SEMI-ANNUAL REPORT OCTOBER 31, 1997
[logo omitted] ARK FUNDS
[GRAPHIC OMITTED]
<PAGE>
TABLE OF CONTENTS
Letter to Shareholders 1
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Statement of Net Assets/Schedule of Investments 2
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Statement of Assets and Liabilities 53
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Statement of Operations 54
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Statement of Changes in Net Assets 56
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Financial Highlights 60
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Notes to Financial Statements 64
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This report and the financial statements contained herein are submitted for the
general information of the shareholders of the ARK Funds. The report is not
authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus for each of the Portfolios included.
Shares in the Portfolios are not deposits or obligations of, or guaranteed or
endorsed by The First National Bank of Maryland, or any depositary
institution, are not insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency. Investing in the
shares involves investment risks including the possible loss of principal
amount invested.
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
Letter to Shareholders
Dear Shareholder:
The current economic expansion entered its eightieth month in October
and is positioned to surpass the second longest post-war expansion, the decade
of the 1980's, by the end of the next year. At the same time, unemployment is at
a twenty-four year low of 4.8% and inflation is running at a very favorable
year-over-year rate of 2.2% as measured by the Consumer Price Index.
While our domestic economic reports have been favorable in almost every
category, we have been concerned about some unforeseen, external event that
could shake the capital markets. At this writing, currency and market
corrections in Southeast Asia appear to be that outside force. These events
could have a double-edged impact on our economy. While U.S. multinational
companies might be negatively affected as a result of the weaker foreign
currencies, the devaluations in Pacific Rim countries could also contribute to
an extension of low inflation in the U.S. In addition, our fixed income markets
are attractive as a safe haven for global investments, thereby holding rates
down.
Despite the recent turmoil in the markets, U.S. equities have performed
quite well in 1997. Over the past several months, the market advance has
broadened to include small-cap and mid-cap equities, which have lagged stocks of
larger, multinational companies. Bonds have also provided very solid returns in
the face of mild inflation. Looking ahead to 1998, we expect the economy and
corporate profits to begin to show some signs of slowing, although we do not
believe a recession is imminent. While there is little that causes us to
anticipate the beginning of a prolonged bear market, equity investors may find
the high double digit returns they have experienced in recent years more
difficult to achieve, and more episodes of volatility are to be expected.
Against this economic background, the ARK Funds continue to grow in
terms of both assets and Portfolios. We introduced the ARK Equity Index
Portfolio in early October and saw total assets for the ARK Funds near $3.3
billion at month end. This Semi-Annual Report provides you with valuable
information on our progress, including details about each of the ARK Funds'
Portfolios, such as holdings, net asset values and total returns, as of
10/31/97.
For the rest of 1997 and into the first quarter of 1998, we will be
working on the merger of the ARK Funds with Dauphin Deposit's family of mutual
funds, the Marketvest Funds. First Maryland Bancorp, the holding company for
First National Bank of Maryland, recently acquired Dauphin Deposit Corporation,
and as a result of this acquisition, our two fund families will merge, subject
to shareholder approval, under the ARK Funds' name. We look forward to reporting
to you on the expanded ARK Funds family that will result from this merger, in
our next Annual Report.
Sincerely,
[sig omitted]
JENNIFER W. LAMBDIN, CFA
PRESIDENT AND CHIEF INVESTMENT OFFICER
ALLIED INVESTMENT ADVISORS
[Photo Omitted]
JENNIFER W. LAMBDIN IS PRESIDENT AND CHIEF INVESTMENT OFFICER OF
ALLIED INVESTMENT ADVISORS AND ITS PREDECESSOR SINCE 1991. SHE HAS
OVER 20 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
1
<PAGE>
Statement of Net Assets (unaudited)
ARK Funds: Money Market Portfolio
[Photo Omitted]
James M. Hannan
Portfolio Manager
JAMES M. HANNAN HAS BEEN A PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND ITS
PREDECESSOR SINCE 1987 AND MANAGES OVER 2 BILLION DOLLARS OF MONEY MARKET
ASSETS. MR. HANNAN IS RESPONSIBLE FOR THE ARK MONEY MARKET PORTFOLIOS AND THE
SHORT-TERM TREASURY PORTFOLIO.
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Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 34.6%
AUTOMOTIVE - 0.5%
Ford Capital
9.125%, 05/01/98 $ 2,500 $ 2,540
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TOTAL AUTOMOTIVE $ 2,540
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BANKS - 12.9%
Abbey National Treasury
5.640%, 11/03/97 2,000 2,000
5.500%, 11/26/97 5,000 4,999
5.650%, 04/15/98 (A) (B) 5,000 5,000
American Express
Centurion Bank
5.595%, 11/18/97 (A) 20,000 20,000
Bank America
6.875%, 11/20/97 2,600 2,601
Bankers Trust
5.650%, 12/04/97 (A) 10,000 9,996
Chemical Banking
5.819%, 12/17/97 (A) 4,000 4,001
PNC Bank
5.535%, 11/10/97 (A) 10,000 9,999
PNC Bank, Ohio
5.620%, 11/14/97 (A) 10,000 9,998
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TOTAL BANKS $68,594
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ENTERTAINMENT - 1.9%
Walt Disney
8.000%, 12/19/97 10,000 10,026
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TOTAL ENTERTAINMENT $10,026
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FINANCE - 10.6%
Capital One Funding
5.610%, 11/06/97 (A) (B) 4,500 4,500
5.670%, 11/06/97 (A) (B) 4,700 4,700
Chrysler Finance
5.990%, 11/20/97 2,000 2,000
8.180%, 01/23/98 5,000 5,026
7.260%, 07/01/98 4,500 4,536
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
U.S. Government Agency Obligations -- 5%
Commercial Paper -- 8%
Certificates of Deposit -- 11%
Repurchase Agreements -- 11%
Corporate & Municipal Debt -- 35%
Variable Rate Debt -- 30%
% OF TOTAL PORTFOLIO INVESTMENTS
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Principal
Description Amount (000) Value (000)
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CIT Group Holdings
5.600%, 12/23/97 (A) $ 10,000 $ 9,995
5.625%, 04/01/98 10,000 9,982
6.500%, 07/13/98 5,000 5,019
General Electric Engine
Receivables
5.561%, 11/03/97 (A) 2,300 2,300
General Electric Taxable
Loan Certificate
5.614%, 11/03/97 (A) 5,509 5,510
Trap Rock Industries
5.750%, 11/05/97 (A) 3,000 3,000
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TOTAL FINANCE $ 56,568
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PERSONAL CREDIT - 4.4%
GMAC
7.850%, 11/17/97 4,250 4,254
6.900%, 02/19/98 1,725 1,730
5.900%, 04/09/98 5,000 4,993
6.200%, 05/11/98 5,000 5,008
6.375%, 07/02/98 7,200 7,214
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TOTAL PERSONAL CREDIT $ 23,199
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SECURITY BROKERS & DEALERS - 4.3%
Goldman Sachs
5.594%, 11/10/97 (A) 3,000 3,001
Merrill Lynch
5.680%, 11/17/97 (A) 5,000 5,000
5.680%, 12/26/97 (A) 10,000 10,000
5.720%, 01/17/98 (A) 5,000 5,000
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TOTAL SECURITY BROKERS & DEALERS $ 23,001
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TOTAL CORPORATE OBLIGATIONS
(Cost $183,928) $183,928
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2
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OCTOBER 31, 1997 [LOGO OMITTED]
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Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
TAXABLE MUNICIPAL BONDS - 17.5%
CALIFORNIA - 6.1%
Riverside County, LOC:
CommerzBank (COP)
5.650%, 11/06/97 (A) $ 8,000 $ 8,000
Oakland Alameda County (CIBC)
5.560%, 11/21/97 16,680 16,680
5.600%, 12/01/97 7,850 7,850
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TOTAL CALIFORNIA $32,530
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ILLINOIS - 1.9%
Illinois Health Facilities (MBIA)
5.554%, 11/15/97 (A) 10,000 10,000
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TOTAL ILLINOIS $10,000
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MASSACHUSETTS - 4.4%
Massachusetts State Industrial
Financial Agency, LOC: UBS
5.580%, 11/13/97 23,510 23,510
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TOTAL MASSACHUSETTS $23,510
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NEW JERSEY - 0.9%
New Jersey Economic Development
Authority, LOC: CoreStates
5.750%, 11/15/97 (A) 4,800 4,800
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TOTAL NEW JERSEY $ 4,800
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NEW YORK - 2.8%
New York City (GO) (FGIC)
5.768%, 11/21/97 10,000 10,000
5.650%, 12/10/97 5,000 5,000
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TOTAL NEW YORK $15,000
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NORTH CAROLINA - 1.2%
Durham, Series B (COP)
5.510%, 11/05/97 (A) 1,500 1,500
Winston-Salem (COP)
5.560%, 11/10/97 5,000 5,000
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TOTAL NORTH CAROLINA $ 6,500
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PENNSYLVANIA - 0.2%
Economic Development Financing
Authority, LOC: PNC (RB)
5.600%, 11/06/97 (A) 700 700
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TOTAL PENNSYLVANIA $ 700
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TOTAL TAXABLE MUNICIPAL BONDS
(Cost $93,040) $93,040
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Principal
Description Amount (000) Value (000)
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COMMERCIAL PAPER - 8.2%
Amoco 95
5.590%, 11/21/97 $ 20,000 $20,000
GECC
5.540%, 11/03/97 15,000 14,995
Nacional Financera, Snc
5.530%, 02/18/98 9,000 8,849
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TOTAL COMMERCIAL PAPER
(Cost $43,844) $43,844
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U.S. GOVERNMENT AGENCY OBLIGATION - 4.7%
Federal Home Loan Bank
5.510%, 12/03/97 25,000 24,878
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TOTAL U.S. GOVERNMENT AGENCY OBLIGATION
(Cost $24,878) $24,878
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CERTIFICATES OF DEPOSIT - 10.9%
ABN-Amro
5.980%, 03/19/98 5,000 5,002
Bank of America
5.940%, 10/22/98 5,000 4,997
Bankers Trust
5.910%, 08/07/98 5,000 4,999
Deutsche Bank
5.940%, 10/21/98 5,000 4,998
5.940%, 10/23/98 8,000 7,996
Rabo Bank
6.050%, 03/27/98 5,000 5,004
Royal Bank of Canada
6.200%, 04/06/98 5,000 4,999
6.150%, 05/08/98 5,000 4,999
Societe Generale
5.850%, 03/03/98 10,000 9,999
6.180%, 05/06/98 5,000 5,000
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TOTAL CERTIFICATES OF DEPOSIT
(Cost $57,993) $57,993
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ASSET-BACKED SECURITIES - 1.2%
PNC Student Loan Trust
5.596%, 11/25/97 (A) 6,410 6,410
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TOTAL ASSET-BACKED SECURITIES
(Cost $6,410) $ 6,410
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BONDS & NOTES - 11.1%
ABTmrl 96 Series A-5
5.635%, 11/15/97 (A) (B) 10,000 10,000
Associates Corporation of
North America
8.375%, 01/15/98 8,825 8,869
3
<PAGE>
Statement of Net Assets (unaudited)
Money Market Portfolio (concluded)
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Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Bank of America
5.650%, 11/03/97 (A) $ 15,000 $ 14,997
Bankers Trust, New York
5.700%, 11/03/97 (A) (B) 5,000 5,000
Beta Finance
5.710%, 01/14/98 (A) (B) 10,000 10,000
First USA Bank
5.950%, 01/07/98 (A) 10,000 10,004
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TOTAL BONDS & NOTES
(Cost $58,870) $ 58,870
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REPURCHASE AGREEMENTS - 11.3%
First Boston
5.720%, dated 10/31/97, matures
11/03/97, repurchase price
$50,023,833 (collateralized by
U.S. Treasury Bond: total
market value $53,184,988) 50,000 50,000
Goldman Sachs
5.250%, dated 10/31/97, matures
11/03/97, repurchase price
$4,863,253 (collateralized by
U.S. Treasury Note: total
market value $4,961,759) 4,861 4,861
Goldman Sachs
5.700%, dated 10/31/97,
matures 11/03/97, repurchase
price $5,002,375 (collateralized
by U.S. Treasury Note: total
market value $5,103,508) 5,000 5,000
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TOTAL REPURCHASE AGREEMENTS
(Cost $59,861) $ 59,861
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TOTAL INVESTMENTS - 99.5%
(Cost $528,824) $528,824
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 0.5% $2,872
================================================================================
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Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 272,118,414
outstanding shares
of beneficial interest $272,109
Portfolio Shares of Retail Class
(unlimited authorization --
no par value) based
on 159,382,991
outstanding shares
of beneficial interest 159,378
Portfolio Shares of Institutional II Class
(unlimited authorization --
no par value) based
on 100,174,917
outstanding shares
of beneficial interest 100,174
Undistributed net investment income 47
Accumulated net realized loss
on investments (12)
================================================================================
TOTAL NET ASSETS -- 100.0% $531,696
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL II CLASS $1.00
================================================================================
(A) VARIABLE RATE SECURITY -- THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT AS OF OCTOBER 31, 1997. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(B) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS.
CIBC--CANADIAN IMPERIAL BANK CORPORATION
COP--CERTIFICATE OF PARTICIPATION
FGIC--FINANCIAL GUARANTY INSURANCE COMPANY
GO--GENERAL OBLIGATION
LOC--LETTER OF CREDIT
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
RB--REVENUE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
ARK Funds: Tax-Free Money Market Portfolio
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Fixed Rate Municipal Obligations -- 49%
Variable Rate Municipal Obligations -- 51%
% OF TOTAL PORTFOLIO INVESTMENTS
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Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES - 96.5%
ARIZONA - 0.1%
Maricopa County, Pollution
Control Authority, Arizona
Public Services, Series E, LOC:
Bank of America (RB)
4.200%, 11/03/97 (A) $ 200 $ 200
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TOTAL ARIZONA $ 200
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CALIFORNIA - 4.6%
California State (RAN)
4.500%, 06/30/98 5,000 5,021
California State, School Cash
Reserve Program (TAN)
(AMBAC)
4.750%, 07/02/98 2,000 2,011
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TOTAL CALIFORNIA $7,032
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COLORADO - 2.7%
Colorado State Educational
Facilities Authority, Pro
Rodeo Hall of Fame Project,
LOC: Bank One (RB)
3.700%, 11/06/97 (A) 2,430 2,430
Colorado State Student
Obligations Bond Authority,
LOC: SLMA (RB)
3.600%, 11/05/97 (A) 1,775 1,775
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TOTAL COLORADO $4,205
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Principal
Description Amount (000) Value (000)
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DISTRICT OF COLUMBIA - 4.9%
District of Columbia, LOC:
Morgan Guaranty (TRAN)
4.500%, 09/30/98 $ 2,000 $ 2,011
District of Columbia, LOC:
UBS (TRAN)
4.500%, 09/30/98 2,000 2,011
District of Columbia, Series A-1,
LOC: National Westminster
(GO)
4.250%, 11/03/97 (A) 2,600 2,600
District of Columbia, Series A-5,
LOC: Bank of Nova
Scotia (GO)
4.250%, 11/03/97 (A) 200 200
District of Columbia, Series A-6,
LOC: National Westminster
(GO)
4.250%, 11/03/97 (A) 300 300
District of Columbia, Series 1992
A-2, LOC: Bank of
Nova Scotia (GO)
4.250%, 11/03/97 (A) 200 200
District of Columbia, Series 1992
A-4, LOC: Toronto
Dominion (GO)
4.250%, 11/03/97 (A) 200 200
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TOTAL DISTRICT OF COLUMBIA $ 7,522
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FLORIDA - 10.7%
Florida State Housing Finance
Authority (RB) (Fannie Mae)
3.600%, 11/05/97 (A) 2,200 2,200
Jacksonville, Electric Authority,
LOC: Credit Suisse (TECP)
3.700%, 12/10/97 1,050 1,050
3.850%, 12/12/97 5,000 5,000
Lee County, Housing Finance
Authority (RB) (Fannie Mae)
3.600%, 11/05/97 (A) 1,685 1,685
Sunshine State Government
Financing Commission (TECP)
3.650%, 02/18/98 5,000 5,000
LOC: Morgan Guaranty
3.700%, 12/08/97 450 450
LOC: Nations West
3.700%, 12/08/97 450 450
LOC: UBS
3.700%, 12/08/97 450 450
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TOTAL FLORIDA $16,285
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5
<PAGE>
Statement of Net Assets (unaudited)
Tax-Free Money Market Portfolio (continued)
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Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
GEORGIA - 5.0%
Atlanta, Airport Facilities
(RB) (AMBAC)
5.000%, 01/01/98 $3,750 $ 3,758
Chatham County, Hospital
Authority, Medical Center-A
(RB) (AMBAC)
4.150%, 01/01/98 1,000 1,001
DeKalb County, Housing
Authority, Winters Creek
Apartments Project
(RB) (Fannie Mae)
3.650%, 11/05/97 (A) 1,500 1,500
DeKalb County, Industrial
Development Authority,
LOC: PNC (RB)
3.800%, 11/06/97 (A) 1,300 1,300
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TOTAL GEORGIA $ 7,559
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ILLINOIS - 0.4%
Elmhurst, Joint Commission on
Accreditation of Health Bank,
LOC: Sanwa Bank (RB)
3.700%, 11/06/97 (A) 630 630
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TOTAL ILLINOIS $ 630
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INDIANA - 0.1%
Hammond, Pollution Control
Revenue, Amoco Oil Project,
(RB)
4.200%, 11/03/97 (A) 200 200
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TOTAL INDIANA $ 200
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IOWA - 4.3%
Iowa School Corporation, Warrant
Certificates Anticipation Notes,
Series B (FSA) (RAN)
4.250%, 01/30/98 2,750 2,754
Iowa State Warrant Certificates
Cash Anticipation Program,
State Aid Withholding,
Credit Support: FSA
4.500%, 06/26/98 3,800 3,815
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TOTAL IOWA $ 6,569
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Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
KENTUCKY - 6.0%
Jefferson County, Industrial
Development Revenue Authority,
Bel Knap Project, LOC:
Chase Manhattan Bank
3.700%, 11/03/97 (A) $1,298 $ 1,298
Jefferson County, Pollution
Control Revenue, Credit
Support: Louisville Gas
& Electric (TECP)
3.700%, 12/08/97 4,300 4,300
Pendleton County,
LOC: PNC (RB)
3.950%, 07/01/98 (A) 1,000 1,000
Trimble County, Pollution
Control Revenue, Guarantor:
Louisville Gas & Electric
(TECP)
3.800%, 12/05/97 2,500 2,500
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TOTAL KENTUCKY $ 9,098
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MARYLAND - 14.9%
Anne Arundel County,
Pre-refunded @ 102 (GO)
6.700%, 06/01/98 (B) 1,125 1,165
Baltimore, Industrial Development
Authority, LOC: Dai Ichi
Kango Bank (RB)
3.900%, 11/05/97 (A) 6,000 6,000
Baltimore County, Pollution
Control Revenue (TECP)
3.750%, 01/15/98 3,000 3,000
Howard County, Public
Improvements (TECP)
3.700%, 11/13/97 5,000 5,000
Maryland State Health & Higher
Education, LOC: Sanwa (TECP)
3.850%, 11/13/97 2,412 2,412
Maryland State Health & Higher
Education, Hospital & University
Improvements, LOC: FNB
Chicago (RB)
3.650%, 11/05/97 (A) 1,100 1,100
Maryland State Health & Higher
Education, Pooled Loan
Project, Series D (RB)
3.650%, 11/06/97 (A) 3,000 3,000
Washington Suburban Sanitary
District, General Construction,
Pre-refunded @ 102 (RB)
7.400%, 12/01/97 (B) 1,000 1,023
- --------------------------------------------------------------------------------
TOTAL MARYLAND $22,700
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6
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
MINNESOTA - 4.9%
Minneapolis, LOC: Bayerische
Vereinsbank (GO)
3.640%, 11/03/97 (A) $1,800 $ 1,800
Minnesota School Districts,
Tax & Aid Anticipation,
LOC: SD Credit Program
3.850%, 09/03/98 1,000 1,000
University of Minnesota, DC Trust,
Series 1997A (RB)
3.750%, 11/05/97 (A) 4,700 4,700
- --------------------------------------------------------------------------------
TOTAL MINNESOTA $ 7,500
- --------------------------------------------------------------------------------
MISSOURI - 2.5%
Columbia, Series A, LOC: Toronto
Dominion (RB)
3.650%, 11/05/97 (A) 1,000 1,000
Missouri State Health &
Educational Facilities Authority,
Washington University Project,
Series A, LOC: Morgan (RB)
4.200%, 11/03/97 (A) 1,200 1,200
Series B, LOC: Morgan (RB)
4.200%, 11/03/97 (A) 800 800
Missouri State Health Facilities
Revenue, Pre-refunded @ 100
(RB) (FGIC)
6.875%, 12/01/97 (B) 900 902
- --------------------------------------------------------------------------------
TOTAL MISSOURI $ 3,902
- --------------------------------------------------------------------------------
MONTANA - 1.3%
Forsyth, Portland General Electric,
Colstrip Project,
LOC: Swiss Bank (RB)
3.600%, 11/05/97 (A) 1,000 1,000
Forsyth, Portland General Electric,
Colstrip Project, Series 1983-A,
LOC: Swiss Bank (RB)
3.600%, 11/05/97 (A) 1,000 1,000
- --------------------------------------------------------------------------------
TOTAL MONTANA $ 2,000
- --------------------------------------------------------------------------------
NEVADA - 0.6%
Clark County, Airport
Improvement Authority,
Series A (RB) (MBIA)
3.600%, 11/05/97 (A) 1,000 1,000
- --------------------------------------------------------------------------------
TOTAL NEVADA $ 1,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
NEW JERSEY - 0.7%
New Jersey, Wastewater Treatment
Trust, Series B, Pre-refunded @ 102
(RB)
7.250%, 05/15/98 (B) $ 985 $ 1,021
- --------------------------------------------------------------------------------
TOTAL NEW JERSEY $ 1,021
- --------------------------------------------------------------------------------
NORTH CAROLINA - 6.7%
Durham, Water & Sewer Utility
System (RB)
3.700%, 11/05/97 (A) 2,000 2,000
Raleigh Durham, Airport
Authority, LOC: Royal
Bank of Canada (RB)
4.200%, 11/03/97 (A) 700 700
Raleigh Durham, Airport Authority,
American Airlines Project,
LOC: Royal Bank of
Canada (RB)
4.200%, 11/03/97 (A) 600 600
University of North Carolina,
Chapel Hill Project,
SPA: NationsBank (RB)
3.650%, 11/05/97 (A) 3,900 3,900
Winston Salem (COP)
3.650%, 11/06/97 (A) 3,000 3,000
- --------------------------------------------------------------------------------
TOTAL NORTH CAROLINA $10,200
- --------------------------------------------------------------------------------
PENNSYLVANIA - 5.1%
Allegheny County, Grant Anticipation
Note, Series A, LOC: PNC
3.850%, 06/30/98 2,000 2,000
Bucks County, Industrial
Development Authority,
LOC: ABN-Amro (RB)
3.700%, 11/05/97 (A) 2,200 2,200
Lehigh County, Industrial
Development Authority, Series A,
LOC: Rabo Bank (RB)
3.700%, 11/05/97 (A) 1,600 1,600
Philadelphia, Hospital & Higher
Education Authority, Pennsylvania
Hospital Project,
Series C (RB) (FGIC)
3.950%, 07/01/98 1,000 1,000
Wyomissing, School District,
Pre-refunded @ 100
(GO) (FGIC)
5.400%, 11/01/97 (B) 1,010 1,010
- --------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $ 7,810
- --------------------------------------------------------------------------------
7
<PAGE>
Statement of Net Assets (unaudited)
Tax-Free Money Market Portfolio (concluded)
- --------------------------------------------------------------------------------
Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
SOUTH CAROLINA - 2.0%
South Carolina Public Service
Authority, LOC:
NationsBank (TECP)
3.800%, 12/05/97 $3,000 $ 3,000
- --------------------------------------------------------------------------------
TOTAL SOUTH CAROLINA $ 3,000
- --------------------------------------------------------------------------------
TENNESSEE - 1.0%
Jefferson County, Industrial
Development Authority, Ball
Corporation Project,
LOC: PNC (RB)
3.800%, 11/06/97 (A) 1,500 1,500
- --------------------------------------------------------------------------------
TOTAL TENNESSEE $ 1,500
- --------------------------------------------------------------------------------
TEXAS - 14.1%
Georgetown, Higher Education
Financing Authority, Southwestern
University Project, Series 1984,
(RB)
3.650%, 11/05/97 (A) 3,000 3,000
Gulf Coast County, Waste Disposal
Authority, Exxon Baytown
Project (RB)
4.200%, 11/03/97 (A) 100 100
Harris County, Health Facilities
Development, St. Luke's
Episcopal Project (RB) (ETM)
7.625%, 02/15/98 1,000 1,011
North Central Texas, Health
Facilities Development,
LOC: MBIA (TECP)
3.750%, 12/10/97 3,000 3,000
Port Corpus Christi, Industrial
Development, Series A,
LOC: Bank of Montreal (RB)
3.700%, 11/05/97 (A) 3,000 3,000
Texas State, Series A (TRAN)
4.750%, 08/31/98 8,000 8,059
Texas State Higher Education
Authority, Series B (RB)
(FGIC)
3.650%, 11/05/97 (A) 2,465 2,465
Texas State Public Finance
Authority (RB) (MBIA)
6.400%, 02/01/98 850 855
- --------------------------------------------------------------------------------
TOTAL TEXAS $ 21,490
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
UTAH - 1.2%
Emery County, Pacificorp Project,
Series 1991, LOC: Credit Suisse
(RB)
3.600%, 11/05/97 (A) $1,900 $ 1,900
- --------------------------------------------------------------------------------
TOTAL UTAH $ 1,900
- --------------------------------------------------------------------------------
VERMONT - 2.7%
Vermont, Educational & Health
Buildings, Capital Asset Financing,
Program Series 1, LOC:
CoreStates (RB)
3.700%, 11/06/97 (A) 4,100 4,100
- --------------------------------------------------------------------------------
TOTAL VERMONT $ 4,100
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $147,423) $147,423
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 96.5%
(Cost $147,423) $147,423
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 3.5% $ 5,281
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 106,561,373
outstanding shares
of beneficial interest 106,556
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 25,593,414
outstanding shares of
beneficial interest 25,592
Portfolio Shares of Institutional II Class
(unlimited authorization --
no par value) based on 20,548,832
outstanding shares of
beneficial interest 20,548
Undistributed net investment income 8
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $152,704
================================================================================
8
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Description Value
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL II CLASS $1.00
================================================================================
(A) VARIABLE RATE SECURITY--THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT AS OF OCTOBER 31, 1997. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(B) THE PRE-REFUNDED DATE IS SHOWN AS THE MATURITY DATE ON THE STATEMENT OF
NET ASSETS.
AMBAC--AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
COP--CERTIFICATES OF PARTICIPATION
ETM--ESCROWED TO MATURITY
FGIC--FINANCIAL
GUARANTY INSURANCE COMPANY
FSA--FINANCIAL SECURITY ASSURANCE
GO--GENERAL OBLIGATION
LOC--LETTER OF CREDIT
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
RAN--REVENUE ANTICIPATION NOTE
RB--REVENUE BOND
SLMA--STUDENT LOAN MARKETING ASSOCIATION
SPA--STANDBY PURCHASE AGREEMENT
TAN--TAX ANTICIPATION NOTE
TECP--TAX EXEMPT COMMERCIAL PAPER
TRAN--TAX & REVENUE ANTICIPATION NOTE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK Funds: U.S. Government Money Market Portfolio
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
U.S. Government Agency Obligations -- 34%
Variable Rate U.S. Government Agency Obligations -- 19%
Repurchase Agreements -- 47%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 54.2%
Fannie Mae
5.580%, 11/01/97 (B) $ 25,000 $ 24,996
5.590%, 11/01/97 (B) 25,000 24,995
5.565%, 11/03/97 (B) 25,000 24,990
5.510%, 11/06/97 (A) 35,000 34,973
5.558%, 11/19/97 (B) 25,000 24,999
5.435%, 02/26/98 (A) 25,000 24,558
7.000%, 07/13/98 29,000 29,243
Federal Farm Credit Bank
5.520%, 11/01/97 (B) 15,000 14,992
5.550%, 11/01/97 (B) 25,000 24,997
5.570%, 11/01/97 (B) 25,000 24,993
6.050%, 05/01/98 10,000 9,998
Federal Home Loan Bank
5.700%, 11/04/97 (B) (C) 25,000 24,990
5.570%, 11/05/97 (B) 25,000 24,993
5.420%, 12/02/97 10,000 9,999
5.430%, 12/03/97 (A) 25,000 24,879
5.510%, 12/03/97 (A) 75,000 74,633
5.480%, 12/10/97 (A) 40,000 39,763
5.710%, 01/21/98 10,000 9,999
5.435%, 02/20/98 (A) 35,000 34,413
5.425%, 03/06/98 (A) 50,000 49,058
5.420%, 04/24/98 (A) 50,000 48,690
5.700%, 10/23/98 25,000 24,985
Federal Home Loan Mortgage
Corporation
5.715%, 03/17/98 10,000 9,995
5.950%, 06/19/98 10,000 9,997
Student Loan Marketing
Association
5.600%, 11/04/97 (B) 25,000 24,993
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $675,121) $675,121
- --------------------------------------------------------------------------------
9
<PAGE>
Statement of Net Assets (unaudited)
U.S. Government Money Market
Portfolio (concluded)
- --------------------------------------------------------------------------------
Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 48.1%
First Boston
5.720%, dated 10/31/97,
matures 11/03/97,
repurchase price
$305,145,383
(collateralized by
U.S. Treasury Bonds:
total market
value $312,666,398) $305,000 $305,000
Goldman Sachs
5.250%, dated 10/31/97,
matures 11/03/97,
repurchase price
$3,530,210 (collateralized
by various U.S. Treasury
instruments: total
market value $3,599,241) 3,529 3,529
Goldman Sachs
5.700%, dated 10/31/97,
matures 11/03/97, repurchase
price $290,137,750
(collateralized by various
U.S. Treasury instruments:
total market value
$295,800,116) 290,000 290,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $598,529) $ 598,529
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 102.3%
(Cost $1,273,650) $1,273,650
================================================================================
OTHER ASSETS AND LIABILITIES, NET - (2.3%) $ (28,215)
================================================================================
- --------------------------------------------------------------------------------
Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization --
no par value) based on
1,167,551,251 outstanding
shares of beneficial interest $1,167,536
Portfolio Shares of Retail Class
(unlimited authorization --
no par value) based
on 7,804,206 outstanding
shares of beneficial interest 7,804
Portfolio Shares of Institutional II Class
(unlimited authorization --
no par value) based on 70,061,189
outstanding shares
of beneficial interest 70,061
Undistributed net investment income 59
Accumulated net realized loss
on investments (25)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $1,245,435
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL II CLASS $1.00
================================================================================
(A) THE ANNUALIZED DISCOUNT YIELD AT TIME OF PURCHASE IS SHOWN AS THE RATE ON
THE STATEMENT OF NET ASSETS.
