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ANNUAL REPORT APRIL 30, 1999
Our clients and our portfolio managers ...
contributing to the success of the ARK Funds.
[LOGO]
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ABOUT THE ANNUAL REPORT
This year we'd like to say a special thank you to you, our shareholders,
who have contributed directly to the success of the ARK Funds family. By
placing your trust in our investment expertise, and investing in our mutual
funds, you have made our growth over the past 6 years possible.
Throughout this Annual Report, the spotlight is on clients like you, and the
many different ways we serve you. As you will see, you are a varied group;
from the individual investor who invests in an ARK equity Portfolio for
retirement ... to the Cash Management client who uses our ARK money
market sweep product ... to the Trust client who uses our Portfolio to
diversify their trust assets ... and the employee who invests in the ARK
Funds through their 401(k) plan ... our shareholders' needs and reasons for
investing in the Portfolios are wide and varied.
It is with commitment and enthusiasm that we dedicate ourselves to meeting
our many different client needs. We enjoy our partnership with you now and
look forward to working with you into the future.
Table of Contents
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Letter to Shareholders 1
Economic and Investment Review 2
The ARK Funds Family 6
Equity Portfolios
Management Discussion and Analysis 9
Fixed Income Portfolios
Management Discussion and Analysis 35
Money Market Portfolios
Management Discussion and Analysis 51
Independent Auditor's Report 56
Statements of Net Assets 57
Statement of Assets and Liabilities 109
Statements of Operations 110
Statements of Changes in Net Assets 114
Financial Highlights 118
Notes to Financial Statements 122
Notice to Shareholders 128
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April 30, 1999
DEAR ARK FUNDS SHAREHOLDER:
I'm pleased to report another period of solid growth, business expansion and
positive industry recognition. During the period from October 31, 1998 to April
30, 1999, ARK Funds' assets grew to almost $6 billion. This was done without
adding any new Portfolios, which means this increase is based on solid
performance and growth in assets. You'll find more information on performance
inside this Annual Report. We continue to be pleased with the performance of the
ARK Funds' Portfolios, and are very happy with the industry recognition we have
enjoyed this fiscal year:
[Bullet] The Retail Class A ARK Capital Growth Portfolio was recognized in
the March 1999 issue of Kiplinger's Personal Finance Magazine. The Portfolio was
included with the long-term growth stock funds featured in the article "The
Winners Circle", based on its three-year annualized total return as of December
31, 1998.
[Bullet] In April 1999, MUTUAL FUNDS MAGAZINE wrote an article on the ARK
Equity Portfolios, featuring the ARK Capital Growth, ARK Balanced and ARK Small
- -Cap Equity Portfolios. Portfolio Managers Chris Baggini, Chuck Knudsen and Gil
Knight were interviewed for this article, and contributed some insightful
comments about the performance and philosophy of their Portfolios.
As the recognition of our fund family grows, so does our expansion
throughout our marketplace. The ARK Funds are now available to individual
investors in more branches throughout Pennsylvania through First Maryland
Brokerage Corporation representatives. In addition, more commercial clients in
Pennsylvania are now able to take advantage of our ARK Funds sweep options. This
expansion in our marketplace is a direct result of the 1997 acquisition of
Harrisburg-based Dauphin Deposit Bank and Trust Company by First Maryland
Bancorp.
As part of our efforts to keep investors well-informed, we will be issuing
ARK Funds Plain English Prospectuses in September. You've no doubt heard about
the new Plain English Prospectus, which is one of the more important recent
developments in the mutual fund industry. The goal of the Plain English
Prospectus is to make it easier to understand a mutual fund's investment
objectives and risks, and the new requirements by the Securities and Exchange
Commission are designed to improve mutual fund disclosure. Our new Retail Class
Prospectus will include an easy-to-read introduction that provides an overview
of mutual funds and why they can play an important part in an investor's
investment strategy. Our hope is that better-informed investors will become ARK
Fund shareholders when they better understand the investment philosophies of our
various Portfolios.
With the introduction of our Retail Class Plain English Prospectus in
September, we will add Retail Class B shares to the ARK Maryland Tax-Free and
the ARK Pennsylvania Tax-Free Portfolios. These back-end load Portfolios will
broaden the choice for investors interested in alternative pricing options.
We hope that you are as pleased with the ARK Funds and their performance as
we are, and that they continue to help you attain your investment objectives.
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.
Sincerely,
/s/ signature omitted
William H. Cowie, Jr.
CHAIRMAN OF THE BOARD
ARK FUNDS
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ECONOMIC AND INVESTMENT REVIEW
DEAR ARK FUNDS INVESTOR:
When conjuring words that accurately describe global financial market behavior
over the past year, one would certainly put adjectives such as "dull" or
"boring" at the bottom of the list. Despite the fact that both the S&P 500 Index
and the Dow Jones Industrial Average managed to finish the 12 months with
returns in excess of 20%, the path to this more-than-acceptable performance
could hardly be characterized as smooth, but instead almost schizophrenic. Also
the strong results displayed by these averages of big company stocks belie the
turmoil experienced within the broader markets. One could almost describe the
events of the past year as "fear and greed.com." The U.S. bond market, too, had
more than its share of sharp moves, as investors' economic assessment swung from
possible worldwide recession (or worse), to recent worries that our economy may
be overheating to such an extent that inflation becomes a problem.
Emotions, dominated alternatively by fear, euphoria and greed, played no
small role in fueling market volatility during the year. The Asian, Russian and
Brazilian economic crises, combined with the Long Term Capital Management
"situation," caused panic in world markets, and a corresponding "flight to
quality" into U.S. Treasury securities last fall. Investors' worst fears were
quelled when Federal Reserve Chairman Alan Greenspan came to the rescue with
three interest rate cuts. Suddenly, all seemed right with the world, or at least
right enough in the U.S., such that money came pouring back into stocks,
particularly those of big, blue-chip growth companies. The market's upward climb
continued to be driven by the stocks of a very select group of household names,
with little regard for the lofty levels at which many were selling. More
recently, as signs of economic strength have persisted beyond the expectations
of many, shares of smaller and mid-cap companies have begun to participate in
the market upswing, and long-ignored, deep-cyclical stocks (so-called "Value"
equities) have benefited at the expense of the elite blue-chip darlings of
recent years.
Just how strong is our economy? As we enter the ninth (that's right, ninth) year
of expansion, the U.S. economy shows few signs of slowing, but we do not think
it will continue to expand at such a pace that we will experience a dramatic
inflationary spiral. At this writing, Mr. Greenspan has announced a bias
[PHOTO OMITTED]
Jennifer W. Lambdin, CFA, is President and Chief Investment Officer of Allied
Investment Advisors, Inc. She has over 20 years of investment management
experience. Allied Investment Advisors, Inc. advises over $13 billion in assets.
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ARK FUNDS ANNUAL REPORT APRIL 30, 1999
toward tightening interest rates, and will not hesitate to act if signs of
inflation become more evident. The very strong G.D.P. growth of the first
quarter of this year was due in large part to Americans doing what we do best:
shopping, for everything from apparel to housing. Tax refunds and bonus payments
were factors in this shopping spree, and thus the high level of spending may not
be sustainable in subsequent quarters. As we enter the summer months, the rapid
pace of economic growth could slow somewhat to a more sustainable level of
around 3%. Corporate profit margins are shrinking in aggregate, and consumers
are now spending more than they are saving. We do expect, however, that domestic
economic growth will continue into the first quarter of 2000, providing a
reasonable backdrop for financial market assets.
It has always been our belief that having a long-term focus is essential to
being a successful investor. In selecting a security for investment, we focus on
a number of quantitative measures, including sales growth, return on equity,
balance sheet strength, historical earnings growth and expected earnings growth.
We spend a great deal of time "kicking the tires" with companies, trying to
assess qualitative factors as well. We expect to be rewarded, in time, for our
patience. But a new investment philosophy has emerged on the way to the Internet
- -- one that fascinates us and no doubt has more than a few professors of
security analysis and portfolio management at America's institutions of higher
learning scratching their heads in bewilderment. This cutting-edge approach has
three major premises: 1) any company whose name ends in ".com" represents a
great buying opportunity; 2) valuations aren't important and 3) earnings don't
matter. In fact the most compelling price/earnings multiple is one that is "Not
Meaningful" ("NMF") -- there are no earnings. Just imagine: earnings aren't
necessary, and if you day-trade, you can have instant gratification! Gordon
Gekko ("Greed is Good") would be proud.
Call us old-fashioned, but we're going to stick with our approach of buying
the stocks of companies that have real earnings and the potential to grow those
earnings over time. My father always told me, "You can't get something for
nothing." As with most things, Dad, I think you're right.
We appreciate your confidence in the ARK Funds, and look forward to serving
you in the coming year.
Sincerely,
/s/ Signature omitted
Jennifer W. Lambdin, CFA
President and Chief Investment Officer
Allied Investment Advisors, Inc.
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STABLER COMPANIES INC.: 410(K) PLAN INVESTOR
[PHOTO OMITTED]
Shelley Machamer and Tom Minori of the Stabler Companies, Inc. are shown outside
their headquarters in Harrisburg, Pennsylvania. Stabler is a producer of
aggregates, construction products and work-zone traffic safety equipment, such
as the roadway signs you see pictured here. Stabler Companies' employees can
invest in the ARK Funds through their 401(k), which helps them to save for their
retirement.
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TELECORP PCS, INC.: CASH MANAGEMENT INVESTOR
[PHOTO OMITTED]
Bart Hawley, treasurer, is pictured in the TeleCorp PCS, Inc. headquarters
located in Arlington, VA with samples of their products. TeleCorp is AT&T
Wireless' largest affiliate. They provide the sate-of-the-art SunCom wireless
service, which is a digital phone, voicemail and pager -- all-in-one -- and is
available in such cities as New Orleans, Memphis, Little Rock, Puerto Rico and
in parts of New England. TeleCorp uses our First Investment Loan Manager product
(FILM), for the overnight investing of their excess funds.
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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.
Sixteen Retail Class A and six Retail Class B portfolios are available to
individual investors through First Maryland Brokerage Corporation
representatives, located in most branches of the First National Bank of Maryland
and The York Bank & Trust Company, or by calling 1-800-ARK Fund. Stop by your
local branch or call us for details.
Twenty Institutional Class ARK Funds portfolios are available through FMB
Trust Company to clients who establish a trust or custody relationship with FMB
Trust. To contact an FMB Trust officer call 1-800-624-4116.
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ARK FUNDS ANNUAL REPORT APRIL 30, 1999
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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.
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PAUL AND LINDSAY ECKERT: RETAIL CLASS INVESTORS AND INSTITUTIONAL CLASS TRUST
CLIENTS
[PHOTO OMITTED]
Paul and Lindsay Eckert are shown here in front of their home with their
daughters Leigh and Allie. Paul and Lindsay use the ARK Funds to save for their
daughters' college education as well as to manage and diversify their Trust
assets. Paul may look familiar to some of you as he has been at the First
National Bank of Maryland for 18 years and is now a Regional Sales Coordinator
in the Bank's Metro Region.
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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 with an
expectation of superior sales, cash flow and earnings growth rates, and market
and industry growth, as well as strong balance sheets and capable,
shareholder-oriented management. We like companies that can earn returns on
capital in excess of their cost of capital.
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, the combination necessary to thrive in today's
highly competitive, rapidly evolving business environment. Our team of
professionals, which includes all 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% or more on a relative basis, and when a more attractive opportunity presents
itself.
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EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
BALANCED PORTFOLIO
[PHOTO OMITTED]
CHARLES E. KNUDSEN, CFA
PORTFOLIO MANAGER
Charles E. Knudsen, CFA, is a Managing Director of Allied Investment Advisors,
Inc. He is the portfolio manager of the Balanced Portfolio. He has more than 11
years of investment management experience.
REVIEW AND OUTLOOK
The last 12 months for investors would have made a wonderful movie for
Hollywood: a few scary scenes, lots of action and a happy ending. Certainly the
fact that the S&P 500 Index ended the period up 21.85% presents an idyllic
impression. But the streets were not paved with gold for the whole year. In
fact, stocks spent the first half of the year either flat or down. It was not
until the Federal Reserve stepped in and cut interest rates three times last
fall that stocks rebounded from what was bordering on panic selling. However,
small, mid-cap, and international stocks all trailed the huge advance that
engulfed the very largest and best-known stocks. In fact, the Russell 2000 Index
of small-cap stocks was actually down over 9%. The bond market's experience was
exactly the opposite. The Lehman Aggregate Bond Index was up 6.27%, with nearly
all of that return achieved during the first half of the year.
During these tumultuous times, the ARK Balanced Portfolio was able to
generate strong absolute and relative returns. First, we were able to manage our
asset allocation through the market's volatility. Although it is not our intent
to aggressively manage the Portfolio's mixture of stocks, bonds, and cash, last
year required us to be more active than usual. Heading into last summer, the
Portfolio's allocation to equities was about 66%. At that point, we became
concerned about the risk profile of the stock market and began to reduce our
positions until, by September, equities were just over 50%. In early October,
with stocks off 30% to 50% from their highs, we began to rebuild our equity
allocation back to the 65% level. These moves helped protect the Portfolio
during the stock market's corrections and positioned it for the dramatic rebound
that ensued.
Stock selection also contributed to the Portfolio's strong returns. Our
over-weighted position in technology stocks certainly helped. Some of the
well-known names, like Cisco Systems and EMC, had major upward moves. In
addition, several smaller, emerging companies, like Electronics For Imaging
(termed the Cisco Systems of digital copiers), and Comverse Technology (which
provides voice mailboxes and other enhanced
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ARK FUNDS ANNUAL REPORT APRIL 30, 1999
services to wireless telecommunication companies) also were major contributors.
Other sectors also helped. Healthcare (Amgen), advertising (Young and Rubicam),
finance (Citigroup), CATV (Time Warner), and telecommunications (MCI WorldCom)
all provided very strong returns.
Some of the risks to the investment markets have changed somewhat over the
past 12 months, and some remain the same. Like last year, the lofty valuation
levels for stocks are a real concern. And the economic recovery, currently in
its ninth year, cannot proceed forever. Unlike last year, the international
turmoil has calmed and, although not a positive contributor, it has stopped
being a negative.
Unfortunately, a new risk has emerged instead: the Federal Reserve. Alan
Greenspan has recently hinted that the Fed may have to reverse its course and
bump interest rates higher if economic growth does not slow. Such a move would
certainly unsettle the markets, although we doubt if they will have to make
anything more than a very modest shift in policy. The good news is that earnings
growth, which has been hampered by the weak international economies, is
beginning to pick up, especially for multi-national companies. Mixing it all
together, we do not see anything that would require a major shift in the
Portfolio's asset allocation.
While the stock market's ascent has been breathtaking (it has doubled in
just four years) and a correction would not be surprising, we are most focused
on identifying well-managed companies that are generating strong earnings growth
and selling at reasonable valuations. We continue to favor technology companies,
with a bent towards the telecommunication sector. Our play on the Internet is a
bit more indirect than some. Rather than owning some of the high-flying, very
expensive names, we are looking more towards the equipment suppliers and the
cable companies. Healthcare and finance sectors are also well represented, as
are several consumer sectors, such as retail and entertainment. 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 investment returns. Believe it or not, opportunities do
still abound.
[PHOTO OMITTED]
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EQUITY PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS BALANCED PORTFOLIO
CONTINUED
Comparison of Change of a Value of a $100,00 Investment in the ARK Balanced
Fund, Institutional Class, versus S&P 500 Composite Index, the Lehman Brothers
Aggregate Bond Index, the 60/40 Hybrid of the S&P 500 and Lehman Aggregate, and
the Lipper Balanced Funds Average
In the printed version of the document, a line graph appears which depicts
the following plot points:
PERFORMANCE AS OF 4/30/99
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
7/31/93 Apr. 94 Apr. 95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- -------- -------- -------- -------- -------- --------
ARK Balanced Fund, Institutional Class $100,000 $103,771 $107,663 $130,164 $140,382 $183,830 $217,232
S&P 500 Composite Index $100,000 $102,680 $120,587 $156,992 $196,429 $277,043 $337,577
Lehman Brothers Aggregate Bond Index $100,000 $ 98,354 $105,563 $114,673 $122,792 $136,201 $144,741
60/40 Hybrid of the S&P 500 and Lehman Aggregate $100,000 $100,953 $114,440 $138,679 $163,322 $209,771 $243,439
Lipper Balanced Funds Average $100,000 $101,594 $110,768 $133,066 $150,271 $189,026 $206,322
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
3/31/94 Apr. 94 Apr. 95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- ------- ------- -------
ARK Balanced Fund, Retail A Class $10,000 $10,059 $10,394 $12,497 $13,454 $17,580 $20,739
ARK Balanced Fund, Retail A Class, with load $ 9,525 $ 9,581 $ 9,900 $11,903 $12,815 $16,745 $19,754
S&P 500 Composite Index $10,000 $10,128 $11,894 $15,485 $19,375 $27,327 $33,298
Lehman Brothers Aggregate Bond Index $10,000 $ 9,920 $10,647 $11,566 $12,385 $13,737 $14,599
60/40 Hybrid of the S&P 500 and Lehman Aggregate $10,000 $10,045 $11,387 $13,799 $16,251 $20,872 $24,222
Lipper Balanced Funds Average $10,000 $10,026 $10,931 $13,132 $14,830 $18,654 $20,361
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS B: VALUE OF A $10,000 INVESTMENT
7/31/93 Apr. 94 Apr. 95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- ------- ------- -------
ARK Balanced Fund, Retail Class B, with CDSC $10,000 $10,377 $10,766 $13,016 $14,038 $18,383 $21,515
S&P 500 Composite Index $10,000 $10,268 $12,059 $15,699 $19,643 $27,704 $33,758
Lehman Brothers Aggregate Bond Index $10,000 $ 9,835 $10,556 $11,467 $12,279 $13,620 $14,474
60/40 Hybrid of the S&P 500 and Lehman Aggregate $10,000 $10,095 $11,444 $13,868 $16,332 $20,977 $24,344
Lipper Balanced Funds Average $10,000 $10,159 $11,077 $13,307 $15,027 $18,903 $20,632
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BALANCED
INSTITUTIONAL RETAIL RETAIL LEHMAN HYBRID LIPPER
CLASS CLASS A CLASS B* S&P 500 AGGREGATE BENCHMARK** BALANCED
------------- ------- -------- -------- --------- ----------- --------
ONE YEAR
TOTAL RETURN 18.17% 17.97% 17.58% 21.85% 6.27% 16.05% 9.15%
ONE YEAR
TOTAL RETURN WITH LOAD N/A 12.35% 12.58% N/A N/A N/A N/A
ANNUALIZED 3 YEAR
TOTAL RETURN 18.62% 18.40% 18.42% 29.07% 8.07% 20.63% 15.89%
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 16.48% 17.70% N/A N/A N/A N/A
ANNUALIZED 5 YEAR
TOTAL RETURN 15.92% 15.57% 15.81% 26.87% 8.03% 19.25% 15.49%
ANNUALIZED 5 YEAR
TOTAL RETURN WITH LOAD N/A 14.44% 15.58% N/A N/A N/A N/A
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 14.29% 14.20% 14.19% N/A N/A N/A N/A
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 13.13% 14.10% N/A N/A 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 Retail Class A
shares reflects the deduction of the 4.75% sales charge. Retail Class B shares
were offered beginning September 14, 1998.
The performance reflected in the graphs begins at July 31, 1993 for
Institutional Class and Retail Class B shares and at March 31, 1994 for Retail
Class A shares. Performance in the graph for Retail Class B shares reflects
the deduction of the 1.00% contingent deferred sales charge applied in year
six.
The performance reflected in the table begins at July 16, 1993 for
Institutional Class and Retail Class B shares and at March 9, 1994 for Retail
Class A shares. Performance in the table for Retail Class B shares with load
reflects the deduction of the applicable contingent deferred sales charge.
* Performance shown prior to the 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. Actual cumulative
performance since inception for Retail Class B shares is 23.13% without CDSC
and 18.13% 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.
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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 over 12 years of investment management experience.
REVIEW AND OUTLOOK
The ARK Equity Income Portfolio invests primarily in income-producing common
stocks. The Portfolio seeks to provide a moderate level of current income and
growth of capital. As of April 30, 1999, the Portfolio was invested in
approximately 92% common stocks, 5% securities convertible into common stocks,
and 3% cash. About 7% of the Portfolio was invested in the common stocks of
non-U.S. companies. The Portfolio continues to have significant positions in
financials, energy, and utilities, but is represented in most of the major
sectors of the U.S. stock market. The ARK Equity Income Portfolio owns primarily
dividend-paying stocks, so the technology allocation is small because of a lack
of candidates.
The Portfolio has lagged behind the broad market indices, with the
Institutional Class returning 4.17% in the fiscal year because of the
unprecedented dominance of technology and other growth stocks. The Portfolio's
best performers were Time Warner convertible stock, Pitney Bowes and auto,
healthcare and telephone stocks. These sectors had returns in excess of the
market indices. Energy stocks lagged behind the market for most of the fiscal
year but rebounded strongly in March and April as the price of oil recovered.
The Portfolio's performance was hurt by investments in aerospace, capital
equipment and finance. Many of these stocks were in the mid-capitalization
range, and the market continues to favor large-capitalization stocks, even
within the economically cyclical sectors, which have recently recovered. To date
in calendar 1999, we have upgraded quality and capitalization and placed
somewhat more emphasis on growth rather than absolute yield in making purchases.
The Portfolio's relative performance has recently improved.
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 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 is now just under 1.3%. The index's payout ratio
averaged about 50%
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[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 18 years of investment management experience.
through 1993, but fell to 35% by the end of 1997. The S&P 500's dividend grew
about 4.5% in 1998, just ahead of 1997's 4.0%. The payout ratio increased for
the first time in seven years to 37% in 1998. Some of this trend has to do with
the changing complexion of the 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. Last
year we wrote that we had become more defensive, given the market's returns and
valuation, but clearly the market marched on regardless. We have maintained the
conservative posture of the ARK Equity Income Portfolio. In the recent periods
when growth stocks have faltered, the relative performance of this Portfolio has
been quite strong.
PERFORMANCE AS OF 4/30/99
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
Comparison of Change in the Value of a $100,000 Investment in the ARK Equity
Income Fund, Institutional Class, versus the S&P 500 Composite Index, and the
Lipper Equity Income Funds Average
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
11/30/96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- -------- -------- --------
ARK Equity Income Fund, Institutional Class $100,000 $104,419 $138,919 $144,711
S&P 500 Composite Index $100,000 $106,644 $150,411 $183,276
Lipper Equity Income Funds Average $100,000 $103,861 $139,350 $149,941
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
5/31/97 Apr. 98 Apr. 99
----------------------- ------- ------- -------
ARK Equity Income Fund, Retail A Class $10,000 $12,495 $12,985
ARK Equity Income Fund, Retail, with load $ 9,525 $11,902 $12,369
S&P 500 Composite Index $10,000 $13,295 $16,200
Lipper
Institutional Retail Equity
Class Class A S&P 500 Income
- -------------------------------------------------------------------------------
One Year
Total Return 4.17% 3.92% 21.85% 7.60%
- -------------------------------------------------------------------------------
One Year
Total Return with Load N/A -0.98% N/A N/A
- -------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 17.80% 15.87% N/A N/A
- -------------------------------------------------------------------------------
Annualized Total Return
Inception to Date with Load N/A 13.05% 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 reflects the deduction of the 4.75% sales charge.
The performance reflected in the graphs begins at November 30, 1996 for the
Institutional Class shares and at May 31, 1997 for the Retail Class A shares.
The performance in the table begins at the inception dates.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
15
18
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OMITTED]
J. ERIC LEO,
PORTFOLIO MANAGER
J. Eric Leo is a Managing Director of Equity Investments for Allied Investment
Advisors, Inc. He is the portfolio manager of the Value Equity Portfolio and the
Equity Index Portfolio. He has more than 25 years of investment management
experience.
VALUE EQUITY PORTFOLIO
REVIEW AND OUTLOOK
The Value Equity Portfolio Institutional Class returned 10.48% for the fiscal
year ended April 30, 1999. Performance during this period lagged both the S&P
500 Index and the S&P Value Index, which appreciated 21.85% and 13.50%,
respectively. This Portfolio's underperformance compared with both benchmarks is
an unusual occurrence resulting from an abrupt shift to deep-cyclical stocks in
the last few months of the fiscal year.
The value style of investing has been out of favor for a number of years.
You may recall that the ARK Value Equity Portfolio outperformed the S&P Value
Index for the year ended December 31, 1998 by a very significant amount. The
outperformance in 1998 was due to the hybrid nature of the Portfolio, which has
a strong value bias but limited exposure to "deep-cyclical" types of stocks that
have very low price-to-book value ratios but heavy dependence on economic growth
and rising inflation. The ARK Value Equity Portfolio focuses on companies with
growing sales, solid cash flow, and modest dependence on economic growth. This
strategy has worked well in the past, especially in 1998, but not since the
recent market rotation began in the first quarter of 1999. Investors became
concerned that the U.S. inflation rate might rise, based on signs that depressed
global economies were beginning to recover and that the U.S. economy continued
to grow at a rapid pace. On top of this came the triggering event, the rapid
rebound in the price of oil. The result was a rapid shift from growth stocks,
especially the 50 largest in the S&P 500, into deep-value stocks, which are
considered potentially economically sensitive beneficiaries of inflation. The
deep value stocks and the S&P Value Index made a very strong rebound. In the
month of April alone, the S&P Value Index appreciated 8.62%, significantly
outpacing the ARK Value Equity Portfolio's 4.25%, which in turn outpaced the S&P
500's 3.87%. It is too early to determine if the rotation away from the growth
style to the value style will continue.
The companies that benefited the Portfolio's performance the most during
the fiscal year were Hewlett Packard, Xerox, and Parker Hannifin, plus energy
stocks in general. Energy stocks surged in the final quarter of the fiscal year
after having been
16
19
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
significant underperformers for most of the year. On the negative side, Network
Associates, a developer of network security and management software, was our
worst performer. The company's business was expected to be immune from the
abrupt slowdown in the purchase of new application software by U.S. corporations
as they prepared for Y2K. In fact, most companies were busy testing what systems
they had and were not adding new ones. Rite Aid was another problem child and a
large portfolio holding. Rite Aid's earnings disappointed investors late in the
fiscal year due to overly ambitious plans to open new stores and to close old
ones. The bottom line was that management "bit off more than they could chew."
While we were disappointed, the basic fundamentals of the business are solid
with excellent growth potential over the long term. For this reason, we added
significantly to our holdings of Rite Aid.
During the fiscal year, we reduced the holdings in the Portfolio from well
over 100 (as a result of the merger of the Stock Portfolio with the Value Equity
Portfolio on April 24, 1998) to a more manageable 76. In addition, we have
significantly increased the weighting of our top 20 holdings to concentrate on
the companies we have the most confidence in. We expect to do some fine-tuning
in the technology and the applied technology sectors. We hope to take advantage
of some of the better software companies that are deeply depressed for the same
Y2K reasons that Network Associates was hurt. We are also looking at companies
that are indirect beneficiaries of the Internet and its convergence with the
telecommunications and entertainment industries. This convergence will have a
dramatic impact on the ever-changing business environment and will result, as
always, in the creation of significant risks and opportunities.
The upward bias to the market is expected to remain in place for the
balance of the year, but the "road is likely to get more bumpy." The tension
between growth and value styles will increase market volatility as well as the
opportunity to purchase some excellent companies at attractive prices.
17
20
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
VALUE EQUITY PORTFOLIO CONTINUED
PERFORMANCE AS OF 4/30/99
[GRAPHIC OMITTED]
Comparison of Change in the Value of a $100,000 Investment in the ARK Value
Equity Fund, Institutional Class, versus the S&P 500 Composite Index, and the
Lipper Growth Funds Average
In the printed version of the document, a line graph appears which deposits
the following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
3/31/96 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- -------- -------- -------- --------
ARK Value Equity Fund, Institutional Class $100,000 $102,830 $124,692 $168,783 $186,471
S&P 500 Composite Index $100,000 $101,470 $126,959 $179,063 $218,189
Lipper Growth Funds Average $100,000 $103,220 $117,371 $163,463 $188,064
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which deposits
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
3/31/96 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- -------
ARK Value Equity Fund, Synthetic Retail A Class $10,000 $10,283 $12,469 $16,889 $18,627
ARK Value Equity Fund, Synthetic Retail A, with load $ 9,698 $ 9,973 $12,093 $16,380 $18,065
S&P 500 Composite Index $10,000 $10,147 $12,696 $17,906 $21,819
Lipper Growth Funds Average $10,000 $10,322 $11,737 $16,346 $18,806
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which deposits
the following plot points:
RETAIL CLASS B: VALUE OF A $10,000 INVESTMENT
3/31/96 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- -------
ARK Value Equity Fund with CDSC Retail B Class $10,000 $10,283 $12,469 $16,878 $18,242
S&P 500 Composite Index $10,000 $10,147 $12,696 $17,906 $21,819
Lipper Growth Funds Average $10,000 $10,322 $11,737 $16,346 $18,806
18
21
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
INSTITUTIONAL RETAIL RETAIL LIPPER
CLASS CLASS A* CLASS B* S&P 500 GROWTH
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 10.48% 10.29% 9.86% 21.85% 15.05%
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A 5.04% 4.86% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 21.95% 21.91% 21.72% 29.07% 21.53%
- --------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 19.95% 21.04% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 22.41% 22.37% 22.18% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 20.44% 21.54% N/A N/A
Past performance of the Portfolio is not predictive of future performance.
For Institutional Class shares, performance presented from inception to March
29, 1998 reflects the performance of the Marketvest Equity Fund shares, which
were offered beginning March 31, 1996. Retail Class A shares were offered
beginning April 1, 1998. Performance for Retail Class A shares reflects the
deduction of the 4.75% sales charge. Retail Class B shares were offered
beginning September 14, 1998.
The performance reflected in the graphs begins March 31, 1996 for
Institutional Class, Retail Class A, and Retail Class B shares. Performance in
the graph for Retail Class B shares reflects the deduction of the 3.00%
contingent deferred sales charge applied in year four.
The performance shown in the table begins at the inception date for
Institutional Class shares. Performance in the table for Retail Class B shares
with load reflects the deduction of the applicable contingent deferred sales
charge.
* Performance shown prior to the 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.
Actual annualized performance since inception for Retail Class A shares is
9.85% without load and 4.98% with load. Actual cumulative performance since
inception for Retail Class B shares is 23.70% without CDSC and 18.70% with
CDSC.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
19
22
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
EQUITY INDEX PORTFOLIO
[PHOTO OMITTED]
J. ERIC LEO,
PORTFOLIO MANAGER
J. Eric Leo is a Managing Director of Equity Investments for Allied Investment
Advisors, Inc. He is the portfolio manager of the Value Equity Portfolio and the
Equity Index Portfolio. He has more than 25 years of investment management
experience.
REVIEW AND OUTLOOK
The ARK Equity Index Portfolio is managed to achieve returns similar to the S&P
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. The U.S. Equity Markets
have performed very well over the past 17 years and over that time S&P 500 Index
Funds have become a popular low cost way of participating.
The past year has found market experts breathlessly waiting for the bear
market to take the leadership away from large growth companies that have been
the Index's primary drivers. But, every time a correction has occurred, buyers
have stepped in and raised the S&P 500 above the levels where the negative
returns began. There has been rotation in and out of sectors, but the trend has
been especially upward in the technology and communication services areas.
Cyclical stocks have rallied as of late, breathing new life into value stocks at
the expense of some of the larger growth companies.
The ARK Equity Index Portfolio grew from less than $47 million to over $92
million over the past year. As the Portfolio grows, it is better able to handle
cash flows and more closely match the returns of the Index. The slight
outperformance can be attributed to heavy fund purchases at a time when the
markets were very negative. Among the stocks owned, the largest contributors to
the return were Microsoft, Cisco Systems, and Wal-Mart. The stocks with the most
negative impact on returns were Disney, Coca-Cola, and Bank of America.
Investors continue to wonder when this market will correct. We expect the
balance of 1999 to throw as many curves as we have seen in the past with
interest rate and inflation uncertainty, and the recent resignation of Robert
Rubin as Treasury Secretary already making market participants nervous. However,
if the past years are any guide, the S&P 500 will be a difficult index for a
clever manager to beat.
20
23
[GRAPHIC OMITTED]
PERFORMANCE AS OF 4/30/99
Comparison of Change in the Value of a $10,000 Investment in the ARK Equity
Index Fund, Institutional Class, versus the S&P Composite Index, and the Lipper
Growth Funds Average
In the printed version of the document, a line graph appears which depicts
the following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
10/31/97 Apr. 98 Apr. 99
----------------------- -------- -------- --------
ARK Equity Index Fund, Institutional Class $100,000 $122,594 $150,019
S&P 500 Composite Index $100,000 $122,489 $149,253
Lipper Growth Funds Average $100,000 $117,508 $135,193
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
11/30/97 Apr. 98 Apr. 99
----------------------- -------- ------- -------
ARK Equity Index Fund, Retail Class A $10,000 $11,694 $14,272
ARK Equity Index Fund, Retail A, with load $ 9,525 $11,138 $13,594
S&P 500 Composite Index $10,000 $11,707 $14,265
Lipper Growth Funds Average $10,000 $11,545 $13,283
INSTITUTIONAL RETAIL LIPPER
CLASS CLASS A S&P 500 GROWTH
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 22.37% 22.05% 21.85% 15.05%
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A 16.23% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 25.34% 28.58% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 24.42% 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 for Retail Class A
shares reflects the deduction of the 4.75% sales charge.
The performance in the graphs begins at October 31, 1997 for the Institutional
Class and at November 30, 1997 for Retail Class A shares.
The performance reflected in the table begins at the inception dates.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
21
24
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 18 years of investment management experience.
REVIEW AND OUTLOOK
The ARK Blue Chip Equity Portfolio delivered consistent results through the
fiscal year ended April 30, 1999. The Portfolio's investments were helped by a
robust U.S. equity market that continued to focus on large-cap companies.
This past year witnessed an extremely volatile equity environment. Our
fiscal year began with the Dow Jones Industrial Average hovering slightly above
the 9,000 mark. The market then peaked in July, only to drop rather
precipitously to 7,300 by early October as Asian economic weakness continued and
financial chaos surfaced in Russia. However, accommodating interest rate moves
by the Federal Reserve once again sparked interest in equities and the Dow
closed out our fiscal year at a record level.
Throughout the year, the Blue Chip Equity Portfolio remained focused on its
strategy of looking for large-cap companies that are dominant in their markets,
have franchise characteristics with solid management teams, and a proven record
of delivering above-average equity performance. This strategy prompted us to
stay broadly diversified by covering each sector of the market. Although we were
tempted to overweight sectors
PERFORMANCE AS OF 4/30/99
[GRAPHIC OMITTED]
Comparison of Change in the Value of a $100,000 Investment in the ARK Blue Chip
Equity Fund, Institutional Class versus the S&P Composite Index, and the Lipper
Growth Funds Average
In the printed version of the document, a line graph appears which depicits
the following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
4/30/96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- -------- -------- --------
ARK Blue Chip Equity Fund, Institutional Class $100,000 $124,410 $173,353 $209,878
S&P 500 Composite Index $100,000 $125,120 $176,469 $215,028
Lipper Growth Funds Average $100,000 $113,710 $158,364 $182,198
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicits
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
5/31/96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- -------
ARK Blue Chip Fund, Retail A Class $10,000 $11,956 $16,611 $20,092
ARK Blue Chip Fund, Retail A, with load $ 9,525 $11,388 $15,822 $19,138
S&P 500 Composite Index $10,000 $12,196 $17,201 $20,959
Lipper Growth Funds Average $10,000 $11,044 $15,381 $17,696
22
25
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 over 12 years of investment management experience.
that had outpaced the market, we stayed the course and several of our more
cyclical equities surged at the end of the year, helping our performance outpace
that of the market.
As of April 30, 1999, the Portfolio's largest contributors have been Cisco,
Amgen, and MCI Worldcom. Each of these companies is a leader in its respective
sector of technology, healthcare, and telecommunication. Over the last year, it
has been these sectors that have really been the growth engine behind this
market's advance. The Portfolio was negatively affected by our weighting in
consumer-related companies, which had a tough time delivering earnings growth
because of pricing power.
We continue with our positive bias on the equity markets. In the past, a
surprisingly strong economy, relatively low interest rates, and little in the
way of inflation have resulted in a favorable equity environment. We continue to
look for investments in large companies with strong business franchises;
however, we must be cognizant of individual equity valuations, for we have now
witnessed three years of strong equity performance.
INSTITUTIONAL RETAIL RETAIL LIPPER
CLASS CLASS A CLASS B* S&P 500 GROWTH
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 21.07% 20.96% 20.24% 21.85% 15.05%
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A 15.20% 15.24% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 28.03% N/A 27.74% 29.07% 21.53%
- --------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A N/A 27.12% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 27.71% 27.40% 27.43% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 25.30% 26.84% N/A N/A
Comparison of Change in the Value of a $100,000 Investment in the ARK Blue Chip
Equity Fund, Institutional Class versus the S&P Composite Index, and the Lipper
Growth Funds Average
In the printed version of the document, a line graph appears which depicits
the following plot points:
RETAIL CLASS B: VALUE OF A $10,000 INVESTMENT
4/30/96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- -------
ARK Blue Chip Fund, Retail B Class $10,000 $12,441 $17,335 $20,544
S&P 500 Composite Index $10,000 $12,512 $17,647 $20,503
Lipper Growth Funds Average $10,000 $11,371 $15,836 $18,220
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 Retail Class A
shares reflects the deduction of the 4.75% sales charge. Retail Class B shares
were offered beginning July 31, 1998.
The performance reflected in the graphs begins at April 30, 1996 for
Institutional Class and Retail Class B shares, and at May 31, 1996 for Retail
Class A shares. Performance in the graph for Retail Class B shares reflects
the deduction of the 3.00% contingent deferred sales charge applied in year
three.
The performance shown in the table begins at April 1, 1996 for Institutional
Class and Retail Class B shares and at May 16, 1996 for Retail Class A shares.
Performance in the table for Retail Class B shares with load reflects the
deduction of the applicable contingent deferred sales charge.
* Performance shown prior to the 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. Actual cumulative
performance since inception for Retail Class B shares is 19.62% without CDSC
and 14.62% with CDSC.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
23
26
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
CAPITAL GROWTH PORTFOLIO
[PHOTO OMITTED]
CHRISTOPHER E. BAGGINI,
CFA, PORTFOLIO MANAGER
Christopher E. Baggini, CFA, is a Principal of Allied Investment Advisors, Inc.
He is the portfolio manager of the Mid-Cap Equity Portfolio and the Capital
Growth Portfolio. He has over 12 years of investment management experience.
REVIEW AND OUTLOOK
The last 12 months have once again provided opportunities to investors in the
U.S. stock markets, while at the same time trying the patience of even the
wildest bulls. As the dust clears on the ARK Capital Growth Portfolio's fiscal
year ended April 30, 1999, investors clearly benefited, as the Portfolio
returned nearly 30% for both the Institutional Class and the Retail Class A
shares during the previous 12 months. This performance compares very favorably
to our mutual fund peers and the broader market indices, including the S&P 500
Index.
As always, stock picking was a critical factor in the success of the
Portfolio, as investments in Amgen, Cisco, EMC, Electronics For Imaging, and
Comverse Technology all advanced over 100% during the previous 12 months. Not
every investment performed
PERFORMANCE AS OF 4/30/99
[GRAPHIC OMITTED]
Comparison of Change in the Value of a $100,000 Investment in the ARK Capital
Growth Fund, Institutional Class, versus the S&P Composite Index, and the Lipper
Growth Funds Average
In the printed version of the document, a line graph appears which depicts
the following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
Initial Investment Date 7/31/93 Apr. 94 Apr. 95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- -------- -------- -------- -------- -------- --------
ARK Capital Growth Fund, Institutional Class $100,000 $102,876 $106,219 $131,308 $148,982 $216,307 $280,140
S&P 500 Composite Index $100,000 $102,680 $120,587 $156,992 $196,429 $277,043 $337,577
Lipper Growth Funds Average $100,000 $104,903 $116,464 $151,473 $172,240 $239,878 $275,980
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
Initial Investment Date 3/31/94 Apr. 94 Apr. 95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- ------- ------- -------
ARK Capital Growth Fund, Retail A Class $10,000 $ 9,951 $10,224 $12,600 $14,287 $20,701 $26,775
ARK Capital Growth Fund, Retail A, with load $ 9,525 $ 9,478 $ 9,738 $12,001 $13,608 $19,718 $25,503
S&P 500 Composite Index $10,000 $10,128 $11,894 $15,484 $19,374 $27,325 $33,296
Lipper Growth Funds Average $10,000 $10,040 $11,147 $14,497 $16,485 $22,959 $26,414
24
27
well. Shortfalls in earnings caused investments in Rite Aid, Cendant, and Disney
to decline by over 40% relative to the S&P 500 Index.
Throughout the last year, numerous opportunities appeared for long-term
investors who were able to look past short-term issues to upgrade their
portfolios. Most notably, after the 3-month correction from July 17 to October
8, while the S&P 500 declined 19.2% and the Russell 2000 Small-Cap Index
declined 33%, patient investors benefited from a staggering 11 week rally of
over 30% for all the major indices.
As economic earnings growth becomes increasingly viewed as "too hot" or
"too cold" by market watchers, we believe that opportunities will once again
surface. The value of solid research in this type of environment will continue
to be very important in separating long-term winning investments from the
laggards.
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS B: VALUE OF A $10,000 INVESTMENT
4/30/96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- -------
ARK Blue Chip Equity Fund,
with CDSC Retail B Class $10,000 $12,441 $17,335 $20,544
S&P 500 Composite Index $10,000 $12,512 $17,647 $21,503
Lipper Growth Funds Average $10,000 $11,371 $15,836 $18,220
INSTITUTIONAL RETAIL RETAIL S&P 500 LIPPER
CLASS CLASS A CLASS B* GROWTH
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 29.51% 29.34% 28.83% 21.85% 15.05%
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A 23.18% 23.83% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 28.74% 28.57% 28.51% 29.07% 21.53%
- --------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 26.48% 27.90% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED 5 YEAR
TOTAL RETURN 22.19% 21.89% 22.06% 26.87% 20.90%
- --------------------------------------------------------------------------------
ANNUALIZED 5 YEAR
TOTAL RETURN WITH LOAD N/A 20.70% 21.88% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 19.43% 19.63% 19.32% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 18.51% 19.24% 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 Retail Class A
shares reflects the deduction of the 4.75% sales charge. Retail Class B shares
were offered beginning September 14, 1998.
The performance reflected in the graphs begins at July 31, 1993 for
Institutional Class and Retail Class B shares, and at March 31, 1994 for
Retail Class A shares. Performance in the graph for Retail Class B shares
reflects the deduction of the 1.00% contingent deferred sales charge applied
in year six.
The performance shown in the table begins at July 16, 1993 for Institutional
Class and Retail Class B shares and at March 9, 1994 for Retail Class A
shares. Performance in the table for Retail Class B shares with load reflects
the deduction of the applicable contingent deferred sales charge.
* Performance shown prior to the 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. Actual cumulative
performance since inception for Retail Class B shares is 41.88% without CDSC
and 36.88% with CDSC.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
25
28
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MID-CAP EQUITY PORTFOLIO
[PHOTO OMITTED]
CHRISTOPHER E. BAGGINI,
CFA, PORTFOLIO MANAGER
Christopher E. Baggini, CFA, is a Principal of Allied Investment Advisors, Inc.
He is the portfolio manager of the Mid-Cap Equity Portfolio and the Capital
Growth Portfolio. He has over 12 years of investment management experience.
REVIEW AND OUTLOOK
Mid-cap stocks staggered through a difficult 12 months. Although the ARK Mid-Cap
Equity Portfolio Institutional Class advanced almost 9%, far below the results
of the large-cap market, the results compared favorably to the S&P 400 Mid-Cap
Index and similarly managed mid-cap funds. Disappointing earnings growth
relative to initial expectations and the large-cap companies held back the
advancement of mid-cap shares.
During the year mid-cap stocks went on a wild ride, declining 26% from
July 17 to October 8, only to rebound over 40% the remainder of the calendar
year. Investments in America Online, Comverse Technology, Biogen, Lexmark, and
Best Buy paid off handsomely, while losses in the energy sector, General
Nutrition, Borders Group, and Keane mitigated those gains.
The market's fear of an economic recession, caused by sharp declines in
most Asian countries, has most recently given way to expectations that the U.S.
economy is growing too quickly. Concerns that the Federal Reserve would take
action to slow the growth of the money supply and/or raise interest rates caused
growth stocks to languish in February and March, only to rally in April with the
report of strong earnings growth. This type of short-term price volatility is
likely to continue throughout the rest of the year as additional concerns,
including the effects of Y2K, permeate the markets. We expect that our ability
to define and locate long-term investments during times of market duress will be
tested many times over the coming months.
26
29
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
PERFORMANCE AS OF 4/30/99
Comparison of Change in the Value of a $100,000 Investment in the ARK Mid-Cap
Equity Fund, Institutional Class, versus the S&P 400 Mid-Cap Index, and the
Lipper Mid-Cap Funds Average
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
11/30/96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- -------- -------- --------
ARK Mid-Cap Equity Fund, Institutional Class $100,000 $100,671 $147,906 $160,862
S&P 400 Mid-Cap Index $100,000 $101,178 $149,613 $159,248
Lipper Mid-Cap Funds Average $100,000 $ 94,945 $135,316 $142,082
INSTITUTIONAL S&P 400 LIPPER
CLASS MID-CAP MID-CAP
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 8.76% 6.44% 5.00%
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 22.00% 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 reflected in the graph begins at November 30, 1996.
