[ARK FUNDS LOGO OMITTED]
ANNUAL REPORT APRIL 30, 1998
[PHOTO OF CITY OMITTED]
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TABLE OF CONTENTS
LETTER TO SHAREHOLDERS 1
ECONOMIC AND INVESTMENT REVIEW 2
THE ARK FUNDS FAMILY 4
EQUITY PORTFOLIOS MANAGEMENT
DISCUSSION AND ANALYSIS 6
FIXED INCOME PORTFOLIOS MANAGEMENT
DISCUSSION AND ANALYSIS 22
MONEY MARKET PORTFOLIOS MANAGEMENT
DISCUSSION AND ANALYSIS 32
INDEPENDENT AUDITORS' REPORT 36
STATEMENTS OF NET ASSETS 37
STATEMENTS OF OPERATIONS 92
STATEMENTS OF CHANGES IN NET ASSETS 96
FINANCIAL HIGHLIGHTS 100
NOTES TO FINANCIAL STATEMENTS 104
NOTICE TO SHAREHOLDERS 112
ABOUT THE COVER
Baltimore, Maryland, site of the Bromo Seltzer Tower, is but one "home" for the
ARK Funds. Throughout the past year, investors from across the Mid-Atlantic
region joined us as shareholders. Within our annual report we will show you
other landmarks from our "homes" across the region, as well as introduce you to
the individuals who drive our organization.
<PAGE>
April 30, 1998
DEAR ARK FUNDS SHAREHOLDER:
We are happy to report that it has been an exciting year filled with many
positive changes for the ARK Funds Family. The most significant news is the
successful completion of the merger of the Marketvest Funds with the ARK Funds.
Through this merger, ARK Funds assets grew 34.3% from $3.5 billion to $4.7
billion.
The merger also broadened the range of investment selections available to you.
Four new Portfolios were added to the ARK Funds Family: the Value Equity
Portfolio, the Short-Term Bond Portfolio (Institutional Class only), the U.S.
Government Bond Portfolio, and the International Equity Selection Portfolio,
which is a fund of funds.
In other product news, we have launched the Equity Index Portfolio and opened a
Retail Class of the Equity Income Portfolio. The ARK Funds Family currently
offers 21 Institutional Class Portfolios and 18 Retail Class Portfolios. The
ability to offer you a wide variety of investment choices enables us to help you
further diversify your portfolio, which may contribute to long-term investment
success.
Throughout the 12-month period ended April 30, 1998, ARK Funds reported overall
strong performance. We are proud to note that five of the Portfolios performed
exceptionally well and have been recognized for their healthy performance by the
industry ratings services.
Looking ahead, we plan to add a Class B of shares for six of our retail
Portfolios beginning in the summer of 1998. Unlike Class A shares, which have an
initial sales charge, Class B shares have a contingent deferred sales charge.
Many investors find that the flexibility of an alternative pricing option makes
it easier for them to invest for their future.
Also, in an effort to better communicate our investment philosophy and process
to our shareholders, ARK Funds portfolio managers will "go on the road" in the
coming year to present informative investment seminars about their specific
Portfolios and markets. We believe this effort will both increase shareholder
awareness and help us to further grow our assets under management by introducing
the ARK Funds to prospective shareholders.
We thank you for your confidence. As always, we are dedicated to helping you
reach your financial goals. We look forward to serving you well into the next
century.
Sincerely,
/S/ SIGNATURE
WILLIAM H. COWIE, JR.
CHAIRMAN OF THE BOARD
ARK FUNDS
1
<PAGE>
ECONOMIC AND INVESTMENT REVIEW
DEAR ARK INVESTOR:
As we begin the second quarter of 1998, the Dow Jones Industrial Average is
above 9000, and the S&P 500 is up 14% year-to-date, having just completed its
13th consecutive quarter of positive returns. Stocks have doubled over the past
three years, with investors enjoying gains of over 20% per year during this
period. In describing market performance, financial writers have stopped using
words such as "bliss" and "exuberant" and are now up to "utopia" and "nirvana."
Some are even debating whether or not to use a comma when the Dow reaches
10,000.
Although returns from fixed income securities seem to be unexciting when
compared with those from equities, bonds have also performed very well over the
past year. With the broad bond market (Lehman Brothers Aggregate Bond Index) up
more than 11% during this period of minimal inflation, real returns to investors
have been greater than 9%. In fact, over the past three years, real returns
(over inflation) from bonds have averaged more than 6% annually. Even the
"tortoise" has been winning the race against inflation!
Economic conditions have fueled the booming stock market, and the run of
favorable data is likely to continue. March 1998 ushered in the 85th consecutive
month of economic expansion, far surpassing the average post-World War II growth
cycle of 52 months. At the same time, inflation is virtually non-existent. As
measured by the CPI, price increases in 1997 were only 1.7% above the prior
year. This is the lowest rate of inflation at such a late stage of the business
cycle in 52 years.
Within this environment benefits have accrued to both corporate America and the
consumer. Profits, as measured by earnings per share for the S&P 500, have grown
at a double-digit rate for an unprecedented five consecutive years. With low
inflation, low unemployment, and favorable job growth, the consumer is
expressing the highest level of confidence in 28 years. All of this has provided
a solid underpinning to the equity market and given us a relatively stable bond
market.
2
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
[PHOTO OF JENNIFER LAMBDIN OMITTED]
JENNIFER W. LAMBDIN, CFA, IS PRESIDENT AND CHIEF INVESTMENT OFFICER OF ALLIED
INVESTMENT ADVISORS, INC. SHE HAS OVER 20 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE. ALLIED INVESTMENT ADVISORS, INC. ADVISES OVER $12 BILLION IN ASSETS.
Presently, the outlook is positive for the economy with corporate earnings still
growing, albeit at a slower rate of about 5% this year. Earnings will vary for
individual companies, and the global economy (especially Asia) will have an
impact. This means that volatility in the equity markets will continue, with
more daily changes in price movement of greater than plus-or-minus 1%.
Is the stock market overvalued? The short and easy answer is that the market is
properly valued today because it is made up of players willing to pay, and
receive, today's prices. Further justification for current record-breaking
levels can be attributed to cash flows into equity mutual funds (over $20
billion per month during the past year), a scarcity of attractive alternative
investments, and headline-making merger and acquisition activity. However, it is
future expectations and results that will ultimately determine capital market
valuations. These expectations will center on the economy (including any action
by the Fed), corporate earnings, investors' risk premiums, interest rates, and
P/E multiples.
While we believe that a solid grasp of the broad macroeconomic environment is
important in making investment decisions, we do not believe it is possible to
achieve consistent, solid investment performance by "timing" the markets. Our
approach with respect to equity selection is primarily "bottom up," with a focus
on specific securities and their fundamentals. Even within a market that could
generally be perceived as overvalued, we feel that we are able to identify
opportunities for investment which are selling at attractive levels of
valuation.
Similarly, our historically successful approach to managing fixed income
portfolios across the yield curve centers around finding relative value among
market sectors and specific securities, rather than relying on interest rate
timing to generate incremental returns.
As always, we are committed to delivering superior long-term performance within
every ARK Funds Portfolio, and look forward to having the opportunity to help
you achieve your investment goals.
Sincerely,
/S/ SIGNATURE
Jennifer W. Lambdin, CFA
PRESIDENT AND CHIEF INVESTMENT OFFICER
ALLIED INVESTMENT ADVISORS, INC.
3
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THE ARK FUNDS FAMILY
[GRAPHIC DEPICTING HALF OF THE ARK FUNDS]
4
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
[GRAPHIC DEPICTING OTHER HALF OF THE ARK FUNDS]
THE ARK FUNDS FAMILY
As a rule, investments, such as stocks, with greater perceived risks also have
the potential for greater returns than fixed-income investments. Keep in mind
stocks also have greater price fluctuations ("volatility") and risks than
fixed-income investments, which may not make them appropriate for the short-term
investor or those whose primary concern is preservation of principal amount
invested. If you are investing for the long-term and will not need your
investment for several years in the future, then investing in an equity-based
mutual fund may be appropriate.
5
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OF THE EQUITY PORTFOLIO MANAGERS OMITTED]
Led by the Managing Director of Equity Investments, J. Eric Leo, the equity team
manages over $1.3 billion of ARK Fund assets for investors seeking capital
appreciation. Looking for great companies at a fair price, the team combines
experience, talent, and energy in selecting the companies that are being
purchased for the 10 ARK equity portfolios. Their disciplined approach is
particularly appealing to investors with a long-term investment perspective.
6
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
THE ARK FUNDS EQUITY PORTFOLIOS MANAGEMENT TEAM (FROM LEFT TO RIGHT):
CLYDE L. RANDALL, CFA, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE IS
THE CO-PORTFOLIO MANAGER OF THE BLUE CHIP EQUITY PORTFOLIO AND THE EQUITY INCOME
PORTFOLIO. HE HAS OVER 12 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
CHRISTOPHER E. BAGGINI, CFA, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC.
HE IS THE PORTFOLIO MANAGER OF THE MID-CAP EQUITY PORTFOLIO AND THE CAPITAL
GROWTH PORTFOLIO. HE HAS OVER 12 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
ANNA MARIE MARTINEZ IS A VICE PRESIDENT OF ALLIED INVESTMENT ADVISORS, INC. SHE
HAS SEVERAL YEARS OF INVESTMENT MANAGEMENT EXPERIENCE AND PERFORMS EQUITY
RESEARCH AND ANALYSIS.
ALLEN J. ASHCROFT, JR., IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE IS
THE CO-PORTFOLIO MANAGER OF THE BLUE CHIP EQUITY PORTFOLIO AND THE EQUITY INCOME
PORTFOLIO. HE HAS MORE THAN 18 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
CHARLES E. KNUDSEN, CFA, IS A MANAGING DIRECTOR OF ALLIED INVESTMENT ADVISORS,
INC. HE IS THE PORTFOLIO MANAGER OF THE BALANCED PORTFOLIO. HE HAS MORE THAN 10
YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
BRETT A. HOFFACKER, CFP, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE
IS THE MANAGER OF THE INTERNATIONAL EQUITY SELECTION PORTFOLIO. HE HAS OVER 15
YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
J. ERIC LEO IS A MANAGING DIRECTOR OF EQUITY INVESTMENTS FOR ALLIED INVESTMENT
ADVISORS, INC. HE IS THE PORTFOLIO MANAGER OF THE VALUE EQUITY PORTFOLIO AND THE
EQUITY INDEX PORTFOLIO. HE HAS MORE THAN 25 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
H. GILES KNIGHT IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE IS THE
PORTFOLIO MANAGER OF THE SMALL-CAP EQUITY PORTFOLIO. HE HAS MORE THAN 28 YEARS
OF INVESTMENT MANAGEMENT EXPERIENCE.
7
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OF BALTIMORE'S INNER HARBOR OMITTED]
THE PRATT STREET OFFICES OF ALLIED INVESTMENT ADVISORS, INC., THE INVESTMENT
ADVISER FOR THE ARK FUNDS, OVERLOOK BALTIMORE'S INNER HARBOR, A SYMBOL OF THAT
CITY'S RENAISSANCE.
BALANCED PORTFOLIO REVIEW AND OUTLOOK
CHARLES E. KNUDSEN, CFA, PORTFOLIO MANAGER
It would not be an exaggeration to say that the last 12 months were phenomenal
for equity investors. The S&P 500 broke records almost daily. The performance is
especially spectacular given that the market had surged more than 60% during the
past two years!
The Balanced Portfolio was able to achieve impressive results relative to its
peers for two reasons. First, the allocation to equities has remained at about
65%, versus about 60% for the average balanced fund. Second, and most important,
the equities in the Portfolio performed well. For most of the fiscal year, we
were overweighted in technology, healthcare, and consumer-related issues. Within
technology, our emphasis on software, computer components, and networking
companies paid off well. Microsoft, Cisco Systems, and EMC Corp. were three very
noteworthy stocks. Consumer stocks did very well, whether related to retail
(WalMart), to personal care (Colgate Palmolive), or to travel (Carnival
Corporation). During the year, we shifted, slowly at first, back into some of
the entertainment and cable stocks, like Viacom and Tele-Communications Inc.
They both experienced very strong moves higher after several years of
underperformance.
We expect the economy to continue to expand, albeit at a slower pace. Most
indicators signal that inflation should remain low, which will support the bond
market and keep the Federal Reserve on the sidelines. This positive environment
should help support stocks. There is one issue that requires close scrutiny:
earnings growth is slowing, with stock market valuations near record levels.
Therefore, although a "bear market" does not appear to be imminent, volatility
could pick up again.
Looking forward, the Portfolio will continue to seek superior returns while
controlling risk by investing in a balance of stocks and bonds. While we see
nothing that would prompt us to change our allocation strategy that favors
stocks over bonds and cash, we are becoming more inclined to reduce the equity
exposure closer to 60%. Certainly, the economic slowdown that we expect in the
second half of 1998 will put pressure on corporate earnings, and valuations are
not cheap. U.S. companies have regained the lead internationally in a variety of
industries and are benefiting from the development of many emerging countries,
although the turmoil in the Southeast Asia region will take some time to
improve. The combination of slow growth, stable inflation, low interest rates,
and continued cash flows into mutual funds will all support equities.
As we search for potential investments in the Portfolio, we are most keenly
interested in the underlying trend of company's profits. We still believe that
the secular forces are positive for the leaders in the technology group,
although the year 2000 problems may temporarily slow spending on computer
equipment. In addition, a large portion of the Portfolio is invested in
companies that have well-known brands that are being expanded globally. This
should help insulate some of their earnings should an economic slowdown develop
in the U.S. During this time of uncertainty, our focus on quality companies with
quality management will be critical.
8
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
BALANCED PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
60/40 Blend of
ARK Balanced Fund, the S&P 500, S&P 500 Lehman Brothers Lipper
Institutional and Lehman Composite Aggregate Balanced
Class Aggregate++ Index Bond Index Funds Average
7/31/93 $100,000 $100,000 $100,000 $100,000 $100,000
Apr 94 103,771 100,953 102,680 98,354 101,516
Apr 95 107,663 114,477 120,587 105,563 110,562
Apr 96 130,164 139,165 156,992 114,673 132,873
Apr 97 140,382 164,081 196,429 122,792 149,907
Apr 98 183,830 211,661 277,063 136,201 188,149
<TABLE>
<CAPTION>
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
60/40 Blend of
ARK Balanced Fund, ARK Balanced Fund, the S&P 500 S&P 500 Lehman Brothers Lipper
Retail Retail Class and Lehman Composite Aggregate Balanced
Class with Load Aggregate++ Index Bond Index Funds Average
<S> <C> <C> <C> <C> <C> <C>
3/31/94 $10,000 $ 9,700 $10,000 $10,000 $10,000 $10,000
Apr 94 10,059 9,757 10,045 10,128 9,920 10,020
Apr 95 10,394 10,082 11,390 11,894 10,647 10,913
Apr 96 12,497 12,122 13,847 15,485 11,566 13,115
Apr 97 13,454 13,050 16,326 19,375 12,385 14,796
Apr 98 17,580 17,053 21,060 27,329 13,737 18,571
</TABLE>
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL 60/40 BLEND OF LIPPER
CLASS CLASS CLASS THE S&P 500 BALANCED
WITH LOAD AND LEHMAN
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 30.95% 30.67% 26.78% 29.00% 25.51%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 13.51% 13.32% 12.49% N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING JULY 16, 1993. RETAIL CLASS
SHARES WERE OFFERED BEGINNING MARCH 9, 1994. PERFORMANCE FOR THE RETAIL CLASS
REFLECTS THE DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE PERFORMANCE
OF THE S&P 500 COMPOSITE INDEX AND THE LEHMAN BROTHERS AGGREGATE BOND INDEX
DO NOT INCLUDE OPERATING EXPENSES WHICH ARE INCURRED BY THE PORTFOLIO. THE
PERFORMANCE REFLECTED IN THE GRAPHS BEGINS AT JULY 31, 1993 FOR THE
INSTITUTIONAL CLASS AND AT MARCH 31, 1994 FOR THE RETAIL CLASS. THE
PERFORMANCE REFLECTED IN THE TABLE BEGINS AT THE INCEPTION DATE.
++ BENCHMARK IS COMPRISED OF TWO UNMANAGED BENCHMARKS, WEIGHTED 60% S&P 500
COMPOSITE INDEX AND 40% LEHMAN BROTHERS AGGREGATE BOND INDEX. PREVIOUSLY THE
PORTFOLIO USED BOTH THE S&P 500 COMPOSITE INDEX AND THE LEHMAN BROTHERS
AGGREGATE BOND INDEX. GOING FORWARD, THE PORTFOLIO WILL ALSO USE A BLENDED
INDEX AS A COMPARISON INDEX BECAUSE IT IS BETTER SUITED TO THE PORTFOLIO'S
OBJECTIVE.
EQUITY INCOME PORTFOLIO REVIEW AND OUTLOOK
CLYDE L. RANDALL, CFA ALLEN J. ASHCROFT, JR.
CO-PORTFOLIO MANAGERS
The Equity Income Portfolio seeks to provide a moderate level of current income
and growth of capital by investing primarily in high-quality, income-producing
common stocks. At April 30, the Portfolio was invested approximately 6% in cash,
7% in securities convertible into common stocks, and 87% in common stocks. About
6% of the Portfolio was invested in the common stocks of non-U.S. companies. The
Portfolio continues to have significant positions in financials, energy, and
utilities, but is represented in all of the major sectors of the U.S. stock
market. All of the stocks are income-producing and yield more than the S&P 500
Index; we have not employed a "barbell" approach.
The Portfolio's performance was outstanding in calendar 1997, but has lagged in
the first four months of 1998. Technology stocks have decisively led the market
this year, and the Portfolio has little participation in that sector. The best
contributors to the Portfolio's performance over the past year have been the
financial and telephone stocks, as well as Ford and Bristol-Myers. The worst
areas have been utilities, real estate, and, to a lesser extent, energy. The
latter areas have lagged the broad market averages considerably over the past
year.
Despite these recent market dynamics, we continue to be confident that the lower
risk investment strategy of this Portfolio will provide competitive long-term
total returns. We seek stocks which have a combination of above-average current
yield and dividend growth rate or which
9
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
EQUITY INCOME PORTFOLIO, CONTINUED
have an above-average yield and appear undervalued by other criteria as well. We
want to own stocks which have high yields for the right reasons: they have
generous, sustainable payouts and are undervalued, rather than having
burdensome, unsustainable payouts and average or high valuations. We sell stocks
when their prospects change or if their yields fall to a point where they are a
source of funds for a higher-yielding substitute (thereby raising the fund's
yield).
Investing in higher-yielding stocks continues to be challenging. The S&P
500 had a current yield of 5.4% at the end of 1981 and is now just over 1.3%.
The index's payout ratio averaged about 50% through 1993, but has fallen to 35%
over the past four years. The stock market's complexion has changed during this
decade. Energy and utilities, historically industries with high payouts, have
had below-average earnings growth, while technology, healthcare, and consumer
companies have been the leaders. Another factor in the market's falling payout
has been the trend towards using free cash flow to repurchase stock rather than
raising dividends. As valuations increase, the returns on buybacks must
decrease, but the buybacks remain quite popular with the majority of investors.
Coming off the extraordinary equity returns of the past three years, we have
become somewhat more defensive in the past six months, and we believe this
Portfolio should maintain that position. We continue to add securities which
have sound prospects while seeking to maintain the Portfolio's current return.
EQUITY INCOME PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Equity S&P 500 Lipper
Income Portfolio Composite Equity Income
Institutional Class Index Funds Average
11/30/96 $100,000 $100,000 $100,000
Apr 97 104,419 106,644 104,258
Apr 98 138,919 150,422 139,778
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK Equity ARK Equity S&P 500 Lipper
Income Portfolio Income Portfolio Composite Equity Income
Retail Class Retail Class Index Funds Average
with load
5/31/97 $10,000 $ 9,700 $10,000 $10,000
Apr 98 12,495 12,120 13,297 12,699
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL S&P 500 LIPPER
CLASS CLASS CLASS COMPOSITE EQUITY
WITH LOAD INDEX INCOME
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 33.04% N/A N/A 41.05% 34.07%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 28.19% N/A N/A N/A N/A
- --------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURN
INCEPTION
TO DATE 43.52% 28.73% 24.87% N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING NOVEMBER 18, 1996. RETAIL
CLASS SHARES WERE OFFERED BEGINNING MAY 9, 1997. PERFORMANCE FOR THE RETAIL
CLASS REFLECTS THE DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE
PERFORMANCE OF THE S&P 500 COMPOSITE INDEX DOES NOT INCLUDE OPERATING EXPENSES
WHICH ARE INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS
BEGINS AT NOVEMBER 30, 1996 FOR THE INSTITUTIONAL CLASS AND AT MAY 31, 1997 FOR
THE RETAIL CLASS. THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT THE INCEPTION
DATES.
10
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ARK FUNDS ANNUAL REPORT APRIL 30, 1998
VALUE EQUITY PORTFOLIO REVIEW AND OUTLOOK
J. ERIC LEO, PORTFOLIO MANAGER
The Value Equity Portfolio Institutional Class returned 35.4% for the fiscal
year ended April 30, 1998, but lagged its benchmarks, the Lipper Growth Index
and the S&P 500 Index, which returned 39.1% and 41.1%, respectively. There were
two primary factors for the Portfolio's underperformance. The first was an
underweighting in financial services stocks, which were very strong during the
fiscal year. We are gradually and opportunistically adding to this sector when
attractive values present themselves. The second was the general defensive
posture of the Portfolio, which included very broad diversification among stocks
with below-average volatility, and a relatively high cash position of about
7.5%. We are comfortable with the less-volatile nature of the Portfolio in the
current market environment and expect that it will help performance before the
year is out. As this is being written, the Portfolio has recovered a significant
amount of ground on its two benchmarks.
As our shareholders know, the Marketvest family of mutual funds merged into
the ARK mutual funds family, which created the ARK Value Equity Portfolio. In
addition, in April 1998 the ARK Stock Portfolio merged into the Value Equity
Portfolio. Although responsibility for managing the Portfolio was transferred to
Allied Investment Advisors, Inc. upon Sam Long's retirement on March 31, 1998,
we do not anticipate significant changes to the value-oriented style followed by
previous management.
Our goal is to purchase superior business enterprises at a reasonable
price. In this period of great change and intense competitive pressure, we feel
that it is more prudent to purchase a great company at a fair price than a fair
company at a great price. Naturally, we are always searching for an opportunity
to purchase a great company at a great price, but there are few opportunities in
this market environment. For our value portfolios, we focus on the criteria that
have worked the best over time: low price to earnings ratios; low price to sales
ratios; strong cash flows; return on capital in excess of the cost of capital;
and, most importantly, a competent, shareholder-oriented management. We purchase
stocks with a three-to-five-year time horizon in mind.
We have made some minor changes to the Portfolio such as the sale of Nike,
which we believe will have difficulty for the balance of the year. We have
purchased Rite Aid, a local drug store chain which has strong defensive
characteristics and solid earnings expectations at a valuation below that of the
market. In the area of financial services, we have added Waddell & Reed, the
nation's third-oldest mutual fund complex, and CIT Financial, an old line
financial services company that focuses on loans to small-and-medium- size
companies. These companies represent excellent value relative to the market
based on their solid long-term earnings prospects, low relative price to
earnings ratios, and conservative business practices.
We remain positive on the long-term outlook for U.S. equities, based on low
interest rates and inflation, as well as the strong global position and
financial strength of U.S. industry. In the shorter term, problems in Asia will
continue to keep investors on edge and corporate profits at risk. As a result,
we expect the equity market to be more volatile for the balance of the year,
with the normal caveat that a 5-10% market correction could happen at any time.
Recent history aside, rational expectations for future stock market returns
should be kept in the 10-12% range. It is important to keep in mind that in a 2%
inflationary environment, the compounding effects of a 10-12% return are very
powerful over the long term.
11
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EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OF PAGODA OMITTED]
LOCATED IN READING, PENNSYLVANIA, THE FAR EAST ARCHITECTURE OF THE PAGODA SHOWS
THAT INTERNATIONAL FLAVORS CAN FIND A HOME IN THE HEART OF PENNSYLVANIA DUTCH
COUNTRY.
VALUE EQUITY PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $10,000 INVESTMENT
ARK Value S&P 500 Lipper
Equity Portfolio Composite Growth
Institutional Class Index Funds Average
3/31/96 $100,000 $100,000 $100,000
Apr 96 102,830 101,470 103,220
Apr 97 124,692 126,959 116,897
Apr 98 168,783 179,076 162,615
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK Value ARK Value S&P 500 Lipper
Equity Fund Equity Portfolio Composite Growth
Retail Class Retail Class Index Funds Average
(Synthetic) with load (Synthetic)
3/31/96 $10,000 $ 9,700 $10,000 $10,000
Apr 96 10,283 9,974 10,147 10,322
Apr 97 12,469 12,095 12,696 11,689
Apr 98 16,889 16,383 17,908 16,261
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL S&P 500 LIPPER
CLASS CLASS* CLASS COMPOSITE GROWTH
WITH LOAD* INDEX
-------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 35.36% 35.45% 31.43% 41.05% 39.11%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 28.58% 28.63% 26.75% N/A N/A
- --------------------------------------------------------------------------------
*PERFORMANCE SHOWN PRIOR TO THE INCEPTION DATE OF THE RETAIL CLASS IS SYNTHETIC
(NOT ACTUAL) AND REPRESENTS THAT OF THE INSTITUTIONAL CLASS ADJUSTED FOR THE
SALES CHARGE.
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PERFORMANCE PRESENTED FROM INCEPTION TO MARCH 29, 1998 REFLECTS THE PERFORMANCE
OF THE MARKETVEST EQUITY FUND SHARES, WHICH WERE OFFERED BEGINNING APRIL 1,
1996. RETAIL CLASS SHARES WERE OFFERED BEGINNING APRIL 1, 1998. PERFORMANCE FOR
THE RETAIL CLASS REFLECTS THE DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS.
THE PERFORMANCE OF THE S&P 500 COMPOSITE INDEX DOES NOT INCLUDE OPERATING
EXPENSES WHICH ARE INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE
GRAPHS BEGINS AT MARCH 31, 1996 FOR THE INSTITUTIONAL CLASS AND THE RETAIL
CLASS. THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT APRIL 1, 1996 FOR THE
INSTITUTIONAL CLASS AND THE RETAIL CLASS.
12
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
EQUITY INDEX PORTFOLIO REVIEW AND OUTLOOK
J. ERIC LEO, PORTFOLIO MANAGER
The Equity Index Portfolio was established on October 1, 1997, and has almost
doubled in size to more than $46 million in assets. As reflected in the
performance detail, the Portfolio has tracked its benchmark, the S&P 500 Index,
closely for the fourth fiscal quarter and year-to-date.
We remain positive on the long-term outlook for U.S. equities, based on low
interest rates and inflation, as well as the strong global position and
financial strength of U.S. industry. In the shorter term, problems in Asia will
continue to keep investors on edge and corporate profits at risk. As a result,
we expect the equity market to be more volatile for the balance of the year,
with the normal caveat that a 5-10% market correction could happen at any time.
Recent history aside, rational expectations for future stock market returns
should be kept in the 10-12% range. It is important to keep in mind that in a 2%
inflationary environment, the compounding effects of a 10-12% return are very
powerful over the long term.
EQUITY INDEX PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Equity S&P 500 Lipper
Index Portfolio Composite Growth
Institutional Class Index Funds Average
9/30/97 $100,000 $100,000 $100,000
Apr 98 116,710 118,398 112,820
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK Equity ARK Equity S&P 500 Lipper
Index Portfolio Index Portfolio Composite Growth
Retail Class Retail Class Index Funds Average
with load
11/30/97 $10,000 $ 9,700 $10,000 $10,000
Apr 98 11,694 11,343 11,707 11,532
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL S&P 500 LIPPER
CLASS CLASS CLASS COMPOSITE GROWTH
WITH LOAD INDEX
- --------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURN
INCEPTION
TO DATE 16.71% 19.08% 15.54% N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING OCTOBER 1, 1997. RETAIL CLASS
SHARES WERE OFFERED BEGINNING NOVEMBER 3, 1997. PERFORMANCE FOR THE RETAIL
CLASS REFLECTS THE DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE
PERFORMANCE OF THE S&P 500 COMPOSITE INDEX DOES NOT INCLUDE OPERATING EXPENSES
WHICH ARE INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS
BEGINS AT SEPTEMBER 30, 1997 FOR THE INSTITUTIONAL CLASS AND AT NOVEMBER 30,
1997 FOR THE RETAIL CLASS. THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT THE
INCEPTION DATES.
13
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
BLUE CHIP EQUITY PORTFOLIO REVIEW AND OUTLOOK
ALLEN J. ASHCROFT, JR. CLYDE L. RANDALL, CFA
CO-PORTFOLIO MANAGERS
The Blue Chip Equity Portfolio produced strong, consistent results through our
fiscal year ended April 30, 1998. The Portfolio's investments were aided by a
robust U.S. equity market, which once again focused on large-cap companies.
Last October, the market sold off over 1,000 points on concerns of an Asian
economic slowdown coupled with severe currency problems. This long-standing bull
market finally appeared in jeopardy. It seemed apparent that a decline in Asia
would put pressure on corporate profits. The equity markets drifted until the
mid-January reporting period, when it became evident that the troubles in Asia
hadn't affected earnings growth. The markets rapidly accelerated and closed the
fiscal year over 1,300 points higher.
Throughout the year, the Blue Chip Equity Portfolio remained focused on our fund
strategy of looking for large-cap quality companies that are dominant in their
markets and have franchise characteristics, solid management teams, and a proven
record of delivering above-average equity performance. This strategy has enabled
us to be broadly diversified among the major sectors of the economy, in 30 to 50
quality companies, with a long-term investment horizon.
As of April 30, 1998, the Portfolio's largest contributors have been Pfizer,
Associates First Capital, Microsoft, and Ford Motors. We find that over long
periods, our best performers tend to come from a diverse group of industries.
The Portfolio was negatively impacted by our market weighting in energy stocks,
as the price of oil corrected by 40% throughout the year. We carefully review
any company that has underperformed, but will retain it if we continue to feel
that underlying fundamentals are intact.
Looking ahead, we remain positive on the equity markets. A strong economy, low
interest rates, and inflation in check in the past usually resulted in a
favorable equity environment. We do, however, face difficult decisions in the
months ahead, as extended valuations and uncertainty in Asia may affect our
markets. We continue to search for investments in larger companies with strong
business franchises that will add value to the Portfolio.
BLUE CHIP EQUITY PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Blue Chip S&P 500 Lipper
Equity Portfolio Composite Growth
Institutional Class Index Funds Average
4/30/96 $100,000 $100,000 $100,000
Apr 97 124,410 125,120 113,250
Apr 98 173,353 176,482 157,542
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK Blue Chip ARK Blue Chip S&P 500 Lipper
Equity Portfolio Equity Portfolio Composite Growth
Retail Class Retail Class Index Funds Average
with load
5/31/96 $10,000 $ 9,700 $10,000 $10,000
Apr 97 11,956 11,597 12,195 11,022
Apr 98 16,610 16,112 17,202 15,333
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL S&P 500 LIPPER
CLASS CLASS CLASS COMPOSITE GROWTH
WITH LOAD INDEX FUNDS AVERAGE
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 39.34% 38.93% 34.79% 41.05% 39.11%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 31.04% 30.82% 28.80% N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING APRIL 1, 1996. RETAIL CLASS
SHARES WERE OFFERED BEGINNING MAY 16, 1996. PERFORMANCE FOR THE RETAIL CLASS
REFLECTS THE DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE PERFORMANCE OF
THE S&P 500 COMPOSITE INDEX DOES NOT INCLUDE OPERATING EXPENSES WHICH ARE
INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS BEGINS AT
APRIL 30, 1996 FOR THE INSTITUTIONAL CLASS AND AT MAY 31, 1996 FOR THE RETAIL
CLASS. THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT THE INCEPTION DATES.
14
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
CAPITAL GROWTH PORTFOLIO REVIEW AND OUTLOOK
CHRISTOPHER E. BAGGINI, CFA, PORTFOLIO MANAGER
The stock market's historic rise continued over the past year. For the fiscal
year ended April 30, 1998, the market rose a stellar 41.1%. Likewise, our
competitors, as reported by the Lipper Growth Funds Average, performed well with
returns approaching 39.1%. We are pleased to report that the Capital Growth
Portfolio exceeded both benchmarks by climbing 45.2% over the same time frame.
The last six months have been extremely volatile, especially in the technology
sector. Investment returns in November and December were hampered by fears of
the Asian economic slide, a nervous investment environment, and a certain degree
of illiquidity within the market. As these points became better addressed
throughout the first quarter, stocks staged a fierce rally from a very difficult
early January.
Although any of these concerns could resurface, our focus continues to be on
picking companies, not macro sectors. For example, the sector weightings of the
Portfolio varied slightly throughout the year as we continued an overweighted
position in technology, finance, and healthcare. Meanwhile, the Capital Growth
Portfolio was active in the first quarter, adding to or initiating positions in
several firms across numerous industry groups. Maryland-based Ciena Corp.
quickly became one of the Portfolio's largest holdings after its price declined
30% within one trading week. Similarly, Electronics For Imaging gave long-term
investors an interesting opportunity after a 60% price decline in early
December. The Portfolio added to holdings in Rite Aid, Amgen, Merck, Chase,
Intel, and EMC after significant but less severe price corrections.
Going forward, the short-term performance of the Portfolio could be impacted by
a change in interest rates or inflation expectations. In this type of
environment, P/E ratios may change dramatically, giving rise to volatile prices.
Should this occur, we believe that the market's volatility would once again
create numerous investment opportunities. We look to add value for investors
through diligent research and timely and consistent execution of our "growth at
a price" strategy.
CAPITAL GROWTH PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Capital S&P 500 Lipper
Growth Portfolio Composite Growth
Institutional Class Index Funds Average
7/31/93 $100,000 $100,000 $100,000
Apr 94 102,876 102,680 104,744
Apr 95 106,219 120,587 116,245
Apr 96 131,308 156,992 150,991
Apr 97 148,982 196,429 170,997
Apr 98 216,307 277,063 237,874
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK Capital ARK Capital S&P 500 Lipper
Growth Portfolio Growth Portfolio Composite Growth
Retail Class Retail Class Index Funds Average
with load
3/31/94 $10,000 $ 9,700 $10,000 $10,000
Apr 94 9,951 9,652 10,128 10,035
Apr 95 10,223 9,917 11,894 11,137
Apr 96 12,599 12,227 15,485 14,466
Apr 97 14,287 13,858 19,375 16,382
Apr 98 20,702 20,080 27,328 22,789
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL S&P 500 LIPPER
CLASS CLASS CLASS COMPOSITE GROWTH
WITH LOAD INDEX
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 45.19% 44.90% 40.52% 41.05% 39.11%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 17.43% 17.42% 16.55% N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING JULY 16, 1993. RETAIL CLASS
SHARES WERE OFFERED BEGINNING MARCH 9, 1994. PERFORMANCE FOR THE RETAIL CLASS
REFLECTS THE DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE PERFORMANCE OF
THE S&P 500 COMPOSITE INDEX DOES NOT INCLUDE OPERATING EXPENSES WHICH ARE
INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS BEGINS AT
JULY 31, 1993 FOR THE INSTITUTIONAL CLASS AND AT MARCH 31, 1994 FOR THE RETAIL
CLASS. THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT THE INCEPTION DATES.
15
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MID-CAP EQUITY PORTFOLIO REVIEW AND OUTLOOK
CHRISTOPHER E. BAGGINI, CFA, PORTFOLIO MANAGER
The year ended April 30, 1998, was another exciting one for U.S. equity
investors. The Mid-Cap Equity Portfolio rewarded investors with a return of
nearly 47%. This compared favorably to most small-and large-cap investments and
highlights a marvelous three-year time span for mid-cap investors.
The Mid-Cap Equity Portfolio has been greatly aided by low interest rates, which
have helped push P/E ratios to near 12-year high levels. Aiding the mid-cap
market was the large-cap market's bout with the "Asian flu" and the small-cap
market's lack of liquidity from October 1997 through March 1998. As many
mid-sized companies generate a large percentage of sales and earnings from the
U.S. with a relatively low exposure to international economies, this sector
benefited from fears that multinational firms might experience earnings
shortfalls over the first half of 1998. Smaller companies also benefited from
this economic backdrop but lacked the desired safety perceived by the liquidity
of mid-cap stocks. We believe this double-edged scenario should continue to
benefit the Mid-Cap Equity Portfolio over the short term.
The last few months haven't been smooth for mid-cap investors, despite the
sector's cumulative advance. Volatility in interest rates and inflation
expectations have caused several double-digit declines since November. This
volatility created opportunities for the Portfolio. Investments in Ciena and
Amgen were established during times of price weakness. Meanwhile, America Online
advanced rapidly and became the Portfolio's largest holding by April. Finally,
over the last year the technology sector as a percentage of the Portfolio's
holdings increased. This change creates risk through greater price and business
volatility but could create a dramatic increase in return potential as we enter
the era of digital conversion in the 21st century.
MID-CAP EQUITY PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Mid-Cap S&P 400 Lipper
Equity Portfolio Mid-Cap Mid-Cap
Institutional Class Composite Index Funds Average
11/30/96 $100,000 $100,000 $100,000
Apr 97 100,671 101,178 94,485
Apr 98 147,906 149,613 134,433
- --------------------------------------------------------------------------------
INSTITUTIONAL S&P 400 LIPPER
CLASS MID-CAP MID-CAP
INDEX
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 46.92% 47.87% 42.28%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 32.03% N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING NOVEMBER 18, 1996. THE
PERFORMANCE OF THE S&P 400 MID-CAP INDEX DOES NOT INCLUDE OPERATING EXPENSES
WHICH ARE INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPH
BEGINS AT NOVEMBER 30, 1996. THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT
THE INCEPTION DATE.
16
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
SMALL-CAP EQUITY PORTFOLIO REVIEW AND OUTLOOK
H. GILES KNIGHT, PORTFOLIO MANAGER
The Small-Cap Equity Portfolio (formerly the Special Equity Portfolio) recovered
nicely from a poor year in 1997 as strategic changes made to the industry
composition of the Portfolio in late 1997 were successful. Small-cap stocks have
generally underperformed relative to large-cap stocks for several years, and the
Small-Cap Equity Portfolio with its heavy weighting in technology lagged the
small-cap benchmarks, which had relatively less technology exposure.
New Portfolio strategy included a lower weighting in technology, particularly
semiconductor-related issues, and more emphasis on less volatile financial and
retail stocks. Small-cap bank, insurance, and real estate investment trust
issues were included as well as several "growth" retailers. Furthermore, the
overall price/earnings level of the Portfolio was lowered to smooth out some of
the market volatility. The result of the changes is a Portfolio with far better
balance with respect to its respective benchmarks.
The Portfolio benefited from exposure to telecommunications, particularly the
"clec" (competitive local exchange) group such as Electric Lightwave and
Nextlink Communications, as well as from specialty retailers such as Tiffany and
Petsmart. Key financial gainers were Sovereign Bancorp (PA), GoldenState Bancorp
(CA), and several REITs (real estate investment trusts). Computer software
stocks such as Sapient were also strong performers.
Looking ahead, we continue to expect a choppy stock market and heavy rotation of
industry groups among small-capitalization stocks. However, by all conventional
valuations, small-cap stocks relative to large-cap, "nifty-thirty" issues are
very attractive, and we continue to believe that this asset class will
eventually receive much stronger investor recognition in the year ahead.
SMALL-CAP EQUITY PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Small-Cap Frank Russell Lipper
Equity Portfolio 2000 Growth Small Cap
Institutional Class Index Funds Average
7/31/95 $100,000 $100,000 $100,000
Apr 96 137,992 119,379 121,986
Apr 97 105,661 103,203 118,765
Apr 98 156,304 148,313 172,946
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK Small-Cap ARK Small-Cap Frank Russell Lipper
Equity Portfolio Equity Portfolio 2000 Growth Small-Cap
Retail Class Retail Class Index Funds Average
(Synthetic) with load (Synthetic)
7/31/95 $10,000 $ 9,700 $10,000 $10,000
Apr 96 13,799 13,385 11,937 12,197
Apr 97 10,566 10,249 10,320 11,877
Apr 98 15,592 15,124 14,831 17,295
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL RUSSELL 2000 LIPPER
CLASS CLASS* CLASS GROWTH INDEX SMALL-CAP
WITH LOAD*
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 47.93% 47.57% 43.21% 43.71% 45.62%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 20.36% 20.26% 18.96% N/A N/A
- --------------------------------------------------------------------------------
*PERFORMANCE SHOWN PRIOR TO THE INCEPTION DATE OF THE RETAIL CLASS IS SYNTHETIC
(NOT ACTUAL) AND REPRESENTS THAT OF THE INSTITUTIONAL CLASS ADJUSTED FOR THE
SALES CHARGE.
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING JULY 13,1995. RETAIL CLASS
SHARES WERE OFFERED BEGINNING MAY 16, 1996. PERFORMANCE FOR THE RETAIL CLASS
REFLECTS THE DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE PERFORMANCE
OF THE FRANK RUSSELL 2000 GROWTH INDEX DOES NOT INCLUDE OPERATING EXPENSES
WHICH ARE INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS
BEGINS AT JULY 31, 1995 FOR THE INSTITUTIONAL CLASS AND THE RETAIL CLASS. THE
PERFORMANCE REFLECTED IN THE TABLE BEGINS AT JULY 13, 1995 FOR THE
INSTITUTIONAL CLASS AND THE RETAIL CLASS.
17
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
INTERNATIONAL EQUITY SELECTION PORTFOLIO REVIEW AND OUTLOOK
BRETT A. HOFFACKER, CFP, PORTFOLIO MANAGER
Foreign market investors endured a tumultuous year as they experienced times of
both boom and bust. The year encompassed the collapse of the Southeast Asian
markets and currencies and resulting aftermath, as well as strong enthusiasm for
European equities created by lack of inflationary concerns, a strong dollar, and
positive outlook for the start of the European Monetary Union in 1999.
It was with this type of volatility in mind that the International Equity
Selection Portfolio continued to pursue its strategy of investing in a portfolio
of mutual funds that are geographically diversified. As of year-end, the
International Equity Selection Portfolio held six international mutual funds and
had exposure to all major regional equity markets. No single country or emerging
market mutual funds were held in the Portfolio. From a market point of view,
performance benefited most from a substantial underweighting in Japan and an
almost equal weighting among the European markets. From an individual underlying
fund basis, performance was aided by the Harbor International and GAM
International Funds, which were the Portfolio's top performers. During the year,
we replaced the T. Rowe Price International Stock Fund with the American
Advantage International Equity Fund.
Going forward, our outlook for the International Equity Selection Portfolio is
positive. While most foreign fund managers remain cautious with respect to the
Japanese and Southeast Asian markets, they have not abandoned them.
Opportunities continue to exist throughout Europe and now Latin America, as well
as in Russia and China. Our strategic goal in managing the Portfolio is to
provide exposure to non-U.S. markets using mutual funds which incorporate a
variety of investment styles and approaches. We attempt to construct the
Portfolio to produce an array of funds that complement one another on a
risk-adjusted basis. Our analysis of the current portfolio as well as potential
mutual fund investments will maintain our emphasis on identifying funds with
long-term track records, which reward investors for the risk taken relative to
the benchmark.
[PHOTO OF CAPITAL BUILDING ROTUNA OMITTED]
CURRENTLY BEING REFURBISHED TO ITS ORIGINAL GLORY, THE CAPITAL BUILDING, LOCATED
IN HARRISBURG, PENNSYLVANIA, IS A STUNNING TESTAMENT TO BUILDING WITH QUALITY
AND LONGEVITY IN MIND. THE SPACIOUS ROTUNDA IS A POPULAR LANDMARK FOR THOSE
VISITING THE STATE CAPITAL.
18
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
INTERNATIONAL EQUITY SELECTION PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK International Morgan Stanley Lipper
Equity Selection Portfolio MSCI EAFE International
Institutional Class Index Funds Average
5/31/91 $100,000 $100,000 $100,000
Apr 92 102,478 90,553 102,983
Apr 93 110,574 110,121 113,271
Apr 94 134,945 128,434 137,534
Apr 95 138,669 135,640 136,255
Apr 96 162,132 151,103 158,356
Apr 97 180,826 149,773 167,065
Apr 98 215,815 178,110 201,965
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK International ARK International Morgan Stanley Lipper
Equity Selection Equity Selection MSCI EAFE International
Portfolio Portfolio, Retail Index Funds Average
Retail Class Class with load
(Synthetic) (Synthetic)
5/31/91 $10,000 $ 9,850 $10,000 $10,000
Apr 92 10,228 10,074 9,055 10,298
Apr 93 11,028 10,863 11,012 11,327
Apr 94 13,422 13,220 12,843 13,753
Apr 95 13,755 13,548 13,564 13,626
Apr 96 16,076 15,835 15,110 15,836
Apr 97 17,890 17,621 14,977 16,707
Apr 98 21,351 21,031 17,811 20,197
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL MORGAN LIPPER
CLASS CLASS* CLASS STANLEY INTERNATIONAL
WITH LOAD* MSCI EAFE
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 19.35% 19.35% 17.59% 18.92% 20.89%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 11.76% 11.59% 11.34% N/A N/A
- --------------------------------------------------------------------------------
*PERFORMANCE SHOWN PRIOR TO THE INCEPTION DATE OF THE RETAIL CLASS IS SYNTHETIC
(NOT ACTUAL) AND REPRESENTS THAT OF THE INSTITUTIONAL CLASS ADJUSTED FOR THE
SALES CHARGE.