(B) VARIABLE RATE SECURITY -- THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT AS OF OCTOBER 31, 1997. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(C) WHEN ISSUED SECURITY TOTAL COST $24,990,318.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
ARK Funds: U.S. Treasury Money Market Portfolio
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
U.S. Treasury Bills -- 15%
U.S. Treasury Notes -- 85%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Principal
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 91.8%
U.S. Treasury Bills
5.335%, 01/08/98 (A) $ 1,654 $ 1,637
5.345%, 02/05/98 1,675 1,651
5.045%, 03/05/98 183 180
5.080%, 03/05/98 559 549
5.090%, 03/05/98 5,369 5,275
5.030%, 04/02/98 1,727 1,690
5.100%, 04/09/98 18,171 17,762
5.090%, 04/16/98 16,901 16,504
5.110%, 04/16/98 1,833 1,790
5.115%, 04/16/98 1,116 1,090
5.195%, 08/20/98 3,068 2,939
U.S. Treasury Notes
7.375%, 11/15/97 70,000 70,040
5.375%, 11/30/97 25,000 24,998
5.375%, 12/01/97 75,000 75,002
5.000%, 01/31/98 10,000 9,989
8.125%, 02/15/98 75,000 75,545
5.875%, 04/30/98 20,000 20,046
5.250%, 07/31/98 13,000 12,962
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $339,649) $339,649
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 91.8%
(Cost $339,649) $339,649
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 8.2% $ 30,205
================================================================================
- --------------------------------------------------------------------------------
Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization --
no par value) based on
252,295,564 outstanding
shares of beneficial interest $252,285
Portfolio Shares of Retail Class
(unlimited authorization --
no par value) based
on 29,200,579 outstanding
shares of beneficial interest 29,201
Portfolio Shares of Institutional II Class
(unlimited authorization --
no par value) based on 88,364,673
outstanding shares
of beneficial interest 88,361
Undistributed net investment income 26
Accumulated net realized loss
on investments (19)
================================================================================
TOTAL NET ASSETS -- 100.0% $369,854
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL II CLASS $1.00
================================================================================
(A) THE ANNUALIZED DISCOUNT YIELD AT TIME OF PURCHASE IS SHOWN AS THE RATE ON
THE STATEMENT OF NET ASSETS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<PAGE>
Statement of Net Assets (unaudited)
ARK Funds: Short-Term Treasury Portfolio
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
U.S. Treasury Bill -- 1%
U.S. Treasury Bond -- 14%
U.S. Treasury Notes -- 85%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 99.3%
U.S. Treasury Bill
5.260%, 08/20/98 (A) $ 54 $ 52
U.S. Treasury Bond
6.000%, 08/15/99 5,376 5,405
U.S. Treasury Notes
6.250%, 07/31/98 1,180 1,186
5.875%, 08/15/98 69 69
6.000%, 09/30/98 5,800 5,823
5.875%, 10/31/98 251 252
5.625%, 11/30/98 3,355 3,356
5.750%, 12/31/98 1,000 1,001
5.875%, 01/31/99 2,436 2,443
5.875%, 02/28/99 2,000 2,006
5.875%, 08/31/99 1,640 1,645
5.875%, 11/15/99 5,379 5,399
6.375%, 05/15/00 4,000 4,062
6.000%, 08/15/00 3,000 3,024
8.750%, 08/15/00 4,000 4,305
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $39,851) $40,028
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.3%
(Cost $39,851) $40,028
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 0.7% $ 267
================================================================================
- --------------------------------------------------------------------------------
Market
Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 2,304,800
outstanding shares
of beneficial interest $23,050
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 1,702,893
outstanding shares
of beneficial interest 17,060
Undistributed net investment income 1
Accumulated net realized gain
on investments 7
Net unrealized appreciation on investments 177
================================================================================
TOTAL NET ASSETS -- 100.0% $40,295
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $10.06
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $10.05
================================================================================
(A) THE ANNUALIZED DISCOUNT YIELD AT TIME OF PURCHASE IS SHOWN AS THE RATE ON
THE STATEMENTS OF NET ASSETS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
ARK Funds: Maryland Tax-Free Portfolio
[PHOTO OMITTED]
Susan L. Schnaars,
CPA, CFA
Portfolio Manager
SUSAN L. SCHNAARS HAS OVER TEN YEARS OF FIXED INCOME ANALYSIS AND PORTFOLIO
MANAGEMENT EXPERIENCE. SHE IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND IS
RESPONSIBLE FOR MANAGING SEVERAL LARGE INSTITUTIONAL ACCOUNTS. MS. SCHNAARS IS
RESPONSIBLE FOR THE MARYLAND & PENNSYLVANIA TAX-FREE PORTFOLIOS AND IS
CO-MANAGER OF THE INCOME AND THE INTERMEDIATE FIXED INCOME PORTFOLIOS.
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES - 98.4%
MARYLAND - 89.1%
Alleghany County, Public
Improvements, Callable
03/01/07 @ 101 (GO) (AMBAC)
5.300%, 03/01/12 $1,190 $1,215
Anne Arundel County, Callable
09/01/06 @ 101 (GO)
5.000%, 09/01/10 1,500 1,511
Baltimore, Series A, Callable
04/01/03 @ 102 (COP) (MBIA)
5.200%, 04/01/04 750 782
Baltimore, Series B (GO) (MBIA)
7.000%, 10/15/03 1,000 1,141
Baltimore, Port Facilities-DuPont,
Callable 04/01/02 @ 103 (RB)
6.500%, 10/01/11 1,000 1,094
Baltimore, Water Project, Series A,
Callable 07/01/06 @ 101
(RB) (FGIC)
5.500%, 07/01/26 1,500 1,524
Baltimore, Water Utility Revenue,
Pre-refunded @ 100 (GO)
(MBIA)
6.500%, 07/01/00 (A) 1,700 1,802
Baltimore County, Callable
06/16/97 @ 102 (COP)
6.900%, 12/01/99 1,000 1,012
Baltimore County,
Baltimore Gas & Electric (TECP)
3.850%, 01/08/98 1,100 1,100
Baltimore County, Consolidated
Public Improvements,
Callable 06/01/06 @ 101 (GO)
5.500%, 06/01/16 2,000 2,055
Baltimore County, Pension Funding,
Callable 07/01/98 @ 102 (GO)
6.700%, 07/01/11 1,000 1,036
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Cash -- 1%
Fixed Rate Municipal Obligations -- 99%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Calvert County, Pollution Control,
Baltimore Gas & Electric Project,
Callable 07/15/04 @ 102 (RB)
5.550%, 07/15/14 $2,500 $2,556
Calvert County, Public & School
Improvements, Callable
01/01/06 @ 101 (GO)
5.750%, 01/01/11 1,900 2,004
Carroll County, Pre-refunded
@ 102 (GO)
7.250%, 10/01/00 (A) 500 551
Carroll County, Consolidated
Public Improvements,
Pre-refunded @ 102 (GO)
6.250%, 11/01/01 (A) 1,000 1,094
Charles County, Callable
03/01/05 @ 101 (GO)
5.700%, 03/01/10 750 790
Cumberland, Series A, Callable
05/01/04 @ 102 (RB) (FGIC)
5.125%, 05/01/13 1,000 1,012
Frederick, Callable 12/01/02 @ 102
(GO) (FGIC)
6.125%, 12/01/06 1,000 1,089
6.125%, 12/01/07 500 543
Frederick County, Callable
07/01/02 @ 102 (GO)
5.700%, 07/01/09 1,000 1,045
Frederick County, Series B,
Callable 07/01/02 @ 102 (GO)
6.300%, 07/01/07 1,000 1,086
6.300%, 07/01/08 2,000 2,162
13
<PAGE>
Statement of Net Assets (unaudited)
Maryland Tax-Free Portfolio (continued)
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Gaithersburg, Hospital & Nursing
Home Improvements, Shady
Grove, Callable 09/01/05 @ 102
(RB) (FSA)
6.000%, 09/01/22 $1,000 $1,047
Howard County, Series B (GO)
5.800%, 08/15/01 500 529
Howard County, Consolidated
Public Improvements, Series A,
Callable 02/15/03 @ 101 (GO)
5.200%, 02/15/04 1,000 1,048
Maryland State (GO)
6.700%, 07/15/00 500 534
Maryland State, Callable
10/15/01 @ 101 (GO)
5.900%, 10/15/04 1,000 1,061
10/15/01 @ 102 (GO)
6.100%, 10/15/06 1,500 1,611
Maryland State & Local Facilities
Authority, Callable 08/01/07
@ 101 (GO)
5.000%, 08/01/09 1,000 1,020
Maryland State & Local Facilities
Authority, First Series, Callable
02/01/03 @ 100 (GO)
5.300%, 02/01/04 1,000 1,041
Maryland State & Local Facilities
Authority, Second Series AA,
Callable 06/01/04 @ 101.5 (GO)
5.500%, 06/01/08 1,500 1,586
Maryland State Community
Development Administration,
Housing & Community
Development, Callable
04/01/07 @ 101.5 (RB)
5.600%, 03/01/17 1,000 1,016
Maryland State Community
Development Administration,
Single Family Program,
Callable 04/01/07 @ 101.5 (RB)
5.050%, 04/01/08 1,000 1,015
Maryland State Department of
Transportation, Public
Improvements, Callable
09/01/00 @ 100.75 (RB)
6.100%, 09/01/01 2,000 2,118
Maryland State Doctors Community
Hospital, Health Improvements,
Callable 07/01/03 @ 100 (RB)
5.500%, 07/01/24 2,000 1,925
Maryland State Health & Higher
Education Facilities Authority,
Callable 07/01/07 @ 102
(RB)
5.500%, 07/01/17 (B) 2,250 2,216
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Maryland State Health & Higher
Education Facilities Authority,
Health Improvements, Peninsula
Regional Medical Center Project,
Callable 07/01/03 @ 102 (RB)
5.000%, 07/01/08 $1,000 $ 979
Maryland State Health & Higher
Education Facilities Authority,
Hospital Improvements, North
Arundel Project, Callable
07/01/03 @ 102 (RB) (MBIA)
6.000%, 07/01/12 500 533
Maryland State Health & Higher
Education Facilities Authority,
Howard County General Hospital
Project, Callable 07/01/03
@ 102 (RB)
5.500%, 07/01/13 1,000 1,003
Maryland State Health & Higher
Education Facilities Authority,
Johns Hopkins University Project,
Callable 07/01/98 @ 102 (RB)
7.375%, 07/01/08 1,000 1,041
Maryland State Health & Higher
Education Facilities Authority,
Johns Hopkins Hospital Project,
Callable 11/15/98 @ 102 (RB)
7.375%, 07/01/09 1,000 1,049
Maryland State Health & Higher
Education Facilities Authority,
Loyola College Project, Series A,
Callable 10/01/06 @ 102
(RB) (MBIA)
5.375%, 10/01/11 950 981
Maryland State Health & Higher
Education Facilities Authority,
Loyola College Project, Series A,
Callable 10/01/06 @ 102
(RB) (MBIA)
5.375%, 10/01/26 1,500 1,515
Maryland State Health & Higher
Education Facilities Authority,
Mercy Medical Center Project,
Callable 07/01/03 @ 102
(RB) (AMBAC)
5.750%, 07/01/15 2,000 2,080
Maryland State Health & Higher
Education Facilities Authority,
Pickersgill Project, Series A,
Callable 01/01/07 @ 102 (RB)
6.000%, 01/01/15 1,500 1,566
Maryland State Health & Higher
Education Facilities Authority,
Sinai Hospital Project, Callable
07/01/03 @ 102 (RB) (AMBAC)
5.200%, 07/01/04 1,000 1,045
14
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Maryland State Health & Higher
Education Facilities Authority,
University of Maryland Medical
Systems Project, Callable 07/01/03
@ 102 (RB) (FGIC)
5.300%, 07/01/05 $1,000 $1,045
Maryland State Health & Higher
Education Facilities Authority,
University of Maryland Medical
Systems Project, Series A,
Pre-refunded @ 102
(RB) (FGIC)
7.000%, 07/01/01 (A) 1,000 1,113
Maryland State Industrial
Development Financing
Authority, Holy Cross Health
Systems Project (RB)
5.000%, 12/01/03 1,000 1,029
Maryland State Stadium Authority,
Sports Facility, Callable
03/01/06 @ 101 (RB) (AMBAC)
5.500%, 03/01/12 1,000 1,038
Maryland State Transportation
Authority, Callable 07/01/02
@ 100 (RB)
5.750%, 07/01/15 3,000 3,038
Maryland State Transportation
Authority, Baltimore/Washington
International Airport Project,
Callable 07/01/04 @ 102
(RB) (FGIC)
6.000%, 07/01/07 1,000 1,098
Maryland State Water Quality
Financing Administration,
Revolving Loan Fund, Series A,
Callable 09/01/05 @ 100 (RB)
5.500%, 09/01/12 1,250 1,284
Callable 09/01/02 @ 101 (RB)
6.550%, 09/01/14 945 1,019
Montgomery County, Consolidated
Public Improvements, Series A,
Callable 10/01/04 @ 102 (GO)
6.000%, 10/01/09 2,000 2,183
Montgomery County, Parking
Authority, Silver Spring Parking
Lot Project, Series A, Callable
06/01/02 @ 102 (RB) (FGIC)
6.250%, 06/01/09 500 541
Montgomery County, Public
Improvements, Series A (GO)
5.800%, 07/01/07 1,000 1,103
Callable 10/01/02 @ 102 (GO)
5.500%, 10/01/06 1,000 1,060
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Montgomery County, Single Family
Mortgage Program, Series A,
Callable 07/01/05 @ 102 (RB)
(FHA/VA/FHLMC)
6.350%, 07/01/14 $ 150 $ 162
Prince Georges County,
Consolidated Public
Improvements, Callable 03/15/03
@ 102 (GO) (AMBAC)
5.750%, 03/15/10 725 765
Prince Georges County, Public
Improvements (GO)
7.000%, 01/15/98 1,000 1,006
Prince Georges County, Public
Improvements, Series A,
Callable 03/01/02 @ 102
(GO) (MBIA)
6.000%, 03/01/07 1,450 1,557
Prince Georges County, Solid
Waste Management System,
Callable 06/15/03 @ 102
(RB) (FSA)
5.000%, 06/15/04 1,000 1,029
Prince Georges County, Water
Utility Improvements, Stormwater
Management Project, Callable
03/15/03 @ 102 (GO)
5.500%, 03/15/13 2,575 2,610
Queens Annes County, Public
Facilities, Callable 11/15/07
@ 101 (GO) (FGIC)
5.400%, 11/15/11 1,000 1,043
Queens Annes County, School and
Recreational Facilities
Improvements, Callable 11/15/07
@ 101 (GO) (FGIC)
6.000%, 11/15/08 1,000 1,108
St. Mary's County, Academic &
Auxiliary Facilities, Callable
09/01/07 @ 102 (RB) (MBIA)
5.250%, 09/01/27 2,000 1,983
University of Maryland, Equipment
Loan Program, Second Series,
Callable 06/01/02 @ 102 (RB)
6.000%, 06/01/05 500 539
University of Maryland, Medical
Systems Project, Series A,
Callable 04/01/05 @ 102 (RB)
5.500%, 04/01/10 2,000 2,090
University of Maryland, Medical
Systems Project, Series B,
Callable 10/01/02 @ 102 (RB)
6.100%, 04/01/03 500 544
Washington County, Public
Improvements, Callable
01/01/05 @ 102 (GO) (MBIA)
5.800%, 01/01/15 1,250 1,314
15
<PAGE>
Statement of Net Assets (unaudited)
Maryland Tax-Free Portfolio (concluded)
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Washington Suburban Sanitation
District, General
Construction (GO)
5.000%, 06/01/09 $1,000 $ 1,026
Washington Suburban Sanitation
District, General Construction,
Callable 06/01/04 @ 102 (RB)
5.000%, 06/01/11 1,000 1,006
Washington Suburban Sanitation
District, Sewer Improvements,
Callable 06/01/03 @ 102 (GO)
5.300%, 06/01/08 1,000 1,038
Callable 06/01/06 @ 100 (GO)
5.600%, 06/01/18 1,000 1,029
- --------------------------------------------------------------------------------
TOTAL MARYLAND $ 93,163
- --------------------------------------------------------------------------------
PUERTO RICO - 8.8%
Commonwealth of Puerto Rico,
Public Improvements
(GO) (MBIA)
6.250%, 07/01/12 1,000 1,133
Commonwealth of Puerto Rico,
Public Improvements,
Callable 07/01/07 @ 100
(GO) (MBIA)
5.375%, 07/01/25 2,075 2,067
Puerto Rico Electric Power
Authority, Callable 07/01/07
@ 101.5 (RB) (MBIA)
5.250%, 07/01/15 1,000 1,006
Puerto Rico Public Building
Authority, Callable 07/01/07
@ 101.5 (RB) (MBIA)
5.000%, 07/01/15 5,005 4,942
- --------------------------------------------------------------------------------
TOTAL PUERTO RICO $ 9,148
- --------------------------------------------------------------------------------
TEXAS - 0.5%
Austin, Utility Systems, Series A,
(ETM) (RB)
9.100%, 05/15/00 190 212
Austin, Utility Systems,
Un-refunded Balance,
Series A (RB)
9.100%, 05/15/00 310 347
- --------------------------------------------------------------------------------
TOTAL TEXAS $ 559
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $98,451) $102,870
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
CASH EQUIVALENT - 1.0%
Dreyfus Tax Exempt Cash
Management 1,060,465 $ 1,060
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $1,060) $ 1,060
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.4%
(Cost $99,511) $103,930
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 0.6% $ 584
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 8,276,435 outstanding
shares of beneficial interest 79,481
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 1,992,031 outstanding
shares of beneficial interest 20,018
Accumulated net realized gain on investments 596
Net unrealized appreciation on investments 4,419
================================================================================
TOTAL NET ASSETS -- 100.0% $104,514
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $10.18
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $10.18
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL
CLASS ($10.18 / 95.50%) (C) $10.66
================================================================================
(A) THE PRE-REFUNDED DATE IS SHOWN AS THE MATURITY DATE
ON THE STATEMENT OF NET ASSETS.
(B) WHEN ISSUED SECURITY (TOTAL COST $2,227,813)
(C) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE PORTFOLIO. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME. THE
MAXIMUM SALES LOAD IS 4.50%. SHAREHOLDERS WHO INVESTED IN THE ARK FUNDS
PRIOR TO 04/01/97 CAN INVEST WITHOUT A SALES LOAD THROUGH 12/31/97.
AMBAC--AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
COP--CERTIFICATES OF PARTICIPATION
ETM--ESCROWED TO MATURITY
FGIC--FINANCIAL GUARANTY INSURANCE COMPANY
FHA--FEDERAL HOUSING ADMINISTRATION
FHLMC--FEDERAL HOME LOAN MORTGAGE CORPORATION
FSA--FINANCIAL SECURITY ASSURANCE
GO--GENERAL OBLIGATION
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
RB--REVENUE BOND
TECP--TAX EXEMPT COMMERCIAL PAPER
VA--VETERANS ADMINISTRATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
ARK Funds: Pennsylvania Tax-Free Portfolio
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Cash -- 1%
Variable Rate Municipal Obligations -- 2%
Fixed Rate Municipal Obligations -- 97%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES - 100.1%
PENNSYLVANIA - 97.8%
Abington, School District,
Callable 05/15/07 @ 100
(GO) (FGIC)
5.300%, 05/15/21 $500 $497
Allegheny County, Series C-39,
Callable 05/01/02 @ 102
(GO) (AMBAC)
5.600%, 05/01/04 300 320
Allegheny County, Hospital
Development Authority, Pittsburgh
Mercy Health System Project,
Callable 08/15/06 @ 102
(RB) (AMBAC)
5.625%, 08/15/18 500 509
Allegheny County, Hospital
Development Authority,
Presbyterian Health Center
Project, Series C (RB)
(MBIA)
3.600%, 11/06/97 (A) 400 400
Allegheny County, Redevelopment
Authority, Home
Improvement (RB)
6.700%, 02/01/99 500 513
Allentown, Callable 07/15/03
@ 100 (GO) (AMBAC)
5.650%, 07/15/08 500 523
Allentown, Callable 07/15/09
@ 100 (GO) (AMBAC)
5.650%, 07/15/10 250 267
Allentown, Sewer Systems,
Callable 07/15/09 @ 100
(RB) (AMBAC)
5.650%, 07/15/10 250 267
Bucks County, Community
College Project, Callable
6/15/07 @ 100 (RB)
5.500%, 06/15/17 500 510
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Chester County, Callable
12/15/03 @ 100 (GO)
5.300%, 12/15/05 $500 $520
Conrad Weiser Area School
District, Pre-refunded @ 100
(GO) (MBIA)
6.700%, 12/15/04 (B) 500 568
Cornwall & Lebanon, Suburban
Joint School Authority,
Callable 03/01/04 @ 100
(RB) (FGIC)
5.750%, 03/01/08 500 527
Cumberland County, Messiah
College Project, Callable
10/01/06 @ 100 (RB) (AMBAC)
5.125%, 10/01/15 500 492
Cumberland Valley, School District,
Callable 09/01/03 @ 100
(GO) (FGIC)
5.350%, 09/01/07 500 519
Delaware County, Callable
11/15/07 @ 100 (GO)
5.125%, 11/15/16 500 501
Delaware County, Dunwoody
Village Project (RB)
5.550%, 04/01/06 300 307
Fox Chapel, Sanitation Sewer
Authority, Callable 05/01/97
@ 100 (RB)
5.900%, 05/01/05 420 421
Harrisburg, School District
Authority, Series B, Callable
09/01/02 @ 100 (RB) (AMBAC)
5.650%, 09/01/05 250 261
Lancaster, Franklin & Marshall
College Project, Callable 04/15/02
@ 100 (RB) (MBIA)
6.500%, 04/15/06 250 270
Lancaster County, Lancaster
General Hospital Project
(RB) (AMBAC)
5.800%, 07/01/01 500 527
Lansdale, Callable 06/01/02 @ 100
(GO) (AMBAC)
6.400%, 06/01/05 150 162
Lansdale, Callable 06/01/02 @ 100
(GO) (AMBAC)
6.500%, 06/01/06 100 108
Luzerne County, Callable 12/15/07
@ 100 (GO) (FGIC)
5.600%, 12/15/16 500 514
Montgomery County, Callable
10/15/01 @ 102 (GO)
5.200%, 10/15/02 300 314
5.750%, 10/15/10 500 522
17
<PAGE>
Statement of Net Assets (unaudited)
Pennsylvania Tax-Free Portfolio (concluded)
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Montgomery County, Health &
Higher Education Authority,
Abington Memorial Hospital
Project, Series A,
Callable 06/01/04
@ 102 (RB) (AMBAC)
5.125%, 06/01/14 $500 $491
Montgomery County, Health &
Higher Education Authority,
Beaver College Project, Callable
04/01/06 @ 102 (RB) (Connie Lee)
5.700%, 04/01/10 500 524
Montgomery County, Pennsylvania
Hill School Project, Callable
08/15/07 @ 100 (RB) (MBIA)
5.350%, 08/15/27 500 498
Montgomery County, Sewer
Authority, Callable 08/01/97
@ 100 (RB) (FGIC)
5.850%, 08/01/06 500 501
Norristown, School District
Authority, Callable 03/01/07
@ 100 (GO) (FGIC)
5.500%, 09/01/14 500 511
Northampton County, Pennsylvania
Higher Education Authority,
Lehigh University, Callable
10/15/01 @ 102 (RB) (MBIA)
6.900%, 10/15/06 500 555
North Hills, School District
Authority, Callable 11/15/07
@ 100 (GO) (FGIC)
5.625%, 11/15/14 500 516
North Huntingdon Township,
(ETM) (GO)
5.750%, 04/01/08 305 323
North Wales, Water Authority,
Callable 11/01/05 @ 100
(RB) (FGIC)
5.600%, 11/01/16 500 507
Parkland, School District
Improvements, Callable 03/01/06
@ 100 (GO) (MBIA)
5.500%, 09/01/09 500 528
Pennsylvania State, First Series,
Callable 05/15/06 @ 101.5
(GO) (FGIC)
5.375%, 05/15/14 500 509
Pennsylvania State, Second
Series (GO)
6.000%, 07/01/07 300 333
Pennsylvania State Convention
Center Authority, Series A,
(ETM) (RB) (FGIC)
6.700%, 09/01/16 265 314
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Pennsylvania State Financing
Authority, Callable 11/01/03
@ 102 (RB)
6.600%, 11/01/09 $400 $435
Pennsylvania State Higher
Education Facilities Authority,
Series E, (ETM) (RB) (MBIA)
6.450%, 06/15/01 500 538
Pennsylvania State Higher Education
Facilities Authority,
Drexel University
(RB) (MBIA)
5.750%, 05/01/03 500 534
Pennsylvania State Higher
Education Facilities Authority,
University of Pennsylvania
Project, Callable 01/01/06 @
101 (RB)
5.600%, 01/01/10 500 523
Pennsylvania State Housing
Finance Agency, Callable
07/01/02 @ 102 (RB)
(Fannie Mae)
6.400%, 07/01/12 500 526
Pennsylvania State Turnpike
Commission, Callable 12/01/02
@ 102 (RB) (FGIC)
6.000%, 12/01/12 400 425
Pennsylvania State University,
Callable 03/01/02 @ 102 (RB)
5.950%, 03/01/03 500 539
Philadelphia Airport Parking
Authority, Callable 09/01/07
@ 101 (RB) (AMBAC)
5.500%, 09/01/18 500 504
Philadelphia Higher Education
Facilities Authority, Moss
Rehabilitation Hospital Project
(RB) (AMBAC)
6.900%, 07/01/00 230 246
Philadelphia Industrial Development,
Callable 07/01/03 @ 102 (RB)
5.250%, 07/01/17 500 489
Philadelphia Water & Waste
Authority, Callable 08/01/07
@ 102 (RB) (AMBAC)
5.125%, 08/01/27 500 478
Punxsutawney Area School District,
Callable 04/15/05 @ 100
(GO) (MBIA)
5.750%, 04/15/10 500 526
Red Lion Area School District,
Callable 04/01/02 @ 100
(GO) (AMBAC)
5.850%, 04/01/05 100 106
Ridley Park, Taylor Hospital
Authority, Series A (RB)
6.000%, 12/01/05 500 514
18
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Scranton-Lackawanna, Health
& Welfare Authority, Mercy
Health Project, Series B
(RB) (MBIA)
5.100%, 01/01/07 $500 $ 515
South Allegheny School District,
Callable 10/01/05 @ 100
(GO) (MBIA)
5.100%, 10/01/06 500 520
Upper Merion, Municipal Utility
Authority, Callable 08/15/03
@ 100 (RB)
6.000%, 08/15/12 500 522
West Shore, Holy Spirit Hospital
Project, Callable 07/01/07 @
100 (RB) (MBIA)
5.600%, 01/01/13 500 510
York County (GO) (FGIC)
5.500%, 10/01/01 200 210
- --------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $25,109
- --------------------------------------------------------------------------------
PUERTO RICO - 2.3%
Commonwealth of Puerto Rico
(GO) (MBIA)
6.500%, 07/01/08 500 576
- --------------------------------------------------------------------------------
TOTAL PUERTO RICO $ 576
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $24,742) $25,685
- --------------------------------------------------------------------------------
CASH EQUIVALENT - 0.5%
Federated Pennsylvania Muni
Cash Trust 139 139
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $138) $ 139
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.6%
(Cost $24,880) $25,824
================================================================================
OTHER ASSETS AND LIABILITIES, NET - (0.6%) $ (152)
================================================================================
- --------------------------------------------------------------------------------
Market
Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 2,313,338 outstanding
shares of beneficial interest $22,650
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 196,794
outstanding shares of
beneficial interest 1,975
Accumulated net realized gain on investments 103
Net unrealized appreciation on investments 944
================================================================================
TOTAL NET ASSETS -- 100.0% $25,672
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $10.23
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $10.22
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL
CLASS ($10.22 / 95.50%) (C) $10.70
================================================================================
(A) VARIABLE RATE SECURITY -- THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT AS OF OCTOBER 31, 1997. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(B) THE PRE-REFUNDED DATE IS SHOWN AS THE MATURITY DATE ON THE STATEMENT
OF NET ASSETS.
(C) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE PORTFOLIO. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME.
THE MAXIMUM SALES LOAD IS 4.50%. SHAREHOLDERS WHO INVESTED IN THE ARK FUNDS
PRIOR TO 04/01/97 CAN INVEST WITHOUT A SALES LOAD THROUGH 12/31/97.
AMBAC--AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
ETM--ESCROWED TO MATURITY
FGIC--FINANCIAL GUARANTY INSURANCE COMPANY
GO--GENERAL OBLIGATION
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
RB--REVENUE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<PAGE>
Statement of Net Assets (unaudited)
ARK Funds: Income Portfolio
[PHOTO OMITTED]
Steven M. Gradow
Co-Portfolio Manager
STEVEN M. GRADOW HAS OVER FOURTEEN YEARS OF FIXED INCOME PORTFOLIO MANAGEMENT
EXPERIENCE. HE IS A MANAGING DIRECTOR OF ALLIED INVESTMENT ADVISORS AND IS
CO-MANAGER OF THE INCOME AND THE INTERMEDIATE FIXED INCOME PORTFOLIOS.
[PHOTO OMITTED]
Susan L. Schnaars,
CPA, CFA
Co-Portfolio Manager
SUSAN L. SCHNAARS HAS OVER TEN YEARS OF FIXED INCOME ANALYSIS AND PORTFOLIO
MANAGEMENT EXPERIENCE. SHE IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND IS
RESPONSIBLE FOR MANAGING SEVERAL LARGE INSTITUTIONAL ACCOUNTS. MS. SCHNAARS IS
RESPONSIBLE FOR THE MARYLAND & PENNSYLVANIA TAX-FREE PORTFOLIOS AND IS
CO-MANAGER OF THE INCOME AND THE INTERMEDIATE FIXED INCOME PORTFOLIOS.