The performance shown in the table begins at the inception date.
The performance of the S&P 400 Mid-Cap Index does not include operating expenses
that are incurred by the Portfolio.
27
30
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 28 years
of investment management experience.
REVIEW AND OUTLOOK
The ARK Small-Cap Equity Portfolio closed out the fiscal year with solid
performance, gaining 9.89% for the Institutional Class, compared to a decline in
the Russell 2000 Index of 9.25%. Small-company funds as a group, however,
continued to lag behind the strong performance shown by larger-company stocks,
particularly those involved in technology applications.
Major drivers of the ARK Small-Cap Equity Portfolio's success were
overweighted positions in telecommunications, technology, specialty retail, and
some medical service shares. The telecommunications industry represents one of
the most significant changes ever affecting global societies, and the Portfolio
has participated in wireless telephony, Internet processing, and
telecommunications equipment and software. Uniphase, Western Wireless, and
Omnipoint have been strong wireless service and equipment performers, while
Infoseek and U.S. Webb have provided Internet exposure.
An important change in the market occurred in April, as the Russell 2000, a
small-cap index, actually outperformed the S&P 500 Index. This means that the
stock markets are broadening and investors are expected to return to smaller
capitalization issues, which on a relative basis are historically undervalued.
The Portfolio will continue to focus on the strongest growth industries and
companies for the Millennium.
28
31
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
Performance as of 4/30/99
[GRAPHIC OMITTED]
Comparison of Change in the Value of a $100,000 Investment in the ARK Small-Cap
Equity Fund, Institutional Class, versus the Frank Russell 2000 Index, and the
Lipper Small Cap Funds Average
In the printed version of the document, a line graph appears which depicts
the following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
7/31/95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- -------- -------- -------- --------
ARK Small-Cap Equity Fund, Institutional Class $100,000 $137,992 $105,661 $156,304 $171,762
Frank Russell 2000 Growth Index $100,000 $119,379 $103,203 $148,313 $142,722
Frank Russell 2000 Index $100,000 $117,543 $117,614 $167,482 $151,990
Lipper Small Cap Funds Average $100,000 $122,048 $119,265 $173,841 $154,527
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
5/31/96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- -------
ARK Small-Cap Equity, Retail A Class $10,000 $7,426 $10,958 $12,016
ARK Small-Cap Equity, Retail A, with load $9,525 $7,073 $10,437 $11,446
Frank Russell 2000 Growth Index $10,000 $8,223 $11,817 $11,372
Frank Russell 2000 Index $10,000 $9,626 $13,707 $12,439
Lipper Small Cap Funds Average $10,000 $9,345 $13,622 $12,109
[PHOTO]
INSTITUTIONAL RETAIL RUSSELL 2000 RUSSELL 2000 LIPPER
CLASS CLASS A GROWTH SMALL CAP
- -----------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 9.89% 9.66% -3.77% -9.25% -11.11%
- -----------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A 4.45% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 7.57% N/A 6.13% 8.94% 7.49%
- -----------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 17.57% 5.73% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 4.01% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
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 reflects the deduction of the 4.75% sales charge.
The performance reflected in the graphs begins at July 31, 1995 for the
Institutional Class shares and at May 31, 1996 for Retail Class A shares.
The performance shown in the table begins at the inception dates for the
Institutional Class and the Retail Class A shares.
The performance of the Frank Russell 2000 Growth Index and the Frank Russell
2000 Index does not include operating expenses that are incurred by the
Portfolio.
29
32
[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
over 15 years of investment management experience.
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
INTERNATIONAL EQUITY SELECTION PORTFOLIO
REVIEW AND OUTLOOK
For the fiscal year ended April 30, 1999, activity in the foreign markets
continued to be dominated by the consequences of the Asian crisis that began in
the summer of 1997. First and foremost, we remember the period for the bouts of
extreme market volatility that circled the globe. In Asia, we have seen riots,
political leadership changes, as well as instances of government intervention
into the securities and currency markets. In Japan, despite economic reforms and
interest rates falling to near 0%, the economy has slipped into recession. Latin
America has not gone unscathed, as Brazil was finally forced to abandon currency
controls and let the Real float. The effects of devaluation quickly spread to
neighboring South and Central American countries. Last but not least, we saw the
Russian government default on its sovereign debt.
European markets, which were the bastions of strength for most of calendar
year 1998, began losing momentum as falling demand from Asia and Russia were
projected to cut into corporate profits. In fact, in the last quarter of 1998,
the German economy contracted for the first time in three years. Another
significant development in Europe was the implementation of the "Euro" on
January 1, 1999. The adoption of the Euro by the 11 member countries of the
European Union also formally placed the responsibility for monetary and economic
policy for the member nations under control of the European Central Bank (ECB).
In an effort to promote growth among members, we have already seen the ECB
institute its first interest-rate cut. Most recently, European markets are
dealing with the military and political situation in Kosovo.
From a market perspective, it is interesting to note the change in investor
sentiment surrounding foreign markets. At the beginning of the year, feelings
were positive toward the European markets, which existed in an environment of
corporate restructuring and favorable interest rates. Later in the year, as
Europe faced economic slowing, Japanese and Asian markets began to rebound as
investors anticipated
30
33
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
economic improvement in the region. Investors venturing into these markets have
been rewarded as pockets of recovery have been recognized and reflected in
strong returns since the beginning of 1999. For our fiscal year ended April 30,
1999, the European and Asian markets as measured by the MSCI Europe and Asia
Pacific Indices gained 3.41% and 18.18%, respectively. Latin American markets,
while also strong since the beginning of 1999, still posted negative returns at
the end of our fiscal year.
During this period, we increased the number of underlying funds from six to
15 in order to diversify the ARK International Equity Selection Portfolio. Prior
to the addition of these funds, the Portfolio was composed primarily of funds
pursuing a value-style investment approach. To widen the scope of the Portfolio,
we added growth funds and growth at a reasonable price-style funds as well as a
small capitalization fund and a single-country Japan fund. We eliminated our
positions in the GAM International and Hotchkis and Wiley Funds.
For the year, the MSCI World (Ex - U.S.) Value Index outperformed its
counterpart the MSCI Growth Index by 2.11%. This was not an across-the-board
phenomenon and was attributable to the fact that holdings in the stronger
performing Japanese and Asian markets were found in value funds. In fact, both
styles had winners and losers as sector selection, stock picking, and currency
fluctuation all were important factors in determining underlying fund returns.
Rotation among equities of different market capitalizations also had dramatic
effects on returns. These trends, which made it difficult to exceed the
benchmark indices, are evident in the Portfolio as the list of bottom and top
performers included both value and growth funds. Underlying funds negatively
affecting performance were the Hotchkis and Wiley International, Harbor
International Growth, GAM International, and the BT International funds. Our
top-performing fund holdings were
[PHOTO OMITTED]
[PHOTO OMITTED]
31
34
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
INTERNATIONAL EQUITY SELECTION PORTFOLIO (CONTINUED)
the Artisan International, Federated International Small Company, Putnam
International Growth, Europacific Growth, and Glenmede International funds.
Going forward, while not ideal, foreign markets will provide ample
opportunity for investors, especially if U.S. growth tapers off. Europe should
benefit from continued corporate restructuring and the creation of "Euroland."
In Japan, we search for signs that implementation of government reforms are
translating into the early stages of recovery. The rest of Southeast Asia
continues to improve as the effects of IMF loans and mandated reforms take hold.
Latin American economies, which appear to be stabilizing, depend upon recovery
in Brazil and strong fiscal management of the Mexican economy. The region has
already been aided by the rise in the price of oil. Across the globe, a
favorable interest rate environment, competition, consolidation and increased
productivity will promote growth and limit inflation.
As a fund of funds, we continue to manage the Portfolio by selecting funds
with consistent patterns of outperformance that are appropriate with respect to
foreign market conditions. Diversification and attention to fees and investment
strategies are paramount to provide a complementary array of investment styles
and risk/return profiles within the Portfolio's selection of funds.
[PHOTO OMITTED]
32
35
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
[GRAPHIC OMITTED]
PERFORMANCE AS OF 4/30/99
Comparison of Change in the Value of a $100,000 Investment in the ARK
International Equity Selection, Synthetic Institutional Class, versus the Morgan
Stanley MSCI EAFE Index, and the Lipper International Funds Average
In the printed version of the document, a line graph appears which depicts the
following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
5/31/91 Apr. 92 Apr. 93 Apr. 94 Apr. 95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- -------- ------- ------- ------- ------- ------- ------- -------
ARK International Equity Selection,
Synthetic Institutional Class $100,000 $102,478 $110,574 $134,945 $138,669 $162,132 $180,826 $215,815 $214,736
Morgan Stanley MSCI EAFE Index $100,000 $ 90,553 $110,121 $128,434 $135,640 $151,103 $149,773 $178,110 $195,013
Lipper International Funds Average $100,000 $103,169 $113,465 $137,974 $136,994 $159,379 $168,671 $204,412 $211,035
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
5/31/91 Apr. 92 Apr. 93 Apr. 94 Apr. 95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
ARK International Equity Selection
Fund, Synthetic Retail A $10,000 $10,248 $11,057 $13,494 $13,867 $16,213 $18,083 $21,582 $21,454
ARK International Equity Selection,
Retail, with load $9,850 $10,094 $10,891 $13,292 $13,659 $15,970 $17,811 $21,258 $21,132
Morgan Stanley MSCI EAFE Index $10,000 $9,055 $11,012 $12,843 $13,564 $15,110 $14,977 $17,811 $19,501
Lipper International Funds Average $10,000 $10,317 $11,347 $13,797 $13,699 $15,938 $16,867 $20,441 $21,104
INSTITUTIONAL RETAIL MSCI EAFE LIPPER
CLASS CLASS A* INTERNATIONAL
- ------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN -0.50% -0.59% 9.49% 3.24%
- ------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A -2.12% N/A N/A
- ------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 9.82% 9.79% 8.88% 9.40%
- ------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 9.22% N/A N/A
- ------------------------------------------------------------------------------------------
ANNUALIZED 5 YEAR
TOTAL RETURN 9.74% 9.72% 8.71% 8.29%
- ------------------------------------------------------------------------------------------
ANNUALIZED 5 YEAR
TOTAL RETURN WITH LOAD N/A 9.40% N/A N/A
- ------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 10.16% 10.15% N/A N/A
- ------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 9.95% N/A N/A
- ------------------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Performance presented from inception 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 quoted performance data
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
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
reflects the deduction of the 1.50% sales charge.
The performance reflected in the graphs begins at May 31, 1991 for
Institutional Class and Retail Class A shares.
Performance shown in the table begins at May 31, 1991 for both Institutional
Class and Retail Class A shares.
* Performance shown prior to the 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. Actual annualized
performance since inception for Retail Class A shares is 0.34% without load
and -1.03% with load.
The performance of the MSCI EAFE Index does not include operating expenses
that are incurred by the Portfolio.
[PHOTO OMITTED]
33
36
[BLANK PAGE]
37
UNIVERSITY OF MARYLAND MEDICAL SYSTEM PENSION PLAN INVESTOR
[PHOTO OMITTED]
Dotti LaForce and Art McCombs stand in the Homer Gudelsky Building at the
University of Maryland Medical Center in Baltimore, the core component of the
University of Maryland Medical System. This consumer friendly atrium features
everything from a food court to a branch of Allfirst Bank (formerly known as the
First National Bank of Maryland). The University of Maryland Medical Center is a
pioneer in trauma care, organ transplant, cancer and AIDS research, stroke
treatment, and women's and children's health. The Medical System invests in the
ARK Funds for its employees' money purchase pension plan.
34
38
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 over 15 years,
has been consistently applied, and has generated excellent results.
35
39
FIXED INCOME PORTFOLIO 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 over 10 years of investment management experience.
SHORT-TERM TREASURY PORTFOLIO
REVIEW AND OUTLOOK
The ARK Short-Term Treasury Portfolio continued to provide a rate of return that
was greater than that available from investing in a money market fund, while
providing lower price volatility than a long-term bond fund. For the one-year
period ending April 30, 1999, the Institutional Class returned 5.24%, while the
Retail Class A returned 5.04%. During this same period, the net asset value
ranged between $10.28 and $10.01. To achieve these results, we actively managed
the Portfolio utilizing a conservative and highly disciplined relative-value
approach that emphasizes security selection.
The short-term interest rate environment during 1998 was influenced by the
Federal Reserve's easing of monetary policy by 25 basis points on three separate
occasions during the fall of 1998. This was the first easing of monetary policy
since January 1996. The cut in short-term interest rates was in response to
growing fears of a global economic recession and to "cushion the effects of
increasing weakness in foreign economies." In spite of the weak global
economies, the U.S. economy continued its spectacular performance of the past
three years. The unemployment rate fell to a 29-year low of 4.2%; consumer
prices increased by less than 2% during 1998; economic growth surged as
confident consumers pushed housing starts to a record high; and consumer
spending remained robust. Two-year U.S. Treasury yields averaged 4.92% for our
fiscal year. The high yield was 5.64% on May 11, 1998. The low yield of 3.82% on
October 15, 1998 was in response to expectations for further Federal Reserve
easing of monetary policy, and a flight to quality precipitated by concerns of
the Asian contagion spreading to South America.
Our approach is to actively manage the Portfolio. The average maturity of
the Portfolio is lengthened when we anticipate a decline in short-term interest
rates. Conversely, when we anticipate a rise in interest rates, we shorten the
average maturity of the Portfolio. We also examine the shape and slope of the
yield curve, implied forward interest rates, and anticipated monetary policy in
determining the Portfolio's average maturity.
36
40
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
Currently, economic growth is too fast for the Federal Reserve to ease
monetary policy and inflation is too low for it to tighten monetary policy.
However, given the current strength of the economy and the improvement of
foreign economies, the risk of a tightening of monetary policy has increased.
Given our outlook, our strategy is to be cautious while selectively purchasing
longer-dated, higher-yielding securities. As always, we will continue to utilize
our conservative and disciplined active relative-value approach to managing the
ARK Short-Term Treasury Portfolio.
PERFORMANCE AS OF 4/30/99
Comparison of Change in the Value of a $10,000 Investment in the ARK Short-Term
Treasury Fund, Retail Class A Class, versus the Lehman 1-3 Year Government Bond
Index, and the Lipper Short U.S. Treasury Funds Average
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts the
following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
3/31/96 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- -------- -------- -------- --------
ARK Short-Term Treasury Fund, Institutional Class $100,000 $100,110 $105,246 $112,066 $117,938
Lehman 1-3 Year Government Bond Index $100,000 $100,100 $106,236 $113,821 $120,548
Lipper Short U.S. Treasury Funds Average $100,000 $ 99,960 $105,338 $112,543 $118,620
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
9/30/96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- -------- -------- --------
ARK Short-Term Treasury Fund, Retail A Class $10,000 $10,284 $10,925 $11,475
Lehman 1-3 Year Government Bond Index $10,000 $10,339 $11,077 $11,732
Lipper Short U.S. Treasury Funds Average $10,000 $10,294 $10,998 $11,592
[PHOTO OMITTED]
INSTITUTIONAL RETAIL LEHMAN 1-3 LIPPER SHORT
CLASS CLASS A YEAR GOV'T. U.S. TREASURY
-----------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 5.24% 5.04% 5.91% 5.40%
-----------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 5.62% N/A 6.39% 5.91%
-----------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 5.46% 5.57% 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 reflected in the graphs begins at March 31, 1996 for
Institutional Class and at September 30, 1996 for Retail Class A shares.
The performance shown in the table begins at the inception dates for the
Institutional Class and Retail Class A shares.
The performance of the Lehman 1-3 Year Government Bond Index does not include
operating expenses that are incurred by the Portfolio.
37
41
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[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 over 15 years of investment management
experience.
SHORT-TERM BOND PORTFOLIO
REVIEW AND OUTLOOK
The past year was a tumultuous one for the short-term bond market. Domestically,
the U.S. economic record was almost flawless: robust growth, 29-year low
unemployment, and a benign inflation rate. Globally, however, economic
deterioration in Southeast Asia and Russia gave way to a massive liquidity
crisis. Investors around the world sought safety in U.S. Treasuries. Between
August and October 1998, due to this flight to quality, the yield on the
two-year U.S. Treasury bond declined by an impressive 120 basis points to 3.80%.
Elsewhere in the short-term bond market, liquidity concerns caused
corporate, mortgage, and asset-backed securities to substantially underperform
U.S. Treasuries. By November 1998, the Federal Reserve provided the needed
market liquidity, lowering short-term interest rates by 25 basis points on three
occasions. These actions were successful in restoring market confidence.
Fundamentally, the credit issues surrounding the corporate and asset-backed
sectors of the U.S. bond market did not change during the liquidity crisis.
Corporate issuers were in sound financial condition and the collateral
underlying asset-backed securities were performing well. Our analysis revealed
that these sectors were significantly undervalued versus U.S. Treasuries. As a
result, the ARK Short-Term Bond Portfolio increased its exposure to selective
corporate and AAA-rated asset-backed securities. As the market's confidence was
restored, the "flight to quality" was reversed, with investors selling U.S.
Treasuries for higher-yielding securities such as corporate issues.
The sectors of the bond market that had underperformed during the global
liquidity crisis were now outperforming U.S. Treasuries. The Portfolio's return
was enhanced because of its 19% allocation to AAA-rated home equity asset-backed
securities, as well as its 31% weighting in medium-grade corporate securities.
During 1999 we
38
42
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
intend to continue to add relative value through such active-sector allocation
strategies.
Within the corporate bond market, we determined that medium-grade corporate
securities offered relative value versus high-grade corporates. The incremental
yield offered by medium-grade securities over the course of the year made them
more attractive from a total return perspective than more expensively priced
high-grade corporate securities.
Recently, U.S. interest rates have been hovering within a trading range
bound by strong U.S. economic growth on the one hand and a tenuous global
economic condition on the other. At its most recent Federal Open Market
Committee meeting in May, the Federal Reserve changed to a "tightening bias"
with regard to U.S. monetary policy. However, in light of the benign
inflationary environment, we believe this trading range will continue. Given
this interest rate forecast, incremental income and return will be realized in
selective corporate bonds and well-structured asset-backed securities. Going
forward, we will continue to employ our conservative and disciplined investment
strategy of actively pursuing relative value in both sector allocation and
security selection.
[GRAPHIC OMITTED]
PERFORMANCE AS OF 4/30/99
Comparison of Change in the Value of a $100,000 Investment in the ARK Short-Term
Bond Fund, Institutional Class, versus the Lehman 1-3 Year Government Bond
Index, and the Lipper Short Investment-Grade Debt Average
In the printed version of the document, a line graph appears which depicts the
following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
3/31/96 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- -------- -------- -------- --------
ARK Short-Term Bond Fund, Institutional Class $100,000 $ 99,970 $105,078 $111,656 $117,407
Lehman 1-3 Year Government Bond Index $100,000 $100,100 $106,236 $113,821 $120,548
Lipper Short Investment-Grade Debt Average $100,000 $100,010 $105,971 $113,081 $118,792
INSTITUTIONAL LEHMAN 1-3 LIPPER SHORT
CLASS YEAR GOV'T. INV.-GRADE
------------------ ----- ----------- ----------
ONE YEAR
TOTAL RETURN 5.15% 5.91% 5.05%
---- ---- ----
ANNUALIZED 3 YEAR
TOTAL RETURN 5.51% 6.39% 5.87%
---- ---- ----
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 5.34% N/A N/A
Past performance of the Portfolio is not predictive of future performance.
The performance presented from inception to March 22, 1998 reflects the
performance of the Marketvest Short-Term Bond Fund shares, which were offered
beginning March 31, 1996.
The performance reflected in the graph and table begins at 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.
[PHOTO OMITTED]
Wilmer C. Stith, III
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 overseas Fixed
Income trading. He has over 8 years of investment management experience.
39
43
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MARYLAND AND PENNSYLVANIA TAX-FREE PORTFOLIOS
[PHOTO OMITTED]
Susan L. Schnaars; CFA, Portfolio Manager
Susan L. Schaars, 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 10 years of
investment management experience.
REVIEW AND OUTLOOK
The ARK Maryland Tax-Free Portfolio Institutional Class returned 5.86% for the
year ended April 30, 1999, while the Portfolio's benchmark, the Lipper Maryland
Municipal Debt Funds Average, returned 5.72% for the same period. The ARK
Pennsylvania Tax-Free Portfolio Institutional Class returned 5.56% for the year
ended April 30, 1999, while its benchmark, the Lipper Pennsylvania Intermediate
Municipal Average, returned 5.53% for the same period.
Municipal interest rates have remained relatively stable amidst the
relative volatility we have experienced in the U.S. Treasury market. Yields on
municipal securities hovered in a 40-basis-point range during the past year,
averaging around 5%, while U.S. Treasury rates have been as high as 6% and as
low as 4.75% during the liquidity crisis that took place in the second half of
1998. For most of the year, the ratio of municipal yields to U.S. Treasury
yields (a measure of the tax advantage of tax-exempt securities) traded at the
wider end of the historical range. The flight to quality that took place in the
taxable market during fall and the ever-alluring equity market, coupled with the
reluctance of municipal investors to buy securities with yields below 5%, and a
greater supply of bonds due to lower interest rates, made municipals an
extremely attractive opportunity for most bond investors. As the flight to
quality has abated and as the possibilities for a stronger economy have become
more realistic, the yield ratio has fallen, resulting in outperformance by
municipal securities over the past six months.
During 1998, we began to lengthen the maturity of the ARK Maryland
Tax-Free and the ARK Pennsylvania Tax-Free Portfolios as the yield ratio of
longer maturity municipals approached, moved into, and continued to exceed the
90% of treasuries range. The municipal yield curve continues to remain steep
relative to the treasury yield curve, and provides very attractive after-tax
yields in longer dated securities. Supply
40
44
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
should slow down as interest rates rise; however, the equity market still
appears to be distracting investors who would otherwise be focused on
municipals. We expect that the municipal market will continue to trade in a very
narrow range until the yield ratio of municipals to treasuries declines to more
normal levels. After that, municipals should trade in sympathy with the treasury
market. We continue to focus new purchases in the Portfolios in securities with
maturities greater than ten years. The narrow spread between AAA-rated and
BBB-rated securities still exists, although it is slightly wider than several
months ago, as the result of continued weak hospital profitability and concerns
over credit deterioration. Where opportunities present themselves, we will take
advantage of the narrow spreads and upgrade quality.
We continue to have a long to intermediate term bias in the Portfolios,
focusing new purchases in the 15-to-20-year sector of the yield curve. Changes
to the Portfolios reflect the bias to maximize after-tax total return, while
providing current income. Moderate fluctuations in principal should be expected
as interest rates change. As of April 30, 1999, the effective duration of the
Portfolios was 7.4 years. Effective duration is a measurement of the sensitivity
of the Portfolios to changes in interest rates. As noted previously, we remain
focused on maintaining a high-credit-quality profile, insulating performance if
quality spreads begin to widen.
[PHOTO OMITTED]
[PHOTO OMITTED]
41
45
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MARYLAND AND PENNSYLVANIA TAX-FREE PORTFOLIOS CONTINUED
Maryland Tax-Free Performance as of 4/30/99
[GRAPHIC OMITTED]
Comparison of Change in the Value of a $100,000 Investment in the ARK Maryland
Tax-Free Fund, Institutional Class, versus the Lehman 7 Year Municipal Bond
Index, and the Lipper Short Maryland Debt Funds Average
In the printed version of the document, a line graph appears which depicts
the following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
11/30/96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- ------- ------- -------
ARK Maryland Tax-Free Fund, Institutional Class $100,000 $100,104 $108,263 $114,607
Lehman 7 Year Municipal Bond Index $100,000 $100,106 $107,964 $115,306
Lehman 10 Year Municipal Bond Index $100,000 $100,262 $109,256 $117,068
Lipper Maryland Municipal Debt Funds Average $100,000 $ 99,896 $108,337 $114,534
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
1/31/97 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- -------
ARK Maryland Tax-Free Fund, Retail A Class $10,000 $10,022 $10,814 $11,430
ARK Maryland Tax-Free Fund, Retail A, with load $ 9,550 $ 9,571 $10,328 $11,915
Lehman 7 Year Municipal Bond Index $10,000 $10,005 $10,790 $11,524
Lehman 10 Year Municipal Bond Index $10,000 $10,032 $10,932 $11,714
Lipper maryland Municipal Debt Funds Average $10,000 $10,033 $10,880 $11,503
[PHOTO OMITTED]
INSTITUTIONAL RETAIL LEHMAN LEHMAN LIPPER
CLASS CLASS A 7 YEAR MUNI 10 YEAR MUNI MD MUNI
------------------- ----- ------- ----------- ------------ -------
ONE YEAR
TOTAL RETURN 5.86% 5.69% 6.80% 7.15% 5.72%
---- ---- ---- ---- ----
ONE YEAR
TOTAL RETURN WITH LOAD N/A 0.92% N/A N/A N/A
---- ---- ---- ---- ----
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 6.05% 6.11% N/A N/A N/A
---- ---- ---- ---- ----
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 4.03% 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 Retail
Class A reflects the deduction of the 4.50% sales charge.
The performance reflected in the graphs begins at November 30, 1996 for
Institutional Class shares and at January 31, 1997 for Retail Class A shares.
The performance shown in the table begins at the inception dates for the
Institutional Class and Retail Class A shares.
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.
42
46
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
PENNSYLVANIA TAX-FREE PERFORMANCE AS OF 4/30/99
Comparison of Change in the Value of a $100,000 Investment in the ARK
Pennsylvania Tax-Free Fund, Institutional Class, versus the Lehman 5 Year
Municipal Bond Index, the Lehman 7 Year Municipal Bond Index, the Lehman 10 Year
Municipal Bond Index, and the Lipper PA Intermediate Municipal Average
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
3/31/96 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- -------- -------- -------- --------
ARK Pennsylvania Tax-Free Fund, Institutional Class $100,000 $100,340 $104,253 $111,311 $117,500
Lehman 5 Year Municipal Bond Index $100,000 $ 99,990 $104,640 $111,692 $118,941
Lehman 7 Year Municipal Bond Index $100,000 $ 99,820 $105,170 $113,426 $121,139
Lehman 10 Year Municipal Bond Index $100,000 $ 99,650 $105,978 $115,484 $123,741
Lipper PA Intermediate Municipal Average $100,000 $ 99,620 $104,462 $112,077 $118,275
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
3/31/96 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- -------
ARK Pennsylvania Tax-Free Retail A Class $10,000 $10,034 $10,425 $11,118 $11,717
ARK Pennsylvania Tax-Free A, with load $ 9,550 $ 9,582 $ 9,956 $10,617 $11,190
Lehman 5 Year Municipal Bond Index $10,000 $ 9,999 $10,464 $11,169 $11,894
Lehman 7 Year Municipal Bond Index $10,000 $ 9,982 $10,517 $11,343 $12,114
Lehman 10 Year Municipal Bond Index $10,000 $ 9,965 $10,598 $11,548 $12,374
Lipper PA Intermediate Municipal Average $10,000 $ 9,962 $10,446 $11,208 $11,827
LIPPER
INSTITUTIONAL RETAIL LEHMAN LEHMAN LEHMAN INTERMEDIATE
CLASS CLASS A* 5 YEAR MUNI 7 YEAR MUNI 10 YEAR MUNI MUNI
----- -------- ----------- ----------- ------------ ----
One Year
TOTAL Return 5.56% 5.39% 6.49% 6.80% 7.15% 5.53%
---- ---- ---- ---- ---- ----
One Year
TOTAL Return with Load N/A 0.63% N/A N/A N/A N/A
---- ---- ---- ---- ---- ----
Annualized 3 Year
TOTAL Return 5.40% 5.31% 5.96% 6.67% 7.48% 5.84%
---- ---- ---- ---- ---- ----
Annualized 3 Year
TOTAL Return WITH Load N/A 3.71% N/A N/A N/A N/A
---- ---- ---- ---- ---- ----
Annualized TOTAL Return
Inception to Date 5.37% 5.28% N/A N/A N/A N/A
---- ---- ---- ---- ---- ----
Annualized TOTAL Return
Inception to Date WITH Load N/A 3.72% N/A N/A N/A N/A
---- ---- ---- ---- ---- ----
Past performance of the Portfolio is not predictive of future performance.
Performance presented from inception to March 22, 1998, reflects the
performance of the Marketvest Pennsylvania Intermediate Municipal Bond Fund
shares, which were offered beginning March 31, 1996. Retail Class A shares
were offered beginning March 23, 1998. Performance for Retail Class A shares
reflects the deduction of the 4.50% sales charge.
The performance reflected in the graphs begins at March 31, 1996 for the
Institutional Class and Retail Class A shares.
Performance shown in the table begins at March 31, 1996 for Institutional
Class and Retail Class A shares.
* Performance shown prior to the 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. Actual annualized
performance since inception for Class A shares is 4.25% without load and 0.01%
with load.
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.
43
47
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[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 10 years of
investment management experience.
INTERMEDIATE FIXED INCOME PORTFOLIO
REVIEW AND OUTLOOK
The ARK Intermediate Fixed Income Portfolio Institutional Class returned 5.40%
for the year, versus the Lehman Intermediate Government/Corporate Bond Index
with a 6.36% return and the Lipper Intermediate Investment Grade Debt Funds
Average with a 5.12% return.
Based on our continued outlook for moderate growth and subdued inflation
for most of last year, we maintained our overweightings in the spread sectors,
emphasizing corporates, mortgages and asset-backed securities throughout the
year.
Mid-year, we had a somewhat cautious estimate for corporate profitability
and domestic G.D.P., as we expected global weakness to spread to the United
States. We expected that weakness abroad would begin to place pressures on our
economy in the form of competition from lower-priced imports and weaker earnings
for domestic companies doing business abroad. However, as interest rates fell,
we continued to experience stronger-than-expected economic growth as mortgage
refinancings, the wealth effect of the stock market, and lower-priced imports
boosted consumer spending. The strong growth story, coupled with heightened
inflation fears caused by the rise in oil prices and a very tight labor market,
has provoked a negative reaction from the bond market during the first part of
1999, with interest rates headed upward. Although the Federal Reserve has
confirmed that they have a neutral stance toward monetary policy, we feel that
pressures may be mounting. We anticipate that growth will slow from the fast
pace we have seen over the past two quarters, as higher interest rates begin to
have an effect on the economy.
After the dismal performance of corporates and mortgages during the second
half of 1998, spreads have tightened as these sectors have rebounded from the
liquidity crisis and as prepayment assumptions have slowed. The BBB-rated
quality sector and the industrial and Yankee sectors were the worst performing
intermediate categories for the year, while AAA-rated and utility issuers were
the strongest performers. The Portfolio's weighting in lower-quality assets hurt
performance, while over-exposure to the asset-backed sector boosted performance.
Early in the third quarter of 1998, we purchased municipal securities for the
Portfolio with the expectation that the yield ratio between
44
48
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
tax-exempt municipal securities and their treasury counterparts would
contract to a more normal level. Despite the volatility in the treasury market
and the rise in interest rates, municipal yields have remained relatively
stable, with the yield ratio returning to historical norms. This finally
resulted in dramatic outperformance of the municipal sector and we took the
opportunity to reverse our position.
As of April 30, 1999, the effective duration of the ARK Intermediate Fixed
Income Portfolio was 3.55 years. Effective duration is a tax-exempt municipal
securities and their treasury counterparts would contract to a more normal
level. Despite the volatility in the treasury market and the rise in interest
rates, municipal yields have remained relatively stable, with the yield ratio
returning to historical norms. This finally resulted in dramatic outperformance
of the municipal sector and we took the opportunity to reverse our position. As
of April 30, 1999, the effective duration of the ARK Intermediate Fixed Income
Portfolio was 3.55 years. Effective duration is a measurement of the sensitivity
of the Portfolio to changes in interest rates. 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.
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
PERFORMANCE AS OF 4/30/99
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
Initial Investment Date 11/31/96 Apr. 97 Apr. 98 Apr. 99
----------------------- -------- ------- ------- -------
ARK Intermediate Fixed Income Fund,
Institutional $100,000 $100,267 $108,941 $114,823
Lehman Intermediate Gov't./Corp. Bond Index $100,000 $100,419 $109,386 $116,343
Lehman Intermediate Government Bond Index $100,000 $100,551 $109,279 $116,218
Lipper Intmdt. Investment Grade Debt
Funds Average $100,000 $ 99,941 $109,885 $115,511
LEHMAN LEHMAN LIPPER
INSTITUTIONAL INTERMEDIATE INTERMEDIATE INTERMEDIATE
CLASS GOV'T./CORP. GOV'T. INV.-GRADE
----- ------------ ------ ----------
ONE YEAR
TOTAL RETURN 5.40% 6.36% 6.35% 5.12%
---- ---- ---- ----
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 6.01% 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 reflected in the graphs begins at November 30, 1996 for the
Institutional Class.
Performance shown in the table begins at the inception date.
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.
45
49
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
[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 over 15 years of investment management
experience.
U.S. GOVERNMENT BOND PORTFOLIO
REVIEW AND OUTLOOK
Following the pattern of the past few years, the U.S. economy has remained
strong and healthy despite the contagion-caused dislocations in other parts of
the world, notably Asia and more recently Latin America, and the related pause
in growth on the European continent. Inflation has been notably tame throughout
the period. Had it not been for the third quarter of 1998's sharp change in
sentiment, followed by three successive easings by the Federal Reserve and other
global monetary authorities, and subsequent improvement in investor sentiment,
it might seem that the economic landscape is not much different from that of the
beginning of the ARK U.S. Government Bond Portfolio's fiscal year. In fact, the
United States remains "the oasis" in a world constrained by overcapacity and
general economic slowdown. The U.S. bond market has increasingly adopted a
domestic focus, watching the volatility of oil prices, the otherwise benign
inflation outlook, strong money growth, and a neutral-biased, although perhaps
less accommodating monetary policy. Accordingly, we believe that the bond market
will trade in a self-correcting, narrow range over the next few months.
Throughout the year, the flat shape of the yield curve has given us little
incentive to extend the average maturity or duration more than slightly longer
than our benchmark. At the end of April 1999, the U.S. Government Bond
Portfolio's duration was 4.1 years. Returns in such narrowly traded market
environments benefit from increased weightings to sectors that offer higher
yields. Accordingly, throughout the year, we have maintained our relative
weightings in higher-yielding corporates and AAA-rated asset-backed securities.
More recently, in a tactical move, we reduced the duration profile of our
corporate holdings by selling a long-term obligation and subsequently buying a
medium-term obligation of the same obligor. At the same time, we increased our
weighting in the mortgage-backed sector since we feel that the volatility in
prepayments expectations has subsided; currently we have nearly twice the
exposure to this sector compared to our benchmark. These two actions increased
our overall weighting in 3-to-4-year duration instruments, maintained the
Portfolio's quality at a strong AA1, and enhanced yield and return prospects.
Over the next quarter, we anticipate holding duration modestly longer than our
benchmark. With interest rates stabilizing over the coming months, we foresee
adding modestly to our mortgage positions.
46
50
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
3/31/96 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- -------
ARK U.S. Government Bond Fund,
Institutional Class $100,000 $99,480 $103,967 $113,022 $118,470
Lehman Intermediate Government/
Corporate Index $100,000 $99,650 $106,048 $115,518 $122,864
Lipper Intermediate U.S. Government
Funds Average $100,000 $99,400 $105,255 $114,885 $120,940
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
3/31/96 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- -------
ARK U.S. Government Bond,
Retail A Class $10,000 $9,948 $10,397 $11,274 $11,830
ARK U.S. Government Bond,
Retail A, with load $ 9,550 $9,500 $ 9,929 $10,767 $11,298
Lehman Intermediate Government/
Corporate Index $10,000 $9,965 $10,605 $11,552 $12,286
Lipper Intermediate U.S. Government
Funds Average $10,000 $9,940 $10,525 $11,489 $12,094
LEHMAN LIPPER
INSTITUTIONAL RETAIL INTERMEDIATE INTERMEDIATE
CLASS CLASS A* GOV'T./CORP. U.S. GOV'T.
----- -------- ------------ -----------
ONE YEAR
TOTAL RETURN 4.82% 4.93% 6.36% 5.27%
---- ---- ---- ----
ONE YEAR
TOTAL RETURN WITH LOAD N/A 0.25% N/A N/A
---- ---- ---- ----
ANNUALIZED 3 YEAR
TOTAL RETURN 6.00% 8.68% 7.23% 6.81%
---- ---- ---- ----
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 7.01% N/A N/A
---- ---- ---- ----
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 5.65% 8.26% N/A N/A
---- ---- ---- ----
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 6.65% N/A N/A
---- ---- ---- ----
Past performance of the Portfolio is not predictive of future performance.
Performance presented from inception to March 22, 1998 reflects the
performance of the Marketvest Intermediate U.S. Government Bond Fund shares,
which were offered beginning 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 reflects the deduction of
the 4.50% sales charge.
The performance reflected in the graphs and in the table begins at March 31,
1996 for the Institutional Class and Retail Class A shares.
* Performance shown prior to the 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. Actual annualized
performance since inception for Retail Class A shares is 12.15% without load
and 7.42% with load.
The performance of the Lehman Intermediate Government/Corporate Index does not
include operating expenses that are incurred by the Portfolio.
[PHOTO OMITTED]
N. BETH VOLK, CFA
CO-PORTFOLIO MANAGER
N. Beth Volk, is a Principal of Allied Investment Advisors, Inc. She is the
co-portfolio manager of the U.S. Government Bond Portfolio and oversees credit
research for the fixed income group. She has over 18 years of investment
research and management experience.
47
51
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
INCOME PORTFOLIO
[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 over 15 years of investment management
experience.
REVIEW AND OUTLOOK
The U.S. economy continues to experience significant growth with modest
inflationary prospects. Despite the volatile dislocations witnessed in Asia and
Latin America, the United States continues to be the engine of growth for the
remaining world economies. With low inflation and the prospects for a slowdown
of domestic activity, the financial markets should settle into a trading range
with 30-year interest rates between 5.25% and 6.00%. The recent rise in oil
prices and the perception of a recovery in the Asian markets should lead to
further volatility. We expect Japan to have very little influence in terms of
growth in 1999, as the world's second-largest economy is projected to have
negative G.D.P. results for the year. Europe's growth prospects are also
expected to be anemic, and therefore the U.S. trade balance is unlikely to
appreciably improve. The concern for a reacceleration of inflation may weigh
heavily on the market in the near term but it is unlikely, given the global
backdrop, that rates have much more room to move higher. With consumer spending
continuing to grow at record levels and the lowest
PERFORMANCE AS OF 4/30/99
[GRAPHIC OMITTED]
Comparison of Change in the Value of a $100,000 Investment in the ARK Income
Fund, Retail Class A Class, versus the Lehman 1-3 Year Government Bond Index,
and the Lipper Short U.S. Treasury Funds Average
In the printed version of the document, a line graph appears which depicts
the following plot points:
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
7/31/93 Apr. 94 Apr. 95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- ------- ------- -------
ARK Income Fund, Institutional Class $100,000 $99,836 $106,355 $115,353 $122,862 $136,181 $141,928
Lehman Aggregate Bond Index $100,000 $98,354 $105,563 $114,673 $122,792 $136,201 $144,741
Lipper Corporate Debt A Rated Funds Average $100,000 $97,962 $103,948 $112,170 $119,450 $132,219 $138,539
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
RETAIL CLASS A: VALUE OF A $10,000 INVESTMENT
4/30/94 Apr. 95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- ------- -------
ARK Income Fund, Retail A Class $10,000 $10,623 $11,488 $12,214 $13,493 $14,043
ARK Income Fund, Retail A Class $ 9,550 $10,145 $10,971 $11,664 $12,885 $13,411
Lehman Aggregate Bond Index $10,000 $10,733 $11,659 $12,485 $13,848 $14,716
Lipper Corporate Debt A Rated Funds Average $10,000 $10,611 $11,450 $12,193 $13,497 $14,142
48
52
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
unemployment rate in 29 years, the outlook for U.S. financial assets remains
strong.
Throughout the year, we have continued to maintain an overweighting in the
intermediate part of the curve, particularly in corporate securities, as we
expect the curve to steepen; therefore longer-dated securities should
underperform. Asset-backed securities and mortgages have been added selectively
in the past few months as the dynamics of the mortgage market have improved. The
Portfolio has emphasized BBB-quality corporate bonds, particularly in the
telecommunication, energy and retail sectors. We expect both the corporate and
mortgage sectors to outperform in 1999 as the re-valuation of risk premium in
the market continues, after the severe underperformance of spread sectors in
1998. We continue to hold a modestly long interest rate exposure with the
anticipation of an economic slowdown to occur early into next year.
INSTITUTIONAL RETAIL RETAIL LEHMAN LIPPER CORP.
CLASS CLASS A CLASS B* AGGREGATE DEBT A-RATED
----- ------- -------- --------- ------------
ONE YEAR
TOTAL RETURN 4.22% 4.08% 4.07% 6.27% 4.78%
---- ---- ---- ---- ----
ONE YEAR
TOTAL RETURN WITH LOAD N/A -0.61% -0.85% N/A N/A
---- ---- ---- ---- ----
ANNUALIZED 3 YEAR
TOTAL RETURN 7.16% 6.92% 7.10% 8.07% 7.33%
---- ---- ---- ---- ----
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 5.29% 6.22% N/A N/A
---- ---- ---- ---- ----
ANNUALIZED 5 YEAR
TOTAL RETURN 7.29% 7.03% 7.26% 8.03% 7.31%
---- ---- ---- ---- ----
ANNUALIZED 5 YEAR
TOTAL RETURN WITH LOAD N/A 6.06% 6.96% N/A N/A
---- ---- ---- ---- ----
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 6.25% 6.91% 6.22% N/A N/A
---- ---- ---- ---- ----
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 5.93% 6.09% 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 reflects the deduction of the 4.50% sales charge. Retail Class B shares
were offered beginning September 14, 1998.
The performance reflected in the graphs begins at July 31, 1993 for the
Institutional Class and Retail Class B shares, and at April 30, 1994 for
Retail Class A shares. Performance in the graph for Retail Class B shares
reflects the deduction of the 1.00% contingent deferred sales charge applied
in year six.
Performance shown in the table begins at July 16, 1993 for Institutional Class
and Retail Class B shares, and at April 12, 1994 for Retail Class A shares.
Performance in the table for Retail Class B shares with load reflects the
deduction of the applicable contingent deferred sales charge.
* Performance shown prior to the 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. Actual cumulative
performance since inception for Retail Class B shares is 0.35% without CDSC
and -4.50% with CDSC.
The performance of the Lehman Aggregate Bond Index does not include operating
expenses that are incurred by the Portfolio.
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
Comparison of Change in the Value of a $10,000 Investment in the ARK Income
Fund, Retail Class A Class, versus the Lehman 1-3 Year Government Bond Index,
and the Lipper Short U.S. Treasury Funds Average
RETAIL CLASS B: VALUE OF A $10,000 INVESTMENT
7/31/93 Apr. 94 Apr. 95 Apr. 96 Apr. 97 Apr. 98 Apr. 99
----------------------- ------- ------- ------- ------- ------- ------- -------
ARK Income Fund, Retail B Class with CDSC $10,000 $9,984 $10,636 $11,535 $12,286 $13,618 $14,072
Lehman Aggregate Bond Index $10,000 $9,835 $10,556 $11,467 $12,279 $13,620 $14,474
Lipper Corporate Debt A Rated Funds Average $10,000 $9,796 $10,395 $11,217 $11,945 $13,222 $13,854
49
53
CMD INVESTMENT GROUP, INC: RETAIL CLASS INVESTOR
[PHOTO OMITTED]
Vicky McAndrews, Russ Causey and Don Dolan are shown in the brand new offices of
CMD Investment Group located in Baltimore. CMD provides customer support and
receivables management services to the healthcare and education industries. They
use the ARK Money Market Portfolio to hold their excess cash. As their business
grows, they can move to a sweep account.
50
54
MONEY MARKET PORTFOLIOS
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 provide preservation of 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 trust investment personnel.
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 provide high 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.
51
55
MONEY MARKET PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MONEY MARKET PORTFOLIOS
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 over 10 years of investment management experience.
REVIEW AND OUTLOOK
This past year was another successful year for the Money Market Portfolios as
each Portfolio continued to meet the investment objectives of providing
preservation of principal, daily liquidity and competitive current income. Each
of the Portfolios continued to grow, with the ARK Money Market Portfolio
becoming our second billion-dollar portfolio. The ARK U.S. Government Money
Market Portfolio, which is rated AAA by Standard & Poor's Rating Group and Aaa
by Moody's Investors Service, Inc., topped the $2 billion mark during the first
quarter of 1999. Total assets for the four ARK Money Market Portfolios exceeded
$3.2 billion at fiscal year end.
The money market interest rate environment during 1998 was influenced by
the Federal Reserve's easing of monetary policy by 25 basis points on three
separate occasions during the fall of 1998. This was the first easing of
monetary policy since January 1996. The cut in short-term interest rates was in
response to growing fears of a global economic recession and to "cushion the
effects of increasing weakness in foreign economies." In spite of the weak
global economies, the U.S. economy continued its spectacular performance of the
past three years. The unemployment rate fell to a 29-year low of 4.2%. Consumer
prices increased by less than 2% during 1998 and economic growth surged as
confident consumers pushed housing starts to a record high and consumer spending
remained robust.