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PERFORMANCE PRESENTED FROM INCEPTION TO MARCH 29, 1998 REFLECTS THE PERFORMANCE
OF THE MARKETVEST INTERNATIONAL EQUITY FUND SHARES WHICH IS THE SUCCESSOR TO A
COLLECTIVE TRUST FUND. THE QUOTED PERFORMANCE DATA INCLUDES PERFORMANCE OF THE
COLLECTIVE TRUST FUND FOR PERIOD FROM 5/31/91 (INCEPTION DATE OF COLLECTIVE
TRUST FUND) TO 4/1/97 WHEN THE FUND'S REGISTRATION STATEMENT BECAME EFFECTIVE,
AS ADJUSTED TO REFLECT THE FUND'S ANTICIPATED EXPENSES. THE COLLECTIVE TRUST
FUND WAS NOT REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT")
AND THEREFORE WAS NOT SUBJECT TO CERTAIN INVESTMENT RESTRICTIONS IMPOSED BY THE
1940 ACT. IF THE COLLECTIVE TRUST FUND HAD BEEN REGISTERED UNDER THE 1940 ACT,
THE PERFORMANCE MAY HAVE BEEN ADVERSELY AFFECTED. RETAIL CLASS SHARES WERE
OFFERED BEGINNING APRIL 1, 1998. PERFORMANCE FOR THE RETAIL CLASS REFLECTS THE
DEDUCTION OF THE 1.50% SALES CHARGE AFTER WAIVERS. THE PERFORMANCE OF THE MSCI
EAFE INDEX DOES NOT INCLUDE OPERATING EXPENSES WHICH ARE INCURRED BY THE
PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS BEGINS AT MAY 31, 1991 FOR
THE INSTITUTIONAL CLASS AND THE RETAIL CLASS. THE PERFORMANCE REFLECTED IN THE
TABLE BEGINS AT MAY 31, 1991 FOR THE INSTITUTIONAL CLASS AND THE RETAIL CLASS.
INTERNATIONAL EQUITY PORTFOLIO REVIEW AND OUTLOOK
EILEEN M. FITZPATRICK, PORTFOLIO MANAGER
International markets as a group have provided a good return to U.S.-based
investors over the past year. For the 12 months ended April 30, 1998, the total
return (in U.S. dollars) on the MSCI EAFE Index was 18.9%. The corresponding
performance of the International Equity Portfolio Institutional Class was
21.67%.
There has been a sharp divergence between the European and U.K. markets on the
one hand, and the Asia/Pacific region on the other, which was even more marked
than that of the prior 12-month period. In Asia, a number of the previously
fast-growing "tiger" countries ran into a financial and economic brick wall in
the third quarter of 1997. A slew of structural flaws and imbalances, previously
camouflaged by rapid growth, came to the fore in catastrophic fashion. The key
problems arose from an inappropriate pegging of exchange rates to the U.S.
dollar, leading to excessive foreign currency borrowing by the corporate sector,
with unprofitable investment of much of the proceeds. The worst-affected
economies were Korea, Thailand, Indonesia, and Malaysia. These countries, plus a
number of others, suffered a collapse of their currencies and stock markets,
necessitating drastic monetary tightening and (except for Malaysia) intervention
by the International Monetary Fund. The subsequent weakness of these economies,
most of which are now in outright recession, has had a domino effect throughout
the region. In Hong Kong, the local currency's peg to the U.S. dollar came under
speculative attack, leading to a sharp rise in interest rates, but the peg
itself has held firm. For the region overall (Pacific Ex. Japan), the MSCI EAFE
Index has fallen by 28.6% in U.S. dollar terms. Hong Kong, the largest
constituent, held up relatively well, with a 19.5% fall, while the worst
performers were Indonesia (down 78.8%) and Korea (down 60.0%).
19
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
INTERNATIONAL EQUITY PORTFOLIO, CONTINUED
Japan, not surprisingly, suffered collateral damage from the troubles of its
geographic neighbors. The nascent economic recovery of 1995/1996 had already
begun to falter with the April 1997 hike in consumption taxes, and suffered
further damage from subsequent events across the region. The Tokyo market fell
by 15.1% over the 12-month period. In March of this year the Government
announced a 16.0-trillion-yen fiscal stimulus package. While this will provide a
boost to domestic demand, it may not yet be enough to return the economy to a
sustained recovery path.
The picture in Western markets has been much brighter, and buoyant returns from
the U.K. and Continental Europe (whose market indices were up 34.6% and 45.4%,
respectively) have more than made up for the weakness in Asia. The strength
across this region has shared many common factors with the bull market on Wall
Street. The virtual disappearance of inflation has led to a more stable interest
rate background, to the benefit of both bonds and equities. Financial market
liquidity has been abundant; cash inflows to mutual funds and institutions have
grown rapidly, while corporations, generating strong cash flow themselves, have
been more disposed to buying back stock than issuing new paper. With larger
demand chasing a shrinking supply, stock prices have been bid sharply upward.
In the U.K., vigorous economic growth necessitated a tightening of interest
rates, which moved from 6.0% to 7.3% over the year. Bond yields, however, went
in the other direction, falling from 7.2% to 5.9%. Sterling's exchange rate
against almost all other major currencies appreciated sharply, depressing
profits growth for many companies, but in the closing weeks of the period it has
started to drift downward again. The Labour Party came to power, for the first
time since 1979, following the May 1997 general election. The new government has
been well received by the financial markets, with perhaps its most significant
policy initiative being the granting of much greater independence to the Bank of
England.
In Continental Europe, the advent of monetary union (on January 1, 1999) became
a certainty over the past 12 months. Interest rates, as a result, have converged
towards a common level, to the considerable benefit of the peripheral country
markets such as Spain and Italy. The economies of "core" Europe, France and
Germany in particular, are now growing at a healthy pace, following a very
sluggish phase through 1995 and 1996. European corporations, meanwhile, have
become much more focused on generating shareholder value. This has driven an
intense bout of restructuring, asset sales, and mergers, the largest of which so
far has been the combination, announced in December, of Swiss Bank Corporation
and Union Bank of Switzerland.
The Portfolio is currently fully invested, and is distributed across the major
markets as follows:
U.K. 26.1%
Continental Europe 56.6%
Japan 11.8%
Pacific Ex. Japan 5.5%
Weightings in Japan and the other Asian markets were reduced to their present
very low levels in the earlier part of the period. The allocation to the Pacific
Ex. Japan is concentrated solely in the relative safe havens of Hong Kong and
Australia. Meanwhile, more than 80% of the Portfolio's assets are positioned in
the U.K. and European markets, up from a level of 56% one year ago.
Looking ahead, favorable economic and monetary conditions prevailing across
Europe should support further gains from the stock markets in this region,
although they are not at cheap levels. The Japanese equity market and corporate
sector have large recovery potential for the longer term, but a more appropriate
economic policy mix will be required for this to be realized. The Pacific Ex.
Japan markets also have recovery potential, but the risks in this area are still
very high over the foreseeable future.
20
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
INTERNATIONAL EQUITY PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK International Morgan Stanley
Equity Portfolio MSCI EAFE
Institutional Class Index
12/31/94 $100,000 $100,000
Apr 95 101,504 105,705
Apr 96 117,400 117,755
Apr 97 111,272 116,719
Apr 98 135,384 138,802
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK International ARK International Morgan Stanley
Equity Portfolio Equity Portfolio MSCI EAFE
Retail Class Retail Class Index
with load
11/30/96 $10,000 $ 9,700 $10,000
Apr 97 9,686 9,395 9,768
Apr 98 11,776 11,422 11,616
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL MORGAN
CLASS CLASS CLASS STANLEY
WITH LOAD MSCI EAFE
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 21.67% 21.58% 17.97% 18.92%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 9.45% 13.87% 11.57% N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING DECEMBER 30, 1994. RETAIL
CLASS SHARES WERE OFFERED BEGINNING NOVEMBER 1, 1996. PERFORMANCE FOR THE RETAIL
CLASS REFLECTS THE DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE
PERFORMANCE OF THE MSCI EAFE INDEX DOES NOT INCLUDE OPERATING EXPENSES WHICH ARE
INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS BEGINS AT
DECEMBER 31, 1994 FOR THE INSTITUTIONAL CLASS AND AT NOVEMBER 30, 1996 FOR THE
RETAIL CLASS. THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT THE INCEPTION
DATES.
21
<PAGE>
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OF FIXED INCOME PORTFOLIO MANAGERS OMITTED]
TEAMWORK IS THE KEY INGREDIENT FOR THE FIXED INCOME PORTFOLIO MANAGERS, UNDER
THE DIRECTION OF STEVEN M. GRADOW, MANAGING DIRECTOR OF FIXED INCOME
INVESTMENTS. THEY MANAGE 6 PORTFOLIOS WITH $1.2 BILLION IN ARK FUND ASSETS. THEY
ADD VALUE BY FINDING OPPORTUNITIES ACROSS THE YIELD CURVE IN THE CORPORATE, US
GOVERNMENT AND MUNICIPAL SECURITIES MARKETS. THEIR MANAGEMENT STYLE IS
ATTRACTIVE TO INVESTORS LOOKING FOR RELIABLE MONTHLY INCOME AND A COMPETITIVE
TOTAL RETURN.
22
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
THE ARK FUNDS FIXED INCOME PORTFOLIOS MANAGEMENT TEAM (FROM LEFT TO RIGHT):
STEVEN M. GRADOW IS A MANAGING DIRECTOR OF FIXED INCOME INVESTMENTS FOR ALLIED
INVESTMENT ADVISORS, INC. HE IS THE PORTFOLIO MANAGER OF THE INCOME PORTFOLIO
AND CO-PORTFOLIO MANAGER OF THE U.S. GOVERNMENT BOND PORTFOLIO AND THE
SHORT-TERM BOND PORTFOLIO. HE HAS OVER 15 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
N. BETH VOLK, CFA, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. SHE IS THE
CO-PORTFOLIO MANAGER OF THE U.S. GOVERNMENT BOND PORTFOLIO AND OVERSEES CREDIT
RESEARCH FOR THE FIXED INCOME GROUP. SHE HAS OVER 17 YEARS OF INVESTMENT
RESEARCH AND MANAGEMENT EXPERIENCE.
WILMER C. STITH III IS A VICE PRESIDENT OF ALLIED INVESTMENT ADVISORS, INC. HE
IS CO-PORTFOLIO MANAGER OF THE SHORT-TERM BOND PORTFOLIO. HE HAS OVER 8 YEARS OF
INVESTMENT MANAGEMENT EXPERIENCE.
SUSAN S. SCHNAARS, CFA, CPA, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC.
SHE IS THE PORTFOLIO MANAGER OF THE INTERMEDIATE FIXED INCOME PORTFOLIO,
MARYLAND TAX-FREE PORTFOLIO, AND PENNSYLVANIA TAX-FREE PORTFOLIO. SHE HAS OVER 8
YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
23
<PAGE>
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
SHORT-TERM TREASURY PORTFOLIO REVIEW AND OUTLOOK
JAMES M. HANNAN, PORTFOLIO MANAGER
The Short-Term Treasury Portfolio continued to provide a rate of return that was
greater than the return available from investing in a money market fund while
providing less price volatility than a long-term bond fund. For the one-year
period ended April 30, 1998, the Institutional Class returned 6.5%, while the
Retail Class returned 6.2%. During this same period the net asset value of the
Institutional Class ranged between $10.13 and $9.96. To achieve these results,
we actively managed the Portfolio utilizing a conservative and highly
disciplined relative value approach that emphasizes security selection.
The U.S. economy continued its exceptional performance during 1997 and early
1998, as the unemployment rate declined to its lowest level in 24 years,
inflation fell to a 30-year low, and economic growth remained strong. Not even
the Southeast Asian financial crisis could derail the remarkable performance of
the U.S. economy. Throughout fiscal year 1997, the Federal Reserve did not
change monetary policy, but did maintain a bias toward tightening during most of
the year. Two-year U.S. Treasury yields averaged 5.8% for the fiscal year. The
high yield was 6.3% on May 7, 1997. The low yield of 5.2% occurred on January 9,
1998, in response to the Southeast Asian financial crisis.
Our approach is to actively manage the Portfolio. The average maturity of the
Portfolio is lengthened when we anticipate a decline in short-term interest
rates. Conversely, when we anticipate a rise in interest rates, we shorten the
average maturity of the Portfolio. We also examine the shape and slope of the
yield curve, implied forward interest rates, and anticipated monetary policy in
determining the Portfolio's average maturity.
Looking forward, given the current uncertainty regarding monetary policy, our
strategy is to remain cautious while selectively purchasing longer-dated,
higher-yielding securities. We will continue to actively manage the Short-Term
Treasury Portfolio utilizing our conservative and disciplined relative value
approach.
SHORT-TERM TREASURY PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Short-Term Lehman 1-3 Year Lipper Short
Treasury Portfolio Government Bond U.S. Treasury
Institutional Class Index Funds Average
3/31/96 $100,000 $100,000 $100,000
Apr 96 100,110 100,100 99,920
Apr 97 105,246 106,236 105,286
Apr 98 112,066 113,821 112,361
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK Short-Term Lehman 1-3 Year Lipper Short
Treasury Portfolio Government Bond U.S. Treasury
Retail Class Index Funds Average
9/30/96 $10,000 $10,000 $10,000
Apr 97 10,284 10,339 10,295
Apr 98 10,925 11,076 10,987
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL LEHMAN LIPPER
CLASS CLASS 1-3 YEAR SHORT U.S.
GOVERNMENT TREASURY
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 6.48% 6.23% 7.14% 6.72%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 5.57% 5.89% N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING MARCH 20, 1996. RETAIL CLASS
SHARES WERE OFFERED BEGINNING SEPTEMBER 9, 1996. THE PERFORMANCE OF THE LEHMAN
1-3 YEAR GOVERNMENT BOND INDEX DOES NOT INCLUDE OPERATING EXPENSES WHICH ARE
INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS BEGINS AT
MARCH 31, 1996 FOR THE INSTITUTIONAL CLASS AND AT SEPTEMBER 30, 1996 FOR THE
RETAIL CLASS. THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT THE INCEPTION
DATES.
24
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
[PHOTO OF WASHINGTON, D.C. OMITTED]
THE MONUMENTS OF OUR NATION'S CAPITAL ARE LANDMARKS THAT HONOR LEADERSHIP,
DISCIPLINE, AND SUCCESS, THE SAME QUALITIES THE ARK FUNDS EMPHASIZE IN THEIR
INVESTMENTS.
SHORT-TERM BOND PORTFOLIO REVIEW AND OUTLOOK
STEVEN M. GRADOW WILMER C. STITH III
CO-PORTFOLIO MANAGERS
The past year was a good one for short-term bonds as the U.S. inflationary
outlook remained well under control. As the year progressed, U.S. economic
growth picked up in both the fourth quarter of 1997 and the first quarter of
1998, and unemployment fell to a 24-year low of 4.7%. This economic growth was
discounted by the bond market as the "Asian contagion" began to surface. Asia's
economic weakness was expected to be a drag on U.S. economic growth as exports
to Asia were expected to decline. In addition, cheaper import prices from Asia
were expected to further the very benign inflationary outlook in the U.S. Thus
far, these countervailing forces have allowed the Federal Reserve to leave
monetary policy unchanged. Subsequently, the bond market has been in a narrow
trading range.
With a healthy U.S. economy, corporate bonds allowed investors to pick up
incremental yield versus lower-yielding U.S. Treasuries. The Short-Term Bond
Portfolio increased its exposure to corporate bonds to approximately 39%.
Additionally, we reduced our exposure to prepayment risk by reducing our
exposure to mortgage-backed securities.
Going forward, an area of focus is AAA-rated asset-backed securities, which
offer incremental yield relative to U.S. Treasuries and experience less
prepayment risk than mortgage-backed securities. It is our opinion that this
narrow trading range in the U.S. fixed income market will continue into the
second quarter of 1998, and that incremental income and return will be realized
in quality corporate bonds and well-structured asset-backed securities.
SHORT-TERM BOND PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Short-Term Lehman 1-3 Year Lipper Short
Bond Portfolio Government Bond Investment-Grade
Institutional Class Index Debt Average
3/31/96 $100,000 $100,000 $100,000
Apr 96 99,970 100,100 100,010
Apr 97 105,078 106,236 105,901
Apr 98 111,656 113,821 112,964
- --------------------------------------------------------------------------------
INSTITUTIONAL LEHMAN 1-3 YEAR LIPPER
CLASS GOVERNMENT SHORT INVESTMENT
GRADE
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 6.26% 7.14% 6.67%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 5.44% N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PERFORMANCE PRESENTED FROM INCEPTION TO MARCH 22, 1998 REFLECTS THE PERFORMANCE
OF THE MARKETVEST SHORT-TERM BOND FUND SHARES WHICH WERE OFFERED BEGINNING APRIL
1, 1996. THE PERFORMANCE OF THE LEHMAN 1-3 YEAR GOVERNMENT BOND INDEX DOES NOT
INCLUDE OPERATING EXPENSES WHICH ARE INCURRED BY THE PORTFOLIO. THE PERFORMANCE
REFLECTED IN THE GRAPHS BEGINS AT MARCH 31, 1996 FOR THE INSTITUTIONAL CLASS.
THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT THE INCEPTION DATE.
25
<PAGE>
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MARYLAND AND PENNSYLVANIA TAX-FREE PORTFOLIOS REVIEW AND OUTLOOK
SUSAN S. SCHNAARS, CFA, CPA, PORTFOLIO MANAGER
The Maryland Tax-Free Portfolio Institutional Class returned 8.2% for the year
ended April 30, 1998. The Portfolio's benchmark, the Lipper Maryland Municipal
Debt Funds Average, returned 8.4% for the same period. The Pennsylvania Tax-Free
Portfolio Institutional Class returned 6.8% for the year ended April 30, 1998.
The Maryland Tax-Free Portfolio assets increased $88 million to end the fiscal
year at $108 million in assets. Due to the merger with the Marketvest
Pennsylvania Intermediate Municipal Bond Fund, the assets in the Pennsylvania
Tax-Free Portfolio grew from $25 million to $200 million during the year.
As U.S. Treasury rates have continued their downward progression due to low
inflation, moderate economic growth, and a strong dollar, municipal interest
rates have followed suit, albeit not quite as substantially. The ratio of
municipal yields to U.S. Treasury yields (a measure of the tax advantage of
tax-exempt securities) has continued to trade at the wider end of the historical
range, which usually only occurs during periods of tax reform debate/action.
Although municipals underperformed their taxable counterparts over the past
year, on an after-tax basis, municipal securities make sense for even those
investors paying a marginal tax rate as low as 28%. Supply of new issues is
mounting as lower interest rates are making it more attractive for refinancing,
and the improved financial condition of many municipalities affords them the
opportunity to raise funds for new projects. Combined with the absence of many
retail buyers for securities with rates below 5%, the diversion of the booming
equity markets, and the absence of some insurance company buyers due to proposed
tax law changes, this should keep municipal prices suppressed for a while
longer.
With the decline in interest rates over the past several years, investors have
been extending beyond their normal investment parameters to maintain their
income. Investors have stepped down into the lower-credit-quality categories to
secure higher yields. This added demand for lower-rated securities has resulted
in a compression of spreads between AAA issuers and lower-quality issuers. While
it is true that municipalities generally are in the best financial condition
that they have been in for the last several decades, we generally do not believe
that the incremental return warrants a reduction in credit standards at this
point. We continue to emphasize well-supported issues with somewhat
higher-quality credits and those with insurance.
The Tax-Free Portfolios have benefited from our increased exposure to
longer-dated discount securities and our exposure to the hospital sector. We
continue to have a long-to-intermediate-term bias in the Portfolios, focusing
new purchases in the 15-to-20-year sector of the yield curve. Changes to the
Portfolios reflect the bias toward maximizing after-tax total return, while
providing a high level of current income. Moderate fluctuations in principal
should be expected as interest rates change. As of April 30, 1998, the effective
duration of the Portfolios was approximately 6.5 years. Effective duration is a
measurement of the sensitivity of the Portfolio to changes in interest rates. As
noted previously, we remain focused on maintaining a high-credit-quality
profile, insulating performance if quality spreads begin to widen.
26
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
MARYLAND TAX-FREE PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Maryland Lehman Lehman Lipper
Tax-Free Portfolio 7 Year 10 Year Maryland
Institutional Municipal Bond Municipal Bond Municipal Debt
Class Index Index Funds Average
11/30/96 $100,000 $100,000 $100,000 $100,000
Apr 97 100,115 100,106 100,262 99,856
Apr 98 108,274 107,964 109,256 108,273
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK Maryland ARK Maryland Lehman Lehman Lipper
Tax-Free Tax-Free 7 Year 10 Year Maryland
Portfolio Portfolio Municipal Municipal Municipal
Retail Class Retail Class Bond Bond Debt
with load Index Index Funds Average
1/31/97 $10,000 $ 9,700 $10,000 $10,000 $10,000
Apr 97 10,022 9,721 10,005 10,032 10,028
Apr 98 10,814 10,489 10,790 10,932 10,874
- --------------------------------------------------------------------------------
INST`L RETAIL RETAIL LEHMAN LEHMAN LIPPER
CLASS CLASS CLASS 7 YEAR 10 YEAR MARYLAND
WITH LOAD MUNICIPAL MUNICIPAL MUNICIPAL
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 8.15% 7.91% 4.63% 7.85% 8.97% 8.43%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 6.18% 6.43% 3.99% N/A N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING NOVEMBER 18, 1996. RETAIL
CLASS SHARES WERE OFFERED BEGINNING JANUARY 2, 1997. PERFORMANCE FOR THE RETAIL
CLASS REFLECTS THE DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE
PERFORMANCE OF THE LEHMAN 7 YEAR MUNICIPAL BOND INDEX AND THE LEHMAN 10 YEAR
MUNICIPAL BOND INDEX DOES NOT INCLUDE OPERATING EXPENSES WHICH ARE INCURRED BY
THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS BEGINS AT NOVEMBER 30,
1996 FOR THE INSTITUTIONAL CLASS AND AT JANUARY 31, 1997 FOR THE RETAIL CLASS.
THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT THE INCEPTION DATES.
PENNSYLVANIA TAX-FREE PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Pennsylvania Lehman Lehman Lehman Lipper
Tax-Free 5 Year 7 Year 10 Year Pennsylvania
Portfolio Municipal Municipal Municipal Intermediate
Institutional Bond Bond Bond Municipal
Class Index Index Index Average
3/31/96 $100,000 $100,000 $100,000 $100,000 $100,000
Apr 96 100,340 99,990 99,820 99,650 99,710
Apr 97 104,253 104,640 105,170 105,978 104,825
Apr 98 111,311 111,692 113,426 115,484 112,362
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
ARK Pennsylvania ARK Pennsylvania Lehman Lehman Lehman Lipper
Tax-Free Tax-Free Portfolio 5 Year 7 Year 10 Year Pennsylvania
Portfolio Retail Class Municipal Municipal Municipal Intermediate
Retail Class with Load Bond Bond Bond Municipal
<S> <C> <C> <C> <C> <C> <C>
(Synthetic) (Synthetic) Index Index Index Average
3/31/96 $10,000 $ 9,770 $10,000 $10,000 $10,000 $10,000
Apr 96 10,034 9,733 9,999 9,982 9,965 9,971
Apr 97 10,425 10,113 10,464 10,517 10,598 10,482
Apr 98 11,112 10,779 11,169 11,343 11,548 11,236
</TABLE>
- --------------------------------------------------------------------------------
INST`L RETAIL RETAIL LEHMAN LEHMAN LEHMAN INTERMED.
CLASS CLASS* CLASS 5 YEAR 7 YEAR 10 YEAR MUNI.
WITH LOAD* MUNI. MUNI. MUNI. AVERAGE
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 6.77% 6.59% 3.37% 6.74% 7.85% 8.97% 7.19%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 5.28% 5.20% 3.67% N/A N/A N/A N/A
- --------------------------------------------------------------------------------
*PERFORMANCE SHOWN PRIOR TO THE INCEPTION DATE OF THE RETAIL CLASS IS SYNTHETIC
(NOT ACTUAL) AND REPRESENTS THAT OF THE INSTITUTIONAL CLASS ADJUSTED FOR THE
SALES CHARGE.
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PERFORMANCE PRESENTED FROM INCEPTION TO MARCH 22, 1998 REFLECTS THE PERFORMANCE
OF THE MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND SHARES WHICH
WERE OFFERED BEGINNING APRIL 1, 1996. RETAIL CLASS SHARES WERE OFFERED
BEGINNING MARCH 23, 1998. PERFORMANCE FOR THE RETAIL CLASS REFLECTS THE
DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE PERFORMANCE OF THE LEHMAN
5 YEAR MUNICIPAL BOND INDEX, LEHMAN 7 YEAR MUNICIPAL BOND INDEX, AND THE LEHMAN
10 YEAR MUNICIPAL BOND INDEX DOES NOT INCLUDE OPERATING EXPENSES WHICH ARE
INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS BEGINS AT
MARCH 31, 1996 FOR THE INSTITUTIONAL CLASS AND THE RETAIL CLASS. THE
PERFORMANCE REFLECTED IN THE TABLE BEGINS AT APRIL 1, 1996 FOR THE
INSTITUTIONAL CLASS AND THE RETAIL CLASS.
27
<PAGE>
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
INTERMEDIATE FIXED INCOME PORTFOLIO REVIEW AND OUTLOOK
SUSAN S. SCHNAARS, CFA, CPA, PORTFOLIO MANAGER
The Intermediate Fixed Income Portfolio focuses on systematically over-or
underweighting the major fixed income sectors based on our outlook for the
economic environment and the bond market. The average life of the Portfolio can
range from 3 to 10 years, but is normally maintained at 5 years. The Portfolio
offers a high rate of current income, while attempting to mitigate principal
volatility.
Entering the year, we anticipated that interest rates would continue to trade in
a relatively tight range, as domestic growth and inflation remained at levels
favorable to the bond market. With the expectation that corporate profits would
continue to improve in the seventh year of the economic expansion, we
overweighted our exposure to the corporate sector, selecting medium-quality
issuers with improving financial and market situations. The Portfolio's
performance benefited from this overweighting, in addition to several issuers
receiving upgrades in their credit rating. As interest rates have periodically
traded at the upper end of the range, opportunities have been taken to lengthen
the maturities in the Portfolio. We remain only slightly longer than our
benchmark index, as the flatness in the yield curve does not warrant a dramatic
extension.
In the short run, we are concerned that stronger than expected economic growth
may push interest rates toward the upper end of the range, possibly even
touching 6.5%. Longer term, the effects of the Asian crisis should be favorable
for the bond market. We anticipate that the Asian problems will be good news for
the inflation story (importing lower-priced goods) and that the instability
could suppress U.S. economic growth due to decreased foreign demand. We also
expect that the gradual decline in Treasury debt issuance will help to keep
rates lower, as demand for U.S. securities should remain relatively high due to
the strength of the dollar.
INTERMEDIATE FIXED INCOME PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Intermediate Lehman Intermediate Lipper Intermediate
Fixed Income Portfolio Government Bond Investment-Grade
Institutional Class Index Debt funds Average
11/30/96 $100,000 $100,000 $100,000
Apr 97 100,267 100,551 99,901
Apr 98 108,941 109,279 109,731
- --------------------------------------------------------------------------------
INSTITUTIONAL LEHMAN LEHMAN
CLASS INTERMEDIATE INTERMEDIATE
GOVERNMENT INVESTMENT-GRADE
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 8.65% 8.68% 9.84%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 6.43% N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING NOVEMBER 18, 1996. THE
PERFORMANCE OF THE LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX DOES NOT INCLUDE
OPERATING EXPENSES WHICH ARE INCURRED BY THE PORTFOLIO. THE PERFORMANCE
REFLECTED IN THE GRAPH BEGINS AT NOVEMBER 30, 1996. THE PERFORMANCE REFLECTED IN
THE TABLE BEGINS AT THE INCEPTION DATE.
28
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
U.S. GOVERNMENT BOND PORTFOLIO
REVIEW AND OUTLOOK
STEVEN M. GRADOW N. BETH VOLK, CFA
CO-PORTFOLIO MANAGERS
During the first quarter of 1998, the U.S. economy continued to fare well in
defying the belief that the downturn in the Asian markets during the second half
of 1997 would lead to weakness domestically. If anything, the slack of the Asian
and, notably, Japanese markets has been taken up by the renewed strength of the
European economies. The recent drop in oil prices and continued temperance of
inflationary pressures across many commodities are dampening concerns about
strong wage pressures and reinforcing investors' belief that the Federal Reserve
will remain on the sidelines for another quarter or two while the bond market
trades in a self-correcting, narrow range.
The flatness of the yield curve has given us little incentive to take more than
a slightly longer duration stance than our benchmark. Compared to our benchmark,
the duration of the U.S. Government Bond Portfolio was only slightly longer at
4.1 years. At the same time, returns in such narrowly traded market environments
benefit from increased exposure to sectors that offer higher-yield spreads.
Accordingly, during the quarter, we trimmed our exposure to lower-yielding
agency and U.S. Treasuries and in turn increased the weighting in
higher-yielding corporates and high-quality asset-backed securities. We also
swapped out of some agencies and reinvested the proceeds in higher-yielding,
similar-quality mortgage pass-throughs. Our strategy preserved overall quality
at a strong AA1 and enhanced yield. Over the next quarter, we anticipate holding
duration modestly longer than our benchmark. We will continue to emphasize the
higher yields of the corporate, asset-backed, and mortgage-backed markets until
we see a slowing in the economy and impending deterioration in corporate balance
sheets.
U.S. GOVERNMENT BOND PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK U.S. Government Lehman Intermediate Lipper Intermediate
Bond Portfolio Government/Corporate U.S. Government
Institutional Class Index Funds Average
3/31/96 $100,000 $100,000 $100,000
Apr 96 99,480 99,650 99,380
Apr 97 103,967 106,048 105,243
Apr 98 113,022 115,243 114,957
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK U.S. Government ARK U.S. Government Lehman Lipper
Bond Portfolio Bond Portfolio Intermediate Intermediate
Retail Class Retail Class Government/ U.S. Government
(Synthetic) with load Corporate Funds
(Synthetic) Index Average
3/31/96 $10,000 $ 9,700 $10,000 $10,000
Apr 96 9,948 9,650 9,965 9,938
Apr 97 10,397 10,085 10,605 10,524
Apr 98 12,166 11,801 11,552 11,496
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL LEHMAN LEHMAN
CLASS CLASS* CLASS INTERMEDIATE INTERMEDIATE
WITH LOAD* GOV'T./CORP. U.S. GOV'T
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 8.71% 8.44% 5.19% 8.93% 9.23%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 6.06% 5.95% 4.41% N/A N/A
- --------------------------------------------------------------------------------
*PERFORMANCE SHOWN PRIOR TO THE INCEPTION DATE OF THE RETAIL CLASS IS SYNTHETIC
(NOT ACTUAL) AND REPRESENTS THAT OF THE INSTITUTIONAL CLASS ADJUSTED FOR THE
SALES CHARGE.
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PERFORMANCE PRESENTED FROM INCEPTION TO MARCH 22, 1998 REFLECTS THE PERFORMANCE
OF THE MARKETVEST INTERMEDIATE U.S. GOVERNMENT BOND FUND. INSTITUTIONAL CLASS
SHARES WERE OFFERED BEGINNING APRIL 1, 1996. RETAIL CLASS SHARES WERE OFFERED
BEGINNING APRIL 1, 1998. PERFORMANCE FOR THE RETAIL CLASS REFLECTS THE
DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE PERFORMANCE OF THE LEHMAN
INTERMEDIATE GOVERNMENT/CORPORATE INDEX DOES NOT INCLUDE OPERATING EXPENSES
WHICH ARE INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS
BEGINS AT MARCH 31, 1996 FOR THE INSTITUTIONAL CLASS AND THE RETAIL CLASS. THE
PERFORMANCE REFLECTED IN THE TABLE BEGINS AT APRIL 1, 1996 FOR THE
INSTITUTIONAL CLASS AND THE RETAIL CLASS.
29
<PAGE>
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OF CENTRAL MARKET OMITTED]
THE PAST MEETS THE PRESENT AT THE CENTRAL MARKET, LOCATED IN YORK, PENNSYLVANIA.
THE MARKET IS A TIME HONORED TRADITION FOR LOCAL RESIDENTS. BY OFFERING THE BEST
IN LOCAL PRODUCE, MEATS AND OTHER PRODUCTS, THE CENTRAL MARKET DELIVERS THE
CENTRALIZED CONVENIENCE OF THE PRESENT FOR THOSE WITH A TASTE FOR THE PAST.
INCOME PORTFOLIO REVIEW AND OUTLOOK
STEVEN M. GRADOW, PORTFOLIO MANAGER
The Income Portfolio continues to exhibit solid results, returning 10.8% versus
10.6% for the Lipper Corporate Debt A-Rated Funds Average for the year ended
April 30, 1998. In spite of fears that the downturn in the Asian markets during
the second half of 1997 would lead to slower growth domestically, the U.S.
economy continues to exhibit strong growth. With housing starts reaching record
levels in the first quarter of 1998 and consumer spending remaining very
healthy, the U.S. economy is poised to grow at over a 3% rate for 1998.
Inflation has reached record lows in what the Europeans refer to as a
"wunderkind" economy. We expect interest rates to remain in a stable trading
range for the next few quarters, as there is little indication of excesses to
propel a major rate movement.
We will continue to seek to enhance returns on the Portfolio through selective
overweighting in medium-grade and lower-quality corporate bonds. We've
maintained an underweighting in mortgage-backed securities for the past two
quarters which has enhanced performance. As lower rates have resulted in
increased prepayments in the mortgage market, we have avoided the
underperforming premium mortgage area. We continue to expect little movement in
the shape of the yield curve, as for the past six months the flat shape of the
yield curve has given us little incentive to extend the duration of the
Portfolio. It looks like 1998 will be another year in which coupon will dominate
return. We expect to capture strong performance by overweighting the
higher-yielding corporate and asset-backed securities sectors, and
opportunistically trading the mortgage sector. We find particular value in the
home-equity area of the asset-backed market and hold a large overweighting in
this sector. Corporate holdings in the Portfolio emphasize telecommunication,
energy, and financial issuers. These industry groups continue to display strong
performance and together with rapid consolidations should outperform through the
coming months.
30
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
INCOME PORTFOLIO PERFORMANCE
AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
ARK Income Lehman Brothers Lipper Corporate
Portfolio Aggregate Bond Debt A-Rated
Institutional Class Index Funds Average
7/31/93 $100,000 $100,000 $100,000
Apr 94 99,836 98,354 97,883
Apr 95 106,355 105,563 103,883
Apr 96 115,353 114,673 112,121
Apr 97 122,862 122,792 119,442
Apr 98 136,181 136,201 132,139
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
ARK Income ARK Income Lehman Brothers Lipper Corporate
Portfolio Portfolio Aggregate Debt A-Rated
Retail Class Retail Class Bond Index Funds Average
with load
7/31/94 $10,000 $ 9,700 $10,000 $10,000
Apr 95 10,623 10,304 10,733 10,613
Apr 96 11,487 11,143 11,659 11,455
Apr 97 12,214 11,847 12,485 12,203
Apr 98 13,492 13,088 13,848 13,499
- --------------------------------------------------------------------------------
INSTITUTIONAL RETAIL RETAIL LEHMAN LIPPER
CLASS CLASS CLASS BROTHERS CORPORATE
WITH LOAD AGGREGATE DEBT A-RATED
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 10.84% 10.47% 7.13% 10.92% 10.63%
- --------------------------------------------------------------------------------
ANNUALIZED
TOTAL RETURN
INCEPTION
TO DATE 6.68% 7.62% 6.82% N/A N/A
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INSTITUTIONAL CLASS SHARES WERE OFFERED BEGINNING JULY 16, 1993. RETAIL CLASS
SHARES WERE OFFERED BEGINNING APRIL 12, 1994. PERFORMANCE FOR THE RETAIL CLASS
REFLECTS THE DEDUCTION OF A 3.00% SALES CHARGE AFTER WAIVERS. THE PERFORMANCE OF
THE LEHMAN BROTHERS AGGREGATE BOND INDEX DOES NOT INCLUDE OPERATING EXPENSES
WHICH ARE INCURRED BY THE PORTFOLIO. THE PERFORMANCE REFLECTED IN THE GRAPHS
BEGINS AT JULY 31, 1993 FOR THE INSTITUTIONAL CLASS AND AT APRIL 30, 1994 FOR
THE RETAIL CLASS. THE PERFORMANCE REFLECTED IN THE TABLE BEGINS AT THE INCEPTION
DATES.
31
<PAGE>
MONEY MARKET PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OF MONEY MARKET MANAGERS OMITTED]
Meeting the daily challenge of mixing safety, liquidity, and results, the money
market and short-term Treasury team, led by James M. Hannan, manages over $2.4
billion in assets for ARK Fund investors. The highly contested market for liquid
investments has been a cornerstone of the ARK family since inception.
Institutions and individuals alike have been drawn to the competitive returns.
32
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
THE ARK FUNDS MONEY MARKET PORTFOLIOS MANAGEMENT TEAM (FROM LEFT TO RIGHT):
JAMES M. HANNAN IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE IS
PORTFOLIO MANAGER OF THE MONEY MARKET PORTFOLIOS AND THE SHORT-TERM TREASURY
PORTFOLIO. HE HAS OVER 10 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
WILMER C. STITH III IS A VICE PRESIDENT OF ALLIED INVESTMENT ADVISORS, INC. IN
ADDITION TO CO-MANAGING THE SHORT-TERM BOND PORTFOLIO, HE ASSISTS IN THE TRADING
OF THE MONEY MARKET PORTFOLIOS.
BRYAN J. DINGLE IS A CREDIT ANALYST IN THE FIXED INCOME GROUP. HE PERFORMS
INDEPENDENT CREDIT ANALYSIS ON CORPORATE AND MUNICIPAL ISSUERS.
33
<PAGE>
MONEY MARKET PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OF ANNAPOLIS, MARYLAND OMITTED]
MONEY MARKET PORTFOLIOS
REVIEW AND OUTLOOK
JAMES M. HANNAN, PORTFOLIO MANAGER
WORLD CLASS DINING AND SAILING ARE HALLMARKS OF ANNAPOLIS, THE CAPITAL CITY OF
MARYLAND
The Money Market Portfolios continued to outperform their relevant IBC/Donoghues
Money Market Average yields for the fiscal year as displayed in the respective
performance charts. To achieve these results, we actively managed the Portfolios
utilizing a conservative and highly disciplined relative value approach that
emphasizes security selection. Through the consistent application of our
investment process, the Money Market Portfolios have consistently outperformed
the relevant IBC/Donoghues Money Market Average yields since their inception in
June 1993.
The U.S. economy continued its exceptional performance during 1997 and early
1998, as the unemployment rate declined to its lowest level in 24 years,
inflation fell to a 30-year low, and economic growth remained strong. Not even
the Southeast Asian financial crisis could derail the remarkable performance of
the U.S. economy. Throughout the Portfolios' 1998 fiscal year the Federal
Reserve did not change monetary policy, but did maintain a bias toward
tightening during most of 1997. In response to this interest rate environment,
our strategy was to extend the average maturity of each Portfolio to take
advantage of longer-dated, higher-yielding securities. We also utilized a
barbell portfolio strategy, which provided us with the flexibility to meet our
shareholders' liquidity needs and to take advantage of short-lived market
inefficiencies.
Throughout the year, the Money Market Portfolios continued to meet their
investment objectives of providing preservation of principal, daily liquidity,
and current income. To provide for preservation of principal, our independent
credit evaluation process focuses on quantitative and qualitative factors that
highlight the issuer's ability to maintain its credit rating and leading
industry position. Approved corporate issuers are monitored to ensure that high
credit quality is maintained. To provide for daily liquidity, we determine the
appropriate average maturity of the Portfolios by examining our shareholders'
liquidity needs, expected monetary policy, the shape and slope of the yield
curve, and implied forward interest rates. To provide a high level of current
income, we identify market inefficiencies and short-lived trading opportunities.
We take advantage of these opportunities through our active management style.
Looking forward, given the current uncertainty regarding monetary policy, our
strategy is to remain cautious while selectively purchasing longer-dated,
higher-yielding securities. We will continue to actively manage the Money Market
Portfolios utilizing our conservative and disciplined relative value approach.
34
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 1998
MONEY MARKET PORTFOLIO PERFORMANCE
AS OF 4/30/98
<TABLE>
<CAPTION>
[LINE GRAPH OMITTED]
Plot Points are as follows:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THIRTY DAY YIELD COMPARISON 5/31/97 6/30/97 7/31/97 8/31/97 9/30/97 10/31/97 11/30/97 12/31/97 1/31/98 2/28/98 3/31/98 4/30/98
ARK Funds Money Market
Portfolio, Institutional 5.44 5.44 5.44 5.43 5.43 5.42 5.46 5.54 5.39 5.33 5.32 5.31
IBC/Financial Data First Tier
Institutions Only 5.28 5.31 5.32 5.32 5.31 5.30 5.34 5.38 5.36 5.31 5.29 5.28
ARK Funds Money Market
Portfolio, Retail 5.13 5.13 5.13 5.12 5.12 5.11 5.15 5.23 5.14 5.08 5.07 5.06
IBC/Financial Data First
Tier 4.92 4.95 4.94 4.94 4.93 4.92 4.97 5.04 5.01 4.95 4.93 4.92
ARK Funds Money Market
Portfolio, Institutional II 5.34 5.34 5.34 5.33 5.33 5.32 5.36 5.44 5.35 5.29 5.28 5.27
TAX-FREE MONEY MARKET PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
THIRTY DAY YIELD COMPARISON
ARK Tax-Free Money Market
Portfolio, Institutional 3.72 3.65 3.35 3.28 3.48 3.44 3.53 3.51 3.23 3.05 3.06 3.48
IBC/Financial Data Tax-Free
Institutions Only 3.57 3.50 3.33 3.19 3.38 3.36 3.46 3.43 3.18 3.00 3.03 3.44
ARK Tax-Free Money Market
Portfolio, Retail 3.41 3.34 3.04 2.97 3.17 3.13 3.22 3.20 2.98 2.80 2.81 3.23
IBC/Financial Data Tax-Free
Stockbroker &
General Purpose 3.27 3.22 3.04 2.92 3.10 3.09 3.19 3.17 2.94 2.77 2.78 3.16
ARK Tax-Free Money Market
Portfolio, Institutional II 3.62 3.55 3.25 3.18 3.38 3.34 3.43 3.41 3.19 3.01 3.02 3.44
U.S. GOVERNMENT MONEY MARKET PORTFOLIO PERFORMANCE AS OF 4/30/98
[LINE GRAPH OMITTED]
Plot Points are as follows:
THIRTY DAY YIELD COMPARISON
ARK U.S. Government Money Market
Portfolio, Institutional 5.25 5.30 5.31 5.34 5.31 5.30 5.34 5.39 5.30 5.25 5.18 5.15
IBC/Financial Data Government
Only Institutions Only 5.09 5.11 5.11 5.16 5.13 5.11 5.16 5.19 5.16 5.15 5.15 5.14
ARK U.S. Government Money Market
Portfolio, Retail (inception date August '97) 5.03 5.00 4.99 5.03 5.08 5.02 4.97 4.94 4.91
IBC/Financial Data U.S.
Government & Agencies 4.83 4.86 4.87 4.88 4.87 4.87 4.92 4.96 4.93 4.91 4.89 4.89
ARK U.S. Government Money Market
Portfolio, Institutional II 5.15 5.20 5.21 5.24 5.21 5.20 5.24 5.29 5.23 5.18 5.15 5.12
U.S. TREASURY MONEY MARKET PORTFOLIO PERFORMANCE AS OF 4/30/98
THIRTY DAY YIELD COMPARISON
[LINE GRAPH OMITTED]
Plot Points are as follows:
ARK U.S.Treasury Money Market
Portfolio, Institutional 5.07 5.01 4.99 5.00 5.02 4.93 4.98 4.99 4.90 4.88 4.88 4.90
IBC/Financial Data 100%
U.S. Treasury 4.71 4.71 4.72 4.76 4.74 4.68 4.57 4.75 4.75 4.72 4.76 4.73
ARK U.S. Treasury Money Market
Portfolio, Institutional II 4.97 4.90 4.89 4.90 4.92 4.83 4.88 4.89 4.82 4.80 4.86 4.87
ARK U.S. Treasury Money Market
Portfolio, Portfolio Retail 4.76 4.70 4.68 4.69 4.71 4.62 4.67 4.68 4.61 4.59 4.65 4.66
</TABLE>
35
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE TRUSTEES AND SHAREHOLDERS
ARK FUNDS:
We have audited the accompanying statements of net assets of Money Market
Portfolio, Tax-Free Money Market Portfolio, U.S. Government Money Market
Portfolio, U.S. Treasury Money Market Portfolio (collectively "Money Market
Portfolios), Short-Term Treasury Portfolio, Short-Term Bond Portfolio, Maryland
Tax-Free Portfolio, Pennsylvania Tax-Free Portfolio, Income Portfolio,
Intermediate Fixed Income Portfolio, U.S. Government Bond Portfolio, Balanced
Portfolio, Equity Income Portfolio, Value Equity Portfolio, Equity Index
Portfolio, Blue Chip Equity Portfolio, Capital Growth Portfolio, Mid-Cap Equity
Portfolio, Small-Cap Equity Portfolio (formerly Special Equity Portfolio),
International Equity Selection Portfolio and International Equity Portfolio,
portfolios of ARK Funds, (the "Funds"), as of April 30, 1998 and the related
statements of operations, statements of changes in net assets and financial
highlights for each of the years or periods presented below:
Money Market Portfolios, Short-Term Treasury Portfolio, Maryland Tax-Free
Portfolio, Income Portfolio, Intermediate Fixed Income Portfolio, Balanced
Portfolio, Equity Income Portfolio, Blue Chip Equity Portfolio, Capital
Growth Portfolio, Mid-Cap Equity Portfolio, Small-Cap Equity Portfolio and
International Equity Portfolio -- statements of operations for the year
ended April 30, 1998, statements of changes in net assets for each of the
years or periods in the two-year period ended April 30, 1998, and the
financial highlights for each of the periods presented for these Funds, on
pages 100, 101, 102 and 103.
Equity Index Portfolio -- statements of operations, changes in net assets
and financial highlights for the period from October 1, 1997 (commencement
of operations) to April 30, 1998.
