[ARK LOGO] ANNUAL REPORT APRIL 30, 2000
[CENTER COVER PHOTO OMITTED]
INTERNATIONAL EQUITY SELECTION PORTFOLIO
SMALL-CAP EQUITY PORTFOLIO
MID-CAP EQUITY PORTFOLIO
CAPITAL GROWTH PORTFOLIO
BLUE CHIP EQUITY PORTFOLIO
EQUITY INDEX PORTFOLIO
VALUE EQUITY PORTFOLIO
EQUITY INCOME PORTFOLIO
BALANCED PORTFOLIO
INCOME PORTFOLIO
U.S. GOVERNMENT BOND PORTFOLIO
INTERMEDIATE FIXED INCOME PORTFOLIO
MD/PA TAX-FREE PORTFOLIOS
SHORT-TERM BOND PORTFOLIO
SHORT-TERM TREASURY PORTFOLIO
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
TAX-FREE MONEY MARKET PORTFOLIO
MONEY MARKET PORTFOLIO
<PAGE>
TABLE OF CONTENTS
----------------------------------------------------------
LETTER TO SHAREHOLDERS 1
ECONOMIC AND INVESTMENT REVIEW 2
MONEY MARKET PORTFOLIOS
MANAGEMENT DISCUSSION AND ANALYSIS
STATEMENTS OF NET ASSETS 6
FIXED INCOME PORTFOLIOS
MANAGEMENT DISCUSSION AND ANALYSIS
STATEMENTS OF NET ASSETS 19
EQUITY PORTFOLIOS
MANAGEMENT DISCUSSION AND ANALYSIS
STATEMENTS OF NET ASSETS 49
STATEMENTS OF OPERATIONS 96
STATEMENTS OF CHANGES IN NET ASSETS 100
FINANCIAL HIGHLIGHTS 104
NOTES TO FINANCIAL STATEMENTS 110
NOTICE TO SHAREHOLDERS 116
INDEPENDENT AUDITORS' REPORT 117
<PAGE>
APRIL 30, 2000
DEAR ARK FUNDS SHAREHOLDERS:
What an exciting year for the ARK Family of Mutual Funds and its shareholders.
Strong fund performance, industry recognition and asset growth were the keynotes
of this year. In this Annual Report, we'll update you on our progress and
provide you with important information about our performance and portfolio
holdings. In addition, we've included reviews from each of our portfolio
managers, which will give you added insight into the management of each of the
ARK Funds.
The highlights of this past fiscal year include:
STRONG PERFORMANCE -- A number of our funds exceeded the performance of their
benchmarks. See inside this Annual Report for details on your particular
fund(s).
NATIONAL AND LOCAL INDUSTRY RECOGNITION -- Our solid performance attracted
recognition by the industry press, and a number of our funds were ranked highly
by Lipper Analytical, Inc. ARK Funds coverage and recognition included:
[bullet] ARK Small-Cap Equity Portfolio and portfolio manager Gil Knight
profiled in THE WALL STREET TRANSCRIPT, and on BLOOMBERG NEWS and
CNBC.COM.
[bullet] ARK Balanced Portfolio and ARK Capital Growth Portfolio profiled in
BALTIMORE MAGAZINE.
[bullet] ARK Balanced Portfolio and ARK Blue Chip Equity Portfolio and their
portfolio managers profiled on WORLDLYINVESTOR.COM.
[bullet] ARK Blue Chip Equity Portfolio profiled in the BALTIMORE BUSINESS
JOURNAL; portfolio managers Clyde Randall and Allen Ashcroft were also
interviewed for THE WALL STREET TRANSCRIPT.
[bullet] ARK Funds Family featured in the DAILY RECORD and the performance of
our domestic equity funds recognized in MUTUAL FUNDS MAGAZINE.
[bullet] ARK U.S. Government Money Market Portfolio continues to be ranked
AAAm by Standard and Poor's and Aaa by Moody's Investors Service.
We are very happy with this industry recognition, and are pleased with the
performance of our Portfolios.
GROWTH -- This year ARK Funds assets surpassed $6 billion. We've come a long way
from our inception in 1993, and we have you to thank for that. Also this year,
in order to broaden the choices for our retail investors and offer alternative
pricing options, we added Retail Class A Shares of our ARK Mid-Cap Equity
Portfolio, and Class B Shares of the ARK Maryland Tax-Free and ARK Pennsylvania
Tax-Free Portfolios.
In addition, we've increased the number of ways you, as shareholders, can access
information about the ARK Funds. Log on to our new web site, www.arkfunds.com.
It provides you with up-to-date information about our Portfolios, including
prices, yields and performance, as well as top ten holdings and investment
objective and strategy. There are portfolio managers' quarterly reviews, our
quarterly investment newsletter, and our Learning Center, which provides you
with useful information about investing in mutual funds. In addition, if you are
a Retail Shareholder, you can get up-to-date prices, yields and performance of
our Retail Class A and B Portfolios by calling our automated ARK Funds
Phoneline, 1-800-646-4ARK, 24 hours a day, seven days a week.
We hope that you are as pleased as we are with the ARK Funds performance and
progress. Our goals continue to be asset growth, increased investment choices
for investors and building upon our successes. Everyone here at ARK Funds thanks
you for your trust. We look forward to continuing to help you meet your
financial goals.
/S/ SIGNATURE OMITTED
William H. Cowie, Jr.
Chairman
1
<PAGE>
ECONOMIC AND INVESTMENT REVIEW
APRIL 30, 2000
DEAR ARK FUNDS INVESTOR:
[photo omitted]
As our fiscal year ends, we are proud to say that your ARK Funds have
performed very well in a financial market environment that has been quite
difficult. The accomplishments of our portfolio managers have begun to regularly
receive positive press in the local and national media, a trend we hope to
continue.
During the last 12 months, the equity market has progressively
transitioned from unbridled bullishness for "new economy" companies, to what
appeared to be a full-blown correction as the fiscal year ended. It was a
difficult time for bonds as well, but relative to equities, bonds performed very
well. From an investors' psychological point of view, the glass has transitioned
from being half-full to half-empty. This subtle change is having a significant
impact on the financial markets.
When investors are optimistic and feel that the glass is half-full,
positive events are interpreted by extrapolating the good news into the future.
When there is bad news, they will try to look for the silver lining. When they
are pessimistic and they feel that the glass is half empty, investors interpret
good news by thinking "Yes, this is good news, but what about tomorrow?" When
the news is bad, this bad news is extrapolated into the future.
The irony of market psychology is that the real world does not have to
change much at all for the market to change materially. What caused investors to
see the glass half-empty? We think there were four key events, most of which
occurred in April of this year: an unexpected sharp rise in the consumer price
index; extreme price volatility in an already volatile market; the Justice
Department's proposal to break up Microsoft, and, last but not least, the
valuation correction in the technology related sectors that has been under way
for the last few months.
Microsoft lost $190 billion in market capitalization during the month of
April, most of which occurred after the Government's announcement, which
recommended splitting the company into two pieces. To put $190 billion in
context, it exceeds the total value of the 105 smallest companies in the S&P 500
index. The Microsoft news came on top of joint statements in early March from
the Prime Minister of England and the President of the United States questioning
the legality of biotechnology companies' patenting human genetic codes. These
statements deflated the highly inflated biotechnology stocks and, most likely,
acted to magnify the Microsoft news. The key issue here is that government
involvement in business reduces predictability and increases market uncertainty.
As we mentioned in our semi-annual report, change or the perception of change
creates uncertainty, which in turn leads to increased price volatility, as
investors become less confident in their ability to predict the future.
The extreme volatility of the equity markets in April was more a function
of the combination of strong GDP growth coupled with a higher-than-expected
consumer price index (CPI), a proxy for inflation. It was a signal that the
Federal Reserve might raise short-term rates by 1/2%, which of course they did.
It also created fears that more rate increases would be required in the future
to slow the very robust U.S. economy. During April, both the Dow Jones
Industrial Average and the NASDAQ Composite suffered their worst point losses in
history. The NASDAQ suffered its four worst one-day point losses ever and
conversely, its four best point gains ever, all in the month of April. Needless
to say, April was a very unnerving month for investors.
The over-exuberance and subsequent speculative surge in Internet "new
economy" stocks in the early summer of 1999 was based on the perception that the
new economy was so powerful that it would quickly vanquish the old economy. We
believe the Internet will be a powerful engine of change over the long-term.
However, the fiberoptic backbone necessary to handle the huge bandwidth required
to harvest the Internet's true potential is only partially complete. The
bandwidth buildout continues at a rapid pace, but needs two to three years more
to reach critical mass. For Internet-related stocks, reality and the shake-out
began to set in as investors/speculators recognized that too many Internet
"players" had entered the market, and that few had the capital to sustain their
business plans during the years it would take for the infrastructure to be
built. As of April 30th, the stock market was doing an excellent job of
correcting the over-valuations in technology and telecommunication companies.
The market, however, was unmerciful in taking the speculative fluff out of the
Internet and biotechnology stocks. Unfortunately, the corrective phase has
progressed beyond the well-needed valuation correction in the NASDAQ market.
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ARK FUNDS ANNUAL REPORT APRIL 30, 2000
Another dynamic has been added to the equation, fear that interest rates
would have to rise further than expected to counter rising inflation, and
ultimately creating a potential recession in the United States.
New data was released indicating that the U.S. economy was continuing to
grow robustly, and, more important, the inflation rate, at least in the
short-term, had begun to rise for the first time in many years. Higher inflation
was driven by rising labor costs and sharp increases in energy prices and
healthcare. The resultant 1/2% rise in interest rates by the Federal Reserve in
mid-May created concerns that to "nip inflation in the bud," the Federal Reserve
would take a more aggressive approach to fighting inflation, requiring
increasingly higher interest rates, which would eventually risk slowing the U.S.
economy, possibly into a recession. These fears caused the financial markets to
adopt portfolio contingency plans to prepare for a recession. Financial markets
acted by rounding up (i.e., selling) the usual suspects - financial stocks;
economically sensitive companies and compounded the heavy selling pressure on
the technology sector. Bond yields also rose and quality spreads widened between
government-backed bonds and corporate and other non-government obligations
because of the perceived credit risks and recession fears. The bond market is
currently further out of calibration because of the normal 30-year treasury
benchmark. The yield on the 30-year government bond is artificially low because
the bonds are in the process of being repurchased by applying funds from the
large federal budget surplus expected over the next three to five years.
Currently, the yield curve is inverted, meaning that short-term notes and bonds
are yielding more than progressively longer-term issues, a harbinger of caution
for the financial markets.
As painful as the current correction is, it is very healthy for the
financial market. It has been a long time coming and will have a sobering effect
because of its significantly greater magnitude and duration than the traditional
short five percent to 10 percent "dips and bounce-back" we have experienced in
the past five years or so.
The U.S. economy is beginning to show signs of slowing. The recent 1/2%
rise in short-term rates appears to have caught everyone's attention, as have
declining stock prices; both should help slow the economy. At present, we think
the odds of a recession are remote for at least the next six to nine months.
Inflation will be receiving the most attention from Wall Street, especially by
the equity market. While we do not believe that the inflation "genie" is
completely out of the bottle, it is a concern and investors who are already
experiencing difficulties with market valuations are very nervous. Markets can
deal with good news and bad news because they are qualifiable, but they don't
like uncertainty and it will take a few months to get a better sense of the
economic and inflationary environments. If the economy slows modestly, and
inflation stabilizes, the Federal Reserve may not have to raise interest rates
much more from current levels. Should that happen, the financial markets would
likely rebound sharply, increasing the probability that the second half of the
year would see both stocks and bonds significantly higher.
We remain very focused on the long-term. We have the advantage of a highly
experienced staff with an average experience level of more than 13 years per
portfolio manager. We are smart enough not to try to predict what the markets
will do over the short term, and experienced enough to know that regardless of
the market environment, there are always individual opportunities available;
that is where our focus will be. Market corrections are excellent times to
prepare portfolios for the next "up" cycle. We keep reminding ourselves that not
much has changed and the United States is the best fundamentally positioned
country in the world. Thank you for your continuing support in this period of
volatility.
Sincerely,
/S/ SIGNATURE OMITTED
J. Eric Leo
CHIEF INVESTMENT OFFICER
ALLIED INVESTMENT ADVISORS, INC.
3
<PAGE>
THE ARK FUNDS FAMILY
The ARK Funds Family offers a comprehensive range of money market,
fixed income, and equity portfolios designed to meet both short and
long-term needs. Whether you're looking to enhance short-term income,
gain tax advantages, or achieve long-term growth, ARK Funds offers a
variety of mutual fund solutions.
Take a look at the ARK Funds Portfolio line-up on the opposite
page. Choices ranging from money market funds, to municipal bond
funds, to blue chip and international equity funds allow you to
diversify your investments within one mutual fund family.
Seventeen Retail Class A, eight Retail Class B and twenty
Institutional Class portfolios are available.
4
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
[RISK,CHART OMITTED]
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>
MONEY MARKET PORTFOLIOS
MANAGEMENT DISCUSSION AND ANALYSIS
OUR MONEY MARKET INVESTMENT MANAGEMENT PHILOSOPHY IS DEFINED BY THREE
OBJECTIVES: TO PROVIDE PRESERVATION OF PRINCIPAL, TO MAINTAIN DAILY LIQUIDITY,
AND TO MAXIMIZE CURRENT INCOME. TO ACHIEVE THESE OBJECTIVES, WE ACTIVELY MANAGE
THE MONEY MARKET PORTFOLIOS UTILIZING OUR CONSERVATIVE AND HIGHLY DISCIPLINED
RELATIVE-VALUE APPROACH, WHICH IS CONSTANTLY MONITORED AND REVIEWED TO ENSURE
THAT OUR SHAREHOLDERS' GOALS ARE REALIZED.
TO PRESERVE PRINCIPAL, WE INCLUDE ON OUR APPROVED LIST ONLY THOSE ISSUERS
THAT PASS OUR STRINGENT CREDIT EVALUATION PROCESS. THE GOAL OF THE CREDIT
EVALUATION PROCESS IS TO SELECT HIGH-QUALITY ISSUERS THAT PRESENT MINIMAL CREDIT
RISK. THE EVALUATION PROCESS IS BASED ON BOTH QUANTITATIVE AND QUALITATIVE
FACTORS THAT HIGHLIGHT THE ISSUER'S ABILITY TO MAINTAIN ITS CREDIT RATING AND
LEADING INDUSTRY POSITION. ISSUERS ARE MONITORED AND REVIEWED BY THE ALLIED
INVESTMENT ADVISORS INVESTMENT POLICY COMMITTEE, WHICH IS COMPRISED OF SENIOR
PERSONNEL FROM ALLIED INVESTMENT ADVISORS, INC.
TO PROVIDE DAILY LIQUIDITY, WE MANAGE OUR MATURITIES AND ENGAGE IN
OVERNIGHT REPURCHASE AGREEMENTS WITH APPROVED BROKER/DEALERS THAT HAVE
OBTAINED THE HIGHEST SHORT-TERM RATINGS. EACH REPURCHASE AGREEMENT IS
COLLATERALIZED BY U.S. TREASURY OR U.S. GOVERNMENT AGENCY COLLATERAL.
TO MAXIMIZE CURRENT INCOME, WE ACTIVELY MANAGE THE PORTFOLIOS. WE SEEK TO
TAKE ADVANTAGE OF SHORT-LIVED TRADING OPPORTUNITIES AND MARKET INEFFICIENCIES BY
EMPLOYING A RELATIVE-VALUE APPROACH THAT EMPHASIZES SECURITY SELECTION.
EACH PORTFOLIO'S STRATEGY STARTS WITH AN AVERAGE MATURITY DECISION. THIS
DECISION IS DETERMINED BY A NUMBER OF FACTORS, SUCH AS ANALYSIS OF OUR
SHAREHOLDERS' LIQUIDITY NEEDS, EXPECTED FEDERAL RESERVE MONETARY POLICY AND
YIELD CURVE, AND IMPLIED FORWARD INTEREST-RATE ANALYSIS.
UPON DETERMINING THE PORTFOLIO'S AVERAGE MATURITY, WE ANALYZE EACH
MARKET SECTOR TO DETERMINE WHICH SECTORS ARE CHEAP, THUS PROVIDING VALUE, AND
WHICH SECTORS ARE EXPENSIVE. INDIVIDUAL SECURITIES ARE THEN SELECTED FROM OUR
APPROVED LIST. THIS IN-DEPTH ANALYSIS ALLOWS US TO IDENTIFY MARKET
INEFFICIENCIES AND TRADING OPPORTUNITIES.
6
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
MONEY MARKET PORTFOLIOS
[PHOTO OMITTED]
JAMES M. HANNAN
--------------------------------------------------------------------------------
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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 MORE THAN 11 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The money market interest rate environment was dominated by the Federal
Reserve's tightening monetary policy on five different occasions during the past
fiscal year. The Federal Reserve began reversing its eases of 1998 in the summer
of 1999 as the U.S. economy continued to grow too fast for its comfort level. It
raised the fed funds target from 4.75% to its current level of 6%. The goal is
to keep inflation from moving much higher by slowing the pace of economic
growth. During the past year the ARK Money Market Portfolios' yields also
increased. For example, the ARK Money Market Portfolio's Institutional Class
seven-day yield increased from 4.67% for the seven days ending May 28, 1999 to
5.79% for the seven days ended April 28, 2000.
The U.S. economy set a record for the longest economic expansion during
February 2000, surpassing the economic expansion of the 1960s. The unemployment
rate fell to a 30-year low of 3.9% for the month of April 2000. The economy grew
at a 5% rate for the year ended March 2000. Consumers led the advance as
consumer spending rose at its fastest pace since the early 1990s. The tight
labor markets and a spike in energy prices provided the catalyst for higher
inflation. The Consumer Price Index increased to 3.7% for the year ending in
March, up from only 1.8% for 1999. However, the core rate of inflation has
increased by only 2.4% for the same period. The Federal Reserve's concern is
that excessive economic growth will lead to higher inflation, and that, in turn,
will require stronger medicine (i.e., higher interest rates) to slow the economy
and keep inflation under control. Currently, we are expecting the Federal
Reserve to raise short-term interest rates by another 1/2% by early summer.
Implied interest rate analysis reveals that the market is anticipating the
Federal Reserve to raise interest rates by 1% over the next six months.
In response to this interest rate environment, our strategy was to shorten
the average maturity of the Portfolios. For example, the Money Market
Portfolio's average maturity declined from 60 days as of May 14, 1999 to 42 days
as of April 30, 2000. We also continued to utilize a barbell portfolio
structure, which is comprised of higher-yielding, longer-dated securities and a
large percentage of portfolio assets invested with very short maturities. As an
example, the ARK U.S. Government Money Market Portfolio, which continues to
receive the highest ratings of Aaa from Moody's Investor Service, Inc. and AAAm
from Standard & Poor's Ratings Group, increased its overnight investment
position from 32% of the Portfolio as of May 14, 1999, to 63% at the end of
April 2000. This strategy will allow the Portfolio to reinvest in
higher-yielding securities once the Federal Reserve tightens monetary policy as
we expect it to do.
7
<PAGE>
MONEY MARKET PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MONEY MARKET PORTFOLIOS CONTINUED
Throughout the year, the ARK Funds Money Market Portfolios continued to
meet their investment objectives of providing preservation of principal, daily
liquidity and current income. Each Portfolio continued to outperform the
appropriate IBC Financial Inc. average yield. Our investment process is to
actively manage the Portfolios. The appropriate average maturity for each
Portfolio is determined by considering our shareholders' liquidity needs,
expected monetary policy, the shape and slope of the yield curve and implied
interest rate analysis. Commercial paper and corporate securities are purchased
only from those issuers that meet our stringent credit evaluation standards. The
credit quality of each issuer on our approved list is monitored to ensure that
high credit quality is maintained. Individual securities are then selected after
the completion of a relative-value analysis. Looking forward, we will continue
to actively manage the Portfolios utilizing our conservative and highly
disciplined relative-value approach.
MONEY MARKET PORTFOLIO
PERFORMANCE AS OF
APRIL 30, 2000*
[GRAPHIC CHART OMITTED]
[PLOT POINTS FOLLOW]
ARK FUNDS MONEY MARKET PORTFOLIO, INSTITUTIONAL CLASS
IBC/FINANCIAL DATA FIRST TIER INSTITUTIONS ONLY[DAGGER]
ARK FUNDS MONEY MARKET, RETAIL CLASS A
IBC/FINANCIAL DATA FIRST TIER[DAGGER]
ARK FUNDS MONEY MARKET, INSTITUTIONAL II CLASS
5/31/99 4.7 4.57 4.47 4.19 4.63
6/30/99 4.72 4.57 4.49 4.23 4.65
7/31/99 4.85 4.71 4.62 4.35 4.77
8/31/99 4.92 4.82 4.69 4.47 4.85
9/30/99 5.06 4.97 4.83 4.62 4.99
10/31/99 5.17 5.09 4.94 4.74 5.1
11/30/99 5.33 5.22 5.1 4.88 5.26
12/31/99 5.53 5.42 5.3 5.09 5.46
1/31/00 5.51 5.45 5.28 5.13 5.44
2/29/00 5.53 5.5 5.3 5.15 5.46
3/31/00 5.65 5.57 5.42 5.22 5.58
4/30/00 5.78 5.72 5.55 5.38 5.71
TAX-FREE MONEY MARKET PORTFOLIO
PERFORMANCE AS OF
APRIL 30, 2000*
[GRAPHIC CHART OMITTED]
[PLOT POINTS FOLLOWS]
ARK TAX-FREE MONEY MARKET PORTFOLIO, INSTITUTIONAL CLASS
IBC/FINANCIAL DATA TAX-FREE INSTITUTIONS ONLY[DAGGER]
ARK TAX-FREE MONEY MARKET, RETAIL CLASS A
IBC/FINANCIAL DATA TAX-FREE STOCKBROKER & GENERAL PURPOSE [DAGGER]
ARK TAX-FREE MONEY MARKET, INSTITUTIONAL II CLASS
5/31/99 3.09 3.08 2.86 2.79 3.02
6/30/99 2.94 2.92 2.71 2.65 2.87
7/31/99 2.71 2.78 2.48 2.54 2.64
8/31/99 2.79 2.8 2.56 2.58 2.72
9/30/99 3.03 2.98 2.8 2.76 2.96
10/31/99 3.06 3.03 2.83 2.8 2.99
11/31/99 3.22 3.23 2.99 2.99 3.15
12/31/99 3.44 3.6 3.21 3.33 3.37
1/31/00 3.08 3.07 2.85 2.85 3.01
2/29/00 3.15 3.22 2.92 2.97 3.08
3/31/00 3.31 3.39 3.08 3.13 3.24
4/30/00 3.62 3.67 3.39 3.43 3.55
U.S. GOVERNMENT MONEY MARKET
PORTFOLIO PERFORMANCE AS OF
APRIL 30, 2000*
[GRAPHIC CHART OMITTED]
[PLOT POINTS FOLLOWS]
ARK U.S. GOVERNMENT MONEY MARKET PORTFOLIO, INSTITUTIONAL CLASS
IBC/FINANCIAL DATA GOVERNMENT ONLY INSTITUTIONS ONLY[DAGGER]
ARK U.S. GOVERNMENT MONEY MARKET, RETAIL CLASS A
IBC/FINANCIAL DATA U.S. GOVERNMENT & AGENCIES[DAGGER]
ARK U.S. GOVERNMENT MONEY MARKET PORTFOLIO, INSTITUTIONAL II CLASS
5/31/99 4.55 4.37 4.32 4.18 4.48
6/30/99 4.55 4.37 4.32 4.2 4.48
7/31/99 4.68 4.5 4.45 4.32 4.61
8/31/99 4.74 4.6 4.51 4.44 4.67
9/30/99 4.87 4.74 4.64 4.58 4.8
10/31/99 4.9 4.77 4.67 4.66 4.83
11/31/99 5.06 4.92 4.83 4.81 4.99
12/31/99 5.14 4.97 4.91 4.89 5.07
1/31/00 5.26 5.1 5.03 4.98 5.19
2/29/00 5.4 5.26 5.17 5.13 5.33
3/31/00 5.5 5.37 5.27 5.22 5.43
4/30/00 5.66 5.52 5.44 5.37 5.59
8
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
U.S. TREASURY MONEY MARKET
PORTFOLIO PERFORMANCE AS OF
APRIL 30, 2000*
ARK U.S. TREASURY MONEY MARKET, INSTITUTIONAL CLASS
IBC/FINANCIAL DATA 100% U.S. TREASURY[DAGGER]
ARK U.S. TREASURY MONEY MARKET, RETAIL CLASS A
ARK U.S. TREASURY MONEY MARKET, INSTITUTIONAL II CLASS
5/31/99 4.12 3.93 3.89 4.05
6/30/99 4.22 3.97 3.99 4.15
7/31/99 4.22 4.03 3.99 4.15
8/31/99 4.29 4.12 4.06 4.22
9/30/99 4.44 4.24 4.21 4.37
10/31/99 4.49 4.25 4.26 4.42
11/30/99 4.58 4.39 4.35 4.51
12/31/99 4.68 4.59 4.45 4.61
1/31/00 4.83 4.65 4.6 4.76
2/29/00 5.04 4.79 4.81 4.97
3/31/00 5.24 4.97 5.01 5.17
4/30/00 5.29 5.12 5.06 5.21
* Past performance of the Portfolios is not predictive of future performance.
+ The performance of the IBC/Financial Data indices does not include operating
expenses that are incurred by the Portfolio.
MONEY MARKET PORTFOLIO
STATEMENTS OF NET ASSETS
[pie chart omitted]
[plot points follow]
% OF TOTAL PORTFOLIO INVESTMENTS
Repurchase Agreements -- 5%
Taxable Municipal Bonds -- 8%
Certificates of Deposit -- 3%
Commercial Paper -- 32%
Asset-Backed Securities -- 3%
Corporate Obligations -- 47%
U.S. Government Agency Obligations -- 2%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION -- 2.4%
FEDERAL HOME LOAN BANK DISCOUNT NOTE (A)
5.882%, 05/01/00 $25,000 $ 25,000
--------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATION
(Cost $25,000) $25,000
--------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 47.1%
BANKS -- 3.7%
CHASE MANHATTAN (B)
6.188%, 05/25/00 24,000 23,999
FIRST UNION NATIONAL BANK (B)
6.338%, 06/27/00 15,000 14,994
--------------------------------------------------------------------------------
TOTAL BANKS $38,993
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 16.3%
ASSOCIATES FIRST CAPITAL
6.350%, 09/15/00 5,000 5,002
ASSOCIATES N.A.
6.375%, 06/15/00 2,000 2,001
AT&T CAPITAL, MTN
7.500%, 11/15/00 8,500 8,559
BETA FINANCE, MTN (B) (C)
6.347%, 05/02/00 25,000 25,000
BETA FINANCE, MTN (C)
5.980%, 08/07/00 10,000 10,000
CAPITAL ONE FUNDING,
SERIES 1995-C (B) (C)
6.200%, 05/04/00 3,100 3,100
CAPITAL ONE FUNDING,
SERIES 1996-H (B) (C)
6.200%, 05/04/00 3,800 3,800
CIT GROUP HOLDINGS, MTN
5.850%, 05/26/00 15,000 14,998
6.200%, 10/20/00 5,900 5,897
CIT GROUP HOLDINGS, MTN (B)
6.133%, 05/01/00 10,000 10,000
HOUSEHOLD FINANCE, MTN (B)
6.340%, 05/01/00 40,000 39,989
MORGAN STANLEY, MTN (B)
6.230%, 06/13/00 25,000 25,029
TEXTRON FINANCIAL (B) (C)
6.250%, 05/01/00 20,000 20,000
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $173,375
--------------------------------------------------------------------------------
9
<PAGE>
MONEY MARKET PORTFOLIOS
MONEY MARKET PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
INDUSTRIAL -- 4.2%
CONAGRA (B) (C)
6.340%, 06/11/00 $ 5,000 $ 4,999
GTE (B)
6.300%, 05/01/00 10,000 9,995
6.175%, 06/12/00 30,000 29,998
--------------------------------------------------------------------------------
TOTAL INDUSTRIAL $ 44,992
--------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 2.1%
BOB SUMEREL TIRE, LOC (B) (C)
6.230%, 05/03/00 5,250 5,250
ELSINORE PROPERTIES, LOC (B)
6.230%, 05/05/00 9,900 9,900
REYNOLDS ROAD FITNESS CENTER,
SERIES 1998, LOC (B) (C)
6.200%, 05/04/00 5,900 5,900
TRAP ROCK INDUSTRY, DEMAND
RB, LOC (B)
6.310%, 05/03/00 1,500 1,500
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 22,550
--------------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS -- 7.1%
FORD MOTOR CREDIT, MTN (B)
6.240%, 05/01/00 25,000 24,993
6.160%, 05/10/00 10,000 10,000
GENERAL MOTORS ACCEPTANCE, MTN (B)
6.040%, 07/30/00 15,000 14,994
XEROX CAPITAL EUROPE PLC,
YANKEE MTN, SERIES F (B)
6.221%, 07/30/00 15,000 14,998
XEROX CREDIT, MTN
5.635%, 07/14/00 10,000 9,999
--------------------------------------------------------------------------------
TOTAL PERSONAL CREDIT INSTITUTIONS $ 74,984
--------------------------------------------------------------------------------
SECURITY BROKERS & DEALERS -- 13.7%
BEAR STEARNS, MTN, SERIES B (B)
6.070%, 05/10/00 25,000 25,000
6.380%, 06/30/00 15,000 15,000
GOLDMAN SACHS GROUP, MTN (B)
6.711%, 07/08/00 10,000 10,031
GOLDMAN SACHS GROUP,
MTN (B) (C)
6.406%, 06/15/00 10,000 10,000
GOLDMAN SACHS GROUP,
MTN, SERIES B (B)
6.310%, 05/01/00 15,000 15,000
LEHMAN BROTHERS HOLDINGS
6.500%, 07/18/00 3,300 3,300
6.890%, 10/10/00 3,180 3,183
6.125%, 02/01/01 13,400 13,327
LEHMAN BROTHERS HOLDINGS, MTN
6.330%, 08/01/00 15,000 15,007
MERRILL LYNCH, MTN
6.885%, 03/30/01 10,000 10,000
MERRILL LYNCH, MTN (B)
6.298%, 06/25/00 25,000 25,009
--------------------------------------------------------------------------------
TOTAL SECURITY BROKERS & DEALERS $144,857
--------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $499,751) $499,751
--------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 2.8%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
FOREIGN BANKS -- 2.8%
DEUTSCHE BANK NY
5.250%, 05/18/00 $10,000 $ 9,999
UBS AG STAMFORD CONNECTICUT
6.500%, 01/08/01 20,000 19,993
--------------------------------------------------------------------------------
TOTAL FOREIGN BANKS $ 29,992
--------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $29,992) $ 29,992
--------------------------------------------------------------------------------
COMMERCIAL PAPER (A) -- 32.1%
ATLANTIS ONE
6.001%, 05/12/00 40,000 39,928
BAVARIA TRR
6.061%, 05/09/00 10,000 9,987
6.083%, 05/23/00 19,000 18,930
6.100%, 05/23/00 10,100 10,062
CIESCO LP
5.952%, 05/03/00 20,000 19,993
CORPORATE ASSET FUNDING
6.094%, 06/01/00 40,000 39,792
DAKOTA CERTIFICATE
6.010%, 05/05/00 20,000 19,987
6.028%, 05/05/00 10,000 9,993
DELAWARE FUNDING
6.042%, 05/08/00 17,726 17,705
6.107%, 06/23/00 24,991 24,767
EDISON ASSET SECURITIZATION
6.107%, 05/17/00 25,546 25,477
6.086%, 05/25/00 15,000 14,939
EXXON MOBIL AUSTRALIA
5.997%, 05/04/00 15,000 14,992
EXXON IMPERIAL
5.957%, 05/04/00 11,000 10,995
MCI WORLDCOM
6.102%, 05/17/00 5,000 4,987
PEPSICO
6.003%, 05/01/00 27,600 27,600
TEXAS UTILITIES (C)
6.107%, 05/17/00 5,000 4,987
WELLS FARGO
6.018%, 05/15/00 25,000 24,942
--------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $340,063) $340,063
--------------------------------------------------------------------------------
TAXABLE MUNICIPAL BONDS -- 7.6%
CALIFORNIA -- 2.4%
OAKLAND-ALAMEDIA COLISEUM CP
6.080%, 05/12/00 17,500 17,500
RIVERSIDE COUNTY COP, LOC (B)
6.150%, 05/03/00 7,800 7,800
--------------------------------------------------------------------------------
TOTAL CALIFORNIA $ 25,300
--------------------------------------------------------------------------------
ILLINOIS -- 0.8%
ILLINOIS STATE HEALTH FACILITIES
RB, MBIA (B)
6.150%, 05/03/00 8,500 8,500
--------------------------------------------------------------------------------
TOTAL ILLINOIS $ 8,500
--------------------------------------------------------------------------------
10
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
MARYLAND -- 0.5%
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES RB,
SERIES B, LOC (B)
6.250%, 05/03/00 $ 4,900 $ 4,900
--------------------------------------------------------------------------------
TOTAL MARYLAND $ 4,900
--------------------------------------------------------------------------------
NEW JERSEY -- 0.4%
NEW JERSEY STATE ECONOMIC
DEVELOPMENT AUTHORITY
RB, LOC (B)
6.310%, 05/03/00 4,400 4,400
--------------------------------------------------------------------------------
TOTAL NEW JERSEY $ 4,400
--------------------------------------------------------------------------------
NEW YORK -- 1.1%
NEW YORK CITY, CP
6.180%, 06/05/00 12,000 12,000
--------------------------------------------------------------------------------
TOTAL NEW YORK $12,000
--------------------------------------------------------------------------------
NORTH CAROLINA -- 0.6%
DURHAM COP, SERIES B (B)
6.150%, 05/03/00 1,500 1,500
WINSTON-SALEM, COP, LOC
6.090%, 06/01/00 5,000 5,000
--------------------------------------------------------------------------------
TOTAL NORTH CAROLINA $ 6,500
--------------------------------------------------------------------------------
PENNSYLVANIA -- 0.0%
PENNSYLVANIA STATE ECONOMIC
DEVELOPMENT FINANCE AUTHORITY
RB, LOC (B)
6.250%, 05/04/00 425 425
--------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $ 425
--------------------------------------------------------------------------------
TEXAS -- 1.8%
TEXAS STATE GO, VETERANS HOUSING
ASSISTANCE PROGRAM (B)
6.150%, 05/03/00 10,000 10,000
TEXAS STATE GO, VETERANS LAND
REFUNDING PROGRAM (B)
6.150%, 05/03/00 8,920 8,920
--------------------------------------------------------------------------------
TOTAL TEXAS $18,920
--------------------------------------------------------------------------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $80,945) $80,945
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 3.3%
FORD CREDIT AUTO OWNER TRUST,
SERIES 2000-A, CLASS A2
6.217%, 12/15/00 35,000 35,000
--------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $35,000) $35,000
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 4.3%
GOLDMAN SACHS
(5.250%, dated 04/28/00, matures
05/01/00, repurchase price
$19,115,988 (collateralized
by U.S. Treasury Note: total
market value $20,267,857) 19,108 19,108
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
SALOMON BROTHERS
(5.720%, dated 04/28/00, matures
05/01/00, repurchase price
$27,012,870 (collateralized
by U.S. Treasury Note: total
market value $27,551,565) $27,000 $ 27,000
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $46,108) $ 46,108
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.6%
(Cost $1,056,859) $1,056,859
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.4% $ 4,095
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 509,166,582 outstanding shares
of beneficial interest 509,150
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 251,134,060 outstanding shares
of beneficial interest 251,124
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 23,023 outstanding shares
of beneficial interest 23
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par value)
based on 300,602,755 outstanding shares
of beneficial interest 300,600
Undistributed net investment income 64
Distributions in excess of net realized
gain on investments (7)
================================================================================
TOTAL NET ASSETS -- 100.0% $1,060,954
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS A $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS B $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL II CLASS $1.00
================================================================================
(A) THE ANNUALIZED DISCOUNT YIELD AT TIME OF PURCHASE IS SHOWN AS THE RATE ON
THE STATEMENT OF NET ASSETS.
(B) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON APRIL 30, 2000. THE DATE SHOWN IS THE NEXT SCHEDULED
RESET DATE.
(C) 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.
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
THE FOLLOWING ORGANIZATIONS HAVE PROVIDED UNDERLYING CREDIT SUPPORT FOR
SECURITES LISTED ABOVE, AS INDICATED.
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<PAGE>
MONEY MARKET PORTFOLIOS
TAX-FREE MONEY MARKET PORTFOLIO
STATEMENTS OF NET ASSETS
[pie chart omitted]
[plot points follow]
% OF TOTAL PORTFOLIO INVESTMENTS
Anticipation Notes -- 4%
General Obligations -- 4%
Tax-Exempt Commercial Paper -- 14%
Participation Notes -- 6%
Revenue Bonds -- 72%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 98.5%
ARIZONA -- 1.8%
ARIZONA SCHOOL DISTRICT TAN
4.500%, 07/31/00 $2,000 $ 2,002
MARICOPA, POLLUTION CONTROL
RB, ARIZONA PUBLIC SERVICES,
SERIES B (A)
6.050%, 05/01/00 600 600
--------------------------------------------------------------------------------
TOTAL ARIZONA $2,602
--------------------------------------------------------------------------------
CALIFORNIA -- 0.6%
LOS ANGELES COUNTY, METROPOLITAN
TRANSIT AUTHORITY
RB, AMBAC (A)
5.200%, 05/03/00 900 900
--------------------------------------------------------------------------------
TOTAL CALIFORNIA $ 900
--------------------------------------------------------------------------------
COLORADO -- 0.8%
COLORADO STATE EDUCATIONAL
FACILITIES AUTHORITY RB,
PRO RODEO HALL OF FAME
PROJECT, LOC (A)
5.100%, 05/04/00 1,135 1,135
--------------------------------------------------------------------------------
TOTAL COLORADO $1,135
--------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 2.1%
DISTRICT OF COLUMBIA TECP,
NATIONAL ACADEMY OF SCIENCES,
SERIES B, AMBAC
3.900%, 05/22/00 3,000 3,000
--------------------------------------------------------------------------------
TOTAL DISTRICT OF COLUMBIA $3,000
--------------------------------------------------------------------------------
FLORIDA -- 4.2%
SUNSHINE STATE TECP, GOVERNMENT
FINANCING COMMISSION, SERIES A
4.000%, 06/01/00 3,050 3,050
SUNSHINE STATE TECP, GOVERNMENT
FINANCING COMMISSION
4.000%, 06/06/00 3,000 3,000
--------------------------------------------------------------------------------
TOTAL FLORIDA $6,050
--------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
GEORGIA -- 2.1%
HAPEVILLE, INDUSTRIAL DEVELOPMENT
AUTHORITY RB, HAPEVILLE
HOTEL PROJECT, LOC (A)
6.050%, 05/01/00 $3,000 $ 3,000
--------------------------------------------------------------------------------
TOTAL GEORGIA $3,000
--------------------------------------------------------------------------------
ILLINOIS -- 2.3%
ILLINOIS STATE HEALTH FACILITY
AUTHORITY RB, SWEDISH
COVENANT HOSPITAL PROJECT,
AMBAC (A)
5.000%, 05/03/00 3,300 3,300
--------------------------------------------------------------------------------
TOTAL ILLINOIS $3,300
--------------------------------------------------------------------------------
INDIANA -- 1.7%
LAWRENCE-FORT HARRISON RB,
FORT HARRISON MILITARY BASE
REUSE AUTHORITY, LOC (A)
4.650%, 05/01/00 2,500 2,500
--------------------------------------------------------------------------------
TOTAL INDIANA $2,500
--------------------------------------------------------------------------------
KENTUCKY -- 3.8%
JEFFERSON COUNTY, RETIREMENT
HOME RB, NAZARETH PROJECT (A)
5.180%, 05/05/00 5,500 5,500
--------------------------------------------------------------------------------
TOTAL KENTUCKY $5,500
--------------------------------------------------------------------------------
LOUISIANA -- 1.0%
LOUISIANA STATE PUBLIC FACILITIES
AUTHORITY RB, KENNER HOTEL
PROJECT, LOC (A)
6.050%, 05/01/00 1,500 1,500
--------------------------------------------------------------------------------
TOTAL LOUISIANA $1,500
--------------------------------------------------------------------------------
MARYLAND -- 33.1%
BALTIMORE COUNTY, GARRISON
FOREST SCHOOL PROJECT RB,
LOC (A)
5.100%, 05/04/00 3,000 3,000
BALTIMORE COUNTY, POLLUTION
CONTROL RB, BG&E
PROJECT, SPA
4.050%, 06/01/00 4,000 4,000
FREDERICK COUNTY, EDUCATIONAL
FACILITIES RB, MOUNT
ST. MARY'S COLLEGE (A)
5.100%, 05/04/00 4,000 4,000
HOWARD COUNTY BAN, SERIES A
4.500%, 04/13/01 2,000 2,006
HOWARD COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A,
PRE-REFUNDED @ 100 (B)
6.900%, 05/15/00 1,000 1,001
12
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
MARYLAND STATE DEPARTMENT OF
HOUSING & COMMUNITY
DEVELOPMENT MUNICIPAL TRUST
RECEIPTS, SERIES CMC3,LOC (A)
5.000%, 05/03/00 $5,200 $ 5,200
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, HOSPITAL & UNIVERSITY
IMPROVEMENTS, LOC (A)
5.000%, 05/03/00 1,100 1,100
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, KENNEDY KRIEGER INSTITUTE
PROJECT, SERIES D, LOC (A)
5.050%, 05/04/00 7,600 7,600
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, POOLED LOAN PROJECT,
SERIES D, LOC (A)
5.050%, 05/04/00 7,348 7,348
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, SERIES 1998-A, LOC (A)
5.100%, 05/03/00 4,900 4,900
MARYLAND STATE SUBURBAN
WASHINGTON D.C. SANITATION
GO, PRE-REFUNDED @ 102 (B)
6.900%, 06/01/00 1,000 1,023
MONTGOMERY COUNTY, HOUSING
RB, BARCLAY APARTMENTS,
ISSUE I, MBIA (A)
5.000%, 05/03/00 2,800 2,800
PRINCE GEORGES COUNTY COP,
EQUIPMENT ACQUISITION,
SERIES A
3.600%, 11/01/00 1,000 997
WASHINGTON COUNTY, ECONOMIC
DEVELOPMENT AUTHORITY RB,
MANDATORY PUT @ 100 (C)
4.375%, 11/01/00 3,000 3,006
--------------------------------------------------------------------------------
TOTAL MARYLAND $47,981
--------------------------------------------------------------------------------
MINNESOTA -- 5.7%
MINNEAPOLIS GO, LOC (A)
4.900%, 05/03/00 2,300 2,300
MINNESOTA SCHOOL DISTRICTS
COP, SERIES B
4.000%, 08/23/00 3,000 3,004
MINNESOTA SCHOOL DISTRICTS
TAX & AID ANTICIPATION
BORROWING CERTIFICATES
4.250%, 02/28/01 3,000 3,001
--------------------------------------------------------------------------------
TOTAL MINNESOTA $ 8,305
--------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
MISSOURI -- 0.7%
COLUMBIA RB, SERIES A, LOC (A)
5.050%, 05/03/00 $1,000 $ 1,000
--------------------------------------------------------------------------------
TOTAL MISSOURI $ 1,000
--------------------------------------------------------------------------------
MONTANA -- 0.7%
MONTANA STATE HEALTH FACILITIES
AUTHORITY RB, FGIC (A)
5.100%, 05/04/00 1,000 $ 1,000
--------------------------------------------------------------------------------
TOTAL MONTANA $ 1,000
--------------------------------------------------------------------------------
NEVADA -- 0.6%
CLARK COUNTY, AIRPORT
IMPROVEMENT AUTHORITY RB,
SERIES A, MBIA (A)
5.000%, 05/03/00 900 900
--------------------------------------------------------------------------------
TOTAL NEVADA $ 900
--------------------------------------------------------------------------------
NEW JERSEY -- 3.4%
NEW JERSEY STATE TRAN,
SERIES 2000A, LOC
4.050%, 06/15/00 5,000 5,000
--------------------------------------------------------------------------------
TOTAL NEW JERSEY $ 5,000
--------------------------------------------------------------------------------
NEW YORK -- 7.5%
NEW YORK CITY GO, LOC (A)
6.050%, 05/01/00 1,100 1,100
NEW YORK CITY GO, SERIES B-7,
AMBAC (A)
6.050%, 05/01/00 700 700
NEW YORK CITY, MASS TRANSIT
AUTHORITY DEMAND CERTIFICATE
TRUST, SERIES 1993C, FGIC (A)
5.050%, 05/03/00 4,000 4,000
NEW YORK CITY, TRANSITIONAL
FINANCE AUTHORITY RB,
SERIES A-1, SPA (A)
5.050%, 05/03/00 5,000 5,000
--------------------------------------------------------------------------------
TOTAL NEW YORK $10,800
--------------------------------------------------------------------------------
NORTH CAROLINA -- 4.0%
CHARLOTTE, AIRPORT DEVELOPMENT
AUTHORITY RB,
SERIES A, MBIA (A)
5.000%, 05/03/00 2,800 2,800
CITY OF GREENSBORO, PUBLIC
IMPROVEMENT RB,
SERIES 1994-B, LOC (A)
5.050%, 05/03/00 1,000 1,000
DURHAM, WATER &
SEWER SYSTEM RB (A)
5.150%, 05/03/00 2,000 2,000
--------------------------------------------------------------------------------
TOTAL NORTH CAROLINA $ 5,800
--------------------------------------------------------------------------------
13
<PAGE>
MONEY MARKET PORTFOLIOS
TAX-FREE MONEY MARKET PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
PENNSYLVANIA -- 8.1%
BUCKS COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, LOC (A)
4.700%, 05/03/00 $2,200 $ 2,200
CUMBERLAND COUNTY, DICKINSON
COLLEGE RB, SERIES A, MANDATORY
PUT @ 100, LOC (C)
3.800%, 11/01/00 2,860 2,860
CUMBERLAND COUNTY, MUNICIPAL
AUTHORITY RB, UNITED
METHODIST HOMES FOR THE
AGING PROJECT, MANDATORY
PUT @ 100, LOC (A) (C)
3.230%, 06/01/00 2,315 2,315
DELAWARE VALLEY, REGIONAL
GOVERNMENT FINANCE RB,
SERIES A (A)
5.050%, 05/03/00 1,000 1,000
LEHIGH COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
SERIES A, LOC (A)
4.700%, 05/03/00 1,400 1,400
PENNSYLVANIA STATE GO, SERIES A,
PRE-REFUNDED @ 101.5 (B)
7.000%, 05/01/00 950 964
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, COUNCIL OF INDEPENDENT
COLLEGES, SERIES A3, LOC
4.250%, 04/01/01 1,000 1,000
--------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $11,739
--------------------------------------------------------------------------------
SOUTH CAROLINA -- 1.7%
SOUTH CAROLINA PUBLIC SERVICE
TECP, LOC
3.750%, 06/07/00 2,400 2,400
--------------------------------------------------------------------------------
TOTAL SOUTH CAROLINA $ 2,400
--------------------------------------------------------------------------------
TEXAS -- 9.1%
GEORGETOWN, HIGHER EDUCATION
FINANCING AUTHORITY RB,
SOUTHWESTERN UNIVERSITY PROJECT,
SERIES 1984, LOC (A)
5.000%, 05/03/00 3,000 3,000
TEXAS MUNICIPAL GAS
CORPORATION RB, FSA (A)
5.050%, 05/03/00 4,000 4,000
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
TEXAS STATE HIGHER EDUCATION
AUTHORITY RB, SERIES B,
FGIC (A)
5.100%, 05/03/00 $2,170 $ 2,170
TEXAS STATE TRAN
4.500%, 08/31/00 4,000 4,010
--------------------------------------------------------------------------------
TOTAL TEXAS $ 13,180
--------------------------------------------------------------------------------
VERMONT -- 1.4%
VERMONT STATE EDUCATIONAL
& HEALTH BUILDINGS RB,
CAPITAL ASSET FINANCING
PROGRAM, SERIES 1, LOC (A)
5.050%, 05/04/00 2,100 $ 2,100
--------------------------------------------------------------------------------
TOTAL VERMONT $ 2,100
--------------------------------------------------------------------------------
WISCONSIN -- 2.1%
WISCONSIN STATE TECP
3.800%, 06/07/00 3,000 3,000
--------------------------------------------------------------------------------
TOTAL WISCONSIN $ 3,000
--------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $142,692) $142,692
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.5%
(Cost $142,692) $142,692
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.5% $ 2,200
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 63,667,555 outstanding shares
of beneficial interest 63,659
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 45,967,687 outstanding shares
of beneficial interest 45,966
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par value)
based on 35,255,616 outstanding shares
of beneficial interest 35,254
Undistributed net investment income 14
Distributions in excess of net realized
gain on investments (1)
================================================================================
TOTAL NET ASSETS -- 100.0% $144,892
================================================================================
14
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
DESCRIPTION VALUE
--------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $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 ON APRIL 30, 2000. 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.