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 34.5%
AUTOMOTIVE - 0.4%
Chrysler
7.450%, 02/01/97 $1,000 $ 1,040
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 1,040
- --------------------------------------------------------------------------------
BANKS - 5.7%
Bank of America
5.650%, 11/03/97 (B) 5,000 5,000
Bank of New York
7.780%, 12/01/26 (A) 1,500 1,521
BankAmerica Institutional, Series A
8.070%, 12/31/26 2,500 2,628
Bankers Trust
5.650%, 11/03/97 (A) (B) 5,000 5,002
First Nationwide Holdings
10.625%, 10/01/03 1,000 1,095
- --------------------------------------------------------------------------------
TOTAL BANKS $15,246
- --------------------------------------------------------------------------------
COMMUNICATION - 5.4%
360 Communications
7.600%, 04/01/09 1,500 1,569
Comcast Cable
8.875%, 05/01/17 3,650 4,229
Comcast Cablevision
8.375%, 05/01/07 2,725 3,015
ITT
6.750%, 11/15/03 2,000 2,012
7.375%, 11/15/15 1,000 969
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
U.S. Government Agency Obligations --1%
Yankee Bonds -- 2%
Asset-Backed Securities -- 2%
Repurchase Agreement -- 3%
Treasury Mortgage-Backed Securities -- 7%
U.S. Government Mortgage Backed -- 22%
Corporate Obligations -- 33%
U.S. Treasury Obligations -- 30%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Worldcom
7.750%, 04/01/07 $212,650 $ 2,809
- --------------------------------------------------------------------------------
TOTAL COMMUNICATION $14,603
- --------------------------------------------------------------------------------
FINANCE - 8.6%
Abbey National Treasury
Services
5.650%, 11/03/97 (A) (B) 5,000 4,997
Compass Trust I
8.230%, 01/15/27 2,000 2,105
Crestar Financial
8.160%, 12/15/26 3,500 3,671
Dynex Capital
7.875%, 07/15/02 2,500 2,537
Hutchison Whampoa
7.450%, 08/01/17 (A) 4,000 3,635
Mellon Capital I
7.720%, 12/01/26 2,000 2,043
Safeco Capital I
8.072%, 07/15/37 (A) 4,125 4,269
- --------------------------------------------------------------------------------
TOTAL FINANCE $23,257
- --------------------------------------------------------------------------------
ENERGY & POWER - 2.1%
Texas Utility Electric
9.750%, 05/01/21 5,000 5,769
- --------------------------------------------------------------------------------
TOTAL ENERGY & POWER $ 5,769
- --------------------------------------------------------------------------------
ENTERTAINMENT - 2.4%
Royal Caribbean Cruises
7.250%, 08/15/06 2,500 2,588
Time Warner
7.250%, 10/15/17 4,000 3,935
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 6,523
- --------------------------------------------------------------------------------
EQUIPMENT - 0.9%
Case Equipment
7.250%, 01/15/16 2,385 2,382
- --------------------------------------------------------------------------------
TOTAL EQUIPMENT $ 2,382
- --------------------------------------------------------------------------------
HEALTHCARE - 1.0%
Tenet Healthcare
8.000%, 01/15/05 2,500 2,603
- --------------------------------------------------------------------------------
TOTAL HEALTHCARE $ 2,603
- --------------------------------------------------------------------------------
20
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
PETROLEUM - 2.6%
Husky Oil
7.550%, 11/15/16 $3,600 $ 3,636
Oryx Energy
8.375%, 07/15/04 1,000 1,079
8.125%, 10/15/05 2,000 2,153
- --------------------------------------------------------------------------------
TOTAL PETROLEUM $ 6,868
- --------------------------------------------------------------------------------
RETAIL - 3.5%
Great Atlantic & Pacific Tea
7.750%, 04/15/07 1,500 1,603
Kroger
7.650%, 04/15/07 2,000 2,140
Nabisco
6.300%, 08/26/99 (A) 1,500 1,506
Loewen Group International
8.250%, 10/15/03 2,000 2,115
Storage USA
7.125%, 11/01/03 2,000 2,033
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 9,397
- --------------------------------------------------------------------------------
SECURITY BROKERS & DEALERS - 1.9%
Merrill Lynch, Series B
5.670%, 11/01/97 (A) 5,000 5,000
- --------------------------------------------------------------------------------
TOTAL SECURITY BROKERS & DEALERS $ 5,000
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $90,567) $92,688
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 31.3%
U.S. Treasury Bond
10.750%, 08/15/05 15,625 20,276
U.S. Treasury Notes
6.125%, 05/15/98 4,000 4,014
9.125%, 05/15/99 6,000 6,303
7.125%, 09/30/99 2,500 2,566
7.750%, 11/30/99 3,000 3,119
6.375%, 01/15/00 5,000 5,074
6.375%, 09/30/01 6,000 6,121
6.250%, 06/30/02 14,000 14,249
7.875%, 11/15/04 11,000 12,248
6.500%, 05/15/05 10,000 10,360
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $82,053) $84,330
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS - 23.3%
Fannie Mae
7.000%, 08/01/25 453 455
7.000%, 09/01/25 3,383 3,391
7.000%, 02/01/26 3,001 3,009
7.000%, 12/01/27 20,000 20,019
Fannie Mae (CMO)
10.000%, 01/25/16 90 91
Fannie Mae (REMIC)
7.250%, 12/18/16 2,500 2,529
9.750%, 09/25/18 616 669
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corporation
8.500%, 11/01/01 $ 72 $ 75
9.000%, 01/01/02 64 67
8.000%, 01/01/08 134 139
14.750%, 03/01/10 42 50
8.500%, 09/01/26 2,309 2,417
Federal Home Loan Mortgage
Corporation (CMO)
10.000%, 06/15/19 343 348
Federal Home Loan Mortgage
Corporation (GTD)
9.000%, 09/15/08 35 36
12.450%, 09/15/09 19 20
Government National
Mortgage Association
7.500%, 05/15/22 1,038 1,061
7.500%, 10/15/23 3,832 3,918
7.500%, 12/15/23 1,608 1,645
7.000%, 02/15/24 4,308 4,332
7.000%, 05/15/24 8,399 8,444
7.500%, 05/15/24 3,564 3,644
7.500%, 10/15/24 3,252 3,326
7.000%, 09/20/25 1,823 1,826
Government National Mortgage
Association (REMIC)
7.750%, 06/16/20 1,000 1,046
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $61,108) $62,557
- --------------------------------------------------------------------------------
MORTGAGE RELATED - 7.5%
Countrywide Funding
Series 1994-4, Cl A12
6.950%, 04/25/24 5,452 5,370
IMC Home Equity Loan
Trust 1996-4, Cl A1
6.590%, 07/25/11 558 564
IMC Home Equity Loan
Trust 1997-1, Cl A2
6.620%, 10/25/11 2,600 2,631
IMC Home Equity Loan
Trust 1997-2, Cl A3
6.940%, 11/20/11 4,000 4,065
IMC Home Equity Loan
Trust 1997-3, Cl A4
6.840%, 10/20/13 3,000 3,043
MDC Asset Investors
Trust Series V, Cl 2
9.325%, 12/01/17 3 4
Prudential Home Mortgage
Securities 1993-36, Cl A1
6.850%, 10/25/23 2,506 2,507
Residential Asset Securitization
Series 1996-A8, Cl A1
8.000%, 12/25/26 1,821 1,852
21
<PAGE>
Statement of Net Assets (unaudited)
Income Portfolio (concluded)
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL MORTGAGE RELATED
(Cost $19,369) $ 20,036
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 2.4%
Premier Auto Trust
1996-2, Cl A4
6.575%, 10/06/00 $ 4,600 4,652
Standard Credit Card Master
Trust Series 1995-10, Cl A
5.900%, 02/07/01 1,875 1,878
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $6,473) $ 6,530
- --------------------------------------------------------------------------------
YANKEE BONDS - 1.8%
Gulf Canada Resources
8.250%, 03/15/17 2,000 2,133
Hydro-Quebec
7.500%, 04/01/16 2,195 2,327
Quebec Province
7.500%, 07/15/23 465 489
- --------------------------------------------------------------------------------
TOTAL YANKEE BONDS
(Cost $4,639) $ 4,949
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCK - 1.3%
Simon Debartolo Group 67,000 3,492
- --------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCK
(Cost $3,399) $ 3,492
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.7%
Fannie Mae
8.625%, 11/10/04 $ 400 $ 420
Fannie Mae, Callable
06/09/99 @ 100
7.840%, 06/09/06 1,500 1,563
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,947) $ 1,983
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 2.9%
First Boston
5.720%, dated 10/31/97, matures
11/03/97, repurchase price
$7,822,979 (collateralized by
U.S. Treasury Bond: total
market value $7,996,373) 7,819 7,819
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $7,819) $ 7,819
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 105.7%
(Cost $277,374) $284,384
================================================================================
(A) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS.
(B) VARIABLE RATE SECURITY--THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT AS OF OCTOBER 31, 1997. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
CL--CLASS
CMO--COLLATERALIZED MORTGAGE OBLIGATION
GTD--GUARANTEED MORTGAGE CERTIFICATES
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
ARK Funds: Intermediate Fixed Income Portfolio
[Photo Omitted]
Susan L. Schnaars,
CPA, CFA
Co-Portfolio Manager
SUSAN L. SCHNAARS HAS OVER TEN YEARS OF FIXED INCOME ANALYSIS AND PORTFOLIO
MANAGEMENT EXPERIENCE. SHE IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND IS
RESPONSIBLE FOR MANAGING SEVERAL LARGE INSTITUTIONAL ACCOUNTS. MS. SCHNAARS IS
RESPONSIBLE FOR THE MARYLAND & PENNSYLVANIA TAX-FREE PORTFOLIOS AND IS
CO-MANAGER OF THE INCOME AND THE INTERMEDIATE FIXED INCOME PORTFOLIOS.
[Photo Omitted]
Steven M. Gradow
Co-Portfolio Manager
STEVEN M. GRADOW HAS OVER FOURTEEN YEARS OF FIXED INCOME PORTFOLIO MANAGEMENT
EXPERIENCE. HE IS A MANAGING DIRECTOR OF ALLIED INVESTMENT ADVISORS AND IS
CO-MANAGER OF THE INCOME AND THE INTERMEDIATE FIXED INCOME PORTFOLIOS.
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 39.2%
U.S. Treasury Bond
10.750%, 08/15/05 $2,000 $ 2,595
U.S. Treasury Notes
7.375%, 11/15/97 5,500 5,503
7.500%, 10/31/99 5,750 5,945
7.750%, 11/30/99 5,000 5,199
7.500%, 11/15/01 5,000 5,304
7.875%, 11/15/04 4,000 4,454
6.500%, 05/15/05 1,000 1,036
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $29,273) $30,036
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 22.7%
FINANCE - 5.5%
Bear Stearns
6.500%, 07/05/00 850 858
Case Credit
6.125%, 02/15/03 1,000 986
First Union
8.770%, 11/15/04 1,350 1,419
Hutchison Whampoa
6.950%, 08/01/07 (A) 1,000 925
- --------------------------------------------------------------------------------
TOTAL FINANCE $ 4,188
- --------------------------------------------------------------------------------
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Repurchase Agreement -- 3%
Mortgage Related -- 4%
U.S. Government & Agency Obligations -- 5%
Yankee Bonds -- 6%
Asset-Backed Securities -- 7%
U.S. Government Mortgage-Backed Obligations -- 12%
Corporate Obligations -- 23%
U.S. Treasury Obligations -- 40%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
COMMUNICATIONS - 8.0%
360 Communications
7.125%, 03/01/03 $1,000 $ 1,017
Comcast Cablevision
8.375%, 05/01/07 1,000 1,106
ITT
6.750%, 11/15/03 1,000 1,006
Lucent Technologies
7.250%, 07/15/06 1,220 1,293
Time Warner
8.110%, 08/15/06 600 648
Worldcom
7.750%, 04/01/07 1,000 1,060
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS $ 6,130
- --------------------------------------------------------------------------------
HEALTHCARE - 1.4%
Tenet Healthcare
8.000%, 01/15/05 1,000 1,041
- --------------------------------------------------------------------------------
TOTAL HEALTHCARE $ 1,041
- --------------------------------------------------------------------------------
PETROLEUM - 1.4%
Oryx Energy
8.375%, 07/15/04 1,000 1,079
- --------------------------------------------------------------------------------
TOTAL PETROLEUM $ 1,079
- --------------------------------------------------------------------------------
RETAIL - 2.7%
Federated Department Store
8.500%, 06/15/03 1,000 1,087
Storage USA
7.125%, 11/01/03 1,000 1,016
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 2,103
- --------------------------------------------------------------------------------
SECURITY BROKERS & DEALERS - 3.7%
Lehman Brothers Holdings
7.250%, 10/15/03 1,250 1,289
Merrill Lynch
7.200%, 10/15/12 1,500 1,536
- --------------------------------------------------------------------------------
TOTAL SECURITY BROKERS & DEALERS $ 2,825
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $16,991) $17,366
- --------------------------------------------------------------------------------
23
<PAGE>
Statement of Net Assets (unaudited)
Intermediate Fixed Income Portfolio (concluded)
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
OBLIGATIONS - 11.6%
Fannie Mae
6.500%, 05/01/08 $ 916 $ 915
6.500%, 10/01/08 3,334 3,329
Fannie Mae (CMO)
7.250%, 12/18/16 1,000 1,012
7.000%, 07/18/18 1,500 1,525
Federal Home Loan Bank (CMO)
6.634%, 02/20/04 1,535 1,542
Federal Home Loan Mortgage
Corporation (CMO)
7.000%, 07/15/99 297 298
7.250%, 03/15/04 155 155
8.000%, 05/15/05 85 85
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
OBLIGATIONS
(Cost $8,744) $8,861
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 6.4%
Capita Equipment Trust
Series 1996-1, Cl A3
6.110%, 07/15/99 1,500 1,507
Cityscape Home Equity Loan
Trust Series 1996-3, Cl A1
6.700%, 06/25/11 803 802
Premier Auto Trust Series
1996-2, Cl A4
6.575%, 10/06/00 1,575 1,593
Standard Credit Card Master
Trust Series 1995, Cl 10A
5.900%, 02/07/01 1,000 1,002
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $4,878) $4,904
- --------------------------------------------------------------------------------
YANKEE BONDS - 5.9%
Hydro Quebec
6.490%, 07/16/03 1,500 1,526
Merita Bank
6.500%, 01/15/06 1,350 1,333
Royal Caribbean
8.250%, 04/01/05 1,500 1,626
- --------------------------------------------------------------------------------
TOTAL YANKEE BONDS
(Cost $4,362) $4,485
- --------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 4.7%
Fannie Mae
6.270%, 09/20/00 2,500 2,515
Federal Home Loan Bank
6.570%, 09/03/02 1,050 1,056
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $3,560) $3,571
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares/Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
MORTGAGE RELATED - 4.0%
Collateralized Mortgage
Series 1992-2, Cl F
7.000%, 10/20/00 $ 500 $ 502
IMC Home Equity Loan
Trust 1997-1, Cl A2
6.620%, 10/25/11 750 759
IMC Home Equity Loan
Trust Series 1997-3, Cl A4
6.840%, 10/20/13 1,000 1,014
Prudential Home Mortgage
Series 1993-36, Cl A1
6.850%, 10/25/23 808 809
- --------------------------------------------------------------------------------
TOTAL MORTGAGE RELATED
(Cost $3,062) $ 3,084
- --------------------------------------------------------------------------------
PREFERRED STOCK - 1.3%
Simon Debartolo Group 20,000 1,043
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $1,012) $ 1,043
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 3.2%
First Boston
5.720%, dated 10/31/97, matures
11/03/97, repurchase price
$2,471,887 (collateralized by
U.S. Treasury Bond: total
market value $2,528,874) 2,471 2,471
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,471) $ 2,471
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.0%
(Cost $74,353) $75,821
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 1.0% $ 779
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 7,641,978 outstanding
shares of beneficial interest 74,922
Accumulated net realized gain on investments 210
Net unrealized appreciation on investments 1,468
================================================================================
TOTAL NET ASSETS -- 100.0% $76,600
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $10.02
================================================================================
(A) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS.
CL--CLASS
CMO--COLLATERALIZED MORTGAGE OBLIGATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
24
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
ARK Funds: Balanced Portfolio
[Photo Omitted]
Charles E. Knudsen III,
CFA
Co-Portfolio Manager
CHARLES E. KNUDSEN III HAS BEEN A PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND
ITS PREDECESSOR SINCE 1987. HE PROVIDES EQUITY RESEARCH FOR SEVERAL INDUSTRY
GROUPS AND IS CO-MANAGER OF THE BALANCED PORTFOLIO.
[Photo Omitted]
J. Eric Leo
Co-Portfolio Manager
J. ERIC LEO IS A MANAGING DIRECTOR OF, AND DIRECTOR OF EQUITY RESEARCH FOR,
ALLIED INVESTMENT ADVISORS, INC. AND CO-MANAGER WITH MR. KNUDSEN, OF THE
BALANCED PORTFOLIO. HE HAS OVER 20 YEARS OF EXPERIENCE IN INVESTMENT MANAGEMENT.
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCKS - 55.1%
AIRCRAFT - 2.3%
Boeing 20,000 $ 957
Lockheed Martin 12,000 1,141
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $2,098
- --------------------------------------------------------------------------------
AUTOMOTIVE - 1.1%
Magna International, Cl A 15,000 988
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 988
- --------------------------------------------------------------------------------
BANKS - 3.8%
Banc One 22,000 1,147
Chase Manhattan 10,000 1,154
Norwest 36,000 1,154
- --------------------------------------------------------------------------------
TOTAL BANKS $3,455
- --------------------------------------------------------------------------------
BEAUTY PRODUCTS - 1.0%
Gillette 10,000 891
- --------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 891
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS &
ADVERTISING - 0.6%
Chancellor Media, Cl A* 10,000 549
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 549
- --------------------------------------------------------------------------------
CHEMICALS - 2.4%
E.I. du Pont de Nemours 20,000 1,137
Monsanto 25,000 1,069
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $2,206
- --------------------------------------------------------------------------------
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Asset-Backed Securities -- 2%
Mortgage Related -- 3%
U.S. Treasury Obligations -- 7%
U.S. Government Mortgage-Backed Obligations -- 10%
Corporate Obligations -- 11%
Repurchase Agreement -- 11%
Common Stocks -- 56%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 2.5%
Computer Associates
International 18,000 $1,342
Microsoft* 7,500 975
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $2,317
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES - 1.7%
Bell & Howell* 30,000 827
Electronics For Imaging* 15,000 701
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $1,528
- --------------------------------------------------------------------------------
DRUGS - 5.5%
Abbott Laboratories 12,500 766
American Home Products 11,000 815
Amgen* 26,000 1,280
Pfizer 16,000 1,132
Schering Plough 19,000 1,065
- --------------------------------------------------------------------------------
TOTAL DRUGS $5,058
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.1%
General Electric 16,000 1,033
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $1,033
- --------------------------------------------------------------------------------
ENTERTAINMENT - 2.2%
Carnival 25,000 1,212
Walt Disney 10,000 822
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $2,034
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 2.4%
Federal Home Loan Mortgage
Corporation 30,000 1,136
Morgan Stanley, Dean Witter,
& Discover 21,000 1,029
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $2,165
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 3.9%
CPC International 12,000 1,188
PepsiCo 30,000 1,104
Philip Morris 31,250 1,238
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $3,530
- --------------------------------------------------------------------------------
HEALTHCARE - 1.2%
Johnson & Johnson 20,000 1,147
- --------------------------------------------------------------------------------
TOTAL HEALTHCARE $1,147
- --------------------------------------------------------------------------------
25
<PAGE>
Statement of Net Assets (unaudited)
Balanced Portfolio (continued)
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
HOTELS & LODGING - 1.1%
HFS* 15,000 $ 1,057
- --------------------------------------------------------------------------------
TOTAL HOTELS & LODGING $ 1,057
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.1%
Colgate-Palmolive 16,000 1,036
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 1,036
- --------------------------------------------------------------------------------
INSURANCE - 0.9%
American International Group 8,250 842
- --------------------------------------------------------------------------------
TOTAL INSURANCE $ 842
- --------------------------------------------------------------------------------
MACHINERY - 0.6%
Deere 10,000 526
- --------------------------------------------------------------------------------
TOTAL MACHINERY $ 526
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 1.2%
Guidant 20,000 1,150
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 1,150
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 3.5%
Computer Sciences* 15,000 1,064
CUC International* 40,000 1,180
Synopsys* 25,000 972
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 3,216
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 2.5%
Smith International* 15,650 1,193
Union Pacific Resources Group 45,000 1,108
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 2,301
- --------------------------------------------------------------------------------
RETAIL - 5.0%
Home Depot 20,000 1,112
Linens N Things* 31,500 1,132
Rite Aid 22,000 1,306
Wal-Mart Stores 30,000 1,054
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 4,604
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 1.4%
National Semiconductor* 35,000 1,260
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 1,260
- --------------------------------------------------------------------------------
TECHNOLOGY - 2.3%
3Com* 20,000 829
Cisco Systems* 16,000 1,313
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY $ 2,142
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 3.8%
Boston Technology* 40,500 1,099
Ericsson Telephone, ADR 27,500 1,217
Tele-Communications, Cl A* 31,810 730
Tele-Communications Tci
Ventures Group A* 18,190 420
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 3,466
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $37,779) $50,599
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 11.1%
BANKS - 2.7%
Bank of New York
7.780%, 12/01/26 (A) $ 500 $ 507
Bankers Trust
5.640%, 09/11/98 (A) 2,000 1,999
- --------------------------------------------------------------------------------
TOTAL BANKS $2,506
- --------------------------------------------------------------------------------
COMMUNICATIONS - 0.6%
Comcast Cablevision
8.375%, 05/01/07 500 553
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS $ 553
- --------------------------------------------------------------------------------
ENERGY & POWER - 2.8%
Husky Oil
7.550%, 11/15/16 960 970
Hydro-Quebec
7.500%, 04/01/16 375 398
Oryx Energy
8.125%, 10/15/05 500 538
Texas Utility Electric
9.750%, 05/01/21 600 692
- --------------------------------------------------------------------------------
TOTAL ENERGY & POWER $2,598
- --------------------------------------------------------------------------------
ENTERTAINMENT - 0.9%
Royal Caribbean Cruises
7.250%, 08/15/06 500 518
Time Warner
8.110%, 08/15/06 275 297
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 815
- --------------------------------------------------------------------------------
EQUIPMENT - 0.2%
Case Equipment
7.250%, 01/15/16 200 200
- --------------------------------------------------------------------------------
TOTAL EQUIPMENT $ 200
- --------------------------------------------------------------------------------
FINANCE - 2.4%
Crestar Financial
8.160%, 12/15/26 800 839
Dynex Capital
7.875%, 07/15/02 500 508
Hutchison Whampoa
7.450%, 08/01/17 (A) 500 454
Safeco Capital I, Callable
07/15/17 @ 100
8.072%, 07/15/37 (A) 400 414
- --------------------------------------------------------------------------------
TOTAL FINANCE $2,215
- --------------------------------------------------------------------------------
HEALTHCARE - 0.6%
Tenet Healthcare
8.000%, 01/15/05 500 521
- --------------------------------------------------------------------------------
TOTAL HEALTHCARE $ 521
- --------------------------------------------------------------------------------
RETAIL - 0.9%
Great Atlantic & Pacific Tea
7.750%, 04/15/07 250 267
Loewen Group International,
Callable 10/15/02 @ 100
8.250%, 10/15/03 500 529
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 796
- --------------------------------------------------------------------------------
26
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $9,945) $10,204
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS - 9.7%
Fannie Mae
7.000%, 02/01/07 $ 393 399
9.750%, 09/25/18 205 223
7.000%, 02/01/26 592 594
Fannie Mae (REMIC)
10.500%, 12/01/00 6 7
Federal Home Loan Mortgage Corporation
8.500%, 11/01/01 37 38
9.000%, 01/01/02 71 75
9.500%, 07/01/02 8 9
6.500%, 04/01/08 944 944
8.500%, 09/01/26 256 269
Government National Mortgage
Association
7.500%, 10/15/23 1,131 1,157
7.500%, 12/15/23 1,071 1,095
7.000%, 02/15/24 1,247 1,254
7.000%, 05/15/24 2,519 2,534
Government National Mortgage
Association (REMIC)
7.750%, 06/16/20 300 314
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $8,616) $ 8,912
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 6.9%
U.S. Treasury Bond
8.000%, 11/15/21 600 729
U.S. Treasury Notes
7.375%, 11/15/97 550 550
7.875%, 04/15/98 1,300 1,314
7.500%, 10/31/99 500 517
7.750%, 02/15/01 350 371
6.500%, 05/15/05 700 725
6.625%, 05/15/07 2,000 2,102
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $6,230) $ 6,308
- --------------------------------------------------------------------------------
MORTGAGE RELATED - 2.6%
Countrywide Funding,
Series 1994-4, Cl A12
6.950%, 04/25/24 968 954
IMC Home Equity Loan Trust,
Series 1997-1, Cl A2
6.620%, 10/25/11 275 278
IMC Home Equity Loan Trust,
Series 1997-2, Cl A3
6.940%, 11/20/11 400 407
- --------------------------------------------------------------------------------
Shares/Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
IMC Home Equity Loan Trust,
Series 1997-3, Cl A4
6.840%, 10/20/13 $ 350 $ 355
MDC Asset Investors Trust
8.940%, 03/01/18 33 34
Prudential Home Mortgage Securities,
Series 1993-36, Cl A1
6.850%, 10/25/23 343 344
- --------------------------------------------------------------------------------
TOTAL MORTGAGE RELATED
(Cost $2,268) $ 2,372
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 1.9%
Money Store 21,000 572
Premier Auto Trust,
Series 1996-2, Cl A4
6.575%, 10/06/00 675 683
Standard Credit Card Master
Trust, Cl A
5.900%, 02/07/01 450 451
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $1,632) $ 1,706
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCKS - 1.2%
DRUGS - 0.9%
MedPartners 35,000 849
- --------------------------------------------------------------------------------
TOTAL DRUGS $ 849
- --------------------------------------------------------------------------------
REAL ESTATE - 0.3%
Simon Debartolo Group 4,000 209
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE $ 209
- --------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCKS
(Cost $980) $ 1,058
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 10.3%
First Boston
5.720%, dated 10/31/97,
matures 11/03/97, repurchase
price $9,499,589 (collateralized
by U.S. Treasury Bond:
total market value
$9,709,882) 9,495 9,495
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $9,495) $ 9,495
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.8%
(Cost $76,945) $ 90,654
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 1.2% $ 1,144
================================================================================
27
<PAGE>
Statement of Net Assets (unaudited)
Balanced Portfolio (concluded)
- --------------------------------------------------------------------------------
Market
Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 6,264,522 outstanding
shares of beneficial interest $59,098
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 812,778 outstanding
shares of beneficial interest 9,489
Undistributed net investment income 200
Accumulated net realized gain on investments 9,302
Net unrealized appreciation on investments 13,709
================================================================================
TOTAL NET ASSETS -- 100.0% $91,798
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $12.97
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $12.94
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL
CLASS ($12.94 / 95.25%) (B) $13.59
================================================================================
* NON-INCOME PRODUCING SECURITY
(A) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS.
(B) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE PORTFOLIO. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME. THE
MAXIMUM SALES LOAD IS 4.75%. SHAREHOLDERS WHO INVESTED IN THE ARK FUNDS
PRIOR TO 04/01/97 CAN INVEST WITHOUT A SALES LOAD THROUGH 12/31/97.
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK Funds: Equity Income Portfolio
[Photo Omitted]
Clyde L. Randall, CFA
Co-Portfolio Manager
CLYDE L. RANDALL HAS OVER 14 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE. HE IS A
PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND CO-MANAGER OF THE EQUITY INCOME AND
THE BLUE CHIP EQUITY PORTFOLIOS.
[Photo Omitted]
Allen J. Ashcroft
Co-Portfolio Manager
ALLEN J. ASHCROFT HAS OVER 18 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE. HE IS A
PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND CO-MANAGER OF THE EQUITY INCOME AND
THE BLUE CHIP EQUITY PORTFOLIOS.
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCKS - 87.1%
AIRCRAFT - 3.7%
General Dynamics 25,000 $ 2,030
Lockheed Martin 15,500 1,473
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $ 3,503
- --------------------------------------------------------------------------------
AUTOMOTIVE - 4.0%
Ford Motor 50,000 2,184
General Motors 25,000 1,605
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 3,789
- --------------------------------------------------------------------------------
BANKS - 10.8%
Banc One 44,000 2,293
Fleet Financial Group 27,000 1,736
Norwest 72,000 2,308
PNC 40,000 1,900
Washington Mutual 30,000 2,053
- --------------------------------------------------------------------------------
TOTAL BANKS $10,290
- --------------------------------------------------------------------------------
BEAUTY PRODUCTS - 2.0%
Colgate Palmolive 30,000 1,943
- --------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 1,943
- --------------------------------------------------------------------------------
CHEMICALS - 3.7%
Dow Chemical 17,900 1,624
Olin 42,000 1,908
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $ 3,532
- --------------------------------------------------------------------------------
28
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Repurchase Agreement -- 2%
Consumer Cyclical -- 2%
Real Estate Investment Trusts -- 3%
Miscellaneous Business -- 8%
Technology -- 9%
Consumer Non-Durable -- 11%
Chemicals & Drugs -- 12%
Finance -- 21%
Energy -- 20%
Transportation -- 12%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.5%
GTE 34,000 $1,443
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $1,443
- --------------------------------------------------------------------------------
DRUGS - 7.0%
Abbott Laboratories 33,000 2,023
American Home Products 30,000 2,224
Bristol-Myers Squibb 27,200 2,387
- --------------------------------------------------------------------------------
TOTAL DRUGS $6,634
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES - 1.6%
Baltimore Gas & Electric 54,000 1,482
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $1,482
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 2.1%
Dynex Capital 60,000 836
Fannie Mae 24,000 1,163
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $1,999
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 9.4%
CPC International 18,000 1,782
General Mills 28,000 1,848
H.J. Heinz 44,000 2,043
Philip Morris 48,000 1,902
UST 45,000 1,347
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $8,922
- --------------------------------------------------------------------------------
GAS/NATURAL GAS - 1.7%
UGI 60,000 1,613
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $1,613
- --------------------------------------------------------------------------------
INSURANCE - 3.5%
Hartford Financial
Services Group 26,000 2,106
Safeco 25,000 1,191
- --------------------------------------------------------------------------------
TOTAL INSURANCE $3,297
- --------------------------------------------------------------------------------
LEASING & RENTING - 2.3%
Pitney Bowes 27,000 2,141
- --------------------------------------------------------------------------------
TOTAL LEASING & RENTING $2,141
- --------------------------------------------------------------------------------
MACHINERY - 1.4%
Deere 25,000 1,316
- --------------------------------------------------------------------------------
TOTAL MACHINERY $1,316
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
MARINE TRANSPORTATION - 1.3%
Knightsbridge Tankers 40,000 $ 1,200
- --------------------------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $ 1,200
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 5.5%
Atlantic Richfield 24,000 1,976
Equitable Resources 48,000 1,527
New Century Energies 40,293 1,682
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 5,185
- --------------------------------------------------------------------------------
PETROLEUM REFINING - 8.7%
Chevron 26,000 2,156
Imperial Oil 39,000 2,428
Mobil 24,000 1,748
Texaco 33,600 1,913
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 8,245
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES - 1.6%
Dun & Bradstreet 55,000 1,571
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 1,571
- --------------------------------------------------------------------------------
RAILROADS - 2.8%
Norfolk Southern 55,200 1,773
Union Pacific 15,000 919
- --------------------------------------------------------------------------------
TOTAL RAILROADS $ 2,692
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 3.0%
Arden Realty Group 25,000 763
First Industrial Realty Trust 25,000 866
Kilroy Realty Corp 45,000 1,193
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS $ 2,822
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 1.9%
AMP 40,000 1,800
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 1,800
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS - 2.3%
USX-U.S. Steel Group 35,000 1,190
Worthington Industries 50,000 1,034
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 2,224
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 5.3%
BellSouth 40,500 1,916
Telefonica de Espana, ADR 21,000 1,727
US West 35,900 1,429
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 5,072
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $61,767) $82,715
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCKS - 8.7%
BANKS - 1.3%
WBK Strypes Trust 40,000 1,240
- --------------------------------------------------------------------------------
TOTAL BANKS $ 1,240
- --------------------------------------------------------------------------------
DRUGS - 1.7%
MedPartners 65,000 1,576
- --------------------------------------------------------------------------------
TOTAL DRUGS $ 1,576
- --------------------------------------------------------------------------------
29
<PAGE>
Statement of Net Assets (unaudited)
Equity Income Portfolio (concluded)
- --------------------------------------------------------------------------------
Shares/Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
ELECTRIC UTILITY - 0.5%
Houston Industries 7,500 $ 411
- --------------------------------------------------------------------------------
TOTAL ELECTRIC UTILITY $ 411
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 1.7%
Money Store 60,000 1,635
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 1,635
- --------------------------------------------------------------------------------
INSURANCE - 1.7%
Aetna 22,500 1,614
- --------------------------------------------------------------------------------
TOTAL INSURANCE $ 1,614
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 1.8%
Enron 80,000 1,725
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 1,725
- --------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCKS
(Cost $7,995) $ 8,201
- --------------------------------------------------------------------------------
CONVERTIBLE BOND - 2.0%
RETAIL - 2.0%
Home Depot, 14.4665 Shares
3.250%, 10/01/01 $1,500 1,931
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 1,931
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BOND
(Cost $1,493) $ 1,931
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 2.2%
First Boston
5.720%, dated 10/31/97,
matures 11/03/97,
repurchase price
$2,106,539
(collateralized by
U.S. Treasury Bond:
total market
value $2,156,372) 2,106 2,106
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,105) $ 2,106
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(Cost $73,360) $94,953
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 0.0% $ 24
================================================================================
- --------------------------------------------------------------------------------
Market
Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 7,605,428 outstanding
shares of beneficial interest $ 61,733
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 155,713
outstanding shares of
beneficial interest 1,899
Overdistributed net investment income (1)
Accumulated net realized gain on investments 9,753
Net unrealized appreciation on investments 21,593
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $94,977
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $12.24
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $12.23
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL
CLASS ($12.23 / 95.25%) (A) $12.84
================================================================================
*NON-INCOME PRODUCING SECURITY
(A) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE PORTFOLIO. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME. THE
MAXIMUM SALES LOAD IS 4.75%. SHAREHOLDERS WHO INVESTED IN THE ARK FUNDS
PRIOR TO 04/01/97 CAN INVEST WITHOUT A SALES LOAD THROUGH 12/31/97.