Short-Term Bond Portfolio, Pennsylvania Tax-Free Portfolio, U.S. Government
Bond Portfolio, Value Equity Portfolio and International Equity Selection
Portfolio -- statements of operations, statements of changes in net assets
and financial highlights for the period from March 1, 1998 to April 30,
1998. The statements of operations, statements of changes in net assets and
financial highlights of these Funds for the periods ended prior to April
30, 1998 were audited by other auditors whose report dated April 16, 1998
expressed an unqualified opinion thereon.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of April 30, 1998 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Money
Market Portfolio, Tax-Free Money Market Portfolio, U.S. Government Money Market
Portfolio, U.S. Treasury Money Market Portfolio, Short-Term Treasury Portfolio,
Short-Term Bond Portfolio, Maryland Tax-Free Portfolio, Pennsylvania Tax-Free
Portfolio, Income Portfolio, Intermediate Fixed Income Portfolio, U.S.
Government Bond Portfolio, Balanced Portfolio, Equity Income Portfolio, Value
Equity Portfolio, Equity Index Portfolio, Blue Chip Portfolio, Capital Growth
Portfolio, Mid-Cap Equity Portfolio, Small-Cap Equity Portfolio, International
Equity Selection Portfolio and International Equity Portfolio, portfolios of ARK
Funds, as of April 30, 1998, the results of their operations, the changes in
their net assets and the financial highlights for each of the years or periods
specified in the first paragraph above (except for the Funds and periods audited
and reported on by others as specified above) in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
May 29, 1998
36
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: MONEY MARKET PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Asset-Backed Securities -- 5%
Repurchase Agreement -- 11%
Certificates of Deposit -- 15%
Taxable Municipal Bonds -- 22%
Corporate Obligations -- 47%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 46.6%
BANKS -- 9.5%
BANK ONE TEXAS (A)
5.420%, 05/05/98 $10,000 $ 9,999
BANKERS TRUST (A) (B)
5.650%, 05/01/98 10,000 9,998
NORWEST, SERIES D, MTN (A)
5.734%, 06/16/98 10,000 10,010
WELLS FARGO
8.625%, 04/01/99 17,000 17,428
- --------------------------------------------------------------------------------
TOTAL BANKS $ 47,435
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 28.3%
BEAR STEARNS, SERIES B, MTN (A)
5.680%, 05/01/98 10,000 10,000
5.711%, 05/27/98 10,000 10,009
CAPITAL ONE FUNDING (A)
5.570%, 05/07/98 4,300 4,300
5.670%, 05/07/98 4,600 4,600
CIT GROUP HOLDINGS, MTN
6.500%, 07/13/98 5,000 5,005
CIT GROUP HOLDINGS, MTN (A)
5.600%, 05/01/98 10,000 9,999
FORD CAPITAL BV, YB
9.125%, 05/01/98 2,500 2,500
GENERAL ELECTRIC ENGINE
RECEIVABLES (A)
5.646%, 05/03/98 1,850 1,850
GENERAL ELECTRIC TAXABLE
LOAN CERTIFICATE (A)
5.727%, 05/04/98 4,968 4,968
GOLDMAN SACHS GROUP (A) (B)
5.656%, 07/15/98 10,000 10,000
GOLDMAN SACHS GROUP (A) (B)
6.088%, 07/26/98 5,000 5,015
GOLDMAN SACHS GROUP,
SERIES A (A) (B)
5.688%, 05/26/98 8,000 8,000
5.759%, 07/31/98 2,500 2,501
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
LEHMAN BROTHERS HOLDINGS,
SERIES E, MTN (A)
5.698%, 06/13/98 $10,000 $ 9,999
MERRILL LYNCH, SERIES B,
MTN (A)
5.550%, 05/01/98 10,000 10,010
5.680%, 05/01/98 10,000 10,000
MORGAN STANLEY GROUP,
SERIES C, MTN (A)
5.665%, 05/10/98 9,000 9,002
SALOMON SMITH BARNEY
HOLDINGS, CP
5.530%, 07/13/98 20,000 19,776
TRAP ROCK INDUSTRY,
DEMAND RB (A)
5.750%, 05/06/98 3,000 3,000
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $140,534
- --------------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS -- 8.8%
CHRYSLER FINANCE
6.500%, 06/15/98 5,000 5,003
CHRYSLER FINANCE,
SERIES M, MTN
7.260%, 07/01/98 4,500 4,509
CHRYSLER FINANCE,
SERIES Q, MTN (A)
5.636%, 05/21/98 10,000 10,002
FORD MOTOR CREDIT,
MTN (A)
5.700%, 05/01/98 5,000 4,999
GENERAL MOTORS
ACCEPTANCE, MTN
6.200%, 05/11/98 5,000 5,000
6.375%, 07/02/98 7,200 7,204
6.000%, 07/13/98 5,000 5,003
NORWEST FINANCIAL
6.250%, 03/15/99 2,000 2,009
- --------------------------------------------------------------------------------
TOTAL PERSONAL CREDIT INSTITUTIONS $ 43,729
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $231,698) $231,698
- --------------------------------------------------------------------------------
TAXABLE MUNICIPAL BONDS -- 22.1%
CALIFORNIA -- 7.0%
OAKLAND-ALAMEDA COUNTY, CIBC
5.570%, 05/12/98 18,000 18,000
5.570%, 05/15/98 8,500 8,500
RIVERSIDE COUNTY COP, LOC (A)
5.650%, 05/07/98 8,000 8,000
- --------------------------------------------------------------------------------
TOTAL CALIFORNIA $ 34,500
- --------------------------------------------------------------------------------
ILLINOIS -- 2.0%
ILLINOIS STATE HEALTH FACILITIES
RB, MBIA (A)
5.650%, 05/06/98 10,000 10,000
- --------------------------------------------------------------------------------
TOTAL ILLINOIS $ 10,000
- --------------------------------------------------------------------------------
37
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MONEY MARKET PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MARYLAND -- 1.0%
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
RB, SERIES B, LOC
5.750%, 05/07/98 $ 5,000 $ 5,000
- --------------------------------------------------------------------------------
TOTAL MARYLAND $ 5,000
- --------------------------------------------------------------------------------
MASSACHUSETTS -- 4.3%
MASSACHUSETTS STATE INDUSTRIAL
FINANCE AUTHORITY RB,
SERIES C, LOC
5.625%, 05/06/98 21,125 21,125
- --------------------------------------------------------------------------------
TOTAL MASSACHUSETTS $ 21,125
- --------------------------------------------------------------------------------
NEW JERSEY -- 1.0%
NEW JERSEY STATE ECONOMIC
DEVELOPMENT AUTHORITY
RB, LOC (A)
5.750%, 05/06/98 4,800 4,800
- --------------------------------------------------------------------------------
TOTAL NEW JERSEY $ 4,800
- --------------------------------------------------------------------------------
NEW YORK -- 2.4%
NEW YORK GO, FGIC
5.663%, 05/21/98 12,000 12,000
- --------------------------------------------------------------------------------
TOTAL NEW YORK $ 12,000
- --------------------------------------------------------------------------------
NORTH CAROLINA -- 1.3%
DURHAM COP, SERIES B (A)
5.550%, 05/06/98 1,500 1,500
WINSTON SALEM COP
5.580%, 05/15/98 5,000 5,000
- --------------------------------------------------------------------------------
TOTAL NORTH CAROLINA $ 6,500
- --------------------------------------------------------------------------------
PENNSYLVANIA -- 0.1%
PENNSYLVANIA STATE ECONOMIC
DEVELOPMENT FINANCING
AUTHORITY RB, LOC (A)
5.650%, 05/07/98 600 600
- --------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $ 600
- --------------------------------------------------------------------------------
VIRGINIA -- 3.0%
VIRGINIA STATE HOUSING
DEVELOPMENT RB,
AMBAC (A)
5.530%, 05/07/98 15,000 15,000
- --------------------------------------------------------------------------------
TOTAL VIRGINIA $ 15,000
- --------------------------------------------------------------------------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $109,525) $109,525
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 15.1%
COMMERCIAL BANKS -- 6.4%
BANK OF AMERICA
5.940%, 10/22/98 $ 5,000 $ 4,999
BANKERS TRUST
5.910%, 08/07/98 5,000 4,999
HUNTINGTON NATIONAL
5.625%, 01/12/99 11,900 11,890
WACHOVIA
5.810%, 10/08/98 10,000 10,003
- --------------------------------------------------------------------------------
TOTAL COMMERCIAL BANKS $ 31,891
- --------------------------------------------------------------------------------
FOREIGN BANKS -- 8.7%
DEUTSCHE BANK
5.940%, 10/21/98 5,000 4,999
5.940%, 10/23/98 8,000 7,998
ROYAL BANK OF CANADA
6.150%, 05/08/98 5,000 5,000
SOCIETE GENERALE
6.180%, 05/06/98 5,000 5,000
5.860%, 11/18/98 10,000 10,008
5.680%, 02/26/99 10,000 9,996
- --------------------------------------------------------------------------------
TOTAL FOREIGN BANKS $ 43,001
- --------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $74,892) $ 74,892
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 4.4%
ABT 96, SERIES A-5 (A)
5.666%, 05/16/98 14,000 14,000
CAPITAL EQUIPMENT RECEIVABLES
TRUST, SERIES 1997-1, CLASS A1
5.790%, 12/15/98 4,328 4,328
TMS AUTO GRANTOR TRUST,
SERIES 1997-4, CLASS A1
5.909%, 01/08/99 3,490 3,490
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $21,818) $ 21,818
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 11.2%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$55,867,392 (collateralized by
U.S. Treasury Bonds:
total market value
$58,959,555) $55,859 55,859
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $55,859) $ 55,859
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.4%
(Cost $493,792) $493,792
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.6% $ 2,988
================================================================================
38
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 226,422,589 outstanding
shares of beneficial interest $ 226,407
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 188,044,979 outstanding
shares of beneficial interest 188,035
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 82,295,274 outstanding shares
of beneficial interest 82,292
Undistributed net investment income 63
Distributions in excess of net realized
gain on investments (17)
================================================================================
TOTAL NET ASSETS -- 100.0% $496,780
================================================================================
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 APRIL 30, 1998. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(B) SECURITY EXEMPT FROM REGISTRATION UNDER RULE144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL INVESTORS.
COP--CERTIFICATE OF PARTICIPATION
CP--COMMERCIAL PAPER
GO--GENERAL OBLIGATION
LOC--SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
BANK OR OTHER FINANCIAL INSTITUTION.
MTN--MEDIUM-TERM NOTE
RB--REVENUE BOND
YB--YANKEE BOND
THE FOLLOWING ORGANIZATIONS HAVE PROVIDED UNDERLYING CREDITSUPPORT FOR
SECURITIES LISTED ABOVE, AS INDICATED.
AMBAC--AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
CIBC--CANADIAN IMPERIAL BANK CORPORATION
FGIC--FINANCIAL GUARANTY INSURANCE COMPANY
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: TAX-FREE MONEY MARKET PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
General Obligations -- 6%
Tax-Exempt Commercial Paper -- 14%
Anticipation Notes -- 17%
Revenue Bonds -- 63%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 99.3%
ARIZONA -- 4.5%
MARICOPA COUNTY, POLLUTION
CONTROL AUTHORITY RB,
SERIES E, LOC (A)
4.200%, 05/01/98 $1,500 $1,500
SALT RIVER, AGRICULTURAL
IMPROVEMENT TECP, LOC
3.600%, 06/17/98 5,000 5,000
- --------------------------------------------------------------------------------
TOTAL ARIZONA $6,500
- --------------------------------------------------------------------------------
CALIFORNIA -- 4.8%
CALIFORNIA STATE RAN
4.500%, 06/30/98 5,000 5,005
CALIFORNIA STATE TAN, SCHOOL
CASH RESERVE PROGRAM,
AMBAC
4.750%, 07/02/98 2,000 2,003
- --------------------------------------------------------------------------------
TOTAL CALIFORNIA $7,008
- --------------------------------------------------------------------------------
COLORADO -- 2.9%
COLORADO STATE EDUCATIONAL
FACILITIES AUTHORITY RB,
PRO RODEO HALL OF FAME
PROJECT, LOC (A)
4.150%, 05/07/98 2,430 2,430
COLORADO STATE STUDENT
OBLIGATIONS BOND AUTHORITY
RB, SLMA (A)
4.000%, 05/06/98 1,775 1,775
- --------------------------------------------------------------------------------
TOTAL COLORADO $4,205
- --------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 4.9%
DISTRICT OF COLUMBIA TRAN, LOC
4.500%, 09/30/98 4,000 4,010
DISTRICT OF COLUMBIA GO,
SERIES 1992 A-1, LOC (A)
4.350%, 05/01/98 2,600 2,600
DISTRICT OF COLUMBIA GO,
SERIES 1992 A-2, LOC (A)
4.350%, 05/01/98 200 200
39
<PAGE>
TAX-FREE MONEY MARKET PORTFOLIO (CONTINUED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
DISTRICT OF COLUMBIA GO,
SERIES 1992 A-6, LOC (A)
4.350%, 05/01/98 $ 300 $ 300
- --------------------------------------------------------------------------------
TOTAL DISTRICT OF COLUMBIA $ 7,110
- --------------------------------------------------------------------------------
FLORIDA -- 7.1%
FLORIDA STATE HOUSING FINANCE
AUTHORITY RB, FNMA (A)
4.200%, 05/06/98 5,235 5,235
SUNSHINE STATE GOVERNMENT
FINANCING TECP, LOC
3.550%, 05/11/98 5,000 5,000
- --------------------------------------------------------------------------------
TOTAL FLORIDA $10,235
- --------------------------------------------------------------------------------
GEORGIA -- 1.5%
DE KALB COUNTY, HOUSING
AUTHORITY RB, WINTERS
CREEK APARTMENTS PROJECT,
FNMA (A)
4.200%, 05/06/98 1,700 1,700
DE KALB COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, LOC (A)
4.350%, 05/07/98 600 600
- --------------------------------------------------------------------------------
TOTAL GEORGIA $ 2,300
- --------------------------------------------------------------------------------
ILLINOIS -- 0.7%
ILLINOIS STATE POLLUTION
CONTROL RB, AMOCO OIL
COMPANY PROJECT (A)
4.200%, 05/01/98 1,000 1,000
- --------------------------------------------------------------------------------
TOTAL ILLINOIS $ 1,000
- --------------------------------------------------------------------------------
INDIANA -- 0.5%
INDIANA STATE EDUCATIONAL
FACILITIES AUTHORITY RB,
UNIVERSITY OF NOTRE DAME
DU LAC PROJECT, LOC (A)
4.000%, 05/06/98 800 800
- --------------------------------------------------------------------------------
TOTAL INDIANA $ 800
- --------------------------------------------------------------------------------
IOWA -- 3.3%
IOWA STATE HIGHER EDUCATION
AUTHORITY RB, ST. AMBROSE
UNIVERSITY PROJECT, LOC (A)
4.100%, 05/07/98 1,000 1,000
IOWA STATE WARRANT CERTIFICATE,
CASH ANTICIPATION PROGRAM,
SERIES A, FSA
4.500%, 06/26/98 3,800 3,804
- --------------------------------------------------------------------------------
TOTAL IOWA $ 4,804
- --------------------------------------------------------------------------------
KENTUCKY -- 3.3%
JEFFERSON COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
BEL KNAP PROJECT, LOC (A)
3.750%, 05/01/98 1,226 1,226
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PENDLETON COUNTY RB, LOC (A)
3.950%, 07/01/98 $1,000 $ 1,000
TRIMBLE COUNTY TECP, LOC
3.300%, 05/15/98 2,500 2,500
- --------------------------------------------------------------------------------
TOTAL KENTUCKY $ 4,726
- --------------------------------------------------------------------------------
LOUISIANA -- 3.1%
LOUISIANA STATE PUBLIC FACILITIES
AUTHORITY RB, KENNER HOTEL
PROJECT, LOC (A)
4.250%, 05/01/98 4,400 4,400
- --------------------------------------------------------------------------------
TOTAL LOUISIANA $ 4,400
- --------------------------------------------------------------------------------
MARYLAND -- 18.4%
ANNE ARUNDEL COUNTY GO,
PRE-REFUNDED @ 102 (B)
6.700%, 06/01/98 1,125 1,150
BALTIMORE COUNTY GO
6.000%, 03/01/99 950 967
BALTIMORE COUNTY, GARRISON
FOREST SCHOOL PROJECT
RB, LOC (A)
4.400%, 05/07/98 3,000 3,000
BALTIMORE COUNTY, POLLUTION
CONTROL TECP, LOC
3.650%, 08/12/98 2,000 2,000
HOWARD COUNTY TECP,
SERIES B, LOC
3.550%, 06/11/98 5,000 5,000
HOWARD COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A
4.000%, 02/15/99 2,400 2,407
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, HOSPITAL & UNIVERSITY
IMPROVEMENTS, LOC (A)
4.150%, 05/06/98 1,100 1,100
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, POOLED LOAN PROJECT,
SERIES D, LOC (A)
4.050%, 05/07/98 2,900 2,900
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, SERIES 1998-A, LOC (A)
4.300%, 05/06/98 5,000 5,000
NORTH EAST MARYLAND WASTE
DISPOSAL AUTHORITY RB,
AMBAC (A)
3.900%, 05/06/98 3,260 3,260
- --------------------------------------------------------------------------------
TOTAL MARYLAND $26,784
- --------------------------------------------------------------------------------
40
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MINNESOTA -- 7.6%
MINNEAPOLIS GO, LOC (A)
4.130%, 05/02/98 $1,600 $ 1,600
MINNESOTA STATE SCHOOL
DISTRICTS TAN, LOC
3.850%, 09/03/98 1,000 1,000
3.900%, 03/04/99 1,375 1,379
UNIVERSITY OF MINNESOTA, DC
TRUST RB, SERIES 1997A,
LOC (A)
4.250%, 05/06/98 7,000 7,000
- --------------------------------------------------------------------------------
TOTAL MINNESOTA $10,979
- --------------------------------------------------------------------------------
MISSISSIPPI -- 0.6%
JACKSON COUNTY RB, CHEVRON
USA PROJECT, SERIES 93 (A)
4.200%, 05/01/98 850 850
- --------------------------------------------------------------------------------
TOTAL MISSISSIPPI $ 850
- --------------------------------------------------------------------------------
MISSOURI -- 5.2%
COLUMBIA RB, SERIES A, LOC (A)
4.050%, 05/06/98 1,000 1,000
MISSOURI STATE DEVELOPMENT
FINANCE AUTHORITY RB, LOC (A)
4.300%, 05/01/98 2,100 2,100
MISSOURI STATE DEVELOPMENT
FINANCE AUTHORITY RB,
SCIENCE CITY UNION STATION,
SERIES C, LOC (A)
4.300%, 05/01/98 1,300 1,300
MISSOURI STATE HEALTH &
EDUCATION FACILITIES AUTHORITY
RB, WASHINGTON UNIVERSITY
PROJECT, SERIES A, LOC (A)
4.300%, 05/01/98 3,200 3,200
- --------------------------------------------------------------------------------
TOTAL MISSOURI $ 7,600
- --------------------------------------------------------------------------------
MONTANA -- 2.3%
FORSYTH, PORTLAND GENERAL ELECTRIC
RB, COLSTRIP PROJECT, LOC (A)
4.100%, 05/06/98 1,000 1,000
FORSYTH, PORTLAND GENERAL ELECTRIC
RB, COLSTRIP PROJECT,
SERIES 1983-A, LOC (A)
4.050%, 05/06/98 500 500
4.100%, 05/06/98 1,800 1,800
- --------------------------------------------------------------------------------
TOTAL MONTANA $ 3,300
- --------------------------------------------------------------------------------
NEVADA -- 0.7%
CLARK COUNTY, AIRPORT
IMPROVEMENT AUTHORITY RB,
SERIES A, MBIA (A)
4.000%, 05/06/98 1,000 1,000
- --------------------------------------------------------------------------------
TOTAL NEVADA $ 1,000
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
NEW JERSEY -- 0.7%
NEW JERSEY STATE WASTEWATER
TREATMENT RB, TRUST SERIES B,
PRE-REFUNDED @ 102 (B)
7.250%, 05/15/98 $ 985 $ 1,006
- --------------------------------------------------------------------------------
TOTAL NEW JERSEY $ 1,006
- --------------------------------------------------------------------------------
NEW YORK -- 2.5%
NEW YORK CITY GO,
SERIES B, FGIC (A)
4.250%, 05/01/98 700 700
NEW YORK CITY GO,
SERIES B-4, MBIA (A)
4.200%, 05/01/98 900 900
NEW YORK CITY, MUNICIPAL
WATER FINANCE AUTHORITY
RB, SERIES C, FGIC (A)
4.200%, 05/01/98 2,000 2,000
- --------------------------------------------------------------------------------
TOTAL NEW YORK $3,600
- --------------------------------------------------------------------------------
NORTH CAROLINA -- 5.7%
DURHAM, WATER & SEWER
SYSTEM RB (A)
4.150%, 05/06/98 2,000 2,000
RALEIGH DURHAM, AIRPORT
AUTHORITY RB, LOC (A)
4.250%, 05/01/98 1,700 1,700
UNIVERSITY OF NORTH CAROLINA
RB, CHAPEL HILL PROJECT,
SPA (A)
4.050%, 05/06/98 1,500 1,500
WINSTON SALEM COP, LOC (A)
4.200%, 05/07/98 3,000 3,000
- --------------------------------------------------------------------------------
TOTAL NORTH CAROLINA $8,200
- --------------------------------------------------------------------------------
PENNSYLVANIA -- 4.6%
ALLEGHENY COUNTY, GRANT
ANTICIPATION NOTE,
SERIES A, LOC
3.850%, 06/30/98 2,000 2,000
BUCKS COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, LOC (A)
4.100%, 05/06/98 2,200 2,200
LEHIGH COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, SERIES A, LOC (A)
4.100%, 05/06/98 1,500 1,500
PHILADELPHIA, HOSPITAL & HIGHER
EDUCATION AUTHORITY RB,
PENNSYLVANIA HOSPITAL
PROJECT, SERIES C, FGIC
3.950%, 07/01/98 1,000 1,000
- --------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $6,700
- --------------------------------------------------------------------------------
41
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
TAX-FREE MONEY MARKET PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TEXAS -- 9.8%
GEORGETOWN, HIGHER EDUCATION
FINANCING AUTHORITY RB,
SOUTHWESTERN UNIVERSITY PROJECT,
SERIES 1984, LOC (A)
4.150%, 05/06/98 $3,000 $ 3,000
SOUTHWEST TEXAS STATE HIGHER
EDUCATION AUTHORITY RB,
SOUTHERN METHODIST UNIVERSITY
PROJECT, LOC (A)
4.250%, 05/01/98 800 800
TEXAS STATE HIGHER EDUCATION
AUTHORITY RB, SERIES B,
FGIC (A)
4.050%, 05/06/98 2,415 2,415
TEXAS STATE TRAN, SERIES A
4.750%, 08/31/98 8,000 8,024
- --------------------------------------------------------------------------------
TOTAL TEXAS $ 14,239
- --------------------------------------------------------------------------------
VERMONT -- 2.8%
VERMONT STATE EDUCATIONAL &
HEALTH BUILDINGS RB, CAPITAL
ASSET FINANCING PROGRAM,
SERIES 1, LOC (A)
4.250%, 05/03/98 4,100 4,100
- --------------------------------------------------------------------------------
TOTAL VERMONT $ 4,100
- --------------------------------------------------------------------------------
WYOMING -- 1.8%
LINCOLN COUNTY, POLLUTION
CONTROL RB, EXXON PROJECT,
SERIES D (A)
4.200%, 05/01/98 1,000 1,000
SWEETWATER COUNTY RB, LOC (A)
4.300%, 05/01/98 1,600 1,600
- --------------------------------------------------------------------------------
TOTAL WYOMING $ 2,600
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $144,046) $144,046
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.3%
(Cost $144,046) $144,046
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.7% $ 1,018
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 90,445,825 outstanding
shares of beneficial interest $ 90,438
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 25,143,722 outstanding
shares of beneficial interest 25,142
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 29,473,472 outstanding
shares of beneficial interest 29,472
Undistributed net investment income 12
================================================================================
TOTAL NET ASSETS -- 100.0% $145,064
================================================================================
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 APRIL 30, 1998. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(B) PRE-REFUNDED SECURITY. THE PRE-REFUNDED DATE IS SHOWN AS THE MATURITY DATE
ON THE STATEMENT OF NET ASSETS.
COP--CERTIFICATE OF PARTICIPATION
GO--GENERAL OBLIGATION
LOC--SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
COMMERCIAL BANK OR OTHER FINANCIAL INSTITUTION.
RAN--REVENUE ANTICIPATION NOTE
RB--REVENUE BOND
SPA--STANDBY PURCHASE AGREEMENT
TAN--TAX ANTICIPATION NOTE
TECP--TAX EXEMPT COMMERCIAL PAPER
TRAN--TAX & REVENUE ANTICIPATION NOTE
THE FOLLOWING ORGANIZATIONS HAVE PROVIDED UNDERLYING CREDIT SUPPORT FOR
SECURITIES LISTED ABOVE, AS INDICATED.
AMBAC--AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
FGIC--FINANCIAL GUARANTY INSURANCE COMPANY
FNMA--FEDERAL NATIONAL MORTGAGE ASSOCIATION
FSA--FINANCIAL SECURITY ASSURANCE
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
SLMA--STUDENT LOAN MARKETING ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
42
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: U.S. GOVERNMENT MONEY MARKET
PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Repurchase Agreements -- 46%
U.S. Government Agency Obligations -- 54%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 54.7%
FEDERAL FARM CREDIT BANK
6.050%, 05/01/98 $10,000 $ 10,000
FEDERAL FARM CREDIT BANK (A)
5.520%, 05/01/98 15,000 14,997
5.510%, 05/10/98 40,000 39,986
FEDERAL HOME LOAN BANK
5.700%, 10/23/98 25,000 24,992
5.835%, 12/17/98 25,000 24,991
5.723%, 05/05/99 15,000 14,995
FEDERAL HOME LOAN BANK (A)
5.560%, 05/01/98 25,000 24,994
5.558%, 05/05/98 25,000 24,995
5.543%, 05/06/98 25,000 24,997
5.508%, 05/07/98 25,000 24,990
FEDERAL HOME LOAN BANK DISCOUNT NOTE (B)
5.430%, 05/01/98 50,000 50,000
FEDERAL HOME LOAN MORTGAGE CORPORATION
5.950%, 06/19/98 10,000 9,999
5.505%, 03/12/99 10,000 9,991
FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES (B)
5.435%, 05/18/98 80,000 79,795
5.440%, 05/20/98 35,000 34,900
5.430%, 05/28/98 25,000 24,898
5.430%, 05/29/98 100,000 99,578
FEDERAL NATIONAL MORTGAGE ASSOCIATION (A)
5.538%, 05/04/98 25,000 24,995
FEDERAL NATIONAL MORTGAGE ASSOCIATION
DISCOUNT NOTE (A)
5.415%, 06/12/98 100,000 99,368
5.420%, 06/19/98 60,000 59,557
FEDERAL NATIONAL MORTGAGE ASSOCIATION, MTN
7.000%, 07/13/98 29,000 29,070
5.370%, 02/26/99 20,000 19,964
STUDENT LOAN MARKETING ASSOCIATION (A)
5.573%, 05/05/98 25,000 24,996
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $797,048) $797,048
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 46.5%
DEAN WITTER REYNOLDS
5.530%, dated 04/30/98, matures
05/01/98, repurchase price
$150,023,042 (collateralized by
U.S. Treasury Instruments:
total market value
$153,000,768) $150,000 $ 150,000
GOLDMAN SACHS
5.520%, dated 04/30/98, matures
05/01/98, repurchase price
$326,764,468 (collateralized by
U.S. Treasury Notes:
total market value
$333,249,386) 326,714 326,714
SALOMON SMITH BARNEY
5.520%, dated 04/30/98, matures
05/01/98, repurchase price
$200,030,667 (collateralized by
U.S. Treasury Note:
total market value
$205,019,133) 200,000 200,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $676,714) $ 676,714
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.2%
(Cost $1,473,762) $1,473,762
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- (1.2%) $ (18,028)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 1,285,826,694 outstanding
shares of beneficial interest 1,285,731
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 78,265,587 outstanding
shares of beneficial interest 78,261
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 91,630,135 outstanding
shares of beneficial interest 91,623
Undistributed net investment income 150
Distributions in excess of net realized
gain on investments (31)
================================================================================
TOTAL NET ASSETS -- 100.0% $1,455,734
================================================================================
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 APRIL 30, 1998. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(B) THE ANNUALIZED DISCOUNT YIELD AT TIME OF PURCHASE IS SHOWN AS
THE RATE ON THE STATEMENT OF NET ASSETS.
MTN--MEDIUM-TERM NOTE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
43
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: U.S. TREASURY MONEY MARKET
PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
U.S. Treasury Bills -- 20%
U.S. Treasury Notes -- 80%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 98.6%
U.S. TREASURY BILLS (A)
4.890%, 07/30/98 $ 27,093 $ 26,762
5.050%, 09/17/98 25,000 24,513
5.123%, 04/01/99 29,073 27,687
U.S. TREASURY NOTES
6.000%, 05/31/98 250,000 250,116
5.250%, 07/31/98 13,000 12,987
5.875%, 08/15/98 25,000 25,036
5.875%, 03/31/99 20,000 20,065
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $387,166) $387,166
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.6%
(Cost $387,166) $387,166
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- 1.4% $ 5,667
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 262,707,306 outstanding
shares of beneficial interest 262,685
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 35,304,567 outstanding
shares of beneficial interest 35,303
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 94,858,810 outstanding
shares of beneficial interest 94,851
Undistributed net investment income 44
Distributions in excess of net realized
gain on investments (50)
================================================================================
TOTAL NET ASSETS -- 100.0% $392,833
================================================================================
DESCRIPTION
- --------------------------------------------------------------------------------
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.
44
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: SHORT-TERM TREASURY PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
U.S. Treasury Notes -- 100%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 98.6%
U.S. TREASURY NOTES
6.250%, 07/31/98 $ 67 $ 67
5.875%, 10/31/98 251 252
5.625%, 11/30/98 333 334
5.875%, 01/31/99 2,436 2,442
5.875%, 02/28/99 2,000 2,006
6.000%, 08/15/99 5,376 5,405
5.875%, 08/31/99 1,640 1,647
5.875%, 11/15/99 5,379 5,402
7.750%, 12/31/99 3,800 3,930
5.500%, 02/29/00 2,000 1,997
6.375%, 05/15/00 4,000 4,060
8.750%, 08/15/00 4,000 4,269
5.750%, 11/15/00 1,000 1,003
5.375%, 02/15/01 6,000 5,965
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $38,621) $38,779
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.6%
(Cost $38,621) $38,779
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- 1.4% $ 560
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 2,480,630 outstanding
shares of beneficial interest $ 24,816
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 1,434,246 outstanding
shares of beneficial interest 14,358
Undistributed net investment income 1
Accumulated net realized gain on investments 6
Net unrealized appreciation on investments 158
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $ 39,339
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $10.05
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $10.05
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
45
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: SHORT-TERM BOND PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
U.S. Government Agency Obligations -- 5%
U.S. Government Mortgage-Backed Obligations -- 5%
U.S. Treasury Obligations -- 9%
Asset-Backed Securities -- 13%
Non-Agency Mortgage-Backed Obligations -- 14%
Corporate Obligations -- 40%
Repurchase Agreement -- 14%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 9.4%
U.S. TREASURY NOTES
6.750%, 04/30/00 $7,000 $ 7,151
7.875%, 08/15/01 3,000 3,198
5.750%, 08/15/03 2,000 2,008
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $12,387) $ 12,357
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.4%
FEDERAL HOME LOAN
MORTGAGE CORPORATION
7.000%, 08/07/00 2,000 2,007
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, MTN
7.020%, 09/17/01 3,000 3,048
6.580%, 10/26/01 2,000 2,020
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $7,030) $ 7,075
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 4.6%
FEDERAL HOME LOAN
MORTGAGE CORPORATION
5.500%, 10/01/98 901 885
FEDERAL HOME LOAN MORTGAGE
CORPORATION, REMIC
6.500%, 10/15/00 1,021 1,022
7.000%, 06/15/20 2,655 2,673
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (A)
5.252%, 09/01/27 8 8
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
8.000%, 07/25/18 1,460 1,481
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $6,068) $ 6,069
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 40.5%
BANKS -- 3.1%
BANKERS TRUST NEW YORK
6.625%, 07/30/99 2,000 2,012
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
FIRST INTERSTATE
8.625%, 04/01/99 $2,000 $ 2,042
- --------------------------------------------------------------------------------
TOTAL BANKS $ 4,054
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 21.0%
ASSOCIATES OF NORTH AMERICA
7.500%, 05/15/99 1,000 1,014
BENEFICIAL, MTN
6.250%, 02/18/03 3,000 2,985
CONSECO
6.400%, 02/10/03 2,000 1,973
FORD MOTOR CREDIT
9.500%, 04/15/00 1,500 1,594
7.000%, 09/25/01 3,000 3,083
GENERAL MOTORS ACCEPTANCE
6.525%, 03/22/99 2,000 2,014
GOLDMAN SACHS (A) (B)
5.838%, 12/22/00 3,000 3,001
GOLDMAN SACHS, MTN (A) (B)
5.766%, 02/23/00 2,000 2,000
LEHMAN BROTHERS HOLDINGS
6.625%, 11/15/00 2,000 2,023
6.500%, 10/01/02 2,000 2,010
NEW ENGLAND EDUCATION
LOAN MARKETING
6.125%, 07/17/98 2,000 2,000
SMITH BARNEY HOLDINGS
6.625%, 07/01/02 2,000 2,020
SPIEKER PROPERTIES
6.875%, 02/01/05 2,000 2,000
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $27,717
- --------------------------------------------------------------------------------
INDUSTRIAL -- 16.4%
CABLE & WIRELESS COMMUNICATIONS
6.375%, 03/06/03 3,500 3,496
COCA-COLA, PAT (B)
6.000%, 03/15/01 2,000 1,993
COMDISCO
6.500%, 04/30/99 3,000 3,011
FRED MEYER
7.375%, 03/01/05 1,000 1,004
HERTZ
7.000%, 04/15/01 3,000 3,056
HUSKY OIL
6.875%, 11/15/03 3,000 3,005
TENET HEALTHCARE
7.875%, 01/15/03 1,000 1,026
TIME WARNER
6.100%, 12/30/01 2,000 1,983
VIACOM
6.750%, 01/15/03 1,000 993
WILLIAMS
6.500%, 11/15/02 2,000 2,005
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL $21,572
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $53,278) $53,343
- --------------------------------------------------------------------------------
46
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 10.6%
AFG RECEIVABLES TRUST,
SERIES 1996-C, CLASS B
6.950%, 07/15/01 $1,242 $ 1,258
AFG RECEIVABLES TRUST,
SERIES 1996-D, CLASS B
6.650%, 10/15/01 1,842 1,852
CAPITA EQUIPMENT TRUST,
SERIES 1996-1, CLASS A3S
6.110%, 07/15/99 2,000 2,006
KEY AUTO FINANCE TRUST,
SERIES 1997-1, CLASS B
6.400%, 04/15/04 625 630
THE MONEY STORE HOME
EQUITY TRUST, SERIES 1996-C,
CLASS A4
7.400%, 06/15/21 3,000 3,121
THE MONEY STORE HOME
EQUITY TRUST, SERIES 1997-A,
CLASS A3
6.675%, 04/15/12 1,590 1,596
THE MONEY STORE HOME
EQUITY TRUST, SERIES 1997-D,
CLASS AF3
6.345%, 11/15/21 3,500 3,502
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $13,876) $13,965
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -- 15.9% ADVANTA MORTGAGE LOAN
TRUST, SERIES 1997-1,
CLASS A2
7.100%, 04/25/20 3,000 3,040
AMRESCO RESIDENTIAL SECURITIES
MORTGAGE LOAN TRUST,
SERIES 1997-3, CLASS A3
6.600%, 01/25/18 1,250 1,253
CONTIMORTGAGE HOME EQUITY
LOAN TRUST, SERIES 1997-2,
CLASS A4
6.770%, 01/15/12 2,800 2,835
GREEN TREE HOME
IMPROVEMENT LOAN TRUST,
SERIES 1995-B, CLASS A
8.150%, 03/15/15 2,226 2,268
GREEN TREE HOME
IMPROVEMENT LOAN TRUST,
SERIES 1995-F, CLASS B1
6.750%, 01/15/21 2,000 2,001
GREEN TREE HOME
IMPROVEMENT LOAN TRUST,
SERIES 1996-F, CLASS HIB1
7.250%, 11/15/27 2,000 2,032
PRUDENTIAL HOME MORTGAGE
SECURITIES, SERIES 1992-45,
CLASS A4
6.500%, 01/25/00 1,697 1,702
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PRUDENTIAL HOME MORTGAGE
SECURITIES, SERIES 1993-5,
CLASS A3
6.250%, 03/25/00 $ 33 $ 33
PRUDENTIAL HOME MORTGAGE
SECURITIES, SERIES 1994-5,
CLASS A1
7.000%, 02/25/24 2,233 2,242
SECURITIZED ASSET SALES,
SERIES 1995-7, CLASS A4
7.000%, 01/25/26 3,506 3,517
- --------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS
(Cost $20,832) $20,923
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 13.9%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$18,324,675 (collateralized by
U.S. Treasury Bonds:
total market value
$18,688,737) 18,322 18,322
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $18,322) $ 18,322
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.3%
(Cost $131,793) $132,054
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (0.3%) $ (385)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 13,228,191 outstanding
shares of beneficial interest 131,683
Undistributed net investment income 44
Accumulated net realized loss on investments (319)
Net unrealized appreciation on investments 261
================================================================================
TOTAL NET ASSETS -- 100.0% $131,669
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.95
================================================================================
(A) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT AS OF APRIL 30, 1998.
(B) SECURITY EXEMPT FROM REGISTRATION UNDER RULE144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL INVESTORS.
MTN--MEDIUM TERM NOTE
PAT--PUTABLE ASSET TRUST
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
47
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: MARYLAND TAX-FREE PORTFOLIO
General Obligations -- 45%
Revenue Bonds -- 55%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 99.6%
MARYLAND -- 91.3%
ALLEGANY COUNTY, PUBLIC
IMPROVEMENTS GO, AMBAC
5.300%, 03/01/12 $1,190 $ 1,223
ANNE ARUNDEL COUNTY GO
5.000%, 09/01/10 1,500 1,532
BALTIMORE COP, SERIES A, MBIA
5.200%, 04/01/04 750 781
BALTIMORE COUNTY COP
6.900%, 12/01/99 1,000 1,012
BALTIMORE COUNTY GO
5.000%, 08/01/06 1,750 1,811
BALTIMORE COUNTY, PENSION
FUNDING GO,
PRE-REFUNDED @ 102 (A)
6.700%, 07/01/98 1,000 1,024
BALTIMORE COUNTY, PUBLIC
IMPROVEMENTS GO
5.500%, 06/01/16 2,000 2,057
BALTIMORE GO, SERIES B, MBIA
7.000%, 10/15/03 1,000 1,125
BALTIMORE, PORT FACILITIES
RB, DUPONT PROJECT
6.500%, 10/01/11 1,000 1,091
BALTIMORE, WATER PROJECT
RB, SERIES A, FGIC
5.500%, 07/01/26 1,500 1,541
CALVERT COUNTY, POLLUTION
CONTROL RB, BALTIMORE GAS
& ELECTRIC COMPANY PROJECT
5.550%, 07/15/14 2,500 2,578
CALVERT COUNTY, PUBLIC &
SCHOOL IMPROVEMENTS GO
5.750%, 01/01/11 1,900 2,007
CARROLL COUNTY GO,
PRE-REFUNDED @ 102 (A)
7.250%, 10/01/00 500 544
CHARLES COUNTY GO
5.700%, 03/01/10 750 791
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CUMBERLAND RB, SERIES A, FGIC
5.125%, 05/01/13 $1,000 $ 1,007
FREDERICK COUNTY GO
5.700%, 07/01/09 1,000 1,052
FREDERICK COUNTY GO, SERIES B
6.300%, 07/01/07 1,000 1,083
6.300%, 07/01/08 2,000 2,160
FREDERICK COUNTY, RETIREMENT
COMMUNITY RB,
BUCKINGHAMS CHOICE
5.900%, 01/01/17 1,000 991
FREDERICK GO, FGIC
6.125%, 12/01/06 1,000 1,081
6.125%, 12/01/07 500 539
GAITHERSBURG, HOSPITAL &
NURSING HOME IMPROVEMENTS
RB, SHADY GROVE, FSA
6.000%, 09/01/22 1,000 1,051
HOWARD COUNTY GO
5.000%, 02/15/09 2,000 2,053
HOWARD COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A
5.200%, 02/15/04 1,000 1,043
LAUREL GO, FGIC
5.000%, 10/01/07 1,000 1,033
MARYLAND NATIONAL CAPITAL
PARK & PLANNING COMMISSION
RB, PRINCE GEORGES COUNTY
5.375%, 01/15/14 1,950 1,991
MARYLAND STATE & LOCAL
FACILITIES AUTHORITY GO
5.000%, 08/01/09 1,000 1,026
MARYLAND STATE & LOCAL
FACILITIES AUTHORITY GO,
FIRST SERIES
5.300%, 02/01/04 1,000 1,039
MARYLAND STATE & LOCAL
FACILITIES AUTHORITY GO,
SECOND SERIES AA
5.500%, 06/01/08 1,500 1,584
MARYLAND STATE & LOCAL
FACILITIES AUTHORITY RB
5.000%, 08/01/10 1,200 1,221
MARYLAND STATE COMMUNITY
DEVELOPMENT ADMINISTRATION
RB, HOUSING & COMMUNITY
DEVELOPMENT
5.050%, 04/01/08 1,000 1,025
5.600%, 03/01/17 1,000 1,029
MARYLAND STATE DEPARTMENT OF
TRANSPORTATION RB,
PUBLIC IMPROVEMENTS
6.100%, 09/01/01 2,000 2,098
48
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MARYLAND STATE ECONOMIC
DEVELOPMENT CORPORATION RB,
HEALTH CARE FACILITIES, GNMA
4.650%, 12/20/08 $ 905 $ 896
MARYLAND STATE GO
6.100%, 10/15/06 1,500 1,599
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, BROADMEAD
5.500%, 07/01/17 2,250 2,250
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, DOCTORS
COMMUNITY HOSPITAL
5.500%, 07/01/24 2,000 2,003
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB,
HELIX HEALTH ISSUE
5.125%, 07/01/12 1,600 1,602
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, HOWARD COUNTY
GENERAL HOSPITAL PROJECT
5.500%, 07/01/13 1,000 1,013
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, JOHNS HOPKINS
HOSPITAL PROJECT
7.375%, 07/01/09 1,000 1,035
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, JOHNS HOPKINS
UNIVERSITY PROJECT,
PRE-REFUNDED @ 102 (A)
7.375%, 07/01/98 1,000 1,025
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, KENNEDY KRIEGER
5.125%, 07/01/22 2,000 1,908
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, LOYOLA COLLEGE
PROJECT, SERIES A, MBIA
5.375%, 10/01/11 950 987
5.375%, 10/01/26 1,500 1,524
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, MERCY MEDICAL
CENTER PROJECT, AMBAC
5.750%, 07/01/15 2,000 2,083
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, NORTH ARUNDEL
PROJECT, MBIA
6.000%, 07/01/12 500 534
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, PENINSULA
REGIONAL MEDICAL
CENTER PROJECT
5.000%, 07/01/08 $1,000 $ 990
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, PICKERSGILL
PROJECT, SERIES A
6.000%, 01/01/15 1,500 1,569
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, SINAI HOSPITAL
PROJECT, AMBAC
5.200%, 07/01/04 1,000 1,040
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, UNIVERSITY OF
MARYLAND MEDICAL SYSTEMS
PROJECT, FGIC
5.300%, 07/01/05 1,000 1,045
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, UNIVERSITY OF
MARYLAND MEDICAL SYSTEMS
PROJECT, SERIES A,
PRE-REFUNDED @ 102, FGIC (A)
7.000%, 07/01/01 1,000 1,098
MARYLAND STATE INDUSTRIAL
DEVELOPMENT FINANCING
AUTHORITY RB, HOLY CROSS
HEALTH SYSTEMS PROJECT
5.000%, 12/01/03 1,000 1,031
MARYLAND STATE STADIUM
AUTHORITY RB, AMBAC
5.500%, 03/01/12 1,000 1,048
MARYLAND STATE TRANSPORTATION
AUTHORITY RB
5.750%, 07/01/15 3,000 3,086
MARYLAND STATE TRANSPORTATION
AUTHORITY RB, BALTIMORE/
WASHINGTON INTERNATIONAL
AIRPORT PROJECT, FGIC
6.000%, 07/01/07 1,000 1,095
MARYLAND STATE WATER QUALITY
FINANCING ADMINISTRATION RB,
REVOLVING LOAN FUND, SERIES A
5.500%, 09/01/12 1,250 1,298
6.550%, 09/01/14 945 1,022
49
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARYLAND TAX-FREE PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MONTGOMERY COUNTY, PARKING
AUTHORITY RB, SILVER SPRING
PARKING LOT PROJECT,
SERIES A, FGIC
6.250%, 06/01/09 $ 500 $ 540
MONTGOMERY COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A
5.500%, 10/01/06 1,000 1,056
5.800%, 07/01/07 1,000 1,094
MONTGOMERY COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A,
PRE-REFUNDED @ 102 (A)
6.000%, 10/01/04 2,000 2,200
MONTGOMERY COUNTY, SINGLE
FAMILY MORTGAGE PROGRAM RB,
SERIES A, FHA, VA
6.350%, 07/01/14 150 163
PRINCE GEORGES COUNTY, PUBLIC
IMPROVEMENTS GO,
SERIES A, MBIA
6.000%, 03/01/07 1,450 1,544
PRINCE GEORGES COUNTY,
SOLID WASTE MANAGEMENT
SYSTEM RB, FSA
5.000%, 06/15/04 1,000 1,031
PRINCE GEORGES COUNTY, WATER
UTILITY IMPROVEMENTS GO,
STORMWATER MANAGEMENT PROJECT
5.500%, 03/15/13 2,575 2,652
QUEENS ANNES COUNTY, PUBLIC
FACILITIES GO, FGIC
5.400%, 11/15/11 1,000 1,050
QUEENS ANNES COUNTY, SCHOOL
& RECREATIONAL FACILITIES
IMPROVEMENTS GO, FGIC
6.000%, 11/15/08 1,000 1,111
ST. MARY'S COUNTY, ACADEMIC &
AUXILIARY FACILITIES RB, MBIA
5.250%, 09/01/27 2,000 1,998
SUBURBAN WASHINGTON
SANITATION DISTRICT GO,
GENERAL CONSTRUCTION
5.000%, 06/01/09 1,000 1,030
SUBURBAN WASHINGTON
SANITATION DISTRICT GO,
SEWER IMPROVEMENTS
5.300%, 06/01/08 1,000 1,039
5.600%, 06/01/18 1,000 1,025
TALBOT COUNTY GO
4.600%, 05/01/09 985 981
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
UNIVERSITY OF MARYLAND,
EQUIPMENT LOAN PROGRAM
RB, SECOND SERIES
6.000%, 06/01/05 $ 500 $ 537
UNIVERSITY OF MARYLAND, MEDICAL
SYSTEMS PROJECT RB, SERIES A
5.500%, 04/01/10 2,000 2,098
UNIVERSITY OF MARYLAND, MEDICAL
SYSTEMS PROJECT RB, SERIES B
6.100%, 04/01/03 500 540
WASHINGTON COUNTY, PUBLIC
IMPROVEMENTS GO, MBIA
5.800%, 01/01/15 1,250 1,320
- --------------------------------------------------------------------------------
TOTAL MARYLAND $ 99,013
- --------------------------------------------------------------------------------
PUERTO RICO -- 7.8%
COMMONWEALTH OF PUERTO RICO,
INFRASTRUCTURE FINANCING
AUTHORITY RB, AMBAC
5.000%, 07/01/28 2,500 2,400
COMMONWEALTH OF PUERTO RICO,
PUBLIC IMPROVEMENTS
GO, MBIA
6.250%, 07/01/12 1,000 1,138
PUERTO RICO ELECTRIC POWER
AUTHORITY RB, MBIA
5.250%, 07/01/15 1,000 1,011
PUERTO RICO PUBLIC BUILDING
AUTHORITY RB, MBIA
5.000%, 07/01/15 4,005 3,975
- --------------------------------------------------------------------------------
TOTAL PUERTO RICO $ 8,524
- --------------------------------------------------------------------------------
TEXAS -- 0.5%
AUSTIN, UTILITY SYSTEMS
RB, SERIES A
9.100%, 05/15/00 310 340
AUSTIN, UTILITY SYSTEMS
RB, SERIES A, ETM
9.100%, 05/15/00 190 208
- --------------------------------------------------------------------------------
TOTAL TEXAS $ 548
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $103,900) $108,085
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.3%
DREYFUS TAX-EXEMPT
CASH MANAGEMENT 261 261
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $261) $261
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.9%
(Cost $104,161) $108,346
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.1% $ 152
================================================================================
50
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 8,203,509 outstanding
shares of beneficial interest $ 78,740
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 2,492,960 outstanding
shares of beneficial interest 25,149
Undistributed net investment income 1
Accumulated net realized gain on investments 423
Net unrealized appreciation on investments 4,185
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $108,498
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $10.14
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $10.14
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($10.14/95.50%) (B) $10.62
================================================================================
(A) PRE-REFUNDED SECURITY. THE PRE-REFUNDED DATE IS SHOWN AS THE MATURITY DATE
ON THE STATEMENT OF NET ASSETS.