Our investment approach, which we have been utilizing since the inception
of the ARK Funds in June of 1993, is to actively manage the Portfolios. We
utilize a conservative and highly disciplined relative-value process. The
appropriate average maturity for each Portfolio is determined by considering our
shareholders' liquidity needs, expected monetary policy, the shape of the yield
curve, and implied forward interest rate analysis. Commercial paper and
corporate securities are purchased from only those issuers that meet our
stringent credit evaluation standards. The credit quality of each
52
56
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
issuer on our approved list is monitored to ensure that high credit quality is
maintained. We then select individual securities after completing a
relative-value analysis. We also seek to take advantage of short-lived market
inefficiencies and trading opportunities.
An example of our active management style with respect to average maturity
decisions is apparent when reviewing the ARK U.S. Government Money Market
Portfolio. This Portfolio's average maturity was increased from 44 days to 54
days during the week of October 16, 1998, as we correctly anticipated the
Federal Reserve lowering short-term interest rates. This strategy enhanced the
Portfolio's yield as we purchased longer-dated securities at higher yields than
were available after the Federal Reserve eased monetary policy in October and
November.
Currently, economic growth is too fast for the Federal Reserve to ease
monetary policy, and inflation is too low for it to tighten monetary policy.
However, given the current strength of the economy and the improvement of
foreign economies, the risk of a tightening of monetary policy has increased.
Given our outlook, our strategy is to be cautious while selectively purchasing
longer-dated, higher-yielding securities while maintaining our exposure to
floating and variable-rate securities. As always we will continue to utilize our
conservative and disciplined active relative-value approach to managing the ARK
Money Market Portfolios.
53
57
MONEY MARKET PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MONEY MARKET PORTFOLIOS continued
[PHOTO OMITTED]
Money Market Portfolio Performance as of 4/30/99
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
THIRTY-DAY YIELD COMPARISON
5/31/98 6/30/98 7/31/98 8/31/98 9/30/98 10/31/98
------- ------- ------- ------- ------- --------
ARK Funds Money Market, Institutional 5.31 5.33 5.30 5.32 5.30 5.10
IBC/Financial Data First Tier Institutions Only 5.27 5.28 5.28 5.27 5.25 5.04
ARK Funds Money Market, Retail 5.06 5.07 5.05 5.07 5.05 4.85
IBC/Financial Data First Tier 4.91 4.92 4.92 4.91 4.90 4.70
ARK Funds Money Market, Institutional II 5.27 5.28 5.26 5.28 5.25 5.06
11/30/98 12/31/98 1/31/99 2/28/99 3/31/99 4/30/99
-------- -------- ------- ------- ------- -------
ARK Funds Money Market, Institutional 5.01 5.01 4.90 4.67 4.66 4.66
IBC/Financial Data First Tier Institutions Only 4.93 4.87 4.76 4.66 4.62 4.60
ARK Funds Money Market, Retail 4.76 4.76 4.67 4.44 4.43 4.43
IBC/Financial Data First Tier 4.59 4.53 4.41 4.28 4.23 4.21
ARK Funds Money Market, Institutional II 4.97 4.97 4.83 4.60 4.59 4.59
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
Tax-Free Money Market Portfolio Performance as of 4/30/99
THIRTY-DAY YIELD COMPARISON
5/31/98 6/30/98 7/31/98 8/31/98 9/30/98 10/31/98
------- ------- ------- ------- ------- --------
ARK Tax-Free Money Market, Institutional 3.42 3.24 3.02 3.02 3.19 3.01
IBC/Financial Data Tax-Free Institutions Only 3.45 3.28 3.12 3.06 3.17 3.00
ARK Tax-Free Money Market, Retail 3.17 2.99 2.77 2.77 2.94 2.76
IBC/Financial Data Tax-Free Stockbroker & General Purpose 3.18 3.02 2.86 2.81 2.91 2.75
ARK Tax-Free Money Market, Institutional II 3.38 3.20 2.98 2.98 3.15 2.97
11/30/98 12/31/98 1/31/99 2/28/99 3/31/99 4/30/99
-------- -------- ------- ------- ------- -------
ARK Tax-Free Money Market, Institutional 2.92 2.98 2.74 2.30 2.64 2.84
IBC/Financial Data Tax-Free Institutions Only 2.94 2.94 2.74 2.41 2.68 2.75
ARK Tax-Free Money Market, Retail 2.67 2.73 2.51 2.07 2.41 2.61
IBC/Financial Data Tax-Free Stockbroker & General Purpose 2.68 2.68 2.49 2.19 2.41 2.48
ARK Tax-Free Money Market, Institutional II 2.88 2.94 2.67 2.23 2.57 2.77
54
58
ARK FUNDS ANNUAL REPORT APRIL 30, 1999
U.S. Government Money Market Portfolio Performance as of 4/30/99
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
THIRTY-DAY YIELD COMPARISON
5/31/98 6/30/98 7/31/98 8/31/98 9/30/98 10/31/98
------- ------- ------- ------- ------- --------
ARK U.S. Government Money Market, Institutional 5.15 5.19 5.20 5.25 5.19 4.87
IBC/Financial Data Government Only Institutions Only 5.09 5.10 5.11 5.10 5.07 4.70
ARK U.S. Government Money Market, Retail 4.90 4.94 4.95 5.00 4.94 4.62
IBC/Financial Data U.S. Government & Agencies 4.88 4.89 4.89 4.89 4.86 4.57
ARK U.S. Government Money Market, Institutional II 5.11 5.15 5.16 5.21 5.15 4.83
11/30/98 12/31/98 1/31/99 2/28/99 3/31/99 4/30/99
-------- -------- ------- ------- ------- -------
ARK U.S. Government Money Market, Institutional 4.78 4.72 4.63 4.58 4.56 4.53
IBC/Financial Data Government Only Institutions Only 4.58 4.52 4.46 4.42 4.44 4.41
ARK U.S. Government Money Market, Retail 4.53 4.47 4.40 4.35 4.33 4.30
IBC/Financial Data U.S. Government & Agencies 4.47 4.41 4.32 4.26 4.24 4.20
ARK U.S. Government Money Market, Institutional II 4.74 4.68 4.56 4.51 4.49 4.46
[GRAPHIC OMITTED]
In the printed version of the document, a line graph appears which depicts
the following plot points:
U.S. Treasury Money Market Portfolio Performance as of 4/30/99
THIRTY-DAY YIELD COMPARISON
5/31/98 6/30/98 7/31/98 8/31/98 9/30/98 10/31/98
------- ------- ------- ------- ------- --------
ARK U.S. Treasury Money Market, Institutional 4.82 4.87 4.79 4.76 4.78 4.38
IBC/Financial Data 100% U.S. Treasury 4.63 4.64 4.62 4.61 4.59 4.24
ARK U.S. Treasury Money Market, Retail 4.57 4.62 4.54 4.51 4.53 4.13
ARK U.S. Treasury Money Market, Institutional II 4.78 4.83 4.75 4.72 4.74 4.34
11/30/98 12/31/98 1/31/99 2/28/99 3/31/99 4/30/99
-------- -------- ------- ------- ------- -------
ARK U.S. Treasury Money Market, Institutional 4.31 4.33 4.25 4.13 4.21 4.18
IBC/Financial Data 100% U.S. Treasury 4.08 4.03 3.99 3.96 4.00 3.99
ARK U.S. Treasury Money Market, Retail 4.06 4.08 4.02 3.90 3.98 3.95
ARK U.S. Treasury Money Market, Institutional II 4.27 4.29 4.18 4.06 4.14 4.11
55
59
INDEPENDENT AUDITOR'S REPORT
The Trustees and Shareholders -- ARK Funds:
We have audited the accompanying statements of net assets (in the case of
Small-Cap Equity Portfolio, Statement of Assets and Liabilities and Schedule of
Investments) of the 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, and International Equity Selection
Portfolio, portfolios of ARK Funds, (the "Portfolios"), as of April 30, 1999 and
the related statements of operations, statements of changes in net assets and
financial highlights for each of the years or periods presented below:
Money Market Portfolios, Short-Term Treasury Portfolio, Maryland Tax-Free
Portfolio, Income Portfolio, Intermediate Fixed Income Portfolio, Balanced
Portfolio, Equity Income Portfolio, Equity Index Portfolio, Blue Chip
Equity Portfolio, Capital Growth Portfolio, Mid-Cap Equity Portfolio and
Small-Cap Equity Portfolio -- statements of operations for the year ended
April 30, 1999, statements of changes in net assets for each of the years
or periods in the two-year period ended April 30, 1999, and the financial
highlights for each of the periods presented for these Portfolios, on pages
118 through 121.
Short-Term Bond Portfolio, Pennsylvania Tax-Free Portfolio, U.S. Government
Bond Portfolio, Value Equity Portfolio and International Equity Selection
Portfolio -- statements of operations for the year ended April 30, 1999,
and statements of changes in net assets and financial highlights for the
year ended April 30, 1999 and the period from March 1, 1998 to April 30,
1998. The statements of changes in net assets and financial highlights of
these Portfolios for the periods ended prior to April 30, 1998 were audited
by other auditors whose report dated April 16, 1998, expressed an
unqualified opinion thereon.
These financial statements and financial highlights are the responsibility of
the Portfolios' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of April 30, 1999 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Money
Market Portfolio, Tax-Free Money Market Portfolio, U.S. Government Money Market
Portfolio, U.S. Treasury Money Market Portfolio, Short-Term Treasury Portfolio,
Short-Term Bond Portfolio, Maryland Tax-Free Portfolio, Pennsylvania Tax-Free
Portfolio, Income Portfolio, Intermediate Fixed Income Portfolio, U.S.
Government Bond Portfolio, Balanced Portfolio, Equity Income Portfolio, Value
Equity Portfolio, Equity Index Portfolio, Blue Chip Portfolio, Capital Growth
Portfolio, Mid-Cap Equity Portfolio, Small-Cap Equity Portfolio and
International Equity Selection Portfolio as of April 30, 1999, 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 others as specified
above), in conformity with generally accepted accounting principles.
[LOGO OMITTED]
Boston, Massachusetts
May 28, 1999
56
60
- --------------------------------------------------------------------------------
This report and the financial statements contained herein are submitted for
the general information of the shareholders of the ARK Funds. The report is not
authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus for each of the portfolios included.
Shares of the portfolios are not deposits or obligations of, or guaranteed or
endorsed by FMB Trust Company, N.A., any of its affiliates, or any depository
institution, are not insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other government agency. Investing in the shares
involves investment risks including the possible loss of principal amount
invested.
- --------------------------------------------------------------------------------
57
61
Investment Advisers
- --------------------------------------------------------------------------------
Allied Investment Advisors, Inc.
Baltimore, Maryland
Trustees
- --------------------------------------------------------------------------------
William H. Cowie, Jr.
David D. Downes
Charlotte R. Kerr
George K. Reynolds III
Thomas Schweizer
Richard B. Seidel
Administrator
- --------------------------------------------------------------------------------
SEI Investments Mutual Funds Services
Oaks, Pennsylvania
Distributor
- --------------------------------------------------------------------------------
SEI Investments Distribution Co.
Oaks, Pennsylvania
Legal Counsel
- --------------------------------------------------------------------------------
Piper & Marbury L.L.P.
Baltimore, Maryland
Independent Auditors
- --------------------------------------------------------------------------------
KPMG LLP
Boston, Massachusetts
Custodian
- --------------------------------------------------------------------------------
FMB Trust Company, N.A.
Baltimore, Maryland
This material must be preceded or accompanied by a current prospectus.
AK0430(99/06)
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: MONEY MARKET PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Repurchase Agreements -- 4%
Taxable Municipal Bonds -- 6%
Certificates of Deposit -- 13%
Commercial Paper -- 31%
Asset-Backed Securities -- 2%
Corporate Obligations -- 44%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
CORPORATE OBLIGATIONS -- 43.5%
BANKS -- 9.5%
Chase Manhattan
9.750%, 06/15/99 $ 1,250 $ 1,256
First National Bank
Chicago (A)
4.880%, 05/01/99 28,000 27,984
First Union National Bank (A)
5.020%, 05/16/99 15,000 15,000
Huntington National Bank (A)
4.900%, 05/01/99 20,000 19,992
PNC Bank (A)
4.790%, 05/01/99 5,000 5,000
4.800%, 05/01/99 15,000 14,999
4.926%, 05/13/99 11,000 10,999
---------
Total Banks $ 95,230
---------
FINANCIAL SERVICES -- 13.9%
Abbey National Treasury (B)
5.720%, 06/11/99 5,000 5,000
Abbey National Treasury,
MTN (B)
5.640%, 07/15/99 15,000 14,998
American Express Centurion (A)
4.950%, 05/01/99 25,000 25,000
Beta Finance, MTN
5.160%, 04/17/00 10,000 10,000
Beta Finance, MTN (A) (B)
4.975%, 05/01/99 10,000 10,000
Beta Finance, MTN (B)
5.150%, 01/13/00 10,000 10,000
Capital One Funding (A) (B)
4.890%, 05/06/99 4,000 4,000
4.890%, 05/06/99 4,100 4,100
CIT Group, MTN (A)
4.800%, 05/01/99 25,000 24,996
4.950%, 05/01/99 5,000 5,000
General Electric Engine
Receivables (A)
4.908%, 05/03/99 1,140 1,140
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
Norwest
6.000%, 08/01/99 $ 25,500 $ 25,554
---------
Total Financial Services $ 139,788
---------
Bob Sumerel Tire, LOC (A) (B)
4.920%, 05/05/99 5,250 5,250
Elsinore Properties, LOC (A)
4.920%, 05/07/99 10,000 10,000
Reynolds Road Fitness Center,
Series 1998, LOC (A) (B)
4.920%, 05/06/99 6,000 6,000
Trap Rock Industry,
Demand RB, LOC (A)
5.000%, 05/05/99 1,600 1,600
---------
Total Miscellaneous Business Services $ 22,850
---------
PERSONAL CREDIT INSTITUTIONS -- 8.5%
Chrysler Finance
12.750%, 11/01/99 5,000 5,186
Chrysler Finance, Series P, MTN
6.440%, 06/23/99 3,000 3,003
Chrysler Finance, Series Q, MTN
6.670%, 06/21/99 5,000 5,004
General Electric Capital, MTN (A)
4.950%, 07/13/99 28,000 28,000
General Motors Acceptance
8.625%, 06/15/99 5,305 5,323
6.050%, 10/04/99 3,000 3,010
General Motors Acceptance, MTN
7.375%, 06/09/99 10,000 10,018
5.850%, 04/06/00 13,500 13,556
Xerox Credit
6.500%, 06/11/99 12,000 12,007
---------
Total Personal Credit Institutions $ 85,107
---------
SECURITY BROKERS & DEALERS -- 9.3%
Bear Stearns (A)
5.030%, 05/01/99 5,000 5,000
Bear Stearns, MTN
6.075%, 09/24/99 7,000 7,027
Goldman Sachs Group, MTN (A)
5.000%, 05/11/99 10,000 10,000
Goldman Sachs Group, MTN (B)
5.310%, 02/25/00 12,000 12,000
Lehman Brothers Holdings,
Series E, MTN
6.900%, 07/15/99 2,000 2,004
Merrill Lynch & Company, MTN (A)
5.410%, 06/07/99 3,000 3,011
Morgan Stanley, Dean Witter,
Discover, MTN, Series I (A)
5.300%, 07/13/99 10,000 10,007
Salomon Brothers
7.125%, 08/01/99 15,000 15,048
62
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]MONEY MARKET PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
Salomon Brothers, MTN
7.000%, 05/15/99 $ 1,070 $ 1,070
Salomon Smith Barney
Holdings
6.500%, 03/01/00 5,900 5,951
Salomon Smith Barney
Holdings, Series D, MTN
7.650%, 05/18/99 12,000 12,012
Shearson Lehman Hutton
Holdings
8.950%, 01/10/00 10,000 10,204
---------
Total Security Brokers & Dealers $ 93,334
---------
Total Corporate Obligations
(Cost $436,309) $ 436,309
---------
BANKS -- 2.6%
Bankers Trust (A)
4.840%, 05/01/99 10,000 9,999
NationsBank (A)
4.830%, 05/01/99 9,000 8,999
Security Pacific
9.750%, 05/15/99 7,010 7,022
---------
Total Banks $ 26,020
---------
FOREIGN BANKS -- 10.0%
Bayerische Hypo-Vereinsbank
5.150%, 04/20/00 20,000 19,991
Canadian Imperial Bank of
Commerce NY
5.110%, 02/22/00 15,000 14,996
Royal Bank of Canada
5.120%, 03/21/00 5,000 4,999
Royal Bank of Canada (A)
4.805%, 05/01/99 25,000 24,997
Societe Generale
5.690%, 07/16/99 10,000 9,999
Toronto Dominion Bank NY (A)
4.790%, 05/01/99 25,000 24,994
---------
Total Foreign Banks $ 99,976
---------
Total Certificates of Deposit
(Cost $125,996) $ 125,996
---------
COMMERCIAL PAPER (C) -- 31.3%
Associates Financial Services
4.886%, 05/13/99 15,000 14,976
4.889%, 05/18/99 15,000 14,966
Atlantis One Funding
4.892%, 05/17/99 25,000 24,946
Ciesco LP (B)
4.902%, 05/03/99 30,000 29,992
Conagra
4.944%, 05/25/99 5,000 4,984
Corporate Asset Funding (B)
4.842%, 06/24/99 31,011 30,788
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
Dayton Hudson
4.962%, 05/21/99 $ 5,000 $ 4,986
Delaware Funding (B)
4.839%, 05/18/99 12,060 12,032
4.869%, 07/20/99 17,067 16,885
First Data
4.863%, 05/04/99 35,000 34,986
Ford Motor Credit
4.912%, 05/03/99 35,000 34,990
Household Finance
4.922%, 05/03/99 30,000 29,992
MCI Worldcom (B)
5.078%, 05/10/99 5,000 4,994
Norfolk Southern
5.047%, 05/03/99 5,000 4,999
Standard Credit Card
Master Trust
4.879%, 06/07/99 15,000 14,925
4.898%, 07/21/99 15,000 14,837
Standard Credit Card
Master Trust (B)
4.879%, 07/20/99 10,000 9,893
Texas Utilities (B)
5.063%, 07/07/99 5,000 4,953
Textron Financial
4.995%, 05/20/99 5,000 4,987
---------
Total Commercial Paper
(Cost $314,111) $ 314,111
---------
TAXABLE MUNICIPAL BONDS -- 6.1%
CALIFORNIA -- 2.2%
Oakland-Alameda
County CP, LOC
4.900%, 05/03/99 14,350 14,350
Riverside County COP,
LOC (A)
4.900%, 05/05/99 7,900 7,900
---------
Total California $ 22,250
---------
ILLINOIS -- 1.0%
Illinois State Health Facilities RB,
MBIA (A)
4.900%, 05/05/99 9,800 9,800
---------
Total Illinois $ 9,800
---------
Maryland State Health & Higher
Education Facilities RB,
Series A, LOC (A)
5.050%, 05/05/99 5,000 5,000
---------
Total Maryland $ 5,000
---------
NEW JERSEY -- 0.5%
New Jersey State Economic Development
Authority RB, LOC (A)
5.000%, 05/05/99 4,600 4,600
---------
Total New Jersey $ 4,600
---------
58
63
STATEMENTS OF NET ASSETS
APRIL 30, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
NEW YORK -- 1.2%
New York CP, FGIC
5.049%, 05/21/99 $ 12,000 $ 12,000
--------- ---------
Total New York $ 12,000
---------
NORTH CAROLINA -- 0.6%
Durham COP, Series B (A)
4.810%, 05/05/99 1,500 1,500
Winston-Salem COP, LOC
4.940%, 05/10/99 5,000 5,000
--------- ---------
Total North Carolina $ 6,500
---------
PENNSYLVANIA -- 0.1%
Pennsylvania State Economic
Development Finance
Authority RB, LOC (A)
5.000%, 05/06/99 525 525
--------- ---------
Total Pennsylvania $ 525
---------
Total Taxable Municipal Bonds
(Cost $60,675) $ 60,675
---------
ASSET-BACKED SECURITIES -- 2.2%
Asset Backed Trust MRL 1996,
Series A-5 (A)
4.929%, 05/15/99 9,000 9,000
Ford Credit Auto Owner Trust,
Series 1999-A, Class A1
5.010%, 07/15/99 1,520 1,520
Structured Enhanced Return
Trust, Series A-39, MBIA
(A) (B)4.963%, 05/25 4,087 4,088
Structured Enhanced Return
Trust, Series A-42, MTN (A)
4.933%, 05/25/99 7,145 7,146
--------- ---------
Total Asset-Backed Securities
(Cost $21,754) $ 21,754
---------
REPURCHASE AGREEMENTS -- 4.0%
Goldman Sachs
4.800%, dated 04/30/99, matures
05/03/99, repurchase price
$616,845 (collateralized by
U.S. Treasury Bond: total
market value $629,726) 617 617
4.890%, dated 04/30/99, matures
05/03/99, repurchase price
$40,016,300 (collateralized by
U.S. Treasury Bond: total
market value $40,799,611) 40,000 40,000
--------- ---------
TOTAL REPURCHASE AGREEMENTS
(Cost $40,617) $ 40,617
--------- ---------
MARKET
DESCRIPTION VALUE (000)
- ----------- -----------
Total Investments -- 99.7%
(Cost $999,462) $ 999,462
===========
Other Assets and Liabilities, Net -- 0.3% $ 3,234
===========
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 527,107,454 outstanding
shares of beneficial interest 527,091
Portfolio Shares of Retail Class
A (unlimited authorization -- no par value)
based on 246,490,103 outstanding shares
of beneficial interest 246,480
Portfolio Shares of Retail Class B (unlimited
authorization -- no par value)
based on 22,052 outstanding shares of
beneficial interest 22
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 229,048,626 outstanding
shares of beneficial interest 229,046
Undistributed net investment income 64
Distributions in excess of net realized gain
on investments (7)
-----------
Total Net Assets -- 100.0% $ 1,002,696
===========
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $ 1.00
===========
Net Asset Value, Offering and Redemption
Price Per Share -- Retail Class 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) Variable Rate Security. The rate reported on the Statement of Net Assets is
the rate in effect on April 30, 1999. The date shown is the next scheduled
reset date.
(B) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional investors.
(C) The annualized discount yield at time of purchase is shown as the rate
on the Statement of Net Assets.
COP--Certificate of Participation
CP--Commercial Paper
LOC--Securities are held in connection with a letter of credit issued by a
major commercial bank or other financial institution.
MTN--Medium Term Note
RB--Revenue Bond The following organizations have provided underlying credit
support for securities listed above, as indicated.
FGIC--Financial Guaranty Insurance Corporation
MBIA--Municipal Bond Insurance Association
The accompanying notes are an integral part of the financial statements.
59
64
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: TAX-FREE MONEY MARKET PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINT FOLLOWS]
Anticipation Notes -- 7%
General Obligation -- 8%
Tax-Exempt Commercial Paper -- 10%
Revenue Bonds -- 75%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
MUNICIPAL BONDS & NOTES -- 99.4%
ALASKA -- 0.4%
Valdez, Industrial Development
Authority RB, Exxon Pipeline
Company Project (A)
4.200%, 05/01/99 $ 700 $ 700
-------
Total Alaska $ 700
-------
ARIZONA -- 3.9%
Arizona State School District
COP 4.200%, 07/30/99 1,500 1,505
Arizona State School District
COP, Series A
4.100%, 07/30/99 4,500 4,507
-------
Total Arizona $ 6,012
-------
CALIFORNIA -- 6.1%
California Community College
Financing Authority RB,
Series 1998-A24, LOC (A)
3.650%, 05/05/99 5,000 5,000
Los Angeles County,
Metropolitan Transit
Authority RB, AMBAC (A)
4.100%, 05/05/99 3,000 3,000
Oakland, Joint Powers
Financing Authority RB,
Series A-1, FSA (A)
3.900%, 05/06/99 1,400 1,400
-------
Total California $ 9,400
-------
COLORADO -- 0.8%
Colorado State Educational
Facilities Authority RB,
Pro Rodeo Hall of Fame
Project, LOC (A)
4.050%, 05/06/99 1,285 1,285
-------
Total Colorado $ 1,285
-------
DISTRICT OF COLUMBIA -- 5.0%
District of Columbia GO,
Series 1992 A-1, LOC (A)
4.300%, 05/01/99 400 400
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
District of Columbia GO,
Series 1992 A-2, LOC (A)
4.300%, 05/01/99 $ 200 $ 200
District of Columbia GO,
Series 1992 A-3, LOC (A)
4.300%, 05/01/99 700 700
District of Columbia GO,
Series 1992 A-5, LOC (A)
4.300%, 05/01/99 800 800
District of Columbia RB,
National Rehabilitation Hospital,
MBIA, Pre-refunded @ 102 (B)
7.100%, 11/01/99 2,500 2,596
District of Columbia TECP,
National Academy of Sciences
Project, AMBAC
2.950%, 09/07/99 3,000 3,000
-------
Total District of Columbia $ 7,696
-------
FLORIDA -- 7.9%
Florida State Financing
Commission TECP,
Series A , LOC
3.050%, 08/11/99 5,050 5,050
Florida State Housing Finance
Authority RB, FNMA (A)
4.000%, 05/05/99 5,235 5,235
Lee County, Housing Finance
Authority RB, FNMA (A)
4.000%, 05/05/99 1,985 1,985
-------
Total Florida $12,270
-------
ILLINOIS -- 2.7%
Illinois State Health Facility
Authority RB, Swedish
Covenant Hospital Project,
AMBAC (A)
4.000%, 05/05/99 1,400 1,400
Illinois State Health Facility
Authority RB, Swedish
Covenant Hospital Project,
Series 1995, AMBAC (A)
4.000%, 05/05/99 2,100 2,100
Illinois State Pollution
Control RB, Amoco Oil
Company Project (A)
4.200%, 05/01/99 710 710
-------
Total Illinois $ 4,210
-------
INDIANA -- 3.0%
Allen County, Economic
Development RB, Golden
Years Homestead Project,
LOC (A)
4.050%, 05/06/99 4,255 4,255
Hammond, Pollution Control RB,
Amoco Oil Project (A)
4.200%, 05/01/99 400 400
-------
Total Indiana $ 4,655
-------
60
65
STATEMENTS OF NET ASSETS
APRIL 30, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
IOWA -- 3.0%
Iowa State Higher Education
Authority RB, St. Ambrose
University Project, LOC (A)
4.150%, 05/06/99 $1,200 $ 1,200
Iowa State Schools Cash
Anticipation Note, FSA
3.500%, 01/28/00 3,000 3,011
Storm Lake, Private College RB,
Buena Vista College Project,
LOC (A)
4.150%, 05/06/99 500 500
-------
Total Iowa $ 4,711
-------
LOUISIANA -- 0.4%
East Baton Rouge, Pollution
Control RB, Exxon Project (A)
4.250%, 05/01/99 550 550
-------
Total Louisiana $ 550
-------
MARYLAND -- 14.7%
Baltimore County, Garrison
Forest School Project RB,
LOC (A) 4.000%, 05/06/99 3,000 3,000
Gaithersburg RB, Asbury
Methodist Hospital,
Pre-refunded @ 102 (B)
7.850%, 01/01/00 2,000 2,100
Howard County BAN, Series A
3.070%, 04/14/00 1,300 1,300
Maryland State Department of
Transportation RB,
Pre-refunded @ 102 (B)
6.700%, 08/15/99 2,625 2,700
Maryland State Health &
Higher Education Facilities
Authority RB, Hospital &
University Improvements,
LOC (A)
3.950%, 05/05/99 1,100 1,100
Maryland State Health &
Higher Education Facilities
Authority RB, Pooled Loan
Project, Series D, LOC (A)
3.950%, 05/06/99 5,533 5,533
Maryland State Health & Higher
Education Facilities Authority RB,
Series 1998-A, LOC (A)
3.850%, 05/05/99 5,000 5,000
North East Maryland Waste
Disposal Authority RB,
AMBAC (A)
3.750%, 05/05/99 1,060 1,060
Suburban Washington D.C.
Sewer Disposal Service RB,
Pre-refunded @ 102 (B)
6.700%, 07/01/99 1,000 1,025
-------
Total Maryland $22,818
-------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
MINNESOTA -- 4.2%
Minnesota State School Districts
COP, Series A, LOC
3.670%, 08/20/99 $1,500 $ 1,500
University of Minnesota,
DC Trust RB, Series 1997A,
LOC (A)
4.100%, 05/05/99 5,000 5,000
-------
Total Minnesota $ 6,500
-------
MISSISSIPPI -- 0.1%
Jackson County RB, Chevron
USA Project, Series 93 (A)
4.250%, 05/01/99 100 100
-------
Total Mississippi $ 100
-------
MISSOURI -- 3.4%
Columbia RB, Series A, LOC (A)
3.900%, 05/05/99 1,000 1,000
Missouri State Development
Finance Authority RB, LOC (A)
4.400%, 05/01/99 1,000 1,000
Missouri State Development
Finance Authority RB, Science
City Union Station,
Series C, LOC (A)
4.400%, 05/01/99 300 300
Missouri State Health &
Educational Facilities
Authority RAN, Series G
3.500%, 04/29/00 2,000 2,005
Missouri State Health &
Educational Facilities
Authority RB, Washington
University Project, Series B,
LOC (A)
4.250%, 05/01/99 900 900
-------
Total Missouri $ 5,205
-------
MONTANA -- 0.6%
Montana State Health Facilities
Authority RB, FGIC (A)
4.050%, 05/06/99 1,000 1,000
-------
Total Montana $ 1,000
-------
NEVADA -- 0.6%
Clark County, Airport
Improvement Authority RB,
Series A, MBIA (A)
3.850%, 05/05/99 900 900
-------
Total Nevada $ 900
-------
NEW YORK -- 7.2%
New York City GO, MBIA (A)
4.250%, 05/01/99 400 400
New York City GO, Series B-2,
LOC (A)
4.400%, 05/01/99 500 500
61
66
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]TAX-FREE MONEY MARKET PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
New York City, Mass Transit Authority
Demand Certificate Trust,
Series 1993C, FGIC (A)
4.050%, 05/05/99 $4,000 $ 4,000
New York City, Municipal Water
Finance Authority RB,
Series A, FGIC (A)
4.400%, 05/01/99 300 300
New York City, Transitional
Finance Authority RB,
Series A-1, SPA (A)
4.000%, 05/05/99 5,000 5,000
New York City, Water & Sewer
Authority RB, Series C, FGIC
(A) 4.250%, 05/01/99 1,000 1,000
-------
Total New York $11,200
-------
NORTH CAROLINA -- 9.3%
Charlotte, Airport Development
Authority RB, Series A,
MBIA (A)
3.850%, 05/05/99 6,900 6,900
City of Greensboro, Public
Improvement RB, Series 94-B,
LOC (A)
3.900%, 05/05/99 1,000 1,000
Durham, Water & Sewer
System RB (A)
4.050%, 05/05/99 2,000 2,000
University of North Carolina
RB, Chapel Hill Project,SPA (A)
3.850%, 05/05/99 1,500 1,500
Winston Salem COP, LOC (A)
3.950%, 05/06/99 3,000 3,000
-------
Total North Carolina $14,400
-------
PENNSYLVANIA -- 8.1%
Bucks County, Industrial Development
Authority RB, LOC (A)
3.450%, 05/05/99 2,200 2,200
Cumberland County, Municipal
Authority RB, United Methodist
Homes for the Aging Project,
Mandatory Put @ 100,
LOC (A) (C)
3.750%, 06/01/99 3,000 3,000
Lehigh County, Industrial
Development Authority RB,
Series A, LOC (A)
3.450%, 05/05/99 1,500 1,500
Pennsylvania State GO, Series A,
Pre-refunded @ 101.5 (B)
7.000%, 05/01/00 950 999
Pennsylvania State Higher
Education Facilities Authority
RB, Council of Independent
Colleges, Series 97-A1, LOC,
Mandatory Put @ 100 (C)
3.125%, 03/01/00 2,400 2,400
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
Pennsylvania State Higher
Education Facilities Authority
RB, Council of Independent
Colleges, Series 97-A3, LOC,
Mandatory Put @ 100 (C)
3.125%, 03/01/00 $2,500 $ 2,500
-------
Total Pennsylvania $12,599
-------
Berkeley County, South Carolina
Pollution Control RB,
Amoco Chemical Project (A)
4.200%, 05/01/99 1,850 1,850
South Carolina State TECP
2.900%, 05/11/99 7,000 7,000
-------
Total South Carolina $ 8,850
-------
TEXAS -- 6.1%
Georgetown, Higher Education
Financing Authority RB,
Southwestern University Project,
Series 1984, LOC (A)
3.950%, 05/05/99 3,000 3,000
Northern Central Texas RB,
Dallas Methodist Hospital,
MBIA (A)
4.250%, 05/01/99 200 200
Texas Municipal Gas
Corporation RB, FSA (A)
4.000%, 05/05/99 4,000 4,000
Texas State Higher Education
Authority RB, Series B,
FGIC (A)
4.000%, 05/05/99 2,315 2,315
-------
Total Texas $ 9,515
-------
UTAH -- 1.3%
Utah State Highway GO,
Series 97-A, LOC
3.100%, 08/16/99 2,000 2,000
-------
Total Utah $ 2,000
-------
VERMONT -- 1.4%
Vermont State Educational &
Health Buildings RB, Capital
Asset Financing Program,
Series 1, LOC (A)
4.000%, 05/06/99 2,100 2,100
-------
Total Vermont $ 2,100
-------
Wisconsin State GO, Series G,
Pre-refunded @ 101 (B)
6.750%, 05/01/99 3,465 3,500
-------
Total Wisconsin $ 3,500
-------
WYOMING -- 1.2%
Lincoln County, Pollution
Control RB, Exxon Project (A)
4.200%, 05/01/99 1,000 1,000
62
67
STATEMENTS OF NET ASSETS
APRIL 30, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
Sublette County, Pollution
Control RB, Exxon Project (A)
4.200%, 05/01/99 $800 $ 800
--------
Total Wyoming $ 1,800
--------
(Cost $153,976) $153,976
--------
Total Investments -- 99.4%
(Cost $153,976) $153,976
========
Other Assets and Liabilities, Net -- 0.6% $ 1,004
========
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 77,897,665 outstanding shares of
beneficial interest 77,889
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value) based on
33,506,911 outstanding shares of beneficial
interest 33,505
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par value)
based on 43,574,868 outstanding shares
of beneficial interest 43,573
Undistributed net investment income 13
========
Total Net Assets -- 100.0% $154,980
========
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, 1999. 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.
RAN--Revenue Anticipation Note
RB--Revenue Bond
SPA--Standby Purchase Agreement
TECP--Tax-Exempt Commercial Paper
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
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
MBIA--Municipal Bond Insurance Association
The accompanying notes are an integral part of the financial statements.
[ARROW]ARK FUNDS: U.S. GOVERNMENT MONEY MARKET PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINT FOLLOWS]
Repurchase Agreements -- 36%
U.S. Government Agency Obligations -- 64%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------- ------------ -----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 64.9%
Federal Farm Credit Bank
5.550%, 06/01/99 $25,000 $ 24,998
4.760%, 01/18/00 20,000 19,994
Federal Home Loan Bank
5.723%, 05/05/99 15,000 15,000
5.540%, 07/15/99 25,000 24,997
4.900%, 12/01/99 30,000 30,000
4.915%, 01/13/00 25,000 25,003
4.900%, 02/11/00 30,500 30,469
4.950%, 02/17/00 8,000 7,985
5.150%, 03/08/00 10,000 9,994
Federal Home Loan Bank (A)
4.820%, 05/01/99 39,000 38,992
4.840%, 05/01/99 25,000 25,000
4.850%, 05/01/99 25,000 25,000
4.910%, 05/01/99 30,000 29,991
4.955%, 05/01/99 50,000 49,976
4.855%, 05/05/99 25,000 24,999
Federal Home Loan Bank
Discount Notes (B)
4.792%, 05/21/99 60,000 59,842
5.290%, 06/04/99 15,000 14,928
4.719%, 06/23/99 50,000 49,656
Federal Home Loan Mortgage
Corporation (A)
4.885%, 05/04/99 25,000 25,000
Federal Home Loan Mortgage
Corporation Discount
Notes (B)
4.841%, 05/06/99 40,000 39,973
4.860%, 05/20/99 19,000 18,952
4.823%, 06/17/99 75,000 74,533
4.747%, 07/14/99 70,000 69,324
4.861%, 08/06/99 15,000 14,807
Federal National Mortgage
Association (A)
4.585%, 05/04/99 18,000 17,988
63
68
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]U.S. GOVERNMENT MONEY MARKET PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Federal National Mortgage
Association Discount
Notes (B)
4.819%, 06/18/99 $35,000 $ 34,778
4.813%, 06/25/99 50,000 49,637
4.812%, 10/15/99 50,000 48,910
4.817%, 10/15/99 20,000 19,564
Federal National Mortgage
Association, MTN
5.560%, 05/21/99 25,000 24,998
5.180%, 03/10/00 15,000 14,989
Federal National Mortgage
Association, MTN (A)
4.795%, 06/23/99 7,000 6,997
Federal National Mortgage
Association, MTN (C)
5.000%, 05/05/00 25,000 24,971
Student Loan Marketing
Association (A)
4.910%, 05/01/99 25,000 24,999
5.107%, 05/04/99 20,000 19,994
5.107%, 05/04/99 25,000 24,995
5.207%, 05/04/99 25,000 24,992
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $1,087,225) $1,087,225
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 36.6%
Goldman Sachs
4.800%, dated 04/30/99,
matures 05/03/99, repurchase
price $2,535,949 (collateralized
by U.S. Treasury Instruments:
total market value
$2,585,634) 2,535 2,535
4.890%, dated 04/30/99,
matures 05/03/99, repurchase
price $310,126,325 (collateralized
by U.S. Treasury Instruments:
total market value
$316,200,597) 310,000 310,000
Morgan Stanley
4.890%, dated 04/30/99,
matures 05/03/99, repurchase
price $300,122,250 (collateralized
by U.S. Treasury Instruments:
total market value
$308,155,808) 300,000 300,000
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $612,535) $ 612,535
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
Total Investments -- 101.5%
(Cost $1,699,760) $1,699,760
================================================================================
Other Assets and Liabilities, Net -- (1.5%) $ (25,515)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 1,428,043,550 outstanding
shares of beneficial interest 1,427,946
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 104,036,003 outstanding shares
of beneficial interest 104,032
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 142,145,105 outstanding shares
of beneficial interest 142,138
Undistributed net investment income 161
Distributions in excess of net realized gain
on investments (32)
- --------------------------------------------------------------------------------
Total Net Assets -- 100.0% $1,674,245
================================================================================
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 Clas $ 1.00
================================================================================
(A) Variable Rate Security. The rate reported on the Statement of Net Assets is
the rate in effect on April 30, 1999. The date shown is the next scheduled
reset date.
(B) The annualized discount yield at time of purchase is shown
as the rate on the Statement of Net Assets.
(C) When Issued Security (total cost $24,971,000)
MTN--Medium Term Note
The accompanying notes are an integral part of the financial statements.
64
69
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: U.S. TREASURY MONEY MARKET PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINT FOLLOWS]
U.S. Treasury Notes -- 44%
U.S. Treasury Bills -- 56%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 99.4%
U.S. Treasury Bills (A)
4.444%, 05/27/99 $ 3,837 $ 3,825
4.469%, 05/27/99 28,453 28,363
4.477%, 05/27/99 2,224 2,217
4.495%, 05/27/99 75,000 74,757
4.499%, 05/27/99 1,589 1,584
4.517%, 05/27/99 1,804 1,798
4.565%, 05/27/99 2,527 2,519
4.583%, 05/27/99 2,010 2,003
4.450%, 06/10/99 14,102 14,034
4.407%, 06/17/99 11,144 11,080
4.369%, 07/22/99 8,555 8,472
4.428%, 08/12/99 3,654 3,608
4.437%, 10/07/99 7,787 7,638
4.432%, 10/14/99 10,644 10,431
4.471%, 10/14/99 6,322 6,195
4.496%, 10/21/99 4,250 4,160
4.509%, 10/21/99 61,206 59,909
4.584%, 11/12/99 7,649 7,466
U.S. Treasury Notes
6.375%, 05/15/99 50,000 50,030
6.875%, 07/31/99 120,000 120,629
7.875%, 11/15/99 25,000 25,427
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $446,145) $446,145
- --------------------------------------------------------------------------------
Total Investments -- 99.4%
(Cost $446,145) $446,145
================================================================================
Other Assets and Liabilities, Net -- 0.6% $ 2,670
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 289,937,708 outstanding
share of beneficial interest $289,914
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)based on
19,632,288 outstanding shares of
beneficial interest 19,631
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 139,264,960 outstanding
shares of beneficial interest 139,257
Undistributed net investment income 45
Distributions in excess of net realized
gain on investments (32)
================================================================================
Total Net Assets -- 100.0% $448,815
================================================================================
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.
65
70
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: SHORT-TERM TREASURY PORTFOLIO
U.S. Treasury Bills -- 5%
U.S. Treasury Notes -- 95%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 99.0%
U.S. Treasury Bills
4.507%, 10/21/99 $11,442 $ 11,411
4.509%, 10/21/99 915 896
U.S. Treasury Notes
6.000%, 08/15/99 729 732
5.875%, 08/31/99 60 60
5.875%, 11/15/99 154 155
4.710%, 12/31/99 2,186 2,227
5.500%, 02/29/00 2,000 2,010
6.375%, 05/15/00 4,000 4,057
8.750%, 08/15/00 4,000 4,183
5.750%, 11/15/00 1,000 1,010
4.625%, 11/30/00 1,025 1,018
4.625%, 12/31/00 2,549 2,531
4.500%, 01/31/01 6,000 5,942
5.375%, 02/15/01 8,000 8,039
5.000%, 02/28/01 2,000 1,997
6.500%, 08/31/01 11,000 11,325
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $47,575) $ 47,593
- --------------------------------------------------------------------------------
Total Investments -- 99.0%
(Cost $47,575) $ 47,593
================================================================================
Other Assets and Liabilities, Net -- 1.0% $ 501
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 3,398,269 outstanding shares
of beneficial interest $ 34,064
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 1,396,715 outstanding shares
of beneficial interest 13,986
Accumulated net realized gain on investments 26
Net unrealized appreciation on investments 18
================================================================================
Total Net Asset -- 100.0% $ 48,094
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $10.03
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Retail Class A $10.03
================================================================================
The accompanying notes are an integral part of the financial statements.
