHARES:
Issued................. 460,393 388,441 57,792 599,173
Reinvested............. 47,710 85,077 17,152 25,777
Redeemed............... (282,872) (277,121) (151,582) (168,592)
------------ ------------ ----------- ------------
Change in Institutional
Shares................ 225,231 196,397 (76,638) 456,358
------------ ------------ ----------- ------------
Total net increase
(decrease) from share
transactions.......... 590,967 3,154,153 1,874,149 1,505,429
============ ============ =========== ============
</TABLE>
Continued
-126-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE MISSOURI
MUNICIPAL TAX-EXEMPT
PORTFOLIO BOND PORTFOLIO
------------------------- -------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997
----------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares is-
sued.................... $ 60,837 $ 205,699 $ 6,638,404 $ 1,499,109
Dividends reinvested..... 603 1,147 335,410 789,615
Cost of shares redeemed.. (76,439) (240,296) (7,289,080) (4,057,694)
----------- ---------- ----------- -----------
Investor A capital trans-
actions................. $ (14,999) $ (33,450) $ (315,266) $(1,768,970)
----------- ---------- ----------- -----------
INVESTOR B SHARES:
Proceeds from shares is-
sued.................... $ -- $ -- $ 621,770 $ 789,463
Dividends reinvested..... -- -- 17,450 20,926
Cost of shares redeemed.. -- -- (4,919) (111,171)
----------- ---------- ----------- -----------
Investor B capital trans-
actions................. $ -- $ -- $ 634,301 $ 699,218
----------- ---------- ----------- -----------
TRUST SHARES:
Proceeds from shares is-
sued.................... $13,853,626 $5,241,935 $13,046,098 $23,929,592
Dividends reinvested..... 20,884 43,196 151,242 330,429
Cost of shares redeemed.. (3,095,628) (4,369,507) (9,348,958) (5,967,692)
----------- ---------- ----------- -----------
Trust capital transac-
tions................... $10,778,882 $ 915,624 $ 3,848,382 $18,292,329
----------- ---------- ----------- -----------
Total net increase
(decrease) from capital
transactions............ $10,763,883 $ 882,174 $ 4,167,417 $17,212,577
=========== ========== =========== ===========
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued................... 5,970 20,507 552,303 128,988
Reinvested............... 59 114 28,094 67,767
Redeemed................. (7,537) (24,107) (607,079) (349,719)
----------- ---------- ----------- -----------
Change in Investor A
Shares.................. (1,508) (3,486) (26,682) (152,964)
----------- ---------- ----------- -----------
INVESTOR B SHARES:
Issued................... -- -- 52,031 67,907
Reinvested............... -- -- 1,464 1,790
Redeemed................. -- -- (412) (9,625)
----------- ---------- ----------- -----------
Change in Investor B
Shares.................. -- -- 53,083 60,072
----------- ---------- ----------- -----------
TRUST SHARES:
Issued................... 1,364,684 521,384 1,092,130 2,053,156
Reinvested............... 2,061 4,303 12,666 28,328
Redeemed................. (305,260) (436,228) (778,856) (510,882)
----------- ---------- ----------- -----------
Change in Trust Shares... 1,061,485 89,459 325,940 1,570,602
----------- ---------- ----------- -----------
Total net increase
(decrease) from share
transactions............ 1,059,977 85,973 352,341 1,477,710
=========== ========== =========== ===========
</TABLE>
Continued
-127-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
NATIONAL INTERMEDIATE
MUNICIPAL CORPORATE
BOND PORTFOLIO BOND PORTFOLIO
-------------------------- -------------------------
SIX MONTHS YEAR SIX MONTHS FEBRUARY 10,
ENDED ENDED ENDED 1997 TO
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 1998 1997 (A)
------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued................ $ 920,418 $ 13,770,069 $ 206 $ 270,045
Dividends reinvested... 13,801 3,680 4,305 2,019
Cost of shares re-
deemed................ (478,908) (13,076,003) (30,000) --
------------ ------------ ----------- -----------
Investor A capital
transactions.......... $ 455,311 $ 697,746 $ (25,489) $ 272,064
------------ ------------ ----------- -----------
INVESTOR B SHARES:
Proceeds from shares
issued................ $ 37,450 $ 411,518 $ -- $ --
Dividends reinvested... 21,411 1,479 -- --
Cost of shares re-
deemed................ (87,475) (6,295) -- --
------------ ------------ ----------- -----------
Investor B capital
transactions.......... $ (28,614) $ 406,702 $ -- $ --
------------ ------------ ----------- -----------
TRUST SHARES:
Proceeds from shares
issued................ $ 26,313,549 $ 60,718,167 $11,370,046 $47,591,097
Dividends reinvested... 38,454 10,473 106,114 96,442
Cost of shares re-
deemed................ (17,544,990) (12,338,741) (2,286,528) (3,610,853)
------------ ------------ ----------- -----------
Trust capital transac-
tions................. $ 8,807,013 $ 48,389,899 $ 9,189,632 $44,076,686
------------ ------------ ----------- -----------
INSTITUTIONAL SHARES:
Proceeds from shares
issued................ $ -- $ -- $ 1,037,580 $ 26,700
Dividends reinvested... -- -- 1,220 354
Cost of shares re-
deemed................ -- -- -- --
------------ ------------ ----------- -----------
Institutional capital
transactions.......... $ -- $ -- $ 1,038,800 $ 27,054
------------ ------------ ----------- -----------
Total net increase
(decrease) from
capital transactions.. $ 9,233,710 $ 49,494,347 $10,202,943 $44,375,804
============ ============ =========== ===========
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued................. 91,135 1,349,188 20 27,183
Reinvested............. 1,382 366 429 201
Redeemed............... (47,213) (1,279,833) (2,956) --
------------ ------------ ----------- -----------
Change in Investor A
Shares................ 45,304 69,721 (2,507) 27,384
------------ ------------ ----------- -----------
INVESTOR B SHARES:
Issued................. 3,673 40,048 -- --
Reinvested............. 2,137 144 -- --
Redeemed............... (8,630) (617) -- --
------------ ------------ ----------- -----------
Change in Investor B
Shares................ (2,820) 39,575 -- --
------------ ------------ ----------- -----------
TRUST SHARES:
Issued................. 2,616,916 6,018,490 1,131,516 4,752,205
Reinvested............. 3,844 1,035 10,571 9,712
Redeemed............... (1,741,323) (1,229,913) (227,120) (363,897)
------------ ------------ ----------- -----------
Change in Trust Shares. 879,437 4,789,612 914,967 4,398,020
------------ ------------ ----------- -----------
INSTITUTIONAL SHARES:
Issued................. -- -- 103,447 2,678
Reinvested............. -- -- 122 35
Redeemed............... -- -- -- --
------------ ------------ ----------- -----------
Change in Institutional
Shares................ -- -- 103,569 2,713
------------ ------------ ----------- -----------
Total net increase
(decrease) from
capital transactions.. 921,921 4,898,908 1,016,029 4,428,117
============ ============ =========== ===========
</TABLE>
- ------
(a) Period from commencement of operations.
Continued
-128-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
BOND INDEX
PORTFOLIO
--------------------------
SIX MONTHS FEBRUARY 10,
ENDED 1997 TO
MAY 31, NOVEMBER 30,
1998 1997 (A)
------------ ------------
(UNAUDITED)
<S> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares issued....................... $ 119,459 $ 249,869
Dividends reinvested.............................. 213 878
Cost of shares redeemed........................... (13,976) (198,047)
------------ ------------
Investor A capital transactions................... $ 105,696 $ 52,700
------------ ------------
TRUST SHARES:
Proceeds from shares issued....................... $ 23,254,263 $141,965,580
Dividends reinvested.............................. 76,592 64,546
Cost of shares redeemed........................... (12,015,067) (5,562,846)
------------ ------------
Trust capital transactions........................ $ 11,315,788 $136,467,280
------------ ------------
INSTITUTIONAL SHARES:
Proceeds from shares issued....................... $ 6,093,737 $ 36,865
Dividends reinvested.............................. 42,478 454
Cost of shares redeemed........................... (524,450) (10,305)
------------ ------------
Institutional capital transactions................ $ 5,611,765 $ 27,014
------------ ------------
Total net increase (decrease) from capital
transactions..................................... $ 17,033,249 $136,546,994
============ ============
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued............................................ 11,772 25,427
Reinvested........................................ 21 89
Redeemed.......................................... (1,372) (20,139)
------------ ------------
Change in Investor A Shares....................... 10,421 5,377
------------ ------------
TRUST SHARES:
Issued............................................ 2,282,453 14,163,934
Reinvested........................................ 7,532 6,471
Redeemed.......................................... (1,174,003) (556,016)
------------ ------------
Change in Trust Shares............................ 1,115,982 13,614,389
------------ ------------
INSTITUTIONAL SHARES:
Issued............................................ 597,792 3,679
Reinvested........................................ 4,177 45
Redeemed.......................................... (51,616) (1,021)
------------ ------------
Change in Institutional Shares.................... 550,353 2,703
------------ ------------
Total net increase (decrease) from share
transactions..................................... 1,676,756 13,622,469
============ ============
</TABLE>
- ------
(a) Period from commencement of operations.
Continued
-129-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of securities (excluding short-term securities) during
the period ended May 31, 1998 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
PURCHASES SALES
--------- ---------
<S> <C> <C>
Growth & Income Equity................................... $206,316 $ 246,800
Small Cap Equity......................................... 104,789 123,685
International Equity..................................... 33,647 27,828
Equity Income............................................ 45,619 76,083
Equity Index............................................. 16,368 4,185
Growth Equity............................................ 34,746 31,279
Balanced................................................. 30,835 32,840
Government & Corporate Bond.............................. 82,206 61,908
U.S. Government Securities............................... 45,437 25,030
Short-Intermediate Municipal............................. 11,214 5,237
Missouri Tax-Exempt Bond................................. 9,153 5,368
National Municipal Bond.................................. 54,470 71,001
Intermediate Corporate Bond.............................. 10,074 2,104
Bond Index............................................... 47,004 30,562
</TABLE>
6. RELATED PARTY TRANSACTIONS
Investment advisory services are provided to the Fund by Mississippi Valley
Advisors Inc. ("MVA"), a wholly-owned subsidiary of Mercantile Bank
National Association ("Mercantile"), which in turn is a wholly-owned
subsidiary of Mercantile Bancorporation Inc. Under the terms of the
investment advisory agreement, MVA is entitled to receive fees from each
Portfolio based on a percentage of the average daily net assets of that
Portfolio. Mercantile also serves as custodian for the Fund. Under the
terms of the custodian agreement, Mercantile receives fees computed at .03%
(.0125% for the Money Market, Treasury Money Market and Tax-Exempt Money
Market Portfolios) of the average daily net assets of each Portfolio.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
is an Ohio limited partnership. BISYS Fund Services Ohio, Inc. (the
"Company") and BISYS are subsidiaries of The BISYS Group, Inc.
The Company, with whom certain officers of the Fund are affiliated, serves
the Fund as administrator. Such officers are paid no fees directly by the
Portfolios for serving as officers of the Fund. Under the terms of the
administration agreement, the Company receives fees computed at 0.20%
(0.10% for the Tax-Exempt Money Market Portfolio) of the average daily net
assets of each Portfolio. The Company also serves as transfer agent to the
Fund. BISYS serves as the Fund's distributor and is entitled to receive
commissions on sales of Investor A Shares and Investor B Shares of the
variable net asset value portfolios. For the period ended May 31, 1998,
BISYS received approximately $227,539 from commissions earned on sales of
Investor A Shares and $127,115 from commissions earned on redemptions of
Investor B Shares. BISYS re-allowed $320,176 to dealers of the Fund's
shares.
With respect to Investor A Shares of the Portfolios, the Fund has adopted a
Distribution and Services Plan (the "Plan") pursuant to Rule 12b-1 under
the 1940 Act. Under the Plan, each Portfolio may pay (i) up to 0.10% of the
average daily net assets of each Portfolio's outstanding Investor A Shares
to BISYS or another organization for distribution services performed and
expenses assumed relating to the Portfolio's Investor A shares and (ii) up
to 0.20% (0.15% for the money market portfolios) of the average daily net
assets of each
Continued
-130-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
Portfolio's outstanding Investor A Shares to broker-dealers and other
organizations for shareholder administrative services provided pursuant to
servicing agreements under the Plan.
Similarly, with respect to Investor B and S Shares, the Fund has adopted
separate Distribution and Services Plans (each a "Plan") pursuant to Rule
12b-1 under the 1940 Act. Under the Plans, a Portfolio may pay (i) up to
0.75% of the average daily net assets of the Portfolio's outstanding
Investor B or S Shares to BISYS or another organization for distribution
services performed and expenses assumed relating to the Portfolio's
Investor B or S Shares and (ii) up to 0.25% of the average daily net assets
of the Portfolio's Investor B or S Shares to broker-dealers and other
organizations for shareholder administrative services provided pursuant to
servicing agreements under the Plans.
With respect to Trust and Institutional Shares of the Portfolios, the Fund
has adopted separate Administrative Services Plans pursuant to which a
Portfolio may pay banks and other financial institutions, which have agreed
to provide certain shareholder administrative services for their clients or
account holders, servicing fees of up to 0.30% (0.25% for the money market
portfolios) of the average daily net assets of the Portfolio's Trust or
Institutional Shares, respectively.
Continued
-131-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
Fees may be voluntarily reduced to assist the Portfolios in maintaining
competitive expense ratios.
Information regarding these transactions is as follows for the period ended
May 31, 1998:
<TABLE>
<CAPTION>
ADMINISTRATIVE
SERVICES
INVESTMENT ADVISORY ADMINISTRATION CUSTODIAN FEES -- TRUST
FEES FEES FEES SHARES
--------------------- -------------- ---------- --------------
ANNUAL
FEE BEFORE
VOLUNTARY VOLUNTARY VOLUNTARY VOLUNTARY VOLUNTARY FUND TRANSFER
FEE FEE FEE FEE FEE ACCOUNTING AGENT
REDUCTIONS REDUCTIONS REDUCTIONS REDUCTIONS REDUCTIONS FEES FEES
---------- ---------- -------------- ---------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market Portfolio.. 0.40% $318,799 $637,575 -- $707,690 $2,098 $118,019
Treasury Money Market
Portfolio.............. 0.40% 63,491 126,978 -- 207,168 546 33,596
Tax-Exempt Money Market
Portfolio.............. 0.40% 43,043 -- -- 157,949 782 20,745
Growth & Income Equity
Portfolio.............. 0.55% -- 238,800 -- 481,820 2,184 84,459
Small Cap Equity
Portfolio.............. 0.75% -- 133,377 -- 323,909 3,094 43,257
International Equity
Portfolio.............. 1.00% -- 36,386 30,025 92,372 970 10,738
Equity Income
Portfolio.............. 0.75% 280,159 73,861 11,206 170,044 1,377 16,326
Equity Index Portfolio.. 0.30% 35,308 19,769 3,531 54,060 13,185 4,518
Growth Equity
Portfolio.............. 0.75% -- 47,770 -- 45,109 1,825 6,458
Balanced Portfolio...... 0.75% -- 63,508 -- 77,096 11,135 18,200
Government & Corporate
Bond Portfolio......... 0.45% -- 100,555 -- 265,788 11,948 28,645
U.S. Government
Securities Portfolio... 0.45% -- 48,778 -- 127,960 8,918 13,650
Short-Intermediate
Municipal Portfolio.... 0.55% 62,424 18,102 -- 54,272 4,722 4,172
Missouri Tax-Exempt Bond
Portfolio.............. 0.45% -- 50,914 -- 112,650 7,098 16,744
National Municipal Bond
Portfolio.............. 0.55% 663,265 235,865 36,178 542,756 6,734 63,700
Intermediate Corporate
Bond Portfolio......... 0.55% 91,356 32,981 4,983 75,902 5,892 39
Bond Index Portfolio.... 0.30% 142,710 73,149 14,270 215,803 13,250 24,273
</TABLE>
Additionally, the distributor voluntarily reduced distribution and services
fees for the Investor A Shares in the amount of $5 for the Short-
Intermediate Municipal Portfolio, $12,508 for the Missouri Tax-Exempt Bond
Portfolio and $488 for the National Municipal Bond Portfolio. The
distributor also voluntarily reduced administrative services fees for the
Institutional Shares in the amounts of $1, $633, $28 and $807, for the
Equity Income Portfolio, the Equity Index Portfolio, the Intermediate
Corporate Bond Portfolio and Bond Index Portfolio, respectively.