(C) MANDATORY PUT SECURITY. THE MANDATORY PUT DATE IS SHOWN AS THE MATURITY DATE
ON THE STATEMENT OF NET ASSETS.
BAN--BOND ANTICIPATION NOTE
COP--CERTIFICATE OF PARTICIPATION
GO--GENERAL OBLIGATION
LOC--SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
BANK OR OTHER FINANCIAL INSTITUTION.
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 CORPORATION
FSA--FINANCIAL SECURITY ASSURANCE
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<PAGE>
MONEY MARKET PORTFOLIOS
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
STATEMENTS OF NET ASSETS
[pie chart omitted]
plot points follow
% OF TOTAL PORTFOLIO INVESTMENTS
Repurchase Agreements -- 36%
U.S. Government Agency Obligations -- 64%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 63.8%
FEDERAL FARM CREDIT BANK
5.850%, 12/01/00 $25,000 $ 24,962
FEDERAL FARM CREDIT BANK DISCOUNT NOTE (A)
6.781%, 04/03/01 15,000 14,117
FEDERAL HOME LOAN BANK
5.480%, 07/13/00 20,000 19,987
5.750%, 08/09/00 10,000 9,999
6.500%, 03/15/01 25,000 24,956
FEDERAL HOME LOAN BANK (B)
6.130%, 07/04/00 25,000 24,993
FEDERAL HOME LOAN BANK
DISCOUNT NOTE (A)
5.882%, 05/01/00 225,000 225,000
FEDERAL HOME LOAN
MORTGAGE CORPORATION
DISCOUNT NOTES (A)
5.882%, 05/01/00 200,000 200,000
5.523%, 06/08/00 20,000 19,890
6.220%, 09/14/00 50,000 48,861
6.254%, 09/14/00 25,000 24,427
FEDERAL HOME LOAN MORTGAGE
CORPORATION, MTN (C)
6.451%, 01/16/01 25,000 23,908
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, MTN
6.570%, 02/22/01 25,000 24,986
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (B)
6.120%, 05/01/00 24,000 23,997
FEDERAL NATIONAL MORTGAGE
ASSOCIATION DISCOUNT
NOTES (A)
5.775%, 05/18/00 75,000 74,801
5.985%, 06/22/00 50,000 49,580
6.389%, 09/28/00 50,000 48,710
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, MTN
5.000%, 05/05/00 25,000 25,000
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, MTN (B)
6.060%, 05/01/00 $25,000 $ 24,997
STUDENT LOAN MARKETING
ASSOCIATION (B)
6.282%, 05/02/00 25,000 24,994
STUDENT LOAN MARKETING
ASSOCIATION, MTN (B)
6.090%, 05/01/00 25,000 24,998
6.402%, 05/02/00 25,000 25,009
6.482%, 05/02/00 25,000 24,993
--------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,033,165) $1,033,165
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 36.5%
DEUTSCHE BANK
(5.710%, dated 04/28/00,
matures 05/01/00, repurchase
price $300,142,750 (collateralized
by U.S.Treasury Obligations:
total market value
$317,623,783) 300,000 300,000
GOLDMAN SACHS
(5.250%, dated 04/28/00,
matures 05/01/00, repurchase
price $6,423,748 (collateralized
by U.S. Treasury Bill: total
market value $6,549,995) 6,421 6,421
SALOMON BROTHERS
(5.720%, dated 04/28/00,
matures 05/01/00, repurchase
price $285,135,850 (collateralized
by U.S. Treasury Obligations:
total market value
$290,838,282) 285,000 285,000
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $591,421) $ 591,421
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.3%
(Cost $1,624,586) $1,624,586
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (0.3%) $ (4,733)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 1,414,758,218 outstanding shares
of beneficial interest 1,414,661
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 120,577,728 outstanding shares
of beneficial interest 120,574
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par value)
based on 84,504,510 outstanding shares
of beneficial interest 84,497
Undistributed net investment income 161
Distributions in excess of net realized
gain on investments (40)
================================================================================
TOTAL NET ASSETS -- 100.0% $1,619,853
================================================================================
16
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
DESCRIPTION VALUE
--------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL II CLASS $1.00
================================================================================
(A) THE ANNUALIZED DISCOUNT YIELD AT TIME OF PURCHASE IS SHOWN AS THE RATE ON
THE STATEMENT OF NET ASSETS.
(B) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON APRIL 30, 2000. THE DATE SHOWN IS THE NEXT SCHEDULED
RESET DATE.
(C) ZERO COUPON SECURITY. THE EFFECTIVE 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.
17
<PAGE>
MONEY MARKET PORTFOLIOS
U.S. TREASURY MONEY MARKET PORTFOLIO
STATEMENTS OF NET ASSETS
[pie chart omitted]
[plot points follow]
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Treasury Notes -- 49%
U.S. Treasury Bills -- 51%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 99.1%
U.S. TREASURY BILLS (A)
5.620%, 05/04/00 $ 300 $ 300
5.642%, 05/18/00 480 479
5.665%, 06/01/00 1,000 995
5.687%, 06/08/00 750 746
5.445%, 06/22/00 4,144 4,112
5.628%, 06/22/00 143 142
5.632%, 06/22/00 1,998 1,982
5.632%, 06/22/00 7,402 7,343
5.634%, 06/22/00 13,864 13,754
5.638%, 06/22/00 3,228 3,202
5.638%, 06/22/00 27,637 27,417
5.680%, 06/22/00 20,473 20,308
5.682%, 06/22/00 9,608 9,531
5.688%, 06/22/00 7,858 7,795
5.718%, 06/22/00 5,573 5,528
5.752%, 06/22/00 7,291 7,232
5.614%, 06/29/00 13,347 13,227
5.625%, 06/29/00 4,790 4,747
5.652%, 06/29/00 9,588 9,501
5.620%, 07/06/00 25,000 24,745
5.384%, 08/17/00 6,068 5,970
5.570%, 08/17/00 6,448 6,344
5.757%, 08/17/00 10,000 9,834
5.767%, 08/17/00 3,544 3,485
5.911%, 10/19/00 4,670 4,543
5.927%, 10/19/00 25,000 24,317
U.S. TREASURY NOTES
5.625%, 05/01/00 140,000 140,000
6.750%, 05/01/00 60,000 60,000
5.375%, 06/30/00 5,000 5,001
--------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $422,580) $422,580
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.1%
(Cost $422,580) $422,580
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.9% $ 3,984
================================================================================
MARKET
DESCRIPTION VALUE (000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 278,540,427 outstanding shares
of beneficial interest $ 278,517
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 18,617,475 outstanding shares
of beneficial interest 18,616
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par value)
based on 129,422,918 outstanding shares
of beneficial interest 129,415
Undistributed net investment income 41
Distributions in excess of net realized
gain on investments (25)
--------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $426,564
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $1.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $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.
18
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
FIXED INCOME PORTFOLIOS
OUR FIXED INCOME INVESTMENT MANAGEMENT PHILOSOPHY CENTERS ON FOUR CORE
BELIEFS. WE BELIEVE THAT OVER A FULL INTEREST-RATE CYCLE, A PORTFOLIO OF
FIXED INCOME INVESTMENTS SHOULD PROVIDE REAL RETURNS THAT EXCEED ANY LOSS
OF PURCHASING POWER DUE TO INFLATION, EXCEED THE SPECIFIED PORTFOLIO
BENCHMARK RETURN SUCH AS THE LIPPER UNIVERSE, BE COMPETITIVE VERSUS
PORTFOLIOS OF SIMILAR RISK, AND MAINTAIN LOW-TO-MODERATE PRINCIPAL
VOLATILITY.
WITH THE UNDERSTANDING OF EACH PORTFOLIO'S CONSTRAINTS AND TOLERANCE FOR
RISK, WE EMPLOY A VALUE APPROACH TO FIXED INCOME INVESTING INVOLVING OVER-
OR UNDER-WEIGHTING MARKET SECTORS, INDUSTRIES, OR YIELD CURVE SEGMENTS
DEEMED TO BE RELATIVELY UNDERVALUED OR EXPENSIVE. WE UNDERTAKE RIGOROUS
ANALYSIS UTILIZING THE FOLLOWING COMPONENTS TO CONSTRUCT A PORTFOLIO:
SECTOR SELECTION, DURATION MANAGEMENT, CREDIT ANALYSIS, INDUSTRY AND ISSUE
SELECTION, AND YIELD CURVE MANAGEMENT.
THE FIXED INCOME PROCESS IS AN ACTIVELY MANAGED, BOTTOM-UP SECTOR
SELECTION APPROACH, WHEREIN RISK CONTAINMENT IS PARAMOUNT. OUR OBJECTIVE IS
TO POSITION THE PORTFOLIOS IN SUCH A WAY THAT OUR SECTOR, INTEREST RATE,
YIELD CURVE, AND CREDIT ANALYSIS CAN ADD VALUE WITHOUT ASSUMING AN
INORDINATE RISK OF UNDERPERFORMANCE. AS PART OF THE CONSTRUCTION AND
MANAGEMENT PROCESS, WE CONTINUALLY TEST PORTFOLIOS TO ASSESS AND CONTROL
RISK. THIS DISCIPLINED FIXED INCOME PHILOSOPHY HAS BEEN IN PLACE WITHIN OUR
ORGANIZATION FOR MORE THAN 15 YEARS,HAS BEEN CONSISTENTLY APPLIED, AND HAS
GENERATED EXCELLENT RESULTS.
19
<PAGE>
FIXED INCOME PORTFOLIOS
MANAGEMENT DISCUSSION AND ANALYSIS
SHORT-TERM TREASURY PORTFOLIO
[PHOTO OMITTED]
JAMES M. HANNAN
--------------------------------------------------------------------------------
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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 MORE THAN 11 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The short-term interest rate environment was dominated by the Federal Reserve's
tightening monetary policy on five different occasions during the past fiscal
year. It began reversing its eases of 1998 in the summer of 1999, as the U.S.
economy continued to grow too fast for its comfort level. It raised the fed
funds target from 4.75% to its current level of 6%. The goal is to keep
inflation from moving much higher by slowing the pace of economic growth. During
the past year the ARK Short-Term Treasury Portfolio Institutional Class returned
3.11%. The Portfolio outperformed the Lipper Short U.S. Treasury Index, which
returned only 2.68% for the fiscal year. During the year the yield on the
two-year U.S.Treasury rose from 5% to over 6.5% by the end of April.
The U.S. economy set a record for the longest economic expansion during
February 2000, surpassing the economic expansion of the 1960s. The unemployment
rate fell to a 30-year low of 3.9% for the month of April 2000. The economy grew
at a 5% rate for the year ended March of 2000. Consumers led the advance as
consumer spending rose at its fastest pace since the early 1990s. The tight
labor markets and a spike in energy prices provided the catalyst for higher
inflation. The C.P.I. increased to 3.7% for the year ending in March, up from
only 1.8% for 1999. However, the core rate of inflation increased only by 2.4%
for the same period. The Federal Reserve's concern is that excessive economic
growth will lead to higher inflation, and that, in turn, will require stronger
medicine (i.e., higher interest rates) to slow the economy and keep inflation
under control. Currently, we are expecting the Federal Reserve to raise
short-term interest rates by another 1/2% by early summer. Implied interest rate
analysis reveals that the market is anticipating the Federal Reserve to raise
interest rates by 1% over the next six months.
In response to this interest-rate environment, our strategy was to shorten
the average maturity of the ARK Short-Term Treasury Portfolio. For example, the
Portfolio's average maturity declined from 1.76 years as of May 17, 1999 to 1.38
years as of April 30, 2000. The appropriate average maturity for the Portfolio
is determined after we analyze expected monetary policy, the shape and slope of
the yield curve and implied interest rates. Looking forward, we will continue to
actively manage the Portfolio utilizing our conservative and highly disciplined
relative-value approach.
20
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PERFORMANCE AS OF
APRIL 30, 2000
[CHART OMITTED]
[PLOT POINTS FOLLOW]
ARK SHORT-TERM LEHMAN 1-3 YEAR LIPPER SHORT
TREASURY PORTFOLIO GOVERNMENT BOND U.S. TREASURY
INSTITUTIONAL CLASS INDEX FUNDS AVERAGE
3/31/96 100000 100000 100000
APRIL 96 100110 100100 99960
APRIL 97 105246 106236 105338
APRIL 98 112066 113821 112543
APRIL 99 117938 120548 118620
APRIL 00 121606 124852 121799
[CHART OMITTED]
[PLOT POINTS FOLLOW]
ARK SHORT-TERM LEHMAN 1-3 YEAR LIPPER SHORT
TREASURY PORTFOLIO GOVERNMENT BOND U.S. TREASURY
RETAIL CLASS A INDEX FUNDS AVERAGE
9/30/96 10000 10000 10000
APRIL 97 10284 10339 10294
APRIL 98 10925 11077 10998
APRIL 99 11475 11732 11592
APRIL 00 11797 12151 11902
Institutional Retail Lehman 1-3 year Lipper Short
Class Class A Gov't Bond U.S. Treasury
--------------------------------------------------------------------------------
One Year
Total Return 3.11% 2.80% 3.57% 2.68%
--------------------------------------------------------------------------------
Annualized 3 Year
Total Return 4.93% 4.68% 5.53% 5.00%
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 4.88% 4.80% 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
A 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.
STATEMENT OF NET ASSETS
[pie chart omitted]
[plot points follow]
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Treasury Bills -- 1%
U.S. Treasury Bonds -- 5%
U.S. Treasury Notes -- 94%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 98.7%
U.S. TREASURY BILL (A)
5.425%, 06/22/00 $ 288 $ 286
U.S. TREASURY BOND
11.625%, 11/15/02 2,000 2,225
U.S. TREASURY NOTES
4.500%, 01/31/01 3,500 3,451
5.375%, 02/15/01 8,000 7,936
5.000%, 02/28/01 500 494
5.250%, 05/31/01 2,000 1,975
5.500%, 07/31/01 3,000 2,958
6.500%, 08/31/01 10,000 9,980
5.875%, 11/30/01 4,000 3,951
6.250%, 02/28/02 4,000 3,969
6.625%, 04/30/02 2,000 1,997
5.750%, 11/30/02 3,000 2,935
5.500%, 01/31/03 2,000 1,943
--------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $44,754) $44,100
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.7%
(Cost $44,754) $44,100
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.3% $ 581
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 3,537,801 outstanding shares
of beneficial interest $35,451
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 995,300 outstanding shares
of beneficial interest 10,016
Accumulated net realized loss on investments (132)
Net unrealized depreciation on investments (654)
--------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $44,681
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.86
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $9.85
================================================================================
(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.
21
<PAGE>
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
SHORT-TERM BOND PORTFOLIO
[PHOTO OMITTED]
STEVEN M. GRADOW
--------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
--------------------------------------------------------------------------------
STEVEN M. GRADOW IS THE 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 MORE THAN 17 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
[PHOTO OMITTED]
WILMER C. STITH III, CFA
--------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
--------------------------------------------------------------------------------
WILMER C. STITH III IS A VICE PRESIDENT OF ALLIED INVESTMENT ADVISORS, INC. HE
IS CO-PORTFOLIO MANAGER OF THE SHORT-TERM BOND PORTFOLIO AND OVERSEES FIXED
INCOME TRADING. HE HAS MORE THAN 9 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The short end of the bond market during the past year was characterized by its
volatility, stemming from a strong economy, a Treasury buyback, and heightened
perceived credit risk. Robust economic growth continued and inflation remained
at bay in part because of advances in productivity. Yet, storm clouds on the
economic horizon became more pressing in the opinion of the Federal Reserve.
Simply put, the members of the Federal Reserve thought the economy was growing
too fast and it was only a matter of time until inflation took root. This
concern has resulted in 1.25% worth of tightening in monetary policy in the form
of five 25 basis point moves. Amidst this economic backdrop, recent federal
budget surpluses have resulted in the U.S. Treasury buying back an expected $30
billion worth of long-dated U.S. Treasury securities. Both the Treasury buyback
and a tightening in monetary policy have resulted in an inverted U.S. Treasury
yield curve. Concurrent to all of these developments was the perceived notion
that credit risk dramatically increased over the past year. As monetary policy
was tightened, raising the cost of corporate funds, and the equity markets
became more volatile, investors believed credit risk had increased. Furthermore,
the broker/dealer community, still reeling from the effects of the 1998 Asian
financial crisis, maintained relatively lean corporate bond inventories
throughout most of the past year.
A by-product of these developments can be seen in the two-year U.S.
Treasury increasing to a 6.65% yield by the end of April 2000 versus last
April's yield of 4.95%. Additionally, spread product (corporate, U.S. government
agency, and asset-backed securities) has substantially underperformed U.S.
Treasury securities. The ARK Short-Term Bond Portfolio has benefited from having
less interest rate risk versus the Lehman Brothers 1-3 Year Government Bond
Index. However, the Portfolio was overweighted in corporate and asset-backed
securities that have negatively impacted its overall return. In addition, some
of the Portfolio's lower credit quality corporate securities have been hampered
by illiquidity and unfavorable technical conditions within the corporate bond
market.
Going forward, the ARK Short-Term Bond Portfolio will continue to have a
defensive posture, as we expect the Federal Reserve to raise short-term interest
rates 50 basis points by the middle of this year. We feel the optimal portfolio
structure in this environment is a barbell-type structure. This type of
portfolio structure is effective during periods in which interest rates are
expected to increase. Once they have increased, cash can be redeployed along the
short end of the yield curve at a higher yield to maturity. To this end, we
expect to continue to purchase extremely short-dated securities. We look to
continue to emphasize upgrading the quality of longer-dated securities in the
Portfolio. We will continue to employ our conservative and disciplined
investment strategy of actively pursuing relative-value in both sector
allocation and security selection.
22
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PERFORMANCE AS OF
APRIL 30, 2000
[CHART OMITTED]
[PLOT POINT FOLLOW]
ARK SHORT-TERM LEHMAN 1-3 YEAR LIPPER SHORT
BOND PORTFOLIO GOVERNMENT BOND INVESTMENT-GRADE
INSTITUTIONAL CLASS INDEX DEBT
3/31/96 100000 100000 100000
APRIL 96 99970 100100 99990
APRIL 97 105078 106236 105939
APRIL 98 111656 113821 113112
APRIL 99 117407 120548 119005
APRIL 00 119767 124852 122491
INSTITUTIONAL LEHMAN 1-3 YEAR LIPPER SHORT
CLASS GOVERNMENT BOND INVESTMENT-GRADE DEBT
--------------------------------------------------------------------------------
One Year
Total Return 2.01% 3.57% 2.93%
--------------------------------------------------------------------------------
Annualized 3 Year
Total Return 4.46% 5.53% 4.92%
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 4.51% N/A N/A
--------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning March 22, 1998. Inception to
date performance includes the performance of the Marketvest Short-Term Bond
Fund from its inception date of March 31, 1996.
The performance of the Lehman 1-3 Year Government Bond Index does not include
operating expenses that are incurred by the Portfolio.
STATEMENT OF NET ASSETS
[PIE CHART OMITTED]
% OF TOTAL PORTFOLIO INVESTMENTS
Repurchase Agreements -- 8%
Non-Agency Mortgage-Backed Obligations -- 8%
U.S. Treasury Obligations -- 11%
Asset-Backed Securities -- 14%
U.S. Government Agency Obligations -- 9%
Corporate Obligations -- 50%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 10.5%
U.S. TREASURY NOTES
6.250%, 04/30/01 $2,000 $1,997
7.875%, 08/15/01 200 203
6.500%, 08/31/01 1,550 1,547
6.250%, 10/31/01 3,000 2,981
6.250%, 02/28/02 2,000 1,985
6.000%, 07/31/02 1,000 986
--------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $9,899) $9,699
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.4%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
4.750%, 12/14/01 3,000 2,896
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
4.450%, 10/16/00 3,000 2,971
--------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $5,989) $5,867
--------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 2.7%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (A)
7.026%, 05/01/00 2 2
STUDENT LOAN MARKETING
ASSOCIATION, REMIC (A)
6.420%, 05/03/00 2,502 2,491
--------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS
(Cost $2,497) $2,493
--------------------------------------------------------------------------------
23
<PAGE>
FIXED INCOME PORTFOLIOS
SHORT-TERM BOND PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
COMMERCIAL PAPER (B) -- 7.8%
ASSOCIATES FINANCIAL SERVICES
6.215%, 06/27/00 $ 200 $ 198
ENRON
6.210%, 05/17/00 2,000 1,994
MCI WORLDCOM
6.402%, 05/12/00 1,268 1,266
NORFOLK SOUTHERN
6.181%, 05/09/00 761 760
6.208%, 05/25/00 1,000 996
TEXAS UTILITIES
6.224%, 05/12/00 2,000 1,996
--------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $7,210) $7,210
--------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 42.2%
BANKS -- 2.2%
MBNA, MTN
6.500%, 09/15/00 1,000 997
PNC FUNDING
9.875%, 03/01/01 1,000 1,021
--------------------------------------------------------------------------------
TOTAL BANKS $2,018
--------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 2.1%
COMDISCO
5.750%, 02/15/01 1,000 985
SEAGATE TECHNOLOGY
7.125%, 03/01/04 1,000 906
--------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $1,891
--------------------------------------------------------------------------------
ENERGY & POWER -- 1.1%
NRG NORTHEAST GENERATING (C)
8.065%, 12/15/04 1,000 1,001
--------------------------------------------------------------------------------
TOTAL ENERGY & POWER $1,001
--------------------------------------------------------------------------------
ENTERTAINMENT -- 3.7%
TIME WARNER, MTN (C)
6.100%, 12/30/01 2,000 1,955
VIACOM
6.750%, 01/15/03 1,500 1,457
--------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $3,412
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 13.7%
BEAR STEARNS
6.450%, 08/01/02 800 779
CONSECO
6.400%, 02/10/03 2,000 1,220
CONSECO, MANDATORY PUT @ 100 (D)
6.400%, 06/15/01 2,000 1,300
FORD MOTOR CREDIT
6.550%, 09/10/02 2,000 1,957
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
FORD MOTOR CREDIT,
GLOBAL BOND
6.700%, 07/16/04 $1,000 $ 962
GENERAL MOTORS ACCEPTANCE,
MTN
6.650%, 05/24/00 2,000 2,000
GOLDMAN SACHS (A) (C)
6.490%, 01/25/01 1,000 1,001
HOUSEHOLD FINANCE, MTN (A)
6.340%, 09/14/00 1,000 1,000
LEHMAN BROTHERS HOLDINGS
6.625%, 11/15/00 2,000 1,996
6.900%, 01/29/01 400 399
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $12,614
--------------------------------------------------------------------------------
INDUSTRIAL -- 12.6%
COCA-COLA, PAT (C)
6.000%, 03/15/01 2,000 1,977
CONAGRA (A) (C)
6.340%, 06/12/00 3,000 2,999
HUSKY OIL, YB
6.875%, 11/15/03 3,000 2,858
SPIEKER PROPERTIES LP
6.875%, 02/01/05 2,000 1,883
WILLIAMS
6.500%, 11/15/02 2,000 1,933
--------------------------------------------------------------------------------
TOTAL INDUSTRIAL $11,650
--------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 6.8%
CABLE & WIRELESS
COMMUNICATIONS
6.375%, 03/06/03 3,500 3,434
SPRINT CAPITAL
5.875%, 05/01/04 1,000 939
WORLDCOM
6.250%, 08/15/03 2,000 1,928
--------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 6,301
--------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $41,158) $38,887
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 21.1%
AFG RECEIVABLES TRUST,
SERIES 1996-D, CLASS B
6.650%, 10/15/01 373 372
EQCC HOME EQUITY LOAN TRUST,
SERIES 1998-1, CLASS A4F
6.459%, 03/15/21 2,000 1,949
EQCC HOME EQUITY LOAN TRUST,
SERIES 1999-1, CLASS A2F
5.765%, 06/20/15 1,000 978
EQCC HOME EQUITY LOAN TRUST,
SERIES 1999-1, CLASS A3F
5.915%, 11/20/24 1,000 959
24
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
EQUICREDIT FUNDING TRUST,
SERIES 1996-A, CLASS A3
7.350%, 11/15/19 $1,821 $ 1,823
FORD CREDIT AUTO OWNER TRUST,
SERIES 2000-A, CLASS A3
6.820%, 06/17/02 1,500 1,499
GREEN TREE HOME
IMPROVEMENT LOAN TRUST,
SERIES 1995-B, CLASS A
8.150%, 03/15/15 849 849
GREEN TREE HOME
IMPROVEMENT LOAN TRUST,
SERIES 1995-F, CLASS B1
6.750%, 01/15/21 2,000 1,966
GREEN TREE HOME
IMPROVEMENT LOAN TRUST,
SERIES 1996-F, CLASS HIB1
7.250%, 11/15/27 2,000 1,929
GREENPOINT MANUFACTURED
HOUSING TRUST,
SERIES 1999-1, CLASS A2
6.010%, 08/15/15 500 480
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-1, CLASS A3
6.820%, 10/25/11 167 166
KEY AUTO FINANCE TRUST,
SERIES 1997-1, CLASS B
6.400%, 04/15/04 625 622
KEY AUTO FINANCE TRUST,
SERIES 1999-1, CLASS A3
5.630%, 07/15/03 1,250 1,234
PREMIER AUTO TRUST,
SERIES 1998-4, CLASS A3
5.690%, 06/08/02 1,000 993
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1996-C, CLASS A4
7.400%, 06/15/21 1,848 1,844
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF3
6.345%, 11/15/21 862 855
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1998-B, CLASS AF4
6.115%, 06/15/21 970 954
--------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $19,775) $19,472
--------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -- 1.0%
PRUDENTIAL HOME MORTGAGE
SECURITIES TRUST,
SERIES 1994-25, CLASS A7
7.500%, 08/25/24 963 943
--------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS
(Cost $1,001) $ 943
--------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.6%
FIRST BOSTON
(5.820%, dated 04/28/00, matures
05/01/00, repurchase price
$6,975,888 (collateralized by U.S.
Government Agency Obligations:
total market value $7,178,528)$6,973 $ 6,973
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $6,973) $ 6,973
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.3%
(Cost $94,502) $91,544
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.7% $ 641
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 9,576,956 outstanding shares
of beneficial interest 95,431
Undistributed net investment income 65
Accumulated net realized loss on investments (353)
Net unrealized depreciation on investments (2,958)
--------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $92,185
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.63
================================================================================
(A) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON APRIL 30, 2000.
(B) THE ANNUALIZED DISCOUNT YIELD AT TIME OF PURCHASE IS SHOWN AS THE RATE ON
THE STATEMENT OF NET ASSETS.
(C) 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.
(D) MANDATORY PUT SECURITY. THE MANDAORY PUT DATE IS SHOWN AS THE MATURITY DATE
ON THE STATEMENT OF NET ASSETS.
MTN--MEDIUM TERM NOTE
PAT--PUTABLE ASSET TRUST
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
YB--YANKEE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
<PAGE>
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MARYLAND AND PENNSYLVANIA TAX-FREE PORTFOLIOS
[PHOTO OMITTED]
SUSAN L. SCHNAARS, CFA
-------------------------------------------------------------------------------
PORTFOLIO MANAGER
-------------------------------------------------------------------------------
SUSAN L. SCHNAARS, CFA, 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 11
YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The municipal market has not avoided the general rise in interest rates. While
the rise in short-maturity tax-exempt securities has been less severe than in
the Treasury market over the past year, yields on securities with more than 10
years to maturity have risen much more dramatically than their Treasury
counterparts, allowing the municipal yield curve to maintain its upwardly
sloping shape. A long-dated (30-year) municipal bond offers more than 1.25% more
in yield than short-dated (one to two year) tax-exempt securities. Due to the
inversion in the Treasury curve, where short-dated securities are yielding 50
basis points more than the 30-year, the municipal/Treasury yield ratios for
longer-dated bonds have reached historically high levels. The ratio for
shorter-dated securities, however, has remained relatively stable as both the
taxable and municipal markets await further interest rate hikes by the Federal
Reserve.
The municipal market continues to struggle with limited supply. With the
onset of a higher interest-rate environment, there is no incentive to refund
outstanding debt. In addition, after experiencing nearly a decade of economic
prosperity many municipalities are finding the funds within to finance projects
that would otherwise have been financed with new debt. It is expected that the
municipal market will have negative-net new issuance for the year 2000 (more
bonds maturing than issued). Aggregate municipal bond mutual fund flows are
negative, forcing fund managers to continue to sell holdings, which has added
supply to the market. However, to offset this supply, there has been some buying
from other sectors of the institutional sector and heightened demand for
deep-discount securities from total-return investors. Intermediate-term,
current-coupon bonds and new issues have continued to be the securities of
choice with individual and trust department buyers. These factors have been a
neutralizing force and added some stability to the municipal market.
In response to the rise in interest rates, we have modestly restructured
the ARK Maryland Tax-Free Portfolio and the ARK Pennsylvania Tax-Free Portfolio
and shortened their duration. We have sold lower-yielding holdings with
maturities and coupons that have been in demand in the retail sector. In
shortening the Portfolios, we have focused on reducing our exposure to
securities with 25 to 30 year maturities and shorter calls, and have
concentrated on purchasing securities in the 15 to 20 year maturity spectrum
with better call protection. Where opportunities present themselves, we continue
to upgrade credit quality and remain focused on maintaining a high credit
quality profile for the Portfolios. Any modifications to the Portfolios reflect
our bias to maximize after-tax total return, while providing a high level of
current income. Moderate fluctuations in principal should be expected as
interest rates change.
We anticipate that volatility in the stock market, coupled with the very
attractive relative value that municipals offer versus their taxable
counterparts, will provide new flows into the tax-exempt market and we believe
that municipal bonds are an attractive opportunity for investors needing a tax
advantage.
26
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PERFORMANCE AS OF
APRIL 30, 2000
[CHART OMITTED]
[PLOT POINTS FOLLOW]
ARK MARYLAND TAX- LEHMAN 7 YEAR LIPPER 10 YEAR LIPPER MARYLAND
FREE PORTFOLIO MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL DEBT
INSTITUTIONAL CLASS INDEX INDEX FUNDS AVERAGE
11/30/96 100000 100000 100000 100000
APRIL 97 100104 100106 100262 99886
APRIL 98 108263 107964 109256 108336
APRIL 99 114607 115306 117068 114543
APRIL 00 111891 115283 116728 111726
[CHART OMITTED]
[PLOT POINTS FOLLOW]
<TABLE>
<CAPTION>
ARK MARYLAND TAX- ARK MARYLAND TAX- LEHMAN 7 YEAR LIPPER 10 YEAR LIPPER MARYLAND
FREE PORTFOLIO FREE PORTFOLIO RETAIL MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL DEBT
RETAIL CLASS A CLASS A WITH LOAD INDEX INDEX FUNDS AVERAGE
<S> <C> <C> <C> <C> <C>
1/31/97 10000 9550 10000 10000 10000
APRIL 97 10022 9571 10005 10032 10032
APRIL 98 10814 10328 10790 10932 10880
APRIL 99 11430 10915 11524 11714 11504
APRIL 00 11144 10642 11521 11680 11221
</TABLE>
MARYLAND TAX-FREE PORTFOLIO
[CHART OMITTED]
[PLOT POINTS FOLLOW]
<TABLE>
<CAPTION>
ARK MARYLAND TAX- ARK MARYLAND TAX- LEHMAN 7 YEAR LIPPER 10 YEAR LIPPER MARYLAND
FREE PORTFOLIO FREE PORTFOLIO RETAIL MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL DEBT
RETAIL CLASS A CLASS A WITH LOAD INDEX INDEX FUNDS AVERAGE
<S> <C> <C> <C> <C> <C>
11/30/96 10000 10000 10000 10000 10000
APRIL 97 10010 10010 10011 10026 9989
APRIL 98 10826 10826 10796 10926 10834
APRIL 99 11461 11461 11531 11707 11454
APRIL 00 12570 12286 11528 11673 11173
</TABLE>
MARYLAND TAX-FREE PORTFOLIO
Lehman Lehman Lipper MD
7 Year 10 Year Intermed
Inst'l Retail Retail Muni Muni Muni
Class Class A Class B* Bond Bond Debt
--------------------------------------------------------------------------------
One Year
Total Return -2.37% -2.50% 9.68% -0.02% -0.29% -2.46%
--------------------------------------------------------------------------------
One Year
Total Return with Load N/A -6.88% 5.04% N/A N/A N/A
--------------------------------------------------------------------------------
Annualized 3 year
total return 3.78% 3.61% 7.88% 4.82% 5.20% 3.83%
--------------------------------------------------------------------------------
Annualized 3 year
total return with Load N/A 2.01% 7.05% N/A N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 3.54% 3.44% 7.08% N/A N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date with load N/A 2.02% 6.38% N/A N/A N/A
--------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning November 15, 1996. Retail
Class A shares were offered beginning January 2, 1997. Performance for the
Retail Class A shares with load reflects the deduction of the 4.50% sales
charge. Retail Class B shares were offered beginning September 9, 1999.
Performance for Retail Class B shares with load reflects the deduction of the
applicable contingent deferred sales charge (CDSC).
* Performance shown prior to the actual inception date of the Retail Class B
shares represents that of the Institutional Class adjusted for the sales
charge only. No adjustments have been made for Retail Class 12b-1 fees and
expenses. With such adjustments, performance would be lower than shown.
Cumulative performance since actual inception for Retail Class B shares is
13.17% without CDSC and 8.31% with CDSC.
The performance of the Lehman 7 Year Municipal Bond Index and the Lehman 10
Year Municipal Bond Index does not include operating expenses that are
incurred by the Portfolio.
27
<PAGE>
FIXED INCOME PORTFOLIOS
PENNSYLVANIA TAX-FREE PORTFOLIO
PERFORMANCE AS OF
APRIL 30, 2000
[CHART OMITTED]
[PLOT POINTS FOLLOW]
<TABLE>
<CAPTION>
ARK PENNSYLVANIA LEHMAN 5 YEAR LEHMAN 7 YEAR LEHMAN 10 YEAR LIPPER PENNSYLVANIA
TAX-FREE PORTFOLIO MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL BOND INTERMEDIATE
INSTITUTIONAL CLASS INDEX INDEX INDEX MUNICIPAL AVERAGE
<S> <C> <C> <C> <C> <C>
3/31/96 100000 100000 100000 100000 100000
APRIL 96 100340 99990 99820 99650 99620
APRIL 97 104253 104640 105170 105978 104462
APRIL 98 111311 111692 113426 115484 112077
APRIL 99 117500 118941 121139 123741 118275
APRIL 00 112941 119369 121115 123382 116004
</TABLE>
<TABLE>
<CAPTION>
[CHART OMITTED]
[PLOT POINTS FOLLOW]
ARK PENNSYLVANIA ARK PENNSYLVANIA LEHMAN 5 YEAR LEHMAN 7 YEAR LEHMAN 10 YEAR LIPPER PENNSYLVANIA
TAX-FREE PORTFOLIO TAX-FREE PORTFOLIO MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL BOND INTERMEDIATE
RETAIL CLASS B RETAIL CLASS B WITH CDSC INDEX INDEX INDEX MUNICIPAL AVERAGE
<S> <C> <C> <C> <C> <C> <C>
3/31/96 100000 100000 100000 100000 100000 100000
APRIL 96 100340 100340 99990 99820 99650 99620
APRIL 97 104253 104253 104640 105170 105978 104462
APRIL 98 111311 111311 111692 113426 115484 112077
APRIL 99 117500 117500 118941 121139 123741 118275
APRIL 00 123822 123634 119369 121115 123382 116004
</TABLE>
<TABLE>
<CAPTION>
t
ARK PENNSYLVANIA ARK PENNSYLVANIA LEHMAN 5 YEAR LEHMAN 7 YEAR LEHMAN 10 YEAR LIPPER PENNSYLVANIA
TAX-FREE PORTFOLIO TAX-FREE PORTFOLIO MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL BOND INTERMEDIATE
RETAIL CLASS A RETAIL CLASS A WITH LOAD INDEX INDEX INDEX MUNICIPAL AVERAGE
<S> <C> <C> <C> <C> <C> <C>
3/31/96 10000 9550 10000 10000 10000 10000
April 96 10034 9582 9999 9982 9965 9962
April 97 10425 9956 10464 10517 10598 10446
April 98 11118 10617 11169 11343 11548 11208
April 99 11717 11190 11894 12114 12374 11827
April 00 11254 10748 11937 12111 12338 11600
</TABLE>
PENNSYLVANIA TAX-FREE PORTFOLIO
<TABLE>
<CAPTION>
Lehman Lehman Lehman
5 Year 7 Year 10 Year Lipper PA
INST'L Retail Retail Muni Muni Muni Intermediate
Class Class A* Class B* Bond Bond Bond Muni
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
One Year
Total Return -3.88% -3.95% 5.38% 0.36% -0.02% -0.29% -1.92%
-----------------------------------------------------------------------------------------
One Year
Total Return with Load N/A -8.26% 0.79% N/A N/A N/A N/A
-----------------------------------------------------------------------------------------
Annualized 3 Year
Total Return 2.70% 2.59% 5.90% 4.49% 4.82% 5.20% 3.51%
-----------------------------------------------------------------------------------------
Annualized 3 Year
Total Return With Load N/A 1.02% 5.05% N/A N/A N/A N/A
-----------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 3.02% 2.94% 5.37% N/A N/A N/A N/A
-----------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date With
Load N/A 1.79% 4.97% N/A N/A N/A N/A
-----------------------------------------------------------------------------------------
</TABLE>
Past performance of the Portfolio is not predictive of future performance.
For each class, performance presented prior to March 22, 1998, reflects the
performance of the Marketvest Pennsylvania Intermediate Municipal Bond Fund
from its inception date of March 31, 1996. Retail Class A shares were offered
beginning March 23, 1998. Performance for the Retail Class A shares with load
reflects the deduction of the 4.50% sales charge. Retail Class B shares were
offered beginning September 9, 1999. Performance for Retail Class B shares
with load reflects the deduction of the applicable contingent deferred sales
charge (CDSC).
* Performance shown prior to the actual inception dates of Retail Class A shares
and Retail Class B shares represents that of the Institutional Class adjusted
for the sales charge only. No adjustments have been made for Retail Class
12b-1 fees and expenses. With such adjustments, performance would be lower
than shown. Annualized performance since actual inception for Class A shares
is 0.27% without load and -1.88% with load. Cumulative performance since
actual inception for Retail Class B shares is 9.37% without CDSC and 4.54%
with CDSC.
The performance of the Lehman 5 Year Municipal Bond Index, Lehman 7 Year
Municipal Bond Index, and Lehman 10 Year Municipal Bond Index does not include
operating expenses that are incurred by the Portfolio.
28
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
MARYLAND TAX-FREE PORTFOLIO
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
[pie chart omitted]
General Obligations -- 40%
Cash Equivalents -- 2%
Revenue Bonds -- 58%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 98.2%
MARYLAND -- 94.0%
ALLEGANY COUNTY, PUBLIC
IMPROVEMENTS GO, AMBAC
5.300%, 03/01/12 $1,190 $1,186
ANNE ARUNDEL COUNTY, PUBLIC
IMPROVEMENTS GO
6.000%, 09/01/06 2,560 2,691
BALTIMORE COUNTY, PUBLIC
IMPROVEMENTS GO
5.500%, 06/01/16 2,000 1,990
BALTIMORE GO, SERIES B, MBIA
7.000%, 10/15/03 1,000 1,066
BALTIMORE, AUTO PARKING
RB, FGIC
5.250%, 07/01/17 1,000 947
BALTIMORE, CONVENTION CENTER
RB, MBIA
5.375%, 09/01/11 2,910 2,928
BALTIMORE, PORT FACILITIES RB,
DUPONT PROJECT
6.500%, 10/01/11 1,000 1,052
CALVERT COUNTY RB, BALTIMORE
GAS CORPORATION, MBIA
5.550%, 07/15/14 2,500 2,503
CALVERT COUNTY, PUBLIC &
SCHOOL IMPROVEMENTS GO
5.750%, 01/01/11 1,900 1,955
CARROLL COUNTY, REFUNDING
RB, ASSET
5.375%, 01/01/16 2,000 1,915
CHARLES COUNTY GO
5.700%, 03/01/10 750 771
FREDERICK COUNTY GO, SERIES B
6.300%, 07/01/08 2,000 2,085
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
-------------------------------------------------------------------------------
FREDERICK COUNTY, RETIREMENT
COMMUNITY RB,
BUCKINGHAMS CHOICE
5.900%, 01/01/17 $1,000 $ 854
FREDERICK GO, FGIC
6.125%, 12/01/06 1,000 1,044
6.125%, 12/01/07 500 521
HARFORD COUNTY GO
5.500%, 12/01/08 1,895 1,947
HOWARD COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A
5.250%, 02/15/14 1,350 1,328
MARYLAND NATIONAL PARKS &
PLANNING COMMISSION RB
5.375%, 01/15/14 1,000 990
MARYLAND STATE & LOCAL
FACILITIES AUTHORITY GO
5.000%, 08/01/10 1,200 1,183
MARYLAND STATE & LOCAL
FACILITIES AUTHORITY GO,
SECOND SERIES AA
5.500%, 06/01/08 1,500 1,537
MARYLAND STATE COMMUNITY
DEVELOPMENT ADMINISTRATION
RB, HOUSING & COMMUNITY
DEVELOPMENT
5.050%, 04/01/08 1,000 985
5.600%, 03/01/17 1,000 979
MARYLAND STATE COMMUNITY
DEVELOPMENT ADMINISTRATION
RB, HOUSING & COMMUNITY
DEVELOPMENT, SECOND SERIES
5.000%, 04/01/17 1,000 921
MARYLAND STATE ECONOMIC
DEVELOPMENT CORPORATION RB,
HEALTH CARE FACILITIES, GNMA
4.650%, 12/20/08 900 837
MARYLAND STATE ECONOMIC
DEVELOPMENT CORPORATION RB,
LUTHERAN WORLD RELIEF
7.125%, 04/01/19 1,000 991
MARYLAND STATE ECONOMIC
DEVELOPMENT CORPORATION
RB, STUDENT HOUSING
5.600%, 06/01/10 1,950 1,872
MARYLAND STATE GO
6.100%, 10/15/06 1,500 1,551
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB
6.000%, 12/01/13 1,370 1,408
4.750%, 11/01/14 1,600 1,418
5.125%, 07/01/20 2,000 1,835
4.750%, 05/15/33 2,000 1,600
29
<PAGE>
FIXED INCOME PORTFOLIOS
MARYLAND TAX-FREE PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, BROADMEAD
5.500%, 07/01/17 $1,500 $1,305
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, DOCTORS
COMMUNITY HOSPITAL
5.500%, 07/01/24 2,500 1,928
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, HELIX HEALTH
ISSUE, AMBAC, ETM
5.000%, 07/01/27 2,500 2,187
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, HOWARD COUNTY
GENERAL HOSPITAL PROJECT
5.500%, 07/01/13 1,000 1,005
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, JOHNS HOPKINS
MEDICINE, MBIA
5.000%, 07/01/19 1,500 1,335
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB,
JOHNS HOPKINS UNIVERSITY
5.250%, 07/01/17 2,000 1,897
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, KENNEDY KRIEGER
5.125%, 07/01/22 2,000 1,515
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, LOYOLA COLLEGE
PROJECT, SERIES A, MBIA
5.375%, 10/01/11 950 955
5.375%, 10/01/26 2,500 2,328
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, MBIA
5.300%, 10/01/18 460 432
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, MEDLANTIC/
HELIX, SERIES A
5.250%, 08/15/12 1,175 1,153
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, MERCY MEDICAL
CENTER PROJECT, AMBAC
5.750%, 07/01/15 2,000 2,003
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, NORTH ARUNDEL
PROJECT, MBIA
6.000%, 07/01/12 $ 500 $ 518
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, PENINSULA
REGIONAL MEDICAL CENTER PROJECT
5.000%, 07/01/08 1,000 936
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, PICKERSGILL
PROJECT, SERIES A
6.000%, 01/01/15 1,500 1,449
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, SERIES A
5.250%, 08/15/11 2,000 1,975
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 1,046
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, UPPER
CHESAPEAKE HEALTH, FSA
5.375%, 01/01/28 1,500 1,373
MARYLAND STATE STADIUM
AUTHORITY RB, AMBAC
5.500%, 03/01/12 1,000 1,009
MARYLAND STATE TRANSPORTATION
AUTHORITY RB
5.750%, 07/01/15 3,000 3,011
MARYLAND STATE TRANSPORTATION
AUTHORITY RB, BALTIMORE/
WASHINGTON INTERNATIONAL
AIRPORT PROJECT, FGIC
6.000%, 07/01/07 1,000 1,049
MARYLAND STATE WATER QUALITY
FINANCING ADMINISTRATION RB,
REVOLVING LOAN FUND, SERIES A
5.500%, 09/01/12 1,250 1,258
6.550%, 09/01/14 945 978
30
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
-------------------------------------------------------------------------------
MONTGOMERY COUNTY GO
5.375%, 05/01/11 $2,000 $2,020
MONTGOMERY COUNTY, PARKING
AUTHORITY RB, SILVER SPRING
PARKING LOT PROJECT,
SERIES A, FGIC
6.250%, 06/01/09 500 523
MONTGOMERY COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A
5.500%, 10/01/06 1,000 1,029
5.800%, 07/01/07 1,000 1,045
4.875%, 05/01/12 2,000 1,910
5.600%, 01/01/16 2,000 2,010
MONTGOMERY COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A,
PRE-REFUNDED @ 102 (A)
6.000%, 10/01/04 2,000 2,110
PRINCE GEORGES COUNTY, PUBLIC
IMPROVEMENTS GO, FSA
5.500%, 10/01/10 2,000 2,045
PRINCE GEORGES COUNTY, PUBLIC
IMPROVEMENTS GO,
SERIES A, MBIA
6.000%, 03/01/07 1,450 1,495
PRINCE GEORGES COUNTY,
SOLID WASTE MANAGEMENT
SYSTEM RB, FSA
5.000%, 06/15/04 1,000 998
PRINCE GEORGES COUNTY,
WATER UTILITY IMPROVEMENTS
GO, STORMWATER
MANAGEMENT PROJECT
5.500%, 03/15/13 2,575 2,581
QUEEN ANNES COUNTY, PUBLIC
FACILITIES GO, FGIC
5.400%, 11/15/11 1,000 1,009
QUEEN ANNES COUNTY, SCHOOL &
RECREATIONAL FACILITIES
IMPROVEMENTS GO, FGIC
6.000%, 11/15/08 1,000 1,061
ST. MARY'S COUNTY, ACADEMIC &
AUXILIARY FACILITIES RB, MBIA
5.250%, 09/01/27 2,000 1,805
UNIVERSITY OF MARYLAND, AUXILIARY
FACILITY & TUITION RB, SERIES A
5.000%, 04/01/10 2,000 1,965
UNIVERSITY OF MARYLAND, LOAN
PROGRAM RB, SECOND SERIES
6.000%, 06/01/05 500 520
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
UNIVERSITY OF MARYLAND,
MEDICAL SYSTEMS PROJECT
RB, SERIES A
5.500%, 04/01/10 $2,000 $ 2,033
WASHINGTON COUNTY, PUBLIC
IMPROVEMENTS GO, MBIA
5.800%, 01/01/15 1,250 1,264
WASHINGTON, SUBURBAN
SANITATION DISTRICT GO
6.000%, 06/01/18 1,000 1,044
WASHINGTON, SUBURBAN
SANITATION DISTRICT GO,
SEWER IMPROVEMENTS
5.300%, 06/01/08 1,000 1,008
--------------------------------------------------------------------------------
TOTAL MARYLAND $107,010
-------------------------------------------------------------------------------
PUERTO RICO -- 3.8%
COMMONWEALTH OF PUERTO RICO,
PUBLIC FINANCE AUTHORITY
RB, AMBAC
5.375%, 06/01/19 1,500 1,463
COMMONWEALTH OF PUERTO RICO,
PUBLIC IMPROVEMENTS
GO, MBIA
6.250%, 07/01/12 1,000 1,096
4.875%, 07/01/23 2,000 1,733
--------------------------------------------------------------------------------
TOTAL PUERTO RICO $ 4,292
--------------------------------------------------------------------------------
TEXAS -- 0.4%
AUSTIN, UTILITY SYSTEMS RB,
SERIES A
9.100%, 05/15/00 310 310
AUSTIN, UTILITY SYSTEMS RB,
SERIES A, ETM
9.100%, 05/15/00 190 190
--------------------------------------------------------------------------------
TOTAL TEXAS $ 500
--------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $114,982) $111,802
--------------------------------------------------------------------------------
CASH EQUIVALENT -- 1.7%
DREYFUS TAX-EXEMPT CASH
MANAGEMENT FUND 1,858 1,858
--------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $1,858) $ 1,858
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.9%
(Cost $116,840) $113,660
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- 0.1% $ 159
================================================================================
31
<PAGE>
FIXED INCOME PORTFOLIOS
MARYLAND TAX-FREE PORTFOLIO CONCLUDED
MARKET
DESCRIPTION VALUE (000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 9,269,669 outstanding shares
of beneficial interest $ 89,895
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 2,735,962 outstanding shares
of beneficial interest 28,079
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 5,307 outstanding shares
of beneficial interest 51
Accumulated net realized loss on investments (1,026)
Net unrealized depreciation on investments (3,180)
--------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $113,819
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.48
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $9.48
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($9.48 / 95.50%) $9.93
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS B $9.48
================================================================================
(A) PRE-REFUNDED SECURITY. THE PRE-REFUNDED DATE IS SHOWN AS THE MATURITY DATE
ON THE STATEMENT OF NET ASSETS.
