1
October 31, 1999
DEAR ARK FUNDS SHAREHOLDERS:
I'm pleased to report another period of solid growth and positive industry
recognition for the ARK Funds. You'll find more information about how the funds
performed inside this Semi Annual Report, but we wanted to highlight a number of
accomplishments for you:
[BULLET] The ARK Funds family was recognized in terms of overall fund
family performance in the October issue of MUTUAL FUNDS MAGAZINE.
[BULLET] The ARK Small-Cap Equity Portfolio was listed as one of the "Best
Performers" in the stock fund section of THE WALL STREET JOURNAL'S OCTOBER'S
LEADERS AND LAGGARDS.
[BULLET] The ARK Blue Chip Equity Portfolio was listed as one of the top
performing Large-Cap Value Funds as of September 30, 1999 by THE WALL STREET
JOURNAL.
In addition, you may have seen some of our portfolio managers interviewed
on Bloomberg and CNN and quoted in SMART MONEY, ADVISOR INSIGHT and MUTUAL FUNDS
MAGAZINE.
As recognition of our fund family grows, so do the classes of shares we
are able to offer our shareholders. This September we added Retail Class B
Shares to the ARK Maryland Tax-Free Portfolio and the ARK Pennsylvania Tax-Free
Portfolio, which broadens the choices for investors who are looking for
alternative pricing options. We also added Retail Class A Shares to the ARK
Mid-Cap Equity Portfolio so that it is now available to the individual investor.
Looking forward, this January we will be introducing the ARK Funds web
site, www.arkfunds.com. This site will allow you to access important information
on the ARK Funds family through the Internet. Net Asset Values (NAVs),
performance figures, portfolio holdings and asset allocation will be available,
as well as information on general investing concepts. We will also include
comments and interviews with portfolio managers that will provide you with
insight into the management of the Funds. Complete Institutional and Retail
prospectuses will be available on-line as well. We plan to evolve this web site
over time so that it becomes a valuable tool for both the ARK Funds shareholder
and the investor who is thinking about investing in the Funds.
We hope that you are as pleased with the ARK Funds and their performance
as we are. We look forward to helping you to achieve your investment objectives
through the new millennium. Our goals continue to be solid returns and asset
growth, increased investment choices for investors and to build upon our
successes. Everyone here at ARK Funds thanks you for your trust, and wishes you
a safe, happy and prosperous New Year.
Sincerely,
/s/Signature
William H. Cowie, Jr.
CHAIRMAN OF THE BOARD
ARK FUNDS>
1
2
ECONOMIC AND INVESTMENT REVIEW
DEAR ARK FUNDS INVESTOR:
[photo omitted]
The first half of our fiscal year has been very volatile. A continuation
of global economic growth coupled with a strong U.S. economy, low unemployment
and a modest uptick in inflation and interest rates have kept both the equity
and bond markets nervous. The equity market continues to be bifurcated with only
a narrow group of large growth stocks performing well. Technology and
telecommunication companies have been the primary performance drivers.
Ironically, most stocks remain lower year-to-date.
ARK Funds growth-oriented Portfolios have performed very well in this
environment and in recent months have been receiving some much-deserved
attention from the financial media. The ARK value-oriented funds, along with
notable value investors such as Warren Buffet, are having a more difficult year.
ARK bond funds navigated the challenging bond market relatively well.
Investors find themselves asking why the equity market is so much more
volatile. The U.S. and, to a lesser degree, the world, is experiencing a period
of unprecedented change. This change has been driven by applied technology that
has in turn unleashed dramatic productivity improvements and the ability to
conduct business faster, cheaper and better. Productivity improvements fostered
intense global competition, which has helped keep price inflation under control.
The U.S. economy has been the major beneficiary of these changes, but now all
corporations have to run faster just to stay even. Significantly compounding
this competitive environment has been the addition of the Internet and
e-commerce to the equation. Change creates uncertainty, which in turn leads to
price volatility as investors become less confident in their ability to predict
the future. Wall Street analysts also help create volatility because they are
very quick to recognize the potential winners and losers, but tend to
overestimate how quickly that change is actually implemented. We also believe
that history may look on the next ten-year period as the modern economic
equivalent of the Industrial Revolution. In this challenging environment, we
expect to see more companies that will struggle, but they will be more than
offset by the winners.
The ARK Funds are coping with this higher risk, higher reward environment
by continuing to look at companies on a bottom-up basis. Specifically, we
believe a company's success will be in large part due to how it is positioned to
deal with what we see to be the four "C's" of change. They are:
CONVERGENCE - There is a convergence of technology (personal computers,
wireless, telecommunication, TV media, and the Internet). No one knows who or
what the winners will look like when the dust settles.
CREATIVE DESTRUCTION PROCESS - Aggressive companies are now willing to
cannibalize their own product to stay ahead of the competition. Faster, better
and cheaper ... a never-ending journey.
COMPRESSION - This is a time issue. The product time cycle continues to
shorten. It took the telephone industry 50 years to reach 30% market share.
Experts expect the Internet to achieve a 30% market share in only seven years.
We all have to run fast just to stay even.
CONSOLIDATION - Companies are actively consolidating, even very large ones
(Exxon/Mobil), in order to reach critical mass and improve profitability.
Divisions of companies that don't have critical mass are sold to those who do.
2
3
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
We would be remiss if we did not address the Y2K issue, we hope for the
last time. Y2K has been on our minds for the past two or three years, in the
media for the past year, and just recently a made-for-TV movie depicted the
worst-case scenario. Despite the hype, we do not foresee major problems,
especially in the U.S. We have just finished another comprehensive review of the
companies we have an interest in; they all have disclosed that they expect to be
Y2K ready. Not surprisingly, no one is willing to unconditionally guarantee what
might occur as a result of the rollover to the new year but we continue to
believe that there will be no major dislocations. So far the market seems to
agree with us.
In closing, we look forward with enthusiasm to what the next century will
bring. While volatility is here to stay, it is important to keep in mind that
the U.S. is extraordinarily well positioned to compete in this new global
economy. We sincerely thank you for your support, and wish you all a happy and
profitable holiday season.
Sincerely,
/s/signature omitted
J. Eric Leo
CHIEF INVESTMENT OFFICER
ALLIED INVESTMENT ADVISORS, INC.
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4
MONEY MARKET PORTFOLIOS
MANAGEMENT DISCUSSION AND ANALYSIS
[photo omitted]
JAMES M. HANNAN
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
JAMES M. HANNAN IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE IS
PORTFOLIO MANAGER OF THE MONEY MARKET PORTFOLIOS AND THE SHORT-TERM TREASURY
PORTFOLIO. HE HAS MORE THAN 10 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The U.S. economy continued its exceptional performance of the past three years.
The unemployment rate reached a new business cycle low of 4.1%, while economic
growth has averaged a 4% pace for the past three years. Although inflation
remains benign, consumer prices have increased at a 2.6% rate for the last year,
which is higher than the 1.9% increase in the C.P.I. for 1998. The Fed became
increasingly concerned with the tightness of the labor markets and the strong
level of economic growth. The Fed's fears led them to raise the Federal funds
rate target by 25 basis points on two separate occasions during the summer.
Currently the Fed maintains a bias to tighten a third time. The Fed's concern is
that excessive economic growth will lead to higher inflation, and that, in turn,
will require stronger medicine (i.e., higher interest rates) to slow the economy
to its normal growth rate and to keep inflation low.
Our strategy during the past six months has been to selectively purchase
higher yielding, longer-dated securities while slightly increasing our exposure
to floating and variable rate securities. This barbell strategy has provided
liquidity while enhancing the overall yield on the ARK Money Market Portfolios.
Looking forward, we expect year-end financing pressures to provide many
opportunities to enhance the yield of the Portfolios. Given our outlook for
economic growth to remain relatively strong, the risks are tilted towards higher
interest rates next year; our strategy is to be cautious while selectively
purchasing longer dated securities. Most important, we will continue to
faithfully utilize our conservative and disciplined relative-value investment
process to provide for preservation of principal, daily liquidity and current
income.
4
5
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MONEY MARKET PORTFOLIO
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
Corporate Obligations -- 58%
Commercial Paper -- 23%
Taxable Municipal Bonds --7%
Repurchase Agreements -- 6%
Certificates of Deposit -- 5%
Asset-Backed Securities -- 1%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 57.2%
BANKS -- 9.8%
CHASE MANHATTAN (A)
5.563%, 11/25/99 $24,000 $ 23,990
FIRST NATIONAL BANK CHICAGO (A)
5.380%, 11/01/99 28,000 27,993
FIRST UNION NATIONAL BANK (A)
5.488%, 11/16/99 15,000 15,000
5.606%, 12/27/99 15,000 14,987
HUNTINGTON NATIONAL BANK (A)
5.400%, 11/01/99 20,000 19,997
- -------------------------------------------------------------------------------
TOTAL BANKS $101,967
- -------------------------------------------------------------------------------
FINANCIAL SERVICES -- 17.3%
AMERICAN EXPRESS CENTURION (A)
5.450%, 11/01/99 25,000 25,000
ASSOCIATES FIRST CAPITAL
6.350%, 09/15/00 5,000 5,005
ASSOCIATES N.A.
6.375%, 06/15/00 2,000 2,005
BETA FINANCE, MTN
5.150%, 01/13/00 10,000 10,000
BETA FINANCE, MTN (A)
5.475%, 11/01/99 10,000 10,000
BETA FINANCE, MTN (B)
5.160%, 04/17/00 10,000 10,000
5.980%, 08/07/00 10,000 10,000
CAPITAL ONE FUNDING (A) (B)
5.500%, 11/04/99 3,200 3,200
5.500%, 11/04/99 3,900 3,900
CIT GROUP HOLDINGS, MTN
6.125%, 11/15/99 8,000 8,001
5.850%, 05/26/00 15,000 14,983
6.200%, 10/20/00 5,900 5,894
CIT GROUP HOLDINGS, MTN (A)
5.383%, 11/01/99 10,000 9,996
GENERAL ELECTRIC ENGINE
RECEIVABLES (A)
5.399%, 11/01/99 640 640
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -------------------------------------------------------------------------------
HOUSEHOLD FINANCE, MTN (A)
5.650%, 11/01/99 $20,000 $ 19,990
TEXTRON FINANCIAL, MTN (A) (B)
5.678%, 12/06/99 20,000 20,000
TEXTRON FINANCIAL, MTN,
SERIES C (A) (B)
5.638%, 12/20/99 20,000 19,999
- -------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $178,613
- -------------------------------------------------------------------------------
INDUSTRIAL -- 3.7%
CONAGRA (A) (B)
5.711%, 12/11/99 5,000 4,997
FORD, MTN
7.500%, 11/19/99 3,000 3,003
GTE (A)
5.546%, 12/11/99 30,000 29,988
- -------------------------------------------------------------------------------
TOTAL INDUSTRIAL $ 37,988
- -------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS
SERVICES --2.2%
BOB SUMEREL TIRE, LOC (A) (B)
5.400%, 11/03/99 5,250 5,250
ELSINORE PROPERTIES, LOC (A)
5.410%, 11/05/99 10,000 10,000
REYNOLDS ROAD FITNESS CENTER,
SERIES 1998, LOC (A) (B)
5.410%, 11/04/99 6,000 6,000
TRAP ROCK INDUSTRY, DEMAND
RB, LOC (A)
5.550%, 11/03/99 1,500 1,500
- -------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 22,750
- -------------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS -- 12.5%
CHRYSLER FINANCE
12.750%, 11/01/99 5,000 5,000
CHRYSLER FINANCE, MTN, SERIES R
5.970%, 04/06/00 4,500 4,513
FORD MOTOR CREDIT, MTN (A)
5.490%, 11/01/99 25,000 24,980
GENERAL ELECTRIC CAPITAL, MTN (A)
6.124%, 01/13/00 28,000 28,000
GENERAL MOTORS ACCEPTANCE
7.000%, 03/01/00 5,000 5,016
GENERAL MOTORS ACCEPTANCE (A)
9.402%, 04/01/00 8,000 8,107
GENERAL MOTORS ACCEPTANCE, MTN
5.850%, 04/06/00 13,500 13,526
GENERAL MOTORS ACCEPTANCE, MTN (A)
5.313%, 01/30/00 15,000 14,989
XEROX CAP EUROPE PLC,
YANKEE MTN, SERIES F (A)
6.131%, 01/19/00 15,000 14,993
XEROX CREDIT, MTN (A)
5.635%, 07/14/00 10,000 9,996
- -------------------------------------------------------------------------------
TOTAL PERSONAL CREDIT INSTITUTIONS $129,120
- -------------------------------------------------------------------------------
5
6
MONEY MARKET PORTFOLIOS
MONEY MARKET PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
SECURITY BROKERS & DEALERS -- 11.7%
BEAR STEARNS, MTN, SERIES B (A)
5.340%, 11/10/99 $25,000 $ 25,000
6.179%, 12/31/99 15,000 15,000
GOLDMAN SACHS GROUP,
MTN (B)
5.310%, 02/25/00 12,000 12,000
GOLDMAN SACHS GROUP, MTN,
SERIES B (A)
5.560%, 11/01/99 15,000 15,000
GOLDMAN SACHS GROUP, MTN,
SERIES B (A) (B)
6.258%, 11/15/99 10,000 10,000
LEHMAN BROTHERS HOLDINGS,
MTN
6.330%, 08/01/00 15,000 15,021
LEHMAN BROTHERS HOLDINGS,
MTN, SERIES E
6.150%, 03/15/00 10,000 10,019
MERRILL LYNCH & COMPANY,
MTN (A)
5.928%, 12/06/99 3,000 3,005
SALOMON SMITH BARNEY HOLDINGS
6.500%, 03/01/00 5,900 5,920
SHEARSON LEHMAN HUTTON
HOLDINGS
8.950%, 01/10/00 10,000 10,056
- -------------------------------------------------------------------------------
TOTAL SECURITY BROKERS & DEALERS $121,021
- -------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $591,459) $591,459
- -------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 4.8%
FOREIGN BANKS -- 4.8%
BAYERISCHE HYPO-VEREINSBANK
5.150%, 04/20/00 20,000 19,996
CANADIAN IMPERIAL BANK OF
COMMERCE NY
5.110%, 02/22/00 15,000 14,999
DEUTSCHE BANK NY
5.250%, 05/18/00 10,000 9,991
ROYAL BANK OF CANADA
5.120%, 03/21/00 5,000 4,999
- -------------------------------------------------------------------------------
TOTAL FOREIGN BANKS $ 49,985
- -------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $49,985) $ 49,985
- -------------------------------------------------------------------------------
COMMERCIAL PAPER (C) -- 23.2%
ASSOCIATES FINANCIAL
6.107%, 02/24/00 17,000 16,675
ATLANTIS ONE FUNDING
6.112%, 01/26/00 20,000 19,713
CORPORATE ASSET FUNDING
5.378%, 11/22/99 40,000 39,875
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -------------------------------------------------------------------------------
BAVARIA TRR
6.096%, 03/27/00 $20,000 $ 19,516
CIESCO LP (B)
5.354%, 11/17/99 40,000 39,905
DAKOTA CERTIFICATE
5.395%, 11/18/99 40,000 39,899
DAYTON HUDSON
5.496%, 11/08/99 5,000 4,995
DELAWARE FUNDING
5.372%, 11/15/99 25,106 25,054
6.110%, 01/24/00 15,000 14,790
ENRON
5.441%, 11/15/99 5,000 4,989
MCI WORLDCOM
4.804%, 11/05/99 5,000 4,997
NORFOLK SOUTHERN
5.527%, 11/16/99 5,000 4,989
TEXAS UTILITIES
5.637%, 11/16/99 5,000 4,988
- -------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (C)
(Cost $240,385) $240,385
- -------------------------------------------------------------------------------
TAXABLE MUNICIPAL BONDS -- 7.5%
CALIFORNIA -- 2.2%
OAKLAND-ALAMEDA COUNTY, CP
5.370%, 11/17/99 14,350 14,350
RIVERSIDE COUNTY COP, LOC (A)
5.400%, 11/03/99 7,900 7,900
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TOTAL CALIFORNIA $ 22,250
- -------------------------------------------------------------------------------
ILLINOIS -- 0.8%
ILLINOIS STATE HEALTH FACILITIES
RB, MBIA (A)
5.400%, 11/03/99 8,500 8,500
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TOTAL ILLINOIS $ 8,500
- -------------------------------------------------------------------------------
MARYLAND -- 0.5%
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES RB,
SERIES B, LOC (A)
5.400%, 11/03/99 5,000 5,000
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TOTAL MARYLAND $ 5,000
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NEW JERSEY -- 0.4%
NEW JERSEY STATE ECONOMIC
DEVELOPMENT AUTHORITY RB,
LOC (A)
5.550%, 11/03/99 4,400 4,400
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TOTAL NEW JERSEY $ 4,400
- -------------------------------------------------------------------------------
NEW YORK -- 1.2%
NEW YORK CITY, CP
5.800%, 02/01/00 12,000 12,000
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TOTAL NEW YORK $ 12,000
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7
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
NORTH CAROLINA -- 0.5%
DURHAM COP, SERIES B (A)
5.450%, 11/03/99 $ 1,500 $ 1,500
WINSTON-SALEM COP, LOC
5.350%, 11/04/99 4,000 4,000
- --------------------------------------------------------------------------------
TOTAL NORTH CAROLINA $ 5,500
- --------------------------------------------------------------------------------
PENNSYLVANIA -- 0.1%
PENNSYLVANIA STATE ECONOMIC
DEVELOPMENT FINANCE AUTHORITY
RB, LOC (A)
5.500%, 11/04/99 525 525
- --------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $ 525
- --------------------------------------------------------------------------------
TEXAS -- 1.8%
TEXAS STATE GO, VETERANS HOUSING
ASSISTANCE PROGRAM (A)
5.375%, 12/13/99 10,000 10,000
TEXAS STATE GO, VETERANS LAND
REFUNDING PROGRAM (A)
5.375%, 11/03/99 8,920 8,920
- --------------------------------------------------------------------------------
TOTAL TEXAS $ 18,920
- --------------------------------------------------------------------------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $77,095) $ 77,095
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 1.2%
ASSET BACKED TRUST MRL 1996,
SERIES A-5 (A)
5.390%, 11/15/99 9,000 9,000
STRUCTURED ENHANCED RETURN
TRUST, SERIES A-39, MBIA (A) (B)
5.450%, 11/25/99 3,392 3,393
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TOTAL ASSET-BACKED SECURITIES
(Cost $12,393) $ 12,393
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REPURCHASE AGREEMENTS -- 5.6%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99,
repurchase price $50,022,208
(collateralized by U.S. Treasury
Obligations: total market value
$51,533,650) 50,000 50,000
GOLDMAN SACHS
4.750%, dated 10/29/99,
matures 11/01/99, repurchase
price $7,717,276 (collateralized
by U.S. Treasury Bond: total
market value $7,869,105) 7,714 7,714
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $57,714) $ 57,714
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.5%
(Cost $1,029,031) $1,029,031
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET -- 0.5% $ 4,658
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 497,062,908 outstanding
shares of beneficial interest $ 497,046
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 277,763,046 outstanding
shares of beneficial interest 277,753
Portfolio Shares of Retail Class B (unlimited
authorization -- no par value)
based on 45,158 outstanding shares
of beneficial interest 45
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 258,793,874 outstanding
shares of beneficial interest 258,791
Undistributed net investment income 62
Distributions in excess of net realized
gain on investments (8)
- -------------------------------------------------------------------------------
TOTAL NET ASSET -- 100.0% $1,033,689
- --------------------------------------------------------------------------------
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 OCTOBER 31, 1999. THE DATE SHOWN IS THE NEXT SCHEDULED
RESET DATE.
(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) 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
GO--GENERAL OBLIGATION
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.
7
8
MONEY MARKET PORTFOLIOS
TAX-FREE MONEY MARKET PORTFOLIO
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
Revenue Bonds -- 68%
Tax-Exempt Commercial Paper -- 13%
Anticipation Notes -- 8%
General Obligations -- 6%
Participation Notes -- 5%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 101.0%
ARIZONA -- 1.3%
ARIZONA SCHOOL DISTRICT TAN
4.500%, 07/31/00 $2,000 $2,007
- -------------------------------------------------------------------------------
TOTAL ARIZONA $2,007
- -------------------------------------------------------------------------------
CALIFORNIA -- 2.8%
LOS ANGELES COUNTY, METROPOLITAN
TRANSIT AUTHORITY RB,
AMBAC (A)
3.700%, 11/03/99 3,000 3,000
OAKLAND, JOINT POWERS
FINANCING AUTHORITY RB,
SERIES A-1, FSA (A)
2.800%, 11/04/99 1,400 1,400
- -------------------------------------------------------------------------------
TOTAL CALIFORNIA $4,400
- -------------------------------------------------------------------------------
COLORADO -- 0.7%
COLORADO STATE EDUCATIONAL
FACILITIES AUTHORITY RB, PRO
RODEO HALL OF FAME PROJECT,
LOC (A)
3.550%, 11/04/99 1,135 1,135
- -------------------------------------------------------------------------------
TOTAL COLORADO $1,135
- -------------------------------------------------------------------------------
CONNECTICUT -- 3.2%
CONNECTICUT STATE HEALTH &
EDUCATION RB, YALE UNIVERSITY,
SERIES T-1 (A)
3.400%, 11/04/99 5,000 5,000
- -------------------------------------------------------------------------------
TOTAL CONNECTICUT $5,000
- -------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 4.9%
DISTRICT OF COLUMBIA GO,
SERIES 1992 A-1, LOC (A)
3.600%, 11/01/99 400 400
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -------------------------------------------------------------------------------
DISTRICT OF COLUMBIA GO,
SERIES 1992 A-2, LOC (A)
3.600%, 11/01/99 $ 500 $ 500
DISTRICT OF COLUMBIA GO,
SERIES 1992 A-3, LOC (A)
3.600%, 11/01/99 600 600
DISTRICT OF COLUMBIA GO,
SERIES 1992 A-5, LOC (A)
3.600%, 11/01/99 700 700
DISTRICT OF COLUMBIA RB,
NATIONAL REHABILITATION
HOSPITAL, MBIA, PRE-REFUNDED
@ 102 (B)
7.100%, 11/01/99 2,500 2,550
DISTRICT OF COLUMBIA TECP,
AMBAC
3.850%, 01/20/00 3,000 3,000
- -------------------------------------------------------------------------------
TOTAL DISTRICT OF COLUMBIA $ 7,750
- -------------------------------------------------------------------------------
FLORIDA -- 9.5%
JACKSONVILLE TECP
3.350%, 11/09/99 5,000 5,000
LEE COUNTY, HOUSING FINANCE
AUTHORITY RB, FNMA (A)
3.400%, 11/03/99 1,985 1,985
SUNSHINE STATE TECP
3.400%, 11/05/99 3,000 3,000
SUNSHINE STATE TECP, LOC
3.500%, 12/01/99 5,050 5,050
- -------------------------------------------------------------------------------
TOTAL FLORIDA $15,035
- -------------------------------------------------------------------------------
ILLINOIS -- 2.1%
ILLINOIS STATE HEALTH FACILITY
AUTHORITY RB, SWEDISH
COVENANT HOSPITAL PROJECT,
AMBAC (A)
3.550%, 11/03/99 1,300 1,300
3.550%, 11/03/99 2,000 2,000
- -------------------------------------------------------------------------------
TOTAL ILLINOIS $ 3,300
- -------------------------------------------------------------------------------
IOWA -- 1.9%
IOWA STATE SCHOOLS CASH
ANTICIPATION NOTE, FSA
3.500%, 01/28/00 3,000 3,004
- -------------------------------------------------------------------------------
TOTAL IOWA $ 3,004
- -------------------------------------------------------------------------------
KENTUCKY -- 1.6%
JEFFERSON COUNTY, RETIREMENT
HOME RB, NAZARETH PROJECT (A)
3.570%, 11/05/99 2,500 2,500
- -------------------------------------------------------------------------------
TOTAL KENTUCKY $ 2,500
- -------------------------------------------------------------------------------
MARYLAND -- 21.2%
BALTIMORE COUNTY, GARRISON
FOREST SCHOOL PROJECT RB,
LOC (A)
3.600%, 11/04/99 3,000 3,000
8
9
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
FREDERICK COUNTY, EDUCATIONAL
FACILITIES RB, MOUNT ST.