(B) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME. THE
MAXIMUM SALES LOAD IS 4.50%.
COP--CERTIFICATE OF PARTICIPATION
ETM--ESCROWED TO MATURITY
GO--GENERAL OBLIGATION
RB--REVENUE BOND
THE FOLLOWING ORGANIZATIONS HAVE PROVIDED UNDERLYING CREDIT SUPPORT FOR
SECURITIES LISTED ABOVE.
AMBAC--AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
FGIC--FINANCIAL GUARANTY INSURANCE CORPORATION
FHA--FEDERAL HOUSING ADMINISTRATION
FSA--FINANCIAL SECURITY ASSURANCE
GNMA--GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
MBIA---MUNICIPAL BOND INVESTORS ASSURANCE
VA--VETERANS ADMINISTRATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: PENNSYLVANIA TAX-FREE PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
General Obligations -- 33%
Revenue Bonds -- 67%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 98.3%
PENNSYLVANIA -- 98.0%
ABINGTON SCHOOL DISTRICT
GO, FGIC
5.300%, 05/15/21 $ 500 $ 497
ALLEGHENY COUNTY, HOSPITAL
DEVELOPMENT AUTHORITY,
MAGEE-WOMEN'S HOSPITAL RB,
SERIES 1993, FGIC
5.200%, 10/01/05 1,000 1,031
ALLEGHENY COUNTY, HOSPITAL
IMPROVEMENTS RB,
SERIES B, MBIA
5.125%, 07/01/22 1,000 966
ALLEGHENY COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, MBIA
6.800%, 03/01/15 3,500 3,824
ALLEGHENY COUNTY, MAGEE-
WOMEN'S HOSPITAL PROJECT
RB, FGIC
5.700%, 10/01/01 1,790 1,859
ALLEGHENY COUNTY, PITTSBURGH
INTERNATIONAL AIRPORT
RB, MBIA
5.000%, 01/01/19 5,000 4,806
ALLEGHENY COUNTY GO,
SERIES C-45, FGIC
5.100%, 10/01/07 5,000 5,156
ALLENTOWN GO, AMBAC
5.650%, 07/15/10 250 272
ALLENTOWN, SACRED HEART
HOSPITAL RB, SERIES A
6.500%, 11/15/08 2,665 2,898
ALLENTOWN, SEWER SYSTEMS
RB, AMBAC
5.650%, 07/15/10 250 272
BENSALEM TOWNSHIP, RECREATIONAL
FACILITIES IMPROVEMENT RB, FGIC
5.550%, 12/01/10 1,390 1,456
51
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PENNSYLVANIA TAX-FREE PORTFOLIO (CONTINUED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
BETHLEHEM AREA SCHOOL
IMPROVEMENTS RB, FGIC
5.500%, 09/01/08 $3,000 $3,165
BETHLEHEM AREA SCHOOL
IMPROVEMENTS RB,
PRE-REFUNDED @ 100,
MBIA (A)
5.700%, 03/01/06 1,000 1,071
5.750%, 03/01/06 1,000 1,075
5.850%, 03/01/06 1,635 1,768
BUCKS COUNTY RB, COMMUNITY
COLLEGE PROJECT
5.500%, 06/15/17 500 510
BURRELL, SCHOOL DISTRICT
GO, FGIC
5.250%, 11/15/10 4,000 4,120
CAMBRIA COUNTY GO, FGIC
5.000%, 08/15/23 2,500 2,378
CHESTER COUNTY, COMMUNITY
HOSPITAL HEALTH & EDUCATION
AUTHORITY RB, MBIA
5.625%, 07/01/10 1,675 1,757
CHESTER COUNTY, HEALTH &
EDUCATION AUTHORITY RB,
CHESTER COUNTY HOSPITAL,
MBIA
5.500%, 07/01/07 965 1,014
5.625%, 07/01/09 1,985 2,094
CHESTER COUNTY, HEALTH &
EDUCATION AUTHORITY RB,
MAIN LINE HEALTH SYSTEMS,
MBIA
5.300%, 05/15/07 3,045 3,144
COATESVILLE, WATER AUTHORITY
RB, FGIC
5.000%, 10/01/12 1,000 992
CONRAD WEISER AREA SCHOOL
DISTRICT GO,
PRE-REFUNDED @ 100, MBIA (A)
6.700%, 12/15/04 500 562
CORNWALL & LEBANON COUNTIES,
SUBURBAN JOINT SCHOOL
AUTHORITY RB, FGIC
5.750%, 03/01/08 500 525
CUMBERLAND COUNTY, MESSIAH
COLLEGE PROJECT RB, AMBAC
5.125%, 10/01/15 2,800 2,779
CUMBERLAND VALLEY, SCHOOL
DISTRICT GO, FGIC
5.350%, 09/01/07 500 517
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
DAUPHIN COUNTY, GENERAL
AUTHORITY RB, MANDATORY
PUT @ 100, AMBAC (B)
5.000%, 06/01/01 $5,000 $5,075
DAUPHIN COUNTY, PINNACLE
HEALTH SYSTEM PROJECT
RB, MBIA
5.100%, 05/15/08 830 847
5.200%, 05/15/09 910 934
DELAWARE COUNTY GO
5.125%, 11/15/16 500 500
DELAWARE COUNTY, CATHOLIC
HEALTH SYSTEMS EAST RB,
SERIES A, AMBAC
4.875%, 11/15/14 3,910 3,754
DELAWARE COUNTY, COMMUNITY
HOSPITAL AUTHORITY RB,
AMBAC
6.000%, 12/15/20 4,000 4,130
DELAWARE COUNTY, DUNWOODY
VILLAGE PROJECT RB
5.550%, 04/01/06 300 307
DELAWARE VALLEY, REGIONAL
FINANCE AUTHORITY RB,
SERIES A
5.900%, 04/15/16 2,000 2,092
DOWNINGTOWN, SCHOOL
DISTRICT GO
5.500%, 02/01/10 1,000 1,059
ERIE COUNTY, CORRECTIONAL
FACILITIES IMPROVEMENTS
PROJECT RB, ETM, MBIA
6.300%, 11/01/99 1,500 1,552
GEISINGER, HEALTH SYSTEMS
RB, SERIES B
6.500%, 07/01/07 3,000 3,079
HAZLETON, SCHOOL DISTRICT
AUTHORITY RB, SERIES C, FGIC
5.250%, 03/01/10 3,550 3,719
LANCASTER COUNTY, HIGHER
EDUCATION AUTHORITY RB,
FRANKLIN & MARSHALL
COLLEGE, MBIA
5.650%, 04/15/10 1,000 1,036
LANCASTER COUNTY, HOSPITAL
AUTHORITY RB, MASONIC
HOMES PROJECT
4.750%, 11/15/02 1,000 1,017
LANCASTER COUNTY, LANCASTER
GENERAL HOSPITAL PROJECT
RB, AMBAC
5.800%, 07/01/01 500 519
LEHIGH COUNTY, MUHLENBERG
HOSPITAL CENTER PROJECT
RB, ETM, GOH
5.750%, 07/15/10 3,000 3,281
52
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
LEHIGH COUNTY, PUBLIC
IMPROVEMENTS PROJECT GO,
SERIES A, CNTY GTD
5.500%, 11/15/11 $2,000 $2,070
5.550%, 11/15/12 2,100 2,168
LUZERNE COUNTY GO, FGIC
5.600%, 12/15/16 500 516
MONTGOMERY COUNTY, HEALTH
& HIGHER EDUCATION AUTHORITY
RB, BEAVER COLLEGE PROJECT,
CONLEE
5.700%, 04/01/10 500 533
MONTGOMERY COUNTY, HIGHER
EDUCATION & HEALTH AUTHORITY
RB, AMBAC
5.250%, 10/01/04 2,070 2,142
5.500%, 10/01/08 1,275 1,342
NORRISTOWN, SCHOOL DISTRICT
AUTHORITY GO, FGIC
5.500%, 09/01/14 500 515
NORTH HILLS, SCHOOL DISTRICT
AUTHORITY GO, FGIC
5.625%, 11/15/14 500 519
NORTH HUNTINGDON TOWNSHIP
GO, ETM
5.750%, 04/01/08 285 301
NORTHAMPTON COUNTY, HIGHER
EDUCATION AUTHORITY RB,
LEHIGH UNIVERSITY, MBIA
5.750%, 08/15/03 2,710 2,873
6.900%, 10/15/06 500 547
PARKLAND, SCHOOL DISTRICT
IMPROVEMENTS GO, MBIA
5.500%, 09/01/09 500 527
PENNRIDGE, SCHOOL DISTRICT
AUTHORITY GO
6.400%, 03/15/01 1,000 1,054
PENNSYLVANIA INTERGOVERNMENTAL
COOPERATIVE AUTHORITY
RB, FGIC
5.500%, 06/15/11 3,300 3,457
PENNSYLVANIA INTERGOVERNMENTAL
COOPERATIVE AUTHORITY RB,
PHILADELPHIA FUNDING
PROGRAM, FGIC
5.400%, 06/15/09 2,145 2,247
PENNSYLVANIA STATE ECONOMIC
DEVELOPMENT AUTHORITY
RB, AMBAC
6.000%, 07/01/06 3,000 3,274
6.000%, 07/01/07 5,000 5,481
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PENNSYLVANIA STATE GO, FGIC
5.375%, 11/15/07 $5,000 $5,287
PENNSYLVANIA STATE GO,
FIRST SERIES, FGIC
5.375%, 05/15/14 500 508
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES
AUTHORITY RB
4.500%, 07/15/17 3,500 3,176
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, DREXEL UNIVERSITY, MBIA
5.750%, 05/01/03 3,535 3,738
4.800%, 05/01/28 5,000 4,587
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, SERIES A, FGIC
6.800%, 12/01/00 5,020 5,321
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES
AUTHORITY RB, SERIES B
5.350%, 01/01/08 3,750 3,923
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, SERIES E, ETM, MBIA
6.450%, 06/15/01 500 531
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, UNIVERSITY OF PENNSYLVANIA
HEALTH SERVICES PROJECT, SERIES A
5.500%, 01/01/09 3,000 3,158
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES
AUTHORITY RB, UNIVERSITY OF
PENNSYLVANIA PROJECT
5.600%, 01/01/10 500 526
PENNSYLVANIA STATE HOUSING
FINANCE AGENCY RB, FNMA
6.400%, 07/01/12 500 532
PENNSYLVANIA STATE HOUSING
FINANCE AGENCY RB, SERIES A
6.000%, 10/01/13 1,500 1,592
PENNSYLVANIA STATE INFRASTRUCTURE
INVESTMENT AUTHORITY RB, WATER
UTILITY IMPROVEMENTS, MBIA
6.000%, 09/01/06 1,000 1,093
5.250%, 09/01/07 2,720 2,832
PENNSYLVANIA STATE PUBLIC
IMPROVEMENTS GO, FIRST
SERIES, FGIC
5.375%, 05/15/04 4,000 4,200
PENNSYLVANIA STATE PUBLIC
IMPROVEMENTS GO,
SECOND SERIES
6.000%, 07/01/09 4,375 4,878
53
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PENNSYLVANIA TAX-FREE PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PENNSYLVANIA STATE UNIVERSITY
RB, GOI
5.950%, 03/01/03 $ 500 $ 533
5.300%, 08/15/03 5,000 5,213
PHILADELPHIA, AIRPORT & MARINA
IMPROVEMENTS RB, FGIC
6.000%, 06/15/04 2,000 2,158
PHILADELPHIA, HIGHER EDUCATION
FACILITIES AUTHORITY RB, MOSS
REHABILITATION HOSPITAL
PROJECT, AMBAC
6.900%, 07/01/00 230 242
PHILADELPHIA, HOSPITAL &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, CHILDREN'S
HOSPITAL OF PHILADELPHIA,
SERIES A
5.250%, 02/15/07 3,250 3,356
PHILADELPHIA, HOSPITAL &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, EINSTEIN
MEDICAL CENTER
7.625%, 04/01/11 1,350 1,413
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB
5.250%, 07/01/17 1,000 994
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
FRANKLIN INSTITUTE PROJECT
5.200%, 06/15/18 1,000 965
5.200%, 06/15/26 3,100 2,949
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
GIRARD ESTATE COAL MINING
5.500%, 11/15/16 2,000 2,045
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
SERIES A, MBIA
6.000%, 02/15/07 1,365 1,491
PHILADELPHIA, JEFFERSON HEALTH
SYSTEMS RB, MBIA
5.500%, 05/15/05 1,000 1,058
PHILADELPHIA, JUSTICE LEASE
AUTHORITY RB, SERIES A, MBIA
7.100%, 11/15/06 4,095 4,515
PHILADELPHIA, SCHOOL DISTRICT
GO, SERIES A, MBIA
5.350%, 07/01/03 5,000 5,200
5.300%, 07/01/04 3,500 3,636
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PHILADELPHIA, TEMPLE UNIVERSITY
HOSPITAL RB, SERIES A
6.625%, 11/15/23 $ 500 $ 536
PHILADELPHIA, WATER &
WASTE RB, MBIA
6.250%, 08/01/07 3,000 3,345
6.250%, 08/01/08 2,150 2,411
PITTSBURGH, PUBLIC
IMPROVEMENTS GO, AMBAC
5.000%, 09/01/10 3,595 3,667
PUNXSUTAWNEY AREA SCHOOL
DISTRICT GO, MBIA,
PRE-REFUNDED @ 100 (A)
5.750%, 04/15/05 500 536
RIDLEY PARK, TAYLOR HOSPITAL
AUTHORITY RB, SERIES A
6.000%, 12/01/05 755 795
SCRANTON-LACKAWANNA, HEALTH
& WELFARE AUTHORITY RB,
MOSES TAYLOR HOSPITAL
5.450%, 07/01/03 1,350 1,380
SCRANTON-LACKAWANNA, MERCY
HEALTH HOSPITAL FACILITIES
RB, SERIES B, MBIA
5.625%, 01/01/16 2,000 2,055
UNIVERSITY OF PITTSBURGH
RB, SERIES B, MBIA
5.500%, 06/01/02 3,440 3,578
WEST SHORE, HOLY SPIRIT
HOSPITAL PROJECT RB, MBIA
5.600%, 01/01/13 500 514
- --------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $213,442
- --------------------------------------------------------------------------------
PUERTO RICO -- 0.3%
COMMONWEALTH OF PUERTO RICO
GO, MBIA
6.500%, 07/01/08 500 573
- --------------------------------------------------------------------------------
TOTAL PUERTO RICO $ 573
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $209,298) $214,015
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.3%
BLACKROCK PENNSYLVANIA MUNICIPAL
MONEY MARKET PORTFOLIO 694 694
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $694) $ 694
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.6%
(Cost $209,992) $214,709
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.4% $ 3,050
================================================================================
54
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 21,218,732 outstanding
shares of beneficial interest $ 209,140
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 254,256 outstanding
shares of beneficial interest 2,581
Distribution in excess of net investment income (69)
Accumulated net realized gain on investments 1,390
Net unrealized appreciation on investments 4,717
================================================================================
TOTAL NET ASSETS -- 100.0% $ 217,759
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $10.14
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $10.13
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($10.13 / 95.50%) (C) $10.61
================================================================================
(A) PRE-REFUNDED SECURITY. THE PRE-REFUNDED DATE IS SHOWN AS THE MATURITY DATE
ON THE STATEMENT OF NET ASSETS. (B) MANDATORY PUT SECURITY. THE MANDATORY
PUT DATE IS SHOWN AS THE MATURITY DATE ON THE STATEMENT OF NET ASSETS.
(C) EFFECTIVE 03/23/98, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME.
THE MAXIMUM SALES LOAD IS 4.50%.
ETM--ESCROWED TO MATURITY
GO--GENERAL OBLIGATION
RB--REVENUE BOND
THE FOLLOWING ORGANIZATIONS HAVE PROVIDED UNDERLYING CREDIT SUPPORT FOR
SECURITIES LISTED ABOVE, AS INDICATED.
AMBAC--AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
CNTY GTD--COUNTY GUARANTEED
CONLEE--COLLEGE CONSTRUCTION LOAN INSURANCE ASSOCIATION
FGIC--FINANCIAL GUARANTY INSURANCE CORPORATION
GOH--GENERAL OBLIGATION OF HOSPITAL
GOI--GENERAL OBLIGATION OF INSTITUTION
MBIA--MUNICIPAL BOND INVESTORS ASSURANCE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: INCOME PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Non-Agency Mortgage-Backed Obligations -- 2%
Yankee Bonds -- 3%
Repurchase Agreement -- 6%
Asset-Backed Securities -- 9%
U.S. Government Mortgage-Backed Obligations -- 21%
Taxable Municipal Bond -- 1%
Preferred Convertible Stock -- 1%
Corporate Obligations -- 29%
U.S. Government Agency Obligations -- 1%
U.S. Treasury Obligations -- 27%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 1.5%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
8.625%, 11/10/04 $ 400 $ 416
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, MTN
7.840%, 06/09/06 1,500 1,529
7.020%, 07/03/07 3,000 3,088
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $4,991) $5,033
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 22.6%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
8.500%, 11/01/01 58 60
9.000%, 01/01/02 49 51
8.000%, 01/01/08 114 119
14.750%, 03/01/10 38 44
8.500%, 09/01/26 1,814 1,894
FEDERAL HOME LOAN MORTGAGE
CORPORATION (A)
6.000%, 04/01/13 15,000 14,780
FEDERAL HOME LOAN MORTGAGE
CORPORATION, GTD
9.000%, 09/15/08 36 37
12.450%, 09/15/09 20 20
FEDERAL HOME LOAN MORTGAGE
CORPORATION, REMIC
10.000%, 06/15/19 176 177
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
7.000%, 08/01/25 417 421
7.000%, 09/01/25 3,081 3,115
7.000%, 02/01/26 2,814 2,845
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (A)
7.000%, 04/01/28 20,000 20,187
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
7.250%, 12/18/16 2,500 2,516
9.750%, 09/25/18 546 589
55
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
INCOME PORTFOLIO (CONTINUED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
7.500%, 05/15/22 $ 986 $ 1,013
7.500%, 10/15/23 3,549 3,646
7.500%, 12/15/23 1,502 1,543
7.000%, 02/15/24 4,036 4,084
7.000%, 05/15/24 7,926 8,020
7.500%, 05/15/24 3,306 3,397
7.500%, 10/15/24 3,078 3,163
7.000%, 09/20/25 1,727 1,740
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION, REMIC
7.750%, 06/16/20 1,000 1,038
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $72,879) $74,499
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 30.2%
U.S. TREASURY BONDS
10.750%, 08/15/05 15,625 20,210
7.500%, 11/15/16 2,000 2,328
U.S. TREASURY NOTES
7.125%, 09/30/99 2,500 2,553
7.750%, 11/30/99 3,000 3,098
6.375%, 09/30/01 10,000 10,222
7.500%, 11/15/01 5,000 5,294
6.250%, 06/30/02 20,000 20,423
7.875%, 11/15/04 13,000 14,502
6.500%, 05/15/05 20,000 20,904
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $97,315) $99,534
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 32.0%
BANKS -- 5.6%
BANKAMERICA, SERIES A (B)
8.070%, 12/31/26 2,500 2,694
BANK OF NEW YORK (B)
7.780%, 12/01/26 1,500 1,547
BANKERS TRUST (C)
5.650%, 09/04/98 5,000 5,001
COMPASS TRUST I
8.230%, 01/15/27 2,000 2,133
CRESTAR FINANCIAL
8.160%, 12/15/26 3,500 3,776
FIRST NATIONWIDE HOLDINGS
10.625%, 10/01/03 1,000 1,119
MELLON CAPITAL I
7.720%, 12/01/26 2,000 2,080
- --------------------------------------------------------------------------------
TOTAL BANKS $18,350
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 5.4%
COMCAST CABLEVISION
8.375%, 05/01/07 2,725 3,032
8.875%, 05/01/17 3,650 4,293
CSC HOLDINGS
7.875%, 02/15/18 2,500 2,475
TIME WARNER
7.250%, 10/15/17 4,000 4,060
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TIME WARNER, PAT
4.900%, 07/29/99 $3,000 $ 2,955
VIACOM
6.750%, 01/15/03 1,000 993
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $17,808
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 10.1%
AMVESCO CAPITAL (B)
6.375%, 05/15/03 2,000 1,996
CONSECO
6.400%, 02/10/03 2,500 2,466
DYNEX CAPITAL
7.875%, 07/15/02 2,500 2,522
HUTCHISON WHAMPOA (B)
7.450%, 08/01/17 4,000 3,665
LEHMAN BROTHERS HOLDINGS
6.250%, 04/01/03 3,000 2,992
MERRILL LYNCH, SERIES B (C)
5.670%, 10/30/98 5,000 5,000
MORGAN STANLEY GROUP (A) (C)
5.838%, 12/19/01 7,380 7,380
SAFECO CAPITAL I
8.072%, 07/15/37 4,125 4,321
SPIEKER PROPERTIES
6.750%, 01/15/08 3,000 2,970
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $33,312
- --------------------------------------------------------------------------------
INDUSTRIAL -- 5.8%
B.F. GOODRICH
7.000%, 04/15/38 2,500 2,500
CASE EQUIPMENT
7.250%, 01/15/16 2,385 2,492
ITT
6.750%, 11/15/03 2,000 1,923
7.375%, 11/15/15 1,000 919
LOEWEN GROUP INTERNATIONAL
8.250%, 10/15/03 2,000 2,065
NABISCO (B)
6.300%, 08/26/99 1,500 1,509
ORYX ENERGY
8.375%, 07/15/04 1,000 1,074
STORAGE USA
7.125%, 11/01/03 2,000 2,040
TENET HEALTHCARE
8.625%, 12/01/03 2,000 2,073
8.000%, 01/15/05 2,500 2,563
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL $19,158
- --------------------------------------------------------------------------------
RETAIL -- 2.7%
FRED MEYER
7.375%, 03/01/05 5,000 5,019
GREAT ATLANTIC & PACIFIC TEA
7.750%, 04/15/07 1,500 1,607
KROGER
7.650%, 04/15/07 2,000 2,145
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 8,771
- --------------------------------------------------------------------------------
56
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 2.4%
360 COMMUNICATIONS
7.600%, 04/01/09 $1,500 $ 1,611
NEW YORK TELEPHONE
9.375%, 07/15/31 3,000 3,390
WORLDCOM
7.750%, 04/01/07 2,650 2,855
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 7,856
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $103,168) $105,255
- --------------------------------------------------------------------------------
YANKEE BONDS -- 3.1%
GULF CANADA RESOURCES
8.250%, 03/15/17 2,000 2,125
HUSKY OIL
7.550%, 11/15/16 3,600 3,645
ROYAL CARIBBEAN CRUISES
7.250%, 08/15/06 3,000 3,116
SAGA PETROLEUM
9.125%, 07/15/14 1,000 1,189
- --------------------------------------------------------------------------------
TOTAL YANKEE BONDS
(Cost $9,927) $ 10,075
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 9.3%
CONTINENTAL HOME EQUITY TRUST,
SERIES 1998-1, CLASS A6
6.580%, 02/01/03 3,000 3,000
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-1, CLASS A2
6.620%, 10/25/11 2,600 2,634
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-2, CLASS A3
6.940%, 11/20/11 4,000 4,041
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-3, CLASS A4
6.840%, 10/20/13 3,000 3,030
PREMIER AUTO TRUST,
SERIES 1996-2, CLASS A4
6.575%, 10/06/00 4,600 4,646
STANDARD CREDIT CARD MASTER
TRUST, SERIES 1995-10, CLASS A
5.900%, 02/07/01 1,875 1,877
THE MONEY STORE HOME
EQUITY TRUST, SERIES 1996-C,
CLASS A4
7.400%, 06/15/21 3,000 3,121
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS A5
6.555%, 12/15/38 4,350 4,324
PRINCIPAL AMOUNT MARKET
DESCRIPTION (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------------
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF3
6.345%, 11/15/21 $ 4,000 $ 4,002
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $30,512) $ 30,675
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -- 2.7%
COUNTRYWIDE FUNDING,
SERIES 1994-4, CLASS A12
6.950%, 04/25/24 5,452 5,481
MDC ASSET INVESTORS TRUST,
SERIES V, CLASS 2
9.325%, 12/01/17 1 1
PRUDENTIAL HOME MORTGAGE
SECURITIES, SERIES 1993-36,
CLASS A1
6.850%, 10/25/23 2,039 2,035
RESIDENTIAL ASSET SECURITIZATION,
SERIES 1996-A8, CLASS A1
8.000%, 12/25/26 1,203 1,215
- --------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS
(Cost $8,165) $ 8,732
- --------------------------------------------------------------------------------
TAXABLE MUNICIPAL BOND -- 0.6%
NEW YORK CITY, NEW YORK, SERIES I
6.400%, 03/15/01 2,000 2,008
- --------------------------------------------------------------------------------
TOTAL TAXABLE MUNICIPAL BOND
(Cost $2,015) $ 2,008
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCK -- 1.4%
SIMON DEBARTOLO GROUP 90 4,669
- --------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCK
(Cost $4,573) $ 4,669
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.5%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$21,312,072 (collateralized by
U.S. Treasury Bonds:
total market value
$21,794,467) $21,309 21,309
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $21,309) $ 21,309
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 109.9%
(Cost $354,854) $361,789
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (9.9%) (D) $ (32,596)
================================================================================
57
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
INCOME PORTFOLIO (CONCLUDED)
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 31,453,509 outstanding
shares of beneficial interest $316,108
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 664,393 outstanding
shares of beneficial interest 6,795
Undistributed net investment income 25
Accumulated net realized loss on investments (670)
Net unrealized appreciation on investments 6,935
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $329,193
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $10.25
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $10.37
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($10.37 / 95.50%) (E) $10.86
================================================================================
(A) WHEN ISSUED SECURITY (TOTAL COST $14,751,563, $20,156,250 AND
$7,379,784, RESPECTIVELY).
(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 INVESTORS.
(C) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT AS OF APRIL 30, 1998.
(D) OTHER ASSETS AND LIABILITIES REPRESENTING GREATER THAN FIVE
PERCENT OF TOTAL NET ASSETS INCLUDE THE FOLLOWING:
CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN $99,864,025
PAYABLE UPON RETURN OF SECURITIES ON LOAN $99,864,025
(E) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME.
THE MAXIMUM SALES LOAD IS 4.50%.
GTD--GUARANTEED MORTGAGE CERTIFICATE
MTN--MEDIUM TERM NOTE
PAT--PUTABLE ASSET TRUST
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: INTERMEDIATE FIXED INCOME PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Repurchase Agreement -- 2%
U.S. Government Agency Obligations -- 5%
Yankee Bonds -- 6%
U.S. Government Mortgage-Backed Obligations -- 10%
Asset-Backed Securities -- 11%
Preferred Stock -- 1%
Taxable Municipal Bond -- 1%
U.S. Treasury Obligations -- 39%
Non-Agency Mortgage-Backed Obligations -- 1%
Corporate Obligations -- 24%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 38.7%
U.S. TREASURY BOND
10.750%, 08/15/05 $2,000 $ 2,587
U.S. TREASURY NOTES
7.500%, 10/31/99 5,750 5,907
7.750%, 11/30/99 5,000 5,163
7.500%, 11/15/01 5,000 5,294
6.250%, 02/28/02 6,000 6,120
7.875%, 11/15/04 4,000 4,462
6.500%, 05/15/05 1,000 1,045
6.250%, 02/15/07 2,000 2,068
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $31,899) $32,646
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 4.8%
FEDERAL HOME LOAN BANK
6.634%, 02/20/04 1,535 1,542
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.270%, 09/20/00 2,500 2,519
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $4,035) $ 4,061
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 9.5%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.500%, 05/01/08 835 838
6.500%, 10/01/08 3,047 3,058
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
6.250%, 07/25/08 1,590 1,593
7.250%, 12/18/16 1,000 1,007
7.000%, 07/18/18 1,500 1,520
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $7,910) $ 8,016
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 10.7%
CAPITAL EQUIPMENT TRUST,
SERIES 1996-1, CLASS A3
6.110%, 07/15/99 1,500 1,504
58
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CITYSCAPE HOME EQUITY LOAN
TRUST, SERIES 1996-3, CLASS A1
6.700%, 06/25/11 $ 2 $ 2
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-1, CLASS A2
6.620%, 10/25/11 750 760
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-3, CLASS A4
6.840%, 10/20/13 1,000 1,010
PREMIER AUTO TRUST,
SERIES 1996-2, CLASS A4
6.575%, 10/06/00 1,575 1,591
STANDARD CREDIT CARD MASTER
TRUST, SERIES 1995-10,
CLASS A
5.900%, 02/07/01 1,000 1,001
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1996-C, CLASS A4
7.400%, 06/15/21 1,513 1,574
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS A5
6.555%, 12/15/38 1,620 1,610
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $8,995) $9,052
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -- 1.0%
COLLATERALIZED MORTGAGE SECURITIES,
SERIES 1992-2, CLASS F
7.000%, 10/20/00 136 135
PRUDENTIAL HOME MORTGAGE
SECURITIES, SERIES 1993-36,
CLASS A1
6.850%, 10/25/23 658 657
- --------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS
(Cost $792) $ 792
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 23.4%
COMMUNICATIONS -- 6.1%
CABLE & WIRELESS COMMUNICATIONS
6.375%, 03/06/03 1,000 999
COMCAST CABLEVISION
8.375%, 05/01/07 1,000 1,112
LUCENT TECHNOLOGIES
7.250%, 07/15/06 1,220 1,296
TIME WARNER
8.110%, 08/15/06 600 654
WORLDCOM
7.750%, 04/01/07 1,000 1,077
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS $5,138
- --------------------------------------------------------------------------------
INDUSTRIAL -- 3.6%
ITT
6.750%, 11/15/03 1,000 961
ORYX ENERGY
8.375%, 07/15/04 1,000 1,074
PRINCIPAL AMOUNT MARKET
DESCRIPTION (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------------
TENET HEALTHCARE
8.000%, 01/15/05 $ 1,000 $ 1,025
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL $ 3,060
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 10.9%
BEAR STEARNS
6.500%, 07/05/00 850 858
CASE CREDIT
6.125%, 02/15/03 1,000 993
DEAN WITTER DISCOVER (A)
5.543%, 03/02/99 1,500 1,503
FIRST UNION
8.770%, 11/15/04 1,350 1,404
LEHMAN BROTHERS HOLDINGS
7.250%, 10/15/03 1,250 1,294
MERRILL LYNCH
7.200%, 10/15/12 1,500 1,549
PROGRESSIVE
6.600%, 01/15/04 550 556
STORAGE USA
7.125%, 11/01/03 1,000 1,020
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 9,177
- --------------------------------------------------------------------------------
RETAIL -- 2.8%
FEDERATED DEPARTMENT STORES
8.500%, 06/15/03 1,000 1,085
KROGER
8.500%, 06/15/03 1,200 1,253
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 2,338
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $19,304) $19,713
- --------------------------------------------------------------------------------
YANKEE BONDS -- 6.4%
HUTCHISON WHAMPOA (B)
6.950%, 08/01/07 1,000 946
HYDRO QUEBEC
6.490%, 07/16/03 1,500 1,515
MERITA BANK
6.500%, 01/15/06 1,350 1,333
ROYAL CARIBBEAN
8.250%, 04/01/05 1,500 1,618
- --------------------------------------------------------------------------------
TOTAL YANKEE BONDS
(Cost $5,359) $ 5,412
- --------------------------------------------------------------------------------
TAXABLE MUNICIPAL BOND -- 0.6%
NEW YORK CITY, NEW YORK,
SERIES I
6.400%, 03/15/01 500 502
- --------------------------------------------------------------------------------
TOTAL TAXABLE MUNICIPAL BOND
(Cost $504) $ 502
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 1.2%
SIMON DEBARTOLO GROUP 20 1,038
- --------------------------------------------------------------------------------
59
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
INTERMEDIATE FIXED INCOME PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $1,012) $ 1,038
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.5%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$2,071,217 (collateralized by
U.S. Treasury Bond:
total market value
$2,119,102) $2,071 2,071
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,071) $ 2,071
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.8%
(Cost $81,881) $83,303
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.2% (C) $ 1,025
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 8,431,193 outstanding
shares of beneficial interest 82,839
Distribution in excess of net investment income (2)
Accumulated net realized gain on investments 69
Net unrealized appreciation on investments 1,422
- --------------------------------------------------------------------------------
TOTAL NET ASSETS-- 100.0% $84,328
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $10.00
================================================================================
(A) VARIABLE RATE SECURITY. THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON APRIL 30, 1998.
(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 INVESTORS.
(C) OTHER ASSETS AND LIABILITIES REPRESENTING GREATER THAN FIVE
PERCENT OF TOTAL NET ASSETS INCLUDE THE FOLLOWING:
CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN $14,000,000
PAYABLE UPON RETURN OF SECURITIES ON LOAN $14,000,000
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: U.S. GOVERNMENT BOND PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Preferred Stocks -- 2%
Repurchase Agreement -- 4%
Asset-Backed Obligations -- 5%
U.S. Government Agency Obligations -- 14%
U.S. Government Mortgage-Backed Obligations -- 17%
Taxable Municipal Bond -- 1%
U.S. Treasury Obligations -- 31%
Corporate Obligations -- 26%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 33.2%
U.S. TREASURY BOND
9.125%, 05/15/09 $ 5,000 $ 5,826
U.S. TREASURY NOTES
9.000%, 05/15/98 3,000 3,005
9.125%, 05/15/99 27,000 27,957
8.000%, 08/15/99 24,000 24,721
7.500%, 05/15/02 25,000 26,630
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $88,997) $88,139
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 15.2%
FEDERAL NATIONAL MORTGAGE ASSOCIATION, MTN
6.030%, 07/02/99 10,000 10,032
6.030%, 07/07/99 10,000 10,033
6.470%, 09/25/12 7,500 7,785
9.500%, 07/01/17 5,000 6,800
7.125%, 04/30/26 5,000 5,575
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $39,657) $40,225
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 17.9%
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION
6.250%, 01/15/20 3,000 2,935
6.250%, 09/15/23 5,000 4,925
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION (A)
6.000%, 04/01/13 5,000 4,927
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.500%, 10/25/23 8,500 8,456
7.000%, 09/02/27 11,337 11,716
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (A)
6.500%, 04/01/28 15,000 14,822
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $47,452) $47,781
- --------------------------------------------------------------------------------
60
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
ASSET-BACKED OBLIGATIONS -- 5.2%
AMRESCO RESIDENTIAL SECURITIES,
SERIES 1996-5, CLASS A2
6.275%, 04/25/18 $2,612 $ 2,632
CONTINENTAL HOME EQUITY TRUST,
SERIES 1998-1, CLASS A6
6.580%, 02/01/03 3,000 3,000
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1996-C, CLASS A4
7.400%, 06/15/21 4,000 4,162
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF3
6.345%, 11/15/21 4,000 4,002
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED OBLIGATIONS
(Cost $13,710) $13,796
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 27.7%
ENTERTAINMENT -- 2.3%
ROYAL CARIBBEAN CRUISES
8.250%, 04/01/05 3,000 3,236
TIME WARNER
6.950%, 01/15/28 3,000 2,914
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 6,150
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 12.0%
AMVESCO CAPITAL
6.375%, 05/15/03 2,500 2,495
CONSECO
6.400%, 02/10/03 3,000 2,959
DEAN WITTER DISCOVER (B)
5.828%, 05/14/99 8,000 8,003
FORD MOTOR CREDIT
8.375%, 01/15/00 3,000 3,112
GREEN TREE FINANCIAL
10.250%, 06/01/02 2,000 2,230
MERRILL LYNCH (B)
5.540%, 06/21/99 10,000 10,002
SPIEKER PROPERTIES
6.750%, 01/15/08 3,000 2,970
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $31,771
- --------------------------------------------------------------------------------
INDUSTRIAL -- 6.5%
B.F. GOODRICH
7.000%, 04/15/38 2,000 2,000
COCA-COLA ENTERPRISES
6.750%, 01/15/38 2,500 2,450
HUSKY OIL
7.550%, 11/15/16 4,500 4,556
OCCIDENTAL PETROLEUM, MTN
8.270%, 12/02/02 1,000 1,069
SAGA PETROLEUM
9.125%, 07/15/14 4,000 4,755
PRINCIPAL AMOUNT MARKET
DESCRIPTION (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------------
TENET HEALTHCARE
7.875%, 01/15/03 $2,450 $ 2,514
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL $ 17,344
- --------------------------------------------------------------------------------
RETAIL -- 1.1%
FRED MEYER
7.375%, 03/01/05 3,000 3,011
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 3,011
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 5.0%
360 COMMUNICATIONS
7.600%, 04/01/09 3,000 3,221
GTE FLORIDA
6.860%, 02/01/28 2,500 2,519
NEW YORK TELEPHONE
9.375%, 07/15/31 3,850 4,351
WORLDCOM
7.550%, 04/01/04 3,000 3,146
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 13,237
- --------------------------------------------------------------------------------
UTILITIES -- 0.8%
UNION ELECTRIC
8.750%, 12/01/21 2,000 2,188
- --------------------------------------------------------------------------------
TOTAL UTILITIES $ 2,188
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $74,535) $ 73,701
- --------------------------------------------------------------------------------
TAXABLE MUNICIPAL BOND -- 0.9%
NEW YORK CITY, NEW YORK, SERIES I
6.400%, 03/15/01 2,500 2,509
- --------------------------------------------------------------------------------
TOTAL TAXABLE MUNICIPAL BOND
(Cost $2,519) $ 2,509
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 1.8%
BANK OF NEW YORK CAP II 20 509
SIMON DEBARTOLO GROUP 80 4,150
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $4,532) $ 4,659
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.4%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$11,702,793 (collateralized by
U.S. Treasury Bond:
total market value
$11,942,915) 11,701 11,701
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $11,701) $ 11,701
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 106.3%
(Cost $283,103) $282,511
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (6.3%) $(16,865)
================================================================================
61
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
U.S. GOVERNMENT BOND PORTFOLIO (CONCLUDED)
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 26,978,512 outstanding
shares of beneficial interest $267,979
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 3,021 outstanding
shares of beneficial interest 30
Undistributed net investment income 14
Accumulated net realized loss on investments (1,785)
Net unrealized depreciation on investments (592)
================================================================================
TOTAL NET ASSETS -- 100.0% $265,646
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.85
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $9.85
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($9.85 / 95.50%) (C) $10.31
================================================================================
(A) WHEN ISSUED SECURITY (TOTAL COST $4,917,188 AND $14,789,438, RESPECTIVELY).
(B) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT AS OF APRIL 30, 1998.
(C) EFFECTIVE 04/01/98, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME.
THE MAXIMUM SALES LOAD IS 4.50%.