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
ASSET--ASSET GUARANTY
FGIC--FINANCIAL GUARANTY INSURANCE CORPORATION
FSA--FINANCIAL SECURITY ASSURANCE
GNMA--GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
32
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PENNSYLVANIA TAX-FREE PORTFOLIO
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
[pie chart omitted]
General Obligations -- 16%
Cash Equivalents -- 1%
Revenue Bonds -- 83%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 98.1%
PENNSYLVANIA -- 98.1%
ALLEGHENY COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, MBIA
6.800%, 03/01/15 $3,500 $3,666
ALLEGHENY COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, USX PROJECT
6.100%, 01/15/18 5,255 4,900
ALLENTOWN, SACRED HEART
HOSPITAL RB, SERIES A
6.500%, 11/15/08 2,665 2,645
BUCKS COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, ETM
10.000%, 05/15/19 4,775 7,097
BURRELL, SCHOOL DISTRICT
GO, FGIC
5.250%, 11/15/10 4,000 4,035
CHESTER COUNTY, HEALTH &
EDUCATION FACILITIES AUTHORITY
RB, CHESTER COUNTY HOSPITAL,
MBIA
5.500%, 07/01/07 965 979
5.625%, 07/01/09 1,985 2,020
5.625%, 07/01/10 1,675 1,696
CHESTER COUNTY, HEALTH &
EDUCATION FACILITIES AUTHORITY
RB, IMMACULATA COLLEGE,
ASSET
5.625%, 10/15/27 2,750 2,544
CHESTER COUNTY, HEALTH &
EDUCATION FACILITIES AUTHORITY
RB, MAIN LINE HEALTH SYSTEMS,
MBIA
5.300%, 05/15/07 3,045 3,053
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
CUMBERLAND COUNTY, MESSIAH
COLLEGE PROJECT RB, AMBAC
5.125%, 10/01/15 $2,800 $2,642
DAUPHIN COUNTY, PINNACLE
HEALTH SYSTEM PROJECT
RB, MBIA
5.200%, 05/15/09 910 901
DELAWARE COUNTY, CATHOLIC
HEALTH SYSTEMS EAST RB,
SERIES A
4.875%, 11/15/14 3,910 3,524
DELAWARE COUNTY, COMMUNITY
HOSPITAL AUTHORITY RB
6.000%, 12/15/20 4,000 3,460
DELAWARE COUNTY, DUNWOODY
VILLAGE PROJECT RB
5.550%, 04/01/06 300 301
INDIANA COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
POLLUTION CONTROL RB,
NY STATE ELECTRIC & GAS
CORPORATION, SERIES A, MBIA
6.000%, 06/01/06 1,500 1,569
LANCASTER COUNTY, HOSPITAL
AUTHORITY RB, MASONIC
HOMES PROJECT
4.750%, 11/15/02 1,000 989
LANCASTER COUNTY, SOLID WASTE
MANAGEMENT AUTHORITY
RB, AMBAC
5.375%, 12/15/15 4,000 3,875
LEHIGH COUNTY, MUHLENBERG
HOSPITAL CENTER PROJECT
RB, ETM, GOH
5.750%, 07/15/10 1,270 1,319
5.750%, 07/15/10 1,730 1,797
LEHIGH COUNTY, PUBLIC
IMPROVEMENTS PROJECT GO,
SERIES A, CNTY GTD
5.500%, 11/15/11 2,000 2,020
5.550%, 11/15/12 2,100 2,116
LOWER MERION TOWNSHIP,
SCHOOL DISTRICT GO, STAID
5.125%, 05/15/13 3,185 3,101
MONTGOMERY COUNTY, HEALTH &
HIGHER EDUCATION AUTHORITY RB
7.250%, 12/01/19 3,000 2,820
MONTGOMERY COUNTY, HEALTH &
HIGHER EDUCATION AUTHORITY
RB, AMBAC
5.250%, 10/01/04 2,070 2,083
5.500%, 10/01/08 1,275 1,293
33
<PAGE>
FIXED INCOME PORTFOLIOS
PENNSYLVANIA TAX-FREE PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
MONTGOMERY COUNTY, HEALTH &
HIGHER EDUCATION AUTHORITY
RB, BEAVER COLLEGE PROJECT,
CONLEE
5.700%, 04/01/10 $ 500 $ 512
MONTGOMERY COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
RETIREMENT-LIFE COMMUNITIES
5.250%, 11/15/28 2,500 1,962
NORRISTOWN, SCHOOL DISTRICT
AUTHORITY GO, FGIC
5.500%, 09/01/14 500 494
NORTHAMPTON COUNTY, HIGHER
EDUCATION AUTHORITY RB,
LEHIGH UNIVERSITY, MBIA
5.750%, 08/15/03 2,710 2,778
PENNSYLVANIA CONVENTION CENTER
AUTHORITY RB, ETM, FGIC
6.000%, 09/01/19 5,410 5,566
PENNSYLVANIA CONVENTION CENTER
AUTHORITY RB, MBIA
6.750%, 09/01/19 2,500 2,650
PENNSYLVANIA INTERGOVERNMENTAL
COOPERATIVE AUTHORITY RB,
PHILADELPHIA FUNDING PROGRAM,
FGIC
5.400%, 06/15/09 4,845 4,881
PENNSYLVANIA STATE ECONOMIC
DEVELOPMENT AUTHORITY RB,
AMBAC
6.000%, 07/01/06 3,000 3,131
PENNSYLVANIA STATE GEISINGER
HEALTH SYSTEMS RB, SERIES A
5.000%, 08/15/28 2,490 2,032
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, DREXEL UNIVERSITY
6.000%, 05/01/24 4,075 3,999
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, DREXEL UNIVERSITY, MBIA
5.750%, 05/01/03 2,535 2,592
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, GWYNEDD-MERCY COLLEGE,
ASSET
5.600%, 11/01/22 1,825 1,722
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, SERIES B
5.350%, 01/01/08 3,750 3,417
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, UNIVERSITY OF PENNSYLVANIA
HEALTH SERVICES PROJECT, SERIES A
5.500%, 01/01/09 $3,000 $2,737
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, UNIVERSITY OF
PENNSYLVANIA PROJECT
5.600%, 01/01/10 500 456
PENNSYLVANIA STATE HOUSING
FINANCE AGENCY RB, SERIES A
6.000%, 10/01/13 1,500 1,521
PENNSYLVANIA STATE INFRASTRUCTURE
INVESTMENT AUTHORITY RB,
WATER UTILITY IMPROVEMENTS,
MBIA
5.250%, 09/01/07 2,720 2,737
PENNSYLVANIA STATE PUBLIC
IMPROVEMENTS GO, SECOND
SERIES, FGIC
5.375%, 11/15/07 5,000 5,087
PHILADELPHIA GO, FGIC
5.125%, 05/15/14 5,000 4,712
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
FRANKLIN INSTITUTE PROJECT
5.200%, 06/15/18 2,100 1,898
5.200%, 06/15/26 3,100 2,457
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
GIRARD ESTATE COAL MINING
PROJECT, ETM
5.500%, 11/15/16 3,590 3,545
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
SERIES A, MBIA
6.000%, 02/15/07 1,365 1,430
PHILADELPHIA, JEFFERSON HEALTH
SYSTEMS RB
5.500%, 05/15/05 1,000 1,001
PHILADELPHIA, JUSTICE LEASE
AUTHORITY RB, SERIES A, MBIA
7.100%, 11/15/06 4,095 4,305
PHILADELPHIA, TEMPLE UNIVERSITY
HOSPITAL RB, SERIES A
6.625%, 11/15/23 5,100 4,718
PHILADELPHIA, WATER &
WASTEWATER RB, MBIA
6.250%, 08/01/07 3,000 3,199
6.250%, 08/01/08 2,150 2,301
34
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
PHILADELPHIA, WATER & WASTEWATER
RB, SERIES A, AMBAC
5.000%, 08/01/22 $5,000 $ 4,369
PITTSBURGH & ALLEGHENY
COUNTIES, PUBLIC AUDITORIUM
RB, AMBAC
5.250%, 02/01/17 5,000 4,669
RIDLEY PARK, TAYLOR HOSPITAL
RB, SERIES A, ETM
6.000%, 12/01/05 670 679
SCRANTON-LACKAWANNA,
MERCY HEALTH HOSPITAL FACILITIES
RB, SERIES B, MBIA
5.625%, 01/01/16 2,000 1,958
WEST MIFFLIN, PENNSYLVANIA AREA
SCHOOL DISTRICT GO, FGIC
4.875%, 02/15/23 5,000 4,244
WEST SHORE, HOLY SPIRIT HOSPITAL
PROJECT RB, MBIA
5.600%, 01/01/13 500 498
--------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $160,702
--------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $167,112) $160,702
--------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.4%
BLACKROCK PENNSYLVANIA MUNICPAL
MONEY MARKET PORTFOLIO 725 725
--------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $725) $ 725
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.5%
(Cost $167,837) $161,427
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.5% $ 2,461
================================================================================
MARKET
DESCRIPTION VALUE (000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 17,119,292 outstanding
shares of beneficial interest $ 171,402
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 323,847 outstanding shares
of beneficial interest 3,498
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 19,987 outstanding shares
of beneficial interest 189
Accumulated net realized loss on investments (4,791)
Net unrealized depreciation on investments (6,410)
================================================================================
TOTAL NET ASSETS -- 100.0% $163,888
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.38
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $9.38
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($9.38 / 95.50%) $9.82
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS B $9.39
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
ASSET--ASSET GUARANTY
CNTY GTD--COUNTY GUARANTEED
CONLEE--COLLEGE CONSTRUCTION LOAN INSURANCE ASSOCIATION
FGIC--FINANCIAL GUARANTY INSURANCE CORPORATION
GOH--GENERAL OBLIGATION OF HOSPITAL
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
STAID--STATE AID WITHHOLDING
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
35
<PAGE>
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
INTERMEDIATE FIXED INCOME PORTFOLIO
[PHOTO OMITTED]
SUSAN L. SCHNAARS, CFA
--------------------------------------------------------------------------------
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
SUSAN L. SCHNAARS, CFA, 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 11
YEARS OF INVESTMENT
MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
Persistently strong U.S. economic growth, coupled with heightened inflation
fears due to higher oil prices and low unemployment levels, brought about higher
interest rates during the year. In an effort to stave off inflation and slow the
economy, the Federal Reserve raised short-term interest rates five times in the
past year to 6.00% in 25 basis point increments. However, over the past year,
yields on long-dated U.S. Treasuries have not risen as dramatically as yields in
the shorter end of the yield curve, resulting in an inverted yield curve. We
cite two major reasons for the inversion of the yield curve: (1) investors'
presumption that by raising short-term interest rates the Federal Reserve will
temper economic growth and preempt a rise in inflation, and (2) increased
investor demand for longer-dated Treasury bonds due to a perception that the
scarcity value of these securities will increase as the Treasury reduces the
national debt. As volatility in the financial markets increased, spreads on
corporate, agency, mortgage and asset-backed securities widened as investors
focused investments in the Treasury market. The result was significantly weaker
total returns in these segments when compared to similar maturity Treasury
securities.
With the inversion in the yield curve, we have elected to assume credit
risk at the front-end of the yield curve in the higher-yielding corporate and
asset-backed sectors, increasing our exposure slightly. Throughout the year, we
slightly increased our exposure to the corporate, agency, mortgage and
asset-backed sectors. We found several issues attractive in the regional
banking, brokerage, consumer finance, telecommunications and industrial segments
of the corporate sector. Also included in our list of purchases during the year
were floating-rate asset-backed securities that will benefit from future hikes
in short-term rates. While adding to our mortgage pass-through exposure during
the year, we also focused on higher-coupon pass-through securities in order to
enhance yield.
In anticipation of increased interest rate volatility, as well as higher
interest rates, we are keeping the duration of the ARK Intermediate Fixed Income
Portfolio relatively neutral to slightly less than that of the broad
intermediate government/corporate segment of the bond market. Our expectation is
that the Federal Reserve will continue to gradually raise short-term interest
rates by another 50 to 75 basis points by the summer in an effort to slow the
economy. We anticipate that growth will remain strong into the second half of
the year, until the increases in short-term rates begin to have an effect on the
economy. We will continue to follow our core strategy and take advantage of the
excess spread and value offered by the corporate, mortgage and asset-backed
sectors.
36
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PERFORMANCE AS OF
APRIL 30, 2000
]CHART OMITTED]
PLOT POINTS FOLLOWS
<TABLE>
<CAPTION>
LIPPER
ARK INTERMEDIATE LEHMAN INTERMEDIATE LEHMAN INTERMEDIATE INTERMEDIATE
FIXED INCOME PORTFOLIO GOV'T/CORP GOVERNMENT BOND INVESTMENT GRADE
INSTITUTIONAL CLASS BOND INDEX INDEX DEBT FUNDS AVERAGE
<S> <C> <C> <C> <C>
11/30/96 100000 100000 100000 100000
APRIL 97 100267 100419 100551 99911
APRIL 98 108941 109386 109279 109882
APRIL 99 114823 116343 116218 115838
APRIL 00 115191 118111 118659 115953
</TABLE>
Lehman Lehman Lipper
Intermediate Intermediate Intermediate
Institutional Gov't/CORP Government Investment
Class Bond Bond Grade Debt
--------------------------------------------------------------------------------
One Year
Total Return 0.32% 1.52% 2.10% 0.10%
--------------------------------------------------------------------------------
Annualized 3 year
total return 4.73% 5.56% 5.67% 5.06%
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 4.33% N/A N/A N/A
--------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning November 15, 1996.
The performance of the Lehman Intermediate Government Bond Index and the
Lehman Intermediate Government/Corporate Bond Index does not include operating
expenses that are incurred by the Portfolio.
STATEMENT OF NET ASSETS
[pie chart omitted]
plot points follows
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Government Mortgage-
Backed Obligations -- 16%
Repurchase
Agreements -- 5%
U.S. Government
Agency Obligations -- 5%
Asset-Backed
Securities -- 8%
Corporate
Obligations -- 38%
U.S. Treasury
Obligations -- 27%
Preferred
Stock -- 1%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 26.9%
U.S. TREASURY NOTES
7.500%, 11/15/01 $3,000 $ 3,034
6.250%, 02/28/02 4,375 4,341
5.500%, 03/31/03 4,225 4,101
5.375%, 06/30/03 3,000 2,897
7.875%, 11/15/04 7,500 7,871
6.500%, 05/15/05 2,175 2,172
5.875%, 11/15/05 150 145
5.625%, 02/15/06 150 144
6.250%, 02/15/07 6,175 6,090
--------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $31,604) $30,795
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.2%
FEDERAL HOME LOAN BANK
7.100%, 03/23/05 2,000 1,955
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, MTN
5.890%, 04/06/04 1,000 951
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.000%, 05/15/08 3,260 2,997
--------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $6,284) $ 5,903
--------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 15.4%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
6.500%, 07/01/09 2,483 2,377
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.500%, 05/01/08 548 525
6.500%, 10/01/08 1,882 1,801
6.000%, 04/01/11 1,672 1,566
7.500%, 12/01/29 2,423 2,370
7.500%, 04/01/30 2,445 2,393
37
<PAGE>
INTERMEDIATE FIXED INCOME PORTFOLIOS CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT(000) VALUE (000)
--------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
6.250%, 07/25/08 $1,590 $ 1,522
6.000%, 11/25/28 1,072 1,041
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION
7.000%, 02/15/29 1,080 1,039
STUDENT LOAN MARKETING
ASSOCIATION, REMIC (A)
6.532%, 07/25/06 1,876 1,869
6.462%, 04/25/07 1,201 1,194
--------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS
(Cost $18,206) $17,697
--------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 38.0%
360 COMMUNICATIONS
7.125%, 03/01/03 125 124
7.500%, 03/01/06 1,385 1,383
ASSOCIATES NA, MTN
8.430%, 11/23/01 1,000 1,016
AT&T
6.000%, 03/15/09 1,650 1,471
BANK OF NEW YORK
6.625%, 06/15/03 1,500 1,451
BANKAMERICA, MTN
7.125%, 05/12/05 1,500 1,455
BEAR STEARNS
7.625%, 02/01/05 800 784
CABLE & WIRELESS
COMMUNICATIONS
6.375%, 03/06/03 1,000 981
CANADIAN NATIONAL
RAILWAY, YB
6.450%, 07/15/06 1,545 1,423
CIT GROUP
7.375%, 03/15/03 1,790 1,774
COLUMBUS SOUTHERN POWER,
MTN
6.510%, 02/01/08 1,250 1,170
COMCAST CABLEVISION, MTN
8.375%, 05/01/07 1,000 1,000
COMMERCIAL CREDIT
7.750%, 03/01/05 1,285 1,284
CONSECO
6.400%, 02/10/03 1,000 610
CSC HOLDINGS, SERIES B
8.125%, 08/15/09 1,000 945
DILLARD'S
6.690%, 08/01/07 1,370 1,122
FEDERAL-MOGUL
7.750%, 07/01/06 750 613
FIRST CHICAGO, MTN
6.700%, 03/15/02 1,500 1,478
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
FORD MOTOR CREDIT
8.000%, 06/15/02 $1,175 $ 1,184
GOLDEN STATE ESCROW
7.125%, 08/01/05 1,000 877
MCI WORLDCOM
6.400%, 08/15/05 1,275 1,210
MERITA BANK, YB
6.500%, 01/15/06 1,350 1,254
MERRILL LYNCH
7.200%, 10/15/12 1,500 1,384
MOTOROLA
7.600%, 01/01/07 1,850 1,864
NATIONAL RURAL UTILITIES, MTN
7.300%, 09/15/06 1,250 1,231
NORWEST FINANCIAL
6.375%, 09/15/02 1,370 1,336
PNC FUNDING
7.000%, 09/01/04 1,740 1,694
PROGRESSIVE
6.600%, 01/15/04 550 526
QWEST COMMUNICATIONS
INTERNATIONAL
7.250%, 11/01/08 1,000 941
SARA LEE, MTN
6.150%, 06/19/08 1,700 1,558
SPRINT CAPITAL, GLOBAL BOND
6.125%, 11/15/08 1,500 1,333
STAR BANK NA-CINCINNATI
6.375%, 03/01/04 1,705 1,628
STORAGE USA
7.125%, 11/01/03 1,000 961
SUNTRUST BANKS
7.375%, 07/01/06 1,500 1,470
TARGET
6.800%, 10/01/01 600 594
TIME WARNER
9.125%, 01/15/13 1,225 1,312
UNISYS
11.750%, 10/15/04 1,000 1,080
--------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $46,400) $43,521
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 7.8%
EQCC HOME EQUITY LOAN TRUST,
SERIES 1999-1, CLASS A3F
5.915%, 11/20/24 1,525 1,463
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-3, CLASS A4
6.840%, 10/20/13 218 217
KEY AUTO FINANCE TRUST,
SERIES 1999-1, CLASS A3
5.630%, 07/15/03 1,915 1,890
38
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PRINCIPAL AMOUNT MARKET
DESCRIPTION (000)/SHARES VALUE (000)
--------------------------------------------------------------------------------
PP&L TRANSITION BOND COMPANY
LLC, SERIES 1999-1, CLASS A1
6.080%, 03/25/03 $ 691 $ 687
PREMIER AUTO TRUST,
SERIES 1998-4, CLASS A3
5.690%, 06/08/02 605 601
THE MONEY STORE HOME
EQUITY TRUST,
SERIES 1996-C, CLASS A4
7.400%, 06/15/21 932 930
THE MONEY STORE HOME
EQUITY TRUST,
SERIES 1997-D, CLASS AF5
6.555%, 12/15/38 1,780 1,699
THE MONEY STORE HOME
EQUITY TRUST,
SERIES 1998-B, CLASS AF4
6.115%, 06/15/21 1,484 1,460
--------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $9,147) $ 8,947
--------------------------------------------------------------------------------
PREFERRED STOCK -- 0.8%
SPG PROPERTIES, 7.890% 20,000 890
--------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $1,012) $ 890
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.9%
FIRST BOSTON
(5.820%, dated 04/28/00, matures
05/01/00, repurchase price
$5,656,123 (collateralized by U.S.
Government Agency Obligation:
total market value $5,818,800)5,653 5,653
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $5,653) $ 5,653
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.0%
(Cost $118,306) $113,406
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.0% $ 1,148
================================================================================
MARKET
DESCRIPTION VALUE (000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 12,160,350 outstanding shares
of beneficial interest $ 119,540
Undistributed net investment income 7
Accumulated net realized loss on investments (93)
Net unrealized depreciation on investments (4,900)
================================================================================
TOTAL NET ASSETS -- 100.0% $114,554
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.42
================================================================================
(A) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON APRIL 30, 2000.
MTN--MEDIUM TERM NOTE
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
YB--YANKEE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
39
<PAGE>
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
U.S. GOVERNMENT BOND PORTFOLIO
[PHOTO OMITTED]
STEVEN M. GRADOW
--------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
STEVEN M. GRADOW IS THE 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 MORE THAN 17 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
[PHOTO OMITTED]
N. BETH VOLK, CFA
--------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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 MORE THAN 19 YEARS OF INVESTMENT
RESEARCH AND MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The Federal Reserve's orchestration of five hikes in short-term interest rates
over the past year has yet to take the steam out of the U.S.'s booming economy.
Despite higher oil prices and signs of rising labor costs, the core rate of
inflation remains low. Even the stock market's recent sloppiness has yet to
sharply dampen consumer confidence, retail sales, or the housing market. An
improving manufacturing sector is mirrored globally, as most foreign economies
have shaken off the effects of the Asian Flu of 1998 and 1999's Y2K fears. For
now, with domestic growth exceeding the Fed's targets, all eyes remain focused
on the "how much" and "when" of the monetary authorities' next upward move in
interest rates. As a result, we remain cautious on the bond market.
In contrast to "few changes" on the economic front, fixed income investors
have been grappling with the inversion in the U.S. Treasury yield curve. On
April 30, 2000, the 6.70% yield on the two-year U.S. Treasury was almost 75
basis points higher than the 5.95% on the 30-year bond. Past yield curve
inversions have occurred close to the onset of a recession when economic growth
was slowing, inflation rising rapidly, the federal budget ballooning, and
consequently, tight monetary policy nearing an end. Clearly, this is not the
case today. Rather, market technicals -- the Treasury Department's buyback of
securities and investors' continued confidence in the Fed's ability to keep
inflation at bay -- have propped up the price of long-term U.S. Treasuries. At
any rate, until we see a change in the bias of Fed policy, we expect that the
U.S. Treasury yield curve will remain inverted. In contrast, the yield curves
for other fixed-income sectors have and will retain their positive slope, with
the yields on long maturities exceeding the rate on short securities. In fact,
today investors require greater compensation for bearing credit risk than they
did a year ago.
During the year, adjustments to overall duration -- a slight shortening as
interest rates rose, then lengthening back in line with our benchmark as
interest rates dropped -- helped the performance of the ARK U.S. Government Bond
Portfolio. As of the end of April, the Portfolio's duration was 4.2 years. More
important, while our sector weightings in corporates and mortgage and
asset-backed securities were unchanged, the composition of the duration
weightings of each individual sector changed over the year. More of the
Portfolio's overall assets were invested in the very shortest (zero to one year)
and very longest (eight years or longer) instruments. Tactically we accomplished
this in several ways. Throughout 1999, we reduced the duration profile of our
corporate holdings by selling a long-term bond and, subsequently, buying a
medium-term obligation of the same issuer. Since early 2000, we increased our
exposure to floating-rate U.S. agencies and thus were able to maintain the
Portfolio's current yield. At the same time, with the inversion of the U.S.
Treasury curve, we captured some of the relative outperformance of long U.S.
Treasuries by the outright purchase of some of these securities. Although our
overall quality profile remained steady at AA1, the mix within the quality
distribution was of a higher nature, given the reinvestment of sale proceeds
from some medium-grade corporates into the AAA-rated agency floaters.
40
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PERFORMANCE AS OF
APRIL 30, 2000
[CHART OMITTED]
PLOT POINTS FOLLOWS
ARK US GOVERNMENT LEHMAN INTERMEDIATE LIPPER INTERMEDIATE
BOND PORTFOLIO GOV'T/CORP U.S. GOVERNMENT BOND
INSTITUTIONAL CLASS BOND INDEX INDEX
3/31/96 100000 100000 100000
APRIL 96 99480 99650 99410
APRIL 97 103967 106048 105265
APRIL 98 113022 115518 114886
APRIL 99 118470 122864 120930
APRIL 00 118517 124732 121522
[CHART OMITTED]
PLOT POINTS FOLLOWS
<TABLE>
<CAPTION>
ARK U.S. GOVERNMENT ARK U.S. GOVERNMENT LEHMAN INTERMEDIATE LIPPER INTERMEDIATE
BOND PORTFOLIO BOND PORTFOLIO GOVERNMENT/CORPORATE U.S. GOVERNMENT
RETAIL CLASS A RETAIL CLASS A W/LOAD INDEX FUNDS AVERAGE
<S> <C> <C> <C> <C>
3/31/96 10000 9550 10000 10000
APRIL 96 9948 9500 9965 9941
APRIL 97 10397 9929 10605 10527
APRIL 98 12169 11622 11552 11489
APRIL 99 12769 12195 12286 12093
APRIL 00 12758 12184 12473 12152
</TABLE>
Lehman Lipper
Institutional Retail Intermediate Intermediate
Class Class A* Gov't/Corp Bond U.S. Gov't
--------------------------------------------------------------------------------
One Year
Total Return 0.04% -0.09% 1.52% 0.49%
--------------------------------------------------------------------------------
One Year
Total Return with Load N/A -4.58% N/A N/A
--------------------------------------------------------------------------------
Annualized 3 Year
Total Return 4.46% 7.06% 5.56% 4.91%
--------------------------------------------------------------------------------
Annualized 3 Year
Total Return With Load N/A 5.41% N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 4.25% 6.14% N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date With Load N/A 4.96% N/A N/A
--------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
For each class, performance presented prior to March 22, 1998 reflects the
performance of the Marketvest Intermediate U.S. Government Bond Fund from its
inception date of March 31, 1996. Retail Class A shares were offered beginning
April 1, 1998 and performance shown for the periods indicated is higher than
normally expected due to the impact of the opening of this class. Performance
for Retail Class A shares with load reflects the deduction of the 4.50% sales
charge.
* Performance shown prior to the actual inception date of the Retail Class A
shares represents that of the Institutional Class adjusted for the sales
charge only. No adjustments have been made for Retail Class 12b-1 fees and
expenses. With such adjustments, performance would be lower than shown.
Annualized performance since actual inception for Retail Class A shares is
6.08% without load and 3.73% with load.
The performance of the Lehman Intermediate Government/Corporate Index does not
include operating expenses that are incurred by the Portfolio.
41
<PAGE>
FIXED INCOME PORTFOLIOS
U.S.GOVERNMENT BOND PORTFOLIO CONTINUED
STATEMENT OF NET ASSETS
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS
% OF TOTAL PORTFOLIO INVESTMENTS
Preferred Stock -- 2%
Asset-Backed Securities -- 5%
Corporate
Obligations -- 18%
U.S. Treasury
Obligations -- 21%
Repurchase Agreements -- 2%
U.S. Government Mortgage-Backed Obligations -- 35%
U.S. Government Agency
Obligations -- 17%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 21.3%
U.S. TREASURY BONDS
7.500%, 11/15/16 $ 3,000 $ 3,365
6.000%, 02/15/26 2,000 1,947
5.250%, 02/15/29 2,000 1,760
U.S. TREASURY NOTES
5.375%, 02/15/01 10,500 10,416
5.500%, 01/31/03 5,000 4,858
5.500%, 03/31/03 14,000 13,589
--------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $36,997) $35,935
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 17.3%
FEDERAL HOME LOAN BANK
5.375%, 03/02/01 5,000 4,951
FEDERAL HOME LOAN BANK (A)
6.232%, 07/14/00 10,000 10,002
FEDERAL HOME LOAN MORTGAGE
CORPORATION
5.750%, 04/15/08 3,000 2,716
FEDERAL HOME LOAN MORTGAGE
CORPORATION (B)
8.250%, 12/01/28 1,000 103
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.000%, 05/15/08 5,000 4,597
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, MTN
6.470%, 09/25/12 7,500 6,912
--------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $30,937) $29,281
--------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 34.7%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
6.000%, 03/01/13 $12,442 $ 11,669
FEDERAL HOME LOAN MORTGAGE
CORPORATION, REMIC
6.250%, 01/15/20 3,000 2,931
6.000%, 04/15/21 5,000 4,739
6.250%, 09/15/23 5,000 4,637
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
7.000%, 09/01/27 2,955 2,840
6.500%, 08/01/28 2,017 1,884
6.500%, 08/01/28 2,579 2,409
6.500%, 08/01/28 4,326 4,042
6.500%, 08/01/28 5,302 4,953
6.500%, 03/01/29 3,859 3,601
6.500%, 03/01/29 4,722 4,406
7.000%, 03/01/29 2,637 2,522
6.500%, 05/01/29 2,865 2,673
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
6.500%, 10/25/23 3,139 3,101
STUDENT LOAN MARKETING
ASSOCIATION, REMIC (A)
6.532%, 07/25/06 2,251 2,242
--------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $61,990) $58,649
--------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 17.3%
ENTERTAINMENT -- 2.3%
CSC HOLDINGS
8.125%, 07/15/09 1,000 947
ROYAL CARIBBEAN CRUISES, YB
8.250%, 04/01/05 3,000 3,011
--------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 3,958
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.2%
AMVESCAP PLC, YB
6.375%, 05/15/03 2,500 2,338
CONSECO
6.400%, 02/10/03 3,000 1,830
GOLDEN STATE ESCROW
7.000%, 08/01/03 2,000 1,833
SPIEKER PROPERTIES LP
6.750%, 01/15/08 3,000 2,760
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 8,761
--------------------------------------------------------------------------------
42
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PRINCIPAL AMOUNT MARKET
DESCRIPTION (000)/SHARES VALUE (000)
--------------------------------------------------------------------------------
INDUSTRIAL -- 7.5%
FEDERAL-MOGUL
7.750%, 07/01/06 $ 1,500 $ 1,226
HUSKY OIL, YB (C)
7.550%, 11/15/16 2,000 1,815
NRG ENERGY
7.500%, 06/01/09 2,000 1,830
SAGA PETROLEUM A.S., YB (C)
9.125%, 07/15/14 4,000 4,410
TENNESSEE GAS PIPELINE
7.000%, 10/15/28 1,600 1,400
UNION PACIFIC
7.600%, 05/01/05 2,000 1,950
--------------------------------------------------------------------------------
TOTAL INDUSTRIAL $12,631
--------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 2.3%
360 COMMUNICATIONS
7.600%, 04/01/09 3,000 2,993
QWEST COMMUNICATIONS
INTERNATIONAL, SERIES B
7.250%, 11/01/08 1,000 941
--------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 3,934
--------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $33,128) $29,284
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 5.1%
CONTIMORTGAGE HOME
EQUITY LOAN TRUST,
SERIES 1998-1, CLASS A6
6.580%, 12/15/18 3,000 2,892
CONTIMORTGAGE HOME
EQUITY LOAN TRUST,
SERIES 1998-2, CLASS A6
6.360%, 11/15/19 2,500 2,374
THE MONEY STORE
HOME EQUITY TRUST,
SERIES 1996-C, CLASS A4
7.400%, 06/15/21 2,464 2,458
THE MONEY STORE
HOME EQUITY TRUST,
SERIES 1997-D, CLASS AF3
6.345%, 11/15/21 986 977
--------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $8,958) $ 8,701
--------------------------------------------------------------------------------
PREFERRED STOCK -- 2.1%
SPG PROPERTIES, 7.890% 80,000 3,560
--------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $4,032) $ 3,560
--------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.8%
FIRST BOSTON
(5.820%, dated 04/28/00, matures
05/01/00, repurchase price
$3,083,356 (collateralized by U.S.
Government Agency Obligation:
total market value $3,178,112)$3,082 $ 3,082
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $3,082) $ 3,082
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.6%
(Cost $179,124) $168,492
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- 0.4% $ 720
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 17,991,905 outstanding
shares of beneficial interest 182,047
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 255,982 outstanding shares
of beneficial interest 2,545
Undistributed net investment income 31
Accumulated net realized loss on investments (4,779)
Net unrealized depreciation on investments (10,632)
================================================================================
TOTAL NET ASSETS -- 100.0% $169,212
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.27
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $9.28
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($9.28/95.50%) $9.72
(A) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON APRIL 30, 2000.
(B) ZERO COUPON SECURITY. THE EFFECTIVE YIELD AT TIME OF PURCHASE IS SHOWN AS
THE RATE ON THE STATEMENT OF NET ASSETS.
(C) 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.
MTN--MEDIUM TERM NOTE
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
YB--YANKEE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
43
<PAGE>
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OMITTED]
STEVEN M. GRADOW
--------------------------------------------------------------------------------
PORTFOLIO MANAGER
STEVEN M. GRADOW IS THE 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 MORE THAN 17 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
REVIEW AND OUTLOOK
The domestic fixed income market during the past year has shown significant
interest volatility as the economy continues to exhibit robust growth. Concerned
about rising inflation, the Federal Reserve began its vigilant march to slow
down the economy, by raising short-term interest rates five times in the past
year. The labor unemployment rate continues at record-low levels. This growth
environment, together with the concern for increasing inflation, has contributed
to sub-par performance returns for all G-7 bond markets.
As a by-product of the Federal Reserve's actions, we have short-term rates
at higher levels than long-term rates. Typically in the past this has led to a
recession. We do not believe this is the case in this instance. Amidst the
backdrop of large budget surpluses, the U.S. Treasury is expected to buy back
$30 billion of longer-dated Treasury securities. The Treasury buyback together
with a tightening monetary policy has resulted in this inverted Treasury yield
curve.
With an increasingly vigilant Federal Reserve posture, the ARK Income
Portfolio continues to have a lower interest rate posture than its comparable
index. We expect volatility to remain high and look to reduce corporate
positions, as we believe that credit concerns will increase in the coming
months. We plan to add selectively to the mortgage-backed securities area, as
bond spreads for these securities have surpassed levels not seen since the
October 1998 global liquidity scare. In times of limited liquidity for riskier
assets, opportunities to take advantage of anomalies within the market become
more readily available. This is the environment in which our seasoned investment
professionals can look to capture unique opportunities to benefit our investors.
44
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PERFORMANCE AS OF
APRIL 30, 2000
[CHART OMITTED]
PLOT POINTS FOLLOWS
<TABLE>
<CAPTION>
ARK INCOME PORTFOLIO LEHMAN AGGREGATE LIPPER CORPORATE
INSTITUTIONAL CLASS BOND INDEX A-RATED DEBT FUNDS AVERAGE
<S> <C> <C> <C>
7/31/93 100000 100000 100000
APRIL 94 99836 98354 97814
APRIL 95 106355 105563 103762
APRIL 96 115353 114673 112011
APRIL 97 122862 122792 119314
APRIL 98 136181 136201 132080
APRIL 99 141928 144741 138394
APRIL 00 141913 146565 137480
</TABLE>
[CHART OMITTED]
PLOT POINTS FOLLOWS
<TABLE>
<CAPTION>
ARK INCOME ARK INCOME LEHMAN AGGREGATE LIPPER CORPORATE-A
RETAIL A RETAIL A W/LOAD BOND INDEX RATED DEBT FUNDS AVG
<S> <C> <C> <C> <C>
4/30/94 10000 9550 10000 10000
APRIL 95 10623 10145 10733 10608
APRIL 96 11488 10971 11659 11451
APRIL 97 12214 11664 12485 12198
APRIL 98 13493 12885 13848 13503
APRIL 99 14043 13411 14716 14149
APRIL 00 14018 13387 14902 14055
</TABLE>
[CHART OMITTED]
PLOT POINTS FOLLOWS
ARK RETAIL B LEHMAN AGGREGATE LIPPER CORPORATE
RETAIL CLASS B W/WO CDSC BOND INDEX A-RATED DEBT FUNDS AVG
7/31/93 10000 10000 10000
APRIL 94 9984 9835 9781
APRIL 95 10636 10556 10376
APRIL 96 11535 11467 11201
APRIL 97 12286 12279 11931
APRIL 98 13618 13620 13208
APRIL 99 14172 14474 13839
APRIL 00 14052 14656 13748
LEHMAN Lipper CORP.
Institutional Retail Retail AGGREGATE A-RATED
Class Class A Class B* BOND DEBT
--------------------------------------------------------------------------------
One Year
Total Return -0.01% -0.18% -0.85% 1.26% -0.66%
--------------------------------------------------------------------------------
One Year
Total Return with Load N/A -4.67% -5.57% N/A N/A
--------------------------------------------------------------------------------
Annualized 3 Year
Total Return 4.92% 4.70% 4.58% 6.07% 4.86%
--------------------------------------------------------------------------------
Annualized 3 Year
Total Return With Load N/A 3.10% 3.68% N/A N/A
--------------------------------------------------------------------------------
Annualized 5 Year
Total Return 5.94% 5.70% 5.73% 6.78% 5.80%
--------------------------------------------------------------------------------
Annualized 5 Year
Total Return With Load N/A 4.73% 5.41% N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 5.30% 5.70% 5.15% N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date
With Load N/A 4.89% 5.15% 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
A shares were offered beginning April 12, 1994. Performance for Retail Class A
shares with load reflects the deduction of the 4.50% sales charge. Retail
Class B shares were offered beginning September 14, 1998. Performance for
Retail Class B shares with load reflects the deduction of the applicable
contingent deferred sales charge
* Performance shown prior to the actual inception date of the Retail Class B
shares represents that of the Institutional Class adjusted for the sales
charge only. No adjustments have been made for Retail Class 12b-1 fees and
expenses. With such adjustments, performance would be lower than shown.
Annualized performance since actual inception for Retail Class B shares is
-0.31% without CDSC and -2.58% with CDSC
The performance of the Lehman Aggregate Bond Index does not include operating
expenses that are incurred by thePortfolio.
45
<PAGE>
FIXED INCOME PORTFOLIOS
INCOME PORTFOLIO CONTINUED
STATEMENT OF NET ASSETS
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS
% OF TOTAL PORTFOLIO INVESTMENTS
Repurchase Agreements -- 3%
Yankee Bonds -- 3%
Asset-Backed
Securities -- 4%
U.S. Treasury
Obligations -- 18%
U.S. Government
Mortgage-Backed
Obligations -- 32%
Non-Agency Mortgage-Backed
Obligations -- 1%
Preferred
Stock -- 1%
Corporate
Obligations -- 38%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 23.5%
U.S. TREASURY BONDS
10.750%, 08/15/05 $15,000 $ 17,722
6.000%, 02/15/26 5,000 4,868
U.S. TREASURY NOTES
6.250%, 06/30/02 13,000 12,888
5.875%, 11/15/04 11,500 11,192
7.875%, 11/15/04 15,000 15,741
7.500%, 02/15/05 2,500 2,592
6.000%, 08/15/09 7,000 6,844
6.500%, 02/15/10 10,000 10,196
------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $83,452) $82,043
------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 1.0%
FEDERAL HOME LOAN BANK (A)
8.200%, 07/27/18 6,100 1,449
FEDERAL HOME LOAN MORTGAGE
CORPORATION (A)
8.230%, 01/26/18 4,480 1,064
8.150%, 02/22/29 10,000 990
------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $3,482) $ 3,503
------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 39.4%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
8.500%, 11/01/01 16 16
9.000%, 01/01/02 11 11
8.000%, 01/01/08 56 56
14.750%, 03/01/10 20 23
8.500%, 09/01/26 663 673
FEDERAL HOME LOAN MORTGAGE
CORPORATION, GTD
9.000%, 09/15/08 22 21
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
7.000%, 02/01/26 1,976 1,890
7.000%, 03/01/29 1,646 1,575
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (B)
7.000%, 05/01/30 $10,000 $ 9,566
7.500%, 05/01/30 58,500 57,238
8.000%, 05/01/30 31,500 31,451
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
9.750%, 09/25/18 260 272
6.000%, 07/18/26 10,732 9,654
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION
7.500%, 05/15/22 524 515
7.500%, 10/15/23 2,299 2,261
7.500%, 12/15/23 1,048 1,031
7.000%, 02/15/24 2,868 2,759
7.000%, 05/15/24 2,842 2,733
7.000%, 05/15/24 2,925 2,814
7.500%, 05/15/24 2,030 1,997
7.500%, 10/15/24 1,693 1,665
7.000%, 09/20/25 1,137 1,088
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION, REMIC
7.750%, 06/16/20 1,000 1,002
STUDENT LOAN MARKETING
ASSOCIATION, REMIC (C)
6.532%, 07/25/06 3,752 3,737
6.462%, 04/25/07 3,831 3,809
------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS
(Cost $139,915) $137,857
------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 48.2%
BANKS -- 11.0%
BANK OF AMERICA, MTN (C)
6.150%, 04/27/01 4,000 4,000
6.170%, 03/22/01 5,000 5,000
6.280%, 09/06/01 5,000 5,000
BANK OF NEW YORK (D)
7.780%, 12/01/26 1,500 1,350
BANKAMERICA, SERIES A (D)
8.070%, 12/31/26 2,500 2,312
CRESTAR FINANCIAL
8.160%, 12/15/26 3,500 3,356
FIRST UNION NATIONAL BANK (C)
6.180%, 05/16/00 10,000 9,999
MELLON CAPITAL I
7.720%, 12/01/26 2,500 2,269
ROYAL BANK OF CANADA NY
CD (C)
6.120%, 03/22/01 5,000 4,998
--------------------------------------------------------------------------------
TOTAL BANKS $ 38,284
--------------------------------------------------------------------------------
46
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 0.9%
SEAGATE TECHNOLOGY
7.125%, 03/01/04 $ 3,500 $ 3,172
--------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 3,172
--------------------------------------------------------------------------------
ENTERTAINMENT -- 2.8%
COMCAST CABLEVISION
8.875%, 05/01/17 2,000 2,100
COMCAST CABLEVISION, MTN
8.375%, 05/01/07 2,725 2,725
CSC HOLDINGS
8.125%, 07/15/09 1,000 947
7.875%, 02/15/18 2,500 2,222
TIME WARNER
7.250%, 10/15/17 2,000 1,832
--------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 9,826
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 18.3%
ABBEY NATIONAL
8.963%, 12/29/49 2,000 1,937
AT&T CAPITAL, MTN (C)
7.594%, 06/14/00 5,000 5,006
BEAR STEARNS
7.625%, 12/07/09 3,000 2,865
GENERAL MOTORS ACCEPTANCE,
MTN (C)
6.520%, 07/11/01 10,000 10,013
GOLDEN STATE ESCROW
7.000%, 08/01/03 4,500 4,123
7.125%, 08/01/05 2,000 1,755
GOLDMAN SACHS GROUP, MTN,
SERIES B (C)
6.310%, 08/07/00 8,000 8,000
MORGAN STANLEY, DEAN WITTER,
DISCOVER, EURO MTN,
SERIES D (C)
6.400%, 12/19/01 7,380 7,370
NEWCOURT CREDIT
6.875%, 02/16/05 3,500 3,349
SALOMON SMITH BARNEY HOLDINGS,
MTN (C)
6.430%, 03/08/02 10,000 10,006
SPIEKER PROPERTIES LP
6.750%, 01/15/08 3,000 2,760
STORAGE USA
7.125%, 11/01/03 2,000 1,922
TEXTRON FINANCIAL (C) (D)
6.420%, 05/12/00 5,000 5,000
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $64,106
--------------------------------------------------------------------------------
INDUSTRIAL -- 8.1%
ANADARKO PETROLEUM
7.200%, 03/15/29 3,800 3,420
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
CONAGRA (C) (D)
6.340%, 06/12/00 10,000 $ 9,995
FEDERAL-MOGUL
7.750%, 07/01/06 $3,400 2,779
J SEAGRAM & SONS
7.500%, 12/15/18 4,000 3,765
NRG ENERGY
7.500%, 06/01/09 4,000 3,660
TENNESSEE GAS PIPELINE
7.000%, 10/15/28 2,000 1,750
UNION PACIFIC
7.600%, 05/01/05 3,000 2,925
--------------------------------------------------------------------------------
TOTAL INDUSTRIAL $ 28,294
--------------------------------------------------------------------------------
RETAIL -- 1.1%
DILLARD'S
5.790%, 11/15/01 2,000 1,878
7.000%, 12/01/28 3,000 2,010
--------------------------------------------------------------------------------
TOTAL RETAIL $ 3,888
--------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 6.0%
360 COMMUNICATIONS
7.600%, 04/01/09 5,000 4,988
GTE (C)
6.300%, 01/05/01 5,000 4,997
GTE SOUTH
6.125%, 06/15/07 2,000 1,820
QWEST COMMUNICATIONS
INTERNATIONAL
7.250%, 11/01/08 5,000 4,706
SPRINT CAPITAL
6.900%, 05/01/19 5,000 4,444
--------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 20,955
--------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $175,497) $168,525
--------------------------------------------------------------------------------
YANKEE BONDS -- 4.4%
AMVESCAP PLC, SERIES REGS
6.375%, 05/15/03 2,000 1,870
AT&T CANADA
7.650%, 09/15/06 2,000 1,978
CANADIAN NATIONAL RAILWAY
6.450%, 07/15/06 2,000 1,842
GULF CANADA RESOURCES
8.250%, 03/15/17 2,000 1,820
HUSKY OIL (D)
7.550%, 11/15/16 2,100 1,906
ROYAL CARIBBEAN CRUISES
7.250%, 08/15/06 5,000 4,769
SAGA PETROLEUM A.S. (D)
9.125%, 07/15/14 1,000 1,103
--------------------------------------------------------------------------------
TOTAL YANKEE BONDS
(Cost $16,315) $ 15,288
--------------------------------------------------------------------------------
47
<PAGE>
FIXED INCOME PORTFOLIOS
INCOME PORTFOLIO CONCLUDED
PRINCIPAL AMOUNT MARKET
DESCRIPTION (000)/SHARES VALUE (000)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 4.8%
CITIBANK CREDIT CARD MASTER
TRUST I, SERIES 1998-9,
CLASS A
5.300%, 01/09/06 $2,000 $ 1,862
CONTINENTAL HOME EQUITY
TRUST, SERIES 1998-1,
CLASS A6
6.580%, 12/15/18 3,000 2,892
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-3, CLASS A4
6.840%, 10/20/13 556 554
L.A. ARENA FUNDING,
SERIES 99-1, CLASS A
7.656%, 12/15/26 2,000 1,820
PREMIER AUTO TRUST,
SERIES 1998-3, CLASS A3
5.880%, 12/08/01 2,515 2,508
THE MONEY STORE HOME
EQUITY TRUST, SERIES 1996-C,
CLASS A4
7.400%, 06/15/21 1,848 1,844
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D,
CLASS AF3
6.345%, 11/15/21 986 977
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D,
CLASS AF5
6.555%, 12/15/38 4,350 4,151
--------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $17,257) $ 16,608
--------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -- 1.4%
COUNTRYWIDE FUNDING,
SERIES 1994-4, CLASS A12
6.950%, 04/25/24 5,452 4,912
--------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED
OBLIGATIONS
(Cost $5,234) $ 4,912
--------------------------------------------------------------------------------
PREFERRED STOCK -- 1.1%
SPG PROPERTIES, 7.890% 90,000 4,005
--------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $4,573) $ 4,005
--------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.3%
FIRST BOSTON
(5.820%, dated 04/28/00,
matures 05/01/00, repurchase
price $11,488,113 (collateralized
by U.S. Government Agency
Obligation: total market value
$11,826,941) $11,483 $ 11,483
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $11,483) $ 11,483
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 127.1%
(Cost $457,208) $444,224
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (27.1%) $(94,705)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 36,101,129 outstanding shares
of beneficial interest 363,122
Portfolio Shares of Retail Class
A (unlimited authorization -- no par value)
based on 605,824 outstanding shares
of beneficial interest 6,330
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 45,178 outstanding shares
of beneficial interest 457
Undistributed net investment income 53
Accumulated net realized loss on investments (7,459)
Net unrealized depreciation on investments (12,984)
================================================================================
TOTAL NET ASSETS -- 100.0% $349,519
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.51
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $9.62
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($9.62 / 95.50%) $10.07
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHAR -- RETAIL CLASS B $9.51
(A) ZERO COUPON SECURITY. THE EFFECTIVE YIELD AT TIME OF PURCHASE IS SHOWN AS
THE RATE ON THE STATEMENT OF NET ASSETS.