66
71
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: SHORT-TERM BOND PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINT FOLLOWS]
U.S. Government Agency Obligations -- 5%
Repurchase Agreements -- 5%
Non-Agency Mortgage- Backed Obligations -- 9%
U.S. Treasury Obligations -- 14%
Asset-Backed Securities -- 20%
Corporate Obligations -- 46%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 13.6%
U.S. Treasury Notes
6.000%, 06/30/99 $3,245 $ 3,253
6.250%, 04/30/01 2,000 2,043
7.875%, 08/15/01 1,000 1,058
6.500%, 08/31/01 3,550 3,655
6.250%, 10/31/01 3,000 3,077
6.000%, 07/31/02 2,000 2,045
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $15,201) $15,131
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.3%
Federal Home Loan Mortgage
Corporation
4.750%, 12/14/01 3,000 2,958
Federal National Mortgage
Association
4.450%, 10/16/00 3,000 2,969
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $5,972) 5,927
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS -- 0.5%
Federal Home Loan Mortgage
Corporation, REMIC
6.500%, 10/15/00 298 299
Federal National Mortgage
Association (A)
7.076%, 09/01/27 2 3
Federal National Mortgage
Association, REMIC
8.000%, 07/25/18 235 236
- -------------------------------------------------------------------------------
Total U.S. Government Mortgage-
Backed Obligations
(Cost $537) $ 538
- -------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 45.6%
BANKS -- 1.0%
Mellon Financial
9.250%, 08/15/01 1,000 1,071
- --------------------------------------------------------------------------------
Total Banks $ ,071
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 4.1%
Time Warner (B)
6.100%, 12/30/01 $2,000 $ 2,010
Time Warner, PAT (B)
4.900%, 07/29/99 1,000 997
Viacom
6.750%, 01/15/03 1,500 1,521
- --------------------------------------------------------------------------------
Total Entertainment $ 4,528
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 21.6%
Associates of North America
7.500%, 05/15/99 1,000 1,001
Conseco
6.400%, 02/10/03 2,000 1,942
Conseco, Mandatory
Put @ 100 (C)
6.400%, 06/15/01 2,000 1,972
Ford Motor Credit
9.500%, 04/15/00 1,500 1,558
Ford Motor Credit Global Bond
5.750%, 02/23/04 1,000 987
General Motors Acceptance, MTN
6.650%, 05/24/00 2,000 2,027
Goldman Sachs (A) (B)
5.150%, 12/22/00 3,000 3,001
Goldman Sachs, MTN (A) (B)
5.100%, 02/23/00 2,000 2,000
Lehman Brothers Holdings
6.625%, 11/15/00 2,000 2,012
6.500%, 10/01/02 2,000 2,000
Lehman Brothers Holdings, MTN
6.400%, 12/27/99 1,500 1,506
Newcourt Credit
6.875%, 02/16/05 1,000 1,021
Rouse, MTN (A)
5.750%, 03/22/00 1,000 991
Spieker Properties
6.875%, 02/01/05 $2,000 1,960
- --------------------------------------------------------------------------------
Total Financial Services $23,978
- --------------------------------------------------------------------------------
INDUSTRIAL -- 17.5%
AT&T
5.625%, 03/15/04 1,000 989
Cable & Wireless
Communications
6.375%, 03/06/03 3,500 3,513
Coca-Cola, PAT (B)
6.000%, 03/15/01 2,000 2,008
Husky Oil, YB
6.875%, 11/15/03 3,000 2,954
Nabisco, PAT (B)
6.300%, 08/26/99 2,000 2,003
Oryx Energy
10.000%, 04/01/01 1,000 1,066
Puget Sound Energy, MTN
7.250%, 12/10/99 2,000 2,020
67
72
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]SHORT-TERM BOND PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Sprint Capital
5.700%, 11/15/03 1,000 $ 984
Williams
6.500%, 11/15/02 2,000 1,985
Worldcom
6.250%, 08/15/03 2,000 2,008
- --------------------------------------------------------------------------------
Total Industrial $19,530
- --------------------------------------------------------------------------------
RETAIL -- 1.4%
Fred Meyer
7.375%, 03/01/05 1,500 1,547
- --------------------------------------------------------------------------------
Total Retail $ 1,547
- --------------------------------------------------------------------------------
Total Corporate Obligations
(Cost $50,807) $50,654
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 20.2%
AFG Receivables Trust,
Series 1996-C, Class B
6.950%, 07/15/01 587 596
AFG Receivables Trust,
Series 1996-D, Class B
6.650%, 10/15/01 951 956
Contimortgage Home Equity
Loan Trust, Series 1997-2,
Class A4
6.770%, 01/15/12 1,616 1,636
EQCC Home Equity Loan Trust,
Series 1998-1, Class A4F
6.459%, 03/15/21 1,000 1,009
EQCC Home Equity Loan Trust,
Series 1999-1, Class A3F
5.915%, 03/20/29 1,000 996
Equicredit Funding Trust,
Series 1996-A, Class A3
7.350%, 11/15/19 2,000 2,095
First Plus Home Loan Trust,
Series 1996-4, Class A4
6.450%, 03/10/10 2,500 2,506
Greenpoint Manufactured
Housing Trust,
Series 1999-1, Class A2
6.010%, 08/15/15 500 500
IMC Home Equity Loan Trust,
Series 1997-1, Class A3
6.820%, 10/25/11 1,475 1,493
Key Auto Finance Trust,
Series 1997-1, Class B
6.400%, 04/15/04 625 633
Key Auto Finance Trust,
Series 1999-1, Class A3
5.630%, 07/15/03 1,000 1,001
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Premier Auto Trust,
Series 1998-4, Class A3
5.690%, 06/08/02 $1,000 $ 1,003
The Money Store Home Equity
Trust, Series 1996-C, Class A4
7.400%, 06/15/21 3,000 3,081
The Money Store Home Equity
Trust, Series 1997-D,
Class AF3
6.345%, 11/15/21 2,919 2,937
The Money Store Home Equity
Trust, Series 1998-B,
Class AF2
6.115%, 06/15/10 1,000 1,000
The Money Store Home Equity
Trust, Series 1998-B,
Class AF4
6.115%, 06/15/21 1,000 993
- --------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $22,283) $22,435
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -- 9.2%
Advanta Mortgage Loan Trust,
Series 1997-1, Class A2
7.100%, 04/25/20 1,718 1,723
Amresco Residential Securities
Mortgage Loan Trust,
Series 1997-3, Class A3
6.600%, 01/25/18 1,045 1,046
Green Tree Home Improvement
Loan Trust, Series 1995-B,
Class A
8.150%, 03/15/15 1,416 1,452
Green Tree Home Improvement
Loan Trust, Series 1995-F,
Class B1
6.750%, 01/15/21 2,000 1,975
Green Tree Home Improvement
Loan Trust, Series 1996-F,
Class HIB1
7.250%, 11/15/27 2,000 2,008
Prudential Home Mortgage
Securities Trust,
Series 1992-45, Class A4
6.500%, 01/25/00 735 734
Prudential Home Mortgage
Securities Trust,
Series 1994-5, Class A1
7.000%, 02/25/24 279 279
Prudential Home Mortgage
Securities Trust,
Series 1994-25, Class A7
7.500%, 08/25/24 1,000 1,024
- --------------------------------------------------------------------------------
Total Non-Agency Mortgage-Backed Obligations
(Cost $10,267) $10,241
- --------------------------------------------------------------------------------
68
73
STATEMENTS OF NET ASSETS
APRIL 30, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.8%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $5,372,082 (collateralized
by U.S. Government Agency
Instruments: total market
value $5,515,053) $5,370 $ 5,370
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $5,370) $ 5,370
- --------------------------------------------------------------------------------
Total Investments -- 99.2%
(Cost $110,437) $110,296
================================================================================
Other Assets and Liabilities, Net -- 0.8% (D) $ 831
===============================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 11,176,885 outstanding shares
of beneficial interest 111,173
Undistributed net investment income 62
Accumulated net realized gain on investments 33
Net unrealized depreciation on investments (141)
================================================================================
Total Net Assets-- 100.0% $111,127
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share-- Institutional Class $ 9.94
================================================================================
(A) Variable Rate Security. The rate reported on the Statement of Net Assets is
the rate in effect on April 30, 1999.
(B) Security exempt from registration under Rule 144A of the Securites Act of
1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional investors.
(C) Mandatory Put Security. The mandatory put date is shown as the maturity
date on the Statement of Net Assets.
(D) Other Assets and Liabilities representing greater than five percent of
total net assets include the following (000):
Collateral received for securities on loan $9,926
Payable upon return of securities on loan $9,926
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.
[ARROW] ARK FUNDS: MARYLAND TAX-FREE PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
General Obligations -- 41%
% of Total Portfolio Investments
Revenue Bonds -- 59%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 98.4%
MARYLAND -- 93.5%
Allegany County, Public
Improvements GO, AMBAC
5.300%, 03/01/12 $1,190 $ 1,248
Anne Arundel County GO
5.000%, 09/01/10 1,500 1,566
Anne Arundel County, Public
Improvements GO
6.000%, 09/01/06 2,560 2,864
Baltimore County, Public
Improvements GO
5.000%, 08/01/11 2,500 2,609
5.500%, 06/01/16 2,000 2,100
Baltimore GO, Series B, MBIA
7.000%, 10/15/03 1,000 1,127
Baltimore, Auto Parking RB,
FGIC
5.250%, 07/01/17 1,000 1,041
Baltimore, Convention
Center RB, MBIA
5.000%, 09/01/09 2,000 2,097
Baltimore, Port Facilities RB,
DuPont Project
6.500%, 10/01/11 1,000 1,092
Baltimore, Wastewater
Project RB, Series B, FGIC
5.000%, 07/01/18 1,000 996
Baltimore, Water Project RB,
Series A, FGIC
5.500%, 07/01/26 1,500 1,558
Calvert County, Pollution
Control RB, Baltimore Gas &
Electric Company Project
5.550%, 07/15/14 2,500 2,612
Calvert County, Public & School
Improvements GO
5.750%, 01/01/11 1,900 2,050
69
74
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW] MARYLAND TAX-FREE PORTFOLIO (CONTINUED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Charles County, GO
5.700%, 03/01/10 $ 750 $ 809
Cumberland RB,
Series A, FGIC
5.125%, 05/01/13 1,000 1,029
Frederick County GO, Series B
6.300%, 07/01/08 2,000 2,167
Frederick County, Retirement
Community RB,
Buckinghams Choice
5.900%, 01/01/17 1,000 997
Frederick GO, FGIC
6.125%, 12/01/06 1,000 1,084
6.125%, 12/01/07 500 540
Gaithersburg, Hospital &
Nursing Home Improvements
RB, Shady Grove, FSA
6.000%, 09/01/22 1,000 1,075
Howard County, GO
5.000%, 02/15/09 3,500 3,675
Howard County, Public
Improvements GO, Series A
5.200%, 02/15/04 1,000 1,055
Laurel GO, FGIC
5.000%, 10/01/07 1,000 1,057
Maryland National Parks &
Planning Commission RB
5.375%, 01/15/14 1,950 2,050
Maryland State & Local
Facilities Authority GO
5.000%, 08/01/09 1,000 1,054
Maryland State & Local
Facilities Authority GO,
Second Series AA
5.500%, 06/01/08 1,500 1,612
Maryland State & Local
Facilities Authority RB
5.000%, 08/01/10 1,200 1,251
Maryland State Community
Development Administration
RB, Housing & Community
Development
5.050%, 04/01/08 1,000 1,031
5.600%, 03/01/17 1,000 1,041
Maryland State Department
of Transportation RB,
Public Improvements,
Pre-refunded @ 100.75 (A)
6.100%, 09/01/00 2,000 2,085
Maryland State Economic
Development Corporation RB,
Health Care Facilities, GNMA
4.650%, 12/20/08 905 914
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Maryland State GO
6.100%, 10/15/06 $1,500 $1,609
Maryland State Health &
Higher Education Facilities
Authority RB
4.750%, 11/01/14 1,600 1,588
5.125%, 07/01/20 2,000 2,017
4.750%, 05/15/33 2,000 1,862
Maryland State Health &
Higher Education Facilities
Authority RB, Broadmead
5.500%, 07/01/17 2,505 2,518
Maryland State Health &
Higher Education Facilities
Authority RB, Calvert
Memorial Hospital
5.000%, 07/01/19 2,000 1,932
Maryland State Health &
Higher Education Facilities
Authority RB, Doctors
Community Hospital
5.500%, 07/01/24 2,500 2,494
Maryland State Health &
Higher Education Facilities
Authority RB, Helix Health
Issue, RB, AMBAC, ETM
5.000%, 07/01/27 2,500 2,526
Maryland State Health &
Higher Education Facilities
Authority RB, Howard
County General Hospital
Project
5.500%, 07/01/13 1,000 1,055
Maryland State Health &
Higher Education Facilities
Authority RB, Johns Hopkins
Medicine, MBIA
5.000%, 07/01/19 1,500 1,492
Maryland State Health &
Higher Education Facilities
Authority RB, Johns Hopkins
University
5.250%, 07/01/17 2,000 2,047
Maryland State Health &
Higher Education Facilities
Authority RB, Kennedy Krieger
5.125%, 07/01/22 2,000 1,910
Maryland State Health &
Higher Education Facilities
Authority RB, Loyola College
Project, Series A, MBIA
5.375%, 10/01/11 950 1,008
5.375%, 10/01/26 1,500 1,534
70
75
STATEMENTS OF NET ASSETS
APRIL 30, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Higher Education Facilities
Authority RB, MBIA
5.300%, 10/01/18 $ 460 $ 472
Maryland State Health &
Higher Education Facilities
Authority RB, Medlantic/
Helix, Series A
5.250%, 08/15/12 1,175 1,225
Maryland State Health &
Higher Education Facilities
Authority RB, Mercy Medical
Center Project, AMBAC
5.750%, 07/01/15 2,000 2,133
Maryland State Health &
Higher Education Facilities
Authority RB, North Arundel
Project, MBIA
6.000%, 07/01/12 500 540
Maryland State Health &
Higher Education Facilities
Authority RB, Peninsula
Regional Medical Center
Project
5.000%, 07/01/08 1,000 1,018
Maryland State Health &
Higher Education Facilities
Authority RB, Pickersgill
Project, Series A
6.000%, 01/01/15 1,500 1,586
Maryland State Health &
Higher Education Facilities
Authority RB, Series A
5.250%, 08/15/11 2,000 2,098
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 1,089
Maryland State Health &
Higher Education Facilities
Authority RB, Upper
Chesapeake Health, FSA
5.375%, 01/01/28 1,500 1,530
Maryland State Housing RB,
Second Series
5.000%, 04/01/17 1,000 994
Maryland State Stadium
Authority RB, AMBAC
5.500%, 03/01/12 1,000 1,065
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Maryland State Transportation
Authority RB
5.750%, 07/01/15 $3,000 $ 3,071
Maryland State Transportation
Authority RB, Baltimore/
Washington International
Airport Project, FGIC
6.000%, 07/01/07 1,000 1,099
Maryland State Water Quality
Financing Administration RB,
Revolving Loan Fund, Series A
5.500%, 09/01/12 1,250 1,302
6.550%, 09/01/14 945 1,015
Montgomery County, Parking
Authority RB, Silver Spring
Parking Lot Project,
Series A, FGIC
6.250%, 06/01/09 500 540
Montgomery County, Public
Improvements GO, Series A
5.500%, 10/01/06 1,000 1,065
5.800%, 07/01/07 1,000 1,113
4.875%, 05/01/12 2,000 2,048
Montgomery County, Public
Improvements GO, Series A,
Pre-refunded @ 102 (A)
6.000%, 10/01/04 2,000 2,238
Prince Georges County, Public
Improvements GO, MBIA
5.500%, 03/15/16 1,000 1,051
Prince Georges County, Public
Improvements GO,
Series A, MBIA
6.000%, 03/01/07 1,450 1,544
Prince Georges County,
Solid Waste Management
System RB, FSA
5.000%, 06/15/04 1,000 1,045
Prince Georges County, Water
Utility Improvements GO,
Stormwater Management Project
5.500%, 03/15/13 2,575 2,691
Queen Annes County,
Public Facilities GO, FGIC
5.400%, 11/15/11 1,000 1,066
Queen Annes County,
School & Recreational
Facilities Improvements
GO, FGIC
6.000%, 11/15/08 1,000 1,133
St. Mary's County, Academic &
Auxiliary Facilities RB, MBIA
5.250%, 09/01/27 2,000 2,020
71
76
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]MARYLAND TAX-FREE PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Auxiliary Facility &
Tuition RB, Series A
5.000%, 04/01/10 $2,000 $ 2,083
University of Maryland, Loan
Program RB, Second Series
6.000%, 06/01/05 500 538
University of Maryland, Medical
Systems Project RB, Series A
5.500%, 04/01/10 2,000 2,140
Washington County, Public
Improvements GO, MBIA
5.800%, 01/01/15 1,250 1,356
Washington, Suburban
Sanitation District GO, Sewer
Improvements
5.300%, 06/01/08 1,000 1,058
5.600%, 06/01/18 1,000 1,051
- --------------------------------------------------------------------------------
Total Maryland $119,095
- --------------------------------------------------------------------------------
PUERTO RICO -- 4.5%
Commonwealth of Puerto Rico,
Public Improvements
GO, MBIA
6.250%, 07/01/12 1,000 1,169
4.875%, 07/01/23 2,000 1,965
Puerto Rico Electric Power
Authority RB, MBIA
5.250%, 07/01/15 1,000 1,044
Puerto Rico Public Finance
Authority RB, AMBAC
5.375%, 06/01/19 1,500 1,592
- --------------------------------------------------------------------------------
Total Puerto Rico $ 5,770
- --------------------------------------------------------------------------------
TEXAS -- 0.4%
Austin, Utility Systems RB,
Series A
9.100%, 05/15/00 310 328
Austin, Utility Systems RB,
Series A, ETM
9.100%, 05/15/00 190 201
- --------------------------------------------------------------------------------
Total Texas $ 529
- --------------------------------------------------------------------------------
Total Municipal Bonds & Notes
(Cost $120,725) $125,394
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.0%
Dreyfus Tax-Exempt Cash
Management Fund 24 24
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $24) $ 24
- --------------------------------------------------------------------------------
Total Investments -- 98.4%
(Cost $120,749) $125,418
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
Other Assets and Liabilities, Net -- 1.6% 2,023
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 9,306,557 outstanding shares
of beneficial interest 90,106
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 3,172,691 outstanding shares
of beneficial interest 32,133
Accumulated net realized gain on investments 533
Net unrealized appreciation on investments 4,669
================================================================================
Total Net Assets -- 100.0% $127,441
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share-- Institutional Class $ 10.21
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $ 10.21
================================================================================
Maximum Offering Price Per Share --
Retail Class A (10.21 / 95.50%) $ 10.69
================================================================================
(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
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.
72
77
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW] ARK FUNDS: PENNSYLVANIA TAX-FREE PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
General Obligatories -- 26%
Revenue Bonds -- 74%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 98.2%
PENNSYLVANIA -- 96.2%
Allegheny County GO,
Series C-45, FGIC
5.100%, 10/01/07 $5,000 $ 5,256
Allegheny County, Industrial
Development Authority RB,
MBIA
6.800%, 03/01/15 3,500 3,811
Allegheny County, Industrial
Development Authority RB,
USX Project
6.100%, 01/15/18 5,255 5,524
Allegheny County, Pittsburgh
International Airport RB,
MBIA
5.000%, 01/01/19 5,000 4,931
Allentown, Sacred Heart
Hospital RB, Series A
6.500%, 11/15/08 2,665 2,888
Bedford, Area School District
GO, FSA
4.750%, 04/15/24 5,000 4,719
Bensalem Township,
Recreational Facilities
Improvement RB, FGIC
5.550%, 12/01/10 1,390 1,473
Bethlehem Area School
Improvements RB, FGIC
5.500%, 09/01/08 3,000 3,244
Bethlehem Area School
Improvements RB,
Pre-refunded @ 100,
MBIA (A)
5.750%, 03/01/06 1,000 1,095
5.850%, 03/01/06 1,635 1,800
Bucks County, Industrial
Development Authority RB, ETM
10.000%, 05/15/19 4,775 7,724
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Burrell, School District
GO, FGIC
5.250%, 11/15/10 $4,000 $ 4,270
Chester County, Community
Hospital Health & Education
Authority RB, MBIA
5.625%, 07/01/10 1,675 1,796
Chester County, Health &
Education Facilities Authority
RB, Chester County
Hospital, MBIA
5.500%, 07/01/07 965 1,040
5.625%, 07/01/09 1,985 2,119
Chester County, Health &
Education Facilities Authority
RB, Immaculata College
5.600%, 10/15/18 1,000 1,001
5.625%, 10/15/27 1,000 1,000
Chester County, Health &
Education Facilities Authority
RB, Main Line Health
Systems, MBIA
5.300%, 05/15/07 3,045 3,228
Cumberland County, Messiah
College Project RB, AMBAC
5.125%, 10/01/15 2,800 2,852
Dauphin County, Pinnacle
Health System Project
RB, MBIA
5.100%, 05/15/08 830 873
5.200%, 05/15/09 910 948
Delaware County, Catholic
Health Systems East RB,
Series A, AMBAC
4.875%, 11/15/14 3,910 3,915
Delaware County, Community
Hospital Authority RB,
AMBAC
6.000%, 12/15/20 4,000 4,135
Delaware County, Dunwoody
Village Project RB
5.550%, 04/01/06 300 309
Delaware Valley, Regional
Finance Authority RB, Series A
5.900%, 04/15/16 2,000 2,127
Hazleton, School District
Authority RB, Series C, FGIC
5.250%, 03/01/10 3,550 3,763
Lancaster County, Hospital
Authority RB, Masonic
Homes Project
4.750%, 11/15/02 1,000 1,027
73
78
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]PENNSYLVANIA TAX-FREE PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Lehigh County, Muhlenberg
Hospital Center Project RB,
ETM, GOH
5.750%, 07/15/10 $1,270 $ 1,391
5.750%, 07/15/10 1,730 1,894
Lehigh County, Public
Improvements Project GO,
Series A, CNTY GTD
5.500%, 11/15/11 2,000 2,122
5.550%, 11/15/12 2,100 2,229
Montgomery County, Health &
Higher Education
Authority RB, AMBAC
5.250%, 10/01/04 2,070 2,194
5.500%, 10/01/08 1,275 1,380
Montgomery County, Health &
Higher Education Authority
RB, Beaver College Project,
CONLEE
5.700%, 04/01/10 500 541
Norristown, School District
Authority GO, FGIC
5.500%, 09/01/14 500 528
Northampton County, Higher
Education Authority RB,
Lehigh University, MBIA
5.750%, 08/15/03 2,710 2,917
Parkland, School District
GO, FGIC
5.000%, 09/01/18 5,000 4,956
Pennsylvania Convention Center
Authority RB, ETM, FGIC
6.000%, 09/01/19 4,100 4,623
Pennsylvania Intergovernmental
Cooperative Authority
RB, FGIC
5.500%, 06/15/11 3,300 3,486
Pennsylvania Intergovernmental
Cooperative Authority RB,
Philadelphia Funding
Program, FGIC
5.400%, 06/15/09 4,845 5,081
Pennsylvania State Economic
Development Authority RB,
AMBAC
6.000%, 07/01/06 3,000 3,326
6.000%, 07/01/07 5,000 5,569
Pennsylvania State Higher
Education Facilities
Authority RB, AMBAC
5.000%, 06/15/19 5,000 4,962
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Pennsylvania State Higher
Education Facilities
Authority RB, Drexel
University, MBIA
5.750%, 05/01/03 $3,535 $ 3,782
Pennsylvania State Higher
Education Facilities
Authority RB, Series B
5.350%, 01/01/08 3,750 3,923
Pennsylvania State Higher
Education Facilities
Authority RB, Temple
University, First Series, MBIA
5.000%, 04/01/19 3,500 3,474
Pennsylvania State Higher
Education Facilities
Authority RB, University
of Pennsylvania Health
Services Project, Series A
5.500%, 01/01/09 3,000 3,150
Pennsylvania State Higher
Education Facilities
Authority RB, University
of Pennsylvania Project
5.600%, 01/01/10 500 527
Pennsylvania State Hospital RB,
Geisinger Health Systems
5.000%, 08/15/28 4,990 4,747
Pennsylvania State Housing
Finance Agency RB, Series A
6.000%, 10/01/13 1,500 1,581
Pennsylvania State Infrastructure
Investment Authority RB,
Water Utility Improvements,
MBIA
5.250%, 09/01/07 2,720 2,900
Pennsylvania State Public
Improvements GO,
Second Series
6.000%, 07/01/09 4,375 4,927
Pennsylvania State Public
Improvements GO,
Second Series, FGIC
5.375%, 11/15/07 5,000 5,400
Pennsylvania State Turnpike
Commission RB, AMBAC
4.750%, 12/01/27 6,000 5,670
Pennsylvania State
University RB, GOI
5.300%, 08/15/03 5,000 5,281
Philadelphia GO, FSA
5.000%, 03/15/28 5,000 4,869
Philadelphia, Industrial
Development Authority RB
5.250%, 07/01/17 1,000 1,014
74
79
(This page left blank)
80
STATEMENTS OF NET ASSETS
APRIL 30, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Philadelphia, Industrial
Development Authority RB,
Franklin Institute Project
5.200%, 06/15/18 $2,100 $ 2,061
5.200%, 06/15/26 3,100 3,019
Philadelphia, Industrial
Development Authority RB,
Girard Estate Coal
Mining Project
5.500%, 11/15/16 3,590 3,725
Philadelphia, Industrial
Development Authority RB,
Series A, MBIA
6.000%, 02/15/07 1,365 1,519
Philadelphia, Jefferson Health
Systems RB, MBIA
5.500%, 05/15/05 1,000 1,065
Philadelphia, Justice Lease
Authority RB, Series A, MBIA
7.100%, 11/15/06 4,095 4,464
Philadelphia, School
District GO, Series A, MBIA
5.350%, 07/01/03 5,000 5,294
5.300%, 07/01/04 3,500 3,719
Philadelphia, Temple University
Hospital RB, Series A
6.625%, 11/15/23 5,100 5,412
Philadelphia, Water &
Waste RB, MBIA
6.250%, 08/01/07 3,000 3,409
6.250%, 08/01/08 2,150 2,462
Ridley Park, Taylor Hospital RB,
Series A, ETM
6.000%, 12/01/05 755 809
Scranton-Lackawanna,
Mercy Health Hospital
Facilities RB, Series B, MBIA
5.625%, 01/01/16 2,000 2,107
Southeastern Pennsylvania
Transit Authority RB,
Series A, FGIC
4.750%, 03/01/29 5,000 4,706
West Shore, Holy Spirit
Hospital Project RB, MBIA
5.600%, 01/01/13 500 527
- --------------------------------------------------------------------------------
Total Pennsylvania $219,610
- --------------------------------------------------------------------------------
PUERTO RICO -- 2.0%
Puerto Rico Electric Power
Authority RB, MBIA
6.000%, 07/01/11 4,000 4,565
- --------------------------------------------------------------------------------
Total Puerto Rico $ 4,565
- --------------------------------------------------------------------------------
Total Municipal Bonds & Notes
(Cost $218,038) $224,175
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.5%
Blackrock Pennsylvania
Municipal Money Market 1,244 $ 1,244
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $1,244) $ 1,244
- --------------------------------------------------------------------------------
Total Investments -- 98.7%
(Cost $219,282) $225,419
================================================================================
Other Assets and Liabilities, Net-- 1.3% $ 2,881
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 21,943,390 outstanding
shares of beneficial interest 217,691
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 373,591 outstanding shares
of beneficial interest 3,809
Accumulated net realized gain on investments 663
Net unrealized appreciation on investments 6,137
================================================================================
Total Net Asset -- 100.0% $228,300
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $ 10.23
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $ 10.22
================================================================================
Maximum Offering Price Per Share --
Retail Class A (10.22 / 95.50%) $ 10.70
================================================================================
(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
CNTY GTD--County Guaranteed
CONLEE--College Construction Loan Insurance Association
FGIC--Financial Guaranty Insurance Corporation
FSA--Financial Security Assurance
GOH--General Obligation of Hospital
GOI--General Obligation of Institution
MBIA--Municipal Bond Insurance Association
The accompanying notes are an integral part of the financial statements.
75
81
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: INTERMEDIATE FIXED INCOME PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Preferred Stock -- 1%
Repurchase Agreements -- 2%
U.S. Government Agency
Obligations -- 6%
U.S. Government
Mortgage-Backed
Obligations -- 11%
Asset-Backed
Securities -- 11%
Yankee Bonds -- 1%
U.S. Treasury
Obligations -- 38%
Corporate
Obligations -- 30%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 37.5%
U.S. Treasury Notes
7.500%, 10/31/99 $7,000 $ 7,091
7.500%, 11/15/01 3,000 3,165
6.250%, 02/28/02 7,500 7,706
5.375%, 06/30/03 1,000 1,004
7.875%, 11/15/04 7,500 8,403
6.500%, 05/15/05 2,000 2,115
5.625%, 02/15/06 1,885 1,908
6.250%, 02/15/07 6,000 6,308
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $37,256) $37,700
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.8%
Federal National Mortgage
Association
6.270%, 09/20/00 2,500 2,512
6.000%, 05/15/08 3,260 3,285
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $5,824) $ 5,797
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS -- 10.9%
Federal Home Loan Bank
6.634%, 02/20/04 709 709
Federal National Mortgage
Association
6.500%, 05/01/08 634 640
6.500%, 10/01/08 2,342 2,362
6.000%, 04/01/11 1,999 1,981
5.500%, 04/01/18 1,128 1,063
Federal National Mortgage
Association, REMIC
6.250%, 07/25/08 1,590 1,598
7.000%, 07/18/18 1,223 1,225
6.000%, 11/25/28 1,368 1,369
- --------------------------------------------------------------------------------
Total U.S. Government Mortgage-
Backed Obligations
(Cost $10,979) $10,947
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 31.2%
AT&T, MTN
6.000%, 03/15/09 $1,500 $ 1,464
Bank of New York
6.625%, 06/15/03 1,500 1,532
Cable & Wireless
Communications
6.375%, 03/06/03 1,000 1,004
Columbus Southern
Power, MTN
6.510%, 02/01/08 1,250 1,256
Comcast Cablevision, MTN
8.375%, 05/01/07 1,000 1,120
Conseco
6.400%, 02/10/03 1,000 971
Dillard's
6.690%, 08/01/07 1,370 1,353
Federal-Mogul
7.750%, 07/01/06 750 750
First Union
8.770%, 11/15/04 1,350 1,374
Fred Meyer
7.375%, 03/01/05 1,000 1,031
H.F. Ahmanson, Washington
Mutual
9.875%, 11/15/99 1,500 1,533
Lucent Technologies
7.250%, 07/15/06 1,505 1,605
Merita Bank, YB
6.500%, 01/15/06 1,350 1,347
Merrill Lynch
7.200%, 10/15/12 1,500 1,534
National Rural Utilities, MTN
7.300%, 09/15/06 1,250 1,344
Norwest Financial
6.375%, 09/15/02 1,370 1,389
Oryx Energy
8.375%, 07/15/04 1,000 1,075
Progressive
6.600%, 01/15/04 550 562
Sara Lee, MTN
6.150%, 06/19/08 1,700 1,696
Sprint Capital
6.125%, 11/15/08 1,500 1,446
Star Bank NA-Cincinnati
6.375%, 03/01/04 1,425 1,430
Storage USA
7.125%, 11/01/03 1,000 985
Time Warner
9.125%, 01/15/13 1,225 1,488
Time Warner, PAT (A)
4.900%, 07/29/99 1,000 997
76
82
STATEMENTS OF NET ASSETS
APRIL 30, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Worldcom
7.750%, 04/01/07 $ 1,000 $ 1,077
- -------------------------------------------------------------------------------
Total Corporate Obligations
(Cost $31,305) $ 31,363
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 10.6%
EQCC Home Equity Loan
Trust, Series 1999-1,
Class A3F
5.915%, 03/20/29 1,525 1,519
IMC Home Equity Loan
Trust, Series 1997-3,
Class A4
6.840%, 10/20/13 1,000 1,006
Key Auto Finance Trust,
Series 1999-1, Class A3
5.630%, 07/15/03 1,915 1,916
Premier Auto Trust,
Series 1996-2, Class A4
6.575%, 10/06/00 1,154 1,161
Premier Auto Trust,
Series 1998-4, Class A3
5.690%, 06/08/02 605 607
The Money Store Home
Equity Trust,
Series 1996-C, Class A4
7.400%, 06/15/21 1,513 1,554
The Money Store Home
Equity Trust,
Series 1997-D, Class A5
6.555%, 12/15/38 1,620 1,629
The Money Store Home
Equity Trust,
Series 1998-B, Class AF4
6.115%, 06/15/21 1,265 1,256
- --------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $10,623) $ 10,648
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCK -- 0.9%
SPG Properties 20,000 906
- --------------------------------------------------------------------------------
Total Preferred Convertible Stock
(Cost $1,012) $ 906
- -------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.0%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $1,973,734 (collateralized
by U.S. Government Agency
Instrument: total market
value $2,041,358) $ 1,973 $ 1,973
- --------------------------------------------------------------------------------
(Cost $1,973) $ 1,973
- --------------------------------------------------------------------------------
Total Investments -- 98.9%
(Cost $98,972) $ 99,334
================================================================================
Other Assets and Liabilities, Net -- 1.1% (B) $ 1,085
================================================================================
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 10,116,471 outstanding shares
of beneficial interest 99,843
Undistributed net investment income 8
Accumulated net realized gain on investments 206
Net unrealized appreciation on investments 362
================================================================================
Total Net Assets -- 100.0% $100,419
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $ 9.93
================================================================================
(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.
(B) Other Assets and Liabilities representing greater than five percent of
total net assets include the following (000):
Collateral received for securities on loan $11,205
Payable upon return of securities on loan $11,205
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.
77
83
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: U.S. GOVERNMENT BOND PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Repurchase Agreements -- 2%
Asset-Backed
Obligations -- 5%
Corporate
Obligations -- 20%
U.S. Treasury
Obligations -- 21%
Preferred Stock -- 2%
U.S. Government
Mortgage-Backed
Obligations -- 28%
U.S. Government
Agency
Obligations -- 22%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 21.5%
U.S. Treasury Bonds
7.500%, 11/15/16 $ 5,000 $ 5,857
5.250%, 11/15/28 1,500 1,387
U.S. Treasury Notes
5.375%, 02/15/01 21,700 21,806
5.500%, 01/31/03 5,000 5,038
5.500%, 03/31/03 18,000 18,144
5.625%, 05/15/08 3,000 3,042
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $55,422) $55,274
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 21.7%
Federal Home Loan Bank
5.540%, 07/15/99 15,000 15,016
5.375%, 03/02/01 10,000 10,000
Federal Home Loan Mortgage
Corporation
5.750%, 04/15/08 3,000 2,973
Federal National Mortgage
Association
6.000%, 05/15/08 10,000 10,076
Federal National Mortgage
Association, MTN
6.030%, 07/07/99 10,000 10,020
6.470%, 09/25/12 7,500 7,731
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $55,943) $55,816
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 28.4%
Federal Home Loan Mortgage
Corporation
6.000%, 03/01/13 18,536 18,391
6.250%, 01/15/20 3,000 2,988
Federal Home Loan Mortgage
Corporation, REMIC
6.000%, 04/15/21 5,000 4,957
6.250%, 09/15/23 5,000 5,030
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Federal National Mortgage Association
7.000%, 09/01/27 $ 3,420 $ 3,482
6.500%, 08/01/28 4,677 4,652
6.500%, 08/01/28 5,323 5,293
6.500%, 08/01/28 2,819 2,803
6.500%, 08/01/28 5,887 5,854
6.500%, 03/01/29 5,039 5,008
6.500%, 03/01/29 3,996 3,971
7.000%, 03/01/29 3,133 3,175
6.500%, 05/01/29 3,000 2,981
Federal National Mortgage Association, REMIC
6.500%, 10/25/23 4,671 4,696
- --------------------------------------------------------------------------------
Total U.S. Government Mortgage-
Backed Obligations
(Cost $73,294) $73,281
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 19.7%
ENTERTAINMENT -- 1.2%
Royal Caribbean Cruises, YB
8.250%, 04/01/05 3,000 3,161
- --------------------------------------------------------------------------------
Total Entertainment $ 3,161
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.6%
Amvescap PLC, YB
6.375%, 05/15/03 2,500 2,455
Conseco
6.400%, 02/10/03 3,000 2,914
Golden State Escrow
7.000%, 08/01/03 2,000 1,998
Green Tree Financial
10.250%, 06/01/02 2,000 2,088
Newcourt Credit
6.875%, 02/16/05 2,000 2,042
Spieker Properties LP
6.750%, 01/15/08 3,000 2,869
- --------------------------------------------------------------------------------
Total Financial Services $14,366
- --------------------------------------------------------------------------------
INDUSTRIAL -- 7.0%
B.F. Goodrich
7.000%, 04/15/38 2,000 1,883
Conagra
7.375%, 02/01/05 1,000 1,034
Federal-Mogul
7.750%, 07/01/06 1,500 1,500
Husky Oil, YB
7.550%, 11/15/16 2,000 1,888
Pepsi Bottling Group (A)
7.000%, 03/01/29 2,500 2,481
Qwest Communications
International (A)
7.250%, 11/01/08 1,000 1,031
Saga Petroleum A.S., YB
9.125%, 07/15/14 4,000 4,460
Tennessee Gas Pipeline
7.000%, 10/15/28 1,600 1,580
78
84
STATEMENTS OF NET ASSETS
APRIL 30, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT/SHARES(000) VALUE (000)
- --------------------------------------------------------------------------------
Union Electric
8.750%, 12/01/21 $ 2,000 $ 2,133
- --------------------------------------------------------------------------------
Total Industrial $ 17,990
- --------------------------------------------------------------------------------
RETAIL -- 1.3%
Fred Meyer
7.375%, 03/01/05 3,200 3,300
- --------------------------------------------------------------------------------
Total Retail $ 3,300
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 4.6%
360 Communications
7.600%, 04/01/09 3,000 3,266
New York Telephone
9.375%, 07/15/31 3,850 4,264
Sprint Capital
6.125%, 11/15/08 2,500 2,409
6.900%, 05/01/19 2,000 1,994
- --------------------------------------------------------------------------------
Total Telephones & Telecommunications $ 11,933
- --------------------------------------------------------------------------------
Total Corporate Obligations
(Cost $52,102) $ 50,750
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 5.0%
Contimortgage Home Equity
Loan Trust, Series 1998-2,
Class A6
6.360%, 11/15/19 2,500 2,497
Contimortgage Home Equity
Loan Trust, Series 1998-1,
Class A6
6.250%, 12/15/18 3,000 3,042
The Money Store Home
Equity Trust, Series 1996-C,
Class A4
7.400%, 06/15/21 4,000 4,108
The Money Store Home Equity
Trust, Series 1997-D,
Class AF3
6.345%, 11/15/21 3,336 3,356
- --------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $12,915) $ 13,003
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 1.4%
SPG Properties 80,000 3,625
- --------------------------------------------------------------------------------
(Cost $4,032) $ 3,625
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.4%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $6,194,285 (collateralized
by U.S. Government Agency
Instrument: total market
value $6,381,988) $ 6,192 $ 6,192
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $6,192) $ 6,192
- --------------------------------------------------------------------------------
Total Investments -- 100.1%
(Cost $259,900) $257,941
================================================================================
Other Assets and Liabilities, Net -- (0.1%) (B) $ (372)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 26,099,821 outstanding shares
of beneficial interest 259,278
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value) based on
228,773 outstanding shares of beneficial
interest 2,275
Undistributed net investment income 3
Accumulated net realized loss on investments (2,028)
Net unrealized depreciation on investments (1,959)
- --------------------------------------------------------------------------------
Total Net Assets -- 100.0% $257,569
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $ 9.78
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $ 9.79
================================================================================
Maximum Offering Price Per Share --
Retail Class A (9.79 / 95.50%) $ 10.25
================================================================================
(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.
(B) Other Assets and Liabilities representing greater than five percent of
total net assets include the following (000):
Collateral received for securities on loan $ 39,250
Payable upon return of securities on loan $ 39,250
MTN--Medium Term Note
REMIC--Real Estate Mortgage Investment Conduit
PLC--Public Limited Company
YB--Yankee Bond
The accompanying notes are an integral part of the financial statements.
79
85
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: INCOME PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINT ARE AS FOLLOWS]
Non-Agency Mortgage-Backed Obligations -- 1%
U.S. Government Agency Obligations -- 2%
Repurchase Agreements -- 4%
Yankee Bonds -- 5%
Asset-Backed Securities -- 7%
U.S. Treasury
Obligations -- 19%
Preferred Stock -- 1%
Corporate
Obligations -- 36%
U.S. Government
Mortgage-Backed
Obligations -- 25%
% of Total Portfolio Investments
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 23.2%
U.S. Treasury Bonds
10.750%, 08/15/05 $15,000 $ 19,209
6.125%, 11/15/27 600 621
5.500%, 08/15/28 1,950 1,856
U.S. Treasury Notes
6.375%, 09/30/01 5,000 5,138
7.500%, 11/15/01 5,000 5,274
6.250%, 06/30/02 20,000 20,568
5.750%, 08/15/03 5,000 5,091
7.875%, 11/15/04 20,000 22,408
7.500%, 02/15/05 2,500 2,764
4.750%, 11/15/08 2,000 1,910
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $83,030) $ 84,839
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 1.9%
Federal National Mortgage
Association
8.625%, 11/10/04 400 407
6.000%, 05/15/08 5,000 5,038
Federal National Mortgage
Association, MTN
7.840%, 06/09/06 1,500 1,503
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $7,004) $ 6,948
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 29.5%
Federal Home Loan Mortgage
Corporation
8.500%, 11/01/01 32 33
9.000%, 01/01/02 21 23
8.000%, 01/01/08 80 85
14.750%, 03/01/10 28 34
8.500%, 09/01/26 948 998
Federal Home Loan Mortgage
Corporation, GTD
9.000%, 09/15/08 28 30
12.450%, 09/15/09 9 11
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Federal National Mortgage
Association
7.000%, 02/01/26 $ 2,247 $ 2,277
7.000%, 03/01/29 1,955 1,982
Federal National Mortgage
Association (A)
6.000%, 05/01/14 15,000 14,864
6.500%, 05/01/29 55,000 54,656
Federal National Mortgage
Association, REMIC
9.750%, 09/25/18 356 382
6.000%, 07/18/26 10,731 10,259
Government National
Mortgage Association
7.500%, 05/15/22 628 647
7.500%, 10/15/23 2,782 2,868
7.500%, 12/15/23 1,250 1,289
7.000%, 02/15/24 3,357 3,408
7.000%, 05/15/24 3,269 3,319
7.000%, 05/15/24 3,364 3,416
7.500%, 05/15/24 2,537 2,615
7.500%, 10/15/24 2,084 2,148
7.000%, 09/20/25 1,332 1,347
Government National Mortgage
Association, REMIC
7.750%, 06/16/20 1,000 1,034
- --------------------------------------------------------------------------------
Total U.S. Government Mortgage-
Backed Obligations
(Cost $107,094) $107,725
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 43.2%
BANKS -- 11.1%
Bank of New York (B)
7.780%, 12/01/26 1,500 1,530
BankAmerica, Series A (B)
8.070%, 12/31/26 2,500 2,588
Crestar Financial
8.160%, 12/15/26 3,500 3,723
First National Bank Chicago (C)
4.880%, 04/13/00 10,000 9,994
First Union National Bank (C)
5.090%, 05/16/00 10,000 10,000
Mellon Capital I
7.720%, 12/01/26 2,500 2,534
NationsBank (C)
4.830%, 08/03/99 5,000 4,999
4.905%, 04/05/00 5,000 4,986
- --------------------------------------------------------------------------------
Total Banks $ 40,354
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 3.6%
Comcast Cablevision
8.875%, 05/01/17 2,000 2,393
Comcast Cablevision, MTN
8.375%, 05/01/07 2,725 3,052
CSC Holdings
7.875%, 02/15/18 2,500 2,562
80
86
STATEMENTS OF NET ASSETS
APRIL 30, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Time Warner
7.250%, 10/15/17 $ 2,000 $ 2,060
Time Warner, PAT (B)
4.900%, 07/29/99 3,000 2,993
- --------------------------------------------------------------------------------
Total Entertainment $ 13,060
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 11.9%
American Express Centurion (C)
4.950%, 04/24/00 5,000 5,000
Golden State Escrow
7.000%, 08/01/03 2,000 1,998
7.125%, 08/01/05 2,000 1,998
Household Finance
5.875%, 02/01/09 5,000 4,762
Merrill Lynch, MTN,
Series B (C)
5.040%, 03/09/00 10,000 9,991
Morgan Stanley, Dean Witter,
Discover, Euro MTN,
Series D (C)
5.150%, 12/19/01 7,380 7,374
Newcourt Credit
6.875%, 02/16/05 7,500 7,659
Spieker Properties LP
6.750%, 01/15/08 3,000 2,869
Storage USA
7.125%, 11/01/03 2,000 1,970
- --------------------------------------------------------------------------------
Total Financial Services $ 43,621
- --------------------------------------------------------------------------------
INDUSTRIAL -- 7.1%
B.F. Goodrich
7.000%, 04/15/38 2,500 2,353
Canadian National Railway
6.450%, 07/15/06 2,000 1,995
Federal-Mogul
7.750%, 07/01/06 3,400 3,400
J Seagram & Sons
7.500%, 12/15/18 4,000 4,060
James River
6.750%, 10/01/99 2,000 2,010
Nabisco, PAT (B)
6.300%, 08/26/99 1,500 1,502
Oryx Energy
9.500%, 11/01/99 1,000 1,016
10.000%, 04/01/01 1,500 1,599
8.375%, 07/15/04 1,000 1,075
Pepsi
7.000%, 03/01/29 5,000 4,962
Tennessee Gas Pipeline
7.000%, 10/15/28 2,000 1,975
- --------------------------------------------------------------------------------
Total Industrial $ 25,947
- --------------------------------------------------------------------------------
RETAIL -- 3.6%
Dillard's
5.790%, 11/15/01 2,000 1,963
7.000%, 12/01/28 3,000 2,891
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Fred Meyer
7.375%, 03/01/05 $ 5,000 $ 5,156
Great Atlantic & Pacific Tea
7.750%, 04/15/07 1,000 1,004
Kroger
7.650%, 04/15/07 2,000 2,148
- --------------------------------------------------------------------------------
Total Retail $ 13,162
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 4.5%
360 Communications
7.600%, 04/01/09 1,500 1,633
GTE South
6.125%, 06/15/07 2,000 1,990
New York Telephone
9.375%, 07/15/31 3,000 3,323
Qwest Communications
International (B)
7.250%, 11/01/08 5,000 5,156
Sprint Capital
6.900%, 05/01/19 2,500 2,493
6.875%, 11/15/28 2,000 1,940
- --------------------------------------------------------------------------------
Total Telephones & Telecommunications $ 16,535
- --------------------------------------------------------------------------------
UTILITIES -- 1.4%
Puget Sound Energy, MTN
7.250%, 12/10/99 5,000 5,050
- --------------------------------------------------------------------------------
Total Utilities $ 5,050
- --------------------------------------------------------------------------------
Total Corporate Obligations
(Cost $156,969) $157,729
- --------------------------------------------------------------------------------
YANKEE BONDS -- 5.5%
Amvescap PLC, Series REGS
6.375%, 05/15/03 2,000 1,964
Bank of Montreal Chicago (C)
4.895%, 03/30/00 10,000 9,997
Gulf Canada Resources
8.250%, 03/15/17 2,000 1,900
Husky Oil (B)
7.550%, 11/15/16 2,100 1,982
Royal Caribbean Cruises
7.250%, 08/15/06 3,000 3,026
Saga Petroleum A.S. (B)
9.125%, 07/15/14 1,000 1,115
- --------------------------------------------------------------------------------
Total Yankee Bonds
(Cost $20,375) $ 19,984
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 8.3%
Citibank Credit Card Master
Trust I, Series 1998-9, Class A
5.300%, 01/09/06 2,000 1,938
Continental Home Equity Trust,
Series 1998-1, Class A6
6.580%, 12/15/18 3,000 3,042
IMC Home Equity Loan Trust,
Series 1997-2, Class A3
6.940%, 11/20/11 3,408 3,432
81
87
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]Income Portfolio (Concluded)
PRINCIPAL AMOUNT MARKET
DESCRIPTION (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------------
IMC Home Equity Loan Trust,
Series 1997-3, Class A4
6.840%, 10/20/13 $ 3,000 $ 3,019
L.A. Arena Funding,
Series 99-1, Class A
7.656%, 12/15/26 2,000 2,000
Premier Auto Trust,
Series 1996-2, Class A4
6.575%, 10/06/00 3,370 3,390
Premier Auto Trust,
Series 1998-3, Class A3
5.880%, 12/08/01 2,800 2,819
The Money Store Home Equity
Trust, Series 1996-C,
Class A4
7.400%, 06/15/21 3,000 3,081
The Money Store Home Equity
Trust, Series 1997-D,
Class AF3
6.345%, 11/15/21 3,336 3,356
The Money Store Home Equity
Trust, Series 1997-D,
Class AF5
6.555%, 12/15/38 4,350 4,375
- --------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $30,319) $ 30,452
- --------------------------------------------------------------------------------
Non-Agency Mortgage-Backed Obligations -- 1.5%
Countrywide Funding,
Series 1994-4, Class A12
6.950%, 04/25/24 5,452 5,311
Residential Asset Securitization,
Series 1996-A8, Class A1
8.000%, 12/25/26 85 85
- --------------------------------------------------------------------------------
Total Non-Agency Mortgage-Backed
Obligations
(Cost $5,204) $ 5,396
- --------------------------------------------------------------------------------
Preferred Stock -- 1.1%
SPG Properties 90,000 4,078
- --------------------------------------------------------------------------------
Total Preferred Stock
(Cost $4,573) $ 4,078
- --------------------------------------------------------------------------------
Repurchase Agreement -- 5.0%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $18,164,320 (collateralized
by U.S. Government Agency
Instrument: total market
value $18,707,468) $18,157 $ 18,157
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $18,157) $ 18,157
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
Total Investments -- 119.2%
(Cost $432,725) $435,308
================================================================================
Other Assets and Liabilities, Net -- (19.2%) (D) $(69,973)
================================================================================
Net Assets:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 35,351,972 outstanding
shares of beneficial interest 355,866
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 840,879 outstanding shares
of beneficial interest 8,631
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 27,747 outstanding shares
of beneficial interest 284
Distribution in excess of net investment income (16)
Accumulated net realized loss on investments (2,013)
Net unrealized appreciation on investments 2,583
- --------------------------------------------------------------------------------
Total Net Assets -- 100.0% $365,335
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share-- Institutional Class $ 10.08
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $ 10.20
================================================================================
Maximum Offering Price Per Share --
Retail Class A ($10.20 / 95.50%) $ 10.68
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Retail Class B $ 10.08
================================================================================
(A) When Issued Security (total cost $69,725,781)
(B) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional investors.