MTN--MEDIUM-TERM NOTE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: BALANCED PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Preferred Convertible Stocks -- 1%
Asset-Backed Securities -- 3%
Repurchase Agreement -- 6%
U.S. Treasury Obligations -- 7%
U.S. Government Mortgage-Backed Obligations -- 7%
Corporate Obligations -- 9%
Non-Agency Mortgage-Backed Securities -- 1%
Common Stocks -- 66%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 66.0%
AIRCRAFT -- 2.2%
BOEING 22,000 $1,101
LOCKHEED MARTIN 12,000 1,336
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $2,437
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 1.7%
CHRYSLER 20,000 804
MAGNA INTERNATIONAL, CL A 15,000 1,118
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $1,922
- --------------------------------------------------------------------------------
BANKS -- 4.5%
BANC ONE 24,200 1,423
BANKBOSTON 10,000 1,079
CHASE MANHATTAN 10,000 1,386
NORWEST 29,000 1,151
- --------------------------------------------------------------------------------
TOTAL BANKS $5,039
- --------------------------------------------------------------------------------
CHEMICALS -- 3.3%
E.I. DU PONT DE NEMOURS 20,000 1,456
MONSANTO 28,000 1,480
ROYAL GROUP TECHNOLOGIES* 25,000 777
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $3,713
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.7%
BAY NETWORKS* 35,000 820
CIENA* 25,000 1,394
TELLABS* 12,000 850
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $3,064
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 1.1%
MICROSOFT* 13,500 1,217
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $1,217
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 5.8%
BELL & HOWELL* 30,000 829
COMVERSE TECHNOLOGY* 28,000 1,326
ELECTRONICS FOR IMAGING* 65,000 1,332
EMC/MASS* 30,000 1,384
GATEWAY 2000* 27,000 1,585
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $6,456
- --------------------------------------------------------------------------------
62
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
DRUGS -- 5.4%
ABBOTT LABORATORIES 12,500 $ 914
AMERICAN HOME PRODUCTS 14,000 1,304
AMGEN* 23,000 1,371
BRISTOL-MYERS SQUIBB 10,000 1,059
SCHERING PLOUGH 17,000 1,362
- --------------------------------------------------------------------------------
TOTAL DRUGS $6,010
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.2%
GENERAL ELECTRIC 16,000 1,362
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $1,362
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 4.9%
CARNIVAL, CL A 15,000 1,043
TELE-COMMUNICATIONS, CL A* 31,810 1,026
TIME WARNER 15,000 1,178
VIACOM, CL B* 15,000 870
WALT DISNEY 11,000 1,367
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $5,484
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.1%
CIT GROUP, CL A* 30,000 1,063
FEDERAL HOME LOAN MORTGAGE
CORPORATION 30,000 1,389
MORGAN STANLEY, DEAN WITTER,
DISCOVER 18,000 1,420
WADDELL & REED
FINANCIAL, CL A 30,000 742
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $4,614
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 2.2%
PEPSICO 30,000 1,191
PHILIP MORRIS 34,000 1,269
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $2,460
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.5%
COLGATE-PALMOLIVE 15,000 1,345
GILLETTE 10,000 1,154
SUNBEAM 10,000 251
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $2,750
- --------------------------------------------------------------------------------
INSURANCE -- 1.0%
AMERICAN INTERNATIONAL GROUP 8,250 1,085
- --------------------------------------------------------------------------------
TOTAL INSURANCE $1,085
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES-- 3.0%
BOSTON SCIENTIFIC* 12,000 868
JOHNSON & JOHNSON 20,000 1,428
SOFAMOR DANEK GROUP* 12,500 1,097
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $3,393
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES-- 2.4%
CENDANT* 50,000 1,250
FIRST DATA 30,000 1,016
USWEB* 20,000 456
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $2,722
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 1.1%
SMITH INTERNATIONAL* 20,000 1,175
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $1,175
- --------------------------------------------------------------------------------
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 1.0%
XEROX 10,000 $1,135
- --------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $1,135
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 0.8%
CARIBINER INTERNATIONAL* 45,000 900
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 900
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 2.5%
CABOT INDUSTRIAL TRUST 33,000 747
PACIFIC GULF PROPERTIES* 25,000 550
SPIEKER PROPERTIES 12,000 476
STARWOOD LODGING 20,000 1,004
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS $ 2,777
- --------------------------------------------------------------------------------
RETAIL -- 4.5%
HOME DEPOT 18,000 1,253
LINENS 'N THINGS* 26,000 1,567
RITE AID 35,000 1,124
WAL-MART STORES 22,000 1,112
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 5,056
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 1.9%
INTEL 12,000 970
SYNOPSYS* 27,000 1,161
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 2,131
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 1.2%
COOPER CAMERON* 20,000 1,329
- --------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 1,329
- --------------------------------------------------------------------------------
TECHNOLOGY -- 2.3%
AMERICAN POWER CONVERSION* 30,000 966
CISCO SYSTEMS* 22,000 1,612
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY $ 2,578
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 2.7%
L.M. ERICSSON TELEPHONE,
ADR 25,000 1,286
TELE-COMMUNICATIONS TCI
VENTURES GROUP, CL A* 36,380 593
WORLDCOM* 28,000 1,198
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 3,077
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $53,414) $73,886
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCKS -- 1.0%
THE MONEY STORE 21,000 643
SIMON DEBARTOLO GROUP 8,000 415
- --------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCKS
(Cost $915) $ 1,058
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 7.1%
U.S. TREASURY BOND
8.000%, 11/15/21 $ 500,000 622
U.S. TREASURY NOTES
7.500%, 10/31/99 1,500,000 1,541
7.750%, 02/15/01 850,000 896
7.500%, 11/15/01 600,000 635
6.500%, 05/15/05 1,000,000 1,045
6.625%, 05/15/07 3,000,000 3,181
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $7,805) $ 7,920
- --------------------------------------------------------------------------------
63
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
BALANCED PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 7.4%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
8.500%, 11/01/01 $ 30 $ 31
9.000%, 01/01/02 55 57
9.500%, 07/01/02 7 7
6.500%, 04/01/08 902 907
8.500%, 09/01/26 202 210
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
10.500%, 12/01/00 5 5
7.000%, 02/01/07 341 347
7.000%, 02/01/26 556 562
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
9.750%, 09/25/18 182 196
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION
7.500%, 10/15/23 1,048 1,077
7.500%, 12/15/23 1,000 1,027
7.000%, 02/15/24 1,168 1,182
7.000%, 05/15/24 2,378 2,406
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION, REMIC
7.750%, 06/16/20 300 311
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $7,996) $8,325
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 2.9%
BANKS -- 3.0%
BANK OF NEW YORK
7.780%, 12/01/26 500 516
BANKERS TRUST
5.640%, 09/11/98 2 1,999
CRESTAR FINANCIAL
8.160%, 12/15/26 800 863
- --------------------------------------------------------------------------------
TOTAL BANKS $ 3,378
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 2.0%
CSC HOLDINGS
7.875%, 02/15/18 250 248
COMCAST CABLEVISION
8.375%, 05/01/07 500 556
ROYAL CARIBBEAN CRUISES
7.250%, 08/15/06 500 519
TIME WARNER
8.110%, 08/15/06 275 300
TIME WARNER, PAT
4.900%, 07/29/99 700 690
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 2,313
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.9%
DYNEX CAPITAL
7.875%, 07/15/02 500 504
HUTCHISON WHAMPOA
7.450%, 08/01/17 500 458
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 962
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
GENERAL UTILITIES -- 0.4%
HYDRO-QUEBEC
7.500%, 04/01/16 $375 $ 404
- --------------------------------------------------------------------------------
TOTAL GENERAL UTILITIES $ 404
- --------------------------------------------------------------------------------
INDUSTRIAL -- 1.8%
CASE EQUIPMENT
7.250%, 01/15/16 200 209
HUSKY OIL
7.550%, 11/15/16 960 972
ORYX ENERGY
8.125%, 10/15/05 250 267
TENET HEALTHCARE
8.000%, 01/15/05 500 513
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL $ 1,961
- --------------------------------------------------------------------------------
INSURANCE -- 0.4%
SAFECO CAPITAL I
8.072%, 07/15/37 400 419
- --------------------------------------------------------------------------------
TOTAL INSURANCE $ 419
- --------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES -- 0.5%
LOEWEN GROUP INTERNATIONAL
8.250%, 10/15/03 500 516
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER SERVICES $ 516
- --------------------------------------------------------------------------------
RETAIL -- 0.2%
GREAT ATLANTIC & PACIFIC TEA
7.750%, 04/15/07 250 268
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 268
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $9,963) $10,221
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 2.6%
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-1, CLASS A2
6.620%, 10/25/11 275 279
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-2, CLASS A3
6.940%, 11/20/11 400 404
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-3, CLASS A4
6.840%, 10/20/13 350 354
PREMIER AUTO TRUST,
SERIES 1996-2, CLASS A4
6.575%, 10/06/00 675 682
STANDARD CREDIT CARD MASTER
TRUST, SERIES 1995-10, CLASS A
5.900%, 02/07/01 450 451
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1996-C, CLASS A4
7.400%, 06/15/21 350 364
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF3
6.345%, 11/15/21 375 375
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $2,883) $ 2,909
- --------------------------------------------------------------------------------
64
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -- 1.1%
COUNTRYWIDE FUNDING,
SERIES 1994-4, CLASS A12
6.950%, 04/25/24 $ 969 $ 974
MDC ASSET INVESTORS TRUST,
SERIES XII, CLASS 3
8.940%, 03/01/18 25 26
PRUDENTIAL HOME MORTGAGE
SECURITIES, SERIES 1993-36,
CLASS A1
6.850%, 10/25/23 279 279
- --------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS
(Cost $1,182) $ 1,279
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.4%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$7,129,038 (collateralized by U.S.
Treasury Bond: total market value
$7,294,402) 7,128 7,128
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $7,128) $ 7,128
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.7%
(Cost $91,286) $112,726
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (0.7%) $ (794)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 7,314,614 outstanding
shares of beneficial interest 71,944
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 1,142,088 outstanding
shares of beneficial interest 13,595
Undistributed net investment income 222
Accumulated net realized gain on investments 4,731
Net unrealized appreciation on investments 21,440
================================================================================
TOTAL NET ASSETS -- 100.0% $111,932
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $13.24
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $13.20
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($13.20 / 95.25%) (A) $13.86
================================================================================
* NON-INCOME PRODUCING SECURITY
(A) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME.
THE MAXIMUM SALES LOAD IS 4.75%.
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
PAT--PUTABLE ASSET TRUST
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: EQUITY INCOME PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Transportation -- 4%
Real Estate Investment Trusts -- 5%
Miscellaneous Business -- 6%
Repurchase Agreement -- 6%
Technology -- 9%
Consumer Cyclicals -- 9%
Chemicals & Drugs -- 11%
Financial -- 21%
Energy -- 17%
Consumer Non-Durable -- 12%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 86.9%
AEROSPACE & DEFENSE -- 1.4%
GENCORP 50,000 $ 1,522
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $ 1,522
- --------------------------------------------------------------------------------
AIRCRAFT -- 3.5%
GENERAL DYNAMICS 50,000 2,112
LOCKHEED MARTIN 15,500 1,726
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $ 3,838
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 3.6%
FORD MOTOR 50,000 2,291
GENERAL MOTORS 25,000 1,684
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 3,975
- --------------------------------------------------------------------------------
BANKS -- 10.6%
BANC ONE 48,400 2,847
FLEET FINANCIAL GROUP 27,000 2,332
NORWEST 50,000 1,984
PNC 40,000 2,417
WASHINGTON MUTUAL 30,000 2,102
- --------------------------------------------------------------------------------
TOTAL BANKS $11,682
- --------------------------------------------------------------------------------
BEAUTY PRODUCTS -- 1.6%
COLGATE PALMOLIVE 20,000 1,794
- --------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 1,794
- --------------------------------------------------------------------------------
CHEMICALS -- 3.4%
DOW CHEMICAL 17,900 1,731
OLIN 42,000 1,966
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $ 3,697
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.8%
GTE 34,000 1,987
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $ 1,987
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 1.4%
BALL 40,000 1,545
- --------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 1,545
- --------------------------------------------------------------------------------
DRUGS -- 7.3%
ABBOTT LABORATORIES 33,000 2,413
AMERICAN HOME PRODUCTS 30,000 2,794
BRISTOL-MYERS SQUIBB 27,200 2,880
- --------------------------------------------------------------------------------
TOTAL DRUGS $ 8,087
- --------------------------------------------------------------------------------
65
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
EQUITY INCOME PORTFOLIO (CONCLUDED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 1.6%
UNICOM 50,000 $1,737
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $1,737
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 1.7%
WADDELL & REED FINANCIAL, CL A 75,000 1,856
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $1,856
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 6.9%
BESTFOODS 36,000 1,975
H.J. HEINZ 44,000 2,398
PHILIP MORRIS 53,000 1,978
UST 45,000 1,240
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $7,591
- --------------------------------------------------------------------------------
GAS/NATURAL GAS -- 4.5%
BALTIMORE GAS & ELECTRIC 54,000 1,701
CONSOLIDATED NATURAL GAS 25,000 1,437
SONAT 42,000 1,864
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $5,002
- --------------------------------------------------------------------------------
INSURANCE -- 4.7%
HARTFORD FINANCIAL
SERVICES GROUP 15,000 1,661
LINCOLN NATIONAL 25,000 2,220
SAFECO 25,000 1,248
- --------------------------------------------------------------------------------
TOTAL INSURANCE $5,129
- --------------------------------------------------------------------------------
LEASING & RENTING -- 1.7%
PITNEY BOWES 40,000 1,920
- --------------------------------------------------------------------------------
TOTAL LEASING & RENTING $1,920
- --------------------------------------------------------------------------------
MARINE TRANSPORTATION -- 1.1%
KNIGHTSBRIDGE
TANKERS LIMITED 40,000 1,150
- --------------------------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $1,150
- --------------------------------------------------------------------------------
METALS & MINING -- 1.5%
PHELPS DODGE 25,000 1,678
- --------------------------------------------------------------------------------
TOTAL METALS & MINING $1,678
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 3.4%
ATLANTIC RICHFIELD 24,000 1,872
NEW CENTURY ENERGIES 40,293 1,914
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $3,786
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 6.6%
CHEVRON 26,000 2,150
MOBIL 24,000 1,896
ROYAL DUTCH PETROLEUM,
NEW YORK SHARES 20,000 1,131
TEXACO 33,600 2,066
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $7,243
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 1.8%
DUN & BRADSTREET 55,000 $ 1,953
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 1,953
- --------------------------------------------------------------------------------
RAILROADS -- 3.2%
NORFOLK SOUTHERN 55,200 1,846
UNION PACIFIC 30,000 1,643
- --------------------------------------------------------------------------------
TOTAL RAILROADS $ 3,489
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-- 4.9%
BERKSHIRE REALTY 110,000 1,341
CABOT INDUSTRIAL TRUST 50,000 1,131
FIRST INDUSTRIAL REALTY TRUST 25,000 813
KILROY REALTY CORP 45,000 1,193
PACIFIC GULF PROPERTIES 41,700 917
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS $ 5,395
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 3.5%
CARPENTER TECHNOLOGY 25,000 1,452
USX-U.S. STEEL GROUP 60,000 2,348
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 3,800
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS-- 5.2%
BELLSOUTH 27,000 1,733
TELEFONICA DE ESPANA, ADR 17,000 2,124
US WEST 35,900 1,894
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 5,751
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $67,926) $95,607
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCKS -- 7.2%
BANKS -- 1.2%
WBK STRYPES TRUST 40,000 1,365
- --------------------------------------------------------------------------------
TOTAL BANKS $ 1,365
- --------------------------------------------------------------------------------
ELECTRIC UTILITY -- 1.1%
HOUSTON INDUSTRIES 17,500 1,214
- --------------------------------------------------------------------------------
TOTAL ELECTRIC UTILITY $ 1,214
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 1.7%
THE MONEY STORE 60,000 1,838
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 1,838
- --------------------------------------------------------------------------------
INSURANCE -- 1.6%
AETNA 22,500 1,766
- --------------------------------------------------------------------------------
TOTAL INSURANCE $ 1,766
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 1.6%
ENRON 80,000 1,720
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 1,720
- --------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCKS
(Cost $7,117) $ 7,903
- --------------------------------------------------------------------------------
66
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.0%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$6,627,042 (collateralized by
U.S. Treasury Bond:
total market value
$6,830,939 $6,626 $ 6,626
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $6,626) $ 6,626
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(Cost $81,669) $110,136
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- (0.1%) $ (65)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 8,514,656 outstanding
shares of beneficial interest 72,328
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 273,825 outstanding
shares of beneficial interest 3,347
Distribution in excess of net investment income (1)
Accumulated net realized gain on investments 5,930
Net unrealized appreciation on investments 28,467
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $110,071
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $12.52
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $12.52
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($12.52 / 95.25%) (A) $13.14
================================================================================
(A) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME.
THE MAXIMUM SALES LOAD IS 4.75%.
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: VALUE EQUITY PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Miscellaneous Business -- 6%
Retail -- 7%
Consumer Products -- 7%
Chemicals & Drugs -- 8%
Repurchase Agreement -- 7%
Miscellaneous -- 10%
Technology -- 17%
Durable Goods -- 14%
Financial -- 13%
Oil-Energy -- 11%
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 92.4%
AEROSPACE & DEFENSE -- 3.0%
ALLIEDSIGNAL 124,000 $ 5,433
LOCKHEED MARTIN 65,537 7,299
RAYTHEON COMPANY, CL B 120,400 6,825
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $19,557
- --------------------------------------------------------------------------------
AIRCRAFT -- 0.1%
BOEING 10,000 501
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $ 501
- --------------------------------------------------------------------------------
APPAREL/TEXTILES -- 1.0%
VF 123,600 6,427
- --------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $ 6,427
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 3.3%
CHRYSLER 149,500 6,008
EATON 55,700 5,145
ECHLIN 94,300 4,462
TRW 108,600 5,735
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $21,350
- --------------------------------------------------------------------------------
BANKS -- 6.0%
BANC ONE 152,020 8,941
BANKERS TRUST NEW YORK 50,500 6,521
CHASE MANHATTAN 47,600 6,596
CITICORP 35,700 5,373
CRESTAR FINANCIAL 20,000 1,196
NORWEST 220,000 8,731
PNC 20,000 1,209
- --------------------------------------------------------------------------------
TOTAL BANKS $38,567
- --------------------------------------------------------------------------------
CHEMICALS -- 2.1%
E.I. DU PONT DE NEMOURS 13,000 947
LUBRIZOL 106,000 3,909
MONSANTO 22,000 1,163
PPG INDUSTRIES 107,800 7,620
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $13,639
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.4%
CIENA* 20,000 1,115
GTE 117,500 6,866
LUCENT TECHNOLOGIES 12,000 913
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $ 8,894
- --------------------------------------------------------------------------------
67
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
VALUE EQUITY PORTFOLIO (CONCLUDED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 5.3%
CISCO SYSTEMS* 18,000 $ 1,318
COMPAQ COMPUTER 349,100 9,797
DELL COMPUTER* 59,200 4,780
EMC* 15,000 692
HEWLETT PACKARD 122,500 9,226
IBM 73,900 8,563
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $34,376
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.9%
NEWELL 119,000 5,749
- --------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 5,749
- --------------------------------------------------------------------------------
DRUGS -- 5.8%
ABBOTT LABORATORIES 88,400 6,464
AMERICAN HOME PRODUCTS 87,200 8,120
AMGEN* 178,300 10,631
BRISTOL-MYERS SQUIBB 9,000 953
ELI LILLY 22,056 1,534
MERCK 8,000 964
MYLAN LABORATORIES 321,500 8,721
- --------------------------------------------------------------------------------
TOTAL DRUGS $37,387
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 0.9%
DUKE ENERGY 101,192 5,856
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $ 5,856
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 0.4%
WALT DISNEY 9,500 1,181
CARNIVAL, CL A 15,000 1,043
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 2,224
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.1%
AMERICAN EXPRESS 10,000 1,020
CIT GROUP, CL A* 125,000 4,430
FEDERAL NATIONAL MORTGAGE
ASSOCIATION 134,800 8,071
J.P. MORGAN 52,000 6,825
MORGAN STANLEY, DEAN WITTER,
DISCOVER 14,000 1,104
WADDELL & REED
FINANCIAL, CL A 204,500 5,061
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $26,511
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 3.7%
ANHEUSER BUSCH 200,000 9,162
H.J. HEINZ 62,600 3,412
PHILIP MORRIS 23,000 858
SARA LEE 67,600 4,026
UNILEVER NV 83,800 6,254
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $23,712
- --------------------------------------------------------------------------------
GAS/NATURAL GAS -- 1.8%
EL PASO NATURAL GAS 105,212 3,886
QUESTAR 168,900 7,326
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $11,212
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 3.0%
COLGATE PALMOLIVE 93,800 $ 8,413
PROCTER & GAMBLE 14,000 1,151
SNAP-ON TOOLS 92,400 3,910
WHIRLPOOL 83,300 5,998
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $19,472
- --------------------------------------------------------------------------------
INSURANCE -- 2.5%
ALLSTATE 9,000 866
AMERICAN INTERNATIONAL GROUP 7,500 987
CIGNA 31,500 6,519
TRAVELERS 126,150 7,719
- --------------------------------------------------------------------------------
TOTAL INSURANCE $16,091
- --------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 0.9%
WEYERHAEUSER 101,500 5,849
- --------------------------------------------------------------------------------
TOTAL LUMBER & WOOD PRODUCTS $ 5,849
- --------------------------------------------------------------------------------
MACHINERY -- 6.3%
DEERE 109,900 6,422
DRESSER INDUSTRIES 150,400 7,952
EMERSON ELECTRIC 74,100 4,715
GENERAL ELECTRIC 89,800 7,644
INGERSOLL RAND 180,600 8,319
TENNECO 134,600 5,796
- --------------------------------------------------------------------------------
TOTAL MACHINERY $40,848
- --------------------------------------------------------------------------------
MEASURING DEVICES -- 1.2%
HONEYWELL 85,600 7,971
- --------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 7,971
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES-- 5.6%
BAUSCH & LOMB 133,900 6,620
BAXTER INTERNATIONAL 108,600 6,021
BECTON DICKINSON 148,000 10,305
JOHNSON & JOHNSON 119,900 8,558
MEDTRONIC 91,400 4,810
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $36,314
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 2.4%
COMPUTER ASSOCIATES
INTERNATIONAL 140,000 8,199
FIRST DATA 106,400 3,604
ORACLE SYSTEMS* 35,000 906
STERLING SOFTWARE* 114,600 3,030
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $15,739
- --------------------------------------------------------------------------------
OFFICE FURNITURE & FIXTURES-- 0.9%
JOHNSON CONTROLS 92,600 5,498
- --------------------------------------------------------------------------------
TOTAL OFFICE FURNITURE & FIXTURES $ 5,498
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.9%
KIMBERLY-CLARK 115,000 5,836
- --------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 5,836
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 2.5%
ATLANTIC RICHFIELD 113,400 8,845
PHILLIPS PETROLEUM 152,100 7,538
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $16,383
- --------------------------------------------------------------------------------
68
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 5.4%
AMOCO 161,800 $ 7,160
CHEVRON 84,400 6,979
MOBIL 104,900 8,287
SUN 167,800 6,785
UNOCAL 144,000 5,895
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $35,106
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 1.8%
XEROX 103,000 11,691
- --------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $11,691
- --------------------------------------------------------------------------------
RAILROADS -- 0.7%
BURLINGTON NORTHERN SANTA FE 42,500 4,208
- --------------------------------------------------------------------------------
TOTAL RAILROADS $ 4,208
- --------------------------------------------------------------------------------
RETAIL -- 6.5%
ALBERTSON'S 76,000 3,800
J.C. PENNEY 107,900 7,668
LOWE'S 100,000 6,994
MAY DEPARTMENT STORES 58,600 3,615
MCDONALD'S 95,600 5,915
PEPSICO 170,000 6,747
RITE AID 225,000 7,228
- --------------------------------------------------------------------------------
TOTAL RETAIL $41,967
- --------------------------------------------------------------------------------
RUBBER & PLASTIC -- 0.9%
GOODYEAR TIRE & RUBBER 80,800 5,656
- --------------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $ 5,656
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 4.2%
APPLIED MATERIALS* 185,300 6,694
INTEL 103,000 8,324
ROCKWELL INTERNATIONAL 98,400 5,504
TEXAS INSTRUMENTS 105,400 6,752
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $27,274
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 0.1%
COOPER CAMERON* 6,000 399
- --------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 399
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.8%
ALCAN ALUMINUM 135,200 4,394
USX-U.S. STEEL GROUP 15,000 587
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 4,981
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 4.3%
BELLSOUTH 127,000 8,152
SBC COMMUNICATIONS 234,400 9,713
SPRINT 80,700 5,513
US WEST 84,700 4,468
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $27,846
- --------------------------------------------------------------------------------
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
WHOLESALE -- 1.7%
AVNET 86,100 $ 5,311
MOTOROLA 104,600 5,818
- --------------------------------------------------------------------------------
TOTAL WHOLESALE $ 11,129
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $391,934) $596,220
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.5%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$48,292,747 (collateralized by
U.S. Treasury Bonds:
total market value
$49,281,747) $48,285 48,285
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $48,285) $ 48,285
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.9%
(Cost $440,219) $644,505
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.1% $ 924
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 44,224,688 outstanding
shares of beneficial interest 403,243
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 15,608 outstanding
shares of beneficial interest 228
Undistributed net investment income 140
Accumulated net realized gain on investments 37,532
Net unrealized appreciation on investments 204,286
================================================================================
TOTAL NET ASSETS -- 100.0% $645,429
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $14.59
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $14.60
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($14.60 / 95.25%) (A) $15.33
================================================================================
* NON-INCOME PRODUCING SECURITY
(A) EFFECTIVE 04/01/98, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME.
THE MAXIMUM SALES LOAD IS 4.75%.
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
69
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: EQUITY INDEX PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Cash Equivalent -- 3%
Durable Goods -- 4%
Retail -- 5%
Miscellaneous -- 10%
Consumer Products -- 12%
Chemicals & Drugs -- 13%
Healthcare -- 3%
Financial -- 18%
Technology -- 17%
Oil-Energy -- 15%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 96.3%
AEROSPACE & DEFENSE -- 0.2%
RAYTHEON COMPANY, CL B 1,805 $102
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $102
- --------------------------------------------------------------------------------
AGRICULTURE -- 0.1%
PIONEER HI-BRED INTERNATIONAL 1,245 47
- --------------------------------------------------------------------------------
TOTAL AGRICULTURE $ 47
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.5%
AMR* 535 82
DELTA AIR LINES 455 53
FDX* 796 54
SOUTHWEST AIRLINES 1,055 29
US AIR GROUP* 435 31
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $249
- --------------------------------------------------------------------------------
AIRCRAFT -- 1.6%
ALLIEDSIGNAL 2,885 126
BOEING 5,300 265
GENERAL DYNAMICS 610 26
LOCKHEED MARTIN 1,020 114
NORTHROP GRUMMAN 420 44
ROCKWELL INTERNATIONAL 990 55
UNITED TECHNOLOGIES 1,205 119
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $749
- --------------------------------------------------------------------------------
APPAREL/TEXTILES -- 0.1%
FRUIT OF THE LOOM* 220 8
LIZ CLAIBORNE 320 16
RUSSELL 110 3
SPRINGS INDUSTRIES, CL A 60 3
VF 590 31
- --------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $ 61
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 1.3%
CHRYSLER 3,330 134
DANA 505 30
EATON 370 34
ECHLIN 190 9
FORD MOTOR 6,365 292
GENUINE PARTS 860 31
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
NAVISTAR INTERNATIONAL* 220 $ 7
PACCAR 370 22
TRW 595 31
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $590
- --------------------------------------------------------------------------------
BANKS -- 9.0%
BANC ONE 3,352 197
BANK OF NEW YORK 1,930 114
BANKAMERICA 3,700 315
BANKBOSTON 790 85
BANKERS TRUST NEW YORK 565 73
BB&T 655 44
CHASE MANHATTAN 2,195 304
CITICORP 2,405 362
COMERICA 758 51
FIFTH THIRD BANCORP 1,245 68
FIRST CHICAGO NBD 1,475 137
FIRST UNION 5,129 310
FLEET FINANCIAL GROUP 1,445 125
GOLDEN WEST FINANCIAL 275 29
H.F. AHMANSON 555 42
HUNTINGTON BANCSHARES 915 33
J.P. MORGAN 940 123
KEYCORP 2,330 92
MELLON BANK 1,305 94
MERCANTILE BANCORPORATION 630 35
NATIONAL CITY 1,685 117
NATIONSBANK 4,945 375
NORTHERN TRUST 610 45
NORWEST 3,895 155
PNC 1,615 98
PROVIDIAN FINANCIAL 455 27
REPUBLIC NEW YORK 365 49
STATE STREET 770 55
SUMMIT BANCORP 830 42
SUNTRUST BANKS 1,100 90
SYNOVUS FINANCIAL 845 30
U.S. BANCORP 1,260 160
WACHOVIA 1,065 90
WASHINGTON MUTUAL 1,370 96
WELLS FARGO 460 170
- --------------------------------------------------------------------------------
TOTAL BANKS $4,232
- --------------------------------------------------------------------------------
BEAUTY PRODUCTS -- 0.2%
ALBERTO-CULVER, CL B 170 5
AVON PRODUCTS 630 52
INTERNATIONAL FLAVORS &
FRAGRANCES 585 29
- --------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 86
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 0.9%
CBS 3,590 128
CLEAR CHANNEL COMMUNICATIONS* 630 59
COMCAST, CL A SPECIAL 1,850 66
INTERPUBLIC GROUP 600 38
OMNICOM GROUP 775 37
U.S. WEST MEDIA GROUP* 3,120 118
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 446
- --------------------------------------------------------------------------------
70
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.1%
CENTEX 180 $ 6
FLUOR 405 19
FOSTER WHEELER 120 3
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 28
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES -- 0.1%
ARMSTRONG WORLD INDUSTRIES 195 17
MCDERMOTT INTERNATIONAL 160 7
OWENS CORNING 160 7
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION SUPPLIES $ 31
- --------------------------------------------------------------------------------
CHEMICALS -- 2.1%
AIR PRODUCTS & CHEMICALS 625 54
AVERY DENNISON 490 26
B.F. GOODRICH 260 14
E.I. DU PONT DE NEMOURS 5,965 434
EASTMAN CHEMICAL 380 26
FMC* 110 9
GREAT LAKES CHEMICAL 290 15
HERCULES 375 18
MONSANTO 3,055 162
MORTON INTERNATIONAL 530 17
NALCO CHEMICAL 200 8
PPG INDUSTRIES 940 66
PRAXAIR 755 38
ROHM & HAAS 395 43
UNION CARBIDE 595 29
W.R. GRACE & COMPANY* 360 7
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $966
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.3%
ANDREW* 270 6
BAY NETWORKS* 1,010 24
DSC COMMUNICATIONS* 350 6
GENERAL INSTRUMENT* 710 16
GTE 5,035 294
HARRIS 385 19
ITT INDUSTRIES 570 21
NORTHERN TELECOM 2,680 163
SCIENTIFIC-ATLANTA 230 5
TELLABS* 1,005 71
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $625
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 4.5%
APPLE COMPUTER* 670 18
CERIDIAN* 370 21
COMPAQ COMPUTER 8,040 226
DATA GENERAL* 140 2
DELL COMPUTER* 3,410 275
DIGITAL EQUIPMENT* 705 39
EMC* 2,625 121
GATEWAY 2000* 800 47
HEWLETT PACKARD 5,550 418
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
IBM 5,195 $ 602
MINNESOTA MINING &
MANUFACTURING 2,235 211
SEAGATE TECHNOLOGY* 1,180 31
SILICON GRAPHICS* 900 12
SUN MICROSYSTEMS* 2,020 83
UNISYS* 1,245 28
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $2,134
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.5%
MICROSOFT* 12,910 1,164
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $1,164
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.2%
BALL 90 3
CROWN CORK & SEAL 620 32
NEWELL 770 37
OWENS-ILLINOIS* 675 27
- --------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 99
- --------------------------------------------------------------------------------
DRUGS -- 8.5%
ABBOTT LABORATORIES 4,045 296
ALLERGAN 190 8
ALZA* 410 20
AMERICAN HOME PRODUCTS 3,445 321
AMGEN* 1,410 84
BRISTOL-MYERS SQUIBB 5,300 561
ELI LILLY 5,885 409
MERCK 6,335 763
MILLIPORE 130 4
PFIZER 6,825 777
PHARMACIA & UPJOHN 2,600 109
SCHERING PLOUGH 3,885 311
SIGMA ALDRICH 485 19
WARNER LAMBERT 1,540 291
- --------------------------------------------------------------------------------
TOTAL DRUGS $3,973
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 5.3%
AMEREN 660 26
AMERICAN ELECTRIC POWER 845 40
BALTIMORE GAS & ELECTRIC 705 22
CAROLINA POWER & LIGHT 725 31
CENTRAL & SOUTH WEST 1,020 27
CINERGY 760 27
CONSOLIDATED EDISON 1,125 51
DOMINION RESOURCES 895 35
DTE ENERGY 695 27
DUKE ENERGY 1,850 107
EDISON INTERNATIONAL 1,820 54
ENTERGY 1,165 29
FIRSTENERGY 1,110 34
FPL GROUP 1,010 63
GENERAL ELECTRIC 17,360 1,478
GPU 575 23
HOUSTON INDUSTRIES 1,360 40
NORTHERN STATES POWER 355 20
71
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
EQUITY INDEX PORTFOLIO (CONTINUED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
P P & L RESOURCES 790 $ 18
PACIFICORP 1,415 33
PG&E 2,330 75
PUBLIC SERVICE ENTERPRISE
GROUP 1,110 37
SOUTHERN 3,530 94
TEXAS UTILITIES 1,165 47
UNICOM 1,045 36
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $2,474
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 1.0%
KING WORLD PRODUCTIONS* 220 6
MIRAGE RESORTS* 855 19
WALT DISNEY 3,560 443
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 468
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.3%
BROWNING-FERRIS INDUSTRIES 945 32
LAIDLAW 1,585 22
WASTE MANAGEMENT 2,450 82
- --------------------------------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES $ 136
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.9%
AMERICAN EXPRESS 2,500 255
ASSOCIATES FIRST CAPITAL 1,811 135
BENEFICIAL 355 46
CHARLES SCHWAB 1,255 44
COUNTRYWIDE CREDIT INDUSTRIES 515 25
EQUIFAX 725 28
FEDERAL HOME LOAN MORTGAGE
CORPORATION 3,685 171
FEDERAL NATIONAL MORTGAGE
ASSOCIATION 5,525 331
FRANKLIN RESOURCES 1,500 80
GREEN TREE FINANCIAL 710 29
HOUSEHOLD INTERNATIONAL 615 81
LEHMAN BROTHERS HOLDINGS 455 32
MBNA 2,920 99
MERRILL LYNCH 1,700 149
MORGAN STANLEY, DEAN WITTER,
DISCOVER 3,150 248
TEXTRON 785 61
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $1,814
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 6.4%
ADOLPH COORS, CL B 110 4
ANHEUSER BUSCH 2,515 115
ARCHER-DANIELS-MIDLAND 3,035 65
BESTFOODS 1,560 86
BROWN-FORMAN, CL B 330 19
CAMPBELL SOUP 2,365 121
COCA-COLA 13,140 997
CONAGRA 2,530 74
FORTUNE BRANDS 825 30
GENERAL MILLS 750 51
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
H.J. HEINZ 1,885 $ 103
HERSHEY FOODS 685 50
KELLOGG 2,195 91
PEPSICO 8,045 319
PHILIP MORRIS 12,905 482
QUAKER OATS 660 34
RALSTON PURINA GROUP 575 61
SARA LEE 2,420 144
SEAGRAM 1,705 73
UST 890 25
WM. WRIGLEY, JR. 555 49
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $2,993
- --------------------------------------------------------------------------------
GAS/NATURAL GAS -- 0.5%
COLUMBIA GAS SYSTEMS 265 22
CONSOLIDATED NATURAL GAS 460 26
EASTERN ENTERPRISES 60 3
ENRON 1,505 74
NICOR 140 6
ONEOK 80 3
PACIFIC ENTERPRISES 400 16
PEOPLES ENERGY 100 4
SONAT 530 24
WILLIAMS 2,100 66
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $ 244
- --------------------------------------------------------------------------------
GENERAL UTILITIES -- 0.1%
NIAGARA MOHAWK POWER* 430 5
ORYX ENERGY* 310 8
PECO ENERGY 1,190 28
- --------------------------------------------------------------------------------
TOTAL GENERAL UTILITIES $ 41
- --------------------------------------------------------------------------------
GLASS PRODUCTS -- 0.1%
CORNING 1,105 44
- --------------------------------------------------------------------------------
TOTAL GLASS PRODUCTS $ 44
- --------------------------------------------------------------------------------
HOME APPLIANCES -- 0.1%
NATIONAL SERVICE INDUSTRIES 130 7
SHERWIN-WILLIAMS 835 30
- --------------------------------------------------------------------------------
TOTAL HOME APPLIANCES $ 37
- --------------------------------------------------------------------------------
HOME BUILDERS -- 0.0%
PULTE 60 3
- --------------------------------------------------------------------------------
TOTAL HOME BUILDERS $ 3
- --------------------------------------------------------------------------------
HOTELS & LODGING -- 0.2%
HARRAH'S ENTERTAINMENT* 300 8
HILTON HOTELS 1,195 38
MARRIOTT INTERNATIONAL* 1,305 43
- --------------------------------------------------------------------------------
TOTAL HOTELS & LODGING $ 89
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.8%
CLOROX 495 42
COLGATE-PALMOLIVE 1,500 135
GILLETTE 3,005 347
ILLINOIS TOOL WORKS 1,330 94
72
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MAYTAG 460 $ 24
PROCTER & GAMBLE 7,080 582
RAYCHEM 415 17
SNAP-ON TOOLS 180 8
STANLEY WORKS 425 22
WHIRLPOOL 360 26
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $1,297
- --------------------------------------------------------------------------------
INSURANCE -- 5.1%
AETNA 760 61
ALLSTATE 2,280 219
AMERICAN GENERAL 1,315 88
AMERICAN INTERNATIONAL GROUP 3,690 485
AON 895 58
CHUBB 905 71
CIGNA 450 93
CINCINNATI FINANCIAL 365 46
CONSECO 900 45
GENERAL RE 425 95
HARTFORD FINANCIAL SERVICES
GROUP 660 73
HUMANA* 790 21
JEFFERSON-PILOT 517 30
LINCOLN NATIONAL 490 44
LOEWS 650 65
MARSH & MCLENNAN 905 82
MBIA 430 32
MGIC INVESTMENT 545 34
PROGRESSIVE 445 60
SAFECO 675 34
ST. PAUL 552 47
SUNAMERICA 930 46
TORCHMARK 675 30
TRANSAMERICA 405 47
TRAVELERS 6,062 371
UNITED HEALTHCARE 900 63
UNUM 665 36
- --------------------------------------------------------------------------------
TOTAL INSURANCE $2,376
- --------------------------------------------------------------------------------
LEASING & RENTING -- 0.2%
PITNEY BOWES 1,545 74
- --------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 74
- --------------------------------------------------------------------------------
LEISURE PRODUCTS -- 0.2%
HASBRO 605 22
JOSTENS 120 3
MATTEL 1,490 57
- --------------------------------------------------------------------------------
TOTAL LEISURE PRODUCTS $ 82
- --------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 0.1%
GEORGIA-PACIFIC 445 34
LOUISIANA-PACIFIC 320 7
- --------------------------------------------------------------------------------
TOTAL LUMBER & WOOD PRODUCTS $ 41
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MACHINERY -- 1.9%
AEROQUIP-VICKERS 80 $ 5
APPLIED MATERIALS* 1,740 63
BAKER HUGHES 805 33
BLACK & DECKER 455 23
BRIGGS & STRATTON 80 4
BRUNSWICK 480 16
CASE 365 23
CATERPILLAR 1,910 109
CINCINNATI MILACRON 120 4
CRANE 140 8
CUMMINS ENGINE 110 6
DEERE 1,205 70
DOVER 1,060 42
DRESSER INDUSTRIES 840 44
EMERSON ELECTRIC 2,250 143
GENERAL SIGNAL 150 7
HARNISCHFEGER INDUSTRIES 150 4
INGERSOLL RAND 800 37
NACCO INDUSTRIES, CL A 120 20
PALL 380 7
PARKER-HANNIFIN 540 24
TENNECO 815 35
TIMKEN 190 8
TYCO INTERNATIONAL LIMITED 3,070 167
- --------------------------------------------------------------------------------
TOTAL MACHINERY $ 902
- --------------------------------------------------------------------------------
MEASURING DEVICES -- 0.3%
HONEYWELL 610 57
KLA-TENCOR* 410 17
MALLINCKRODT 220 7
PERKIN ELMER 235 16
TEKTRONIX 150 6
THERMO ELECTRON* 730 29
- --------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 132
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES-- 2.4%
BAUSCH & LOMB 160 8
BAXTER INTERNATIONAL 1,325 73
BECTON DICKINSON 590 41
BIOMET* 535 16
BOSTON SCIENTIFIC* 930 67
C.R. BARD 170 6
COLUMBIA/HCA HEALTHCARE 3,310 109
GUIDANT 710 47
HEALTHSOUTH REHABILITATION* 1,860 56
JOHNSON & JOHNSON 7,095 506
MANOR CARE 190 7
MEDTRONIC 2,420 127
ST. JUDE MEDICAL 440 16
TENET HEALTHCARE* 1,565 59
UNITED STATES SURGICAL 220 7
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $1,145
- --------------------------------------------------------------------------------
73
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
EQUITY INDEX PORTFOLIO (CONTINUED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
METALS & MINING -- 0.1%
CYPRUS AMAX MINERALS 280 $ 5
FREEPORT-MCMORAN
COPPER & GOLD, CL B 930 18
PHELPS DODGE 285 19
REYNOLDS METALS 355 23
- --------------------------------------------------------------------------------
TOTAL METALS & MINING $ 65
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 1.7%
ADOBE SYSTEMS 350 18
AUTODESK 140 7
AUTOMATIC DATA PROCESSING 1,535 103
CABLETRON SYSTEMS* 470 6
CENDANT* 4,041 101
COMPUTER ASSOCIATES
INTERNATIONAL 2,787 163
COMPUTER SCIENCES* 740 39
DELUXE 240 8
ECOLAB 620 20
FIRST DATA 2,245 76
HBO 1,020 61
NOVELL* 1,305 13
ORACLE SYSTEMS* 5,215 135
PARAMETRIC TECHNOLOGY* 1,220 39
SHARED MEDICAL SYSTEMS 70 5
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $794
- --------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES -- 0.2%
H & R BLOCK 500 23
SERVICE INTERNATIONAL 1,205 50
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER SERVICES $ 73
- --------------------------------------------------------------------------------
MISCELLANEOUS TRANSPORTATION -- 0.0%
FLEETWOOD ENTERPRISES 110 5
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS TRANSPORTATION $ 5
- --------------------------------------------------------------------------------
OFFICE PRODUCTS & SUPPLIES -- 0.1%
IKON OFFICE SOLUTIONS 640 15
JOHNSON CONTROLS 400 24
- --------------------------------------------------------------------------------
TOTAL OFFICE PRODUCTS & SUPPLIES $ 39
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.9%
BEMIS 160 7
BOISE CASCADE 160 6
CHAMPION INTERNATIONAL 465 25
FORT JAMES 1,000 50
INTERNATIONAL PAPER 1,595 83
KIMBERLY-CLARK 2,830 144
MEAD 505 17
POTLATCH 90 4
STONE CONTAINER 290 5
TEMPLE-INLAND 275 18
UNION CAMP 335 20
WESTVACO 490 15
WILLAMETTE INDUSTRIES 535 21
- --------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $415
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 1.5%
ANADARKO PETROLEUM 290 $ 21
APACHE 460 16
ATLANTIC RICHFIELD 1,670 130
BURLINGTON RESOURCES 842 40
HELMERICH & PAYNE 140 4
KERR-MCGEE 230 15
OCCIDENTAL PETROLEUM 1,805 53
PHILLIPS PETROLEUM 1,260 62
ROWAN* 260 8
SCHLUMBERGER 2,640 219
UNION PACIFIC RESOURCES GROUP 1,225 29
USX-MARATHON GROUP 1,380 49
WESTERN ATLAS* 265 21
WEYERHAEUSER 955 55
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 722
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 5.9%
AMERADA HESS 445 26
AMOCO 5,170 229
ASHLAND 360 19
CHEVRON 3,485 288
COASTAL 505 36
EXXON 13,080 954
MOBIL 4,140 327
PENNZOIL 230 15
ROYAL DUTCH PETROLEUM,
NEW YORK SHARES 11,440 647
SUN 345 14
TEXACO 2,920 180
UNOCAL 1,180 48
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $2,783
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES-- 0.7%
EASTMAN KODAK 1,660 120
POLAROID 140 6
XEROX 1,690 192
- --------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $ 318
- --------------------------------------------------------------------------------
PRECIOUS METALS -- 0.2%
BARRICK GOLD 1,780 40
BATTLE MOUNTAIN GOLD 680 5
HOMESTAKE MINING 440 5
NEWMONT MINING 840 27
PLACER DOME GROUP 1,155 17
- --------------------------------------------------------------------------------
TOTAL PRECIOUS METALS $ 94
- --------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 1.4%
AMERICAN GREETINGS, CL A 355 16
DOW JONES 465 23
GANNETT 1,465 100
KNIGHT-RIDDER 405 24
MCGRAW-HILL 475 37
MEREDITH 160 7
MOORE 260 4
NEW YORK TIMES, CL A 460 33
74
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
R.R. DONNELLEY & SONS 705 $ 31
TIME WARNER 3,070 241
TIMES MIRROR, CL A 360 22
TRIBUNE 590 39
VIACOM, CL B* 1,870 108
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $685
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 0.3%
COGNIZANT 775 40
DUN & BRADSTREET 815 29
EG & G 140 4
HALLIBURTON 1,400 77
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $150
- --------------------------------------------------------------------------------
RAILROADS -- 0.6%
BURLINGTON NORTHERN SANTA FE 840 83
CSX 1,045 55
NORFOLK SOUTHERN 1,800 60
UNION PACIFIC 1,320 72
- --------------------------------------------------------------------------------
TOTAL RAILROADS $270
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 0.0%
KAUFMAN & BROAD HOME 120 3
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUST $ 3
- --------------------------------------------------------------------------------
REPAIR SERVICES -- 0.0%
RYDER SYSTEM 370 13
- --------------------------------------------------------------------------------
TOTAL REPAIR SERVICES $ 13
- --------------------------------------------------------------------------------
RETAIL -- 5.3%
ALBERTSON'S 1,160 58
AMERICAN STORES 1,305 31
AUTOZONE* 720 22
CIRCUIT CITY STORES 475 19
CONSOLIDATED STORES* 540 22
COSTCO* 1,015 57
CVS 980 72
DARDEN RESTAURANTS 450 7
DAYTON-HUDSON 1,130 99
DILLARDS INCORPORATED, CL A 530 19
F.W. WOOLWORTH* 650 15
FEDERATED DEPARTMENT STORES* 1,000 49
GAP 1,942 100
GIANT FOOD, CL A 180 7
GREAT ATLANTIC & PACIFIC TEA 110 3
HARCOURT GENERAL 340 18
HOME DEPOT 3,910 272
J.C. PENNEY 1,330 95
KMART* 2,350 41
KROGER* 1,220 51
LIMITED 1,300 44
LONGS DRUG STORES 120 3
LOWE'S 835 58
MAY DEPARTMENT STORES 1,205 74
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MCDONALD'S 3,655 $ 226
MERCANTILE STORES 110 8
NORDSTROM 375 25
PEP BOYS - MANNY MOE & JACK 190 4
RITE AID 1,190 38
SEARS ROEBUCK 2,005 119
TANDY 400 20
TJX 785 35
TOYS "R" US* 1,365 38
TRICON GLOBAL RESTAURANTS* 732 23
WAL-MART STORES 11,980 606
WALGREEN 2,525 87
WENDY'S INTERNATIONAL 635 15
WINN DIXIE STORES 720 27
- --------------------------------------------------------------------------------
TOTAL RETAIL $2,507
- --------------------------------------------------------------------------------
RUBBER & PLASTIC -- 0.7%
COOPER TIRE & RUBBER 230 5
DOW CHEMICAL 1,175 114
GOODYEAR TIRE & RUBBER 845 59
NIKE 1,390 66
REEBOK INTERNATIONAL 170 5
RUBBERMAID 715 20
SEALED AIR* 633 40
TUPPERWARE 180 5
- --------------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $ 314
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 2.0%
ADVANCED MICRO DEVICES* 490 14
AMP 1,050 41
INTEL 8,650 699
LSI LOGIC* 680 18
MICRON TECHNOLOGY 1,020 32
NATIONAL SEMICONDUCTOR* 585 13
TEXAS INSTRUMENTS 1,995 128
THOMAS & BETTS 265 15
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 960
- --------------------------------------------------------------------------------
SPECIALTY CONSTRUCTION -- 0.1%
MASCO 790 46
- --------------------------------------------------------------------------------
TOTAL SPECIALTY CONSTRUCTION $ 46
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 0.1%
COOPER INDUSTRIES 585 39
- --------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 39
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.4%
ALCAN ALUMINUM 1,095 36
ALLEGHENY TELEDYNE 830 21
ALUMINUM COMPANY OF AMERICA 825 64
ARMCO* 320 2
ASARCO 120 3
BETHLEHEM STEEL* 330 5
ENGELHARD 430 9
INCO 805 14
INLAND STEEL INDUSTRIES 140 4
75
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
- --------------------------------------------------------------------------------
EQUITY INDEX PORTFOLIO (CONCLUDED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
NUCOR 420 $ 25
USX-U.S. STEEL GROUP 415 16
WORTHINGTON INDUSTRIES 290 5
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 204
- --------------------------------------------------------------------------------
TECHNOLOGY -- 1.0%
3COM* 1,885 65
CISCO SYSTEMS* 5,435 398
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY $ 463
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 7.3%
AIRTOUCH COMMUNICATIONS* 2,885 153
ALLTEL 885 38
AMERITECH 5,810 247
AT&T 8,540 513
BELL ATLANTIC 4,120 385
BELLSOUTH 5,210 334
FRONTIER 785 24
LUCENT TECHNOLOGIES 6,855 522
MCI COMMUNICATIONS 3,695 186
NEXTEL COMMUNICATIONS, CL A* 1,220 35
SBC COMMUNICATIONS 9,750 404
SPRINT 2,235 153
TELE-COMMUNICATIONS, CL A* 2,695 87
US WEST 2,485 131
WORLDCOM* 5,370 230
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 3,442
- --------------------------------------------------------------------------------
WHOLESALE -- 1.7%
CARDINAL HEALTH 525 51
GENERAL MOTORS 3,770 254
MOTOROLA 3,190 177
SUPERVALU 290 13
SYSCO 1,640 39
UNILEVER NV 3,380 252
W.W. GRAINGER 240 26
- --------------------------------------------------------------------------------
TOTAL WHOLESALE $ 812
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $39,793) $45,190
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 1.7%
S&P 500 DEPOSITORY RECEIPT 7,166 798
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $790) $ 798
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.8%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$394,036 (collateralized by
U.S. Treasury Bond:
total market value
$403,800) $394 $ 394
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $394) $ 394
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.8%
(Cost $40,977) $46,382
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.2% $ 566
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 3,929,861 outstanding
shares of beneficial interest 39,768
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 122,438 outstanding
shares of beneficial interest 1,317
Undistributed net investment income 38
Accumulated net realized gain on investments 420
Net unrealized appreciation on investments 5,405
================================================================================
TOTAL NET ASSETS -- 100.0% $46,948
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $11.59
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $11.57
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($11.57 / 95.25%)(A) $12.15
================================================================================
* NON-INCOME PRODUCING SECURITY
(A) EFFECTIVE 11/03/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME.