MARY'S COLLEGE (A)
3.500%, 11/04/99 $4,000 $ 4,000
GAITHERSBURG RB, ASBURY
METHODIST HOSPITAL,
PRE-REFUNDED @ 102 (B)
7.850%, 01/01/00 2,000 2,055
HOWARD COUNTY BAN, SERIES A
3.070%, 04/14/00 1,300 1,300
HOWARD COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A
4.000%, 02/15/00 875 876
HOWARD COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A,
PRE-REFUNDED @ 100 (B)
6.900%, 05/15/00 1,000 1,016
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, HOSPITAL & UNIVERSITY
IMPROVEMENTS, LOC (A)
3.350%, 11/03/99 1,100 1,100
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, KENNEDY KRIEGER INSTITUTE
PROJECT, SERIES D, LOC (A)
3.450%, 11/03/99 6,100 6,100
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, POOLED LOAN PROJECT,
SERIES D, LOC (A)
3.550%, 11/04/99 5,358 5,358
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, SERIES 1998-A, LOC (A)
3.500%, 11/03/99 5,000 5,000
MARYLAND STATE SUBURBAN
WASHINGTON D.C. SANITATION
GO, PRE-REFUNDED @ 102 (B)
6.900%, 06/01/00 1,000 1,039
MONTGOMERY COUNTY, HOUSING
RB, BARCLAY APARTMENTS, ISSUE I, MBIA
3.600%, 03/01/00 2,800 2,800
- --------------------------------------------------------------------------------
TOTAL MARYLAND $33,644
- --------------------------------------------------------------------------------
MINNESOTA -- 5.1%
MINNEAPOLIS RB, SERIES A (A)
3.500%, 11/04/99 60 60
MINNESOTA SCHOOL DISTRICTS COP,
SERIES B
4.000%, 08/23/00 3,000 3,011
UNIVERSITY OF MINNESOTA, DC
TRUST RB, SERIES 1997A,
LOC (A)
3.550%, 11/03/99 5,000 5,000
- --------------------------------------------------------------------------------
TOTAL MINNESOTA $ 8,071
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MISSOURI -- 3.1%
COLUMBIA RB, SERIES A, LOC (A)
3.500%, 11/03/99 $1,000 $ 1,000
MISSOURI STATE DEVELOPMENT
FINANCE AUTHORITY RB, LOC (A)
3.750%, 11/01/99 1,000 1,000
MISSOURI STATE DEVELOPMENT
FINANCE AUTHORITY RB,
SCIENCE CITY UNION STATION,
SERIES C, LOC (A)
3.750%, 11/01/99 900 900
MISSOURI STATE HEALTH &
EDUCATIONAL FACILITIES
AUTHORITY RAN, SERIES G
3.500%, 04/29/00 2,000 2,003
- --------------------------------------------------------------------------------
TOTAL MISSOURI $ 4,903
- --------------------------------------------------------------------------------
MONTANA -- 0.6%
MONTANA STATE HEALTH FACILITIES
AUTHORITY RB, FGIC (A)
3.400%, 11/04/99 1,000 1,000
- --------------------------------------------------------------------------------
TOTAL MONTANA $ 1,000
- --------------------------------------------------------------------------------
NEVADA -- 0.6%
CLARK COUNTY, AIRPORT
IMPROVEMENT AUTHORITY RB,
SERIES A, MBIA (A)
3.450%, 11/03/99 900 900
- --------------------------------------------------------------------------------
TOTAL NEVADA $ 900
- --------------------------------------------------------------------------------
NEW JERSEY -- 1.9%
NEW JERSEY STATE TRAN
3.450%, 11/08/99 3,000 3,000
- --------------------------------------------------------------------------------
TOTAL NEW JERSEY $ 3,000
- --------------------------------------------------------------------------------
NEW YORK -- 8.2%
NEW YORK CITY GO,
SERIES A-10, LOC (A)
4.000%, 11/01/99 1,000 1,000
NEW YORK CITY, MASS TRANSIT
AUTHORITY DEMAND CERTIFICATE
TRUST, SERIES 1993C, FGIC (A)
3.500%, 11/03/99 7,000 7,000
NEW YORK CITY, TRANSITIONAL
FINANCE AUTHORITY RB,
SERIES A-1, SPA (A)
3.500%, 11/03/99 5,000 5,000
- --------------------------------------------------------------------------------
TOTAL NEW YORK $13,000
- --------------------------------------------------------------------------------
NORTH CAROLINA -- 9.0%
CHARLOTTE, AIRPORT DEVELOPMENT
AUTHORITY RB, SERIES A,
MBIA (A)
3.450%, 11/03/99 6,800 6,800
9
10
MONEY MARKET PORTFOLIOS
TAX-FREE MONEY MARKET PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CITY OF GREENSBORO, PUBLIC
IMPROVEMENT RB, SERIES 94-B,
LOC (A)
3.500%, 11/03/99 $1,000 $ 1,000
DURHAM, WATER & SEWER SYSTEM
RB (A)
3.550%, 11/03/99 2,000 2,000
UNIVERSITY OF NORTH CAROLINA RB,
CHAPEL HILL PROJECT, SPA (A)
3.500%, 11/03/99 1,500 1,500
WINSTON SALEM COP, LOC (A)
3.550%, 11/04/99 3,000 3,000
- --------------------------------------------------------------------------------
TOTAL NORTH CAROLINA $14,300
- --------------------------------------------------------------------------------
PENNSYLVANIA -- 9.3%
BUCKS COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
LOC (A) 2,200 2,200
CUMBERLAND COUNTY, MUNICIPAL
AUTHORITY RB, UNITED
METHODIST HOMES FOR THE
AGING PROJECT, MANDATORY PUT
@ 100, LOC (A) (C)
3.230%, 12/01/99 2,315 2,315
CUMBERLAND COUNTY, DICKINSON
COLLEGE RB, SERIES A,
MANDATORY PUT @ 100, LOC (C)
3.800%, 11/01/00 2,860 2,860
LEHIGH COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
SERIES A, LOC (A)
3.450%, 11/03/99 1,500 1,500
PENNSYLVANIA STATE GO, SERIES A,
PRE-REFUNDED @ 101.5 (B)
7.000%, 05/01/00 950 981
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, COUNCIL OF INDEPENDENT
COLLEGES, SERIES 97-A1, LOC,
MANDATORY PUT @ 100 (C)
3.125%, 03/31/00 2,400 2,400
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, COUNCIL OF INDEPENDENT
COLLEGES, SERIES 97-A3, LOC,
MANDATORY PUT @ 100 (C)
3.125%, 04/01/00 2,500 2,500
- --------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $14,756
- --------------------------------------------------------------------------------
SOUTH CAROLINA -- 1.5%
SOUTH CAROLINA PUBLIC SERVICE
TECP
3.500%, 11/05/99 2,400 2,400
- --------------------------------------------------------------------------------
TOTAL SOUTH CAROLINA $ 2,400
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TEXAS -- 8.4%
GEORGETOWN, HIGHER EDUCATION
FINANCING AUTHORITY RB,
SOUTHWESTERN UNIVERSITY PROJECT,
SERIES 1984, LOC (A)
3.450%, 11/03/99 $3,000 $ 3,000
TEXAS MUNICIPAL GAS
CORPORATION RB, FSA (A)
3.550%, 11/03/99 4,000 4,000
TEXAS STATE HIGHER EDUCATION
AUTHORITY RB, SERIES B,
FGIC (A)
3.550%, 11/03/99 2,265 2,265
TEXAS STATE TRAN
4.500%, 11/03/99 4,000 4,026
- --------------------------------------------------------------------------------
TOTAL TEXAS $ 13,291
- --------------------------------------------------------------------------------
VERMONT -- 1.3%
VERMONT STATE EDUCATIONAL &
HEALTH BUILDINGS RB, CAPITAL
ASSET FINANCING PROGRAM,
SERIES 1, LOC (A)
3.500%, 11/04/99 2,100 2,100
- --------------------------------------------------------------------------------
TOTAL VERMONT $ 2,100
- --------------------------------------------------------------------------------
WISCONSIN -- 1.9%
WISCONSIN STATE TECP, LOC
3.400%, 11/10/99 1,500 1,500
3.400%, 11/10/99 1,500 1,500
- --------------------------------------------------------------------------------
TOTAL WISCONSIN $ 3,000
- --------------------------------------------------------------------------------
WYOMING -- 0.9%
LINCOLN COUNTY, POLLUTION
CONTROL RB, EXXON PROJECT (A)
3.500%, 11/01/99 1,500 1,500
- --------------------------------------------------------------------------------
TOTAL WYOMING $ 1,500
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $159,996) $159,996
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.0%
(Cost $159,996) $159,996
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (1.0%) $ (1,550)
================================================================================
10
11
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 74,366,866 outstanding shares
of beneficial interest $ 74,358
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 50,537,715 outstanding shares of
beneficial interest 50,536
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 33,541,056 outstanding shares
of beneficial interest 33,539
Undistributed net investment income 13
================================================================================
TOTAL NET ASSETS-- 100.0% $158,446
================================================================================
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 OCTOBER 31, 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
TAN--TAX ANTICIPATION NOTE
TECP--TAX-EXEMPT COMMERCIAL PAPER
TRAN--TAX & REVENUE ANTICIPATION NOTE
THE FOLLOWING ORGANIZATIONS HAVE PROVIDED UNDERLYING CREDIT SUPPORT FOR
SECURITIES LISTED ABOVE, AS INDICATED.
AMBAC--AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
FGIC--FINANCIAL GUARANTY INSURANCE CORPORATION
FNMA--FEDERAL NATIONAL MORTGAGE ASSOCIATION
FSA--FINANCIAL SECURITY ASSURANCE
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
THE ACCOMPANYING NOTES ARE INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
12
MONEY MARKET PORTFOLIOS
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENT
U.S. Government Agency Obligations -- 69%
Repurchase Agreements -- 31%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 68.8%
FEDERAL FARM CREDIT BANK
4.760%, 01/18/00 $20,000 $19,998
FEDERAL HOME LOAN BANK
4.900%, 12/01/99 30,000 30,000
4.915%, 01/13/00 25,000 25,001
4.900%, 02/11/00 30,500 30,489
4.950%, 02/17/00 8,000 7,994
5.150%, 03/08/00 10,000 9,998
5.750%, 08/09/00 10,000 9,999
FEDERAL HOME LOAN BANK (A)
5.310%, 11/01/99 30,000 29,999
5.320%, 11/01/99 39,000 38,998
5.340%, 11/01/99 25,000 25,000
5.350%, 11/01/99 25,000 25,000
5.355%, 11/01/99 50,000 49,989
5.924%, 01/04/00 25,000 24,984
FEDERAL HOME LOAN BANK
DISCOUNT NOTES (B)
4.947%, 11/12/99 20,000 19,970
5.389%, 01/21/00 50,000 49,409
5.694%, 03/03/00 50,000 49,054
FEDERAL HOME LOAN MORTGAGE
CORPORATION DISCOUNT NOTES (B)
5.162%, 11/01/99 40,000 40,000
5.160%, 11/30/99 25,000 24,897
5.227%, 12/09/99 75,000 74,589
5.628%, 02/18/00 25,000 24,587
5.668%, 03/30/00 35,000 34,201
5.523%, 06/08/00 20,000 19,360
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (A)
5.370%, 11/01/99 24,000 23,991
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION DISCOUNT NOTES (B)
5.162%, 11/01/99 $80,000 $ 80,000
4.856%, 11/05/99 50,000 49,974
5.204%, 12/08/99 25,000 24,869
5.180%, 12/13/99 25,000 24,853
5.695%, 03/28/00 40,000 39,092
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, MTN
5.180%, 03/10/00 15,000 14,995
5.000%, 05/05/00 25,000 24,985
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, MTN (A)
5.370%, 11/01/99 25,000 24,991
5.309%, 12/23/99 7,000 6,999
STUDENT LOAN MARKETING
ASSOCIATION (A)
5.425%, 11/02/99 10,000 10,000
5.795%, 11/02/99 20,000 19,999
5.795%, 11/02/99 25,000 24,999
5.895%, 11/02/99 25,000 25,000
STUDENT LOAN MARKETING
ASSOCIATION, MTN (A)
5.340%, 11/01/99 25,000 24,995
5.765%, 11/02/99 25,000 25,025
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,108,283) $1,108,283
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 31.3%
DEUTSCHE BANK
5.220%, dated 10/29/99,
matures 11/01/99,
repurchase price $250,108,750
(collateralized by U.S. Treasury
Obligations: total market value
$257,668,250) 250,000 250,000
GOLDMAN SACHS
4.750%, dated 10/29/99,
matures 11/01/99,
repurchase price $5,025,811
(collateralized by
U.S. Treasury Bond:
total market value
$5,125,019) 5,024 5,024
SALOMON BROTHERS
5.220%, dated 10/29/99,
matures 11/01/99,
repurchase price $250,108,750
(collateralized by U.S. Treasury
Obligations: total market
value $255,186,600) 250,000 250,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $505,024) $ 505,024
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(Cost $1,613,307) $1,613,307
================================================================================
12
13
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET-- (0.1%) $ (1,703)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par value)
based on 1,360,419,671 outstanding
shares of beneficial interest $ 1,360,322
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 127,158,176 outstanding shares
of beneficial interest 127,154
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 124,016,325 outstanding
shares of beneficial interest 124,010
Undistributed net investment income 158
Distributions in excess of net realized
gain on investments (40)
================================================================================
TOTAL NET ASSETS-- 100.0% $1,611,604
================================================================================
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 OCTOBER 31, 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.
MTN--MEDIUM TERM NOTE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
14
MONEY MARKET PORTFOLIOS
U.S. TREASURY MONEY MARKET PORTFOLIO
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Treasury Notes -- 55%
U.S. Treasury Bills -- 45%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 99.2%
U.S. TREASURY BILLS (A)
4.861%, 11/18/99 $ 958 $ 956
4.863%, 12/09/99 6,078 6,048
4.715%, 12/30/99 17,547 17,413
4.759%, 12/30/99 14,779 14,665
4.768%, 12/30/99 4,547 4,512
4.920%, 01/27/00 1,152 1,139
4.926%, 01/27/00 1,817 1,796
4.953%, 01/27/00 6,541 6,464
4.959%, 01/27/00 7,907 7,814
4.986%, 01/27/00 570 563
5.022%, 01/27/00 27,507 27,177
5.032%, 01/27/00 25,000 24,700
4.904%, 03/02/00 3,980 3,915
4.915%, 03/02/00 465 457
4.930%, 03/02/00 2,183 2,147
4.932%, 03/02/00 994 978
4.954%, 03/02/00 14,712 14,470
4.885%, 03/09/00 3,243 3,187
4.890%, 03/09/00 1,457 1,432
4.929%, 03/09/00 25,000 24,568
5.041%, 04/06/00 277 271
5.086%, 04/13/00 3,738 3,654
5.095%, 04/13/00 1,229 1,201
5.104%, 04/13/00 9,932 9,707
5.181%, 04/20/00 826 806
5.246%, 04/20/00 14,163 13,819
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES
5.520%, 11/01/99 $ 50,000 $ 50,000
7.875%, 11/15/99 25,000 25,030
7.750%, 11/30/99 10,000 10,022
5.625%, 12/31/99 25,000 25,019
6.186%, 01/15/00 100,000 100,217
5.375%, 01/31/00 25,000 25,009
5.375%, 06/30/00 5,000 5,003
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $434,159) $434,159
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.2%
(Cost $434,159) $434,159
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- 0.8% $ 3,657
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 310,016,084 outstanding shares
of beneficial interest 309,992
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 23,766,724 outstanding shares
of beneficial interest 23,765
Portfolio Shares of Institutional II Class
(unlimited authorization -- no par
value) based on 104,049,769 outstanding shares
of beneficial interest 104,042
Undistributed net investment income 50
Distributions in excess of net realized
gain on investments (33)
================================================================================
TOTAL NET ASSETS-- 100.0% $437,816
================================================================================
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.
14
15
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MONEY MARKET PORTFOLIOS CONTINUED
MONEY MARKET PORTFOLIO
PERFORMANCE AS OF
OCTOBER 31, 1999
THIRTY-DAY YIELD COMPARISON
[GRAPH OMITTED]
In the printed version of the document, a line graph appears
which depicts the following plot points:
ARK Funds IBC/Finan. ARK Funds IBC/Finan. ARK Funds
MM Data First MM Data. MM
Institu. Tier Retail First Instituti.
Class Insti. Only Class A Tier II Class
----- ----------- ------- ---- --------
11/30/98 5.01 4.93 4.76 4.59 4.97
12/30/98 5.01 4.87 4.76 4.53 4.97
1/31/99 4.9 4.76 4.67 4.41 4.83
2/28/99 4.67 4.66 4.44 4.28 4.6
3/31/99 4.66 4.62 4.43 4.23 4.59
4/30/99 4.66 4.6 4.43 4.21 4.59
5/31/99 4.7 4.57 4.47 4.19 4.63
6/30/99 4.72 4.57 4.49 4.23 4.65
7/31/99 4.85 4.71 4.62 4.35 4.77
8/31/99 4.92 4.82 4.69 4.47 4.85
9/30/99 5.06 4.97 4.83 4.62 4.99
10/31/99 5.17 5.09 4.94 4.74 5.1
TAX-FREE MONEY MARKET PORTFOLIO
PERFORMANCE AS OF
OCTOBER 31, 1999
THIRTY-DAY YIELD COMPARISON
[GRAPH OMITTED]
In the printed version of the document, a line graph appears
which depicts the following plot points:
ARK IBC/Finan. ARK IBC/Finan. ARK
Tax-Free Data Tax-Free Data Tax-Free Tax-Free
MM, Tax-Free MM Retail Stockbroker MM Institu.
Insti. Class Insti. Only Class A General Purpose II Class
------------ ----------- ------- --------------- --------
11/30/98 2.92 2.94 2.67 2.68 2.88
12/31/98 2.98 2.94 2.73 2.68 2.94
1/31/99 2.74 2.74 2.51 2.49 2.67
2/28/99 2.3 2.41 2.07 2.19 2.23
3/31/99 2.64 2.68 2.41 2.41 2.57
4/30/99 2.84 2.75 2.61 2.48 2.77
5/31/99 3.09 3.08 2.86 2.79 3.02
6/30/99 2.94 2.92 2.71 2.65 2.87
7/31/99 2.71 2.78 2.48 2.54 2.64
8/31/99 2.79 2.8 2.56 2.58 2.72
9/30/99 3.03 2.98 2.8 2.76 2.96
10/31/99 3.06 3.03 2.82 2.8 2.99
U.S. GOVERNMENT MONEY MARKET
PORTFOLIO PERFORMANCE AS OF
OCTOBER 31, 1999
THIRTY-DAY YIELD COMPARISON
[GRAPH OMITTED]
In the printed version of the document, a line graph appears
which depicts the following plot points:
ARK IBC/Finan. ARK IBC/Finan. ARK
Gov't MM Data Gov't U.S. Gov't Data U.S. U.S. Gov't
Institu. Only, MM Retail Gov't and MM Instituti.
Class Insti. Only Class A Agencies II Class
----- ----------- ------- -------- --------
11/30/98 4.78 4.58 4.53 4.47 4.74
12/30/98 4.72 4.52 4.47 4.41 4.68
1/31/99 4.63 4.46 4.4 4.32 4.56
2/28/99 4.58 4.42 4.35 4.26 4.51
3/31/99 4.56 4.44 4.33 4.24 4.49
4/30/99 4.53 4.41 4.3 4.2 4.46
5/31/99 4.55 4.37 4.32 4.18 4.48
6/30/99 4.55 4.37 4.32 4.2 4.48
7/31/99 4.68 4.5 4.45 4.32 4.61
8/31/99 4.74 4.6 4.51 4.44 4.67
9/30/99 4.87 4.74 4.64 4.58 4.8
10/31/99 4.9 4.77 4.67 4.66 4.83
U.S. TREASURY MONEY MARKET
PORTFOLIO PERFORMANCE AS OF
OCTOBER 31, 1999
THIRTY-DAY YIELD COMPARISON
[GRAPH OMITTED]
In the printed version of the document, a line graph appears
which depicts the following plot points:
ARK Insti. IBC/ ARK ARK
U.S. Trea. MM, Finan. Data 100% U.S. Trea. MM U.S. Trea. MM
Institu. Class U.S. Treasury Retail Class A Instituti. II Cl.
-------------- ------------- -------------- -----------------
11/30/98 4.31 4.08 4.06 4.27
12/31/98 4.33 4.03 4.08 4.29
1/31/99 4.25 3.99 4.02 4.18
2/28/99 4.13 3.96 3.9 4.06
3/31/99 4.21 4 3.98 4.14
4/30/99 4.18 3.99 3.95 4.11
5/31/99 4.12 3.93 3.89 4.05
6/30/99 4.22 3.97 3.99 4.15
7/31/99 4.22 4.03 3.99 4.15
8/31/99 4.29 4.12 4.06 4.22
9/30/99 4.44 4.24 4.21 4.37
10/31/99 4.49 4.25 4.26 4.42
15
16
FIXED INCOME PORTFOLIOS
MANAGEMENT DISCUSSION AND ANALYSIS
SHORT-TERM TREASURY PORTFOLIO
JAMES M. HANNAN
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
JAMES M. HANNAN IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE IS
PORTFOLIO MANAGER OF THE MONEY MARKET PORTFOLIOS AND THE SHORT-TERM TREASURY
PORTFOLIO. HE HAS MORE THAN 10 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The U.S. economy continued its exceptional performance of the past three years.
The unemployment rate reached a new business cycle low of 4.1%, while economic
growth has averaged a 4% pace for the past three years. Although inflation
remains benign, consumer prices have increased at a 2.6% rate for the last year,
which is higher than the 1.9% increase in the C.P.I. for 1998. The Fed became
increasingly concerned with the tightness of the labor markets and the strong
level of economic growth. The Fed's fears lead to the Fed raising the Federal
funds rate target by 25 basis points on two separate occasions during the
summer. Currently the Fed maintains a bias to tighten a third time. The Fed's
concern is that economic growth exceeding potential growth will lead to higher
inflation and that, in turn, will require stronger medicine (i.e., higher
interest rates) to slow the economy to its potential growth rate and to keep
inflation low. Two-year U.S. Treasury yields rose from 5% to approximately 5.75%
over the past six months in response to the aforementioned hikes in short-term
interest rates by the Federal Reserve.
Our strategy during the past six months has been to maintain the average
maturity of the ARK Short-Term Treasury Portfolio between one and one-half years
and one and three-quarter years. Currently, the Portfolio has an average
maturity of approximately 1.5 years, given our outlook for economic growth to
remain relatively strong and the risks tilted towards higher interest rates.
Once we anticipate a decline in short-term interest rates we will extend the
average maturity of the Portfolio.
PERFORMANCE AS OF
OCTOBER 31, 1999
INSTITUTIONAL RETAIL LEHMAN 1-3 YEAR LIPPER SHORT
CLASS CLASS A GOV'T BOND U.S. TREASURY
- ------------------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 2.32% 2.02% 2.96% 1.65%
- ------------------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 5.03% 4.79% 5.68% 5.08%
- ------------------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 5.11% 5.08% 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
were offered beginning September 9, 1996.
The performance of the Lehman 1-3 Year Government Bond Index does not include
operating expenses which are incurred by the Portfolio.
16
17
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Treasury Notes -- 97%
U.S. Treasury Bills -- 3%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 98.8%
U.S. TREASURY BILLS (A)
4.604%, 12/09/99 $ 58 $ 58
4.622%, 12/09/99 57 57
4.681%, 12/09/99 93 92
4.800%, 12/16/99 8 8
4.866%, 12/16/99 2 2
4.950%, 01/13/00 40 40
5.241%, 04/20/00 1,190 1,161
U.S. TREASURY NOTES
5.875%, 11/15/99 91 91
7.750%, 12/31/99 164 165
5.750%, 11/15/00 1,000 1,001
4.625%, 11/30/00 1,025 1,014
4.625%, 12/31/00 949 938
4.500%, 01/31/01 6,000 5,914
5.375%, 02/15/01 8,000 7,966
5.000%, 02/28/01 2,000 1,982
5.000%, 04/30/01 2,500 2,474
5.250%, 05/31/01 2,000 1,984
5.500%, 07/31/01 3,000 2,984
6.500%, 08/31/01 10,000 10,115
6.250%, 02/28/02 4,000 4,034
6.625%, 04/30/02 2,000 2,035
5.750%, 11/30/02 3,000 2,986
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $47,524) $47,101
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.8%
(Cost $47,524) $47,101
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- 1.2% $ 554
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 3,520,215 outstanding shares
of beneficial interest $35,274
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 1,271,624 outstanding shares
of beneficial interest 12,747
Accumulated net realized gain on investments 57
Net unrealized depreciation on investments (423)
================================================================================
TOTAL NET ASSETS-- 100.0% $47,655
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $ 9.95
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS A $ 9.94
================================================================================
(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.
17
18
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
SHORT-TERM BOND PORTFOLIO
STEVEN M. GRADOW
- --------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
STEVEN M. GRADOW IS THE MANAGING DIRECTOR OF FIXED INCOME INVESTMENTS FOR ALLIED
INVESTMENT ADVISORS, INC. HE IS THE PORTFOLIO MANAGER OF THE INCOME PORTFOLIO
AND CO-PORTFOLIO MANAGER OF THE U.S. GOVERNMENT BOND PORTFOLIO AND THE
SHORT-TERM BOND PORTFOLIO. HE HAS MORE THAN 15 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
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 OVERSEES FIXED
INCOME TRADING. HE HAS MORE THAN 8 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
Over the last six months several developments came to the forefront within the
fixed income market, resulting in heightened volatility. Although global
economic concerns were diminished and broad-based inflation remained benign, a
perceived avalanche of new-issue corporate securities and year-end uncertainties
relating to Y2K weighed heavily on the market. An already fragile corporate bond
and asset-backed securities market was bracing for an expected $90+ billion
worth of new issues for the month of September alone. However, as the dust
settled and September came to a close, only $50+ billion worth of new securities
were actually issued. Additionally, late in the quarter the Federal Reserve
issued several measures to alleviate concerns surrounding Y2K uncertainties.
Both of these developments resulted in a substantial improvement in the market
tone of both sectors. Concurrently, the Federal Reserve, as expected, tightened
monetary policy by raising both the Federal Funds Rate and the Discount Rate by
25 basis points on August 24. As year-end approaches we expect volatility and
relative illiquidity to continue to characterize the fixed income market as
renewed year-end quitters will inevitably resurface.
In response to these developments, we increased the overall quality and
liquidity of the corporate bond position by selling holdings which we viewed to
be particularly susceptible to market illiquidity. We have increased the average
issue size of corporate securities with maturities greater than one year to a
very large $600 million. On average the Short-Term Bond Portfolio had 6% less
interest rate risk versus the Lehman 1 to 3 Year Government Bond Index over the
quarter, which also positively contributed to performance. Going forward we will
continue to seek incremental yield in corporate and AAA-rated asset-backed
securities, focusing on highly liquid issues. We will also continue to employ
our conservative and disciplined investment strategy of actively pursuing
relative value in both sector allocation and security selection.
PERFORMANCE AS
OF OCTOBER 31, 1999
INSTITUTIONAL LEHMAN 1-3 YEAR LIPPER SHORT
CLASS GOVERNMENT BOND INVESTMENT GRADE DEBT
- -----------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 2.66% 2.96% 2.98%
- -----------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 4.87% 5.68% 5.07%
- -----------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 4.98% N/A N/A
- -----------------------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Performance presented prior to March 22, 1998, reflects the performance of the
Marketvest Short-Term Bond Fund shares which were offered beginning March 31,
1996.
The performance of the Lehman 1-3 Year Government Bond Index does not include
operating expenses which are incurred by the Portfolio.
18
19
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
Corporate Obligations -- 46%
Asset-Backed Securities -- 18%
U.S. Treasury Obligations -- 16%
Repurchase Agreements -- 7%
Non-Agency Mortgage-Backed Obligations -- 7%
U.S. Government Agency Obligations -- 6%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 16.3%
U.S. TREASURY NOTES
6.250%, 04/30/01 $2,000 $ 2,014
7.875%, 08/15/01 200 207
6.500%, 08/31/01 1,550 1,568
6.250%, 10/31/01 3,000 3,024
6.250%, 02/28/02 2,000 2,017
6.000%, 07/31/02 2,000 2,006
6.250%, 08/31/02 3,000 3,027
6.000%, 08/15/04 2,000 2,004
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $16,024) $15,867
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.0%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
4.750%, 12/14/01 3,000 2,919
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
4.450%, 10/16/00 3,000 2,960
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $5,980) $ 5,879
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 0.0%
FEDERAL HOME LOAN MORTGAGE
CORPORATION, REMIC
6.500%, 10/15/00 32 32
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (A)
7.086%, 09/03/04 2 2
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS
(Cost $35) $ 34
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 45.3%
BANKS -- 2.0%
MBNA, MTN
6.500%, 09/15/00 $1,000 $ 997
MBNA, MTN (A)
5.863%, 12/20/99 1,000 1,000
- --------------------------------------------------------------------------------
TOTAL BANKS $ 1,997
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 3.5%
TIME WARNER (B)
6.100%, 12/30/01 2,000 1,975
VIACOM
6.750%, 01/15/03 1,500 1,477
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 3,452
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 18.0%
BEAR STEARNS
6.450%, 08/01/02 800 788
CONSECO
6.400%, 02/10/03 2,000 1,887
CONSECO, MANDATORY PUT
@ 100 (C)
6.400%, 06/15/01 2,000 1,950
FORD MOTOR CREDIT
9.500%, 04/15/00 1,500 1,525
6.550%, 09/10/02 2,000 1,983
FORD MOTOR CREDIT, GLOBAL BOND
6.700%, 07/16/04 1,000 990
GENERAL MOTORS ACCEPTANCE, MTN
6.650%, 05/24/00 2,000 2,009
GOLDMAN SACHS, MTN (A) (B)
5.586%, 02/23/00 2,000 2,000
LEHMAN BROTHERS HOLDINGS
6.625%, 11/15/00 2,000 2,009
LEHMAN BROTHERS HOLDINGS, MTN
6.400%, 12/27/99 1,500 1,501
NEWCOURT CREDIT
6.875%, 02/16/05 1,000 969
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $17,611
- --------------------------------------------------------------------------------
INDUSTRIAL -- 13.1%
COCA-COLA, PAT (B)
6.000%, 03/15/01 2,000 1,985
CONAGRA (A)
5.711%, 06/12/00 3,000 3,001
HUSKY OIL, YB
6.875%, 11/15/03 3,000 2,893
ROUSE, MTN (A)
6.261%, 03/22/00 1,000 991
SPIEKER PROPERTIES
6.875%, 02/01/05 2,000 1,910
WILLIAMS
6.500%, 11/15/02 2,000 1,963
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL $12,743
- --------------------------------------------------------------------------------
19
20
FIXED INCOME PORTFOLIOS
SHORT-TERM BOND PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 6.6%
CABLE & WIRELESS COMMUNICATIONS
6.375%, 03/06/03 $3,500 $ 3,504
SPRINT CAPITAL
5.875%, 05/01/04 1,000 959
WORLDCOM
6.250%, 08/15/03 2,000 1,963
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 6,426
- --------------------------------------------------------------------------------
UTILITIES -- 2.1%
PUGET SOUND ENERGY, MTN
7.250%, 12/10/99 2,000 2,000
- --------------------------------------------------------------------------------
TOTAL UTILITIES $ 2,000
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $44,857) $44,229
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 17.5%
AFG RECEIVABLES TRUST,
SERIES 1996-C, CLASS B
6.950%, 07/15/01 357 361
AFG RECEIVABLES TRUST,
SERIES 1996-D, CLASS B
6.650%, 10/15/01 627 627
EQCC HOME EQUITY LOAN TRUST,
SERIES 1998-1, CLASS A4F
6.459%, 03/15/21 2,000 1,975
EQCC HOME EQUITY LOAN TRUST,
SERIES 1999-1, CLASS A3F
5.915%, 11/20/24 1,000 972
EQUICREDIT FUNDING TRUST,
SERIES 1996-A, CLASS A3
7.350%, 11/15/19 2,000 2,046
FIRST PLUS HOME LOAN TRUST,
SERIES 1996-4, CLASS A4
6.450%, 03/10/10 1,285 1,284
GRENNPOINT MANUFACTURED
HOUSING TRUST, SERIES 1999-1,
CLASS A2
6.010%, 08/15/15 500 485
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-1, CLASS A3
6.820%, 10/25/11 810 816
KEY AUTO FINANCE TRUST,
SERIES 1997-1, CLASS B
6.400%, 04/15/04 625 625
KEY AUTO FINANCE TRUST,
SERIES 1999-1, CLASS A3
5.630%, 07/15/03 1,250 1,235
PREMIER AUTO TRUST,
SERIES 1998-4, CLASS A3
5.690%, 06/08/02 1,000 991
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
THE MONEY STORE HOME
EQUITY TRUST, SERIES 1996-C,
CLASS A4
7.400%, 06/15/21 $2,830 $ 2,826
THE MONEY STORE HOME
EQUITY TRUST, SERIES 1997-D,
CLASS AF3
6.345%, 11/15/21 1,719 1,710
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1998-B, CLASS AF2
6.115%, 06/15/10 212 212
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1998-B, CLASS AF4
6.115%, 06/15/21 1,000 974
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $17,270) $17,139
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -- 7.1%
ADVANTA MORTGAGE LOAN TRUST,
SERIES 1997-1, CLASS A2
7.100%, 04/25/20 662 664
AMRESCO RESIDENTIAL SECURITIES
MORTGAGE LOAN TRUST,
SERIES 1997-3, CLASS A3
6.600%, 01/25/18 313 312
GREEN TREE HOME IMPROVEMENT
LOAN TRUST, SERIES 1995-B,
CLASS A
8.150%, 03/15/15 1,060 1,077
GREEN TREE HOME IMPROVEMENT
LOAN TRUST, SERIES 1995-F,
CLASS B1
6.750%, 01/15/21 2,000 1,979
GREEN TREE HOME IMPROVEMENT
LOAN TRUST, SERIES 1996-F,
CLASS HIB1
7.250%, 11/15/27 2,000 1,951
PRUDENTIAL HOME MORTGAGE
SECURITIES TRUST, SERIES 1994-25,
CLASS A7
7.500%, 08/25/24 985 989
- --------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS
(Cost $7,072) $ 6,972
- --------------------------------------------------------------------------------
20
21
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.0%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99,
repurchase price $6,854,970
(collateralized by U.S.