Continued
-132-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
7. CONCENTRATION OF CREDIT RISK
The Missouri Tax-Exempt Bond Portfolio invests a substantial proportion of
its assets in debt obligations issued by the State of Missouri and its
political subdivisions, agencies and public authorities. The Portfolio is
more susceptible to factors adversely affecting issuers of Missouri
municipal securities than a fund that is not concentrated in these issuers
to the same extent.
The Tax-Exempt Money Market Portfolio, Short-Intermediate Municipal
Portfolio, Missouri Tax-Exempt Bond Portfolio and National Municipal Bond
Portfolio had the following concentrations by industry sector at May 31,
1998 (as a percentage of total investments):
<TABLE>
<CAPTION>
SHORT- MISSOURI NATIONAL
TAX-EXEMPT INTERMEDIATE TAX-EXEMPT MUNICIPAL
MONEY MARKET MUNICIPAL BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ---------- ---------
<S> <C> <C> <C> <C>
Airport....................... 5.65% -- -- --
Bond Bank..................... -- 2.67% -- --
Commercial Paper.............. 11.99% -- -- --
Development................... 4.75% -- 0.69% --
Education..................... 2.92% 1.25% 5.49% 2.30%
Facilities.................... -- 6.08% 8.26% 2.10%
General Obligation............ 19.42% 30.46% 16.85% 47.39%
Higher Education.............. 5.52% 4.91% 10.48% 4.01%
Medical....................... 12.06% 2.40% 19.84% 5.59%
Multifamily Housing........... -- -- 2.33% --
Mutual Funds.................. 1.03% 1.03% 4.13% 1.27%
Nursing Homes................. -- -- 0.86% --
Pollution..................... 30.58% 7.56% 5.46% 2.93%
Power......................... -- 2.74% 1.99% 4.39%
School District............... 4.58% 21.09% 14.84% 10.06%
Single Family Housing......... -- -- 1.00% 0.29%
Student Loan.................. -- -- 1.00% --
Transportation................ 1.50% 9.66% -- 7.28%
Utilities..................... -- 4.66% 2.05% 9.73%
Water......................... -- 5.49% 4.73% 2.66%
------ ------ ------ ------
100.00% 100.00% 100.00% 100.00%
====== ====== ====== ======
</TABLE>
Continued
-133-
<PAGE>
THE ARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1998
(UNAUDITED)
8. CONVERSION OF COMMON TRUST FUNDS
On December 8, 1997 the Growth Equity Portfolio issued Trust shares to
acquire all of the assets and liabilities of certain common trust funds of
Mercantile Bank National Association and its affiliates. On December 15,
1997 the Government & Corporate Bond and the Intermediate Corporate Bond
Portfolios issued Trust shares to acquire all of the assets and liabilities
of certain common trust funds of Mercantile Bank National Association and
its affiliates. The following is a summary of shares issued, net assets
converted, and net asset values per share, and unrealized appreciation as
of the conversion date (amounts in thousands except per share amounts):
<TABLE>
<CAPTION>
NET ASSET UNREALIZED
SHARES NET ASSETS VALUE APPRECIATION
------ ---------- --------- ------------
<S> <C> <C> <C> <C>
Growth Equity Portfolio............ 1,469 $24,903 $16.95 $13,748
Government & Corporate Bond
Portfolio......................... 521 $ 5,425 $10.42 $ 41
Intermediate Corporate Bond........ 474 $ 4,767 $10.05 $ 65
</TABLE>
9. RESULTS OF SHAREHOLDER MEETING
On January 30, 1998, a reconvened Annual Meeting of Shareholders of the
Fund was held to consider various proposals. The shareholders approved each
of the following proposals (with actual vote tabulations):
With respect to all of the Portfolios:
1. To elect the following Board of Directors:
<TABLE>
<CAPTION>
DIRECTOR VOTES IN FAVOR VOTES WITHHELD
-------- -------------- --------------
<S> <C> <C>
Jerry V. Wookham............................... 893,201,822 534,577
Robert M. Cox, Jr. ............................ 893,185,888 594,546
Joseph J. Hunt................................. 893,134,321 602,078
James C. Jacobsen.............................. 893,197,536 538,863
Ronald D. Winney............................... 890,193,978 578,421
Donald E. Brandt............................... 893,136,846 599,552
Patrick J. Moore............................... 893,038,230 698,169
</TABLE>
2. To select KPMG Peat Marwick LLP as independent accountants for the year
ending November 30, 1998.
<TABLE>
<CAPTION>
SHARES VOTED VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED
------------ -------------- ------------- ---------------
<S> <C> <C> <C>
895,573,553 889,400,247 914,762 4,327,382
</TABLE>
With respect to the Money Market and Treasury Money Market Portfolios only:
3. To approve or disapprove a change in the Portfolios' fundamental
investment limitations to permit securities lending.
<TABLE>
<CAPTION>
FUND NAME SHARES VOTED VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED
--------- ------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Money Market Portfolio.. 576,618,891 456,138,140 3,813,231 3,533,200
Treasury Money Market
Portfolio.............. 63,710,217 60,543,710 1,459,321 6,852
</TABLE>
-134-
<PAGE>
THE ARCH FUND, INC.
MONEY MARKET PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED --------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 (a) 1993
------------ ---------- ---------- ---------- ---------- --------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------ ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.025 0.048 0.047 0.052 0.033 0.025
-------- -------- ------- ------- ------- -------
Total from Investment
Activities........... 0.025 0.048 0.047 0.052 0.033 0.025
-------- -------- ------- ------- ------- -------
Distributions
Net investment income.. (0.025) (0.048) (0.047) (0.052) (0.033) (0.025)
-------- -------- ------- ------- ------- -------
Total Distributions... (0.025) (0.048) (0.047) (0.052) (0.033) (0.025)
-------- -------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======= ======= =======
Total Return............ 2.48 %(b) 4.93 % 4.81 % 5.33 % 3.37 % 2.52 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $159,531 $164,777 $91,166 $64,865 $48,384 $46,920
Ratio of expenses to
average net assets.... 0.77 %(c) 0.77 % 0.78 % 0.77 % 0.78 % 0.79 %
Ratio of net investment
income to average net
assets................ 4.93 %(c) 4.84 % 4.70 % 5.20 % 3.35 % 2.50 %
Ratio of expenses to
average net
assets*............... 0.92 %(c) 0.92 % 0.93 % 0.92 % 0.93 % 0.93 %
Ratio of net investment
income to average net
assets*............... 4.78 %(c) 4.69 % 4.55 % 5.05 % 3.20 % 2.36 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) On September 27, 1994, the Portfolio redesignated the Investor Shares as
"Investor A" Shares.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-135-
<PAGE>
THE ARCH FUND, INC.
MONEY MARKET PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS JANUARY 26, 1996
ENDED YEAR ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 NOVEMBER 30, 1996 (a)
------------ ----------------- ---------------------
INVESTOR B INVESTOR B INVESTOR B
SHARES SHARES SHARES
------------ ----------------- ---------------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Investment Activities
Net investment income.. 0.021 0.041 0.033
------- ------- -------
Total from Investment
Activities........... 0.021 0.041 0.033
------- ------- -------
Distributions
Net investment income.. (0.021) (0.041) (0.033)
------- ------- -------
Total Distributions... (0.021) (0.041) (0.033)
------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total Return (excludes
sales charge).......... 2.10 %(b) 4.15 % 3.35 %(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $ 70 $ 73 $ 41
Ratio of expenses to
average net assets.... 1.52 %(c) 1.52 % 1.47 %(c)
Ratio of net investment
income to average net
assets................ 4.18 %(c) 4.10 % 3.73 %(c)
Ratio of expenses to
average net assets*... 1.67 %(c) 1.67 % 1.68 %(c)
Ratio of net investment
income to average net
assets*............... 4.03 %(c) 3.95 % 3.52 %(c)
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-136-
<PAGE>
THE ARCH FUND, INC.
MONEY MARKET PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTH YEARS ENDED NOVEMBER 30,
ENDED ------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 1993
------------ ---------- -------- -------- -------- --------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES
------------ ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- -------- -------- -------- --------
Investment Activities
Net investment income.. 0.025 0.050 0.049 0.054 0.035 0.026
---------- ---------- -------- -------- -------- --------
Total from Investment
Activities........... 0.025 0.050 0.049 0.054 0.035 0.026
---------- ---------- -------- -------- -------- --------
Distributions
Net investment income.. (0.025) (0.050) (0.049) (0.054) (0.035) (0.026)
---------- ---------- -------- -------- -------- --------
Total Distributions... (0.025) (0.050) (0.049) (0.054) (0.035) (0.026)
---------- ---------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ======== ======== ======== ========
Total Return............ 2.55 %(a) 5.06 % 4.99 % 5.52 % 3.55 % 2.72 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $1,063,211 $1,042,151 $717,265 $698,131 $544,952 $621,717
Ratio of expenses to
average net assets.... 0.64 %(b) 0.64 % 0.61 % 0.59 % 0.61 % 0.59 %
Ratio of net investment
income to average net
assets................ 5.06 %(b) 4.96 % 4.88 % 5.38 % 3.45 % 2.70 %
Ratio of expenses to
average net assets*... 0.92 %(b) 0.92 % 0.76 % 0.74 % 0.93 % 0.80 %
Ratio of net investment
income to average net
assets*............... 4.78 %(b) 4.68 % 4.73 % 5.23 % 3.13 % 2.49 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
See notes to financial statements
-137-
<PAGE>
THE ARCH FUND, INC.
MONEY MARKET PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED ----------------------------------------------------------------
MAY 31 1998 1997 1996 1995 1994 (a) 1993
------------- ------------- ------------- ------------- ------------- --------
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------- ------------- ------------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.025 0.048 0.047 0.052 0.033 0.025
------- ------- ------- ------- ------- -------
Total from Investment
Activities........... 0.025 0.048 0.047 0.052 0.033 0.025
------- ------- ------- ------- ------- -------
Distributions
Net investment income.. (0.025) (0.048) (0.047) (0.052) (0.033) (0.025)
------- ------- ------- ------- ------- -------
Total Distributions... (0.025) (0.048) (0.047) (0.052) (0.033) (0.025)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total Return............ 2.48 %(b) 4.93 % 4.81 % 5.33 % 3.34 % 2.52 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $24,761 $22,022 $15,921 $13,340 $10,295 $46,920
Ratio of expenses to
average net assets.... 0.77 %(c) 0.77 % 0.78 % 0.77 % 0.78 % 0.79 %
Ratio of net investment
income to average net
assets................ 4.93 %(c) 4.83 % 4.70 % 5.20 % 3.48 % 2.50 %
Ratio of expenses to
average net assets*... 0.92 %(c) 0.92 % 0.93 % 0.92 % 0.95 % 0.93 %
Ratio of net investment
income to average net
assets* .............. 4.78 %(c) 4.68 % 4.55 % 5.05 % 3.31 % 2.36 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) On January 3, 1994, the Portfolio issued a new series of shares which were
designated as "Institutional" Shares. The financial highlights presented
for the periods prior to January 3, 1994 represent financial highlights
applicable to the Investor Shares.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-138-
<PAGE>
THE ARCH FUND, INC.
TREASURY MONEY MARKET PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED --------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 (a) 1993
------------ ---------- ---------- ---------- ---------- --------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------ ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.022 0.044 0.044 0.048 0.031 0.024
------- ------- ------- ------- ------- -------
Total from Investment
Activities........... 0.022 0.044 0.044 0.048 0.031 0.024
------- ------- ------- ------- ------- -------
Distributions
Net investment income.. (0.022) (0.044) (0.044) (0.048) (0.031) (0.024)
------- ------- ------- ------- ------- -------
Total Distributions... (0.022) (0.044) (0.044) (0.048) (0.031) (0.024)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total Return............ 2.24 %(b) 4.53 % 4.46 % 4.93 % 3.16 % 2.43 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $17,433 $ 8,409 $ 7,667 $ 2,776 $ 1,713 $ 1,411
Ratio of expenses to
average net assets.... 0.81 %(c) 0.77 % 0.81 % 0.78 % 0.71 % 0.64 %
Ratio of net investment
income to average net
assets................ 4.42 %(c) 4.43 % 4.35 % 4.84 % 3.14 % 2.41 %
Ratio of expenses to
average net assets*... 0.96 %(c) 0.92 % 0.96 % 0.93 % 0.94 % 0.97 %
Ratio of net investment
income to average net
assets*............... 4.27 %(c) 4.28 % 4.20 % 4.69 % 2.90 % 2.08 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) On September 27, 1994, the Portfolio redesignated the Investor Shares as
"Investor A" Shares.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-139-
<PAGE>
THE ARCH FUND, INC.
TREASURY MONEY MARKET PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED ----------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 1993
------------ -------- -------- -------- -------- --------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARE SHARES SHARES
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income.. 0.023 0.046 0.045 0.050 0.033 0.026
-------- -------- -------- -------- -------- --------
Total from Investment
Activities........... 0.023 0.046 0.045 0.050 0.033 0.026
-------- -------- -------- -------- -------- --------
Distributions
Net investment income.. (0.023) (0.046) (0.045) (0.050) (0.033) (0.026)
-------- -------- -------- -------- -------- --------
Total Distributions... (0.023) (0.046) (0.045) (0.050) (0.033) (0.026)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return............ 2.32 %(a) 4.70 % 4.64 % 5.12 % 3.38 % 2.67 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $252,528 $283,653 $131,322 $252,780 $242,099 $256,503
Ratio of expenses to
average net assets.... 0.64 %(b) 0.61 % 0.61 % 0.60 % 0.49 % 0.41 %
Ratio of net investment
income to average net
assets................ 4.61 %(b) 4.60 % 4.55 % 5.01 % 3.26 % 2.64 %
Ratio of expenses to
average net assets*... 0.96 %(b) 0.92 % 0.76 % 0.75 % 0.94 % 0.85 %
Ratio of net investment
income to average net
assets*............... 4.29 %(b) 4.28 % 4.40 % 4.86 % 2.82 % 2.21 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
See notes to financial statements
-140-
<PAGE>
THE ARCH FUND, INC.
TREASURY MONEY MARKET PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 26, 1995
SIX MONTHS NOVEMBER 30, TO
ENDED --------------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 (a)
------------- ------------- ------------- ----------------
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
SHARES SHARES SHARES SHARES
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Investment Activities
Net investment income.. 0.022 0.044 0.044 0.042
------- ------- ------- -------
Total from Investment
Activities........... 0.022 0.044 0.044 0.042
------- ------- ------- -------
Distributions
Net investment income.. (0.022) (0.044) (0.044) (0.042)
------- ------- ------- -------
Total Distributions... (0.022) (0.044) (0.044) (0.042)
------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total Return............ 2.23 %(b) 4.53 % 4.46 % 4.94 %(d)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $ 232 $ 233 $ 299 $ 28
Ratio of expenses to
average net assets.... 0.81 %(c) 0.77 % 0.79 % 0.92 %(c)
Ratio of net investment
income to average net
assets................ 4.44 %(c) 4.44 % 4.39 % 5.76 %(c)
Ratio of expenses to
average net assets*... 0.96 %(c) 0.92 % 0.94 % 1.07 %(c)
Ratio of net investment
income to average net
assets*............... 4.29 %(c) 4.29 % 4.24 % 5.61 %(c)
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Represents total return for the Investor A Shares from December 1, 1994 to
January 25, 1995 plus the total return for the Institutional Shares from
January 26, 1995 to November 30, 1995.
See notes to financial statements
-141-
<PAGE>
THE ARCH FUND, INC.