ADR--AMERICAN DEPOSITORY RECEIPT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
30
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
ARK Funds: Equity Index Portfolio
[Photo Omitted]
Christopher D. Baker
Portfolio Manager
CHRISTOPHER D. BAKER IS AN INVESTMENT OFFICER OF ALLIED INVESTMENT ADVISORS,
MANAGER OF THE EQUITY INDEX PORTFOLIO AND CO-MANAGER OF THE MID-CAP EQUITY
PORTFOLIO. HE HAS OVER 5 YEARS EXPERIENCE IN INVESTMENT RESEARCH AND EQUITY
ANALYSIS.
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCKS - 99.9%
AEROSPACE & DEFENSE - 0.2%
Raytheon 700 $ 38
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $ 38
- --------------------------------------------------------------------------------
AGRICULTURE - 0.1%
Pioneer Hi Bred International 240 22
- --------------------------------------------------------------------------------
TOTAL AGRICULTURE $ 22
- --------------------------------------------------------------------------------
AIR TRANSPORTATION - 0.4%
AMR* 270 31
Delta Airlines 220 22
Federal Express* 340 23
Southwest Airlines 430 14
US Air Group* 270 13
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 103
- --------------------------------------------------------------------------------
AIRCRAFT - 1.7%
Allied Signal 1,930 69
Boeing 3,490 167
General Dynamics 190 15
Lockheed Martin 670 64
Northrop Grumman 200 22
Rockwell International 620 30
United Technologies 815 57
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $ 424
- --------------------------------------------------------------------------------
APPAREL/TEXTILES - 0.2%
Fruit of the Loom* 220 6
Liz Claiborne 210 11
Russell 110 3
Springs Industries, Cl A 60 3
VF 190 17
- --------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $ 40
- --------------------------------------------------------------------------------
AUTOMOTIVE - 1.5%
Chrysler 2,300 81
Dana 310 15
Eaton 230 22
Echlin 190 6
Ford Motor 4,165 182
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Healthcare -- 3%
Wholesale -- 4%
Transportation -- 6%
Durable Goods -- 9%
Miscellaneous -- 9%
Technology -- 9%
Oil-Energy -- 10%
Finance -- 15%
Retail -- 13%
Consumer Products -- 11%
Chemicals & Drugs -- 11%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Genuine Parts 530 $ 17
Navistar International* 220 5
Paccar 230 10
TRW 370 21
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 359
- --------------------------------------------------------------------------------
BANKS - 8.3%
Banc One 1,985 103
Bank of New York 1,310 62
BankAmerica 2,435 174
BankBoston 430 35
Bankers Trust, New York 300 35
Barnett Banks 690 48
Chase Manhattan 1,480 171
Citicorp 1,600 200
Comerica 310 25
CoreStates Financial 700 51
Fifth Third Bancorp 540 35
First Chicago NBD 1,010 73
First Union 1,915 94
Fleet Financial Group 865 56
Golden West Financial 170 15
H.F. Ahmanson 290 17
Huntington Bancshares 665 21
J.P. Morgan 610 67
Keycorp 750 46
Mellon Bank 750 39
National City 640 38
NationsBank 2,480 148
Norwest 2,560 82
PNC 1,060 50
Providian Financial 280 10
Republic New York 160 17
State Street 480 27
SunTrust Banks 740 48
U.S. Bancorp 835 85
Wachovia 470 35
Washington Mutual 865 59
Wells Fargo 300 87
- --------------------------------------------------------------------------------
TOTAL BANKS $2,053
- --------------------------------------------------------------------------------
31
<PAGE>
Statement of Net Assets (unaudited)
Equity Index Portfolio (continued)
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
BEAUTY PRODUCTS - 1.8%
Alberto-Culver, Cl B 170 $ 5
Avon Products 390 26
Colgate Palmolive 1,010 65
International Flavors
& Fragrances 320 15
Procter & Gamble 4,710 320
- --------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $431
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS &
ADVERTISING - 0.5%
Clear Channel Communications* 290 19
Comcast Cablevision,
Cl A Special 1,215 33
Interpublic Group 370 18
US West Media Group* 2,095 53
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $123
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION - 0.1%
Centex 90 5
Fluor 250 10
Foster Wheeler 120 4
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 19
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES - 0.1%
McDermott International 160 6
Armstrong World Industries 120 8
Owens Corning 160 5
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION SUPPLIES $ 19
- --------------------------------------------------------------------------------
CHEMICALS - 2.1%
Air Products & Chemicals 330 25
Avery Dennison 310 12
B.F. Goodrich 160 7
E.I. du Pont de Nemours 3,940 224
Eastman Chemical 230 14
FMC* 110 9
Great Lakes Chemical 180 8
Hercules 290 13
Monsanto 2,010 86
Morton International 420 14
Nalco Chemical 200 8
PPG Industries 530 30
Praxair 470 20
Rohm & Haas 180 15
Union Carbide 370 17
W.R. Grace & Company 220 15
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $517
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.2%
Andrew* 270 6
DSC Communications* 350 9
GTE 3,335 142
Harris 240 10
ITT Industries 350 11
NextLevel Systems* 440 6
Northern Telecom 895 80
Scientific-Atlanta 230 4
Tellabs* 630 34
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $302
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES - 4.6%
Apple Computer* 380 $ 6
Bay Networks* 590 19
Ceridian* 240 9
Compaq Computer 2,635 168
Data General* 140 3
Dell Computer* 1,130 91
Digital Equipment* 450 23
EMC/Mass* 855 48
Hewlett Packard 3,625 224
IBM 3,425 336
Minnesota Mining &
Manufacturing 1,450 133
Seagate Technology* 730 20
Silicon Graphics* 530 8
Sun Microsystems* 1,275 44
Unisys* 520 7
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $1,139
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 0.2%
Ball 90 3
Crown Cork & Seal 380 17
Newell 470 18
Owens-Illinois* 420 14
- --------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 52
- --------------------------------------------------------------------------------
DRUGS - 8.1%
Abbott Laboratories 2,685 165
Allergan 190 6
Alza* 250 7
American Home Products 2,260 168
Amgen* 925 46
Bristol-Myers Squibb 3,475 305
Eli Lilly 3,880 259
Merck 4,210 376
Millipore 130 5
Pfizer 4,505 319
Pharmacia & Upjohn 1,755 56
Schering Plough 2,555 143
Sigma Aldrich 300 11
Warner Lambert 950 136
- --------------------------------------------------------------------------------
TOTAL DRUGS $2,002
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES - 2.1%
American Electric Power 560 26
Baltimore Gas & Electric 440 12
Carolina Power & Light 450 16
Central & South West 630 14
Cinergy 470 16
Consolidated Edison of New York 700 24
Dominion Resources 550 20
DTE Energy 430 13
Duke Energy 1,245 60
Edison International 1,180 30
Entergy 720 18
FPL Group 540 28
GPU 360 13
Houston Industries 850 18
Northern States Power 220 11
Ohio Edison 450 11
PG&E 1,300 33
32
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
PP&L Resources 490 $ 11
PacifiCorp 880 19
Public Service Enterprise Group 690 18
Southern 2,365 54
Texas Utilities 710 25
Unicom 640 18
Union Electric Power 300 11
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $519
- --------------------------------------------------------------------------------
ENTERTAINMENT - 0.9%
King World Productions* 110 5
Mirage Resorts* 530 13
Walt Disney 2,355 194
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $212
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 0.3%
Browning-Ferris Industries 630 20
Laidlaw 970 14
Waste Management 1,565 37
- --------------------------------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES $ 71
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 3.2%
American Express 1,600 125
Beneficial 160 12
Charles Schwab 780 27
Countrywide Credit Industries 320 11
Equifax 450 14
Federal Home Loan Mortgage
Corporation 2,370 90
Fannie Mae 3,700 179
Green Tree Financial 400 17
Household International 320 36
MBNA 1,705 45
Merrill Lynch 1,130 76
Morgan Stanley, Dean
Witter & Discover 2,000 98
Salomon 320 25
Textron 490 28
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $783
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 7.0%
Adolph Coors, Cl B 110 4
Anheuser Busch 1,700 68
Archer-Daniels-Midland 1,660 37
Brown-Forman, Cl B 200 10
Campbell Soup 1,570 81
Coca Cola 8,645 488
Conagra 1,610 49
CPC International 430 43
Fortune Brands 510 17
General Mills 470 31
H.J. Heinz 1,275 59
Hershey Foods 420 23
Kellogg 1,425 61
PepsiCo 5,335 196
Philip Morris 8,445 335
Quaker Oats 410 20
Ralston Purina Group 320 29
Sara Lee 1,640 84
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Seagram 1,100 $ 37
UST 550 16
William Wrigley, Jr. 340 25
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $1,713
- --------------------------------------------------------------------------------
GAS/NATURAL GAS - 0.5%
Columbia Gas Systems 160 12
Consolidated Natural Gas 280 15
Eastern Enterprises 60 2
Enron 910 35
Nicor 140 5
Oneok 80 3
Pacific Enterprises 250 8
Peoples Energy 100 4
Sonat 250 11
Whitman 300 8
Williams 470 24
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $ 127
- --------------------------------------------------------------------------------
GENERAL UTILITIES - 0.1%
Niagara Mohawk Power* 430 4
Oryx Energy* 310 9
PECO Energy 660 15
- --------------------------------------------------------------------------------
TOTAL GENERAL UTILITIES $ 28
- --------------------------------------------------------------------------------
GLASS PRODUCTS - 0.1%
Corning 680 31
- --------------------------------------------------------------------------------
TOTAL GLASS PRODUCTS $ 31
- --------------------------------------------------------------------------------
HOME APPLIANCES - 0.1%
National Service Industries 130 6
Sherwin-Williams 510 14
- --------------------------------------------------------------------------------
TOTAL HOME APPLIANCES $ 20
- --------------------------------------------------------------------------------
HOME BUILDERS - 0.0%
Pulte 60 2
- --------------------------------------------------------------------------------
TOTAL HOME BUILDERS $ 2
- --------------------------------------------------------------------------------
HOTELS & LODGING - 0.5%
Harrah's Entertainment* 300 6
HFS* 470 33
Hilton Hotels 740 23
ITT* 350 26
Marriott International 380 27
- --------------------------------------------------------------------------------
TOTAL HOTELS & LODGING $ 115
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 0.5%
Clorox 310 22
Illinois Tool Works 740 36
Maytag 290 10
Raychem 130 12
Snap-On Tools 180 8
Stanley Works 260 11
Whirlpool 220 13
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 112
- --------------------------------------------------------------------------------
INSURANCE - 4.6%
Aetna 440 31
Allstate 1,520 126
American General 740 38
American International Group 2,445 250
33
<PAGE>
Statement of Net Assets (unaudited)
Equity Index Portfolio (continued)
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Aon 500 $ 27
Chubb 510 34
Cigna 220 34
Conseco 560 24
General Re 240 47
Hartford Financial Services Group 350 28
Humana* 490 10
Jefferson-Pilot 210 16
Lincoln National 300 21
Loews 340 38
Marsh & McLennan 500 36
MBIA 260 16
MGIC Investment 340 21
Progressive 210 22
Safeco 485 23
St. Paul 250 20
SunAmerica 580 21
Torchmark 410 16
Transamerica 190 19
Travelers 2,235 156
United Healthcare 560 26
UNUM 410 20
USF&G 330 7
- --------------------------------------------------------------------------------
TOTAL INSURANCE $1,127
- --------------------------------------------------------------------------------
LEASING & RENTING - 0.1%
Pitney Bowes 430 34
- --------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 34
- --------------------------------------------------------------------------------
LEISURE PRODUCTS - 0.2%
Hasbro 380 11
Jostens 120 3
Mattel 860 33
- --------------------------------------------------------------------------------
TOTAL LEISURE PRODUCTS $ 47
- --------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS - 0.1%
Georgia-Pacific 270 23
Louisiana-Pacific 320 7
- --------------------------------------------------------------------------------
TOTAL LUMBER & WOOD PRODUCTS $ 30
- --------------------------------------------------------------------------------
MACHINERY - 5.0%
Aerquip-Vickers 80 4
Applied Materials* 1,260 42
Baker Hughes 500 23
Black & Decker 280 11
Briggs & Stratton 80 4
Brunswick 290 10
Case 220 13
Caterpillar 1,300 67
Cincinnati Milacron 120 3
Crane 140 6
Cummins Engine 110 7
Deere 750 39
Dover 330 22
Dresser Industries 520 22
Emerson Electric 1,510 79
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
General Electric 11,415 $ 737
General Signal 150 6
Harnischfeger Industries 150 6
Ingersoll Rand 490 19
Nacco Industries, Cl A 20 2
Pall 380 8
Parker-hannifin 385 16
Tenneco 500 22
Timken 190 6
Tyco International 1,820 69
- --------------------------------------------------------------------------------
TOTAL MACHINERY $1,243
- --------------------------------------------------------------------------------
MEASURING DEVICES - 0.3%
Honeywell 380 26
KLA-Tencor 250 11
Mallinckrodt 220 8
Perkin Elmer 130 8
Tektronix 100 6
Thermo Electron* 450 17
- --------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 76
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 1.5%
Bausch & Lomb 160 6
Baxter International 965 45
Becton, Dickinson 360 17
Beverly Enterprises* 330 5
Biomet* 330 8
Boston Scientific* 580 26
C.R. Bard 170 5
Columbia/HCA Healthcare 2,255 64
Guidant 440 25
Healthsouth Rehabilitation* 1,350 35
Manor Care 190 7
Medtronic 1,595 69
St. Jude Medical 270 8
Tenet Healthcare 1,045 32
United States Surgical 220 6
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 358
- --------------------------------------------------------------------------------
METALS & MINING - 0.2%
Cyprus AMAX Minerals 280 6
Freeport-McMoran Copper
& Gold, Cl B 590 14
Phelps Dodge 180 13
Reynolds Metals 220 13
- --------------------------------------------------------------------------------
TOTAL METALS & MINING $ 46
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 4.1%
Adobe Systems 220 11
Autodesk 140 5
Automatic Data Processing 870 44
Cabletron Systems* 470 14
Computer Associates
International 1,240 92
Computer Sciences* 230 16
CUC International* 1,210 36
Deluxe 240 8
Ecolab 190 9
First Data 1,530 44
34
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
HBO 675 $ 29
Microsoft* 4,180 543
Novell* 1,040 9
Oracle Systems* 3,415 122
Parametric Technology* 445 20
Safety-Kleen 170 4
Shared Medical Systems 70 4
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $1,010
- --------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES - 0.1%
H & R Block 310 11
Service International 750 23
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER SERVICES $ 34
- --------------------------------------------------------------------------------
MISCELLANEOUS TRANSPORTATION - 0.0%
Fleetwood Enterprises 110 3
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS TRANSPORTATION $ 3
- --------------------------------------------------------------------------------
OFFICE PRODUCTS & SUPPLIES - 0.1%
Ikon Office Solutions 390 11
Johnson Controls 250 11
- --------------------------------------------------------------------------------
TOTAL OFFICE PRODUCTS & SUPPLIES $ 22
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS - 1.0%
Bemis 160 6
Boise Cascade 160 6
Champion International 280 15
Fort James 560 22
International Paper 1,045 47
Kimberly-Clark 1,900 99
Mead 160 10
Potlatch 90 4
Stone Container 290 3
Temple-Inland 170 10
Union Camp 210 11
Westvaco 300 10
Willamette Industries 330 11
- --------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 254
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 1.9%
Anadarko Petroleum 180 13
Apache 270 11
Atlantic Richfield 1,095 90
Burlington Resources 522 26
Helmerich & Payne 70 6
Kerr-McGee 140 9
Occidental Petroleum 1,140 32
Phillips Petroleum 780 38
Rowan* 260 10
Schlumberger 1,725 151
Union Pacific Resources Group 750 18
USX-Marathon Group 850 30
Western Atlas* 160 14
Weyerhaeuser 590 28
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 476
- --------------------------------------------------------------------------------
PETROLEUM REFINING - 6.8%
Amerada Hess 270 17
Amoco 1,710 157
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Ashland 220 $ 10
Chevron 2,285 190
Coastal 310 19
Exxon 8,625 530
Mobil 2,740 200
Pennzoil 140 10
Royal Dutch Petroleum 7,475 393
Sun 220 9
Texaco 1,830 104
Unocal 730 30
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $1,669
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 0.7%
Eastman Kodak 1,125 67
Polaroid 140 6
Xerox 1,110 88
- --------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $ 161
- --------------------------------------------------------------------------------
PRECIOUS METALS - 0.2%
Barrick Gold 1,110 23
Battle Mountain Gold 680 4
Echo Bay Mines 410 2
Homestake Mining 440 5
Newmont Mining 460 16
Placer Dome Group 710 11
- --------------------------------------------------------------------------------
TOTAL PRECIOUS METALS $ 61
- --------------------------------------------------------------------------------
PRINTING & PUBLISHING - 1.3%
American Greetings, Cl A 220 8
Dow Jones 280 13
Gannett 980 52
John H. Harland 90 2
Knight-Ridder 260 14
McGraw-Hill 290 19
Meredith 160 5
Moore 260 4
New York Times, Cl A 330 18
R.R. Donnelley & Sons 430 14
Time Warner 1,910 110
Times Mirror, Cl A 280 15
Tribune 360 20
Viacom, Cl B* 1,050 32
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $ 326
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES - 0.4%
Cognizant* 490 19
Dun & Bradstreet 510 15
EG & G 140 3
Halliburton 875 52
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 89
- --------------------------------------------------------------------------------
RAILROADS - 0.7%
Burlington Northern Santa Fe 540 51
CSX 650 36
Norfolk Southern 1,300 42
Union Pacific 855 52
- --------------------------------------------------------------------------------
TOTAL RAILROADS $ 181
- --------------------------------------------------------------------------------
35
<PAGE>
Statement of Net Assets (unaudited)
Equity Index Portfolio (concluded)
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
REAL ESTATE - 0.0%
Kaufman & Broad Home 120 $ 3
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE $ 3
- --------------------------------------------------------------------------------
REPAIR SERVICES - 0.0%
Ryder System 230 8
- --------------------------------------------------------------------------------
TOTAL REPAIR SERVICES $ 8
- --------------------------------------------------------------------------------
RETAIL - 5.0%
Albertson's 730 27
Autozone* 450 13
American Stores 810 21
Charming Shoppes* 310 2
Circuit City Stores 290 12
Costco* 740 28
CVS 510 31
Darden Restaurants 450 5
Dayton-Hudson 650 41
Dillards Incorporated, Cl A 330 13
F.W. Woolworth* 400 8
Federated Department Stores* 620 27
Gap 800 43
Giant Food, Cl A 180 6
Great Atlantic & Pacific Tea 110 3
Harcourt General 210 11
Home Depot 2,545 142
J.C. Penney 740 43
Kmart* 1,440 19
Kroger* 750 24
Limited 810 19
Longs Drug Stores 120 3
Lowe's 520 22
May Department Stores 690 37
McDonald's 2,345 105
Mercantile Stores 110 6
Nordstrom 230 14
Pep Boys - Manny Moe & Jack 190 5
Rite Aid 360 21
Sears Roebuck 1,335 56
Tandy 310 11
TJX 480 14
Toys "R" Us* 850 29
Tricon Global Restaurants* 522 16
Wal-Mart Stores 7,895 277
Walgreen 1,715 48
Wendy's International 390 8
Winn Dixie Stores 440 16
- --------------------------------------------------------------------------------
TOTAL RETAIL $1,226
- --------------------------------------------------------------------------------
RUBBER & PLASTIC - 0.7%
Cooper Tire & Rubber 230 5
Dow Chemical 780 71
Goodyear Tire & Rubber 460 29
Nike 995 47
Reebok International 170 6
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Rubbermaid 440 $ 11
Tupperware 180 5
- --------------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $174
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 2.4%
Advanced Micro Devices* 490 11
AMP 650 29
Intel 5,695 439
LSI Logic* 420 9
Micron Technology 620 17
National Semiconductor* 500 18
Texas Instruments 655 70
Thomas & Betts 160 8
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $601
- --------------------------------------------------------------------------------
SPECIALTY CONSTRUCTION - 0.1%
Masco 490 22
- --------------------------------------------------------------------------------
TOTAL SPECIALTY CONSTRUCTION $ 22
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY - 0.3%
Cooper Industries 360 19
Westinghouse Electric 2,435 64
- --------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 83
- --------------------------------------------------------------------------------
STANDARD & POORS - 3.9%
S&P 500 Depositary Receipt 10,539 966
- --------------------------------------------------------------------------------
TOTAL STANDARD & POORS $966
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS - 0.5%
Alcan Aluminum 670 19
Allegheny Teledyne 520 14
Aluminum Company of America 520 38
Armco* 320 2
Asarco 120 3
Bethlehem Steel* 330 3
Engelhard 430 7
Inco 500 10
Inland Steel Industries 140 3
Nucor 260 14
USX-U.S. Steel Group 250 9
Worthington Industries 290 6
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $128
- --------------------------------------------------------------------------------
TECHNOLOGY - 1.0%
3Com* 1,190 49
Cisco Systems* 2,335 192
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY $241
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 6.6%
Airtouch Communications* 1,740 67
Alltel 550 19
Ameritech 1,915 124
AT&T 5,665 277
Bell Atlantic 2,705 216
BellSouth 3,455 163
Frontier 490 11
Lucent Technologies 2,240 185
MCI Communications 2,410 86
SBC Communications 3,185 203
36
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Sprint 1,470 $ 76
Tele-Communications Cl A* 1,765 40
US West 1,655 66
Worldcom* 3,145 106
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 1,639
- --------------------------------------------------------------------------------
TRUCKING - 0.0%
Caliber System 120 6
- --------------------------------------------------------------------------------
TOTAL TRUCKING $ 6
- --------------------------------------------------------------------------------
WHOLESALE - 3.7%
Cardinal Health 320 24
Fleming 110 2
General Motors 2,540 163
Gillette 1,950 174
Johnson & Johnson 4,640 266
Motorola 2,030 125
Supervalu 180 7
Sysco 520 21
Unilever 2,200 117
W.W. Grainger 150 13
- --------------------------------------------------------------------------------
TOTAL WHOLESALE $ 912
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $25,912) $24,632
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.9%
(Cost $25,912) $24,632
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 0.1% $ 14
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 2,588,087 outstanding
shares of beneficial interest 25,903
Undistributed net investment income 39
Accumulated net realized loss on investments (16)
Net unrealized depreciation on investments (1,280)
================================================================================
TOTAL NET ASSETS -- 100.0% $24,646
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.52
================================================================================
* NON-INCOME PRODUCING SECURITY
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK Funds: Blue Chip Equity Portfolio
[Photo Omitted]
Allen J. Ashcroft
Co-Portfolio Manager
ALLEN J. ASHCROFT HAS OVER 18 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE. HE IS A
PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND CO-MANAGER OF THE EQUITY INCOME AND
THE BLUE CHIP EQUITY PORTFOLIOS.
[Photo Omitted]
Clyde L. Randall, CFA
Co-Portfolio Manager
CLYDE L. RANDALL HAS OVER 14 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE. HE IS A
PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND CO-MANAGER OF THE EQUITY INCOME AND
THE BLUE CHIP EQUITY PORTFOLIOS.
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCKS - 92.2%
AIRCRAFT - 5.0%
Boeing 40,000 $1,915
Lockheed Martin 18,600 1,768
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $3,683
- --------------------------------------------------------------------------------
AUTOMOTIVE - 2.9%
Ford Motor 50,000 2,184
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $2,184
- --------------------------------------------------------------------------------
BANKS - 5.4%
Chase Manhattan 17,500 2,019
Norwest 61,200 1,962
- --------------------------------------------------------------------------------
TOTAL BANKS $3,981
- --------------------------------------------------------------------------------
CHEMICALS - 2.9%
E.I. du Pont de Nemours 38,000 2,161
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $2,161
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.8%
Philips Electronics, ADR 26,900 2,108
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $2,108
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 3.8%
Computer Associates
International 20,000 1,491
Microsoft* 10,300 1,339
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $2,830
- --------------------------------------------------------------------------------
37
<PAGE>
Statement of Net Assets (unaudited)
Blue Chip Equity Portfolio (concluded)
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Real Estate Investment Trust -- 1%
American Depository Receipts -- 2%
Household Products -- 2%
Repurchase Agreement -- 5%
Retail -- 5%
Oil-Energy -- 10%
Transportation -- 10%
Miscellaneous -- 10%
Financial -- 16%
Chemicals & Drugs -- 14%
Consumer Products -- 13%
Technology -- 12%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
DRUGS - 10.8%
Abbott Laboratories 33,000 $2,023
Amgen* 35,000 1,724
Merck 21,300 1,901
Pfizer 33,000 2,335
- --------------------------------------------------------------------------------
TOTAL DRUGS $7,983
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.6%
General Electric 29,500 1,905
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $1,905
- --------------------------------------------------------------------------------
ENTERTAINMENT - 2.7%
Walt Disney 24,700 2,032
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $2,032
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 5.7%
Associates First Capital 32,800 2,087
Fannie Mae 44,000 2,131
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $4,218
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 10.3%
Coca Cola 27,000 1,525
CPC International 23,000 2,277
PepsiCo 54,000 1,988
Philip Morris 46,500 1,843
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $7,633
- --------------------------------------------------------------------------------
HEALTHCARE PRODUCTS & SERVICES - 2.7%
Johnson & Johnson 34,600 1,985
- --------------------------------------------------------------------------------
TOTAL HEALTHCARE PRODUCTS & SERVICES $1,985
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 2.4%
Procter & Gamble 26,000 1,768
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $1,768
- --------------------------------------------------------------------------------
INSURANCE - 2.4%
Chubb 27,200 1,802
- --------------------------------------------------------------------------------
TOTAL INSURANCE $1,802
- --------------------------------------------------------------------------------
LEASING & RENTING - 5.6%
Hertz, Cl A 60,000 2,074
Pitney Bowes 25,800 2,046
- --------------------------------------------------------------------------------
TOTAL LEASING & RENTING $4,120
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares/Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
PETROLEUM INTERNATIONAL - 2.6%
Exxon 31,000 $ 1,905
- --------------------------------------------------------------------------------
TOTAL PETROLEUM INTERNATIONAL $ 1,905
- --------------------------------------------------------------------------------
PETROLEUM REFINING - 5.3%
Royal Dutch Petroleum 38,500 2,026
Texaco 33,600 1,913
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 3,939
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.9%
Xerox 18,000 1,428
- --------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $ 1,428
- --------------------------------------------------------------------------------
RAILROADS - 2.1%
Tranz Rail Holdings, ADR 60,000 810
Union Pacific 12,000 735
- --------------------------------------------------------------------------------
TOTAL RAILROADS $ 1,545
- --------------------------------------------------------------------------------
RETAIL - 2.6%
Home Depot 34,350 1,911
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 1,911
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS - 2.3%
Aluminum Company of America 24,000 1,752
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 1,752
- --------------------------------------------------------------------------------
TECHNOLOGY - 2.4%
Cisco Systems* 21,500 1,764
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY $ 1,764
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 5.0%
Ericsson Telephone, ADR 32,000 1,416
SBC Communications 36,000 2,290
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 3,706
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $56,653) $ 68,343
- --------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT - 2.7%
Bankers Trust
5.640%, 11/03/97 (A) $2,000 1,999
- --------------------------------------------------------------------------------
TOTAL CERTIFICATE OF DEPOSIT
(Cost $1,999) $ 1,999
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 4.6%
First Boston
5.720%, dated 10/31/97, matures
11/03/97, repurchase price
$3,431,576 (collateralized by
U.S. Treasury Bond: total
market value $3,509,795) 3,430 3,430
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $3,430) $ 3,430
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.5%
(Cost $62,082) $ 73,772
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 0.5% $ 372
================================================================================
38
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Market
Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 3,252,990 outstanding
shares of beneficial interest $36,315
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 2,030,215 outstanding
shares of beneficial interest 25,591
Undistributed net investment income 52
Accumulated net realized gain on investments 496
Net unrealized appreciation on investments 11,690
================================================================================
TOTAL NET ASSETS -- 100.0% $74,144
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $14.04
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $14.02
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL
CLASS ($14.02 / 95.25%) (B) $14.72
================================================================================
* NON-INCOME PRODUCING SECURITY
(A) VARIABLE RATE SECURITY--THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT AS OF OCTOBER 31, 1997. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(B) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE PORTFOLIO. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME. THE
MAXIMUM SALES LOAD IS 4.75%. SHAREHOLDERS WHO INVESTED IN THE ARK FUNDS
PRIOR TO 04/01/97 CAN INVEST WITHOUT A SALES LOAD THROUGH 12/31/97.
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK Funds: Stock Portfolio
[Photo Omitted]
H. Giles Knight
Portfolio Manager
H. GILES KNIGHT HAS OVER 25 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE. HE IS A
PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND THE MANAGER OF THE STOCK AND THE
SPECIAL EQUITY PORTFOLIOS.