(B) WHEN ISSUED SECURITY (TOTAL COST $99,176,719)
(C) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF
NET ASSETS IS THE RATE IN EFFECT ON APRIL 30, 2000.
(D) 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.
CD--CERTIFICATE OF DEPOSIT
GTD--GUARANTEED MORTGAGE CERTIFICATE
MTN--MEDIUM TERM NOTE
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
48
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
EQUITY PORTFOLIOS
SIMPLY STATED, OUR INVESTMENT MANAGEMENT PHILOSOPHY FOR THE EQUITY PORTFOLIOS
IS QUALITY FOR THE LONG-TERM. WE LOOK FOR SUPERIOR BUSINESSES THAT ARE
REASONABLY PRICED, BECAUSE OVER THE LONG HAUL, EXPERIENCE HAS SHOWN THE BENEFITS
OF BUYING A QUALITY COMPANY, AT A FAIR PRICE, VERSUS A FAIR BUSINESS AT A
BARGAIN PRICE.
IN THEIR RESEARCH, OUR PORTFOLIO MANAGERS LOOK FOR BUSINESSES THAT
DEMONSTRATE FASTER-THAN-AVERAGE GROWTH, STRONG CASH FLOWS, AND RETURNS ON
CAPITAL IN EXCESS OF THE COST OF CAPITAL.
WE LOOK FOR HIGH-QUALITY COMPANIES AND USE A BOTTOM-UP STOCK SELECTION
PROCESS WITH STRICT CRITERIA. WE SELECT THE STOCKS OF COMPANIES THAT DEMONSTRATE
SUPERIOR SALES, CASH FLOW AND EARNINGS GROWTH RATES, AND THAT OPERATE IN A
DYNAMIC MARKET AND INDUSTRY. WE ALSO LOOK FOR STRONG BALANCE SHEETS AND CAPABLE,
SHAREHOLDER-ORIENTED MANAGEMENT. WE LIKE COMPANIES THAT CAN EARN RETURNS ON
CAPITAL IN EXCESS OF THEIR COST OF CAPITAL.
WE BELIEVE HISTORY HAS BECOME A LESS-THAN-ACCURATE PREDICTOR OF THE
FUTURE; THUS, WE PLACE GREATER EMPHASIS ON MEETING WITH MANAGEMENT TO ASSESS
EACH COMPANY'S FUTURE. INCREASINGLY IMPORTANT IS THE TEAMING OF STRONG
FINANCIALS WITH ENLIGHTENED CORPORATE LEADERSHIP, A COMBINATION NECESSARY TO
THRIVE IN TODAY'S HIGHLY COMPETITIVE, RAPIDLY EVOLVING BUSINESS ENVIRONMENT. OUR
TEAM OF PROFESSIONALS, WHICH INCLUDES ALL OF OUR PORTFOLIO MANAGERS, SEARCHES
FOR THE BEST COMPANIES BASED ON OUR SPECIFIC SCREENING CRITERIA.
NEXT, WE ASSESS FUTURE EARNINGS PROSPECTS TO IDENTIFY THE COMPANIES THAT
CAN CONTINUE TO GENERATE SUPERIOR SALES AND PROFIT GROWTH. WE EXAMINE INDUSTRY
DYNAMICS, THE COMPANIES' RELATIVE POSITIONS, COST STRUCTURES, MARGIN TRENDS, AND
MANAGEMENT PLANS. FINALLY, WE ASSESS EACH COMPANY'S CURRENT STOCK VALUATION
RELATIVE TO FUTURE EARNINGS STREAM AGAINST HISTORY, COMPETITORS, AND THE S&P
500.
WE REVIEW A PORTFOLIO HOLDING FOR SALE UNDER THE FOLLOWING CIRCUMSTANCES:
WHEN THE PRICE OBJECTIVE IS ACHIEVED, WHEN FUNDAMENTALS DETERIORATE AND MAKE THE
ACHIEVEMENT OF OBJECTIVES UNLIKELY, WHEN THE STOCK UNDERPERFORMS THE
S&P 500 BY 20 PERCENT OR MORE ON A RELATIVE BASIS, AND WHEN A MORE ATTRACTIVE
OPPORTUNITY PRESENTS ITSELF.
49
<PAGE>
EQUITY PORTFOLIOS
MANAGEMENT DISCUSSION AND ANALYSIS
BALANCED PORTFOLIO
[PHOTO OMITTED]
CHARLES E. KNUDSEN, CFA
--------------------------------------------------------------------------------
PORTFOLIO MANAGER
CHARLES E. KNUDSEN, CFA, IS THE MANAGING DIRECTOR OF ALLIED INVESTMENT ADVISORS,
INC. HE IS THE PORTFOLIO MANAGER OF THE BALANCED PORTFOLIO. HE HAS MORE THAN 12
YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The old adage "don't judge a book by its cover" certainly applies to the
investment markets during the last year. The S&P 500's 12-month return of 10.1%
or the NASDAQ's meteoric 52.2% return do not nearly reflect what went on with
most stocks. In fact, most stocks (66%) were down for the period, with the
median return for the stocks in the S&P 500 of -11.3%. In a market that is
supposedly experiencing "irrational exuberance," nearly two thirds of the 500
stocks are at least 20% below their 52-week high. Quite simply, most of the
market has been through or is in a severe correction. The bond market was
equally paradoxical. Last spring, the Federal Reserve was still in an "easing"
mood. That changed in September, when they reversed course and instituted the
first of what is so far five quarter-point interest rate hikes in an attempt to
slow the economy and fend off any inflationary pressures. This led to a rather
sharp increase in short-term interest rates over the past 12 months. Longer-term
rates moved up only slightly, though. For the year, the Lehman Aggregate Bond
Index was up a modest 1.3%.
In the wild, confusing market, the ARK Balanced Portfolio continued to
deliver strong results, outperforming both its stock and bond benchmarks. The
list of companies that contributed to the superior performance certainly
includes several technology and telecommunication names, as these two sectors
again delivered spectacular moves. Names like Nortel Networks, Motorola, Oracle,
Texas Instruments, Intel, and Cisco were all up strongly over the period. But
other sectors, like media (Disney, Time Warner), finance (Wadell & Reed, Morgan
Stanley Dean Witter), and healthcare (Amgen, Warner Lambert) also did very well.
As the year came to a close, we began to lighten up on our equity allocation by
reducing some of our technology holdings. Some of the money we moved to finance
(Firstar) and a few select consumer-related names, like CVS.
While the first year of the new millennium will continue to present many
challenges and surprises, the overall environment of low inflation and moderate
economic growth will still provide a positive backdrop for financial assets.
Regardless of what lies ahead, we will continue to manage the ARK Balanced
Portfolio as we always have, by looking for attractive, high-quality investment
opportunities in both the bond and the stock markets that will provide our
investors with attractive, long-term returns.
50
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PERFORMANCE AS OF
APRIL 30, 2000
[CHART OMITTED]
PLOT POINTS FOLLOWS
ARK BALANCED , S&P 500 LEHMAN BROS 60/40 HYBRID LIPPER
PORTFOLIO COMPOSITE AGGREGATE OF THE S&P 500 BAL FUNDS
INSTITUTIONAL CLASS INDEX BOND AND LEHMAN AVERAGE** AVERAGE
7/31/93 100000 100000 100000 100000 100000
APRIL 94 103771 102689 98354 100953 101567
APRIL 95 107663 120587 105563 114440 110830
APRIL 96 130164 156992 114673 138679 133129
APRIL 97 140382 196429 122792 163322 150409
APRIL 98 183830 277043 136201 209771 189455
APRIL 90 217232 337577 144741 243439 207340
APRIL 00 265870 371773 146565 259968 218183
<TABLE>
<CAPTION>
ARK BALANCED ARK BALANCED S&P 500 LEHMAN BROS 60/40 HYBRID LIPPER
PORTFOLIO PORTFOLIO COMPOSITE AGGREGATE BOND OF THE S&P 500 BAL FUNDS
RETAIL CLASS A RETAIL CLASS A W/LOAD INDEX INDEX AND LEHMAN AGGEGATE** AVERAGE
<S> <C> <C> <C> <C> <C> <C>
3/31/94 10000 9525 10000 10000 10000 10000
APRIL 94 10059 9581 10128 9920 10045 10026
APRIL 95 10394 9900 11894 10647 11387 10940
APRIL 96 12497 11903 15485 11566 13799 13142
APRIL 97 13454 12814 19375 12385 16251 14847
APRIL 98 17580 16744 27327 13737 20872 18702
APRIL 99 20739 19753 33298 14599 24222 20467
APRIL 00 25356 24151 36671 14783 25867 21538
</TABLE>
[CHART OMITTED]
PLOT POINTS FOLLOWS
<TABLE>
<CAPTION>
ARK BALANCED PORTFOLIO S&P 500 LEHMAN BROS 60/40 HYBRID LIPPER
RETAIL CLASS B COMPOSITE AGGREGATE BOND OF THE S&P 500 BAL FUNDS
W/LOAD & WO/CDSC* INDEX INDEX AND LEHMAN AGGREGATE* AVERAGE
<S> <C> <C> <C> <C> <C>
3/31/94 10000 10000 10000 10000 10000
APRIL 94 10377 10268 9835 10095 10157
APRIL 95 10766 12059 10556 11444 11083
APRIL 96 13016 15699 11467 13868 13313
APRIL 97 14038 19643 12279 16332 15041
APRIL 98 18383 27704 13620 20977 18946
APRIL 99 21615 33758 14474 24344 20734
APRIL 00 26223 37177 14656 25997 21818
</TABLE>
<TABLE>
<CAPTION>
60/40 Blend
of the S&P 500 Lehman
Inst'l Retail Retail S&P500 Lipper Composite Aggregate
Class Class A Class B* & Lehman** Balanced Index Bond
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
One Year
Total Return 22.39% 22.26% 21.32% 6.79% 5.23% 10.13% 1.26%
---------------------------------------------------------------------------------------------------
One Year
Total Return with Load N/A 16.37% 16.32% N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------
Annualized 3 Year
Total Return 23.72% 23.50% 23.15% 16.76% 13.04% 23.70% 6.07%
---------------------------------------------------------------------------------------------------
Annualized 3 Year
Total Return With Load N/A 21.51% 22.49% N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------
Annualized 5 Year
Total Return 19.82% 19.51% 19.49% 17.83% 14.49% 25.25% 6.78%
---------------------------------------------------------------------------------------------------
Annualized 5 Year
Total Return With Load N/A 18.36% 19.29% N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 15.44% 15.46% 15.21% N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date
With Load N/A 14.55% 15.21% N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------
</TABLE>
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning July 16, 1993. Retail Class
A shares were offered beginning March 9, 1994. Performance for the Retail
Class A shares with load reflects the deduction of the 4.75% sales charge.
Retail Class B shares were offered beginning September 14, 1998. Performance
for Retail Class B shares with load reflects the deduction of the applicable
contingent deferred sales charge.
* Performance shown prior to the actual inception date of the Retail Class B
shares represents that of the Institutional Class adjusted for the sales
charge only. No adjustments have been made for Retail Class 12b-1 fees and
expenses. With such adjustments, performance would be lower than shown.
Annualized performance since actual inception for Retail Class B shares is
27.97% without CDSC and 25.85% with CDSC.
The performance of the S&P 500 Composite Index and Lehman Aggregate Bond Index
does not include operating expenses that are incurred by the Portfolio.
**Benchmark is comprised of two unmanaged indexes, weighted 60% S&P 500
Composite Index and 40% Lehman Brothers Aggregate Bond Index. The portfolio
uses a blended index as a comparison index because it is better suited to the
Portfolio's objective.
51
<PAGE>
EQUITY PORTFOLIOS
BALANCED PORTFOLIO CONTINUED
STATEMENT OF NET ASSETS
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Government Agency Obligations -- 1%
Asset-Backed Securities -- 1%
Repurchase Agreements -- 7%
U.S. Treasury
Obligations -- 7%
U.S. Government
Mortgage-Backed
Obligations -- 10%
Corporate
Obligations -- 7%
Non-Agency Mortgage-Backed
Obligations -- 1%
Common
Stocks -- 66%
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
COMMON STOCKS -- 65.8%
AIRCRAFT -- 1.0%
UNITED TECHNOLOGIES 65,000 $ 4,042
--------------------------------------------------------------------------------
TOTAL AIRCRAFT $ 4,042
--------------------------------------------------------------------------------
AUTOMOTIVE -- 0.7%
BORG-WARNER AUTOMOTIVE 25,000 1,045
GENTEX* 50,000 1,613
--------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 2,658
--------------------------------------------------------------------------------
BANKS -- 4.2%
BANK ONE 100,000 3,050
CHASE MANHATTAN 67,700 4,879
FIRSTAR 150,000 3,731
WELLS FARGO 129,375 5,312
--------------------------------------------------------------------------------
TOTAL BANKS $16,972
--------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.7%
CLEAR CHANNEL
COMMUNICATIONS* 30,000 2,160
MEDIAONE GROUP* 62,700 4,742
--------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 6,902
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 5.0%
CIENA* 10,000 1,236
CISCO SYSTEMS* 90,000 6,240
COMVERSE TECHNOLOGY* 42,000 3,746
LUCENT TECHNOLOGIES 60,000 3,731
MOTOROLA 44,500 5,298
--------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $20,251
--------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.5%
MICROSOFT* 40,400 2,818
ORACLE SYSTEMS* 90,000 7,194
--------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $10,012
--------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 7.0%
AMERICAN POWER CONVERSION* 40,000 1,413
ELECTRONICS FOR IMAGING* 86,000 4,494
EMC* 60,000 8,336
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
HEWLETT PACKARD 40,500 $ 5,468
JABIL CIRCUIT* 160,000 6,550
LEXMARK INTERNATIONAL
GROUP, CL A* 15,000 1,770
--------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $28,031
--------------------------------------------------------------------------------
CONGLOMERATE -- 0.9%
TYCO INTERNATIONAL LIMITED 80,000 3,675
--------------------------------------------------------------------------------
TOTAL CONGLOMERATE $ 3,675
--------------------------------------------------------------------------------
DRUGS -- 5.6%
ABBOTT LABORATORIES 50,000 1,922
AMGEN* 92,000 5,152
BRISTOL-MYERS SQUIBB 85,000 4,457
SCHERING PLOUGH 71,800 2,894
WARNER LAMBERT 70,000 7,967
--------------------------------------------------------------------------------
TOTAL DRUGS $22,392
--------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 2.0%
GENERAL ELECTRIC 51,800 8,146
--------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $ 8,146
--------------------------------------------------------------------------------
ENERGY -- 0.4%
HALLIBURTON 40,000 1,768
--------------------------------------------------------------------------------
TOTAL ENERGY $ 1,768
--------------------------------------------------------------------------------
ENTERTAINMENT -- 3.2%
AT&T-LIBERTY MEDIA, CL A* 37,834 1,889
CARNIVAL, CL A 87,000 2,164
CBS 25,000 1,469
ROYAL CARIBBEAN CRUISES 60,000 1,249
TIME WARNER 15,000 1,349
WALT DISNEY 109,000 4,721
--------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $12,841
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.1%
CITIGROUP 52,500 3,120
FREDDIE MAC 35,000 1,608
MERRILL LYNCH 25,000 2,548
MORGAN STANLEY, DEAN WITTER,
DISCOVER 100,000 7,675
WADDELL & REED FINANCIAL,
CL A 60,000 1,598
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $16,549
--------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 2.5%
PEPSICO 142,100 5,213
RALSTON PURINA GROUP 140,000 2,476
SEAGRAM 45,000 2,430
--------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $10,119
--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS & APPLIANCES-- 1.9%
COLGATE-PALMOLIVE 100,400 5,735
ENERGIZER HOLDINGS* 46,666 796
WINDMERE-DURABLE HOLDINGS 70,000 1,124
--------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS & APPLIANCES $ 7,655
--------------------------------------------------------------------------------
52
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
MARKET
DESCRIPTION SHARES VALUE (000)
------------------------------------------------------------------------
INSURANCE -- 1.9%
AMERICAN INTERNATIONAL GROUP 69,218 $ 7,592
------------------------------------------------------------------------
TOTAL INSURANCE $ 7,592
------------------------------------------------------------------------
INTERNET SERVICES -- 1.3%
NORTEL NETWORKS 46,400 5,255
------------------------------------------------------------------------
TOTAL INTERNET SERVICES $ 5,255
------------------------------------------------------------------------
MACHINERY -- 0.4%
BLACK & DECKER 35,000 1,472
------------------------------------------------------------------------
TOTAL MACHINERY $ 1,472
------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES-- 1.8%
GUIDANT* 102,400 5,875
JOHNSON & JOHNSON 15,000 1,238
------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 7,113
------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES-- 1.5%
CENDANT* 90,000 1,389
FIRST DATA 96,700 4,708
------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 6,097
------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.6%
KIMBERLY-CLARK 45,000 2,613
------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 2,613
------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 1.9%
SMITH INTERNATIONAL* 99,000 7,524
------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 7,524
------------------------------------------------------------------------
RETAIL -- 3.9%
CVS 30,000 1,305
HOME DEPOT 102,600 5,752
LOWE'S 30,000 1,485
OFFICE DEPOT* 100,000 1,056
TARGET 70,700 4,706
WAL-MART STORES 22,000 1,218
------------------------------------------------------------------------
TOTAL RETAIL $ 15,522
------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 5.3%
ALTERA* 70,900 7,250
INTEL 56,200 7,127
TEXAS INSTRUMENTS 42,600 6,939
------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 21,316
------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 4.5%
ADC TELECOMMUNICATIONS* 40,000 2,430
ALLTEL 62,000 4,131
CORNING 10,000 1,975
MCI WORLDCOM* 102,300 4,648
VOICESTREAM WIRELESS* 27,000 2,673
WILLIAMS COMMUNICATION
GROUP* 61,700 2,283
------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 18,140
------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $219,542) $264,657
------------------------------------------------------------------------
PREFERRED STOCK -- 0.2%
SPG PROPERTIES, 7.890% 20,000 890
------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $939) $ 890
------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 6.5%
U.S. TREASURY BONDS
8.000%, 11/15/21 $ 500 $ 602
6.000%, 02/15/26 4,000 3,895
U.S. TREASURY NOTES
7.750%, 02/15/01 4,000 4,039
7.500%, 11/15/01 2,400 2,427
6.250%, 02/28/02 2,000 1,984
5.500%, 03/31/03 4,000 3,883
7.500%, 02/15/05 3,500 3,629
7.000%, 07/15/06 2,500 2,559
6.625%, 05/15/07 3,175 3,199
------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $26,693) $ 26,217
------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 1.3%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
5.750%, 06/15/01 3,500 3,460
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.000%, 05/15/08 1,750 1,609
------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $5,245) $ 5,069
------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 9.7%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
9.000%, 08/01/01 11 12
8.500%, 11/01/01 33 34
9.000%, 11/01/01 37 38
9.000%, 01/01/02 12 13
9.500%, 07/01/02 2 2
6.500%, 04/01/08 620 593
11.000%, 01/01/16 59 65
8.500%, 09/01/26 74 75
7.000%, 08/01/29 1,761 1,687
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
7.000%, 02/01/07 188 184
8.000%, 12/01/08 231 228
7.500%, 02/01/20 2,986 2,922
7.000%, 12/01/25 638 610
7.000%, 02/01/26 1,670 1,597
6.500%, 02/11/29 1,779 1,660
6.500%, 04/01/29 3,878 3,619
6.500%, 06/01/29 958 895
7.000%, 06/01/29 1,917 1,834
7.500%, 01/01/30 1,592 1,560
7.500%, 01/01/30 1,594 1,561
7.500%, 01/01/30 2,966 2,904
7.500%, 04/01/30 2,246 2,197
7.500%, 04/01/30 5,754 5,630
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
9.750%, 09/25/18 87 91
53
<PAGE>
EQUITY PORTFOLIOS
BALANCED PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION
7.500%, 10/15/23 $2,069 $ 2,035
7.500%, 12/15/23 698 686
7.000%, 02/15/24 1,637 1,574
7.000%, 05/15/24 1,705 1,640
7.000%, 05/15/24 1,755 1,688
7.000%, 09/20/25 853 816
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION, REMIC
7.750%, 06/16/20 300 300
--------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $39,390) $38,750
--------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 7.3%
BANKS -- 0.6%
BANK OF NEW YORK (A)
7.780%, 12/01/26 500 450
CIT GROUP
7.375%, 03/15/03 850 843
CITICORP CAPITAL I
7.933%, 02/15/27 250 231
CRESTAR FINANCIAL
8.160%, 12/15/26 800 767
--------------------------------------------------------------------------------
TOTAL BANKS $ 2,291
--------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 0.2%
SEAGATE TECHNOLOGY
7.125%, 03/01/04 1,000 906
--------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 906
--------------------------------------------------------------------------------
ENTERTAINMENT -- 1.5%
COMCAST CABLEVISION
8.875%, 05/01/17 500 525
COMCAST CABLEVISION, MTN
8.375%, 05/01/07 1,000 1,000
CSC HOLDINGS
8.125%, 07/15/09 1,000 947
7.875%, 02/15/18 750 667
ROYAL CARIBBEAN CRUISES, YB
7.250%, 08/15/06 1,400 1,335
TIME WARNER
9.125%, 01/15/13 1,250 1,339
VIACOM
6.750%, 01/15/03 500 486
--------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 6,299
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 1.7%
ASSOCIATES N.A.
5.500%, 02/15/04 500 462
AT&T CAPITAL, MTN
7.500%, 11/15/00 1,000 1,003
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
BEAR STEARNS
7.625%, 02/01/05 $1,000 $ 980
GOLDEN STATE ESCROW
7.000%, 08/01/03 1,000 916
HOUSEHOLD FINANCE
7.250%, 05/15/06 1,000 961
MELLON CAPITAL I
7.720%, 12/01/26 600 544
MELLON CAPITAL II
7.995%, 01/15/27 500 466
NEWCOURT CREDIT
6.875%, 02/16/05 1,500 1,435
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 6,767
--------------------------------------------------------------------------------
INDUSTRIAL -- 1.6%
APACHE
7.625%, 07/01/19 1,000 974
CANADIAN NATIONAL RAILWAY
6.900%, 07/15/28 500 426
HUSKY OIL, YB (A)
7.550%, 11/15/16 1,225 1,112
HYDRO-QUEBEC, YB
7.500%, 04/01/16 890 864
8.050%, 07/07/24 500 519
SAGA PETROLEUM A.S., YB (A)
9.125%, 07/15/14 1,000 1,103
J SEAGRAM & SONS
7.500%, 12/15/18 1,000 941
TENNESSEE GAS PIPELINE
7.000%, 10/15/28 500 437
--------------------------------------------------------------------------------
TOTAL INDUSTRIAL $ 6,376
--------------------------------------------------------------------------------
RETAIL -- 0.3%
DILLARD'S
7.850%, 10/01/12 540 444
7.000%, 12/01/28 1,200 804
--------------------------------------------------------------------------------
TOTAL RETAIL $ 1,248
--------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 1.4%
360 COMMUNICATIONS
7.600%, 04/01/09 1,250 1,247
AT&T CANADA (A)
7.625%, 03/15/05 1,000 990
QWEST COMMUNICATIONS
INTERNATIONAL
7.250%, 11/01/08 1,000 941
SPRINT CAPITAL, GLOBAL BOND
6.125%, 11/15/08 2,150 1,911
WORLDCOM
7.550%, 04/01/04 500 499
--------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 5,588
--------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $30,950) $29,475
--------------------------------------------------------------------------------
54
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 1.0%
CONTIMORTGAGE HOME EQUITY
LOAN TRUST, SERIES 1998-2,
CLASS A6
6.360%, 11/15/19 $ 600 $ 570
CONTIMORTGAGE HOME EQUITY
TRUST, SERIES 1998-1,
CLASS A4
6.280%, 01/15/13 450 440
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-3, CLASS A4
6.840%, 10/20/13 158 157
PREMIER AUTO TRUST,
SERIES 1998-3, CLASS A4
5.960%, 10/08/02 475 468
PREMIER AUTO TRUST,
SERIES 1998-4, CLASS A3
5.690%, 06/08/02 500 497
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1996-C, CLASS A4
7.400%, 06/15/21 524 522
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF3
6.345%, 11/15/21 216 214
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF5
6.555%, 12/15/38 400 382
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1998-B, CLASS AF4
6.115%, 06/15/21 873 859
--------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $4,158) $ 4,109
--------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -- 0.4%
COUNTRYWIDE FUNDING,
SERIES 1994-4, CLASS A12
6.950%, 04/25/24 1,905 1,716
--------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-
BACKED OBLIGATIONS
(Cost $1,779) $ 1,716
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.5%
FIRST BOSTON
(5.820%, dated 04/28/00,
matures 05/01/00, repurchase
price $30,250,416 (collateralized
by U.S. Government Agency
Obligation: total market
value $31,119,432) 30,236 30,236
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $30,236) $ 30,236
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.7%
(Cost $358,932) $401,119
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.3% $ 1,302
================================================================================
MARKET
DESCRIPTION VALUE (000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 20,609,521 outstanding shares
of beneficial interest $ 294,378
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 2,559,886 outstanding shares
of beneficial interest 34,238
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 653,565 outstanding shares
of beneficial interest 9,881
Undistributed net investment income 699
Accumulated net realized gain on investments 21,038
Net unrealized appreciation on investments 42,187
================================================================================
TOTAL NET ASSETS -- 100.0% $402,421
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $16.90
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $16.84
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($16.84 / 95.25%) $17.68
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS B $16.82
================================================================================
*NON-INCOME PRODUCING SECURITY
(A) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL INVESTORS.
CL--CLASS
MTN--MEDIUM TERM NOTE
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
YB--YANKEE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
55
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
EQUITY INCOME PORTFOLIO
[PHOTO OMITTED]
CLYDE L. RANDALL, CFA
--------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
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 MORE THAN 13 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
[PHOTO OMITTED]
ALLEN J. ASHCROFT, JR.
--------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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 19 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The ARK Equity Income Portfolio invests primarily in dividend paying common
stocks. The Portfolio seeks to provide current income in addition to long-term
capital appreciation. As of April 30, 2000, the Portfolio was invested in
approximately 2% cash, 4% securities convertible into common stocks, and 94%
common stocks. About 9% of the Portfolio was invested in the common stocks of
non-U.S. companies. The Portfolio is represented in most of the major sectors of
the U.S. stock market, weighted somewhat towards those sectors with higher
dividend payouts: financials, utilities, energy, capital goods and healthcare.
The Portfolio owns only dividend-paying stocks because we believe that meets our
shareholders' expectations for an income-oriented portfolio. The technology
allocation is small because most technology stocks pay no dividend.
While the Equity Income Portfolio lagged the broad market averages over
the past 12 months because of the continued valuation expansion of technology
stocks, it returned to outperforming its peer group averages because of the
changes that we described last year. We upgraded the Portfolio in capitalization
and quality, diversified the sector allocation and focused somewhat more on
growth rather than pure yield. The Portfolio's best performers were a diverse
group: Nortel, Dynegy (which merged with our original investment Illinova),
Philips Electronics, Waddell & Reed and Warner Lambert (which is merging with
Pfizer). The worst performers followed the market sector returns: basic
industry, consumer and financials. The exception was Pitney Bowes, which, after
several years of outperformance, was hurt by the perception of Internet-based
competition.
We seek stocks that have a combination of above-average current yield and
dividend growth rate, or that have an above-average yield and appear undervalued
by other criteria as well. We want to own stocks that 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.
Dividends have not become more popular among companies or investors over
the past year, despite the fact that, over time, dividends have contributed a
substantial portion of the total return of the stock market. The S&P 500 had a
current yield of 5.4% at the end of 1981 and now yields just 1.1%. The index's
payout ratio averaged about 50% through 1993, but fell to 35% by the end of
1997. The S&P 500's dividend grew about 6.8% in 1999, the highest rate of growth
since 1996. However, after a slight uptick in 1998, the S&P 500's payout ratio
fell to a new low of 32% in 1999. Some of this trend has to do with the changing
complexion of the
56
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
market indices, towards growth industries, and some is due to a greater
emphasis by individual companies on share repurchase or investment rather than
dividends. We do not see a shift in these priorities soon, unless investors
eventually question the returns from buying high-priced stock.
We continue to seek investments with strong total return prospects. The
ARK Equity Income Portfolio maintains a very conservative posture relative to
the market and equity funds broadly. And in periods when growth stocks have
faltered, the relative performance of this Portfolio has been quite strong.
PERFORMANCE AS OF
APRIL 30, 2000
[CHART OMITTED]
PLOT POINTS FOLLOWS
ARK EQUITY INCOME S&P 500 LIPPER EQUITY
INSTITUTIONAL CLASS COMPOSITE INDEX INCOME FUNDS CLASSIFICATION
11/30/96 100000 100000 100000
APRIL 97 104419 106644 104248
APRIL 98 138919 150411 139297
APRIL 99 144711 183276 149368
APRIL 00 152526 201842 143304
[CHART OMITTED]
PLOT POINTS FOLLOWS
<TABLE>
<CAPTION>
ARK EQUITY INCOME ARK EQUITY INCOME S&P 500 LIPPER EQUITY
PORTFOLIO PORTFOLIO COMPOSITE INCOME FUNDS
RETAIL CLASS A RETAIL A W/LOAD INDEX CLASSIFICATION
<S> <C> <C> <C> <C>
5/31/97 10000 9525 10000 10000
APRIL 98 12495 11902 13295 12645
APRIL 99 12985 12368 16200 13559
APRIL 00 13672 13023 17842 13009
</TABLE>
S&P 500 Lipper
Institutional Retail Composite Equity
Class Class A Index Income
--------------------------------------------------------------------------------
One Year
Total Return 5.40% 5.29% 10.13% -2.74%
--------------------------------------------------------------------------------
One Year
Total Return with Load N/A 0.29% N/A N/A
--------------------------------------------------------------------------------
Annualized 3 year
total return 13.47% N/A 23.70% 11.83%
--------------------------------------------------------------------------------
Annualized 3 year
total return with load N/A N/A N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 14.06% 12.19% N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date
With Load N/A 10.37% N/A N/A
--------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning November 15, 1996. Retail
Class A shares were offered beginning May 9, 1997. Performance for Retail
Class A shares with load reflects the deduction of the 4.75% sales charge.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
57
<PAGE>
EQUITY PORTFOLIOS
EQUITY INCOME PORTFOLIO CONTINUED
STATEMENT OF NET ASSETS
[pie chart omitted]
plot points follows
% OF TOTAL PORTFOLIO INVESTMENTS
Real Estate Investment Trusts -- 4%
Miscellaneous Business Services -- 6%
Cash Equivalent -- 2%
Durable Goods -- 12%
Chemicals &
Drugs -- 12%
Consumer
Non-Durable -- 8%
Repurchase Agreements -- 2%
Financial -- 14%
Convertible
Preferred Stock -- 2%
Energy -- 21%
Technology -- 17%
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
COMMON STOCKS -- 94.4%
AIRCRAFT -- 1.8%
UNITED TECHNOLOGIES 25,000 $ 1,555
--------------------------------------------------------------------------------
TOTAL AIRCRAFT $1,555
--------------------------------------------------------------------------------
AUTOMOTIVE -- 4.6%
FORD MOTOR 30,000 1,641
TRW 40,000 2,340
--------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $3,981
--------------------------------------------------------------------------------
BANKS -- 8.4%
CHASE MANHATTAN 25,000 1,802
FIRSTAR 65,000 1,617
FLEETBOSTON FINANCIAL 50,000 1,772
WELLS FARGO 50,000 2,053
--------------------------------------------------------------------------------
TOTAL BANKS $7,244
--------------------------------------------------------------------------------
CHEMICALS -- 1.6%
E.I. DU PONT DE NEMOURS 30,000 1,423
--------------------------------------------------------------------------------
TOTAL CHEMICALS $1,423
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 4.1%
KONINKLIJKE (ROYAL) PHILIPS
ELECTRONICS N.V.,
NEW YORK SHARES 45,000 2,008
MOTOROLA 13,000 1,548
--------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $3,556
--------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 2.3%
HEWLETT PACKARD 15,000 2,025
--------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $2,025
--------------------------------------------------------------------------------
DRUGS -- 11.0%
ABBOTT LABORATORIES 60,000 2,306
AMERICAN HOME PRODUCTS 30,000 1,686
BRISTOL-MYERS SQUIBB 40,000 2,097
WARNER LAMBERT 30,000 3,414
--------------------------------------------------------------------------------
TOTAL DRUGS $9,503
--------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT & UTILITIES-- 6.5%
GENERAL ELECTRIC 15,000 $ 2,359
MONTANA POWER 30,000 1,322
UNICOM 50,000 1,988
--------------------------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT & UTILITIES $5,669
--------------------------------------------------------------------------------
ENERGY -- 2.5%
HALLIBURTON 50,000 2,209
--------------------------------------------------------------------------------
TOTAL ENERGY $2,209
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.4%
WADDELL & REED FINANCIAL,
CL A 110,000 2,929
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $2,929
--------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 4.3%
H.J. HEINZ 35,000 1,190
PEPSICO 45,000 1,651
PHILIP MORRIS 40,000 875
--------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $3,716
--------------------------------------------------------------------------------
GAS/NATURAL GAS -- 4.5%
DYNEGY 40,000 2,618
WILLIAMS 35,000 1,306
--------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $3,924
--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.6%
COLGATE-PALMOLIVE 40,000 2,285
--------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $2,285
--------------------------------------------------------------------------------
INDUSTRIAL AUTOMATION -- 1.4%
ROCKWELL INTERNATIONAL 30,000 1,181
--------------------------------------------------------------------------------
TOTAL INDUSTRIAL AUTOMATION $1,181
--------------------------------------------------------------------------------
INSURANCE -- 1.8%
HARTFORD FINANCIAL SERVICES
GROUP 30,000 1,566
--------------------------------------------------------------------------------
TOTAL INSURANCE $1,566
--------------------------------------------------------------------------------
INTERNET SERVICES -- 2.1%
NORTEL NETWORKS 16,000 1,812
--------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $1,812
--------------------------------------------------------------------------------
LEASING & RENTING -- 1.4%
PITNEY BOWES 30,000 1,226
--------------------------------------------------------------------------------
TOTAL LEASING & RENTING $1,226
--------------------------------------------------------------------------------
MACHINERY -- 1.4%
INGERSOLL RAND 25,000 1,173
--------------------------------------------------------------------------------
TOTAL MACHINERY $1,173
--------------------------------------------------------------------------------
MARINE TRANSPORTATION -- 1.6%
KNIGHTSBRIDGE TANKERS
LIMITED 75,000 1,397
--------------------------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $1,397
--------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 1.1%
FIRST DATA 20,000 974
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 974
--------------------------------------------------------------------------------
58
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 1.6%
HONEYWELL INTERNATIONAL 25,000 $ 1,400
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING $ 1,400
--------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 2.1%
KERR-MCGEE 35,000 1,811
--------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 1,811
--------------------------------------------------------------------------------
PETROLEUM REFINING -- 5.4%
CHEVRON 25,000 2,128
EXXON MOBIL 33,003 2,564
--------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 4,692
--------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-- 4.2%
BOSTON PROPERTIES 36,000 1,255
DUKE REALTY INVESTMENTS 50,000 1,084
SPIEKER PROPERTIES 30,000 1,329
--------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS $ 3,668
--------------------------------------------------------------------------------
RETAIL -- 1.1%
TARGET 15,000 998
--------------------------------------------------------------------------------
TOTAL RETAIL $ 998
--------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS-- 10.3%
BELLSOUTH 45,000 2,191
SPRINT 30,000 1,845
TELEFONICA DE ESPANA, ADR 35,000 2,319
US WEST 35,900 2,556
--------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 8,911
--------------------------------------------------------------------------------
WHOLESALE -- 1.3%
W.W. GRAINGER 25,000 1,084
--------------------------------------------------------------------------------
TOTAL WHOLESALE $ 1,084
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $56,030) $81,912
--------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 4.2%
CVS, TRACES, 6.000% 20,000 1,560
NISOURCE, 7.750% WBK 22,500 871
WBK STRYPES TRUST, 10.000% 40,000 1,200
--------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $3,793) $ 3,631
--------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.5%
FIRST BOSTON
(5.820%, dated 04/28/00,
matures 05/01/00, repurchase
price $1,339,931 (collateralized
by U.S. Government Agency
Obligation: total market
value $1,387,034) $1,339 $ 1,339
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,339) $ 1,339
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(Cost $61,162) $86,882
OTHER ASSETS AND LIABILITIES, NET -- (0.1%) $ (56)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 6,958,129 outstanding shares
of beneficial interest 54,040
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 279,719 outstanding shares
of beneficial interest 3,433
Distribution in excess of net investment income (1)
Accumulated net realized gain on investments 3,634
Net unrealized appreciation on investments 25,720
================================================================================
TOTAL NET ASSETS -- 100.0% $86,826
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $12.00
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $11.99
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($11.99 / 95.25%) $12.59
================================================================================
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
TRACES--TRUST AUTOMATIC COMMON EXCHANGE SECURITIES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
59
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
VALUE EQUITY PORTFOLIO
[PHOTO OMITTED]
J. ERIC LEO
--------------------------------------------------------------------------------
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
J. ERIC LEO IS THE CHIEF INVESTMENT OFFICER AND MANAGING DIRECTOR OF EQUITY
INVESTMENTS FOR ALLIED INVESTMENT ADVISORS, INC. HE IS THE PORTFOLIO MANAGER OF
THE VALUE EQUITY PORTFOLIO. HE HAS MORE THAN 26 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
REVIEW AND OUTLOOK
The ARK Value Equity Portfolio Institutional Class returned 10.87% for the
fiscal year ended April 30, 2000. Performance during this period modestly
outperformed the 10.13% return of the S&P 500 and significantly outperformed the
0.44% return of the S&P Value Index.
The value style of investing has been out of favor for at least the past
two to three years. The market became highly bifurcated during 1998 and 1999
with mutual fund flows leaving value style funds and other "old economy" style
funds for the "new economy" technology/telecommunication/Internet sector funds
and aggressive growth funds. This trend began to shift back to reality in the
fourth quarter of 1999 and picked up momentum in March 2000 as investors began
to recognize the magnitude of the speculation in Internet-related companies,
which had little hope of earning money for years.
The Value Equity Portfolio's solid performance was driven by the top ten
holdings. On close inspection, a number of our top holdings are more reflective
of growth companies than value. In reality they reflect the success of our
long-term approach of purchasing potential growth companies at a discount. We
believe real long-term value is better measured by the revenue a company's
assets produce over time and the ability of that company's management to
reinvest, i.e., compound those revenues at profitable rates of return. We do not
weigh heavily static measures, such as book value, in this period of rapid
change. Most of the companies in the Value Equity Portfolio are purchased
because we believe they can evolve into growth companies over a two to three
year period. So if we do our job right, our top ten or 15 companies will
ultimately look like growth companies. Three of our best performing companies
this year, Corning, Inc. (+214%), National Semiconductor (+160%) and Nortel
Networks (+174%), were purchased about two years ago. Two other top performers,
Applied Materials (+182%) and Amgen (+97%), have been Portfolio members for more
than five years. We harvest our winners gradually unless we see a specific
problem evolving.
The weakest performer for the year was Xerox (-58%). We reduced this
holding early in the fiscal year at a nice profit and have recently been adding
to it with the expectation that a full turnaround is about a year away. Rite
Aid, which was beset by management problems, was sold during the first quarter
of 2000. New management has an excellent chance at a turnaround but it will take
a fair amount of time. CIT Group, Office Depot and Newell Rubbermaid were also
underperformers, but these companies appear to have only short-term problems and
we are content to hold them.
As value investors, we are encouraged by the significant and healthy
correction of speculative excesses that has taken place in the "new economy"
stocks. We believe that value stocks or old economy companies are in a much
better place to compete with the new economy companies. For the new economy
companies, access to capital has been significantly impaired and their cost of
capital has risen dramatically. The net effect is that the old economy will have
the opportunity to catch up, effectively leveling the playing field. Markets
should gradually become more rational, but volatility will remain high. The
Value Equity Portfolio should benefit from this trend, as it will have a foot in
both the "new" and "old" economy. We thank you for your support and your focus
on long-term investing.
60
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PERFORMANCE AS OF
APRIL 30, 2000
[CHART OMITTED]
PLOT POINTS OMITTED
INSTITUTIONAL CLASS: VALUE OF $100,000 INVESTMENT
ARK LIPPER
VALUE EQUITY S&P 500/ LARGE0-CAP
PORTFOLIO BARRA S&P 500 VALUE
INSTITUTIONAL VALUE COMPOSITE FUNDS
CLASS INDEX INDEX CLASSIFICATION
3/31/96 100000 100000 100000 100000
APRIL 96 102830 101020 101470 101480
APRIL 97 124692 121062 126959 122212
APRIL 98 168783 168228 179063 166135
APRIL 99 186471 190939 218189 189544
APRIL 00 206740 191817 240291 194719
[CHART OMITTED]
PLOT POINTS OMITTED
<TABLE>
<CAPTION>
ARK ARK
VALUE EQUITY VALUE EQUITY S&P 500/ LIPPER
PORTFOLIO, PORTFOLIO, BARRA S&P 500 LARGE-CAP
RETAIL RETAIL CLASS A, VALUE COMPOSITE VALUE FUNDS
CLASS A* WITH LOAD INDEX INDEX CLASSIFICATION
<S> <C> <C> <C> <C> <C>
3/31/96 10000 9525 10000 10000 10000
APRIL 96 10283 9795 10102 10147 10148
APRIL 97 12469 11877 12106 12696 12221
APRIL 98 16889 16087 16823 17906 16614
APRIL 99 18627 17743 19094 21819 18954
APRIL 00 20624 19645 19182 24029 19472
</TABLE>
[CHART OMITTED]
PLOT POINTS OMITTED
<TABLE>
<CAPTION>
ARK ARK
VALUE EQUITY VALUE EQUITY S&P 500/ LIPPER
PORTFOLIO, PORTFOLIO, BARRA S&P 500 LARGE-CAP
RETAIL RETAIL CLASS B, VALUE COMPOSITE VALUE FUNDS
CLASS B* WITH CDSC* INDEX INDEX CLASSIFICATION
<S> <C> <C> <C> <C> <C>
3/31/96 10000 10000 10000 10000 10000
APRIL 96 10283 10283 10102 10147 10148
APRIL 97 12469 12469 12106 12696 12221
APRIL 98 16878 16878 16823 17906 16614
APRIL 99 18542 18542 19094 21819 18954
APRIL 00 20384 20184 19182 24029 19472
</TABLE>
<TABLE>
<CAPTION>
S&P 500/BARRA S&P 500 Lipper
Institutional Retail Retail Value Composite Large-Cap
Class Class A* Class B* Index Index Value
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year
Total Return 10.87% 10.72% 9.93% 0.46% 10.13% 2.73%
-------------------------------------------------------------------------------------------------
One Year
Total Return
with Load N/A 5.46% 5.33% N/A N/A N/A
-------------------------------------------------------------------------------------------------
Annualized 3 Year
Total Return 18.36% 18.27% 17.80% 16.58% 23.70% 16.43%
-------------------------------------------------------------------------------------------------
Annualized 3 Year
Total Return
With Load N/A 16.37% 17.07% N/A N/A N/A
-------------------------------------------------------------------------------------------------
Annualized Total
Return Inception
to Date 19.46% 19.39% 19.05% N/A N/A N/A
-------------------------------------------------------------------------------------------------
Annualized Total
Return Inception to
Date With Load N/A 17.97% 18.76% N/A N/A N/A
-------------------------------------------------------------------------------------------------
</TABLE>
Past performance of the Portfolio is not predictive of future performance.
For each class, performance presented prior to March 29, 1998 reflects the
performance of the Marketvest Equity Fund from its inception date of March 31,
1996. Retail Class A shares were offered beginning April 1, 1998. Performance
for Retail Class A shares with load reflects the deduction of the 4.75% sales
charge. Retail Class B shares were offered beginning September 14, 1998.
Performance for Retail Class B shares with load reflects the deduction of the
applicable contingent deferred sales charge.