THE MAXIMUM SALES LOAD IS 4.75%.
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
76
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: BLUE CHIP EQUITY PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Retail -- 2%
Repurchase Agreement -- 3%
Miscellaneous -- 8%
Consumer Non-Durables -- 11%
Chemicals & Drugs -- 13%
Oil-Energy -- 10%
Transportation -- 2%
Technology -- 20%
Financial -- 17%
Consumer Products -- 14%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 94.6%
AIRCRAFT -- 4.3%
BOEING 45,000 $ 2,253
LOCKHEED MARTIN 22,000 2,450
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $ 4,703
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 2.1%
FORD MOTOR 50,000 2,291
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 2,291
- --------------------------------------------------------------------------------
BANKS -- 5.0%
CHASE MANHATTAN 22,000 3,048
NORWEST 61,200 2,429
- --------------------------------------------------------------------------------
TOTAL BANKS $ 5,477
- --------------------------------------------------------------------------------
CHEMICALS -- 2.5%
E.I. DU PONT DE NEMOURS 38,000 2,767
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $ 2,767
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 3.0%
PHILIPS ELECTRONICS, ADR 37,000 3,330
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $ 3,330
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.0%
MICROSOFT* 24,000 2,163
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 2,163
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 1.8%
COMPAQ COMPUTER 70,000 1,964
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 1,964
- --------------------------------------------------------------------------------
DRUGS -- 10.1%
ABBOTT LABORATORIES 40,000 2,925
AMGEN* 50,000 2,981
MERCK 25,000 3,012
PFIZER 20,000 2,276
- --------------------------------------------------------------------------------
TOTAL DRUGS $11,194
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.7%
GENERAL ELECTRIC 35,000 2,979
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $ 2,979
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 2.8%
WALT DISNEY 24,700 $ 3,071
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 3,071
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 7.8%
ASSOCIATES FIRST CAPITAL 40,000 2,990
CIT GROUP, CL A* 85,000 3,012
FEDERAL NATIONAL MORTGAGE
ASSOCIATION 44,000 2,634
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 8,636
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 9.1%
BESTFOODS 46,000 2,524
COCA-COLA 27,000 2,049
PEPSICO 77,000 3,056
PHILIP MORRIS 65,000 2,425
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $10,054
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.5%
PROCTER & GAMBLE 33,000 2,712
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 2,712
- --------------------------------------------------------------------------------
INSURANCE -- 2.2%
CHUBB 31,000 2,447
- --------------------------------------------------------------------------------
TOTAL INSURANCE $ 2,447
- --------------------------------------------------------------------------------
MACHINERY -- 2.3%
INGERSOLL RAND 55,000 2,533
- --------------------------------------------------------------------------------
TOTAL MACHINERY $ 2,533
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES-- 2.4%
JOHNSON & JOHNSON 37,000 2,641
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 2,641
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 2.7%
FIRST DATA 90,000 3,049
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 3,049
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 2.2%
SCHLUMBERGER 30,000 2,486
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 2,486
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 7.8%
CHEVRON 35,000 2,894
EXXON 40,000 2,918
ROYAL DUTCH PETROLEUM,
NEW YORK SHARES 50,000 2,828
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 8,640
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 2.4%
XEROX 23,000 2,611
- --------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $ 2,611
- --------------------------------------------------------------------------------
RAILROADS -- 2.0%
UNION PACIFIC 40,000 2,190
- --------------------------------------------------------------------------------
TOTAL RAILROADS $ 2,190
- --------------------------------------------------------------------------------
RETAIL -- 2.2%
HOME DEPOT 34,350 2,392
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 2,392
- --------------------------------------------------------------------------------
77
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
BLUE CHIP EQUITY PORTFOLIO (CONCLUDED)
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 2.0%
INTEL 28,000 $ 2,263
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 2,263
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 2.4%
ALUMINUM COMPANY
OF AMERICA 34,000 2,635
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 2,635
- --------------------------------------------------------------------------------
TECHNOLOGY -- 1.9%
CISCO SYSTEMS* 28,500 2,088
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY $ 2,088
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 6.4%
L.M. ERICSSON TELEPHONE,
ADR 37,000 1,903
SBC COMMUNICATIONS 72,000 2,984
WORLDCOM* 50,000 2,139
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 7,026
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $77,989) $104,342
- --------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT -- 1.8%
BANKERS TRUST (A)
5.640%, 09/11/98 $2,000 1,999
- --------------------------------------------------------------------------------
TOTAL CERTIFICATE OF DEPOSIT
(Cost $2,000) $ 1,999
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.0%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$3,349,122 (collateralized by U.S.
Treasury Bond: total market
value $3,429,760) 3,349 3,349
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $3,349) $ 3,349
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.4%
(Cost $83,338) $109,690
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.6% $ 670
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 3,943,013 outstanding
shares of beneficial interest $ 47,028
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 2,549,638 outstanding
shares of beneficial interest 33,751
Undistributed net investment income 31
Accumulated net realized gain on investments 3,198
Net unrealized appreciation on investments 26,352
================================================================================
TOTAL NET ASSETS -- 100.0% $110,360
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $17.01
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $16.98
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($16.98 / 95.25%) (B) $17.83
================================================================================
* NON-INCOME PRODUCING SECURITY
(A) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT AS OF APRIL 30, 1998.
(B) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME. THE
MAXIMUM SALES LOAD IS 4.75%.
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
78
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: CAPITAL GROWTH PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Repurchase Agreement -- 3%
Consumer Non-Durables -- 4%
Retail -- 8%
Miscellaneous -- 11%
Chemicals & Drugs -- 12%
Consumer Products -- 14%
Transportation -- 2%
Financial -- 17%
Technology -- 29%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%
AIRCRAFT -- 3.8%
BOEING 16,000 $ 801
LOCKHEED MARTIN 15,000 1,671
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $2,472
- --------------------------------------------------------------------------------
APPAREL/TEXTILES -- 1.9%
JONES APPAREL GROUP* 20,000 1,196
- --------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $1,196
- --------------------------------------------------------------------------------
BANKS -- 7.5%
BANC ONE 22,000 1,294
CHASE MANHATTAN 8,000 1,108
CRESTAR FINANCIAL 15,000 897
NORWEST 40,000 1,587
- --------------------------------------------------------------------------------
TOTAL BANKS $4,886
- --------------------------------------------------------------------------------
CHEMICALS -- 2.5%
MONSANTO 30,000 1,586
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $1,586
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 10.7%
CIENA* 30,000 1,672
CISCO SYSTEMS* 25,000 1,831
COMVERSE TECHNOLOGY* 30,000 1,421
RELTEC* 30,000 1,196
VISUAL NETWORKS* 25,000 828
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $6,948
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 3.0%
MICROSOFT* 10,000 901
NETWORKS ASSOCIATES* 15,000 1,028
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $1,929
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 6.3%
ELECTRONICS FOR IMAGING* 60,000 1,230
EMC* 30,000 1,384
GATEWAY 2000* 25,000 1,467
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $4,081
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
DRUGS -- 10.0%
AMGEN* 36,000 $2,146
BRISTOL-MYERS SQUIBB 13,500 1,429
MERCK 10,000 1,205
SCHERING PLOUGH 10,000 801
WARNER LAMBERT 5,000 946
- --------------------------------------------------------------------------------
TOTAL DRUGS $6,527
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.4%
GENERAL ELECTRIC 11,000 936
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $ 936
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 2.6%
CARNIVAL, CL A 15,000 1,043
WALT DISNEY 5,000 622
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $1,665
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 6.1%
CIT GROUP, CL A* 40,000 1,418
FEDERAL HOME LOAN
MORTGAGE CORPORATION 30,000 1,389
MORGAN STANLEY, DEAN WITTER,
DISCOVER 15,000 1,183
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $3,990
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 3.8%
PEPSICO 40,000 1,588
PHILIP MORRIS 24,000 896
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $2,484
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.9%
CLOROX 15,000 1,258
COLGATE-PALMOLIVE 7,000 628
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $1,886
- --------------------------------------------------------------------------------
INSURANCE -- 3.7%
AMERICAN INTERNATIONAL GROUP 4,500 592
TRAVELERS 30,000 1,836
- --------------------------------------------------------------------------------
TOTAL INSURANCE $2,428
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 5.3%
BECTON DICKINSON 17,000 1,184
BOSTON SCIENTIFIC* 5,000 362
JOHNSON & JOHNSON 14,000 999
SOFAMOR DANEK GROUP* 10,000 878
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $3,423
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 5.6%
CENDANT* 45,000 1,125
FIRST DATA 35,000 1,186
GARTNER GROUP, CL A* 30,000 994
USWEB* 15,000 342
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $3,647
- --------------------------------------------------------------------------------
79
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: CAPITAL GROWTH PORTFOLIO (CONCLUDED)
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 1.4%
SMITH INTERNATIONAL* 15,500 $ 911
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 911
- --------------------------------------------------------------------------------
RAILROADS -- 1.4%
KANSAS CITY SOUTHERN
INDUSTRIES 20,000 904
- --------------------------------------------------------------------------------
TOTAL RAILROADS $ 904
- --------------------------------------------------------------------------------
RETAIL -- 8.4%
HOME DEPOT 15,000 1,044
LINENS 'N THINGS* 20,000 1,205
RITE AID 66,000 2,120
TJX 25,000 1,106
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 5,475
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 4.2%
INTEL 20,000 $ 1,616
SYNOPSYS* 25,500 1,097
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 2,713
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 2.0%
COOPER CAMERON* 20,000 1,329
- --------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 1,329
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 4.4%
L.M. ERICSSON TELEPHONE,
ADR 20,000 1,029
QWEST COMMUNICATIONS
INTERNATIONAL* 25,000 964
WORLDCOM* 20,000 856
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 2,849
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $48,698) $64,265
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.3%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$2,151,748 (collateralized by
U.S. Treasury Bond: total
market value $2,202,686) $2,151 2,151
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,151) 2,151
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 102.2%
(Cost $50,849) $66,416
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (2.2%) $(1,400)
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 3,397,179 outstanding
shares of beneficial interest $34,497
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 971,753 outstanding
shares of beneficial interest 12,300
Undistributed net investment income 6
Accumulated net realized gain on investments 2,646
Net unrealized appreciation on investments 15,567
================================================================================
TOTAL NET ASSETS -- 100.0% $65,016
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $14.90
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $14.82
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($14.82 / 95.25%) (A) $15.56
================================================================================
* 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%.
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
80
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: MID-CAP EQUITY PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Building & Construction -- 2%
Chemicals & Drugs -- 8%
Consumer Products -- 8%
Miscellaneous -- 9%
Utilities -- 9%
Retail -- 10%
Transportation -- 2%
Technology -- 21%
Financial -- 16%
Oil-Energy -- 15%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 99.5%
AEROSPACE & DEFENSE -- 0.7%
GENCORP 2,400 $ 73
HUBBELL, CL B 3,816 188
THIOKOL 1,800 97
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $358
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.4%
AIRBORNE FREIGHT 2,900 115
ALASKA AIRGROUP* 1,000 56
ASA HOLDINGS 1,300 49
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $220
- --------------------------------------------------------------------------------
AIRCRAFT -- 0.4%
SUNDSTRAND 3,280 227
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $227
- --------------------------------------------------------------------------------
APPAREL/TEXTILES -- 0.9%
ALBANY INTERNATIONAL 1,150 33
BURLINGTON INDUSTRIES* 2,600 45
JONES APPAREL GROUP* 2,700 161
SHAW INDUSTRIES 7,100 115
UNIFI 3,100 119
- --------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $473
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 1.0%
BORG-WARNER AUTOMOTIVE 600 37
FEDERAL MOGUL 1,850 120
FEDERAL SIGNAL 1,882 40
KAYDON 2,200 96
MERITOR AUTOMOTIVE 3,600 93
MODINE MANUFACTURING 1,250 46
OEA 800 15
SUPERIOR INDUSTRIES
INTERNATIONAL 1,155 37
TELEFLEX 1,700 72
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $556
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
BANKS -- 8.4%
CHARTER ONE FINANCIAL 3,500 $ 237
CITY NATIONAL 1,700 63
CRESTAR FINANCIAL 6,450 386
DIME BANCORP 6,500 199
FIRST SECURITY 9,693 237
FIRST TENNESSEE NATIONAL 7,200 248
FIRST VIRGINIA BANKS 2,950 165
FIRSTAR 8,400 313
HIBERNIA, CL A 7,100 145
MARSHALL & ILSLEY 5,700 333
MERCANTILE BANCORP 6,150 341
MERCANTILE BANKSHARES 3,675 141
NORTH FORK BANCORPORATION 5,000 186
OLD KENT FINANCIAL 5,400 210
PACIFIC CENTURY FINANCIAL 4,000 99
REGIONS FINANCIAL 7,510 328
SOUTHTRUST 8,025 343
TCF FINANCIAL 5,000 163
UNION PLANTERS 3,700 228
WILMINGTON TRUST 1,900 123
ZIONS BANCORP 3,200 164
- --------------------------------------------------------------------------------
TOTAL BANKS $4,652
- --------------------------------------------------------------------------------
BEAUTY PRODUCTS -- 0.0%
CHURCH & DWIGHT 825 25
- --------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 25
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING-- 0.3%
CHRIS-CRAFT INDUSTRIES* 1,346 77
TCA CABLE TV 1,250 77
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 154
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.2%
JACOBS ENGINEERING GROUP* 1,175 39
MARTIN MARIETTA MATERIALS 1,800 84
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 123
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES -- 0.0%
LUKENS 700 24
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION SUPPLIES $ 24
- --------------------------------------------------------------------------------
CHEMICALS -- 2.9%
A. SCHULMAN 1,600 36
AIRGAS* 3,000 46
ALBEMARLE 2,650 66
BETZDEARBORN 1,231 66
CABOT 3,000 108
CROMPTON & KNOWLES 4,200 126
CYTEC INDUSTRIES* 2,300 126
DEXTER 1,000 41
ETHYL 4,850 37
81
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MID-CAP EQUITY PORTFOLIO (CONTINUED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
FULLER (H.B.) 590 $ 37
GEORGIA GULF 1,400 36
IMC GLOBAL 6,000 216
LAWTER INTERNATIONAL 1,800 19
LUBRIZOL 2,900 107
OLIN 2,550 119
RPM 3,890 67
SOLUTIA 6,500 184
WELLMAN 1,500 34
WITCO CHEMICAL 2,875 114
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $1,585
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 3.4%
ADC TELECOMMUNICATIONS* 7,400 222
CIENA* 10,000 557
MOLEX 9,452 271
QUALCOMM* 3,700 208
RELTEC* 15,000 598
VISHAY INTERTECHNOLOGY* 2,611 48
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $1,904
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.4%
BMC SOFTWARE* 5,648 528
COMPUWARE* 9,200 450
INFORMIX* 8,000 79
STERLING SOFTWARE* 7,200 190
SYMANTEC* 2,140 62
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $1,309
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 6.1%
ARROW ELECTRONICS* 5,212 142
AVNET 2,175 134
CIRRUS LOGIC* 2,600 27
COMVERSE TECHNOLOGY* 15,000 711
DIEBOLD 3,854 158
KEANE* 3,800 191
LEXMARK INTERNATIONAL
GROUP, CL A* 3,500 203
NETWORKS ASSOCIATES* 5,000 343
QUANTUM* 7,400 174
SCI SYSTEMS* 3,200 132
SEQUENT COMPUTER SYSTEMS* 1,350 26
SOLECTRON* 7,100 315
STERLING COMMERCE* 5,000 213
STORAGE TECHNOLOGY* 3,261 275
STRATUS COMPUTER* 850 37
SUNGARD DATA SYSTEMS* 4,400 157
SYMBOL TECHNOLOGIES 3,318 128
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $3,366
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
CONCRETE & MINERAL PRODUCTS-- 0.1%
CALMAT 1,100 $ 29
FERRO 1,575 45
- --------------------------------------------------------------------------------
TOTAL CONCRETE & MINERAL PRODUCTS $ 74
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.1%
FIRST BRANDS 2,200 59
- --------------------------------------------------------------------------------
TOTAL CONSUMER PRODUCTS $ 59
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.1%
LONGVIEW FIBRE 2,200 37
- --------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 37
- --------------------------------------------------------------------------------
DRUGS -- 4.6%
ALLEGIANCE 3,200 146
AMGEN* 13,000 775
BIOGEN* 5,300 235
CARTER-WALLACE 1,900 34
CENTOCOR* 3,800 160
CHIRON* 9,564 185
FOREST LABORATORIES* 4,368 158
GENZYME* 6,024 186
IVAX* 5,850 57
MYLAN LABORATORIES 7,087 192
PERRIGO* 3,050 39
R.P. SCHERER* 1,450 106
WATSON PHARMACEUTICALS* 6,300 271
- --------------------------------------------------------------------------------
TOTAL DRUGS $2,544
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 7.9%
AES* 9,600 530
ALLEGHENY ENERGY 6,729 206
AMETEK 1,350 41
CMS ENERGY 5,800 253
CONECTIV 4,687 98
FLORIDA PROGRESS 6,100 248
HAWAIIAN ELECTRIC INDUSTRIES 1,475 60
IDAHO POWER 1,650 59
ILLINOVA 3,100 95
INTERSTATE ENERGY 1,600 50
IPALCO ENTERPRISES 2,371 103
KANSAS CITY POWER & LIGHT 3,250 97
LG&E 3,350 89
MIDAMERICAN ENERGY HOLDINGS 4,964 105
MINNESOTA POWER & LIGHT 1,825 74
MONTANA POWER 2,150 80
NEVADA POWER 2,000 49
NEW CENTURY ENERGIES 5,486 261
NEW ENGLAND ELECTRIC SYSTEM 3,300 144
NEW YORK STATE ELECTRIC & GAS 3,650 152
NIPSCO INDUSTRIES 7,500 201
NORTHEAST UTILITIES 6,200 88
82
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
OGE ENERGY 2,053 $ 113
PG&E 997 32
PINNACLE WEST CAPITAL 5,000 221
POTOMAC ELECTRIC POWER 6,150 151
PUBLIC SERVICE COMPANY
OF NEW MEXICO 1,200 28
PUGET SOUND ENERGY 4,200 111
SCANA 5,550 166
TECO ENERGY 7,372 196
UCAR INTERNATIONAL* 2,700 88
WISCONSIN ENERGY 6,500 198
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $4,387
- --------------------------------------------------------------------------------
ENERGY & POWER -- 0.2%
CALENERGY* 3,150 103
- --------------------------------------------------------------------------------
TOTAL ENERGY & POWER $ 103
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 0.3%
INTERNATIONAL GAME TECHNOLOGY 6,600 $ 184
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 184
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 1.1%
USA WASTE SERVICES* 11,900 584
- --------------------------------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES $ 584
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.2%
A.G. EDWARDS & SONS 5,318 239
BEAR STEARNS 6,489 370
CAPITAL ONE FINANCIAL 3,700 355
FINOVA GROUP 2,750 161
PAINE WEBBER GROUP 9,650 432
T. ROWE PRICE 2,700 204
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $1,761
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 4.0%
COCA-COLA 20,650 780
DEAN FOODS 2,075 97
DOLE FOOD 3,150 142
DREYER'S GRAND ICE CREAM 1,300 33
FLOWERS INDUSTRIES 3,656 78
HORMEL FOODS 3,800 129
IBP 4,650 96
INTERSTATE BAKERIES 3,700 117
LANCASTER COLONY 1,848 71
LANCE 1,250 27
MCCORMICK 4,250 146
TYSON FOODS 12,010 232
UNIVERSAL FOODS 1,200 61
US FOODSERVICE* 2,750 97
WHITMAN 5,300 104
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $2,210
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
FORESTRY -- 0.1%
RAYONIER 1,100 $ 55
- --------------------------------------------------------------------------------
TOTAL FORESTRY $ 55
- --------------------------------------------------------------------------------
GAS/NATURAL GAS -- 1.6%
AGL RESOURCES 2,150 45
EL PASO NATURAL GAS 6,518 241
INDIANA ENERGY 1,500 47
KEYSPAN ENERGY 2,000 68
MCN 4,100 155
NATIONAL FUEL & GAS 1,425 66
QUESTAR 2,150 93
UTILICORP UNITED 2,950 111
WASHINGTON GAS LIGHT 2,000 54
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $ 880
- --------------------------------------------------------------------------------
HOME BUILDERS -- 0.2%
CLAYTON HOMES 5,961 120
- --------------------------------------------------------------------------------
TOTAL HOME BUILDERS $ 120
- --------------------------------------------------------------------------------
HOTELS & LODGING -- 0.4%
CIRCUS CIRCUS ENTERPRISES* 4,825 87
PROMUS HOTEL* 2,405 109
- --------------------------------------------------------------------------------
TOTAL HOTELS & LODGING $ 196
- --------------------------------------------------------------------------------
HOUSEHOLD FURNITURE & FIXTURES -- 0.5%
LEGGETT & PLATT 5,350 278
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD FURNITURE & FIXTURES $ 278
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.7%
DANAHER 3,750 270
DIAL 5,200 127
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 397
- --------------------------------------------------------------------------------
INSURANCE -- 4.0%
AFLAC 7,130 463
AMBAC 3,950 224
AMERICAN FINANCIAL GROUP 3,000 131
FIRST HEALTH GROUP, CL A* 1,400 83
FOUNDATION HEALTH
SYSTEMS, CL A* 6,752 195
HSB GROUP 900 59
OLD REPUBLIC INTERNATIONAL 4,900 222
OXFORD HEALTH PLANS* 4,000 68
PACIFICARE HEALTH
SYSTEMS, CL B* 2,153 154
PMI GROUP 1,700 138
POLICY MANAGEMENT SYSTEMS* 850 69
PROVIDENT 7,300 285
TRANSATLANTIC HOLDINGS 1,750 134
- --------------------------------------------------------------------------------
TOTAL INSURANCE $2,225
- --------------------------------------------------------------------------------
83
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MID-CAP EQUITY PORTFOLIO (CONTINUED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
INTERNET SERVICE PROVIDERS -- 1.6%
AMERICA ONLINE* 10,850 $ 868
- --------------------------------------------------------------------------------
TOTAL INTERNET SERVICE PROVIDERS $ 868
- --------------------------------------------------------------------------------
LEASING & RENTING -- 0.3%
COMDISCO 3,750 166
- --------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 166
- --------------------------------------------------------------------------------
LEISURE PRODUCTS -- 0.4%
CALLAWAY GOLF 3,700 101
ELECTRONIC ARTS* 2,750 127
- --------------------------------------------------------------------------------
TOTAL LEISURE PRODUCTS $ 228
- --------------------------------------------------------------------------------
MACHINERY -- 1.4%
AGCO 3,200 86
DONALDSON 2,200 56
FLOWSERVE 2,137 64
KENNAMETAL 1,600 85
MARK IV INDUSTRIES 2,615 55
NORDSON 800 38
PENTAIR 1,574 68
SMITH INTERNATIONAL* 2,750 162
STEWART & STEVENSON SERVICES 1,400 31
VARCO INTERNATIONAL* 2,650 81
WATTS INDUSTRIES, CL A 1,350 35
- --------------------------------------------------------------------------------
TOTAL MACHINERY $ 761
- --------------------------------------------------------------------------------
MANUFACTURING -- 0.2%
TRINITY INDUSTRIES 2,000 102
- --------------------------------------------------------------------------------
TOTAL MANUFACTURING $ 102
- --------------------------------------------------------------------------------
MARINE TRANSPORTATION -- 0.2%
ALEXANDER & BALDWIN 1,900 54
OVERSEAS SHIPHOLDING GROUP 1,575 33
- --------------------------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $ 87
- --------------------------------------------------------------------------------
MEASURING DEVICES -- 0.1%
BECKMAN COULTER 1,250 70
- --------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 70
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 3.5%
ACUSON CORP* 1,026 19
APRIA HEALTHCARE GROUP* 2,550 24
ATL ULTRASOUND* 600 29
BERGEN BRUNSWIG, CL A 2,556 116
CONCENTRA MANAGED CARE* 1,000 31
COVANCE* 2,950 63
DENTSPLY INTERNATIONAL 3,900 128
HEALTH MANAGEMENT
ASSOCIATES, CL A* 10,750 339
HEALTHCARE & RETIREMENT* 1,825 74
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MCKESSON 5,000 $ 353
NOVACARE* 2,000 28
OMNICARE 4,000 137
QUORUM HEALTH GROUP* 2,000 64
STRYKER 5,200 234
SYBRON INTERNATIONAL* 9,800 260
VARIAN ASSOCIATES 1,300 64
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $1,963
- --------------------------------------------------------------------------------
METALS & MINING -- 0.5%
CLEVELAND CLIFFS 325 18
MINERALS TECHNOLOGIES 900 49
VULCAN MATERIALS 1,975 227
- --------------------------------------------------------------------------------
TOTAL METALS & MINING $ 294
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 2.7%
ACNIELSEN* 3,000 84
CINTAS 5,300 252
CULLIGAN WATER TECHNOLOGIES* 1,400 81
FISERV* 2,675 175
KELLY SERVICES, CL A 2,000 74
OGDEN 2,000 62
OLSTEN 3,437 47
REYNOLDS & REYNOLDS, CL A 4,100 94
ROLLINS 1,700 34
SENSORMATIC ELECTRONICS 2,925 46
SOTHEBY'S HOLDINGS, CL A 2,600 60
SOUTHDOWN 1,300 92
U.S. FILTER* 5,800 189
VIAD 4,900 126
VIKING OFFICE PRODUCTS* 4,300 104
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $1,520
- --------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES -- 1.1%
MANPOWER 4,425 195
ROBERT HALF INTERNATIONAL* 5,100 276
STEWART ENTERPRISES, CL A 5,000 129
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER SERVICES $ 600
- --------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 0.5%
GTECH* 1,000 36
HILLENBRAND INDUSTRIES 3,850 240
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING $ 276
- --------------------------------------------------------------------------------
MISCELLANEOUS TRANSPORTATION -- 0.2%
HARSCO 2,500 115
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS TRANSPORTATION $ 115
- --------------------------------------------------------------------------------
MOTORCYCLES, BICYCLES & PARTS -- 0.5%
HARLEY-DAVIDSON 8,360 301
- --------------------------------------------------------------------------------
TOTAL MOTORCYCLES, BICYCLES & PARTS $ 301
- --------------------------------------------------------------------------------
84
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
OFFICE FURNITURE & FIXTURES -- 0.4%
HERMAN MILLER 4,600 $ 139
HON INDUSTRIES 2,400 77
- --------------------------------------------------------------------------------
TOTAL OFFICE FURNITURE & FIXTURES $ 216
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.7%
BOWATER 1,650 92
CHESAPEAKE 1,050 38
CONSOLIDATED PAPERS 2,250 149
PH GLATFELTER 1,800 33
UNISOURCE WORLDWIDE 3,000 38
WAUSAU-MOSINEE PAPER 1,520 32
- --------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 382
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 3.6%
BJ SERVICES* 4,200 158
ENSCO INTERNATIONAL 7,600 215
GLOBAL MARINE* 9,575 226
NABORS INDUSTRIES* 5,350 135
NOBLE AFFILIATES 2,900 125
NOBLE DRILLING* 7,300 236
PARKER DRILLING* 2,800 29
PIONEER NATURAL RESOURCES* 3,950 95
QUAKER STATE 1,350 24
RANGER OIL LIMITED 4,310 30
SEAGULL ENERGY* 3,200 55
TIDEWATER 3,355 133
TRANSOCEAN OFFSHORE 5,600 313
VALERO ENERGY 2,300 74
WEATHERFORD ENTERRA* 2,733 137
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $1,985
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 1.3%
LYONDELL PETROCHEMICAL 4,000 132
MURPHY OIL 2,400 123
TOSCO 9,300 331
ULTRAMAR DIAMOND SHAMROCK 3,800 123
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 709
- --------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 1.5%
A.H. BELO, CL A 3,600 191
BANTA 1,200 38
HOUGHTON MIFFLIN 1,380 45
LEE ENTERPRISES 1,850 58
MEDIA GENERAL 1,100 52
SCHOLASTIC* 600 22
STANDARD REGISTER 1,200 48
WALLACE COMPUTER SERVICES 1,900 69
WASHINGTON POST, CL B 550 288
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $ 811
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 0.8%
CORRECTIONS CORPORATION
OF AMERICA* 4,400 $122
PAYCHEX 6,066 329
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $451
- --------------------------------------------------------------------------------
RAILROADS -- 0.9%
ILLINOIS CENTRAL 3,125 124
KANSAS CITY SOUTHERN
INDUSTRIES 6,600 298
WISCONSIN CENTRAL
TRANSPORTATION* 2,700 66
- --------------------------------------------------------------------------------
TOTAL RAILROADS $488
- --------------------------------------------------------------------------------
RETAIL -- 10.3%
ANN TAYLOR STORES* 900 14
BARNES & NOBLE* 3,800 129
BED BATH & BEYOND* 3,500 172
BEST BUY* 1,400 98
BJ'S WHOLESALE CLUB* 2,000 80
BRINKER INTERNATIONAL* 2,549 61
CLAIRE'S STORES 2,487 54
COMPUSA* 4,825 90
CRACKER BARREL OLD
COUNTRY STORES 3,500 129
DOLLAR GENERAL 9,233 350
DUANE READE* 15,000 356
FAMILY DOLLAR STORES 4,450 151
FASTENAL 1,650 92
FRED MEYER* 4,050 182
GENERAL NUTRITION* 4,500 161
HANNAFORD BROTHERS 2,450 109
HEILIG-MEYERS 2,050 29
KOHL'S* 8,200 339
LANDS' END* 1,350 50
LINENS 'N THINGS* 5,000 301
LONE STAR STEAKHOUSE
& SALOON* 2,650 56
MICRO WAREHOUSE* 1,400 22
NINE WEST GROUP* 1,600 45
OFFICE DEPOT* 8,623 286
OFFICEMAX* 5,000 94
OUTBACK STEAKHOUSE* 2,800 107
PAYLESS SHOESOURCE* 2,000 143
PREMARK INTERNATIONAL 3,000 100
PROFFITTS* 5,000 199
RITE AID 20,000 643
RUDDICK 1,400 25
SAKS HOLDINGS* 4,000 89
85
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MID-CAP EQUITY PORTFOLIO (CONCLUDED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
SBARRO 850 $ 25
STAPLES* 14,611 361
STARBUCKS* 4,500 217
TIFFANY & COMPANY 1,850 84
U.S. OFFICE PRODUCTS* 6,000 106
WARNACO GROUP 2,850 120
- --------------------------------------------------------------------------------
TOTAL RETAIL $5,669
- --------------------------------------------------------------------------------
RUBBER & PLASTIC -- 0.6%
CARLISLE 1,200 61
HANNA 2,124 49
SONOCO PRODUCTS 5,500 221
- --------------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $ 331
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 5.1%
ALTERA* 4,500 182
AMERICAN POWER CONVERSION* 5,550 179
ANALOG DEVICES* 9,000 350
ATMEL* 5,250 106
CADENCE DESIGN SYSTEMS* 9,000 327
CYPRESS SEMICONDUCTOR* 4,250 43
INTEGRATED DEVICE TECHNOLOGY* 3,000 36
LINEAR TECHNOLOGY 4,200 338
MAXIM INTEGRATED PRODUCTS* 7,000 283
MENTOR GRAPHICS* 2,400 25
STRUCTURAL DYNAMICS RESEARCH* 2,000 57
SYNOPSYS* 12,300 529
TERADYNE* 4,250 155
XILINX* 4,725 216
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $2,826
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 0.3%
TECUMSEH PRODUCTS, CL A 950 48
YORK INTERNATIONAL 2,100 104
- --------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 152
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.7%
AK STEEL HOLDING 3,500 74
ALUMAX INCORPORATED* 2,450 121
CARPENTER TECHNOLOGY 1,100 64
OREGON STEEL MILLS 1,600 38
PRECISION CASTPARTS 1,050 65
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 362
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
TECHNOLOGY -- 0.2%
NCR* 3,300 $ 121
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY $ 121
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 2.5%
360 COMMUNICATIONS* 6,300 193
ALIANT COMMUNICATIONS 1,450 41
CENTURY TELEPHONE
ENTERPRISES 4,575 195
CINCINNATI BELL 7,200 275
COMSAT 2,050 83
LCI INTERNATIONAL* 4,450 177
SOUTHERN NEW ENGLAND
TELECOM 3,850 270
TELEPHONE & DATA SYSTEMS 3,100 147
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $1,381
- --------------------------------------------------------------------------------
TESTING LABORATORIES -- 0.4%
QUINTILES TRANSNATIONAL* 4,800 238
- --------------------------------------------------------------------------------
TOTAL TESTING LABORATORIES $ 238
- --------------------------------------------------------------------------------
TRANSPORTATION SERVICES -- 0.2%
GATX 1,275 106
- --------------------------------------------------------------------------------
TOTAL TRANSPORTATION SERVICES $ 106
- --------------------------------------------------------------------------------
TRUCKING -- 0.4%
ARNOLD INDUSTRIES 1,500 24
CNF TRANSPORTATION 2,400 93
JB HUNT TRANSPORT SERVICES 2,100 67
PITTSTON SERVICES 1,600 63
- --------------------------------------------------------------------------------
TOTAL TRUCKING $ 247
- --------------------------------------------------------------------------------
WATER UTILITIES -- 0.2%
AMERICAN WATER WORKS 4,100 123
- --------------------------------------------------------------------------------
TOTAL WATER UTILITIES $ 123
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $37,764) $55,019
- --------------------------------------------------------------------------------
RIGHT -- 0.3%
TALBERT MEDICAL MANAGEMENT* 2,350 141
- --------------------------------------------------------------------------------
TOTAL RIGHT
(Cost $93) $ 141
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.8%
(Cost $37,857) $55,160
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.2% $ 120
================================================================================
86
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 3,916,843 outstanding
shares of beneficial interest $35,714
Accumulated net realized gain on investments 2,263
Net unrealized appreciation on investments 17,303
================================================================================
TOTAL NET ASSETS -- 100.0% $55,280
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $14.11
================================================================================
* NON-INCOME PRODUCING SECURITY
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: SMALL-CAP EQUITY PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Real Estate Investment Trusts -- 2%
Chemicals & Drugs -- 3%
Computers & Services -- 5%
Consumer Cyclicals -- 5%
Miscellaneous -- 5%
Retail -- 10%
Miscellaneous Business -- 14%
Transportation -- 2%
Technology -- 22%
Financial -- 16%
Repurchase Agreement -- 16%
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 92.6%
AIR TRANSPORTATION -- 2.1%
MIDWAY AIRLINES* 30,000 $ 630
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 630
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 1.2%
KAYDON 8,000 350
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 350
- --------------------------------------------------------------------------------
BANKS -- 8.2%
ALBANK FINANCIAL 10,000 525
GOLDEN STATE BANCORP* 10,000 390
SOVEREIGN BANCORP 31,600 596
STERLING BANCORP 20,000 560
TCF FINANCIAL 10,000 326
- --------------------------------------------------------------------------------
TOTAL BANKS $2,397
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING-- 4.0%
COX RADIO, CL A* 6,000 290
JACOR COMMUNICATIONS* 9,000 512
U.S. WEST MEDIA GROUP* 10,000 377
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $1,179
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 1.0%
TOLL BROTHERS* 10,000 279
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 279
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES -- 1.7%
MCDERMOTT INTERNATIONAL 12,000 496
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION SUPPLIES $ 496
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 9.1%
BROADCOM CORPORATION, CL A* 500 24
CIENA* 15,000 836
MERCURY COMPUTER SYSTEMS* 7,500 124
RELTEC* 12,000 478
VISUAL NETWORKS* 20,000 662
YURIE SYSTEMS* 15,000 521
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $2,645
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 5.6%
COMPUWARE* 10,000 489
COMVERSE TECHNOLOGY* 5,000 237
87
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: SMALL-CAP EQUITY PORTFOLIO
(CONCLUDED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
CUNNINGHAM GRAPHICS
INTERNATIONAL* 500 $ 9
ELECTRONICS FOR IMAGING* 30,000 615
INFORMATION MANAGEMENT
RESOURCES* 4,000 109
J.D. EDWARDS* 5,000 178
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $1,637
- --------------------------------------------------------------------------------
DRUGS -- 3.6%
COULTER PHARMACEUTICAL* 10,000 288
DURA PHARMACEUTICALS* 15,000 398
MEDAREX* 29,000 190
SHIRE PHARMACEUTICALS
GROUP PLC* 8,000 180
- --------------------------------------------------------------------------------
TOTAL DRUGS $1,056
- --------------------------------------------------------------------------------
ELECTRICAL TECHNOLOGY -- 0.9%
ANADIGICS* 15,000 250
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL TECHNOLOGY $ 250
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 1.1%
DOVER DOWNS ENTERTAINMENT 10,000 328
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 328
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 1.8%
EASTERN ENVIRONMENTAL
SERVICES* 20,000 523
- --------------------------------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES $ 523
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 9.2%
CONNING* 25,000 513
FRIEDMAN BILLING RAMSEY
GROUP, CL A 50,000 941
LONG BEACH FINANCIAL* 40,000 522
T & W FINANCIAL* 25,000 713
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $2,689
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.7%
RPM 12,500 216
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 216
- --------------------------------------------------------------------------------
INSURANCE -- 0.4%
ANNUITY & LIFE RE HOLDINGS* 5,000 119
- --------------------------------------------------------------------------------
TOTAL INSURANCE $ 119
- --------------------------------------------------------------------------------
LEISURE PRODUCTS -- 3.1%
TIFFANY & COMPANY 20,000 910
- --------------------------------------------------------------------------------
TOTAL LEISURE PRODUCTS $ 910
- --------------------------------------------------------------------------------
MACHINERY -- 0.3%
SECOM GENERAL* 50,000 91
- --------------------------------------------------------------------------------
TOTAL MACHINERY $ 91
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 6.6%
INTUIT* 7,000 372
NETWORKS ASSOCIATES* 6,000 411
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
SAPIENS INTERNATIONAL* 60,000 $ 540
SAPIENT* 6,000 296
USWEB* 5,000 114
VERISIGN* 5,000 192
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $1,925
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 1.6%
DRIL-QUIP* 13,000 467
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 467
- --------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 0.1%
ZIFF-DAVIS* 1,000 18
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $ 18
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 3.1%
PROVANT* 1,000 19
SNYDER COMMUNICATIONS* 15,000 637
SYLVAN LEARNING SYSTEMS* 5,000 247
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 903
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 1.8%
KILROY REALTY CORP 20,000 530
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUST $ 530
- --------------------------------------------------------------------------------
RETAIL -- 11.4%
DARDEN RESTAURANTS 40,000 640
FOOD LION, CL A 35,000 354
LINENS 'N THINGS* 7,000 422
OUTBACK STEAKHOUSE* 10,000 381
ROSS STORES 10,000 463
SUN TELEVISION & APPLIANCES* 125,000 316
TROPICAL SPORTSWEAR* 45,000 765
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 3,341
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS-- 1.8%
ARM HOLDINGS PLC, ADR* 2,000 81
LEVEL ONE COMMUNICATIONS* 10,000 311
POWER-ONE* 10,000 126
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 518
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 12.2%
ADVANCED FIBRE
COMMUNICATION* 15,000 636
CLEARNET, CL A* 30,000 418
ELECTRIC LIGHTWAVE* 28,000 536
ESAT TELECOM GROUP, ADR* 5,000 160
ICG COMMUNICATIONS* 12,628 442
IRIDIUM WORLD
COMMUNICATIONS* 5,000 328
NEXTLINK COMMUNICATIONS* 25,000 750
TELIGENT* 10,000 294
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 3,564
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $23,546) $27,061
- --------------------------------------------------------------------------------
88
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
FOREIGN PREFERRED STOCK -- 0.1%
SPARTA PHARMACEUTICALS (A)* 10,000 $ 29
- --------------------------------------------------------------------------------
TOTAL FOREIGN PREFERRED STOCK
(Cost $95) $ 29
- --------------------------------------------------------------------------------
WARRANT -- 0.0%
SPARTA PHARMACEUTICALS, CL C* 66,666 10
- --------------------------------------------------------------------------------
TOTAL WARRANT
(Cost $5) $ 10
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 17.9%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$5,220,488 (collateralized by
U.S. Treasury Bond:
total market value
$5,340,626) $5,220 5,220
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $5,220) $ 5,220
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 110.6%
(Cost $28,866) $32,320
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- (10.6%) $(3,095)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 2,307,949 outstanding
shares of beneficial interest 23,095
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 156,700 outstanding
shares of beneficial interest 1,963
Accumulated net realized gain on investments 713
Net unrealized appreciation on investments 3,454
================================================================================
TOTAL NET ASSETS -- 100.0% $29,225
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $11.86
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $11.83
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($11.83 / 95.25%) (B) $12.42
================================================================================
* NON-INCOME PRODUCING SECURITY
(A) SECURITY VALUED IN GOOD FAITH BASED ON GUIDELINES ESTABLISHED BY THE BOARD
OF TRUSTEES.
(B) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME.
THE MAXIMUM SALES LOAD IS 4.75%.