(C) Variable Rate Security. The rate reported onthe Statement of Net Assets is
the rate in effect on April 30, 1999.
(D) Other Assets and Liabilities representing greater than five percent of
total net assets include the following (000):
Collateral received for securities on loan $ 66,927
Payable upon return of securities on loan $ 66,927
GTD--Guaranteed Mortgage Certificate
MTN--Medium Term Note
PAT--Putable Asset Trust
REMIC--Real Estate Mortgage Investment Conduit
The accompanying notes are an integral part of the financial statements.
82
88
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: BALANCED PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
U.S. Government Agency Obligations -- 1%
Asset-Backed Securities -- 2%
Repurchase Agreements -- 5%
U.S. Treasury Obligations -- 6%
U.S. Government Mortgage -- Backed Obligations -- 9%
Corporate Obligations -- 10%
Non-Agency Mortgage-Backed Obligations -- 1%
Common Stocks -- 66%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 66.1%
AUTOMOTIVE -- 1.0%
Borg-Warner Automotive 25,000 $ 1,419
- --------------------------------------------------------------------------------
Total Automotive $ 1,419
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.7%
Lockheed Martin 24,000 1,034
- --------------------------------------------------------------------------------
Total Aerospace & Defense $ 1,034
- --------------------------------------------------------------------------------
BANKS -- 3.8%
Bank One 24,200 1,428
Chase Manhattan 20,000 1,655
Washington Mutual 30,000 1,234
Wells Fargo 29,000 1,252
- --------------------------------------------------------------------------------
Total Banks $ 5,569
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 3.6%
Adelphia Communications,
Cl A* 5,000 341
Chancellor Media, Cl A* 25,000 1,372
MediaOne Group* 20,000 1,631
Young & Rubicam* 49,375 1,966
- --------------------------------------------------------------------------------
Total Broadcasting, Newspapers & Advertising $ 5,310
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 5.6%
Ascend Communications* 10,000 966
Cisco Systems* 17,000 1,939
Comverse Technology* 37,500 2,405
Motorola 20,000 1,603
Nokia, Cl A, ADR 18,000 1,335
- --------------------------------------------------------------------------------
Total Communications Equipment $ 8,248
- --------------------------------------------------------------------------------
Microsoft* 15,000 1,220
Networks Associates* 30,000 397
- --------------------------------------------------------------------------------
Total Computer Software $ 1,617
- -------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 4.9%
Compaq Computer 46,668 1,041
Electronics for Imaging* 50,000 2,366
EMC* 18,000 1,961
Jabil Circuit* 40,000 1,863
- --------------------------------------------------------------------------------
Total Computers & Services $ 7,231
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
CONGLOMERATE -- 0.8%
Tyco International Limited 15,000 $ 1,219
- --------------------------------------------------------------------------------
Total Conglomerate $ 1,219
- --------------------------------------------------------------------------------
Abbott Laboratories 25,000 1,211
American Home Products 25,000 1,525
Amgen* 35,000 2,150
Bristol-Myers Squibb 30,000 1,907
Schering Plough 20,000 966
Warner Lambert 30,000 2,038
Watson Pharmaceuticals* 30,000 1,215
- --------------------------------------------------------------------------------
Total Drugs $11,012
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.9%
General Electric 13,000 1,372
- --------------------------------------------------------------------------------
Total Electrical Equipment $ ,372
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 5.5%
AT&T-Liberty Media, Cl A* 18,917 1,208
Carnival, Cl A 35,000 1,444
CBS 20,000 911
Mirage Resorts* 40,000 897
Time Warner 25,000 1,750
Viacom, Cl B* 25,000 1,022
Walt Disney 28,000 889
- --------------------------------------------------------------------------------
Total Entertainment $ 8,121
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.0%
Citigroup 35,000 2,634
Freddie Mac 30,000 1,882
Morgan Stanley,
Dean Witter, Discover 20,000 1,984
Waddell & Reed
Financial, Cl A 40,000 902
- --------------------------------------------------------------------------------
Total Financial Services $ 7,402
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 3.6%
Interstate Bakeries 40,000 890
PepsiCo 40,000 1,477
Ralston Purina Group 60,000 1,830
Seagram 20,000 1,147
- --------------------------------------------------------------------------------
Total Food, Beverage & Tobacco $ 5,344
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS & APPLIANCES -- 3.4%
Colgate-Palmolive 15,000 1,537
Dial 55,000 1,870
Gillette 10,000 522
Windmere-Durable Holdings 90,000 1,035
- --------------------------------------------------------------------------------
Total Household Products & Appliances $ 4,964
- --------------------------------------------------------------------------------
INSURANCE -- 1.0%
American International Group 12,375 1,453
- --------------------------------------------------------------------------------
Total Insurance $ 1,453
- --------------------------------------------------------------------------------
Callaway Golf 50,000 753
Mattel 40,000 1,035
- --------------------------------------------------------------------------------
Total Leisure Products $ 1,788
- --------------------------------------------------------------------------------
83
89
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]BALANCED PORTFOLIO (CONTINUED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MACHINERY -- 0.8%
Black & Decker 20,000 $ 1,135
- --------------------------------------------------------------------------------
Total Machinery $ 1,135
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 0.8%
Johnson & Johnson 11,600 1,131
- --------------------------------------------------------------------------------
Total Medical Products & Services $ 1,131
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 3.5%
Cendant* 125,000 2,250
First Data 30,000 1,273
Nielson Media Research* 40,000 1,095
USWeb* 25,000 561
- --------------------------------------------------------------------------------
Total Miscellaneous Business Services $ 5,179
- --------------------------------------------------------------------------------
OIL SERVICE -- 1.1%
Halliburton 40,000 1,705
- --------------------------------------------------------------------------------
Total Oil Service $ 1,705
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.6%
Kimberly-Clark 15,000 920
- --------------------------------------------------------------------------------
Total Paper & Paper Products $ 920
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.7%
Xerox 18,000 1,057
- --------------------------------------------------------------------------------
Total Photographic Equipment & Supplies $ 1,057
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 0.4%
Sylvan Learning Systems* 25,000 628
- --------------------------------------------------------------------------------
Total Professional Services $ 628
- --------------------------------------------------------------------------------
RETAIL -- 3.9%
Dayton Hudson 17,000 1,144
Home Depot 20,000 1,199
Linens 'N Things* 33,000 1,510
Rite Aid 40,000 933
Wal-Mart Stores 22,000 1,012
- --------------------------------------------------------------------------------
Total Retail $ 5,798
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 1.2%
Intel 30,000 1,836
- --------------------------------------------------------------------------------
Total Semi-Conductors/Instruments $ 1,836
- --------------------------------------------------------------------------------
TECHNOLOGY -- 0.7%
American Power Conversion* 30,000 990
- --------------------------------------------------------------------------------
Total Technology $ 990
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS-- 2.8%
Alltel 15,000 1,012
MCI WorldCom* 23,000 1,890
Sprint PCS Group* 30,000 1,271
- --------------------------------------------------------------------------------
Total Telephones & Telecommunications $ 4,173
- --------------------------------------------------------------------------------
(Cost $63,464) $97,655
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.3%
SPG Properties 8,000 363
- --------------------------------------------------------------------------------
Total Preferred Stock
(Cost $408) $ 363
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 6.2%
U.S. Treasury Bonds
8.000%, 11/15/21 $ 500 $ 627
6.125%, 11/15/27 60 62
5.500%, 08/15/28 60 57
5.250%, 11/15/28 500 462
U.S. Treasury Notes
7.500%, 10/31/99 2,500 2,533
7.750%, 02/15/01 1,100 1,149
7.500%, 11/15/01 1,000 1,055
7.500%, 02/15/05 500 553
6.625%, 05/15/07 2,500 2,691
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $9,277) $ 9,189
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION -- 1.2%
Federal National Mortgage
Association
6.000%, 05/15/08 1,750 1,763
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligation
(Cost $1,783) $ 1,763
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 8.5%
Federal Home Loan Mortgage
Corporation
8.500%, 11/01/01 17 17
9.000%, 01/01/02 25 25
9.500%, 07/01/02 4 4
6.500%, 04/01/08 736 744
8.500%, 09/01/26 105 111
Federal National Mortgage
Association
10.500%, 12/01/00 2 2
7.000%, 02/01/07 234 240
7.000%, 12/01/25 794 805
7.000%, 02/01/26 479 486
6.500%, 04/01/28 545 542
6.500%, 10/01/28 508 505
6.500%, 02/11/29 1,939 1,927
6.500%, 04/01/29 2,000 1,987
Federal National Mortgage
Association, REMIC
9.750%, 09/25/18 119 127
Government National
Mortgage Association
7.500%, 10/15/23 821 847
7.500%, 12/15/23 833 858
7.000%, 02/15/24 972 987
7.000%, 05/15/24 981 996
7.000%, 05/15/24 1,009 1,025
Government National Mortgage
Association, REMIC
7.750%, 06/16/20 300 310
- --------------------------------------------------------------------------------
Total U.S. Government Mortgage-
Backed Obligations
(Cost $12,325) $12,545
- --------------------------------------------------------------------------------
84
90
STATEMENTS OF NET ASSETS
APRIL 30, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 10.0%
BANKS -- 0.9%
Bank of New York (A)
7.780%, 12/01/26 $ 500 $ 510
Crestar Financial
8.160%, 12/15/26 800 851
- --------------------------------------------------------------------------------
Total Banks $ 1,361
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 3.0%
Comcast Cablevision, MTN
8.375%, 05/01/07 500 560
CSC Holdings
7.875%, 12/15/07 1,000 1,051
7.875%, 02/15/18 250 256
Royal Caribbean Cruises, YB
7.250%, 08/15/06 500 504
Time Warner
9.125%, 01/15/13 750 911
Time Warner, PAT (A)
4.900%, 07/29/99 700 698
Viacom
6.750%, 01/15/03 500 507
- --------------------------------------------------------------------------------
Total Entertainment $ 4,487
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 2.0%
Household Finance
5.875%, 02/01/09 1,000 953
Newcourt Credit
6.875%, 02/16/05 1,000 1,021
Sprint Capital
6.125%, 11/15/08 1,000 964
- --------------------------------------------------------------------------------
Total Financial Services $ 2,938
- --------------------------------------------------------------------------------
INDUSTRIAL -- 1.6%
Canadian National Railway
6.900%, 07/15/28 500 491
Husky Oil, YB (A)
7.550%, 11/15/16 725 684
Hydro-Quebec, YB
7.500%, 04/01/16 375 405
J Seagram & Sons
7.500%, 12/15/18 500 508
Oryx Energy
8.125%, 10/15/05 250 268
- --------------------------------------------------------------------------------
Total Industrial $ 2,356
- --------------------------------------------------------------------------------
RETAIL -- 1.4%
Dayton Hudson
6.750%, 01/01/28 550 538
Dillard's
7.000%, 12/01/28 750 723
Fred Meyer
7.375%, 03/01/05 500 516
Great Atlantic & Pacific Tea
7.750%, 04/15/07 250 251
- --------------------------------------------------------------------------------
Total Retail $ 2,028
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 1.1%
Qwest Communications
International (A)
7.250%, 11/01/08 $ 1,000 $ 1,031
MCI WorldCom
7.550%, 04/01/04 500 528
- --------------------------------------------------------------------------------
Total Telephones & Telecommunications $ 1,559
- --------------------------------------------------------------------------------
Total Corporate Obligations
(Cost $14,707) $14,729
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 1.8%
Contimortgage Home Equity
Loan Trust, Series 1998-2,
Class A6
6.360%, 11/15/19 350 349
Contimortgage Home Equity
Loan Trust, Series 1998-1,
Class A4
6.280%, 01/15/13 450 455
IMC Home Equity Loan Trust,
Series 1997-2, Class A3
6.940%, 11/20/11 340 343
IMC Home Equity Loan Trust,
Series 1997-3, Class A4
6.840%, 10/20/13 350 352
MDC Asset Investors Trust,
Series XII, Class 3
8.940%, 03/01/18 11 11
Premier Auto Trust,
Series 1996-2, Class A4
6.575%, 10/06/00 494 497
The Money Store Home Equity
Trust, Series 1996-C, Class A4
7.400%, 06/15/21 350 359
The Money Store Home Equity
Trust, Series 1997-D,
Class AF3
6.345%, 11/15/21 313 315
- --------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $2,667) $ 2,681
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -- 0.6%
Countrywide Funding,
Series 1994-4, Class A12
6.950%, 04/25/24 969 944
- --------------------------------------------------------------------------------
Total Non-Agency Mortgage-Backed Obligations
(Cost $910) $ 944
- --------------------------------------------------------------------------------
85
91
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW] BALANCED PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.7%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $6,977,501 (collateralized
by U.S. Government Agency
Instrument: total market
value $7,190,303) $ 6,975 $ 6,975
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $6,975) 6,975
- --------------------------------------------------------------------------------
Total Investments -- 99.4%
(Cost $112,516) $146,844
================================================================================
Other Assets and Liabilities, Net-- 0.6% $ 957
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 8,085,196 outstanding shares
of beneficial interest 81,759
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 1,845,510 outstanding shares
of beneficial interest 23,249
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 169,813 outstanding shares of
beneficial interest 2,389
Undistributed net investment income 249
Accumulated net realized gain on investments 5,827
Net unrealized appreciation on investments 34,328
- --------------------------------------------------------------------------------
Total Net Assets -- 100.0% $147,801
================================================================================
Net Asset Value, Offering and Redemption
Price Per Shar -- Institutional Class $14.64
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $14.59
================================================================================
Maximum Offering Price Per Share --
Retail Class A ($14.59 / 95.25%) $15.32
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Retail Class B $14.60
================================================================================
* 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.
ADR--American Depository Receipt
Cl--Class
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.
[ARROW]ARK FUNDS: EQUITY INCOME PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Real Estate Investment Trusts -- 3%
Miscellaneous Business Services -- 6%
Transportation -- 7%
Durable goods -- 8%
Chemicals & Drugs -- 11%
Consumer Non-Durable -- 12%
Repurchase Agreements -- 2%
Financial -- 20%
Energy -- 19%
Technology -- 12%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 93.3%
AEROSPACE & DEFENSE -- 4.2%
Gencorp 44,500 $ 1,029
Lockheed Martin 40,000 1,723
Northrop Grumman 25,000 1,598
- --------------------------------------------------------------------------------
Total Aerospace & Defense $ 4,350
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 3.9%
Ford Motor 30,000 1,918
General Motors 25,000 2,223
- --------------------------------------------------------------------------------
Total Automotive $ 4,141
- --------------------------------------------------------------------------------
BANKS -- 11.2%
Bank One 20,000 1,180
Chase Manhattan 20,000 1,655
Fleet Financial Group 54,000 2,325
PNC 40,000 2,315
Union Planters 50,000 2,141
Wells Fargo 50,000 2,159
- --------------------------------------------------------------------------------
Total Banks $ 11,775
- --------------------------------------------------------------------------------
BEAUTY PRODUCTS -- 4.3%
Colgate Palmolive 20,000 2,049
Johnson & Johnson 25,000 2,437
- --------------------------------------------------------------------------------
Total Beauty Products $ 4,486
- --------------------------------------------------------------------------------
CHEMICALS -- 1.7%
E.I. du Pont de Nemours 25,000 1,766
- -------------------------------------------------------------------------------
Total Chemicals $ 1,766
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.7%
Koninklijke Philips El,
New York Shares, ADR 21,000 1,793
- --------------------------------------------------------------------------------
Total Communications Equipment $ 1,793
- --------------------------------------------------------------------------------
DRUGS -- 9.3%
Abbott Laboratories 66,000 3,197
American Home Products 50,000 3,050
Bristol-Myers Squibb 54,400 3,458
- --------------------------------------------------------------------------------
Total Drugs $ 9,705
- --------------------------------------------------------------------------------
86
92
STATEMENTS OF NET ASSETS
APRIL 30, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 4.7%
Illinova 75,000 $ 1,969
New Century Energies 30,293 1,060
Unicom 50,000 1,941
- --------------------------------------------------------------------------------
Total Electric Utilities $ 4,970
- --------------------------------------------------------------------------------
ENERGY -- 2.0%
Halliburton 50,000 2,131
- --------------------------------------------------------------------------------
Total Energy $ 2,131
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.2%
CIT Group, Cl A 35,000 1,137
Waddell & Reed
Financial, Cl A 100,000 2,256
- --------------------------------------------------------------------------------
Total Financial Services $ 3,393
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 6.2%
Bestfoods 36,000 1,807
H.J. Heinz 35,000 1,634
PepsiCo 45,000 1,662
Philip Morris 40,000 1,402
- --------------------------------------------------------------------------------
Total Food, Beverage & Tobacco $ 6,505
- --------------------------------------------------------------------------------
INSURANCE -- 3.1%
Chubb 25,000 1,481
Hartford Financial
Services Group 30,000 1,768
- --------------------------------------------------------------------------------
Total Insurance $ 3,249
- --------------------------------------------------------------------------------
LEASING & RENTING -- 2.0%
Pitney Bowes 30,000 2,098
- --------------------------------------------------------------------------------
Total Leasing & Renting $ 2,098
- --------------------------------------------------------------------------------
MACHINERY -- 3.2%
Emerson Electric 27,000 1,741
General Electric 15,000 1,583
- --------------------------------------------------------------------------------
Total Machinery $ 3,324
- --------------------------------------------------------------------------------
MARINE TRANSPORTATION -- 1.0%
Knightsbridge Tankers
Limited 58,000 1,091
- --------------------------------------------------------------------------------
Total Marine Transportation $01,091
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 4.7%
Consol Energy 50,000 713
Enron Oil & Gas 100,000 1,900
Shell Transport &
Trading, ADR 50,000 2,272
- --------------------------------------------------------------------------------
Total Petroleum & Fuel Products $ 4,885
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 7.4%
Chevron 26,000 2,594
Mobil 25,000 2,619
Texaco 40,000 2,510
- -------------------------------------------------------------------------------
Total Petroleum Refining $ 7,723
- --------------------------------------------------------------------------------
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 1.1%
Xerox 20,000 $ 1,175
- --------------------------------------------------------------------------------
Total Photographic Equipment & Supplies $ 1,175
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 2.0%
Dun & Bradstreet 55,000 2,021
- --------------------------------------------------------------------------------
Total Professional Services $ 2,021
- --------------------------------------------------------------------------------
RAILROADS -- 2.2%
Norfolk Southern 70,200 2,295
- --------------------------------------------------------------------------------
Total Railroads $ 2,295
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 3.4%
Berkshire Realty 94,100 1,082
Boston Properties 36,000 1,307
Spieker Properties 30,000 1,177
- -------------------------------------------------------------------------------
Total Real Estate Investment Trusts $ 3,566
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 1.2%
Carpenter Technology 40,000 1,253
- --------------------------------------------------------------------------------
Total Steel & Steel Works $ 1,253
- --------------------------------------------------------------------------------
TECHNOLOGY -- 1.7%
Rockwell International 35,000 1,807
- --------------------------------------------------------------------------------
Total Technology $ 1,807
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 7.9%
AT&T 37,500 1,894
BellSouth 45,000 2,014
Telefonica de Espana, ADR 17,687 2,465
US WEST 35,900 1,878
- --------------------------------------------------------------------------------
Total Telephones & Telecommunications $ 8,251
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $69,751) $97,753
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCKS -- 5.0%
BANKS -- 1.3%
WBK Strypes Trust 40,000 1,388
- --------------------------------------------------------------------------------
Total Banks $ 1,388
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 2.6%
Houston Industries 13,500 1,593
Nisource* 22,500 1,148
- --------------------------------------------------------------------------------
Total Electric Utilities $ 2,741
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 1.1%
Ralston Purina 25,000 1,162
- --------------------------------------------------------------------------------
Total Food, Beverage & Tobacco $ 1,162
- --------------------------------------------------------------------------------
Total Preferred Convertible Stocks
(Cost $4,245) $ 5,291
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 1.0%
CIT Group, MTN (A)
4.800%, 07/21/99 $1,000 999
- --------------------------------------------------------------------------------
Total Corporate Obligations
(Cost $1,000) $ 999
- --------------------------------------------------------------------------------
87
93
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]EQUITY INCOME PORTFOLIO (CONCLUDED)
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.7%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $1,802,403 (collateralized
by U.S. Government Agency
Instrument: total market
value $1,864,508) $1,802 $ 1,802
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $1,802) $ 1,802
- --------------------------------------------------------------------------------
Total Investments -- 101.0%
(Cost $76,798) $105,845
================================================================================
Other Assets and Liabilities, Net-- (1.0%) $ (1,082)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 8,393,482 outstanding shares
of beneficial interest 70,906
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 303,967 outstanding shares
of beneficial interest 3,720
Distribution in excess of net investment income (1)
Accumulated net realized gain on investments 1,091
Net unrealized appreciation on investments 29,047
================================================================================
Total Net Assets -- 100.0% $104,763
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $12.05
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $12.04
================================================================================
Maximum Offering Price Per Share --
Retail Class A ($12.04 / 95.25%) $12.64
================================================================================
* Non-income producing security.
(A) Variable Rate Security. The rate reported on the Statement of Net Assets is
the rate in effect on April 30, 1999.
ADR--American Depository Receipt
Cl--Class
MTN--Medium Term Note
The accompanying notes are an integral part of the financial statements.
[ARROW]ARK FUNDS: VALUE EQUITY PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Repurchase Agreements -- 2%
Miscellaneous Business Services -- 6%
Retail -- 7%
Consumer Products -- 7%
Miscellaneous -- 8%
Chemicals & Drugs -- 10%
Financial -- 12%
Technology -- 21%
Durable Goods -- 14%
Durable Goods -- 14%
Oil-Energy -- 13%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.4%
AEROSPACE & DEFENSE -- 2.5%
Lockheed Martin 150,000 $ 6,459
Raytheon Company, Cl B 100,000 7,025
- --------------------------------------------------------------------------------
Total Aerospace & Defense $ 13,484
- --------------------------------------------------------------------------------
APPAREL/TEXTILES -- 1.2%
VF 123,600 $ 6,365
- --------------------------------------------------------------------------------
Total Apparel/Textiles $ 6,365
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 0.9%
TRW 120,000 5,032
- -------------------------------------------------------------------------------
Total Automotive $ 5,032
- --------------------------------------------------------------------------------
BANKS -- 4.8%
Bank One 140,020 8,261
Chase Manhattan 100,000 8,275
Wells Fargo 220,000 9,501
- --------------------------------------------------------------------------------
Total Banks $ 26,037
- --------------------------------------------------------------------------------
CHEMICALS -- 0.8%
Monsanto 99,375 4,497
- --------------------------------------------------------------------------------
Total Chemicals $ 4,497
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 4.4%
GTE 117,500 7,865
Motorola 200,000 16,025
- --------------------------------------------------------------------------------
Total Communications Equipment $ 23,890
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 5.8%
Compaq Computer 333,108 7,432
Data General* 25,000 292
Dell Computer* 160,000 6,590
Hewlett Packard 85,000 6,704
IBM 50,000 10,459
- --------------------------------------------------------------------------------
Total Computers & Services $ 31,477
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 1.3%
Newell Rubbermaid 150,000 7,115
- --------------------------------------------------------------------------------
Total Containers & Packaging $ 7,115
- --------------------------------------------------------------------------------
88
94
STATEMENTS OF NET ASSETS
APRIL 30, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
DRUGS -- 9.1%
Abbott Laboratories 150,000 $ 7,266
American Home Products 200,000 12,200
Amgen* 300,000 18,431
Bristol-Myers Squibb 80,000 5,085
Mylan Laboratories 275,000 6,239
- --------------------------------------------------------------------------------
Total Drugs $49,221
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 1.6%
General Electric 80,000 8,440
- --------------------------------------------------------------------------------
Total Electrical Services $ 8,440
- --------------------------------------------------------------------------------
ENERGY -- 1.2%
Halliburton 150,400 6,411
- --------------------------------------------------------------------------------
Total Energy $ 6,411
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 0.2%
Royal Caribbean Cruises 25,000 923
- --------------------------------------------------------------------------------
Total Entertainment $ 923
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.4%
CIT Group, Cl A 230,000 7,475
Citigroup 190,000 14,297
Waddell & Reed
Financial, Cl A 325,000 7,333
- --------------------------------------------------------------------------------
Total Financial Services $29,105
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 4.9%
Anheuser Busch 120,000 8,775
H.J. Heinz 62,600 2,923
Interstate Bakeries 200,000 4,450
PepsiCo 200,000 7,387
Sara Lee 135,200 3,008
- --------------------------------------------------------------------------------
Total Food, Beverage & Tobacco $26,543
- --------------------------------------------------------------------------------
GAS/NATURAL GAS -- 2.2%
AGL Resources 100,000 1,819
El Paso Energy 105,212 3,867
Questar 337,800 6,144
- --------------------------------------------------------------------------------
Total Gas/Natural Gas $11,830
- --------------------------------------------------------------------------------
GLASS PRODUCTS -- 1.3%
Corning 125,000 7,156
- --------------------------------------------------------------------------------
Total Glass Products $ 7,156
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.8%
Colgate-Palmolive 93,800 9,609
- --------------------------------------------------------------------------------
Total Household Products $ 9,609
- --------------------------------------------------------------------------------
INSURANCE -- 1.7%
Allstate 90,000 3,274
Cigna 70,000 6,103
- --------------------------------------------------------------------------------
Total Insurance $ 9,377
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 1.3%
Weyerhaeuser 101,500 $ 6,813
- --------------------------------------------------------------------------------
Total Lumber & Wood Products $ 6,813
- --------------------------------------------------------------------------------
MACHINERY -- 3.9%
Applied Materials* 75,000 4,022
Ingersoll Rand 180,600 12,495
Parker-Hannifin 100,000 4,694
- --------------------------------------------------------------------------------
Total Machinery $21,211
- --------------------------------------------------------------------------------
MEASURING DEVICES -- 2.8%
Honeywell 85,600 8,111
Mallinckrodt 200,000 7,012
- --------------------------------------------------------------------------------
Total Measuring Devices $15,123
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES-- 4.9%
Baxter International 108,600 6,842
Becton Dickinson 300,000 11,156
Medtronic 91,400 6,575
Total Renal Care Holdings* 150,000 2,081
- --------------------------------------------------------------------------------
Total Medical Products & Services $26,654
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES-- 2.4%
First Data 200,000 8,488
Networks Associates* 231,850 3,072
Sterling Software* 70,000 1,448
- --------------------------------------------------------------------------------
Total Miscellaneous Business Services $13,008
- --------------------------------------------------------------------------------
OFFICE PRODUCTS & SUPPLIES -- 1.3%
Johnson Controls 92,600 6,754
- --------------------------------------------------------------------------------
Total Office Products & Supplies $ 6,754
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.9%
Kimberly-Clark 80,000 4,905
- --------------------------------------------------------------------------------
Total Paper & Paper Products $ 4,905
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 1.1%
Phillips Petroleum 120,000 6,075
- --------------------------------------------------------------------------------
Total Petroleum & Fuel Products $ 6,075
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 8.3%
BP Amoco PLC, ADR 107,057 12,118
Chevron 84,400 8,419
Mobil 104,900 10,988
Sunoco 140,000 5,005
Unocal 200,000 8,313
- --------------------------------------------------------------------------------
Total Petroleum Refining $44,843
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 2.3%
Xerox 215,000 12,631
- --------------------------------------------------------------------------------
Total Photographic Equipment & Supplies $12,631
- --------------------------------------------------------------------------------
95
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW] VALUE EQUITY PORTFOLIO (CONCLUDED)
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
RETAIL -- 4.8%
Albertson's 105,000 $ 5,408
Lowe's 175,000 9,231
May Department Stores 87,900 3,500
Rite Aid 325,000 7,577
- --------------------------------------------------------------------------------
Total Retail $ 25,716
- --------------------------------------------------------------------------------
RUBBER & PLASTIC -- 1.1%
Goodyear Tire & Rubber 100,000 5,719
- --------------------------------------------------------------------------------
Total Rubber & Plastic $ 5,719
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 4.9%
Conexant Systems* 75,000 3,056
Intel 260,000 15,909
Rockwell International 150,000 7,744
- --------------------------------------------------------------------------------
Total Semi-Conductors/Instruments $ 26,709
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 6.4%
BellSouth 230,000 10,293
E.spire Communications* 20,000 250
SBC Communications 200,000 11,200
Sprint 80,700 8,277
US WEST 84,700 4,431
- --------------------------------------------------------------------------------
Total Telephones & Telecommunications $ 34,451
- --------------------------------------------------------------------------------
TRANSPORTATION -- 0.9%
Burlington Northern
Santa Fe 127,500 4,670
- --------------------------------------------------------------------------------
Total Transportation $ 4,670
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $329,660) $531,794
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.9%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $10,641,415 (collateralized
by U.S. Government Agency
Instrument: total market
value $11,015,270) $10,637 10,637
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $10,637) $ 10,637
- --------------------------------------------------------------------------------
Total Investments -- 100.3%
(Cost $340,297) $542,431
================================================================================
Other Assets and Liabilities, Net-- (0.3%) $ (1,887)
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 35,268,320 outstanding shares
of beneficial interest $280,814
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 233,460 outstanding shares
of beneficial interest 3,371
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 10,829 outstanding shares
of beneficial interest 157
Distribution in excess of net investment income (3)
Accumulated net realized gain on investments 54,071
Net unrealized appreciation on investments 202,134
================================================================================
Total Net Assets -- 100.0% $540,544
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $15.22
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $15.22
================================================================================
Maximum Offering Price Per Share --
Retail Class A ($15.22 / 95.25%) $15.98
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Retail Class B $15.16
================================================================================
* Non-income producing security
ADR--American Depository Receipt
Cl--Class
The accompanying notes are an integral part of the financial statements.