TAX-EXEMPT MONEY MARKET PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
SIX MONTHS NOVEMBER 30, ENDED YEARS ENDED MAY 31,
ENDED ---------------------- NOVEMBER 30, --------------------------------
MAY 31, 1998 1997 1996 1995 (d) 1995 (a) 1994 1993
------------ ---------- ---------- ------------ ---------- ---------- --------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------------ ---------- ---------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.014 0.028 0.028 0.014 0.027 0.017 0.019
------- ------- ------- ------- ------- ------- -------
Total from Investment
Activities........... 0.014 0.028 0.028 0.014 0.027 0.017 0.019
------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income.. (0.014) (0.028) (0.028) (0.014) (0.027) (0.017) (0.019)
------- ------- ------- ------- ------- ------- -------
Total Distributions... (0.014) (0.028) (0.028) (0.014) (0.027) (0.017) (0.019)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= =======
Total Return............ 1.37 %(b) 2.88 % 2.83 % 1.45 %(b) 2.70 % 1.73 % 1.90 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $12,368 $15,789 $17,984 $ 5,403 $ 5,138 $ 8,631 $ 6,837
Ratio of expenses to
average net assets.... 0.78 %(c) 0.77 % 0.75 % 0.94 %(c) 0.84 % 0.76 % 0.80 %
Ratio of net investment
income to average net
assets................ 2.71 %(c) 2.82 % 2.78 % 2.87 %(c) 2.63 % 1.72 % 1.88 %
Ratio of expenses to
average net assets*... 0.83 %(c) 0.82 % 0.80 % 0.99 %(c) 0.93 % 0.86 % 0.90 %
Ratio of net investment
income to average net
assets*............... 2.66 %(c) 2.77 % 2.73 % 2.82 %(c) 2.54 % 1.62 % 1.78 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) On September 27, 1994, the Portfolio redesignated the Investor Shares as
"Investor A" Shares.
(b) Not Annualized.
(c) Annualized.
(d) Upon reorganizing as a Portfolio of the ARCH Fund, Inc., the Tax-Exempt
Money Market Portfolio changed its fiscal year end from May 31 to November
30.
See notes to financial statements
-142-
<PAGE>
THE ARCH FUND, INC.
TAX-EXEMPT MONEY MARKET PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
SIX MONTHS NOVEMBER 30, ENDED YEARS ENDED MAY 31,
ENDED ------------------ NOVEMBER 30 -----------------------------
MAY 31, 1998 1997 1996 1995 (c) 1995 1994 1993
------------ -------- ------- ----------- ------- -------- --------
TRUST TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------------ -------- ------- ----------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- ------- ------- -------- --------
Investment Activities
Net investment
income.................. 0.015 0.030 0.030 0.016 0.029 0.020 0.021
-------- -------- ------- ------- ------- -------- --------
Total from Investment
Activities............. 0.015 0.030 0.030 0.016 0.029 0.020 0.021
-------- -------- ------- ------- ------- -------- --------
Distributions
Net investment
income.................. (0.015) (0.030) (0.030) (0.016) (0.029) (0.020) (0.021)
-------- -------- ------- ------- ------- -------- --------
Total Distributions..... (0.015) (0.030) (0.030) (0.016) (0.029) (0.020) (0.021)
-------- -------- ------- ------- ------- -------- --------
NET ASSET VALUE, END OF
PERIOD................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======= ======= ======== ========
Total Return.............. 1.47 %(a) 3.08 % 3.06 % 1.57 %(a) 2.93 % 1.97 % 2.16 %
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000).............. $135,146 $143,517 $95,726 $78,031 $85,324 $112,594 $137,602
Ratio of expenses to
average Net assets...... 0.58 %(b) 0.58 % 0.53 % 0.70 %(b) 0.61 % 0.52 % 0.52 %
Ratio of net investment
income to average net
assets.................. 2.90 %(b) 3.04 % 3.01 % 3.10 %(b) 2.87 % 1.95 % 2.13 %
Ratio of expenses to
average Net assets*..... 0.83 %(b) 0.83 % 0.58 % 0.75 %(b) 0.70 % 0.86 % 0.62 %
Ratio of net investment
income to average net
assets*................. 2.65 %(b) 2.79 % 2.96 % 3.05 %(b) 2.78 % 1.61 % 2.03 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Upon reorganizing as a Portfolio of the ARCH Fund, Inc., the Tax-Exempt
Money Market Portfolio changed its fiscal year end from May 31 to November
30.
See notes to financial statements
-143-
<PAGE>
THE ARCH FUND, INC.
GROWTH & INCOME EQUITY PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED --------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 (a) 1993
------------ ---------- ---------- ---------- ---------- --------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------ ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 21.12 $ 18.67 $ 16.30 $ 12.70 $ 14.74 $ 14.49
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.02 0.11 0.20 0.23 0.20 0.25
Net realized and
unrealized gains
(losses) from
investments........... 1.79 3.96 3.32 3.74 (0.17) 1.06
------- ------- ------- ------- ------- -------
Total from Investment
Activities........... 1.81 4.07 3.52 3.97 0.03 1.31
------- ------- ------- ------- ------- -------
Distributions
Net investment income.. (0.02) (0.13) (0.20) (0.23) (0.21) (0.25)
In excess of net
investment income..... (0.03) (0.03) (0.01) -- -- --
Net realized gains..... (3.57) (1.46) (0.94) (0.14) (0.18) (0.81)
In excess of net
realized gains........ -- -- -- -- (1.68) --
------- ------- ------- ------- ------- -------
Total Distributions... (3.62) (1.62) (1.15) (0.37) (2.07) (1.06)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 19.31 $ 21.12 $ 18.67 $ 16.30 $ 12.70 $ 14.74
======= ======= ======= ======= ======= =======
Total Return (excludes
sales charge).......... 9.99 %(b) 23.90 % 22.99 % 31.95 % 0.20 % 9.65 %
RATIOS/SUPPLEMENTARY DA-
TA:
Net Assets at end of
period (000).......... $50,762 $46,372 $38,229 $25,082 $18,343 $11,157
Ratio of expenses to
average net assets.... 1.04 %(c) 1.04 % 1.05 % 1.05 % 1.05 % 0.74 %
Ratio of net investment
income to average net
assets................ 0.51 %(c) 0.60 % 1.20 % 1.59 % 1.45 % 1.74 %
Ratio of expenses to
average net assets*... 1.14 %(c) 1.14 % 1.15 % 1.15 % 1.15 % 0.96 %
Ratio of net investment
income to average net
assets*............... 0.41 %(c) 0.50 % 1.10 % 1.49 % 1.35 % 1.52 %
Portfolio turnover**... 44.79 % 57.11 % 63.90 % 58.50 % 65.00 % 41.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) On September 27, 1994, the Portfolio redesignated the Investor Shares as
"Investor A" Shares, and authorized the issuance of a series of shares
designated as "Investor B" Shares.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-144-
<PAGE>
THE ARCH FUND, INC.
GROWTH & INCOME EQUITY PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 1, 1995
SIX MONTHS NOVEMBER 30, TO
ENDED --------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 (a)
------------ ---------- ---------- -------------
INVESTOR B INVESTOR B INVESTOR B INVESTOR B
SHARES SHARES SHARES SHARES
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $20.94 $18.58 $16.23 $13.43
------ ------ ------ ------
Investment Activities
Net investment income
(loss).................. -- (0.02) 0.11 0.14
Net realized and
unrealized gains
(losses) from
investments............. 1.73 3.93 3.30 2.81
------ ------ ------ ------
Total from Investment
Activities............. 1.73 3.91 3.41 2.95
------ ------ ------ ------
Distributions
Net investment income.... -- -- (0.11) (0.15)
In excess of net
investment income....... (0.02) (0.09) (0.01) --
Net realized gains....... (3.57) (1.46) (0.94) --
------ ------ ------ ------
Total Distributions..... (3.59) (1.55) (1.06) (0.15)
------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................... $19.08 $20.94 $18.58 $16.23
====== ====== ====== ======
Total Return (excludes
sales charge)............ 9.61 %(c) 23.04 % 22.29 % 31.20 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)............ $8,284 $6,349 $3,537 $ 781
Ratio of expenses to
average net assets...... 1.74 %(d) 1.73 % 1.75 % 1.75 %(c)
Ratio of net investment
income (loss) to average
net assets.............. (0.20)%(d) (0.11)% 0.49 % 0.87 %(c)
Ratio of expenses to
average net assets*..... 1.84 %(d) 1.83 % 1.85 % 1.85 %(c)
Ratio of net investment
income (loss) to average
net assets*............. (0.30)%(d) (0.21)% 0.39 % 0.77 %(c)
Portfolio turnover**..... 44.79 % 57.11 % 63.90 % 58.50 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) Period from commencement of operations. On September 27, 1994, the
Portfolio authorized the issuance of a series designated as "Investor B"
Shares.
(b) Represents total return for the Investor A Shares from December 1, 1994 to
February 28, 1995 plus the total return for the Investor B Shares from
March 1, 1995 to November 30, 1995.
(c) Not annualized.
(d) Annualized.
See notes to financial statements
-145-
<PAGE>
THE ARCH FUND, INC.
GROWTH & INCOME EQUITY PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED
SIX MONTHS NOVEMBER 30,
ENDED ----------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 1993
------------ -------- -------- -------- -------- --------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 21.19 $ 18.71 $ 16.32 $ 12.72 $ 14.74 $ 14.49
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income.... 0.08 0.23 0.24 0.27 0.22 0.25
Net realized and
unrealized gains
(losses) from
investments............. 1.77 3.96 3.34 3.74 (0.17) 1.06
-------- -------- -------- -------- -------- --------
Total from Investment
Activities............. 1.85 4.19 3.58 4.01 0.05 1.31
-------- -------- -------- -------- -------- --------
Distributions
Net investment income.... (0.08) (0.25) (0.24) (0.27) (0.21) (0.25)
In excess of net
investment income....... -- -- (0.01) -- -- --
Net realized gains....... (3.57) (1.46) (0.94) (0.14) (0.18) (0.81)
In excess of net realized
gains................... -- -- -- -- (1.68) --
-------- -------- -------- -------- -------- --------
Total Distributions..... (3.65) (1.71) (1.19) (0.41) (2.07) (1.06)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................... $ 19.39 $ 21.19 $ 18.71 $ 16.32 $ 12.72 $ 14.74
======== ======== ======== ======== ======== ========
Total Return.............. 10.14%(a) 24.55% 23.45% 32.27% 0.36% 9.65%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)............ $324,530 $322,304 $348,183 $286,546 $235,955 $238,771
Ratio of expenses to
average net assets...... 0.75%(b) 0.74% 0.75% 0.75% 0.75% 0.74%
Ratio of net investment
income to average net
assets.................. 0.81%(b) 0.91% 1.50% 1.89% 1.72% 1.74%
Ratio of expenses to
average net assets*..... 1.15%(b) 1.14% 0.85% 0.85% 1.15% 0.96%
Ratio of net investment
income to average net
assets*................. 0.41%(b) 0.51% 1.40% 1.79% 1.32% 1.52%
Portfolio turnover**..... 44.79% 57.11% 63.90% 58.50% 65.00% 41.00%
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Not annualized.
(b) Annualized.
See notes to financial statements
-146-
<PAGE>
THE ARCH FUND, INC.
GROWTH & INCOME EQUITY PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED ----------------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 (a) 1993
------------- ------------- ------------- ------------- ------------- --------
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------- ------------- ------------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 21.12 $ 18.67 $ 16.29 $ 12.70 $ 14.74 $ 14.49
-------- ------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.02 0.12 0.20 0.23 0.20 0.25
Net realized and
unrealized gains
(losses) from
investments........... 1.79 3.95 3.33 3.74 (0.17) 1.06
-------- ------- ------- ------- ------- -------
Total from Investment
Activities........... 1.81 4.07 3.53 3.97 0.03 1.31
-------- ------- ------- ------- ------- -------
Distributions
Net investment income.. (0.02) (0.13) (0.20) (0.24) (0.21) (0.25)
In excess of net
investment income..... (0.03) (0.03) (0.01) -- -- --
Net realized gains..... (3.57) (1.46) (0.94) (0.14) (0.18) (0.81)
In excess of net
realized gains........ -- -- -- -- (1.68) --
-------- ------- ------- ------- ------- -------
Total Distributions... (3.62) (1.62) (1.15) (0.38) (2.07) (1.06)
-------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 19.31 $ 21.12 $ 18.67 $ 16.29 $ 12.70 $ 14.74
======== ======= ======= ======= ======= =======
Total Return............ 10.00%(b) 23.90% 23.08% 31.88% 0.19% 9.65%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $107,778 $92,515 $72,950 $40,228 $21,897 $11,157
Ratio of expenses to
average net assets.... 1.04%(c) 1.04% 1.05% 1.05% 1.05% 0.74%
Ratio of net investment
income to average net
assets................ 0.51%(c) 0.60% 1.19% 1.58% 1.41% 1.74%
Ratio of expenses to
average net assets*... 1.14%(c) 1.14% 1.15% 1.15% 1.16% 0.96%
Ratio of net investment
income to average net
assets*............... 0.41%(c) 0.50% 1.09% 1.48% 1.30% 1.52%
Portfolio turnover**... 44.79% 57.11% 63.90% 58.50% 65.00% 41.00%
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) On January 3, 1994, the Portfolio issued a new series of shares which were
designated as "Institutional" Shares. The financial highlights presented
for the periods prior to January 3, 1994 represent financial highlights
applicable to the Investor Shares.
(b) Not Annualized.
(c) Annualized.
See notes to financial statements
-147-
<PAGE>
THE ARCH FUND, INC.
SMALL CAP EQUITY PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED --------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 (A) 1993
------------ ---------- ----------- ----------- ---------- --------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------ ---------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 15.03 $ 13.40 $ 13.44 $ 11.99 $ 13.14 $11.23
------- ------- ------- ------- ------- ------
Investment Activities
Net investment income
(loss)................ (0.02) (0.05) (0.01) -- (0.03) 0.03
Net realized and
unrealized gains
(losses) from
investments........... 0.86 2.50 1.03 2.36 0.89 2.14
------- ------- ------- ------- ------- ------
Total from Investment
Activities........... 0.84 2.45 1.02 2.36 0.86 2.17
------- ------- ------- ------- ------- ------
Distributions
Net investment income.. -- -- -- -- -- (0.05)
In excess of net
investment income..... -- -- (0.01) -- -- --
Net realized gains..... (1.22) (0.82) (1.05) (0.91) (1.78) (0.21)
In excess of net
realized gains........ -- -- -- -- (0.23) --
------- ------- ------- ------- ------- ------
Total Distributions... (1.22) (0.82) (1.06) (0.91) (2.01) (0.26)
------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD................. $ 14.65 $ 15.03 $ 13.40 $ 13.44 $ 11.99 $13.14
======= ======= ======= ======= ======= ======
Total Return (excludes
sales charge).......... 6.07 %(b) 19.45 % 8.36 % 21.47 % 7.38 % 19.75 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $15,697 $14,213 $13,889 $15,056 $10,899 $4,559
Ratio of expenses to
average net assets.... 1.25 %(c) 1.25 % 1.26 % 1.26 % 1.25 % 0.61 %
Ratio of net investment
income (loss) to
average net assets.... (0.47)%(c) (0.29)% (0.13)% (0.12)% (0.44)% 0.19 %
Ratio of expenses to
average net assets*... 1.35 %(c) 1.35 % 1.36 % 1.36 % 1.36 % 1.23 %
Ratio of net investment
loss to average net
assets*............... (0.57)%(c) (0.39)% (0.23)% (0.22)% (0.55)% (0.43)%
Portfolio turnover**... 40.42 % 80.23 % 65.85 % 83.13 % 85.00 % 65.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) On September 27, 1994, the Portfolio redesignated the Investor Shares as
"Investor A" Shares, and authorized the issuance of a series of shares
designated as "Investor B" Shares.
(b) Not Annualized.
(c) Annualized.
See notes to financial statements
-148-
<PAGE>
THE ARCH FUND, INC.
SMALL CAP EQUITY PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 1, 1995
SIX MONTHS NOVEMBER 30, TO
ENDED --------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 (a)
------------ ---------- ---------- -------------
INVESTOR B INVESTOR B INVESTOR B INVESTOR B
SHARES SHARES SHARES SHARES
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $14.74 $13.24 $13.37 $11.83
------ ------ ------ ------
Investment Activities
Net investment loss...... (0.05) (0.13) (0.07) (0.03)
Net realized and
unrealized gains
(losses) from
investments............. 0.82 2.45 0.99 1.57
------ ------ ------ ------
Total from Investment
Activities............. 0.77 2.32 0.92 1.54
------ ------ ------ ------
Distributions
Net realized gains....... (1.22) (0.82) (1.05) --
------ ------ ------ ------
Total Distributions..... (1.22) (0.82) (1.05) --
------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................... $14.29 $14.74 $13.24 $13.37
====== ====== ====== ======
Total Return (excludes
sales charge)............ 5.68 %(c) 18.62 % 7.63 % 20.83 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)............ $1,665 $1,503 $1,272 $ 603
Ratio of expenses to
average net assets...... 1.95 %(d) 1.95 % 1.96 % 1.96 %(c)
Ratio of net investment
loss to average net
assets.................. (1.18)%(d) (0.99)% (0.83)% (0.78)%(c)
Ratio of expenses to
average net assets*..... 2.05 %(d) 2.05 % 2.06 % 2.06 %(c)
Ratio of net investment
loss to average net
assets*................. (1.28)%(d) (1.09)% (0.93)% (0.88)%(c)
Portfolio turnover**..... 40.42 % 80.23 % 65.85 % 83.13 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) Period from commencement of operations. On September 27, 1994, the
Portfolio authorized the issuance of a series designated as "Investor B"
Shares.