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
PLC--PUBLIC LIMITED COMPANY
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: INTERNATIONAL EQUITY SELECTION PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS ARE AS FOLLOWS:
Repurchase Agreement -- 7%
Mutual Funds -- 93%
% of Total Portfolio Investments
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MUTUAL FUNDS -- 93.6%
AMERICAN ADVANTAGE INTERNATIONAL
EQUITY FUND 415,890 $ 7,752
AMERICAN FUNDS EUROPACIFIC
GROWTH FUND 250,905 7,505
GAM INTERNATIONAL FUND 71,240 2,345
HARBOR INTERNATIONAL FUND 234,320 9,757
HOTCHKIS & WILEY
INTERNATIONAL FUND 170,249 4,463
TEMPLETON FOREIGN FUND,
CL I 635,808 7,045
- --------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $33,988) $38,867
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.5%
FIRST BOSTON
5.500%, dated 04/30/98, matures
05/01/98, repurchase price
$2,693,882 (collateralized by
U.S. Treasury Bond: total
market value $2,748,880) $2,693 2,693
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,693) $ 2,693
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(Cost $36,681) $41,560
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (0.1%) $ (37)
================================================================================
89
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
ARK FUNDS: INTERNATIONAL EQUITY SELECTION
PORTFOLIO (CONCLUDED)
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 3,607,011 outstanding
shares of beneficial interest $36,347
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 1,073 outstanding
shares of beneficial interest 13
Accumulated net realized gain on investments 284
Net unrealized appreciation on investments 4,879
================================================================================
TOTAL NET ASSETS -- 100.0% $41,523
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $11.51
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $11.51
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($11.51 / 98.50%) $11.69
================================================================================
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: INTERNATIONAL EQUITY PORTFOLIO
[PIE CHART OMITTED]
PLOT POINTS TO FOLLOW:
Hong Kong -- 5%
Other -- 8%
Netherlands -- 8%
Switzerland -- 9%
France -- 10%
Germany -- 10%
United Kingdom -- 26%
Ireland -- 12%
Japan -- 12%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- 97.5%
AUSTRALIA -- 0.8%
NATIONAL AUSTRALIA BANK 1,966 $ 28
- --------------------------------------------------------------------------------
TOTAL AUSTRALIA $ 28
- --------------------------------------------------------------------------------
FINLAND -- 0.9%
NOKIA OYJ, SERIES A 525 35
- --------------------------------------------------------------------------------
TOTAL FINLAND $ 35
- --------------------------------------------------------------------------------
FRANCE -- 10.2%
ACCOR 320 87
AXA 620 73
BANQUE NATIONAL PARIS 620 52
CIE GENERALE DES EAUX 621 115
TOTAL, SERIES B 450 54
- --------------------------------------------------------------------------------
TOTAL FRANCE $381
- --------------------------------------------------------------------------------
GERMANY -- 7.4%
DEUTSCHE BANK 651 50
HENKEL KGAA 594 46
MANNESMANN 174 138
VEBA 650 43
- --------------------------------------------------------------------------------
TOTAL GERMANY $277
- --------------------------------------------------------------------------------
HONG KONG -- 4.8%
GUANGNAN HOLDINGS 76,000 49
NEW WORLD DEVELOPMENT 15,000 43
SINO LAND 200,000 87
- --------------------------------------------------------------------------------
TOTAL HONG KONG $179
- --------------------------------------------------------------------------------
IRELAND -- 12.0%
BANK OF IRELAND 4,600 93
CRH 6,700 96
GREENCORE GROUP 20,000 122
IRISH LIFE 15,000 139
- --------------------------------------------------------------------------------
TOTAL IRELAND $450
- --------------------------------------------------------------------------------
ITALY -- 3.2%
ASSICURAZIONI GENERALI 1,003 30
ENI 5,306 36
TELECOM ITALIA 7,130 53
- --------------------------------------------------------------------------------
TOTAL ITALY $119
- --------------------------------------------------------------------------------
90
<PAGE>
STATEMENTS OF NET ASSETS
April 30, 1998
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
JAPAN -- 11.8%
FUJITSU 5,000 $ 58
HONDA MOTOR 1,000 36
ITO YOKADO 1,000 52
MATSUSHITA ELECTRIC 4,000 64
SHIN-ETSU CHEMICAL 3,000 58
SUMITOMO ELECTRIC 4,000 48
TOKIO MARINE & FIRE INSURANCE 6,000 65
TOPPAN PRINTING 5,000 59
- --------------------------------------------------------------------------------
TOTAL JAPAN $440
- --------------------------------------------------------------------------------
NETHERLANDS -- 8.0%
ABN-AMRO 2,780 68
AHOLD 1,158 36
ING GROEP 1,079 70
ROYAL DUTCH PETROLEUM 430 24
VNU 3,160 102
- --------------------------------------------------------------------------------
TOTAL NETHERLANDS $300
- --------------------------------------------------------------------------------
SWEDEN -- 3.8%
ELECTROLUX AB, SERIES B 687 64
ERICSSON 941 50
SANDVIK, SERIES B 969 28
- --------------------------------------------------------------------------------
TOTAL SWEDEN $142
- --------------------------------------------------------------------------------
SWITZERLAND -- 8.5%
CREDIT SUISSE GROUP 320 70
NESTLE 44 85
NOVARTIS 38 63
ROCHE HOLDINGS 5 51
UBS-BEARER 29 47
- --------------------------------------------------------------------------------
TOTAL SWITZERLAND $316
- --------------------------------------------------------------------------------
THAILAND -- 0.0%
FINANCE ONE PUBLIC* 3,000 --
- --------------------------------------------------------------------------------
TOTAL THAILAND $ --
- --------------------------------------------------------------------------------
UNITED KINGDOM -- 26.1%
ALLIED-DOMECQ* 300 3
ASDA GROUP 13,700 46
BARCLAYS BANK 1,157 33
BARRATT DEVELOPMENTS 2,000 11
BAT INDUSTRIES 3,019 28
BRITISH PETROLEUM 3,047 48
COOKSON GROUP 3,000 13
GLAXO WELLCOME 2,828 80
GRANADA GROUP 3,017 52
HSBC HOLDINGS 1,574 50
LLOYDS TSB GROUP 5,921 89
MARKS & SPENCER 4,299 41
NATIONAL WESTMINSTER 1,895 38
PRUDENTIAL 5,443 77
RAILTRACK GROUP 3,292 60
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
ROYAL & SUN ALLIANCE
INSURANCE GROUP 4,000 $ 45
SEVERN TRENT 1,914 31
SHELL TRANSPORTATION
& TRADING 7,419 55
VODAFONE GROUP 5,552 61
YORKSHIRE WATER 2,433 20
ZENECA GROUP 2,234 96
- --------------------------------------------------------------------------------
TOTAL UNITED KINGDOM $ 977
- --------------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(Cost $2,943) $3,644
- --------------------------------------------------------------------------------
FOREIGN PREFERRED STOCKS -- 2.8%
GERMANY -- 2.8%
GEA 140 57
SAP 96 48
- --------------------------------------------------------------------------------
TOTAL GERMANY $ 105
- --------------------------------------------------------------------------------
TOTAL FOREIGN PREFERRED STOCKS
(Cost $80) $ 105
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.3%
(Cost $3,023) $3,749
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (0.3%) $ (10)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 248,821 outstanding
shares of beneficial interest 2,218
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 79,569 outstanding
shares of beneficial interest 862
Undistributed net investment income 9
Accumulated net realized loss on investments (68)
Net unrealized depreciation on forward
foreign currency contracts, foreign
currency and translation of other assets
and liabilities in foreign currency (8)
Net unrealized appreciation on investments 726
================================================================================
TOTAL NET ASSETS -- 100.0% $3,739
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $11.39
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS $11.37
================================================================================
MAXIMUM OFFERING PRICE PER SHARE -- RETAIL CLASS
($11.37 / 95.25%) (A) $11.94
================================================================================
* NON-INCOME PRODUCING SECURITY
(A) EFFECTIVE 10/01/97, A 3% DISCOUNTED SALES LOAD IS CHARGED ON INVESTMENTS
INTO THE RETAIL CLASS. THIS DISCOUNT MAY BE DISCONTINUED AT ANY TIME.
THE MAXIMUM SALES LOAD IS 4.75%.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
91
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (000)
FOR THE YEAR OR PERIOD INDICATED
TAX-FREE U.S. GOVERNMENT U.S. TREASURY SHORT-TERM
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET TREASURY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ --------------- ------------- ----------
5/1/97 5/1/97 5/1/97 5/1/97 5/1/97
to 4/30/98 to 4/30/98 to 4/30/98 to 4/30/98 to 4/30/98
------------ ------------ --------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ -- $ -- $ -- $ --
Interest 30,797 5,392 77,178 20,376 2,370
Less: Foreign Taxes Withheld -- -- -- -- --
------- ------- ------- ------- -------
Total Investment Income 30,797 5,392 77,178 20,376 2,370
------- ------- ------- ------- -------
EXPENSES:
Administrator Fees 697 189 1,778 494 53
Less: Waiver of Administrator Fees -- -- -- -- --
Investment Advisory Fees 1,341 364 3,419 950 143
Less: Waiver of Investment
Advisory Fees (751) (233) (1,504) (228) (7)
Custodian Fees 93 23 259 45 11
Less: Waiver of Custodian Fees -- -- -- -- --
Transfer Agency Fees 32 9 77 23 2
Professional Fees 75 22 188 52 8
Registration Fees 58 26 131 48 3
Distribution Fees--Retail Class 454 65 90 69 71
Less: Waiver of Distribution Fees--
Retail Class -- -- -- -- (27)
Distribution Fees--
Institutional II Class 83 21 73 88 --
Printing Fees 67 16 139 39 (1)
Trustee Fees 7 2 21 5 1
Amortization of Deferred
Organization Costs 4 4 4 4 3
Miscellaneous Fees 32 8 118 11 2
Shareholder Servicing Fees--
Institutional Class 132 49 490 105 12
Less: Waiver of Shareholder Servicing
Fees--Institutional Class (79) (30) (280) (45) (7)
Shareholder Servicing Fees--
Retail Class 273 39 48 41 20
Less: Waiver of Shareholder Servicing
Fees--Retail Class (163) (23) (29) (25) (20)
------- ------- ------- ------- -------
Total Expenses 2,355 551 5,022 1,676 267
------- ------- ------- ------- -------
Net Investment Income 28,442 4,841 72,156 18,700 2,103
------- ------- ------- ------- -------
Net Realized Gain (Loss) on:
Investments (12) -- (2) (45) 62
Foreign Currency Transactions -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments
and Foreign Currency Transactions -- -- -- -- 357
------- ------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency Transactions (12) -- (2) (45) 419
------- ------- ------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations $28,430 $ 4,841 $72,154 $18,655 $ 2,522
======= ======= ======= ======= =======
SHORT-TERM MARYLAND PENNSYLVANIA
BOND TAX-FREE TAX-FREE INCOME
PORTFOLIO (1) PORTFOLIO PORTFOLIO (1) PORTFOLIO
--------------------- ---------- --------------------- ----------
3/1/98 3/1/97 5/1/97 3/1/98 3/1/97 5/1/97
to 4/30/98 to 2/28/98 to 4/30/98 to 4/30/98 to 2/28/98 to 4/30/98
--------------------- ---------- --------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ -- $ -- $ -- $ -- $ 168
Interest 1,415 9,349 5,407 1,640 10,754 18,862+
Less: Foreign Taxes Withheld -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total Investment Income 1,415 9,349 5,407 1,640 10,754 19,030
------- ------- ------- ------- ------- -------
EXPENSES:
Administrator Fees 34 257 132 52 393 365
Less: Waiver of Administrator Fees (4) (63) -- (5) (94) --
Investment Advisory Fees 174 1,062 524 232 1,567 1,431
Less: Waiver of Investment
Advisory Fees (26) (212) (61) (23) (313) (24)
Custodian Fees 5 29 16 1 39 51
Less: Waiver of Custodian Fees -- -- -- 14 (13) --
Transfer Agency Fees 12 21 6 4 21 17
Professional Fees 2 32 16 1 32 45
Registration Fees 1 14 13 1 10 38
Distribution Fees--Retail Class -- -- 56 -- -- 17
Less: Waiver of Distribution Fees--
Retail Class -- -- (9) -- -- (3)
Distribution Fees--
Institutional II Class -- -- -- -- -- --
Printing Fees 3 7 13 -- 12 33
Trustee Fees 2 3 2 -- 7 4
Amortization of Deferred
Organization Costs 1 -- 3 -- -- 4
Miscellaneous Fees 3 17 6 3 18 12
Shareholder Servicing Fees--
Institutional Class 21 -- 42 35 -- 153
Less: Waiver of Shareholder Servicing
Fees--Institutional Class (13) -- (25) (21) -- (92)
Shareholder Servicing Fees--
Retail Class -- -- 24 -- -- 8
Less: Waiver of Shareholder Servicing
Fees--Retail Class -- -- (24) -- -- (8)
------- ------- ------- ------- ------- -------
Total Expenses 215 1,167 734 294 1,679 2,051
------- ------- ------- ------- ------- -------
Net Investment Income 1,200 8,182 4,673 1,346 9,075 16,979
------- ------- ------- ------- ------- -------
Net Realized Gain (Loss) on:
Investments 1 (317) 541 384 1,985 3,238
Foreign Currency Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments
and Foreign Currency Transactions (172) 584 2,461 (3,114) 2,425 7,153
------- ------- ------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency Transactions (171) 267 3,002 (2,730) 4,410 10,391
------- ------- ------- ------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 1,029 $ 8,449 $ 7,675 $(1,384) $13,485 $27,370
======= ======= ======= ======= ======= =======
INTERMEDIATE U.S. GOVERNMENT
FIXED INCOME BOND
PORTFOLIO PORTFOLIO (1)
------------ ---------------------
5/1/97 3/1/98 3/1/97
to 4/30/98 to 4/30/98 to 2/28/98
------------ ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 39 $ -- $ 49
Interest 5,224+ 3,075 20,648
Less: Foreign Taxes Withheld -- -- --
------- ------- -------
Total Investment Income 5,263 3,075 20,697
------- ------- -------
EXPENSES:
Administrator Fees 102 67 481
Less: Waiver of Administrator Fees -- (7) (121)
Investment Advisory Fees 471 333 2,023
Less: Waiver of Investment
Advisory Fees (115) (50) (405)
Custodian Fees 24 8 40
Less: Waiver of Custodian Fees -- -- --
Transfer Agency Fees 5 14 31
Professional Fees 13 2 38
Registration Fees 11 1 19
Distribution Fees--Retail Class -- -- --
Less: Waiver of Distribution Fees--
Retail Class -- -- --
Distribution Fees--
Institutional II Class -- -- --
Printing Fees 7 2 11
Trustee Fees 1 -- 7
Amortization of Deferred
Organization Costs 3 1 --
Miscellaneous Fees 4 3 18
Shareholder Servicing Fees--
Institutional Class 40 43 --
Less: Waiver of Shareholder Servicing
Fees--Institutional Class (24) (26) --
Shareholder Servicing Fees--
Retail Class -- -- --
Less: Waiver of Shareholder Servicing
Fees--Retail Class -- -- --
------- ------- -------
Total Expenses 542 391 2,142
------- ------- -------
Net Investment Income 4,721 2,684 18,555
------- ------- -------
Net Realized Gain (Loss) on:
Investments 356 86 (923)
Foreign Currency Transactions -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments
and Foreign Currency Transactions 1,393 (325) 2,239
------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency Transactions 1,749 (239) 1,316
------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 6,470 $ 2,445 $19,871
======= ======= =======
<FN>
(1) See Note 9 of Notes to Financial Statements regarding fund mergers.
+ Includes income from securities lending program. See Notes to the Financial Statements for additional information.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
92 & 93
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (000)
FOR THE YEAR OR PERIOD INDICATED
EQUITY VALUE EQUITY BLUE CHIP
BALANCED INCOME EQUITY INDEX EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO (1) PORTFOLIO PORTFOLIO
------------- ------------- ----------------------- ------------ ------------
5/1/97 5/1/97 3/1/98 3/1/97 10/1/97 5/1/97
to 4/30/98 to 4/30/98 to 4/30/98 to 2/28/98 to 4/30/98 to 4/30/98
------------- ------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 681 $ 3,126 $ 449 $ 10,815 $ 286 $ 1,098
Interest 2,412 256 1,276 1,850 37 267
Less: Foreign Taxes Withheld -- -- -- -- --
------- ------- ------- -------- ------- -------
Total Investment Income 3,093 3,382 1,725 12,665 323 1,365
------- ------- ------- -------- ------- -------
EXPENSES:
Administrator Fees 125 128 156 970 26 101
Less: Waiver of Administrator Fees -- -- -- -- (26) --
Investment Advisory Fees 537 692 998 5,824 40 474
Less: Waiver of Investment
Advisory Fees (8) (95) (162) (1,165) (38) (27)
Custodian Fees 33 36 17 68 17 18
Transfer Agency Fees 6 6 15 31 2 5
Professional Fees 13 15 8 36 3 12
Registration Fees 11 11 -- 18 14 17
Distribution Fees--Retail Class 41 7 -- -- 1 155
Less: Waiver of Distribution Fees--
Retail Class (15) (2) -- -- -- (84)
Distribution Fees--
Institutional II Class -- -- -- -- -- --
Printing Fees 7 10 3 8 -- 4
Trustee Fees 1 2 1 16 -- 1
Amortization of Deferred
Organization Costs 4 3 -- -- -- 3
Miscellaneous Fees 6 2 5 25 1 3
Shareholder Servicing Fees--
Institutional Class 46 51 80 -- 19 29
Less: Waiver of Shareholder Servicing
Fees--Institutional Class (28) (31) (48) -- (19) (17)
Shareholder Servicing Fees--
Retail Class 15 2 -- -- -- 37
Less: Waiver of Shareholder Servicing
Fees--Retail Class (15) (2) -- -- -- (37)
------- ------- ------- -------- ------- -------
Total Expenses 779 835 1,073 5,831 40 694
------- ------- ------- -------- ------- -------
Net Investment Income (Loss) 2,314 2,547 652 6,834 283 671
------- ------- ------- -------- ------- -------
Net Realized Gain on:
Investments 10,217 9,065 5,752 80,123 420 3,473
Foreign Currency Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
on Investments and Foreign
Currency Transactions 13,045 15,858 19,421 71,490 5,405 21,036
------- ------- ------- -------- ------- -------
Net Realized and Unrealized
Gain on Investments and Foreign
Currency Transactions 23,262 24,923 25,173 151,613 5,825 24,509
------- ------- ------- -------- ------- -------
Net Increase in Net Assets
Resulting from Operations $25,576 $27,470 $25,825 $158,447 $ 6,108 $25,180
======= ======= ======= ======== ======= =======
CAPITAL MID-CAP SMALL-CAP INTERNATIONAL INTERNATIONAL
GROWTH EQUITY EQUITY EQUITY SELECTION EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO (1) PORTFOLIO
------------ ------------ ------------ ----------------------- ---------------
5/1/97 5/1/97 5/1/97 3/1/98 4/1/97 5/1/97
to 4/30/98 to 4/30/98 to 4/30/98 to 4/30/98 to 2/28/98 to 4/30/98
------------ ------------ ------------ ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 406 $ 487 $ 128 $ -- $ 810 $ 68
Interest 76 26 51 17 125 15
Less: Foreign Taxes Withheld -- -- -- -- -- (6)
------- ------- ------- ------- ------- -------
Total Investment Income 482 513 179 17 935 77
------- ------- ------- ------- ------- -------
EXPENSES:
Administrator Fees 65 52 32 17 106 5
Less: Waiver of Administrator Fees -- -- -- (2) (29) --
Investment Advisory Fees 304 286 151 42 245 28
Less: Waiver of Investment
Advisory Fees (3) (21) -- (23) (141) (21)
Custodian Fees 10 29 33 2 12 28
Transfer Agency Fees 3 3 1 13 14 --
Professional Fees 7 7 5 -- 21 --
Registration Fees 10 12 7 (1) 35 2
Distribution Fees--Retail Class 40 -- 6 -- -- 3
Less: Waiver of Distribution Fees--
Retail Class (15) -- (2) -- -- (3)
Distribution Fees--
Institutional II Class -- -- -- -- -- --
Printing Fees 4 5 3 -- 10 --
Trustee Fees 1 1 -- -- 1 --
Amortization of Deferred
Organization Costs 4 2 -- -- -- --
Miscellaneous Fees 2 4 2 1 9 13
Shareholder Servicing Fees--
Institutional Class 23 25 12 5 -- 1
Less: Waiver of Shareholder Servicing
Fees--Institutional Class (14) (15) (7) (3) -- (1)
Shareholder Servicing Fees--
Retail Class 15 -- 2 -- -- --
Less: Waiver of Shareholder Servicing
Fees--Retail Class (15) -- (2) -- -- --
------- ------- ------- ------- ------- -------
Total Expenses 441 390 243 51 283 55
------- ------- ------- ------- ------- -------
Net Investment Income (Loss) 41 123 (64) (34) 652 22
Net Realized Gain on:
Investments 6,670 4,248 4,416 48 1,296 270
Foreign Currency Transactions -- -- -- -- -- 1
Net Change in Unrealized Appreciation
on Investments and Foreign
Currency Transactions 11,791 10,632 4,818 2,204 2,674 534
------- ------- ------- ------- ------- -------
Net Realized and Unrealized
Gain on Investments and Foreign
Currency Transactions 18,461 14,880 9,234 2,252 3,970 805
------- ------- ------- ------- ------- -------
Net Increase in Net Assets
Resulting from Operations $18,502 $15,003 $ 9,170 $ 2,218 $ 4,622 $ 827
======= ======= ======= ======= ======= =======
<FN>
(1) See Note 9 of Notes to Financial Statements regarding fund mergers.
+ Includes income from securities lending program. See Notes to the Financial Statements for additional information.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
94 & 95
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE YEAR OR PERIOD INDICATED
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 4/30/98 to 4/30/97 to 4/30/98 to 4/30/97 to 4/30/98 to 4/30/97
----------- ---------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 28,442 $ 23,742 $ 4,841 $ 3,744 $ 72,156 $ 60,867
Net Realized Gain (Loss) on Investments
and Foreign Currency Transactions (12) (3) -- -- (2) (29)
Net Change in Unrealized Appreciation (Depreciation)
on Investments and Foreign Currency -- -- -- -- -- --
-------- -------- -------- -------- ---------- ----------
Net Increase (Decrease) in Net Assets from Operations 28,430 23,739 4,841 3,744 72,154 60,838
-------- -------- -------- -------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (14,677) (15,435) (3,344) (2,735) (66,224) (59,082)
Retail Class (9,312) (5,700) (808) (515) (1,590) --
Institutional II Class (4,453) (2,607) (688) (495) (4,316) (1,811)
Net Capital Gains
Institutional Class -- -- -- -- -- --
Retail Class -- -- -- -- -- --
-------- -------- -------- -------- ---------- ----------
Total Distributions (28,442) (23,742) (4,840) (3,745) (72,130) (60,893)
-------- -------- -------- -------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 678,729 630,250 129,030 101,174 2,467,089 2,115,793
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- -- -- --
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- 21 45
Shares Redeemed (771,203) (659,673) (107,675) (106,822) (2,432,072) (1,908,765)
-------- -------- -------- -------- ---------- ----------
Total Institutional Class Share Transactions (92,474) (29,423) 21,355 (5,648) 35,038 207,073
-------- -------- -------- -------- ---------- ----------
Retail Class:
Shares Issued 436,117 78,945 84,889 33,688 160,166 --
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions 8,342 5,699 806 516 -- --
Shares Redeemed (385,100) (60,653) (77,046) (33,888) (81,900) --
-------- -------- -------- -------- ---------- ----------
Total Retail Class Share Transactions 59,359 23,991 8,649 316 78,266 --
-------- -------- -------- -------- ---------- ----------
Institutional II Class:
Shares Issued 248,051 136,399 80,395 66,745 470,456 315,465
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed (228,716) (102,228) (67,649) (59,404) (416,112) (295,206)
-------- -------- -------- -------- ---------- ----------
Total Institutional II Class Share Transactions 19,335 34,171 12,746 7,341 54,344 20,259
-------- -------- -------- -------- ---------- ----------
Increase (Decrease) in Net Assets from
Shareholder Transactions (13,780) 28,739 42,750 2,009 167,648 227,332
-------- -------- -------- -------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS (13,792) 28,736 42,751 2,008 167,672 227,277
NET ASSETS:
Beginning of period 510,572 481,836 102,313 100,305 1,288,062 1,060,785
-------- -------- -------- -------- ---------- ----------
End of period $496,780 $510,572 $145,064 $102,313 $1,455,734 $1,288,062
======== ======== ======== ======== ========== ==========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 678,729 630,250 129,030 101,174 2,467,089 2,115,793
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- -- -- --
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- 21 45
Shares Redeemed (771,203) (659,673) (107,675) (106,822) (2,432,072) (1,908,765)
-------- -------- -------- -------- ---------- ----------
Total Institutional Class Share Transactions (92,474) (29,423) 21,355 (5,648) 35,038 207,073
-------- -------- -------- -------- ---------- ----------
Retail Class:
Shares Issued 436,117 78,945 84,889 33,688 160,166 --
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions 8,342 5,699 806 516 -- --
Shares Redeemed (385,100) (60,653) (77,046) (33,888) (81,900) --
-------- -------- -------- -------- ---------- ----------
Total Retail Class Share Transactions 59,359 23,991 8,649 316 78,266 --
-------- -------- -------- -------- ---------- ----------
Institutional II Class:
Shares Issued 248,051 136,399 80,395 66,745 470,456 315,465
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed (228,716) (102,228) (67,649) (59,404) (416,112) (295,206)
-------- -------- -------- -------- ---------- ----------
Total Institutional II Class Share Transactions 19,335 34,171 12,746 7,341 54,344 20,259
-------- -------- -------- -------- ---------- ----------
Net Increase (Decrease) in Share Transactions (13,780) 28,739 42,750 2,009 167,648 227,332
======== ======== ======== ======== ========== ==========
U.S. TREASURY SHORT-TERM
MONEY MARKET TREASURY
PORTFOLIO PORTFOLIO
---------------------- ----------------------
5/1/97 5/1/96 5/1/97 5/1/96
to 4/30/98 to 4/30/97 to 4/30/98 to 4/30/97
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 18,700 $ 16,904 $ 2,103 $ 1,651
Net Realized Gain (Loss) on Investments
and Foreign Currency Transactions (45) (5) 62 12
Net Change in Unrealized Appreciation (Depreciation)
on Investments and Foreign Currency -- -- 357 (116)
-------- -------- -------- --------
Net Increase (Decrease) in Net Assets from Operations 18,655 16,899 2,522 1,547
-------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (13,110) (13,231) (1,221) (1,009)
Retail Class (1,281) (473) (882) (641)
Institutional II Class (4,309) (3,200) -- --
Net Capital Gains
Institutional Class -- -- (25) (12)
Retail Class -- -- (18) (13)
-------- -------- -------- --------
Total Distributions (18,700) (16,904) (2,146) (1,675)
-------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 483,164 443,559 4,390 4,158
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- --
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- --
Shares Issued in Lieu of Cash Distributions 6 6 30 11
Shares Redeemed (446,375) (492,896) (1,242) (1,437)
-------- -------- -------- --------
Total Institutional Class Share Transactions 36,795 (49,331) 3,178 2,732
-------- -------- -------- --------
Retail Class:
Shares Issued 69,512 23,822 2,600 30,973
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- --
Shares Issued in Lieu of Cash Distributions 852 474 900 654
Shares Redeemed (48,733) (19,380) (12,215) (8,554)
-------- -------- -------- --------
Total Retail Class Share Transactions 21,631 4,916 (8,715) 23,073
-------- -------- -------- --------
Institutional II Class:
Shares Issued 247,477 186,332 -- --
Shares Issued in Lieu of Cash Distributions -- -- -- --
Shares Redeemed (216,118) (170,056) -- --
-------- -------- -------- --------
Total Institutional II Class Share Transactions 31,359 16,276 -- --
-------- -------- -------- --------
Increase (Decrease) in Net Assets from
Shareholder Transactions 89,785 (28,139) (5,537) 25,805
-------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS 89,740 (28,144) (5,161) 25,677
NET ASSETS:
Beginning of period 303,093 331,237 44,500 18,823
-------- -------- -------- --------
End of period $392,833 $303,093 $ 39,339 $ 44,500
======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 483,164 443,559 436 416
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- --
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- --
Shares Issued in Lieu of Cash Distributions 6 6 3 1
Shares Redeemed (446,375) (492,895) (123) (144)
-------- -------- -------- --------
Total Institutional Class Share Transactions 36,795 (49,330) 316 273
-------- -------- -------- --------
Retail Class:
Shares Issued 69,512 23,822 259 3,093
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- --
Shares Issued in Lieu of Cash Distributions 852 474 90 65
Shares Redeemed (48,733) (19,380) (1,217) (855)
-------- -------- -------- --------
Total Retail Class Share Transactions 21,631 4,916 (868) 2,303
-------- -------- -------- --------
Institutional II Class:
Shares Issued 247,477 186,332 -- --
Shares Issued in Lieu of Cash Distributions -- -- -- --
Shares Redeemed (216,118) (170,056) -- --
-------- -------- -------- --------
Total Institutional II Class Share Transactions 31,359 16,276 -- --
-------- -------- -------- --------
Net Increase (Decrease) in Share Transactions 89,785 (28,138) (552) 2,576
======== ======== ======== ========
SHORT-TERM MARYLAND
BOND TAX-FREE
PORTFOLIO PORTFOLIO
------------------------------------- -----------------------
3/1/98 3/1/97 4/1/96 5/1/97 11/18/96
to 4/30/98 to 2/28/98 to 2/28/97 to 4/30/98 to 4/30/97
---------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 1,200 $ 8,182 $ 6,514 $ 4,673 $ 1,872
Net Realized Gain (Loss) on Investments
and Foreign Currency Transactions 1 (317) (4) 541 469
Net Change in Unrealized Appreciation (Depreciation)
on Investments and Foreign Currency (172) 584 (151) 2,461 (1,565)
-------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets from Operations 1,029 8,449 6,359 7,675 776
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (1,203) (8,140) (6,508) (3,834) (1,787)
Retail Class -- -- -- (838) (85)
Institutional II Class -- -- -- -- --
Net Capital Gains
Institutional Class -- -- -- (466) --
Retail Class -- -- -- (121) --
-------- -------- -------- -------- --------
Total Distributions (1,203) (8,140) (6,508) (5,259) (1,872)
-------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 3,424 25,180 166,519 11,869 4,262
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- -- --
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- 81,100
Shares Issued in Lieu of Cash Distributions 690 4,387 3,234 502 --
Shares Redeemed (5,815) (42,510) (23,426) (10,974) (4,730)
-------- -------- -------- -------- --------
Total Institutional Class Share Transactions (1,701) (12,943) 146,327 1,397 80,632
-------- -------- -------- -------- --------
Retail Class:
Shares Issued -- -- -- 22,144 8,773
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- 959 85
Shares Redeemed -- -- -- (6,023) (789)
-------- -------- -------- -------- --------
Total Retail Class Share Transactions -- -- -- 17,080 8,069
-------- -------- -------- -------- --------
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 (1,701) (12,943) 146,327 18,477 88,701
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS (1,875) (12,634) 146,178 20,893 87,605
NET ASSETS:
Beginning of period 133,544 146,178 -- 87,605 --
-------- -------- -------- -------- --------
End of period $131,669 $133,544 $146,178 $108,498 $ 87,605
======== ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 349 2,528 16,727 1,168 436
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- -- --
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- 8,110
Shares Issued in Lieu of Cash Distributions 69 441 325 49 --
Shares Redeemed (594) (4,263) (2,354) (1,081) (478)
-------- -------- -------- -------- --------
Total Institutional Class Share Transactions (176) (1,294) 14,698 136 8,068
-------- -------- -------- -------- --------
Retail Class:
Shares Issued -- -- -- 2,179 883
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- 94 8
Shares Redeemed -- -- -- (591) (80)
-------- -------- -------- -------- --------
Total Retail Class Share Transactions -- -- -- 1,682 811
-------- -------- -------- -------- --------
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 (176) (1,294) 14,698 1,818 8,879
======== ======== ======== ======== ========
PENNSYLVANIA
TAX-FREE INCOME
PORTFOLIO PORTFOLIO
------------------------------------- -----------------------
3/1/98 3/1/97 4/1/96 5/1/97 5/1/96
to 4/30/98 to 2/28/98 to 2/28/97 to 4/30/98 to 4/30/97
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 1,346 $ 9,075 $ 9,061 $ 16,979 $ 13,213
Net Realized Gain (Loss) on Investments
and Foreign Currency Transactions 384 1,985 (365) 3,238 (2,706)
Net Change in Unrealized Appreciation (Depreciation)
on Investments and Foreign Currency (3,114) 2,425 4,600 7,153 1,565
-------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets from Operations (1,384) 13,485 13,296 27,370 12,072
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (1,421) (9,058) (9,061) (16,640) (12,965)
Retail Class (11) (530) -- (324) (249)
Institutional II Class -- -- -- -- --
Net Capital Gains
Institutional Class (85) -- -- -- --
Retail Class -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions (1,517) (9,588) (9,061) (16,964) (13,214)
-------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 1,992 23,203 246,897 95,431 36,737
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio 24,789 -- -- -- --
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- 55,913
Shares Issued in Lieu of Cash Distributions 5 17 5 10,893 1,652
Shares Redeemed (4,056) (53,188) (29,844) (37,186) (31,143)
-------- -------- -------- -------- --------
Total Institutional Class Share Transactions 22,730 (29,968) 217,058 69,138 63,159
-------- -------- -------- -------- --------
Retail Class:
Shares Issued 216 -- -- 3,976 2,111
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio 2,600 -- -- -- --
Shares Issued in Lieu of Cash Distributions 10 -- -- 324 249
Shares Redeemed (218) -- -- (1,719) (2,455)
-------- -------- -------- -------- --------
Total Retail Class Share Transactions 2,608 -- -- 2,581 (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 25,338 (29,968) 217,058 71,719 63,064
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS 22,437 (26,071) 221,293 82,125 61,922
NET ASSETS:
Beginning of period 195,322 221,393 100 247,068 185,146
-------- -------- -------- -------- --------
End of period $217,759 $195,322 $221,393 $329,193 $247,068
======== ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 207 2,308 24,915 9,322 3,712
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio 2,427 -- -- -- --
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- 5,552
Shares Issued in Lieu of Cash Distributions 1 2 1 1,072 169
Shares Redeemed (409) (5,265) (2,978) (3,679) (3,161)
-------- -------- -------- -------- --------
Total Institutional Class Share Transactions 2,226 (2,955) 21,938 6,715 6,272
-------- -------- -------- -------- --------
Retail Class:
Shares Issued 21 -- -- 387 212
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio 253 -- -- -- --
Shares Issued in Lieu of Cash Distributions 1 -- -- 32 25
Shares Redeemed (21) -- -- (167) (246)
-------- -------- -------- -------- --------
Total Retail Class Share Transactions 254 -- -- 252 (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 2,480 (2,955) 21,938 6,967 6,263
======== ======== ======== ======== ========
INTERMEDIATE
FIXED INCOME
PORTFOLIO
-----------------------
5/1/97 11/18/96
to 4/30/98 to 4/30/97
---------- ----------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 4,721 $ 2,181
Net Realized Gain (Loss) on Investments
and Foreign Currency Transactions 356 (81)
Net Change in Unrealized Appreciation (Depreciation)
on Investments and Foreign Currency 1,393 (1,200)
-------- --------
Net Increase (Decrease) in Net Assets from Operations 6,470 900
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (4,723) (2,181)
Retail Class -- --
Institutional II Class -- --
Net Capital Gains
Institutional Class (206) --
Retail Class -- --
-------- --------
Total Distributions (4,929) (2,181)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 17,828 4,653
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- --
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- 78,230
Shares Issued in Lieu of Cash Distributions 303 --
Shares Redeemed (11,670) (5,276)
-------- --------
Total Institutional Class Share Transactions 6,461 77,607
-------- --------
Retail Class:
Shares Issued -- --
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- --
Shares Issued in Lieu of Cash Distributions -- --
Shares Redeemed -- --
-------- --------
Total Retail Class Share Transactions -- --
-------- --------
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 6,461 77,607
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS 8,002 76,326
NET ASSETS:
Beginning of period 76,326 --
-------- --------
End of period $ 84,328 $ 76,326
======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 1,782 499
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- --
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- 7,823
Shares Issued in Lieu of Cash Distributions 30 --
Shares Redeemed (1,168) (535)
-------- --------
Total Institutional Class Share Transactions 644 7,787
Retail Class:
Shares Issued -- --
Shares Issued in Conjunction with Acquisition
of the ARK Pennsylvania Tax-Free Portfolio -- --
Shares Issued in Lieu of Cash Distributions -- --
Shares Redeemed -- --
-------- --------
Total Retail Class Share Transactions -- --
-------- --------
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 644 7,787
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
96 & 97
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE YEAR OR PERIOD INDICATED
U.S. GOVERNMENT BALANCED
BOND PORTFOLIO PORTFOLIO
----------------------------------- ----------------------
3/1/98 3/1/97 4/1/96 5/1/97 5/1/96
to 4/30/98 to 2/28/98 to 2/28/97 to 4/30/98 to 4/30/97
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ 2,684 $ 18,555 $ 13,730 $ 2,314 $ 2,709
Net Realized Gain (Loss) on Investments
and Foreign Currency Transactions 86 (923) (949) 10,217 6,028
Net Change in Unrealized Appreciation
(Depreciation) on Investments
and Foreign Currency (325) 2,239 (2,506) 13,045 (1,398)
-------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets
from Operations 2,445 19,871 10,275 25,576 7,339
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (2,684) (18,542) (13,728) (2,071) (2,387)
Retail Class -- -- -- (233) (118)
Institutional II Class -- -- -- -- --
Net Capital Gains
Institutional Class -- -- -- (8,182) (4,424)
Retail Class -- -- -- (1,083) (203)
-------- -------- -------- -------- --------
Total Distributions (2,684) (18,542) (13,728) (11,569) (7,132)
-------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 6,075 69,240 279,905 15,826 14,504
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- --
Shares Issued in Conjunction with
Acquisition of the ARK Stock Portfolio -- -- -- -- --
Shares Issued in Lieu of Cash Distributions 758 5,185 3,481 10,175 4,943
Shares Redeemed (5,543) (70,231) (20,991) (18,845) (44,855)
-------- -------- -------- -------- --------
Total Institutional Class Share Transactions 1,290 4,194 262,395 7,156 (25,408)
-------- -------- -------- -------- --------
Retail Class:
Shares Issued 30 -- -- 9,134 3,804
Shares Issued in Lieu of Cash Distributions -- -- -- 1,316 321
Shares Redeemed -- -- -- (2,832) (1,329)
-------- -------- -------- -------- --------
Total Retail Class Share Transactions 30 -- -- 7,618 2,796
-------- -------- -------- -------- --------
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 1,320 4,194 262,395 14,774 (22,612)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS 1,081 5,523 258,942 28,781 (22,405)
NET ASSETS:
Beginning of period 264,565 259,042 100 83,151 105,556
-------- -------- -------- -------- --------
End of period $265,646 $264,565 $259,042 $111,932 $ 83,151
======== ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 618 7,072 28,154 1,229 1,290
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- --
Shares Issued in Conjunction with
Acquisition of the ARK Stock Portfolio -- -- -- -- --
Shares Issued in Lieu of Cash Distributions 77 529 351 848 444
Shares Redeemed (564) (7,146) (2,123) (1,497) (3,988)
-------- -------- -------- -------- --------
Total Institutional Class Share Transactions 131 455 26,382 580 (2,254)
-------- -------- -------- -------- --------
Retail Class:
Shares Issued 3 -- -- 716 337
Shares Issued in Lieu of Cash Distributions -- -- -- 110 29
Shares Redeemed -- -- -- (224) (118)
-------- -------- -------- -------- --------
Total Retail Class Share Transactions 3 -- -- 602 248
-------- -------- -------- -------- --------
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 134 455 26,382 1,182 (2,006)
======== ======== ======== ======== ========
EQUITY VALUE EQUITY
INCOME EQUITY INDEX
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------- ---------------------------------- ----------
5/1/97 11/18/96 3/1/98 3/1/97 4/1/96 10/1/97
to 4/30/98 to 4/30/97 to 4/30/98 to 2/28/98 to 2/28/97 to 4/30/98
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ 2,547 $ 922 $ 652 $ 6,834 $ 5,939 $ 283
Net Realized Gain (Loss) on Investments
and Foreign Currency Transactions 9,065 6,425 5,752 80,123 21,302 420
Net Change in Unrealized Appreciation
(Depreciation) on Investments
and Foreign Currency 15,858 (1,090) 19,421 71,490 96,868 5,405
-------- ------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets
from Operations 27,470 6,257 25,825 158,447 124,109 6,108
-------- ------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (2,505) (922) (512) (6,768) (5,888) (242)
Retail Class (43) -- -- -- -- (3)
Institutional II Class -- -- -- -- -- --
Net Capital Gains
Institutional Class (9,335) -- (1,196) (59,362) (8,725) --
Retail Class (225) -- -- -- -- --
-------- ------- -------- -------- -------- --------
Total Distributions (12,108) (922) (1,708) (66,130) (14,613) (245)
-------- ------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 9,302 1,578 6,964 81,207 471,400 40,712
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- 80,587 -- -- -- --
Shares Issued in Conjunction with
Acquisition of the ARK Stock Portfolio -- -- 44,621 -- -- --
Shares Issued in Lieu of Cash Distributions 9,363 -- 765 32,139 6,978 240
Shares Redeemed (11,250) (3,553) (8,420) (169,398) (46,985) (1,184)
-------- ------- -------- -------- -------- --------
Total Institutional Class Share Transactions 7,415 78,612 43,930 (56,052) 431,393 39,768
-------- ------- -------- -------- -------- --------
Retail Class:
Shares Issued 3,410 -- 228 -- -- 1,420
Shares Issued in Lieu of Cash Distributions 267 -- -- -- -- 4
Shares Redeemed (330) -- -- -- -- (107)
-------- ------- -------- -------- -------- --------
Total Retail Class Share Transactions 3,347 -- 228 -- -- 1,317
-------- ------- -------- -------- -------- --------
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 10,762 78,612 44,158 (56,052) 431,393 41,085
-------- ------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS 26,124 83,947 68,275 36,265 540,889 46,948
NET ASSETS:
Beginning of period 83,947 -- 577,154 540,889 -- --
-------- ------- -------- -------- -------- --------
End of period $110,071 $83,947 $645,429 $577,154 $540,889 $ 46,948
======== ======= ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 767 151 470 6,184 49,148 4,019
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- 8,058 -- -- -- --
Shares Issued in Conjunction with
Acquisition of the ARK Stock Portfolio -- -- 3,061 -- -- --
Shares Issued in Lieu of Cash Distributions 810 -- 53 2,486 627 22
Shares Redeemed (930) (342) (586) (12,877) (4,341) (111)
-------- ------- -------- -------- -------- --------
Total Institutional Class Share Transactions 647 7,867 2,998 (4,207) 45,434 3,930
-------- ------- -------- -------- -------- --------
Retail Class:
Shares Issued 278 -- 16 -- -- 132
Shares Issued in Lieu of Cash Distributions 23 -- -- -- -- --
Shares Redeemed (27) -- -- -- -- (10)
-------- ------- -------- -------- -------- --------
Total Retail Class Share Transactions 274 -- 16 -- -- 122
-------- ------- -------- -------- -------- --------
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 921 7,867 3,014 (4,207) 45,434 4,052
======== ======= ======== ======== ======== ========
The accompanying notes are an integral part of the financial statements.