90
96
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW] ARK FUNDS: EQUITY INDEX PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Cash Equivalents -- 3%
Repurchase Agreements -- 3%
Retail -- 6%
Durable Goods --7%
Miscellaneous -- 8%
Chemicals & Drugs -- 10%
Consumer Products -- 10%
Healthcare -- 2%
Technology -- 24%
Financial -- 16%
Oil-Energy -- 11%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 95.5%
AEROSPACE & DEFENSE -- 0.4%
Lockheed Martin 3,090 $ 133
Northrop Grumman 420 27
Raytheon Company, Cl B 2,680 188
- --------------------------------------------------------------------------------
Total Aerospace & Defense $ 348
- --------------------------------------------------------------------------------
AGRICULTURE -- 0.1%
Pioneer Hi-Bred International 1,795 67
- --------------------------------------------------------------------------------
Total Agriculture $ 67
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.4%
AMR* 1,370 96
Delta Air Lines 1,180 75
FDX* 1,096 123
Southwest Airlines 2,432 79
US Air Group* 635 35
- --------------------------------------------------------------------------------
Total Air Transportation $ 408
- --------------------------------------------------------------------------------
AIRCRAFT -- 1.0%
AlliedSignal 4,385 258
Boeing 7,830 318
General Dynamics 960 67
United Technologies 1,805 262
- --------------------------------------------------------------------------------
Total Aircraft $ 905
- --------------------------------------------------------------------------------
APPAREL/TEXTILES -- 0.1%
Fruit of the Loom, Cl A* 220 2
Liz Claiborne 320 11
Russell 110 2
Springs Industries, Cl A 60 2
VF 890 46
- --------------------------------------------------------------------------------
Total Apparel/Textiles $ 63
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 1.5%
Dana 1,331 63
Eaton 570 52
Ford Motor 10,165 650
General Motors 5,270 469
Genuine Parts 1,310 39
Navistar International* 545 29
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Paccar 620 $ 35
TRW 895 38
- --------------------------------------------------------------------------------
Total Automotive $ 1,375
- --------------------------------------------------------------------------------
BANKS -- 7.0%
Amsouth Bancorp 1,000 48
Bank of America 14,435 1,039
Bank of New York 6,135 245
Bank One 9,513 561
BankBoston 2,380 117
Bankers Trust New York 755 68
BB&T 2,110 84
Chase Manhattan 6,840 566
Comerica 1,232 80
Fifth Third Bancorp 2,145 154
First Union 7,939 440
Firstar 5,400 162
Fleet Financial Group 4,440 191
Golden West Financial 475 48
Huntington Bancshares 1,556 55
Keycorp 3,645 113
Mellon Bank 2,055 153
Mercantile Bancorporation 1,205 69
National City 2,580 185
Northern Trust 860 80
PNC 2,440 141
Providian Financial 1,057 136
Regions Financial 1,520 57
Republic New York 730 43
Southtrust 1,400 56
State Street 1,195 105
Summit Bancorp 1,380 58
SunTrust Banks 2,570 184
Synovus Financial 1,942 43
U.S. Bancorp 5,785 214
Union Planters 1,000 43
Wachovia 1,700 149
Washington Mutual 4,656 191
Wells Fargo 13,655 590
- --------------------------------------------------------------------------------
Total Banks $ 6,468
- --------------------------------------------------------------------------------
BEAUTY PRODUCTS -- 0.2%
Alberto-Culver, Cl B 170 4
Avon Products 1,960 106
International Flavors &
Fragrances 860 34
- --------------------------------------------------------------------------------
Total Beauty Products $ 144
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.0%
Clear Channel
Communications* 2,110 147
Comcast, Cl A Special 2,925 192
Interpublic Group 1,100 85
MediaOne Group* 5,070 414
Omnicom Group 1,325 96
- --------------------------------------------------------------------------------
Total Broadcasting, Newspapers & Advertising $ 934
- --------------------------------------------------------------------------------
91
97
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW] EQUITY INDEX PORTFOLIO (CONTINUED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.0%
Centex 480 $ 18
Fluor 405 14
Foster Wheeler 120 2
- --------------------------------------------------------------------------------
Total Building & Construction $ 34
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES -- 0.0%
Armstrong World Industries 195 11
McDermott International 160 5
Owens Corning 160 6
- --------------------------------------------------------------------------------
Total Building & Construction Supplies $ 22
- --------------------------------------------------------------------------------
CHEMICALS -- 1.6%
Air Products & Chemicals 1,700 80
Avery Dennison 940 64
B.F. Goodrich 585 23
E.I. du Pont de Nemours 9,085 642
Eastman Chemical 630 35
FMC* 110 7
Great Lakes Chemical 290 14
Hercules 800 30
Monsanto 5,015 227
Morton International 1,030 42
Nalco Chemical 200 7
PPG Industries 1,290 84
Praxair 1,155 60
Rohm & Haas 1,185 53
Union Carbide 1,070 56
W.R. Grace & Company* 360 6
- --------------------------------------------------------------------------------
Total Chemicals $ 1,430
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.5%
3Com* 2,885 75
Andrew* 270 4
Ascend Communications* 1,700 164
General Instrument* 1,210 44
GTE 7,735 518
Harris 385 13
ITT Industries 845 30
Nortel Networks* 5,271 359
Scientific-Atlanta 605 19
Tellabs* 1,580 173
- --------------------------------------------------------------------------------
Total Communications Equipment $ 1,399
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 3.7%
Microsoft* 42,260 3,436
- --------------------------------------------------------------------------------
Total Computer Software $ 3,436
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 6.8%
Apple Computer* 1,070 49
Ceridian* 1,140 42
Cisco Systems* 13,250 1,511
Compaq Computer 13,621 304
Data General* 140 2
Dell Computer* 20,540 846
EMC* 4,050 441
Gateway 2000* 1,150 76
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Hewlett Packard 8,270 $ 652
IBM 7,585 1,587
Minnesota Mining &
Manufacturing 3,135 279
Seagate Technology* 1,780 50
Silicon Graphics* 1,500 19
Sun Microsystems* 6,140 367
Unisys* 1,870 59
- --------------------------------------------------------------------------------
Total Computers & Services $ 6,284
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.2%
Ball 90 5
Crown Cork & Seal 970 32
Newell Rubbermaid 2,088 99
Owens-Illinois* 925 27
- --------------------------------------------------------------------------------
Total Containers & Packaging $ 163
- --------------------------------------------------------------------------------
DRUGS -- 8.1%
Abbott Laboratories 12,215 592
Allergan 540 49
Alza* 685 23
American Home Products 11,040 673
Amgen* 4,070 250
Bristol-Myers Squibb 16,500 1,049
Cardinal Health 2,375 142
Eli Lilly 9,160 674
Merck 19,820 1,392
Millipore 130 4
Pfizer 10,780 1,240
Pharmacia & Upjohn 4,000 224
Schering Plough 12,245 592
Sigma Aldrich 485 16
Warner Lambert 6,635 451
Watson Pharmaceuticals* 800 32
- --------------------------------------------------------------------------------
Total Drugs $ 7,403
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 5.0%
AES* 1,300 65
Ameren 1,010 39
American Electric Power 1,415 59
Baltimore Gas & Electric 1,155 32
Carolina Power & Light 1,125 45
Central & South West 1,570 39
Cinergy 1,160 35
Consolidated Edison 1,735 79
Dominion Resources 1,545 64
DTE Energy 1,045 43
Duke Energy 2,825 158
Edison International 2,765 68
Entergy 1,815 57
FirstEnergy 1,660 49
FPL Group 1,360 77
General Electric 27,445 2,895
GPU 975 37
New Century Energies 815 29
Niagara Mohawk Holdings* 1,130 15
Northern States Power 1,190 29
PacifiCorp 2,165 36
92
98
STATEMENTS OF NET ASSETS
APRIL 30, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------------------------------
PG&E 3,080 $ 96
PP&L Resources 1,215 34
Public Service Enterprise
Group 1,810 72
Reliant Energy 2,310 65
Sempra Energy 1,901 39
Southern 5,510 149
Texas Utilities 2,265 90
Unicom 1,595 62
- ------------------------------------------------------------------------------------
Total Electrical Services $4,557
- ------------------------------------------------------------------------------------
ENERGY -- 0.2%
Halliburton 3,540 151
- ------------------------------------------------------------------------------------
Total Energy $ 151
- ------------------------------------------------------------------------------------
ENTERTAINMENT -- 1.9%
CBS 5,600 255
King World Productions* 220 8
Mirage Resorts* 855 19
Time Warner 10,190 713
Viacom, Cl B* 5,610 229
Walt Disney 17,180 545
- ------------------------------------------------------------------------------------
Total Entertainment $1,769
- ------------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.4%
Browning-Ferris Industries 1,365 54
Laidlaw 1,585 10
Waste Management 5,076 287
- ------------------------------------------------------------------------------------
Total Environmental Services $ 351
- ------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.7%
American Express 3,660 478
Associates First Capital 5,770 256
Bear Stearns 719 34
Capital One Financial 520 90
Charles Schwab 3,197 351
Citigroup 18,744 1,410
Countrywide Credit
Industries 815 37
Equifax 1,125 40
Fannie Mae 8,690 616
Franklin Resources 2,000 80
Freddie Mac 5,485 344
Household International 3,908 197
J.P. Morgan 1,415 191
Lehman Brothers Holdings 930 52
MBNA 6,455 182
Merrill Lynch 2,735 230
Morgan Stanley,
Dean Witter, Discover 4,675 464
SLM Holding 1,305 56
Textron 1,235 114
- ------------------------------------------------------------------------------------
Total Financial Services $5,222
- ------------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 5.2%
Adolph Coors, Cl B 285 15
Anheuser Busch 3,765 275
Archer-Daniels-Midland 4,386 66
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------------------------------
Bestfoods 2,310 $ 116
Brown-Forman, Cl B 530 39
Campbell Soup 3,565 146
Coca-Cola 20,515 1,395
Coca-Cola Enterprises 3,000 104
Conagra 3,855 96
General Mills 1,250 91
H.J. Heinz 2,860 134
Hershey Foods 1,085 57
Kellogg 3,275 121
PepsiCo 11,820 437
Philip Morris 19,655 689
Quaker Oats 1,010 65
Ralston Purina Group 2,325 71
RJR Nabisco Holdings 2,550 66
Sara Lee 7,270 162
Seagram 3,080 177
Unilever NV, New York
Shares, ADR 5,155 335
UST 1,365 38
Wm. Wrigley, Jr. 905 80
- ------------------------------------------------------------------------------------
Total Food, Beverage & Tobacco $4,775
- ------------------------------------------------------------------------------------
GAS/NATURAL GAS -- 0.5%
Columbia Gas Systems 647 31
Consolidated Natural Gas 760 45
Eastern Enterprises 60 2
Enron 2,635 198
Nicor 140 5
ONEOK 80 2
Peoples Energy 100 4
Sonat 530 19
Williams 3,425 162
- ------------------------------------------------------------------------------------
Total Gas/Natural Gas $ 468
- ------------------------------------------------------------------------------------
GENERAL UTILITIES -- 0.1%
PECO Energy 1,640 78
- ------------------------------------------------------------------------------------
Total General Utilities $ 78
- --------------------------------------------------------------------------------
GLASS PRODUCTS -- 0.1%
Corning 1,815 104
- --------------------------------------------------------------------------------
Total Glass Products $ 104
- --------------------------------------------------------------------------------
HOME APPLIANCES -- 0.1%
National Service Industries 130 5
Sherwin-Williams 1,360 42
- --------------------------------------------------------------------------------
Total Home Appliances $ 47
- --------------------------------------------------------------------------------
HOME BUILDERS -- 0.0%
Pulte 120 3
- --------------------------------------------------------------------------------
Total Home Builders $ 3
- --------------------------------------------------------------------------------
HOTELS & LODGING -- 0.1%
Harrah's Entertainment* 1,000 22
Hilton Hotels 1,895 30
Marriott International, Cl A* 1,855 78
- --------------------------------------------------------------------------------
Total Hotels & Lodging $ 130
- --------------------------------------------------------------------------------
93
99
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROWOMITTED] EQUITY INDEX PORTFOLIO (CONTINUED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.6%
Clorox 970 $ 112
Colgate-Palmolive 2,290 235
Danaher 1,040 69
Fortune Brands 1,375 54
Gillette 8,935 466
Illinois Tool Works 2,030 156
Maytag 720 49
Procter & Gamble 11,105 1,042
Raychem 415 11
Snap-On Tools 180 6
Solectron* 1,900 92
Stanley Works 425 13
Whirlpool 600 40
- --------------------------------------------------------------------------------
Total Household Products $2,345
- --------------------------------------------------------------------------------
INSURANCE -- 3.4%
Aetna 1,060 93
Allstate 6,410 233
American General 2,015 149
American International
Group 10,273 1,206
Aon 1,220 84
Chubb 1,205 71
Cigna 1,600 140
Cincinnati Financial 1,095 44
Conseco 2,260 71
Hartford Financial
Services Group 1,720 101
Humana* 790 11
Jefferson-Pilot 817 55
Lincoln National 790 76
Loews 850 62
Marsh & McLennan 2,082 159
MBIA 780 52
MGIC Investment 885 43
Progressive 570 82
Provident 1,000 39
Safeco 1,025 41
St. Paul 1,854 53
Torchmark 1,025 35
Transamerica 1,010 72
United Healthcare 1,425 80
UNUM 1,015 55
- --------------------------------------------------------------------------------
Total Insurance $3,107
- --------------------------------------------------------------------------------
INTERNET SERVICE PROVIDERS -- 1.4%
America Online* 8,900 1,270
- --------------------------------------------------------------------------------
Total Internet Service
Providers $1,270
- --------------------------------------------------------------------------------
LEASING & RENTING -- 0.2%
Pitney Bowes 2,180 152
- --------------------------------------------------------------------------------
Total Leasing & Renting $ 152
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
LEISURE PRODUCTS -- 0.1%
Hasbro 1,537 $ 52
Jostens 120 3
Mattel 2,290 59
- --------------------------------------------------------------------------------
Total Leisure Products $ 114
- --------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 0.2%
Georgia-Pacific 725 67
Louisiana-Pacific 870 18
Weyerhaeuser 1,580 106
- --------------------------------------------------------------------------------
Total Lumber & Wood Products $ 191
- --------------------------------------------------------------------------------
MACHINERY -- 1.7%
Applied Materials* 2,960 159
Baker Hughes 2,320 69
Black & Decker 725 41
Briggs & Stratton 80 5
Brunswick 480 12
Case 365 13
Caterpillar 2,885 186
Crane 210 6
Cummins Engine 110 6
Deere 1,930 83
Dover 1,610 59
Emerson Electric 3,410 220
Harnischfeger Industries 150 1
Ingersoll Rand 1,200 83
Milacron 120 3
Nacco Industries, Cl A 50 4
Pall 980 18
Parker-Hannifin 865 41
Tenneco 1,265 34
Timken 190 4
Tyco International Limited 6,828 555
- --------------------------------------------------------------------------------
Total Machinery $1,602
- --------------------------------------------------------------------------------
MARINE TRANSPORTATION -- 0.2%
Carnival, Cl A 4,800 198
- --------------------------------------------------------------------------------
Total Marine Transportation $ 198
- --------------------------------------------------------------------------------
MEASURING DEVICES -- 0.2%
Honeywell 1,010 96
KLA-Tencor* 710 35
Mallinckrodt 570 20
Perkin Elmer 385 42
Tektronix 150 4
Thermo Electron* 730 12
- --------------------------------------------------------------------------------
Total Measuring Devices $ 209
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 2.4%
Bausch & Lomb 440 33
Baxter International 2,245 141
Becton Dickinson 1,805 67
Biomet 885 36
Boston Scientific* 2,810 120
C.R. Bard 445 22
94
100
STATEMENTS OF NET ASSETS
APRIL 30, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Columbia/HCA Healthcare 5,210 $ 129
Guidant 2,420 130
HCR Manor Care* 790 22
Healthsouth Rehabilitation* 3,110 42
Johnson & Johnson 11,170 1,089
Medtronic 4,695 338
St. Jude Medical 440 12
Tenet Healthcare* 2,265 54
- --------------------------------------------------------------------------------
Total Medical Products &
Services $2,235
- --------------------------------------------------------------------------------
METALS & MINING -- 0.1%
Cyprus AMAX Minerals 280 4
Freeport-McMoran
Copper & Gold, Cl B 930 14
Phelps Dodge 285 18
Reynolds Metals 355 22
- --------------------------------------------------------------------------------
Total Metals & Mining $ 58
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS
SERVICES -- 1.8%
Adobe Systems 350 22
Autodesk 140 4
Automatic Data Processing 4,720 210
BMC Software* 1,600 69
Cabletron Systems* 470 4
Cendant* 6,816 123
Computer Associates
International 4,417 189
Computer Sciences* 1,170 70
Compuware* 2,754 67
Deluxe 640 22
Ecolab 1,020 43
Electronic Data Systems 3,875 208
First Data 3,570 152
Momentum Business
Applications* 40 --
Novell* 2,605 58
Oracle Systems* 11,722 317
Parametric Technology* 1,520 20
PeopleSoft* 2,000 27
Shared Medical Systems 70 4
- --------------------------------------------------------------------------------
Total Miscellaneous Business
Services $1,609
- --------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER
SERVICES -- 0.1%
H&R Block 800 39
Service International 1,880 39
- --------------------------------------------------------------------------------
Total Miscellaneous Consumer
Services $ 78
- --------------------------------------------------------------------------------
MISCELLANEOUS TRANSPORTATION
-- 0.0%
Fleetwood Enterprises 110 3
- --------------------------------------------------------------------------------
Total Miscellaneous
Transportation $ 3
- --------------------------------------------------------------------------------
OFFICE PRODUCTS &
SUPPLIES -- 0.1%
Ikon Office Solutions 640 8
Johnson Controls 675 49
- --------------------------------------------------------------------------------
Total Office Products & Supplies $ 57
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
PAPER & PAPER
PRODUCTS -- 0.7%
Bemis 160 $ 6
Boise Cascade 160 6
Champion International 765 42
Fort James 1,630 62
International Paper 2,245 120
Kimberly-Clark 4,280 262
Mead 505 21
Potlatch 90 4
Temple-Inland 450 31
Union Camp 560 44
Westvaco 490 15
Willamette Industries 1,085 51
- --------------------------------------------------------------------------------
Total Paper & Paper Products $ 664
- --------------------------------------------------------------------------------
PETROLEUM & FUEL
PRODUCTS -- 0.9%
Anadarko Petroleum 955 36
Apache 460 14
Atlantic Richfield 2,520 212
Burlington Resources 1,292 60
Helmerich & Payne 140 4
Kerr-McGee 344 15
Occidental Petroleum 2,655 54
Phillips Petroleum 1,910 97
Rowan* 260 4
Schlumberger 4,265 272
Union Pacific Resources Group 1,225 17
USX-Marathon Group 2,130 67
- --------------------------------------------------------------------------------
Total Petroleum & Fuel
Products $ 852
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 4.8%
Amerada Hess 720 41
Ashland 610 26
Chevron 5,265 525
Coastal 1,560 60
Exxon 20,230 1,680
Mobil 6,540 685
Royal Dutch Petroleum,
New York Shares, ADR 17,900 1,051
Sunoco 735 26
Texaco 4,170 262
Unocal 1,905 79
- --------------------------------------------------------------------------------
Total Petroleum Refining $4,435
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT
& SUPPLIES-- 0.5%
Eastman Kodak 2,510 187
Polaroid 140 3
Xerox 5,180 304
- --------------------------------------------------------------------------------
Total Photographic Equipment
& Supplies $ 494
- --------------------------------------------------------------------------------
PRECIOUS METALS -- 0.1%
Barrick Gold 2,780 56
Battle Mountain Gold 680 2
Homestake Mining 1,540 15
95
101
STATEMENTS OF NET ASSETS
APRIL 30, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Newmont Mining 840 $ 20
Placer Dome Group 1,155 16
- --------------------------------------------------------------------------------
Total Precious Metals $ 109
- --------------------------------------------------------------------------------
PRINTING & PUBLISHING
-- 0.6%
American Greetings, Cl A 355 9
Dow Jones 740 40
Gannett 2,240 159
Knight-Ridder 630 34
McGraw-Hill 1,550 86
Meredith 160 6
Moore 260 3
New York Times, Cl A 1,420 49
R.R. Donnelley & Sons 1,105 39
Times Mirror, Cl A 525 31
Tribune 940 78
- --------------------------------------------------------------------------------
Total Printing & Publishing $ 534
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 0.2%
Dun & Bradstreet* 1,335 49
EG&G 140 4
IMS Health* 2,450 74
Paychex 1,325 68
- --------------------------------------------------------------------------------
Total Professional Services $ 195
- --------------------------------------------------------------------------------
RAILROADS -- 0.5%
Burlington Northern Santa Fe 3,770 138
CSX 1,695 83
Kansas City Southern
Industries 900 54
Norfolk Southern 2,775 91
Union Pacific 1,820 109
- --------------------------------------------------------------------------------
Total Railroads $ 475
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUST -- 0.0%
Kaufman & Broad Home 120 3
- --------------------------------------------------------------------------------
Total Real Estate
Investment Trust $ 3
- --------------------------------------------------------------------------------
REPAIR SERVICES -- 0.0%
Ryder System 370 10
- --------------------------------------------------------------------------------
Total Repair Services $ 10
- --------------------------------------------------------------------------------
RETAIL -- 6.4%
Albertson's 1,985 102
American Stores 2,155 68
Autozone* 1,190 36
Circuit City Stores 800 49
Consolidated Stores* 540 19
Costco* 1,765 143
CVS 3,040 145
Darden Restaurants 1,100 25
Dayton Hudson 3,435 231
Dillard's, Cl A 530 15
Dollar General 1,468 51
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Federated Department
Stores* 1,550 $ 72
Fred Meyer* 1,250 68
Gap 4,630 308
Great Atlantic & Pacific Tea 110 3
Harcourt General 565 27
Home Depot 12,270 735
J.C. Penney 1,830 83
Kmart* 3,830 57
Kohl's* 1,175 78
Kroger* 2,070 112
Limited 1,800 79
Longs Drug Stores 120 4
Lowe's 2,820 149
May Department Stores 2,835 113
McDonald's 10,710 454
Nike 2,115 132
Nordstrom 1,175 41
Pep Boys - Manny Moe & Jack 190 3
Reebok International 170 3
Rite Aid 1,890 44
Sears Roebuck 3,080 142
Staples* 3,675 110
Tandy 650 47
TJX 2,320 77
Toys "R" Us* 2,090 45
Tricon Global Restaurants* 1,132 73
Wal-Mart Stores 37,020 1,703
Walgreen 7,800 210
Wendy's International 635 17
Winn Dixie Stores 1,120 40
- --------------------------------------------------------------------------------
Total Retail $5,913
- --------------------------------------------------------------------------------
RUBBER & PLASTIC -- 0.4%
Cooper Tire & Rubber 230 5
Dow Chemical 1,775 233
Goodyear Tire & Rubber 1,145 65
Sealed Air* 632 38
Tupperware 180 4
- --------------------------------------------------------------------------------
Total Rubber & Plastic $ 345
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/
INSTRUMENTS -- 2.5%
Advanced Micro Devices* 750 12
Intel 27,920 1,708
LSI Logic* 1,130 38
Micron Technology 2,000 74
National Semiconductor* 585 7
Rockwell International 1,490 77
Texas Instruments 3,245 331
Thomas & Betts 265 11
- --------------------------------------------------------------------------------
Total Semi-Conductors/
Instruments $2,258
- --------------------------------------------------------------------------------
SPECIALTY CONSTRUCTION
-- 0.1%
Masco 2,480 73
- --------------------------------------------------------------------------------
Total Specialty Construction $ 73
- --------------------------------------------------------------------------------
96
102
STATEMENTS OF NET ASSETS
APRIL 30, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 0.0%
Cooper Industries 910 $ 44
- --------------------------------------------------------------------------------
Total Specialty Machinery $ 44
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.4%
Alcan Aluminum 1,695 54
Alcoa 2,750 171
Allegheny Teledyne 1,530 34
Asarco 120 2
Bethlehem Steel* 330 3
Engelhard 1,130 22
Inco 805 15
Nucor 695 41
USX-U.S. Steel Group 415 13
Worthington Industries 290 4
- --------------------------------------------------------------------------------
Total Steel & Steel Works $ 359
- --------------------------------------------------------------------------------
TELEPHONES &
TELECOMMUNICATIONS -- 9.2%
Airtouch Communications* 4,620 431
Alltel 2,235 151
Ameritech 8,815 603
AT&T 27,075 1,367
Bell Atlantic 12,940 746
BellSouth 16,170 724
Century Telephone
Enterprises 1,100 44
Frontier 1,285 71
Lucent Technologies 22,060 1,326
MCI WorldCom* 15,397 1,265
Nextel Communications, Cl A* 2,245 92
SBC Communications 16,225 909
Sprint 3,785 388
Sprint PCS Group* 3,267 138
US WEST 3,932 206
- --------------------------------------------------------------------------------
Total Telephones &
Telecommunications $ 8,461
- --------------------------------------------------------------------------------
WHOLESALE -- 0.8%
McKesson HBOC 2,181 76
Motorola 4,840 388
Safeway* 3,780 204
Supervalu 580 12
Sysco 2,440 72
W.W. Grainger 755 38
- --------------------------------------------------------------------------------
Total Wholesale $ 790
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $68,487) $87,780
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 3.0%
S&P 500 Depository Receipt 20 2,725
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $2,582) $ 2,725
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.6%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $2,356,568
(collateralized by U.S.
Government Agency
Instrument: total market
value $2,444,537) $2,356 $ 2,356
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $2,356) $ 2,356
- --------------------------------------------------------------------------------
Total Investments -- 101.1%
(Cost $73,425) $92,861
================================================================================
Other Assets and Liabilities, Net
-- (1.1%) $ (976)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 6,267,134 outstanding shares
of beneficial interest 67,190
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 359,269 outstanding shares
of beneficial interest 4,314
Undistributed net investment income 53
Accumulated net realized gain on investments 892
Net unrealized appreciation on investments 19,436
- --------------------------------------------------------------------------------
Total Net Assets -- 100.0% $91,885
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $13.87
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $13.84
================================================================================
Maximum Offering Price Per Share --
Retail Class A ($13.84 / 95.25%) $14.53
================================================================================
* Non-income producing security
Cl--Class
The accompanying notes are an integral part of the financial statements.
97
103
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: BLUE CHIP EQUITY PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Retail -- 4% Transportation -- 5% Miscellaneous -- 10% Oil-Energy -- 12%
Consumer Products -- 12% Repurchase Agreements -- 3% Technology -- 22% Financial
- -- 16% Chemicals & Drugs -- 16%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 96.3%
AUTOMOTIVE -- 2.7%
Ford Motor 80,000 $ 5,115
- --------------------------------------------------------------------------------
Total Automotive $ 5,115
- --------------------------------------------------------------------------------
BANKS -- 5.7%
Chase Manhattan 65,000 5,379
Wells Fargo 125,000 5,398
- --------------------------------------------------------------------------------
Total Banks $10,777
- --------------------------------------------------------------------------------
CHEMICALS -- 2.4%
E.I. du Pont de Nemours 65,000 4,591
- --------------------------------------------------------------------------------
Total Chemicals $ 4,591
- --------------------------------------------------------------------------------
COMMUNICATIONS
EQUIPMENT -- 7.5%
Ascend Communications* 35,000 3,382
Koninklijke Philips El,
New York Shares 50,000 4,269
Motorola 55,000 4,407
Nokia, Cl A, ADR 30,000 2,226
- --------------------------------------------------------------------------------
Total Communications
Equipment $14,284
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 1.9%
Microsoft* 45,000 3,659
- --------------------------------------------------------------------------------
Total Computer Software $ 3,659
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES
-- 1.8%
Hewlett Packard 43,000 3,392
- --------------------------------------------------------------------------------
Total Computers & Services $ 3,392
- --------------------------------------------------------------------------------
CONGLOMERATE -- 2.6%
Tyco International Limited 60,000 4,875
- --------------------------------------------------------------------------------
Total Conglomerate $ 4,875
- --------------------------------------------------------------------------------
DRUGS -- 13.5%
Abbott Laboratories 90,000 4,359
American Home Products 70,000 4,270
Amgen* 80,000 4,915
Bristol-Myers Squibb 80,000 5,085
Pfizer 20,000 2,301
Warner Lambert 70,000 4,756
- --------------------------------------------------------------------------------
Total Drugs $25,686
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
-- 2.8%
General Electric 50,000 $ 5,275
- --------------------------------------------------------------------------------
Total Electrical Equipment $ 5,275
- --------------------------------------------------------------------------------
ENERGY -- 2.6%
Halliburton 115,000 4,902
- -------------------------------------------------------------------------------
Total Energy $ 4,902
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 1.8%
Walt Disney 110,000 3,492
- --------------------------------------------------------------------------------
Total Entertainment $ 3,492
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 7.6%
Associates First Capital 110,000 4,874
CIT Group, Cl A 140,000 4,550
Morgan Stanley,
Dean Witter, Discover 50,000 4,959
- --------------------------------------------------------------------------------
Total Financial Services $14,383
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO
-- 7.6%
Bestfoods 35,000 1,757
PepsiCo 120,000 4,432
Philip Morris 85,000 2,980
Ralston Purina Group 175,000 5,337
- --------------------------------------------------------------------------------
Total Food, Beverage
& Tobacco $14,506
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.2%
Procter & Gamble 45,000 4,222
- --------------------------------------------------------------------------------
Total Household Products $ 4,222
- --------------------------------------------------------------------------------
INSURANCE -- 2.5%
American International
Group 40,000 4,697
- --------------------------------------------------------------------------------
Total Insurance $ 4,697
- --------------------------------------------------------------------------------
MACHINERY -- 2.6%
Ingersoll Rand 70,000 4,843
- --------------------------------------------------------------------------------
Total Machinery $ 4,843
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 6.4%
Exxon 45,000 3,738
Mobil 40,000 4,190
Royal Dutch Petroleum,
New York Shares 70,000 4,108
- --------------------------------------------------------------------------------
Total Petroleum Refining $12,036
- --------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT
& SUPPLIES -- 2.2%
Xerox 70,000 4,112
- --------------------------------------------------------------------------------
Total Photographic
Equipment & Supplies $ 4,112
- --------------------------------------------------------------------------------
RAILROADS -- 2.1%
Norfolk Southern 125,000 4,086
- --------------------------------------------------------------------------------
Total Railroads $ 4,086
- --------------------------------------------------------------------------------
RETAIL -- 4.3%
Dayton Hudson 55,000 3,702
Home Depot 75,000 4,495
- -------------------------------------------------------------------------------
Total Retail $ 8,197
- --------------------------------------------------------------------------------
98
104
STATEMENTS OF NET ASSETS
APRIL 30, 1999
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ------------------------------------------------------------------------------------
SEMI-CONDUCTORS/
INSTRUMENTS-- 2.0%
Intel 62,000 $ 3,794
- ------------------------------------------------------------------------------------
Total Semi-Conductors/
Instruments $ 3,794
- ------------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 3.0%
Alcoa 90,000 5,603
- ------------------------------------------------------------------------------------
Total Steel & Steel Works $ 5,603
- ------------------------------------------------------------------------------------
TECHNOLOGY -- 2.4%
Cisco Systems* 40,000 4,563
- ------------------------------------------------------------------------------------
Total Technology $ 4,563
- ------------------------------------------------------------------------------------
TELEPHONES &
TELECOMMUNICATIONS-- 6.1%
AT&T 35,000 1,768
MCI WorldCom* 55,000 4,520
SBC Communications 95,000 5,320
- ------------------------------------------------------------------------------------
Total Telephones
& Telecommunications $ 11,608
- ------------------------------------------------------------------------------------
Total Common Stocks
(Cost $131,276) $182,698
- ------------------------------------------------------------------------------------
CORPORATE OBLIGATION -- 0.5%
CIT Group, MTN (A)
4.800%, 07/21/99 $1,000 999
- ------------------------------------------------------------------------------------
Total Corporate Obligation
(Cost $1,000) $ 999
- ------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.4%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99,
repurchase price
$6,377,124
(collateralized
by U.S. Government Agency
Instrument: total market
value $6,572,180) 6,375 6,375
- ------------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $6,375) $ 6,375
- ------------------------------------------------------------------------------------
Total Investments -- 100.2%
(Cost $138,651) $190,072
====================================================================================
Other Assets and Liabilities,
Net -- (0.2%) $ (419)
====================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 6,486,078 outstanding shares
of beneficial interest $ 91,926
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 2,842,073 outstanding shares
of beneficial interest 39,033
Portfolio Shares of Retail Class B
(unlimited authorization -- no par value)
based on 158,696 outstanding
shares of beneficial interest 2,893
Distribution in excess of net investment income (9)
Accumulated net realized gain on investments 4,389
Net unrealized appreciation on investments 51,421
================================================================================
Total Net Assets -- 100.0% $189,653
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $20.00
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $19.98
================================================================================
Maximum Offering Price Per Share --
Retail Class A ($19.98 / 95.25%) $20.98
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Retail Class B $19.93
================================================================================
* Non-income producing security
(A) Variable Rate Security. The rate reported on the Statement of Net Assets is
the rate in effect on April 30, 1999.
ADR--American Depository Receipt
Cl--Class
MTN--Medium Term Note
The accompanying notes are an integral part of the financial statements.
99
105
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: CAPITAL GROWTH PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Repurchase Agreements -- 2%
Oil-Energy -- 4%
Miscellaneous Business Services -- 5%
Consumer Products -- 6%
Retail -- 8%
Telephones & Telecommunications -- 8% Chemicals & Drugs -- 10% Miscellaneous --
12% Transportation -- 1% Technology -- 28% Financial -- 16% % of Total Portfolio
Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.9%
AUTOMOTIVE -- 1.2%
Borg-Warner Automotive 25,000 $ 1,419
- --------------------------------------------------------------------------------
Total Automotive $ 1,419
- --------------------------------------------------------------------------------
BANKS -- 5.1%
Bank One 20,000 1,180
Chase Manhattan 31,000 2,565
Wells Fargo 50,000 2,159
- --------------------------------------------------------------------------------
Total Banks $ 5,904
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS &
ADVERTISING -- 5.6%
MediaOne Group* 50,000 4,078
Young & Rubicam* 60,000 2,389
- --------------------------------------------------------------------------------
Total Broadcasting,
Newspapers & Advertising $ 6,467
- --------------------------------------------------------------------------------
COMMUNICATIONS
EQUIPMENT -- 14.9%
Ascend Communications* 10,000 966
Cisco Systems* 30,000 3,422
Comverse Technology* 37,500 2,405
Motorola 55,000 4,407
Nokia, Cl A, ADR 45,000 3,338
Nortel Networks* 38,000 2,591
- --------------------------------------------------------------------------------
Total Communications
Equipment $17,129
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.4%
Legato Systems* 35,000 1,415
Microsoft* 16,000 1,301
- --------------------------------------------------------------------------------
Total Computer Software $ 2,716
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 9.2%
Compaq Computer 50,000 1,116
Electronics for Imaging* 75,000 3,548
EMC* 20,000 2,179
Jabil Circuit* 55,000 2,561
Lexmark International
Group, Cl A* 10,000 1,235
- --------------------------------------------------------------------------------
Total Computers & Services $10,639
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
CONGLOMERATE -- 1.1%
Tyco International Limited 15,000 $ 1,219
- --------------------------------------------------------------------------------
Total Conglomerate $ 1,219
- --------------------------------------------------------------------------------
DRUGS -- 10.4%
American Home Products 30,000 1,830
Amgen* 64,000 3,932
Bristol-Myers Squibb 40,000 2,542
Schering Plough 20,000 966
Warner Lambert 40,000 2,718
- --------------------------------------------------------------------------------
Total Drugs $11,988
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.5%
General Electric 16,000 1,688
- --------------------------------------------------------------------------------
Total Electrical Equipment $ 1,688
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 0.9%
Carnival, Cl A 25,000 1,031
- --------------------------------------------------------------------------------
Total Entertainment $ 1,031
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 10.4%
Associates First Capital 20,000 886
Freddie Mac 38,000 2,385
Merrill Lynch 20,000 1,679
Morgan Stanley,
Dean Witter, Discover 27,500 2,728
Paine Webber Group 30,000 1,408
State Street 20,000 1,750
Waddell & Reed
Financial, Cl A 50,000 1,128
- --------------------------------------------------------------------------------
Total Financial Services $11,964
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO
-- 3.1%
PepsiCo 55,000 2,032
Ralston Purina Group 50,000 1,525
- --------------------------------------------------------------------------------
Total Food, Beverage
& Tobacco $ 3,557
- --------------------------------------------------------------------------------
GAS/NATURAL GAS -- 2.8%
Williams 67,500 3,189
- --------------------------------------------------------------------------------
Total Gas/Natural Gas $ 3,189
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.8%
Colgate-Palmolive 7,000 717
Dial 40,000 1,360
- --------------------------------------------------------------------------------
Total Household Products $ 2,077
- --------------------------------------------------------------------------------
INSURANCE -- 1.0%
American International Group 10,000 1,174
- --------------------------------------------------------------------------------
Total Insurance $ 1,174
- --------------------------------------------------------------------------------
INTERNET SERVICE PROVIDERS
-- 0.6%
America Online* 5,000 714
- --------------------------------------------------------------------------------
Total Internet Service
Providers $ 714
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS &
SERVICES-- 2.2%
Baxter International 12,500 788
Guidant 15,000 805
Johnson & Johnson 10,000 975
- --------------------------------------------------------------------------------
Total Medical Products &
Services $ 2,568
- --------------------------------------------------------------------------------
100
106
STATEMENTS OF NET ASSETS
APRIL 30, 1999
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS
SERVICES -- 2.1%
Cendant* 75,000 $ 1,350
Nielson Media Research* 40,000 1,095
- --------------------------------------------------------------------------------
Total Miscellaneous Business
Services $ 2,445
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES
-- 0.4%
Razorfish* 10,000 435
- --------------------------------------------------------------------------------
Total Professional Services $ 435
- --------------------------------------------------------------------------------
RETAIL -- 8.2%
Dayton Hudson 40,000 2,693
Home Depot 25,000 1,498
Linens 'N Things* 35,000 1,601
Office Depot* 75,000 1,650
Rite Aid 85,000 1,982
- --------------------------------------------------------------------------------
Total Retail $ 9,424
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS
-- 4.0%
Intel 50,000 3,059
Texas Instruments 15,000 1,532
- --------------------------------------------------------------------------------
Total Semi-Conductors/Instruments $ 4,591
- --------------------------------------------------------------------------------
TELEPHONES &
TELECOMMUNICATIONS
-- 8.2%
Alltel 35,000 2,360
MCI WorldCom* 25,000 2,055
Rhythms Netconnections* 20,000 1,650
Sprint PCS Group* 40,000 1,695
Winstar Communications* 35,000 1,702
- --------------------------------------------------------------------------------
Total Telephones &
Telecommunications $ 9,462
- --------------------------------------------------------------------------------
TESTING LABORATORIES
-- 0.8%
Medimmune* 18,000 992
- --------------------------------------------------------------------------------
Total Testing Laboratories $ 992
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $77,725) $112,792
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.4%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99,
repurchase price
$2,747,985 (collateralized
by U.S. Government Agency
Instrument: total market
value $2,849,297) $2,747 2,747
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $2,747) $ 2,747
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
Total Investments -- 100.3%
(Cost $80,472) $115,539
================================================================================
Other Assets and Liabilities,
Net -- (0.3%) $ (300)
================================================================================
NET ASSETS:
Portfolio Shares of
Institutional Class
(unlimited authorization --
no par value) based on
4,811,827 outstanding
shares of beneficial
interest 57,336
Portfolio Shares of Retail
Class A (unlimited
authorization --
no par value)
based on 1,239,889
outstanding shares of
beneficial interest 16,773
Portfolio Shares of Retail
Class B (unlimited
authorization --
no par value)
based on 116,185 outstanding
shares of beneficial interest 2,032
Accumulated net realized gain on
investments 4,031
Net unrealized appreciation on
investments 35,067
- --------------------------------------------------------------------------------
Total Net Assets -- 100.0% $115,239
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $18.71
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $18.58
================================================================================
Maximum Offering Price Per Share --
Retail Class A ($18.58 / 95.25%) $19.51
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Retail Class B $18.61
================================================================================
* Non-income producing security
ADR--American Depository Receipt
Cl--Class
The accompanying notes are an integral part of the financial statements.
101
107
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: MID-CAP EQUITY PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Consumer Products -- 3%
Transportation -- 4%
Telephones &
Telecommunications -- 4%
Oil-Energy -- 5%
Chemicals & Drugs -- 6%
Utilities -- 7%
Retail -- 9%
Miscellaneous -- 11%
Building & Construction -- 2%
Technology -- 19%
Financial -- 16%
Miscellaneous Business Services -- 14%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 100.1%
AEROSPACE & DEFENSE -- 0.8%
Cordant Technologies 2,800 $129
Hubbell, Cl B 3,816 182
Lear* 4,100 188
- --------------------------------------------------------------------------------
Total Aerospace & Defense $499
- --------------------------------------------------------------------------------
AGRICULTURE -- 0.2%
Dole Food 3,550 113
- --------------------------------------------------------------------------------
Total Agriculture $113
- --------------------------------------------------------------------------------
AIRCRAFT -- 0.8%
Gulfstream Aerospace* 5,000 244
Sundstrand 3,780 271
- --------------------------------------------------------------------------------
Total Aircraft $515
- --------------------------------------------------------------------------------
APPAREL/TEXTILES -- 0.8%
Albany International 1,183 29
Jones Apparel Group* 5,400 178
Shaw Industries 9,300 169
WestPoint Stevens* 3,200 110
- --------------------------------------------------------------------------------
Total Apparel/Textiles $486
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 0.9%
Borg-Warner Automotive 600 34
Federal Signal 2,882 71
Federal-Mogul 3,350 147
Kaydon 2,200 74
Meritor Automotive 3,600 76
Modine Manufacturing 1,250 39
Superior Industries
International 1,155 29
Teleflex 1,700 74
- --------------------------------------------------------------------------------
Total Automotive $544
- --------------------------------------------------------------------------------
BANKS -- 8.5%
Associated Banc 4,875 177
Astoria Financial 4,000 200
CCB Financial 2,200 127
Charter One Financial 12,000 375
City National 2,700 104
Dime Bancorp 8,000 184
First Security 12,893 245
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
First Tennessee National 9,000 $ 388
First Virginia Banks 4,750 237
Hibernia, Cl A 10,800 144
Keystone Financial 2,700 87
Marshall & Ilsley 8,700 609
Mercantile Bancorp 12,200 695
Mercantile Bankshares 5,075 188
North Fork Bancorporation 10,000 225
Old Kent Financial 7,670 362
Pacific Century Financial 4,000 87
Provident Financial Group 3,500 147
Sovereign Bancorp 11,600 158
TCF Financial 6,500 188
Wilmington Trust 1,900 117
Zions Bancorp 5,400 360
- --------------------------------------------------------------------------------
Total Banks $5,404
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS
& ADVERTISING -- 1.9%
Chris-Craft Industries* 2,586 122
Snyder Communications* 5,000 147
TCA Cable TV 2,500 125
Young & Rubicam* 20,000 796
- --------------------------------------------------------------------------------
Total Broadcasting,
Newspapers & Advertising $1,190
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION
-- 0.6%
Jacobs Engineering Group* 1,175 46
Martin Marietta Materials 5,000 309
- --------------------------------------------------------------------------------
Total Building &
Construction $ 355
- --------------------------------------------------------------------------------
CHEMICALS -- 1.4%
Airgas* 6,000 70
Cabot 3,000 81
Crompton & Knowles 4,200 85
Dexter 1,000 41
Fuller (H.B.) 590 40
IMC Global 8,500 212
Lubrizol 2,900 80
RPM 3,890 55
Solutia 8,000 195
- --------------------------------------------------------------------------------
Total Chemicals $ 859
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT
-- 5.2%
ADC Telecommunications* 9,900 473
Comverse Technology* 22,500 1,443
FORE Systems* 8,200 277
Molex 9,452 305
QUALCOMM* 4,200 840
- --------------------------------------------------------------------------------
Total Communications
Equipment $3,338
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.8%
Citrix Systems* 6,200 263
Informix* 8,000 58
Intuit* 5,000 431
Legato Systems* 7,700 311
Networks Associates* 12,000 159
Rational Software* 7,500 222
Siebel Systems* 6,600 254
Sterling Software* 5,200 108
- --------------------------------------------------------------------------------
Total Computer Software $1,806
- --------------------------------------------------------------------------------
102
108
STATEMENTS OF NET ASSETS
APRIL 30, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES
-- 8.5%
American Power Conversion* 7,000 $ 231
Avnet 3,675 156
Diebold 3,854 93
Electronics for Imaging* 35,000 1,656
Jabil Circuit* 25,000 1,164
Keane* 4,800 119
Lexmark International
Group, Cl A* 4,700 580
Quantum* 10,900 195
SCI Systems* 4,200 160
Solectron* 10,000 485
Sterling Commerce* 7,000 219
Storage Technology* 7,522 145
Symbol Technologies 4,318 206
- --------------------------------------------------------------------------------
Total Computers & Services $5,409
- --------------------------------------------------------------------------------
CONCRETE & MINERAL PRODUCTS-- 0.4%
Ferro 1,575 44
Southdown 2,800 179
- --------------------------------------------------------------------------------
Total Concrete &
Mineral Products $ 223
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING
-- 0.1%
Longview Fibre 2,200 29
- --------------------------------------------------------------------------------
Total Containers & Packaging $ 29
- --------------------------------------------------------------------------------
DRUGS -- 5.3%
Agouron Pharmaceutical* 2,000 118
Amgen* 16,000 983
Biogen* 6,800 646
Carter-Wallace 2,400 42
Centocor* 5,800 257
Chiron* 13,064 263
Forest Laboratories* 4,368 194
Genzyme* 8,024 303
ICN Pharmaceuticals 5,000 165
Mylan Laboratories 9,087 206
Perrigo* 3,050 23
Sepracor* 1,650 139
- --------------------------------------------------------------------------------
Total Drugs $3,339
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 6.6%
Allegheny Energy 8,729 297
CMS Energy 7,800 343
Conectiv 6,687 160
DPL 10,000 179
Energy East 7,300 193
Florida Progress 6,100 235
Hawaiian Electric Industries 1,475 52
Idacorp 1,650 52
Illinova 3,100 81
Interstate Energy 5,500 158
Ipalco Enterprises 4,742 109
Kansas City Power & Light 3,250 87
LG&E 7,150 156
Minnesota Power & Light 3,650 77
Montana Power 5,000 373
Nevada Power 2,000 52
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
New England Electric System 3,300 $ 163
Nisource 8,700 241
OGE Energy 6,106 145
Pinnacle West Capital 5,000 194
Potomac Electric Power 6,150 180
Puget Sound Energy 4,200 104
Scana 5,550 130
TECO Energy 9,372 200
Wisconsin Energy 8,000 215
- --------------------------------------------------------------------------------
Total Electrical Services $4,176
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 0.2%
International Game
Technology 6,600 117
- --------------------------------------------------------------------------------
Total Entertainment $ 117
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICE
-- 0.4%
Allied Waste Industries* 13,000 230
- --------------------------------------------------------------------------------
Total Environmental Service $ 230
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.5%
A.G. Edwards & Sons 6,818 239
Bear Stearns 5,343 249
E*trade Group* 8,500 982
FINOVA Group 3,750 181
Greenpoint Financial 6,700 234
Paine Webber Group 12,450 584
T. Rowe Price 11,000 415
- --------------------------------------------------------------------------------
Total Financial Services $2,884
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO
-- 2.0%
Dean Foods 2,075 74
Dreyer's Grand Ice Cream 1,300 18
Flowers Industries 5,656 120
Hormel Foods 3,800 140
IBP 4,650 94
Interstate Bakeries 5,200 116
Lancaster Colony 1,848 55
McCormick 4,250 129
Suiza Foods* 2,500 94
Tyson Foods 13,010 269
Universal Foods 2,400 50
Vlasic Foods International* 2,500 20
Whitman 5,300 87
- --------------------------------------------------------------------------------
Total Food, Beverage &
Tobacco $1,266
- --------------------------------------------------------------------------------
FORESTRY -- 0.1%
Rayonier 1,100 50
- --------------------------------------------------------------------------------
Total Forestry $ 50
- --------------------------------------------------------------------------------
GAS/NATURAL GAS -- 1.6%
AGL Resources 2,150 39
El Paso Energy 8,518 313
KeySpan Energy 10,000 267
MCN 4,100 82
National Fuel & Gas 1,425 62
Questar 5,800 105
Utilicorp United 4,425 108
Washington Gas Light 2,000 47
- --------------------------------------------------------------------------------
Total Gas/Natural Gas $1,023
- --------------------------------------------------------------------------------
103
109
STATEMENTS OF NET ASSETS
APRIL 30, 1999
[ARROW]MID-CAP EQUITY PORTFOLIO (CONTINUED)
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
GENERAL UTILITY -- 0.2%
Mid American Energy
Holdings* 4,350 $ 140
- --------------------------------------------------------------------------------
Total General Utility $ 140
- --------------------------------------------------------------------------------
HOME BUILDER -- 0.2%
Clayton Homes 11,701 130
- --------------------------------------------------------------------------------
Total Home Builder $ 130
- --------------------------------------------------------------------------------
HOTELS & LODGING -- 0.3%
Circus Circus Enterprises* 7,500 158
- --------------------------------------------------------------------------------
Total Hotels & Lodging $ 158
- --------------------------------------------------------------------------------
HOUSEHOLD FURNITURE &
FIXTURES -- 0.4%
Leggett & Platt 11,700 270
- --------------------------------------------------------------------------------
Total Household Furniture &
Fixtures $ 270
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCT -- 0.5%
Dial 10,200 347
- --------------------------------------------------------------------------------
Total Household Product $ 347
- --------------------------------------------------------------------------------
INSURANCE -- 3.9%
Aflac 20,260 1,099
AMBAC 5,000 302
American Financial Group 4,500 163
HSB Group 1,350 51
Old Republic International 7,350 144
PMI Group 1,700 95
Provident 9,500 374
Reliastar Financial 6,500 239
- --------------------------------------------------------------------------------
Total Insurance $2,467
- --------------------------------------------------------------------------------
LEASING & RENTING -- 0.3%
Comdisco 7,500 197
- --------------------------------------------------------------------------------
Total Leasing & Renting $ 197
- --------------------------------------------------------------------------------
LEISURE PRODUCTS -- 0.4%
Callaway Golf 5,500 83
Electronic Arts* 3,750 191
- --------------------------------------------------------------------------------
Total Leisure Products $ 274
- --------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS
-- 0.2%
Timber Group 5,000 129
- --------------------------------------------------------------------------------
Total Lumber & Wood Products $ 129
- --------------------------------------------------------------------------------
MACHINERY -- 0.8%
Donaldson 2,200 49
Flowserve 2,137 40
Kennametal 1,600 42
Mark IV Industries 2,615 47
Pentair 1,574 74
Smith International* 3,500 157
SPX 1,500 98
- --------------------------------------------------------------------------------
Total Machinery $ 507
- --------------------------------------------------------------------------------
MANUFACTURING -- 0.1%
Trinity Industries 2,000 70
- --------------------------------------------------------------------------------
Total Manufacturing $ 70
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES
-- 3.7%
Beckman Coulter 1,250 $ 60
Bergen Brunswig, Cl A 8,112 154
Cardinal Health 3,984 238
Covance* 2,950 65
Dentsply International 3,900 102
First Health Group, Cl A* 2,800 46
Health Management
Associates, Cl A* 16,125 252
Lincare Holdings* 3,200 95
Omnicare 5,000 120
McKesson HBOC 5,000 175
Pacificare Health
Systems, Cl B* 2,153 172
Steris* 5,300 94
Stryker 7,500 459
Sybron International* 7,800 216
Total Renal Care Holdings* 6,500 90
Trigon Healthcare* 1,500 48
- --------------------------------------------------------------------------------
Total Medical Products &
Services $2,386
- --------------------------------------------------------------------------------
METALS & MINING -- 0.5%
Minerals Technologies 900 49
Vulcan Materials 5,925 283
- --------------------------------------------------------------------------------
Total Metals & Mining $ 332
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS
SERVICES -- 5.2%
AC Nielsen* 3,000 84
Apollo Group, Cl A* 5,000 124
Cambridge Technology
Partners* 4,500 65
Cintas 7,300 502
Concord EFS* 7,000 234
Convergys* 21,200 395
Fiserv* 5,012 294
Litton Industries* 2,350 147
Nova* 5,500 143
Ogden 2,000 52
Paychex 7,299 373
Reynolds & Reynolds, Cl A 4,100 94
Robert Half International* 6,600 158
Sotheby's Holdings, Cl A 3,300 141
Stewart Enterprises, Cl A 5,000 99
Sungard Data Systems* 8,600 275
Viad 4,900 162
- --------------------------------------------------------------------------------
Total Miscellaneous
Business Services $3,342
- --------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING
-- 0.4%
Gtech* 1,000 26
Hillenbrand Industries 4,850 228
- --------------------------------------------------------------------------------
Total Miscellaneous
Manufacturing $ 254
- --------------------------------------------------------------------------------
MOTORCYCLES, BICYCLES &
PARTS -- 1.0%
Harley-Davidson 10,860 648
- --------------------------------------------------------------------------------
Total Motorcycles,
Bicycles & Parts $ 648
- --------------------------------------------------------------------------------
OFFICE FURNITURE &
FIXTURES -- 0.3%
Herman Miller 5,900 118
Hon Industries 2,400 65
- --------------------------------------------------------------------------------
Total Office Furniture &
Fixtures $ 183
- --------------------------------------------------------------------------------
104
110
STATEMENTS OF NET ASSETS
APRIL 30, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.5%
Bowater 2,650 $ 142
Chesapeake 1,050 34
Consolidated Papers 4,500 136
PH Glatfelter 1,800 23
- --------------------------------------------------------------------------------
Total Paper & Paper Products $ 335
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 2.1%
BJ Services* 5,200 139
Ensco International 8,000 148
Global Marine* 12,575 187
KN Energy 3,450 71
Noble Affiliates 2,900 93
Noble Drilling* 10,000 196
Ocean Energy* 7,000 65
Tidewater 3,355 89
Transocean Offshore 9,600 285
Valero Energy 3,300 74
- --------------------------------------------------------------------------------
Total Petroleum & Fuel Products $ 1,347
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 1.0%
Lyondell Petrochemical 4,000 78
Murphy Oil 2,400 113
Tosco 11,800 316
Ultramar Diamond Shamrock 4,800 111
- --------------------------------------------------------------------------------
Total Petroleum Refining $ 618
- --------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 1.2%
A.H. Belo, Cl A 7,200 156
Banta 1,200 26
Houghton Mifflin 1,380 62
Lee Enterprises 1,850 53
Media General, Cl A 1,100 57
Scholastic* 600 28
Standard Register 1,200 37
Wallace Computer Services 1,900 44
Washington Post, Cl B 550 316
- --------------------------------------------------------------------------------
Total Printing & Publishing $ 779
- --------------------------------------------------------------------------------
RETAIL -- 9.1%
Abercrombie & Fitch, Cl A* 3,400 323
Barnes & Noble* 4,800 167
Bed Bath & Beyond* 10,000 357
Best Buy* 14,600 697
BJ's Wholesale Club* 6,000 159
Borders Group* 7,000 101
Brinker International* 4,849 134
CBRL Group 3,500 71
Dollar Tree Stores* 3,500 128
Family Dollar Stores 8,900 215
Fastenal 1,650 79
General Nutrition* 4,400 73
Hannaford Brothers 2,450 107
Lands' End* 1,350 52
Micro Warehouse* 400 7
Office Depot* 30,634 674
OfficeMax* 7,000 71
Outback Steakhouse* 5,700 204
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Premark International 4,600 $ 169
Rite Aid 25,000 583
Ross Stores 2,550 117
Saks* 10,280 291
Sbarro 850 22
Staples* 10,000 300
Starbucks* 13,000 480
Tiffany & Company 1,850 155
Warnaco Group 3,350 89
- --------------------------------------------------------------------------------
Total Retail $ 5,825
- --------------------------------------------------------------------------------
RUBBER & PLASTIC -- 0.8%
Carlisle 1,200 59
Hanna 2,124 34
Sonoco Products 6,050 156
Weatherford International* 7,000 237
- --------------------------------------------------------------------------------
Total Rubber & Plastic $ 486
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS-- 6.1%
Altera* 7,000 506
Analog Devices* 13,000 457
Atmel* 7,200 131
Cadence Design Systems* 16,000 217
Cypress Semiconductor* 6,250 64
Linear Technology 12,400 705
Maxim Integrated Products* 9,500 532
Synopsys* 6,000 283
Teradyne* 5,250 248
Vitesse Semiconductor* 5,500 255
Xilinx* 11,000 502
- --------------------------------------------------------------------------------
Total Semi-Conductors/Instruments $ 3,900
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 0.2%
Tecumseh Products, Cl A 950 58
York International 2,100 87
- --------------------------------------------------------------------------------
Total Specialty Machinery $ 145
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.3%
AK Steel Holding 3,500 91
Carpenter Technology 1,100 34
Precision Castparts 1,050 45
- --------------------------------------------------------------------------------
Total Steel & Steel Works $ 170
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 3.7%
Aliant Communications 1,450 64
Century Telephone Enterprises 6,862 276
Cincinnati Bell 9,200 208
Comsat 2,050 67
Rhythms Netconnections* 10,000 825
Telephone & Data Systems 3,100 186
Winstar Communications* 15,000 729
- --------------------------------------------------------------------------------
Total Telephones & Telecommunications $ 2,355
- --------------------------------------------------------------------------------
TESTING LABORATORIES -- 0.7%
Medimmune* 4,000 221
Quintiles Transnational* 6,300 256
- --------------------------------------------------------------------------------
Total Testing Laboratories $ 477
- --------------------------------------------------------------------------------
105
111
STATEMENTS OF NET ASSETS/SCHEDULE OF INVESTMENTS
APRIL 30, 1999
[ARROW]MID-CAP EQUITY PORTFOLIO (CONCLUDED)
SHARES/
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TRANSPORTATION SERVICES-- 2.0%
Airborne Freight 2,900 $ 93
Alaska Airgroup* 1,000 44
Alexander & Baldwin 1,900 41
CNF Transportation 2,400 105
Comair 7,500 165
GATX 2,550 88
Harsco 2,500 82
JB Hunt Transport Services 2,100 44
Kansas City Southern
Industries 9,700 578
Pittston Services 1,600 42
- --------------------------------------------------------------------------------
Total Transportation Services $ 1,282
- --------------------------------------------------------------------------------
WATER UTILITY -- 0.2%
American Water Works 5,600 159
- --------------------------------------------------------------------------------
Total Water Utilities $ 159
- --------------------------------------------------------------------------------
WHOLESALE -- 0.2%
US Foodservice* 3,750 158
- --------------------------------------------------------------------------------
Total Wholesale $ 158
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $47,383) $63,725
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.0%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $6,314 (collateralized
by U.S. Government Agency
Instrument: total market
value $10,652) $ 6 6
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $6) $ 6
- --------------------------------------------------------------------------------
Total Investments -- 100.1%
(Cost $47,389) $63,731
================================================================================
Other Assets and Liabilities, Net -- (0.1%) $ (83)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -- no par
value) based on 4,329,268 outstanding shares
of beneficial interest 41,512
Distribution in excess of net investment income (6)
Accumulated net realized gain on investments 5,800
Net unrealized appreciation on investments 16,342
================================================================================
Total Net Assets-- 100.0% $63,648
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share-- Institutional Class $ 14.70
================================================================================
* Non-income producing security
Cl--Class
The accompanying notes are an integral part of the financial statements.