(b) Represents total return for the Investor A Shares from December 1, 1994 to
February 28, 1995 plus the total return for the Investor B Shares from
March 1, 1995 to November 30, 1995.
(c) Not annualized.
(d) Annualized.
See notes to financial statements
-149-
<PAGE>
THE ARCH FUND, INC.
SMALL CAP EQUITY PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED --------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 1993
------------ -------- -------- -------- ------- -------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES
------------ -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 15.17 $ 13.49 $ 13.49 $ 12.01 $ 13.14 $ 11.23
-------- -------- -------- -------- ------- -------
Investment Activities
Net investment income
(loss)................ (0.01) 0.01 0.02 0.03 (0.01) 0.03
Net realized and
unrealized gains
(losses) from
investments........... 0.88 2.50 1.05 2.36 0.89 2.14
-------- -------- -------- -------- ------- -------
Total from Investment
Activities........... 0.87 2.51 1.07 2.39 0.88 2.17
-------- -------- -------- -------- ------- -------
Distributions
Net investment income.. -- (0.01) (0.02) -- -- (0.05)
Net realized gains..... (1.22) (0.82) (1.05) (0.91) (1.78) (0.21)
In excess of net
realized gains........ -- -- -- -- (0.23) --
-------- -------- -------- -------- ------- -------
Total Distributions... (1.22) (0.83) (1.07) (0.91) (2.01) (0.26)
-------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 14.82 $ 15.17 $ 13.49 $ 13.49 $ 12.01 $ 13.14
======== ======== ======== ======== ======= =======
Total Return............ 6.15 %(a) 19.77 % 8.72 % 21.70 % 7.56 % 19.75 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $209,714 $211,643 $171,295 $139,681 $77,690 $47,473
Ratio of expenses to
average net assets.... 0.95 %(b) 0.95 % 0.96 % 0.96 % 0.95 % 0.61 %
Ratio of net investment
income (loss) to
average net assets.... (0.18)%(b) 0.01 % 0.17 % 0.18 % (0.16)% 0.19 %
Ratio of expenses to
average net assets*... 1.35 %(b) 1.35 % 1.06 % 1.06 % 1.36 % 1.23 %
Ratio of net investment
income (loss) to
average net assets*... (0.58)%(b) (0.39)% 0.07 % 0.08 % (0.56)% (0.43)%
Portfolio turnover**... 40.42 % 80.23 % 65.85 % 83.13 % 85.00 % 65.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Not annualized.
(b) Annualized.
See notes to financial statements
-150-
<PAGE>
THE ARCH FUND, INC.
SMALL CAP EQUITY PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED -----------------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 (a) 1993
------------- ------------- -------------- ------------- ------------- --------
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------- ------------- -------------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 14.98 $ 13.36 $ 13.40 $ 11.96 $13.14 $11.23
Investment Activities
Net investment income
(loss)................ (0.04) (0.04) (0.01) (0.01) (0.03) 0.03
Net realized and
unrealized gains
(losses) from
investments........... 0.88 2.48 1.03 2.36 0.86 2.14
------- ------- ------- ------- ------ ------
Total from Investment
Activities........... 0.84 2.44 1.02 2.35 0.83 2.17
------- ------- ------- ------- ------ ------
Distributions
Net investment income.. -- -- -- -- -- (0.05)
In excess of net
investment income..... -- -- (0.01) -- -- --
Net realized gains..... (1.22) (0.82) (1.05) (0.91) (1.78) (0.21)
In excess of net real-
ized gains............ -- -- -- -- (0.23) --
------- ------- ------- ------- ------ ------
Total Distributions... (1.22) (0.82) (1.06) (0.91) (2.01) (0.26)
------- ------- ------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD................. $ 14.60 $ 14.98 $ 13.36 $ 13.40 $11.96 $13.14
======= ======= ======= ======= ====== ======
Total Return............ 6.02 %(b) 19.41 % 8.39 % 21.43 % 7.11 % 19.75 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $33,404 $34,395 $30,081 $17,620 $5,633 $4,559
Ratio of expenses to
average net assets.... 1.25 %(c) 1.25 % 1.26 % 1.26 % 1.25 % 0.61 %
Ratio of net investment
income (loss) to
average net assets.... (0.48)%(c) (0.29)% (0.13)% (0.11)% (0.41)% 0.19 %
Ratio of expenses to
average net assets*... 1.35 %(c) 1.35 % 1.36 % 1.36 % 1.37 % 1.23 %
Ratio of net investment
loss to average net
assets*............... (0.58)%(c) (0.39)% (0.23)% (0.21)% (0.53)% (0.43)%
Portfolio turnover**... 40.42 % 80.23 % 65.85 % 83.13 % 85.00 % 65.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) On January 3, 1994, the Portfolio issued a new series of shares designated
as "Institutional" Shares. The financial highlights presented for periods
prior to January 3, 1994 represent financial highlights applicable to the
Investor Shares.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-151-
<PAGE>
THE ARCH FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
APRIL 4, 1994
SIX MONTHS YEARS ENDED NOVEMBER 30, TO
ENDED -------------------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 1994 (a)(b)(c)
------------ ---------- ---------- ---------- --------------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A
SHARES SHARES SHARES SHARES SHARES
------------ ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $11.99 $12.05 $10.76 $ 9.90 $10.00
------ ------ ------ ------ ------
Investment Activities
Net investment income
(loss)................ (0.02) (0.02) 0.02 0.02 (0.01)
Net realized and
unrealized gains
(losses) from
Investments and
foreign currency...... 2.45 0.32 1.27 0.86 (0.09)
------ ------ ------ ------ ------
Total from Investment
Activities........... 2.43 0.30 1.29 0.88 (0.10)
------ ------ ------ ------ ------
Distributions
In excess of net
investment income..... (0.04) (0.05) -- -- --
Net realized gains..... (0.43) (0.31) -- (0.01) --
Tax return of capital.. -- -- -- (0.01) --
------ ------ ------ ------ ------
Total Distributions... (0.47) (0.36) -- (0.02) --
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $13.95 $11.99 $12.05 $10.76 $ 9.90
====== ====== ====== ====== ======
Total Return (excludes
sales charge).......... 20.99 %(d) 2.58 % 11.99 % 8.89 % (1.00)%(d)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $3,435 $2,854 $2,573 $1,568 $ 791
Ratio of expenses to
average net assets.... 1.57 %(e) 1.59 % 1.44 % 1.45 % 1.55 %(e)
Ratio of net investment
income (loss) to
average net assets.... (0.07)%(e) (0.20)% 0.19 % 0.07 % (0.39)%(e)
Ratio of expenses to
average net assets*... 1.75 %(e) 1.75 % 1.75 % 1.76 % 1.89 %(e)
Ratio of net investment
income (loss) to
average net assets*... (0.25)%(e) (0.36)% (0.12)% (0.24)% (0.73)%(e)
Portfolio turnover**... 40.12 % 75.18 % 77.63 % 62.78 % 21.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) On April 4, 1994, the Portfolio issued a series of shares which were
designated as "Trust" Shares. In addition, on May 2, 1994, the Portfolio
issued a new series of shares which were designated as "Investor" Shares.
The financial highlights presented for April 4, 1994 to May 2, 1994
represent financial highlights applicable to the Trust Shares.
(c) On September 27, 1994, the Portfolio redesignated the Investor Shares as
"Investor A" Shares, and authorized the issuance of a series of shares
designated as "Investor B" Shares.
(d) Not annualized.
(e) Annualized.
See notes to financial statements
-152-
<PAGE>
THE ARCH FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 1, 1995
SIX MONTHS NOVEMBER 30, TO
ENDED --------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 (a)
------------ ---------- ---------- -------------
INVESTOR B INVESTOR B INVESTOR B INVESTOR B
SHARES SHARES SHARES SHARES
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $11.77 $11.90 $10.71 $ 9.26
------ ------ ------ ------
Investment Activities
Net investment loss...... (0.06) (0.09) (0.04) (0.03)
Net realized and
unrealized gains
(losses) from
investments and foreign
currency................ 2.40 0.30 1.23 1.48
------ ------ ------ ------
Total from Investment
Activities............. 2.34 0.21 1.19 1.45
------ ------ ------ ------
Distributions
Net investment income.... -- -- -- --
In excess of net
investment income....... (0.02) (0.03) -- --
Net realized gains....... (0.43) (0.31) -- --
------ ------ ------ ------
Total Distributions..... (0.45) (0.34) -- --
------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................... $13.66 $11.77 $11.90 $10.71
====== ====== ====== ======
Total Return (excludes
sales charge)............ 20.57 %(c) 1.82 % 11.11 % 8.38 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)............ $ 633 $ 562 $ 437 $ 102
Ratio of expenses to
average net assets...... 2.27 %(d) 2.29 % 2.14 % 2.02 %(c)
Ratio of net investment
loss to average net
assets.................. (0.85)%(d) (0.91)% (0.50)% (0.96)%(c)
Ratio of expenses to
average net assets*..... 2.45 %(d) 2.45 % 2.46 % 2.44 %(c)
Ratio of net investment
loss to average net
assets*................. (1.03)%(d) (1.07)% (0.82)% (1.38)%(c)
Portfolio turnover**..... 40.12 % 75.18 % 77.63 % 62.78 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Represents total return for the Investor A Shares from December 1, 1994 to
February 28, 1995 plus the total return for the Investor B Shares from
March 1, 1995 to November 30, 1995.
(c) Not annualized.
(d) Annualized.
See notes to financial statements
-153-
<PAGE>
THE ARCH FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
APRIL 4, 1994
SIX MONTHS YEARS ENDED NOVEMBER 30, TO
ENDED ------------------------------ NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 1994 (a)
------------ -------- -------- -------- -------------
TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES
------------ -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 12.09 $ 12.12 $ 10.79 $ 9.92 $ 10.00
------- -------- -------- -------- -------
Investment Activities
Net investment income.. 0.04 0.01 0.06 0.03 0.01
Net realized and
unrealized gains
(losses) from
investments and
foreign currency...... 2.43 0.33 1.27 0.86 (0.09)
------- -------- -------- -------- -------
Total from Investment
Activities........... 2.47 0.34 1.33 0.89 (0.08)
------- -------- -------- -------- -------
Distributions
Net investment income.. (0.05) (0.04) -- -- --
In excess of net
investment income..... -- (0.02) -- -- --
Net realized gains..... (0.43) (0.31) -- (0.01) --
Tax return of capital.. -- -- -- (0.01) --
------- -------- -------- -------- -------
Total Distributions... (0.48) (0.37) -- (0.02) --
------- -------- -------- -------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 14.08 $ 12.09 $ 12.12 $ 10.79 $ 9.92
======= ======== ======== ======== =======
Total Return............ 21.16 %(b) 2.91 % 12.33 % 8.97 % (0.80)%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $68,560 $ 55,038 $ 52,181 $ 36,096 $23,746
Ratio of expenses to
average net assets.... 1.27 %(c) 1.29 % 1.14 % 1.16 % 1.23 %(c)
Ratio of net investment
income to average net
assets................ 0.23 %(c) 0.09 % 0.51 % 0.39 % 0.23 %(c)
Ratio of expenses to
average net assets*... 1.75 %(c) 1.75 % 1.45 % 1.46 % 1.95 %(c)
Ratio of net investment
income (loss) to
average net assets*... (0.25)%(c) (0.37)% 0.20 % 0.09 % (0.49)%(c)
Portfolio turnover**... 40.12 % 75.18 % 77.63 % 62.78 % 21.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-154-
<PAGE>
THE ARCH FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
APRIL 4, 1994
SIX MONTHS YEARS ENDED NOVEMBER 30, TO
ENDED ----------------------------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 1994 (a)
------------- ------------- ------------- ------------- -------------
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
SHARES SHARES SHARES SHARES SHARES
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $11.97 $12.03 $10.75 $ 9.90 $10.00
------ ------ ------ ------ ------
Investment Activities
Net investment income
(loss)................ 0.02 (0.03) 0.01 0.01 (0.01)
Net realized and
unrealized gains
(losses) from
Investments and
foreign currency...... 2.41 0.33 1.27 0.86 (0.09)
------ ------ ------ ------ ------
Total from Investment
Activities........... 2.43 0.30 1.28 0.87 (0.10)
------ ------ ------ ------ ------
Distributions
Net investment income.. (0.02) -- -- -- --
In excess of net
investment income..... (0.02) (0.05) -- -- --
Net realized gains..... (0.43) (0.31) -- (0.01) --
Total return of
capital............... -- -- -- (0.01) --
------ ------ ------ ------ ------
Total Distributions... (0.47) (0.36) -- (0.02) --
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $13.93 $11.97 $12.03 $10.75 $ 9.90
====== ====== ====== ====== ======
Total Return............ 21.03 %(b) 2.59 % 11.91 % 8.78 % (1.00)%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $8,181 $6,798 $6,059 $2,159 $ 197
Ratio of expenses to
average net assets.... 1.57 %(c) 1.59 % 1.44 % 1.44 % 1.70 %(c)
Ratio of net investment
income (loss) to
average net assets.... (0.10)%(c) (0.21)% 0.16 % 0.13 % (0.48)%(c)
Ratio of expenses to
average net assets*... 1.75 %(c) 1.75 % 1.76 % 1.75 % 2.17 %(c)
Ratio of net investment
loss to average net
assets*............... (0.28)%(c) (0.37)% (0.16)% (0.18)% (0.94)%(c)
Portfolio turnover**... 40.12 % 75.18 % 77.63 % 62.78 % 21.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) On April 4, 1994, the Portfolio issued a series of shares which were
designated as "Trust" Shares. In addition, on April 24, 1994, the
Portfolio issued a new series of shares which were designated as
"Institutional" Shares. The financial highlights presented for April 4,
1994 to April 24, 1994 represent financial highlights applicable to the
Trust Shares.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-155-
<PAGE>
THE ARCH FUND, INC.
EQUITY INCOME PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 27, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------ ---------------------
INVESTOR A INVESTOR A
SHARES SHARES
------------ ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $11.56 $10.00
------ ------
Investment Activities
Net investment income.................... 0.09 0.16
Net realized and unrealized gains
(losses) from investments............... 1.20 1.57
------ ------
Total from Investment Activities........ 1.29 1.73
------ ------
Distributions
Net investment income.................... (0.09) (0.16)
In excess of net investment income....... (0.01) (0.01)
Net realized gains....................... (2.29) --
------ ------
Total Distributions..................... (2.39) (0.17)
------ ------
NET ASSET VALUE, END OF PERIOD............ $10.46 $11.56
====== ======
Total Return (excludes sales charge)...... 13.26 %(b) 17.42 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........ $ 894 $ 173
Ratio of expenses to average net assets.. 0.84 %(c) 0.45 %(c)
Ratio of net investment income to average
net assets.............................. 1.75 %(c) 2.29 %(c)
Ratio of expenses to average net assets*. 1.48 %(c) 1.38 %(c)
Ratio of net investment income to average
net assets*............................. 1.11 %(c) 1.36 %(c)
Portfolio turnover**..................... 41.22 % 48.33 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-156-
<PAGE>
THE ARCH FUND, INC.