Government Agency Instrument:
total market value
$7,063,603) $6,852 $ 6,852
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $6,852) $ 6,852
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.2%
(Cost $98,090) $96,972
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- 0.8% $ 748
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 9,937,121 outstanding shares
of beneficial interest 98,949
Undistributed net investment income 64
Accumulated net realized loss on investments (175)
Net unrealized depreciation on investments (1,118)
================================================================================
TOTAL NET ASSETS-- 100.0% $97,720
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $9.83
================================================================================
(A) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON OCTOBER 31, 1999.
(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) MANDATORY PUT SECURITY. THE MANDATORY PUT DATE IS SHOWN AS THE
MATURITY DATE ON THE STATEMENT OF NET ASSETS.
MTN--MEDIUM TERM NOTE
PAT--PUTABLE ASSET TRUST
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
YB--YANKEE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
21
22
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
MARYLAND AND PENNSYLVANIA TAX-FREE PORTFOLIOS
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.
REVIEW AND OUTLOOK
During the past six months, municipal bonds have significantly underperformed
their taxable counterparts. The municipal markets suffered as a result of poor
performance in the hospital sector due to credit quality concerns and the
re-introduction of anxiety over a market discount being treated as ordinary
income in a "tax-free" environment (as opposed to a capital gain). Flows out of
funds, the lure of the equity market, and the lack of demand for municipal bonds
from the usual buyers has intensified the situation.
Longer maturity bonds were down between 6% and 7% over the past six
months, as issues with discount coupons began to fall further out of favor.
Long-term municipal rates have risen nearly 90 basis points. While we felt that
municipal bonds were an attractive opportunity at the beginning of the fiscal
year, at 87% of treasuries, the story is even more compelling with municipals
offering yields that are over 90% of the yield being obtainable on Treasury
bonds.
Supply of bonds in the Maryland and Pennsylvania markets has been
relatively low, since the rise in interest rates has paralyzed borrowers looking
to refund outstanding debt. Municipalities looking to raise new money this year
had come to market earlier this year, either expecting higher funding costs as
the year progressed, or to avoid anticipated Y2K issues, or are still sitting on
the sidelines awaiting a change in the direction of interest rates. While the
Treasury yield curve continues to be relatively flat, the slope of the municipal
curve remains steep, providing attractive opportunities in the 12-to-15-year
sector.
We have continued to take advantage of the rise in rates to execute tax
loss swaps in an effort to realize losses that can be utilized to offset any
gains realized earlier in the year and any future gains that may be realized by
the ARK Tax-Free Portfolios. Any changes to the Portfolios reflect the bias to
maximize after-tax total return, while providing a high level of current income.
Over the past six months, we have also reduced the duration or interest rate
sensitivity of the Portfolios slightly, to 7.3. Moderate fluctuations in
principal should be expected as interest rates change.
New purchases have added higher yielding holdings to the Portfolios, but
we continue to emphasize quality and structure. Our focus continues to be in the
higher quality categories and avoiding bonds subject to the Federal Alternative
Minimum Tax (AMT).
22
23
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
PERFORMANCE AS OF
OCTOBER 31, 1999
MARYLAND TAX-FREE PORTFOLIO
LEHMAN LEHMAN LIPPER MD
7 YEAR 10 YEAR INTERMEDIATE
INST'L RETAIL RETAIL MUNI MUNI MUNI
CLASS CLASS A CLASS B* BOND BOND DEBT
- ---------------------------------------------------------------------------------------------------------------
ONE YEAR TOTAL RETURN -3.17% -3.29% 9.38% 0.01% -1.20% -1.97%
- ---------------------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A -7.66% 4.77% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 3.42% 3.33% 7.77% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE
WITH LOAD N/A 1.66% 6.93% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning November 15, 1996. Retail
Class A shares were offered beginning January 2, 1997. Performance for the
Retail Class A reflects the deduction of the 4.50% sales charge. Retail Class B
shares were offered beginning September 9, 1999.
The performance shown in the table begins at November 15, 1996 for Institutional
Class and Retail Class B shares, and at January 2, 1997 for Retail Class A
shares. Performance in the table for Retail Class B shares with load reflects
the deduction of the applicable contingent 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 11.47% without CDSC and
6.57% with CDSC.
The performance of the Lehman 7 Year Municipal Bond Index and the Lehman 10 Year
Municipal Bond Index does not include operating expenses that are incurred by
the Portfolio.
PENNSYLVANIA TAX-FREE PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
LEHMAN LEHMAN LEHMAN LIPPER PA
5 YEAR 7 YEAR 10 YEAR INTERMEDIATE
INST'L RETAIL RETAIL MUNI MUNI MUNI MUNI
CLASS CLASS A* CLASS B* BOND BOND IBOND DEBT
- ---------------------------------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN -4.43% -4.58% 5.05% 1.02% 0.01% -1.20% -2.32%
- ---------------------------------------------------------------------------------------------------------------------------
ONE YEAR TOTAL RETURN
WITH LOAD N/A -8.88% 0.49% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 2.61% 2.49% 5.89% 4.59% 4.90% 5.16% 3.50%
- ---------------------------------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 0.94% 5.04% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 3.01% 2.91% 5.76% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 1.60% 5.07% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
For Institutional Class Shares, performance presented prior 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 the Retail Class A
reflects the deduction of the 4.50% sales charge. Retail Class B shares were
offered beginning September 9, 1999.
The performance shown in the table begins at March 31, 1996 for Institutional
Class, Retail Class A and Retail Class B shares. Performance in the table for
Retail Class B shares with load reflects the deduction of the applicable
contingent sales charge.
* Performance shown prior to the inception dates of Retail Class A shares and
Retail Class B shares represents that of the Institutional Class adjusted for
the sales charge only. No adjustments have been made for Retail Class 12b-1 fees
and expenses. With such adjustments, performance would be lower than shown.
Actual annualized performance since inception for Class A shares is -0.60%
without load and -3.40% with load. Actual cumulative performance since inception
for Retail Class B shares is 7.99% without CDSC and 3.11% with CDSC.
The performance of the Lehman 5 Year Municipal Bond Index, Lehman 7 Year
Municipal Bond Index, and Lehman 10 Year Municipal Bond Index does not include
operating expenses that are incurred by the Portfolio.
MARYLAND TAX-FREE PORTFOLIO
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
Revenue Bonds -- 57%
General Obligations -- 42%
Cash Equivalents -- 1%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 98.3%
MARYLAND -- 92.5%
ALLEGANY COUNTY, PUBLIC
IMPROVEMENTS GO, AMBAC
5.300%, 03/01/12 $1,190 $1,177
ANNE ARUNDEL COUNTY GO
5.000%, 09/01/10 1,500 1,474
ANNE ARUNDEL COUNTY, PUBLIC
IMPROVEMENTS GO
6.000%, 09/01/06 2,560 2,720
BALTIMORE COUNTY, PENSION
FUNDING GO
5.125%, 08/01/13 1,000 959
BALTIMORE COUNTY, PUBLIC
IMPROVEMENTS GO
5.500%, 06/01/16 2,000 1,957
BALTIMORE GO, SERIES B, MBIA
7.000%, 10/15/03 1,000 1,086
BALTIMORE, AUTO PARKING
RB, FGIC
5.250%, 07/01/17 1,000 946
BALTIMORE, CONVENTION CENTER
RB, MBIA
5.000%, 09/01/09 2,000 1,977
BALTIMORE, PORT FACILITIES RB,
DUPONT PROJECT
6.500%, 10/01/11 1,000 1,062
BALTIMORE, WATER PROJECT RB,
SERIES A, FGIC
5.500%, 07/01/26 1,500 1,406
CALVERT COUNTY, POLLUTION
CONTROL RB, BALTIMORE GAS &
ELECTRIC COMPANY PROJECT
5.550%, 07/15/14 2,500 2,444
23
24
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CALVERT COUNTY, PUBLIC &
SCHOOL IMPROVEMENTS GO
5.750%, 01/01/11 $1,900 $ 1,959
CARROLL COUNTY, REFUNDING
RB, ASSET
5.375%, 01/01/16 2,000 1,890
CHARLES COUNTY GO
5.700%, 03/01/10 750 773
FREDERICK COUNTY GO, SERIES B
6.300%, 07/01/08 2,000 2,110
FREDERICK COUNTY, RETIREMENT
COMMUNITY RB,
BUCKINGHAMS CHOICE
5.900%, 01/01/17 1,000 906
FREDERICK GO, FGIC
6.125%, 12/01/06 1,000 1,054
6.125%, 12/01/07 500 525
GAITHERSBURG, HOSPITAL &
NURSING HOME IMPROVEMENTS
RB, SHADY GROVE, FSA
6.000%, 09/01/22 1,000 1,000
HARFORD COUNTY GO
5.500%, 12/01/08 1,895 1,959
HOWARD COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A
5.200%, 02/15/04 1,000 1,024
LAUREL GO, FGIC
5.000%, 10/01/07 1,000 1,004
MARYLAND NATIONAL PARKS &
PLANNING COMMISSION RB
5.375%, 01/15/14 1,950 1,904
MARYLAND STATE & LOCAL
FACILITIES AUTHORITY GO
5.000%, 08/01/09 1,000 996
5.000%, 08/01/10 1,200 1,185
MARYLAND STATE & LOCAL
FACILITIES AUTHORITY GO,
SECOND SERIES AA
5.500%, 06/01/08 1,500 1,551
MARYLAND STATE COMMUNITY
DEVELOPMENT ADMINISTRATION
RB, HOUSING & COMMUNITY
DEVELOPMENT
5.050%, 04/01/08 1,000 989
5.600%, 03/01/17 1,000 980
MARYLAND STATE DEPARTMENT OF
TRANSPORTATION RB, PUBLIC
IMPROVEMENTS, PRE-REFUNDED
@ 100.75 (A)
6.100%, 09/01/00 1,000 1,025
MARYLAND STATE ECONOMIC
DEVELOPMENT CORPORATION RB,
HEALTH CARE FACILITIES, GNMA
4.650%, 12/20/08 905 854
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MARYLAND STATE ECONOMIC
DEVELOPMENT CORPORATION RB,
STUDENT HOUSING
5.600%, 06/01/10 $1,000 $ 961
MARYLAND STATE GO
6.100%, 10/15/06 1,500 1,566
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB
4.750%, 11/01/14 1,600 1,436
5.625%, 07/01/18 1,500 1,311
5.125%, 07/01/20 2,000 1,795
4.750%, 05/15/33 2,000 1,565
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, BROADMEAD
5.500%, 07/01/17 2,505 2,320
MARYLAND STATE HEALTH &
HIGHER EDUCATION FACILITIES
AUTHORITY RB, DOCTORS
COMMUNITY HOSPITAL
5.500%, 07/01/24 2,500 2,075
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, HELIX HEALTH ISSUE, RB,
AMBAC, ETM
5.000%, 07/01/27 2,500 2,197
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, HOWARD COUNTY GENERAL
HOSPITAL PROJECT
5.500%, 07/01/13 1,000 1,012
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, JOHNS HOPKINS MEDICINE,
MBIA
5.000%, 07/01/19 1,500 1,341
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, JOHNS HOPKINS UNIVERSITY
5.250%, 07/01/17 2,000 1,882
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, KENNEDY KRIEGER
5.125%, 07/01/22 2,000 1,635
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, LOYOLA COLLEGE PROJECT,
SERIES A, MBIA
5.375%, 10/01/11 950 954
5.375%, 10/01/26 1,500 1,382
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, MBIA
5.300%, 10/01/18 460 430
24
25
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, MEDLANTIC/HELIX, SERIES A
5.250%, 08/15/12 $1,175 $1,147
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, MERCY MEDICAL CENTER
PROJECT, AMBAC
5.750%, 07/01/15 2,000 1,992
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, NORTH ARUNDEL PROJECT,
MBIA
6.000%, 07/01/12 500 522
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, PENINSULA REGIONAL MEDICAL
CENTER PROJECT
5.000%, 07/01/08 1,000 955
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, PICKERSGILL PROJECT, SERIES A
6.000%, 01/01/15 1,500 1,487
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, SERIES A
5.250%, 08/15/11 2,000 1,972
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 1,064
MARYLAND STATE HEALTH & HIGHER
EDUCATION FACILITIES AUTHORITY
RB, UPPER CHESAPEAKE
HEALTH, FSA
5.375%, 01/01/28 1,500 1,376
MARYLAND STATE HOUSING RB,
SECOND SERIES
5.000%, 04/01/17 1,000 905
MARYLAND STATE STADIUM
AUTHORITY RB, AMBAC
5.500%, 03/01/12 1,000 1,004
MARYLAND STATE STATE & LOCAL
FACILITIES GO
5.000%, 07/15/05 2,000 2,030
MARYLAND STATE TRANSPORTATION
AUTHORITY RB
5.750%, 07/01/15 3,000 2,970
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MARYLAND STATE TRANSPORTATION
AUTHORITY RB, BALTIMORE/
WASHINGTON INTERNATIONAL
AIRPORT PROJECT, FGIC
6.000%, 07/01/07 $1,000 $1,060
MARYLAND STATE WATER QUALITY
FINANCING ADMINISTRATION
RB, REVOLVING LOAN FUND,
SERIES A
5.500%, 09/01/12 1,250 1,252
6.550%, 09/01/14 945 980
MONTGOMERY COUNTY GO
5.375%, 05/01/11 2,000 2,017
MONTGOMERY COUNTY, PARKING
AUTHORITY RB, SILVER SPRINGS
PARKING LOT PROJECT,
SERIES A, FGIC
6.250%, 06/01/09 500 526
MONTGOMERY COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A
5.500%, 10/01/06 1,000 1,037
5.800%, 07/01/07 1,000 1,057
4.875%, 05/01/12 2,000 1,902
MONTGOMERY COUNTY, PUBLIC
IMPROVEMENTS GO, SERIES A,
PRE-REFUNDED @ 102 (A)
6.000%, 10/01/04 2,000 2,153
PRINCE GEORGES COUNTY, PUBLIC
IMPROVEMENTS GO, FSA
5.500%, 10/01/10 2,000 2,043
PRINCE GEORGES COUNTY, PUBLIC
IMPROVEMENTS GO, MBIA
5.500%, 03/15/16 1,000 986
PRINCE GEORGES COUNTY, PUBLIC
IMPROVEMENTS GO,
SERIES A, MBIA
6.000%, 03/01/07 1,450 1,508
PRINCE GEORGES COUNTY, SOLID
WASTE MANAGEMENT SYSTEM
RB, FSA
5.000%, 06/15/04 1,000 1,009
PRINCE GEORGES COUNTY, WATER
UTILITY IMPROVEMENTS GO,
STORMWATER MANAGEMENT PROJECT
5.500%, 03/15/13 2,575 2,552
QUEEN ANNES COUNTY, PUBLIC
FACILITIES GO, FGIC
5.400%, 11/15/11 1,000 1,003
25
26
FIXED INCOME PORTFOLIOS
MARYLAND TAX-FREE PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
QUEEN ANNES COUNTY, SCHOOL &
RECREATIONAL FACILITIES
IMPROVEMENTS GO, FGIC
6.000%, 11/15/08 $1,000 $ 1,069
ST. MARY'S COUNTY, ACADEMIC &
AUXILIARY FACILITIES RB, MBIA
5.250%, 09/01/27 2,000 1,798
UNIVERSITY OF MARYLAND,
AUXILIARY FACILITY &
TUITION RB, SERIES A
5.000%, 04/01/10 2,000 1,963
UNIVERSITY OF MARYLAND, LOAN
PROGRAM RB, SECOND SERIES
6.000%, 06/01/05 500 525
UNIVERSITY OF MARYLAND,
MEDICAL SYSTEMS PROJECT RB,
SERIES A
5.500%, 04/01/10 2,000 2,045
WASHINGTON COUNTY, PUBLIC
IMPROVEMENTS GO, MBIA
5.800%, 01/01/15 1,250 1,280
WASHINGTON, SUBURBAN
SANITATION DISTRICT GO,
SEWER IMPROVEMENTS
5.300%, 06/01/08 1,000 1,011
5.600%, 06/01/18 1,000 976
- --------------------------------------------------------------------------------
TOTAL MARYLAND $113,934
- --------------------------------------------------------------------------------
PUERTO RICO -- 5.4%
COMMONWEALTH OF PUERTO RICO,
PUBLIC IMPROVEMENTS GO,
MBIA
6.250%, 07/01/12 1,000 1,083
4.875%, 07/01/23 2,000 1,713
PUERTO RICO ELECTRIC POWER
AUTHORITY RB, MBIA
5.250%, 07/01/13 1,500 1,464
5.250%, 07/01/15 1,000 960
PUERTO RICO PUBLIC FINANCE
AUTHORITY RB, AMBAC
5.375%, 06/01/19 1,500 1,436
- --------------------------------------------------------------------------------
TOTAL PUERTO RICO $ 6,656
- --------------------------------------------------------------------------------
TEXAS -- 0.4%
AUSTIN, UTILITY SYSTEMS RB,
SERIES A
9.100%, 05/15/00 310 318
AUSTIN, UTILITY SYSTEMS RB,
SERIES A, ETM
9.100%, 05/15/00 190 195
- --------------------------------------------------------------------------------
TOTAL TEXAS $ 513
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $124,504) $121,103
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.6%
DREYFUS TAX-EXEMPT CASH
MANAGEMENT FUND $674 $ 674
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $674) $ 674
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.9%
(Cost $125,178) $121,777
================================================================================
OTHER ASSETS AND LIABILITIES, NET-- 1.1% $ 1,392
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 9,564,189 outstanding
shares of beneficial interest $ 92,681
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value) based on
3,323,930 outstanding shares of
beneficial interest 33,643
Portfolio Shares of Retail Class B (unlimited
authorization -- no par value)
based on 5,184 outstanding shares
of beneficial interest 50
Undistributed net investment income 1
Accumulated net realized gain on investments 195
Net unrealized depreciation on investments (3,401)
================================================================================
TOTAL NET ASSETS-- 100.0% $123,169
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $ 9.55
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- RETAIL CLASS A $ 9.55
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($9.55 / 95.50%) $ 10.00
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS B $ 9.56
================================================================================
(A) PRE-REFUNDED SECURITY. THE PRE-REFUNDED DATE IS SHOWN AS THE MATURITY DATE
ON THE STATEMENT OF NET ASSETS.
ETM--ESCROWED TO MATURITY
GO--GENERAL OBLIGATION
RB--REVENUE BOND
THE FOLLOWING ORGANIZATIONS HAVE PROVIDED UNDERLYING CREDIT SUPPORT FOR
SECURITIES LISTED ABOVE, AS INDICATED.
AMBAC--AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
ASSET--ASSET GUARANTY
FGIC--FINANCIAL GUARANTY INSURANCE CORPORATION
FSA--FINANCIAL SECURITY ASSURANCE
GNMA--GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26
27
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
PENNSYLVANIA TAX-FREE PORTFOLIO
STATEMENTS OF NET ASSETS
[pie chart omitted]
% OF TOTAL PORTFOLIO INVESTMENTS
Revenue Bonds -- 78%
General Obligations -- 20%
Cash Equivalents -- 2%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 97.3%
PENNSYLVANIA -- 97.3%
ALLEGHENY COUNTY GO,
SERIES C-45, FGIC
5.100%, 10/01/07 $5,000 $5,019
ALLEGHENY COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, MBIA
6.800%, 03/01/15 3,500 3,706
ALLEGHENY COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, USX PROJECT
6.100%, 01/15/18 5,255 5,051
ALLENTOWN, SACRED HEART
HOSPITAL RB, SERIES A
6.500%, 11/15/08 2,665 2,725
BETHLEHEM AREA SCHOOL
IMPROVEMENTS RB, FGIC
5.500%, 09/01/08 3,000 3,067
BUCKS COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY
RB, ETM
10.000%, 05/15/19 4,775 7,037
BURRELL, SCHOOL DISTRICT
GO, FGIC
5.250%, 11/15/10 4,000 4,085
CHESTER COUNTY, HEALTH &
EDUCATION FACILITIES
AUTHORITY RB, CHESTER
COUNTY HOSPITAL, MBIA
5.500%, 07/01/07 965 990
5.625%, 07/01/09 1,985 2,030
5.625%, 07/01/10 1,675 1,700
CHESTER COUNTY, HEALTH &
EDUCATION FACILITIES AUTHORITY
RB, IMMACULATA COLLEGE
5.600%, 10/15/18 1,000 904
5.625%, 10/15/27 1,000 882
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CHESTER COUNTY, HEALTH &
EDUCATION FACILITIES AUTHORITY
RB, MAIN LINE HEALTH SYSTEMS,
MBIA
5.300%, 05/15/07 $3,045 $3,079
CUMBERLAND COUNTY, MESSIAH
COLLEGE PROJECT RB, AMBAC
5.125%, 10/01/15 2,800 2,551
DAUPHIN COUNTY, PINNACLE
HEALTH SYSTEM PROJECT
RB, MBIA
5.100%, 05/15/08 830 825
5.200%, 05/15/09 910 904
DELAWARE COUNTY, CATHOLIC
HEALTH SYSTEMS EAST RB,
SERIES A, AMBAC
4.875%, 11/15/14 3,910 3,490
DELAWARE COUNTY, COMMUNITY
HOSPITAL AUTHORITY RB,
AMBAC
6.000%, 12/15/20 4,000 3,660
DELAWARE COUNTY, DUNWOODY
VILLAGE PROJECT RB
5.550%, 04/01/06 300 302
INDIANA COUNTY, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
POLLUTION CONTROL
6.000%, 06/01/06 1,500 1,588
LANCASTER COUNTY, HOSPITAL
AUTHORITY RB, MASONIC
HOMES PROJECT
4.750%, 11/15/02 1,000 996
LANCASTER COUNTY, SOLID
WASTE MANAGEMENT
AUTHORITY RB, AMBAC
5.375%, 12/15/15 4,000 3,820
LEHIGH COUNTY, MUHLENBERG
HOSPITAL CENTER PROJECT
RB, ETM, GOH
5.750%, 07/15/10 1,270 1,321
5.750%, 07/15/10 1,730 1,799
LEHIGH COUNTY, PUBLIC
IMPROVEMENTS PROJECT GO,
SERIES A, CNTY GTD
5.500%, 11/15/11 2,000 2,017
5.550%, 11/15/12 2,100 2,110
MONTGOMERY COUNTY, HEALTH
& HIGHER EDUCATION
AUTHORITY RB, AMBAC
5.250%, 10/01/04 2,070 2,117
5.500%, 10/01/08 1,275 1,304
27
28
FIXED INCOME PORTFOLIOS
PENNSYLVANIA TAX-FREE PORTFOLIOS CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MONTGOMERY COUNTY, HEALTH &
HIGHER EDUCATION AUTHORITY
RB, BEAVER COLLEGE PROJECT,
CONLEE
5.700%, 04/01/10 $ 500 $ 512
NORRISTOWN, SCHOOL DISTRICT
AUTHORITY GO, FGIC
5.500%, 09/01/14 500 489
NORTHAMPTON COUNTY, HIGHER
EDUCATION AUTHORITY RB,
LEHIGH UNIVERSITY, MBIA
5.750%, 08/15/03 2,710 2,815
PARKLAND, SCHOOL DISTRICT
GO, FGIC
5.000%, 09/01/18 5,000 4,375
PENNSYLVANIA CONVENTION
CENTER AUTHORITY
RB, ETM, FGIC
6.000%, 09/01/19 5,410 5,545
PENNSYLVANIA INTERGOVERNMENTAL
COOPERATIVE AUTHORITY
RB, PHILADELPHIA FUNDING
PROGRAM, FGIC
5.400%, 06/15/09 4,845 4,887
PENNSYLVANIA STATE CONVENTION
CENTER AUTHORITY RB,
SERIES A, ETM, FGIC
6.700%, 09/01/16 3,075 3,394
PENNSYLVANIA STATE ECONOMIC
DEVELOPMENT AUTHORITY RB,
AMBAC
6.000%, 07/01/06 3,000 3,169
6.000%, 07/01/07 5,000 5,288
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, AMBAC
5.000%, 06/15/19 5,000 4,331
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, DREXEL UNIVERSITY
6.000%, 05/01/24 4,075 3,932
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, DREXEL UNIVERSITY, MBIA
5.750%, 05/01/03 2,535 2,627
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, SERIES B
5.350%, 01/01/08 3,750 3,628
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, TEMPLE UNIVERSITY, MBIA
5.000%, 04/01/29 6,000 5,040
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, UNIVERSITY OF PENNSYLVANIA
HEALTH SERVICES PROJECT,
SERIES A
5.500%, 01/01/09 $3,000 $2,903
PENNSYLVANIA STATE HIGHER
EDUCATION FACILITIES AUTHORITY
RB, UNIVERSITY OF
PENNSYLVANIA PROJECT
5.600%, 01/01/10 500 484
PENNSYLVANIA STATE HOSPITAL
RB, GEISINGER HEALTH SYSTEMS
5.000%, 08/15/28 4,990 4,017
PENNSYLVANIA STATE HOUSING
FINANCE AGENCY RB, SERIES A
6.000%, 10/01/13 1,500 1,519
PENNSYLVANIA STATE INFRASTRUCTURE
INVESTMENT AUTHORITY RB,
WATER UTILITY IMPROVEMENTS,
MBIA
5.250%, 09/01/07 2,720 2,757
PENNSYLVANIA STATE PUBLIC
IMPROVEMENTS GO, SECOND
SERIES, FGIC
5.375%, 11/15/07 5,000 5,125
PENNSYLVANIA STATE UNIVERSITY
RB, GOI
5.300%, 08/15/03 5,000 5,119
PHILADELPHIA GO, FGIC
5.125%, 05/15/14 5,000 4,638
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB
5.250%, 07/01/17 1,000 931
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
FRANKLIN INSTITUTE PROJECT
5.200%, 06/15/18 2,100 1,885
5.200%, 06/15/26 3,100 2,604
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
GIRARD ESTATE COAL MINING
PROJECT
5.500%, 11/15/16 3,590 3,496
PHILADELPHIA, INDUSTRIAL
DEVELOPMENT AUTHORITY RB,
SERIES A, MBIA
6.000%, 02/15/07 1,365 1,443
PHILADELPHIA, JEFFERSON HEALTH
SYSTEMS RB, MBIA
5.500%, 05/15/05 1,000 1,013
PHILADELPHIA, JUSTICE LEASE
AUTHORITY RB, SERIES A, MBIA
7.100%, 11/15/06 4,095 4,397
28
29
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PHILADELPHIA, SCHOOL DISTRICT
GO, SERIES A, MBIA
5.300%, 07/01/04 $3,000 $ 3,075
PHILADELPHIA, TEMPLE
UNIVERSITY HOSPITAL RB,
SERIES A
6.625%, 11/15/23 5,100 4,928
PHILADELPHIA, WATER &
WASTEWATER RB, MBIA
6.250%, 08/01/07 3,000 3,229
6.250%, 08/01/08 2,150 2,317
PHILADELPHIA, WATER &
WASTEWATER RB,
SERIES A, AMBAC
5.000%, 08/01/22 5,000 4,275
PITTSBURGH & ALLEGHENY
COUNTIES, PUBLIC AUDITORIUM
RB, AMBAC
5.250%, 02/01/17 5,000 4,594
RIDLEY PARK, TAYLOR HOSPITAL RB,
SERIES A, ETM
6.000%, 12/01/05 755 775
SCRANTON-LACKAWANNA, MERCY
HEALTH HOSPITAL FACILITIES
RB, SERIES B, MBIA
5.625%, 01/01/16 2,000 1,938
WEST MIFFLIN, PENNSYLVANIA AREA
SCHOOL DISTRICT GO, FGIC
4.875%, 02/15/23 5,000 4,169
WEST SHORE, HOLY SPIRIT HOSPITAL
PROJECT RB, MBIA
5.600%, 01/01/13 500 497
- --------------------------------------------------------------------------------
TOTAL PENNSYLVANIA $191,239
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $199,305) $191,239
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 1.9%
BLACKROCK PENNSYLVANIA
MUNICPAL MONEY MARKET
PORTFOLIO 3,653 3,653
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $3,653) $ 3,653
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.2%
(Cost $202,958) $194,892
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.8% $ 1,554
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 20,300,995 outstanding
shares of beneficial interest $201,753
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value) based on
423,326 outstanding shares of beneficial
interest 4,272
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value) based on
5,462 outstanding shares of beneficial
interest 53
Undistributed net investment income 2
Accumulated net realized loss on investments (1,568)
Net unrealized depreciation on investments (8,066)
================================================================================
TOTAL NET ASSETS -- 100.0% $196,446
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $ 9.48
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE -- RETAIL CLASS A $ 9.47
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($9.47 / 95.50%) $ 9.92
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS B $ 9.48
================================================================================
ETM--ESCROWED TO MATURITY
GO--GENERAL OBLIGATION
RB--REVENUE BOND
THE FOLLOWING ORGANIZATIONS HAVE PROVIDED UNDERLYING CREDIT SUPPORT FOR
SECURITIES LISTED ABOVE, AS INDICATED.