[ARROW]ARK FUNDS: SMALL-CAP EQUITY PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Repurchase Agreements -- 4%
Healthcare -- 6%
Consumer Cyclicals -- 7%
Chemicals & Drugs -- 8%
Miscellaneous -- 16%
Computers & Services -- 2%
Technology -- 40%
Miscellaneous Business Services -- 17%
% of Total Portfolio Investments
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.2%
BROADCASTING, NEWSPAPERS &
ADVERTISING -- 0.1%
Worldgate Communications* 1,000 $ 28
- --------------------------------------------------------------------------------
Total Broadcasting, Newspapers & Advertising $ 28
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 4.8%
Stolt Comex Seaway S.A.* 125,000 1,562
- --------------------------------------------------------------------------------
Total Building & Construction $ 1,562
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES -- 1.2%
Mobile Mini* 30,000 388
- --------------------------------------------------------------------------------
Total Building & Construction Supplies $ 388
- --------------------------------------------------------------------------------
CHEMICALS -- 6.0%
NL Industries 50,000 591
Wellman 50,000 716
Witco Chemical 34,900 665
- --------------------------------------------------------------------------------
Total Chemicals $ 1,972
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 9.4%
Digital Microwave* 50,000 637
DM Management* 20,000 475
Omnipoint* 50,000 887
P-Com* 59,000 345
Polycom* 30,000 733
- --------------------------------------------------------------------------------
Total Communications Equipment $ 3,077
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 0.1%
Proxicom* 1,000 22
- --------------------------------------------------------------------------------
Total Computers & Services $ 22
- --------------------------------------------------------------------------------
DRUGS -- 2.5%
Sigma Aldrich 25,000 812
- --------------------------------------------------------------------------------
Total Drugs $ 812
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 1.1%
Robert Mondavi* 10,000 362
- --------------------------------------------------------------------------------
Total Food, Beverage & Tobacco $ 362
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS & APPLIANCES -- 2.4%
Windmere-Durable Holdings 70,000 805
- --------------------------------------------------------------------------------
Total Household Products & Appliances $ 805
- --------------------------------------------------------------------------------
106
112
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
INSURANCE -- 4.2%
Healtheon* 15,000 $ 679
Total Renal Care Holdings* 50,000 694
- --------------------------------------------------------------------------------
Total Insurance $ 1,373
- --------------------------------------------------------------------------------
INTERNET SERVICE PROVIDERS -- 0.4%
Easynet Group PLC 15,000 126
- --------------------------------------------------------------------------------
Total Internet Service Providers $ 126
- --------------------------------------------------------------------------------
MACHINERY -- 1.4%
Secom General* 21,760 44
Wyman-Gordon* 30,000 420
- --------------------------------------------------------------------------------
Total Machinery $ 464
- --------------------------------------------------------------------------------
MEASURING DEVICES -- 5.5%
Uniphase* 15,000 1,821
- --------------------------------------------------------------------------------
Total Measuring Devices $ 1,821
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES-- 1.9%
Laser Vision Centers* 15,000 632
- --------------------------------------------------------------------------------
Total Medical Products & Services $ 632
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES-- 14.9%
Ikon Office Solutions 50,000 603
Jack Henry & Associates 25,000 825
Landmark Systems* 5,000 57
Marimba* 100 6
Nielson Media Research* 53,533 1,465
Remedy* 25,000 437
Security Dynamics
Technology* 20,000 435
Sotheby's Holdings, Cl A 25,000 1,066
Ziff-Davis - ZDNet* 300 11
- --------------------------------------------------------------------------------
Total Miscellaneous Business Services $ 4,905
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 1.3%
Buckeye Technologies* 30,000 435
- --------------------------------------------------------------------------------
Total Paper & Paper Products $ 435
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 1.5%
Cal Dive International* 15,000 480
- --------------------------------------------------------------------------------
Total Petroleum & Fuel Products $ 480
- --------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 1.8%
Onhealth Network* 17,500 265
Ziff-Davis* 20,000 316
- --------------------------------------------------------------------------------
Total Printing & Publishing $ 581
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 0.1%
Net Perceptions* 1,000 26
- --------------------------------------------------------------------------------
Total Professional Services $ 26
- --------------------------------------------------------------------------------
RUBBER & PLASTIC -- 1.1%
U.S. Plastic Lumber 40,000 370
- --------------------------------------------------------------------------------
Total Rubber & Plastic $ 370
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 10.5%
Dallas Semiconductor 10,000 425
Dupont Photomasks* 16,500 722
MMC Networks * 50,000 1,228
SHARES/
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Nvidia* 35,000 $ 639
Transwitch* 10,000 440
- --------------------------------------------------------------------------------
Total Semi-Conductors/Instruments $ 3,454
- --------------------------------------------------------------------------------
TECHNOLOGY -- 1.0%
Multex.com* 7,500 323
- --------------------------------------------------------------------------------
Total Technology $ 323
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 20.4%
Aerial Communications* 50,000 400
E.spire Communications* 25,000 313
Electric Lightwave* 30,000 420
Globalstar Telecommunications
Limited* 20,000 403
Intermedia Communications
of Florida* 35,000 1,127
ITC Deltacom* 15,000 375
Optibase Limited* 145,000 1,015
Shared Technologies Cellular* 25,000 278
Tele Centro Oeste Celular
Participacoes S.A., ADR* 40,000 145
Telecomunicacoes de Sao Paulo
Participacoes, ADR* 20,000 500
Telesystem International
Wireless* 25,000 491
Western Wireless, Cl A* 30,000 1,232
- --------------------------------------------------------------------------------
Total Telephones & Telecommunications $ 6,699
- --------------------------------------------------------------------------------
WHOLESALE -- 3.6%
Airgas* 100,000 1,175
- --------------------------------------------------------------------------------
Total Wholesale $ 1,175
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $29,967) $31,892
- --------------------------------------------------------------------------------
FOREIGN PREFERRED STOCK -- 0.0%
Sparta Pharmaceuticals (A)* 10,000 13
- --------------------------------------------------------------------------------
Total Foreign Preferred Stock
(Cost $95) $ 13
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.8%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $1,230,065 (collateralized
by U.S. Government Agency
Instruments: total market
value $1,274,820) $ 1,230 1,230
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $1,230) $ 1,230
- --------------------------------------------------------------------------------
Total Investments -- 101.0%
(Cost $31,292) $33,135
================================================================================
* Non-income producing security
(A) Security valued in good faith based on guidelines established by the Board
of Trustees.
ADR--American Depository Receipt
Cl--Class
The accompanying notes are an integral part of the financial statements.
107
113
STATEMENT OF NET ASSETS
APRIL 30, 1999
[ARROW]ARK FUNDS: INTERNATIONAL EQUITY SELECTION PORTFOLIO
[PIE CHART OMITTED]
[PLOT POINTS ARE AS FOLLOWS]
Repurchase Agreements -- 5%
% of Total Portfolio Investments
Mutual Funds -- 95%
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MUTUAL FUNDS -- 95.1%
American Advantage
International
Equity Fund 110,183 $ 2,036
American Century 20th
International
Growth Fund 181,893 1,837
American Funds Europacific
Growth Fund 65,573 2,065
Artisan International Fund 72,940 1,346
BT Institutional
International
Equity Fund 131,070 1,794
Federated International
Small Company Fund 22,894 499
Fidelity Diversified
International Fund 104,633 1,995
Glenmede International
Institutional Portfolio 112,557 1,977
Harbor International Fund 50,370 2,011
Harbor International
Growth Fund 25,345 482
Janus Overseas Fund 83,728 1,791
Montgomery International
Growth Fund 93,973 1,765
Putnam International
Growth Fund 95,198 2,020
Scudder Japan Fund 121,359 1,272
Templeton Foreign Fund 105,335 1,065
- --------------------------------------------------------------------------------
Total Mutual Funds
(Cost $22,722) $23,955
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.9%
First Boston
4.930%, dated 04/30/99,
matures 05/03/99, repurchase
price $1,230,885 (collateralized
by U.S. Government Agency
Instruments: total market
value $1,267,023) $ 1,230 $ 1,230
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $1,230) $ 1,230
- --------------------------------------------------------------------------------
Total Investments -- 100.0%
(Cost $23,952) $25,185
================================================================================
Other Assets and Liabilities, Net -- (0.0%) $ (3)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization
-- no par value) based on 2,122,483
outstanding shares of beneficial interest 21,400
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 133,981 outstanding shares
of beneficial interest 1,514
Undistributed net investment income 8
Accumulated net realized gain on investments 1,027
Net unrealized appreciation on investments 1,233
================================================================================
Total Net Assets -- 100.0% $25,182
================================================================================
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $ 11.16
================================================================================
Net Asset Value and Redemption
Price Per Share -- Retail Class A $ 11.16
================================================================================
Maximum Offering Price Per Share --
Retail Class A ($11.16 / 98.50%) $ 11.33
================================================================================
The accompanying notes are an integral part of the financial statements.
108
114
STATEMENT OF ASSETS AND LIABILITIES (000)
FOR THE YEAR ENDED APRIL 30, 1999
SMALL CAP
EQUITY
PORTFOLIO
---------
Assets:
Investments at market value (cost $31,292) $ 33,135
Receivable for investment securities sold 3,195
Other assets 19
---------
Total Assets 36,349
---------
Liabilities:
Payable for investment securities purchased 3,465
Other liabilities 74
---------
Total Liabilities 3,539
---------
Net assets:
Portfolio shares of Institutional Class (unlimited
authorization -- no par
value) based on 2,415,692 outstanding shares of
beneficial interest 24,531
Portfolio shares of Retail Class A (unlimited
authorization -- no par value) based on 178,557
outstanding shares of beneficial interest 2,201
Distributions in excess of net investment income (95)
Accumulated net realized gain on investments 4,330
Net unrealized appreciation on investments 1,843
--------
Total Net Assets $ 32,810
========
Net Asset Value, Offering and Redemption Price
Per Share -- Institutional Class $ 12.65
========
Net Asset Value and Redemption Price Per Share -- Retail Class A $ 12.59
========
Maximum Offering Price Per Share -- Retail Class A
($12.59 / 95.25%) $ 13.22
========
The accompanying notes are an integral part of the financial statements.
109
115
STATEMENTS OF OPERATIONS (000)
FOR THE YEAR ENDED APRIL 30, 1999
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:
Dividends $ -- $ -- $ -- $ -- $ --
Interest 42,281 5,165 87,637 21,172 2,357
------- ------- ------- ------- -------
Total Investment Income 42,281 5,165 87,637 21,172 2,357
------- ------- ------- ------- -------
Expenses:
Administrator Fees 1,019 204 2,169 559 57
Less: Waiver of Administrator Fees -- -- -- -- --
Investment Advisory Fees 1,959 392 4,172 1,076 152
Less: Waiver of Investment
Advisory Fees (1,097) (251) (1,836) (258) --
Custodian Fees 128 32 242 79 8
Transfer Agency Fees 78 16 167 43 4
Professional Fees 43 5 95 17 2
Registration Fees 160 32 122 37 12
Distribution Fees--Retail Class A 541 69 229 70 57
Less: Waiver of Distribution Fees--
Retail Class A -- -- -- -- (22)
Distribution Fees--Retail Class B -- -- -- -- --
Distribution Fees--
Institutional II Class 204 52 180 138 --
Printing Fees 107 21 241 68 6
Trustee Fees 8 1 17 4 --
Amortization of Deferred
Organization Costs 1 1 1 1 3
Miscellaneous Fees 22 7 95 14 3
Shareholder Servicing Fees--
Institutional Class 592 127 2,142 431 44
Less: Waiver of Shareholder
Servicing Fees--
Institutional Class (325) (71) (1,176) (239) (26)
Shareholder Servicing Fees--
Retail Class A 325 41 137 42 22
Less: Waiver of Shareholder
Servicing Fees--
Retail Class A (195) (25) (82) (25) (22)
Shareholder Servicing Fees--
Retail Class B -- -- -- -- --
------- ------- ------- ------- -------
Total Expenses 3,570 653 6,915 2,057 300
------- ------- ------- ------- -------
Net Investment Income 38,711 4,512 80,722 19,115 2,057
------- ------- ------- ------- -------
Net Realized Gain (Loss)
on Investments 10 -- (1) 18 246
Net Change in Unrealized
Appreciation
(Depreciation)
on Investments -- -- -- -- (140)
------- ------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments 10 -- (1) 18 106
------- ------- ------- ------- -------
Net Increase in Net Assets
Resulting from Operations $38,721 $ 4,512 $80,721 $19,133 $ 2,163
======= ======= ======= ======= =======
SHORT-TERM MARYLAND PENNSYLVANIA INTERMEDIATE U.S. GOVERNMENT
BOND TAX-FREE TAX-FREE FIXED INCOME BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- ------------ ------------ ---------------
Investment Income:
Dividends $ -- $ -- $ -- $ 79 $ 325
Interest 8,020+ 5,984 10,957 5,805+ 16,533+
------- ------- ------- ------- -------
Total Investment Income 8,020 5,984 10,957 5,884 16,858
------- ------- ------- ------- -------
Expenses:
Administrator Fees 171 152 289 122 344
Less: Waiver of Administrator Fees -- -- -- -- --
Investment Advisory Fees 984 762 1,443 564 1,986
Less: Waiver of Investment
Advisory Fees (66) (188) -- (103) (238)
Custodian Fees 33 18 38 21 48
Transfer Agency Fees 13 12 22 9 26
Professional Fees 14 5 24 4 27
Registration Fees 10 7 9 12 16
Distribution Fees--Retail Class A -- 86 9 -- 3
Less: Waiver of Distribution Fees--
Retail Class A -- (14) (2) -- --
Distribution Fees--Retail Class B -- -- -- -- --
Distribution Fees--
Institutional II Class -- -- -- -- --
Printing Fees 19 16 35 13 39
Trustee Fees 1 1 3 1 3
Amortization of Deferred
Organization Costs 8 1 11 2 8
Miscellaneous Fees 6 8 11 6 8
Shareholder Servicing Fees--
Institutional Class 197 133 328 141 396
Less: Waiver of Shareholder
Servicing Fees--
Institutional Class (118) (61) (161) (68) (195)
Shareholder Servicing Fees--
Retail Class A -- 43 5 -- 1
Less: Waiver of Shareholder
Servicing Fees--
Retail Class A -- (43) (5) -- (1)
Shareholder Servicing Fees--
Retail Class B -- -- -- -- --
------- ------- ------- ------- -------
Total Expenses 1,272 938 2,059 724 2,471
------- ------- ------- ------- -------
Net Investment Income 6,748 5,046 8,898 5,160 14,387
------- ------- ------- ------- -------
Net Realized Gain (Loss)
on Investments 360 897 1,627 601 (243)
Net Change in Unrealized
Appreciation
(Depreciation)
on Investments (402) 484 1,420 (1,060) (1,367)
------- ------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments (42) 1,381 3,047 (459) (1,610)
------- ------- ------- ------- -------
Net Increase in Net Assets
Resulting from Operations $ 6,706 $ 6,427 $11,945 $ 4,701 $12,777
======= ======= ======= ======= =======
INCOME
PORTFOLIO
---------
Investment Income:
Dividends $ 355
Interest 22,424+
-------
Total Investment Income 22,779
-------
Expenses:
Administrator Fees 452
Less: Waiver of Administrator Fees --
Investment Advisory Fees 2,086
Less: Waiver of Investment
Advisory Fees (313)
Custodian Fees 64
Transfer Agency Fees 35
Professional Fees 16
Registration Fees 22
Distribution Fees--Retail Class A 24
Less: Waiver of Distribution Fees--
Retail Class A (4)
Distribution Fees--Retail Class B 1
Distribution Fees--
Institutional II Class --
Printing Fees 48
Trustee Fees 3
Amortization of Deferred
Organization Costs 1
Miscellaneous Fees 16
Shareholder Servicing Fees--
Institutional Class 510
Less: Waiver of Shareholder
Servicing Fees--
Institutional Class (237)
Shareholder Servicing Fees--
Retail Class A 12
Less: Waiver of Shareholder
Servicing Fees--
Retail Class A (12)
Shareholder Servicing Fees--
Retail Class B --
-------
Total Expenses 2,724
-------
Net Investment Income 20,055
-------
Net Realized Gain (Loss)
on Investments (1,205)
Net Change in Unrealized
Appreciation
(Depreciation)
on Investments (4,352)
-------
Net Realized and Unrealized
Gain (Loss) on Investments (5,557)
-------
Net Increase in Net Assets
Resulting from Operations $14,498
=======
+ Includes income from securities lending program. See Notes to the Financial
Statements for additional information.
The accompanying notes are an integral part of the financial statements.
110 & 111
116
STATEMENTS OF OPERATIONS (000)
FOR THE YEAR ENDED APRIL 30, 1999
EQUITY VALUE EQUITY BLUE CHIP CAPITAL
BALANCED INCOME EQUITY INDEX EQUITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- ---------
Investment Income:
Dividends $ 711 $ 2,908 $ 9,285 $ 913 $ 1,789 $ 579
Interest 3,036 212 911 52 380 150
------- ------- ------- ------- ------- -------
Total Investment Income 3,747 3,120 10,196 965 2,169 729
------- ------- ------- ------- ------- -------
Expenses:
Administrator Fees 164 134 769 88 182 110
Less: Waiver of Administrator Fees -- -- -- (60) -- --
Investment Advisory Fees 821 724 5,914 135 981 592
Less: Waiver of Investment
Advisory Fees (114) (62) (769) (95) (140) (42)
Custodian Fees 29 14 94 37 30 3
Transfer Agency Fees 13 10 59 7 14 8
Professional Fees 7 4 60 5 10 5
Registration Fees 16 11 10 19 28 15
Distribution Fees-- Retail Class A 79 14 9 10 259 69
Less: Waiver of Distribution Fees --
Retail Class A (30) (5) (4) (4) (142) (26)
Distribution Fees-- Retail Class B 4 -- -- -- 6 3
Distribution Fees --
Institutional II Class -- -- -- -- -- --
Printing Fees 17 14 84 11 20 12
Trustee Fees 1 1 8 1 2 1
Amortization of Deferred
Organization Costs 2 2 9 2 3 2
Miscellaneous Fees 9 4 23 8 22 7
Shareholder Servicing Fees --
Institutional Class 159 150 884 97 138 100
Less: Waiver of Shareholder Servicing
Fees-- Institutional Class (65) (64) (379) (97) (53) (38)
Shareholder Servicing Fees--
Retail Class A 30 5 4 4 71 26
Less: Waiver of Shareholder Servicing
Fees-- Retail Class A (30) (5) (4) (4) (71) (26)
Shareholder Servicing Fees--
Retail Class B 1 -- -- -- 2 1
------- ------- ------- ------- ------- -------
Total Expenses 1,113 951 6,771 164 1,362 822
------- ------- ------- ------- ------- -------
Net Investment Income (Loss) 2,634 2,169 3,425 801 807 (93)
------- ------- ------- ------- ------- -------
Net Realized Gain on Investments 6,985 1,092 54,074 1,263 4,389 4,150
Net Change in Unrealized Appreciation
(Depreciation) on Investments 12,888 580 (2,152) 14,031 25,069 19,500
------- ------- ------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments 19,873 1,672 51,922 15,294 29,458 23,650
------- ------- ------- ------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations $22,507 $ 3,841 $55,347 $16,095 $30,265 $23,557
======= ======= ======= ======= ======= =======
MID CAP SMALL-CAP INTERNATIONAL
EQUITY EQUITY EQUITY SELECTION
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ----------------
Investment Income:
Dividends $ 591 $ 44 $ 606
Interest 25 145 79
------- ------- -------
Total Investment Income 616 189 685
------- ------- -------
Expenses:
Administrator Fees 72 36 47
Less: Waiver of Administrator Fees -- -- --
Investment Advisory Fees 445 222 233
Less: Waiver of Investment
Advisory Fees (33) (3) (36)
Custodian Fees 25 23 15
Transfer Agency Fees 6 3 4
Professional Fees 3 1 4
Registration Fees 10 8 10
Distribution Fees-- Retail Class A -- 8 5
Less: Waiver of Distribution Fees --
Retail Class A -- (3) (2)
Distribution Fees-- Retail Class B -- -- --
Distribution Fees --
Institutional II Class -- -- --
Printing Fees 7 4 5
Trustee Fees 1 -- --
Amortization of Deferred
Organization Costs 2 -- 2
Miscellaneous Fees 5 2 1
Shareholder Servicing Fees --
Institutional Class 83 39 52
Less: Waiver of Shareholder Servicing
Fees-- Institutional Class (34) (16) (24)
Shareholder Servicing Fees--
Retail Class A -- 3 2
Less: Waiver of Shareholder Servicing
Fees-- Retail Class A -- (3) (2)
Shareholder Servicing Fees--
Retail Class B -- -- --
------- ------- -------
Total Expenses 592 324 316
------- ------- -------
Net Investment Income (Loss) 24 (135) 369
------- ------- -------
Net Realized Gain on Investments 5,867 4,402 1,446
Net Change in Unrealized Appreciation
(Depreciation) on Investments (961) (1,611) (3,646)
------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments 4,906 2,791 (2,200)
------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 4,930 $ 2,656 $(1,831)
======= ======= =======
The accompanying notes are an integral part of the financial statements.
112 & 113
117
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE YEAR OR PERIOD INDICATED
MONEY MARKET TAX-FREE MONEY U.S. GOVERNMENT MONEY U.S. TREASURY MONEY
PORTFOLIO MARKET PORTFOLIO MARKET PORTFOLIO MARKET PORTFOLIO
----------------------- ---------------------- ----------------------- ----------------------
5/1/98 5/1/97 5/1/98 5/1/97 5/1/98 5/1/97 5/1/98 5/1/97
to 4/30/99 to 4/30/98 to 4/30/99 to 4/30/98 to 4/30/9 to 4/30/98 to 4/30/9 to 4/30/98
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OPERATIONS:
Net Investment Income $ 38,711 $ 28,442 $ 4,512 $ 4,841 $ 80,722 $ 72,156 $ 19,115 $ 18,700
Net Realized Gain (Loss) on
Investments 10 (12) -- -- (1) (2) 18 (45)
Net Change in Unrealized
Appreciation (Depreciation)
on Investments -- -- -- -- -- -- -- --
---------- -------- -------- -------- ---------- ---------- -------- --------
Net increase (Decrease) in
Net Assets from Operations 38,721 28,430 4,512 4,841 80,721 72,154 19,133 18,655
---------- -------- -------- -------- ---------- ---------- -------- --------
Distributions to Shareholders:
Net Investment Income
Institutional Class (19,775) (14,677) (2,499) (3,344) (69,381) (66,224) (12,857) (13,110)
Retail Class A (10,377) (9,312) (732) (808) (4,222) (1,590) (1,205) (1,281)
Retail Class B -- -- -- -- -- -- -- --
Institutional II Class (8,559) (4,453) (1,281) (688) (7,109) (4,316) (5,053) (4,309)
Net Capital Gains
Institutional Class -- -- -- -- -- -- -- --
Retail Class A -- -- -- -- -- -- -- --
Retail Class B -- -- -- -- -- -- -- --
---------- -------- -------- -------- ---------- ---------- -------- --------
Total Distributions (38,711) (28,442) (4,512) (4,840) (80,712) (72,130) (19,115) (18,700)
---------- -------- -------- -------- ---------- ---------- -------- --------
Capital Share Transactions:
Institutional Class:
Shares Issued 971,963 678,729 97,664 129,030 2,187,318 2,467,089 374,307 483,164
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 9 -- -- -- 6 21 6 6
Shares Redeemed (671,287) (771,203) (110,212) (107,675) (2,045,108) (2,432,072) (347,083) (446,375)
---------- -------- -------- -------- ---------- ---------- -------- --------
Total Institutional Class
Share Transactions 300,685 (92,474) (12,548) 21,355 142,216 35,038 27,230 36,795
---------- -------- -------- -------- ---------- ---------- -------- --------
Retail Class A:
Shares Issued 181,887 436,117 66,991 84,889 448,117 160,166 41,393 69,512
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 10,182 8,342 730 806 -- -- 874 852
Shares Redeemed (133,624) (385,100) (59,358) (77,046) (422,346) (81,900) (57,939) (48,733)
---------- -------- -------- -------- ---------- ---------- -------- --------
Total Retail Class A Share
Transactions 58,445 59,359 8,363 8,649 25,771 78,266 (15,672) 21,631
---------- -------- -------- -------- ---------- ---------- -------- --------
Retail Class B:
Shares Issued 22 -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- -- -- --
---------- -------- -------- -------- ---------- ---------- -------- --------
Total Retail Class B Share
Transactions 22 -- -- -- -- -- -- --
---------- -------- -------- -------- ---------- ---------- -------- --------
Institutional II Class:
Shares Issued 547,301 248,051 146,937 80,395 668,319 470,456 375,294 247,477
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- -- -- --
Shares Redeemed (400,547) (228,716) (132,836) (67,649) (617,804) (416,112) (330,888) (216,118)
---------- -------- -------- -------- ---------- ---------- -------- --------
Total Institutional II Class
Share Transactions 146,754 19,335 14,101 12,746 50,515 54,344 44,406 31,359
---------- -------- -------- -------- ---------- ---------- -------- --------
Increase (Decrease) in Net
Assets from Shareholder
Transactions 505,906 (13,780) 9,916 42,750 218,502 167,648 55,964 89,785
---------- -------- -------- -------- ---------- ---------- -------- --------
Net Increase (Decrease) in
Net Assets 505,916 (13,792) 9,916 42,751 218,511 167,672 55,982 89,740
Net Assets:
Beginning of period 496,780 510,572 145,064 102,313 1,455,734 1,288,062 392,833 303,093
---------- -------- -------- -------- ---------- ---------- -------- --------
End of period $1,002,696 $496,780 $154,980 $145,064 $1,674,245 $1,455,734 $448,815 $392,833
========== ======== ======== ======== ========== ========== ======== ========
Shares Issued and Redeemed:
Institutional Class:
Shares Issued 971,963 678,729 97,664 129,030 2,187,318 2,467,089 374,307 483,164
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 9 -- -- -- 6 21 6 6
Shares Redeemed (671,287) (771,203) (110,212) (107,675) (2,045,108) (2,432,072) (347,083) (446,375)
---------- -------- -------- -------- ---------- ---------- -------- --------
Total Institutional Class
share Transactions 300,685 (92,474) (12,548) 21,355 142,216 35,038 27,230 36,795
---------- -------- -------- -------- ---------- ---------- -------- --------
Retail Class A:
Shares Issued 181,887 436,117 66,991 84,889 448,117 160,166 41,393 69,512
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 10,182 8,342 730 806 -- -- 874 852
Shares Redeemed (133,624) (385,100) (59,358) (77,046) (422,346) (81,900) (57,939) (48,733)
---------- -------- -------- -------- ---------- ---------- -------- --------
Total Retail Class A share
Transactions 58,445 59,359 8,363 8,649 25,771 78,266 (15,672) 21,631
---------- -------- -------- -------- ---------- ---------- -------- --------
Retail Class B:
Shares Issued 22 -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- -- -- --
---------- -------- -------- -------- ---------- ---------- -------- --------
Total Retail Class B share
Transactions 22 -- -- -- -- -- -- --
---------- -------- -------- -------- ---------- ---------- -------- --------
Institutional II Class:
Shares Issued 547,301 248,051 146,937 80,395 668,319 470,456 375,294 247,477
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- -- -- --
Shares Redeemed (400,547) (228,716) (132,836) (67,649) (617,804) (416,112) (330,888) (216,118)
---------- -------- -------- -------- ---------- ---------- -------- --------
Total Institutional II Class
share Transactions 146,754 19,335 14,101 12,746 50,515 54,344 44,406 31,359
---------- -------- -------- -------- ---------- ---------- -------- --------
Net Increase (Decrease) in
share Transactions 505,906 (13,780) 9,916 42,750 218,502 167,648 55,964 89,785
========== ======== ======== ======== ========= ========= ======== ========
SHORT-TERM SHORT-TERM MARYLAND
TREASURY PORTFOLIO BOND PORTFOLIO TAX-FREE PORTFOLIO
----------------------- ------------------------------------ -----------------------
5/1/98 5/1/97 5/1/98 3/1/98 3/1/97 5/1/98 5/1/97
to 4/30/99 to 4/30/98 to 4/30/99 to 4/30/98 to 2/28/98 to 4/30/99 to 4/30/98
---------- ---------- ---------- ---------- ---------- ---------- ----------
OPERATIONS:
Net Investment Income $ 2,057 $ 2,103 $ 6,748 $ 1,200 $ 8,182 $ 5,046 $ 4,673
Net Realized Gain (Loss) on
Investments 246 62 360 1 (317) 897 541
Net Change in Unrealized
Appreciation (Depreciation)
on Investments (140) 357 (402) (172) 584 484 2,461
------- ------- -------- -------- -------- -------- --------
Net increase (Decrease) in -- --
Net Assets from Operations 2,163 2,52 6,706 1,029 8,449 6,427 7,675
------- ------- -------- -------- -------- -------- --------
Distributions to Shareholders:
Net Investment Income
Institutional Class (1,396) (1,221) (6,738) (1,203) (8,140) (3,855) (3,834)
Retail Class A (661) (882) -- -- -- (1,192) (838)
Retail Class B -- -- -- -- -- -- --
Institutional II Class -- -- -- -- -- -- --
Net Capital Gains
Institutional Class (154) (25) -- -- -- (598) (466)
Retail Class A (73) (18) -- -- -- (189) (121)
Retail Class B -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Total Distributions (2,284) (2,146) (6,738) (1,203) (8,140) (5,834) (5,259)
------- ------- -------- -------- -------- -------- --------
Capital Share Transactions:
Institutional Class:
Shares Issued 12,880 4,390 28,513 3,424 25,180 20,695 11,869
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 294 30 3,946 690 4,387 638 502
Shares Redeemed (3,926) (1,242) (52,969) (5,815) (42,510) (9,967) (10,974)
------- ------- -------- -------- -------- -------- --------
Total Institutional Class
Share Transactions 9,248 3,178 (20,510) (1,701) (12,943) 11,366 1,397
------- ------- -------- -------- -------- -------- --------
Retail Class A:
Shares Issued 3,506 2,600 -- -- -- 12,753 22,144
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 735 900 -- -- -- 1,381 959
Shares Redeemed (4,613) (12,215) -- -- -- (7,150) (6,023)
------- ------- -------- -------- -------- -------- --------
Total Retail Class A Share
Transactions (372) (8,715) -- -- -- 6,984 17,080
------- ------- -------- -------- -------- -------- --------
Retail Class B:
Shares Issued -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Total Retail Class B Share
Transactions -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Total Institutional II Class
Share Transactions -- -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Increase (Decrease) in Net
Assets from Shareholder
Transactions 8,876 (5,537) (20,510) (1,701) (12,943) 18,350 18,477
------- ------- -------- -------- -------- -------- --------
Net Increase (Decrease) in
Net Assets 8,755 (5,161) (20,542) (1,875) (12,634) 18,943 20,893
Net Assets:
Beginning of period 39,339 44,500 131,669 133,544 146,178 108,498 87,605
------- ------- -------- -------- -------- -------- --------
End of period $48,094 $39,339 $111,127 $131,669 $133,544 $127,441 $108,498
======= ======= ======== ======== ======== ======== ========
Shares Issued and Redeemed:
Institutional Class:
Shares Issued 1,278 436 2,855 349 2,528 2,015 1,168
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 29 3 395 69 441 62 49
Shares Redeemed (389) (123) (5,301) (594) (4,263) (974) (1,081)
------- ------- -------- -------- -------- -------- --------
Total Institutional Class
share Transactions 918 316 (2,051) (176) (1,294) 1,103 136
------- ------- -------- -------- -------- -------- --------
Retail Class A:
Shares Issued 346 259 -- -- -- 1,241 2,179
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 73 90 -- -- -- 134 94
Shares Redeemed (457) (1,217) -- -- -- (695) (591)
------- ------- -------- -------- -------- -------- --------
Total Retail Class A share
Transactions (38) (868) -- -- -- 680 1,682
------- ------- -------- -------- -------- -------- --------
Retail Class B:
Shares Issued -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- -- --
Total Retail Class B share
Transactions -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Total Institutional II Class
share Transactions -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Net Increase (Decrease) in
share Transactions 880 (552) (2,051) (176) (1,294) 1,783 1,818
======= ======= ======== ======== ======== ======== ========
PENNSYLVANIA INTERMEDIATE FIXED
TAX-FREE PORTFOLIO INCOME PORTFOLIO
-------------------------------------- ------------------------
5/1/98 3/1/98 3/1/97 5/1/98 5/1/97
to 4/30/99 to 4/30/98 to 2/28/98 to 4/30/99 to 4/30/98
---------- ---------- ---------- ---------- ----------
OPERATIONS:
Net Investment Income $ 8,898 $ 1,346 $ 9,075 $ 5,160 $ 4,721
Net Realized Gain (Loss) on
Investments 1,627 384 1,985 601 356
Net Change in Unrealized
Appreciation (Depreciation)
on Investments 1,420 (3,114) 2,425 (1,060) 1,393
-------- -------- -------- -------- -------
Net increase (Decrease) in
Net Assets from Operations 11,945 (1,384) 13,485 4,701 6,470
-------- -------- -------- -------- --------
Distributions to Shareholders:
Net Investment Income
Institutional Class (8,692) (1,421) (9,058) (5,150) (4,723)
Retail Class A (120) (11) (530) -- --
Retail Class B -- -- -- -- --
Institutional II Class -- -- -- -- --
Net Capital Gains
Institutional Class (1,246) (85) -- (464) (206)
Retail Class A (18) -- -- -- --
Retail Class B -- -- -- -- --
-------- -------- -------- -------- -------
Total Distributions (10,076) (1,517) (9,588) (5,614) (4,929)
-------- -------- -------- -------- -------
Capital Share Transactions:
Institutional Class:
Shares Issued 27,331 1,992 23,203 30,623 17,828
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- 24,789 -- -- --
Shares Issued in Lieu of
Cash Distributions 1,331 5 17 926 303
Shares Redeemed (21,218) (4,056) (53,188) (14,545) (11,670)
-------- -------- -------- -------- -------
Total Institutional Class
Share Transactions 7,444 22,730 (29,968) 17,004 6,461
-------- -------- -------- -------- -------
Retail Class A:
Shares Issued 2,081 216 -- -- --
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- 2,600 -- -- --
Shares Issued in Lieu of
Cash Distributions 127 10 -- -- --
Shares Redeemed (980) (218) -- -- --
-------- -------- -------- -------- -------
Total Retail Class A Share
Transactions 1,228 2,608 -- -- --
-------- -------- -------- -------- -------
Retail Class B:
Shares Issued -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- --
Shares Redeemed -- -- -- -- --
-------- -------- -------- -------- -------
Total Retail Class B Share -- -- -- --
Transactions -------- -------- -------- -------- -------
Institutional II Class: -- -- -- -- --
Shares Issued
Shares Issued in Lieu of
Cash Distributions -- -- -- -- --
Shares Redeemed -- -- -- -- --
-------- -------- -------- -------- -------
Total Institutional II Class
Share Transactions -- -- -- -- --
-------- -------- -------- -------- -------
Increase (Decrease) in Net
Assets from Shareholder
Transactions 8,672 25,338 (29,968) 17,004 6,461
-------- -------- -------- -------- -------
Net Increase (Decrease) in
Net Assets 10,541 22,437 (26,071) 16,091 8,002
Net Assets:
Beginning of period 217,759 195,322 221,393 84,328 76,326
-------- -------- -------- -------- -------
End of period $228,300 $217,759 $195,322 $100,419 $84,328
======== ======== ======== ======== =======
Shares Issued and Redeemed:
Institutional Class:
Shares Issued 2,654 207 2,308 3,043 1,782
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- 2,427 -- -- --
Shares Issued in Lieu of
Cash Distributions 129 1 2 91 30
Shares Redeemed (2,058) (409) (5,265) (1,449) (1,168)
-------- -------- -------- -------- -------
Total Institutional Class
share Transactions 725 2,226 (2,955) 1,685 644
-------- -------- -------- -------- -------
Retail Class A:
Shares Issued 202 21 -- -- --
Shares Issued in Conjunction
with Acquisition of the
ARK Pennsylvania Tax-Free
Portfolio -- 253 -- -- --
Shares Issued in Lieu of
Cash Distributions 12 1 -- -- --
Shares Redeemed (95) (21) -- -- --
-------- -------- -------- -------- -------
Total Retail Class A share
Transactions 119 254 -- -- --
-------- -------- -------- -------- -------
Retail Class B:
Shares Issued -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- --
Shares Redeemed -- -- -- --
-------- -------- -------- -------- -------
Total Retail Class B share
Transactions -- -- -- -- --
-------- -------- -------- -------- -------
Institutional II Class:
Shares Issued -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- --
Shares Redeemed -- -- -- -- --
-------- -------- -------- -------- -------
Total Institutional II Class
share Transactions -- -- -- -- --
-------- -------- -------- -------- -------
Net Increase (Decrease) in
share Transactions 844 2,480 (2,955) 1,685 644
======== ======== ======== ======== =======
The accompanying notes are an integral part of the financial statements
114 & 115
118
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE YEAR OR PERIOD INDICATED
U.S. GOVERNMENT INCOME BALANCED
BOND PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------ ----------------------- -----------------------
5/1/98 3/1/98 3/1/97 5/1/98 5/1/97 5/1/98 5/1/97
to 4/30/99 to 4/30/98 to 2/28/98 to 4/30/99 to 4/30/98 to 4/30/99 to 4/30/98
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operations:
Net Investment Income (Loss) $ 14,387 $ 2,684 $ 18,55 $ 20,055 $ 16,979 $ 2,634 $ 2,314
Net Realized Gain (Loss) on Investments (243) 86 (923) (1,205) 3,238 6,985 10,217
Net Change in Unrealized Appreciati
(Depreciation) on Investments (1,367) (325) 2,239 (4,352) 7,153 12,888 13,045
-------- -------- -------- -------- -------- -------- --------
from Operations 12,777 2,445 19,871 14,498 27,370 22,507 25,576
-------- -------- -------- -------- -------- -------- --------
Net Investment Income
Institutional Class (14,354) (2,684) (18,542) (19,650) (16,640) (2,218) (2,071)
Retail Class A (44) -- -- (442) (324) (383) (233)
Retail Class B -- -- -- (5) -- (8) --
Institutional II Class -- -- -- -- -- -- --
Net Capital Gains
Institutional Class -- -- -- (135) -- (4,969) (8,182)
Retail Class A -- -- -- (3) -- (903) (1,083)
Retail Class B -- -- -- -- -- (17) --
-------- -------- -------- -------- -------- -------- --------
Total Distributions (14,398) (2,684) (18,542) (20,235) (16,964) (8,498) (11,569)
-------- -------- -------- -------- -------- -------- --------
Institutional Class:
Shares Issued 30,771 6,075 69,240 68,793 95,431 26,622 15,826
Shares Issued in Conjunction
with Acquisition of the Ark
Stock Portfolio -- -- -- -- -- -- --
Shares Issued in Lieu of
Cash Distributions 4,327 758 5,185 13,474 10,893 7,142 10,175
Shares Redeemed (43,799) (5,543) (70,231) (42,508) (37,186) (23,947) (18,845)
-------- -------- -------- -------- -------- -------- --------
Total Institutional Class Share
Transactions (8,701) 1,290 4,194 39,759 69,138 9,817 7,156
-------- -------- ------- -------- -------- -------- --------
Retail Class A:
Shares Issued 2,454 30 -- 2,761 3,976 12,311 9,134
Shares Issued in Lieu of
Distributions 41 -- -- 406 324 1,262 1,316
Shares Redeemed (250) -- -- (1,331) (1,719) (3,919) (2,832)
-------- -------- -------- -------- -------- -------- --------
Total Retail Class A Share Transactions 2,245 30 -- 1,836 2,581 9,654 7,618
-------- -------- -------- -------- -------- -------- --------
Retail Class B:
Shares Issued -- -- -- 309 -- 2,436 --
Shares Issued in Lieu of Cash
Distributions -- -- -- 4 -- 25 --
Shares Redeemed -- -- -- (29) -- (72) --
-------- -------- -------- -------- -------- -------- --------
Total Retail Class B Share Transactions -- -- -- 284 -- 2,389 --
-------- -------- -------- -------- -------- -------- --------
Increase (Decrease) in Net Assets from
Shareholder Transactions (6,456) 1,320 4,194 41,879 71,719 21,860 14,774
-------- -------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets (8,077) 1,081 5,523 36,142 82,125 35,869 28,781
36,265
Net Assets:
Beginning of period 265,646 264,565 259,042 329,193 247,068 111,932 83,151
-------- -------- -------- -------- -------- -------- --------
End of period $257,569 $265,646 $264,565 $365,335 $329,193 $147,801 $111,932
======== ======== ======== ======== ======== ======== ========
Shares Issued and Redeemed:
Institutional Class:
Shares Issued 3,103 618 7,072 6,702 9,322 1,998 1,229
Shares Issued in Conjunction
with Acquisition of the
Ark Stock Portfolio -- -- -- -- -- -- --
Shares Issued in Lieu of Cash
Distributions 436 77 529 1,311 1,072 529 848
Shares Redeemed (4,418) (564) (7,146) (4,115) (3,679) (1,756) (1,497)
-------- -------- -------- -------- -------- -------- --------
Total Institutional Class share
Transactions (879) 131 455 3,898 6,715 771 580
-------- -------- -------- -------- -------- -------- --------
Retail Class A:
Shares Issued 247 3 -- 266 387 900 716
Shares Issued in Lieu of Cash
Distributions 4 -- -- 39 32 94 110
Shares Redeemed (25) -- -- (129) (167) (291) (224)
-------- -------- -------- -------- -------- -------- --------
Total Retail Class A share
Transactions 226 3 -- 176 252 703 602
-------- -------- -------- -------- -------- -------- --------
Retail Class B:
Shares Issued -- -- -- 30 -- 173 --
Shares Issued in Lieu of Cash
Distributions -- -- -- 1 -- 2 --
Shares Redeemed -- -- -- (3) -- (5) --
-------- -------- -------- -------- -------- -------- --------
Total Retail Class B share
Transactions -- -- -- 28 -- 170 --
-------- -------- -------- -------- -------- -------- --------
Net Increase (Decrease) in share
Transactions (653) 134 455 4,102 6,967 1,644 1,182
======== ======== ======== ======== ======== ======== ========
EQUITY INCOME VALUE EQUITY
PORTFOLIO PORTFOLIO
----------------------- ------------------------------------
5/1/98 5/1/97 5/1/98 3/1/98 3/1/97
to 4/30/99 to 4/30/98 to 4/30/99 to 4/30/98 to 2/28/98
---------- ---------- ---------- ---------- ----------
Operations:
Net Investment Income (Loss) $ 2,169 $ 2,547 $ 3,425 $ 652 $ 6,834
Net Realized Gain (Loss) on Investments 1,092 9,065 54,074 5,752 80,123
Net Change in Unrealized Appreciati
(Depreciation) on Investments 580 15,858 (2,152) 19,421 71,490
-------- -------- -------- -------- --------
from Operations 3,841 27,470 55,347 25,825 158,447
-------- -------- -------- -------- --------
Net Investment Income
Institutional Class (2,101) (2,505) (3,675) (512) (6,768)
Retail Class A (68) (43) (12) -- --
Retail Class B -- -- -- -- --
Institutional II Class -- -- -- -- --
Net Capital Gains
Institutional Class (5,723) (9,335) (29,764) (1,196) (59,362)
Retail Class A (208) (225) (110) -- --
Retail Class B -- -- (1) -- --
-------- -------- -------- -------- --------
Total Distributions (8,100) (12,108) (33,562) (1,708) (66,130)
-------- -------- -------- -------- --------
Institutional Class:
Shares Issued 4,716 9,302 18,207 6,964 81,207
Shares Issued in Conjunction
with Acquisition of the Ark
Stock Portfolio -- -- -- 44,621 --
Shares Issued in Lieu of
Cash Distributions 5,770 9,363 31,209 765 32,139
Shares Redeemed (11,908) (11,250) (179,386) (8,420) (169,398)
-------- -------- -------- -------- --------
Total Institutional Class Share
Transactions (1,422) 7,415 (129,970) 43,93 (56,052)
-------- -------- -------- -------- --------
Retail Class A:
Shares Issued 961 3,410 3,997 228 --
Shares Issued in Lieu of
Distributions 270 267 63 -- --
Shares Redeemed (858) (330) (917) -- --
-------- -------- -------- -------- --------
Total Retail Class A Share Transactions 373 3,347 3,143 228 --
-------- -------- -------- -------- --------
Retail Class B:
Shares Issued -- -- 156 -- --
Shares Issued in Lieu of Cash
Distributions -- -- 1 -- --
Shares Redeemed -- -- -- -- --
-------- -------- -------- -------- --------
Total Retail Class B Share Transactions -- -- 157 -- --
-------- -------- -------- -------- --------
Increase (Decrease) in Net Assets from
Shareholder Transactions (1,049) 10,762 (126,670) 44,158 (56,052)
-------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets (5,308) 26,124 (104,885) 68,275 36,265
Net Assets:
Beginning of period 110,071 83,947 645,429 577,154 540,889
-------- -------- -------- -------- --------
End of period $104,763 $110,071 $540,544 $645,429 $577,154
======== ======== ======== ======== ========
Shares Issued and Redeemed:
Institutional Class:
Shares Issued 399 767 1,284 470 6,184
Shares Issued in Conjunction
with Acquisition of the
Ark Stock Portfolio -- -- -- 3,061 --
Shares Issued in Lieu of Cash
Distributions 498 810 2,260 53 2,486
Shares Redeemed (1,018) (930) (12,501) (586) (12,877)
-------- -------- -------- -------- --------
Total Institutional Class share
Transactions (121) 647 (8,957) 2,998 (4,207)
-------- -------- -------- -------- --------
Retail Class A:
Shares Issued 80 278 279 16 --
Shares Issued in Lieu of Cash
Distributions 23 23 5 -- --
Shares Redeemed (73) (27) (66) -- --
-------- -------- -------- -------- --------
Total Retail Class A share
Transactions 30 274 218 16 --
-------- -------- -------- -------- --------
Retail Class B:
Shares Issued -- -- 11 -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- -- --
Shares Redeemed -- -- -- -- --
-------- -------- -------- -------- --------
Total Retail Class B share
Transactions -- -- 11 -- --
-------- -------- -------- -------- --------
Net Increase (Decrease) in share
Transactions (91) 921 (8,728) 3,014 (4,207)
======== ======== ======== ======== ========
The accompanying notes are an integral part of the financial statements.