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCKS - 97.0%
AIR TRANSPORTATION - 2.0%
Southwest Airlines 25,000 $ 816
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 816
- --------------------------------------------------------------------------------
AIRCRAFT - 4.1%
Lockheed Martin 10,000 951
United Technologies 10,000 700
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $1,651
- --------------------------------------------------------------------------------
BANKS - 7.3%
Crestar Financial 20,000 946
NationsBank 15,000 898
Norwest 20,000 641
PNC 10,000 475
- --------------------------------------------------------------------------------
TOTAL BANKS $2,960
- --------------------------------------------------------------------------------
BEAUTY PRODUCTS - 5.2%
Gillette 13,000 1,158
Procter & Gamble 14,000 952
- --------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $2,110
- --------------------------------------------------------------------------------
CHEMICALS - 3.8%
E.I. du Pont de Nemours 13,000 739
Monsanto 15,000 641
Solutia* 8,200 181
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $1,561
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES - 3.0%
Cisco Systems* 15,000 1,230
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $1,230
- --------------------------------------------------------------------------------
DRUGS - 10.1%
Abbott Laboratories 10,000 613
Bristol-Myers Squibb 9,000 790
Eli Lilly 15,056 1,007
Merck 9,000 803
Pfizer 13,000 920
- --------------------------------------------------------------------------------
TOTAL DRUGS $4,133
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 3.0%
General Electric 19,000 1,227
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $1,227
- --------------------------------------------------------------------------------
39
<PAGE>
Statement of Net Assets (unaudited)
Stock Portfolio (concluded)
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Healthcare -- 4%
Repurchase Agreement -- 5%
Oil-Energy -- 5%
Building & Construction -- 7%
Transportation -- 9%
Chemicals & Drugs -- 14%
Consumer Products -- 19%
Financial -- 20%
Technology -- 17%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
ENTERTAINMENT - 1.9%
Walt Disney 9,500 $ 781
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 781
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 9.8%
American Express 12,000 936
Fannie Mae 20,000 969
MBNA 15,000 395
Merrill Lynch 12,000 811
Morgan Stanley, Dean
Witter & Discover 18,000 882
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $3,993
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 5.1%
Coca Cola 21,000 1,187
Philip Morris 23,000 911
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $2,098
- --------------------------------------------------------------------------------
HEALTHCARE - 1.4%
Johnson & Johnson 10,000 574
- --------------------------------------------------------------------------------
TOTAL HEALTHCARE $ 574
- --------------------------------------------------------------------------------
INSURANCE - 3.7%
Allstate 9,000 746
American International Group 7,500 765
- --------------------------------------------------------------------------------
TOTAL INSURANCE $1,511
- --------------------------------------------------------------------------------
MACHINERY - 5.1%
Baker Hughes 20,000 919
Smith International* 15,000 1,144
- --------------------------------------------------------------------------------
TOTAL MACHINERY $2,063
- --------------------------------------------------------------------------------
MARINE TRANSPORTATION - 2.4%
Carnival, Cl A 20,000 970
- --------------------------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $ 970
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 2.3%
Guidant 16,000 920
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 920
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares/Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 5.7%
Computer Associates
International 10,000 $ 746
Microsoft* 8,000 1,040
Oracle Systems* 15,000 537
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 2,323
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS - 1.5%
Fort James 15,000 595
- --------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 595
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 3.0%
Anadarko Petroleum 6,500 476
Union Pacific Resources Group 30,234 745
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 1,221
- --------------------------------------------------------------------------------
PETROLEUM REFINING - 2.0%
Texaco 14,000 797
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 797
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.9%
Xerox 10,000 793
- --------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $ 793
- --------------------------------------------------------------------------------
RAILROADS - 0.9%
Norfolk Southern 12,000 386
- --------------------------------------------------------------------------------
TOTAL RAILROADS $ 386
- --------------------------------------------------------------------------------
RETAIL - 4.6%
Gap 15,000 798
Rite Aid 12,000 713
Sears Roebuck 9,000 377
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 1,888
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 1.9%
National Semiconductor* 22,000 792
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 792
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 5.3%
Boston Technology* 25,000 678
Ericsson Telephone, ADR 15,000 664
Lucent Technologies 10,000 824
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 2,166
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $27,255) $39,559
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 4.7%
First Boston
5.720%, dated 10/31/97, matures
11/03/97, repurchase price
$1,942,319 (collateralized by
U.S. Treasury Bond: total
market value $1,986,677) $1,941 1,941
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,941) $ 1,941
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.7%
(Cost $29,196) $41,500
================================================================================
40
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Market
Description Value (000)
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (1.7%) $ (702)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 3,386,956 outstanding
shares of beneficial interest 21,053
Undistributed net investment income 6
Accumulated net realized gain
on investments 7,435
Net unrealized appreciation on investments 12,304
================================================================================
TOTAL NET ASSETS -- 100.0% $40,798
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $12.05
================================================================================
* NON-INCOME PRODUCING SECURITY
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK Funds: Capital Growth Portfolio
[Photo Omittted]
Christopher E. Baggini,
CFA
Portfolio Manager
CHRISTOPHER E. BAGGINI HAS OVER TWELVE YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE. HE IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, MANAGER OF THE
CAPITAL GROWTH PORTFOLIO AND CO-MANAGER OF THE MID-CAP EQUITY PORTFOLIO.
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCKS - 96.4%
AIRCRAFT - 3.4%
Boeing 16,000 $ 766
Lockheed Martin 8,000 760
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $1,526
- --------------------------------------------------------------------------------
BANKS - 9.9%
Banc One 20,000 1,042
BankBoston 7,500 608
Chase Manhattan 10,000 1,154
Crestar Financial 15,000 710
Norwest 27,000 866
- --------------------------------------------------------------------------------
TOTAL BANKS $4,380
- --------------------------------------------------------------------------------
CHEMICALS - 1.9%
Monsanto 20,000 855
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $ 855
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 5.9%
Computer Associates
International 20,000 1,491
Documentum* 25,000 747
Microsoft* 3,000 390
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $2,628
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES - 4.2%
Computer Sciences* 15,000 1,064
HBO 10,000 435
J.D. Edwards* 1,000 34
Sun Microsystems* 10,000 343
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $1,876
- --------------------------------------------------------------------------------
DRUGS - 5.6%
American Home Products 10,000 741
Merck 13,000 1,160
Schering Plough 10,000 561
- --------------------------------------------------------------------------------
TOTAL DRUGS $2,462
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.2%
General Electric 15,000 968
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $ 968
- --------------------------------------------------------------------------------
41
<PAGE>
Statement of Net Assets (unaudited)
Capital Growth Portfolio (concluded)
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Transportation -- 3%
Miscellaneous -- 3%
Repurchase Agreement -- 5%
Retail -- 8%
Oil-Energy -- 11%
Consumer Products -- 14%
Technology -- 23%
Financial -- 19%
Chemicals & Drugs -- 14%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
ENTERTAINMENT - 3.0%
Carnival 15,000 $ 728
Walt Disney 7,500 617
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $1,345
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 8.0%
Associates First Capital 15,000 954
Federal Home Loan Mortgage
Corporation 30,000 1,136
Morgan Stanley 5,000 245
Travelers 17,000 1,190
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $3,525
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 4.6%
PepsiCo 30,000 1,104
Philip Morris 24,000 951
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $2,055
- --------------------------------------------------------------------------------
HOTELS & LODGING - 1.6%
HFS* 10,000 705
- --------------------------------------------------------------------------------
TOTAL HOTELS & LODGING $ 705
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.0%
Colgate-Palmolive 7,000 453
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 453
- --------------------------------------------------------------------------------
INSURANCE - 1.0%
American International Group 4,500 459
- --------------------------------------------------------------------------------
TOTAL INSURANCE $ 459
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 7.2%
Becton, Dickinson 20,000 921
Boston Scientific* 5,000 228
Guidant 10,000 575
Johnson & Johnson 14,000 803
Medpartners* 25,000 636
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $3,163
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares/Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 2.5%
CUC International* 30,000 $ 885
Kendle International* 15,000 225
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 1,110
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 6.2%
ENSCO International 20,000 841
Oryx Energy* 15,000 413
Smith International* 7,500 572
Union Pacific Resources Group 38,000 936
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 2,762
- --------------------------------------------------------------------------------
PRINTING & PUBLISHING - 3.2%
Applied Graphics Technologies* 10,000 535
Electronics for Imaging* 18,500 865
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $ 1,400
- --------------------------------------------------------------------------------
RENTAL SERVICES - 1.4%
Avis Rent A Car* 10,000 274
Hertz, Cl A* 10,000 346
- --------------------------------------------------------------------------------
TOTAL RENTAL SERVICES $ 620
- --------------------------------------------------------------------------------
RETAIL - 7.7%
Home Depot 16,500 918
Linens N Things* 30,000 1,078
Rite Aid 22,500 1,336
Tricon Global Restaurants* 3,000 91
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 3,423
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 5.5%
National Semiconductor* 40,000 1,440
Synopsys* 25,000 972
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 2,412
- --------------------------------------------------------------------------------
TECHNOLOGY - 5.6%
3Com* 20,000 829
Cisco Systems* 20,000 1,641
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY $ 2,470
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 4.8%
Boston Technology* 45,000 1,221
Ericsson Telephone, ADR 20,000 885
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 2,106
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $34,865) $42,703
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 5.4%
First Boston
5.720%, dated 10/31/97, matures
11/03/97, repurchase price
$2,409,318 (collateralized by
U.S. Treasury Bond: total
market value $2,462,651) $2,408 2,408
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,408) $ 2,408
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.8%
(Cost $37,273) $45,111
================================================================================
OTHER ASSETS AND LIABILITIES, NET - (1.8%) $ (797)
================================================================================
42
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Market
Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 2,358,833 outstanding
shares of beneficial interest $20,793
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 705,319 outstanding
shares of beneficial interest 8,764
Undistributed net investment income 109
Accumulated net realized gain
on investments 6,810
Net unrealized appreciation on investments 7,838
================================================================================
TOTAL NET ASSETS -- 100.0% $44,314
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $14.48
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $14.41
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL
CLASS ($14.41 / 95.25%) (A) $15.13
================================================================================
*NON-INCOME PRODUCING SECURITY
(A) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE PORTFOLIO. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME. THE
MAXIMUM SALES LOAD IS 4.75%. SHAREHOLDERS WHO INVESTED IN THE ARK FUNDS
PRIOR TO 04/01/97 CAN INVEST WITHOUT A SALES LOAD THROUGH 12/31/97.
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK Funds: Mid-Cap Equity Portfolio
[Photo Omitted]
Christopher E. Baggini,
CFA
Co-Portfolio Manager
CHRISTOPHER E. BAGGINI HAS OVER TWELVE YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE. HE IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, MANAGER OF THE
CAPITAL GROWTH PORTFOLIO AND CO-MANAGER OF THE MID-CAP EQUITY PORTFOLIO.
[Photo Omitted]
Christopher D. Baker
Co-Portfolio Manager
CHRISTOPHER D. BAKER IS AN INVESTMENT OFFICER OF ALLIED INVESTMENT ADVISORS,
CO-MANAGER WITH MR. BAGGINI OF THE MID-CAP EQUITY PORTFOLIO AND MANAGER
OF THE EQUITY INDEX PORTFOLIO. HE HAS OVER 5 YEARS EXPERIENCE IN INVESTMENT
RESEARCH AND EQUITY ANALYSIS.
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCKS - 99.3%
AEROSPACE & DEFENSE - 0.8%
Hubbell, Cl B 3,816 $168
Litton Industries 2,350 119
Thiokol 900 82
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $369
- --------------------------------------------------------------------------------
AIR TRANSPORTATION - 0.2%
Airborne Freight 950 60
ASA Holdings 1,300 36
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 96
- --------------------------------------------------------------------------------
AIRCRAFT - 0.4%
Sundstrand 3,280 178
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $178
- --------------------------------------------------------------------------------
APPAREL/TEXTILES - 0.9%
Albany International 1,150 28
Burlington Industries* 2,600 39
Jones Apparel Group* 2,700 137
Shaw Industries 5,300 64
Unifi 3,100 119
- --------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $387
- --------------------------------------------------------------------------------
AUTOMOTIVE - 0.9%
Borg-Warner Automotive 600 33
Federal Mogul 1,850 78
Federal Signal 1,882 46
Kaydon 2,200 67
43
<PAGE>
Statement of Net Assets (unaudited)
Mid-Cap Equity Portfolio (continued)
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Building & Construction -- 1%
Transportation -- 3%
Durable Goods -- 4%
Utilities -- 7%
Consumer Products -- 8%
Oil-Energy -- 8%
Miscellaneous -- 8%
Chemicals & Drugs -- 9%
Repurchase Agreement -- 20%
Technology -- 17%
Financial -- 15%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Modine Manufacturing 1,250 $ 43
OEA 800 32
Superior Industries
International 1,155 31
Teleflex 1,700 63
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 393
- --------------------------------------------------------------------------------
BANKS - 10.4%
Central Fidelity Banks 3,150 146
Charter One Financial 2,800 163
City National 1,700 51
Crestar Financial 6,450 305
Dime Bancorp 5,500 132
First of America Bank 4,725 263
First Security 6,462 187
First Tennessee National 3,600 207
First Virginia Banks 2,950 137
Firstar 7,800 282
Hibernia, Cl A 6,500 116
Marshall & Ilsley 4,950 257
Mercantile Bancorp 6,150 299
Mercantile Bankshares 3,675 131
Northern Trust 5,600 328
Old Kent Financial 2,700 170
Pacific Century Financial 2,000 101
Regions Financial Corporation 7,510 276
Southtrust 5,350 257
Summit Bancorp 10,100 431
Union Planters 3,700 219
Wilmington Trust 1,400 78
- --------------------------------------------------------------------------------
TOTAL BANKS $4,536
- --------------------------------------------------------------------------------
BEAUTY PRODUCTS - 0.1%
Church & Dwight 825 24
- --------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 24
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING - 1.0%
Chris-Craft Industries* 1,307 68
Omnicom Group 4,700 332
TCA Cable TV 1,250 52
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 452
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION - 0.2%
Jacobs Engineering Group* 1,175 $ 32
Martin Marietta Materials 1,800 63
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 95
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES - 0.0%
Lukens 700 13
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION SUPPLIES $ 13
- --------------------------------------------------------------------------------
CHEMICALS - 3.3%
A. Schulman 1,600 36
Airgas* 3,000 47
Albemarle 2,650 64
Betzdearborn 1,231 79
Cabot 3,000 74
Crompton & Knowles 3,700 93
Cytec Industries* 2,300 112
Dexter 1,000 39
Ethyl 4,850 42
Fuller (H.B.) 590 28
Georgia Gulf 1,400 42
IMC Global 5,300 179
Lawter International 1,800 20
Lubrizol 2,900 112
Olin 2,550 116
RPM 3,112 58
Solutia* 6,500 144
Wellman 1,500 30
Witco Chemical 2,875 125
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $1,440
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.1%
ADC Telecommunications* 7,400 245
Molex 4,362 164
Vishay Intertechnology* 2,611 63
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $ 472
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 1.5%
BMC Software* 5,248 317
Compuware* 4,600 304
Symantec* 2,140 47
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 668
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES - 4.0%
Arrow Electronics* 5,612 159
Avnet 2,175 137
Cirrus Logic* 2,600 39
Diebold 3,854 170
Exabyte* 945 10
Lexmark International
Group, Cl A* 3,500 107
Quantum* 7,400 234
SCI Systems* 3,400 150
Sequent Computer Systems* 1,350 28
Solectron* 3,900 153
Sterling Commerce* 5,000 166
Storage Technology* 3,261 191
Stratus Computer* 850 30
Sungard Data Systems* 4,400 104
44
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Symbol Technologies 2,212 $ 88
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $1,766
- --------------------------------------------------------------------------------
CONCRETE & MINERAL PRODUCTS - 0.2%
Calmat 1,100 28
Ferro 1,050 39
- --------------------------------------------------------------------------------
TOTAL CONCRETE & MINERAL PRODUCTS $ 67
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS - 0.1%
First Brands 2,200 56
- --------------------------------------------------------------------------------
TOTAL CONSUMER PRODUCTS $ 56
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 0.1%
Longview Fibre 2,200 35
- --------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 35
- --------------------------------------------------------------------------------
DRUGS - 3.1%
Allegiance 2,500 69
Biogen* 4,300 144
Carter-Wallace 1,900 30
Centocor* 3,800 167
Chiron* 9,564 184
Forest Laboratories* 1,834 85
Genzyme* 5,024 138
Ivax* 5,850 44
Mylan Laboratories 7,087 155
Perrigo* 3,050 47
R.P. Scherer* 1,450 85
Watson Pharmaceuticals* 6,300 200
- --------------------------------------------------------------------------------
TOTAL DRUGS $1,348
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES - 7.9%
AES* 8,000 317
Allegheny Energy 6,729 190
AMETEK* 1,350 32
Atlantic Energy 2,050 38
CMS Energy 5,800 212
Delmarva Power & Light 3,150 62
Florida Progress 6,100 199
Hawaiian Electric Industries 1,475 56
Idaho Power 1,650 53
Illinova 3,100 69
Ipalco Enterprises 2,371 83
Kansas City Power & Light 3,250 95
LG&E 3,350 71
MidAmerican Energy Holdings 4,964 89
Minnesota Power & Light 1,825 66
Montana Power 2,150 54
Nevada Power 2,000 43
New Century Energies* 3,486 146
New England Electric System 3,300 129
New York State Electric & Gas 3,650 97
Nipsco Industries 3,750 165
Northeast Utilities 6,200 71
OGE Energy 2,053 99
PG&E 997 25
Pinnacle West Capital 5,000 174
Potomac Electric Power 6,150 138
Public Service Company
of New Mexico 1,200 23
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Puget Sound Energy 4,200 $ 112
Scana 5,550 140
TECO Energy 7,372 176
UCAR International* 1,700 64
Wisconsin Energy 6,500 165
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $3,453
- --------------------------------------------------------------------------------
ENERGY & POWER - 0.3%
Calenergy* 3,150 108
- --------------------------------------------------------------------------------
TOTAL ENERGY & POWER $ 108
- --------------------------------------------------------------------------------
ENTERTAINMENT - 0.4%
International Game Technology 6,600 169
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 169
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 0.7%
USA Waste Services* 8,500 315
- --------------------------------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES $ 315
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 3.9%
A.G. Edwards & Sons 5,318 175
Bear Stearns 6,489 258
Capital One Financial 3,700 169
FINOVA Group 2,750 121
Franklin Resources 6,375 573
Paine Webber Group 5,000 221
T. Rowe Price 2,700 179
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $1,696
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 3.9%
Coca Cola 19,950 561
Dean Foods 2,075 98
Dole Food 3,150 140
Dreyer's Grand Ice Cream 650 27
Flowers Industries 3,656 69
Hormel Foods 3,800 114
IBP 4,650 108
Interstate Bakeries 1,850 118
Lancaster Colony 1,232 61
Lance 1,250 27
McCormick 4,250 106
Tyson Foods 12,010 227
Universal Foods 1,200 47
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $1,703
- --------------------------------------------------------------------------------
FORESTRY - 0.1%
Rayonier 1,100 48
- --------------------------------------------------------------------------------
TOTAL FORESTRY $ 48
- --------------------------------------------------------------------------------
GAS/NATURAL GAS - 1.6%
AGL Resources 2,150 39
El Paso Natural Gas 3,259 195
KeySpan Energy* 2,000 62
MCN 4,100 142
National Fuel & Gas 1,425 63
Questar 2,150 83
Utilicorp United 1,950 62
Washington Gas Light 2,000 51
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $ 697
- --------------------------------------------------------------------------------
45
<PAGE>
Statement of Net Assets (unaudited)
Mid-Cap Equity Portfolio (continued)
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
HOME BUILDERS - 0.2%
Clayton Homes 5,961 $ 98
- --------------------------------------------------------------------------------
TOTAL HOME BUILDERS $ 98
- --------------------------------------------------------------------------------
HOTELS & LODGING - 0.5%
Circus Circus Enterprises* 4,825 107
Promus Hotel* 2,600 102
- --------------------------------------------------------------------------------
TOTAL HOTELS & LODGING $ 209
- --------------------------------------------------------------------------------
HOUSEHOLD FURNITURE & FIXTURES - 0.5%
Leggett & Platt 5,350 223
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD FURNITURE & FIXTURES $ 223
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 0.6%
Danaher 3,250 178
Dial 5,200 88
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 266
- --------------------------------------------------------------------------------
INSURANCE - 4.0%
AFLAC 4,730 241
AMBAC 3,950 167
American Financial Group 3,000 114
Foundation Health Systems, Cl A* 6,752 194
Healthcare Compare* 1,400 75
HSB Group 900 47
Old Republic International 4,900 175
Oxford Health Plans* 3,000 77
Pacificare Health Systems, Cl B* 2,153 139
PMI Group 1,700 103
Policy Management Systems* 850 52
Provident 7,300 244
Transatlantic Holdings 1,750 121
- --------------------------------------------------------------------------------
TOTAL INSURANCE $1,749
- --------------------------------------------------------------------------------
INTERNET SERVICE PROVIDERS - 0.9%
America Online* 5,175 398
- --------------------------------------------------------------------------------
TOTAL INTERNET SERVICE PROVIDERS $ 398
- --------------------------------------------------------------------------------
LEASING & RENTING - 0.3%
Comdisco 3,750 118
- --------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 118
- --------------------------------------------------------------------------------
LEISURE PRODUCTS - 0.5%
Callaway Golf 3,700 119
Electronic Arts* 2,750 93
- --------------------------------------------------------------------------------
TOTAL LEISURE PRODUCTS $ 212
- --------------------------------------------------------------------------------
MACHINERY - 1.8%
AGCO 3,200 93
Donaldson 1,100 56
Flowserve 937 28
Kennametal 1,600 78
Mark IV Industries 2,615 63
Nordson 800 40
Pentair 1,574 61
Smith International* 2,250 172
Stewart & Stevenson Services 1,400 30
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Tyco International 1,412 $ 53
Varco International* 1,325 81
Watts Industries, Cl A 1,350 34
- --------------------------------------------------------------------------------
TOTAL MACHINERY $ 789
- --------------------------------------------------------------------------------
MANUFACTURING - 0.2%
Trinity Industries 2,000 90
- --------------------------------------------------------------------------------
TOTAL MANUFACTURING $ 90
- --------------------------------------------------------------------------------
MARINE TRANSPORTATION - 0.2%
Alexander & Baldwin 1,900 52
Overseas Shipholding Group 1,575 39
- --------------------------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $ 91
- --------------------------------------------------------------------------------
MEASURING DEVICES - 0.1%
Beckman Instruments 1,250 49
- --------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 49
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 4.0%
Acuson* 1,026 19
Apria Healthcare Group* 2,550 39
ATL Ultrasound* 600 26
Bergen Brunswig, Cl A 2,556 102
Concentra Managed Care* 1,000 33
Covance* 2,950 52
Dentsply International 3,900 111
Health Management Associates,
Cl A* 10,750 262
Healthcare & Retirement* 1,825 69
HEALTHSOUTH* 1,749 45
McKesson 2,500 268
Novacare* 2,000 26
Omnicare 4,000 111
Quorum Health Group* 2,000 49
Stryker 5,200 193
Sybron International* 4,900 197
Varian Associates 1,300 76
Vencor* 3,550 96
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $1,774
- --------------------------------------------------------------------------------
METALS & MINING - 0.5%
Cleveland Cliffs 325 14
Minerals Technologies 900 37
Vulcan Materials 1,975 175
- --------------------------------------------------------------------------------
TOTAL METALS & MINING $ 226
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 2.3%
Cintas 2,650 191
Fiserv* 2,675 120
Kelly Services, Cl A 2,000 71
Ogden 2,000 51
Olsten 3,437 52
Reynolds & Reynolds, Cl A 4,100 70
Sensormatic Electronics 2,925 44
Sotheby's Holdings, Cl A 2,600 49
U.S. Filter* 4,300 173
Viad 4,900 89
Viking Office Products* 4,300 103
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $1,013
- --------------------------------------------------------------------------------
46
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES - 1.1%
Manpower 4,425 $ 170
Robert Half International* 5,100 209
Stewart Enterprises, Cl A 2,500 104
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER SERVICES $ 483
- --------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING - 0.4%
GTECH* 1,000 32
Hillenbrand Industries 3,850 165
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING $ 197
- --------------------------------------------------------------------------------
MISCELLANEOUS TRANSPORTATION - 0.2%
Harsco 2,500 104
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS TRANSPORTATION $ 104
- --------------------------------------------------------------------------------
MOTORCYCLES, BICYCLES & PARTS - 0.5%
Harley-Davidson 8,360 232
- --------------------------------------------------------------------------------
TOTAL MOTORCYCLES, BICYCLES & PARTS $ 232
- --------------------------------------------------------------------------------
OFFICE FURNITURE & FIXTURES - 0.4%
Herman Miller 2,300 112
Hon Industries 1,200 62
- --------------------------------------------------------------------------------
TOTAL OFFICE FURNITURE & FIXTURES $ 174
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS - 0.8%
Bowater 1,650 69
Chesapeake 1,050 33
Consolidated Papers 2,250 117
PH Glatfelter 1,800 36
Unisource Worldwide 3,000 49
Wausau Paper Mills 1,520 31
- --------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 335
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 5.8%
BJ Services* 2,100 178
Ensco International 10,600 446
Global Marine* 9,575 298
Mapco 2,200 73
Nabors Industries* 5,350 220
Noble Affiliates 2,900 119
Noble Drilling* 7,300 260
Parker Drilling* 2,800 41
Pioneer Natural Resources* 1,450 58
Quaker State 1,350 21
Ranger Oil 4,310 37
Seagull Energy* 3,200 78
Tidewater 3,355 220
Transocean Offshore 5,600 302
Valero Energy 2,300 69
Weatherford Enterra* 2,733 140
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $2,560
- --------------------------------------------------------------------------------
PETROLEUM REFINING - 1.5%
Lyondell Petrochemical 4,000 103
Murphy Oil 2,400 139
Tosco 8,610 284
Ultramar Diamond Shamrock 3,800 117
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 643
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
PRINTING & PUBLISHING - 1.6%
A.H. Belo, Cl A 3,600 $170
Banta 1,200 31
Houghton Mifflin 1,380 49
Lee Enterprises 1,850 49
Media General 1,100 45
Scholastic* 600 24
Standard Register 1,200 39
Wallace Computer Services 1,900 73
Washington Post, Cl B 550 239
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $719
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES - 0.9%
Corrections Corporation
of America* 4,400 134
Medaphis* 2,050 12
Paychex 6,066 231
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $377
- --------------------------------------------------------------------------------
RAILROADS - 0.7%
Illinois Central 3,125 111
Kansas City Southern Industries 6,000 183
- --------------------------------------------------------------------------------
TOTAL RAILROADS $294
- --------------------------------------------------------------------------------
RETAIL - 10.3%
Ann Taylor Stores* 900 13
Barnes & Noble* 3,000 77
Bed Bath & Beyond* 3,500 111
Best Buy* 1,400 39
BJ's Wholesale Club* 2,000 58
Brinker International* 2,549 36
Claire's Stores 2,487 55
CompUSA* 8,425 276
Consolidated Stores* 4,687 187
Cracker Barrel Old
Country Stores 3,500 103
Dollar General 7,387 244
Family Dollar Stores 4,450 105
Fastenal 1,650 81
Fred Meyer* 1,750 50
General Nutrition* 4,500 142
Hannaford Brothers 2,450 93
Heilig-Meyers 2,050 27
Kohl's* 4,100 275
Lands' End* 1,350 43
Linens 'N Things* 13,200 474
Lone Star Steakhouse & Saloon* 2,650 61
Micro Warehouse* 1,400 21
Nine West Group* 1,600 57
Office Depot* 8,623 178
OfficeMax* 5,000 67
Outback Steakhouse* 2,800 76
Payless Shoesource* 2,000 112
Premark International 3,000 81
Rite Aid 11,300 671
Ruddick 1,400 22
Sbarro 850 22
Staples* 9,074 238
Starbucks* 4,500 149
Tiffany & Company 1,850 73
47
<PAGE>
Statement of Net Assets (unaudited)
Mid-Cap Equity Portfolio (concluded)
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
U.S. Office Products* 4,000 $ 125
Warnaco Group 2,850 81
- --------------------------------------------------------------------------------
TOTAL RETAIL $4,523
- --------------------------------------------------------------------------------
RUBBER & PLASTIC - 1.1%
Carlisle 1,200 52
Hanna 2,124 55
Sealed Air* 2,150 111
Sonoco Products 8,770 282
- --------------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $ 500
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 4.9%
Altera* 2,900 129
American Power Conversion* 5,050 138
Analog Devices* 8,406 257
Atmel* 5,250 136
Cadence Design Systems* 3,500 186
Cypress Semiconductor* 3,250 37
Integrated Device Technology* 3,000 35
Linear Technology 4,200 264
Maxim Integrated Products* 3,500 232
Mentor Graphics* 2,400 26
Structural Dynamics Research* 1,327 25
Synopsys* 11,600 451
Teradyne* 2,650 99
Xilinx* 4,200 143
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $2,158
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY - 0.3%
Tecumseh Products, Cl A 950 49
York International 2,100 96
- --------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 145
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS - 0.7%
AK Steel Holding 1,500 63
Alumax Incorporated* 2,450 80
Carpenter Technology 1,100 53
Oregon Steel Mills 1,600 34
Precision Castparts 1,050 62
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 292
- --------------------------------------------------------------------------------
TECHNOLOGY - 0.2%
NCR* 3,300 100
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY $ 100
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 3.3%
360 Communications* 6,300 133
Aliant Communications 1,450 37
Boston Technology* 13,100 355
Century Telephone Enterprises 3,050 129
Comsat 2,050 47
LCI International* 3,950 102
Nextel Communications, Cl A* 12,800 336
Southern New England Telecom 3,850 165
Telephone & Data Systems 3,100 132
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $1,436
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares/Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
TRANSPORTATION SERVICES - 0.2%
GATX 1,275 $ 82
- --------------------------------------------------------------------------------
TOTAL TRANSPORTATION SERVICES $ 82
- --------------------------------------------------------------------------------
TRUCKING - 0.5%
APL 1,000 33
CNF Transportation 2,400 107
JB Hunt Transport Services 2,100 32
Pittston Services 1,600 58
- --------------------------------------------------------------------------------
TOTAL TRUCKING $ 230
- --------------------------------------------------------------------------------
WATER UTILITIES - 0.2%
American Water Works 4,100 93
- --------------------------------------------------------------------------------
TOTAL WATER UTILITIES $ 93
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $32,802) $43,566
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 24.5%
First Boston
5.720%, dated 10/31/97, matures
11/03/97, repurchase price
$10,743,470 (collateralized by
U.S. Treasury Bond: total
market value $10,980,527) $10,738 10,738
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $10,738) $10,738
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 123.8%
(Cost $43,540) $54,304
================================================================================
OTHER ASSETS AND LIABILITIES, NET - (23.8%) $(10,423)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 3,515,877 outstanding
shares of beneficial interest 30,716
Undistributed net investment income 13
Accumulated net realized gain on investments 2,388
Net unrealized appreciation on investments 10,764
================================================================================
TOTAL NET ASSETS -- 100.0% $43,881
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $12.48
================================================================================
* NON-INCOME PRODUCING SECURITY
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
48
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
ARK Funds: Special Equity Portfolio
[Photo Omitted]
H. Giles Knight
Portfolio Manager
H. GILES KNIGHT HAS OVER 25 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE. HE IS A
PRINCIPAL OF ALLIED INVESTMENT ADVISORS AND THE MANAGER OF THE STOCK AND THE
SPECIAL EQUITY PORTFOLIOS.