AMBAC--AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
CNTY GTD--COUNTY GUARANTEED
CONLEE--COLLEGE CONSTRUCTION LOAN INSURANCE ASSOCIATION
FGIC--FINANCIAL GUARANTY INSURANCE CORPORATION
GOH--GENERAL OBLIGATION OF HOSPITAL
GOI--GENERAL OBLIGATION OF INSTITUTION
MBIA--MUNICIPAL BOND INSURANCE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
29
30
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
INTERMEDIATE FIXED INCOME PORTFOLIO
[photo omitted]
SUSAN L. SCHNAARS, CFA
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
SUSAN L. SCHNAARS, CFA, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. SHE
IS THE PORTFOLIO MANAGER OF THE INTERMEDIATE FIXED INCOME PORTFOLIO, MARYLAND
TAX-FREE PORTFOLIO, AND PENNSYLVANIA TAX-FREE PORTFOLIO. SHE HAS 10 YEARS OF
INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
We continue to follow our core strategy, positioning the Portfolio with a
bias for the spread sectors of the market, emphasizing the corporate, mortgage
and asset-backed sectors. The effective duration of the Portfolio at October 31,
1999 was 3.55 years. Effective duration is a measurement of the sensitivity of
the Portfolio to changes in interest rate.
So far this year, the Federal Reserve has taken back two of the three 1/4%
reductions in the targeted Fed Funds rate that it bestowed on the market last
fall. Uncertainty about the possibility of an additional increase in interest
rates continues to cloud the market. The yield curve has flattened during the
past six months with long-term interest rates rising 75 basis points, and the
yield on the ten-year Treasury note rising 90 basis points. The rise in interest
rates across the yield curve over the past year has caused bond prices to
depreciate enough to nearly erode the coupon returns/interest income generated
by bonds. Intermediate-term bonds fared better than longer-term bonds as
interest rates rose. Total returns in most long-duration segments of the broad
fixed income markets are negative on a 12-month basis; however, short- and
intermediate-duration assets have managed to generate a slightly positive
return. Spread widening, primarily due to the prospects of a flood of new issues
and thin liquidity in the market, as well as rising interest rates and swap
spread volatility, have hurt the corporate sector. Short-duration, high-quality
asset-backed securities, as well as mortgage-backed securities, continue to
perform very well on a relative basis. During the past six months we have taken
advantage of wider spreads and the weaker market by adding select names in the
corporate, asset-backed and agency sectors, emphasizing quality and liquidity.
In the weeks just prior to the end of the first six months of the fiscal
year, corporate spreads have begun to stabilize and in some cases improved as
supply fears have somewhat abated. We expect that supply will be slow going into
the end of the year as investors and corporations focus on and anticipate
year-end, and we expect technical factors in the sector to improve, leading to
better performance in the corporate sector. Mortgage-backed and asset-backed
securities continue to add value to the Portfolio as the expectations for
prepayments have slowed with the onset of higher interest rates.
30
31
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
In anticipation of increased interest rate volatility, as well as higher
interest rates, we are keeping the duration of the Portfolio relatively neutral
to that of the broad intermediate government/corporate segment of the bond
market. We expect that the Federal Reserve will raise short-term interest rates
an additional 25 basis points as early as the fourth quarter. We anticipate that
growth may remain strong through the end of the year as global economies
continue to show signs of growth and the manufacturing and consumer sectors
remain strong. Inflation should continue to remain benign, but any indication
that prices or wages are headed higher will cause volatility in interest rates.
PERFORMANCE AS OF
OCTOBER 31, 1999
LEHMAN LEHMAN LIPPER
INTERMEDIATE INTERMEDIATE INTERMEDIATE
INSTITUTIONAL GOV'T/CORP GOVERNMENT INVESTMENT
CLASS BOND BOND GRADE DEBT
- ----------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN -0.22% 0.99% 0.82% -0.07%
- ----------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 4.87% 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.
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.
STATEMENTS OF NET ASSETS
[pie chart omitted]
% OF TOTAL PORTFOLIO INVESTMENTS
Corporate Obligations -- 38%
U.S. Treasury Obligations -- 31%
U.S. Government Mortgage-Backed Obligations -- 11%
Asset-Backed Securities -- 10%
U.S. Government Agency Obligations -- 5%
Yankee Bonds -- 2%
Repurchase Agreements -- 2%
Preferred Convertible Stock -- 1%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 31.4%
U.S. TREASURY NOTES
6.375%, 01/15/00 $5,000 $ 5,010
7.500%, 11/15/01 3,000 3,094
6.250%, 02/28/02 5,500 5,547
5.500%, 03/31/03 3,000 2,959
5.375%, 06/30/03 1,000 981
7.875%, 11/15/04 7,500 8,078
6.500%, 05/15/05 2,000 2,036
6.250%, 02/15/07 6,000 6,023
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $34,094) $33,728
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 4.7%
FEDERAL HOME LOAN BANK
7.100%, 03/23/05 2,000 1,989
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.000%, 05/15/08 3,260 3,115
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $5,321) $ 5,104
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 11.5%
FEDERAL HOME LOAN BANK,
REMIC
6.634%, 02/20/04 200 200
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.500%, 05/01/08 573 562
6.500%, 10/01/08 2,064 2,024
6.500%, 07/01/09 2,716 2,664
6.000%, 04/01/11 1,811 1,741
31
32
FIXED INCOME PORTFOLIOS
INTERMEDIATE FIXED INCOME PORTFOLIO CONTINUED
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
6.250%, 07/25/08 $1,590 $ 1,552
6.000%, 11/25/28 1,169 1,151
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION
7.000%, 02/15/29 1,132 1,111
STUDENT LOAN MARKETING ASSOCIATION,
REMIC (A)
5.825%, 04/25/07 1,353 1,346
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS
(Cost $12,620) $12,351
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 40.4%
360 COMMUNICATIONS
7.500%, 03/01/06 1,385 1,392
ASSOCIATES NA, MTN
8.430%, 11/23/01 1,000 1,032
AT&T
6.000%, 03/15/09 1,500 1,387
AT&T CAPITAL
6.750%, 12/01/00 2,130 2,143
BANK OF NEW YORK
6.625%, 06/15/03 1,500 1,489
BANKAMERICA, MTN
7.125%, 05/12/05 1,500 1,491
CABLE & WIRELESS
COMMUNICATIONS
6.375%, 03/06/03 1,000 1,001
CANADIAN NATIONAL RAILWAY, YB
6.450%, 07/15/06 1,545 1,460
COLUMBUS SOUTHERN POWER,
MTN
6.510%, 02/01/08 1,250 1,200
COMCAST CABLEVISION
8.375%, 05/01/07 1,000 1,055
COMMERCIAL CREDIT
7.750%, 03/01/05 1,285 1,314
CONSECO
6.400%, 02/10/03 1,000 944
CSC HOLDINGS, SERIES B
8.125%, 08/15/09 1,000 1,001
DILLARD'S
6.690%, 08/01/07 1,370 1,274
FEDERAL-MOGUL
7.750%, 07/01/06 750 702
FIRST CHICAGO, MTN
6.700%, 03/15/02 1,500 1,500
FIRST UNION
8.770%, 11/15/04 1,350 1,352
FRED MEYER
7.375%, 03/01/05 1,000 989
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
GOLDEN STATE ESCROW
7.125%, 08/01/05 $1,000 $ 917
H.F. AHMANSON, WASHINGTON
MUTUAL
9.875%, 11/15/99 1,500 1,502
MERITA BANK, YB
6.500%, 01/15/06 1,350 1,279
MERRILL LYNCH
7.200%, 10/15/12 1,500 1,508
MOTOROLA
7.600%, 01/01/07 1,850 1,901
NATIONAL RURAL UTILITIES
7.300%, 09/15/06 1,250 1,252
NORWEST FINANCIAL
6.375%, 09/15/02 1,370 1,356
ORYX ENERGY
8.375%, 07/15/04 1,000 1,041
PROGRESSIVE
6.600%, 01/15/04 550 542
SARA LEE, MTN
6.150%, 06/19/08 1,700 1,609
SPRINT CAPITAL
6.125%, 11/15/08 1,500 1,388
STAR BANK NA-CINCINNATI
6.375%, 03/01/04 1,455 1,413
STORAGE USA
7.125%, 11/01/03 1,000 960
SUNTRUST BANKS
7.375%, 07/01/06 1,500 1,517
TIME WARNER
9.125%, 01/15/13 1,225 1,383
WORLDCOM
7.750%, 04/01/07 1,000 1,036
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $44,622) $43,330
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 9.8%
EQCC HOME EQUITY LOAN TRUST,
SERIES 1999-1, CLASS A3F
5.915%, 11/20/24 1,525 1,483
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-3, CLASS A4
6.840%, 10/20/13 679 678
KEY AUTO FINANCE TRUST,
SERIES 1999-1, CLASS A3
5.630%, 07/15/03 1,915 1,892
PP&L TRANSITION BOND
COMPANY LLC, SERIES 1999-1,
CLASS A1
6.080%, 03/25/03 1,000 996
32
33
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PREMIER AUTO TRUST,
SERIES 1996-2, CLASS A4
6.575%, 10/06/00 $ 365 $ 366
PREMIER AUTO TRUST,
SERIES 1998-4, CLASS A3
5.690%, 06/08/02 605 599
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1996-C, CLASS A4
7.400%, 06/15/21 1,427 1,425
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF5
6.555%, 12/15/38 1,620 1,566
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1998-B,
CLASS AF4
6.115%, 06/15/21 1,530 1,491
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $10,680) $ 10,496
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCK -- 0.8%
SPG PROPERTIES 20,000 863
- --------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCK
(Cost $1,012) $863
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.8%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99,
repurchase price $1,888,096
(collateralized by U.S.
Government Agency
Instrument: total market
value $1,949,951) 1,887 1,887
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,887) $ 1,887
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.4%
(Cost $110,236) $107,759
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (0.4%) $ (404)
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 11,131,416 outstanding
shares of beneficial interest $109,738
Undistributed net investment income 1
Accumulated net realized gain on investments 93
Net unrealized depreciation on investments (2,477)
================================================================================
TOTAL NET ASSETS-- 100.0% $107,355
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $9.64
================================================================================
(A) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON OCTOBER 31, 1999.
MTN--MEDIUM TERM NOTE
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
YB--YANKEE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
33
34
FIXED INCOME PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
U.S. GOVERNMENT BOND PORTFOLIO
[photo omitted]
STEVEN M. GRADOW
- --------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
STEVEN M. GRADOW IS THE MANAGING DIRECTOR OF FIXED INCOME INVESTMENTS FOR ALLIED
INVESTMENT ADVISORS, INC. HE IS THE PORTFOLIO MANAGER OF THE INCOME PORTFOLIO
AND CO-PORTFOLIO MANAGER OF THE U.S. GOVERNMENT BOND PORTFOLIO AND THE
SHORT-TERM BOND PORTFOLIO. HE HAS MORE THAN 15 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
[photo omitted]
N. BETH VOLK, CFA
- --------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
N. BETH VOLK, CFA, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. SHE IS THE
CO-PORTFOLIO MANAGER OF THE U.S. GOVERNMENT BOND PORTFOLIO AND OVERSEES CREDIT
RESEARCH FOR THE FIXED INCOME GROUP. SHE HAS MORE THAN 18 YEARS OF INVESTMENT
RESEARCH AND MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The two short-term interest rate hikes orchestrated by the Federal Reserve in
May and August have yet to take the steam out of the economy. Consumer
confidence remains high as evidenced by strong retail sales, and despite a sharp
increase in mortgage rates, the housing market also remains robust. While the
survey of business activity is pointing towards some downward trend, new factory
orders have registered a slight uptick, unemployment remains at a 30-year low,
and the global economy is definitely firming. Despite the continued presence of
some brewing storm clouds -- rising oil prices, the weak dollar, and a growing
trade deficit -- fixed income investors are comforted by well-disciplined
inflation. At this point the Fed's tightening only seems to be affecting stock
valuations. The recent shift in monetary policy to a negative bias signals the
Fed's frustration with the resilience of the economy and, we think, increases
the chances of a tightening at the November meeting.
In the face of a very narrow trading range in yields, performance of the
ARK U.S. Government Bond Portfolio has been helped by our duration which remains
slightly longer than our benchmark at 4.05 years. Our sector overweightings in
the higher-yielding mortgage-backed and asset-backed securities have also
contributed positively to our relative performance. Again this quarter we
decreased our weighting in longer-dated corporates, which had the additional
effect of reducing the duration profile of our corporate sector contribution. We
reinvested the proceeds in an intermediate-term corporate, thus maintaining our
overall sector weighting. Taking advantage of the relative stability of interest
rates and their higher yield, we added to our exposure to short-term
floating-rate agencies. These two actions helped our relative performance,
increased our overall weighting in intermediate duration instruments, and
retained the Portfolio's quality at a strong AA1.
PERFORMANCE AS OF
OCTOBER 31, 1999
LEHMAN LIPPER
INSTITUTIONAL RETAIL INTERMEDIATE INTERMEDIATE
CLASS CLASS A* GOV'T/CORP BOND U.S. GOV'T
- ----------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 0.14% 0.29% 0.99% -0.83%
- ----------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A -4.22% N/A N/A
- ----------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 4.52% 7.15% 5.80% 5.00%
- ----------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 5.52% N/A N/A
- ----------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 4.79% 6.99% N/A N/A
- ----------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 5.63% N/A N/A
- ----------------------------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
For Institutional Class Shares, performance presented prior 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 shown 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 7.98% without load and
4.86% with load.
The performance of the Lehman Intermediate Government/Corporate Index does not
include operating expenses that are incurred by the Portfolio.
34
35
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
STATEMENTS OF NET ASSETS
[pie chart omitted]
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Government Mortgage-Backed Obligations -- 32%
U.S. Treasury Obligations -- 24%
Corporate Obligations -- 20%
U.S. Government Agency Obligations -- 17%
Asset-Backed Securities -- 5%
Preferred Convertible Stock -- 2%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 23.9%
U.S. TREASURY BONDS
5.500%, 03/31/03 $18,000 $17,752
7.500%, 11/15/16 3,000 3,308
5.250%, 02/15/29 1,650 1,428
U.S. TREASURY NOTES
5.375%, 02/15/01 23,000 22,903
5.500%, 01/31/03 5,000 4,937
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $51,263) $50,328
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 17.1%
FEDERAL HOME LOAN BANK
5.375%, 03/02/01 10,000 9,907
FEDERAL HOME LOAN BANK (A)
5.595%, 07/14/00 10,000 9,978
FEDERAL HOME LOAN MORTGAGE
CORPORATION
5.750%, 04/15/08 3,000 2,818
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.000%, 05/15/08 6,500 6,212
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, MTN
6.470%, 09/25/12 7,500 7,213
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $37,370) $36,128
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 31.7%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
6.000%, 03/01/13 17,268 16,605
6.250%, 01/15/20 3,000 2,939
6.250%, 09/15/23 5,000 4,828
FEDERAL HOME LOAN MORTGAGE
CORPORATION, REMIC
6.000%, 04/15/21 5,000 4,823
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.500%, 10/25/23 $3,688 $ 3,674
7.000%, 09/01/27 3,095 3,054
6.500%, 08/01/28 4,969 4,766
6.500%, 08/01/28 2,667 2,558
6.500%, 08/01/28 5,560 5,333
6.500%, 08/31/28 4,474 4,291
6.500%, 03/01/29 4,894 4,690
6.500%, 03/01/29 3,907 3,744
7.000%, 03/01/29 2,924 2,871
6.500%, 05/01/29 2,940 2,818
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $69,204) $66,994
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 19.4%
ENTERTAINMENT -- 1.9%
CSC HOLDINGS
8.125%, 07/15/09 1,000 1,001
ROYAL CARIBBEAN CRUISES, YB
8.250%, 04/01/05 3,000 3,060
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 4,061
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 7.0%
AMVESCAP PLC, YB
6.375%, 05/15/03 2,500 2,359
CONSECO
6.400%, 02/10/03 3,000 2,831
GOLDEN STATE ESCROW
7.000%, 08/01/03 2,000 1,895
GREEN TREE FINANCIAL
10.250%, 06/01/02 2,000 2,077
MBNA, MTN (A)
5.863%, 12/20/99 800 800
NEWCOURT CREDIT
6.875%, 02/16/05 2,000 1,937
SPIEKER PROPERTIES LP
6.750%, 01/15/08 3,000 2,768
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $14,667
- --------------------------------------------------------------------------------
INDUSTRIAL -- 6.2%
FEDERAL-MOGUL
7.750%, 07/01/06 1,500 1,404
HUSKY OIL, YB (B)
7.550%, 11/15/16 2,000 1,825
NRG ENERGY
7.500%, 06/01/09 2,000 1,895
SAGA PETROLEUM A.S., YB (B)
9.125%, 07/15/14 4,000 4,465
TENNESSEE GAS PIPELINE
7.000%, 10/15/28 1,600 1,432
UNION PACIFIC
7.600%, 05/01/05 2,000 2,008
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL $13,029
- --------------------------------------------------------------------------------
35
36
FIXED INCOME PORTFOLIOS
U.S. GOVERNMENT BOND PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
RETAIL -- 0.9%
FRED MEYER
7.375%, 03/01/05 $2,000 $ 1,978
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 1,978
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 3.4%
360 COMMUNICATIONS
7.600%, 04/01/09 3,000 3,049
QWEST COMMUNICATIONS
INTERNATIONAL
7.250%, 11/01/08 1,000 965
SPRINT CAPITAL
6.125%, 11/15/08 2,500 2,313
6.900%, 05/01/19 1,000 934
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 7,261
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $43,605) $40,996
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 5.3%
CONTIMORTGAGE HOME EQUITY
LOAN TRUST, SERIES 1998-2,
CLASS A6
6.360%, 11/15/19 2,500 2,422
CONTINENTAL HOME EQUITY TRUST,
SERIES 1998-1, CLASS A6
6.580%, 12/15/18 3,000 2,969
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1996-C, CLASS A4
7.400%, 06/15/21 3,773 3,769
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF3
6.345%, 11/15/21 1,965 1,955
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $11,285) $ 11,115
- --------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCK -- 1.6%
SPG PROPERTIES 80,000 3,450
- --------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCK
(Cost $4,032) $ 3,450
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.0%
(Cost $216,759) $209,011
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.0% $ 2,176
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 21,928,731 outstanding
shares of beneficial interest $219,090
Portfolio Shares of Retail Class A
(unlimited authorization -- no par value)
based on 278,520 outstanding shares of
beneficial interest 2,761
Undistributed net investment income 37
Accumulated net realized loss on investments (2,953)
Net unrealized depreciation on investments (7,748)
================================================================================
TOTAL NET ASSETS -- 100.0% $211,187
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $ 9.51
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE -- RETAIL CLASS A $ 9.52
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($9.52 / 95.50%) $ 9.97
================================================================================
(A) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON OCTOBER 31, 1999.
(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.
MTN--MEDIUM TERM NOTE
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
YB--YANKEE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
36
37
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 MORE THAN 15 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
REVIEW AND OUTLOOK
The second half of 1999 saw a continuation of a difficult period for bond
markets. The strength of the consumer, together with a renewed vigor within the
manufacturing sector, has dampened investor expectations for a slowing economic
scenario and the potential for a major rally in the bond markets. This economic
strength (5.5% for the third quarter) together with a sustained trade deficit
and increasing commodity prices have alarmed the markets. Subsequently, in
August, the Federal Reserve raised short-term interest rates by 25 basis points.
Despite the continued presence of rising oil prices, a strong housing market and
a growing trade deficit, inflation has remained benign. We expect the Federal
Reserve to continue to take action to reduce the future threat of inflation,
which may warrant another rate hike by February.
Performance of the ARK Income Portfolio has been helped by a continued
overweighting of intermediate corporate and mortgage-backed securities. In the
quarter, we liquidated a number of 30-year corporate bonds to add to
intermediate corporate and current coupon mortgage positions. These securities,
together with a large asset-backed securities weighting, has helped performance
through enhancing the yield of the Portfolio. We remain guarded as to the
outlook for interest rates and expect to be slightly short of the interest rate
exposure versus the index. We are constructive as to the outlook for the
performance of corporate and mortgage securities and therefore continue to
overweight these areas of the market.
PERFORMANCE AS OF
OCTOBER 31, 1999
LEHMAN Lipper
INSTITUTIONAL RETAIL RETAIL AGGREGATE CORP. DEBT
CLASS CLASS A CLASS B* BOND A-RATED
- -----------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN -0.03% -0.10% -0.74% 0.53% -0.92%
- -----------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A -4.59% -5.46% N/A N/A
- -----------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 5.21% 5.03% 5.01% 6.18% 5.40%
- -----------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 3.44% 4.12% N/A N/A
- -----------------------------------------------------------------------------------------------------
ANNUALIZED 5 YEAR
TOTAL RETURN 7.07% 6.89% 6.95% 7.94% 7.09%
- -----------------------------------------------------------------------------------------------------
ANNUALIZED 5 YEAR
TOTAL RETURN WITH LOAD N/A 5.92% 6.65% N/A N/A
- -----------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 5.60% 6.10% 5.50% N/A N/A
- -----------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 5.22% 5.50% 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.
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 annualized
performance since inception for Retail Class B shares is -0.78% without CDSC and
- -4.10% with CDSC.
The performance of the Lehman Aggregate Bond Index does not include operating
expenses that are incurred by the Portfolio.
37
38
FIXED INCOME PORTFOLIOS
INCOME PORTFOLIO CONTINUED
STATEMENTS OF NET ASSETS
[pie chart omitted]
% OF TOTAL PORTFOLIO INVESTMENTS
Corporate Obligations -- 37%
U.S. Government Mortgage-Backed Obligations -- 28%
U.S. Treasury Obligations -- 20%
Asset-Backed Securities -- 5%
Yankee Bonds -- 5%
Repurchase Agreements -- 3%
Non-Agency Mortgage-Backed Obligations -- 1%
Preferred Convertible Stock -- 1%
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 23.5%
U.S. TREASURY BONDS
10.750%, 08/15/05 $15,000 $18,281
5.250%, 11/15/28 5,000 4,295
U.S. TREASURY NOTES
6.375%, 09/30/01 5,000 5,048
7.500%, 11/15/01 5,000 5,157
6.250%, 06/30/02 20,000 20,173
6.250%, 08/31/02 2,500 2,522
5.750%, 08/15/03 1,000 992
7.875%, 11/15/04 20,000 21,542
7.500%, 02/15/05 2,500 2,655
4.750%, 11/15/08 2,000 1,808
- ----------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $82,624) $82,473
- ----------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION -- 0.1%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
8.625%, 11/10/04 400 400
- ----------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATION
(Cost $409) $ 400
- ----------------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 33.3%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
8.500%, 11/01/01 23 24
9.000%, 01/01/02 15 16
8.000%, 01/01/08 67 69
14.750%, 03/01/10 23 28
8.500%, 09/01/26 745 772
FEDERAL HOME LOAN MORTGAGE
CORPORATION, GTD
9.000%, 09/15/08 21 22
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
7.000%, 02/01/26 $ 2,120 $ 2,082
7.000%, 03/01/29 1,825 1,793
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (A)
6.500%, 11/01/29 30,000 28,744
7.000%, 11/01/29 35,000 34,365
7.500%, 11/01/29 15,000 15,019
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
9.750%, 09/25/18 306 326
6.000%, 07/18/26 10,731 9,873
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION
7.500%, 05/15/22 578 579
7.500%, 10/15/23 2,440 2,447
7.500%, 12/15/23 1,099 1,102
7.000%, 02/15/24 3,027 2,969
7.000%, 05/15/24 2,977 2,920
7.000%, 05/15/24 3,089 3,030
7.500%, 05/15/24 2,228 2,234
7.500%, 10/15/24 1,825 1,830
7.000%, 09/20/25 1,201 1,173
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION, REMIC
7.750%, 06/16/20 1,000 1,024
STUDENT LOAN MARKETING
ASSOCIATION, REMIC (B)
5.825%, 04/25/07 4,316 4,292
- ------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS
(Cost $116,913) $116,733
- ------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 45.1%
BANKS -- 9.9%
BANK OF NEW YORK (C)
7.780%, 12/01/26 1,500 1,423
BANKAMERICA, SERIES A (C)
8.070%, 12/31/26 2,500 2,430
CRESTAR FINANCIAL
8.160%, 12/15/26 3,500 3,465
FIRST NATIONAL BANK CHICAGO (B)
5.380%, 04/13/00 10,000 9,997
FIRST UNION NATIONAL BANK (B)
5.571%, 05/16/00 10,000 9,999
MELLON CAPITAL I
7.720%, 12/01/26 2,500 2,350
NATIONSBANK (B)
5.405%, 04/05/00 5,000 4,979
- ------------------------------------------------------------------------------------------
TOTAL BANKS $ 34,643
- ------------------------------------------------------------------------------------------
38
39
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
ENTERTAINMENT -- 2.9%
COMCAST CABLEVISION
8.875%, 05/01/17 $ 2,000 $ 2,215
COMCAST CABLEVISION, MTN
8.375%, 05/01/07 2,725 2,875
CSC HOLDINGS
8.125%, 07/15/09 1,000 1,001
7.875%, 02/15/18 2,500 2,369
TIME WARNER
7.250%, 10/15/17 2,000 1,925
- -------------------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $10,385
- -------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 13.8%
AMERICAN EXPRESS CENTURION (B)
5.450%, 04/24/00 5,000 4,996
GOLDEN STATE ESCROW
7.000%, 08/01/03 4,500 4,264
7.125%, 08/01/05 2,000 1,834
GOLDMAN SACHS GROUP, MTN,
SERIES B (B)
5.560%, 08/07/00 8,000 8,000
MERRILL LYNCH, MTN,
SERIES B (B)
5.520%, 03/09/00 10,000 9,996
MORGAN STANLEY, DEAN WITTER,
DISCOVER, EURO MTN,
SERIES D (B)
5.661%, 12/19/01 7,380 7,368
NEWCOURT CREDIT
6.875%, 02/16/05 7,500 7,266
SPIEKER PROPERTIES LP
6.750%, 01/15/08 3,000 2,767
STORAGE USA
7.125%, 11/01/03 2,000 1,920
- -------------------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $48,411
- -------------------------------------------------------------------------------------------
INDUSTRIAL -- 8.3%
ANADARKO PETROLEUM
7.200%, 03/15/29 3,800 3,496
CANADIAN NATIONAL RAILWAY
6.450%, 07/15/06 2,000 1,890
CONAGRA (B) (C)
5.711%, 06/12/00 10,000 10,005
FEDERAL-MOGUL
7.750%, 07/01/06 3,400 3,183
J. SEAGRAM & SONS
7.500%, 12/15/18 4,000 3,815
ORYX ENERGY
9.500%, 11/01/99 1,000 1,000
8.375%, 07/15/04 1,000 1,041
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------------------------------------------------------------------------------------------
TENNESSEE GAS PIPELINE
7.000%, 10/15/28 $ 2,000 $ 1,790
UNION PACIFIC
7.600%, 05/01/05 3,000 3,011
- ----------------------------------------------------------------------------------------------
TOTAL INDUSTRIAL $ 29,231
- ----------------------------------------------------------------------------------------------
RETAIL -- 2.7%
DILLARD'S
5.790%, 11/15/01 2,000 1,945
7.000%, 12/01/28 3,000 2,595
FRED MEYER
7.375%, 03/01/05 5,000 4,944
- ----------------------------------------------------------------------------------------------
TOTAL RETAIL $ 9,484
- ----------------------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 5.0%
360 COMMUNICATIONS
7.600%, 04/01/09 4,000 4,065
AT&T CANANDA (C)
7.650%, 09/15/06 2,000 2,003
GTE SOUTH
6.125%, 06/15/07 2,000 1,880
QWEST COMMUNICATIONS INTERNATIONAL
7.250%, 11/01/08 5,000 4,825
SPRINT CAPITAL
6.900%, 05/01/19 5,000 4,669
- ----------------------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 17,442
- ----------------------------------------------------------------------------------------------
UTILITIES -- 2.5%
NRG ENERGY
7.500%, 06/01/09 4,000 3,790
PUGET SOUND ENERGY, MTN
7.250%, 12/10/99 5,000 5,000
- ----------------------------------------------------------------------------------------------
TOTAL UTILITIES $ 8,790
- ----------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $162,209) $158,386
- ----------------------------------------------------------------------------------------------
YANKEE BONDS -- 6.2%
AMVESCAP PLC, SERIES REGS
6.375%, 05/15/03 2,000 1,888
BANK OF MONTREAL CHICAGO (B)
5.395%, 03/30/00 10,000 9,995
GULF CANADA RESOURCES
8.250%, 03/15/17 2,000 1,855
HUSKY OIL (C)
7.550%, 11/15/16 2,100 1,916
ROYAL CARIBBEAN CRUISES
7.250%, 08/15/06 5,000 4,838
SAGA PETROLEUM A.S. (C)
9.125%, 07/15/14 1,000 1,116
- ----------------------------------------------------------------------------------------------
TOTAL YANKEE BONDS
(Cost $22,325) $ 21,608
- ----------------------------------------------------------------------------------------------
39
40
FIXED INCOME PORTFOLIOS
INCOME PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -----------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 6.6%
CITIBANK CREDIT CARD MASTER
TRUST I, SERIES 1998-9, CLASS A
5.300%, 01/09/06 $2,000 $ 1,888
CONTINENTAL HOME EQUITY TRUST,
SERIES 1998-1, CLASS A6
6.580%, 12/15/18 3,000 2,969
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-2, CLASS A3
6.940%, 11/20/11 1,567 1,565
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-3, CLASS A4
6.840%, 10/20/13 2,038 2,034
L.A. ARENA FUNDING,
SERIES 99-1, CLASS A
7.656%, 12/15/26 2,000 1,833
PREMIER AUTO TRUST,
SERIES 1996-2, CLASS A4
6.575%, 10/06/00 1,068 1,070
PREMIER AUTO TRUST,
SERIES 1998-3, CLASS A3
5.880%, 12/08/01 2,800 2,783
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1996-C, CLASS A4
7.400%, 06/15/21 2,830 2,826
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF3
6.345%, 11/15/21 1,965 1,955
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF5
6.555%, 12/15/38 4,350 4,205
- -----------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $23,646) $ 23,128
- -----------------------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATION -- 1.4%
COUNTRYWIDE FUNDING,
SERIES 1994-4, CLASS A12
6.950%, 04/25/24 5,452 5,008
- -----------------------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED
OBLIGATION
(Cost $5,175) $ 5,008
- -----------------------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCK -- 1.1%
SPG PROPERTIES 90,000 3,881
- -----------------------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCK
(Cost $4,573) $ 3,881
- -----------------------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.6%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99,
repurchase price $12,478,268
(collateralized by U.S.