* Performance shown prior to the actual inception date of the Retail Class A and
Retail Class B shares represents that of the Institutional Class adjusted for
the sales charge only. No adjustments have been made for Retail Class 12b-1
fees and expenses.With such adjustments, performance would be lower than shown
Annualized performance since actual inception for Retail Class A shares is
10.25% without load and 7.69% with load. Annualized performance since actual
inception for Retail Class B shares is 20.79% without CDSC and 18.59% with
CDSC.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
61
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
VALUE EQUITY PORTFOLIOCONTINUED
STATEMENT OF NET ASSETS
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS
% OF TOTAL PORTFOLIO INVESTMENTS
Miscellanous Business Services -- 13%
Retail -- 2%
Consumer Products -- 3%
Miscellaneous -- 5%
Chemicals & Drugs -- 9%
Financial -- 11%
Repurchase Agreements -- 3%
Technology -- 31%
Durable Goods -- 10%
Oil-Energy -- 13%
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
COMMON STOCKS -- 97.2%
AUTOMOTIVE -- 2.3%
TRW 175,000 $ 10,237
--------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $10,237
--------------------------------------------------------------------------------
BANKS -- 3.7%
CHASE MANHATTAN 100,000 7,206
WELLS FARGO 220,000 9,034
--------------------------------------------------------------------------------
TOTAL BANKS $16,240
--------------------------------------------------------------------------------
BEAUTY PRODUCTS -- 0.8%
INTERNATIONAL FLAVORS &
FRAGRANCES 100,000 3,444
--------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 3,444
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 5.4%
HARRIS 175,000 5,655
LUCENT TECHNOLOGIES 50,000 3,109
MOTOROLA 125,000 14,883
--------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $23,647
--------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 0.4%
NETWORKS ASSOCIATES* 75,000 1,908
--------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 1,908
--------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 6.0%
CERIDIAN* 75,000 1,627
COMPAQ COMPUTER 225,000 6,581
DELL COMPUTER* 135,000 6,767
HEWLETT PACKARD 45,000 6,075
IBM 45,000 5,023
--------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $26,073
--------------------------------------------------------------------------------
CONGLOMERATE -- 1.8%
TYCO INTERNATIONAL LIMITED 175,000 8,039
--------------------------------------------------------------------------------
TOTAL CONGLOMERATE $ 8,039
--------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.6%
NEWELL RUBBERMAID 100,000 2,519
--------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 2,519
--------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
DRUGS -- 9.1%
ABBOTT LABORATORIES 160,000 $ 6,150
AMERICAN HOME PRODUCTS 225,000 12,642
AMGEN* 200,000 11,200
BRISTOL-MYERS SQUIBB 90,000 4,719
SCHERING PLOUGH 125,000 5,039
--------------------------------------------------------------------------------
TOTAL DRUGS $39,750
--------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 1.6%
GENERAL ELECTRIC 45,000 7,076
--------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $ 7,076
--------------------------------------------------------------------------------
ENERGY -- 1.8%
HALLIBURTON 175,400 7,750
--------------------------------------------------------------------------------
TOTAL ENERGY $ 7,750
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 6.9%
CIT GROUP, CL A 285,000 4,827
CITIGROUP 245,000 14,562
WADDELL & REED FINANCIAL,
CL A 397,500 10,583
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $29,972
--------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 2.3%
H.J. HEINZ 110,000 3,740
PEPSICO 175,000 6,420
--------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $10,160
--------------------------------------------------------------------------------
GAS/NATURAL GAS -- 2.6%
EL PASO ENERGY 105,212 4,472
QUESTAR 365,600 6,878
--------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $11,350
--------------------------------------------------------------------------------
INDUSTRIAL AUTOMATION -- 1.4%
ROCKWELL INTERNATIONAL 150,000 5,906
--------------------------------------------------------------------------------
TOTAL INDUSTRIAL AUTOMATION $ 5,906
--------------------------------------------------------------------------------
INTERNET SERVICES -- 2.5%
NORTEL NETWORKS 95,000 10,759
--------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $10,759
--------------------------------------------------------------------------------
LEASING & RENTING -- 0.7%
COMDISCO 100,000 3,106
--------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 3,106
--------------------------------------------------------------------------------
MACHINERY -- 3.1%
INGERSOLL RAND 200,000 9,387
PARKER-HANNIFIN 90,000 4,185
--------------------------------------------------------------------------------
TOTAL MACHINERY $13,572
--------------------------------------------------------------------------------
MEASURING DEVICES -- 0.4%
AGILENT TECHNOLOGIES* 19,300 1,710
--------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 1,710
--------------------------------------------------------------------------------
62
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 5.6%
BAXTER INTERNATIONAL 100,000 $ 6,513
BECTON DICKINSON 200,000 5,125
EDWARDS LIFESCIENCES* 18,000 270
MALLINCKRODT 150,000 4,031
MEDTRONIC 160,000 8,310
--------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 24,249
--------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 2.7%
CONVERGYS* 50,000 2,200
FIRST DATA 200,000 9,738
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 11,938
--------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 2.4%
HONEYWELL INTERNATIONAL 187,500 10,500
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING $ 10,500
--------------------------------------------------------------------------------
PETROLEUM REFINING -- 7.6%
BP AMOCO PLC, ADR 214,114 10,920
CHEVRON 84,400 7,185
EXXON MOBIL 133,000 10,332
UNOCAL 150,000 4,847
--------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 33,284
--------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 1.7%
XEROX 275,000 7,270
--------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $ 7,270
--------------------------------------------------------------------------------
RETAIL -- 2.2%
LOWE'S 165,000 8,168
OFFICE DEPOT* 125,000 1,320
--------------------------------------------------------------------------------
TOTAL RETAIL $ 9,488
--------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS-- 7.6%
APPLIED MATERIALS* 45,000 4,582
CADENCE DESIGN SYSTEMS* 200,000 3,363
INTEL 125,000 15,852
NATIONAL SEMICONDUCTOR* 155,000 9,416
--------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 33,213
--------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.8%
ENGELHARD 200,000 3,513
--------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 3,513
--------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 11.7%
BELLSOUTH 200,000 9,738
CORNING 75,000 14,812
GTE 117,500 7,961
SBC COMMUNICATIONS 200,000 8,763
SPRINT 161,400 9,926
--------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 51,200
--------------------------------------------------------------------------------
WHOLESALE -- 1.5%
W.W. GRAINGER 150,000 6,506
--------------------------------------------------------------------------------
TOTAL WHOLESALE $ 6,506
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $250,172) $424,379
--------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.9%
FIRST BOSTON
(5.820%, dated 04/28/00,
matures 05/01/00,
repurchase price $12,693,493
(collateralized by U.S. Government
Agency Obligations: total market
value $13,334,424) $12,687 $ 12,687
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $12,687) $ 12,687
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(Cost $262,859) $437,066
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (0.1%) $ (292)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 30,382,409 outstanding shares
of beneficial interest 203,799
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 533,148 outstanding shares
of beneficial interest 7,683
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 41,831 outstanding shares
of beneficial interest 608
Distribution in excess of net investment income (7)
Accumulated net realized gain on investments 50,484
Net unrealized appreciation on investments 174,207
================================================================================
TOTAL NET ASSETS -- 100.0% $436,774
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $14.11
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $14.10
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($14.10 / 95.25%) $14.80
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS B $13.94
================================================================================
*NON-INCOME PRODUCING SECURITY
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
63
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
EQUITY INDEX PORTFOLIO
[PHOTO OMITTED]
CLARENCE W. WOODS, JR.
--------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
--------------------------------------------------------------------------------
CLARENCE W. WOODS, JR. IS A PRINCIPAL OF AND CHIEF EQUITY TRADER FOR ALLIED
INVESTMENT ADVISORS, INC. HE IS CO-MANAGER OF THE EQUITY INDEX PORTFOLIO. HE HAS
MORE THAN 16 YEARS EXPERIENCE IN THE INVESTMENT INDUSTRY.
[PHOTO OMITTED]
PETER C. HASTINGS
--------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
--------------------------------------------------------------------------------
PETER C. HASTINGS IS A VICE PRESIDENT OF ALLIED INVESTMENT ADVISORS, INC.
HE IS CO-MANAGER OF THE EQUITY INDEX PORTFOLIO. HE HAS MORE THAN FIVE YEARS
EXPERIENCE IN THE INVESTMENT INDUSTRY.
REVIEW AND OUTLOOK
The ARK Equity Index Portfolio is managed to achieve returns similar to the
Standard and Poor's 500 index. We have chosen to do this by owning the 500 names
in the S&P 500 with the same weighting as they are represented in the index. We
use a disciplined process to buy and sell the positions in the Portfolio as
money gets added or removed from the Portfolio or names get added to or deleted
from the index.
When the past year is taken as a whole, we see quite a disparity between
value versus growth and NASDAQ versus NYSE. It was no contest, as S&P Growth
returned nearly 19% for the 12 months and S&P Value came in at less than 1/2%
over the past year. The disparity between the technology-laden NASDAQ and New
York Stock Exchange-listed stocks was even greater, 52% compared with only 1.5%
respectively. Since the S&P 500 has components of all these indices, its return
was in between -- a total return of 10.13% for the year. The S&P 500's
performance was hurt by a very weak start to this calendar year -- its return is
down nearly .8% for the first four months.
The Institutional Class of the ARK Equity Index Portfolio marginally
exceeded the S&P 500 for the year, with a net return of 10.25% for the 12 months
ending April 30, 2000. The Portfolio continues to handle cash flows and index
changes better, as its size continues to grow. The Portfolio grew from $92
million to nearly $158 million over the last 12 months. We are very proud of
this remarkable growth, and believe that the ARK Equity Index Portfolio is
worthy of the trust you have placed in it. The combination of low fees and
disciplined process makes it able to replicate the index. In fact, it finished
in the top decile of all S&P 500 Index Funds, handily beating the Lipper S&P 500
average of 9.46%.
In the coming year, we can again expect the unexpected. It seems every
week the market rotates in and out of various technology "darlings" and every
once in a while old economy stocks start to rally. Is the great bull rally that
has lasted nearly 20 years ending? Will the Federal Reserve be able to execute a
soft landing for an apparently overheated economy? Stay tuned, as we are sure
that similar questions will again be asked in this Annual Report next year.
64
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PERFORMANCE AS OF
APRIL 30, 2000
CHART OMITTED]
PLOT POINTS FOLLOWS
ARK EQUITY INDEX S&P 500 LIPPER S&P 500
INSTITUTIONAL CLASS COMPOSITE INDEX FUNDS AVERAGE
10/31/97 100000 100000 100000
APRIL 98 122594 122489 122079
APRIL 99 150019 149253 148046
APRIL 00 165396 164373 162051
CHART OMITTED]
PLOT POINTS FOLLOWS
ARK EQUITY INDEX ARK EQUITY INDEX S&P 500 LIPPER S&P 500
RETAIL CLASS A RETAIL A W/LOAD COMPOSITE INDEX FUNDS AVERAGE
11/30/97 10000 9525 10000 10000
APRIL 98 11694 11138 11707 11678
APRIL 99 14272 13594 14265 14162
APRIL 00 15692 14947 15710 15501
S&P 500
Institutional Retail COMPOSITE Lipper
Class Class A INDEX S&P 500
--------------------------------------------------------------------------------
One Year
Total Return 10.25% 9.95% 10.13% 9.46%
--------------------------------------------------------------------------------
One Year
Total Return with Load N/A 4.72% N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 19.23% 20.71% N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date With Load N/A 18.36% 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 A shares were offered beginning November 3, 1997. Performance of Retail
Class A shares with load reflects the deduction of the 4.75% sales charge.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
65
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
EQUITY INDEX PORTFOLIO
STATEMENT OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
Repurchase Agreements -- 10%
Retail -- 6%
Durable Goods -- 3%
Miscellaneous -- 6%
Chemicals &
Drugs -- 8%
Consumer
Products -- 9%
Oil-Energy -- 8%
Cash Equivalents -- 4%
Healthcare -- 2%
Technology -- 32%
Financial -- 12%
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
COMMON STOCKS -- 93.7%
AEROSPACE & DEFENSE -- 0.2%
LOCKHEED MARTIN 4,590 $ 114
NORTHROP GRUMMAN 720 51
RAYTHEON COMPANY, CL B 3,580 79
--------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $ 244
--------------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.3%
AMR* 1,670 57
DELTA AIR LINES 1,530 81
FEDEX* 3,317 125
SOUTHWEST AIRLINES 5,773 125
US AIRWAYS GROUP* 635 18
--------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 406
--------------------------------------------------------------------------------
AIRCRAFT -- 0.6%
BOEING 11,105 441
GENERAL DYNAMICS 2,260 132
UNITED TECHNOLOGIES 5,460 340
--------------------------------------------------------------------------------
TOTAL AIRCRAFT $ 913
--------------------------------------------------------------------------------
APPAREL/TEXTILES -- 0.0%
LIZ CLAIBORNE 670 31
RUSSELL 110 2
SPRINGS INDUSTRIES, CL A 60 2
V.F. 1,375 39
--------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $ 74
--------------------------------------------------------------------------------
AUTOMOTIVE -- 0.8%
DANA 1,681 51
DELPHI AUTOMOTIVE SYSTEMS 6,543 125
EATON 770 65
FORD MOTOR 15,465 846
GENUINE PARTS 1,760 46
NAVISTAR INTERNATIONAL* 545 19
PACCAR 620 29
TRW 1,195 70
--------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $1,251
--------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
BANKS -- 4.5%
AMSOUTH BANCORP 4,250 $ 62
BANK OF AMERICA 21,885 1,072
BANK OF NEW YORK 8,935 367
BANK ONE 14,663 447
BB&T 3,585 95
CHASE MANHATTAN 10,490 756
COMERICA 1,532 65
FIFTH THIRD BANCORP 3,645 230
FIRST UNION 12,639 403
FIRSTAR 12,556 312
FLEETBOSTON FINANCIAL 11,719 415
GOLDEN WEST FINANCIAL 1,875 64
HUNTINGTON BANCSHARES 2,311 42
KEYCORP 5,045 93
MELLON FINANCIAL 5,560 179
NATIONAL CITY 6,910 117
NORTHERN TRUST 2,520 162
OLD KENT FINANCIAL 1,325 40
PNC 3,340 146
PROVIDIAN FINANCIAL 1,600 141
REGIONS FINANCIAL 2,220 45
SOUTHTRUST 1,900 45
STATE STREET 1,800 174
SUMMIT BANCORP 1,700 43
SUNTRUST BANKS 3,745 190
SYNOVUS FINANCIAL 2,742 51
U.S. BANCORP 8,660 176
UNION PLANTERS 1,450 41
WACHOVIA 2,200 138
WASHINGTON MUTUAL 6,506 166
WELLS FARGO 21,055 865
--------------------------------------------------------------------------------
TOTAL BANKS $7,142
--------------------------------------------------------------------------------
BEAUTY PRODUCTS -- 0.1%
ALBERTO-CULVER, CL B 170 4
AVON PRODUCTS 2,585 107
INTERNATIONAL FLAVORS &
FRAGRANCES 860 30
--------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 141
--------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.0%
CLEAR CHANNEL
COMMUNICATIONS* 3,785 273
COMCAST, CL A SPECIAL* 10,800 433
INTERPUBLIC GROUP 3,200 131
MEDIAONE GROUP* 7,170 542
OMNICOM GROUP 1,975 180
YOUNG & RUBICAM 800 45
--------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $1,604
--------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.0%
CENTEX 480 12
FLUOR 755 25
--------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 37
--------------------------------------------------------------------------------
66
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES-- 0.0%
ARMSTRONG WORLD INDUSTRIES 195 $ 4
MCDERMOTT INTERNATIONAL 160 1
OWENS CORNING 160 3
--------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION SUPPLIES $ 8
--------------------------------------------------------------------------------
CHEMICALS -- 0.8%
AIR PRODUCTS & CHEMICALS 2,275 71
AVERY DENNISON 1,240 81
B.F. GOODRICH 985 31
E.I. DU PONT DE NEMOURS 12,197 579
EASTMAN CHEMICAL 900 47
FMC* 300 17
GREAT LAKES CHEMICAL 600 16
HERCULES 800 12
PPG INDUSTRIES 1,990 108
PRAXAIR 1,555 69
ROHM & HAAS 2,564 91
UNION CARBIDE 1,370 81
W.R. GRACE & COMPANY* 360 5
--------------------------------------------------------------------------------
TOTAL CHEMICALS $ 1,208
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 7.8%
3COM* 4,010 158
ADAPTEC* 1,100 30
ANDREW* 270 8
CISCO SYSTEMS* 87,450 6,063
COMVERSE TECHNOLOGY* 1,600 143
GTE 11,410 773
ITT INDUSTRIES 845 27
LUCENT TECHNOLOGIES 40,711 2,532
MOLEX 2,187 120
MOTOROLA 8,217 978
NETWORK APPLIANCE* 3,300 244
QUALCOMM* 8,500 922
SCIENTIFIC-ATLANTA 1,910 124
TELLABS* 4,585 251
--------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $12,373
--------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 4.9%
MICROSOFT* 66,485 4,637
ORACLE SYSTEMS* 32,644 2,609
VERITAS SOFTWARE* 4,400 472
--------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 7,718
--------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 7.5%
APPLE COMPUTER* 1,795 223
CERIDIAN* 1,650 36
COMPAQ COMPUTER 21,621 632
DELL COMPUTER* 29,780 1,493
EMC* 12,993 1,805
GATEWAY* 3,450 191
HEWLETT PACKARD 12,895 1,741
IBM 23,070 2,575
LEXMARK INTERNATIONAL
GROUP, CL A* 1,500 177
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
MINNESOTA MINING &
MANUFACTURING 5,135 $ 444
SEAGATE TECHNOLOGY* 2,330 118
SILICON GRAPHICS* 1,500 11
SOLECTRON* 6,600 309
SUN MICROSYSTEMS* 20,180 1,855
UNISYS* 3,270 76
XILINX* 3,550 260
--------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $11,946
--------------------------------------------------------------------------------
CONGLOMERATE -- 0.6%
TYCO INTERNATIONAL LIMITED 21,631 994
--------------------------------------------------------------------------------
TOTAL CONGLOMERATE $ 994
--------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.1%
BALL 90 3
CROWN CORK & SEAL 970 16
NEWELL RUBBERMAID 2,800 71
OWENS-ILLINOIS* 1,525 21
--------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 111
--------------------------------------------------------------------------------
DRUGS -- 7.5%
ABBOTT LABORATORIES 19,665 756
ALLERGAN 1,480 87
ALZA* 1,035 46
AMERICAN HOME PRODUCTS 16,665 936
AMGEN* 12,040 674
BIOGEN* 1,850 109
BRISTOL-MYERS SQUIBB 22,875 1,199
ELI LILLY 13,950 1,078
MERCK 29,970 2,083
MILLIPORE 530 38
PFIZER 49,540 2,087
PHARMACIA 15,994 799
SCHERING PLOUGH 18,770 757
SIGMA ALDRICH 985 29
WARNER LAMBERT 10,935 1,245
WATSON PHARMACEUTICALS* 800 36
--------------------------------------------------------------------------------
TOTAL DRUGS $11,959
--------------------------------------------------------------------------------
ELECTRICAL SERVICES & UTILITIES-- 5.6%
AES* 2,300 207
AMEREN 1,360 50
AMERICAN ELECTRIC POWER 1,915 70
CAROLINA POWER & LIGHT 1,575 58
CENTRAL & SOUTH WEST 2,270 49
CINERGY 1,560 42
CMS ENERGY 1,000 19
CONSOLIDATED EDISON 2,260 80
CONSTELLATION ENERGY GROUP* 1,655 55
DOMINION RESOURCES OF VIRGINIA 2,750 124
DTE ENERGY 1,445 47
DUKE ENERGY 4,250 244
EDISON INTERNATIONAL 3,465 66
ENTERGY 2,440 62
FIRSTENERGY 2,310 59
FLORIDA PROGRESS 825 40
67
<PAGE>
EQUITY PORTFOLIOS
EQUITY INDEX PORTFOLIO CONTINUED
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
FPL GROUP 1,760 $ 80
GENERAL ELECTRIC 41,970 6,600
GPU 1,400 39
NEW CENTURY ENERGIES 1,315 43
NIAGARA MOHAWK HOLDINGS* 1,980 27
NORTHERN STATES POWER 1,190 26
PG&E 3,780 98
PINNACLE WEST CAPITAL 900 32
PPL 1,215 29
PUBLIC SERVICE ENTERPRISE
GROUP 2,210 79
RELIANT ENERGY 2,960 79
SEMPRA ENERGY 2,676 50
SOUTHERN 7,460 186
TEXAS UTILITIES 2,790 94
UNICOM 2,145 85
--------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES & UTILITIES $8,819
--------------------------------------------------------------------------------
ENTERTAINMENT -- 2.2%
CARNIVAL, CL A 6,875 171
CBS 8,958 526
HARRAH'S ENTERTAINMENT* 1,000 21
MIRAGE RESORTS* 1,955 40
TIME WARNER 14,790 1,330
VIACOM, CL B* 8,160 444
WALT DISNEY 23,780 1,030
--------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $3,562
--------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.1%
ALLIED WASTE INDUSTRIES* 1,900 12
WASTE MANAGEMENT 7,076 112
--------------------------------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES $ 124
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.2%
AMERICAN EXPRESS 5,735 861
ASSOCIATES FIRST CAPITAL 8,520 189
BEAR STEARNS 1,279 55
CAPITAL ONE FINANCIAL 2,260 99
CHARLES SCHWAB 10,419 464
CITIGROUP 43,141 2,564
COUNTRYWIDE CREDIT INDUSTRIES 1,215 34
EQUIFAX 1,625 40
FANNIE MAE 13,065 788
FRANKLIN RESOURCES 2,500 81
FREDDIE MAC 8,810 405
HOUSEHOLD INTERNATIONAL 6,008 251
J.P. MORGAN 1,965 252
LEHMAN BROTHERS HOLDINGS 1,380 113
MBNA 9,080 241
MERRILL LYNCH 4,735 483
MORGAN STANLEY, DEAN WITTER,
DISCOVER 14,600 1,121
PAINE WEBBER GROUP 1,625 71
SLM HOLDING 1,625 51
T. ROWE PRICE 1,300 50
TEXTRON 1,760 109
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $8,322
--------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 3.3%
ADOLPH COORS, CL B 285 $ 15
ANHEUSER BUSCH 5,440 384
ARCHER-DANIELS-MIDLAND 6,101 61
BESTFOODS 3,135 158
BROWN-FORMAN, CL B 780 43
CAMPBELL SOUP 4,815 125
COCA-COLA 31,590 1,487
COCA-COLA ENTERPRISES 4,900 104
CONAGRA 5,755 109
GENERAL MILLS 3,425 125
H.J. HEINZ 3,960 135
HERSHEY FOODS 1,385 63
KELLOGG 4,475 109
NABISCO GROUP HOLDINGS 3,225 42
PEPSICO 16,995 623
PHILIP MORRIS 30,255 662
QUAKER OATS 1,335 87
RALSTON PURINA GROUP 3,225 57
SARA LEE 10,720 161
SEAGRAM 5,055 273
UNILEVER NV* 7,302 333
UST 1,865 28
WM. WRIGLEY, JR. 1,155 84
--------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $5,268
--------------------------------------------------------------------------------
GAS/NATURAL GAS -- 0.7%
COLUMBIA GAS SYSTEMS 922 58
EASTERN ENTERPRISES 310 19
EL PASO ENERGY 2,580 110
ENRON 9,200 641
NICOR 540 18
ONEOK 80 2
PEOPLES ENERGY 100 3
WILLIAMS 4,825 180
--------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $1,031
--------------------------------------------------------------------------------
GENERAL UTILITIES -- 0.2%
HALLIBURTON 5,190 229
PECO ENERGY 2,040 85
--------------------------------------------------------------------------------
TOTAL GENERAL UTILITIES $ 314
--------------------------------------------------------------------------------
HOME APPLIANCES -- 0.0%
NATIONAL SERVICE INDUSTRIES 130 3
SHERWIN-WILLIAMS 1,910 47
--------------------------------------------------------------------------------
TOTAL HOME APPLIANCES $ 50
--------------------------------------------------------------------------------
HOME BUILDERS -- 0.0%
PULTE 120 3
--------------------------------------------------------------------------------
TOTAL HOME BUILDERS $ 3
--------------------------------------------------------------------------------
HOTELS & LODGING -- 0.1%
HILTON HOTELS 4,120 35
MARRIOTT INTERNATIONAL, CL A 2,480 79
--------------------------------------------------------------------------------
TOTAL HOTELS & LODGING $ 114
--------------------------------------------------------------------------------
68
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.5%
CLOROX 2,665 $ 98
COLGATE-PALMOLIVE 7,080 404
DANAHER 1,440 82
GILLETTE 13,660 505
ILLINOIS TOOL WORKS 3,380 217
LEGGETT & PLATT 2,100 45
MAYTAG 720 25
PROCTER & GAMBLE 15,130 902
SNAP-ON TOOLS 680 18
STANLEY WORKS 1,000 29
WHIRLPOOL 800 52
--------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $2,377
--------------------------------------------------------------------------------
INDUSTRIAL AUTOMATION -- 0.0%
ROCKWELL INTERNATIONAL 1,890 74
--------------------------------------------------------------------------------
TOTAL INDUSTRIAL AUTOMATION $ 74
--------------------------------------------------------------------------------
INSURANCE -- 2.8%
AETNA 1,510 87
AFLAC 2,975 145
ALLSTATE 8,635 204
AMERICAN GENERAL 2,815 158
AMERICAN INTERNATIONAL
GROUP 19,828 2,175
AON 3,030 82
CHUBB 2,025 129
CIGNA 2,125 169
CINCINNATI FINANCIAL 1,645 66
CONSECO 3,460 19
HARTFORD FINANCIAL SERVICES
GROUP 2,420 126
HUMANA* 790 6
JEFFERSON-PILOT 1,067 71
LINCOLN NATIONAL 1,980 69
LOEWS 1,150 63
MARSH & MCLENNAN 3,407 336
MBIA 1,080 53
MGIC INVESTMENT 1,235 59
PROGRESSIVE 720 47
SAFECO 1,025 23
ST. PAUL 2,404 86
TORCHMARK 1,475 37
UNITEDHEALTH GROUP 1,725 115
UNUMPROVIDENT 2,545 43
WELLPOINT HEALTH NETWORKS* 600 44
--------------------------------------------------------------------------------
TOTAL INSURANCE $4,412
--------------------------------------------------------------------------------
INTERNET SERVICE PROVIDERS -- 1.6%
AMERICA ONLINE* 29,200 1,747
YAHOO!* 6,050 788
--------------------------------------------------------------------------------
TOTAL INTERNET SERVICE PROVIDERS $2,535
--------------------------------------------------------------------------------
INTERNET SERVICES -- 1.2%
NORTEL NETWORKS 16,592 1,879
--------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $1,879
--------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
LEASING & RENTING -- 0.1%
PITNEY BOWES 2,880 $ 118
--------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 118
--------------------------------------------------------------------------------
LEISURE PRODUCTS -- 0.1%
HASBRO 2,000 32
JOSTENS 120 3
MATTEL 4,440 54
--------------------------------------------------------------------------------
TOTAL LEISURE PRODUCTS $ 89
--------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 0.1%
GEORGIA-PACIFIC 1,850 68
LOUISIANA-PACIFIC 870 12
WEYERHAEUSER 2,605 139
--------------------------------------------------------------------------------
TOTAL LUMBER & WOOD PRODUCTS $ 219
--------------------------------------------------------------------------------
MACHINERY -- 0.6%
BAKER HUGHES 3,320 106
BLACK & DECKER 725 30
BRIGGS & STRATTON 80 3
BRUNSWICK 900 17
CATERPILLAR 3,835 151
CRANE 760 20
CUMMINS ENGINE 410 15
DEERE 2,730 110
DOVER 2,110 107
EMERSON ELECTRIC 4,960 272
INGERSOLL RAND 1,800 84
MILACRON 120 2
NACCO INDUSTRIES, CL A 50 2
PALL 980 22
PARKER-HANNIFIN 1,165 54
TIMKEN 190 3
--------------------------------------------------------------------------------
TOTAL MACHINERY $ 998
--------------------------------------------------------------------------------
MEASURING DEVICES -- 0.2%
KLA-TENCOR* 2,120 159
PE CORP - PE BIOSYSTEMS
GROUP 2,340 140
TEKTRONIX 550 32
THERMO ELECTRON* 1,580 31
--------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 362
--------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 2.1%
BAUSCH & LOMB 640 39
BAXTER INTERNATIONAL 3,245 211
BECTON DICKINSON 2,505 64
BIOMET 885 32
BOSTON SCIENTIFIC* 4,610 122
C.R. BARD 445 19
COLUMBIA/HCA HEALTHCARE 6,060 172
GUIDANT* 3,345 192
HEALTHSOUTH REHABILITATION* 3,110 25
JOHNSON & JOHNSON 17,770 1,466
MALLINCKRODT 570 15
MANOR CARE* 790 9
69
<PAGE>
EQUITY PORTFOLIOS
EQUITY INDEX PORTFOLIO CONTINUED
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
MEDTRONIC 15,240 $ 792
ST. JUDE MEDICAL 840 26
TENET HEALTHCARE* 3,075 78
--------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $3,262
--------------------------------------------------------------------------------
METALS & MINING -- 0.1%
FREEPORT-MCMORAN COPPER
& GOLD, CL B 1,830 18
PHELPS DODGE 908 42
REYNOLDS METALS 655 44
VULCAN MATERIALS 900 39
--------------------------------------------------------------------------------
TOTAL METALS & MINING $ 143
--------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES-- 1.6%
ADOBE SYSTEMS 1,400 169
AUTODESK 690 26
AUTOMATIC DATA PROCESSING 7,320 394
BMC SOFTWARE* 2,650 124
CABLETRON SYSTEMS* 2,120 48
CENDANT* 8,116 125
CITRIX SYSTEMS* 2,000 122
COMPUTER ASSOCIATES
INTERNATIONAL 7,542 421
COMPUTER SCIENCES* 1,920 157
COMPUWARE* 4,154 52
DELUXE 640 16
ECOLAB 1,445 56
ELECTRONIC DATA SYSTEMS 5,525 380
FIRST DATA 4,620 225
NCR* 1,100 42
NOVELL* 3,325 65
PARAMETRIC TECHNOLOGY* 2,670 22
PEOPLESOFT* 2,750 38
SHARED MEDICAL SYSTEMS 300 12
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $2,494
--------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES -- 0.0%
H & R BLOCK 1,150 48
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER SERVICES $ 48
--------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING-- 0.4%
HONEYWELL INTERNATIONAL 10,091 565
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING $ 565
--------------------------------------------------------------------------------
MOTORCYCLES, BICYCLES & PARTS -- 0.1%
HARLEY-DAVIDSON 3,600 143
--------------------------------------------------------------------------------
TOTAL MOTORCYCLES, BICYCLES & PARTS $ 143
--------------------------------------------------------------------------------
OFFICE PRODUCTS & SUPPLIES -- 0.0%
IKON OFFICE SOLUTIONS 640 4
JOHNSON CONTROLS 850 54
--------------------------------------------------------------------------------
TOTAL OFFICE PRODUCTS & SUPPLIES $ 58
--------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.6%
BEMIS 560 21
BOISE CASCADE 575 19
CHAMPION INTERNATIONAL 975 64
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
FORT JAMES 2,180 $ 52
INTERNATIONAL PAPER 4,701 173
KIMBERLY-CLARK 7,080 411
MEAD 905 32
PACTIV* 1,265 10
POTLATCH 90 4
TEMPLE-INLAND 450 23
WESTVACO 990 31
WILLAMETTE INDUSTRIES 1,085 41
--------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 881
--------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 0.8%
ANADARKO PETROLEUM 1,430 62
APACHE 1,310 63
BURLINGTON RESOURCES 2,767 109
KERR-MCGEE 1,094 57
OCCIDENTAL PETROLEUM 4,205 90
PHILLIPS PETROLEUM 2,835 134
ROWAN* 1,060 30
SCHLUMBERGER 7,065 541
TRANSOCEAN SEDCO FOREX 2,493 117
UNION PACIFIC RESOURCES GROUP 2,525 48
USX-MARATHON GROUP 3,280 76
--------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $1,327
--------------------------------------------------------------------------------
PETROLEUM REFINING -- 4.0%
AMERADA HESS 970 62
ASHLAND 610 21
CHEVRON 8,365 712
COASTAL 2,460 123
CONOCO 7,025 175
EXXON MOBIL 44,152 3,430
ROYAL DUTCH PETROLEUM,
NEW YORK SHARES 24,775 1,421
SUNOCO 735 22
TEXACO 6,720 333
TOSCO 1,625 52
UNOCAL 2,405 78
--------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $6,429
--------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.3%
EASTMAN KODAK 3,460 194
POLAROID 140 3
XEROX 7,630 202
--------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $ 399
--------------------------------------------------------------------------------
PRECIOUS METALS -- 0.1%
BARRICK GOLD 3,855 65
HOMESTAKE MINING 1,540 9
NEWMONT MINING 1,640 38
PLACER DOME GROUP 2,805 23
--------------------------------------------------------------------------------
TOTAL PRECIOUS METALS $ 135
--------------------------------------------------------------------------------
70
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 0.4%
AMERICAN GREETINGS, CL A 355 $ 6
DOW JONES 1,015 66
GANNETT 3,090 197
KNIGHT-RIDDER 930 46
MCGRAW-HILL 2,325 122
MEREDITH 560 16
NEW YORK TIMES, CL A 1,920 79
R.R. DONNELLEY & SONS 1,105 23
TRIBUNE 2,655 103
--------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $ 658
--------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 0.2%
DUN & BRADSTREET* 1,635 49
IMS HEALTH 3,150 54
PAYCHEX 2,437 128
PERKINELMER 515 28
--------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 259
--------------------------------------------------------------------------------
RAILROADS -- 0.3%
BURLINGTON NORTHERN SANTA FE 5,195 125
CSX 2,170 45
KANSAS CITY SOUTHERN
INDUSTRIES 1,200 86
NORFOLK SOUTHERN 3,775 67
UNION PACIFIC 2,495 105
--------------------------------------------------------------------------------
TOTAL RAILROADS $ 428
--------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 0.0%
KAUFMAN & BROAD HOME 120 2
--------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS $ 2
--------------------------------------------------------------------------------
REPAIR SERVICES -- 0.0%
RYDER SYSTEM 370 8
--------------------------------------------------------------------------------
TOTAL REPAIR SERVICES $ 8
--------------------------------------------------------------------------------
RETAIL -- 5.9%
ALBERTSON'S 4,517 147
AUTOZONE* 1,190 27
BED BATH & BEYOND* 1,500 55
BEST BUY* 2,350 190
CIRCUIT CITY STORES 2,350 138
CONSOLIDATED STORES* 540 7
COSTCO WHOLESALE* 4,930 267
CVS 4,340 189
DARDEN RESTAURANTS 1,100 20
DILLARD'S, CL A 1,080 15
DOLLAR GENERAL 3,035 69
FEDERATED DEPARTMENT STORES* 2,400 82
GAP 9,995 367
GREAT ATLANTIC & PACIFIC TEA 110 2
HARCOURT GENERAL 565 21
HOME DEPOT 29,467 1,652
J.C. PENNEY 2,605 36
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
KMART* 4,930 $ 40
KOHL'S* 3,850 185
KROGER* 8,865 165
LIMITED 2,142 97
LONGS DRUG STORES 120 3
LOWE'S 4,195 208
MAY DEPARTMENT STORES 3,835 105
MCDONALD'S 17,310 660
NIKE 3,115 135
NORDSTROM 1,175 33
OFFICE DEPOT* 3,300 35
REEBOK INTERNATIONAL 170 3
RITE AID 2,565 13
SEARS ROEBUCK 4,280 157
STAPLES* 5,200 99
TANDY 2,075 118
TARGET 5,660 377
TJX 3,420 66
TOYS 'R' US* 2,090 32
TRICON GLOBAL RESTAURANTS* 1,532 52
WAL-MART STORES 56,970 3,155
WALGREEN 11,775 331
WENDY'S INTERNATIONAL 1,235 28
WINN DIXIE STORES 1,450 24
--------------------------------------------------------------------------------
TOTAL RETAIL $9,405
--------------------------------------------------------------------------------
RUBBER & PLASTIC -- 0.2%
COOPER TIRE & RUBBER 230 3
DOW CHEMICAL 2,475 280
GOODYEAR TIRE & RUBBER 1,545 43
SEALED AIR* 882 49
TUPPERWARE 180 3
--------------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $ 378
--------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 6.0%
ADVANCED MICRO DEVICES* 1,700 149
ALTERA* 2,600 266
ANALOG DEVICES* 4,000 307
APPLIED MATERIALS* 8,770 893
CONEXANT SYSTEMS* 2,300 138
INTEL 39,245 4,977
LINEAR TECHNOLOGY 3,500 200
LSI LOGIC* 3,360 210
MICRON TECHNOLOGY 3,450 480
NATIONAL SEMICONDUCTOR* 1,885 115
TERADYNE* 2,000 220
TEXAS INSTRUMENTS 9,365 1,525
THOMAS & BETTS 565 17
--------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $9,497
--------------------------------------------------------------------------------
SPECIALTY CONSTRUCTION -- 0.1%
FORTUNE BRANDS 1,850 46
MASCO 4,955 111
--------------------------------------------------------------------------------
TOTAL SPECIALTY CONSTRUCTION $ 157
--------------------------------------------------------------------------------
71
<PAGE>
EQUITY PORTFOLIOS
EQUITY INDEX PORTFOLIO CONCLUDED
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 0.0%
COOPER INDUSTRIES 910 $ 31
--------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 31
--------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.3%
ALCAN ALUMINUM 2,295 75
ALCOA 4,275 277
ALLEGHENY TECHNOLOGIES* 765 18
BETHLEHEM STEEL* 330 2
ENGELHARD 1,130 20
INCO 1,905 30
NUCOR 995 43
USX-U.S. STEEL GROUP 915 23
WORTHINGTON INDUSTRIES 290 4
--------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 492
--------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 7.0%
ADC TELECOMMUNICATIONS* 3,400 207
ALLTEL 3,735 249
AT&T 40,850 1,907
BELL ATLANTIC 19,840 1,176
BELLSOUTH 24,095 1,173
CENTURYTEL 1,500 37
CORNING 3,165 625
GLOBAL CROSSING* 8,905 281
MCI WORLDCOM* 32,620 1,482
NEXTEL COMMUNICATIONS, CL A* 4,670 511
SBC COMMUNICATIONS 43,616 1,911
SPRINT 10,270 632
SPRINT PCS GROUP* 9,884 544
US WEST 6,157 438
--------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 11,173
--------------------------------------------------------------------------------
TESTING LABORATORIES -- 0.0%
QUINTILES TRANSNATIONAL* 1,300 19
--------------------------------------------------------------------------------
TOTAL TESTING LABORATORIES $ 19
--------------------------------------------------------------------------------
TRANSPORTATION SERVICES -- 0.0%
SABRE HOLDINGS, CL A* 1,206 42
--------------------------------------------------------------------------------
TOTAL TRANSPORTATION SERVICES $ 42
--------------------------------------------------------------------------------
WHOLESALE -- 0.9%
CARDINAL HEALTH 3,300 182
GENERAL MOTORS 7,470 699
MCKESSON HBOC 2,731 46
SAFEWAY* 5,955 263
SUPERVALU 1,180 24
SYSCO 3,715 140
W.W. GRAINGER 1,105 48
--------------------------------------------------------------------------------
TOTAL WHOLESALE $ 1,402
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $122,381) $148,634
--------------------------------------------------------------------------------
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
CASH EQUIVALENT -- 4.3%
S&P 500 DEPOSITORY RECEIPT 46,500 $ 6,747
--------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $6,786) 6,747
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 10.5%
FIRST BOSTON
(5.820%, dated 04/28/00,
matures 05/01/00,
repurchase price $16,725,256
(collateralized by U.S. Government
Agency Obligations: total
market value $17,240,652) $16,717 16,717
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $16,717) $ 16,717
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 108.5%
(Cost $145,884) $172,098
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (8.5%) $(13,488)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 10,194,851 outstanding shares
of beneficial interest 123,723
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 503,755 outstanding shares
of beneficial interest 6,328
Undistributed net investment income 92
Accumulated net realized gain on investments 2,253
Net unrealized appreciation on investments 26,214
================================================================================
TOTAL NET ASSETS -- 100.0% $158,610
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $14.83
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $14.79
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($14.79 / 95.25%) $15.53
================================================================================
*NON-INCOME PRODUCING SECURITY
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
72
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
BLUE CHIP EQUITY PORTFOLIO
[PHOTO OMITTED]
ALLEN J. ASHCROFT, JR.
--------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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 19 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
[PHOTO OMITTED]
CLYDE L. RANDALL, CFA
--------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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 MORE THAN 13 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The ARK Blue Chip Equity Portfolio delivered consistent results through our
fiscal year ending April 30, 2000. A robust U.S. economy and our equity exposure
in each major market sector within the S&P 500 helped the Portfolio's
investments. Although we saw a resurgence in the performance of small-cap
companies, dominant blue chip companies also performed well in this fiscal
period.
This fiscal year did witness an extremely volatile equity environment. Our
fiscal year began with the Dow Jones Industrial Average slightly above the
11,000 mark. The market traded down throughout the summer months, until a fall
rally pushed the Dow to an 11,600 December close. The new millenium was not kind
either, and by March the Dow had traded down more than 2,000 points, as interest
rate fears and an inverted yield curve worried investors. The market did rally
in April, but once again fear that the Federal Reserve would elevate interest
rates gave us an all-time one-day record correction of more than 600 points.
Throughout the year, the Blue Chip Equity Portfolio remained focused on
our strategy of looking for large-cap 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 forced us
to stay broadly diversified, with 40 quality companies, covering each sector of
the market. Although at times we were enticed to overweight sectors, especially
technology, we stayed the course, and once again delivered solid, consistent
performance.
As of April 30, 2000 the Portfolio's largest contributors, as expected,
were centered on the technology and telecommunication sectors. Companies like
Nokia, Cisco, Philips Electronics and Intel all appreciated over 100% in our
fiscal year. The Portfolio once again was negatively impacted by our weighting
in consumer-related companies, which had a tough time delivering earnings growth
because of pricing power.
We continue with our positive long-term bias on the equity markets.
However, continued volatility and an increasing interest-rate environment could
dampen returns in the near term. We continue to look for investments in large
companies with strong business franchises that fit our investment style and can
deliver consistent equity performance.
73
<PAGE>
EQUITY PORTFOLIOS
BLUE CHIP EQUITY PORTFOLIO
PERFORMANCE AS OF
APRIL 30, 2000
[Chart omitted, plot points are as follows:]
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
Ark Blue Chip Equity Portfolio S&P 500 Lipper Large Cap
Institutional Class Composite Index Value Funds Classification
4/30/96 $100,000 $100,000 $100,000
April 97 124,410 125,120 120,430
April 98 173,353 176,469 163,713
April 99 209,878 215,028 186,780
April 00 252,798 236,810 191,879
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Ark Blue Chip Equity Portfolio Ark Blue Chip Equity Portfolio S&P 500 Lipper Large Cap
Retail Class A Retail Class A, with Load Composite Index Value Funds Classification
<S> <C> <C> <C> <C>
5/31/96 $10,000 $ 9,525 $10,000 $10,000
April 97 11,956 11,388 12,196 11,806
April 98 16,611 15,822 17,201 16,049
April 99 20,092 19,138 20,959 18,311
April 00 24,169 23,021 23,082 18,811
</TABLE>
RETAIL CLASS B: VALUE OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Ark Blue Chip Equity Portfolio Ark Blue Chip Equity Portfolio S&P 500 Lipper Large Cap
Retail Class B* Retail Class B, with CDSC* Composite Index Value Funds Classification
<S> <C> <C> <C> <C>
4/30/96 $1,0000 $10,000 $10,000 $10,000
April 97 12,441 12,441 12,512 12,043
April 98 17,335 17,335 17,647 16,371
April 99 20,844 20,844 21,503 18,678
April 00 24,886 23,686 23,681 19,188
</TABLE>
S&P 500 Lipper
Institutional Retail Retail Composite Large Cap
Class Class A Class B* Index Value
--------------------------------------------------------------------------------
One Year
Total Return 20.45% 20.29% 19.39% 10.13% 2.73%
--------------------------------------------------------------------------------
One Year
Total Return with Load N/A 14.56% 14.39% N/A N/A
--------------------------------------------------------------------------------
Annualized 3 Year
Total Return 26.66% 26.44% 26.00% 23.70% 16.43%
--------------------------------------------------------------------------------
Annualized 3 Year
Total Return With Load N/A 24.40% 25.36% N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 25.87% 25.54% 25.39% N/A N/A
--------------------------------------------------------------------------------
Annualized Total Return
Inception to Date
With Load N/A 24.00% 25.02% 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
A shares were offered beginning May 16, 1996. Performance for the Retail Class
A shares with load reflects the deduction of the 4.75% sales charge. Retail
Class B shares were offered beginning July 31, 1998. Performance for Retail
Class B shares with load reflects the deduction of the applicable contingent
deferred sales charge.
* Performance shown prior to the actual inception date of the Retail Class B
shares represents that of the Institutional Class adjusted for the sales
charge only. No adjustments have been made for Retail Class 12b-1 fees and
expenses. With such adjustments, performance would be lower than shown.
Annualized performance since actual inception for Retail Class B shares is
22.58% without CDSC and 20.60% with CDSC.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
74
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
STATEMENT OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
[PIE CHART OMITTED, PERCENTAGES ARE AS FOLLOWS:]
Miscellaneous -- 11%
Retail -- 8%
Transportation -- 3%
Oil-Energy -- 11%
Consumer Products -- 10%
Chemical & Drugs -- 13%
Repurchase Agreements -- 5%
Technology -- 27%
Financial -- 12%
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
COMMON STOCKS -- 95.0%
ALUMINUM & NON-FERROUS METALS -- 1.8%
ALCOA 80,000 $ 5,190
--------------------------------------------------------------------------------
TOTAL ALUMINUM & NON-FERROUS METALS $ 5,190
--------------------------------------------------------------------------------
AUTOMOTIVE -- 2.5%
FORD MOTOR 135,000 7,383
--------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 7,383
--------------------------------------------------------------------------------
BANKS -- 6.6%
CHASE MANHATTAN 80,000 5,765
FIRSTAR 300,000 7,462
WELLS FARGO 155,000 6,365
--------------------------------------------------------------------------------
TOTAL BANKS $ 19,592
--------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 2.3%
MEDIAONE GROUP* 90,000 6,806
--------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 6,806
--------------------------------------------------------------------------------
CHEMICALS -- 1.8%
E.I. DU PONT DE NEMOURS 115,000 5,455
--------------------------------------------------------------------------------
TOTAL CHEMICALS $ 5,455
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 11.8%
CISCO SYSTEMS* 120,000 8,319
KONINKLIJKE (ROYAL) PHILIPS
ELECTRONICS N.V.,
NEW YORK SHARES* 132,000 5,890
LUCENT TECHNOLOGIES 100,000 6,219
MOTOROLA 45,000 5,358
NOKIA, CL A, ADR 160,000 9,100
--------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $34,886
--------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 1.7%
MICROSOFT* 70,000 4,882
--------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 4,882
--------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 3.3%
HEWLETT PACKARD 45,000 6,075
SUN MICROSYSTEMS* 40,000 3,677
--------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 9,752
--------------------------------------------------------------------------------
CONGLOMERATE -- 3.1%
TYCO INTERNATIONAL LIMITED 200,000 9,188
--------------------------------------------------------------------------------
TOTAL CONGLOMERATE $ 9,188
--------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
DRUGS -- 10.8%
ABBOTT LABORATORIES 195,000 $ 7,495
AMGEN* 115,000 6,440
PFIZER 60,000 2,528
SCHERING PLOUGH 160,000 6,450
WARNER LAMBERT 80,000 9,105
--------------------------------------------------------------------------------
TOTAL DRUGS $32,018
--------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 3.2%
GENERAL ELECTRIC 60,000 9,435
--------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $ 9,435
--------------------------------------------------------------------------------
ELECTRICAL TECHNOLOGY -- 0.4%
ENERGIZER HOLDINGS* 73,333 1,251
--------------------------------------------------------------------------------
TOTAL ELECTRICAL TECHNOLOGY $ 1,251
--------------------------------------------------------------------------------
ENERGY -- 2.6%
HALLIBURTON 175,000 7,733
--------------------------------------------------------------------------------
TOTAL ENERGY $ 7,733
--------------------------------------------------------------------------------
ENTERTAINMENT -- 2.3%
WALT DISNEY 160,000 6,930
--------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 6,930
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 2.6%
MORGAN STANLEY, DEAN WITTER,
DISCOVER 100,000 7,675
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 7,675
--------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 3.4%
PEPSICO 170,000 6,237
RALSTON PURINA GROUP 220,000 3,891
--------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $10,128
--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.3%
PROCTER & GAMBLE 65,000 3,876
--------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 3,876
--------------------------------------------------------------------------------
INSURANCE -- 2.8%
AMERICAN INTERNATIONAL GROUP 75,000 8,227
--------------------------------------------------------------------------------
TOTAL INSURANCE $ 8,227
--------------------------------------------------------------------------------
INTERNET SERVICES -- 2.1%
NORTEL NETWORKS 55,000 6,229
--------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $ 6,229
--------------------------------------------------------------------------------
MACHINERY -- 2.0%
INGERSOLL RAND 125,000 5,867
--------------------------------------------------------------------------------
TOTAL MACHINERY $ 5,867
--------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 2.9%
GUIDANT* 150,000 8,606
--------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 8,606
--------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 2.1%
FIRST DATA 125,000 6,086
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 6,086
--------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 2.7%
HONEYWELL INTERNATIONAL 140,000 7,840
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING $ 7,840
--------------------------------------------------------------------------------
PETROLEUM REFINING -- 4.7%
EXXON MOBIL 90,000 6,992
ROYAL DUTCH PETROLEUM,
NEW YORK SHARES 120,000 6,885
--------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $13,877
--------------------------------------------------------------------------------
75
<PAGE>
EQUITY PORTFOLIOS
BLUE CHIP EQUITY PORTFOLIO CONCLUDED
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
RETAIL -- 4.3%
HOME DEPOT 120,000 $ 6,728
TARGET 90,000 5,991
--------------------------------------------------------------------------------
TOTAL RETAIL $ 12,719
--------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS-- 5.0%
ALTERA* 35,000 3,579
INTEL 62,000 7,862
TEXAS INSTRUMENTS 20,000 3,257
--------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 14,698
--------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS-- 4.9%
ADC TELECOMMUNICATIONS* 55,000 3,341
SBC COMMUNICATIONS 125,000 5,477
US WEST 80,000 5,695
--------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 14,513
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $198,666) $280,842
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.9%
FIRST BOSTON
(5.820%, dated 04/28/00,
matures 05/01/00, repurchase
price $14,340,894 (collateralized
by U.S. Government Agency
Obligations: total market
value $14,771,335) $14,334 14,334
------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $14,334) $ 14,334
------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.9%
(Cost $213,000) $295,176
========================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.1% $415
========================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 8,962,810 outstanding shares
of beneficial interest 144,768
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 3,111,823 outstanding shares
of beneficial interest 44,832
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 458,046 outstanding shares
of beneficial interest 9,247
Undistributed net investment income 119
Accumulated net realized gain on investments 14,449
Net unrealized appreciation on investments 82,176
================================================================================
TOTAL NET ASSETS -- 100.0% $295,591
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $ 23.60
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $ 23.57
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($23.57 / 95.25%) $ 24.75
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS B $ 23.38
================================================================================
*NON-INCOME PRODUCING SECURITY
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
76
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
CAPITAL GROWTH PORTFOLIO
[PHOTO OMITTED]
ALLIED INVESTMENT ADVISORS' EQUITY TEAM
--------------------------------------------------------------------------------
THE ARK CAPITAL GROWTH PORTFOLIO IS MANAGED BY ALLIED INVESTMENT ADVISORS'
EQUITY TEAM. THEIR DISCIPLINED APPROACH TO EQUITY INVESTING IS PARTICULARLY
APPEALING TO INVESTORS WITH A LONG-TERM INVESTMENT PERSPECTIVE.