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCKS - 87.3%
AIR TRANSPORTATION - 1.0%
Ryanair Holdings, ADR* 9,000 $ 225
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 225
- --------------------------------------------------------------------------------
AUTOMOTIVE - 2.5%
Navistar International* 25,000 580
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 580
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES - 2.6%
McDermott International 17,000 617
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION SUPPLIES $ 617
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.6%
Advanced Communication
Systems* 15,000 156
Yurie Systems* 15,000 455
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $ 611
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES - 8.8%
Apex PC Solutions* 5,000 129
Documentum* 10,000 299
Information Management
Resources* 10,000 257
J.D. Edwards* 1,000 34
Metro Information Services* 15,000 373
RADCOM* 20,000 185
S S & C Technologies* 25,000 253
Security Dynamics Technology* 5,000 169
System Software Associates* 20,000 235
Xeikon, ADR* 10,000 136
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $2,070
- --------------------------------------------------------------------------------
DRUGS - 0.8%
Medarex* 29,000 172
Sparta Pharmaceuticals* 30,000 19
- --------------------------------------------------------------------------------
TOTAL DRUGS $ 191
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 3.5%
Everen Capital 10,000 377
Paine Webber Group 10,000 442
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 819
- --------------------------------------------------------------------------------
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Computers & Services -- 8%
Real Estate Investment Trusts -- 9%
Technology -- 11%
Retail -- 12%
Miscellaneous -- 13%
Chemicals & Drugs -- 5%
Transportation -- 4%
Finance -- 3%
Consumer Cyclical -- 2%
American Depository Receipts -- 1%
Oil-Energy -- 18%
Repurchase Agreement -- 14%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
HOTELS & LODGING - 1.5%
CapStar Hotel* 10,000 $ 354
- --------------------------------------------------------------------------------
TOTAL HOTELS & LODGING $ 354
- --------------------------------------------------------------------------------
MEASURING DEVICES - 1.7%
Input/Output* 15,000 402
- --------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 402
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 2.3%
Ameripath* 10,000 165
Laser Industries Limited* 15,000 298
MAXIMUS* 2,500 70
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 533
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 6.9%
At Home, Cl A* 14,000 338
Cal Dive International* 15,000 469
Clarify* 24,000 312
CSG Systems International* 5,000 196
ECCS* 9,500 74
Sapiens International* 30,000 246
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $1,635
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 18.4%
Chesapeake Energy 75,000 736
Dril-Quip* 1,000 36
EVI* 5,000 321
General Nutrition* 15,000 473
Key Energy Group* 30,000 941
Marine Drilling* 20,000 592
Meridian Resource* 40,000 522
Noble Drilling* 20,000 711
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $4,332
- --------------------------------------------------------------------------------
PRINTING & PUBLISHING - 0.1%
Petersen* 1,000 20
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $ 20
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES - 0.0%
VSE 200 2
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 2
- --------------------------------------------------------------------------------
49
<PAGE>
Statement of Net Assets (unaudited)
Special Equity Portfolio (concluded)
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 8.9%
Burnham Pacific Properties 25,000 $ 366
Glenborough Realty Trust 35,000 897
Imperial Credit* 10,000 165
Kilroy Realty 25,000 662
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS $ 2,090
- --------------------------------------------------------------------------------
RENTAL SERVICES - 1.7%
Avis Rent A Car* 15,000 412
- --------------------------------------------------------------------------------
TOTAL RENTAL SERVICES $ 412
- --------------------------------------------------------------------------------
RETAIL - 12.6%
Ames Department Stores* 25,000 389
Charming Shoppes* 35,000 182
Circuit City Stores-Circuit
City Group* 30,000 416
Darden Restaurants 40,000 455
PETsMART* 95,500 728
Sun Television & Appliances* 100,000 275
Tropical Sportswear* 20,000 240
Ugly Duckling* 25,000 297
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 2,982
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 0.3%
Alpha Industries* 5,000 79
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 79
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 8.6%
Anicom* 20,000 310
Audiovox* 90,000 816
Boston Communications Group* 25,000 369
Premisys Communications* 10,000 272
RSL Communications, Cl A* 11,000 259
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 2,026
- --------------------------------------------------------------------------------
TESTING LABORATORIES - 0.6%
ARIAD Pharmaceuticals* 30,000 152
- --------------------------------------------------------------------------------
TOTAL TESTING LABORATORIES $ 152
- --------------------------------------------------------------------------------
TRUCKING - 1.9%
Arkansas Best* 40,000 460
- --------------------------------------------------------------------------------
TOTAL TRUCKING $ 460
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $20,406) $20,592
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCK - 0.2%
Sparta Pharmaceuticals (A)(B)* 10,000 42
- --------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCK
(Cost $95) $ 42
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
WARRANTS - 0.7%
Bio-Technology* $20,500 $ 151
Sparta Pharmaceuticals, Cl C* 66,666 17
- --------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost $207) $ 168
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 15.2%
First Boston
5.720%, dated 10/31/97, matures
11/03/97, repurchase price
$3,594,762 (collateralized by
U.S. Treasury Bond: total
market value $3,675,352) 3,593 3,593
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $3,593) $ 3,593
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 103.4%
(Cost $24,301) $24,395
================================================================================
OTHER ASSETS AND LIABILITIES, NET - (3.4%) $ (807)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 2,018,465 outstanding
shares of beneficial interest 20,218
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 149,429 outstanding
shares of beneficial interest 1,891
Overdistributed net investment income (71)
Accumulated net realized gain on investments 1,456
Net unrealized appreciation on investments 94
================================================================================
TOTAL NET ASSETS -- 100.0% $23,588
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $10.88
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $10.86
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL
CLASS ($10.86 / 95.25%) (C) $11.40
================================================================================
* NON-INCOME PRODUCING SECURITY
(A) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS.
(B) FAIR VALUED SECURITY
(C) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE PORTFOLIO. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME. THE
MAXIMUM SALES LOAD IS 4.75%. SHAREHOLDERS WHO INVESTED IN THE ARK FUNDS
PRIOR TO 04/01/97 CAN INVEST WITHOUT A SALES LOAD THROUGH 12/31/97.
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
50
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
ARK Funds: International Equity Portfolio
[Photo Omitted]
Joseph Mottley
Portfolio Manager
JOSEPH MOTTLEY IS AN ASSOCIATE DIRECTOR OF AIB INVESTMENT MANAGERS LIMITED AND
THE MANAGER OF THE INTERNATIONAL EQUITY PORTFOLIO. HE HAS WORKED ON A NUMBER OF
INTERNATIONAL EQUITY FUNDS, WITH BROAD EXPOSURE IN THE ASIAN AND EUROPEAN
MARKETS.
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS - 91.7%
AUSTRALIA - 1.4%
National Australia Bank 1,966 $ 27
Western Mining 4,971 18
- --------------------------------------------------------------------------------
TOTAL AUSTRALIA $ 45
- --------------------------------------------------------------------------------
FRANCE - 7.6%
Accor 320 60
AXA 560 38
Cie Generale des Eaux 621 72
Groupe SEB 153 18
Total, Series B 450 50
- --------------------------------------------------------------------------------
TOTAL FRANCE $238
- --------------------------------------------------------------------------------
GERMANY - 6.7%
Bayer 900 32
Deutsche Bank 700 46
Mannesmann 174 74
Veba 650 37
Volkswagen 38 23
- --------------------------------------------------------------------------------
TOTAL GERMANY $212
- --------------------------------------------------------------------------------
HONG KONG - 1.7%
Cheung Kong Holdings 2,606 18
Hong Kong Telecommunications 10,800 21
Swire Pacific, Series A 2,736 15
- --------------------------------------------------------------------------------
TOTAL HONG KONG $ 54
- --------------------------------------------------------------------------------
ITALY - 3.4%
ENI 11,800 66
Telecom Italia 6,290 40
- --------------------------------------------------------------------------------
TOTAL ITALY $106
- --------------------------------------------------------------------------------
JAPAN - 12.9%
Asahi Diamond Industrial 3,090 18
Asahi Glass 2,000 13
Chiyoda 1,600 15
DDI 2 7
Fujitsu 3,000 33
Honda Motor 1,000 34
Matsushita Electric 2,000 34
Mitsubishi Heavy Industries 5,000 25
Mitsui Trust & Banking 3,000 10
[Pie Chart Omitted]
Pie chart showing percentages of Portfolio Investments are as follows:
Sweden -- 5%
United States -- 6%
Netherlands -- 8%
France -- 8%
Germany -- 8%
Other -- 8%
United Kingdom -- 34%
Japan -- 13%
Switzerland -- 10%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Orix 300 $ 21
Sankyo 1,000 33
Shimachu 1,000 21
Shinki 1,200 22
Sony 400 33
Sumitomo Electric 2,000 26
Tokio Marine & Fire Insurance 2,000 20
Toppan Printing 1,000 13
Toyota Motor 1,000 28
- --------------------------------------------------------------------------------
TOTAL JAPAN $406
- --------------------------------------------------------------------------------
MALAYSIA - 0.9%
MNI Holdings 6,000 15
Multi-Purpose Holdings 22,000 12
- --------------------------------------------------------------------------------
TOTAL MALAYSIA $ 27
- --------------------------------------------------------------------------------
NETHERLANDS - 7.8%
ABN-Amro 3,570 72
Ahold 1,158 30
Ing Groep 1,079 45
Royal Dutch Petroleum 480 25
VNU 3,160 75
- --------------------------------------------------------------------------------
TOTAL NETHERLANDS $247
- --------------------------------------------------------------------------------
SWEDEN - 4.9%
Atlas, Series A 1,802 53
Electrolux, Series B 414 34
Ericsson 1,297 57
Sandvik, Series B 298 9
- --------------------------------------------------------------------------------
TOTAL SWEDEN $153
- --------------------------------------------------------------------------------
SWITZERLAND - 10.2%
Alusuisse-Lonza 25 22
BBC Brown Boveri 54 71
CS Holdings 320 45
Nestle 37 52
Novartis 33 52
Roche Holdings 9 79
- --------------------------------------------------------------------------------
TOTAL SWITZERLAND $321
- --------------------------------------------------------------------------------
THAILAND - 0.0%
Finance One Public* 3,000 --
- --------------------------------------------------------------------------------
TOTAL THAILAND $ --
- --------------------------------------------------------------------------------
51
<PAGE>
Statement of Net Assets (unaudited)
International Equity Portfolio (concluded)
- --------------------------------------------------------------------------------
Shares/Principal Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
UNITED KINGDOM - 34.2%
ASDA Group 13,700 $ 36
Barclays Bank 1,157 29
Bass 3,000 42
BAT Industries 3,019 26
British Airport Authority 4,836 45
British Airways 4,200 41
British Petroleum 5,117 75
General Electric 5,707 36
GKN 2,000 45
Glaxo Wellcome 2,600 56
Granada Group 3,017 42
HSBC Holdings 1,574 39
Lloyds TSB Group 5,894 74
Marks & Spencer 4,299 44
National Power 3,700 31
National Westminster 1,895 27
Prudential 5,443 58
Railtrack Group 3,267 52
Royal & Sun Alliance
Insurance Group 4,000 38
Severn Trent 114 2
Shell Transportation & Trading 7,419 53
TI Group 4,500 41
Vodafone Group 11,084 60
Yorkshire Water 1,650 13
Zeneca Group 2,234 71
- --------------------------------------------------------------------------------
TOTAL UNITED KINGDOM $1,076
- --------------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(Cost $2,779) $2,885
- --------------------------------------------------------------------------------
FOREIGN PREFERRED STOCK - 1.4%
GERMANY - 1.4%
GEA 140 45
- --------------------------------------------------------------------------------
TOTAL GERMANY $ 45
- --------------------------------------------------------------------------------
TOTAL FOREIGN PREFERRED STOCK
(Cost $51) $ 45
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 6.1%
U.S. Treasury Bills
2.341%, 11/06/97 $95 95
3.827%, 11/13/97 95 95
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $190) $ 190
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.2%
(Cost $3,020) $3,120
================================================================================
OTHER ASSETS AND LIABILITIES, NET - 0.8% $ 26
================================================================================
- --------------------------------------------------------------------------------
Market
Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 221,675 outstanding
shares of beneficial interest $1,943
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 70,631 outstanding
shares of beneficial interest 771
Undistributed net investment income 11
Accumulated net realized gain on investments 334
Netunrealized depreciation on forward foreign
currency contracts, foreign currency and
translation of other assets and liabilities
in foreign currency (13)
Net unrealized appreciation on investments 100
================================================================================
TOTAL NET ASSETS -- 100.0% $3,146
================================================================================
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $10.77
================================================================================
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $10.75
================================================================================
MAXIMUM OFFERING PIECE PER SHARE -- RETAIL
CLASS ($10.75 / 95.25%) (A) $11.29
================================================================================
* NON-INCOME PRODUCING SECURITY
(A) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE PORTFOLIO. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME. THE
MAXIMUM SALES LOAD IS 4.75%. SHAREHOLDERS WHO INVESTED IN THE ARK FUNDS
PRIOR TO 04/01/97 CAN INVEST WITHOUT A SALES LOAD THROUGH 12/31/97.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
52
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
Statement of Assets and Liabilities (000)
AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
INCOME
PORTFOLIO
------------
ASSETS:
Investments at market value (cost $277,374) $284,384
Interest receivable 4,249
Receivable for investment securities sold 21,972
Other assets 1,144
--------
Total assets 311,749
--------
LIABILITIES:
Distribution payable 1,360
Payable for investment securities purchased 40,656
Other liabilities 653
--------
Total liabilities 42,669
--------
NET ASSETS:
Portfolio shares of Institutional Class (unlimited authorization -- no par value)
based on 25,828,050 outstanding shares of beneficial interest 258,077
Portfolio shares of Retail Class (unlimited authorization -- no par value)
based on 552,125 outstanding shares of beneficial interest 5,632
Undistributed net investment income 8
Accumulated net realized loss on investments (1,647)
Net unrealized appreciation on investments 7,010
--------
TOTAL NET ASSETS $269,080
========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE -- INSTITUTIONAL CLASS $10.20
========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- RETAIL CLASS $10.32
========
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS ($10.32 / 95.50%) (A) $10.81
========
<FN>
(A) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS INTO THE PORTFOLIO. THIS DISCOUNT MAY BE DISCONTINUED
AT ANY TIME. THE MAXIMUM SALES LOAD IS 4.50%. SHAREHOLDERS WHO INVESTED IN THE ARK FUNDS PRIOR TO 04/01/97 CAN INVEST
WITHOUT A SALES LOAD THROUGH 12/31/97.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
Statement of Operations (000) (unaudited)
FOR THE PERIOD ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
TAX-FREE U.S. GOVERNMENT U.S. TREASURY SHORT-TERM MARYLAND PENNSYLVANIA
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET TREASURY TAX-FREE TAX-FREE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ --------------- ------------- ------------ ----------- ------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ -- $ -- $ -- $ -- $ -- $ -- $ --
Interest 14,893 2,667 39,446 9,467 1,241 2,571 660
Less: Foreign Taxes Withheld -- -- -- -- -- -- --
------- ------ ------- ------ ------ ------ ------
Total Investment Income 14,893 2,667 39,446 9,467 1,241 2,571 660
------- ------ ------- ------ ------ ------ ------
EXPENSES:
Administrator Fees 338 92 911 229 28 63 16
Less: Waiver of
Administrator Fees -- -- -- -- -- -- --
Investment Advisory Fees 650 178 1,752 441 75 241 63
Less: Waiver of Investment
Advisory Fees (364) (114) (771) (106) (7) (24) (15)
Custodian Fees 47 12 140 39 10 10 5
Transfer Agency Fees 5 1 11 3 -- 1 --
Professional Fees 28 8 63 18 5 11 3
Registration Fees 19 24 95 27 1 5 1
Distribution Fees--Retail Class 204 32 7 25 40 21 3
Less: Waiver of Distribution
Fees--Retail Class -- -- -- -- (15) (4) --
Distribution Fees--
Institutional II Class 40 10 44 42 -- -- --
Printing Fees 21 5 39 12 -- 4 --
Trustee Fees 3 1 8 2 -- 1 --
Amortization of Deferred
Organization Costs 2 2 2 2 1 1 1
Miscellaneous Fees 8 (5) 1 (13) 1 4 1
Shareholder Servicing Fees--
Retail Class 122 19 4 15 9 7 1
Less: Waiver of Shareholder
Servicing Fees--Retail Class (73) (12) (3) (9) (9) (7) (1)
------- ------ ------- ------ ------ ------ ------
Total Expenses 1,050 253 2,303 727 139 334 78
------- ------ ------- ------ ------ ------ ------
Net Investment Income (Loss) 13,843 2,414 37,143 8,740 1,102 2,237 582
------- ------ ------- ------ ------ ------ ------
Net Realized Gain (Loss) On:
Investments (9) -- 4 (14) 20 127 11
Foreign Currency Transactions -- -- -- -- -- -- --
Net Change in Unrealized
Appreciation (Depreciation)
on Investments and Foreign
Currency Transactions -- -- -- -- 376 2,695 738
------- ------ ------- ------ ------ ------ ------
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions (9) -- 4 (14) 396 2,822 749
------- ------ ------- ------ ------ ------ ------
Net Increase (Decrease)
in Net Assets Resulting
from Operations $13,834 $2,414 $37,147 $ 8,726 $ 1,498 $ 5,059 $ 1,331
======= ====== ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE EQUITY EQUITY BLUE CHIP
INCOME FIXED INCOME BALANCED INCOME INDEX EQUITY STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO(1) PORTFOLIO PORTFOLIO
---------- ------------ --------- --------- ------------ ---------- ---------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ -- $ -- $ 290 $ 1,463 $ 24 $ 480 $ 271
Interest 8,967 2,620 1,129 124 19 128 16
Less: Foreign Taxes Withheld -- -- -- -- -- -- --
------- ------ ------ ------- ------- ------ ------
Total Investment Income 8,967 2,620 1,419 1,587 43 608 287
------- ------ ------ ------- ------- ------ ------
EXPENSES:
Administrator Fees 170 50 58 61 3 42 28
Less: Waiver of
Administrator Fees -- -- -- -- (3) -- --
Investment Advisory Fees 654 231 244 330 4 195 154
Less: Waiver of Investment
Advisory Fees -- (58) -- (47) (2) (18) (11)
Custodian Fees 26 17 14 25 1 20 17
Transfer Agency Fees 2 1 1 1 -- 1 --
Professional Fees 13 9 5 4 -- 7 2
Registration Fees 11 3 3 3 1 6 1
Distribution Fees--Retail Class 7 -- 16 1 -- 60 --
Less: Waiver of Distribution
Fees--Retail Class (1) -- (6) (1) -- (33) --
Distribution Fees--
Institutional II Class -- -- -- -- -- -- --
Printing Fees 14 2 2 3 -- 1 1
Trustee Fees 2 1 -- 1 -- -- --
Amortization of Deferred
Organization Costs 2 2 2 2 -- 2 2
Miscellaneous Fees 4 1 2 1 -- 1 1
Shareholder Servicing Fees--
Retail Class 4 -- 6 -- -- 11 --
Less: Waiver of Shareholder
Servicing Fees--Retail Class (4) -- (6) -- -- (11) --
------- ------ ------ ------- ------- ------ ------
Total Expenses 904 259 341 384 4 284 195
------- ------ ------ ------- ------- ------ ------
Net Investment Income (Loss) 8,063 2,361 1,078 1,203 39 324 92
------- ------ ------ ------- ------- ------ ------
Net Realized Gain (Loss) On:
Investments 2,261 291 5,523 3,328 (16) 283 3,898
Foreign Currency Transaction -- -- -- -- -- -- --
Net Change in Unrealized
Appreciation (Depreciation)
on Investments and Foreign
Currency Transactions 7,228 1,439 5,314 8,984 (1,280) 6,374 978
------- ------ ------ ------- ------- ------ ------
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 9,489 1,730 10,837 12,312 (1,296) 6,657 4,876
------- ------ ------ ------- ------- ------ ------
Net Increase (Decrease)
in Net Assets Resulting
from Operations $17,552 $ 4,091 $11,915 $13,515 $(1,257) $6,981 $4,968
======= ======= ======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
CAPITAL MID-CAP SPECIAL INTERNATIONAL
GROWTH EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- -------- ---------- ------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividends $ 191 $ 212 $ 35 $ 57
Interest 27 12 14 9
Less: Foreign Taxes Withheld -- -- -- (2)
------ ------ ------ -------
Total Investment Income 218 224 49 64
------ ------ ------ -------
EXPENSES:
Administrator Fees 29 21 15 2
Less: Waiver of
Administrator Fees -- -- -- --
Investment Advisory Fees 134 113 70 15
Less: Waiver of Investment
Advisory Fees -- (8) -- (8)
Custodian Fees 14 14 26 7
Transfer Agency Fees -- -- -- --
Professional Fees 4 2 3 --
Registration Fees 2 2 2 4
Distribution Fees--Retail Class 16 -- 3 1
Less: Waiver of Distribution
Fees--Retail Class (6) -- (1) (1)
Distribution Fees--
Institutional II Class -- -- -- --
Printing Fees 1 1 1 --
Trustee Fees -- -- -- --
Amortization of Deferred
Organization Costs 2 1 -- --
Miscellaneous Fees 1 1 1 9
Shareholder Servicing Fees--
Retail Class 6 -- 1 --
Less: Waiver of Shareholder
Servicing Fees--Retail Class (6) -- (1) --
------ ------ ------ ------
Total Expenses 197 147 120 29
------ ------ ------ ------
Net Investment Income (Loss) 21 77 (71) 35
------ ------ ------ ------
Net Realized Gain (Loss) On:
Investments 4,105 1,997 3,736 342
Foreign Currency Transaction -- -- -- (19)
Net Change in Unrealized
Appreciation (Depreciation)
on Investments and Foreign
Currency Transactions 4,062 4,093 1,458 (97)
------ ------ ------ ------
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 8,167 6,090 5,194 226
------ ------ ------ ------
Net Increase (Decrease)
in Net Assets Resulting
from Operations $8,188 $6,167 $5,123 $ 261
====== ====== ====== ======
<FN>
(1) Commenced operations on October 1, 1997.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
54 & 55
<PAGE>
Statement of Changes in Net Assets (000) (unaudited)
<TABLE>
<CAPTION>
TAX-FREE U.S. GOVERNMENT
MONEY MARKET MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------- ----------------------- ------------------------
5/1/97 5/1/96 5/1/97 5/1/96 5/1/97 5/1/96
to 10/31/97 to 4/30/97 to 10/31/97 to 4/30/97 to 10/31/97 to 4/30/97
----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 13,843 $ 23,742 $ 2,414 $ 3,744 $ 37,143 $ 60,867
Net Realized Gain (Loss) from Investments
and Foreign Currency Transactions (9) (3) -- -- 4 (29)
Net Change in Unrealized Appreciation
(Depreciation) of Investments
and Foreign Currency -- -- -- -- -- --
-------- -------- -------- -------- ---------- ----------
Net Increase in Net Assets from Operations 13,834 23,739 2,414 3,744 37,147 60,838
-------- -------- -------- -------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (7,532) (15,435) (1,667) (2,735) (34,696) (59,082)
Retail Class (4,172) (5,700) (411) (515) (142) --
Institutional II Class (2,140) (2,607) (335) (495) (2,279) (1,811)
Net Capital Gains
Institutional Class -- -- -- -- -- --
Retail Class -- -- -- -- -- --
-------- -------- -------- -------- ---------- ----------
Total Distributions (13,844) (23,742) (2,413) (3,745) (37,117) (60,893)
-------- -------- -------- -------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 382,957 630,250 91,383 101,174 1,279,200 2,115,793
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- 12 45
Shares Redeemed (429,735) (659,673) (53,912) (106,822) (1,362,449 (1,908,765)
-------- -------- -------- -------- ---------- ----------
Total Institutional Class Share Transactions (46,778) (29,423) 37,471 (5,648) (83,237) 207,073
-------- -------- -------- -------- ---------- ----------
Retail Class:
Shares Issued 228,913 78,945 35,484 33,688 27,555 --
Shares Issued in Lieu of Cash Distributions 3,775 5,699 410 516 -- --
Shares Redeemed (201,991) (60,653) (26,796) (33,888) (19,751) --
-------- -------- -------- -------- ---------- ----------
Total Retail Class Share Transactions 30,697 23,991 9,098 316 7,804 --
-------- -------- -------- -------- ---------- ----------
Institutional II Class:
Shares Issued 140,126 136,399 38,460 66,745 289,367 315,465
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed (102,911) (102,228) (34,639) (59,404) (256,591) (295,206)
-------- -------- -------- -------- ---------- ----------
Total Institutional II Class
Share Transactions 37,215 34,171 3,821 7,341 32,776 20,259
-------- -------- -------- -------- ---------- ----------
Increase (Decrease) in Net Assets from
Shareholder Transactions 21,134 28,739 50,390 2,009 (42,657) 227,332
-------- -------- -------- -------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS 21,124 28,736 50,391 2,008 (42,627) 227,277
-------- -------- -------- -------- ---------- ----------
NET ASSETS:
Beginning of period 510,572 481,836 102,313 100,305 1,288,062 1,060,785
-------- -------- -------- -------- ---------- ----------
End of period $531,696 $510,572 $152,704 $102,313 $1,245,435 $1,288,062
======== ======== ======== ======== ========== ==========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 382,957 630,250 91,383 101,174 1,279,200 2,115,793
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- 12 45
Shares Redeemed (429,735) (659,673) (53,912) (106,822) (1,362,449) (1,908,765)
-------- -------- -------- -------- ---------- ----------
Total Institutional Class Share Transactions (46,778) (29,423) 37,471 (5,648) (83,237) 207,073
-------- -------- -------- -------- ---------- ----------
Retail Class:
Shares Issued 228,913 78,945 35,484 33,688 27,555 --
Shares Issued in Lieu of Cash Distributions 3,775 5,699 410 516 -- --
Shares Redeemed (201,991) (60,653) (26,796) (33,888) (19,751) --
-------- -------- -------- -------- ---------- ----------
Total Retail Class Share Transactions 30,697 23,991 9,098 316 7,804 --
-------- -------- -------- -------- ---------- ----------
Institutional II Class:
Shares Issued 140,126 136,399 38,460 66,745 289,367 315,465
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed (102,911) (102,228) (34,639) (59,404) (256,591) (295,206)
-------- -------- -------- -------- ---------- ----------
Total Institutional II Class
Share Transactions 37,215 34,171 3,821 7,341 32,776 20,259
-------- -------- -------- -------- ---------- ----------
Net Increase (Decrease) in
Share Transactions 21,134 28,739 50,390 2,009 (42,657) 227,332
======== ======== ======== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY SHORT-TERM
MONEY MARKET TREASURY
PORTFOLIO PORTFOLIO
----------------------- -------------------------
5/1/97 5/1/96 5/1/97 5/1/96
to 10/31/97 to 4/30/97 to 10/31/97 to 4/30/97
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 8,740 $ 16,904 $ 1,102 $ 1,651
Net Realized Gain (Loss) from Investments
and Foreign Currency Transactions (14) (5) 20 12