98
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE YEAR OR PERIOD INDICATED
BLUE CHIP CAPITAL MID-CAP
EQUITY GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- ---------------------- -----------------------
5/1/97 5/1/96 5/1/97 5/1/96 5/1/97 11/18/96
to 4/30/98 to 4/30/97 to 4/30/98 to 4/30/97 to 4/30/98 to 4/30/97
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ 671 $ 389 $ 41 $ 347 $ 123 $ 78
Net Realized Gain (Loss) on Investments
and Foreign Currency Transactions 3,473 236 6,670 3,560 4,248 391
Net Change in Unrealized Appreciation
(Depreciation) on Investments
and Foreign Currency 21,036 5,200 11,791 836 10,632 (72)
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets
from Operations 25,180 5,825 18,502 4,743 15,003 397
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (448) (326) (113) (395) (129) (72)
Retail Class (202) (66) (14) (44) -- --
Institutional II Class -- -- -- -- -- --
Net Capital Gains
Institutional Class (302) (19) (5,271) (2,960) (2,376) --
Retail Class (186) (4) (1,458) (304) -- --
-------- -------- -------- -------- -------- --------
Total Distributions (1,138) (415) (6,856) (3,703) (2,505) (72)
-------- -------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 19,277 22,062 14,093 5,594 19,182 3,539
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- -- 26,212
Shares Issued in Conjunction with
Acquisition of the ARK Stock Portfolio -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions 541 87 5,377 2,960 2,415 11
Shares Redeemed (3,952) (2,314) (12,745) (14,909) (5,874) (3,028)
-------- -------- -------- -------- -------- --------
Total Institutional Class Share Transactions 15,866 19,835 6,725 (6,355) 15,723 26,734
-------- -------- -------- -------- -------- --------
Retail Class:
Shares Issued 25,471 12,987 7,125 3,797 -- --
Shares Issued in Lieu of Cash Distributions 388 70 1,472 348 -- --
Shares Redeemed (4,308) (857) (1,717) (736) -- --
-------- -------- -------- -------- -------- --------
Total Retail Class Share Transactions 21,551 12,200 6,880 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 37,417 32,035 13,605 (2,946) 15,723 26,734
-------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS 61,459 37,445 25,251 (1,906) 28,221 27,059
NET ASSETS:
Beginning of period 48,901 11,456 39,765 41,671 27,059 --
-------- -------- -------- -------- -------- --------
End of period $110,360 $ 48,901 $ 65,016 $ 39,765 $ 55,280 $ 27,059
======== ======== ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 1,297 1,943 1,020 476 1,536 341
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- -- 2,621
Shares Issued in Conjunction with
Acquisition of the ARK Stock Portfolio -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions 36 7 433 255 200 1
Shares Redeemed (270) (202) (923) (1,275) (480) (302)
-------- -------- -------- -------- -------- --------
Total Institutional Class Share Transactions 1,063 1,748 530 (544) 1,256 2,661
-------- -------- -------- -------- -------- --------
Retail Class:
Shares Issued 1,746 1,135 504 321 -- --
Shares Issued in Lieu of Cash Distributions 26 6 119 30 -- --
Shares Redeemed (289) (74) (123) (63) -- --
-------- -------- -------- -------- -------- --------
Total Retail Class Share Transactions 1,483 1,067 500 288 -- --
-------- -------- -------- -------- -------- --------
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 2,546 2,815 1,030 (256) 1,256 2,661
======== ======== ======== ======== ======== ========
SMALL-CAP INTERNATIONAL INTERNATIONAL
EQUITY EQUITY SELECTION EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- ----------------------- ----------------------
5/1/97 5/1/96 3/1/98 4/1/97 5/1/97 5/1/96
to 4/30/98 to 4/30/97 to 4/30/98 to 2/28/98 to 4/30/98 to 4/30/97
---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ (64) $ (29) $ (34) $ 652 $ 22 $ 12
Net Realized Gain (Loss) on Investments
and Foreign Currency Transactions 4,416 2,092 48 1,296 271 (3)
Net Change in Unrealized Appreciation
(Depreciation) on Investments
and Foreign Currency 4,818 (8,396) 2,204 2,674 534 (192)
-------- -------- -------- -------- ------- -------
Net Increase (Decrease) in Net Assets
from Operations 9,170 (6,333) 2,218 4,622 827 (183)
-------- -------- -------- -------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class -- -- -- (931) (11) --
Retail Class -- -- -- -- (3) --
Institutional II Class -- -- -- -- --
Net Capital Gains
Institutional Class (1,266) (4,563) -- (746) (248) (63)
Retail Class (93) (286) -- -- (77) (2)
-------- -------- -------- -------- ------- -------
Total Distributions (1,359) (4,849) -- (1,677) (339) (65)
-------- -------- -------- -------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued -- 8,165 3,794 50,153 281 446
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets 4,789 -- -- -- -- --
Shares Issued in Conjunction with
Acquisition of the ARK Stock Portfolio -- -- -- -- --
Shares Issued in Lieu of Cash Distributions 1,198 4,563 -- 1,439 259 63
Shares Redeemed (3,721) (17,980) (360) (18,679) (1,983) --
-------- -------- -------- -------- ------- -------
Total Institutional Class Share Transactions 2,266 (5,252) 3,434 32,913 (1,443) 509
-------- -------- -------- -------- ------- -------
Retail Class:
Shares Issued 541 1,732 13 -- 556 393
Shares Issued in Lieu of Cash Distributions 93 286 -- -- 80 2
Shares Redeemed (307) (384) -- -- (151) (18)
-------- -------- -------- -------- ------- -------
Total Retail Class Share Transactions 327 1,634 13 -- 485 377
-------- -------- -------- -------- ------- -------
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 2,593 (3,618) 3,447 32,913 (958) 886
-------- -------- -------- -------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS 10,404 (14,800) 5,665 35,858 (470) 638
NET ASSETS:
Beginning of period 18,821 33,621 35,858 -- 4,209 3,571
-------- -------- -------- -------- ------- -------
End of period $ 29,225 $ 18,821 $ 41,523 $ 35,858 $ 3,739 $ 4,209
======== ======== ======== ======== ======= =======
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 449 678 333 4,943 24 43
Shares Issued in Conjunction with
Acquisition of Common Trust Fund Assets -- -- -- -- -- --
Shares Issued in Conjunction with
Acquisition of the ARK Stock Portfolio -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions 124 457 -- 140 26 6
Shares Redeemed (345) (1,340) (32) (1,777) (168) --
-------- -------- -------- -------- ------- -------
Total Institutional Class Share Transactions 228 (205) 301 3,306 (118) 49
-------- -------- -------- -------- ------- -------
Retail Class:
Shares Issued 50 134 1 -- 50 37
Shares Issued in Lieu of Cash Distributions 10 28 -- -- 8 1
Shares Redeemed (29) (36) -- -- (14) (2)
-------- -------- -------- -------- ------- -------
Total Retail Class Share Transactions 31 126 1 -- 44 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 259 (79) 302 3,306 (74) 85
======== ======== ======== ======== ======= =======
</TABLE>
99
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD INDICATED
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)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1998 $1.00 0.05 -- (0.05) -- $1.00 5.55%
1997 1.00 0.05 -- (0.05) -- 1.00 5.36
1996 1.00 0.06 -- (0.06) -- 1.00 5.78
1995 1.00 0.05 -- (0.05) -- 1.00 5.13
1994 (1) 1.00 0.03 -- (0.03) -- 1.00 2.80+
RETAIL CLASS
1998 $1.00 0.05 -- (0.05) -- $1.00 5.25%
1997 1.00 0.05 -- (0.05) -- 1.00 5.03
1996 1.00 0.05 -- (0.05) -- 1.00 5.44
1995 1.00 0.05 -- (0.05) -- 1.00 4.69
1994 (2) 1.00 -- -- -- -- 1.00 0.42+
INSTITUTIONAL II CLASS
1998 $1.00 0.05 -- (0.05) -- $1.00 5.47%
1997 1.00 0.05 -- (0.05) -- 1.00 5.25
1996 (3) 1.00 0.04 -- (0.04) -- 1.00 4.33+
- -------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1998 $1.00 0.03 -- (0.03) -- $1.00 3.45%
1997 1.00 0.03 -- (0.03) -- 1.00 3.29
1996 1.00 0.04 -- (0.04) -- 1.00 3.61
1995 1.00 0.03 -- (0.03) -- 1.00 3.24
1994 (1) 1.00 0.02 -- (0.02) -- 1.00 1.87+
RETAIL CLASS
1998 $1.00 0.03 -- (0.03) -- $1.00 3.16%
1997 1.00 0.03 -- (0.03) -- 1.00 3.01
1996 1.00 0.03 -- (0.03) -- 1.00 3.53
1995 1.00 0.03 -- (0.03) -- 1.00 2.74
1994 (4) 1.00 -- -- -- -- 1.00 0.20+
INSTITUTIONAL II CLASS
1998 $1.00 0.03 -- (0.03) -- $1.00 3.37%
1997 1.00 0.03 -- (0.03) -- 1.00 3.19
1996 (5) 1.00 0.02 -- (0.02) -- 1.00 2.62+
- --------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
1998 $1.00 0.05 -- (0.05) -- $1.00 5.42%
1997 1.00 0.05 -- (0.05) -- 1.00 5.22
1996 1.00 0.05 -- (0.05) -- 1.00 5.64
1995 1.00 0.05 -- (0.05) -- 1.00 5.00
1994 (1) 1.00 0.03 -- (0.03) -- 1.00 2.70+
RETAIL CLASS
1998 (21) $1.00 0.04 -- (0.04) -- $1.00 5.19%
INSTITUTIONAL II CLASS
1998 $1.00 0.05 -- (0.05) -- $1.00 5.33%
1997 1.00 0.05 -- (0.05) -- 1.00 5.12
1996 (5) 1.00 0.04 -- (0.04) -- 1.00 4.11+
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS
END OF TO AVERAGE TO AVERAGE (EXCLUDING
PERIOD (000) NET ASSETS NET ASSETS WAIVERS)
===============================================================================
<S> <C> <C> <C> <C>
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1998 $ 226,439 0.33% 5.41% 0.50%
1997 318,919 0.28 5.23 0.43
1996 348,343 0.25 5.62 0.44
1995 277,859 0.20 5.13 0.46
1994 (1) 197,162 0.26* 3.16* 0.52*
RETAIL CLASS
1998 $ 188,048 0.62% 5.13% 0.85%
1997 128,693 0.59 4.92 0.83
1996 104,703 0.58 5.25 0.77
1995 51,081 0.45 4.88 0.97
1994 (2) 12 1.16* 2.26* 592.55*
INSTITUTIONAL II CLASS
1998 $ 82,293 0.41% 5.33% 0.55%
1997 62,960 0.38 5.14 0.53
1996 (3) 28,790 0.36* 5.37* 0.55*
- -------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1998 $ 90,446 0.32% 3.39% 0.51%
1997 69,091 0.28 3.23 0.44
1996 74,739 0.22 3.54 0.45
1995 64,112 0.22 3.21 0.47
1994 (1) 66,692 0.35* 2.10* 0.53*
RETAIL CLASS
1998 $ 25,144 0.61% 3.11% 0.86%
1997 16,495 0.55 2.97 0.84
1996 16,179 0.34 3.33 0.90
1995 2,491 0.75 2.68 2.94
1994 (4) 50 1.25* 1.20* 32.17*
INSTITUTIONAL II CLASS
1998 $ 29,474 0.40% 3.31% 0.56%
1997 16,727 0.38 3.14 0.54
1996 (5) 9,387 0.33* 3.35* 0.58*
- --------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
1998 $1,285,840 0.35% 5.29% 0.49%
1997 1,250,778 0.32 5.10 0.43
1996 1,043,758 0.31 5.45 0.44
1995 651,113 0.25 5.09 0.47
1994 (1) 271,437 0.35* 3.03* 0.62*
RETAIL CLASS
1998 (21) $ 78,265 0.67%* 4.98%* 0.87%*
INSTITUTIONAL II CLASS
1998 $ 91,629 0.44% 5.21% 0.55%
1997 37,284 0.42 5.01 0.53
1996 (5) 17,027 0.41* 5.25* 0.56*
</TABLE>
100
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD INDICATED
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)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
1998 $1.00 0.05 -- (0.05) -- $ 1.00 5.08%
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
1998 $1.00 0.05 -- (0.05) -- $ 1.00 4.77%
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
1998 $1.00 0.05 -- (0.05) -- $ 1.00 4.99%
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
1998 $ 9.96 0.53 0.10 (0.53) (0.01) $10.05 6.48%
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
1998 $ 9.96 0.52 0.09 (0.51) (0.01) $10.05 6.23%
1997 (8) 9.95 0.27 0.03 (0.28) (0.01) 9.96 3.39+
- -------------------------
SHORT-TERM BOND PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
1998 $ 9.96 0.09 (0.01) (0.09) -- $ 9.95 0.82%+
1998++ 9.95 0.57 0.01 (0.57) -- 9.96 5.98
1997++ (22) 10.00 0.49 (0.05) (0.49) -- 9.95 4.49+
- ---------------------------
MARYLAND TAX-FREE PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
1998 $ 9.87 0.47 0.33 (0.47) (0.06) $10.14 8.15%
1997 (9) 10.00 0.22 (0.13) (0.22) -- 9.87 0.89+
RETAIL CLASS
1998 $ 9.87 0.44 0.34 (0.45) (0.06) $10.14 7.91%
1997(10) 9.96 0.13 (0.07) (0.15) -- 9.87 0.63+
- -------------------------------
PENNSYLVANIA TAX-FREE PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1998 $10.28 0.07 (0.14) (0.07) -- $10.14 (0.66)%+
1998++ 10.09 0.40 0.19 (0.40) -- 10.28 6.68
1997++(22) 10.00 0.40 0.09 (0.40) -- 10.09 5.03+
RETAIL CLASS
1998 (24) $10.26 0.04 (0.13) (0.04) -- $10.13 (0.94)%+
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME (LOSS) NET ASSETS PORTFOLIO
END OF TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
==============================================================================================
<S> <C> <C> <C> <C> <C>
- ------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
1998 $ 262,687 0.40% 4.96% 0.48% --
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
1998 $ 35,302 0.70% 4.66% 0.85% --
1997 13,673 0.64 4.62 0.83 --
1996 (6) 8,758 0.55* 4.71* 0.86* --
INSTITUTIONAL II CLASS
1998 $ 94,844 0.48% 4.88% 0.54% --
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
1998 $ 24,929 0.55% 5.26% 0.60% 124.24%
1997 21,563 0.55 5.11 0.60 147.86
1996 (7) 18,823 0.55* (0.55)* 0.60* --
RETAIL CLASS
1998 $ 14,410 0.78% 5.02% 1.07% 124.24%
1997 (8) 22,937 0.67* 5.07* 0.91* 147.86
- -------------------------
SHORT-TERM BOND PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
1998 $ 131,669 0.97%* 5.14%* 1.16%* 108.18%
1998++ 133,544 0.82 5.78 1.01 135.00
1997++ (22) 146,178 0.90* 5.47* 1.08 112.00
- ---------------------------
MARYLAND TAX-FREE PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
1998 $ 83,215 0.68% 4.62% 0.77% 22.40%
1997 (9) 79,608 0.67* 4.95* 0.72* 11.13
RETAIL CLASS
1998 $ 25,283 0.90% 4.39% 1.15% 22.40%
1997(10) 7,997 0.91* 4.70* 1.10* 11.13
- -------------------------------
PENNSYLVANIA TAX-FREE PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1998 $ 215,182 0.84%* 3.84%* 0.91%* 3.50%
1998++ 195,322 0.80 4.43 1.00 57.00
1997++(22) 221,393 0.83* 4.41* 1.02* 86.00
RETAIL CLASS
1998 (24) $ 2,577 1.01%* 3.72%* 1.24%* 3.50%
<FN>
+ Returns are for the period indicated and have not been annualized.
++ Period ended February 28. See Note 9 of Notes to Financial Statements
regarding fund mergers.
* All ratios 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) Presentation of average commission rate paid per share for security
purchases and sales 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.
(22) Commenced operations on April 1, 1996.
(23) Commenced operations on April 1, 1997.
(24) Commenced operations on March 23, 1998.
(25) Commenced operations on April 1, 1998.
(26) Commenced operations on November 3, 1998.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
101
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD INDICATED
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)
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------
INCOME PORTFOLIO
- ----------------
INSTITUTIONAL CLASS
1998 $ 9.82 0.61 0.43 (0.61) -- $10.25 10.84%
1997 9.80 0.59 0.02 (0.59) -- 9.82 6.51
1996 9.60 0.61 0.20 (0.61) -- 9.80 8.46
1995 9.61 0.58 0.02 (0.58) (0.03) 9.60 6.53
1994 (11) 10.00 0.38 (0.38) (0.38) (0.01) 9.61 (0.08)+
RETAIL CLASS
1998 $ 9.94 0.58 0.44 (0.59) -- $10.37 10.47%
1997 9.91 0.59 0.01 (0.57) -- 9.94 6.32
1996 9.72 0.60 0.19 (0.60) -- 9.91 8.14
1995 9.62 0.55 0.05 (0.47) (0.03) 9.72 6.45
1994 (12) 9.69 0.02 (0.06) (0.03) -- 9.62 (0.41)+
- -----------------------------------
INTERMEDIATE FIXED INCOME PORTFOLIO
- -----------------------------------
INSTITUTIONAL CLASS
1998 $ 9.80 0.60 0.23 (0.60) (0.03) $10.00 8.65%
1997 (9) 10.00 0.28 (0.20) (0.28) -- 9.80 0.78+
- ------------------------------
U.S. GOVERNMENT BOND PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1998 $ 9.85 0.10 -- (0.10) -- $ 9.85 1.02%+
1998++ 9.82 0.67 0.03 (0.67) -- 9.85 7.40
1997++ (22) 10.00 0.59 (0.18) (0.59) -- 9.82 4.18+
RETAIL CLASS
1998 (25) $ 9.88 0.81 (0.03) (0.81) -- $ 9.85 7.86%+
- ------------------
BALANCED PORTFOLIO
- ------------------
INSTITUTIONAL CLASS
1998 $11.43 0.30 3.04 (0.30) (1.23) $13.24 30.95%
1997 11.38 0.33 0.53 (0.30) (0.51) 11.43 7.85
1996 10.04 0.34 1.71 (0.34) (0.37) 11.38 20.90
1995 10.16 0.33 0.03 (0.29) (0.19) 10.04 3.75
1994 (11) 10.00 0.19 0.17 (0.19) (0.01) 10.16 3.56+
RETAIL CLASS
1998 $11.40 0.27 3.04 (0.28) (1.23) $13.20 30.67%
1997 11.35 0.28 0.56 (0.28) (0.51) 11.40 7.66
1996 10.04 0.31 1.68 (0.31) (0.37) 11.35 20.23
1995 10.15 0.27 0.05 (0.24) (0.19) 10.04 3.33
1994 (13) 10.62 0.01 (0.43) (0.05) -- 10.15 (3.95)+
- -----------------------
EQUITY INCOME PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
1998 $10.67 0.31 3.06 (0.31) (1.21) $12.52 33.04%
1997 (9) 10.00 0.12 0.67 (0.12) -- 10.67 7.88+
RETAIL CLASS
1998 (14) $11.01 0.28 2.73 (0.29) (1.21) $12.52 28.73%+
- ----------------------
VALUE EQUITY PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1998 $14.00 0.01 0.62 (0.01) (0.03) $14.59 4.51%+
1998++ 11.91 0.15 3.45 (0.15) (1.36) 14.00 31.64
1997++ (22) 10.00 0.14 2.10 (0.14) (0.19) 11.91 22.77+
RETAIL CLASS
1998 (25) $14.55 -- 0.05 -- -- $14.60 0.34%+
- ----------------------
EQUITY INDEX PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1998 (15) $10.00 0.08 1.58 (0.07) -- $11.59 16.71%+
RETAIL CLASS
1998 (26) $ 9.78 0.06 1.80 (0.07) -- $11.57 19.08%+
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS PORTFOLIO AVERAGE
END OF TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER COMMISSION
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE RATE(B)
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- ----------------
INCOME PORTFOLIO
- ----------------
INSTITUTIONAL CLASS
1998 $322,304 0.73% 6.05% 0.77% 154.87% --
1997 242,966 0.68 6.19 0.68 271.60 --
1996 180,962 0.73 6.00 0.73 107.33 --
1995 66,441 0.74 6.15 0.74 73.00 --
1994 (11) 54,289 0.77* 4.90* 0.77* 20.00 --
RETAIL CLASS
1998 $ 6,889 0.95% 5.82% 1.16% 154.87% --
1997 4,102 0.89 5.96 1.09 271.60 --
1996 4,184 1.02 5.54 1.37 107.33 --
1995 296 1.23 5.66 27.63 73.00 --
1994 (12) 30 1.72* 3.95* 55.35* 20.00 --
- -----------------------------------
INTERMEDIATE FIXED INCOME PORTFOLIO
- -----------------------------------
INSTITUTIONAL CLASS
1998 $ 84,328 0.69% 6.02% 0.87% 41.63% --
1997 (9) 76,326 0.68* 5.55* 0.83* 17.18 --
- ------------------------------
U.S. GOVERNMENT BOND PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1998 $265,616 0.88%* 6.04%* 1.06%* 13.77% --
1998++ 264,565 0.79 6.88 0.98 431.00 .0600
1997++ (22) 259,042 0.85* 6.54* 1.03* 255.00 --
RETAIL CLASS
1998 (25) $ 30 1.05%* 6.02%* 1.33%* 13.77% --
- ------------------
BALANCED PORTFOLIO
- ------------------
INSTITUTIONAL CLASS
1998 $ 96,858 0.79% 2.44% 0.83% 71.58% .0685
1997 76,987 0.74 2.79 0.74 124.22 .0673
1996 102,233 0.75 3.19 0.75 107.56 --
1995 91,039 0.77 3.32 0.77 81.00 --
1994 (11) 88,208 0.81* 2.41* 0.81* 37.00 --
RETAIL CLASS
1998 $ 15,074 1.02% 2.20% 1.33% 71.58% .0685
1997 6,164 0.96 2.56 1.19 124.22 .0673
1996 3,323 1.09 2.51 1.55 107.56 --
1995 549 1.26 2.83 5.80 81.00 --
1994 (13) 166 1.86* 1.36* 15.08* 37.00 --
- -----------------------
EQUITY INCOME PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
1998 $106,643 0.84% 2.58% 0.97% 39.88% .0692
1997 (9) 83,947 0.83* 2.47* 0.93* 34.38 .0689
RETAIL CLASS
1998 (14) $ 3,428 1.07%* 2.39%* 1.45%* 39.88% .0692
- ----------------------
VALUE EQUITY PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1998 $645,202 1.08%* 0.65%* 1.20%* 4.34% .0700
1998++ 577,154 1.00 1.17 1.20 30.00 .0632
1997++ (22) 540,889 1.05* 1.48* 1.26* 37.00 .0616
RETAIL CLASS
1998 (25) $ 227 1.26%* 0.62%* 1.67%* 4.34% .0700
- ----------------------
EQUITY INDEX PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1998 (15) $ 45,531 0.20% 1.43% 0.62% 49.56% .0335
RETAIL CLASS
1998 (26) $ 1,417 0.45%* 1.02%* 1.08%* 49.56% .0335
</TABLE>
102
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD INDICATED
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/(LOSS) ON INVESTMENTS INCOME GAINS OF PERIOD RETURN(A)
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1998 $12.39 0.14 4.70 (0.13) (0.09) $17.01 39.34%
1997 10.12 0.17 2.28 (0.17) (0.01) 12.39 24.41
1996 (16) 10.00 -- 0.12 -- -- 10.12 1.20+
RETAIL CLASS
1998 $12.38 0.10 4.69 (0.10) (0.09) $16.98 38.93%
1997 (17) 10.33 0.16 2.06 (0.16) (0.01) 12.38 21.74+
- ------------------------
CAPITAL GROWTH PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1998 $11.92 0.02 4.96 (0.04) (1.96) $14.90 45.19%
1997 11.60 0.11 1.41 (0.14) (1.06) 11.92 13.46
1996 10.20 0.16 2.17 (0.16) (0.77) 11.60 23.62
1995 10.19 0.14 0.16 (0.11) (0.18) 10.20 3.15
1994 (11) 10.00 0.06 0.21 (0.03) (0.05) 10.19 2.66+
RETAIL CLASS
1998 $11.87 -- 4.93 (0.02) (1.96) $14.82 44.90%
1997 11.56 0.09 1.41 (0.13) (1.06) 11.87 13.39
1996 10.18 0.12 2.15 (0.12) (0.77) 11.56 23.24
1995 10.18 0.08 0.18 (0.08) (0.18) 10.18 2.74
1994 (13) 10.89 -- (0.71) -- -- 10.18 (6.52)+
- ------------------------
MID-CAP EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1998 $10.17 0.04 4.61 (0.04) (0.67) $14.11 46.92%
1997 (9) 10.00 0.03 0.17 (0.03) -- 10.17 1.98+
- --------------------------
SMALL-CAP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1998 $ 8.53 (0.02) 3.97 -- (0.62) $11.86 47.93%
1997 14.72 (0.01) (2.97) -- (3.21) 8.53 (23.43)
1996 (18) 10.00 0.09 4.72 (0.09) -- 14.72 48.34+
RETAIL CLASS
1998 $ 8.53 (0.06) 3.98 -- (0.62) $11.83 47.57%
1997 (17) 15.47 (0.01) (3.72) -- (3.21) 8.53 (27.14)+
- ----------------------------------------
INTERNATIONAL EQUITY SELECTION PORTFOLIO
- ----------------------------------------
INSTITUTIONAL CLASS
1998 $10.85 -- 0.66 -- -- $11.51 6.08%+
1998++ (23) 10.00 0.15 1.12 (0.23) (0.19) 10.85 12.95+
RETAIL CLASS
1998 (25) $11.40 -- 0.11 -- -- $11.51 0.96%+
- ------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1998 $10.45 0.03 2.07 (0.04) (1.12) $11.39 21.67%
1997 11.23 0.05 (0.63) -- (0.20) 10.45 (5.22)
1996 10.13 0.19 1.37 (0.23) (0.23) 11.23 15.66
1995 (19) 10.00 0.03 0.10 -- -- 10.13 1.30+
RETAIL CLASS
1998 $10.44 0.04 2.05 (0.04) (1.12) $11.37 21.58%
1997 (20) 10.63 0.01 -- -- (0.20) 10.44 (0.15)+
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME (LOSS) NET ASSETS PORTFOLIO AVERAGE
END OF TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER COMMISSION
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE RATE(B)
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1998 $ 67,060 0.81% 0.96% 0.89% 26.32% .0697
1997 35,690 0.70 1.55 0.90 46.91 .0727
1996 (16) 11,456 0.65* 1.52* 1.38* 0.97 --
RETAIL CLASS
1998 $ 43,300 1.04% 0.71% 1.50% 26.32% .0697
1997 (17) 13,211 0.86* 1.29* 1.25* 46.91 .0727
- ------------------------
CAPITAL GROWTH PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1998 $ 50,615 0.84% 0.13% 0.88% 174.55% .0685
1997 34,170 0.39 0.92 0.85 246.14 .0692
1996 39,560 0.24 1.26 0.84 578.57 --
1995 41,170 0.74 1.35 0.85 182.00 --
1994 (11) 52,233 0.87* 0.78* 0.87* 41.00 --
RETAIL CLASS
1998 $ 14,401 1.06% (0.10)% 1.37% 174.55% .0685
1997 5,595 0.56 0.74 1.30 246.14 .0692
1996 2,111 0.50 1.05 1.65 578.57 --
1995 404 1.23 0.86 9.73 182.00 --
1994 (13) 87 1.92* (0.27)* 30.78* 41.00 --
- ------------------------
MID-CAP EQUITY PORTFOLIO
- ------------------------
INSTITUTIONA L CLASS
1998 $ 55,280 0.97% 0.31% 1.06% 38.30% .0687
1997 (9) 27,059 0.90* 0.65* 0.95* 14.74 .0715
- --------------------------
SMALL-CAP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1998 $ 27,372 0.98% (0.24)% 1.02% 410.72% .0678
1997 17,746 0.95 (0.12) 0.95 704.41 .0678
1996 (18) 33,621 0.91* 0.60* 0.91* 286.80 --
RETAIL CLASS
1998 $ 1,853 1.21% (0.46)% 1.36% 410.72% .0678
1997 (17) 1,075 1.11* (0.13)* 1.21* 704.41 .0678
- ----------------------------------------
INTERNATIONAL EQUITY SELECTION PORTFOLIO
- ----------------------------------------
INSTITUTIONAL CLASS
1998 $ 41,510 0.78%* (0.52)%* 1.22%* 0.98% --
1998++ (23) 35,858 0.75* 1.73* 1.20* 43.00 --
RETAIL CLASS
1998 (25) $ 13 0.96%* (0.63)%* 1.19%* 0.98% --
- ------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1998 $ 2,834 1.55% 0.61% 2.18% 101.46% .0242
1997 3,836 1.55 0.33 1.91 26.65 .0381
1996 3,571 1.55 0.15 2.96 37.16 --
1995 (19) 2,940 1.55* 0.97* 5.35* 2.00 --
RETAIL CLASS
1998 $ 905 1.55% 0.61% 2.60% 101.46% .0242
1997 (20) 373 1.77* 0.16* 2.50* 26.65 .0381
<FN>
+ Returns are for the period indicated and have not been annualized.
++ Period ended February 28. See Note 9 of Notes to Financial Statements
regarding fund mergers.
* All ratios 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) Presentation of average commission rate paid per share for security purchases
and sales 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.
(22) Commenced operations on April 1, 1996.
(23) Commenced operations on April 1, 1997.
(24) Commenced operations on March 23, 1998.
(25) Commenced operations on April 1, 1998.
(26) Commenced operations on November 3, 1997.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
103
<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 twenty-one 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,
Short-Term Bond Portfolio, Maryland Tax-Free Portfolio, Pennsylvania
Tax-Free Portfolio, Income Portfolio, Intermediate Fixed Income Portfolio,
U.S. Government Bond Portfolio, Balanced Portfolio, Equity Income
Portfolio, Value Equity Portfolio, Equity Index Portfolio, Blue Chip Equity
Portfolio, Capital Growth Portfolio, Mid-Cap Equity Portfolio, Small-Cap
Equity Portfolio (formerly Special Equity Portfolio), International Equity
Selection 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 Short-Term Bond 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 Small-Cap Equity Portfolio, in September
1996 for the Short-Term Treasury Portfolio, in November 1996 for the
International Equity Portfolio, in January 1997 for the Maryland Tax-Free
Portfolio, in May 1997 for the Equity Income Portfolio, in July 1997 for
the U.S. Government Money Market Portfolio, in November 1997 for the Equity
Index Portfolio, in March 1998 for the Pennsylvania Tax-Free Portfolio and
in April 1998 for the U.S. Government Bond Portfolio, Value Equity
Portfolio and International Equity Selection 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 of the Portfolios are generally valued by
independent pricing services. 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.
When market quotations are not readily available, securities are valued at
fair value as determined under procedures established and approved by the
Board of Trustees. As of April 30, 1998, the only Portfolio containing
securities valued using these procedures was the Small-Cap Equity
Portfolio. Securities valued in good faith amounted to $29,168 (0.1% 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.
104
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 every business day. It is computed by dividing
the total 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 the applicable class. Other
expenses, income, 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 Portfolio 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 and the U.S. Government
Bond Portfolio engage in dollar roll transactions with 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. The Portfolios
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
105
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
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, Short-Term Bond Portfolio, Maryland Tax-Free Portfolio,
Pennsylvania Tax-Free Portfolio, Income Portfolio, Intermediate Fixed
Income Portfolio, and U.S. Government Bond Portfolio. The Equity Income
Portfolio declares and pays dividends monthly, the Balanced Portfolio,
Value Equity Portfolio, Equity Index Portfolio, Blue Chip Equity Portfolio
and Mid-Cap Equity Portfolio, declare and pay dividends quarterly, and the
Capital Growth Portfolio, Small-Cap Equity Portfolio, International Equity
Selection 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.
On the Statements of Net Assets, the following adjustments were made (000):
<TABLE>
<CAPTION>
Accumulated Undistributed
Net Realized Net Investment
Portfolio Gain (Loss) Income Paid-in-Capital
--------- ------------ -------------- ---------------
<S> <C> <C> <C>
Money Market $(2) $15 $(13)
Tax-Free Money Market -- 4 (4)
U.S. Government Money Market -- 91 (91)
U.S. Treasury Money Market -- 18 (18)
Income -- 2 (2)
Balanced -- 4 (4)
Value Equity 117 (117) --
Capital Growth -- 4 (4)
Small-Cap Equity (64) 64 --
International Equity Selection (313) 313 --
International Equity (6) 6 --
</TABLE>
In addition, the International Equity Portfolio had a permanent difference
reclassified from realized foreign exchange gain to undistributed net
investment income of $1,629. These reclassifications have no effect on net
assets or net asset value per share.
106
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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., the Custodian of each of the Portfolios). Pursuant to an investment
advisory contract on 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%
----------------------------------------------------------
Short-Term Bond .75%
----------------------------------------------------------
Maryland Tax-Free .65%
----------------------------------------------------------
Pennsylvania Tax-Free .65%
----------------------------------------------------------
Income .60%
----------------------------------------------------------
Intermediate Fixed Income .60%
----------------------------------------------------------
U.S. Government Bond .75%
----------------------------------------------------------
Balanced .65%
----------------------------------------------------------
Equity Income .70%
----------------------------------------------------------
Value Equity 1.00%
----------------------------------------------------------
Equity Index .20%
----------------------------------------------------------
Blue Chip Equity .70%
----------------------------------------------------------
Capital Growth .70%
----------------------------------------------------------
Mid-Cap Equity .80%
----------------------------------------------------------
Small-Cap Equity .80%
----------------------------------------------------------
International Equity Selection .65%
----------------------------------------------------------
International Equity .80%
----------------------------------------------------------
Prior to February 12, 1998, the Portfolios were subject to an investment
advisory agreement providing for a different fee schedule. The Advisor
began collecting the Advisory fees shown in the table as of April 1, 1998.
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 Fund Resources serves as administrator and transfer agent for the Fund
under an Administration Agreement and Transfer Agency Agreement. SEI 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
administration agreement. SEI 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.
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, SEI
Investments Distribution Co. (SIDCO) acts as Distributor for the Fund
pursuant to a Distribution Agreement on behalf of each Portfolio. SIDCO is
entitled to a fee of .75% of the 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 Maryland Tax-Free Portfolio, Pennsylvania
Tax-Free Portfolio, Income Portfolio, Intermediate Fixed Income Portfolio,
Short-Term Bond Portfolio, U.S. Government Bond Portfolio; .40% of average
net assets of the Retail Class of the Short-Term Treasury Portfolio,
Balanced Portfolio, Equity Income Portfolio, Value Equity Portfolio,
Capital Growth Portfolio, Small-Cap Equity Portfolio, International Equity
Selection Portfolio, International Equity Portfolio, and Equity Index
Portfolio; .55% of average net
107
<PAGE>
NOTES TO FINANCIAL STATEMENTS
assets of the Retail Class of the Blue Chip Equity Portfolio; and .10% of
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.
In addition, the Board of Trustees has adopted a Shareholder Services Plan
on behalf of the Retail Class and Institutional Class of the Portfolios to
compensate qualified recipients for shareholder services and account
maintenance. Under the respective Shareholder Services Plans, the Retail
Class of a Portfolio may pay an annual fee of up to .25% of the average net
assets of the Retail Class shares attributable to their customers and the
Institutional Class of a Portfolio may pay an annual fee of up to .15% of
the average net assets of the Institutional Class Shares attributable to
their customers. Currently, the Trustees have approved a fee for the Retail
Class of .15% and a fee of .06% for the Institutional Class. In addition, a
portion of the fee is being waived for the Retail Class and Institutional
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
April 30, 1998, were as follows:
PURCHASES SALES
PORTFOLIO (000) (000)
---------------------------------------------------------
Short-Term Treasury $ 50,285 $ 48,176
---------------------------------------------------------
Short-Term Bond 111,118 102,238
---------------------------------------------------------
Maryland Tax-Free 39,715 21,182
---------------------------------------------------------
Pennsylvania Tax-Free 7,515 8,690
---------------------------------------------------------
Income 510,667 417,245
---------------------------------------------------------
Intermediate Fixed Income 33,787 30,236
---------------------------------------------------------
U.S. Government Bond 57,700 36,611
---------------------------------------------------------
Balanced 64,408 62,628
---------------------------------------------------------
Equity Income 37,570 41,943
---------------------------------------------------------
Value Equity 24,838 28,497
---------------------------------------------------------
Equity Index 57,671 17,509
---------------------------------------------------------
Blue Chip Equity 53,986 19,151
---------------------------------------------------------
Capital Growth 92,007 84,944
---------------------------------------------------------
Mid-Cap Equity 28,867 15,527
---------------------------------------------------------
Small-Cap Equity 95,970 95,827
---------------------------------------------------------
International Equity Selection 2,179 368
---------------------------------------------------------
International Equity 3,356 4,054
---------------------------------------------------------
For federal income tax purposes, securities owned at April 30, 1998, were
not materially different from the amounts reported for financial reporting
purposes. The aggregate gross unrealized appreciation and depreciation of
securities at April 30, 1998, for each Portfolio is as follows:
NET
UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION/
SECURITIES SECURITIES (DEPRECIATION)
PORTFOLIO (000) (000) (000)
-------------------------------------------------------------
Short-Term Treasury $ 167 $ (9) $ 158
-------------------------------------------------------------
Short-Term Bond 513 (252) 261
-------------------------------------------------------------
Maryland Tax-Free 4,374 (189) 4,185
-------------------------------------------------------------
Pennsylvania Tax-Free 5,522 (805) 4,717
-------------------------------------------------------------
Income 7,833 (898) 6,935
-------------------------------------------------------------
Intermediate Fixed
Income 1,756 (334) 1,422
-------------------------------------------------------------
U.S. Government Bond 1,244 (1,836) (592)
-------------------------------------------------------------
Balanced 22,543 (1,103) 21,440
-------------------------------------------------------------
Equity Income 29,067 (600) 28,467
-------------------------------------------------------------
Value Equity 205,599 (1,313) 204,286
-------------------------------------------------------------
Equity Index 6,095 (690) 5,405
-------------------------------------------------------------
Blue Chip Equity 26,946 (594) 26,352
-------------------------------------------------------------
Capital Growth 16,064 (497) 15,567
-------------------------------------------------------------
Mid-Cap Equity 18,570 (1,267) 17,303
-------------------------------------------------------------
Small-Cap Equity 3,976 (522) 3,454
-------------------------------------------------------------
International Equity
Selection 4,912 (33) 4,879
-------------------------------------------------------------
International Equity 812 (86) 726
-------------------------------------------------------------
At April 30, 1998, the following Portfolios had capital loss carryforwards
and post-October losses:
CAPITAL LOSS POST
CARRYFORWARD OCTOBER 31, 1997
AMOUNT EXPIRATION DEFERRED LOSSES
PORTFOLIO (000) DATE (000)
-------------------------------------------------------------
Money Market $ 14 2006 $ 1
-------------------------------------------------------------
U.S. Government
Money Market 25 2006 7
-------------------------------------------------------------
U.S. Treasury
Money Market 4 2005 --
15 2006 29
-------------------------------------------------------------
Short-Term Bond 316 2006 --
-------------------------------------------------------------
Income 621 2005 --
-------------------------------------------------------------
U.S. Government 837 2005 --
Bond 919 2006 --
-------------------------------------------------------------
International Equity -- -- 72
-------------------------------------------------------------
108
<PAGE>
NOTES TO FINANCIAL STATEMENTS
6. SECURITIES LENDING TRANSACTIONS
In order to generate additional income, certain portfolios may lend
portfolio securities representing up to one-third of the value of total
assets (which includes collateral received for securities on loan) to
broker dealers, banks, or other institutional borrowers of securities. As
with other extensions of credit, there may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the borrower
of the security fail financially. The market value of the securities on
loan at April 30, 1998, income generated during fiscal 1998 from the
program, the collateral purchased with cash received and held at April 30,
1998, with respect to such loans were as follows (000):
INCOME RECEIVED
MARKET VALUE OF FROM SECURITIES
PORTFOLIO LOANED SECURITIES LENDING
--------------------------------------------------------------
Income $96,264 $37
--------------------------------------------------------------
Intermediate Fixed
Income 13,504 8
--------------------------------------------------------------
MONEY OTHER FIXED
COLLATERAL REPURCHASE MARKET INCOME
PORTFOLIO AGREEMENTS INSTRUMENTS SECURITIES TOTAL
--------------------------------------------------------------
Income $60,000 $1 $40,190 $100,191
--------------------------------------------------------------
Intermediate Fixed
Income 7,000 2 7,360 14,362
--------------------------------------------------------------
7. FORWARD FOREIGN CURRENCY CONTRACTS
The following forward foreign currency contracts were outstanding at
April 30, 1998:
INTERNATIONAL EQUITY PORTFOLIO:
FOREIGN CURRENCY SALES:
UNREALIZED
MATURITY CONTRACTS TO IN EXCHANGE APPRECIATION
DATE DELIVER/RECEIVE FOR (DEPRECIATION)
--------------------------------------------------------------
06/30/98 CF 448,290 $ 300,000 $ (1,081)
--------------------------------------------------------------
06/30/98 DM 1,828,600 1,000,000 (23,191)
--------------------------------------------------------------
06/30/98 JY 63,900,000 500,000 13,082
--------------------------------------------------------------
06/30/98 GP 239,808 400,000 2,560
--------------------------------------------------------------
$ (8,630)
--------------------------------------------------------------
CURRENCY LEGEND
----------------
CF Swiss Franc
DM German Mark
JY Japanese Yen
GP Great Britain Pound
8. 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
April 30, 1998, the percentage of portfolio investments by each revenue
source was as follows:
MARYLAND PENNSYLVANIA
TAX-FREE PORTFOLIO TAX-FREE PORTFOLIO
---------------------------------------------------------
REVENUE BONDS:
---------------------------------------------------------
Education 15% 23%
---------------------------------------------------------
Health Care 12 22
---------------------------------------------------------
Transportation 7 --
---------------------------------------------------------
Utility 8 5
---------------------------------------------------------
Housing 2 3
---------------------------------------------------------
Public Facility 8 8
---------------------------------------------------------
Industrial 1 8
---------------------------------------------------------
Other 3 4
---------------------------------------------------------
GENERAL OBLIGATIONS 44 27
---------------------------------------------------------
100% 100%
---------------------------------------------------------
9. FUND MERGERS
The following ARK Portfolios were established in 1998 for the purpose of
acquiring the net assets of Marketvest Funds, and on March 20, 1998 and
March 27, 1998, the following Marketvest Funds were reorganized into the
ARK Funds pursuant to such agreement and Plan of Reorganization approved by
the Marketvest shareholders.
ARK ACQUIRING PORTFOLIO MARKETVEST ACQUIRED FUND
--------------------------------------------------------------------
Short-Term Bond Short-Term Bond
U.S. Government Intermediate U.S. Government
Bond Bond
Value Equity Equity
International Equity Selection International Equity
--------------------------------------------------------------------
109
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Under the Agreement and Plan of Reorganization, the Marketvest Funds shares
were exchanged for Institutional shares of the ARK Funds in a tax-free
exchange. The value of net assets acquired, number of shares issued and
unrealized appreciation acquired were as follows:
VALUE OF NET NUMBER OF UNREALIZED
PORTFOLIOS ASSETS ACQUIRED SHARES ISSUED APPRECIATION
-------------------------------------------------------------------
Short-Term
Bond $134,474,724 13,484,762 $ 483,752
U.S. Government
Bond 265,737,020 26,918,180 170,754
Value Equity 596,269,138 41,299,581 186,298,370
International Equity
Selection 38,578,490 3,365,077 4,755,196
-------------------------------------------------------------------
In addition, on March 20, 1998, the assets of the Marketvest Pennsylvania
Intermediate Municipal Bond Fund were reorganized into the ARK Pennsylvania
Tax-Free Portfolio. Under the Agreement and Plan of Reorganization,
18,933,932 shares of the Marketvest Pennsylvania Intermediate Municipal
Bond Fund were exchanged for 18,933,932 Institutional shares of the ARK
Pennsylvania Tax-Free Portfolio in a tax-free exchange. The value of the
Marketvest Pennsylvania Tax-Exempt Fund's net assets combined on March 20,
1998 prior to the merger was $194,492,162. The net assets of the Portfolio
immediately after the acquisition were $221,880,784.
In each of the acquisitions of the net assets of the MarketVest Funds
described above, the surviving entity for accounting and performance
purposes was the applicable Marketvest Funds.
On April 24, 1998, the net assets of the ARK Stock Portfolio were
reorganized into the ARK Value Equity Portfolio. Under the Agreement and
Plan of Reorganization, 4,114,786 Institutional Class shares of the ARK
Stock Portfolio were exchanged for 3,061,378 Institutional Class shares of
the ARK Value Equity Portfolio in a tax free exchange. The value of the ARK
Stock Portfolio's net assets combined with those of the ARK Value Equity
Portfolio on April 24, 1998, was $44,621,448. The net assets of the
Portfolio immediately after the acquisition was $644,230,476. The surviving
entity for accounting and performance purposes was the ARK Value Equity
Portfolio.
10. OTHER MATTERS
Retail Class shares of the Maryland Tax-Free Portfolio, Pennsylvania
Tax-Free Portfolio, Income Portfolio and U.S. Government Bond 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,
Value Equity Portfolio, Equity Index Portfolio, Blue Chip Equity Portfolio,
Capital Growth Portfolio, Small-Cap Equity Portfolio and International
Equity Portfolio are subject to a maximum sales charge of 4.75% of the
public offering price. Retail Class shares of the International Equity
Selection Portfolio are subject to a maximum sales charge of 1.50% 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 International Equity Selection Portfolio which has a sales
charge of 1.5% and the Short-Term Treasury Portfolio which has no sales
charge. Shareholders who invested in the ARK Funds prior to April 1, 1997
continued to invest without payment of any sales charges through December
31, 1997.
11. SHAREHOLDER VOTING RESULTS (UNAUDITED)
Pursuant to a consent dated October 1, 1997, the sole shareholder of each
class of the Equity Index Portfolio 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 Fund
Resources dated November 1, 1995; (iii) the Distribution Agreement between
the Fund and SEI Investments Distribution Co. dated November 1, 1995; (iv)
the form of Distribution Plan pursuant to Rule 12b-1 under the 1940 Act for
the Retail Class of such Portfolio; and (v) the form of Shareholder
Services Plan for the Retail Class of such Portfolio.
110
<PAGE>
NOTES TO FINANCIAL STATEMENTS
At a shareholder meeting held on February 4, 1998, the shareholders of the
Income Portfolio, Maryland Tax-Free Portfolio, Pennsylvania Tax-Free
Portfolio, Balanced Portfolio, Blue Chip Equity Portfolio, Mid-Cap Equity
Portfolio, Capital Growth Portfolio and Small-Cap Equity Portfolio voted to
approve a new investment advisory agreement between ARK Funds and Allied
Investment Advisors, Inc. The results of the voting were as follows:
SHARES % OF SHARES % OF SHARES
PORTFOLIO VOTED VOTED OUTSTANDING
------------------------------------------------------------
Income
For 26,227,842 99.91% 96.74%
Against 16,335 0.06% 0.06%
Abstain 7,811 0.03% 0.03%
Maryland Tax-Free
For 8,722,471 98.81% 82.78%
Against 49,322 0.56% 0.47%
Abstain 55,812 0.63% 0.53%
Pennsylvania Tax-Free
For 2,478,338 99.99% 96.64%
Against 0 0.00% 0.00%
Abstain 310 0.01% 0.01%
Balanced
For 7,383,808 99.69% 89.29%
Against 16,251 0.22% 0.20%
Abstain 6,432 0.09% 0.08%
Blue Chip Equity
For 3,861,386 98.17% 67.80%
Against 51,711 1.31% 0.91%
Abstain 20,498 0.52% 0.36%
Mid-Cap Equity
For 3,732,108 100.0% 98.86%
Against 0 0.00% 0.00%
Abstain 0 0.00% 0.00%
Capital Growth
For 3,234,733 99.16% 80.35%
Against 22,463 0.69% 0.56%
Abstain 4,955 0.15% 0.12%
Small-Cap Equity
For 2,164,146 99.43% 93.49%
Against 11,595 0.53% 0.50%
Abstain 931 0.04% 0.04%
------------------------------------------------------------
111
<PAGE>
NOTICE TO SHAREHOLDERS
(UNAUDITED)
For taxpayers filing on a calendar year basis, this notice is for informational
purposes only.
For the fiscal year ended April 30, 1998, each Portfolio is designating the
following items with regard to distributions paid during the year.
<TABLE>
<CAPTION>
LONG TERM (20% RATE) MID TERM (28% RATE) ORDINARY
CAPITAL GAINS CAPITAL GAINS INCOME TAX EXEMPT
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS INCOME QUALIFYING FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DISTRIBUTION TOTAL DIVIDENDS(1) TAX CREDIT
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market 0% 0% 100% 0% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-Free Money Market 0% 0% 0% 100% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government Money Market 0% 0% 100% 0% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Money Market 0% 0% 100% 0% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Treasury 0% 0% 100% 0% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond 0% 0% 100% 0% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Maryland Tax-Free 2% 9% 1% 88% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax-Free 12% 8% 3% 77% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Income 0% 0% 100% 0% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Intermediate Fixed Income 4% 0% 96% 0% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government Bond 0% 0% 100% 0% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced 19% 29% 52% 0% 100% 13% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Equity Income 12% 38% 50% 0% 100% 73% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Value Equity 66% 4% 30% 0% 100% 92% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Equity Index 0% 0% 100% 0% 100% 27% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Blue Chip Equity 4% 16% 80% 0% 100% 45% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Stock (2) 52% 37% 11% 0% 100% 78% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Growth 16% 14% 70% 0% 100% 10% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity 69% 21% 10% 0% 100% 59% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Equity 0% 0% 100% 0% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Selection 0% 0% 0% 0% 0% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity 77% 2% 21% 0% 100% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
(2) Merged with the Value Equity Portfolio on 04/24/98.
None of the Funds qualify in California, Connecticut or New York to pass
through exempt interest dividends from U.S. government obligations.
Please consult your tax adviser for proper treatment of this information.
</FN>
</TABLE>
112
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
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 of the portfolios are not deposits or obligations of, or guaranteed or
endorsed by FMB Trust Company, N.A., any of its affiliates, or any depository
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>
[ARK FUNDS LOGO OMITTED]
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
Richard B. Seidel
ADMINISTRATOR
SEI Fund Resources
Oaks, Pennsylvania
DISTRIBUTOR
SEI Investments Distribution Co.
Oaks, Pennsylvania
LEGAL COUNSEL
Piper and Marbury, L.L.P.
Baltimore, Maryland
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Boston, Massachusetts
CUSTODIAN
FMB Trust Company, N.A.
Baltimore, Maryland
This material must be preceded or accompanied by a current prospectus.
AK0430(98-06)