REVIEW AND OUTLOOK
For the fiscal year ended April 30, 2000, the ARK Capital Growth Portfolio
Institutional Class returned 51.36% and continued to outpace the S&P 500
(10.13%) and the Lipper Growth Funds Average (22.75%) by a significant margin.
Once again, the Portfolio's significant overweightings in technology and
telecommunication stocks were the primary drivers of its successful performance
for the year. Stock selection was an important component of performance,
especially in the latter half of the year when some of the more speculative
Internet-related stocks came under heavy selling pressure as investors came to
the realization that e.commerce and dot-com stock prices had greatly exceeded
their questionable fundamentals. The Capital Growth Portfolio had little
exposure to direct Internet investments, which helped performance. Stocks that
helped drive the Portfolio's strong performance were Oracle, Ciena, Voicestream
Wireless and ADC Telecommunications. The weakest performers for the year were
Royal Caribbean, Freddie Mac, Comcast and Media One.
Tactically, we have become more defensive during the past few months,
allowing cash to build a bit, and have reduced our technology overweighting
modestly. This was done to help offset the high level of investor nervousness
associated with the significant correction that is taking place in the
speculative portions of the technology sectors. Additionally, rising interest
rates and the possibility of higher inflation levels have increased investors'
uncertainty as well. Balancing these concerns are strong corporate earnings in
the United States, a robust U.S. and global economy and perhaps, most important,
a need by all industries to apply technology to improve productivity.
We strongly believe that the Capital Growth Portfolio is well positioned
for the future. We know that the increased volatility of the technology sector
can be unnerving, and we greatly appreciate the long-term focus of our
shareholders.
77
<PAGE>
EQUITY PORTFOLIOS
CAPITAL GROWTH PORTFOLIO
PERFORMANCE AS OF
APRIL 30, 2000
[Chart omitted, plot points are as follows:]
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
Ark Capital Growth Portfolio S&P 500 Lipper Multi-Cap
Institutional Class Composite Index Growth Funds Classification
7/31/93 $100,000 $100,000 $100,000
April 94 102,876 102,680 106,100
April 95 106,219 120,587 116,763
April 96 131,308 156,992 159,802
April 97 148,982 196,429 165,571
April 98 216,307 277,043 235,343
April 99 280,140 337,577 280,340
April 00 424,020 371,773 416,922
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Ark Capital Growth Portfolio Ark Capital Growth Portfolio, S&P 500 Lipper Multi-Cap
Retail Class A Retail Class A, with load Composite Index Growth Funds Classification
<S> <C> <C> <C> <C>
3/31/94 $10,000 $ 9,525 $10,000 $10,000
April 94 9,951 9,479 10,128 10,022
April 95 10,224 9,738 11,894 11,030
April 96 12,600 12,002 15,484 15,095
April 97 14,287 13,609 19,374 15,640
April 98 20,701 19,719 27,325 22,231
April 99 26,775 25,504 33,296 26,481
April 00 40,463 38,542 36,669 39,383
</TABLE>
RETAIL CLASS B: VALUE OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Ark Capital Growth Portfolio S&P 500 Lipper Multi-Cap
Retail Class B, with and w/o CDSC* Composite Index Growth Funds Classification
<S> <C> <C> <C>
7/31/93 $10,000 $10,000 $10,000
April 94 10,288 10,268 10,610
April 95 10,622 12,059 11,676
April 96 13,131 15,699 15,980
April 97 14,898 19,643 16,557
April 98 21,631 27,704 23,534
April 99 27,867 33,758 28,034
April 00 41,809 37,177 41,692
</TABLE>
S&P 500 Lipper
Institutional Retail Retail Composite Multi-Cap
Class Class A Class B* Index Growth
------------------------------------------------------------------------------
One Year
Total Return 51.36% 51.12% 50.03% 10.13% 48.72%
------------------------------------------------------------------------------
One Year
Total Return with
Load N/A 43.92% 45.03% N/A N/A
------------------------------------------------------------------------------
Annualized 3 Year
Total Return 41.72% 41.48% 41.05% 23.70% 35.08%
------------------------------------------------------------------------------
Annualized 3 Year
Total Return
With Load N/A 39.21% 40.55% N/A N/A
------------------------------------------------------------------------------
Annualized 5 Year
Total Return 31.90% 31.67% 31.53% 25.25% 27.81%
------------------------------------------------------------------------------
Annualized 5 Year
Total Return
With Load N/A 30.39% 31.39% N/A N/A
------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 23.66% 24.26% 23.40% N/A N/A
------------------------------------------------------------------------------
Annualized Total Return
Inception to Date
With Load N/A 23.28% 23.40% 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
A shares were offered beginning March 9, 1994. Performance for the Retail
Class A shares with load reflects the deduction of the 4.75% sales charge.
Retail Class B shares were offered beginning September 14, 1998. Performance
for Retail Class B shares with load reflects the deduction of the applicable
contingent deferred sales charge.
* Performance shown prior to the actual inception date of the Retail Class B
shares represents that of the Institutional Class adjusted for the sales
charge only. No adjustments have been made for Retail Class 12b-1 fees and
expenses. With such adjustments, performance would be lower than shown.
Annualized performance since actual inception for Retail Class B shares is
59.08% without CDSC and 57.24% with CDSC.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
78
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
STATEMENT OF NET ASSETS
[PIE CHART OMITTED, PERCENTAGES ARE AS FOLLOWS:]
% OF TOTAL PORTFOLIO INVESTMENTS
Miscellaneous Business Services -- 4%
Oil-Energy -- 1%
Consumer Products -- 3%
Chemical & Drugs -- 9%
Retail -- 10%
Telephones & Telecommunications -- 10%
Miscellaneous -- 2%
Repurchase Agreements -- 9%
Transportation -- 2%
Technology -- 39%
Financial -- 11%
MARKET
DESCRIPTION SHARES VALUE (000)
------------------------------------------------------------------------
COMMON STOCKS -- 91.1%
AIRCRAFT -- 1.4%
UNITED TECHNOLOGIES 60,000 $ 3,731
------------------------------------------------------------------------
TOTAL AIRCRAFT $ 3,731
------------------------------------------------------------------------
BANKS -- 5.2%
CHASE MANHATTAN 60,000 4,324
FIRSTAR 125,000 3,109
WELLS FARGO 150,000 6,159
------------------------------------------------------------------------
TOTAL BANKS $13,592
------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 3.3%
COMCAST, CL A SPECIAL* 65,000 2,604
MEDIAONE GROUP* 80,000 6,050
------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 8,654
------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 12.2%
CIENA* 40,000 4,945
CISCO SYSTEMS* 100,000 6,933
COMVERSE TECHNOLOGY* 50,000 4,459
LUCENT TECHNOLOGIES 60,000 3,731
MOTOROLA 55,000 6,548
NOKIA, CL A, ADR 80,000 4,550
RADWARE LIMITED* 23,000 621
------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $31,787
------------------------------------------------------------------------
COMPUTERS & SERVICES -- 9.3%
ELECTRONICS FOR IMAGING* 100,000 5,225
EMC* 35,000 4,863
HEWLETT PACKARD 50,000 6,750
JABIL CIRCUIT* 120,000 4,912
LEXMARK INTERNATIONAL
GROUP, CL A* 20,000 2,360
------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $24,110
------------------------------------------------------------------------
COMPUTER SOFTWARE -- 1.5%
ORACLE SYSTEMS* 50,000 3,997
------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 3,997
------------------------------------------------------------------------
CONGLOMERATE -- 1.8%
TYCO INTERNATIONAL LIMITED 100,000 4,594
------------------------------------------------------------------------
TOTAL CONGLOMERATE $ 4,594
------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
------------------------------------------------------------------------
DRUGS -- 8.6%
AMGEN* 80,000 $ 4,480
BRISTOL-MYERS SQUIBB 80,000 4,195
ELI LILLY 65,000 5,025
SCHERING PLOUGH 75,000 3,023
WARNER LAMBERT 50,000 5,691
------------------------------------------------------------------------
TOTAL DRUGS $22,414
------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.2%
GENERAL ELECTRIC 20,000 3,145
------------------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $ 3,145
------------------------------------------------------------------------
ENTERTAINMENT -- 0.7%
ROYAL CARIBBEAN CRUISES 85,000 1,769
------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 1,769
------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.8%
FREDDIE MAC 80,000 3,675
MERRILL LYNCH 40,000 4,078
MORGAN STANLEY, DEAN WITTER,
DISCOVER 60,000 4,605
------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $12,358
------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 1.4%
PEPSICO 100,000 3,669
------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 3,669
------------------------------------------------------------------------
INSURANCE -- 1.5%
MARSH & MCLENNAN 40,000 3,943
------------------------------------------------------------------------
TOTAL INSURANCE $ 3,943
------------------------------------------------------------------------
INTERNET SERVICES -- 3.7%
EXODUS COMMUNICATIONS* 20,000 1,769
INFORTE* 25,000 981
NORTEL NETWORKS 60,000 6,795
------------------------------------------------------------------------
TOTAL INTERNET SERVICES $ 9,545
------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 2.6%
GUIDANT* 120,000 6,885
------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 6,885
------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES-- 1.9%
FIRST DATA 100,000 4,869
INDIGO N.V. WARRANTS* 499 1
------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 4,870
------------------------------------------------------------------------
RETAIL -- 8.1%
BEST BUY* 50,000 4,038
CVS 100,000 4,350
HOME DEPOT 30,000 1,682
LOWE'S 60,000 2,970
STARBUCKS* 50,000 1,512
TARGET 100,000 6,656
------------------------------------------------------------------------
TOTAL RETAIL $21,208
------------------------------------------------------------------------
RUBBER & PLASTIC -- 0.4%
SEALED AIR* 20,000 1,113
------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $ 1,113
------------------------------------------------------------------------
79
<PAGE>
EQUITY PORTFOLIOS
CAPITAL GROWTH PORTFOLIO CONCLUDED
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 10.3%
ALTERA* 85,000 $ 8,691
APPLIED MATERIALS* 30,000 3,054
INTEL 60,000 7,609
NOVELLUS SYSTEMS* 50,000 3,334
TEXAS INSTRUMENTS 25,000 4,072
------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 26,760
------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 11.2%
ADC TELECOMMUNICATIONS* 150,000 9,113
ALLTEL 50,000 3,331
CORNING 20,000 3,950
QWEST COMMUNICATIONS
INTERNATIONAL* 150,000 6,506
VOICESTREAM WIRELESS* 35,000 3,465
WILLIAMS COMMUNICATION
GROUP* 75,000 2,775
------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 29,140
------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $162,025) $237,284
------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 9.1%
FIRST BOSTON
(5.820%, dated 04/28/00,
matures 05/01/00, repurchase
price $23,673,410 (collateralized
by U.S.Government Agency
Obligations: total market
value $24,864,521) $23,662 23,662
------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $23,662) $ 23,662
------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.2%
(Cost $185,687) $260,946
========================================================================
OTHER ASSETS AND LIABILITIES, NET -- (0.2%) $ (545)
========================================================================
MARKET
DESCRIPTION VALUE (000)
------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 7,419,097 outstanding shares
of beneficial interest $ 116,423
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 2,025,479 outstanding shares
of beneficial interest 34,308
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 548,989 outstanding shares
of beneficial interest 11,674
Accumulated net realized gain on investments 22,737
Net unrealized appreciation on investments 75,259
========================================================================
TOTAL NET ASSETS -- 100.0% $260,401
========================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $26.13
========================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $25.89
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($25.89 / 95.25%) $27.18
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS B $25.74
================================================================================
*NON-INCOME PRODUCING SECURITY
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
80
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MID-CAP EQUITY PORTFOLIO
[PHOTO OMITTED]
ALLIED INVESTMENT ADVISORS' EQUITY TEAM
--------------------------------------------------------------------------------
THE ARK MID-CAP EQUITY PORTFOLIO IS MANAGED BY ALLIED INVESTMENT ADVISORS'
EQUITY TEAM. THEIR DISCIPLINED APPROACH TO EQUITY INVESTING IS PARTICULARLY
APPEALING TO INVESTORS WITH A LONG-TERM INVESTMENT PERSPECTIVE.
REVIEW AND OUTLOOK
The ARK Mid-Cap Equity Portfolio Institutional Class continued to perform well,
closing out the year with a gain of 38.90% compared to a gain of 23.52% for the
Standard & Poor's 400 Mid-Cap Index. The mid-cap stocks also exceeded the 10.13%
advance witnessed by the most popular large-cap benchmark, the Standard & Poor's
500 Index.
Once again, the Portfolio's best performers were technology and
telecommunications stocks. Triquint Semiconductor, Siebel Systems, Veritas
Software, Ciena and Cyprus Semiconductor were the top five performers, while
financial, chemical and industrial shares underperformed. Energy stocks finally
came to life during the fourth quarter.
Signs of inflation are unfortunately again evident as sharp increases in
wages, housing prices and many service industry prices have begun. This means
that the Federal Reserve could continue to raise interest rates to slow economic
activity, which puts the stock market at greater risk. On the plus side,
however, corporate earnings for mid-cap companies are expected to be strong,
providing some cushion against a market sell-off.
Mid-cap stocks appear to be positioned to provide good long-term
performance relative to large-cap equities, although the volatility seen over
the last year will likely remain with us throughout the year 2000.
81
<PAGE>
EQUITY PORTFOLIOS
MID-CAP EQUITY PORTFOLIO
PERFORMANCE AS OF
APRIL 30, 2000
[Chart omitted, plot points are as follows:]
INSTITUTIONALCLASS: VALUEOFA $100,000 INVESTMENT
Ark Mid-Cap Equity Portfolio S&P 400 Lipper Mid-Cap
Institutional Class Mid-Cap Index Core Funds Classification
11/30/96 $100,000 $100,000 $100,000
April 97 100,671 101,178 96,086
April 98 147,906 149,613 139,268
April 99 160,862 159,248 138,028
April 00 223,438 196,703 194,054
<TABLE>
<CAPTION>
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
Ark Mid-Cap Equity Portfolio Ark Mid-Cap Equity Portfolio, S&P 400 Lipper Mid-Cap
Retail Class A* Retail Class A, with load* Mid-Cap Index Core Funds Classification
<S> <C> <C> <C> <C>
11/30/96 $10,000 $ 9,525 $10,000 $10,000
April 97 10,067 9,589 10,118 9,609
April 98 14,791 14,088 14,961 13,927
April 99 16,086 15,322 15,925 13,803
April 00 22,324 21,264 19,670 19,405
</TABLE>
<TABLE>
<CAPTION>
Institutional Retail S&P 400 Lipper
Class Class A* Mid-cap Mid-Cap Core
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year
Total Return 38.90% 38.78% 23.52% 40.59%
-----------------------------------------------------------------------------------------
One Year
total Return with load N/A 32.21% N/A N/A
-----------------------------------------------------------------------------------------
Annualized 3 year
total return 30.44% 30.40% 24.81 25.49
-----------------------------------------------------------------------------------------
Annualized 3 year
total return with load N/A 28.29% N/A N/A
-----------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 26.65% 26.62% N/A N/A
-----------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date
with load N/A 24.84% N/A N/A
-----------------------------------------------------------------------------------------
</TABLE>
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning November 15, 1996. Retail
Class A shares were offered beginning September 1, 1999. Performance for the
Retail Class A shares with load reflects the deduction of the 4.75% sales
charge.
* Performance shown prior to the actual inception date of the Retail Class A
shares represents that of the Institutional Class adjusted for the sales
charge only. No adjustments have been made for Retail Class 12b-1 fees and
expenses. With such adjustments, performance would be lower than shown.
Cumulative performance since actual inception for Retail Class A shares is
34.04% without load and 27.66% with load.
The performance for the S&P Mid-Cap Index does not include operating expenses
that are incurred by the Portfolio.
82
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
STATEMENT OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
[PIE CHART OMITTED, PERCENTAGES ARE AS FOLLOWS:]
Consumer Products -- 6%
Transportation -- 3%
Telephones & Telecommunications -- 8%
Oil-Energy -- 6%
Chemicals & Drugs -- 6%
Utilities -- 4%
Retail -- 4%
Miscellaneous -- 4%
Miscellanous Business Services -- 9%
Financial -- 8%
Repurchase Agreements -- 1%
Technology -- 39%
Building & Construction -- 2%
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
COMMON STOCKS -- 99.4%
AEROSPACE & DEFENSE -- 0.5%
CORDANT TECHNOLOGIES 2,800 $ 159
HUBBELL, CL B 3,816 99
LEAR* 5,600 168
--------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $ 426
--------------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.1%
AIRBORNE FREIGHT 2,900 62
ALASKA AIRGROUP* 1,000 29
--------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 91
--------------------------------------------------------------------------------
APPAREL/TEXTILES -- 0.4%
JONES APPAREL GROUP* 5,400 160
SHAW INDUSTRIES 9,300 147
WESTPOINT STEVENS* 3,200 60
--------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $ 367
--------------------------------------------------------------------------------
AUTOMOTIVE -- 0.4%
FEDERAL SIGNAL 2,882 59
FEDERAL-MOGUL 1,450 20
KAYDON 2,200 51
MERITOR AUTOMOTIVE 3,600 54
MODINE MANUFACTURING 1,250 28
SUPERIOR INDUSTRIES
INTERNATIONAL 1,155 37
TELEFLEX 3,200 111
--------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $360
--------------------------------------------------------------------------------
BANKS -- 3.5%
ASSOCIATED BANC 4,875 125
ASTORIA FINANCIAL 4,000 110
CCB FINANCIAL 3,700 146
CHARTER ONE FINANCIAL 14,100 286
CITY NATIONAL 4,200 155
COMPASS BANCSHARES 9,000 166
DIME BANCORP 9,500 178
FIRST TENNESSEE NATIONAL 12,000 228
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
FIRST VIRGINIA BANKS 4,750 $ 173
HIBERNIA, CL A 13,500 143
MARSHALL & ILSLEY 11,000 511
MERCANTILE BANKSHARES 5,075 145
NATIONAL COMMERCE
BANCORPORATION 10,000 164
NORTH FORK BANCORPORATION 11,000 178
PACIFIC CENTURY FINANCIAL 4,000 82
PROVIDENT FINANCIAL GROUP 3,500 103
SOVEREIGN BANCORP 14,600 100
TCF FINANCIAL 6,500 152
WILMINGTON TRUST 1,900 88
--------------------------------------------------------------------------------
TOTAL BANKS $3,233
--------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 2.5%
CHRIS-CRAFT INDUSTRIES* 2,663 164
COX COMMUNICATIONS* 10,000 428
HISPANIC BROADCASTING* 4,500 455
L90* 20,000 200
UNIVISION COMMUNICATIONS* 10,000 1,092
--------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $2,339
--------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.3%
MARTIN MARIETTA MATERIALS 5,000 265
--------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 265
--------------------------------------------------------------------------------
CHEMICALS -- 0.7%
AIRGAS* 6,000 35
CABOT 5,000 135
DEXTER 1,000 55
FULLER (H.B.) 590 23
IMC GLOBAL 8,500 131
LUBRIZOL 2,900 74
SOLUTIA 12,000 163
--------------------------------------------------------------------------------
TOTAL CHEMICALS $ 616
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 4.3%
CIENA* 15,000 1,854
COMVERSE TECHNOLOGY* 20,000 1,784
POLYCOM* 2,000 158
SAWTEK* 5,000 239
--------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $4,035
--------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 9.4%
INFORMIX* 18,000 198
INTUIT* 17,500 629
LEGATO SYSTEMS* 10,400 135
NETWORKS ASSOCIATES* 22,000 560
RATIONAL SOFTWARE* 7,500 638
SIEBEL SYSTEMS* 18,700 2,298
SYMANTEC* 10,000 624
VERITAS SOFTWARE* 35,000 3,754
--------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $8,836
--------------------------------------------------------------------------------
<PAGE>
83
<PAGE>
EQUITY PORTFOLIOS
MID-CAP EQUITY PORTFOLIO CONTINUED
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 8.7%
AMERICAN POWER CONVERSION* 15,500 $ 547
AVNET 3,675 289
BROCADE COMMUNICATIONS
SYSTEMS* 10,000 1,240
CDW COMPUTER CENTERS* 5,000 520
DIEBOLD 3,854 111
ELECTRONICS FOR IMAGING* 25,000 1,306
JABIL CIRCUIT* 50,000 2,047
SCI SYSTEMS* 12,400 660
SOLECTRON* 16,000 749
SYMBOL TECHNOLOGIES 11,515 642
--------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $8,111
--------------------------------------------------------------------------------
CONCRETE & MINERAL PRODUCTS-- 0.2%
FERRO 1,575 36
SOUTHDOWN 2,800 163
--------------------------------------------------------------------------------
TOTAL CONCRETE & MINERAL PRODUCTS $ 199
--------------------------------------------------------------------------------
DRUGS -- 5.1%
BIOGEN* 10,000 588
CARTER-WALLACE 2,400 53
CHIRON* 17,064 772
FOREST LABORATORIES* 15,868 1,334
GENZYME* 8,024 392
ICN PHARMACEUTICALS 5,000 126
MILLENNIUM PHARMACEUTICAL* 6,000 476
MYLAN LABORATORIES 15,000 426
PERRIGO* 6,050 34
SEPRACOR* 6,300 580
--------------------------------------------------------------------------------
TOTAL DRUGS $4,781
--------------------------------------------------------------------------------
ELECTRICAL SERVICES & UTILITIES -- 4.1%
ALLEGHENY ENERGY 8,729 265
ALLIANT ENERGY 5,500 165
CALPINE* 5,000 457
CONECTIV 8,687 154
DPL 10,000 232
ENERGY EAST 7,300 152
HAWAIIAN ELECTRIC INDUSTRIES 1,475 55
IDACORP 1,650 61
IPALCO ENTERPRISES 4,742 97
KANSAS CITY POWER & LIGHT 3,250 83
LG&E 10,150 237
MINNESOTA POWER & LIGHT 3,650 67
MONTANA POWER 10,000 441
NISOURCE 8,700 161
OGE ENERGY 6,106 121
PINNACLE WEST CAPITAL 5,000 176
POTOMAC ELECTRIC POWER 10,150 238
PUGET SOUND ENERGY 4,200 100
SCANA 8,750 226
TECO ENERGY 9,372 205
WISCONSIN ENERGY 8,000 171
--------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES & UTILITIES $3,864
--------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
ENTERTAINMENT -- 0.9%
INTERNATIONAL GAME
TECHNOLOGY 6,600 $ 161
MANDALAY RESORT GROUP* 7,500 142
PARK PLACE ENTERTAINMENT* 30,000 384
PREMIER PARKS* 6,500 140
--------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 827
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 2.2%
A.G. EDWARDS & SONS 8,018 302
E*TRADE GROUP* 28,000 602
FINOVA GROUP 4,750 61
GREENPOINT FINANCIAL 8,200 153
LEGG MASON 4,600 174
T. ROWE PRICE 19,000 724
--------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 2,016
--------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 1.0%
DEAN FOODS 3,575 88
FLOWERS INDUSTRIES 5,656 86
HORMEL FOODS 7,600 116
INTERSTATE BAKERIES 5,200 66
LANCASTER COLONY 1,848 49
MCCORMICK 5,750 179
SUIZA FOODS* 2,500 97
TYSON FOODS, CL A 17,510 183
UNIVERSAL FOODS 2,400 39
WHITMAN 5,300 61
--------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 964
--------------------------------------------------------------------------------
FORESTRY -- 0.1%
RAYONIER 2,100 99
--------------------------------------------------------------------------------
TOTAL FORESTRY $ 99
--------------------------------------------------------------------------------
GAS/NATURAL GAS -- 1.2%
AGL RESOURCES 2,150 38
DYNEGY* 3,100 203
KEYSPAN 11,500 338
KINDER MORGAN 3,450 105
MCN 4,100 102
NATIONAL FUEL & GAS 1,425 68
QUESTAR 5,800 109
UTILICORP UNITED 4,425 85
WASHINGTON GAS LIGHT 2,000 51
--------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $1,099
--------------------------------------------------------------------------------
HOME BUILDERS -- 0.1%
CLAYTON HOMES 11,701 111
--------------------------------------------------------------------------------
TOTAL HOME BUILDERS $ 111
--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.2%
DIAL 11,700 163
RPM 3,890 39
--------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 202
--------------------------------------------------------------------------------
84
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
INSURANCE -- 2.7%
AFLAC 9,460 $ 462
ALLMERICA FINANCIAL 9,000 487
AMBAC 5,000 240
AMERICAN FINANCIAL GROUP 4,500 114
FIRST HEALTH GROUP, CL A* 2,800 85
HSB GROUP 1,350 39
OHIO CASUALTY 5,000 83
PACIFICARE HEALTH SYSTEMS,
CL A* 3,153 162
PMI GROUP 2,550 124
PROTECTIVE LIFE 4,900 117
RELIASTAR FINANCIAL 10,000 431
UNITRIN 5,000 169
--------------------------------------------------------------------------------
TOTAL INSURANCE $2,513
--------------------------------------------------------------------------------
LEASING & RENTING -- 0.6%
COMDISCO 17,500 544
--------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 544
--------------------------------------------------------------------------------
LEISURE PRODUCTS -- 0.4%
ELECTRONIC ARTS* 5,750 348
--------------------------------------------------------------------------------
TOTAL LEISURE PRODUCTS $ 348
--------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 0.1%
GEORGIA-PACIFIC (TIMBER GROUP) 5,000 116
--------------------------------------------------------------------------------
TOTAL LUMBER & WOOD PRODUCTS $ 116
--------------------------------------------------------------------------------
MACHINERY -- 0.7%
DONALDSON 2,200 51
FLOWSERVE 2,137 30
GRANT PRIDECO* 15,000 289
KENNAMETAL 1,600 46
MARK IV INDUSTRIES 2,615 55
PENTAIR 1,574 60
SPX 1,500 165
--------------------------------------------------------------------------------
TOTAL MACHINERY $ 696
--------------------------------------------------------------------------------
MANUFACTURING -- 0.1%
TRINITY INDUSTRIES 3,200 71
--------------------------------------------------------------------------------
TOTAL MANUFACTURING $ 71
--------------------------------------------------------------------------------
MARINE TRANSPORTATION -- 0.0%
ALEXANDER & BALDWIN 1,900 40
--------------------------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $ 40
--------------------------------------------------------------------------------
MEASURING DEVICES -- 0.9%
BECKMAN COULTER 2,250 146
WATERS* 7,500 711
--------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 857
--------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 2.5%
BERGEN BRUNSWIG, CL A 5,112 26
DENTSPLY INTERNATIONAL 3,900 113
EXPRESS SCRIPTS, CL A* 4,000 143
GILEAD SCIENCES* 2,000 108
HEALTH MANAGEMENT
ASSOCIATES, CL A* 25,000 398
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
LINCARE HOLDINGS* 3,200 $ 98
MINIMED* 2,200 270
STERIS* 5,300 48
STRYKER 9,500 683
SYBRON INTERNATIONAL* 7,800 243
TRIGON HEALTHCARE* 1,500 54
VISX* 7,000 111
--------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $2,295
--------------------------------------------------------------------------------
METALS & MINING -- 0.4%
MINERALS TECHNOLOGIES 1,900 88
VULCAN MATERIALS 5,925 260
--------------------------------------------------------------------------------
TOTAL METALS & MINING $ 348
--------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 7.8%
AC NIELSEN* 3,000 69
AFFILIATED COMPUTER
SERVICES, CL A* 3,500 116
CHECKFREE HOLDINGS* 5,000 254
CINTAS 16,950 672
CONCORD EFS* 18,050 404
CONVERGYS* 30,200 1,329
DST SYSTEMS* 5,500 408
FISERV* 12,818 589
LITTON INDUSTRIES* 3,350 146
NIKU* 5,000 100
NOVA* 5,500 174
PLEXUS* 15,000 1,149
REYNOLDS & REYNOLDS, CL A 4,100 97
ROBERT HALF INTERNATIONAL* 6,600 403
SOTHEBY'S HOLDINGS, CL A 4,300 71
TRANSACTION SYSTEMS
ARCHITECTS* 2,300 38
VIAD 6,900 175
WESTWOOD ONE* 30,000 1,061
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $7,255
--------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES -- 0.3%
MANPOWER 7,000 247
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER SERVICES $ 247
--------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 0.3%
GTECH* 1,000 21
HARSCO 2,500 74
HILLENBRAND INDUSTRIES 6,000 181
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING $ 276
--------------------------------------------------------------------------------
MOTORCYCLES, BICYCLES & PARTS -- 0.8%
HARLEY-DAVIDSON 20,000 796
--------------------------------------------------------------------------------
TOTAL MOTORCYCLES, BICYCLES & PARTS $ 796
--------------------------------------------------------------------------------
OFFICE FURNITURE & FIXTURES-- 0.2%
HERMAN MILLER 5,900 162
HON INDUSTRIES 2,400 60
--------------------------------------------------------------------------------
TOTAL OFFICE FURNITURE & FIXTURES $ 222
--------------------------------------------------------------------------------
85
<PAGE>
EQUITY PORTFOLIOS
MID-CAP EQUITY PORTFOLIO CONTINUED
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.4%
BOWATER 2,650 $ 146
CHESAPEAKE 1,050 33
CONSOLIDATED PAPERS 4,500 170
--------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $349
--------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 4.5%
BJ SERVICES* 9,200 646
DEVON ENERGY 5,300 255
ENSCO INTERNATIONAL 10,500 348
GLOBAL MARINE* 14,075 338
NABORS INDUSTRIES* 7,200 284
NOBLE AFFILIATES 4,400 159
NOBLE DRILLING* 15,000 599
OCEAN ENERGY* 7,000 91
SMITH INTERNATIONAL* 10,000 760
TIDEWATER 4,855 144
TRANSOCEAN SEDCO FOREX 9,600 451
VALERO ENERGY 3,300 96
--------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $4,171
--------------------------------------------------------------------------------
PETROLEUM REFINING -- 0.7%
MURPHY OIL 2,400 142
TOSCO 11,800 378
ULTRAMAR DIAMOND SHAMROCK 4,800 119
--------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 639
--------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 1.5%
A.H. BELO, CL A 7,200 120
HARTE-HANKS COMMUNICATIONS 5,000 124
HOUGHTON MIFFLIN 1,380 57
LEE ENTERPRISES 1,850 42
MEDIA GENERAL 1,100 54
READER'S DIGEST, CL A 7,500 240
SCHOLASTIC* 600 28
VALASSIS COMMUNICATIONS* 10,000 341
WASHINGTON POST, CL B 850 415
--------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $1,421
--------------------------------------------------------------------------------
RAILROADS -- 0.9%
KANSAS CITY SOUTHERN
INDUSTRIES 12,000 862
--------------------------------------------------------------------------------
TOTAL RAILROADS $ 862
--------------------------------------------------------------------------------
RETAIL -- 4.3%
BEST BUY* 13,000 1,050
BJ'S WHOLESALE CLUB* 6,000 213
BOB EVANS FARMS 3,000 39
BRINKER INTERNATIONAL* 4,849 155
CBRL GROUP 3,500 49
DOLLAR TREE STORES* 3,500 203
FASTENAL 1,650 96
HANNAFORD BROTHERS 5,000 362
LANDS' END* 3,350 142
LONE STAR STEAKHOUSE
& SALOON* 3,000 35
OUTBACK STEAKHOUSE* 5,700 187
PAPA JOHN'S INTERNATIONAL* 2,500 69
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
STARBUCKS* 20,500 $ 620
TIFFANY & COMPANY 8,000 581
WILLIAMS-SONOMA* 7,600 263
--------------------------------------------------------------------------------
TOTAL RETAIL $ 4,064
--------------------------------------------------------------------------------
RUBBER & PLASTIC -- 0.9%
CARLISLE 1,200 49
SONOCO PRODUCTS 7,550 158
WEATHERFORD INTERNATIONAL* 15,000 609
--------------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $ 816
--------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS-- 16.6%
ALTERA* 13,000 1,329
ANALOG DEVICES* 20,000 1,536
ATMEL* 19,400 949
CADENCE DESIGN SYSTEMS* 22,000 370
CYPRESS SEMICONDUCTOR* 18,250 948
EMS TECNOLOGIES* 25,000 447
LINEAR TECHNOLOGY 31,800 1,817
MAXIM INTEGRATED PRODUCTS* 25,500 1,653
MICREL* 3,000 259
MICROCHIP TECHNOLOGY* 11,500 714
NOVELLUS SYSTEMS* 21,000 1,400
QLOGIC* 6,000 602
SANMINA* 10,000 601
SYNOPSYS* 6,000 252
TERADYNE* 10,500 1,155
TRIQUINT SEMICONDUCTOR* 4,000 411
VITESSE SEMICONDUCTOR* 15,500 1,055
--------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $15,498
--------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 0.3%
AMERICAN STANDARD* 6,000 246
--------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 246
--------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.1%
AK STEEL HOLDING 3,500 39
CARPENTER TECHNOLOGY 1,100 22
PRECISION CASTPARTS 1,050 44
--------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 105
--------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 3.9%
BROADWING* 17,700 501
COPPER MOUNTAIN NETWORKS* 10,000 834
COVAD COMMUNICATIONS
GROUP* 22,500 624
TELEPHONE & DATA SYSTEMS 3,100 316
TRANSWITCH* 4,750 418
WILLIAMS COMMUNICATION
GROUP* 10,000 370
WINSTAR COMMUNICATIONS* 15,000 598
--------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 3,661
--------------------------------------------------------------------------------
TESTING LABORATORIES -- 0.9%
MEDIMMUNE* 5,500 880
--------------------------------------------------------------------------------
TOTAL TESTING LABORATORIES $ 880
--------------------------------------------------------------------------------
86
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
--------------------------------------------------------------------------------
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
TRANSPORTATION SERVICES -- 0.2%
CNF TRANSPORTATION 4,400 $ 123
GATX 2,550 91
--------------------------------------------------------------------------------
TOTAL TRANSPORTATION SERVICES $ 214
--------------------------------------------------------------------------------
WATER UTILITIES -- 0.1%
AMERICAN WATER WORKS 5,600 127
--------------------------------------------------------------------------------
TOTAL WATER UTILITIES $ 127
--------------------------------------------------------------------------------
WHOLESALE -- 0.4%
NU HORIZONS ELECTRONICS* 18,900 338
--------------------------------------------------------------------------------
TOTAL WHOLESALE $ 338
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $61,964) $92,856
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.8%
FIRST BOSTON
(5.820%, dated 04/28/00,
matures 05/01/00, repurchase
price $776,573 (collateralized
by U.S. Government Agency
Obligations: total market
value $804,040) $776 776
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $776) $ 776
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.2%
(Cost $62,740) $93,632
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- (0.2%) $ (218)
================================================================================
MARKET
DESCRIPTION VALUE (000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 5,148,683 outstanding shares
of beneficial interest $53,476
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 64,913 outstanding shares
of beneficial interest 1,057
Distribution in excess of net investment income (139)
Accumulated net realized gain on investments 8,128
Net unrealized appreciation on investments 30,892
================================================================================
TOTAL NET ASSETS -- 100.0% $ 93,414
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $ 17.92
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $ 17.90
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($17.90 / 95.25%) $ 18.79
================================================================================
*NON-INCOME PRODUCING SECURITY
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
87
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
SMALL-CAP EQUITY PORTFOLIO
[PHOTO OMITTED]
H. GILES KNIGHT
--------------------------------------------------------------------------------
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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 29 YEARS
OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The ARK Small-Cap Equity Portfolio continued to perform well over the
12-month period ending April 30, 2000, as small-cap stocks, in general,
outperformed large-cap stocks for a good part of this period. Volatility
continued, but the technology and telecommunication sectors provided virtually
all of the performance gains.
Wireless telephone providers remained key players and the Portfolio had
overweighted positions in VoiceStream, Western Wireless, Price Communications,
Omnipoint, Microcell and Clearnet. The fundamentals for these companies remain
strong with sharply increasing average monthly revenue gains and new
subscriptions. The United States is now about 30% penetrated by wireless
telephones and this figure is expected to increase dramatically over the next
few years as consumers shift from wired telephones in favor of mobile units.
Basic computer and semiconductor stocks also played a role in the Portfolio's
success as companies such as Cypress Semiconductor, Tibco Software, Semtech and
Harris Corporation were clear winners.
Looking ahead, the threat of higher interest rates as a result of the
Federal Reserve's efforts to contain inflation dictates a more cautious posture
toward stock selection and major reductions in the technology/telecommunications
sectors have been recently completed. Healthcare stocks such as Hospital
Management Association, Healthsouth Corporation, and Lifepoint Hospitals have
been added, while the energy service and basic industry sectors have also been
increased.
In general, the Portfolio has lowered its risk profile in favor of
small-cap stocks with "real" earnings as opposed to future potential earnings.
At this time, there is only one dotcom stock in the Portfolio. The Portfolio
will, however, continue to focus on those companies delivering above-average
growth in both revenue and earnings.
88
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
PERFORMANCE AS OF
APRIL 30, 2000
[Chart omitted, plot points are as follows:]
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
<TABLE>
<CAPTION>
Ark Small-Cap Equity Portfolio Frank Russell 2000 Frank Russell Lipper Small-Cap
Institutional Class Growth Index 2000 Index Growth Funds Classification
<S> <C> <C> <C> <C>
7/31/95 $100,000 $100,000 $100,000 $100,000
April 96 137,992 119,379 117,543 124,006
April 97 105,661 103,203 117,614 109,559
April 98 156,304 148,313 167,482 157,929
April 99 171,762 142,722 151,990 172,269
April 00 388,904 187,508 179,986 287,621
</TABLE>
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Ark Small-Cap Equity Portfolio Ark Small-Cap Equity Portfolio Frank Russell 2000 Frank Russell LipperSmall-Cap
Retail Class A Retail Class A, with Load Growth Index 2000 Index Growth Funds Classification
<S> <C> <C> <C> <C> <C>
5/31/96 $10,000 $ 9,525 $10,000 $10,000 $10,000
April 97 7,426 7,073 8,223 9,626 8,500
April 98 10,958 10,438 11,817 13,707 12,253
April 99 12,016 11,446 11,372 12,439 13,365
April 00 27,173 25,882 14,940 14,731 22,315
</TABLE>
<TABLE>
<CAPTION>
Institutional Retail Russell 2000 Russell Lipper
Class Class A* Growth 2000 Mid-cap*
-------------------------------------------------------------------------------------------------
One Year
<S> <C> <C> <C> <C> <C>
Total Return 126.42% 126.13% 31.38% 18.42% 66.96%
-------------------------------------------------------------------------------------------------
One Year
Total Return with Load N/A 115.35% N/A N/A N/A
-------------------------------------------------------------------------------------------------
Annualized 3 Year
Total Return 54.39% 54.10% 22.02% 15.24% 37.33%
-------------------------------------------------------------------------------------------------
Annualized 3 Year
Total Return With Load N/A 51.59% N/A N/A N/A
-------------------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 34.81% 28.11% N/A N/A N/A
-------------------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date With Load N/A 26.55% N/A N/A N/A
-------------------------------------------------------------------------------------------------
</TABLE>
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning July 13, 1995. Retail Class
A shares were offered beginning May 16, 1996. Performance for Retail Class A
shares with load reflects the deduction of the 4.75% sales charge.
The performance of the Frank Russell 2000 Growth Index does not include
operating expenses that are incurred by the Portfolio.
* Due to new Lipper reclassification, the Small-Cap Equity Portfolio have been
reclassified as Mid-Cap by Lipper.
89
<PAGE>
EQUITY PORTFOLIOS
SMALL-CAP EQUITY PORTFOLIO
% OF TOTAL PORTFOLIO INVESTMENTS
[PIE CHART OMITTED, PERCENTAGES ARE AS FOLLOWS:]
Repurchase Agreements -- 21%
Communication Equipment -- 15%
Energy -- 9%
Chemical & Drugs -- 4%
Technology -- 18%
Miscellaneous Business Services -- 9%
Miscellaneous -- 12%
Healthcare -- 12%
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
COMMON STOCKS -- 90.8%
AUTOMOTIVE -- 2.3%
ARVIN INDUSTRIES 100,000 $ 2,175
--------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 2,175
--------------------------------------------------------------------------------
CHEMICALS -- 1.7%
WELLMAN 72,100 1,541
--------------------------------------------------------------------------------
TOTAL CHEMICALS $1,541
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 8.7%
COMVERSE TECHNOLOGY* 35,000 3,121
HARRIS 40,000 1,292
MICROCELL TELECOMMUNICATIONS* 48,800 1,702
RADYNE COMSTREAM* 20,000 377
RIT TECHNOLOGIES LIMITED* 61,500 600
VIASAT* 21,100 988
--------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $8,080
--------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 2.8%
EMULEX* 25,000 1,134
MANUGISTICS* 20,000 856
TIDEL TECHNOLOGIES* 80,000 580
--------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $2,570
--------------------------------------------------------------------------------
DRUGS -- 3.1%
MATRIX PHARMACUETICALS* 19,000 175
NOVEN PHARMACEUTICALS* 40,000 470
NS GROUP* 75,000 1,191
QUIDEL* 100,000 800
SUPERGEN* 6,000 199
--------------------------------------------------------------------------------
TOTAL DRUGS $2,835
--------------------------------------------------------------------------------
ENTERTAINMENT -- 1.1%
HARRAH'S ENTERTAINMENT* 50,000 1,028
--------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $1,028
--------------------------------------------------------------------------------
HOUSEHOLD FURNITURE & FIXTURES -- 1.5%
CIMA LABS * 100,000 1,400
--------------------------------------------------------------------------------
TOTAL HOUSEHOLD FURNITURE & FIXTURES $1,400
--------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.5%
RPM 225,000 $ 2,278
--------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 2,278
--------------------------------------------------------------------------------
INTERNET SERVICES -- 1.7%
MCAFEE.COM* 89,000 1,546
--------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $ 1,546
--------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 1.5%
ASPECT MEDICAL SYSTEMS* 31,100 1,380
--------------------------------------------------------------------------------
TOTAL LUMBER & WOOD PRODUCTS $ 1,380
--------------------------------------------------------------------------------
MACHINERY -- 1.3%
GRANT PRIDECO* 65,000 1,251
--------------------------------------------------------------------------------
TOTAL MACHINERY $ 1,251
--------------------------------------------------------------------------------
MEASURING DEVICES -- 0.5%
NANOGEN* 20,000 489
--------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 489
--------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 13.9%
EDWARDS LIFESCIENCES* 200,000 3,000
HEALTH MANAGEMENT
ASSOCIATES, CL A* 200,000 3,187
HEALTHSOUTH* 175,000 1,411
ICOS* 25,000 1,006
IMATRON * 100,000 291
LIFEPOINT HOSPITALS* 75,000 1,284
UNIVERSAL HEALTH SERVICES* 50,000 2,737
--------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $12,916
--------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 4.7%
ITT EDUCATIONAL SERVICES* 75,000 1,341
NETOBJECTS* 135,000 1,806
STARTEK* 10,800 555
VERTEX INTERACTIVE
INCORPROATED* 60,000 611
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 4,313
--------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 3.1%
HARSCO 75,000 2,227
IN FOCUS SYSTEMS* 20,000 599
--------------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING $ 2,826
--------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 1.0%
BUCKEYE TECHNOLOGIES* 50,000 956
--------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 956
--------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 7.3%
GLOBAL MARINE* 75,000 1,800
OCEAN ENERGY* 70,000 906
R&B FALCON* 50,000 1,037
VERITAS DGC* 50,000 1,200
VINTAGE PETROLEUM 91,000 1,809
--------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 6,752
--------------------------------------------------------------------------------
PETROLEUM REFINING -- 2.6%
BARRETT RESOURCES* 75,000 2,381
--------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 2,381
--------------------------------------------------------------------------------
90
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
RETAIL -- 0.5%
BRINKER INTERNATIONAL* 15,000 $ 478
--------------------------------------------------------------------------------
TOTAL RETAIL $ 478
--------------------------------------------------------------------------------
RUBBER & PLASTIC -- 2.9%
WEATHERFORD INTERNATIONAL* 65,000 2,641
--------------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $ 2,641
--------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 12.4%
FAIRCHILD SEMICONDUCTOR
INTERNATIONAL, CL A* 25,000 1,187
MATTSON TECHNOLOGY* 25,000 1,228
NATIONAL SEMICONDUCTOR* 80,000 4,860
SCG HOLDING* 5,000 110
SEMTECH* 10,000 682
VIASYSTEMS GROUP* 89,200 1,422
VITESSE SEMICONDUCTOR* 30,000 2,042
--------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $11,531
--------------------------------------------------------------------------------
SPECIALTY CONSTRUCTION -- 1.0%
QUANTA SERVICES* 20,550 954
--------------------------------------------------------------------------------
TOTAL SPECIALTY CONSTRUCTION $ 954
--------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS-- 11.8%
BELDEN 97,200 2,886
CLEARNET, CL A* 40,000 1,715
DOBSON COMMUNICATIONS* 46,000 1,179
ELECTRIC LIGHTWAVE* 57,500 1,269
RCN* 15,000 429
SPECTRASITE HOLDINGS* 50,000 1,050
TELSCAPE INTERNATIONAL* 32,500 374
WINSTAR COMMUNICATIONS* 50,000 1,994
WORLDQUEST NETWORKS* 7,500 64
--------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $10,960
--------------------------------------------------------------------------------
WHOLESALE -- 0.9%
NU HORIZONS ELECTRONICS* 45,000 804
--------------------------------------------------------------------------------
TOTAL WHOLESALE $ 804
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $86,602) $84,085
--------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 24.1%
FIRST BOSTON
(5.820%, dated 04/28/00,
matures 05/01/00, repurchase
price $22,365,461 (collateralized
by U.S. Government Agency
Obligation: total market
value $23,043,866) $22,355 $ 22,355
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $22,355) $ 22,355
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 114.9%
(Cost $108,957) $106,440
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (14.9%) $(13,773)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 3,502,088 outstanding shares
of beneficial interest $49,907
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 489,590 outstanding shares
of beneficial interest 9,947
Accumulated net realized gain on investments 35,330
Net unrealized depreciation on investments (2,517)
================================================================================
TOTAL NET ASSETS -- 100.0% $92,667
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $ 23.24
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $ 23.07
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($23.07 / 95.25%) $ 24.22
================================================================================
*NON-INCOME PRODUCING SECURITY
CL--CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
91
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
INTERNATIONAL EQUITY SELECTION PORTFOLIO
[PHOTO OMITTED]
BRETT A. HOFFACKER, CFP
--------------------------------------------------------------------------------
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
BRETT A. HOFFACKER, CFP, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE
IS THE PORTFOLIO MANAGER OF THE INTERNATIONAL EQUITY SELECTION PORTFOLIO. HE HAS
MORE THAN 16 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
What a difference 12 months can make. At the start of the year, foreign
markets were still tainted with memories of the Asian financial crisis. Today
these markets are being guided by a completely different set of circumstances.
First and foremost, financial stability has reappeared in Asia. Banking systems
have been restructured and a semblance of balance and growth has returned to the
economic landscape and financial markets. Also, most of the region's political
dilemmas have been resolved. This stability has generally encompassed the globe,
as previously distracted governments and corporations are now able to
concentrate their efforts on the business at hand.
The major exception to this global rebound continues to be Japan, which
hasn't recovered with the strength of its geographic brethren, but instead has
again slipped into recession. However, all is not doom and gloom in Japan.
Corporate Japan is in the throes of painful restructuring that affects
generations of cultural traditions and ideals. This restructuring is Japan's
hope for the future, as it will permit the country to embrace technology and
compete on a global basis.
With concerns of a global crisis fading, foreign equity investors began to
quickly focus on new market and economic catalysts such as accelerating
deregulation, restructuring, industry consolidation and the rapid development
and deployment of technology. These catalysts have produced a growth environment
of high productivity, low inflation and low unemployment that has been the
birthplace of the old/new economy concept.