EQUITY INCOME PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 27, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------ ---------------------
INVESTOR B INVESTOR B
SHARES SHARES
------------ ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $11.55 $10.00
------ ------
Investment Activities
Net investment income.................... 0.05 0.10
Net realized and unrealized gains
(losses) from investments............... 1.21 1.57
------ ------
Total from Investment Activities........ 1.26 1.67
------ ------
Distributions
Net investment income.................... (0.05) (0.10)
In excess of net investment income....... (0.02) (0.02)
Net realized gains....................... (2.29) --
------ ------
Total Distributions..................... (2.36) (0.12)
------ ------
NET ASSET VALUE, END OF PERIOD............ $10.45 $11.55
====== ======
Total Return (excludes sales charge)...... 12.89 %(b) 16.75 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........ $ 215 $ 131
Ratio of expenses to average net assets.. 1.50 %(c) 1.14 %(c)
Ratio of net investment income to average
net assets.............................. 1.08 %(c) 1.53 %(c)
Ratio of expenses to average net assets*. 2.14 %(c) 2.07 %(c)
Ratio of net investment income to average
net assets*............................. 0.44 %(c) 0.60 %(c)
Portfolio turnover**..................... 41.22 % 48.33 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-157-
<PAGE>
THE ARCH FUND, INC.
EQUITY INCOME PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 27, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------ ---------------------
TRUST TRUST
SHARES SHARES
------------ ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $ 11.56 $ 10.00
-------- --------
Investment Activities
Net investment income................... 0.11 0.20
Net realized and unrealized gains
(losses) from investments.............. 1.20 1.55
-------- --------
Total from Investment Activities....... 1.31 1.75
-------- --------
Distributions
Net investment income................... (0.12) (0.19)
Net realized gains...................... (2.29) --
-------- --------
Total Distributions.................... (2.41) (0.19)
-------- --------
NET ASSET VALUE, END OF PERIOD........... $ 10.46 $ 11.56
======== ========
Total Return............................. 13.51 %(b) 17.64 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)....... $113,577 $131,919
Ratio of expenses to average net assets. 0.44 %(c) 0.15 %(c)
Ratio of net investment income to
average net assets..................... 2.18 %(c) 2.51 %(c)
Ratio of expenses to average net
assets*................................ 1.38 %(c) 1.38 %(c)
Ratio of net investment income to
average net assets*.................... 1.24 %(c) 1.28 %(c)
Portfolio turnover**.................... 41.22 % 48.33 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-158-
<PAGE>
THE ARCH FUND, INC.
EQUITY INCOME PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 27, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------- ---------------------
INSTITUTIONAL INSTITUTIONAL
SHARES SHARES
------------- ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $11.56 $10.00
------ ------
Investment Activities
Net investment income.................... 0.10 0.19
Net realized and unrealized gains
(losses) from investments............... 1.20 1.56
------ ------
Total from Investment Activities........ 1.30 1.75
------ ------
Distributions
Net investment income.................... (0.10) (0.19)
In excess of net investment income....... (0.01) --
Net realized gains....................... (2.29) --
------ ------
Total Distributions..................... (2.40) (0.19)
------ ------
NET ASSET VALUE, END OF PERIOD............ $10.46 $11.56
====== ======
Total Return.............................. 13.36 %(b) 17.64 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........ $ 2 $ 1
Ratio of expenses to average net assets.. 0.55 %(c) 0.37 %(c)
Ratio of net investment income to average
net assets.............................. 2.00 %(c) 2.34 %(c)
Ratio of expenses to average net assets*. 1.35 %(c) 1.60 %(c)
Ratio of net investment income to average
net assets*............................. 1.20 %(c) 1.11 %(c)
Portfolio turnover**..................... 41.22 % 48.33 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-159-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------ ----------------------
INVESTOR A INVESTOR A
SHARES SHARES
------------ ----------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $11.93 $10.00
------ ------
Investment Activities
Net investment income................... 0.05 0.07
Net realized and unrealized gains
(losses) from investments.............. 1.70 1.94
------ ------
Total from Investment Activities....... 1.75 2.01
------ ------
Distributions
Net investment income................... (0.05) (0.07)
In excess of net investment income...... (0.01) (0.01)
Net realized gains...................... (0.02) --
------ ------
Total Distributions.................... (0.08) (0.08)
------ ------
NET ASSET VALUE, END OF PERIOD........... $13.60 $11.93
====== ======
Total Return (excludes sales charge)..... 14.71 %(b) 20.14 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)....... $ 542 $ 206
Ratio of expenses to average net assets. 0.74 %(c) 0.78 %(c)
Ratio of net investment income to
average net assets..................... 0.86 %(c) 1.02 %(c)
Ratio of expenses to average net
assets*................................ 1.04 %(c) 1.21 %(c)
Ratio of net investment income to
average net assets*.................... 0.56 %(c) 0.59 %(c)
Portfolio turnover**.................... 10.57 % 1.66 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-160-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------ ---------------------
TRUST TRUST
SHARES SHARES
------------ ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 11.94 $ 10.00
------- -------
Investment Activities
Net investment income.................... 0.08 0.10
Net realized and unrealized gains
(losses) from investments............... 1.68 1.94
------- -------
Total from Investment Activities........ 1.76 2.04
------- -------
Distributions
Net investment income.................... (0.08) (0.10)
Net realized gains....................... (0.02) --
------- -------
Total Distributions..................... (0.10) (0.10)
------- -------
NET ASSET VALUE, END OF PERIOD............ $ 13.60 $ 11.94
======= =======
Total Return.............................. 14.87 %(b) 20.40 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........ $39,946 $31,787
Ratio of expenses to average net assets.. 0.42 %(c) 0.39 %(c)
Ratio of net investment income to average
net assets.............................. 1.18 %(c) 1.48 %(c)
Ratio of expenses to average net assets*. 1.02 %(c) 1.12 %(c)
Ratio of net investment income to average
net assets*............................. 0.58 %(c) 0.75 %(c)
Portfolio turnover**..................... 10.57 % 1.66 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-161-
<PAGE>
THE ARCH FUND, INC.
EQUITY INDEX PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------- ---------------------
INSTITUTIONAL INSTITUTIONAL
SHARES SHARES
------------- ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $11.94 $10.00
------ ------
Investment Activities
Net investment income.................... 0.06 0.10
Net realized and unrealized gains
(losses) from investments............... 1.69 1.94
------ ------
Total from Investment Activities........ 1.75 2.04
------ ------
Distributions
Net investment income.................... (0.06) (0.10)
In excess of net investment income....... (0.01) --
Net realized gains....................... (0.02) --
------ ------
Total Distributions..................... (0.09) (0.10)
------ ------
NET ASSET VALUE, END OF PERIOD............ $13.60 $11.94
====== ======
Total Return.............................. 14.73 %(b) 20.40 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........ $ 8 $ 8
Ratio of expenses to average net assets.. 0.83 %(c) 0.46 %(c)
Ratio of net investment income to average
net assets.............................. 0.76 %(c) 1.30 %(c)
Ratio of expenses to average net assets*. 1.16 %(c) 1.19 %(c)
Ratio of net investment income to average
net assets*............................. 0.43 %(c) 0.57 %(c)
Portfolio turnover**..................... 10.57 % 1.66 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-162-
<PAGE>
THE ARCH FUND, INC.
GROWTH EQUITY PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
OCTOBER 1, 1997 JANUARY 4, 1993
SIX MONTHS TO YEAR ENDED SEPTEMBER 30, TO
ENDED NOVEMBER 30, ---------------------------------------------- SEPTEMBER 30,
MAY 31, 1998 1997 (a) 1997 1996 1995 1994 1993 (d)
------------ --------------- ---------- ---------- ---------- ---------- ---------------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------------ --------------- ---------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $16.26 $18.75 $ 15.06 $ 13.80 $ 9.74 $ 10.02 $ 10.00
------ ------ ------- ------- ------- ------- -------
Investment Activities
Net investment income
(loss)................ (0.02) (0.01) 0.08 0.12 0.10 0.07 0.04
Net realized and
unrealized gains
(losses) From
investments........... 2.07 (0.24) 4.75 1.32 4.05 (0.25) 0.02
------ ------ ------- ------- ------- ------- -------
Total from Investment
Activities........... 2.05 (0.25) 4.83 1.44 4.15 (0.18) 0.06
------ ------ ------- ------- ------- ------- -------
Distributions
Net investment income.. -- -- (0.09) (0.11) (0.09) (0.07) (0.04)
In excess of net
investment income..... -- -- -- -- -- -- --
Net realized gains..... -- (2.24) (1.05) (0.07) -- (0.03) --
------ ------ ------- ------- ------- ------- -------
Total Distributions... -- (2.24) (1.14) (0.18) (0.09) (0.10) (0.04)
------ ------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $18.31 $16.26 $ 18.75 $ 15.06 $ 13.80 $ 9.74 $ 10.02
====== ====== ======= ======= ======= ======= =======
Total Return (excludes
sales charge).......... 12.69 %(b) (1.25)%(b) 33.85 % 10.48 % 42.90 % (1.84)% 0.60 %(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $3,705 $3,467 $68,965 $55,573 $43,708 $30,282 $31,159
Ratio of expenses to
average net assets.... 1.27 %(c) 1.17 %(c) 1.14 % 1.17 % 1.28 % 1.36 % 1.32 %(c)
Ratio of net investment
income to average net
assets................ (0.17)%(c) (0.27)%(c) 0.44 % 0.86 % 0.90 % 0.74 % 0.62 %(c)
Ratio of expenses to
average net assets*... 1.37 %(c) 1.42 %(c) 1.39 % 1.45 % 1.58 % 1.64 % 1.62 %(c)
Ratio of net investment
income to average net
assets*............... (0.27)%(c) (0.52) %(c) 0.19 % 0.58 % 0.60 % 0.46 % 0.32 %(c)
Portfolio turnover**... 34.93 % 24.45 % 42 % 45 % 45 % 127 % 54 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Upon reorganizing as a Portfolio of the Arch Fund, Inc., the Arrow Equity
Portfolio became the Growth Equity Portfolio and changed its year-end to
November 30. Financial Highlights for the periods prior to November 24,
1997 represent financial highlights of the Arrow Equity Portfolio.
(b) Not annualized.
(c) Annualized.
(d) Period from initial public investment.
-163-
<PAGE>
THE ARCH FUND, INC.
GROWTH EQUITY PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FEBRUARY 23, 1998
TO
MAY 31, 1998 (a)
-----------------
INVESTOR B
SHARES
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......................... 16.27
------
Investment Activities
Net investment income (loss)................................ (0.03)
Net realized and unrealized gains (losses) from investments. 2.04
------
Total from Investment Activities........................... 2.01
------
Distributions
Net investment income....................................... --
In excess of net investment income.......................... --
------
Total Distributions........................................ --
------
NET ASSET VALUE, END OF PERIOD............................... 18.28
======
Total Return................................................. 1.22 %(b)
RATIO/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........................... $ 82
Ratio of expenses to average net assets..................... 1.98 %(c)
Ratio of net investment income to average net assets........ (1.18)%(c)
Ratio of expenses to average net assets*.................... 2.08 %(c)
Ratio of net investment income to average net assets*....... (1.28)%(c)
Portfolio turnover**........................................ 34.93 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from initial public investment.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-164-
<PAGE>
THE ARCH FUND, INC.
GROWTH EQUITY PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS NOVEMBER 24, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------ ---------------------
TRUST TRUST
SHARES SHARES
------------ ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 16.26 $ 16.44
------- -------
Investment Activities
Net investment income.................... (0.02) 0.09
Net realized and unrealized gains
(losses) from investments............... 2.09 (0.27)
------- -------
Total from Investment Activities........ 2.07 (0.18)
------- -------
Distributions
Net investment income.................... -- --
In excess of net investment income....... (0.01) --
------- -------
Total Distributions..................... (0.01) --
------- -------
NET ASSET VALUE, END OF PERIOD............ $ 18.32 $ 16.26
======= =======
Total Return.............................. 12.73 %(b) (1.09)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........ $85,401 $63,786
Ratio of expenses to average net assets.. 1.16 %(c) 1.24 %(c)
Ratio of net investment income to average
net assets.............................. (0.07)%(c) (0.15)%(c)
Ratio of expenses to average net assets*. 1.37 %(c) 1.34 %(c)
Ratio of net investment income to average
net assets*............................. (0.28)%(c) (0.25)%(c)
Portfolio turnover**..................... 34.93 % 0.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-165-
<PAGE>
THE ARCH FUND, INC.
GROWTH EQUITY PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DECEMBER 2, 1997
TO
MAY 31, 1998 (a)
----------------
INVESTOR B
SHARES
----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $16.27
------
Investment Activities
Net investment income (loss)................................. (0.02)
Net realized and unrealized gains (losses) from investments.. 2.07
------
Total from Investment Activities............................ 2.05
------
Distributions
Net investment income........................................ (0.01)
In excess of net investment income........................... --
------
Total Distributions......................................... (0.01)
------
NET ASSET VALUE, END OF PERIOD................................ $18.31
======
Total Return.................................................. 9.90 %(b)
RATIO/SUPPLEMENTARY DATA:
Net Assets at end of period (000)............................ $6,268
Ratio of expenses to average net assets...................... 1.27 %(c)
Ratio of net investment income to average net assets......... (0.19)%(c)
Ratio of expenses to average net assets*..................... 1.37 %(c)
Ratio of net investment income to average net assets*........ (0.29)%(c)
Portfolio turnover**......................................... 34.93 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from initial public investment.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-166-
<PAGE>
THE ARCH FUND, INC.
BALANCED PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
APRIL 1, 1993
SIX MONTHS YEARS ENDED NOVEMBER 30, TO
ENDED ------------------------------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 1994 (a) 1993 (b)
------------ ---------- ---------- ---------- ---------- -------------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------ ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 13.26 $12.58 $11.65 $ 9.61 $10.22 $10.00
------- ------ ------ ------ ------ ------
Investment Activities
Net investment income.. 0.13 0.32 0.32 0.32 0.28 0.23
Net realized and
unrealized gains
(losses) from
investments........... 0.77 1.47 1.34 2.02 (0.47) 0.15
------- ------ ------ ------ ------ ------
Total from Investment
Activities........... 0.90 1.79 1.66 2.34 (0.19) 0.38
------- ------ ------ ------ ------ ------
Distributions
Net investment income.. (0.13) (0.40) (0.31) (0.30) (0.29) (0.16)
In excess of net
investment income..... (0.01) -- -- -- -- --
Net realized gains..... (1.47) (0.71) (0.42) -- -- --
In excess of net
realized gains........ -- -- -- -- (0.13) --
------- ------ ------ ------ ------ ------
Total Distributions... (1.61) (1.11) (0.73) (0.30) (0.42) (0.16)
------- ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $ 12.55 $13.26 $12.58 $11.65 $ 9.61 $10.22
======= ====== ====== ====== ====== ======
Total Return (excludes
sales charge).......... 7.45 %(c) 15.38 % 15.10 % 24.85 % (1.91)% 3.86 %(c)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $10,849 $9,923 $9,328 $8,348 $7,321 $1,978
Ratio of expenses to
average net assets.... 1.26 %(d) 1.27 % 1.27 % 1.27 % 1.27 % 0.56 %(d)
Ratio of net investment
income to average net
assets................ 2.17 %(d) 2.57 % 2.79 % 2.98 % 2.77 % 3.42 %(d)
Ratio of expenses to
average net assets*... 1.36 %(d) 1.37 % 1.37 % 1.37 % 1.39 % 1.21 %(d)
Ratio of net investment
income to average net
assets*............... 2.07 %(d) 2.47 % 2.69 % 2.88 % 2.65 % 2.77 %(d)
Portfolio turnover**... 26.02 % 43.60 % 85.16 % 58.16 % 49.00 % 26.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) On September 27, 1994, the Portfolio redesignated the Investor Shares as
"Investor A" Shares, and authorized the issuance of a series of shares
designated as "Investor B" Shares.
(b) Period from commencement of operations.
(c) Not annualized.
(d) Annualized.
See notes to financial statements
-167-
<PAGE>
THE ARCH FUND, INC.