Net Change in Unrealized Appreciation
(Depreciation) of Investments
and Foreign Currency -- -- 376 (116)
-------- -------- ------- -------
Net Increase in Net Assets from Operations 8,726 16,899 1,498 1,547
-------- -------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (6,204) (13,231) (605) (1,009)
Retail Class (459) (473) (497) (641)
Institutional II Class (2,077) (3,200) -- --
Net Capital Gains
Institutional Class -- -- -- (12)
Retail Class -- -- -- (13)
-------- -------- ------- -------
Total Distributions (8,740) (16,904) (1,102) (1,675)
-------- -------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 277,534 443,559 1,830 4,158
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- --
Shares Issued in Lieu of Cash Distributions 3 6 -- 11
Shares Redeemed (251,154) (492,896) (418) (1,437)
-------- -------- ------- -------
Total Institutional Class Share Transactions 26,383 (49,331) 1,412 2,732
-------- -------- ------- -------
Retail Class:
Shares Issued 47,577 23,822 1,344 30,973
Shares Issued in Lieu of Cash Distributions 356 474 497 654
Shares Redeemed (32,406) (19,380) (7,854) (8,554)
-------- -------- ------- -------
Total Retail Class Share Transactions 15,527 4,916 (6,013) 23,073
-------- -------- ------- -------
Institutional II Class:
Shares Issued 123,995 186,332 -- --
Shares Issued in Lieu of Cash Distributions -- -- -- --
Shares Redeemed (99,130) (170,056) -- --
-------- -------- ------- -------
Total Institutional II Class
Share Transactions 24,865 16,276 -- --
-------- -------- ------- -------
Increase (Decrease) in Net Assets from
Shareholder Transactions 66,775 (28,139) (4,601) 25,805
-------- -------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS 66,761 (28,144) (4,205) 25,677
-------- -------- ------- -------
NET ASSETS:
Beginning of period 303,093 331,237 44,500 18,823
-------- -------- ------- -------
End of period $369,854 $303,093 $40,295 $44,500
======== ======== ======= =======
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 277,534 443,559 182 416
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- --
Shares Issued in Lieu of Cash Distributions 3 6 -- 1
Shares Redeemed (251,154) (492,895) (41) (144)
-------- -------- ------- -------
Total Institutional Class Share Transactions 26,383 (49,330) 141 273
-------- -------- ------- -------
Retail Class:
Shares Issued 47,577 23,822 134 3,093
Shares Issued in Lieu of Cash Distributions 356 474 50 65
Shares Redeemed (32,406) (19,380) (784) (855)
-------- -------- ------- -------
Total Retail Class Share Transactions 15,527 4,916 (600) 2,303
-------- -------- ------- -------
Institutional II Class:
Shares Issued 123,995 186,332 -- --
Shares Issued in Lieu of Cash Distributions -- -- -- --
Shares Redeemed (99,130) (170,056) -- --
-------- -------- ------- -------
Total Institutional II Class
Share Transactions 24,865 16,276 -- --
-------- -------- ------- -------
Net Increase (Decrease) in
Share Transactions 66,775 (28,138) (459) 2,576
======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
MARYLAND PENNSYLVANIA
TAX-FREE TAX-FREE
PORTFOLIO(1) PORTFOLIO(1)
------------------------ ------------------------
5/1/97 11/18/96 5/1/97 11/18/96
to 10/31/97 to 4/30/97 to 10/31/97 to 4/30/97
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 2,237 $ 1,872 $ 582 $ 502
Net Realized Gain (Loss) from Investments
and Foreign Currency Transactions 127 469 11 92
Net Change in Unrealized Appreciation
(Depreciation) of Investments
and Foreign Currency 2,695 (1,565) 738 (356)
-------- -------- -------- --------
Net Increase in Net Assets from Operations 5,059 776 1,331 238
-------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (1,909) (1,787) (544) (494)
Retail Class (328) (85) (38) (8)
Institutional II Class -- -- -- --
Net Capital Gains
Institutional Class -- -- -- --
Retail Class -- -- -- --
-------- -------- -------- --------
Total Distributions (2,237) (1,872) (582) (502)
-------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 7,820 4,262 1,468 2,248
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- 81,100 -- 22,508
Shares Issued in Lieu of Cash Distributions 14 -- 14 --
Shares Redeemed (5,696) (4,730) (1,805) (1,221)
-------- -------- -------- --------
Total Institutional Class Share Transactions 2,138 80,632 (323) 23,535
-------- -------- -------- --------
Retail Class:
Shares Issued 13,530 8,773 793 1,207
Shares Issued in Lieu of Cash Distributions 328 85 38 8
Shares Redeemed (1,909) (789) (40) (31)
-------- -------- -------- --------
Total Retail Class Share Transactions 11,949 8,069 791 1,184
-------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- --
Shares Redeemed -- -- -- --
-------- -------- -------- --------
Total Institutional II Class Share Transactions -- -- -- --
-------- -------- -------- --------
Increase (Decrease) in Net Assets from
Shareholder Transactions 14,087 88,701 468 24,719
-------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS 16,909 87,605 1,217 24,455
-------- -------- -------- --------
NET ASSETS:
Beginning of period 87,605 -- 24,455 --
-------- -------- -------- --------
End of period $104,514 $ 87,605 $ 25,672 $ 24,455
======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 772 436 144 218
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- 8,110 -- 2,251
Shares Issued in Lieu of Cash Distributions 1 -- 1 --
Shares Redeemed (565) (478) (178) (123)
-------- -------- -------- --------
Total Institutional Class Share Transactions 208 8,068 (33) 2,346
-------- -------- -------- --------
Retail Class:
Shares Issued 1,338 883 78 121
Shares Issued in Lieu of Cash Distributions 32 8 4 1
Shares Redeemed (188) (80) (4) (3)
-------- -------- -------- --------
Total Retail Class Share Transactions 1,182 811 78 119
-------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- --
Shares Redeemed -- -- -- --
-------- -------- -------- --------
Total Institutional II Class Share Transactions -- -- -- --
-------- -------- -------- --------
Net Increase (Decrease) in Share Transactions 1,390 8,879 45 2,465
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE
INCOME FIXED INCOME
PORTFOLIO PORTFOLIO(1)
------------------------ -----------------------
5/1/97 5/1/96 5/1/97 11/18/96
to 10/31/97 to 4/30/97 to 10/3197 to 4/30/97
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 8,063 $ 13,213 $ 2,361 $ 2,181
Net Realized Gain (Loss) from Investments
and Foreign Currency Transactions 2,261 (2,706) 291 (81)
Net Change in Unrealized Appreciation
(Depreciation) of Investments
and Foreign Currency 7,228 1,565 1,439 (1,200)
-------- -------- -------- --------
Net Increase in Net Assets from Operations 17,552 12,072 4,091 900
-------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (7,918) (12,965) (2,361) (2,181)
Retail Class (145) (249) -- --
Institutional II Class -- -- -- --
Net Capital Gains
Institutional Class -- -- -- --
Retail Class -- -- -- --
-------- -------- -------- --------
Total Distributions (8,063) (13,214) (2,361) (2,181)
-------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 30,167 36,737 6,867 4,653
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- 55,913 -- 78,230
Shares Issued in Lieu of Cash Distributions 5,039 1,652 11 --
Shares Redeemed (24,101) (31,143) (8,334) (5,276)
-------- -------- -------- --------
Total Institutional Class Share Transactions 11,105 63,159 (1,456) 77,607
-------- -------- -------- --------
Retail Class:
Shares Issued 1,944 2,111 -- --
Shares Issued in Lieu of Cash Distributions 144 249 -- --
Shares Redeemed (670) (2,455) -- --
-------- -------- -------- --------
Total Retail Class Share Transactions 1,418 (95) -- --
-------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- --
Shares Redeemed -- -- -- --
-------- -------- -------- --------
Total Institutional II Class Share Transactions -- -- -- --
-------- -------- -------- --------
Increase (Decrease) in Net Assets from
Shareholder Transactions 12,523 63,064 (1,456) 77,607
-------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS 22,012 61,922 274 76,326
-------- -------- -------- --------
NET ASSETS:
Beginning of period 247,068 185,146 76,326 --
-------- -------- -------- --------
End of period $269,080 $247,068 $ 76,600 $ 76,326
======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 2,993 3,712 689 499
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- 5,552 -- 7,823
Shares Issued in Lieu of Cash Distributions 501 169 1 --
Shares Redeemed (2,404) (3,161) (835) (535)
-------- -------- -------- --------
Total Institutional Class Share Transactions 1,090 6,272 (145) 7,787
-------- -------- -------- --------
Retail Class:
Shares Issued 191 212 -- --
Shares Issued in Lieu of Cash Distributions 14 25 -- --
Shares Redeemed (66) (246) -- --
-------- -------- -------- --------
Total Retail Class Share Transactions 139 (9) -- --
-------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- --
Shares Redeemed -- -- -- --
-------- -------- -------- --------
Total Institutional II Class Share Transactions -- -- -- --
-------- -------- -------- --------
Net Increase (Decrease) in Share Transactions 1,229 6,263 (145) 7,787
======== ======== ======== ========
<FN>
(1) Commenced operations on November 18, 1996.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
56 & 57
<PAGE>
Statement of Changes in Net Assets (unaudited)(continued)
OCTOBER 31, 1997 [LOGO OMITTED]
<TABLE>
<CAPTION>
EQUITY EQUITY
BALANCED INCOME INDEX
PORTFOLIO PORTFOLIO(1) PORTFOLIO(2)
------------------------ ------------------------ -----------
5/1/97 5/1/96 5/1/97 11/18/96 10/1/97
to 10/31/97 to 4/30/97 to 10/31/97 to 4/30/97 to 10/31/97
----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ 1,078 $ 2,709 $ 1,203 $ 922 $ 39
Net Realized Gain (Loss) from Investments
and Foreign Currency Transactions 5,523 6,028 3,328 6,425 (16)
Net Change in Unrealized Appreciation
(Depreciation)of Investments
and Foreign Currency 5,314 (1,398) 8,984 (1,090) (1,280)
-------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets
from Operations 11,915 7,339 13,515 6,257 (1,257)
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (993) (2,387) (1,194) (922) --
Retail Class (93) (118) (10) -- --
Institutional II Class -- -- -- -- --
Net Capital Gains
Institutional Class -- (4,424) -- -- --
Retail Class -- (203) -- -- --
-------- -------- -------- -------- --------
Total Distributions (1,086) (7,132) (1,204) (922) --
-------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 5,451 14,504 3,937 1,578 26,005
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- 80,587 --
Shares Issued in Lieu of Cash Distributions 945 4,943 7 -- --
Shares Redeemed (12,089) (44,855) (7,124) (3,553) (102)
-------- -------- -------- -------- --------
Total Institutional Class Share Transactions (5,693) (25,408) (3,180) 78,612 25,903
-------- -------- -------- -------- --------
Retail Class:
Shares Issued 4,615 3,804 1,930 -- --
Shares Issued in Lieu of Cash Distributions 93 321 10 -- --
Shares Redeemed (1,197) (1,329) (41) -- --
-------- -------- -------- -------- --------
Total Retail Class Share Transactions 3,511 2,796 1,899 -- --
-------- -------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- --
Shares Redeemed -- -- -- -- --
-------- -------- -------- -------- --------
Total Institutional II Class Share Transactions -- -- -- -- --
-------- -------- -------- -------- --------
Increase (Decrease) in Net Assets from
Shareholder Transactions (2,182) (22,612) (1,281) 78,612 25,903
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS 8,647 (22,405) 11,030 83,947 24,646
-------- -------- -------- -------- --------
NET ASSETS:
Beginning of period 83,151 105,556 83,947 -- --
-------- -------- -------- -------- --------
End of period $ 91,798 $ 83,151 $ 94,977 $ 83,947 $ 24,646
======== ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 422 1,290 331 151 2,599
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- 8,058 --
Shares Issued in Lieu of Cash Distributions 74 444 1 -- --
Shares Redeemed (966) (3,988) (594) (342) (11)
-------- -------- -------- -------- --------
Total Institutional Class Share Transactions (470) (2,254) (262) 7,867 2,588
-------- -------- -------- -------- --------
Retail Class:
Shares Issued 361 337 158 -- --
Shares Issued in Lieu of Cash Distributions 7 29 1 -- --
Shares Redeemed (95) (118) (3) -- --
-------- -------- -------- -------- --------
Total Retail Class Share Transactions 273 248 156 -- --
-------- -------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- --
Shares Redeemed -- -- -- -- --
-------- -------- -------- -------- --------
Total Institutional II Class Share Transactions -- -- -- -- --
-------- -------- -------- -------- --------
Net Increase (Decrease) in Share Transactions (197) (2,006) (106) 7,867 2,588
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
BLUE CHIP CAPITAL
EQUITY STOCK GROWTH
PORTFOLIO PORTFOLIO(1) PORTFOLIO
------------------------ ------------------------ ------------------------
5/1/97 5/1/96 5/1/97 11/18/96 5/1/97 5/1/96
to 10/31/97 to 4/30/97 to 10/31/97 to 4/30/97 to 10/31/97 to 4/30/97
----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ 324 $ 389 $ 92 $ 144 $ 21 $ 347
Net Realized Gain (Loss) from Investments
and Foreign Currency Transactions 283 236 3,898 3,537 4,105 3,560
Net Change in Unrealized Appreciation
(Depreciation)of Investments
and Foreign Currency 6,374 5,200 978 (240) 4,062 836
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets
from Operations 6,981 5,825 4,968 3,441 8,188 4,743
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (199) (326) (103) (127) -- (395)
Retail Class (83) (66) -- -- -- (44)
Institutional II Class -- -- -- -- -- --
Net Capital Gains
Institutional Class -- (19) -- -- -- (2,960)
Retail Class -- (4) -- -- -- (304)
-------- -------- -------- -------- -------- --------
Total Distributions (282) (415) (103) (127) -- (3,703)
-------- -------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 6,622 22,062 384 897 2,132 5,594
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- 43,067 -- --
Shares Issued in Lieu of Cash Distributions 107 87 1 -- -- 2,960
Shares Redeemed (1,576) (2,314) (5,023) (6,707) (9,114) (14,909)
-------- -------- -------- -------- -------- --------
Total Institutional Class Share Transactions 5,153 19,835 (4,638) 37,257 (6,982) (6,355)
-------- -------- -------- -------- -------- --------
Retail Class:
Shares Issued 15,108 12,987 -- -- 4,015 3,797
Shares Issued in Lieu of Cash Distributions 82 70 -- -- -- 348
Shares Redeemed (1,799) (857) -- -- (672) (736)
-------- -------- -------- -------- -------- --------
Total Retail Class Share Transactions 13,391 12,200 -- -- 3,343 3,409
-------- -------- -------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Institutional II Class Share Transactions -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Increase (Decrease) in Net Assets from
Shareholder Transactions 18,544 32,035 (4,638) 37,257 (3,639) (2,946)
-------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS 25,243 37,445 227 40,571 4,549 (1,906)
-------- -------- -------- -------- -------- --------
NET ASSETS:
Beginning of period 48,901 11,456 40,571 -- 39,765 41,671
-------- -------- -------- -------- -------- --------
End of period $ 74,144 $ 48,901 $ 40,798 $ 40,571 $ 44,314 $ 39,765
======== ======== ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 481 1,943 31 87 154 476
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- 4,307 -- --
Shares Issued in Lieu of Cash Distributions 8 7 -- -- -- 255
Shares Redeemed (116) (202) (411) (628) (662) (1,275)
-------- -------- -------- -------- -------- --------
Total Institutional Class Share Transactions 373 1,748 (380) 3,766 (508) (544)
-------- -------- -------- -------- -------- --------
Retail Class:
Shares Issued 1,086 1,135 -- -- 281 321
Shares Issued in Lieu of Cash Distributions 6 6 -- -- -- 30
Shares Redeemed (129) (74) -- -- (47) (63)
-------- -------- -------- -------- -------- --------
Total Retail Class Share Transactions 963 1,067 -- -- 234 288
-------- -------- -------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Institutional II Class Share Transactions -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Share Transactions 1,336 2,815 (380) 3,766 (274) (256)
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MID-CAP SPECIAL INTERNATIONAL
EQUITY EQUITY EQUITY
PORTFOLIO(1) PORTFOLIO PORTFOLIO
------------------------ ------------------------ ------------------------
5/1/97 11/18/96 5/1/97 5/1/96 5/1/97 5/1/96
to 10/31/97 to 4/30/97 to 10/31/97 to 4/30/97 to 10/31/97 to 4/30/97
----------- ---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ 77 $ 78 $ (71) $ (29) $ 35 $ 12
Net Realized Gain (Loss) from Investments
and Foreign Currency Transactions 1,997 391 3,736 2,092 323 (3)
Net Change in Unrealized Appreciation
(Depreciation)of Investments
and Foreign Currency 4,093 (72) 1,458 (8,396) (97) (192)
------- ------- ------- ------- ------- -------
Net Increase (Decrease) in Net Assets
from Operations 6,167 397 5,123 (6,333) 261 (183)
------- ------- ------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (70) (72) -- -- -- --
Retail Class -- -- -- -- -- --
Institutional II Class -- -- -- -- -- --
Net Capital Gains
Institutional Class -- -- -- (4,563) -- (63)
Retail Class -- -- -- (286) -- (2)
------- ------- ------- ------- ------- -------
Total Distributions (70) (72) -- (4,849) -- (65)
------- ------- ------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 14,201 3,539 1,949 8,165 265 446
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- 26,212 -- -- -- --
Shares Issued in Lieu of Cash Distributions 15 11 -- 4,563 -- 63
Shares Redeemed (3,491) (3,028) (2,560) (17,980) (1,983) --
------- ------- ------- ------- ------- -------
Total Institutional Class Share Transactions 10,725 26,734 (611) (5,252) (1,718) 509
------- ------- ------- ------- ------- -------
Retail Class:
Shares Issued -- -- 422 1,732 432 393
Shares Issued in Lieu of Cash Distributions -- -- -- 286 -- 2
Shares Redeemed -- -- (167) (384) (38) (18)
------- ------- ------- ------- ------- -------
Total Retail Class Share Transactions -- -- 255 1,634 394 377
------- ------- ------- ------- ------- -------
Institutional II Class:
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total Institutional II Class Share Transactions -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Increase (Decrease) in Net Assets from
Shareholder Transactions 10,725 26,734 (356) (3,618) (1,324) 886
------- ------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS 16,822 27,059 4,767 (14,800) (1,063) 638
------- ------- ------- ------- ------- -------
NET ASSETS:
Beginning of period 27,059 -- 18,821 33,621 4,209 3,571
------- ------- ------- ------- ------- -------
End of period $43,881 $27,059 $23,588 $18,821 $ 3,146 $ 4,209
======= ======= ======= ======= ======= =======
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 1,154 341 179 678 23 43
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- 2,621 -- -- -- --
Shares Issued in Lieu of Cash Distributions 1 1 -- 457 -- 6
Shares Redeemed (300) (302) (240) (1,340) (168) --
------- ------- ------- ------- ------- -------
Total Institutional Class Share Transactions 855 2,661 (61) (205) (145) 49
------- ------- ------- ------- ------- -------
Retail Class:
Shares Issued -- -- 39 134 38 37
Shares Issued in Lieu of Cash Distributions -- -- -- 28 -- 1
Shares Redeemed -- -- (16) (36) (3) (2)
------- ------- ------- ------- ------- -------
Total Retail Class Share Transactions -- -- 23 126 35 36
------- ------- ------- ------- ------- -------
Institutional II Class:
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total Institutional II Class Share Transactions -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Net Increase (Decrease) in Share Transactions 855 2,661 (38) (79) (110) 85
======= ======= ======= ======= ======= =======
<FN>
(1) Commenced operations on November 18, 1996.
(2) Commenced operations on October 1, 1997.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
58 & 59
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1997 (UNAUDITED) AND THE PERIODS ENDED APRIL 30,
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET ASSET NET ASSETS
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL VALUE, END TOTAL END OF
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN(A) PERIOD (000)
====================================================================================================================================
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1997* $1.00 0.03 -- (0.03) -- $1.00 5.57% $ 272,137
1997 1.00 0.05 -- (0.05) -- 1.00 5.36 318,919
1996 1.00 0.06 -- (0.06) -- 1.00 5.78 348,343
1995 1.00 0.05 -- (0.05) -- 1.00 5.13 277,859
1994(1) 1.00 0.03 -- (0.03) -- 1.00 2.80 197,162
RETAIL CLASS
1997* $1.00 0.03 -- (0.03) -- $1.00 5.25% $ 159,387
1997 1.00 0.05 -- (0.05) -- 1.00 5.03 128,693
1996 1.00 0.05 -- (0.05) -- 1.00 5.44 104,703
1995 1.00 0.05 -- (0.05) -- 1.00 4.69 51,081
1994(2) 1.00 -- -- -- -- 1.00 0.42 12
INSTITUTIONAL II CLASS
1997* $1.00 0.03 -- (0.03) -- $1.00 5.47% $ 100,172
1997 1.00 0.05 -- (0.05) -- 1.00 5.25 62,960
1996(3) 1.00 0.04 -- (0.04) -- 1.00 4.33 28,790
- -------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1997* $1.00 0.02 -- (0.02) -- $1.00 3.54% $ 106,562
1997 1.00 0.03 -- (0.03) -- 1.00 3.29 69,091
1996 1.00 0.04 -- (0.04) -- 1.00 3.61 74,739
1995 1.00 0.03 -- (0.03) -- 1.00 3.24 64,112
1994(1) 1.00 0.02 -- (0.02) -- 1.00 1.87 66,692
RETAIL CLASS
1997* $1.00 0.02 -- (0.02) -- $1.00 3.22% $ 25,593
1997 1.00 0.03 -- (0.03) -- 1.00 3.01 16,495
1996 1.00 0.03 -- (0.03) -- 1.00 3.53 16,179
1995 1.00 0.03 -- (0.03) -- 1.00 2.74 2,491
1994(4) 1.00 -- -- -- -- 1.00 0.20 50
INSTITUTIONAL II CLASS
1997* $1.00 0.02 -- (0.02) -- $1.00 3.44% $ 20,549
1997 1.00 0.03 -- (0.03) -- 1.00 3.19 16,727
1996(5) 1.00 0.02 -- (0.02) -- 1.00 2.62 9,387
- --------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
1997* $1.00 0.03 -- (0.03) -- $1.00 5.43% $1,167,570
1997 1.00 0.05 -- (0.05) -- 1.00 5.22 1,250,778
1996 1.00 0.05 -- (0.05) -- 1.00 5.64 1,043,758
1995 1.00 0.05 -- (0.05) -- 1.00 5.00 651,113
1994(1) 1.00 0.03 -- (0.03) -- 1.00 2.70 271,437
RETAIL CLASS
1997*(21) $1.00 0.02 -- (0.02) -- $1.00 5.31% $ 7,804
INSTITUTIONAL II CLASS
1997* $1.00 0.03 -- (0.03) -- $1.00 5.33% $ 70,061
1997 1.00 0.05 -- (0.05) -- 1.00 5.12 37,284
1996(5) 1.00 0.04 -- (0.04) -- 1.00 4.11 17,027
</TABLE>
<TABLE>
<CAPTION>
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
EXPENSES INCOME NET ASSETS
TO AVERAGE TO AVERAGE (EXCLUDING
NET ASSETS NET ASSETS WAIVERS)
==========================================================
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
<S> <C> <C> <C>
INSTITUTIONAL CLASS
1997* 0.29% 5.43% 0.43%
1997 0.28 5.23 0.43
1996 0.25 5.62 0.44
1995 0.20 5.13 0.46
1994(1) 0.26* 3.16* 0.52*
RETAIL CLASS
1997* 0.60% 5.12% 0.83%
1997 0.59 4.92 0.83
1996 0.58 5.25 0.77
1995 0.45 4.88 0.97
1994(2) 1.16* 2.26* 592.55*
INSTITUTIONAL II CLASS
1997* 0.39% 5.33% 0.53%
1997 0.38 5.14 0.53
1996(3) 0.36* 5.37* 0.55*
- -------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1997* 0.29% 3.47% 0.45%
1997 0.28 3.23 0.44
1996 0.22 3.54 0.45
1995 0.22 3.21 0.47
1994(1) 0.35* 2.10* 0.53*
RETAIL CLASS
1997* 0.60% 3.17% 0.85%
1997 0.55 2.97 0.84
1996 0.34 3.33 0.90
1995 0.75 2.68 2.94
1994(4) 1.25* 1.20* 32.17*
INSTITUTIONAL II CLASS
1997* 0.39% 3.37% 0.55%
1997 0.38 3.14 0.54
1996(5) 0.33* 3.35* 0.58*
- --------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
1997* 0.32% 5.31% 0.43%
1997 0.32 5.10 0.43
1996 0.31 5.45 0.44
1995 0.25 5.09 0.47
1994(1) 0.35* 3.03* 0.62*
RETAIL CLASS
1997*(21) 0.63% 5.06% 0.83%
INSTITUTIONAL II CLASS
1997* 0.42% 5.21% 0.53%
1997 0.42 5.01 0.53
1996(5) 0.41* 5.25* 0.56*
</TABLE>
60
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
<TABLE>
<CAPTION>
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET ASSET
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL VALUE, END TOTAL
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN(A)
========================================================================================================================
- ------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1997* $1.00 0.03 -- (0.03) -- $ 1.00 5.12%
1997 1.00 0.05 -- (0.05) -- 1.00 5.00
1996 1.00 0.05 -- (0.05) -- 1.00 5.32
1995 1.00 0.05 -- (0.05) -- 1.00 4.60
1994(1) 1.00 0.03 -- (0.03) -- 1.00 2.48
RETAIL CLASS
1997* $1.00 0.02 -- (0.02) -- $ 1.00 4.80%
1997 1.00 0.05 -- (0.05) -- 1.00 4.71
1996(6) 1.00 0.02 -- (0.02) -- 1.00 1.82
INSTITUTIONAL II CLASS
1997* $1.00 0.02 -- (0.02) -- $ 1.00 5.01%
1997 1.00 0.05 -- (0.05) -- 1.00 4.89
1996(5) 1.00 0.04 -- (0.04) -- 1.00 3.87
- -----------------------------
SHORT-TERM TREASURY PORTFOLIO
- -----------------------------
INSTITUTIONAL CLASS
1997* $ 9.96 0.27 0.10 (0.27) -- $10.06 3.74%+
1997 9.96 0.50 -- (0.49) (0.01) 9.96 5.13
1996(7) 10.00 0.06 (0.04) (0.06) -- 9.96 0.16
RETAIL CLASS
1997* $ 9.96 0.27 0.08 (0.26) -- $10.05 3.51%+
1997(8) 9.95 0.27 0.03 (0.28) (0.01) 9.96 3.39
- ---------------------------
MARYLAND TAX-FREE PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
1997* $ 9.87 0.24 0.31 (0.24) -- $10.18 5.57%+
1997(9) 10.00 0.22 (0.13) (0.22) -- 9.87 0.89
RETAIL CLASS
1997* $ 9.87 0.21 0.32 (0.22) -- $10.18 5.45%+
1997(10) 9.96 0.13 (0.07) (0.15) -- 9.87 0.63
- -------------------------------
PENNSYLVANIA TAX-FREE PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1997* $ 9.92 0.24 0.31 (0.24) -- $10.23 5.55%+
1997(9) 10.00 0.21 (0.08) (0.21) -- 9.92 1.32
RETAIL CLASS
1997* $ 9.92 0.22 0.30 (0.22) -- $10.22 5.32%+
1997(10) 10.01 0.13 (0.07) (0.15) -- 9.92 0.60
</TABLE>
<TABLE>
<CAPTION>
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS PORTFOLIO
END OF TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
==================================================================================
- ------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C>
1997* $252,297 0.37% 5.00% 0.43% --
1997 225,924 0.37 4.88 0.43 --
1996 275,259 0.36 5.18 0.45 --
1995 221,069 0.38 4.59 0.47 --
1994(1) 137,826 0.43* 2.80* 0.51* --
RETAIL CLASS
1997* $ 29,201 0.68% 4.69% 0.83% --
1997 13,673 0.64 4.62 0.83 --
1996(6) 8,758 0.55* 4.71* 0.86* --
INSTITUTIONAL II CLASS
1997* $ 88,356 0.47% 4.90% 0.53% --
1997 63,496 0.47 4.79 0.53 --
1996(5) 47,220 0.47* 4.98* 0.55* --
- -----------------------------
SHORT-TERM TREASURY PORTFOLIO
- -----------------------------
INSTITUTIONAL CLASS
1997* $ 23,176 0.53% 5.28% 0.57% 63.59%
1997 21,563 0.55 5.11 0.60 147.86
1996(7) 18,823 0.55* (0.55)* 0.60* --
RETAIL CLASS
1997* $ 17,119 0.78% 5.02% 1.06% 63.59%
1997(8) 22,937 0.67* 5.07* 0.91* 147.86
- ---------------------------
MARYLAND TAX-FREE PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
1997* $ 84,242 0.66% 4.68% 0.71% 7.34%
1997(9) 79,608 0.67* 4.95* 0.72* 11.13
RETAIL CLASS
1997* $ 20,272 0.91% 4.43% 1.11% 7.34%
1997(10) 7,997 0.91* 4.70* 1.10* 11.13
- -------------------------------
PENNSYLVANIA TAX-FREE PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1997* $ 23,661 0.60% 4.63% 0.72% 8.71%
1997(9) 23,278 0.63* 4.78* 0.76* 32.76
RETAIL CLASS
1997* $ 2,011 0.85% 4.39% 1.11% 8.71%
1997(10) 1,177 0.87* 4.65* 1.12* 32.76
<FN>
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
* ALL RATIOS AND TOTAL RETURN FOR THE PERIOD HAVE BEEN ANNUALIZED, EXCEPT
WHERE OTHERWISE NOTED.
(A) TOTAL RETURN FOR THE RETAIL CLASS DOES NOT INCLUDE THE ONE TIME
SALES CHARGE.
(B) AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL
YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
(1) COMMENCED OPERATIONS ON JUNE 14, 1993.
(2) COMMENCED OPERATIONS ON MARCH 2, 1994.
(3) COMMENCED OPERATIONS ON JULY 21, 1995.
(4) COMMENCED OPERATIONS ON MARCH 15, 1994.
(5) COMMENCED OPERATIONS ON JULY 28, 1995.
(6) COMMENCED OPERATIONS ON DECEMBER 15, 1995.
(7) COMMENCED OPERATIONS ON MARCH 20, 1996.
(8) COMMENCED OPERATIONS ON SEPTEMBER 9, 1996.
(9) COMMENCED OPERATIONS ON NOVEMBER 18, 1996.
(10) COMMENCED OPERATIONS ON JANUARY 2, 1997.
(11) COMMENCED OPERATIONS ON JULY 16, 1993.
(12) COMMENCED OPERATIONS ON APRIL 12, 1994.
(13) COMMENCED OPERATIONS ON MARCH 9, 1994.
(14) COMMENCED OPERATIONS ON MAY 9, 1997.
(15) COMMENCED OPERATIONS ON OCTOBER 1, 1997.
(16) COMMENCED OPERATIONS ON APRIL 1, 1996.
(17) COMMENCED OPERATIONS ON MAY 16, 1996.
(18) COMMENCED OPERATIONS ON JULY 13, 1995.
(19) COMMENCED OPERATIONS ON DECEMBER 30, 1994.
(20) COMMENCED OPERATIONS ON NOVEMBER 1, 1996.