This concept of old and new economy as it applies to equities has affected
both foreign and U.S. markets in the same manner. The polarization in valuation
between the cheapest and most expensive stocks has been extreme, resulting in
unprecedented levels of volatility across all market capitalizations. This
remarkable volatility occurs as anxious investors decide whether to own the
"must have" technology, media and telecom stocks or those reasonably valued
companies possessing actual earnings.
This phenomenon played out in the ARK International Equity Selection
Portfolio as returns among underlying funds with investment styles particular to
old or new economy stocks varied greatly. The Portfolio's strong performance for
the year arises from its exposure to small-, mid- and large-cap funds invested
in new economy stocks. Funds invested in old economy stocks were for the most
part a drag on performance until March and April of 2000, when they buffered the
drop in value of the new economy funds. Top-performing funds for the year were
Pilgrim International Small-Cap, Federated International Small Company, Janus
Overseas, Scudder Japan and Artisan International. Performance for the year was
also affected by the valuation of the U.S. dollar vs. the euro and yen. While
the dollar was weak vs. the yen, it reached high record levels against the euro.
Since a majority of the Portfolio is invested in European markets, the euro's
weakness negatively impacted returns.
During the year we increased the number of underlying mutual funds from 15
to 17, while maintaining a blend of old and new economy funds as well as those
that incorporate both styles. Our allocation between old and new economy funds
remained fairly constant until the end of the year, when we shifted some assets
from small-cap and new economy
92
<PAGE>
ARK FUNDS ANNUAL REPORT APRIL 30, 2000
funds into cash and old economy funds. We also maintained our position in the
Scudder Japan Fund and eliminated the investment in the Montgomery International
Growth and Harbor International Growth Funds.
Despite a higher interest-rate environment, international equities offer
an attractive if moderate potential for price appreciation. Supporting this
increase in equity prices is a continuation of global economic growth and
growing interest in share ownership among individuals in Europe and Japan, where
personal savings are held primarily in bonds and savings accounts. Dramatic
sector rotation will continue as valuation disparities between old and new
economy stocks gradually diminish. Even new economy stocks depend on the ability
of old economy stocks to continue funding their earnings growth. Investors will
concentrate on selectivity and fundamentals, as a group of respected new economy
stocks will establish themselves. One thing is certain: throughout this period
of industry and market transition, volatility will continue.
Looking ahead, the ARK Funds Board of Trustees recently approved the
submission of a proposal to change the investment policy of the Portfolio to the
portfolio's shareholders. Under the proposal, the Portfolio would seek its
investment goal by investing primarily in the securities of companies located in
countries other than the United States, rather than in shares of mutual funds
investing in these companies. The Board also approved a related increase in the
investment advisory fee from 0.65% to 1.00% and an investment subadvisory
agreement for the Portfolio with AIB Govett, Inc., an affiliate of Allied
Investment Advisors, Inc., the Portfolio's investment advisor.
These proposals require the approval of the Portfolio's shareholders and
will be submitted to the shareholders for their consideration and vote via the
mailing of a proxy and at a special meeting to be held in July 2000.
PERFORMANCE AS OF
APRIL 30, 2000
[Chart omitted, plot points are as follows:]
INSTITUTIONALCLASS: VALUEOFA $100,000 INVESTMENT
Ark International Equity Selection Morgan Stanley Lipper International
Portfolio, Institutional Class MSCI EAFE Index Funds Average
5/31/91 $100,000 $100,000 $100,000
April 92 102,478 90,553 103,348
April 93 110,574 110,121 113,620
April 94 134,945 128,434 138,242
April 95 138,669 135,640 137,260
April 96 162,132 151,103 159,812
April 97 180,826 149,773 169,241
April 98 215,815 178,110 205,188
April 99 214,736 195,013 212,062
April 00 286,179 222,100 264,568
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Ark International Equity Ark International Equity Morgan Stanley Lipper
Selection Portfolio, Selection Portfolio, MSCI International Funds
Retail Class A* Retail Class A, with load* EAFE Index Average
<S> <C> <C> <C> <C> <C>
5/31/91 $10,000 $ 9,850 $10,000 $10,000
April 92 10,248 10,094 9,055 10,335
April 93 11,057 10,892 11,012 11,362
April 94 13,494 13,292 12,843 13,824
April 95 13,867 13,659 13,564 13,726
April 96 16,213 15,970 15,110 15,981
April 97 18,083 17,811 14,977 16,924
April 98 21,582 21,258 17,811 20,519
April 99 21,454 21,132 19,501 21,206
April 00 28,577 28,148 22,210 26,457
</TABLE>
<TABLE>
<CAPTION>
Institutional Retail Morgan Stanley Lipper
Class Class A* MSCI EAFE International
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year
Total Return 33.27% 33.20% 13.89% 24.75%
---------------------------------------------------------------------------------------------------
One Year
Total Return with Load N/A 31.20% N/A N/A
---------------------------------------------------------------------------------------------------
Annualized 3 Year
Total Return 16.54% 16.48% 14.04% 15.37%
---------------------------------------------------------------------------------------------------
Annualized 3 Year
Total Return With Load N/A 15.90% N/A N/A
---------------------------------------------------------------------------------------------------
Annualized 5 Year
Total Return 15.59% 15.56% 10.37% 13.15%
---------------------------------------------------------------------------------------------------
Annualized 5 Year
Total Return With Load N/A 15.20% N/A N/A
---------------------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 12.54% 12.53% N/A N/A
---------------------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date With Load N/A 12.35% N/A N/A
---------------------------------------------------------------------------------------------------
</TABLE>
Past performance of the Portfolio is not predictive of future performance.
Performance presented prior to March 29, 1998 for the Institutional Class
reflects the performance of the Marketvest International Equity Fund, which is
the successor to a collective trust fund. The performance data quoted includes
performance of the collective trust fund for the period from May 31, 1991
(inception date of the collective trust fund) to March 31, 1997, when the
Marketvest Fund's registration statement became effective. 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 A
shares were offered beginning April 1, 1998. Performance for Retail Class A
shares with load reflects the deduction of the 1.50% sales charge.
* Performance shown prior to the actual inception date of the Retail Class A
shares represents that of the Institutional Class adjusted for the sales
charge only. No adjustments have been made for Retail Class 12b-1 fees and
expenses. With such adjustments, performance would be lower than shown.
Annualized performance since actual inception for Retail Class A shares is
14.96% without load and 14.15% with load.
The performance of the MSCI EAFE Index does not include operating expenses
that are incurred by the Portfolio.
93
<PAGE>
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS INTERNATIONAL EQUITY
SELECTION PORTFOLIO STATEMENT OF NET ASSETS % OF TOTAL PORTFOLIO INVESTMENTS
[PIE CHART OMITTED, PERCENTAGES ARE AS FOLLOWS:]
Repurchase Agreements -- 10%
Mutual Funds -- 90%
MARKET
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
MUTUAL FUNDS -- 90.2%
AMERICAN ADVANTAGE
INTERNATIONAL
EQUITY FUND 196,343 $ 3,636
AMERICAN CENTURY
INTERNATIONAL
GROWTH FUND 178,678 2,555
AMERICAN FUNDS EUROPACIFIC
GROWTH FUND 90,452 3,775
ARTISAN INTERNATIONAL FUND 121,258 3,633
DEUTSCHE INTERNATIONAL
EQUITY FUND 161,804 2,738
FEDERATED INTERNATIONAL
SMALL COMPANY FUND,
CLASS A 9,361 315
FIDELITY DIVERSIFIED
INTERNATIONAL FUND 122,896 2,952
GLENMEDE INTERNATIONAL
INSTITUTIONAL PORTFOLIO 213,520 3,764
HARBOR INTERNATIONAL FUND 96,482 3,767
JANUS OVERSEAS FUND 77,032 2,957
PILGRIM INTERNATIONAL
SMALL CAP GROWTH FUND,
CLASS Q 8,493 368
PUTNAM INTERNATIONAL
GROWTH FUND, CLASS A 135,059 3,924
SCUDDER INTERNATIONAL FUND 43,876 2,830
SCUDDER JAPAN FUND 116,235 1,661
TEMPLETON FOREIGN FUND,
CLASS I 129,027 1,321
UMB SCOUT
WORLDWIDE FUND 64,455 1,491
WADDELL & REED
INTERNATIONAL GROWTH FUND 24,086 635
--------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $35,512) $42,322
--------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 9.8%
FIRST BOSTON
(5.820%, dated 04/28/00,
matures 05/01/00, repurchase
price $4,587,797 (collateralized
by U.S. Government Agency
Obligation: total market
value $4,744,214) $4,586 $ 4,586
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $4,586) $ 4,586
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost $40,098) $46,908
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.0% $ 12
================================================================================
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 3,101,719 outstanding shares
of beneficial interest 35,139
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 225,315 outstanding shares
of beneficial interest 2,764
Undistributed net investment income 181
Accumulated net realized gain on investments* 2,026
Net unrealized appreciation on investments 6,810
================================================================================
TOTAL NET ASSETS -- 100.0% $46,920
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $ 14.10
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $ 14.10
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($14.10 / 98.50%) $ 14.31
================================================================================
*INCLUDES CAPITAL GAINS DISTRIBUTIONS OF $873,700 RECEIVED FROM THE PORTFOLIO'S
MUTUAL FUND HOLDINGS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
94
<PAGE>
This page is intentionally left blank
95
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (000)
FOR THE YEAR ENDED APRIL 30, 2000
TAX-FREE U.S. GOVERNMENT U.S. TREASURY SHORT-TERM
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET TREASURY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ------------- ------------- -----------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Dividends $ -- $ -- $ -- $ -- $ --
Interest 57,435 5,638 89,239 21,720 2,489
------- ------ -------- ------- -------
Total Investment Income 57,435 5,638 89,239 21,720 2,489
------- ------ -------- ------- -------
EXPENSES:
Administrator Fees 1,327 210 2,130 556 62
Less: Waiver of Administrator Fees -- -- -- -- --
Investment Advisory Fees 2,553 405 4,097 1,069 167
Less: Waiver of Investment
Advisory Fees (1,332) (259) (1,803) (257) --
Custodian Fees 125 32 326 72 13
Transfer Agency Fees 102 16 164 43 5
Professional Fees 87 13 122 35 4
Registration Fees 21 19 9 12 11
Distribution Fees -- Retail Class A 658 121 344 56 49
Less: Waiver of Distribution Fees --
Retail Class A -- -- -- -- (18)
Distribution Fees -- Retail Class B -- -- -- -- --
Distribution Fees --
Institutional II Class 380 58 177 169 --
Printing Fees 129 19 190 38 6
Trustee Fees 21 3 36 9 1
Amortization of Deferred
Organization Costs -- -- -- -- 3
Miscellaneous Fees 22 4 98 12 2
Shareholder Servicing Fees --
Institutional Class 757 112 2,075 438 53
Less: Waiver of Shareholder Servicing
Fees--Institutional Class (353) (52) (968) (204) (32)
Shareholder Servicing Fees --
Retail Class A 395 73 207 34 19
Less: Waiver of Shareholder Servicing
Fees--Retail Class A (237) (44) (124) (20) (19)
Shareholder Servicing Fees --
Retail Class B -- -- -- -- --
------- ------ -------- ------- -------
Total Expenses 4,655 730 7,080 2,062 326
------- ------ -------- ------- -------
Net Investment Income 52,780 4,908 82,159 19,658 2,163
------- ------ -------- ------- -------
Net Realized Gain (Loss)
on Investments -- (1) (8) 12 (78)
Net Change in Unrealized
Depreciation on Investments -- -- -- -- (672)
------- ------ -------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments -- (1) (8) 12 (750)
------- ------ -------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations $52,780 $4,907 $ 82,151 $19,670 $ 1,413
======= ====== ======== ======= =======
</TABLE>
96
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (000)
FOR THE YEAR ENDED APRIL 30, 2000
SHORT-TERM MARYLAND PENNSYLVANIA INTERMEDIATE U.S. GOVERNMENT
BOND TAX-FREE TAX-FREE FIXED INCOME BOND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ 79 $ 316 $ 355
5,921+ 6,584 10,216 6,752+ 12,803+ 23,211+
------- ------- -------- ------- ------- -------
5,921 6,584 10,216 6,831 13,119 23,566
------- ------- -------- ------- ------- -------
127 160 252 141 269 462
-- -- -- -- -- --
734 798 1,260 649 1,554 2,131
(49) (197) -- (119) (187) (320)
30 23 37 28 51 68
10 12 19 11 21 36
7 10 16 9 17 30
4 9 5 17 (8) 23
-- 92 14 -- 8 21
-- (15) (2) -- (1) (4)
-- -- 1 -- -- 3
-- -- -- -- -- --
11 16 23 11 24 43
2 3 4 2 5 8
8 -- 13 1 8 --
5 6 7 4 8 12
147 138 284 162 307 521
(88) (28) (76) (43) (82) (104)
-- 46 7 -- 4 11
-- (46) (7) -- (4) (11)
-- -- -- -- -- 1
------- ------- -------- ------- ------- -------
948 1,027 1,857 873 1,994 2,931
------- ------- -------- ------- ------- -------
4,973 5,557 8,359 5,958 11,125 20,635
------- ------- -------- ------- ------- -------
(320) (1,021) (4,790) (205) (2,751) (5,446)
(2,817) (7,849) (12,547) (5,262) (8,673) (15,567)
------- ------- -------- ------- ------- -------
(3,137) (8,870) (17,337) (5,467) (11,424) (21,013)
------- ------- -------- ------- ------- -------
$ 1,836 $(3,313) $ (8,978) $ 491 $ (299) $ (378)
======= ======= ======== ======= ======= =======
97
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (000)
FOR THE YEAR ENDED APRIL 30, 2000
BALANCED INCOME EQUITY INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ------------- -------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividends $ 861 $ 2,481 $ 6,343 $ 1,436
Less: Foreign Taxes Withheld (5) (4) (31) (12)
Interest 5,153 130 206 122
------- ------- -------- -------
Total Investment Income 6,009 2,607 6,518 1,546
------- ------- -------- -------
EXPENSES:
Administrator Fees 274 121 622 157
Less: Waiver of Administrator Fees -- -- -- (72)
Investment Advisory Fees 1,368 651 4,786 242
Less: Waiver of Investment
Advisory Fees (189) (56) (622) (157)
Custodian Fees 43 24 120 52
Transfer Agency Fees 21 9 48 12
Professional Fees 17 5 36 11
Registration Fees 31 10 (12) 28
Distribution Fees -- Retail Class A 138 14 22 26
Less: Waiver of Distribution Fees --
Retail Class A (52) (5) (8) (10)
Distribution Fees-- Retail Class B 48 -- 3 --
Distribution Fees --
Institutional II Class -- -- -- --
Printing Fees 27 11 54 18
Trustee Fees 4 2 11 2
Amortization of Deferred
Organization Costs -- 1 11 2
Miscellaneous Fees 10 2 16 5
Shareholder Servicing Fees --
Institutional Class 254 135 709 172
Less: Waiver of Shareholder Servicing
Fees-- Institutional Class (17) (9) (47) (172)
Shareholder Servicing Fees --
Retail Class A 52 5 8 10
Less: Waiver of Shareholder Servicing
Fees-- Retail Class A (52) (5) (8) (10)
Shareholder Servicing Fees --
Retail Class B 16 -- 1 --
------- ------- -------- -------
Total Expenses 1,993 915 5,750 316
------- ------- -------- -------
Net Investment Income (Loss) 4,016 1,692 768 1,230
------- ------- -------- -------
Net Realized Gain on Investments 23,312 5,839 72,783 4,081
Net Change in Unrealized Appreciation
(Depreciation) on Investments 7,859 (3,327) (27,927) 6,778
------- ------- -------- -------
Net Realized and Unrealized
Gain on Investments 31,171 2,512 44,856 10,859
------- ------- -------- -------
Net Increase in Net Assets
Resulting from Operations $35,187 $ 4,204 $ 45,624 $12,089
======= ======= ======== =======
</TABLE>
98
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (000)
FOR THE YEAR ENDED APRIL 30, 2000
BLUE CHIP CAPITAL MID-CAP SMALL-CAP INTERNATIONAL
EQUITY GROWTH EQUITY EQUITY EQUITY SELECTION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ------------- ------------- -----------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Dividends $ 2,698 $ 875 $ 594 $ 87 $ 888
Less: Foreign Taxes Withheld (33) (4) -- -- --
Interest 506 563 47 356 119
------- ------ ------- ------ -------
Total Investment Income 3,171 1,434 641 443 1,007
------- ------ ------- ------ -------
EXPENSES:
Administrator Fees 304 227 98 81 44
Less: Waiver of Administrator
Fees -- -- -- -- --
Investment Advisory Fees 1,640 1,221 606 500 223
Less: Waiver of Investment
Advisory Fees (234) (87) (45) (6) (34)
Custodian Fees 42 23 27 37 14
Transfer Agency Fees 23 17 8 6 3
Professional Fees 20 14 6 4 2
Registration Fees 31 43 17 21 10
Distribution Fees --
Retail Class A 344 141 1 22 9
Less: Waiver of Distribution
Fees --
Retail Class A (188) (53) -- (8) (3)
Distribution Fees --
Retail Class B 48 53 -- -- --
Distribution Fees --
Institutional II Class -- -- -- -- --
Printing Fees 30 23 10 8 4
Trustee Fees 4 3 1 1 1
Amortization of Deferred
Organization Costs 3 -- 1 -- 1
Miscellaneous Fees 72 15 4 1 1
Shareholder Servicing Fees --
Institutional Class 248 198 113 86 48
Less: Waiver of Shareholder
Servicing
Fees -- Institutional Class (17) (13) (8) (6) (3)
Shareholder Servicing Fees --
Retail Class A 94 53 -- 8 3
Less: Waiver of Shareholder
Servicing
Fees -- Retail Class A (94) (53) -- (8) (3)
Shareholder Servicing Fees --
Retail Class B 16 17 -- -- --
------- ------ ------- ------ -------
Total Expenses 2,386 1,842 839 747 320
------- ------ ------- ------ -------
Net Investment Income (Loss) 785 (408) (198) (304) 687
------- ------ ------- ------ -------
Net Realized Gain
on Investments 14,155 33,108 11,692 43,819 2,404
Net Change in Unrealized
Appreciation
(Depreciation) on
Investments 30,755 40,192 14,550 (4,360) 5,577
------- ------- ------- ------ -------
Net Realized and Unrealized
Gain on Investments 44,910 73,300 26,242 39,459 7,981
------- ------- ------- ------ -------
Net Increase in Net Assets
Resulting from Operations $45,695 $72,892 $26,044 $39,155 $ 8,668
======= ======= ======= ======= =======
The accompanying notes are an integral part of the financial statements.
99
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE YEAR INDICATED
MONEY MARKET TAX-FREE MONEY U.S. GOVERNMENT MONEY U.S. TREASURY MONEY
PORTFOLIO MARKET PORTFOLIO MARKET PORTFOLIO MARKET PORTFOLIO
---------------------- ---------------------- ---------------------- -------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98 to
to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99 to 4/30/00 4/30/99
---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Investment Income $ 52,780 $ 38,711 $ 4,908 $ 4,512 $ 82,159 $ 80,722 $ 19,658 $ 19,115
Net Realized Gain (Loss)
on Investments -- 10 (1) -- (8) (1) 12 18
Net Change in Unrealized Appreciation
(Depreciation)
on Investments -- -- -- -- -- -- -- --
------------ ---------- --------- --------- ---------- --------- -------- ---------
Net increase (Decrease) in
Net Assets
from Operations 52,780 38,721 4,907 4,512 82,151 80,721 19,670 19,133
------------ ---------- --------- --------- ---------- --------- -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (26,445) (19,775) (2,320) (2,499) (69,711) (69,381) (13,487) (12,857)
Retail Class A (13,178) (10,377) (1,407) (732) (6,664) (4,222) (978) (1,205)
Retail Class B (1) -- -- -- -- -- -- --
Institutional II Class (13,156) (8,559) (1,180) (1,281) (5,784) (7,109) (5,202) (5,053)
Net Capital Gains
Institutional Class -- -- -- -- -- -- -- --
Retail Class A -- -- -- -- -- -- -- --
Retail Class B -- -- -- -- -- -- -- --
Institutional Class II -- -- -- -- -- -- -- --
------------ ---------- --------- --------- ---------- --------- -------- ---------
Total Distributions (52,780) (38,711) (4,907) (4,512) (82,159) (80,712) (19,667) (19,115)
------------ ---------- --------- --------- ---------- --------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 863,114 971,963 81,666 97,664 2,438,888 2,187,318 515,143 374,307
Shares Issued in Lieu of
Cash Distributions 1,006 9 -- -- -- 6 6 6
Shares Redeemed (882,061) (671,287) (95,896) (110,212) (2,452,173)(2,045,108) (526,546) (347,083)
------------ ---------- --------- --------- ---------- --------- -------- ---------
Total Institutional Class
Share Transactions (17,941) 300,685 (14,230) (12,548) (13,285) 142,216 (11,397) 27,230
------------ ---------- --------- --------- ---------- --------- -------- ---------
Retail Class A:
Shares Issued 306,915 181,887 110,876 66,991 586,782 448,117 75,494 41,393
Shares Issued in Lieu of
Cash Distributions 11,825 10,182 1,101 730 -- -- 658 874
Shares Redeemed (314,096) (133,624) (99,516) (59,358) (570,240) (422,346) (77,167) (57,939)
------------ ---------- --------- --------- ---------- ---------- ------- ---------
Total Retail Class A
Share Transactions 4,644 58,445 12,461 8,363 16,542 25,771 (1,015) (15,672)
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Retail Class B:
Shares Issued 23 22 -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 1 -- -- -- -- -- -- --
Shares Redeemed (23) -- -- -- -- -- -- --
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Total Retail Class B
Share Transactions 1 22 -- -- -- -- -- --
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Institutional II Class:
Shares Issued 1,160,221 547,301 86,449 146,937 483,872 668,319 377,012 375,294
Shares Issued in Lieu of
Cash Distributions -- -- -- -- 5 -- -- --
Shares Redeemed (1,088,667) (400,547) (94,768) (132,836) (541,518) (617,804) (386,854) (330,888)
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Total Institutional II Class
Share Transactions 71,554 146,754 (8,319) 14,101 (57,641) 50,515 (9,842) 44,406
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Increase (Decrease) in Net
Assets from
Shareholder Transactions 58,258 505,906 (10,088) 9,916 (54,384) 218,502 (22,254) 55,964
------------ ---------- --------- --------- ---------- ---------- -------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS 58,258 505,916 (10,088) 9,916 (54,392) 218,511 (22,251) 55,982
NET ASSETS:
Beginning of period 1,002,696 496,780 154,980 145,064 1,674,245 1,455,734 448,815 392,833
------------ ---------- --------- --------- ---------- ---------- -------- ---------
End of period $1,060,954 $1,002,696 $144,892 $154,980 $1,619,853 $1,674,245 $426,564 $ 448,815
============ ========== ========= ========= ========== ========== ======== =========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 863,114 971,963 81,666 97,664 2,438,888 2,187,318 515,143 374,307
Shares Issued in Lieu of
Cash Distributions 1,006 9 -- -- -- 6 6 6
Shares Redeemed (882,061) (671,287) (95,896) (110,212) (2,452,173)(2,045,108) (526,546) (347,083)
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Total Institutional Class
Share Transactions (17,941) 300,685 (14,230) (12,548) (13,285) 142,216 (11,397) 27,230
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Retail Class A:
Shares Issued 306,915 181,887 110,876 66,991 586,782 448,117 75,494 41,393
Shares Issued in Lieu of
Cash Distributions 11,825 10,182 1,101 730 -- -- 658 874
Shares Redeemed (314,096) (133,624) (99,516) (59,358) (570,240) (422,346) (77,167) (57,939)
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Total Retail Class A
Share Transactions 4,644 58,445 12,461 8,363 16,542 25,771 (1,015) (15,672)
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Retail Class B:
Shares Issued 23 22 -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 1 -- -- -- -- -- -- --
Shares Redeemed (23) -- -- -- -- -- -- --
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Total Retail Class B
Share Transactions 1 22 -- -- -- -- -- --
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Institutional II Class:
Shares Issued 1,160,221 547,301 86,449 146,937 483,872 668,319 377,012 375,294
Shares Issued in Lieu of
Cash Distributions -- -- -- -- 5 -- -- --
Shares Redeemed (1,088,667) (400,547) (94,768) (132,836) (541,518) (617,804) (386,854) (330,888)
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Total Institutional II Class
Share Transactions 71,554 146,754 (8,319) 14,101 (57,641) 50,515 (9,842) 44,406
------------ ---------- --------- --------- ---------- ---------- -------- ---------
Net Increase (Decrease) in
Share Transactions 58,258 505,906 (10,088) 9,916 (54,384) 218,502 (22,254) 55,964
============ ========== ========= ========= ========== ========== ======== =========
</TABLE>
100
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
FOR THE YEAR INDICATED
SHORT-TERM SHORT-TERM MARYLAND PENNSYLVANIA INTERMEDIATE FIXED
TREASURY PORTFOLIO BOND PORTFOLIO TAX-FREE PORTFOLIO TAX-FREE PORTFOLIO INCOME PORTFOLIO
--------------------- --------------------- --------------------- --------------------- ---------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98
to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2,163 $ 2,057 $ 4,973 $ 6,748 $ 5,557 $ 5,046 $ 8,359 $ 8,898 $ 5,958 $ 5,160
(78) 246 (320) 360 (1,021) 897 (4,790) 1,627 (205) 601
(672) (140) (2,817) (402) (7,849) 484 (12,547) 1,420 (5,262) (1,060)
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
1,413 2,163 1,836 6,706 (3,313) 6,427 (8,978) 11,945 491 4,701
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
(1,618) (1,396) (4,969) (6,738) (4,199) (3,855) (8,167) (8,692) (5,959) (5,150)
(545) (661) -- -- (1,357) (1,192) (190) (120) -- --
-- -- -- -- (1) -- (2) -- -- --
-- -- -- -- -- -- -- -- -- --
(60) (154) (67) -- (401) (598) (624) (1,246) (94) (464)
(20) (73) -- -- (137) (189) (40) (18) -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
(2,243) (2,284) (5,036) (6,738) (6,095) (5,834) (9,023) (10,076) (6,053) (5,614)
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
10,814 12,880 29,734 28,513 17,060 20,695 31,011 27,331 40,307 30,623
192 294 2,687 3,946 473 638 670 1,331 964 926
(9,619) (3,926) (48,163) (52,969) (17,744) (9,967) (77,970) (21,218) (21,574) (14,545)
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
1,387 9,248 (15,742) (20,510) (211) 11,366 (46,289) 7,444 19,697 17,004
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
2,699 3,506 -- -- 8,139 12,753 8,207 2,081 -- --
530 735 -- -- 1,254 1,381 190 127 -- --
(7,199) (4,613) -- -- (13,447) (7,150) (8,708) (980) -- --
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
(3,970) (372) -- -- (4,054) 6,984 (311) 1,228 -- --
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
-- -- -- -- 50 -- 187 -- -- --
-- -- -- -- 1 -- 2 -- -- --
-- -- -- -- -- -- -- -- -- --
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
-- -- -- -- 51 -- 189 -- -- --
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
-- -- -- -- -- -- -- -- -- --
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
(2,583) 8,876 (15,742) (20,510) (4,214) 18,350 (46,411) 8,672 19,697 17,004
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
(3,413) 8,755 (18,942) (20,542) (13,622) 18,943 (64,412) 10,541 14,135 16,091
48,094 39,339 111,127 131,669 127,441 108,498 228,300 217,759 100,419 84,328
------- ------- ------- -------- -------- --------- -------- -------- -------- ---------
$44,681 $48,094 $92,185 $111,127 $113,819 $ 127,441 $163,888 $228,300 $114,554 $ 100,419
======= ======= ======= ======== ======== ========= ======== ======== ======== =========
1,092 1,278 3,032 2,855 1,776 2,015 3,270 2,654 4,196 3,043
19 29 274 395 49 62 70 129 101 91
(971) (389) (4,906) (5,301) (1,862) (974) (8,164) (2,058) (2,253) (1,449)
------- ------- ------- -------- -------- --------- ------- -------- -------- ---------
140 918 (1,600) (2,051) (37) 1,103 (4,824) 725 2,044 1,685
------- ------- ------- -------- -------- --------- ------- -------- -------- ---------
270 346 -- -- -- 1,241 858 202 -- --
53 73 -- -- -- 134 20 12 -- --
(725) (457) -- -- -- (695) (928) (95) -- --
------- ------- ------- -------- -------- --------- ------- -------- -------- ---------
(402) (38) -- -- -- 680 (50) 119 -- --
------- ------- ------- -------- -------- --------- ------- -------- -------- ---------
-- -- -- -- 5 -- 20 -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
------- ------- ------- -------- -------- --------- ------- -------- -------- ---------
-- -- -- -- 5 -- 20 -- -- --
------- ------- ------- -------- -------- --------- ------- -------- -------- ---------
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
------- ------- ------- -------- -------- --------- ------- -------- -------- ---------
-- -- -- -- -- -- -- -- -- --
------- ------- ------- -------- -------- --------- ------- -------- -------- ---------
(262) 880 (1,600) (2,051) (469) 1,783 (4,854) 844 2,044 1,685
======= ======= ======= ======== ======== ========= ======= ======== ======== =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
101
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE YEAR INDICATED
U.S. GOVERNMENT INCOME BALANCED
BOND PORTFOLIO PORTFOLIO PORTFOLIO
-------------------- --------------------- ----------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98
4/30/99 to 4/30/99 to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99
-------- ---------- ---------- ---------- ---------- ----------
OPERATIONS:
Net Investment
<S> <C> <C> <C> <C> <C> <C>
Income (Loss) $ 11,125 $ 14,387 $ 20,635 $ 20,055 $ 4,016 $ 2,634
Net Realized
Gain (Loss)
on Investments (2,751) (243) (5,446) (1,205) 23,312 6,985
Net Change in
Unrealized Appreciation
(Depreciation) on
Investments (8,673) (1,367) (15,567) (4,352) 7,859 12,888
-------- -------- -------- -------- -------- --------
Net increase (Decrease)
in Net Assets
from Operations (299) 12,777 (378) 14,498 35,187 22,507
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (10,963) (14,354) (20,146) (19,650) (2,977) (2,218)
Retail Class A (134) (44) (400) (442) (532) (383)
Retail Class B -- -- (20) (5) (57) (8)
Institutional II Class -- -- -- -- -- --
Net Capital Gains
Institutional Class -- -- -- (135) (6,347) (4,969)
Retail Class A -- -- -- (3) (1,468) (903)
Retail Class B -- -- -- -- (286) (17)
-------- -------- -------- -------- -------- --------
Total Distributions (11,097) (14,398) (20,566) (20,235) (11,667) (8,498)
-------- -------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 15,267 30,771 61,253 68,793 238,125 26,622
Shares Issued in
Lieu of Cash
Distributions 3,036 4,327 13,799 13,474 9,288 7,142
Shares Redeemed (95,534) (43,799) (67,796) (42,508) (34,794) (23,947)
-------- -------- -------- -------- -------- --------
Total Institutional
Class Share
Transactions (77,231) (8,701) 7,256 39,759 212,619 9,817
-------- -------- -------- -------- -------- --------
Retail Class A:
Shares Issued 1,392 2,454 782 2,761 14,922 12,311
Shares Issued in
Lieu of Cash
Distributions 124 41 360 406 1,953 1,262
Shares Redeemed (1,246) (250) (3,443) (1,331) (5,886) (3,919)
-------- -------- -------- -------- -------- --------
Total Retail Class A
Share Transactions 270 2,245 (2,301) 1,836 10,989 9,654
-------- -------- -------- -------- -------- --------
Retail Class B:
Shares Issued -- -- 296 309 7,784 2,436
Shares Issued in
Lieu of Cash
Distributions -- -- 18 4 341 25
Shares Redeemed -- -- (141) (29) (633) (72)
-------- -------- -------- -------- -------- --------
Total Retail Class B
Share Transactions -- -- 173 284 7,492 2,389
-------- -------- -------- -------- -------- --------
Increase (Decrease) in
Net Assets from
Shareholder Transactions (76,961) (6,456) 5,128 41,879 231,100 21,860
-------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE)
IN NET ASSETS (88,357) (8,077) (15,816) 36,142 254,620 35,869
NET ASSETS:
Beginning of period 257,569 265,646 365,335 329,193 147,801 111,932
-------- -------- -------- -------- -------- --------
End of period $169,212 $257,569 $349,519 $365,335 $402,421 $147,801
======== ======== ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 1,611 3,103 6,333 6,702 14,127 1,998
Shares Issued in
Lieu of Cash
Distributions 321 436 1,427 1,311 595 529
Shares Redeemed (10,040) (4,418) (7,011) (4,115) (2,198) (1,756)
-------- -------- -------- -------- -------- --------
Total Institutional
Class share
Transactions (8,108) (879) 749 3,898 12,524 771
-------- -------- -------- -------- -------- --------
Retail Class A:
Shares Issued 145 247 79 266 968 900
Shares Issued in
Lieu of Cash
Distributions 13 4 37 39 126 94
Shares Redeemed (131) (25) (350) (129) (380) (291)
-------- -------- -------- -------- -------- --------
Total Retail Class
A share
Transactions 27 226 (234) 176 714 703
-------- -------- -------- -------- -------- --------
Retail Class B:
Shares Issued -- -- 30 30 502 173
Shares Issued in
Lieu of Cash
Distributions -- -- 2 1 22 2
Shares Redeemed -- -- (15) (3) (40) (5)
-------- -------- -------- -------- -------- --------
Total Retail Class B
Share Transactions -- -- 17 28 484 170
-------- -------- -------- -------- -------- --------
Net Increase (Decrease)
in Share Transactions (8,081) (653) 532 4,102 13,722 1,644
======== ======== ======== ======== ======== ========
</TABLE>
102
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE YEAR INDICATED
EQUITY INCOME VALUE EQUITY
PORTFOLIO PORTFOLIO
------------------------- --------------------------
5/1/99 5/1/98 5/1/99 5/1/98
to 4/30/00 to 4/30/99 to 4/30/99 to 4/30/00
------------ ----------- ----------- --------------
OPERATIONS:
Net Investment
<S> <C> <C> <C> <C>
Income (Loss) $ 1,692 $ 2,169 $ 768 $ 3,425
Net Realized
Gain (Loss)
on Investments 5,839 1,092 72,783 54,074
Net Change in
Unrealized Appreciation
(Depreciation) on
Investments (3,327) 580 (27,927) (2,152)
-------- -------- -------- ---------
Net increase (Decrease)
in Net Assets
from Operations 4,204 3,841 45,624 55,347
-------- -------- -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (1,633) (2,101) (848) (3,675)
Retail Class A (59) (68) (5) (12)
Retail Class B -- -- -- --
Institutional II Class -- -- -- --
Net Capital Gains
Institutional Class (3,176) (5,723) (75,007) (29,764)
Retail Class A (120) (208) (968) (110)
Retail Class B -- -- (86) (1)
-------- -------- -------- ---------
Total Distributions (4,988) (8,100) (76,914) (33,562)
-------- -------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 2,573 4,716 28,880 18,207
Shares Issued in
Lieu of Cash
Distributions 3,201 5,770 52,387 31,209
Shares Redeemed (22,640) (11,908) (158,506) (179,386)
-------- -------- -------- ---------
Total Institutional
Class Share
Transactions (16,866) (1,422) (77,239) (129,970)
-------- -------- -------- ---------
Retail Class A:
Shares Issued 474 961 5,487 3,997
Shares Issued in
Lieu of Cash
Distributions 172 270 670 63
Shares Redeemed (933) (858) (1,849) (917)
-------- -------- -------- ---------
Total Retail Class A
Share Transactions (287) 373 4,308 3,143
-------- -------- -------- ---------
Retail Class B:
Shares Issued -- -- 451 156
Shares Issued in
Lieu of Cash
Distributions -- -- 86 1
Shares Redeemed -- -- (86) --
-------- -------- -------- ---------
Total Retail Class B
Share Transactions -- -- 451 157
-------- -------- -------- ---------
Increase (Decrease) in
Net Assets from
Shareholder Transactions (17,153) (1,049) (72,480) (126,670)
-------- -------- -------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS (17,937) (5,308) (103,770) (104,885)
NET ASSETS:
Beginning of period 104,763 110,071 540,544 645,429
-------- -------- -------- ---------
End of period $ 86,826 $104,763 $436,774 $540,544
======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 219 399 2,052 1,284
Shares Issued in
Lieu of Cash
Distributions 290 498 4,036 2,260
Shares Redeemed (1,944) (1,018) (10,974) (12,501)
-------- -------- -------- ---------
Total Institutional
Class share
Transactions (1,435) (121) (4,886) (8,957)
-------- -------- -------- ---------
Retail Class A:
Shares Issued 41 80 381 279
Shares Issued in
Lieu of Cash
Distributions 15 23 52 5
Shares Redeemed (80) (73) (133) (66)
-------- -------- -------- ---------
Total Retail Class
A share
Transactions (24) 30 300 218
-------- -------- -------- ---------
Retail Class B:
Shares Issued -- -- 30 11
Shares Issued in
Lieu of Cash
Distributions -- -- 7 --
Shares Redeemed -- -- (6) --
-------- -------- -------- ---------
Total Retail Class B
Share Transactions -- -- 31 11
-------- -------- -------- ---------
Net Increase (Decrease)
in Share Transactions (1,459) (91) (4,555) (8,728)
======== ======== ======== =========
</TABLE>
102
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
FOR THE YEAR INDICATED
EQUITY INDEX BLUE CHIP EQUITY CAPITAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- --------------------- -----------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98
to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 1,230 $ 801 $ 785 $ 807 $ (408) $ (93)
4,081 1,263 14,155 4,389 33,108 4,150
6,778 14,031 30,755 25,069 40,192 19,500
-------- ------- -------- -------- -------- --------
12,089 16,095 45,695 30,265 72,892 23,557
-------- ------- -------- -------- -------- --------
(1,143) (763) (538) (613) -- --
(50) (24) (131) (233) -- --
-- -- -- (1) -- --
-- -- -- -- -- --
(2,577) (765) (2,889) (2,118) (10,574) (2,133)
(143) (26) (1,091) (1,065) (2,900) (549)
-- -- (115) (15) (600) (9)
-------- ------- -------- -------- -------- --------
(3,913) (1,578) (4,764) (4,045) (14,074) (2,691)
-------- ------- -------- -------- -------- --------
76,893 36,359 82,264 55,745 86,807 34,103
3,343 1,408 2,930 2,439 9,997 2,133
(23,701) (10,344) (32,344) (13,286) (37,657) (13,384)
-------- ------- -------- -------- -------- --------
56,535 27,423 52,850 44,898 59,147 22,852
-------- ------- -------- -------- -------- --------
3,049 3,230 13,891 12,673 18,664 6,681
192 50 1,200 1,265 2,855 538
(1,227) (283) (9,289) (8,656) (3,968) (2,746)
-------- ------- -------- -------- -------- --------
2,014 2,997 5,802 5,282 17,551 4,473
-------- ------- -------- -------- -------- --------
-- -- 6,763 2,968 9,728 2,136
-- -- 115 16 595 8
-- -- (523) (91) (677) (112)
-------- ------- -------- -------- -------- --------
-- -- 6,355 2,893 9,646 2,032
-------- ------- -------- -------- -------- --------
58,549 30,420 65,007 53,073 86,344 29,357
-------- ------- -------- -------- -------- --------
66,725 44,937 105,938 79,293 145,162 50,223
91,885 46,948 189,653 110,360 115,239 65,016
-------- ------- -------- -------- -------- --------
$158,610 $91,885 $295,591 $189,653 $260,401 $115,239
======== ======= ======== ======== ======== ========
5,337 3,026 3,861 3,145 3,808 2,106
232 115 137 139 450 131
(1,641) (804) (1,521) (741) (1,651) (822)
-------- ------- -------- -------- -------- --------
3,928 2,337 2,477 2,543 2,607 1,415
-------- ------- -------- -------- -------- --------
216 255 649 721 833 410
13 4 56 72 130 33
(85) (22) (435) (501) (177) (175)
-------- ------- -------- -------- -------- --------
144 237 270 292 786 268
-------- ------- -------- -------- -------- --------
-- -- 319 163 435 122
-- -- 5 1 27 --
-- -- (25) (5) (29) (6)
-------- ------- -------- -------- -------- --------
-- -- 299 159 433 116
-------- ------- -------- -------- -------- --------
4,072 2,574 3,046 2,994 3,826 1,799
======== ======= ======== ======== ======== ========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
FOR THE YEAR INDICATED
MID-CAP EQUITY SMALL-CAP EQUITY INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO SELECTION PORTFOLIO
---------------------- --------------------- -----------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98
to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99 to 4/30/00 to 4/30/99
----------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
$ (198) $ 24 $ (304) $ (135) $ 687 $ 369
11,692 5,867 43,819 4,402 2,404 1,446
14,550 (961) (4,360) (1,611) 5,577 (3,646)
-------- ------- -------- -------- -------- --------
26,044 4,930 39,155 2,656 8,668 (1,831)
-------- ------- -------- -------- -------- --------
-- (30) -- -- (481) (350)
-- -- -- -- (33) (11)
-- -- -- -- -- --
-- -- -- -- -- --
(9,259) (2,330) (11,450) (732) (1,313) (573)
(40) -- (930) (57) (92) (20)
-- -- -- -- -- --
-------- ------- -------- -------- -------- --------
(9,299) (2,360) (12,380) (789) (1,919) (954)
-------- ------- -------- -------- -------- --------
13,963 12,969 26,251 4,108 20,717 6,844
9,191 2,343 11,275 689 1,521 863
(11,190) (9,514) (12,185) (3,317) (8,499) (22,764)
-------- ------- -------- -------- -------- --------
11,964 5,798 25,341 1,480 13,739 (15,057)
-------- ------- -------- -------- -------- --------
1,064 -- 7,791 587 1,232 1,486
27 -- 911 57 124 31
(34) -- (961) (406) (106) (16)
-------- ------- -------- -------- -------- --------
1,057 -- 7,741 238 1,250 1,501
-------- ------- -------- -------- -------- --------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-------- ------- -------- -------- -------- --------
-- -- -- -- -- --
-------- ------- -------- -------- -------- --------
13,021 5,798 33,082 1,718 14,989 (13,556)
-------- ------- -------- -------- -------- --------
29,766 8,368 59,857 3,585 21,738 (16,341)
63,648 55,280 32,810 29,225 25,182 41,523
-------- ------- -------- -------- -------- --------
$ 93,414 $63,648 $ 92,667 $ 32,810 $ 46,920 $ 25,182
======== ======= ======== ======== ======== ========
871 961 1,094 369 1,506 631
627 177 555 63 110 83
(679) (726) (563) (324) (637) (2,199)
-------- ------- -------- -------- -------- --------
819 412 1,086 108 979 (1,485)
-------- ------- -------- -------- -------- --------
65 -- 314 53 90 132
2 -- 45 5 9 3
(2) -- (48) (36) (8) (2)
-------- ------- -------- -------- -------- --------
65 -- 311 22 91 133
-------- ------- -------- -------- -------- --------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-------- ------- -------- -------- -------- --------
-- -- -- -- -- --
-------- ------- -------- -------- -------- --------
884 412 1,397 130 1,070 (1,352)
======== ======= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
103
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
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
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD
-------------------------------------------------------------------------------------------------
-----------------------
MONEY MARKET PORTFOLIO
-----------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C>
2000 $1.00 0.05 -- (0.05) -- $1.00
1999 1.00 0.05 -- (0.05) -- 1.00
1998 1.00 0.05 -- (0.05) -- 1.00
1997 1.00 0.05 -- (0.05) -- 1.00
1996 1.00 0.06 -- (0.06) -- 1.00
RETAIL CLASS A
2000 $1.00 0.05 -- (0.05) -- $1.00
1999 1.00 0.05 -- (0.05) -- 1.00
1998 1.00 0.05 -- (0.05) -- 1.00
1997 1.00 0.05 -- (0.05) -- 1.00
1996 1.00 0.05 -- (0.05) -- 1.00
RETAIL CLASS B
2000 $1.00 0.04 -- (0.04) -- $1.00
1999 (1) 1.00 0.01 -- (0.01) -- 1.00
INSTITUTIONAL II CLASS
2000 $1.00 0.05 -- (0.05) -- $1.00
1999 1.00 0.05 -- (0.05) -- 1.00
1998 1.00 0.05 -- (0.05) -- 1.00
1997 1.00 0.05 -- (0.05) -- 1.00
1996 (2) 1.00 0.04 -- (0.04) -- 1.00
--------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
--------------------------------
INSTITUTIONAL CLASS
2000 $1.00 0.03 -- (0.03) -- $1.00
1999 1.00 0.03 -- (0.03) -- 1.00
1998 1.00 0.03 -- (0.03) -- 1.00
1997 1.00 0.03 -- (0.03) -- 1.00
1996 1.00 0.04 -- (0.04) -- 1.00
RETAIL CLASS A
2000 $1.00 0.03 -- (0.03) -- $1.00
1999 1.00 0.03 -- (0.03) -- 1.00
1998 1.00 0.03 -- (0.03) -- 1.00
1997 1.00 0.03 -- (0.03) -- 1.00
1996 1.00 0.03 -- (0.03) -- 1.00
INSTITUTIONAL II CLASS
2000 $1.00 0.03 -- (0.03) -- $1.00
1999 1.00 0.03 -- (0.03) -- 1.00
1998 1.00 0.03 -- (0.03) -- 1.00
1997 1.00 0.03 -- (0.03) -- 1.00
1996 (3) 1.00 0.02 -- (0.02) -- 1.00
---------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
---------------------------------------
INSTITUTIONAL CLASS
2000 $1.00 0.05 -- (0.05) -- $1.00
1999 1.00 0.05 -- (0.05) -- 1.00
1998 1.00 0.05 -- (0.05) -- 1.00
1997 1.00 0.05 -- (0.05) -- 1.00
1996 1.00 0.05 -- (0.05) -- 1.00
RETAIL CLASS A
2000 $1.00 0.05 -- (0.05) -- $1.00
1999 1.00 0.05 -- (0.05) -- 1.00
1998 (4) 1.00 0.04 -- (0.04) -- 1.00
INSTITUTIONAL II CLASS
2000 $1.00 0.05 -- (0.05) -- $1.00
1999 1.00 0.05 -- (0.05) -- 1.00
1998 1.00 0.05 -- (0.05) -- 1.00
1997 1.00 0.05 -- (0.05) -- 1.00
1996 (3) 1.00 0.04 -- (0.04) -- 1.00
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD INDICATED
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS
TOTAL END OF TO AVERAGE TO AVERAGE (EXCLUDING
RETURN(A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS)
----------------------------------------------------------------------------------------
-----------------------
MONEY MARKET PORTFOLIO
-----------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C>
2000 5.37% $ 509,229 0.38% 5.25% 0.58%
1999 5.17 527,132 0.38 5.01 0.60
1998 5.55 226,439 0.33 5.41 0.50
1997 5.36 318,919 0.28 5.23 0.43
1996 5.78 348,343 0.25 5.62 0.44
RETAIL CLASS A
2000 5.13% $ 251,140 0.61% 5.02% 0.83%
1999 4.91 246,496 0.62 4.79 0.85
1998 5.25 188,048 0.62 5.13 0.85
1997 5.03 128,693 0.59 4.92 0.83
1996 5.44 104,703 0.58 5.25 0.77
RETAIL CLASS B
2000 4.41% $ 23 1.31% 4.39% 1.44%
1999 (1) 3.86* 22 1.30* 3.76* 1.44*
INSTITUTIONAL II CLASS
2000 5.30% $ 300,562 0.45% 5.20% 0.58%
1999 5.11 229,046 0.43 4.97 0.57
1998 5.47 82,293 0.41 5.33 0.55
1997 5.25 62,960 0.38 5.14 0.53
1996 (2) 4.33+ 28,790 0.36* 5.37* 0.55*
--------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
--------------------------------
INSTITUTIONAL CLASS
2000 3.17% $ 63,666 0.37% 3.12% 0.60%
1999 2.99 77,896 0.36 2.95 0.60
1998 3.45 90,446 0.32 3.39 0.51
1997 3.29 69,091 0.28 3.23 0.44
1996 3.61 74,739 0.22 3.54 0.45
RETAIL CLASS A
2000 2.94% $ 45,970 0.60% 2.90% 0.85%
1999 2.74 33,509 0.60 2.66 0.85
1998 3.16 25,144 0.61 3.11 0.86
1997 3.01 16,495 0.55 2.97 0.84
1996 3.53 16,179 0.34 3.33 0.90
INSTITUTIONAL II CLASS
2000 3.10% $ 35,256 0.44% 3.04% 0.60%
1999 2.94 43,575 0.41 2.87 0.57
1998 3.37 29,474 0.40 3.31 0.56
1997 3.19 16,727 0.38 3.14 0.54
1996 (3) 2.62+ 9,387 0.33* 3.35* 0.58*
--------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
--------------------------------------
INSTITUTIONAL CLASS
2000 5.16% $1,414,772 0.41% 5.05% 0.59%
1999 5.00 1,428,064 0.40 4.86 0.59
1998 5.42 1,285,840 0.35 5.29 0.49
1997 5.22 1,250,778 0.32 5.10 0.43
1996 5.64 1,043,758 0.31 5.45 0.44
RETAIL CLASS A
2000 4.92% $ 120,578 0.64% 4.85% 0.84%
1999 4.75 104,037 0.64 4.62 0.84
1998 (4) 5.19* 78,265 0.67* 4.98* 0.87*
INSTITUTIONAL II CLASS
2000 5.08% $ 84,503 0.48% 4.91% 0.59%
1999 4.95 142,144 0.45 4.76 0.56
1998 5.33 91,629 0.44 5.21 0.55
1997 5.12 37,284 0.42 5.01 0.53
1996 (3) 4.11+ 17,027 0.41* 5.25* 0.56*
</TABLE>
The accompanying notes are an integral part of the financial statements.