BALANCED PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 1, 1995
SIX MONTHS NOVEMBER 30, TO
ENDED --------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 (a)
------------ ---------- ---------- -------------
INVESTOR B INVESTOR B INVESTOR B INVESTOR B
SHARES SHARES SHARES SHARES
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $13.15 $12.49 $11.59 $10.13
------ ------ ------ ------
Investment Activities
Net investment income.... 0.06 0.25 0.25 0.22
Net realized and
unrealized gains
(losses) from
investments............. 0.79 1.43 1.33 1.44
------ ------ ------ ------
Total from Investment
Activities............. 0.85 1.68 1.58 1.66
------ ------ ------ ------
Distributions
Net investment income.... (0.06) (0.26) (0.26) (0.20)
In excess of net
investment income....... (0.04) (0.05) -- --
Net realized gains....... (1.47) (0.71) (0.42) --
------ ------ ------ ------
Total Distributions..... (1.57) (1.02) (0.68) (0.20)
------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................... $12.43 $13.15 $12.49 $11.59
====== ====== ====== ======
Total Return (excludes
sales charge)............ 7.08 %(c) 14.57 % 14.35 % 23.92 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)............ $ 689 $ 522 $ 321 $ 36
Ratio of expenses to
average net assets...... 1.96 %(d) 1.96 % 1.96 % 1.93 %(c)
Ratio of net investment
income to average net
assets.................. 1.47 %(d) 1.85 % 2.09 % 2.28 %(c)
Ratio of expenses to
average net assets*..... 2.06 %(d) 2.06 % 2.06 % 2.03 %(c)
Ratio of net investment
income to average net
assets*................. 1.37 %(d) 1.75 % 1.99 % 2.18 %(c)
Portfolio turnover**..... 26.02 % 43.60 % 85.16 % 58.16 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations. On September 27, 1994, the
Portfolio authorized the issuance of a series of shares designated as
"Investor B" Shares.
(b) Represents total return for the Investor A Shares from December 1, 1994 to
February 28, 1995 plus the total return for the Investor B Shares from
March 1, 1995 to November 30, 1995.
(c) Not annualized.
(d) Annualized.
See notes to financial statements
-168-
<PAGE>
THE ARCH FUND, INC.
BALANCED PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
APRIL 1, 1993
SIX MONTHS YEARS ENDED NOVEMBER 30, TO
ENDED ------------------------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 1994 1993 (a)
------------ ------- ------- ------- ------- -------------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES
------------ ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 13.27 $ 12.58 $ 11.64 $ 9.62 $ 10.22 $ 10.00
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income.... 0.17 0.38 0.37 0.34 0.29 0.23
Net realized and
unrealized gains
(losses) from
Investments............. 0.75 1.45 1.34 2.02 (0.47) 0.15
------- ------- ------- ------- ------- -------
Total from Investment
Activities............. 0.92 1.83 1.71 2.36 (0.18) 0.38
------- ------- ------- ------- ------- -------
Distributions
Net investment income.... (0.16) (0.43) (0.35) (0.34) (0.29) (0.16)
Net realized gains....... (1.47) (0.71) (0.42) -- -- --
In excess of net realized
gains................... -- -- -- -- (0.13) --
------- ------- ------- ------- ------- -------
Total Distributions..... (1.63) (1.14) (0.77) (0.34) (0.42) (0.16)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................... $ 12.56 $ 13.27 $ 12.58 $ 11.64 $ 9.62 $ 10.22
======= ======= ======= ======= ======= =======
Total Return.............. 7.61 %(b) 15.81 % 15.56 % 24.97 % (1.81)% (3.86)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)............ $45,172 $54,299 $61,821 $72,669 $65,288 $69,720
Ratio of expenses to
average net assets...... 0.96 %(c) 0.97 % 0.97 % 0.98 % 0.97 % 0.56 %(c)
Ratio of net investment
income to average net
assets.................. 2.49 %(c) 2.87 % 3.08 % 3.29 % 3.04 % 3.42 %(c)
Ratio of expenses to
average net assets*..... 1.36 %(c) 1.37 % 1.07 % 1.08 % 1.39 % 1.21 %(c)
Ratio of net investment
income to average net
assets*................. 2.09 %(c) 2.47 % 2.98 % 3.19 % 2.63 % 2.77 %(c)
Portfolio turnover**..... 26.02 % 43.60 % 85.16 % 58.16 % 49.00 % 26.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not Annualized.
(c) Annualized.
See notes to financial statements
-169-
<PAGE>
THE ARCH FUND, INC.
BALANCED PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
APRIL 1, 1993
SIX MONTHS YEARS ENDED NOVEMBER 30, TO
ENDED ------------------------------------------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 1994 (a) 1993 (b)
------------- ------------- ------------- ------------- ------------- -------------
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INVESTOR
SHARES SHARE SHARES SHARES SHARES SHARES
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 13.23 $ 12.54 $ 11.62 $ 9.60 $ 10.22 $10.00
------- ------- ------- ------- ------- ------
Investment Activities
Net investment income.. 0.12 0.31 0.32 0.31 0.28 0.23
Net realized and
unrealized gains
(losses) from
investments........... 0.78 1.49 1.34 2.02 (0.48) 0.15
------- ------- ------- ------- ------- ------
Total from Investment
Activities........... 0.90 1.80 1.66 2.33 (0.20) 0.38
------- ------- ------- ------- ------- ------
Distributions
Net investment income.. (0.11) (0.37) (0.32) (0.31) (0.29) (0.16)
In excess of net
investment income..... (0.03) (0.03) -- -- -- --
Net realized gains..... (1.47) (0.71) (0.42) -- -- --
In excess of net
realized gains........ -- -- -- -- (0.13) --
------- ------- ------- ------- ------- ------
Total Distributions... (1.61) (1.11) (0.74) (0.31) (0.42) (0.16)
------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD................. $ 12.52 $ 13.23 $ 12.54 $ 11.62 $ 9.60 $10.22
======= ======= ======= ======= ======= ======
Total Return............ 7.48 %(c) 15.52 % 15.08 % 24.67 % (2.00)% 3.86 %(c)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $72,382 $61,655 $54,731 $36,827 $22,723 $1,978
Ratio of expenses to
average net assets.... 1.26 %(d) 1.27 % 1.27 % 1.27 % 1.27 % 0.56 %(d)
Ratio of net investment
income to average net
assets................ 2.17 %(d) 2.56 % 2.78 % 2.97 % 2.77 % 3.42 %(d)
Ratio of expenses to
average net assets*... 1.36 %(d) 1.37 % 1.37 % 1.37 % 1.40 % 1.21 %(d)
Ratio of net investment
income to average net
assets*............... 2.07 %(d) 2.46 % 2.68 % 2.87 % 2.64 % 2.77 %(d)
Portfolio turnover**... 26.02 % 43.60 % 85.16 % 58.16 % 49.00 % 26.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) The Balanced Portfolio issued a series of shares designated as "Investor"
Shares on April 1, 1993. In addition, on January 3, 1994, the Portfolio
issued a new series of shares designated as "Institutional" Shares. The
financial highlights presented for periods prior to January 3, 1994
represent financial highlights applicable to the Investor Shares.
(c) Not annualized.
(d) Annualized.
See notes to financial statements
-170-
<PAGE>
THE ARCH FUND, INC.
GOVERNMENT & CORPORATE BOND PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED -----------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 (a) 1993
------------ ---------- ---------- ----------- ---------- --------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------ ---------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.35 $10.34 $10.53 $ 9.64 $10.65 $10.26
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income.. 0.28 0.56 0.64 0.61 0.60 0.64
Net realized and
unrealized gains
(losses) from
investments........... 0.10 0.01 (0.19) 0.89 (0.94) 0.39
------ ------ ------ ------ ------ ------
Total from Investment
Activities........... 0.38 0.57 0.45 1.50 (0.34) 1.03
------ ------ ------ ------ ------ ------
Distributions
Net investment income.. (0.28) (0.56) (0.64) (0.61) (0.60) (0.64)
In excess of net
investment income..... -- -- -- -- (0.07) --
------ ------ ------ ------ ------ ------
Total Distributions... (0.28) (0.56) (0.64) (0.61) (0.67) (0.64)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $10.45 $10.35 $10.34 $10.53 $ 9.64 $10.65
====== ====== ====== ====== ====== ======
Total Return (excludes
sales charge).......... 3.76 %(b) 5.78 % 4.51 % 15.98 % (3.32)% 10.23 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $4,599 $4,774 $4,915 $5,496 $5,167 $3,737
Ratio of expenses to
average net assets.... 0.96 %(c) 0.95 % 0.95 % 0.95 % 0.95 % 0.95 %
Ratio of net investment
income to average net
assets................ 5.48 %(c) 5.46 % 6.06 % 6.03 % 6.00 % 6.00 %
Ratio of expenses to
average net assets*... 1.06 %(c) 1.05 % 1.05 % 1.05 % 1.05 % 1.05 %
Ratio of net investment
income to average net
assets*............... 5.38 %(c) 5.36 % 5.96 % 5.93 % 5.90 % 5.90 %
Portfolio turnover**... 33.35 % 140.72 % 149.20 % 59.32 % 50.00 % 31.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) On September 27, 1994, the Portfolio redesignated the Investor Shares as
"Investor A" Shares, and authorized the issuance of a series of shares
designated as "Investor B" Shares.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-171-
<PAGE>
THE ARCH FUND, INC.
GOVERNMENT & CORPORATE BOND PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 1, 1995
SIX MONTHS NOVEMBER 30, TO
ENDED ---------------------- NOVEMBER 30
MAY 31, 1998 1997 1996 1995 (a)
------------ ---------- ---------- -------------
INVESTOR B INVESTOR B INVESTOR B INVESTOR B
SHARES SHARES SHARES SHARES
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $10.37 $ 10.34 $ 10.53 $ 9.92
------ ------- ------- ------
Investment Activities
Net investment income.... 0.25 0.49 0.57 0.38
Net realized and
unrealized gains
(losses) from
investments............. 0.10 0.03 (0.19) 0.61
------ ------- ------- ------
Total from Investment
Activities............. 0.35 0.52 0.38 0.99
------ ------- ------- ------
Distributions
Net investment income.... (0.25) (0.49) (0.57) (0.38)
------ ------- ------- ------
Total Distributions..... (0.25) (0.49) (0.57) (0.38)
------ ------- ------- ------
NET ASSET VALUE, END OF
PERIOD................... $10.47 $ 10.37 $ 10.34 $10.53
====== ======= ======= ======
Total Return (excludes
sales charge)............ 3.39 %(c) 5.26 % 3.79 % 15.27 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000)............ $ 578 $ 545 $ 511 $ 106
Ratio of expenses to
average net assets...... 1.66 %(d) 1.65 % 1.65 % 1.65 %(d)
Ratio of net investment
income to average net
assets.................. 4.77 %(d) 4.84 % 5.37 % 5.19 %(d)
Ratio of expenses to
average net assets*..... 1.76 %(d) 1.75 % 1.75 % 1.75 %(d)
Ratio of net investment
income to average net
assets*................. 4.67 %(d) 4.74 % 5.27 % 5.09 %(d)
Portfolio turnover**..... 33.35 % 140.72 % 149.20 % 59.32 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) Period from commencement of operations. On September 27, 1994, the
Portfolio redesignated the Investor Shares as "Investor A" Shares and
authorized the issuance of a series of shares designated as "Investor B"
Shares.
(b) Represents total return for the Investor A Shares from December 1, 1994 to
February 28, 1995 plus the total return for the Investor B Shares from
March 1, 1995 to November 30, 1995.
(c) Not annualized.
(d) Annualized.
See notes to financial statements
-172-
<PAGE>
THE ARCH FUND, INC.
GOVERNMENT & CORPORATE BOND PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER
ENDED ----------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 1993
------------ -------- -------- -------- -------- --------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 10.37 $ 10.34 $ 10.53 $ 9.64 $ 10.65 $ 10.26
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income.... 0.30 0.59 0.67 0.64 0.63 0.68
Net realized and
unrealized gains
(losses) from
Investments............. 0.09 0.03 (0.19) 0.89 (0.94) 0.39
-------- -------- -------- -------- -------- --------
Total from Investment
Activities............. 0.39 0.62 0.48 1.53 (0.31) 1.07
-------- -------- -------- -------- -------- --------
Distributions
Net investment income.... (0.30) (0.59) (0.67) (0.64) (0.63) (0.68)
In excess of net realized
gains................... -- -- -- -- (0.07) --
-------- -------- -------- -------- -------- --------
Total Distributions..... (0.30) (0.59) (0.67) (0.64) (0.70) (0.68)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................... $ 10.46 $ 10.37 $ 10.34 $ 10.53 $ 9.64 $ 10.65
======== ======== ======== ======== ======== ========
Total Return.............. 3.81 %(a) 6.32 % 4.82 % 16.31 % (3.03)% 10.55 %
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000)............ $178,246 $172,637 $141,440 $127,741 $132,577 $149,674
Ratio of expenses to
average net assets...... 0.66 %(b) 0.65 % 0.65 % 0.65 % 0.65 % 0.65 %
Ratio of net investment
income to average net
assets.................. 5.78 %(b) 5.85 % 6.36 % 6.32 % 6.25 % 6.32 %
Ratio of expenses to
average net assets*..... 1.06 %(b) 1.05 % 0.75 % 0.75 % 1.05 % 0.88 %
Ratio of net investment
income to average net
assets*................. 5.38 %(b) 5.45 % 6.26 % 6.22 % 5.85 % 6.09 %
Portfolio turnover**..... 33.35 % 140.72 % 149.20 % 59.32 % 50.00 % 31.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Not annualized.
(b) Annualized.
See notes to financial statements
-173-
<PAGE>
THE ARCH FUND, INC.
GOVERNMENT & CORPORATE BOND PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED ----------------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 (a) 1993
------------- ------------- ------------- ------------- ------------- --------
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------- ------------- ------------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.37 $ 10.34 $ 10.53 $ 9.64 $10.65 $10.26
------- ------- ------- ------ ------ ------
Investment Activities
Net investment income.. 0.29 0.56 0.64 0.61 0.60 0.64
Net realized and
unrealized gains
(losses) from
investments........... 0.10 0.03 (0.19) 0.89 (0.94) 0.39
------- ------- ------- ------ ------ ------
Total from Investment
Activities........... 0.39 0.59 0.45 1.50 (0.34) 1.03
------- ------- ------- ------ ------ ------
Distributions
Net investment income.. (0.29) (0.56) (0.64) (0.61) (0.60) (0.64)
In excess of net
realized gains........ -- -- -- -- (0.07) --
------- ------- ------- ------ ------ ------
Total Distributions... (0.29) (0.56) (0.64) (0.61) (0.67) (0.64)
------- ------- ------- ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $ 10.47 $ 10.37 $ 10.34 $10.53 $ 9.64 $10.65
======= ======= ======= ====== ====== ======
Total Return............ 3.75 %(b) 6.00 % 4.51 % 15.98 % (3.32)% 10.23 %
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000).......... $19,471 $16,954 $14,875 $9,413 $5,965 $3,737
Ratio of expenses to
average net assets.... 0.96 %(c) 0.95 % 0.95 % 0.95 % 0.96 % 0.95 %
Ratio of net investment
income to average net
assets................ 5.48 %(c) 5.55 % 6.06 % 6.01 % 6.03 % 6.00 %
Ratio of expenses to
average net assets*... 1.06 %(c) 1.05 % 1.05 % 1.05 % 1.07 % 1.05 %
Ratio of net investment
income to average net
assets*............... 5.38 %(c) 5.45 % 5.96 % 5.91 % 5.92 % 5.90 %
Portfolio turnover**... 33.35 % 140.72 % 149.20 % 59.32 % 50.00 % 31.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) On January 3, 1994, the Portfolio issued a new series of shares which were
designated as "Institutional" Shares. The financial highlights presented
for the periods prior to January 3, 1994 represent financial highlights
applicable to the Investor Shares.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-174-
<PAGE>
THE ARCH FUND, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED ----------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 (a) 1993
------------ ---------- ---------- ---------- ---------- --------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------ ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.62 $10.67 $10.85 $10.05 $11.20 $10.80
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income.. 0.29 0.60 0.62 0.64 0.61 0.59
Net realized and
unrealized gains
(losses) from
investments........... 0.02 (0.07) (0.15) 0.80 (1.00) 0.47
------ ------ ------ ------ ------ ------
Total from Investment
Activities........... 0.31 0.53 0.47 1.44 (0.39) 1.06
------ ------ ------ ------ ------ ------
Distributions
Net investment income.. (0.29) (0.58) (0.62) (0.64) (0.61) (0.59)
In excess of net
investment income..... -- -- (0.03) -- -- --
Net realized gains..... -- -- -- -- -- (0.07)
In excess of net
realized gains........ -- -- -- -- (0.18) --
------ ------ ------ ------ ------ ------
Total Distributions... (0.29) (0.58) (0.65) (0.64) (0.79) (0.66)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $10.64 $10.62 $10.67 $10.85 $10.05 $11.20
====== ====== ====== ====== ====== ======
Total Return (excludes
sales charge).......... 2.93 %(b) 5.20 % 4.57 % 14.66 % (3.14)% 10.03 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $4,726 $5,181 $7,153 $8,179 $9,631 $9,567
Ratio of expenses to
average net assets.... 0.97 %(c) 0.97 % 0.97 % 0.97 % 0.96 % 0.97 %
Ratio of net investment
income to average net
assets................ 5.42 %(c) 5.56 % 5.82 % 6.05 % 5.98 % 5.25 %
Ratio of expenses to
average net assets*... 1.07 %(c) 1.07 % 1.07 % 1.07 % 1.06 % 1.08 %
Ratio of net investment
income to average net
assets*............... 5.32 %(c) 5.46 % 5.72 % 5.95 % 5.88 % 5.14 %
Portfolio turnover**... 31.02 % 100.33 % 53.76 % 93.76 % 50.00 % 24.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) On September 27, 1994, the Portfolio redesignated the Investor Shares as
"Investor A" Shares, and authorized the issuance of a series of shares
designated as "Investor B" Shares.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-175-
<PAGE>
THE ARCH FUND, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 1, 1995
SIX MONTHS NOVEMBER 30, TO
ENDED --------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 (a)
------------ ---------- ---------- -------------
INVESTOR B INVESTOR B INVESTOR B INVESTOR B
SHARES SHARES SHARES SHARES
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $10.61 $10.66 $10.84 $10.34
------ ------ ------ ------
Investment Activities
Net investment income.... 0.25 0.51 0.55 0.31
Net realized and
unrealized gains
(losses) from
investments............. 0.02 (0.05) (0.15) 0.50
------ ------ ------ ------
Total from Investment
Activities............. 0.27 0.46 0.40 0.81
------ ------ ------ ------
Distributions
Net investment income.... (0.25) (0.51) (0.55) (0.31)
Net realized gains....... -- -- (0.03) --
------ ------ ------ ------
Total Distributions..... (0.25) (0.51) (0.58) (0.31)
------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................... $10.63 $10.61 $10.66 $10.84
====== ====== ====== ======
Total Return (excludes
sales charge)............ 2.57 %(c) 4.47 % 3.85 % 12.85 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of pe-
riod (000).............. $ 497 $ 466 $ 359 $ 41
Ratio of expenses to
average net assets...... 1.67 %(d) 1.67 % 1.66 % 1.68 %(d)
Ratio of net investment
income to average net
assets.................. 4.73 %(d) 4.84 % 5.06 % 5.37 %(d)
Ratio of expenses to
average net assets*..... 1.77 %(d) 1.77 % 1.76 % 1.78 %(d)
Ratio of net investment
income to average net
assets*................. 4.63 %(d) 4.74 % 4.96 % 5.27 %(d)
Portfolio turnover**..... 31.02 % 100.33 % 53.76 % 93.76 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations. On September 27, 1994, the
Portfolio redesignated the Investor Shares as "Investor A" Shares, and
authorized the issuance of a series of shares designated as "Investor B"
Shares.