Government Agency
Instruments: total market
value $12,855,584) $12,473 $ 12,473
- ----------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $12,473) $ 12,473
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 120.9%
(Cost $430,347) $424,090
====================================================================================================
OTHER ASSETS AND LIABILITIES, NET-- (20.9%) $(73,165)
====================================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 35,312,632 outstanding
shares of beneficial interest $355,597
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 737,225 outstanding shares
of beneficial interest 7,606
Portfolio Shares of Retail Class B (unlimited
authorization -- no par value)
based on 42,917 outstanding shares
of beneficial interest 435
Undistributed net investment income 49
Accumulated net realized loss on investments (6,505)
Net unrealized depreciation on investments (6,257)
====================================================================================================
TOTAL NET ASSETS -- 100.0% $350,925
====================================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $9.72
====================================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $9.84
====================================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($9.84 / 95.50%) $10.30
====================================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS B $9.72
====================================================================================================
(A) WHEN ISSUED SECURITY (TOTAL COST $77,915,625)
(B) VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON OCTOBER 31, 1999.
(C) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION,
NORMALLY QUALIFIED TO INSTITUTIONAL INVESTORS.
GTD--GUARANTEED MORTGAGE CERTIFICATE
MTN--MEDIUM TERM NOTE
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
40
41
EQUITY PORTFOLIOS
MANAGEMENT DISCUSSION AND ANALYSIS
BALANCED PORTFOLIO
[photo omitted]
CHARLES E. KNUDSEN, CFA
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
CHARLES E. KNUDSEN, CFA, IS THE MANAGING DIRECTOR OF ALLIED INVESTMENT ADVISORS,
INC. HE IS THE PORTFOLIO MANAGER OF THE BALANCED PORTFOLIO. HE HAS MORE THAN 11
YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
Oh, how quickly investors can change their minds. For most of the past six
months, they worried. Would economic growth remain robust? Would inflation
re-emerge? How many times more would the Federal Reserve have to raise interest
rates (it raised rates by 25 basis points in August and by 25 in September)? Was
the record economic recovery going to come to an end? Would Y2K destroy
civilization as we know it? With all this to fret about, stock prices trended
lower. That is, until the last two days of October, when, apparently, someone
decided that the sky wasn't going to fall. The result was a two-day 5% surge in
stock prices. Even with that rise in prices, the S&P 500 returned only 2.7% for
the six months. The Federal Reserve's two increases in interest rates during the
summer pushed all interest rates higher and led to a -0.15% return for the
Lehman Aggregate Bond Index. In fact, other than 1994, this may turn out to be
the toughest year for bonds in 20 years!
The ARK Balanced Portfolio was able to weather the turbulence over the past
six months very well. Its performance during the period not only outperformed
its peer group, it also outperformed the S&P 500 and the Lehman Aggregate
indexes. Long term results continue to trend well, too.
In an effort to reduce the risk profile of the Portfolio, we began shifting
assets out of stocks into cash so that our allocation at quarter's end was 11%
cash, 59% stocks and about 30% bonds. Given the uncertainty that currently
exists, we would not expect to reverse this posture, although conditions can and
do change quickly.
Our shift into telecommunications and related stocks earlier in the year
has proven to be quite opportune. In fact, most of the Portfolio's better
performing stocks, namely Voicestream Wireless, Sprint PCS, and Comverse
Technology, were recently in those sectors. We have been adding to some of the
banking and finance stocks, which have been hit with concerns from rising
interest rates and are now trading at relatively attractive valuations. Also,
some of the consumer-related names, like Dial and Royal Caribbean Cruises,
present what we deem to be very attractive investment opportunities.
Interestingly, just over 50% (259) of the S&P 500 component companies have a P/E
ratio of less than 17 times next year's estimated earnings. In other words,
there are lots of stocks that are selling at valuations that are far from
astronomical.
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.
41
42
BALANCED PORTFOLIO CONTINUED
PERFORMANCE AS OF
OCTOBER 31, 1999
60/40 BLEND
OF THE S&P 500 LEHMAN
INST'L Retail Retail S&P 500 LIPPER COMPOSITE AGGREGATE
Class Class A Class B* & LEHMAN** BALANCED INDEX BOND
- -----------------------------------------------------------------------------------------------------------------------
One Year
Total Return 24.70% 24.65% 23.64% 15.19% 11.30% 25.67% 0.53%
- -----------------------------------------------------------------------------------------------------------------------
One Year
Total Return with Load N/A 18.74% 18.64% N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Annualized 3 Year
Total Return 20.47% 20.23% 20.09% 18.37% 13.35% 26.52% 6.18%
- -----------------------------------------------------------------------------------------------------------------------
Annualized 3 Year
Total Return With Load N/A 18.31% 19.39% N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Annualized 5 Year
Total Return 16.65% 16.34% 16.43% 18.73% 14.83% 26.01% 7.94%
- -----------------------------------------------------------------------------------------------------------------------
Annualized 5 Year
Total Return With Load N/A 15.20% 16.21% N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 14.06% 13.94% 13.89% N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date With Load N/A 12.96% 13.89% N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
STATEMENTS OF NET ASSETS
[pie chart omitted]
% OF TOTAL PORTFOLIO INVESTMENTS
Common Stocks -- 61%
Repurchase Agreements -- 10%
Corporate Obligations -- 10%
U.S. Government Mortgage-Backed Obligations -- 8%
U.S. Treasury Obligations -- 5%
Commercial Paper -- 3%
Non-Agency Mortgage-Backed Obligations -- 1%
Asset-Backed Securities -- 1%
U.S. Government Agency Obligations -- 1%
MARKET
DESCRIPTION SHARES VALUE (000)
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS -- 60.1%
AIRCRAFT -- 0.6%
UNITED TECHNOLOGIES 20,000 $1,210
- ----------------------------------------------------------------------------------------------------
TOTAL AIRCRAFT $1,210
- ----------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 0.5%
BORG-WARNER AUTOMOTIVE 25,000 987
- ----------------------------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 987
- ----------------------------------------------------------------------------------------------------
BANKS -- 3.2%
BANK ONE 29,200 1,097
CHASE MANHATTAN 20,000 1,747
WASHINGTON MUTUAL 30,000 1,078
WELLS FARGO 45,000 2,154
- ----------------------------------------------------------------------------------------------------
TOTAL BANKS $6,076
- ----------------------------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING-- 2.1%
MEDIAONE GROUP* 25,000 1,777
YOUNG & RUBICAM 49,375 2,259
- ----------------------------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $4,036
- ----------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 4.1%
CIENA* 30,000 1,057
CISCO SYSTEMS* 34,000 2,516
MOTOROLA 25,000 2,436
NOKIA, CL A, ADR 15,000 1,733
- ----------------------------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $7,742
- ----------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 0.7%
MICROSOFT* 15,000 1,388
- ----------------------------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $1,388
- ----------------------------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 4.7%
AMERICAN POWER CONVERSION* 60,000 1,346
ELECTRONICS FOR IMAGING* 40,000 1,612
EMC* 36,000 2,628
JABIL CIRCUIT* 40,000 2,090
LEXMARK INTERNATIONAL GROUP,
CL A* 15,000 1,171
- ----------------------------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $8,847
- ----------------------------------------------------------------------------------------------------
42
43
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------------------------
DRUGS -- 5.2%
ABBOTT LABORATORIES 25,000 $1,009
AMGEN* 35,000 2,791
BRISTOL-MYERS SQUIBB 30,000 2,304
SCHERING PLOUGH 20,000 990
WARNER LAMBERT 35,000 2,793
- -----------------------------------------------------------------------------------------------
TOTAL DRUGS $9,887
- -----------------------------------------------------------------------------------------------
ENERGY -- 0.8%
HALLIBURTON 40,000 1,508
- -----------------------------------------------------------------------------------------------
TOTAL ENERGY $1,508
- -----------------------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 0.9%
GENERAL ELECTRIC 13,000 1,762
- -----------------------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $1,762
- -----------------------------------------------------------------------------------------------
ENTERTAINMENT -- 4.4%
AT&T-LIBERTY MEDIA, CL A* 37,834 1,502
CBS 25,000 1,220
ROYAL CARIBBEAN CRUISES 60,000 3,184
TIME WARNER 25,000 1,742
WALT DISNEY 28,000 739
- -----------------------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $8,387
- -----------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.8%
CITIGROUP 52,500 2,842
FREDDIE MAC 30,000 1,622
MERRILL LYNCH 20,000 1,570
MORGAN STANLEY, DEAN WITTER,
DISCOVER 20,000 2,206
WADDELL & REED FINANCIAL,
CL A 40,000 960
- -----------------------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $9,200
- -----------------------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 3.3%
PEPSICO 60,000 2,081
RALSTON PURINA GROUP 60,000 1,886
SEAGRAM 45,000 2,222
- -----------------------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $6,189
- -----------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS & APPLIANCES -- 3.4%
COLGATE-PALMOLIVE 30,000 1,815
DIAL 95,000 2,221
PROCTER & GAMBLE 15,000 1,573
WINDMERE-DURABLE HOLDINGS 70,000 910
- -----------------------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS & APPLIANCES $6,519
- -----------------------------------------------------------------------------------------------
INSURANCE -- 1.1%
AMERICAN INTERNATIONAL GROUP 20,468 2,107
- -----------------------------------------------------------------------------------------------
TOTAL INSURANCE $2,107
- -----------------------------------------------------------------------------------------------
INTERNET SERVICES -- 1.6%
AKAMAI TECHNOLOGIES* 200 29
NORTEL NETWORKS 50,000 3,097
- -----------------------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $3,126
- -----------------------------------------------------------------------------------------------
INTERNET SERVICE PROVIDERS -- 0.7%
AMERICA ONLINE* 10,000 1,297
- -----------------------------------------------------------------------------------------------
TOTAL INTERNET SERVICE PROVIDERS $1,297
- -----------------------------------------------------------------------------------------------
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------------
MACHINERY -- 0.5%
BLACK & DECKER 20,000 $ 860
- --------------------------------------------------------------------------------------------------
TOTAL MACHINERY $ 860
- --------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 1.7%
GUIDANT 35,000 1,728
JOHNSON & JOHNSON 15,000 1,571
- --------------------------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 3,299
- --------------------------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 3.3%
CENDANT* 125,000 2,063
FIRST DATA 30,000 1,371
ORACLE SYSTEMS* 40,000 1,903
USWEB* 25,000 969
- --------------------------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 6,306
- --------------------------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.8%
KIMBERLY-CLARK 25,000 1,578
- --------------------------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 1,578
- --------------------------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 0.5%
SMITH INTERNATIONAL* 25,000 864
- --------------------------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 864
- --------------------------------------------------------------------------------------------------
RETAIL -- 3.0%
DAYTON HUDSON 24,000 1,551
HOME DEPOT 20,000 1,510
LINENS 'N THINGS* 33,000 1,312
WAL-MART STORES 22,000 1,247
- --------------------------------------------------------------------------------------------------
TOTAL RETAIL $ 5,620
- --------------------------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 2.4%
INTEL 30,000 2,323
TEXAS INSTRUMENTS 24,000 2,154
- --------------------------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 4,477
- --------------------------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 5.8%
ALLTEL 15,000 1,249
COMVERSE TECHNOLOGY* 25,000 2,837
MCI WORLDCOM* 23,000 1,974
SPRINT PCS GROUP* 25,000 2,073
VOICESTREAM WIRELESS* 20,000 1,975
WILLIAMS COMMUNICATION
GROUP* 30,000 956
- --------------------------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 11,064
- --------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $72,165) $114,336
- --------------------------------------------------------------------------------------------------
PREFERRED CONVERTIBLE STOCK -- 0.2%
SPG PROPERTIES 8,000 345
- --------------------------------------------------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCK
(Cost $408) $ 345
- --------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 5.2%
U.S. TREASURY BONDS
8.000%, 11/15/21 500 587
6.125%, 11/15/27 60 58
5.500%, 08/15/28 60 53
5.250%, 11/15/28 500 430
43
44
EQUITY PORTFOLIOS
BALANCED PORTFOLIO CONTINUED
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES
7.750%, 02/15/01 $2,000 $ 2,050
7.500%, 11/15/01 1,000 1,031
7.500%, 02/15/05 3,000 3,187
6.625%, 05/15/07 2,500 2,563
- ------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $10,318) $ 9,959
- ------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 0.9%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
6.000%, 05/15/08 1,750 1,672
- ------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,782) $ 1,672
- ------------------------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 8.0%
FEDERAL HOME LOAN MORTGAGE
CORPORATION
8.500%, 11/01/01 11 12
9.000%, 01/01/02 16 17
9.500%, 07/01/02 2 3
6.500%, 04/01/08 671 658
8.500%, 09/01/26 82 86
7.000%, 08/01/29 1,096 1,077
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
10.500%, 12/01/00 1 1
7.000%, 02/01/07 207 207
7.000%, 12/01/25 677 666
7.000%, 02/01/26 452 444
6.500%, 04/01/28 519 498
6.500%, 10/01/28 488 468
6.500%, 02/11/29 1,855 1,778
6.500%, 04/01/29 1,977 1,894
6.500%, 06/01/29 995 955
7.000%, 06/01/29 1,971 1,935
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC
9.750%, 09/25/18 102 109
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION
7.500%, 10/15/23 720 723
7.500%, 12/15/23 732 734
7.000%, 02/15/24 876 859
7.000%, 05/15/24 893 876
7.000%, 05/15/24 926 909
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION, REMIC
7.750%, 06/16/20 300 307
- ------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS
(Cost $15,429) $ 15,216
- ------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 10.0%
BANKS -- 1.6%
BANK OF NEW YORK (A)
7.780%, 12/01/26 $ 500 $ 474
CRESTAR FINANCIAL
8.160%, 12/15/26 800 792
FIRST INTERSTATE BANCORP
9.000%, 11/15/04 1,750 1,752
- --------------------------------------------------------------------------------
TOTAL BANKS $ 3,018
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 2.1%
COMCAST CABLEVISION, MTN
8.375%, 05/01/07 500 528
CSC HOLDINGS
8.125%, 07/15/09 1,000 1,001
7.875%, 02/15/18 250 237
ROYAL CARIBBEAN CRUISES, YB
7.250%, 08/15/06 900 871
TIME WARNER
9.125%, 01/15/13 750 847
VIACOM
6.750%, 01/15/03 500 493
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 3,977
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 2.3%
ASSOCIATES N.A.
5.500%, 02/15/04 500 473
AT&T CAPITAL, MTN
7.500%, 11/15/00 1,000 1,014
GOLDEN STATE ESCROW
7.000%, 08/01/03 1,000 948
HOUSEHOLD FINANCE
7.250%, 05/15/06 1,000 994
NEWCOURT CREDIT
6.875%, 02/16/05 1,000 969
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 4,398
- --------------------------------------------------------------------------------
INDUSTRIAL -- 1.7%
APACHE
7.625%, 07/01/19 1,000 983
CANADIAN NATIONAL RAILWAY
6.900%, 07/15/28 500 445
HUSKY OIL, YB (A)
7.550%, 11/15/16 725 662
HYDRO-QUEBEC, YB
7.500%, 04/01/16 375 374
J SEAGRAM & SONS
7.500%, 12/15/18 500 477
ORYX ENERGY
8.125%, 10/15/05 250 258
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL $ 3,199
- --------------------------------------------------------------------------------
RETAIL -- 0.6%
DILLARD'S
7.000%, 12/01/28 750 649
FRED MEYER
7.375%, 03/01/05 500 494
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 1,143
- --------------------------------------------------------------------------------
44
45
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 1.7%
360 COMMUNICATIONS
7.600%, 04/01/09 $ 750 $ 762
QWEST COMMUNICATIONS
INTERNATIONAL
7.250%, 11/01/08 1,000 965
SPRINT CAPITAL
6.125%, 11/15/08 1,000 925
WORLDCOM
7.550%, 04/01/04 500 511
- --------------------------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 3,163
- --------------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $19,550) $18,898
- --------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.6%
CONAGRA
5.430%, 11/15/99 5,000 4,989
- --------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $4,989) $ 4,989
- --------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 1.4%
CONTIMORTGAGE HOME EQUITY
LOAN TRUST, SERIES 1998-2,
CLASS A6
6.360%, 11/15/19 350 339
CONTINENTAL HOME EQUITY TRUST,
SERIES 1998-1, CLASS A4
6.280%, 01/15/13 450 446
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-2, CLASS A3
6.940%, 11/20/11 156 156
IMC HOME EQUITY LOAN TRUST,
SERIES 1997-3, CLASS A4
6.840%, 10/20/13 237 237
MDC ASSET INVESTORS TRUST,
SERIES XII, CLASS 3
8.940%, 03/01/18 5 5
PREMIER AUTO TRUST,
SERIES 1996-2, CLASS A4
6.575%, 10/06/00 156 157
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1996-C, CLASS A4
7.400%, 06/15/21 330 330
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1997-D, CLASS AF3
6.345%, 11/15/21 184 183
THE MONEY STORE HOME EQUITY
TRUST, SERIES 1998-B, CLASS AF4
6.115%, 06/15/21 900 877
- --------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $2,769) $ 2,730
- --------------------------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED OBLIGATION -- 0.5%
COUNTRYWIDE FUNDING,
SERIES 1994-4, CLASS A12
6.950%, 04/25/24 968 890
- --------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------------------------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-
BACKED OBLIGATION
(Cost $920) $ 890
- ----------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 9.2%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99, repurchase
price $17,553,324 (collateralized
by U.S. Government Agency
Instruments: total market
value $18,082,648) $17,546 $ 17,546
- ----------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $17,546) $ 17,546
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.1%
(Cost $145,876) $186,581
====================================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.9% $ 3,527
====================================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 9,812,951 outstanding
shares of beneficial interest 107,227
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 2,202,799 outstanding shares
of beneficial interest 28,478
Portfolio Shares of Retail ClassB (unlimited
authorization -- no par value)
based on 398,763 outstanding shares
of beneficial interest 5,753
Undistributed net investment income 350
Accumulated net realized gain on investments 7,595
Net unrealized appreciation on investments 40,705
====================================================================================================
TOTAL NET ASSETS -- 100.0% $ 190,108
====================================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $15.32
====================================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $15.27
====================================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($15.27 / 95.25%) $16.03
====================================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS B $15.26
====================================================================================================
* 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
REMIC -- REAL ESTATE MORTGAGE INVESTMENT CONDUIT
YB -- YANKEE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
45
46
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
EQUITY INCOME PORTFOLIO
[photo omitted]
CLYDE L. RANDALL, CFA
- --------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
CLYDE L. RANDALL, CFA, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE IS
THE CO-PORTFOLIO MANAGER OF THE BLUE CHIP EQUITY PORTFOLIO AND THE EQUITY INCOME
PORTFOLIO. HE HAS MORE THAN 12 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
[photo omitted]
ALLEN J. ASHCROFT, JR.
- --------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
ALLEN J. ASHCROFT, JR. IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE IS
THE CO-PORTFOLIO MANAGER OF THE BLUE CHIP EQUITY PORTFOLIO AND THE EQUITY INCOME
PORTFOLIO. HE HAS MORE THAN 18 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
Equity income funds as a class have continued to trail the broad stock market
averages as the technology juggernaut, which began in October of 1998, has
continued almost unabated. The only difference in the market in 1999 has been
the inclusion of telecommunications as a favored sector. During this interim
period, the ARK Equity Income Portfolio had a total return of -3.7%, in line
with the value benchmarks, although the recent performance has been much better.
Equity income funds tend to invest in the higher yielding sectors of the stock
market. During this fiscal year, utility, energy, financial, basic industry and
real estate stocks have had negative returns. The bright spot has been
telecommunication, where some of our recent additions have performed well. This
Portfolio has a broad representation in the market and we are not significantly
overweighted in the traditional high-income sectors.
We continue to seek stocks with an attractive combination of current yield
and dividend growth, as well as opportunities with above-average yields, which
also appear undervalued by other financial measures. While we continue to buy
dividend-paying stocks, we have begun to purchase lower absolute yields than we
have historically, in order to broaden the Portfolio's exposure. This has
benefited the Portfolio's returns as recent additions like Motorola, Sprint and
Nortel Networks have been our best stocks. Other recent additions have include
CVS, Williams Cos., United Technologies, TRW and Montana Power.
PERFORMANCE AS OF
OCTOBER 31, 1999
LIPPER S&P 500
Institutional Retail EQUITY COMPOSITE
Class Class A INCOME INDEX
- --------------------------------------------------------------------------------
One Year
Total Return 4.01% 3.89% 9.57% 25.67%
- --------------------------------------------------------------------------------
One Year
Total Return with Load N/A -1.01% N/A N/A
- --------------------------------------------------------------------------------
Annualized Total Return
Inception to Date 13.12% 10.74% N/A N/A
- --------------------------------------------------------------------------------
Annualized Total Return
Inception to Date With Load N/A 8.58% 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 in the table begins at the inception dates.
The performance of the S&P 500 Composite Index does not include operating
expenses which are incurred by the Portfolio.