104
<PAGE>
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Year or Period Indicated
<TABLE>
<CAPTION>
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET ASSET
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL VALUE, END TOTAL
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN(A)
------------------------------------------------------------------------------------------------------------------------
-------------------------------------
U.S. Treasury Money Market Portfolio
-------------------------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C>
2000 $1.00 0.05 -- (0.05) -- $ 1.00 4.73%
1999 1.00 0.04 -- (0.04) -- 1.00 4.58
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
RETAIL CLASS A
2000 $1.00 0.04 -- (0.04) -- $ 1.00 4.49%
1999 1.00 0.04 -- (0.04) -- 1.00 4.33
1998 1.00 0.05 -- (0.05) -- 1.00 4.77
1997 1.00 0.05 -- (0.05) -- 1.00 4.71
1996 (5) 1.00 0.02 -- (0.02) -- 1.00 1.82+
INSTITUTIONAL II CLASS
2000 $1.00 0.05 -- (0.05) -- $ 1.00 4.66%
1999 1.00 0.04 -- (0.04) -- 1.00 4.53
1998 1.00 0.05 -- (0.05) -- 1.00 4.99
1997 1.00 0.05 -- (0.05) -- 1.00 4.89
1996 (3) 1.00 0.04 -- (0.04) -- 1.00 3.87+
------------------------------
Short-Term Treasury Portfolio
------------------------------
INSTITUTIONAL CLASS
2000 $10.03 0.46 (0.15) (0.46) (0.02) $ 9.86 3.11%
1999 10.05 0.48 0.03 (0.48) (0.05) 10.03 5.24
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 (6) 10.00 0.06 (0.04) (0.06) -- 9.96 0.16+
RETAIL CLASS A
2000 $10.03 0.44 (0.16) (0.44) (0.02) $ 9.85 2.80%
1999 10.05 0.47 0.03 (0.47) (0.05) 10.03 5.04
1998 9.96 0.52 0.09 (0.51) (0.01) 10.05 6.23
1997 (7) 9.95 0.27 0.03 (0.28) (0.01) 9.96 3.39+
--------------------------
Short-Term Bond Portfolio
--------------------------
INSTITUTIONAL CLASS
2000 $9.94 0.50 (0.30) (0.50) (0.01) $ 9.63 2.01%
1999 9.95 0.51 (0.01) (0.51) -- 9.94 5.15
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++ (8) 10.00 0.49 (0.05) (0.49) -- 9.95 4.49+
</TABLE>
105
<PAGE>
<TABLE>
<CAPTION>
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
-------------------------------------------------------------------------------------------------
-------------------------------------
U.S. Treasury Money Market Portfolio
-------------------------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C>
2000 $278,568 0.45% 4.63% 0.58% --
1999 289,930 0.45 4.47 0.59 --
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 --
RETAIL CLASS A
2000 $ 18,618 0.68% 4.34% 0.83% --
1999 19,632 0.69 4.31 0.84 --
1998 35,302 0.70 4.66 0.85 --
1997 13,673 0.64 4.62 0.83 --
1996 (5) 8,758 0.55* 4.71* 0.86* --
INSTITUTIONAL II CLASS
2000 $129,378 0.52% 4.58% 0.58% --
1999 139,253 0.50 4.39 0.56 --
1998 94,844 0.48 4.88 0.54 --
1997 63,496 0.47 4.79 0.53 --
1996 (3) 47,220 0.47* 4.98* 0.55* --
------------------------------
Short-Term Treasury Portfolio
------------------------------
INSTITUTIONAL CLASS
2000 $ 34,877 0.64% 4.60% 0.73% 80.49%
1999 34,088 0.63 4.79 0.72 70.64
1998 24,929 0.55 5.26 0.60 124.24
1997 21,563 0.55 5.11 0.60 147.86
1996 (6) 18,823 0.55* (0.55)* 0.60* --
RETAIL CLASS A
2000 $ 9,804 0.82% 4.39% 1.12% 80.49%
1999 14,006 0.82 4.61 1.12 70.64
1998 14,410 0.78 5.02 1.07 124.24
1997 (7) 22,937 0.67* 5.07* 0.91* 147.86
--------------------------
Short-Term Bond Portfolio
--------------------------
INSTITUTIONAL CLASS
2000 $ 92,185 0.97% 5.09% 1.11% 65.58%
1999 111,127 0.97 5.14 1.11 91.22
1998 131,669 0.97* 5.14* 1.16* 108.18
1998++ 133,544 0.82 5.78 1.01 135.00
1997++ (8) 146,178 0.90* 5.47* 1.08 112.00
</TABLE>
105
<PAGE>
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Year or Period Indicated
<TABLE>
<CAPTION>
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET ASSET
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL VALUE, END TOTAL
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN(A)
-----------------------------------------------------------------------------------------------------------------------
---------------------------
Maryland Tax-Free Portfolio
---------------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
2000 $10.21 0.44 (0.69) (0.44) (0.04) $ 9.48 (2.37)%
1999 10.14 0.45 0.14 (0.45) (0.07) 10.21 5.86
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 A
2000 $10.21 0.43 (0.69) (0.43) (0.04) $ 9.48 (2.50)%
1999 10.14 0.43 0.14 (0.43) (0.07) 10.21 5.69
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+
RETAIL CLASS B
2000(11) $ 9.75 1.51 (0.23) (1.51) (0.04) $ 9.48 13.17%+
--------------------------------
Pennsylvania Tax-Free Portfolio
--------------------------------
INSTITUTIONAL CLASS
2000 $10.23 0.42 (0.81) (0.42) (0.04) $ 9.38 (3.88)%
1999 10.14 0.41 0.15 (0.41) (0.06) 10.23 5.56
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++(8) 10.00 0.40 0.09 (0.40) -- 10.09 5.03+
RETAIL CLASS A
2000 $10.22 0.40 (0.80) (0.40) (0.04) $ 9.38 (3.95)%
1999 10.13 0.39 0.15 (0.39) (0.06) 10.22 5.39
1998 (12) 10.26 0.04 (0.13) (0.04) -- 10.13 (0.94)+
RETAIL CLASS B
2000(11) $ 9.71 1.20 (0.28) (1.20) (0.04) $ 9.39 9.37%+
</TABLE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS PORTFOLIO
END OF TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
---------------------------------------------------------------------------------------------------
---------------------------
Maryland Tax-Free Portfolio
---------------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C>
2000 $ 87,845 0.81% 4.57% 1.00% 24.29%
1999 95,046 0.76 4.35 0.99 30.83
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 A
2000 $ 25,924 0.94% 4.43% 1.30% 24.29%
1999 32,395 0.93 4.18 1.29 30.83
1998 25,283 0.90 4.39 1.15 22.40
1997(10) 7,997 0.91* 4.70* 1.10* 11.13
RETAIL CLASS B
2000(11) $ 50 1.68%* 3.82%* 1.85%* 24.29%
--------------------------------
Pennsylvania Tax-Free Portfolio
--------------------------------
INSTITUTIONAL CLASS
2000 $160,664 0.96% 4.32% 1.00% 30.92%
1999 224,480 0.92 4.01 1.00 43.46
1998 215,182 0.84* 3.84* 0.91* 3.50
1998++ 195,322 0.80 4.43 1.00 57.00
1997++(8) 221,393 0.83* 4.41* 1.02* 86.00
RETAIL CLASS A
2000 $ 3,036 1.09% 4.23% 1.29% 30.92%
1999 3,820 1.10 3.84 1.30 43.46
1998 (12) 2,577 1.01* 3.72* 1.24* 3.50
RETAIL CLASS B
2000(11) $ 188 1.84%* 3.63%* 1.84%* 30.92%
<FN>
++ Returns are for the period indicated and have not been annualized.
++ Period ended February 28.
* Annualized
(A) Total return for the retail class does not include the one-time sales charge.
(1) Commenced operations on January 22, 1999.
(2) Commenced operations on July 21, 1995.
(3) Commenced operations on July 28, 1995.
(4) Commenced operations on July 7, 1997.
(5) Commenced operations on December 15, 1995.
(6) Commenced operations on March 20, 1996.
(7) Commenced operations on September 9, 1996.
(8) Commenced operations on April 1, 1996.
(9) Commenced operations on November 18, 1996.
(10) Commenced operations on January 2, 1997.
(11) Commenced operations on September 9, 1999.
(12) Commenced operations on March 23, 1998.
(13) Commenced operations on April 1, 1998.
(14) Commenced operations on September 14, 1998.
(15) Commenced operations on May 9, 1997.
(16) Commenced operations on October 1, 1997.
(17) Commenced operations on November 3, 1997.
(18) Commenced operations on May 16, 1996.
(19) Commenced operations on July 31, 1998.
(20) Commenced operations on September 1, 1999.
(21) Commenced operations on July 13, 1995.
(22) Commenced operations on April 1, 1997.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
106
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
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)
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------
Intermediate Fixed Income Portfolio
-----------------------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
2000 $ 9.93 0.53 (0.50) (0.53) (0.01) $ 9.42 0.32%
1999 10.00 0.55 (0.02) (0.55) (0.05) 9.93 5.40
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
2000 $ 9.78 0.51 (0.51) (0.51) -- $ 9.27 0.04%
1999 9.85 0.54 (0.07) (0.54) -- 9.78 4.82
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++ (8) 10.00 0.59 (0.18) (0.59) -- 9.82 4.18+
RETAIL CLASS A
2000 $ 9.79 0.50 (0.51) (0.50) -- $ 9.28 (0.09)%
1999 9.85 0.54 (0.06) (0.54) -- 9.79 4.93
1998 (13) 9.88 0.81 (0.03) (0.81) -- 9.85 7.86+
-----------------
Income Portfolio
-----------------
INSTITUTIONAL CLASS
2000 $10.08 0.56 (0.57) (0.56) -- $ 9.51 (0.01)%
1999 10.25 0.59 (0.17) (0.59) -- 10.08 4.22
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
RETAIL CLASS A
2000 $10.20 0.56 (0.58) (0.56) -- $ 9.62 (0.18)%
1999 10.37 0.58 (0.16) (0.59) -- 10.20 4.08
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
RETAIL CLASS B
2000 $10.08 0.48 (0.57) (0.48) -- $ 9.51 (0.85)%
1999 (14) 10.40 0.35 (0.32) (0.35) -- 10.08 0.35+
-------------------
Balanced Portfolio
-------------------
INSTITUTIONAL CLASS
2000 $14.64 0.28 2.90 (0.26) (0.66) $16.90 22.39%
1999 13.24 0.28 2.03 (0.28) (0.63) 14.64 18.17
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
RETAIL CLASS A
2000 $14.59 0.28 2.88 (0.25) (0.66) $16.84 22.26%
1999 13.20 0.26 2.02 (0.26) (0.63) 14.59 17.97
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
RETAIL CLASS B
2000 $14.60 0.16 2.87 (0.15) (0.66) $16.82 21.32%
1999 (14) 12.58 0.16 2.67 (0.18) (0.63) 14.60 23.13+
</TABLE>
<TABLE>
<CAPTION>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Net Assets Expenses Income Net Assets Portfolio
End of to Average to Average (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Rate
---------------------------------------------------------------------------------------------------
-----------------------------------
Intermediate Fixed Income Portfolio
-----------------------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C>
2000 $114,554 0.81% 5.52% 0.96% 29.28%
1999 100,419 0.77 5.49 0.95 52.87
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
2000 $166,837 0.96% 5.38% 1.09% 6.62%
1999 255,329 0.93 5.43 1.10 102.27
1998 265,616 0.88* 6.04* 1.06* 13.77
1998++ 264,565 0.79 6.88 0.98 431.00
1997++ (8) 259,042 0.85* 6.54* 1.03* 255.00
RETAIL CLASS A
2000 $ 2,375 1.10% 5.26% 1.40% 6.62%
1999 2,240 1.12 5.11 1.41 102.27
1998 (13) 30 1.05* 6.02* 1.33* 13.77
----------------
Income Portfolio
----------------
INSTITUTIONAL CLASS
2000 $343,260 0.82% 5.82% 0.94% 328.20%
1999 356,482 0.78 5.77 0.94 50.41
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
RETAIL CLASS
2000 $ 5,830 0.95% 5.67% 1.24% 328.20%
1999 8,573 0.95 5.59 1.24 50.41
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
RETAIL CLASS B
2000 $ 429 1.71% 4.97% 1.80% 328.20%
1999 (14) 280 1.70* 4.71* 1.79* 50.41
------------------
Balanced Portfolio
------------------
INSTITUTIONAL CLASS
2000 $348,332 0.90% 1.95% 1.00% 54.46%
1999 118,395 0.85 2.12 1.00 56.70
1998 96,858 0.79 2.44 0.83 71.58
1997 76,987 0.74 2.79 0.74 124.22
1996 102,233 0.75 3.19 0.75 107.56
RETAIL CLASS A
2000 $ 43,098 1.01% 1.84% 1.40% 54.46%
1999 26,927 1.01 1.94 1.40 56.70
1998 15,074 1.02 2.20 1.33 71.58
1997 6,164 0.96 2.56 1.19 124.22
1996 3,323 1.09 2.51 1.55 107.56
RETAIL CLASS B
2000 $ 10,991 1.77% 1.10% 1.86% 54.46%
1999 (14) 2,479 1.75* 0.99* 1.84* 56.70
</TABLE>
107
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
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)
-------------------------------------------------------------------------------------------------------------------
-----------------------
Equity Income Portfolio
-----------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
2000 $12.05 0.20 0.38 (0.20) (0.43) $12.00 5.40%
1999 12.52 0.25 0.22 (0.25) (0.69) 12.05 4.17
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 A
2000 $12.04 0.22 0.38 (0.22) (0.43) $11.99 5.29%
1999 12.52 0.23 0.21 (0.23) (0.69) 12.04 3.92
1998 (15) 11.01 0.28 2.73 (0.29) (1.21) 12.52 28.73+
----------------------
Value Equity Portfolio
----------------------
INSTITUTIONAL CLASS
2000 $15.22 0.26 1.40 (0.26) (2.51) $14.11 10.87% %
1999 14.59 0.08 1.36 (0.09) (0.72) 15.22 10.48
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++ (8) 10.00 0.14 2.10 (0.14) (0.19) 11.91 22.77+
RETAIL CLASS A
2000 $15.22 0.14 1.40 (0.15) (2.51) $14.10 10.72% %
1999 14.60 0.05 1.36 (0.07) (0.72) 15.22 10.29
1998 (13) 14.55 -- 0.05 -- -- 14.60 0.34+
RETAIL CLASS B
2000 $15.16 (0.07) 1.36 -- (2.51) $13.94 9.93%
1999 (14) 12.93 0.01 2.97 (0.03) (0.72) 15.16 23.70+
----------------------
Equity Index Portfolio
----------------------
INSTITUTIONAL CLASS
2000 $13.87 0.14 1.26 (0.14) (0.30) $14.83 10.25%
1999 11.59 0.14 2.41 (0.14) (0.13) 13.87 22.37
1998 (16) 10.00 0.08 1.58 (0.07) -- 11.59 16.71+
RETAIL CLASS A
2000 $13.84 0.11 1.25 (0.11) (0.30) $14.79 9.95%
1999 11.57 0.11 2.40 (0.11) (0.13) 13.84 22.05
1998 (17) 9.78 0.06 1.80 (0.07) -- 11.57 19.08+
--------------------------
Blue Chip Equity Portfolio
--------------------------
INSTITUTIONAL CLASS
2000 $20.00 0.08 3.97 (0.07) (0.38) $23.60 20.45%
1999 17.01 0.10 3.41 (0.12) (0.40) 20.00 21.07
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 (8) 10.00 -- 0.12 -- -- 10.12 1.20+
RETAIL CLASS A
2000 $19.98 0.06 3.95 (0.04) (0.38) $23.57 20.29%
1999 16.98 0.09 3.40 (0.09) (0.40) 19.98 20.96
1998 12.38 0.10 4.69 (0.10) (0.09) 16.98 38.93
1997 (18) 10.33 0.16 2.06 (0.16) (0.01) 12.38 21.74+
RETAIL CLASS B
2000 $19.93 (0.07) 3.90 -- (0.38) $23.38 19.39%
1999 (19) 17.07 0.01 3.28 (0.03) (0.40) 19.93 19.62+
</TABLE>
<TABLE>
<CAPTION>
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS PORTFOLIO
END OF TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
----------------------------------------------------------------------------------------------------------------
-----------------------
Equity Income Portfolio
-----------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C>
2000 $ 83,473 0.98% 1.83% 1.05% 41.43%
1999 101,104 0.91 2.10 1.04 56.03
1998 106,643 0.84 2.58 0.97 39.88
1997 (9) 83,947 0.83* 2.47* 0.93* 34.38
RETAIL CLASS A
2000 $ 3,353 1.09% 1.72% 1.45% 41.43%
1999 3,659 1.08 1.93 1.44 56.03
1998 (15) 3,428 1.07* 2.39* 1.45* 39.88
----------------------
Value Equity Portfolio
----------------------
INSTITUTIONAL CLASS
2000 $428,675 1.20% 0.16% 1.34% 25.00%
1999 536,827 1.14 0.58 1.34 32.21
1998 645,202 1.08* 0.65* 1.20* 4.34
1998++ 577,154 1.00 1.17 1.20 30.00
1997++ (8) 540,889 1.05* 1.48* 1.26* 37.00
RETAIL CLASS A
2000 $ 7,516 1.32% (0.01)% 1.75% 25.00%
1999 3,553 1.31 0.29 1.74 32.21
1998 (13) 227 1.26* 0.62* 1.67* 4.34
RETAIL CLASS
2000 $ 583 2.07% (0.77)% 2.20% 25.00%
1999 (14) 164 2.07* (0.67)* 2.20* 32.21
----------------------
Equity Index Portfolio
----------------------
INSTITUTIONAL CLASS
2000 $151,157 0.25% 1.03% 0.59% 58.81%
1999 86,911 0.23 1.20 0.61 34.04
1998 (16) 45,531 0.20 1.43 0.62 49.56
RETAIL CLASS A
2000 $ 7,453 0.50% 0.78% 0.99% 58.81%
1999 4,974 0.48 0.92 1.00 34.04
1998 (17) 1,417 0.45* 1.02* 1.08* 49.56
--------------------------
Blue Chip Equity Portfolio
--------------------------
INSTITUTIONAL CLASS
2000 $211,534 0.97% 0.39% 1.08% 40.58%
1999 129,720 0.91 0.63 1.07 38.78
1998 67,060 0.81 0.96 0.89 26.32
1997 35,690 0.70 1.55 0.90 46.91
1996 (8) 11,456 0.65* 1.52* 1.38* 0.97
RETAIL CLASS A
2000 $ 73,347 1.08% 0.28% 1.63% 40.58%
1999 56,771 1.07 0.49 1.62 38.78
1998 43,300 1.04 0.71 1.50 26.32
1997 (18) 13,211 0.86* 1.29* 1.25* 46.91
RETAIL CLASS B
2000 $ 10,710 1.83% (0.49)% 1.93% 40.58%
1999 (19) 3,162 1.84* (0.43)* 1.94* 38.78
</TABLE>
108
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
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)
--------------------------------------------------------------------------------------------------------------------
--------------------------
Capital Growth Portfolio
--------------------------
INSTITUTIONAL CLASS
<S> <C> <C> <C> <C> <C> <C>
2000 $18.71 (0.03) 9.31 -- (1.86) $26.13 51.36%
1999 14.90 (0.01) 4.33 -- (0.51) 18.71 29.51
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
RETAIL CLASS A
2000 $18.58 (0.05) 9.22 -- (1.86) $25.89 51.12%
1999 14.82 (0.03) 4.30 -- (0.51) 18.58 29.34
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
RETAIL CLASS B
2000 $18.61 (0.13) 9.12 -- (1.86) $25.74 50.03%
1999 (14) 13.53 (0.04) 5.63 -- (0.51) 18.61 41.88+
-------------------------
Mid-Cap Equity Portfolio
-------------------------
INSTITUTIONAL CLASS
2000 $14.70 (0.04) 5.30 -- (2.04) $17.92 38.90%
1999 14.11 0.01 1.16 (0.01) (0.57) 14.70 8.76
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+
RETAIL CLASS A
2000 (20) $15.22 (0.02) 4.74 -- (2.04) $17.90 34.04%+
---------------------------
Small-Cap Equity Portfolio
---------------------------
INSTITUTIONAL CLASS
2000 $12.65 (0.08) 15.39 -- (4.72) $23.24 126.42%
1999 11.86 (0.05) 1.17 -- (0.33) 12.65 9.89
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 (21) 10.00 0.09 4.72 (0.09) -- 14.72 48.34+
RETAIL CLASS A
2000 $12.59 (0.05) 15.25 -- (4.72) $23.07 126.13%
1999 11.83 (0.07) 1.16 -- (0.33) 12.59 9.66
1998 8.53 (0.06) 3.98 -- (0.62) 11.83 47.57
1997 (18) 15.47 (0.01) (3.72) -- (3.21) 8.53 (27.14)+
-----------------------------------------
International Equity Selection Portfolio
-----------------------------------------
INSTITUTIONAL CLASS
2000 $11.16 0.24 3.45 (0.19) (0.56) $14.10 33.27%
1999 11.51 0.10 (0.18) (0.10) (0.17) 11.16 (0.50)
1998 10.85 -- 0.66 -- -- 11.51 6.08+
1998++ (22) 10.00 0.15 1.12 (0.23) (0.19) 10.85 12.95+
RETAIL CLASS A
2000 $11.16 0.24 3.45 (0.19) (0.56) $14.10 33.20%
1999 11.51 0.08 (0.17) (0.09) (0.17) 11.16 (0.59)
1998*(13) 11.40 -- 0.11 -- -- 11.51 0.96+
</TABLE>
Ratio
Ratio of Net of Expenses
Ratio of Investment to Average
Net Assets Expenses Income Net Assets Portfolio
End of to Average to Average (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Rate
--------------------------------------------------------------------------------
-------------------------
Capital Growth Portfolio
-------------------------
INSTITUTIONAL CLASS
2000 $193,827 1.00% (0.18)% 1.06% 113.74%
1999 90,042 0.94 (0.07) 1.04 118.46
1998 50,615 0.84 0.13 0.88 174.55
1997 34,170 0.39 0.92 0.85 246.14
1996 39,560 0.24 1.26 0.84 578.57
RETAIL CLASS A
2000 $ 52,445 1.11% (0.29)% 1.46% 113.74%
1999 23,035 1.09 (0.23) 1.44 118.46
1998 14,401 1.06 (0.10) 1.37 174.55
1997 5,595 0.56 0.74 1.30 246.14
1996 2,111 0.50 1.05 1.65 578.57
RETAIL CLASS B
2000 $ 14,129 1.86% (1.04)% 1.91% 113.74%
1999 (14) 2,162 1.87* (1.09)* 1.92* 118.46
-------------------------
Mid-Cap Equity Portfolio
-------------------------
INSTITUTIONAL CLASS
2000 $ 92,253 1.11% (0.26)% 1.18% 55.90%
1999 63,648 1.06 0.04 1.18 61.81
1998 55,280 0.97 0.31 1.06 38.30
1997 (9) 27,059 0.90* 0.65* 0.95* 14.74
RETAIL CLASS A
2000 (20) $ 1,161 0.82%* (0.31)%* 1.06%* 55.90%
---------------------------
Small-Cap Equity Portfolio
---------------------------
INSTITUTIONAL CLASS
2000 $ 81,375 1.19% (0.49)% 1.21% 753.31%
1999 30,562 1.16 (0.48) 1.23 733.14
1998 27,372 0.98 (0.24) 1.02 410.72
1997 17,746 0.95 (0.12) 0.95 704.41
1996 (21) 33,621 0.91* 0.60* 0.91* 286.80
RETAIL CLASS A
2000 $ 11,292 1.30% (0.49)% 1.61% 753.31%
1999 2,248 1.32 (0.64) 1.63 733.14
1998 1,853 1.21 (0.46) 1.36 410.72
1997 (18) 1,075 1.11* (0.13)* 1.21* 704.41
-----------------------------------------
International Equity Selection Portfolio
-----------------------------------------
INSTITUTIONAL CLASS
2000 $ 43,743 0.93% 2.01% 1.04% 26.44%
1999 23,686 0.88 1.04 1.04 101.86
1998 41,510 0.78* (0.52)* 1.22* 0.98
1998++ (22) 35,858 0.75* 1.73* 1.20* 43.00
RETAIL CLASS A
2000 $ 3,177 1.04% 1.95% 1.44% 26.44%
1999 1,496 1.05 0.80 1.30 101.86
1998*(13) 13 0.96* (0.63)* 1.19* 0.98
++ Returns are for the period indicated and have not been annualized.
++ Period ended February 28.
* Annualized
(A) Total return for the retail class does not include the one-time sales
charge.
(1) Commenced operations on January 22, 1999.
(2) Commenced operations on July 21, 1995.
(3) Commenced operations on July 28, 1995.
(4) Commenced operations on July 7, 1997.
(5) Commenced operations on December 15, 1995.
(6) Commenced operations on March 20, 1996.
(7) Commenced operations on September 9, 1996.
(8) Commenced operations on April 1, 1996.
(9) Commenced operations on November 18, 1996.
(10) Commenced operations on January 2, 1997.
(11) Commenced operations on September 9, 1999.
(12) Commenced operations on March 23, 1998.
(13) Commenced operations on April 1, 1998.
(14) Commenced operations on September 14, 1998.
(15) Commenced operations on May 9, 1997.
(16) Commenced operations on October 1, 1997.
(17) Commenced operations on November 3, 1997.
(18) Commenced operations on May 16, 1996.
(19) Commenced operations on July 31, 1998.
(20) Commenced operations on September 1, 1999.
(21) Commenced operations on July 13, 1995.
(22) Commenced operations on April 1, 1997.
109
<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 separate investment Portfolios: Money Market
Portfolio, Tax-Free Money Market Portfolio, U.S. Government Money Market
Portfolio, U.S. Treasury Money Market Portfolio (collectively, the "money market
Portfolios"), Short-Term Treasury Portfolio, Short-Term Bond Portfolio, Maryland
Tax-Free Portfolio, Pennsylvania Tax-Free Portfolio, Intermediate Fixed Income
Portfolio, U.S. Government Bond Portfolio, Income 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 and International Equity Selection Portfolio
(individually, a "Portfolio" and collectively, the "Portfolios"). The Fund may
issue an unlimited number of shares of each of its Portfolios. The International
Equity Selection Portfolio is structured as a "fund of funds" and achieves its
investment objective by investing in a number of non-affiliated mutual funds
("Underlying Funds"). The Underlying Funds incur expenses in seeking to achieve
their investment objectives.
Each Portfolio (with the exception of the Intermediate Fixed Income
Portfolio and Short-Term Bond Portfolio) offers both Institutional and Retail
Class A shares. The following Portfolios also offer Retail Class B shares:
Maryland Tax-Free Portfolio, Pennsylvania Tax-Free Portfolio, Income Portfolio,
Balanced Portfolio, Blue Chip Equity Portfolio, Capital Growth Portfolio, Value
Equity Portfolio and Money Market Portfolio (for exchange purposes only). 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 A 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 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; in April 1998
for the U.S. Government Bond Portfolio, Value Equity Portfolio and International
Equity Selection Portfolio; and in September 1999 for the Mid-Cap Equity
Portfolio. Retail Class B shares commenced in August 1998 for the Blue Chip
Equity Portfolio, in September 1998 for the Income Portfolio, Balanced
Portfolio, Value Equity Portfolio and Capital Growth Portfolio, in January 1999
for the Money Market Portfolio, and in September 1999 for the Maryland Tax-Free
Portfolio and Pennsylvania Tax-Free 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.
110
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
Investment securities held by the Money Market Portfolios are stated at
their amortized cost, which approximates market value. Under the amortized cost
method, any discount or premium is amortized ratably to the maturity of the
security and is included in interest income.
INCOME TAXES -- It is the intention of each Portfolio to qualify as a
regulated investment company and to distribute all of its taxable income.
Accordingly, no provision for federal income taxes is considered necessary.
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 eligible organizational costs associated with
the start-up of the Portfolios prior to December 15, 1998 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 organizational 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 and U.S. Government Bond Portfolios
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 cash, U.S. Government securities, or
liquid, high-grade debt obligations in an amount sufficient to meet the purchase
price in a segregated account until the settlement date. No Portfolio intends to
engage in when-issued purchases and forward commitments for speculative
purposes.
DISTRIBUTIONS -- Dividends from net investment income are declared daily
and paid monthly for the money market Portfolios, the Short-Term Treasury
Portfolio, Short-Term Bond Portfolio, Maryland Tax-Free Portfolio, Pennsylvania
Tax-Free Portfolio, Intermediate Fixed Income Portfolio, U.S. Government Bond
Portfolio and Income Portfolio. The Equity Income Portfolio declares and pays
dividends monthly; the Balanced
111
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, and
International Equity Selection 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):
Accumulated Undistributed
Net Realized Net InvestmentPaid-in-
Portfolio Gain (Loss) Income Capital
--------------------------------------------------------------------------------
U.S. Treasury
Money Market $ (5) $ 5 $--
--------------------------------------------------------------------------------
Short-Term
Bond 1 (1) --
--------------------------------------------------------------------------------
Value Equity (309) 81 228
--------------------------------------------------------------------------------
Equity Index -- 2 (2)
--------------------------------------------------------------------------------
Blue Chip Equity -- 12 (12)
--------------------------------------------------------------------------------
Capital Growth (328) 408 (80)
--------------------------------------------------------------------------------
Mid-Cap Equity (65) 65 --
--------------------------------------------------------------------------------
Small-Cap Equity (439) 399 40
--------------------------------------------------------------------------------
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. Allied Investment Advisors, Inc. is an affiliate of Allfirst Trust
Company, N.A., the Custodian and Sub-Administrator of each of the Portfolios.
Pursuant to an investment advisory contract on behalf of each Portfolio, Allied
Investment Advisors, Inc. is entitled to receive fees for its 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%
----------------------------------------------------------------------
Intermediate Fixed Income .60%
----------------------------------------------------------------------
U.S. Government Bond .75%
----------------------------------------------------------------------
Income .60%
----------------------------------------------------------------------
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%
----------------------------------------------------------------------
Allied Investment Advisors, Inc. has agreed to waive a portion of its fees
or reimburse expenses on certain Portfolios in order to limit total
operating expenses of such Portfolios. A portion of these waivers are
voluntary and may be discontinued at any time.
SEI Investments Mutual Funds Services (the "Administrator") serves as
administrator and transfer agent for the Fund under an Administration Agreement
and Transfer Agency Agreement. The Administrator 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. The Administrator 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. Pursuant to a separate
agreement between Allfirst Trust Company, N.A. and the Administrator, Allfirst
Trust Company, N.A. performs sub-administration services on behalf of the
Portfolios, for which it receives an annual fee, paid by the Administrator, of
up to .0275% of each Portfolio's net assets.
112
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The Fund's Board of Trustees has adopted an Amended and Restated
Distribution and Shareholder Services Plan on behalf of Retail Class A
shares of each Portfolio; a Restated Distribution and Shareholder Services
Plan on behalf of Retail Class B shares of the Money Market, Maryland
Tax-Free, Pennsylvania Tax-Free, Income, Balanced, Value Equity, Blue Chip
Equity and Capital Growth Portfolios; and an Amended and Restated
Distribution and Service Plan on behalf of the Institutional II Class
shares of each money market Portfolio pursuant to Rule 12b-1 under the 1940
Act. In addition, the Board of Trustees has adopted a Shareholder Services
Plan on behalf of the Institutional Class shares of the Portfolios (the
"Plans"). Under the Plans, SEI Investments Distribution Co. ("SIDCO") acts
as Distributor for the Fund pursuant to a Distribution Agreement on behalf
of each Portfolio. The Plans permit payment of up to .75% of the average
net assets of the Retail Class A, Retail Class B and Institutional II Class
shares of each Portfolio. The Trustees have authorized payment of a fee to
SIDCO of: .25% of the average net assets of the Retail Class A shares of
each of the money market Portfolios; .30% of average net assets of the
Retail Class A shares of the Maryland Tax-Free Portfolio, Pennsylvania
Tax-Free Portfolio, Income Portfolio, Intermediate Fixed Income Portfolio,
Short-Term Bond Portfolio, and U.S. Government Bond Portfolio; .40% of
average net assets of the Retail Class A shares of the Short-Term Treasury
Portfolio, Balanced Portfolio, Equity Income Portfolio, Value Equity
Portfolio, Capital Growth Portfolio, Mid-Cap Equity Portfolio, Small-Cap
Equity Portfolio, International Equity Selection Portfolio and Equity Index
Portfolio; .55% of average net assets of the Retail Class A shares of the
Blue Chip Equity Portfolio; .75% of the average net assets of the Retail
Class B shares of the Money Market Portfolio, Maryland Tax-Free Portfolio,
Pennsylvania Tax-Free Portfolio, Income Portfolio, Balanced Portfolio,
Value Equity Portfolio, Blue Chip Equity Portfolio and Capital Growth
Portfolio; and .15% of average net assets of the Institutional II Class
shares of each of the money market Portfolios. 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.
The shareholder services fees paid under the Plans are to compensate
qualified intermediaries for shareholder services and account maintenance. Under
the respective Plans, the Retail Class A and Retail Class B shares of a
Portfolio may pay an annual fee of up to .25% of the average net assets of the
respective class shares attributable to their customers and the Institutional
Class shares 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 A shares of
.15%, a fee for the Retail Class B shares of .25%, and a fee of 0.08% of the
average net assets of the Institutional Class shares of each of the money market
Portfolios; 0.11% of the average net assets of the Institutional Class shares of
the ARK Intermediate Fixed Income, Pennsylvania Tax-Free and U.S. Government
Bond Portfolios; 0.12% of the average net assets of the Institutional Class
shares of the ARK Income and Maryland Tax-Free Portfolios; and 0.14% of the
average net assets of the Institutional Class shares of the ARK Balanced, Blue
Chip, Capital Growth, Equity Income, International Equity Selection, Mid-Cap
Equity, Small-Cap Equity and Value Equity Portfolios. In addition, a portion of
the fee is being waived for the Retail Class A shares and Institutional Class
shares of each Portfolio. The waiver is voluntary and may be discontinued at any
time.
A contingent deferred sales charge (CDSC) is imposed on certain redemptions
of Retail Class B shares. The CDSC varies depending on the number of years from
the time of payment for the purchase of Retail Class B shares until the
redemption of such shares.
Years Contingent Deferred
Purchases Made Sales Charge
-----------------------------------------------------------
First ................... 5%
Second .................. 4%
Third ................... 3%
Fourth .................. 3%
Fifth ................... 2%
Sixth ................... 1%
Seventh and Following ... None
113
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, 2000, were as follows:
PURCHASES SALES
PORTFOLIO (000) (000)
--------------------------------------------------------------------------------
Short-Term Treasury $ 31,279 $ 31,754
--------------------------------------------------------------------------------
Short-Term Bond 41,854 65,176
--------------------------------------------------------------------------------
Maryland Tax-Free 29,121 33,728
--------------------------------------------------------------------------------
Pennsylvania Tax-Free 58,430 104,006
--------------------------------------------------------------------------------
Intermediate Fixed Income 46,685 26,003
--------------------------------------------------------------------------------
U.S. Government Bond 11,913 83,917
--------------------------------------------------------------------------------
Income 1,067,525 1,056,715
--------------------------------------------------------------------------------
Balanced 304,783 105,897
--------------------------------------------------------------------------------
Equity Income 37,672 56,885
--------------------------------------------------------------------------------
Value Equity 118,019 271,090
--------------------------------------------------------------------------------
Equity Index 124,350 70,033
--------------------------------------------------------------------------------
Blue Chip Equity 144,691 91,457
--------------------------------------------------------------------------------
Capital Growth 239,982 188,782
--------------------------------------------------------------------------------
Mid-Cap Equity 45,013 42,122
--------------------------------------------------------------------------------
Small-Cap Equity 446,594 432,804
--------------------------------------------------------------------------------
International Equity Selection 19,748 8,487
--------------------------------------------------------------------------------
For federal income tax purposes, the cost of securities owned at April 30,
2000, was not materially different from the amounts reported for financial
reporting purposes. The aggregate gross unrealized appreciation and
depreciation of securities at April 30, 2000, for each Portfolio is as
follows:
NET
UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION/
SECURITIES SECURITIES (DEPRECIATION)
PORTFOLIO (000) (000) (000)
------------------------------------------------------ -------------------------
Short-Term Treasury $ 3 $ (657) $ (654)
--------------------------------------------------------------------------------
Short-Term Bond 2 (2,960) (2,958)
--------------------------------------------------------------------------------
Maryland Tax-Free 1,300 (4,480) (3,180)
--------------------------------------------------------------------------------
Pennsylvania Tax-Free 728 (7,138) (6,410)
--------------------------------------------------------------------------------
Intermediate Fixed Income 127 (5,027) (4,900)
--------------------------------------------------------------------------------
U.S. Government Bond 2 (10,634) (10,632)
--------------------------------------------------------------------------------
Income 463 (13,447) (12,984)
--------------------------------------------------------------------------------
Balanced 58,385 (16,198) 42,187
--------------------------------------------------------------------------------
Equity Income 27,490 (1,770) 25,720
--------------------------------------------------------------------------------
Value Equity 180,847 (6,640) 174,207
--------------------------------------------------------------------------------
Equity Index 38,587 (12,373) 26,214
--------------------------------------------------------------------------------
Blue Chip Equity 87,791 (5,615) 82,176
--------------------------------------------------------------------------------
Capital Growth 80,379 (5,120) 75,259
--------------------------------------------------------------------------------
Mid-Cap Equity 36,666 (5,774) 30,892
--------------------------------------------------------------------------------
Small-Cap Equity 5,027 (7,544) (2,517)
--------------------------------------------------------------------------------
International Equity
Selection 7,629 (819) 6,810
--------------------------------------------------------------------------------
At April 30, 2000, the following Portfolios had capital loss carryforwards
and post-October losses:
POST
CAPITAL LOSS OCTOBER 31, 1999
CARRYFORWARD DEFERRED
AMOUNT EXPIRATION LOSSES
PORTFOLIO (000) DATE (000)
--------------------------------------------------------------------------------
Money Market $ 7 2006 $ --
--------------------------------------------------------------------------------
Tax-Free Money Market 1 2008 --
--------------------------------------------------------------------------------
U.S. Government
Money Market 25 2005 --
5 2006 --
11 2007 --
--------------------------------------------------------------------------------
U.S.Treasury Money Market 25 2007 --
--------------------------------------------------------------------------------
Short-Term Bond 320 2008 --
--------------------------------------------------------------------------------
Maryland Tax-Free 1,026 2007 --
-------------------------------------------------------------------------------
Pennsylvania Tax-Free 2,231 2007 --
2,559 2008 --
--------------------------------------------------------------------------------
U.S. Government Bond 724 2006 1,855
919 2007 --
1,280 2008 --
--------------------------------------------------------------------------------
Income 6,425 2007 --
954 2008 --
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, 2000, income generated from the program during the year
ended April 30, 2000, and the collateral purchased with cash received and
held at April 30, 2000, with respect to such loans were as follows (000):
INCOME RECEIVED
MARKET VALUE OF FROM SECURITIES
PORTFOLIO LOANED SECURITIES LENDING
--------------------------------------------------------------------------------
Short-Term Bond $11,018 $ 13
--------------------------------------------------------------------------------
Intermediate Fixed
Income 13,878 20
--------------------------------------------------------------------------------
U.S. Government
Bond 39,195 52
--------------------------------------------------------------------------------
Income 86,073 154
--------------------------------------------------------------------------------
114
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Money Other Fixed
Collateral Repurchase Market Income
Portfolio Agreements Instruments Securities Cash Total
--------------------------------------------------------------------------------
Short-Term
Bond $ 6,829 $125 $ 4,576 $203 $11,733
--------------------------------------------------------------------------------
Intermediate
Fixed
Income 8,000 157 7,000 7 15,164
--------------------------------------------------------------------------------
U.S. Government
Bond 20,000 43 21,000 -- 41,043
--------------------------------------------------------------------------------
Income 50,071 298 40,705 503 91,577
--------------------------------------------------------------------------------
7. CONCENTRATION OF CREDIT RISK
The Maryland Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio invest
in debt instruments of municipal issuers. Although these Portfolios monitor
investment concentration, the issuers' ability to meet their obligations may be
affected by economic developments in a specific state or region.
The Maryland Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio invest
in securities that include revenue bonds and general obligation bonds. At April
30, 2000, the percentage of portfolio investments by each revenue source was as
follows:
MARYLAND PENNSYLVANIA
TAX-FREE PORTFOLIO TAX-FREE PORTFOLIO
--------------------------------------------------------------------------------
REVENUE BONDS:
--------------------------------------------------------------------------------
Education 14% 16%
--------------------------------------------------------------------------------
Health Care 22 23
--------------------------------------------------------------------------------
Transportation 5 --
--------------------------------------------------------------------------------
Utility 3 9
--------------------------------------------------------------------------------
Housing 3 1
--------------------------------------------------------------------------------
Public Facility 5 13
--------------------------------------------------------------------------------
Industrial -- 16
--------------------------------------------------------------------------------
Other 6 6
--------------------------------------------------------------------------------
General Obligations 42 16
--------------------------------------------------------------------------------
100% 100%
--------------------------------------------------------------------------------
8. FUND MERGERS
On July 24, 1998, the assets of the ARK International Equity Portfolio were
reorganized into the Govett International Equity Fund, a portfolio of The
Govett Funds, Inc. Under the Agreement and Plan of Reorganization, 518,552
Institutional Class shares of the ARK International Equity Portfolio were
exchanged for 464,675 Institutional Class shares of the Govett
International Equity Fund in a tax-free exchange. The activity of the ARK
International Equity Portfolio for the period May 1, 1998 to July 24, 1998,
has not been reflected in these financial statements.
9. SHAREHOLDER VOTING RESULTS (UNAUDITED)
At a shareholder meeting held on July 24, 1998, the shareholders of the ARK
International Equity Portfolio voted to approve an Agreement and Plan of
Reorganization between the ARK International Equity Portfolio and the
Govett International Equity Fund. The results of the voting were as follows:
INTERNATIONAL EQUITY PORTFOLIO (UNAUDITED)
--------------------------------------------------------------------------------
% of Shares % of Shares
Shares Voted Voted Outstanding
-------------- ---------- ------------
FOR 474,354 99.96% 88.35%
AGAINST 173 0.04% 0.03%
ABSTAIN 0 0.00% 0.00%
10. SUBSEQUENT EVENTS (UNAUDITED)
The Govett Funds, Inc. has entered into an Agreement and Plan of
Reorganization with ARK Funds. Under the agreement, the Govett Global
Income Fund will be combined with the ARK Income Portfolio; Govett Smaller
Companies Fund will be combined with the ARK Small-Cap Equity Portfolio;
Govett International Equity Fund will be combined with the ARK
International Equity Selection Portfolio or, if proposed investment policy
and other changes are not implemented, the ARK International Equity
Portfolio; and Govett Emerging Markets Equity Fund will be combined with
the ARK Emerging Markets Equity Portfolio (which Portfolio will have
nominal assets and liabilities before such combination). The Govett shares
will be exchanged for shares of the corresponding ARK Portfolio. The Board
of Govett Funds has approved the proposed reorganizations. A shareholder
vote to approve the reorganizations is scheduled for July, 2000.
In addition, ARK Funds introduced four new Cash Management Portfolios on
May 1, 2000. Those Portfolios are: ARK U.S. Treasury Cash Management Portfolio,
ARK U.S. Government Cash Management Portfolio, ARK Prime Cash Management
Portfolio, and ARK Tax-Free Cash Management Portfolio.
--------------------------------------------------------------------------------
115
<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, 2000, each Portfolio is designating the
following items with regard to distributions paid during the year.
<TABLE>
<CAPTION>
LONG TERM (20% RATE) ORDINARY
CAPITAL GAINS INCOME TAX EXEMPT
DISTRIBUTIONS DISTRIBUTIONS INCOME QUALIFYING FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) DISTRIBUTION TOTAL DIVIDENDS(1) TAX CREDIT
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Bond 1% 99% 0% 100% 0% 0%
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Government Bond 0% 100% 0% 100% 0% 0%
-----------------------------------------------------------------------------------------------------------------------------------
Value Equity 99% 1% 0% 100% 100% 0%
-----------------------------------------------------------------------------------------------------------------------------------
International Equity Selection 63% 37% 0% 100% 0% 0%
-----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Qualifying dividends represent dividends that qualify for the corporate
dividends received deduction.
</FN>
</TABLE>
116
<PAGE>
INDEPENDENT AUDITORS' REPORT
DEAR 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 and International Equity Selection
Portfolio, portfolios of ARK Funds, (the "Portfolios"), as of April 30, 2000 and
the related statements of operations for the year then ended, statements of
changes in net assets for each of the years in the two-year period then ended
and financial highlights for each of the years or periods presented on pages 104
through 109. These financial statements and financial highlights are the
responsibility of the Portfolios' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits. For Short-Term Bond Portfolio, Pennsylvania Tax-Free Portfolio, U.S.
Government Bond Portfolio, Value Equity Portfolio and International Equity
Selection Portfolio, the financial highlights for the periods ended prior to
March 1, 1998 were audited by other auditors whose report dated April 16, 1998,
expressed an unqualified opinion thereon.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2000 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 Equity Portfolio, Capital
Growth Portfolio, Mid-Cap Equity Portfolio, Small-Cap Equity Portfolio and
International Equity Selection Portfolio as of April 30, 2000, 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 Portfolios and periods audited and reported on by other auditors as
specified above), in conformity with accounting principles generally accepted in
the United States of America.
/s/signature omitted
Boston Massachusetts
June 2, 2000
117
<PAGE>
NOTES
118
<PAGE>
NOTES
119
<PAGE>
NOTES
120
<PAGE>
Investment Advisers
--------------------------------------------------------------------------------
Allied Investment Advisors, Inc.
Baltimore, Maryland
Trustees
--------------------------------------------------------------------------------
William H. Cowie, Jr.
David D. Downes
Charlotte R. Kerr
Thomas Schweizer
Richard B. Seidel
Administrator
--------------------------------------------------------------------------------
SEI Investments Mutual Funds Services
Oaks, Pennsylvania
Distributor
--------------------------------------------------------------------------------
SEI Investments Distribution Co.
Oaks, Pennsylvania
Legal Counsel
--------------------------------------------------------------------------------
Kirkpatrick & Lockhart LLP
Washington, D.C.
Independent Auditors
--------------------------------------------------------------------------------
KPMG LLP
Boston, Massachusetts
Custodian
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Allfirst Trust
Baltimore, Maryland
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This report and the financial statements contained herein are submitted for the
general information of the shareholders of the ARK Funds. The report is not
authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus for each of the portfolios included.
Shares of the portfolios are not deposits or obligations of, or guaranteed or
endorsed by Allfirst Trust, 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.
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[logo omitted]
101-624
25 South Charles Street
Baltimore, MD 21201
We are pleased to send you our Annual Report for the year ending 04/30/00. This
report contains valuable information about your investments in the ARK Funds.
Since we are required by law to send an annual report to each person listed as a
shareholder, you ( or your household) may receive more than one report.
This material must be preceded or accompanied by a current prospectus.
ARK-F-004-02