(21) COMMENCED OPERATIONS ON JULY 7, 1997.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
61
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights(concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1997 (UNAUDITED) AND THE PERIODS ENDED APRIL 30,
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET ASSET NET ASSETS
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL VALUE, END TOTAL END OF
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN(A) PERIOD (000)
====================================================================================================================================
- ----------------
INCOME PORTFOLIO
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1997* $ 9.82 0.31 0.38 (0.31) -- $10.20 7.14%+ $263,384
1997 9.80 0.59 0.02 (0.59) -- 9.82 6.51 242,966
1996 9.60 0.61 0.20 (0.61) -- 9.80 8.46 180,962
1995 9.61 0.58 0.02 (0.58) (0.03) 9.60 6.53 66,441
1994(11) 10.00 0.38 (0.38) (0.38) (0.01) 9.61 (0.08) 54,289
RETAIL CLASS
1997* $9.94 0.30 0.38 (0.30) -- $10.32 6.93%+ $ 5,696
1997 9.91 0.59 0.01 (0.57) -- 9.94 6.32 4,102
1996 9.72 0.60 0.19 (0.60) -- 9.91 8.14 4,184
1995 9.62 0.55 0.05 (0.47) (0.03) 9.72 6.45 296
1994(12) 9.69 0.02 (0.06) (0.03) -- 9.62 (0.41) 30
- -----------------------------------
INTERMEDIATE FIXED INCOME PORTFOLIO
- -----------------------------------
INSTITUTIONAL CLASS
1997* $ 9.80 0.31 0.22 (0.31) -- $10.02 5.45%+ $ 76,600
1997(9) 10.00 0.28 (0.20) (0.28) -- 9.80 0.78 76,326
- ------------------
BALANCED PORTFOLIO
- ------------------
INSTITUTIONAL CLASS
1997* $11.43 0.16 1.54 (0.16) -- $12.97 14.88%+ $ 81,282
1997 11.38 0.33 0.53 (0.30) (0.51) 11.43 7.85 76,987
1996 10.04 0.34 1.71 (0.34) (0.37) 11.38 20.90 102,233
1995 10.16 0.33 0.03 (0.29) (0.19) 10.04 3.75 91,039
1994(11) 10.00 0.19 0.17 (0.19) (0.01) 10.16 3.56 88,208
RETAIL CLASS
1997* $11.40 0.13 1.55 (0.14) -- $12.94 14.79%+ $ 10,516
1997 11.35 0.28 0.56 (0.28) (0.51) 11.40 7.66 6,164
1996 10.04 0.31 1.68 (0.31) (0.37) 11.35 20.23 3,323
1995 10.15 0.27 0.05 (0.24) (0.19) 10.04 3.33 549
1994(13) 10.62 0.01 (0.43) (0.05) -- 10.15 (3.95) 166
- -----------------------
EQUITY INCOME PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
1997* $10.67 0.15 1.57 (0.15) -- $12.24 16.19%+ $ 93,072
1997(9) 10.00 0.12 0.67 (0.12) -- 10.67 7.88 83,947
RETAIL CLASS
1997*(14) $11.01 0.14 1.23 (0.15) -- $12.23 12.44%+ $ 1,905
- ----------------------
EQUITY INDEX PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1997*(15) $10.00 0.02 (0.50) -- -- $ 9.52 (4.80)%+ $ 24,646
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1997* $12.39 0.07 1.64 (0.06) -- $14.04 13.84%+ $ 45,677
1997 10.12 0.17 2.28 (0.17) (0.01) 12.39 24.41 35,690
1996(16) 10.00 -- 0.12 -- -- 10.12 1.20 11,456
RETAIL CLASS
1997* $12.38 0.05 1.64 (0.05) -- $14.02 13.65%+ $ 28,467
1997(17) 10.33 0.16 2.06 (0.16) (0.01) 12.38 21.74 13,211
</TABLE>
<TABLE>
<CAPTION>
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
EXPENSES INCOME NET ASSETS PORTFOLIO AVERAGE
TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER COMMISSION
NET ASSETS NET ASSETS WAIVERS) RATE RATE(B)
=================================================================================
- ----------------
INCOME PORTFOLIO
- ----------------
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1997* 0.69% 6.17% 0.69% 101.74% --
1997 0.68 6.19 0.68 271.60 --
1996 0.73 6.00 0.73 107.33 --
1995 0.74 6.15 0.74 73.00 --
1994(11) 0.77* 4.90* 0.77* 20.00 --
RETAIL CLASS
1997* 0.94% 5.92% 1.14% 101.74% --
1997 0.89 5.96 1.09 271.60 --
1996 1.02 5.54 1.37 107.33 --
1995 1.23 5.66 27.63 73.00 --
1994(12) 1.72* 3.95* 55.35* 20.00 --
- -----------------------------------
INTERMEDIATE FIXED INCOME PORTFOLIO
- -----------------------------------
INSTITUTIONAL CLASS
1997* 0.67% 6.13% 0.82% 24.10% --
1997(9) 0.68* 5.55* 0.83* 17.18 --
- ------------------
BALANCED PORTFOLIO
- ------------------
INSTITUTIONAL CLASS
1997* 0.75% 2.45% 0.75% 35.79% $.0651
1997 0.74 2.79 0.74 124.22 .0673
1996 0.75 3.19 0.75 107.56 --
1995 0.77 3.32 0.77 81.00 --
1994(11) 0.81* 2.41* 0.81* 37.00 --
RETAIL CLASS
1997* 1.00% 2.18% 1.30% 35.79% .0651
1997 0.96 2.56 1.19 124.22 .0673
1996 1.09 2.51 1.55 107.56 --
1995 1.26 2.83 5.80 81.00 --
1994(13) 1.86* 1.36* 15.08* 37.00 --
- -----------------------
EQUITY INCOME PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
1997* 0.81% 2.55% 0.91% 16.34% .0700
1997(9) 0.83* 2.47* 0.93* 34.38 .0689
RETAIL CLASS
1997*(14) 1.03% 2.31% 1.40% 16.34% .0700
- ----------------------
EQUITY INDEX PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1997*(15) 0.19% 1.93% 0.33% 2.84% .0300
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1997* 0.79% 1.09% 0.85% 12.22% .0700
1997 0.70 1.55 0.90 46.91 .0727
1996(16) 0.65* 1.52* 1.38* 0.97 --
RETAIL CLASS
1997* 1.04% 0.81% 1.49% 12.22% .0700
1997(17) 0.86* 1.29* 1.25* 46.91 .0727
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET ASSET NET ASSETS
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL VALUE, END TOTAL END OF
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN(A) PERIOD (000)
================================================================================================================================
- ---------------
STOCK PORTFOLIO
- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1997* $10.77 0.03 1.28 (0.03) -- $12.05 12.15%+ $40,798
1997(9) 10.00 0.03 0.77 (0.03) -- 10.77 8.04 40,571
- ------------------------
CAPITAL GROWTH PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1997* $11.92 0.01 2.55 -- -- $14.48 21.48%+ $34,154
1997 11.60 0.11 1.41 (0.14) (1.06) 11.92 13.46 34,170
1996 10.20 0.16 2.17 (0.16) (0.77) 11.60 23.62 39,560
1995 10.19 0.14 0.16 (0.11) (0.18) 10.20 3.15 41,170
1994(11) 10.00 0.06 0.21 (0.03) (0.05) 10.19 2.66 52,233
RETAIL CLASS
1997* $11.87 (0.01) 2.55 -- -- $14.41 21.40%+ $10,160
1997 11.56 0.09 1.41 (0.13) (1.06) 11.87 13.39 5,595
1996 10.18 0.12 2.15 (0.12) (0.77) 11.56 23.24 2,111
1995 10.18 0.08 0.18 (0.08) (0.18) 10.18 2.74 404
1994(13) 10.89 -- (0.71) -- -- 10.18 (6.52) 87
- ------------------------
MID-CAP EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1997* $10.17 0.03 2.31 (0.03) -- $12.48 22.98%+ $43,881
1997(9) 10.00 0.03 0.17 (0.03) -- 10.17 1.98 27,059
- ------------------------
SPECIAL EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1997* $ 8.53 (0.03) 2.38 -- -- $10.88 27.55%+ $21,965
1997 14.72 (0.01) (2.97) -- (3.21) 8.53 (23.43) 17,746
1996(18) 10.00 0.09 4.72 (0.09) -- 14.72 48.34 33,621
RETAIL CLASS
1997* $ 8.53 (0.04) 2.37 -- -- $10.86 27.32%+ $ 1,623
1997(17) 15.47 (0.01) (3.72) -- (3.21) 8.53 (27.14) 1,075
- ------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1997* $10.45 0.02 0.30 -- -- $10.77 3.06%+ $ 2,386
1997 11.23 0.05 (0.63) -- (0.20) 10.45 (5.22) 3,836
1996 10.13 0.19 1.37 (0.23) (0.23) 11.23 15.66 3,571
1995(19) 10.00 0.03 0.10 -- -- 10.13 1.30 2,940
RETAIL CLASS
1997* $10.44 0.03 0.28 -- -- $10.75 2.97%+ $ 760
1997(20) 10.63 0.01 -- -- (0.20) 10.44 (0.15) 373
</TABLE>
<TABLE>
<CAPTION>
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
EXPENSES INCOME NET ASSETS PORTFOLIO AVERAGE
TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER COMMISSION
NET ASSETS NET ASSETS WAIVERS) RATE RATE(B)
=================================================================================
- ---------------
STOCK PORTFOLIO
- ---------------
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1997* 0.89% 0.42% 0.94% 48.49% $.0685
1997(9) 0.90* 0.76* 0.95* 83.17 .0720
- ------------------------
CAPITAL GROWTH PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1997* 0.84% 0.14% 0.84% 94.04% .0682
1997 0.39 0.92 0.85 246.14 .0692
1996 0.24 1.26 0.84 578.57 --
1995 0.74 1.35 0.85 182.00 --
1994(11) 0.87* 0.78* 0.87* 41.00 --
RETAIL CLASS
1997* 1.09% (0.12)% 1.39% 94.04% .0682
1997 0.56 0.74 1.30 246.14 .0692
1996 0.50 1.05 1.65 578.57 --
1995 1.23 0.86 9.73 182.00 --
1994(13) 1.92* (0.27)* 30.78* 41.00 --
- ------------------------
MID-CAP EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1997* 0.91% 0.48% 0.96% 20.86% .0696
1997(9) 0.90* 0.65* 0.95* 14.74 .0715
- ------------------------
SPECIAL EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1997* 1.01% (0.59)% 1.01% 209.46% .0660
1997 0.95 (0.12) 0.95 704.41 .0678
1996(18) 0.91* 0.60* 0.91* 286.80 --
RETAIL CLASS
1997* 1.26% (0.84)% 1.56% 209.46% .0660
1997(17) 1.11* (0.13)* 1.21* 704.41 .0678
- ------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1997* 1.55% 1.21% 1.99% 51.33% .0389
1997 1.55 0.33 1.91 26.65 .0381
1996 1.55 0.15 2.96 37.16 --
1995(19) 1.55* 0.97* 5.35* 2.00 --
RETAIL CLASS
1997* 1.55% 0.80% 2.45% 51.33% .0389
1997(20) 1.77* 0.16* 2.50* 26.65 .0381
<FN>
+ RETURNS ARE FOR THE PERIOD INDICATED, AND HAVE NOT BEEN ANNUALIZED.
* ALL RATIOS AND TOTAL RETURN FOR THE PERIOD HAVE BEEN ANNUALIZED, EXCEPT
WHERE OTHERWISE NOTED.
(A) TOTAL RETURN FOR THE RETAIL CLASS DOES NOT INCLUDE THE ONE TIME SALES CHARGE.
(B) AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
(1) COMMENCED OPERATIONS ON JUNE 14, 1993.
(2) COMMENCED OPERATIONS ON MARCH 2, 1994.
(3) COMMENCED OPERATIONS ON JULY 21, 1995.
(4) COMMENCED OPERATIONS ON MARCH 15, 1994.
(5) COMMENCED OPERATIONS ON JULY 28, 1995.
(6) COMMENCED OPERATIONS ON DECEMBER 15, 1995.
(7) COMMENCED OPERATIONS ON MARCH 20, 1996.
(8) COMMENCED OPERATIONS ON SEPTEMBER 9, 1996.
(9) COMMENCED OPERATIONS ON NOVEMBER 18, 1996.
(10) COMMENCED OPERATIONS ON JANUARY 2, 1997.
(11) COMMENCED OPERATIONS ON JULY 16, 1993.
(12) COMMENCED OPERATIONS ON APRIL 12, 1994.
(13) COMMENCED OPERATIONS ON MARCH 9, 1994.
(14) COMMENCED OPERATIONS ON MAY 9, 1997.
(15) COMMENCED OPERATIONS ON OCTOBER 1, 1997.
(16) COMMENCED OPERATIONS ON APRIL 1, 1996.
(17) COMMENCED OPERATIONS ON MAY 16, 1996.
(18) COMMENCED OPERATIONS ON JULY 13, 1995.
(19) COMMENCED OPERATIONS ON DECEMBER 30, 1994.
(20) COMMENCED OPERATIONS ON NOVEMBER 1, 1996.
(21) COMMENCED OPERATIONS ON JULY 7, 1997.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
63
<PAGE>
Notes to Financial Statements
1. Organization
ARK Funds (the "Fund") is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company
organized as a Massachusetts business trust pursuant to a Declaration of Trust
dated October 22, 1992, and amended and restated on March 19, 1993.
The Fund consists of eighteen Portfolios: Money Market Portfolio,
Tax-Free Money Market Portfolio, U.S. Government Money Market Portfolio, U.S.
Treasury Money Market Portfolio, Short-Term Treasury Portfolio, Maryland
Tax-Free Portfolio, Pennsylvania Tax-Free Portfolio, Income Portfolio,
Intermediate Fixed Income Portfolio, Balanced Portfolio (formerly Growth and
Income Portfolio,) Equity Income Portfolio, Equity Index Portfolio, Blue Chip
Equity Portfolio, Stock Portfolio, Capital Growth Portfolio, Mid-Cap Equity
Portfolio, Special Equity Portfolio and International Equity Portfolio
(individually a "Portfolio" and collectively the "Portfolios"). The Fund may
issue an unlimited number of shares of each of its Portfolios.
Each Portfolio (with the exception of the Intermediate Fixed Income
Portfolio, Mid-Cap Equity Portfolio and the Stock Portfolio) offers both
Institutional and Retail Class shares. In addition, each money market Portfolio
offers Institutional II Class shares. Institutional Class shares were originally
offered with the commencement of each Portfolio's operations. Retail Class
shares commenced in April 1994 for the Income Portfolio, in March 1994 for the
Tax-Free Money Market Portfolio, Money Market Portfolio, Balanced Portfolio and
Capital Growth Portfolio, in December 1995 for the U.S. Treasury Money Market
Portfolio, in May 1996 for the Blue Chip Equity Portfolio and Special Equity
Portfolio, in September 1996 for the Short-Term Treasury Portfolio, in November
1996 for the International Equity Portfolio, in May 1997 for the Equity Income
Portfolio and in July 1997 for the U.S. Government Money Market Portfolio.
Institutional II Class shares commenced in July 1995 for the U.S. Treasury Money
Market Portfolio, U.S. Government Money Market Portfolio, Money Market Portfolio
and Tax-Free Money Market Portfolio. Each class of shares has equal rights as to
earnings, assets and voting privileges, except that each class bears different
distribution and shareholder service expenses. Each class of shares has
exclusive voting rights with respect to matters that affect just that class.
2. Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported therein. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the net assets
of the Portfolios.
The following is a summary of significant accounting policies followed
by the Portfolios.
SECURITY VALUATION - Securities listed on a securities exchange for
which market quotations are readily available are valued at the last reported
sale price on the principal exchange on which they are traded on the valuation
date or, if there is no such reported sale on the valuation date, at the most
recently quoted bid price. Unlisted securities for which market quotations are
readily available are valued at the most recently quoted bid price. Debt
obligations exceeding sixty days to maturity for which market quotations are
readily available are valued at the most recently quoted bid price. Debt
obligations with sixty days or less to maturity may be valued at their amortized
cost.
64
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
When market quotations are not readily available, securities are valued
at fair value as determined in good faith under procedures established and
approved by the Board of Trustees. Securities of the Special Equity Portfolio
valued in good faith by the Board of Trustees amounted to $41,667 (.2% of net
assets) and have been noted in the Statement of Net Assets.
Investment securities held by the money market Portfolios are stated at
their amortized cost which approximates market value. Under the amortized cost
method, any discount or premium is amortized ratably to the maturity of the
security and is included in interest income.
INCOME TAXES - It is the intention of each Portfolio to qualify as a
regulated investment company and to distribute all of its taxable income.
Accordingly, no provision for federal income taxes is considered necessary.
The International Equity Portfolio may be subject to taxes imposed by
countries in which it invests with respect to its investments in issuers
existing or operating in such countries. Such taxes are generally based on
either income earned or repatriated. The International Equity Portfolio accrues
such taxes when the related income is earned.
NET ASSET VALUE PER SHARE - The net asset value per share of each class
of each Portfolio is calculated each business day. It is computed by dividing
the assets of each class of the Portfolio, less the class-related liabilities,
by the number of outstanding shares of each class of the Portfolio.
CLASSES - Class-specific expenses are borne by that class. Income,
expenses, and realized and unrealized gains/losses are allocated to the
respective classes on the basis of relative daily net assets.
ORGANIZATIONAL COSTS - All organizational costs associated with the
start-up of the Portfolios are being amortized on a straight-line basis over a
period of sixty months. If any or all of the shares representing initial capital
of a Portfolio are redeemed by any holder thereof prior to the end of the
amortization period, the proceeds will be reduced by the unamortized
organization cost balance in the same proportion as the number of shares
redeemed bears to the initial shares outstanding immediately preceding the
redemption.
REPURCHASE AGREEMENTS - Securities pledged as collateral for repurchase
agreements are held by the custodian bank until maturity of the repurchase
agreements. Provisions of the repurchase agreements and procedures adopted by
the Board of Trustees require that the market value of the collateral, including
accrued interest thereon, is sufficient in the event of default by the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding, realization of
the collateral by the Fund may be delayed or limited.
SHORT SALES - The Portfolios may sell a security that they own "short
against the box" in anticipation of a decline in the market value of that
security. As collateral for this transaction, the Portfolio must deposit liquid
securities with the broker-dealer through which it made the short sale. A gain,
limited to the price at which the Portfolio sold the security short, or a loss,
the difference between the proceeds received and the market value of the
security, will be recognized upon termination of the short sale.
DOLLAR ROLL TRANSACTIONS - The Income Portfolio, Balanced Portfolio,
and Special Equity Portfolio may engage in dollar roll transactions with
65
<PAGE>
Notes to Financial Statements (continued)
respect to mortgage-related securities issued by GNMA, Fannie Mae, and FHLMC. In
a dollar roll transaction, a Portfolio sells a mortgage-related security to a
financial institution, such as a bank or broker/dealer, and simultaneously
agrees to repurchase a substantially similar (i.e., same type, coupon, and
maturity) security from the institution at a later date at an agreed upon price.
The mortgage-related securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools of
mortgages with different prepayment histories.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS - Each Portfolio may
purchase securities on a "when-issued" basis and may purchase or sell securities
on a "forward commitment" basis. These transactions, which involve a commitment
by a Portfolio to purchase or sell particular securities with payment and
delivery taking place at a future date (perhaps one or two months later), permit
the Portfolio to lock in a price or yield on a security it owns or intends to
purchase, regardless of future changes in interest rates. When-issued and
forward commitment transactions involve the risk, however, that the yield
obtained in a transaction (and therefore the value of the security) may be less
favorable than the yield available in the market when the securities delivery
takes place. A Portfolio is required to hold and maintain in a segregated
account until the settlement date cash, U.S. Government securities or liquid,
high grade debt obligations in an amount sufficient to meet the purchase price.
No Portfolio intends to engage in when-issued purchases and forward commitments
for speculative purposes.
FOREIGN CURRENCY TRANSLATION - The books and records of the
International Equity Portfolio are maintained in U.S. dollars. Foreign currency
amounts are translated into U.S. dollars on the following basis: (i) market
value of investment securities, other assets and liabilities at the current rate
of exchange; and (ii) purchases and sales of investment securities, income and
expenses at the relevant rates of exchange prevailing on the respective dates of
such transactions.
For foreign equity securities, the International Equity Portfolio does
not isolate that portion of gains and losses on investments in securities that
is due to changes in foreign exchange rates from that which is due to changes in
market prices of such securities. The International Equity Portfolio does
isolate the effect of fluctuations in foreign currency rates when determining
the gain or loss upon sale or maturity of foreign currency denominated debt
obligations in accordance with Federal income tax regulations. Such amounts are
categorized as foreign currency gain or loss for both financial reporting and
income tax reporting purposes.
The International Equity Portfolio reports gains and losses on foreign
currency-related transactions as realized and unrealized gains and losses for
financial reporting purposes, whereas such gains and losses, to the extent
realized, are treated as ordinary income or loss for federal income tax
purposes.
FORWARD FOREIGN CURRENCY CONTRACTS - The International Equity Portfolio
may enter into forward foreign currency contracts as hedges against specific
transactions or portfolio positions.
66
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
Such contracts protect the value of the Portfolio's investment
securities against a decline in the value of currency, but do not eliminate
fluctuations in the underlying prices of the securities. They simply establish
an exchange rate at a future date. Also, although such contracts tend to
minimize the risk of loss due to a decline in the value of a hedged currency, at
the same time they tend to limit any potential gain that might be realized
should the value of such foreign currency increase. In addition, if the
counterparty to the contract fails to deliver under the terms of the contract,
realization of any gains or losses could be delayed or limited.
All commitments are "marked-to-market" daily at the applicable foreign
exchange rate, and any resulting unrealized gains or losses are recorded
currently. The Portfolio realizes gains or losses at the time forward contracts
are extinguished, except that gains or losses on certain open contracts are
required to be recognized for U.S. federal income tax purposes at the close of
the Portfolio's taxable year and are generally treated as ordinary income for
such purposes.
DISTRIBUTIONS - Dividends from net investment income are declared daily
and paid monthly for each money market Portfolio. The Short-Term Treasury
Portfolio, Income Portfolio, Intermediate Fixed Income Portfolio, Maryland
Tax-Free Portfolio, Pennsylvania Tax-Free Portfolio and Equity Income Portfolio
declare and pay dividends monthly, the Balanced Portfolio, Blue Chip Equity
Portfolio, Mid-Cap Equity Portfolio, Stock Portfolio and Equity Index Portfolio
declare and pay dividends quarterly, and the Capital Growth Portfolio, Special
Equity Portfolio and International Equity Portfolio declare and pay dividends
annually from net investment income. Distributions from net capital gains, if
any, are declared and paid at least annually by each Portfolio.
Distributions from net investment income and net realized capital gains
are determined in accordance with U.S. federal income tax regulations, which may
differ from those amounts determined under generally accepted accounting
principles. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, they are charged or
credited to paid-in capital in the period that the difference arises.
OTHER - Security transactions are accounted for on the date the
security is purchased or sold (trade date). Net realized capital gains and
losses on the sale of investment securities are determined using the identified
cost method with the exception of the money market Portfolios, for which
original issue discounts and purchase premiums on securities held by the
Portfolios are accreted and amortized ratably to maturity using the effective
interest method. Dividend income is recognized on the ex-dividend date and
interest income is recognized using the accrual method.
3. Investment Advisory and Administrative
Fees and Other Transactions with Affiliates
Allied Investment Advisors, Inc. is the investment adviser to each of the
Portfolios, with the exception of the International Equity Portfolio, which is
advised by AIB Investment Managers Limited ("AIB I.M."). Allied Investment
Advisors, Inc. and AIB I.M. are affiliates of FMB Trust Company, N.A. Pursuant
to an investment advisory contract on
67
<PAGE>
Notes to Financial Statements (continued)
behalf of each Portfolio, Allied Investment Advisors, Inc. and AIB I.M. (in the
case of the International Equity Portfolio) are entitled to receive fees for
their advisory services at the annual rates shown in the following table based
on the average net assets of the Portfolio.
Portfolio Annual Rate
- -------- -----------
Money Market .25%
Tax-Free Money Market .25%
U.S. Government Money Market .25%
U.S. Treasury Money Market .25%
Short-Term Treasury .35%
Maryland Tax-Free .50%
Pennsylvania Tax-Free .50%
Income .50%
Intermediate Fixed Income .60%
Balanced .55%
Equity Income .70%
Equity Index .20%
Blue Chip Equity .60%
Stock .70%
Capital Growth .60%
Mid-Cap Equity .70%
Special Equity .60%
International Equity .80%
Allied Investment Advisors, Inc. and AIB I.M. have agreed to waive a
portion of their fees or reimburse expenses on certain Portfolios in order to
limit total operating expenses of such Portfolios. The waivers are voluntary and
may be discontinued at anytime.
SEI Investments-Fund Resources serves as administrator and transfer
agent for the Fund under an Administration Agreement and Transfer Agency
Agreement. SEI Investments-Fund Resources is entitled to receive an annual fee
of .13% of each Portfolio's average net assets, paid monthly, for services
performed under the agreement. SEI Investment-Fund Resources has voluntarily
agreed to waive a portion of its administrative fees on certain Portfolios in
order to limit total operating expenses of such Portfolios. The waiver is
voluntary and may be discontinued at any time. SEI Investments Distribution Co.
acts as distributor for the Fund pursuant to a General Agreement on behalf of
each Portfolio.
FMB Trust Company, N.A. serves as custodian to each of the
Portfolios.
4. Distribution Plan and Shareholder Services Plan
The Fund's Board of Trustees has adopted a Distribution Plan on behalf of the
Retail Class of each Portfolio and a Distribution and Service Plan on behalf of
the Institutional II Class of each money market Portfolio pursuant to Rule 12b-1
under the 1940 Act ("the Plan"). Under the Plan, SIDCO is entitled to a fee of
.75% of average net assets of the Retail and Institutional II Classes of each
Portfolio. However, the Trustees have authorized payment of a fee to SIDCO of
.25% of the average net assets of the Retail Class of each money market
Portfolio; .30% of average net assets of the Retail Class of the Income
Portfolio, Maryland Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio, .40%
of average net assets of the Retail Class of the Short-Term Treasury Portfolio,
Balanced Portfolio, Capital Growth Portfolio, Special Equity Portfolio,
International Equity Portfolio, and Equity Index Portfolio and .55% of average
net assets of the Retail Class of the Blue Chip Equity Portfolio, and .10% of
the average net assets of the Institutional II Class of each money market
Portfolio. SIDCO has voluntarily agreed to waive a portion of its fee on certain
Portfolios in order to limit total operating expenses of such Portfolios. The
waiver is voluntary and may be discontinued at any time.
68
<PAGE>
OCTOBER 31, 1997 [LOGO OMITTED]
In addition, the Board of Trustees has adopted a Shareholder Services
Plan on behalf of the Retail Class of the Portfolios to compensate qualified
recipients for individual shareholder services and account maintenance. The
recipients are paid a service fee at the annual rate of up to .25% of average
net assets of the Retail Class of each Portfolio or such lesser amount as may be
approved by the Trustees. Currently, the Trustees have approved a fee for
shareholder services of .15% of average net assets of the Retail Class of each
Portfolio.
5. Investment Transactions
The cost of securities purchased and the proceeds from the sale of securities,
other than short-term investments, during the period ended October 31, 1997,
were as follows:
------------------
Purchases Sales
Portfolio (000) (000)
- -------- ------------------
Short-Term Treasury $ 28,362 $ 25,104
Maryland Tax-Free 17,952 6,600
Pennsylvania Tax-Free 3,450 2,063
Income 267,038 246,959
Intermediate Fixed Income 17,527 20,426
Balanced 28,773 39,831
Equity Income 14,593 17,017
Equity Index 26,628 698
Blue Chip Equity 23,867 7,179
Stock 20,301 26,144
Capital Growth 39,765 44,268
Mid-Cap Equity 17,812 6,828
Special Equity 46,296 48,562
International Equity 1,731 2,699
For federal income tax purposes, securities owned at October 31, 1997
were not materially different from the amounts reported for financial reporting
purposes. The aggregate gross unrealized appreciation and depreciation based on
Federal tax cost of securities at October 31, 1997 for each Portfolio is as
follows:
Net
Unrealized
Appreciated Depreciated Appreciation/
Securities Securities (Depreciation)
Portfolio (000) (000) (000)
- -------- ----------- ----------- --------------
Short-Term Treasury $ 177 $ -- $ 177
Maryland Tax-Free 4,447 (28) 4,419
Pennsylvania Tax-Free 955 (11) 944
Income 7,517 (507) 7,010
Intermediate Fixed Income 1,625 (157) 1,468
Balanced 14,913 (1,204) 13,709
Equity Income 21,967 (374) 21,593
Equity Index 267 (1,547) (1,280)
Blue Chip Equity 12,737 (1,047) 11,690
Stock 12,692 (388) 12,304
Capital Growth 8,534 (696) 7,838
Mid-Cap Equity 12,055 (1,291) 10,764
Special Equity 1,602 (1,508) 94
International Equity 350 (250) 100
At April 30, 1997, the following Portfolios had capital loss carryforwards and
post-October losses:
Capital Loss Post
Carryforward October 31, 1996
Amount Expiration Deferred Losses
Portfolio (000) Date (000)
- -------- ------------ ---------- ----------------
Money Market $ -- -- $ 5
U.S. Government
Money Market -- -- 30
U.S. Treasury
Money Market 4 2005 1
Income 230 2003 --
784 2004 --
2,860 2005 --
Intermediate Fixed
Income -- -- 81
Special Equity -- -- 2,724
International Equity -- -- 18
6. Forward Foreign Currency Contracts
The International Equity Portfolio enters into forward foreign currency
contracts as hedges against portfolio positions. Such contracts, which protect
the value of the Portfolio's investment securities against a decline in the
value of currency, do not eliminate fluctuations in the underlying prices of the
securities. They simply establish an exchange rate at a future date. Also,
although such contracts tend to minimize the risk of loss due to a decline in
the value of a hedged currency, at the same time they tend to limit any
potential gain that might be realized should the value of such foreign currency
69
<PAGE>
Notes to Financial Statements (continued)
increase. The following forward foreign currency contracts were outstanding at
October 31, 1997:
INTERNATIONAL EQUITY PORTFOLIO:
Foreign Currency Sales:
Maturity Contracts to In Exchange Unrealized
Date Deliver For Depreciation
--------- -------------- ------------ ------------
01/28/97 GP 245,700 $ 400,000 $ (4,589)
01/28/97 JY 108,000,000 9,00,000 (9,629)
--------
$(14,218)
========
CURRENCY LEGEND
- ---------------
GP British Pounds
JY Japanese Yen
7. Concentration of Credit Risk
The Maryland Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio invest in
debt instruments of municipal issuers. Although these Portfolios monitor
investment concentration, the issuers' ability to meet their obligations may be
affected by economic developments in a specific state or region.
The Maryland Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio
invest in securities which include revenue bonds and general obligation bonds.
At October 31, 1997, the percentage of portfolio investments by each revenue
source was as follows:
Maryland Pennsylvania
Tax-Free Portfolio Tax-Free Portfolio
------------------- ------------------
Revenue Bonds:
Education 14% 18%
Health Care Bonds 9 14
Transportation Bonds 7 5
Utility Bonds 11 10
Housing Bonds 2 5
Pollution Control Bonds 0 0
Public Facility Bonds 7 2
Industrial Bonds 2 4
Other 6 7
General Obligations 42 35
---- ----
100% 100%
==== ====
8. Other Matters
Retail Class shares of the Income Portfolio, Maryland Tax-Free Portfolio and
Pennsylvania Tax-Free Portfolio are subject to a maximum sales charge of 4.50%
of the public offering price. Retail Class shares of the Balanced Portfolio,
Equity Income Portfolio, Equity Index Portfolio, Blue Chip Equity Portfolio,
Capital Growth Portfolio, Special Equity Portfolio and International Equity
Portfolio are subject to a maximum sales charge of 4.75% of the public offering
price. Effective March 1, 1994, sales loads were waived for all purchases of
Retail Class shares. The sales load waiver was in effect through September 30,
1997.
On October 1, 1997, the sales load waiver was discontinued and a sales
charge of 3.0% of the public offering price was implemented on purchases of the
Retail Class shares of the non-money market Portfolios, with the exception of
the Short-Term Treasury Portfolio. Shareholders who invested in the ARK Funds
prior to April 1, 1997 may continue to invest without payment of any sales
charges through December 31, 1997.
On November 7, 1997, the Board of Trustees of the Fund approved,
subject to shareholder approval, the reorganization of the Marketvest Funds and
Marketvest Funds, Inc. (collectively, "Marketvest Funds"). Under the terms of an
Agreement and Plan of Reorganization, the Fund would acquire all of the assets
and stated liabilities of the Marketvest Funds. The proposed reorganization is
expected to take place on or about March 13, 1998.
9. Shareholder Voting Results
Pursuant to a consent dated October 1, 1997, the sole shareholder of each class
of the Equity Index and Large Cap Value Portfolios approved (i) the Investment
Advisory Agreement between the Fund and Allied Investment Advisors, Inc. dated
May 1, 1993 and the Fee Schedule to such Agreement with respect to such
Portfolios; (ii) the Administration Agreement between the Fund and SEI
InvestmentsFund Resources dates November 1, 1995; (iii) the Distribution
Agreement between the Fund and SEI Investments Distribution Co. (formerly SEI
Financial Services Company) dated November 1, 1995; (iv) the form of
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act for the Retail Class
of each Portfolio; and (v) the form of Shareholder Services Plan for the Retail
Class of each Portfolio.
70
<PAGE>
Notes
71
<PAGE>
Notes
72
<PAGE>
<PAGE>
INVESTMENT ADVISERS
Allied Investment Advisors, Inc.
Baltimore, Maryland
AIB Investment Managers Limited
Dublin, Ireland
TRUSTEES
William H. Cowie, Jr.
David D. Downes
Charlotte R. Kerr
George K. Reynolds, III
Thomas Schweizer
ADMINISTRATOR
SEI Investments-Fund Resources
Oaks, Pennsylvania
DISTRIBUTOR
SEI Investments Distribution Co.
Oaks, Pennsylvania
LEGAL COUNSEL
Piper & Marbury, L.L.P.
Baltimore, Maryland
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Boston, Massachusetts
CUSTODIAN
FMB Trust Company, N.A.
Baltimore, Maryland
[Logo Omitted]
This material must be preceded or
accompanied by a current prospectus.
AK1031(97-12)