46
47
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
STATEMENTS OF NET ASSETS
[pie chart omitted]
% OF TOTAL PORTFOLIO INVESTMENTS
Financial -- 17%
Durable Goods -- 13%
Chemicals & Drugs -- 13%
Technology -- 12%
Energy -- 11%
Consumer Non-Durable -- 10%
Miscellaneous Business Services -- 8%
Convertible Preferred Stock -- 5%
Transportation -- 5%
Real Estate Investment Trusts -- 4%
Repurchase Agreements -- 2%
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------------------------------------
COMMON STOCKS -- 91.6%
AIRCRAFT & AIR TRANSPORTATION -- 3.3%
ROCKWELL INTERNATIONAL 30,000 $ 1,453
UNITED TECHNOLOGIES 25,000 1,512
- ------------------------------------------------------------------------------------------
TOTAL AIRCRAFT & AIR TRANSPORTATION $ 2,965
- ------------------------------------------------------------------------------------------
AUTOMOTIVE -- 3.7%
FORD MOTOR 30,000 1,646
TRW 40,000 1,715
- ------------------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 3,361
- ------------------------------------------------------------------------------------------
BANKS -- 12.3%
CHASE MANHATTAN 20,000 1,747
FLEET BOSTON 50,000 2,181
PNC 20,000 1,193
UNION PLANTERS 50,000 2,225
WASHINGTON MUTUAL 38,000 1,366
WELLS FARGO 50,000 2,394
- ------------------------------------------------------------------------------------------
TOTAL BANKS $11,106
- ------------------------------------------------------------------------------------------
CHEMICALS -- 1.8%
E.I. DU PONT DE NEMOURS 25,000 1,611
- ------------------------------------------------------------------------------------------
TOTAL CHEMICALS $ 1,611
- ------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 3.6%
KONINKLIJKE (ROYAL) PHILIPS
ELECTRONICS N.V. 19,320 2,008
MOTOROLA 13,000 1,267
- ------------------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $ 3,275
- ------------------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 1.1%
HEWLETT PACKARD 14,000 1,037
- ------------------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 1,037
- ------------------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------------------
DRUGS -- 11.1%
ABBOTT LABORATORIES 60,000 $ 2,423
AMERICAN HOME PRODUCTS 30,000 1,568
BRISTOL-MYERS SQUIBB 40,000 3,073
WARNER LAMBERT 37,000 2,953
- -----------------------------------------------------------------------------------------
TOTAL DRUGS $10,017
- -----------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 5.7%
ILLINOVA 75,000 2,386
MONTANA POWER 30,000 853
UNICOM 50,000 1,916
- -----------------------------------------------------------------------------------------
TOTAL ELECTRIC UTILITIES $ 5,155
- -----------------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 2.3%
GENERAL ELECTRIC 15,000 2,033
- -----------------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $ 2,033
- -----------------------------------------------------------------------------------------
ENERGY -- 2.1%
HALLIBURTON 50,000 1,884
- -----------------------------------------------------------------------------------------
TOTAL ENERGY $ 1,884
- -----------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 2.7%
WADDELL & REED FINANCIAL,
CL A 100,000 2,400
- -----------------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 2,400
- -----------------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 4.7%
H.J. HEINZ 35,000 1,671
PEPSICO 45,000 1,561
PHILIP MORRIS 40,000 1,008
- -----------------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 4,240
- -----------------------------------------------------------------------------------------
GAS/NATURAL GAS -- 1.5%
WILLIAMS 35,000 1,313
- -----------------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $ 1,313
- -----------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.7%
COLGATE PALMOLIVE 40,000 2,420
- -----------------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 2,420
- -----------------------------------------------------------------------------------------
INSURANCE -- 1.7%
HARTFORD FINANCIAL SERVICES
GROUP 30,000 1,554
- -----------------------------------------------------------------------------------------
TOTAL INSURANCE $ 1,554
- -----------------------------------------------------------------------------------------
47
48
EQUITY PORTFOLIOS
EQUITY INCOME PORTFOLIO CONTINUED
MARKET
DESCRIPTION SHARES VALUE (000)
- ----------------------------------------------------------------------------------------------
INTERNET SERVICES -- 1.5%
NORTEL NETWORKS 22,000 $ 1,363
- ----------------------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $ 1,363
- ----------------------------------------------------------------------------------------------
LEASING & RENTING -- 1.5%
PITNEY BOWES 30,000 1,367
- ----------------------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 1,367
- ----------------------------------------------------------------------------------------------
MACHINERY -- 1.2%
INGERSOLL RAND 20,000 1,045
- ----------------------------------------------------------------------------------------------
TOTAL MACHINERY $ 1,045
- ----------------------------------------------------------------------------------------------
MARINE TRANSPORTATION -- 1.3%
KNIGHTSBRIDGE TANKERS
LIMITED 75,000 1,153
- ----------------------------------------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $ 1,153
- ----------------------------------------------------------------------------------------------
MEASURING DEVICES -- 1.2%
HONEYWELL 10,000 1,054
- ----------------------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 1,054
- ----------------------------------------------------------------------------------------------
PETROLEUM REFINING -- 7.6%
CHEVRON 25,000 2,283
MOBIL 25,000 2,413
TEXACO 35,000 2,148
- ----------------------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 6,844
- ----------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 3.4%
BOSTON PROPERTIES 36,000 1,073
DUKE REALTY INVESTMENTS 50,000 981
SPIEKER PROPERTIES 30,000 1,048
- ----------------------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS $ 3,102
- ----------------------------------------------------------------------------------------------
RETAIL -- 2.3%
CVS 25,000 1,086
DAYTON HUDSON 15,000 969
- ----------------------------------------------------------------------------------------------
TOTAL RETAIL $ 2,055
- ----------------------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 10.1%
BELLSOUTH 45,000 2,025
SPRINT 30,000 2,229
TELEFONICA DE ESPANA, ADR 53,058 2,650
US WEST 35,900 2,192
- ----------------------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 9,096
- ----------------------------------------------------------------------------------------------
WHOLESALE -- 1.2%
W.W. GRAINGER 25,000 1,059
- ----------------------------------------------------------------------------------------------
TOTAL WHOLESALE $ 1,059
- ----------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $60,583) $82,509
- ----------------------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 5.2%
HOUSTON INDUSTRIES 13,500 $ 1,549
NISOURCE 22,500 925
RALSTON PURINA 25,000 1,039
WBK STRYPES TRUST 40,000 1,200
- ------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK
(Cost $4,245) $ 4,713
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.7%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99, repurchase
price $1,525,193 (collateralized
by U.S. Government Agency
Instrument: total market
value $1,570,703) 1,525 1,525
- ------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,525) $ 1,525
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.5%
(Cost $66,353) $88,747
================================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.5% $ 1,362
================================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 7,547,566 outstanding
shares of beneficial interest $60,887
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 288,291 outstanding shares
of beneficial interest 3,538
Distribution in excess of net investment income (6)
Accumulated net realized gain on investments 3,296
Net unrealized appreciation on investments 22,394
================================================================================================
TOTAL NET ASSETS -- 100.0% $90,109
================================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $ 11.50
================================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $ 11.49
================================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($11.49 / 95.25%) $ 12.06
================================================================================================
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
48
49
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
VALUE EQUITY PORTFOLIO
J. ERIC LEO
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
J. ERIC LEO IS THE CHIEF INVESTMENT OFFICER AND MANAGING DIRECTOR OF EQUITY
INVESTMENTS FOR ALLIED INVESTMENT ADVISORS, INC. HE IS THE PORTFOLIO MANAGER OF
THE VALUE EQUITY PORTFOLIO. HE HAS MORE THAN 25 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
REVIEW AND OUTLOOK
The last six months were volatile for the equity markets in general and
particularly for value funds. Year-to-date, the equity market shifted from
growth to value and back to growth. The ARK Value Equity Portfolio's
Institutional Class lagged both the S&P 500 and the S&P Value Index.
The performance shortfall was primarily due to a larger than usual number
of holdings that hit earnings "landmines". Most were high quality companies such
as Xerox, IBM, Hewlett Packard, American Home Products, Ratheon, Newel and
BankOne. These are all excellent companies and currently are all excellent
values. One company, Rite Aid, has experienced more than its share of problems
and we are monitoring developments carefully. In this highly nervous market,
even a small disappointment in earnings resulted in significant stock price
declines. The Portfolio was not without significant winners such as Corning,
Inc., Motorola, Amgen, Citigroup and a new position, Northern
Telecommunications. The market continues to be very narrowly focused on the very
largest and highly valued growth technology stocks. Interestingly, 60% of the
stocks on the New York Stock Exchange were lower than their December 31, 1998
levels. We believe value stocks will rebound in the next 6 months if the global
economy continues to recover and the U.S. economy sustains 4% or more growth. We
are encouraged by the Portfolio's rebound during November, and IBM's and Hewlett
Packard's strong recoveries.
In this rapidly changing world, there is no company or industry that is not
contending with dramatic and dynamic change. In this environment, we want the
companies we invest in to make every effort to adjust to the changing
environment. Change seldom works smoothly and more and more companies will
misstep. Long-term value is created in these situations which we are working
hard to capitalize on. The short-term risk of change is, of course, stock price
volatility, but the long-term benefit of change is opportunity.
49
50
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
PERFORMANCE AS OF
OCTOBER 31, 1999
S&P 500 LIPPER
INSTITUTIONAL RETAIL RETAIL COMPOSITE LARGE-CAP
CLASS CLASS A* CLASS B* INDEX VALUE
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 11.14% 11.04% 10.13% 25.67% 17.51%
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A 5.75% 5.13% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 18.27% 18.21% 17.88% 26.52% 19.71%
- --------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 16.31% 17.15% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 17.92% 17.87% 17.59% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 16.28% 17.04% N/A N/A
- --------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
For Institutional Class shares, performance presented prior 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 shown in the table begins at March 31, 1996 for Institutional
Class, Retail Class A, and Retail Class B 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 4.45%
without load and 1.27% with load. Actual annualized performance since inception
for Retail Class B shares is 16.92% without CDSC and 13.44% with CDSC.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
Technology -- 32%
Oil-Energy -- 14%
Financial -- 11%
Miscellanous Business Services -- 10%
Chemicals & Drugs -- 10%
Durable Goods -- 8%
Retail -- 5%
Consumer Products -- 5%
Miscellaneous -- 4%
Repurchase Agreements -- 1%
MARKET
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.7%
- -------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.6%
RAYTHEON COMPANY, CL B 100,000 $ 2,912
- -------------------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $ 2,912
- -------------------------------------------------------------------------------------------
APPAREL/TEXTILES -- 0.8%
V.F. 123,600 3,716
- -------------------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $ 3,716
- -------------------------------------------------------------------------------------------
AUTOMOTIVE -- 2.9%
JOHNSON CONTROLS 92,600 5,625
TRW 175,000 7,503
- -------------------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $13,128
- -------------------------------------------------------------------------------------------
BANKS -- 5.1%
BANK ONE 100,020 3,757
CHASE MANHATTAN 100,000 8,737
WELLS FARGO 220,000 10,532
- -------------------------------------------------------------------------------------------
TOTAL BANKS $23,026
- -------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 8.4%
CORNING 125,000 9,828
GTE 117,500 8,812
MOTOROLA 200,000 19,487
- -------------------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $38,127
- -------------------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 0.5%
NETWORKS ASSOCIATES* 118,150 2,164
- -------------------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 2,164
- -------------------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 5.2%
COMPAQ COMPUTER 300,000 5,700
DELL COMPUTER* 150,000 6,019
HEWLETT PACKARD 60,000 4,444
IBM 75,000 7,378
- -------------------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $23,541
- -------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.9%
NEWELL RUBBERMAID 119,000 4,120
- -------------------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 4,120
- -------------------------------------------------------------------------------------------
50
51
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------------------------------------
DRUGS -- 10.1%
ABBOTT LABORATORIES 150,000 $ 6,056
AMERICAN HOME PRODUCTS 225,000 11,756
AMGEN* 215,000 17,146
BRISTOL-MYERS SQUIBB 80,000 6,145
MYLAN LABORATORIES 275,000 4,933
- ------------------------------------------------------------------------------------------
TOTAL DRUGS $46,036
- ------------------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 2.2%
GENERAL ELECTRIC 75,000 10,167
- ------------------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $10,167
- ------------------------------------------------------------------------------------------
ENERGY -- 1.2%
HALLIBURTON 150,400 5,668
- ------------------------------------------------------------------------------------------
TOTAL ENERGY $ 5,668
- ------------------------------------------------------------------------------------------
ENTERTAINMENT -- 0.3%
ROYAL CARIBBEAN CRUISES 25,000 1,327
- ------------------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 1,327
- ------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.5%
CITIGROUP 260,000 14,072
NEWCOURT CREDIT 295,000 4,849
WADDELL & REED FINANCIAL,
CL A 257,500 6,180
- ------------------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $25,101
- ------------------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 2.2%
H.J. HEINZ 62,600 2,989
PEPSICO 200,000 6,938
- ------------------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 9,927
- ------------------------------------------------------------------------------------------
GAS/NATURAL GAS -- 3.8%
AGL RESOURCES 100,000 1,744
EL PASO ENERGY 105,212 4,314
QUESTAR 365,600 6,581
WILLIAMS 130,000 4,875
- ------------------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $17,514
- ------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.1%
COLGATE-PALMOLIVE 160,000 9,680
- ------------------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 9,680
- ------------------------------------------------------------------------------------------
INTERNET SERVICES -- 2.0%
NORTEL NETWORKS 150,000 9,291
- ------------------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $ 9,291
- ------------------------------------------------------------------------------------------
LEASING & RENTING -- 0.5%
COMDISCO 50,000 1,009
GATX 40,000 1,328
- ------------------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 2,337
- ------------------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 0.7%
WEYERHAEUSER 50,000 2,984
- ------------------------------------------------------------------------------------------
TOTAL LUMBER & WOOD PRODUCTS $ 2,984
- ------------------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------------------------
MACHINERY -- 5.2%
INGERSOLL RAND 225,000 $11,756
PARKER-HANNIFIN 100,000 4,581
ROCKWELL INTERNATIONAL 150,000 7,266
- --------------------------------------------------------------------------------------------------
TOTAL MACHINERY $23,603
- --------------------------------------------------------------------------------------------------
MEASURING DEVICES -- 2.3%
HONEYWELL 100,000 10,544
- --------------------------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $10,544
- --------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 5.7%
BAXTER INTERNATIONAL 90,000 5,839
BECTON DICKINSON 275,000 6,978
MALLINCKRODT 225,000 7,636
MEDTRONIC 160,000 5,540
- --------------------------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $25,993
- --------------------------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 2.0%
FIRST DATA 200,000 9,138
- --------------------------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 9,138
- --------------------------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 1.2%
PHILLIPS PETROLEUM 120,000 5,580
- --------------------------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 5,580
- --------------------------------------------------------------------------------------------------
PETROLEUM REFINING -- 8.2%
BP AMOCO PLC, ADR 214,114 12,365
CHEVRON 84,400 7,707
MOBIL 104,900 10,123
UNOCAL 200,000 6,900
- --------------------------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $37,095
- --------------------------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 1.0%
XEROX 170,000 4,760
- --------------------------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $ 4,760
- --------------------------------------------------------------------------------------------------
RETAIL -- 3.3%
ALBERTSON'S 75,000 2,723
LOWE'S 165,000 9,075
OFFICE DEPOT* 100,000 1,244
RITE AID 226,500 1,982
- --------------------------------------------------------------------------------------------------
TOTAL RETAIL $15,024
- --------------------------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 5.7%
APPLIED MATERIALS* 60,000 5,389
CADENCE DESIGN SYSTEMS* 100,000 1,519
INTEL 180,000 13,939
NATIONAL SEMICONDUCTOR* 170,000 5,089
- --------------------------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $25,936
- --------------------------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.8%
ENGELHARD 200,000 3,525
- --------------------------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 3,525
- --------------------------------------------------------------------------------------------------
51
52
EQUITY PORTFOLIOS
VALUE EQUITY PORTFOLIO CONTINUED
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 6.8%
BELLSOUTH 200,000 $ 9,000
SBC COMMUNICATIONS 200,000 10,188
SPRINT 161,400 11,994
- --------------------------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 31,182
- --------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.7%
BURLINGTON NORTHERN SANTA FE 100,000 $ 3,188
- --------------------------------------------------------------------------------------------------
TOTAL TRANSPORTATION $ 3,188
- --------------------------------------------------------------------------------------------------
WHOLESALE -- 0.8%
W.W. GRAINGER 85,000 3,602
- --------------------------------------------------------------------------------------------------
TOTAL WHOLESALE $ 3,602
- --------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $283,014) $449,936
- --------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.0%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99, repurchase
price $4,527,107 (collateralized
by U.S. Government Agency
Instrument: total market
value $4,685,418) $4,525 4,525
- --------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $4,525) $ 4,525
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.7%
(Cost $287,539) $454,461
==================================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 0.3% $ 1,229
==================================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 30,567,251 outstanding
shares of beneficial interest $209,848
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 367,677 outstanding shares
of beneficial interest 5,442
Portfolio Shares of Retail Class B (unlimited
authorization -- no par value)
based on 29,415 outstanding shares
of beneficial interest 435
Distribution in excess of net investment income (24)
Accumulated net realized gain on investments 73,067
Net unrealized appreciation on investments 166,922
================================================================================
TOTAL NET ASSETS -- 100.0% $455,690
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $14.72
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $14.72
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($14.72 / 95.25%) $15.45
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS B $14.62
================================================================================
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
52
53
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
EQUITY INDEX PORTFOLIO
[photo omitted]
CLARENCE W. WOODS, JR.
- --------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
CLARENCE W. WOODS, JR. IS A PRINCIPAL OF AND CHIEF EQUITY TRADER FOR ALLIED
INVESTMENT ADVISORS, INC. HE IS CO-MANAGER OF THE EQUITY INDEX PORTFOLIO. HE HAS
MORE THAN 15 YEARS EXPERIENCE IN THE INVESTMENT INDUSTRY.
[photo omitted]
PETER C. HASTINGS
- --------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
PETER C. HASTINGS IS A VICE PRESIDENT OF ALLIED INVESTMENT ADVISORS, INC. HE IS
CO-MANAGER OF THE EQUITY INDEX PORTFOLIO. HE HAS MORE THAN FOUR YEARS EXPERIENCE
IN THE INVESTMENT INDUSTRY.
REVIEW AND OUTLOOK
The ARK Equity Index Portfolio is managed to achieve returns similar to the
Standard and Poor's 500 Index. This strategy is implemented by owning the 500
companies that make up 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; over that time the S&P 500 has led the way with large,
growing companies pacing the Index.
The past six months found the U.S. equity markets on a roller-coaster
ride. The Federal Reserve decided to raise short-term interest rates twice,
which negatively impacted the equity markets. In the third quarter the S&P 500
was negative three months in a row for the first time in several years. However,
the markets rallied strongly in October, giving the S&P 500 the potential to
finish the fifth calendar year in a row with returns over 20%. There has been
rotation in and out of sectors, but the trend has been particularly upward in
the technology and communication services areas.
The ARK Equity Index Portfolio grew from less than $92 million to over
$125 million over the past six months. The growth of the Portfolio decreases the
potentially disruptive effect that shareholder purchases and sales have on
managing the Portfolio, which is subject to the numerous changes, such as
mergers and acquisitions, that affect the S&P 500. There have been more than 25
company changes in the Index during the last six months, with activity always
heavy around month's end. Among the stocks owned, the largest contributors to
the Portfolio's positive return were Gateway, Sun Microsystems and Northern
Telecom. The stocks with the most negative impact on returns were Waste
Management, Raytheon, and Xerox.
We expect the recent volatility to continue through the end of 1999 as
Year 2000 concerns will probably lead to year-end selling pressure. Companies
involved in mergers normally seek to close their transactions by December 31, so
we anticipate wild swings in the markets the last few days of the year when we
will need to own the companies replacing those leaving the S&P 500. However,
with our disciplined investment process we will manage cash and index changes
and we believe the Portfolio will be well positioned to capture Index returns.
53
54
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
EQUITY INDEX PORTFOLIO CONTINUED
PERFORMANCE AS OF
OCTOBER 31, 1999
S&P 500
INSTITUTIONAL RETAIL COMPOSITE LIPPER
CLASS CLASS A INDEX S&P 500
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 25.71% 25.39% 25.67% 24.93%
- --------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A 19.47% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 20.29% 22.31% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 19.34% N/A N/A
- --------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning October 1, 1997. Retail Class
A shares were offered beginning November 3, 1997. Performance of the Class A
shares reflects the deduction of the 4.75% sales charge after waivers.
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 which are incurred by the Portfolio.
STATEMENTS OF NET ASSETS
[pie chart omitted]
% OF TOTAL PORTFOLIO INVESTMENTS
Technology -- 29%
Financial -- 16%
Retail -- 13%
Oil-Energy -- 12%
Chemicals & Drugs -- 10%
Miscellaneous -- 6%
Durable Goods -- 5%
Consumer Products -- 4%
Healthcare -- 3%
Cash Equivalents -- 1%
Repurchase Agreements -- 1%
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.1%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.2%
LOCKHEED MARTIN 3,890 $ 78
NORTHROP GRUMMAN 720 39
RAYTHEON COMPANY, CL B 3,580 104
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $ 221
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.4%
AMR* 1,670 106
DELTA AIR LINES 1,530 83
FDX* 2,942 127
ROCKWELL INTERNATIONAL 1,890 92
SOUTHWEST AIRLINES 4,973 84
US AIRWAYS GROUP* 635 18
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 510
- --------------------------------------------------------------------------------
AIRCRAFT -- 1.0%
ALLIEDSIGNAL 5,935 338
BOEING 10,405 479
GENERAL DYNAMICS 2,260 125
UNITED TECHNOLOGIES 5,160 312
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $1,254
- --------------------------------------------------------------------------------
APPAREL/TEXTILES -- 0.0%
LIZ CLAIBORNE 320 13
RUSSELL 110 2
SPRINGS INDUSTRIES, CL A 60 2
V.F. 890 27
- --------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $ 44
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 0.9%
DANA 1,681 50
DELPHI AUTOMOTIVE SYSTEMS 6,043 99
EATON 770 58
FORD MOTOR 13,415 736
GENUINE PARTS 1,760 46
NAVISTAR INTERNATIONAL* 545 23
PACCAR 620 29
TRW 1,195 51
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $1,092
- --------------------------------------------------------------------------------
54
55
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------------------------------------------------------
BANKS -- 6.4%
AMSOUTH BANCORP 4,250 $ 109
BANK OF AMERICA 19,110 1,230
BANK OF NEW YORK 8,135 341
BANK ONE 12,613 474
BB&T 3,110 113
CHASE MANHATTAN 9,040 790
COMERICA 1,532 91
FIFTH THIRD BANCORP 2,995 221
FIRST UNION 10,339 441
FIRSTAR 10,856 319
FLEET BOSTON 10,219 446
GOLDEN WEST FINANCIAL 475 53
HUNTINGTON BANCSHARES 2,311 68
KEYCORP 4,445 124
MELLON FINANCIAL 5,560 205
NATIONAL CITY 6,260 185
NORTHERN TRUST 1,110 107
PNC 3,340 199
PROVIDIAN FINANCIAL 1,600 174
REGIONS FINANCIAL 2,220 67
REPUBLIC NEW YORK 1,055 67
SOUTHTRUST 1,400 56
STATE STREET 1,600 122
SUMMIT BANCORP 1,700 59
SUNTRUST BANKS 3,445 252
SYNOVUS FINANCIAL 2,742 59
U.S. BANCORP 7,810 289
UNION PLANTERS 1,450 65
WACHOVIA 2,200 190
WASHINGTON MUTUAL 5,856 210
WELLS FARGO 18,255 874
- -------------------------------------------------------------------------------------------------------
TOTAL BANKS $8,000
- -------------------------------------------------------------------------------------------------------
BEAUTY PRODUCTS -- 0.1%
ALBERTO-CULVER, CL B 170 4
AVON PRODUCTS 2,585 83
INTERNATIONAL FLAVORS
& FRAGRANCES 860 33
- -------------------------------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 120
- -------------------------------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.1%
CLEAR CHANNEL
COMMUNICATIONS* 3,560 286
COMCAST, CL A SPECIAL 7,900 333
INTERPUBLIC GROUP 2,800 114
MEDIAONE GROUP* 6,770 481
OMNICOM GROUP 1,775 156
- -------------------------------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $1,370
- -------------------------------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.0%
CENTEX 480 13
FLUOR 755 30
FOSTER WHEELER 120 1
- -------------------------------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 44
- -------------------------------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES -- 0.0%
ARMSTRONG WORLD INDUSTRIES 195 $ 7
MCDERMOTT INTERNATIONAL 160 3
OWENS CORNING 160 3
- ------------------------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION SUPPLIES $ 13
- ------------------------------------------------------------------------------------------------
CHEMICALS -- 1.3%
AIR PRODUCTS & CHEMICALS 2,275 63
AVERY DENNISON 1,240 77
B.F. GOODRICH 985 23
E.I. DU PONT DE NEMOURS 11,422 736
EASTMAN CHEMICAL 630 24
FMC* 300 12
GREAT LAKES CHEMICAL 600 21
HERCULES 800 19
MONSANTO 6,765 260
PPG INDUSTRIES 1,690 102
PRAXAIR 1,555 73
ROHM & HAAS 2,164 83
UNION CARBIDE 1,370 84
W.R. GRACE & COMPANY* 360 5
- ------------------------------------------------------------------------------------------------
TOTAL CHEMICALS $1,582
- ------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 4.2%
3COM* 3,585 104
ADAPTEC* 1,100 49
ADC TELECOMMUNICATIONS* 1,400 67
ANDREW* 270 3
CISCO SYSTEMS* 35,800 2,649
GENERAL INSTRUMENT* 1,710 92
GTE 10,810 811
HARRIS 800 18
ITT INDUSTRIES 845 29
MOTOROLA 6,740 657
NETWORK APPLIANCE* 650 48
QUALCOMM* 1,775 395
SCIENTIFIC-ATLANTA 605 35
TELLABS* 4,185 265
- ------------------------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $5,222
- ------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 4.2%
MICROSOFT* 56,485 5,228
- ------------------------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $5,228
- ------------------------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 5.8%
APPLE COMPUTER* 1,595 128
CERIDIAN* 1,140 25
COMPAQ COMPUTER 18,121 344
DELL COMPUTER* 27,990 1,123
EMC* 11,243 821
GATEWAY* 3,450 228
HEWLETT PACKARD 11,170 827
IBM 19,970 1,965
LEXMARK INTERNATIONAL GROUP,
CL A 1,300 101
55
56
EQUITY PORTFOLIOS
EQUITY INDEX PORTFOLIO CONTINUED
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------------------------------------------
MINNESOTA MINING &
MANUFACTURING 4,335 $ 412
SEAGATE TECHNOLOGY* 2,180 64
SILICON GRAPHICS* 1,500 12
SOLECTRON* 2,900 218
SUN MICROSYSTEMS* 8,615 912
UNISYS* 3,270 79
- ------------------------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 7,259
- ------------------------------------------------------------------------------------------------
CONGLOMERATE -- 0.6%
TYCO INTERNATIONAL LIMITED 18,456 737
- ------------------------------------------------------------------------------------------------
TOTAL CONGLOMERATE $ 737
- ------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.1%
BALL 90 4
CROWN CORK & SEAL 970 23
NEWELL RUBBERMAID 2,800 97
OWENS-ILLINOIS* 1,525 36
- ------------------------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 160
- ------------------------------------------------------------------------------------------------
DRUGS -- 8.1%
ABBOTT LABORATORIES 16,815 679
ALLERGAN 740 79
ALZA* 1,035 44
AMERICAN HOME PRODUCTS 14,440 754
AMGEN* 5,670 452
BRISTOL-MYERS SQUIBB 21,900 1,682
ELI LILLY 12,060 831
MERCK 25,870 2,058
MILLIPORE 130 4
PFIZER 42,740 1,688
PHARMACIA & UPJOHN 5,425 293
SCHERING PLOUGH 16,270 805
SIGMA ALDRICH 985 28
WARNER LAMBERT 9,435 753
WATSON PHARMACEUTICALS* 800 25
- ------------------------------------------------------------------------------------------------
TOTAL DRUGS $10,175
- ------------------------------------------------------------------------------------------------
ELECTRICAL SERVICES & UTILITIES -- 5.7%