(b) Represents total return for the Investor A Shares from December 1, 1994 to
February 28, 1995 plus the total return for the Investor B Shares from
March 1, 1995 to November 30, 1995.
(c) Not annualized.
(d) Annualized.
See notes to financial statements
-176-
<PAGE>
THE ARCH FUND, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED -----------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 1993
------------ ------- ------- ------- ------- -------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.62 $ 10.67 $ 10.85 $ 10.05 $ 11.20 $ 10.80
======= ======= ======= ======= ======= =======
Investment Activities
Net investment income.. 0.30 0.61 0.66 0.67 0.66 0.62
Net realized and
unrealized gains
(losses) from
Investments........... 0.02 (0.05) (0.15) 0.80 (0.97) 0.47
======= ======= ======= ======= ======= =======
Total from Investment
Activities........... 0.32 0.56 0.51 1.47 (0.31) 1.09
======= ======= ======= ======= ======= =======
Distributions
Net investment income.. (0.30) (0.61) (0.66) (0.67) (0.66) (0.62)
Net realized gains..... -- -- -- -- (0.07)
In excess of net
realized gains........ -- -- (0.03) -- (0.18) --
======= ======= ======= ======= ======= =======
Total Distributions... (0.30) (0.61) (0.69) (0.67) (0.84) (0.69)
======= ======= ======= ======= ======= =======
NET ASSET VALUE, END OF
PERIOD................. $ 10.64 $ 10.62 $ 10.67 $ 10.85 $ 10.05 $ 11.20
======= ======= ======= ======= ======= =======
Total Return............ 3.08 %(a) 5.51 % 4.88 % 15.00 % (2.85)% 10.36 %
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $94,110 $72,753 $60,079 $45,513 $33,166 $35,121
Ratio of expenses to
average net assets.... 0.67 %(b) 0.67 % 0.67 % 0.67 % 0.66 % 0.67 %
Ratio of net investment
income to average net
assets................ 5.73 %(b) 5.84 % 6.10 % 6.36 % 6.25 % 5.57 %
Ratio of expenses to
average net assets*... 1.07 %(b) 1.07 % 0.77 % 0.77 % 1.06 % 0.91 %
Ratio of net investment
income to average net
assets*............... 5.33 %(b) 5.44 % 6.00 % 6.26 % 5.85 % 5.33 %
Portfolio turnover**... 31.02 % 100.33 % 53.67 % 93.76 % 50.00 % 24.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Not annualized.
(b) Annualized.
See notes to financial statements
-177-
<PAGE>
THE ARCH FUND, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED ----------------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 (a) 1993
------------- ------------- ------------- ------------- ------------- --------
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES
------------- ------------- ------------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.58 $10.64 $10.82 $10.02 $11.20 $10.80
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income.. 0.29 0.56 0.62 0.63 0.61 0.59
Net realized and
unrealized gains
(losses) from
investments........... 0.02 (0.04) (0.15) 0.80 (1.00) 0.47
------ ------ ------ ------ ------ ------
Total from Investment
Activities........... 0.31 0.52 0.47 1.43 (0.39) 1.06
------ ------ ------ ------ ------ ------
Distributions
Net investment income.. (0.29) (0.58) (0.62) (0.63) (0.61) (0.59)
In excess of net
investment income..... -- -- -- -- (0.18) --
Net realized gains..... -- -- -- -- -- (0.07)
In excess of net
realized gains........ -- -- (0.03) -- -- --
------ ------ ------ ------ ------ ------
Total Distributions... (0.29) (0.58) (0.65) (0.63) (0.79) (0.66)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $10.60 $10.58 $10.64 $10.82 $10.02 $11.20
====== ====== ====== ====== ====== ======
Total Return............ 2.93 %(b) 5.10 % 4.55 % 14.69 % (3.46)% 10.03 %
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000).......... $6,251 $7,049 $2,232 $ 667 $ 51 $9,567
Ratio of expenses to
average net assets.... 0.97 %(c) 0.97 % 0.96 % 0.97 % 0.95 % 0.97 %
Ratio of net investment
income to average net
assets................ 5.42 %(c) 5.52 % 5.75 % 5.91 % 6.54 % 5.25 %
Ratio of expenses to
average net assets*... 1.07 %(c) 1.07 % 1.06 % 1.07 % 1.16 % 1.08 %
Ratio of net investment
income to average net
assets*............... 5.32 %(c) 5.42 % 5.65 % 5.81 % 6.33 % 5.14 %
Portfolio turnover**... 31.02 % 100.33 % 53.76 % 93.76 % 50.00 % 24.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) As of December 1, 1990, the Portfolio designated the existing series of
shares as "Investor" Shares. In addition, on June 7, 1994, the Portfolio
issued a new series of shares designated as "Institutional" Shares. The
financial highlights presented for periods prior to June 7, 1994 represent
financial highlights applicable to the Investor Shares.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-178-
<PAGE>
THE ARCH FUND, INC.
SHORT-INTERMEDIATE MUNICIPAL PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED JULY 10, 1995
SIX MONTHS NOVEMBER 30, TO
ENDED --------------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 (a)
------------ ---------- ---------- -------------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A
SHARES SHARES SHARES SHARES
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $10.11 $10.08 $10.08 $10.00
------ ------ ------ ------
Investment Activities
Net investment income.... 0.18 0.37 0.40 --
Net realized and
unrealized gains
(losses) from
investments............. 0.05 0.03 -- 0.08
------ ------ ------ ------
Total from Investment
Activities............. 0.23 0.40 0.40 0.08
------ ------ ------ ------
Distributions
Net investment income.... (0.18) (0.37) (0.40) --
------ ------ ------ ------
Total Distributions..... (0.18) (0.37) (0.40) --
------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................... $10.16 $10.11 $10.08 $10.08
====== ====== ====== ======
Total Return (excludes
sales charge)............ 2.32 %(b) 4.12 % 4.02 % 0.80 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)............ $ 1 $ 16 $ 51 -- (c)
Ratio of expenses to
average net assets...... 0.85 %(d) 0.62 % 0.56 % 0.00 %(d)
Ratio of net investment
income to average net
assets.................. 3.58 %(d) 3.78 % 3.83 % 0.00 %(d)
Ratio of expenses to
average net assets*..... 1.34 %(d) 1.32 % 1.26 % 0.00 %(d)
Ratio of net investment
income to average net
assets*................. 3.09 %(d) 3.08 % 3.13 % 0.00 %(d)
Portfolio turnover**..... 15.44 % 0.00 % 0.00 % 0.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Only one Investor A Share, worth $10.08, was outstanding as of November 30,
1995.
(d) Annualized.
See notes to financial statements
-179-
<PAGE>
THE ARCH FUND, INC.
SHORT-INTERMEDIATE MUNICIPAL PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JULY 10,
YEARS ENDED 1995
SIX MONTHS NOVEMBER 30, TO
ENDED ----------------- NOVEMBER 30,
MAY 31, 1998 1997 1996 1995 (a)
------------ ------- ------- ------------
TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES
------------ ------- ------- ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD.................. $ 10.10 $ 10.07 $ 10.07 $ 10.00
------- ------- ------- -------
Investment Activities
Net investment income...... 0.20 0.40 0.41 0.14
Net realized and unrealized
gains (losses) from
investments............... 0.05 0.03 -- 0.07
------- ------- ------- -------
Total from Investment Ac-
tivities................. 0.25 0.43 0.41 0.21
------- ------- ------- -------
Distributions
Net investment income...... (0.20) (0.40) (0.41) (0.14)
------- ------- ------- -------
Total Distributions....... (0.20) (0.40) (0.41) (0.14)
------- ------- ------- -------
NET ASSET VALUE, END OF PE-
RIOD....................... $ 10.15 $ 10.10 $ 10.07 $ 10.07
======= ======= ======= =======
Total Return................ 2.46 %(b) 4.39 % 4.15 % 2.15 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000)..................... $41,377 $30,454 $29,472 $23,754
Ratio of expenses to
average net assets........ 0.52 %(c) 0.38 % 0.31 % 0.47 %(c)
Ratio of net investment
income to average net
assets.................... 3.88 %(c) 4.00 % 4.07 % 3.81 %(c)
Ratio of expenses to
average net assets*....... 1.26 %(c) 1.33 % 0.96 % 1.12 %(c)
Ratio of net investment
income to average net
assets*................... 3.14 %(c) 3.05 % 3.42 % 3.16 %(c)
Portfolio turnover**....... 15.44 % 0.00 % 0.00 % 0.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-180-
<PAGE>
THE ARCH FUND, INC.
MISSOURI TAX-EXEMPT BOND PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED SIX MONTHS
ENDED NOVEMBER 30, ENDED YEARS ENDED MAY 31,
MAY 31, ---------------------- NOVEMBER 30, -------------------------------
1998 1997 1996 1995 (d) 1995 (a) 1994 1993
---------- ---------- ---------- ------------ ---------- -------- --------
INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR A INVESTOR INVESTOR
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.87 $ 11.69 $ 11.74 $ 11.52 $ 11.13 $ 11.54 $ 10.97
------- ------- ------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.27 0.53 0.55 0.27 0.55 0.55 0.58
Net realized and
unrealized gains
(losses) from
investments........... 0.10 0.18 (0.05) 0.22 0.40 (0.37) 0.64
------- ------- ------- ------- ------- ------- -------
Total from Investment
Activities........... 0.37 0.71 0.50 0.49 0.95 0.18 1.22
------- ------- ------- ------- ------- ------- -------
Distributions
Net investment income.. (0.27) (0.53) (0.55) (0.27) (0.55) (0.55) (0.58)
Net realized gains..... -- -- -- -- (0.01) (0.04) (0.07)
------- ------- ------- ------- ------- ------- -------
Total Distributions... (0.27) (0.53) (0.55) (0.27) (0.56) (0.59) (0.65)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 11.97 $ 11.87 $ 11.69 $ 11.74 $ 11.52 $ 11.13 $ 11.54
======= ======= ======= ======= ======= ======= =======
Total Return (excludes
sales charge).......... 3.10 %(b) 6.27 % 4.41 % 4.32 %(b) 8.91 % 1.53 % 11.40 %
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000).......... $23,608 $23,722 $25,144 $24,726 $24,318 $27,919 $23,223
Ratio of expenses to
average net assets.... 0.87 %(c) 0.86 % 0.85 % 0.95 %(c) 0.84 % 0.65 % 0.63 %
Ratio of net investment
income to average net
assets................ 4.45 %(c) 4.57 % 4.75 % 4.64 %(c) 5.02 % 4.75 % 5.11 %
Ratio of expenses to
average net assets*... 1.07 %(c) 1.06 % 1.05 % 1.18 %(c) 1.18 % 1.12 % 1.18 %
Ratio of net investment
income to average net
assets*............... 4.25 %(c) 4.37 % 4.55 % 4.44 %(c) 4.68 % 4.28 % 4.56 %
Portfolio turnover**... 5.56 % 3.50 % 3.66 % 1.55 % -- 20.00 % 15.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) On September 27, 1994, the Portfolio redesignated the Investor Shares as
"Investor A" Shares, and authorized the issuance of a series of shares
designated as "Investor B" Shares.
(b) Not annualized.
(c) Annualized.
(d) Upon reorganizing as a Portfolio of the ARCH Fund, Inc., the Missouri Tax-
Exempt Bond Portfolio changed its fiscal year end from May 31 to November
30.
-181-
<PAGE>
THE ARCH FUND, INC.
MISSOURI TAX-EXEMPT BOND PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS MARCH 1, 1995
SIX MONTHS NOVEMBER 30, ENDED TO
ENDED --------------------- NOVEMBER 30, MAY 31,
MAY 31, 1998 1997 1996 1995 (e) 1995 (a)
------------ ---------- ---------- ------------ -------------
INVESTOR B INVESTOR B INVESTOR B INVESTOR B INVESTOR B
SHARES SHARES SHARES SHARES SHARES
------------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $11.86 $11.68 $11.74 $11.52 $11.19
------ ------ ------ ------ ------
Investment Activities
Net investment income.. 0.22 0.44 0.45 0.22 0.11
Net realized and
unrealized gains
(losses) from
Investments........... 0.11 0.18 (0.06) 0.22 0.33
------ ------ ------ ------ ------
Total from Investment
Activities........... 0.33 0.62 0.39 0.44 0.44
------ ------ ------ ------ ------
Distributions
Net investment income.. (0.22) (0.44) (0.45) (0.22) (0.11)
------ ------ ------ ------ ------
Total Distributions... (0.22) (0.44) (0.45) (0.22) (0.11)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $11.97 $11.86 $11.68 $11.74 $11.52
====== ====== ====== ====== ======
Total Return (excludes
sales charge).......... 2.78 %(b) 5.43 % 3.48 % 3.88 %(b) 8.61 %(c)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $2,046 $1,398 $ 675 $ 433 $ 94
Ratio of expenses to
average net assets.... 1.67 %(d) 1.66 % 1.65 % 1.77 %(d) 1.76 %(d)
Ratio of net investment
income to average net
assets................ 3.65 %(d) 3.76 % 3.96 % 3.82 %(d) 4.00 %(d)
Ratio of expenses to
average net assets*... 1.77 %(d) 1.76 % 1.75 % 1.87 %(d) 1.88 %(d)
Ratio of net investment
income to average net
assets*............... 3.55 %(d) 3.66 % 3.86 % 3.72 %(d) 3.89 %(d)
Portfolio turnover**... 5.56 % 3.50 % 3.66 % 1.55 % --
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) On September 27, 1994, the Portfolio redesignated Investor shares as
"Investor A" shares and authorized the issuance of a third series of
shares designated as "Investor B" shares. These financial highlights of
Investor B Shares cover the period from March 1, 1995 (commencement of
operations) through May 31, 1995.