116
119
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE YEAR OR PERIOD INDICATED
EQUITY INDEX BLUE CHIP EQUITY CAPITAL GROWTH MID-CAP EQUITY SMALL-CAP EQUITY INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO SELECTION PORTFOLIO
- ----------------- ------------------- ------------------ ----------------- ----------------- ---------------------------
5/1/98 10/1/97 5/1/98 5/1/97 5/1/98 5/1/97 5/1/98 5/1/97 5/1/98 5/1/97 5/1/98 3/1/98 4/1/97
to to to to to to to to to to to to to
4/30/99 4/30/98 4/30/99 4/30/98 4/30/99 4/30/98 4/30/99 4/30/98 4/30/99 4/30/98 4/30/99 4/30/99 2/28/98
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
$ 801 $ 283 $ 807 $ 671 $ (93) $00,041 $ 24 $ 123 $ (135) $ (64) $ 369 $ (34) $ 652
1,263 420 4,389 3,473 4,150 6,670 5,867 4,248 4,402 4,416 1,446 48 1,296
14,031 5,405 25,069 21,036 19,500 11,791 (961) 10,632 (1,611) 4,818 (3,646) 2,20 2,674
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
16,095 6,108 30,265 25,180 23,557 18,502 4,930 15,003 2,656 9,170 (1,831) 2,21 4,622
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
(763) (242) (613) (448) -- (113) (30) (129) -- -- (350) -- (931)
(24) (3) (233) (202) -- (14) -- -- -- -- (11) -- --
-- -- (1) -- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- -- --
(765) -- (2,118) (302) (2,133) (5,271) (2,330) (2,376) (732) (1,266) (573) -- (746)
(26) -- (1,065) -- (549) -- -- -- (57) -- (20) -- --
-- -- (15) (186) (9) (1,458) -- -- -- (93) -- -- --
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
(1,578) (245) (4,045) (1,138) (2,691) (6,856) (2,360) (2,505) (789) (1,359) (954) -- (1,677)
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
36,359 40,712 55,745 19,277 34,103 14,093 12,969 19,182 4,108 4,789 6,844 3,794 50,153
-- -- -- -- -- -- -- -- -- -- -- -- --
1,408 240 2,439 541 2,133 5,377 2,343 2,415 689 1,198 863 -- 1,439
(10,344) (1,184) (13,286) (3,952) (13,384) (12,745) (9,514) (5,874) (3,317) (3,721) (22,764) (360) (18,679)
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
27,423 39,768 44,898 15,866 22,852 6,725 5,798 15,723 1,480 2,266 (15,057) 3,434 32,913
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
3,230 1,420 12,673 25,471 6,681 7,125 -- -- 587 541 1,486 13 --
50 4 1,265 388 538 1,472 -- -- 57 93 31 -- --
(283) (107) (8,656) (4,308) (2,746) (1,717) -- -- (406) (307) (16) -- --
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
2,997 1,317 5,282 21,551 4,473 6,880 -- -- 238 327 1,501 13 --
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
-- -- 2,968 -- 2,136 -- -- -- -- -- -- -- --
-- -- 16 -- 8 -- -- -- -- -- -- -- --
-- -- (91) -- (112) -- -- -- -- -- -- -- --
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
-- -- 2,893 -- 2,032 -- -- -- -- -- -- -- --
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
30,420 41,085 53,073 37,417 29,357 13,605 5,798 15,723 1,718 2,593 (13,556) 3,447 32,913
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
44,937 46,948 79,293 61,459 50,223 25,251 8,368 28,221 3,585 10,404 (16,341) 5,665 35,858
46,948 -- 110,360 48,901 65,016 39,765 55,280 27,059 29,225 18,821 41,523 35,858 --
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
$91,885 $46,948 $189,653 $110,360 $115,239 $65,016 $63,648 $55,280 $32,810 $29,225 $25,182 $41,523 $35,858
======= ======= ======== ======== ======== ======= ======= ======= ======= ======= ======= ======= =======
3,026 4,019 3,145 1,297 2,106 1,020 961 1,536 369 449 631 333 4,943
-- -- -- -- -- -- -- -- -- -- -- -- --
115 22 139 36 131 433 177 200 63 124 83 -- 140
(804) (111) (741) (270) (822) (923) (726) (480) (324) (345) (2,199) (32) (1,777)
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
2,337 3,930 2,543 1,063 1,415 530 412 1,256 108 228 (1,485) 301 3,306
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
255 132 721 1,746 410 504 -- -- 53 50 132 1 --
4 -- 72 26 33 119 -- -- 5 10 3 -- --
(22) (10) (501) (289) (175) (123) -- -- (36) (29) (2) -- --
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
237 122 292 1,483 268 500 -- -- 22 31 133 1 --
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
-- -- 163 -- 122 -- -- -- -- -- -- -- --
-- -- 1 -- -- -- -- -- -- -- -- -- --
-- -- (5) -- (6) -- -- -- -- -- -- -- --
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
-- -- 159 -- 116 -- -- -- -- -- -- -- --
- ------- ------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
2,574 4,052 2,994 2,546 1,799 1,030 412 1,256 130 259 (1,352) 302 3,306
======= ======= ======== ======== ======== ======= ======= ======= ======= ======= ======= ======= =======
117
120
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD INDICATED
REALIZED AND DISTRIBU- DISTRIBU-
NET ASSET UNREALIZED TIONS TIONS
VALUE, NET GAINS OR FROM NET FROM NET ASSET TOTAL
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END RETURN
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD (A)
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------
MONEY MARKET PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
1999 $1.00 0.05 -- (0.05) -- $1.00 5.17%
1998 1.00 0.05 -- (0.05) -- 1.00 5.55
1997 1.00 0.05 -- (0.05) -- 1.00 5.36
1996 1.00 0.06 -- (0.06) -- 1.00 5.78
1995 1.00 0.05 -- (0.05) -- 1.00 5.13
RETAIL CLASS A
1999 $1.00 0.05 -- (0.05) -- $1.00 4.91%
1998 1.00 0.05 -- (0.05) -- 1.00 5.25
1997 1.00 0.05 -- (0.05) -- 1.00 5.03
1996 1.00 0.05 -- (0.05) -- 1.00 5.44
1995 (2) 1.00 0.05 -- (0.05) -- 1.00 4.69
RETAIL CLASS B
1999 (3 $1.00 0.01 -- (0.01) -- $1.00 3.86%*
INSTITUTIONAL II CLASS
1999 $1.00 0.05 -- (0.05) -- $1.00 5.11%
1998 1.00 0.05 -- (0.05) -- 1.00 5.47
1997 1.00 0.05 -- (0.05) -- 1.00 5.25
1996(4) 1.00 0.04 -- (0.04) -- 1.00 4.33+
- --------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- --------------------------------
INSTITUTIONAL CLASS
1999 $1.00 0.03 -- (0.03) -- $1.00 2.99%
1998 1.00 0.03 -- (0.03) -- 1.00 3.45
1997 1.00 0.03 -- (0.03) -- 1.00 3.29
1996 1.00 0.04 -- (0.04) -- 1.00 3.61
1995(1) 1.00 0.03 -- (0.03) -- 1.00 3.24
RETAIL CLASS A
1999 $1.00 0.03 -- (0.03) -- $1.00 2.74%
1998 1.00 0.03 -- (0.03) -- 1.00 3.16
1997 1.00 0.03 -- (0.03) -- 1.00 3.01
1996 1.00 0.03 -- (0.03) -- 1.00 3.53
1995(5) 1.00 0.03 -- (0.03) -- 1.00 2.74
INSTITUTIONAL II CLASS
1999 $1.00 0.03 -- (0.03) -- $1.00 2.94%
1998 1.00 0.03 -- (0.03) -- 1.00 3.37
1997 1.00 0.03 -- (0.03) -- 1.00 3.19
1996(6) 1.00 0.02 -- (0.02) -- 1.00 2.62+
- ---------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- ---------------------------------------
INSTITUTIONAL CLASS
1999 $1.00 0.05 -- (0.05) -- $1.00 5.00%
1998 1.00 0.05 -- (0.05) -- 1.00 5.42
1997 1.00 0.05 -- (0.05) -- 1.00 5.22
1996 1.00 0.05 -- (0.05) -- 1.00 5.64
1995(1) 1.00 0.05 -- (0.05) -- 1.00 5.00
RETAIL CLASS A
1999 $1.00 0.05 -- (0.05) -- $1.00 4.75%
1998(7) 1.00 0.04 -- (0.04) -- 1.00 5.19*
INSTITUTIONAL II CLASS
1999 $1.00 0.05 -- (0.05) -- $1.00 4.95%
1998 1.00 0.05 -- (0.05) -- 1.00 5.33
1997 1.00 0.05 -- (0.05) -- 1.00 5.12
1996(6) 1.00 0.04 -- (0.04) -- 1.00 4.11+
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS
END OF TO AVERAGE TO AVERAGE (EXCLUDING
PERIOD(000) NET ASSETS NET ASSETS WAIVERS)
- -------------------------------------------------------------------------------------------------------
- -----------------------
MONEY MARKET PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
1999 $ 527,132 0.38% 5.01% 0.60%
1998 226,439 0.33 5.41 0.50
1997 318,919 0.28 5.23 0.43
1996 348,343 0.25 5.62 0.44
1995 277,859 0.20 5.13 0.46
RETAIL CLASS A
1999 $ 246,496 0.62% 4.79% 0.85%
1998 188,048 0.62 5.13 0.85
1997 128,693 0.59 4.92 0.83
1996 104,703 0.58 5.25 0.77
1995 (2) 51,081 0.45 4.88 0.97
RETAIL CLASS B
1999 (3 $ 22 1.30%* 3.76%* 1.44%*
INSTITUTIONAL II CLASS
1999 $ 229,046 0.43% 4.97% 0.57%
1998 82,293 0.41 5.33 0.55
1997 62,960 0.38 5.14 0.53
1996(4) 28,790 0.36* 5.37* 0.55*
- --------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- --------------------------------
INSTITUTIONAL CLASS
1999 $ 77,896 0.36% 2.95% 0.60%
1998 90,446 0.32 3.39 0.51
1997 69,091 0.28 3.23 0.44
1996 74,739 0.22 3.54 0.45
1995(1) 64,112 0.22 3.21 0.47
RETAIL CLASS A
1999 $ 33,509 0.60% 2.66% 0.85%
1998 25,144 0.61 3.11 0.86
1997 16,495 0.55 2.97 0.84
1996 16,179 0.34 3.33 0.90
1995(5) 2,491 0.75 2.68 2.94
INSTITUTIONAL II CLASS
1999 $ 43,575 0.41% 2.87% 0.57%
1998 29,474 0.40 3.31 0.56
1997 16,727 0.38 3.14 0.54
1996(6) 9,387 0.33* 3.35* 0.58*
- --------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
1999 $1,428,064 0.40% 4.86% 0.59%
1998 1,285,840 0.35 5.29 0.49
1997 1,250,778 0.32 5.10 0.43
1996 1,043,758 0.31 5.45 0.44
1995(1) 651,113 0.25 5.09 0.47
RETAIL CLASS A
1999 $ 104,037 0.64% 4.62% 0.84%
1998(7) 78,265 0.67* 4.98* 0.87*
INSTITUTIONAL II CLASS
1999 $ 142,144 0.45% 4.76% 0.56%
1998 91,629 0.44 5.21 0.55
1997 37,284 0.42 5.01 0.53
1996(6) 17,027 0.41* 5.25* 0.56*
The accompanying notes are an integral part of the financial statements.
118
121
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD INDICATED
REALIZED AND DISTRIBU- DISTRIBU-
NET ASSET UNREALIZED TIONS TIONS
VALUE, NET GAINS OR FROM NET FROM NET ASSET TOTAL
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END RETURN
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD (A)
- -----------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
- -----------------------------------
INSTITUTIONAL CLASS
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
1995(1) 1.00 0.05 -- (0.05) -- 1.00 4.60
RETAIL CLASS A
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(8) 1.00 0.02 -- (0.02) -- 1.00 1.82+
INSTITUTIONAL II CLASS
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(6) 1.00 0.04 -- (0.04) -- 1.00 3.87+
- ------------------------------
SHORT-TERM TREASURY PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
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(9) 10.00 0.06 (0.04) (0.06) -- 9.96 0.16+
RETAIL CLASS A
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(10) 9.95 0.27 0.03 (0.28) (0.01) 9.96 3.39+
- ---------------------------
SHORT-TERM BOND PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
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++(11) 10.00 0.49 (0.05) (0.49) -- 9.95 4.49+
- ----------------------------
MARYLAND TAX-FREE PORTFOLIO
- ----------------------------
INSTITUTIONAL CLASS
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(12) 10.00 0.22 (0.13) (0.22) -- 9.87 0.89+
RETAIL CLASS A
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(13) 9.96 0.13 (0.07) (0.15) -- 9.87 0.63+
- --------------------------------
PENNSYLVANIA TAX-FREE PORTFOLIO
- --------------------------------
INSTITUTIONAL CLASS
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++(11) 10.00 0.40 0.09 (0.40) -- 10.09 5.03+
RETAIL CLASS A
1999 $10.13 0.39 0.15 (0.39) (0.06) $10.22 5.39%
1998 (14) 10.26 0.04 (0.13) (0.04) -- 10.13 (0.94)+
RATIO
RATIO OF NET OF EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME 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
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 --
1995(1) 221,069 0.38 4.59 0.47 --
RETAIL CLASS A
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(8) 8,758 0.55* 4.71* 0.86* --
INSTITUTIONAL II CLASS
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(6) 47,220 0.47* 4.98* 0.55* --
- ------------------------------
SHORT-TERM TREASURY PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
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(9) 18,823 0.55* (0.55)* 0.60* --
RETAIL CLASS A
1999 $ 14,006 0.82% 4.61% 1.12% 70.64%
1998 14,410 0.78 5.02 1.07 124.24
1997(10) 22,937 0.67* 5.07* 0.91* 147.86
- ---------------------------
SHORT-TERM BOND PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
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++(11) 146,178 0.90* 5.47* 1.08 112.00
- ----------------------------
MARYLAND TAX-FREE PORTFOLIO
- ----------------------------
INSTITUTIONAL CLASS
1999 $ 95,046 0.76% 4.35% 0.99% 30.83%
1998 83,215 0.68 4.62 0.77 22.40
1997(12) 79,608 0.67* 4.95* 0.72* 11.13
RETAIL CLASS A
1999 $ 32,395 0.93% 4.18% 1.29% 30.83%
1998 25,283 0.90 4.39 1.15 22.40
1997(13) 7,997 0.91* 4.70* 1.10* 11.13
- --------------------------------
PENNSYLVANIA TAX-FREE PORTFOLIO
- --------------------------------
INSTITUTIONAL CLASS
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++(11) 221,393 0.83* 4.41* 1.02* 86.00
RETAIL CLASS A
1999 $ 3,820 1.10% 3.84% 1.30% 43.46%
1998 (14) 2,577 1.01* 3.72* 1.24* 3.50
+ Returns are for the period indicated and have not been annualized.
++ Period ended February 28. See Note 9 of Notes to Financial Statements
regarding fund mergers.
* Annualized.
(A) Total return for the retail class does not include the one-time sales
charge.
(1) Commenced operations on June 14, 1993.
(2) Commenced operations on March 2, 1994.
(3) Commenced operations on January 22, 1999.
(4) Commenced operations on July 21, 1995.
(5) Commenced operations on March 15, 1994.
(6) Commenced operations on July 28, 1995.
(7) Commenced operations on July 7, 1997.
(8) Commenced operations on December 15, 1995.
(9) Commenced operations on March 20, 1996.
(10) Commenced operations on September 9, 1996.
(11) Commenced operations on April 1, 1996.
(12) Commenced operations on November 18, 1996.
(13) Commenced operations on January 2, 1997.
(14) Commenced operations on March 23, 1998.
(15) Commenced operations on July 16, 1993.
(16) Commenced operations on April 12, 1994.
(17) Commenced operations on September 14, 1998.
(18) Commenced operations on April 1, 1998.
(19) Commenced operations on March 9, 1994.
(20) Commenced operations on May 9, 1997.
(21) Commenced operations on October 1, 1997.
(22) Commenced operations on November 3, 1997.
(23) Commenced operations on May 16, 1996.
(24) Commenced operations on July 31, 1998.
(25) Commenced operations on July 13, 1995.
(26) Commenced operations on April 1, 1997.
119
122
123
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD INDICATED
REALIZED
AND DISTRIBU- DISTRIBU-
NET ASSET NET UNREALIZED TIONS TIONS
VALUE, INVEST- GAINS OR FROM NET FROM NET ASSET TOTAL
BEGINNING MENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END RETURN
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD (A)
- ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------
INTERMEDIATE FIXED INCOME PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
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(12) 10.00 0.28 (0.20) (0.28) -- 9.80 0.78+
- --------------------------------
U.S. GOVERNMENT BOND PORTFOLIO
- --------------------------------
INSTITUTIONAL CLASS
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++(11) 10.00 0.59 (0.18) (0.59) -- 9.82 4.18+
RETAIL CLASS A
1999 $ 9.85 0.54 (0.06) (0.54) -- $ 9.79 4.93%
1998(18) 9.88 0.81 (0.03) (0.81) -- 9.85 7.86+
- -------------------
INCOME PORTFOLIO
- -------------------
INSTITUTIONAL CLASS
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
1995(15) 9.61 0.58 0.02 (0.58) (0.03) 9.60 6.53
RETAIL CLASS A
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
1995(16) 9.62 0.55 0.05 (0.47) (0.03) 9.72 6.45
RETAIL CLASS B
1999(17) $10.40 0.35 (0.32) (0.35) -- $10.08 0.35%+
- -------------------
BALANCED PORTFOLIO
- -------------------
INSTITUTIONAL CLASS
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
1995(15) 10.16 0.33 0.03 (0.29) (0.19) 10.04 3.75
RETAIL CLASS A
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
1995(19) 10.15 0.27 0.05 (0.24) (0.19) 10.04 3.33
RETAIL CLASS B
1999(17) $12.58 0.16 2.67 (0.18) (0.63) $14.60 23.13%+
- ------------------------
EQUITY INCOME PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
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(12) 10.00 0.12 0.67 (0.12) -- 10.67 7.88+
RETAIL CLASS A
1999 $12.52 0.23 0.21 (0.23) (0.69) $12.04 3.92%
1998(20) 11.01 0.28 2.73 (0.29) (1.21) 12.52 28.73+
- -----------------------
VALUE EQUITY PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
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++(11) 10.00 0.14 2.10 (0.14) (0.19) 11.91 22.77+
RETAIL CLASS A
1999 $14.60 0.05 1.36 (0.07) (0.72) $15.22 10.29%
1998(18) 14.55 -- 0.05 -- -- 14.60 0.34+
RETAIL CLASS B
1999(17) $12.93 0.01 2.97 (0.03) (0.72) $15.16 23.70%+
RATIO
NET RATIO OF NET OF EXPENSES
ASSETS RATIO OF INVESTMENT TO AVERAGE
END OF EXPENSES INCOME (LOSS) NET ASSETS PORTFOLIO
PERIOD TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER
(000) NET ASSETS NET ASSETS WAIVERS) RATE
- --------------------------------------------------------------------------------------------------------------
- ------------------------------------
INTERMEDIATE FIXED INCOME PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
1999 $100,419 0.77% 5.49% 0.95% 52.87%
1998 84,328 0.69 6.02 0.87 41.63
1997(12) 76,326 0.68* 5.55* 0.83* 17.18
- --------------------------------
U.S. GOVERNMENT BOND PORTFOLIO
- --------------------------------
INSTITUTIONAL CLASS
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++(11) 259,042 0.85* 6.54* 1.03* 255.00
RETAIL CLASS A
1999 $ 2,240 1.12% 5.11% 1.41% 102.27%
1998(18) 30 1.05* 6.02* 1.33* 13.77
- -------------------
INCOME PORTFOLIO
- -------------------
INSTITUTIONAL CLASS
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
1995(15) 66,441 0.74 6.15 0.74 73.00
RETAIL CLASS A
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
1995(16) 296 1.23 5.66 27.63 73.00
RETAIL CLASS B
1999(17) $ 280 1.70%* 4.71%* 1.79%* 50.41%
- -------------------
BALANCED PORTFOLIO
- -------------------
INSTITUTIONAL CLASS
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
1995(15) 91,039 0.77 3.32 0.77 81.00
RETAIL CLASS A
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
1995(19) 549 1.26 2.83 5.80 81.00
RETAIL CLASS B
1999(17) $ 2,479 1.75%* 0.99%* 1.84%* 56.70%
- ------------------------
EQUITY INCOME PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1999 $101,104 0.91% 2.10% 1.04% 56.03%
1998 106,643 0.84 2.58 0.97 39.88
1997(12) 83,947 0.83* 2.47* 0.93* 34.38
RETAIL CLASS A
1999 $ 3,659 1.08% 1.93% 1.44% 56.03%
1998(20) 3,428 1.07* 2.39* 1.45* 39.88
- -----------------------
VALUE EQUITY PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
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++(11) 540,889 1.05* 1.48* 1.26* 37.00
RETAIL CLASS A
1999 $ 3,553 1.31% 0.29% 1.74% 32.21%
1998(18) 227 1.26* 0.62* 1.67* 4.34
RETAIL CLASS B
1999(17) $ 164 2.07%* (0.67)%* 2.20%* 32.21%
The accompanying notes are an integral part of the financial statements.
120
124
REALIZED AND DISTRIBU- DISTRIBU-
NET ASSET UNREALIZED TIONS TIONS
VALUE, NET GAINS OR FROM NET FROM NET ASSET TOTAL
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END RETURN
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD (A)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------
EQUITY INDEX PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
1999 $11.59 0.14 2.41 (0.14) (0.13) $13.87 22.37%
1998(21) 10.00 0.08 1.58 (0.07) -- 11.59 16.71+
RETAIL CLASS A
1999 $11.57 0.11 2.40 (0.11) (0.13) $13.84 22.05%
1998(22) 9.78 0.06 1.80 (0.07) -- 11.57 19.08+
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
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(11) 10.00 -- 0.12 -- -- 10.12 1.20+
RETAIL CLASS A
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(23) 10.33 0.16 2.06 (0.16) (0.01) 12.38 21.74+
RETAIL CLASS B
1999(24) $17.07 0.01 3.28 (0.03) (0.40) $19.93 19.62%+
- ------------------------
CAPITAL GROWTH PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
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
1995(15) 10.19 0.14 0.16 (0.11) (0.18) 10.20 3.15
RETAIL CLASS A
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
1995(19) 10.18 0.08 0.18 (0.08) (0.18) 10.18 2.74
RETAIL CLASS B
1999(17) $13.53 (0.04) 5.63 -- (0.51) $18.61 41.88%+
- ------------------------
MID-CAP EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
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(12) 10.00 0.03 0.17 (0.03) -- 10.17 1.98+
- --------------------------
SMALL-CAP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
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(25) 10.00 0.09 4.72 (0.09) -- 14.72 48.34+
RETAIL CLASS A
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(23) 15.47 (0.01) (3.72) -- (3.21) 8.53 (27.14)+
- ----------------------------------------
INTERNATIONAL EQUITY SELECTION PORTFOLIO
- ----------------------------------------
INSTITUTIONAL CLASS
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++(26) 10.00 0.15 1.12 (0.23) (0.19) 10.85 12.95+
RETAIL CLASS A
1999 $11.51 0.08 (0.17) (0.09) (0.17) $11.16 (0.59)%
1998(18) 11.40 -- 0.11 -- -- 11.51 0.96+
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 INDEX PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
1999 $ 86,911 0.23% 1.20% 0.61% 34.04%
1998(21) 45,531 0.20 1.43 0.62 49.56
RETAIL CLASS A
1999 $ 4,974 0.48% 0.92% 1.00% 34.04%
1998(22) 1,417 0.45* 1.02* 1.08* 49.56
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
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(11) 11,456 0.65* 1.52* 1.38* 0.97
RETAIL CLASS A
1999 $ 56,771 1.07% 0.49% 1.62% 38.78%
1998 43,300 1.04 0.71 1.50 26.32
1997(23) 13,211 0.86* 1.29* 1.25* 46.91
RETAIL CLASS B
1999(24) $ 3,162 1.84%* (0.43)%* 1.94%* 38.78%
- ------------------------
CAPITAL GROWTH PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
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
1995(15) 41,170 0.74 1.35 0.85 182.00
RETAIL CLASS A
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
1995(19) 404 1.23 0.86 9.73 182.00
RETAIL CLASS B
1999(17) $ 2,162 1.87%* (1.09)%* 1.92%* 118.46%
- ------------------------
MID-CAP EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1999 $ 63,648 1.06% 0.04% 1.18% 61.81%
1998 55,280 0.97 0.31 1.06 38.30
1997(12) 27,059 0.90* 0.65* 0.95* 14.74
- --------------------------
SMALL-CAP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
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(25) 33,621 0.91* 0.60* 0.91* 286.80
RETAIL CLASS A
1999 $ 2,248 1.32% (0.64)% 1.63% 733.14%
1998 1,853 1.21 (0.46) 1.36 410.72
1997(23) 1,075 1.11* (0.13)* 1.21* 704.41
- ----------------------------------------
INTERNATIONAL EQUITY SELECTION PORTFOLIO
- ----------------------------------------
INSTITUTIONAL CLASS
1999 $ 23,686 0.88% 1.04% 1.04% 101.86%
1998 41,510 0.78* (0.52)* 1.22* 0.98
1998++(26) 35,858 0.75* 1.73* 1.20* 43.00
RETAIL CLASS A
1999 $ 1,496 1.05% 0.80% 1.30% 101.86%
1998(18) 13 0.96* (0.63)* 1.19* 0.98
+ Returns are for the period indicated and have not been annualized.
++ Period ended February 28. See Note 9 of Notes to Financial Statements
regarding fund mergers.
* Annualized.
(A) Total return for the retail class does not include the one-time
sales charge.
(1) Commenced operations on June 14, 1993.
(2) Commenced operations on March 2, 1994.
(3) Commenced operations on January 22, 1999.
(4) Commenced operations on July 21, 1995.
(5) Commenced operations on March 15, 1994.
(6) Commenced operations on July 28, 1995.
(7) Commenced operations on July 7, 1997.
(8) Commenced operations on December 15, 1995.
(9) Commenced operations on March 20, 1996.
(10) Commenced operations on September 9, 1996.
(11) Commenced operations on April 1, 1996.
(12) Commenced operations on November 18, 1996.
(13) Commenced operations on January 2, 1997.
(14) Commenced operations on March 23, 1998.
(15) Commenced operations on July 16, 1993.
(16) Commenced operations on April 12, 1994.
(17) Commenced operations on September 14, 1998.
(18) Commenced operations on April 1, 1998.
(19) Commenced operations on March 9, 1994.
(20) Commenced operations on May 9, 1997.
(21) Commenced operations on October 1, 1997.
(22) Commenced operations on November 3, 1997.
(23) Commenced operations on May 16, 1996.
(24) Commenced operations on July 31, 1998.
(25) Commenced operations on July 13, 1995.
(26) Commenced operations on April 1, 1997.
121
125
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.
Each Portfolio (with the exception of the Intermediate Fixed Income Portfolio,
Mid-Cap Equity Portfolio, and Short-Term Bond Portfolio) offers both
Institutional and Retail Class A shares. The following Portfolios also offer
Retail Class B shares: 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; and in April 1998 for the U.S. Government Bond Portfolio,
Value Equity Portfolio and International Equity Selection Portfolio. Retail
Class B shares commenced in August 1998 for the Blue Chip Equity Portfolio, in
September 1998 for the Income Portfolio, Balanced Portfolio and Capital Growth
Portfolio, and in January 1999 for the Money Market Portfolio.Institutional II
Class shares commenced in July 1995 for the U.S. Treasury Money Market
Portfolio, U.S. Government Money Market Portfolio, Money Market Portfolio and
Tax-Free Money Market Portfolio. Each class of shares has equal rights as to
earnings, assets and voting privileges, except that each class bears different
distribution and shareholder service expenses. Each class of shares has
exclusive voting rights with respect to matters that affect just that class.
2. SIGNIFICANT ACCOUNTING POLICIES
the preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported therein. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the net assets
of the Portfolios.
The following is a summary of significant accounting policies followed by the
Portfolios.
SECURITY VALUATION -- Securities of the Portfolios are generally valued by
independent pricing services. Securities listed on a securities exchange for
which market quotations are readily available are valued at the last reported
sale price on the principal exchange on which they are traded on the valuation
date or, if there is no such reported sale on the valuation date, at the most
recently quoted bid price. Unlisted securities for which market quotations are
readily available are valued at the most recently quoted bid price. Debt
obligations exceeding sixty days to maturity for which market quotations are
readily available are valued at the most recently quoted bid price. Debt
obligations with sixty days or less to maturity may be valued at their amortized
cost. When market quotations are not readily available, securities are valued at
fair value as determined under procedures established and approved by the Board
of Trustees. As of April 30, 1999, the only Portfolio containing securities
valued using these procedures was the Small-Cap Equity Portfolio. Securities
valued at fair value amounted to $13,067 and have been noted in the Schedule of
Investments.
122
126
NOTES TO FINANCIAL STATEMENTS
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 organizational costs associated with the start-up of
the Portfolios are being amortized on a straight-line basis over a period of
sixty months. If any or all of the shares representing initial capital of a
Portfolio are redeemed by any holder thereof prior to the end of the
amortization period, the proceeds will be reduced by the unamortized
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 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
123
127
NOTES TO FINANCIAL STATEMENTS
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 INVESTMENT PAID-IN-
PORTFOLIO GAIN (LOSS) INCOME CAPITAL
- -------------------------------------------------------------------------------
Money Market $-- $ 1 $ (1)
- -------------------------------------------------------------------------------
Tax-Free Money Market -- 1 (1)
- -------------------------------------------------------------------------------
U.S. Government
Money Market -- 1 (1)
- -------------------------------------------------------------------------------
U.S. Treasury
Money Market -- 1 (1)
- -------------------------------------------------------------------------------
Short-Term Bond (8) 8 --
- -------------------------------------------------------------------------------
Income -- 1 (1)
- -------------------------------------------------------------------------------
Balanced -- 2 (2)
- -------------------------------------------------------------------------------
Equity Index -- 1 (1)
- -------------------------------------------------------------------------------
Capital Growth (74) 87 (13)
- -------------------------------------------------------------------------------
Small-Cap Equity 4 40 (44)
- -------------------------------------------------------------------------------
The Value Equity, Pennsylvania Tax-Free and International Equity Selection
Portfolios reclassified $7,540,467, $1,106,708, and $110,332 respectively from
undistributed net investment income and accumulated net realized gain on
investments to paid-in-capital. These reclassifications were associated with the
Marketvest Funds that were merged into the Ark Funds on March 20 and March 27,
1998. The Marketvest Funds utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends-paid deduction
for income tax purposes. These reclassifications had no effect on net assets or
net asset value per share.
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 FMB 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. The waivers are voluntary and may be discontinued
at anytime.
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
124
128
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 anytime. Pursuant
to a separate agreement between FMB Trust Company, N.A. and the Administrator,
FMB 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.
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, 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, 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, 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 anytime.
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 anannual 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 anytime.
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
125
129
NOTES TO FINANCIAL STATEMENT
5. INVESTMENT TRANSACTIONS
The cost of securities purchased and the proceeds from the sale of securities,
other than short-term investments, during the year ended April 30, 1999, were as
follows:
PURCHASES SALES
PORTFOLIO (000) (000)
- ------------------------------------------------------------------------------
Short-Term Treasury $ 36,572 $ 29,896
- ------------------------------------------------------------------------------
Short-Term Bond 88,677 104,354
- ------------------------------------------------------------------------------
Maryland Tax-Free 51,299 35,274
- ------------------------------------------------------------------------------
Pennsylvania Tax-Free 102,257 94,627
- ------------------------------------------------------------------------------
Intermediate Fixed Income 53,233 41,305
- ------------------------------------------------------------------------------
U.S. Government Bond 239,949 243,830
- ------------------------------------------------------------------------------
Income 160,029 167,366
- ------------------------------------------------------------------------------
Balanced 80,102 64,728
- ------------------------------------------------------------------------------
Equity Income 55,651 57,790
- ------------------------------------------------------------------------------
Value Equity 182,844 299,150
- ------------------------------------------------------------------------------
Equity Index 51,852 22,629
- ------------------------------------------------------------------------------
Blue Chip Equity 100,518 51,621
- ------------------------------------------------------------------------------
Capital Growth 121,912 97,035
- ------------------------------------------------------------------------------
Mid-Cap Equity 38,210 34,551
- ------------------------------------------------------------------------------
Small-Cap Equity 189,426 187,412
- ------------------------------------------------------------------------------
International Equity Selection 34,668 46,477
- ------------------------------------------------------------------------------
For federal income tax purposes, the cost of securities owned at April 30, 1999,
was not materially different from the amounts reported for financial reporting
purposes. The aggregate gross unrealized appreciation and depreciation of
securities at April 30, 1999, for each Portfolio is as follows:
NET
UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION/
SECURITIES SECURITIES (DEPRECIATION)
PORTFOLIO (000) (000) (000)
- -------------------------------------------------------------------------------------
Short-Term Treasury $ 195 $ (177) $ 18
- -------------------------------------------------------------------------------------
Short-Term Bond 442 (583) (141)
- -------------------------------------------------------------------------------------
Maryland Tax-Free 4,920 (251) 4,669
- -------------------------------------------------------------------------------------
Pennsylvania Tax-Free 6,938 (801) 6,137
- -------------------------------------------------------------------------------------
Intermediate Fixed Income 1,153 (791) 362
- -------------------------------------------------------------------------------------
U.S. Government Bond 1,026 (2,985) (1,959)
- -------------------------------------------------------------------------------------
Income 5,534 (2,951) 2,583
- -------------------------------------------------------------------------------------
Balanced 37,549 (3,221) 34,328
- -------------------------------------------------------------------------------------
Equity Income 30,882 (1,835) 29,047
- -------------------------------------------------------------------------------------
Value Equity 213,584 (11,450) 202,134
- -------------------------------------------------------------------------------------
Equity Index 22,049 (2,613) 19,436
- -------------------------------------------------------------------------------------
Blue Chip Equity 52,519 (1,098) 51,421
- -------------------------------------------------------------------------------------
Capital Growth 36,952 (1,885) 35,067
- -------------------------------------------------------------------------------------
Mid-Cap Equity 19,947 (3,605) 16,342
- -------------------------------------------------------------------------------------
Small-Cap Equity 3,115 (1,272) 1,843
- -------------------------------------------------------------------------------------
International Equity
Selection 1,468 (235) 1,233
- -------------------------------------------------------------------------------------
At April 30, 1999, the following Portfolios had capital loss carryforwards and
post-October losses:
CAPITAL LOSS POST
CARRYFORWARD OCTOBER 31, 1998
AMOUNT EXPIRATION DEFERRED LOSSES
PORTFOLIO (000) DATE (000)
- -------------------------------------------------------------------------------
Money Market $ 6 2005 $--
- -------------------------------------------------------------------------------
U.S. Government 25 2005 --
Money Market 5 2006 --
- -------------------------------------------------------------------------------
U.S. Government 724 2005 357
Bond 919 2006 --
- -------------------------------------------------------------------------------
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, 1999,
income generated from the program during the year ended April 30, 1999, the
collateral purchased with cash received and held at April 30, 1999, with respect
to such loans were as follows (000):
INCOME RECEIVED
MARKET VALUE OF FROM SECURITIES
PORTFOLIO LOANED SECURITIES LENDING
- -------------------------------------------------------------------------------
Short-Term Bond 10,438 $ 20
- -------------------------------------------------------------------------------
Intermediate Fixed
Income 10,509 19
- -------------------------------------------------------------------------------
U.S. Government
Bond 37,667 52
- -------------------------------------------------------------------------------
Income $62,753 108
- -------------------------------------------------------------------------------
Money Other Fixed
Collateral Repurchase Market Income
Portfolio Agreements Instruments Securities Cash Total
- --------------------------------------------------------------------------------------------
Short-Term
Bond $ 3,830 $ 29 $ 6,000 $ 67 $ 9,926
- --------------------------------------------------------------------------------------------
Intermediate
Fixed
Income 4,000 37 7,000 168 11,205
- --------------------------------------------------------------------------------------------
U.S. Government
Bond 10,000 50 28,860 340 39,250
- --------------------------------------------------------------------------------------------
Income 34,000 172 32,401 354 66,927
- --------------------------------------------------------------------------------------------
126
130
NOTES TO FINANCIAL STATEMENTS
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,
1999, the percentage of portfolio investments by each revenue source was as
follows:
MARYLAND PENNSYLVANIA
TAX-FREE PORTFOLIO TAX-FREE PORTFOLIO
- --------------------------------------------------------------------------------
REVENUE BONDS:
- --------------------------------------------------------------------------------
Education 12% 16%
- --------------------------------------------------------------------------------
Health Care 24 19
- --------------------------------------------------------------------------------
Transportation 6 5
- --------------------------------------------------------------------------------
Utility 6 6
- --------------------------------------------------------------------------------
Housing 2 3
- --------------------------------------------------------------------------------
Public Facility 4 6
- -------------------------------------------------------------------------------
Industrial -- 14
- -------------------------------------------------------------------------------
Other 4 5
- --------------------------------------------------------------------------------
GENERAL OBLIGATIONS 42 26
- --------------------------------------------------------------------------------
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.
The following ARK Portfolios were established in 1998 for the purpose of
acquiring the net assets of Marketvest Funds, and on March 20, 1998, and March
27, 1998, the following Marketvest Funds were reorganized into the ARK Funds
pursuant to such Agreement and Plan of Reorganization approved by the Marketvest
shareholders.
ARK ACQUIRING PORTFOLIO MARKETVEST ACQUIRED FUND
- --------------------------------------------------------------------------------
Short-Term Bond Short-Term Bond
U.S. Government Intermediate U.S. Government
Bond Bond
Value Equity Equity
International Equity Selection International Equity
- --------------------------------------------------------------------------------
Under the Agreement and Plan of Reorganization, the Marketvest Funds shares were
exchanged for Institutional shares of the ARK Funds in a tax-free exchange. The
value of net assets acquired, number of shares issued, and unrealized
appreciation acquired were as follows:
VALUE OF NET NUMBER OF UNREALIZED
PORTFOLIOS ASSETS ACQUIRED SHARES ISSUE APPRECIATION
- --------------------------------------------------------------------------------
Short-Term
Bond $134,474,724 13,484,762 $ 483,752
U.S. Government
Bond 265,737,020 26,918,180 170,754
Value Equity 596,269,138 41,299,581 186,298,370
International Equity
Selection 38,578,490 3,365,077 4,755,196
- --------------------------------------------------------------------------------
In addition, on March 20, 1998, the assets of the Marketvest Pennsylvania
Intermediate Municipal Bond Fund were reorganized into the ARK Pennsylvania
Tax-Free Portfolio. Under the Agreement and Plan of Reorganization, 18,933,932
shares of the Marketvest Pennsylvania Intermediate Municipal Bond Fund were
exchanged for 18,933,932 Institutional shares of the ARK Pennsylvania Tax-Free
Portfolio in a tax-free exchange. The value of the Marketvest Pennsylvania
Tax-Exempt Fund's net assets combined on March 20, 1998, prior to the merger was
$194,492,162. The net assets of the Portfolio immediately after the acquisition
were $221,880,784.
In each of the acquisitions of the net assets of the Marketvest Funds described
above, the surviving entity for accounting and performance purposes was the
applicable Marketvest Fund.
On April 24, 1998, the net assets of the ARK Stock Portfolio were reorganized
into the ARK Value Equity Portfolio. Under the Agreement and Plan of
Reorganization, 4,114,786 Institutional Class shares of the ARK Stock Portfolio
were exchanged for 3,061,378 Institutional Class shares of the ARK Value Equity
Portfolio in a tax-free exchange. The value of the ARK Stock Portfolio's net
assets combined with those of the ARK Value Equity Portfolio on April 24, 1998,
was $44,621,448. The net assets of the Portfolio immediately after the
acquisition was $644,230,476. The surviving entity for accounting and
performance purposes was the ARK Value Equity Portfolio.
127
131
NOTES TO 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
- ---------------------------------
% 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. YEAR 2000 RISK (UNAUDITED)
The Portfolios depend on the smooth functioning of computer systems in almost
every aspect of their business. Like other mutual funds, businesses and
individuals around the world, the Portfolios could be adversely affected if the
computer systems used by their service providers do not properly process dates
on and after January 1, 2000, and do not distinguish between the year 2000 and
the year 1900. The Portfolios have asked their mission critical service
providers whether they expect to have their computer systems adjusted for the
year 2000 transition, and have sought and received assurances from such service
providers that they are devoting significant resources to prevent material
adverse consequences to the Portfolios. While such assurances have been
received, the Portfolios and their shareholders may experience losses if these
assurances prove to be incorrect or as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or third parties,
such as custodians, banks, broker-dealers or others with which the Portfolios do
business.
NOTICE TO SHAREHOLDERS
(UNAUDITED)
For the fiscal year ended April 30, 1999, each Portfolio is designating the
following items with regard to distributions paid during the year.
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
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Free Money Market 0% 0% 100% 100% 0% 0%
- -----------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond 0% 100% 0% 100% 0% 0%
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland Tax-Free 8% 5% 87% 100% 0% 0%
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax-Free 13% 0% 87% 100% 0% 0%
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Government Bond 0% 100% 0% 100% 0% 0%
- -----------------------------------------------------------------------------------------------------------------------------------
Value Equity 89% 11% 0% 100% 99% 0%
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity Selection 55% 45 0% 100% 0% 0%
- -----------------------------------------------------------------------------------------------------------------------------------
The following portfolios changed their tax accounting period from April 30 to
October 31, effective October 31, 1998:
Money Market Portfolio, U.S. Government Money Market Portfolio, U.S. Treasury
Money Market Portfolio, Short-Term Treasury Portfolio, Intermediate Fixed Income
Portfolio, Income Portfolio, Balanced Portfolio, Equity Income Portfolio, Equity
Index Portfolio, Blue Chip Equity Portfolio, Capital Growth Portfolio, Mid-Cap
Equity Portfolio and Small-Cap Equity Portfolio.
This change affects the tax accounting period only. A separate notice
designating the character of distribution as of October 31, 1999 will be
included as part of the semiannual financial statements.
(1) Qualifying dividends represent dividends that qualify for the corporate
dividends received deduction.
128