AES* 2,300 130
AMEREN 1,360 51
AMERICAN ELECTRIC POWER 1,915 66
CAROLINA POWER & LIGHT 1,575 54
CENTRAL & SOUTH WEST 2,270 50
CINERGY 1,560 44
CMS ENERGY 1,000 37
CONSOLIDATED EDISON 2,260 86
CONSTELLATION ENERGY GROUP* 1,155 35
DOMINION RESOURCES 1,945 94
DTE ENERGY 1,445 48
DUKE ENERGY 3,900 220
EDISON INTERNATIONAL 3,465 103
ENTERGY 2,440 73
FIRSTENERGY 2,310 60
FLORIDA PROGRESS 825 38
FPL GROUP 1,760 89
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------------------------------------
GENERAL ELECTRIC 36,195 $ 4,907
GPU 975 33
NEW CENTURY ENERGIES 815 27
NIAGARA MOHAWK HOLDINGS* 1,980 31
NORTHERN STATES POWER 1,190 26
PACIFICORP 2,965 61
PG&E 3,780 87
PINNACLE WEST CAPITAL 900 33
PP&L RESOURCES 1,215 33
PUBLIC SERVICE ENTERPRISE
GROUP 2,210 87
RELIANT ENERGY 2,960 81
SEMPRA ENERGY 1,901 39
SOUTHERN 7,460 198
TEXAS UTILITIES 2,790 108
UNICOM 2,145 82
- ------------------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES & UTILITIES $7,111
- ------------------------------------------------------------------------------------------
ENTERTAINMENT -- 2.1%
CARNIVAL, CL A 6,550 291
CBS 7,625 372
KING WORLD PRODUCTIONS* 720 28
MIRAGE RESORTS* 1,955 28
TIME WARNER 14,265 994
VIACOM, CL B* 7,385 330
WALT DISNEY 22,780 601
- ------------------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $2,644
- ------------------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.1%
ALLIED WASTE INDUSTRIES* 1,900 20
LAIDLAW 1,585 10
WASTE MANAGEMENT 6,076 112
- ------------------------------------------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES $ 142
- ------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.6%
AMERICAN EXPRESS 4,985 768
ASSOCIATES FIRST CAPITAL 7,770 284
BEAR STEARNS 1,219 52
CAPITAL ONE FINANCIAL 1,960 104
CHARLES SCHWAB 8,694 339
CITIGROUP 37,241 2,016
COUNTRYWIDE CREDIT INDUSTRIES 1,215 41
EQUIFAX 1,125 30
FANNIE MAE 11,365 804
FRANKLIN RESOURCES 2,500 87
FREDDIE MAC 7,410 401
HOUSEHOLD INTERNATIONAL 5,108 228
J.P. MORGAN 1,965 257
LEHMAN BROTHERS HOLDINGS 1,180 87
MBNA 8,455 234
MERRILL LYNCH 3,960 311
MORGAN STANLEY, DEAN WITTER,
DISCOVER 6,350 700
PAINE WEBBER GROUP 1,225 50
SLM HOLDING 1,625 80
T. ROWE PRICE 1,300 46
TEXTRON 1,510 117
56
57
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $7,036
- --------------------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 4.6%
ADOLPH COORS, CL B 285 16
ANHEUSER BUSCH 5,115 367
ARCHER-DANIELS-MIDLAND 6,101 75
BESTFOODS 2,785 164
BROWN-FORMAN, CL B 530 36
CAMPBELL SOUP 4,815 217
COCA-COLA 27,115 1,600
COCA-COLA ENTERPRISES 4,200 107
CONAGRA 4,855 127
GENERAL MILLS 1,525 133
H.J. HEINZ 3,960 189
HERSHEY FOODS 1,385 70
KELLOGG 4,475 178
NABISCO GROUP HOLDINGS 3,225 41
PEPSICO 16,095 558
PHILIP MORRIS 26,355 664
QUAKER OATS 1,335 93
RALSTON PURINA GROUP 3,225 101
SARA LEE 9,620 260
SEAGRAM 4,605 227
UNILEVER NV* 6,102 407
UST 1,865 52
WM. WRIGLEY, JR. 1,155 92
- --------------------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $5,774
- --------------------------------------------------------------------------------------------
GAS/NATURAL GAS -- 0.6%
COLUMBIA GAS SYSTEMS 647 42
CONSOLIDATED NATURAL GAS 1,060 68
EASTERN ENTERPRISES 60 3
EL PASO ENERGY 2,580 106
ENRON 7,550 302
NICOR 540 21
ONEOK 80 2
PEOPLES ENERGY 100 4
WILLIAMS 4,825 181
- --------------------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $ 729
- --------------------------------------------------------------------------------------------
GENERAL UTILITIES -- 0.2%
HALLIBURTON 4,690 177
PECO ENERGY 2,040 78
- --------------------------------------------------------------------------------------------
TOTAL GENERAL UTILITIES $ 255
- --------------------------------------------------------------------------------------------
GLASS PRODUCTS -- 0.2%
CORNING 2,615 206
- --------------------------------------------------------------------------------------------
TOTAL GLASS PRODUCTS $ 206
- --------------------------------------------------------------------------------------------
HOME APPLIANCES -- 0.0%
NATIONAL SERVICE INDUSTRIES 130 4
SHERWIN-WILLIAMS 1,360 30
- --------------------------------------------------------------------------------------------
TOTAL HOME APPLIANCES $ 34
- --------------------------------------------------------------------------------------------
HOME BUILDERS -- 0.0%
PULTE 120 2
- --------------------------------------------------------------------------------------------
TOTAL HOME BUILDERS $ 2
- --------------------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------------------------------------------
HOTELS & LODGING -- 0.1%
HARRAH'S ENTERTAINMENT* 1,000 $ 29
HILTON HOTELS 1,895 18
MARRIOTT INTERNATIONAL, CL A* 2,480 84
- -------------------------------------------------------------------------------------------
TOTAL HOTELS & LODGING $ 131
- -------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.3%
CLOROX 2,340 96
COLGATE-PALMOLIVE 6,230 377
DANAHER 1,440 70
GILLETTE 11,860 429
ILLINOIS TOOL WORKS 2,730 200
LEGGETT & PLATT 2,100 47
MAYTAG 720 29
PROCTER & GAMBLE 14,680 1,540
SNAP-ON TOOLS 680 21
STANLEY WORKS 425 12
WHIRLPOOL 800 56
- -------------------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $2,877
- -------------------------------------------------------------------------------------------
INSURANCE -- 3.2%
AETNA 1,510 76
AFLAC 2,650 135
ALLSTATE 8,635 248
AMERICAN GENERAL 2,815 209
AMERICAN INTERNATIONAL GROUP 17,053 1,755
AON 2,530 90
CHUBB 1,775 97
CIGNA 2,025 151
CINCINNATI FINANCIAL 1,645 59
CONSECO 3,460 84
HARTFORD FINANCIAL SERVICES
GROUP 2,420 125
HUMANA* 790 5
JEFFERSON-PILOT 1,067 80
LINCOLN NATIONAL 1,980 91
LOEWS 1,150 81
MARSH & MCLENNAN 2,807 222
MBIA 1,080 62
MGIC INVESTMENT 885 53
PROGRESSIVE 720 67
SAFECO 1,025 28
ST. PAUL 2,404 77
TORCHMARK 1,025 32
UNITED HEALTHCARE 1,725 89
UNUMPROVIDENT 2,545 84
WELLPOINT HEALTH NETWORKS* 600 35
- -------------------------------------------------------------------------------------------
TOTAL INSURANCE $4,035
- -------------------------------------------------------------------------------------------
INTERNET SERVICES -- 0.7%
NORTEL NETWORKS 14,642 907
- -------------------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $ 907
- -------------------------------------------------------------------------------------------
INTERNET SERVICE PROVIDERS -- 1.3%
AMERICA ONLINE* 12,225 $1,585
- -------------------------------------------------------------------------------------------
TOTAL INTERNET SERVICE PROVIDERS $1,585
- -------------------------------------------------------------------------------------------
57
58
EQUITY PORTFOLIOS
EQUITY INDEX PORTFOLIO CONTINUED
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
LEASING & RENTING -- 0.1%
PITNEY BOWES 2,880 $ 131
- --------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 131
- --------------------------------------------------------------------------------
LEISURE PRODUCTS -- 0.1%
HASBRO 1,537 32
JOSTENS 120 3
MATTEL 4,440 59
- --------------------------------------------------------------------------------
TOTAL LEISURE PRODUCTS $ 94
- --------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 0.2%
GEORGIA-PACIFIC 1,850 73
LOUISIANA-PACIFIC 870 11
WEYERHAEUSER 2,180 130
- --------------------------------------------------------------------------------
TOTAL LUMBER & WOOD PRODUCTS $ 214
- --------------------------------------------------------------------------------
MACHINERY -- 1.1%
APPLIED MATERIALS* 3,985 358
BAKER HUGHES 3,320 93
BLACK & DECKER 725 31
BRIGGS & STRATTON 80 5
BRUNSWICK 900 20
CASE 765 41
CATERPILLAR 3,835 212
CRANE 210 4
CUMMINS ENGINE 410 21
DEERE 2,330 84
DOVER 2,110 90
EMERSON ELECTRIC 4,660 280
INGERSOLL RAND 1,800 94
MILACRON 120 2
NACCO INDUSTRIES, CL A 50 2
PALL 980 21
PARKER-HANNIFIN 1,165 53
TENNECO 1,265 20
TIMKEN 190 3
- --------------------------------------------------------------------------------
TOTAL MACHINERY $1,434
- --------------------------------------------------------------------------------
MEASURING DEVICES -- 0.3%
HONEYWELL 1,310 138
KLA-TENCOR* 910 72
MALLINCKRODT 570 19
PE CORP -- PE BIOSYSTEMS
GROUP 1,020 66
TEKTRONIX 150 5
THERMO ELECTRON* 1,580 21
- --------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 321
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 2.3%
BAUSCH & LOMB 640 35
BAXTER INTERNATIONAL 3,245 211
BECTON DICKINSON 2,505 64
BIOMET 885 27
BOSTON SCIENTIFIC* 3,910 79
C.R. BARD 445 24
COLUMBIA/HCA HEALTHCARE 6,060 146
GUIDANT 3,020 149
MARKET
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------------------
HEALTHSOUTH REHABILITATION* 3,110 $ 18
JOHNSON & JOHNSON 14,820 1,552
MANOR CARE* 790 12
MEDTRONIC 12,540 434
ST. JUDE MEDICAL 840 23
TENET HEALTHCARE* 3,075 60
- -----------------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $2,834
- -----------------------------------------------------------------------------------------
METALS & MINING -- 0.1%
FREEPORT-MCMORAN COPPER &
GOLD, CL B 930 16
PHELPS DODGE 633 36
REYNOLDS METALS 655 40
VULCAN MATERIALS 900 37
- -----------------------------------------------------------------------------------------
TOTAL METALS & MINING $ 129
- -----------------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 2.2%
ADOBE SYSTEMS 1,100 77
AUTODESK 140 3
AUTOMATIC DATA PROCESSING 6,620 319
BMC SOFTWARE* 2,650 170
CABLETRON SYSTEMS* 1,720 28
CENDANT* 7,116 117
COMPUTER ASSOCIATES
INTERNATIONAL 5,717 323
COMPUTER SCIENCES* 1,570 108
COMPUWARE* 3,654 102
DELUXE 640 18
ECOLAB 1,020 34
ELECTRONIC DATA SYSTEMS 5,275 309
FIRST DATA 4,620 211
NOVELL* 3,325 67
ORACLE SYSTEMS* 15,822 753
PARAMETRIC TECHNOLOGY* 2,670 51
PEOPLESOFT* 2,000 30
SHARED MEDICAL SYSTEMS 300 11
- -----------------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $2,731
- -----------------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES -- 0.1%
H & R BLOCK 800 34
SERVICE INTERNATIONAL 2,880 28
- -----------------------------------------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER SERVICES $ 62
- -----------------------------------------------------------------------------------------
MISCELLANEOUS TRANSPORTATION -- 0.0%
FLEETWOOD ENTERPRISES 110 2
- -----------------------------------------------------------------------------------------
TOTAL MISCELLANEOUS TRANSPORTATION $ 2
- -----------------------------------------------------------------------------------------
OFFICE PRODUCTS & SUPPLIES -- 0.1%
IKON OFFICE SOLUTIONS 640 4
JOHNSON CONTROLS 850 52
- -----------------------------------------------------------------------------------------
TOTAL OFFICE PRODUCTS & SUPPLIES $ 56
- -----------------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.7%
BEMIS 560 20
BOISE CASCADE 575 20
CHAMPION INTERNATIONAL 975 56
FORT JAMES 2,180 57
58
59
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- ----------------------------------------------------------------------------------------------
INTERNATIONAL PAPER 4,376 $ 230
KIMBERLY-CLARK 5,680 359
MEAD 905 33
POTLATCH 90 4
TEMPLE-INLAND 450 26
WESTVACO 990 29
WILLAMETTE INDUSTRIES 1,085 45
- ----------------------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 879
- ----------------------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 0.9%
ANADARKO PETROLEUM 955 29
APACHE 960 37
ATLANTIC RICHFIELD 3,445 321
BURLINGTON RESOURCES 1,767 62
HELMERICH & PAYNE 140 3
KERR-MCGEE 744 40
OCCIDENTAL PETROLEUM 3,455 79
PHILLIPS PETROLEUM 2,510 117
ROWAN* 260 4
SCHLUMBERGER 5,865 355
UNION PACIFIC RESOURCES GROUP 2,525 37
USX-MARATHON GROUP 3,280 96
- ----------------------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $1,180
- ----------------------------------------------------------------------------------------------
PETROLEUM REFINING -- 4.6%
AMERADA HESS 970 56
ASHLAND 610 20
CHEVRON 7,265 663
COASTAL 2,110 89
CONOCO* 6,225 169
EXXON 26,805 1,985
MOBIL 8,690 839
ROYAL DUTCH PETROLEUM,
NEW YORK SHARES 23,625 1,416
SUNOCO 735 18
TEXACO 6,120 376
TOSCO 1,625 41
UNOCAL 2,405 83
- ----------------------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $5,755
- ----------------------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.4%
EASTMAN KODAK 3,460 239
POLAROID 140 3
XEROX 7,080 198
- ----------------------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $ 440
- ----------------------------------------------------------------------------------------------
PRECIOUS METALS -- 0.1%
BARRICK GOLD 3,855 71
HOMESTAKE MINING 1,540 13
NEWMONT MINING 1,640 36
PLACER DOME GROUP 2,805 34
- ----------------------------------------------------------------------------------------------
TOTAL PRECIOUS METALS $ 154
- ----------------------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 0.6%
AMERICAN GREETINGS, CL A 355 9
DOW JONES 740 45
GANNETT 3,090 238
MARKET
DESCRIPTION SHARES VALUE (000)
- ----------------------------------------------------------------------------------------
KNIGHT-RIDDER 930 $ 59
MCGRAW-HILL 1,975 118
MEREDITH 560 20
NEW YORK TIMES, CL A 1,920 77
R.R. DONNELLEY & SONS 1,105 27
TIMES MIRROR, CL A 775 56
TRIBUNE 2,380 143
- ----------------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $792
- ----------------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 0.2%
DUN & BRADSTREET* 1,635 48
IMS HEALTH* 3,150 91
PAYCHEX 2,437 96
PERKINELMER 140 6
- ----------------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $241
- ----------------------------------------------------------------------------------------
RAILROADS -- 0.4%
BURLINGTON NORTHERN SANTA FE 4,670 149
CSX 2,170 89
KANSAS CITY SOUTHERN INDUSTRIES 1,200 57
NORFOLK SOUTHERN 3,775 92
UNION PACIFIC 2,495 139
- ----------------------------------------------------------------------------------------
TOTAL RAILROADS $526
- ----------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-- 0.0%
KAUFMAN & BROAD HOME 120 2
- ----------------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS $ 2
- ----------------------------------------------------------------------------------------
REPAIR SERVICES -- 0.0%
RYDER SYSTEM 370 8
- ----------------------------------------------------------------------------------------
TOTAL REPAIR SERVICES $ 8
- ----------------------------------------------------------------------------------------
RETAIL -- 6.6%
ALBERTSON'S 4,517 164
AUTOZONE* 1,190 32
BED BATH & BEYOND* 1,500 50
BEST BUY* 2,100 117
CIRCUIT CITY STORES 2,000 85
CONSOLIDATED STORES* 540 10
COSTCO WHOLESALE* 2,465 198
CVS 4,340 189
DARDEN RESTAURANTS 1,100 21
DAYTON HUDSON 4,735 306
DILLARD'S, CL A 1,080 20
DOLLAR GENERAL 2,385 63
FEDERATED DEPARTMENT STORES* 2,050 87
GAP 9,470 352
GREAT ATLANTIC & PACIFIC TEA 110 3
HARCOURT GENERAL 565 22
HOME DEPOT 16,320 1,232
J.C. PENNEY 2,605 66
KMART* 4,930 50
KOHL'S* 1,625 122
KROGER* 8,865 184
LIMITED 2,142 88
LONGS DRUG STORES 120 3
LOWE'S 4,195 231
59
60
EQUITY PORTFOLIOS
EQUITY INDEX PORTFOLIO CONTINUED
MARKET
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------------------------------------------
MAY DEPARTMENT STORES 3,335 $ 116
MCDONALD'S 15,010 619
NEIMAN-MARCUS GROUP 170 4
NORDSTROM 1,175 29
OFFICE DEPOT* 3,300 41
PEP BOYS -- MANNY,
MOE & JACK 190 2
RITE AID 2,565 22
SEARS ROEBUCK 3,780 107
STAPLES* 4,600 102
TANDY 2,075 131
TJX 3,420 93
TOYS 'R' US* 2,090 30
TRICON GLOBAL RESTAURANTS* 1,532 62
WAL-MART STORES 49,095 2,783
WALGREEN 11,025 278
WENDY'S INTERNATIONAL 1,235 29
WINN DIXIE STORES 1,450 39
- -------------------------------------------------------------------------------------------
TOTAL RETAIL $8,182
- -------------------------------------------------------------------------------------------
RUBBER & PLASTIC -- 0.5%
COOPER TIRE & RUBBER 230 4
DOW CHEMICAL 2,350 278
GOODYEAR TIRE & RUBBER 1,545 64
NIKE 2,840 160
REEBOK INTERNATIONAL 170 2
SEALED AIR* 882 49
TUPPERWARE 180 4
- -------------------------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $ 561
- -------------------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - - 3.3%
ADVANCED MICRO DEVICES* 1,450 29
ANALOG DEVICES* 2,000 106
INTEL 36,445 2,822
LSI LOGIC* 1,430 76
MICRON TECHNOLOGY 2,700 193
NATIONAL SEMICONDUCTOR* 1,435 43
TEXAS INSTRUMENTS 8,690 780
THOMAS & BETTS 565 25
- -------------------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $4,074
- -------------------------------------------------------------------------------------------
SPECIALTY CONSTRUCTION -- 0.2%
FORTUNE BRANDS 1,375 49
MASCO 4,430 135
- -------------------------------------------------------------------------------------------
TOTAL SPECIALTY CONSTRUCTION $ 184
- -------------------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 0.0%
COOPER INDUSTRIES 910 39
- -------------------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 39
- -------------------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.4%
ALCAN ALUMINUM 2,295 76
ALCOA 3,950 240
ALLEGHENY TELEDYNE 1,530 23
ASARCO 120 4
BETHLEHEM STEEL* 330 2
ENGELHARD 1,130 20
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------------------------
INCO 1,905 $ 39
NUCOR 695 36
USX-U.S. STEEL GROUP 915 23
WORTHINGTON INDUSTRIES 290 5
- --------------------------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 468
- --------------------------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 9.7%
ALLTEL 3,235 269
AT&T 35,225 1,647
BELL ATLANTIC 17,090 1,110
BELLSOUTH 20,795 936
CENTURYTEL 1,500 61
COMVERSE TECHNOLOGY* 2,000 227
GLOBAL CROSSING* 8,505 294
LUCENT TECHNOLOGIES 33,786 2,171
MCI WORLDCOM* 20,647 1,772
NEXTEL COMMUNICATIONS, CL A* 3,545 306
SBC COMMUNICATIONS 37,666 1,919
SPRINT 9,620 715
SPRINT PCS GROUP* 4,692 389
US WEST 5,382 329
- --------------------------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $12,145
- --------------------------------------------------------------------------------------------------
WHOLESALE -- 0.8%
CARDINAL HEALTH 2,900 125
GENERAL MOTORS 6,920 486
MCKESSON HBOC 2,731 55
SAFEWAY* 5,455 193
SUPERVALU 1,180 25
SYSCO 3,240 125
W.W. GRAINGER 755 32
- --------------------------------------------------------------------------------------------------
TOTAL WHOLESALE $ 1,041
- --------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $100,675) $121,178
- --------------------------------------------------------------------------------------------------
CASH EQUIVALENT -- 1.3%
S&P 500 DEPOSITORY RECEIPT 12,000 1,644
- --------------------------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $1,540) $ 1,644
- --------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.6%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99, repurchase
price $799,916 (collateralized
by U.S. Government Agency
Instrument: total market
value $825,176) $800 800
- --------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $800) $ 800
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.0%
(Cost $103,015) $123,622
==================================================================================================
OTHER ASSETS AND LIABILITIES, NET -- 1.0% $ 1,247
==================================================================================================
60
61
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 8,333,394 outstanding
shares of beneficial interest $95,867
Portfolio Shares of Retail Class A (unlimited authorization -- no par value)
based on 468,698 outstanding shares
of beneficial interest 5,827
Undistributed net investment income 69
Accumulated net realized gain on investments 2,499
Net unrealized appreciation on investments 20,607
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $124,869
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $14.19
- --------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $14.16
- --------------------------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($14.16 / 95.25%) $14.87
- --------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITY
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
61
62
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.
[photo omitted]
CLYDE L. RANDALL, CFA
- --------------------------------------------------------------------------------
CO-PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
CLYDE L. RANDALL, CFA, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE IS
THE CO-PORTFOLIO MANAGER OF THE BLUE CHIP EQUITY PORTFOLIO AND THE EQUITY INCOME
PORTFOLIO. HE HAS MORE THAN 12 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The ARK Blue Chip Equity Portfolio delivered consistent results in these last
six months of our fiscal year. The equity markets certainly demonstrated a
higher degree of volatility than is the norm over this time period. The Dow
Jones Industrial Average set a new high in May of this year topping the 11,000
mark; however, the Dow trended sideways for most of the summer until it peaked
on August 28, at 11,428. Just six weeks later the Dow had corrected over 1500
points to the 9980 level. This correction was fueled by valuation parameters and
an interest rate hike implemented by the Federal Reserve. It was market
volatility at its finest.
Throughout this period, the Blue Chip Equity Portfolio has remained
focused on our strategy of looking for large-cap quality companies that are
dominant in their markets, have franchise characteristics with solid management
teams and a history of delivering above-average equity performance. This
strategy has enabled us to be broadly diversified among the major sectors of the
economy, in 40 quality companies, with a long-term investment horizon.
At October 31, the Portfolio's largest contributors have been Nortel,
Nokia and Cisco Systems. Each of these equity positions had appreciated over 35%
in the last six months. We usually find that over long periods, our best
performers tend to come from a diverse group of industries; however, recent
market strength has been concentrated in the Technology and Telecommunication
sectors, which explains why the above-mentioned equities outperformed other
equities in the Portfolio. The Portfolio was negatively impacted by an eclectic
combination of equities. Ingersoll Rand, a machinery company, Abbott Labs, a
hospital supply company, and Associates First Capital, a consumer finance
company, all dropped about 20% in the last six months.
Looking forward, we remain positive on the equity markets. A robust
economy continues even though we are now in our ninth year of an economic
expansion. The Federal Reserve has tried to keep this expansion in check with
two recent rate hikes, while inflation, although somewhat higher than a year
ago, still remains under control. The markets seem to be looking past the worry
of a problem stemming from any computer malfunctions due to Y2K. Taking these
factors into consideration, we will continue to search for investments in larger
companies with strong business franchises that will add value to the Portfolio.
62
63
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
PERFORMANCE AS OF
OCTOBER 31, 1999
S&P 500 LIPPER
INSTITUTIONAL RETAIL RETAIL COMPOSITE LARGE-CAP
CLASS CLASS A CLASS B* INDEX VALUE
- -----------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 25.47% 25.28% 24.33% 25.67% 17.51%
- -----------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A 19.33% 19.33% N/A N/A
- -----------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 25.63% 25.41% 25.13% 26.52% 19.71%
- -----------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 23.38% 24.49% N/A N/A
- -----------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 24.43% 24.02% 24.03% N/A N/A
- -----------------------------------------------------------------------------------------
Annualized Total Return
Inception to Date
With Load N/A 22.27% 23.54% N/A N/A
- -----------------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning April 1, 1996. Retail Class A
shares were offered beginning May 16, 1996. Performance for the Retail Class A
shares reflects the deduction of the 4.75% sales charge. Retail Class B shares
were offered beginning July 31, 1998.
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 annualized
performance since inception for Retail Class B shares is 17.74% without CDSC and
14.66% with CDSC.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
Technology -- 26%
Financial -- 15%
Chemical & Drugs -- 13%
Miscellaneous -- 10%
Retail -- 10%
Oil-Energy -- 8%
Repurchase Agreements -- 6%
Consumer Products -- 9%
Transportation -- 3%
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 95.3%
- --------------------------------------------------------------------------------
AIRCRAFT -- 2.6%
UNITED TECHNOLOGIES 95,000 $ 5,747
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $ 5,747
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 2.1%
FORD MOTOR 85,000 4,664
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $ 4,664
- --------------------------------------------------------------------------------
BANKS -- 7.8%
CHASE MANHATTAN 65,000 5,679
WASHINGTON MUTUAL 150,000 5,391
WELLS FARGO 130,000 6,224
- --------------------------------------------------------------------------------
TOTAL BANKS $17,294
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.6%
MEDIAONE GROUP* 50,000 3,553
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 3,553
- --------------------------------------------------------------------------------
CHEMICALS -- 2.2%
E.I. DU PONT DE NEMOURS 75,000 4,833
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $ 4,833
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 10.6%
3COM* 100 2,900
CISCO SYSTEMS* 65,000 4,810
KONINKLIJKE (ROYAL) PHILIPS
ELECTRONICS N.V.* 46,000 4,781
MOTOROLA 55,000 5,359
NOKIA, CL A, ADR 50,000 5,778
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $23,628
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.1%
MICROSOFT* 50,000 4,628
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 4,628
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 1.8%
HEWLETT PACKARD 55,000 4,073
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 4,073
- --------------------------------------------------------------------------------
CONGLOMERATE -- 2.2%
TYCO INTERNATIONAL LIMITED 120,000 4,793
- --------------------------------------------------------------------------------
TOTAL CONGLOMERATE $ 4,793
- --------------------------------------------------------------------------------
63
64
EQUITY PORTFOLIOS
BLUE CHIP EQUITY PORTFOLIO CONTINUED
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
DRUGS -- 11.2%
ABBOTT LABORATORIES 120,000 $ 4,845
AMGEN* 65,000 5,184
BRISTOL-MYERS SQUIBB 80,000 6,145
PFIZER 60,000 2,370
WARNER LAMBERT 80,000 6,385
- --------------------------------------------------------------------------------
TOTAL DRUGS $24,929
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 3.3%
GENERAL ELECTRIC 55,000 7,456
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $ 7,456
- --------------------------------------------------------------------------------
ENERGY -- 2.4%
HALLIBURTON 140,000 5,276
- --------------------------------------------------------------------------------
TOTAL ENERGY $ 5,276
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 1.9%
WALT DISNEY 160,000 4,220
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 4,220
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.9%
ASSOCIATES FIRST CAPITAL 150,000 5,475
MORGAN STANLEY, DEAN WITTER,
DISCOVER 50,000 5,516
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $10,991
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 4.8%
PEPSICO 150,000 5,203
RALSTON PURINA GROUP 175,000 5,502
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $10,705
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.6%
PROCTER & GAMBLE 55,000 5,768
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 5,768
- --------------------------------------------------------------------------------
INTERNET SERVICES -- 1.9%
NORTEL NETWORKS 70,000 4,336
- --------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $ 4,336
- --------------------------------------------------------------------------------
INSURANCE -- 2.8%
AMERICAN INTERNATIONAL GROUP 60,000 6,176
- --------------------------------------------------------------------------------
TOTAL INSURANCE $ 6,176
- --------------------------------------------------------------------------------
MACHINERY -- 1.9%
INGERSOLL RAND 80,000 4,180
- --------------------------------------------------------------------------------
TOTAL MACHINERY $ 4,180
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 2.2%
GUIDANT 100,000 4,938
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 4,938
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 5.3%
EXXON 45,000 3,333
MOBIL 40,000 3,860
ROYAL DUTCH PETROLEUM,
NEW YORK SHARES 75,000 4,495
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $11,688
- --------------------------------------------------------------------------------
RETAIL -- 4.7%
DAYTON HUDSON 75,000 4,847
HOME DEPOT 75,000 5,663
- --------------------------------------------------------------------------------
TOTAL RETAIL $10,510
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 2.2%
INTEL 62,000 $ 4,801
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 4,801
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 2.2%
ALCOA 80,000 4,860
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 4,860
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 8.0%
AT&T 55,000 2,571
LUCENT TECHNOLOGIES 70,000 4,497
MCI WORLDCOM* 65,000 5,578
SBC COMMUNICATIONS 100,000 5,094
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 17,740
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $153,941) $211,787
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 5.9%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99, repurchase
price $13,014,192 (collateralized
by U.S. Government Agency
Instrument: total market
value $13,400,254) 13,008 13,008
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $13,008) $ 13,008
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.2%
(Cost $166,949) $224,795
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (1.2%) $ (2,657)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 7,602,356 outstanding
shares of beneficial interest $ 114,296
Portfolio Shares of Retail Class A (unlimited authorization -- no par value)
based on 2,908,455 outstanding shares
of beneficial interest 40,343
Portfolio Shares of Retail Class B (unlimited authorization -- no par value)
based on 291,112 outstanding shares
of beneficial interest 5,528
Undistributed net investment income 30
Accumulated net realized gain on investments 4,095
Net unrealized appreciation on investments 57,846
================================================================================
TOTAL NET ASSETS -- 100.0% $222,138
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $20.58
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $20.55
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($20.55 / 95.25%) $21.57
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS B $20.44
================================================================================
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
64
65
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 MORE THAN 12 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
The last six months continued the choppy pattern of stock prices established
from the beginning of the year. During this time, the S&P 500 Index declined in
four of the six months, including three consecutive down months from July
through September. The good news is that the down months were offset by a strong
performance in October, which allowed the S&P 500 to appreciate 2.73% for the
period. The primary reason for the market's churn has been the effect of rising
interest rates and the desire by investors to liquidate profitable positions
established within the past year. We believe opportunities continue to emerge in
select growth leaders across many sectors.
Fortunately, the ARK Capital Growth Portfolio found pockets of strength
over the past quarter in mid- and small-cap stocks. Additionally, the
overweighted position in select emerging telecommunication equipment and
services companies helped mitigate the poor performance of many consumer
discretionary and staple stocks, as the Portfolio advanced smartly by more than
16.6% for the period. The Portfolio's pace has been set by investments in Nortel
Networks, Motorola, Voicestream Communications and Sprint PCS. Turnover within
the Portfolio was limited as our review of the fundamentals of the Portfolio's
holdings did not warrant many buy/sell decisions. In fact, we are still
committed to many of this past period's performance laggards, including Pepsi,
Worldcom and Schering Plough, because we feel the fundamentals to be strong.
As the market's moodiness will no doubt persist, we will continue to be
cautious when rapid price movements do not match the underlying business
fundamentals. The value of solid research in this type of environment will
continue to be very important in separating long-term winning investments from
lagging investments.