(b) Not annualized.
(c) Represents total return for the Investor A Shares from June 1, 1994 to
February 28, 1995, plus the total return for the Investor B Shares for the
period from March 1, 1995 to May 31, 1995.
(d) Annualized.
(e) Upon reorganizing as a Portfolio of the ARCH Fund, Inc., the Missouri Tax-
Exempt Bond Portfolio changed its fiscal year end from May 31 to November
30.
See notes to financial statements
-182-
<PAGE>
THE ARCH FUND, INC.
MISSOURI TAX-EXEMPT BOND PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
SIX MONTHS NOVEMBER 30, ENDED YEAR ENDED MAY 31,
ENDED ----------------- NOVEMBER 30, ---------------------------
MAY 31, 1998 1997 1996 1995 (c) 1995 1994 1993
------------ ------- ------- ------------ ------- ------- -------
TRUST TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------------ ------- ------- ------------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 11.87 $ 11.69 $ 11.74 $ 11.52 $ 11.13 $ 11.54 $ 10.97
------- ------- ------- ------- ------- ------- -------
Investment Activities
Net investment income.... 0.28 0.56 0.57 0.28 0.57 0.58 0.60
Net realized and
unrealized gains
(losses) from
investments............. 0.11 0.18 (0.05) 0.22 0.40 (0.37) 0.64
------- ------- ------- ------- ------- ------- -------
Total from Investment
Activities............. 0.39 0.74 0.52 0.50 0.97 0.21 1.24
------- ------- ------- ------- ------- ------- -------
Distributions
Net investment income.... (0.28) (0.56) (0.57) (0.28) (0.57) (0.58) (0.60)
Net realized gains....... -- -- -- -- (0.01) (0.04) (0.07)
------- ------- ------- ------- ------- ------- -------
Total Distributions..... (0.28) (0.56) (0.57) (0.28) (0.58) (0.62) (0.67)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................... $ 11.98 $ 11.87 $ 11.69 $ 11.74 $ 11.52 $ 11.13 $ 11.54
======= ======= ======= ======= ======= ======= =======
Total Return.............. 3.29 %(a) 6.48 % 4.62 % 4.41 %(a) 9.12 % 1.73 % 11.70 %
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)............ $80,000 $75,431 $55,905 $47,773 $44,336 $47,743 $32,777
Ratio of expenses to
average net assets...... 0.67 %(b) 0.66 % 0.65 % 0.78 %(b) 0.64 % 0.45 % 0.43 %
Ratio of net investment
income to average net
assets.................. 4.65 %(b) 4.76 % 4.95 % 4.83 %(b) 5.22 % 4.96 % 5.30 %
Ratio of expenses to
average net assets*..... 1.07 %(b) 1.06 % 0.75 % 0.88 %(b) 1.16 % 1.13 % 0.98 %
Ratio of net investment
income to Average net
assets*................. 4.25 %(b) 4.36 % 4.85 % 4.73 %(b) 4.70 % 4.28 % 4.75 %
Portfolio turnover**..... 5.56 % 3.50 % 3.66 % 1.55 % -- 20.00 % 15.00 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Not annualized.
(b) Annualized.
(c) Upon reorganizing as a Portfolio of the ARCH Fund, Inc., the Missouri Tax-
Exempt Bond Portfolio changed its fiscal year end from May 31 to November
30.
See notes to financial statements
-183-
<PAGE>
THE ARCH FUND, INC.
NATIONAL MUNICIPAL BOND PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS NOVEMBER 18, 1996
ENDED YEAR ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 NOVEMBER 30, 1996 (a)
------------ ----------------- ---------------------
INVESTOR A INVESTOR A INVESTOR A
SHARES SHARES SHARES
------------ ----------------- ---------------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.27 $10.05 $10.00
------ ------ ------
Investment Activities
Net investment income.. 0.23 0.52 0.02
Net realized and
unrealized gains
(losses) from
investments........... 0.15 0.22 0.05
------ ------ ------
Total from Investment
Activities........... 0.38 0.74 0.07
------ ------ ------
Distributions
Net investment income.. (0.23) (0.52) (0.02)
Net realized gains..... (0.34) -- --
In excess of net
realized gains........ (0.01) -- --
------ ------ ------
Total Distributions... (0.58) (0.52) (0.02)
------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $10.07 $10.27 $10.05
====== ====== ======
Total Return (excludes
sales charge).......... 3.85 %(b) 7.61 % 0.73 %(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $1,160 $ 717 $ 1
Ratio of expenses to
average net assets.... 0.61 %(c) 0.35 % 0.37 %(c)
Ratio of net investment
income to average net
assets................ 4.52 %(c) 4.71 % 9.08 %(c)
Ratio of expenses to
average net assets*... 1.22 %(c) 1.17 % 1.07 %(c)
Ratio of net investment
income to average net
assets*............... 3.91 %(c) 3.89 % 8.38 %(c)
Portfolio turnover**... 15.11 % 83.94 % --
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-184-
<PAGE>
THE ARCH FUND, INC.
NATIONAL MUNICIPAL BOND PORTFOLIO
INVESTOR B SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS NOVEMBER 18, 1996
ENDED YEAR ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 NOVEMBER 30, 1996 (a)
------------ ----------------- ---------------------
INVESTOR B INVESTOR B INVESTOR B
SHARES SHARES SHARES
------------ ----------------- ---------------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.29 $10.05 $10.00
------ ------ ------
Investment Activities
Net investment income.. 0.19 0.44 0.02
Net realized and
unrealized gains
(losses) from
investments........... 0.15 0.24 0.05
------ ------ ------
Total from Investment
Activities........... 0.34 0.68 0.07
------ ------ ------
Distributions
Net investment income.. (0.19) (0.44) (0.02)
Net realized gains..... (0.12) -- --
In excess of net
realized gains........ (0.23) -- --
------ ------ ------
Total Distributions... (0.54) (0.44) (0.02)
------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $10.09 $10.29 $10.05
====== ====== ======
Total Return (excludes
sales charge).......... 3.43 %(b) 7.01 % 0.70 %(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $ 372 $ 408 $ 1
Ratio of expenses to
average net assets.... 1.34 %(c) 1.17 % 1.10 %(c)
Ratio of net investment
income to average net
assets................ 3.80 %(c) 4.08 % 8.35 %(c)
Ratio of expenses to
average net assets*... 1.86 %(c) 1.89 % 1.80 %(c)
Ratio of net investment
income to average net
assets*............... 3.28 %(c) 3.36 % 7.65 %(c)
Portfolio turnover**... 15.11 % 83.94 % --
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-185-
<PAGE>
THE ARCH FUND, INC.
NATIONAL MUNICIPAL BOND PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS NOVEMBER 18, 1996
ENDED YEAR ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 NOVEMBER 30, 1996 (a)
------------ ----------------- ---------------------
TRUST TRUST TRUST
SHARES SHARES SHARES
------------ ----------------- ---------------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.28 $ 10.05 $ 10.00
-------- -------- --------
Investment Activities
Net investment income.. 0.24 0.54 0.02
Net realized and
unrealized gains
(losses) from
investments........... 0.15 0.23 0.05
-------- -------- --------
Total from Investment
Activities........... 0.39 0.77 0.07
-------- -------- --------
Distributions
Net investment income.. (0.24) (0.54) (0.02)
Net realized gains..... (0.35) -- --
-------- -------- --------
Total Distributions... (0.59) (0.54) (0.02)
-------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 10.08 $ 10.28 $ 10.05
======== ======== ========
Total Return............ 3.95 %(b) 7.97 % 0.74 %(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000).......... $368,717 $366,889 $310,413
Ratio of expenses to
average net assets.... 0.35 %(c) 0.14 % 0.12 %(c)
Ratio of net investment
income to average net
assets................ 4.79 %(c) 5.38 % 5.77 %(c)
Ratio of expenses to
average net assets*... 1.17 %(c) 1.17 % 0.82 %(c)
Ratio of net investment
income to average net
assets*............... 3.97 %(c) 4.35 % 5.07 %(c)
Portfolio turnover**... 15.11 % 83.94 % --
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-186-
<PAGE>
THE ARCH FUND, INC.
INTERMEDIATE CORPORATE BOND PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 10, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------ ---------------------
INVESTOR A INVESTOR A
SHARES SHARES
------------ ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $10.11 $10.00
------ ------
Investment Activities
Net investment income.................... 0.31 0.52
Net realized and unrealized gains
(losses) from investments............... 0.07 0.11
------ ------
Total from Investment Activities........ 0.38 0.63
------ ------
Distributions
Net investment income.................... (0.31) (0.52)
In excess of net realized gains.......... (0.11) --
------ ------
Total Distributions..................... (0.42) (0.52)
------ ------
NET ASSET VALUE, END OF PERIOD............ $10.07 $10.11
====== ======
Total Return (excludes sales charge)...... 3.90 %(b) 6.48 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at the end of period (000).... $ 251 $ 277
Ratio of expenses to average net assets.. 0.69 %(c) 0.58 %(c)
Ratio of net investment income to average
net assets.............................. 6.21 %(c) 6.52 %(c)
Ratio of expenses to average net assets*. 1.20 %(c) 1.31 %(c)
Ratio of net investment income to average
net assets*............................. 5.70 %(c) 5.79 %(c)
Portfolio turnover**..................... 4.24 % 61.98 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-187-
<PAGE>
THE ARCH FUND, INC.
INTERMEDIATE CORPORATE BOND PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 10, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------ ---------------------
TRUST TRUST
SHARES SHARES
------------ ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 10.11 $ 10.00
------- -------
Investment Activities
Net investment income.................... 0.33 0.53
Net realized and unrealized gains
(losses) from investments............... 0.07 0.11
------- -------
Total from Investment Activities........ 0.40 0.64
------- -------
Distributions
Net investment income.................... (0.33) (0.53)
Net realized gains....................... (0.11) --
------- -------
Total Distributions..................... (0.44) (0.53)
------- -------
NET ASSET VALUE, END OF PERIOD............ $ 10.07 $ 10.11
======= =======
Total Return.............................. 4.05 %(b) 6.65 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at the end of period (000).... $53,479 $44,443
Ratio of expenses to average net assets.. 0.40 %(c) 0.29 %(c)
Ratio of net investment income to average
net assets.............................. 6.50 %(c) 6.90 %(c)
Ratio of expenses to average net assets*. 1.21 %(c) 1.32 %(c)
Ratio of net investment income to average
net assets*............................. 5.69 %(c) 5.87 %(c)
Portfolio turnover**..................... 4.24 % 61.98 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-188-
<PAGE>
THE ARCH FUND, INC.
INTERMEDIATE CORPORATE BOND PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 10, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------- ---------------------
INSTITUTIONAL INSTITUTIONAL
SHARES SHARES
------------- ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $10.11 $10.00
------ ------
Investment Activities
Net investment income.................... 0.32 0.53
Net realized and unrealized gains
(losses) from investments............... 0.07 0.11
------ ------
Total from Investment Activities........ 0.39 0.64
------ ------
Distributions
Net investment income.................... (0.32) (0.53)
Net realized gains....................... (0.11) --
------ ------
Total Distributions..................... (0.43) (0.53)
------ ------
NET ASSET VALUE, END OF PERIOD............ $10.07 $10.11
====== ======
Total Return.............................. 4.00 %(b) 6.60 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at the end of period (000).... $1,070 $ 27
Ratio of expenses to average net assets.. 0.98 %(c) 0.29 %(c)
Ratio of net investment income to average
net assets.............................. 5.89 %(c) 7.06 %(c)
Ratio of expenses to average net assets*. 1.52 %(c) 1.31 %(c)
Ratio of net investment income to average
net assets*............................. 5.35 %(c) 6.04 %(c)
Portfolio turnover**..................... 4.24 % 61.98 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-189-
<PAGE>
THE ARCH FUND, INC.
BOND INDEX PORTFOLIO
INVESTOR A SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 10, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------ ---------------------
INVESTOR A INVESTOR A
SHARES SHARES
------------ ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $10.17 $10.00
------ ------
Investment Activities
Net investment income.................... 0.32 0.50
Net realized and unrealized gains
(losses) from investments............... 0.07 0.17
------ ------
Total from Investment Activities........ 0.39 0.67
------ ------
Distributions
Net investment income.................... (0.32) (0.50)
Net realized gains....................... (0.03) --
------ ------
Total Distributions..................... (0.35) (0.50)
------ ------
NET ASSET VALUE, END OF PERIOD............ $10.21 $10.17
====== ======
Total Return (excludes sales charge)...... 3.89 %(b) 6.93 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at the end of period (000).... $ 161 $ 55
Ratio of expenses to average net assets.. 0.62 %(c) 0.54 %(c)
Ratio of net investment income to average
net assets.............................. 6.15 %(c) 6.71 %(c)
Ratio of expenses to average net assets*. 0.93 %(c) 0.95 %(c)
Ratio of net investment income to average
net assets*............................. 5.84 %(c) 6.30 %(c)
Portfolio turnover**..................... 21.12 % 46.16 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-190-
<PAGE>
THE ARCH FUND, INC.
BOND INDEX PORTFOLIO
TRUST SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 10, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------ ---------------------
TRUST TRUST
SHARES SHARES
------------ ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $ 10.16 $ 10.00
-------- --------
Investment Activities
Net investment income................... 0.32 0.53
Net realized and unrealized gains
(losses) from investments.............. 0.08 0.16
-------- --------
Total from Investment Activities....... 0.40 0.69
-------- --------
Distributions
Net investment income................... (0.32) (0.53)
In excess of net investment income...... (0.01) --
Net realized gains...................... (0.03) --
-------- --------
Total Distributions.................... (0.36) (0.53)
-------- --------
NET ASSET VALUE, END OF PERIOD........... $ 10.20 $ 10.16
======== ========
Total Return............................. 4.05 %(b) 7.15 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at the end of period (000)... $150,234 $138,319
Ratio of expenses to average net assets. 0.30 %(c) 0.23 %(c)
Ratio of net investment income to
average net assets..................... 6.49 %(c) 6.92 %(c)
Ratio of expenses to average net
assets*................................ 0.91 %(c) 0.94 %(c)
Ratio of net investment income to
average net assets*.................... 5.88 %(c) 6.21 %(c)
Portfolio turnover**.................... 21.12 % 46.16 %
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-191-
<PAGE>
THE ARCH FUND, INC.
BOND INDEX PORTFOLIO
INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 10, 1997
ENDED TO
MAY 31, 1998 NOVEMBER 30, 1997 (a)
------------- ---------------------
INSTITUTIONAL INSTITUTIONAL
SHARES SHARES
------------- ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $10.17 $10.00
------ ------
Investment Activities
Net investment income.................... 0.34 0.53
Net realized and unrealized gains (loss-
es) from investments.................... 0.06 0.17
------ ------
Total from Investment Activities........ 0.40 0.70
------ ------
Distributions
Net investment income.................... (0.33) (0.53)
Net realized gains....................... (0.03) --
------ ------
Total Distributions..................... (0.36) (0.53)
------ ------
NET ASSET VALUE, END OF PERIOD............ $10.21 $10.17
====== ======
Total Return.............................. 3.99 %(b) 7.20 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at the end of period (000).... $5,646 $ 27
Ratio of expenses to average net assets.. 0.67 %(c) 0.24 %(c)
Ratio of net investment income to average
net assets.............................. 6.05 %(c) 7.09 %(c)
Ratio of expenses to average net assets*. 1.05 %(c) 0.95 %(c)
Ratio of net investment income to average
net assets*............................. 5.67 %(c) 6.38 %(c)
Portfolio turnover**..................... 21.12 % 46.16 %
</TABLE>
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* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-192-
<PAGE>
[GRAPHICS OF CLOCK AND DOLLAR BILL APPEAR AS BACKGROUND]
INVESTMENT ADVISER
Mississippi Valley Advisors Inc.
One Mercantile Center
Seventh & Washington Streets
St. Louis, Missouri 63101
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
LEGAL COUNSEL
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219-3035
This report is submitted for the general information of the shareholders of The
ARCH Funds, Inc. It is not authorized for distribution to prospective investors
unless accompanied or preceded by effective prospectuses for the Funds, which
contain information concerning the Fund's investment policies and expenses as
well as other pertinent information.
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BULK RATE
U.S. POSTAGE
PAID
LANCASTER, PA
PERMIT 1793
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7/98