PERFORMANCE AS OF
OCTOBER 31, 1999
S&P 500 LIPPER
INSTITUTIONAL RETAIL RETAIL COMPOSITE MULTI-CAP
CLASS CLASS A CLASS B* INDEX GROWTH
- -------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 51.86% 51.63% 50.61% 25.67% 43.90%
- -------------------------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN WITH LOAD N/A 44.47% 45.61% N/A N/A
- -------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN 33.84% 33.58% 33.41% 26.52% 22.92%
- -------------------------------------------------------------------------------------------------
ANNUALIZED 3 YEAR
TOTAL RETURN WITH LOAD N/A 31.42% 32.85% N/A N/A
- -------------------------------------------------------------------------------------------------
ANNUALIZED 5 YEAR
TOTAL RETURN 25.30% 25.02% 25.06% 26.01% 22.15%
- -------------------------------------------------------------------------------------------------
ANNUALIZED 5 YEAR
TOTAL RETURN WITH LOAD N/A 23.80% 24.90% N/A N/A
- -------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 20.65% 20.97% 20.47% N/A N/A
- -------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 19.93% 20.47% N/A N/A
- -------------------------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning July 16, 1993. Retail Class A
shares were offered beginning March 9, 1994. Performance for the Retail Class A
shares reflects the deduction of the 4.75% sales charge. Retail Class B shares
were offered beginning September 14, 1998.
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 annualized
performance since inception for Retail Class B shares is 55.63% without CDSC and
52.28% with CDSC.
The performance of the S&P 500 Composite Index does not include operating
expenses that are incurred by the Portfolio.
65
66
EQUITY PORTFOLIOS
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
Technology -- 23%
Financial -- 22%
Telephones & Telecommunications -- 12%
Chemical & Drugs -- 9%
Repurchase Agreements -- 8%
Consumer Products -- 8%
Miscellaneous Business Services -- 6%
Retail -- 6%
Transportation -- 2%
Oil-Energy -- 2%
Miscellaneous -- 2%
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 93.7%
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.8%
SOUTHWEST AIRLINES 80,000 $ 1,345
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 1,345
- --------------------------------------------------------------------------------
AIRCRAFT -- 1.1%
UNITED TECHNOLOGIES 30,000 1,815
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT $ 1,815
- --------------------------------------------------------------------------------
BANKS -- 6.3%
CHASE MANHATTAN 40,000 3,495
FIRSTAR 40,000 1,175
STATE STREET 20,000 1,522
WELLS FARGO 80,000 3,830
- --------------------------------------------------------------------------------
TOTAL BANKS $10,022
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 5.2%
COMCAST, CL A SPECIAL 45,000 1,896
MEDIAONE GROUP* 50,000 3,553
YOUNG & RUBICAM 60,000 2,745
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 8,194
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 15.5%
CIENA* 50,000 1,762
CISCO SYSTEMS* 60,000 4,440
COMVERSE TECHNOLOGY* 30,000 3,405
MOTOROLA 60,000 5,846
NOKIA, CL A, ADR 25,000 2,889
NORTEL NETWORKS 75,000 4,645
RADWARE LIMITED* 30,000 1,543
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $24,530
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 6.5%
DELL COMPUTER* 20,000 802
ELECTRONICS FOR IMAGING* 75,000 3,023
EMC* 20,000 1,460
JABIL CIRCUIT* 50,000 2,612
LEXMARK INTERNATIONAL
GROUP, CL A* 30,000 2,342
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $10,239
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
DRUGS -- 9.3%
AMGEN* 60,000 $ 4,785
BRISTOL-MYERS SQUIBB 40,000 3,073
INDIGO N.V. WARRANTS* 499 --
SCHERING PLOUGH 60,000 2,970
WARNER LAMBERT 50,000 3,991
- --------------------------------------------------------------------------------
TOTAL DRUGS $14,819
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES -- 1.4%
GENERAL ELECTRIC 16,000 2,169
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES $ 2,169
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 2.3%
ROYAL CARIBBEAN CRUISES 70,000 3,714
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $ 3,714
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 9.0%
ASSOCIATES FIRST CAPITAL 55,000 2,008
FREDDIE MAC 70,000 3,784
MERRILL LYNCH 40,000 3,140
MORGAN STANLEY, DEAN WITTER,
DISCOVER 30,000 3,309
T. ROWE PRICE 30,000 1,065
WADDELL & REED FINANCIAL,
CL A 39,800 955
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $14,261
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 2.7%
PEPSICO 75,000 2,602
RALSTON PURINA GROUP 55,000 1,729
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 4,331
- --------------------------------------------------------------------------------
GAS/NATURAL GAS -- 1.4%
WILLIAMS 60,000 2,250
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $ 2,250
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.1%
DIAL 75,000 1,753
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 1,753
- --------------------------------------------------------------------------------
INSURANCE -- 0.7%
AMERICAN INTERNATIONAL GROUP 10,000 1,029
- --------------------------------------------------------------------------------
TOTAL INSURANCE $ 1,029
- --------------------------------------------------------------------------------
INTERNET SERVICES -- 0.7%
24/7 MEDIA* 25,000 1,080
- --------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $ 1,080
- --------------------------------------------------------------------------------
INTERNET SERVICE PROVIDERS -- 2.5%
AMERICA ONLINE* 30,000 3,891
- --------------------------------------------------------------------------------
TOTAL INTERNET SERVICE PROVIDERS $ 3,891
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 1.9%
GUIDANT 60,000 2,963
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 2,963
- --------------------------------------------------------------------------------
66
67
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
RETAIL -- 6.3%
ABERCROMBIE & FITCH, CL A* 40,000 $ 1,090
CVS 45,000 1,955
DAYTON HUDSON 60,000 3,878
HOME DEPOT 20,000 1,510
LINENS 'N THINGS* 40,000 1,590
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 10,023
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 6.7%
ALTERA* 55,000 2,674
CHARTERED SEMICONDUCTOR
MANUFACTURING* 20,000 664
FLEXTRONICS INTERNATIONAL* 20,000 1,420
INTEL 40,000 3,098
TEXAS INSTRUMENTS 30,000 2,693
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 10,549
- --------------------------------------------------------------------------------
SOFTWARE -- 1.4%
ORACLE SYSTEMS* 20,000 951
SOFTWARE.COM* 20,000 1,346
- --------------------------------------------------------------------------------
TOTAL SOFTWARE $ 2,297
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 10.2%
ALLTEL 40,000 3,330
MCI WORLDCOM* 44,000 3,776
NEXTEL COMMUNICATIONS, CL A* 20,000 1,724
QWEST COMMUNICATIONS
INTERNATIONAL* 50,000 1,800
SPRINT PCS GROUP* 20,000 1,659
VOICESTREAM WIRELESS* 40,000 3,950
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 16,239
- --------------------------------------------------------------------------------
WHOLESALE -- 0.7%
SAFEWAY* 30,000 1,059
- --------------------------------------------------------------------------------
TOTAL WHOLESALE $ 1,059
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $101,252) $148,572
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.6%
- --------------------------------------------------------------------------------
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99, repurchase
price $12,134,268 (collateralized
by U.S. Government Agency
Instruments: total market
value $12,496,605) 12,129 12,129
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $12,129) $ 12,129
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.3%
(Cost $113,381) $160,701
================================================================================
OTHER ASSETS & LIABILITIES, NET -- (1.3%) $ (2,094)
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 5,461,292 outstanding
shares of beneficial interest $ 70,251
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 1,527,571 outstanding shares
of beneficial interest 22,412
Portfolio Shares of Retail Class B (unlimited
authorization -- no par value)
based on 294,616 outstanding shares of
beneficial interest 5,544
Accumulated net realized gain on investments 13,080
Net unrealized appreciation on investments 47,320
================================================================================
TOTAL NET ASSETS -- 100.0% $158,607
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $21.82
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $21.65
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($21.65 / 95.25%) $22.73
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS B $21.61
================================================================================
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
67
68
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 MORE THAN 12 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
Mid-cap stocks "picked-up" strongly in October after five months of declines and
flat returns. The S&P 400 Mid-Cap Index advanced almost 2% for the period while
the Institutional Class of the ARK Mid-Cap Equity Portfolio held gains for most
of the period, accumulating a 4.5% return for the six months ended October 31,
1999. Stock selection has been extremely important to performance as winners
have stood apart from laggards in the current investment environment.
During the market's retreat, biotechnology stocks like Medimmune, Amgen,
Chiron and Biogen advanced strongly, while other healthcare holdings like
Quintiles and Mylan Labs declined, at times significantly. During the market's
upturn in October, technology, stocks like Qualcomm, Comverse Technology and
Jabil Circuit continued to advance. Software companies focusing on emerging
storage needs for large corporations like Legato and Veritas advanced sharply.
Some classic consumer growth companies with long-term track records stumbled
badly during the period, with Starbucks, Outback Steakhouse and Abercrombie &
Fitch declining over 30% each. Despite these setbacks, we still believe that the
performance of consumer stocks will improve over the coming quarters.
As interest rate and Y2K fears fade over the next 3 to 4 months, we
believe there will be a positive rotation back into some of America's best
emerging growth companies. We believe that select investments in mid-cap
telecommunications and consumer stocks could give investors reason to cheer the
coming of the new millennium.
PERFORMANCE AS OF
OCTOBER 31, 1999
INSTITUTIONAL RETAIL S&P 400 LIPPER
CLASS CLASS A* MID-CAP MID-CAP CORE
- -------------------------------------------------------------------------------
ONE YEAR
TOTAL RETURN 26.71% 26.71% 21.07% 31.70%
- --------------------------------------------------------------------------------
ONE YEAR TOTAL
RETURN WITH LOAD N/A 20.70% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE 19.73% 19.73% N/A N/A
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
INCEPTION TO DATE WITH LOAD N/A 17.77% 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 September 1, 1999. Performance for the
Retail Class A reflects the deduction of the 4.75% sales charge.
The performance shown in the table begins at November 15, 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 cumulative
performance since inception for Retail Class A shares is 0.99% without load and
- -3.82% with load.
The performance for the S&P Mid-Cap Index does not include operating expenses
that are incurred by the Portfolio.
68
69
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENT
Financial -- 21%
Technology -- 17%
Miscellanous Business Services -- 13%
Retail -- 8%
Consumer Products -- 6%
Chemicals & Drugs -- 6%
Miscellaneous -- 5%
Utilities -- 5%
Oil-Energy -- 5%
Telephones & Telecommunications -- 5%
Transportation -- 4%
Repurchase Agreement -- 3%
Building & Construction -- 2%
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.7%
AEROSPACE & DEFENSE -- 0.5%
CORDANT TECHNOLOGIES 2,800 $ 87
HUBBELL, CL B 3,816 106
LEAR* 5,600 189
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE $382
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 1.2%
AIRBORNE FREIGHT 2,900 62
ALASKA AIRGROUP* 1,000 40
SOUTHWEST AIRLINES 20,000 336
US AIRWAYS GROUP* 15,000 420
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION $858
- --------------------------------------------------------------------------------
APPAREL/TEXTILES -- 0.7%
JONES APPAREL GROUP* 5,400 171
MOHAWK INDUSTRIES* 4,000 92
SHAW INDUSTRIES 9,300 144
WESTPOINT STEVENS* 3,200 61
- --------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES $468
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 0.5%
FEDERAL SIGNAL 2,882 54
FEDERAL-MOGUL 1,450 36
KAYDON 2,200 55
MERITOR AUTOMOTIVE 3,600 61
MODINE MANUFACTURING 1,250 31
SUPERIOR INDUSTRIES
INTERNATIONAL 1,155 31
TELEFLEX 1,700 58
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE $326
- --------------------------------------------------------------------------------
BANKS -- 7.1%
ASSOCIATED BANC 4,875 188
ASTORIA FINANCIAL 4,000 144
CCB FINANCIAL 2,200 101
CHARTER ONE FINANCIAL 14,100 346
CITY NATIONAL 2,700 105
COMPASS BANCSHARES 9,000 240
DIME BANCORP 9,500 170
FIRST SECURITY 15,493 397
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
FIRST TENNESSEE NATIONAL 12,000 $ 408
FIRST VIRGINIA BANKS 4,750 227
HIBERNIA, CL A 12,000 170
KEYSTONE FINANCIAL 2,700 68
MARSHALL & ILSLEY 8,700 584
MERCANTILE BANKSHARES 5,075 183
NORTH FORK BANCORPORATION 11,000 228
OLD KENT FINANCIAL 8,053 328
PACIFIC CENTURY FINANCIAL 4,000 91
PROVIDENT FINANCIAL GROUP 3,500 150
SOVEREIGN BANCORP 14,600 129
TCF FINANCIAL 6,500 192
WILMINGTON TRUST 1,900 103
ZIONS BANCORP 6,400 377
- --------------------------------------------------------------------------------
TOTAL BANKS $4,929
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 3.9%
CHRIS-CRAFT INDUSTRIES* 2,586 180
CIRCLE.COM* 1,250 18
COX COMMUNICATIONS* 10,000 454
HISPANIC BROADCASTING* 4,500 365
SNYDER COMMUNICATIONS* 5,000 64
UNIVISION COMMUNICATIONS* 8,000 681
YOUNG & RUBICAM 20,000 915
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $2,677
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.3%
JACOBS ENGINEERING GROUP* 1,175 42
MARTIN MARIETTA MATERIALS 5,000 195
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 237
- --------------------------------------------------------------------------------
CHEMICALS -- 1.0%
AIRGAS* 6,000 57
CABOT 5,000 93
CK WITCO 4,200 39
DEXTER 1,000 35
FULLER (H.B.) 590 32
IMC GLOBAL 8,500 108
LUBRIZOL 2,900 74
RPM 3,890 46
SOLUTIA 12,000 206
- --------------------------------------------------------------------------------
TOTAL CHEMICALS $ 690
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.7%
MOLEX 12,752 465
COMVERSE TECHNOLOGY* 12,500 1,419
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $1,884
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 7.1%
CITRIX SYSTEMS* 6,200 398
INFORMIX* 8,000 61
INTUIT* 15,000 437
LEGATO SYSTEMS* 10,400 559
NETWORKS ASSOCIATES* 12,000 220
RATIONAL SOFTWARE* 7,500 321
SIEBEL SYSTEMS* 7,600 835
SYMANTEC* 14,000 669
VERITAS SOFTWARE* 13,500 1,456
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $4,956
- --------------------------------------------------------------------------------
69
70
EQUITY PORTFOLIOS
MID-CAP EQUITY PORTFOLIO CONTINUED
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 7.6%
AMERICAN POWER CONVERSION* 15,500 $ 348
AVNET 3,675 200
DIEBOLD 3,854 101
ELECTRONICS FOR IMAGING* 32,000 1,290
JABIL CIRCUIT* 25,000 1,306
KEANE* 4,800 113
LEXMARK INTERNATIONAL GROUP,
CL A* 7,000 546
QUANTUM -DLT & STORAGE
SYSTEMS* 10,900 168
SCI SYSTEMS* 4,200 207
SOLECTRON* 8,000 602
STORAGE TECHNOLOGY 7,522 118
SYMBOL TECHNOLOGIES 6,477 257
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $5,256
- --------------------------------------------------------------------------------
CONCRETE & MINERAL PRODUCTS - 0.2%
FERRO 1,575 32
SOUTHDOWN 2,800 135
- --------------------------------------------------------------------------------
TOTAL CONCRETE & MINERAL PRODUCTS $ 167
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.0%
LONGVIEW FIBRE 2,200 25
- --------------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING $ 25
- --------------------------------------------------------------------------------
DRUGS -- 5.1%
AMGEN* 8,000 638
BIOGEN* 13,600 1,008
CARTER-WALLACE 2,400 43
CHIRON* 14,564 416
FOREST LABORATORIES* 6,368 292
GENZYME* 8,024 307
ICN PHARMACEUTICALS 5,000 115
MILLENNIUM PHARMACEUTICAL* 3,000 210
MYLAN LABORATORIES 10,587 190
PERRIGO* 6,050 46
SEPRACOR* 3,150 262
- --------------------------------------------------------------------------------
TOTAL DRUGS $3,527
- --------------------------------------------------------------------------------
ELECTRICAL SERVICES & UTILITIES -- 4.9%
ALLEGHENY ENERGY 8,729 278
ALLIANT ENERGY 5,500 150
CONECTIV 8,687 169
DPL 10,000 203
ENERGY EAST 7,300 183
HAWAIIAN ELECTRIC INDUSTRIES 1,475 50
IDACORP 1,650 50
ILLINOVA 3,100 99
IPALCO ENTERPRISES 4,742 97
KANSAS CITY POWER & LIGHT 3,250 80
LG&E 10,150 223
MINNESOTA POWER & LIGHT 3,650 68
MONTANA POWER 10,000 284
NEW ENGLAND ELECTRIC SYSTEM 3,300 172
NISOURCE 8,700 178
OGE ENERGY 6,106 139
PINNACLE WEST CAPITAL 5,000 184
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
POTOMAC ELECTRIC POWER 6,150 $ 169
PUGET SOUND ENERGY 4,200 93
SCANA 5,550 138
TECO ENERGY 9,372 207
WISCONSIN ENERGY 8,000 179
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES & UTILITIES $3,393
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 1.8%
INTERNATIONAL GAME TECHNOLOGY 6,600 123
MANDALAY RESORT GROUP* 7,500 140
MIRAGE RESORTS* 15,000 218
PREMIER PARKS* 6,500 188
ROYAL CARIBBEAN CRUISES 11,300 600
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT $1,269
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.3%
A.G. EDWARDS & SONS 6,818 205
E*TRADE GROUP* 18,000 429
FINOVA GROUP 4,750 209
GREENPOINT FINANCIAL 8,200 234
LEGG MASON 4,600 167
PAINE WEBBER GROUP 10,000 408
T. ROWE PRICE 19,000 675
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES $2,327
- --------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 2.2%
DEAN FOODS 3,575 165
FLOWERS INDUSTRIES 5,656 95
HORMEL FOODS 3,800 164
IBP 4,650 111
INTERSTATE BAKERIES 5,200 105
LANCASTER COLONY 1,848 65
MCCORMICK 5,750 180
SUIZA FOODS* 2,500 90
TYSON FOODS 17,510 267
UNIVERSAL FOODS 2,400 46
US FOODSERVICE* 7,500 144
WHITMAN 5,300 69
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $1,501
- --------------------------------------------------------------------------------
FORESTRY -- 0.1%
RAYONIER 2,100 86
- --------------------------------------------------------------------------------
TOTAL FORESTRY $ 86
- --------------------------------------------------------------------------------
GAS/NATURAL GAS -- 1.7%
AGL RESOURCES 2,150 37
EL PASO ENERGY 8,518 349
KEYSPAN 11,500 323
KINDER MORGAN 3,450 69
MCN 4,100 100
NATIONAL FUEL & GAS 1,425 70
QUESTAR 5,800 104
UTILICORP UNITED 4,425 96
WASHINGTON GAS LIGHT 2,000 54
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS $1,202
- --------------------------------------------------------------------------------
GENERAL UTILITIES -- 0.2%
MID AMERICAN ENERGY HOLDINGS* 4,350 146
- --------------------------------------------------------------------------------
TOTAL GENERAL UTILITIES $ 146
- --------------------------------------------------------------------------------
70
71
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
HOME BUILDERS -- 0.2%
CLAYTON HOMES 11,701 $ 118
- --------------------------------------------------------------------------------
TOTAL HOME BUILDERS $ 118
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS & FIXTURES -- 0.8%
DIAL 11,700 274
LEGGETT & PLATT 11,700 260
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS & FIXTURES $ 534
- --------------------------------------------------------------------------------
INSURANCE -- 3.3%
AFLAC 9,460 484
ALLMERICA FINANCIAL 9,000 515
AMBAC 5,000 299
AMERICAN FINANCIAL GROUP 4,500 133
FIRST HEALTH GROUP, CL A* 2,800 65
HSB GROUP 1,350 52
OHIO CASUALTY 5,000 83
OLD REPUBLIC INTERNATIONAL 7,350 101
PACIFICARE HEALTH SYSTEMS,
CL A* 3,153 124
PMI GROUP 2,550 132
PROTECTIVE LIFE 3,400 123
UNITRIN 5,000 187
- --------------------------------------------------------------------------------
TOTAL INSURANCE $2,298
- --------------------------------------------------------------------------------
LEASING & RENTING -- 0.2%
COMDISCO 7,500 151
- --------------------------------------------------------------------------------
TOTAL LEASING & RENTING $ 151
- --------------------------------------------------------------------------------
LEISURE PRODUCTS -- 0.8%
CALLAWAY GOLF 5,500 74
ELECTRONIC ARTS* 5,750 465
- --------------------------------------------------------------------------------
TOTAL LEISURE PRODUCTS $ 539
- --------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 0.2%
GEORGIA-PACIFIC (TIMBER GROUP) 5,000 119
- --------------------------------------------------------------------------------
TOTAL LUMBER & WOOD PRODUCTS $ 119
- --------------------------------------------------------------------------------
MACHINERY -- 0.6%
AGCO 5,000 54
DONALDSON 2,200 51
FLOWSERVE 2,137 36
KENNAMETAL 1,600 46
MARK IV INDUSTRIES 2,615 50
PENTAIR 1,574 59
SPX 1,500 127
- --------------------------------------------------------------------------------
TOTAL MACHINERY $ 423
- --------------------------------------------------------------------------------
MANUFACTURING -- 0.1%
TRINITY INDUSTRIES 3,200 95
- --------------------------------------------------------------------------------
TOTAL MANUFACTURING $ 95
- --------------------------------------------------------------------------------
MARINE TRANSPORTATION -- 0.1%
ALEXANDER & BALDWIN 1,900 46
- --------------------------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $ 46
- --------------------------------------------------------------------------------
MEASURING DEVICES -- 0.5%
BECKMAN COULTER 2,250 104
WATERS* 5,000 266
- --------------------------------------------------------------------------------
TOTAL MEASURING DEVICES $ 370
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES -- 3.0%
BERGEN BRUNSWIG, CL A 5,112 $ 36
DENTSPLY INTERNATIONAL 3,900 90
GILEAD SCIENCES* 2,000 126
JOHNSON & JOHNSON 3,706 388
LINCARE HOLDINGS* 3,200 90
MINIMED* 2,200 167
STERIS* 5,300 71
STRYKER 9,500 587
SYBRON INTERNATIONAL* 7,800 186
TRIGON HEALTHCARE* 1,500 43
VISX* 5,000 313
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $2,097
- --------------------------------------------------------------------------------
METALS & MINING -- 0.5%
MINERALS TECHNOLOGIES 1,900 82
VULCAN MATERIALS 5,925 245
- --------------------------------------------------------------------------------
TOTAL METALS & MINING $ 327
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 4.3%
AC NIELSEN* 3,000 66
AFFILIATED COMPUTER SERVICES,
CL A* 3,500 133
CAMBRIDGE TECHNOLOGY PARTNERS* 4,500 50
CINTAS 8,300 500
CONCORD EFS* 16,050 434
CONVERGYS* 21,200 415
DST SYSTEMS* 3,000 191
FISERV* 9,318 298
LITTON INDUSTRIES* 3,350 157
NOVA* 5,500 143
OGDEN 2,000 18
REYNOLDS & REYNOLDS, CL A 4,100 75
ROBERT HALF INTERNATIONAL* 6,600 179
SOTHEBY'S HOLDINGS, CL A 4,300 123
TRANSACTION SYSTEMS
ARCHITECTS* 2,300 71
VIAD 6,900 169
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $3,022
- --------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES -- 0.4%
MANPOWER 7,000 246
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER SERVICES $ 246
- --------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 0.0%
GTECH* 1,000 20
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING $ 20
- --------------------------------------------------------------------------------
MISCELLANEOUS TRANSPORTATION -- 0.1%
HARSCO 2,500 74
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS TRANSPORTATION $ 74
- --------------------------------------------------------------------------------
MOTORCYCLES, BICYCLES & PARTS -- 1.1%
HARLEY-DAVIDSON 12,360 733
- --------------------------------------------------------------------------------
TOTAL MOTORCYCLES, BICYCLES & PARTS $ 733
- --------------------------------------------------------------------------------
OFFICE FURNITURE & FIXTURES -- 0.3%
HERMAN MILLER 5,900 128
HON INDUSTRIES 2,400 47
- --------------------------------------------------------------------------------
TOTAL OFFICE FURNITURE & FIXTURES $ 175
- --------------------------------------------------------------------------------
71
72
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
PAPER & PAPER PRODUCTS -- 0.5%
BOWATER 2,650 $ 139
CHESAPEAKE 1,050 32
CONSOLIDATED PAPERS 4,500 141
PH GLATFELTER 1,800 26
- --------------------------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 338
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 3.0%
BJ SERVICES* 5,200 178
DEVON ENERGY 5,300 206
ENSCO INTERNATIONAL 10,500 203
GLOBAL MARINE* 14,075 214
NABORS INDUSTRIES* 7,200 163
NOBLE AFFILIATES 4,400 111
NOBLE DRILLING* 10,000 222
OCEAN ENERGY* 7,000 64
SMITH INTERNATIONAL* 7,000 242
TIDEWATER 4,855 146
TRANSOCEAN OFFSHORE 9,600 261
VALERO ENERGY 3,300 61
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $2,071
- --------------------------------------------------------------------------------
PETROLEUM REFINING -- 0.8%
MURPHY OIL 2,400 135
TOSCO 11,800 299
ULTRAMAR DIAMOND SHAMROCK 4,800 118
- -------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 552
- -------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 1.6%
A.H. BELO, CL A 7,200 147
BANTA 1,200 27
HARTE-HANKS COMMUNICATIONS 5,000 99
HOUGHTON MIFFLIN 1,380 58
LEE ENTERPRISES 1,850 55
MEDIA GENERAL 1,100 60
READER'S DIGEST, CL A 7,500 242
SCHOLASTIC* 600 28
STANDARD REGISTER 1,200 26
WALLACE COMPUTER SERVICES 1,900 42
WASHINGTON POST, CL B 550 293
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING $1,077
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 0.2%
GARTNER GROUP, CL A* 7,000 68
NAVIGANT CONSULTING* 3,500 100
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 168
- --------------------------------------------------------------------------------
RAILROADS -- 0.8%
KANSAS CITY SOUTHERN
INDUSTRIES 12,000 569
- --------------------------------------------------------------------------------
TOTAL RAILROADS $ 569
- --------------------------------------------------------------------------------
RETAIL -- 6.5%
ABERCROMBIE & FITCH, CL A* 10,000 273
BARNES & NOBLE* 7,000 146
BED BATH & BEYOND* 10,000 333
BEST BUY* 9,600 533
BJ'S WHOLESALE CLUB* 6,000 185
BOB EVANS FARMS 3,000 41
BRINKER INTERNATIONAL* 4,849 113
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
CBRL GROUP 3,500 $ 47
COMPUSA* 7,000 40
DOLLAR TREE STORES* 3,500 152
FAMILY DOLLAR STORES 12,400 256
FASTENAL 1,650 60
HANNAFORD BROTHERS 5,000 350
LANDS' END* 3,350 258
LONE STAR STEAKHOUSE & SALOON* 3,000 24
OUTBACK STEAKHOUSE* 5,700 131
PAPA JOHN'S INTERNATIONAL* 2,500 93
PREMARK INTERNATIONAL 4,600 252
ROSS STORES 5,100 105
STARBUCKS* 14,000 381
TIFFANY & COMPANY 8,000 476
WARNACO GROUP 3,350 48
WILLIAMS-SONOMA* 4,600 247
- --------------------------------------------------------------------------------
TOTAL RETAIL $4,544
- --------------------------------------------------------------------------------
RUBBER & PLASTIC -- 0.7%
CARLISLE 1,200 40
HANNA 2,124 23
SONOCO PRODUCTS 6,050 145
WEATHERFORD INTERNATIONAL* 8,500 288
- --------------------------------------------------------------------------------
TOTAL RUBBER & PLASTIC $ 496
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 11.8%
ALTERA* 16,000 778
ANALOG DEVICES* 14,500 770
ATMEL* 7,200 278
CADENCE DESIGN SYSTEMS* 18,000 273
CYPRESS SEMICONDUCTOR* 18,250 467
LINEAR TECHNOLOGY 12,400 867
MAXIM INTEGRATED PRODUCTS* 9,500 750
MICROCHIP TECHNOLOGY* 5,000 333
NOVELLUS SYSTEMS* 4,000 310
QLOGIC* 3,000 312
SANMINA* 5,000 450
SYNOPSYS* 6,000 374
TERADYNE* 18,000 693
VITESSE SEMICONDUCTOR* 11,000 505
XILINX* 13,000 1,022
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $8,182
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY -- 0.4%
AMERICAN STANDARD* 6,000 229
TECUMSEH PRODUCTS, CL A 950 46
- --------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY $ 275
- --------------------------------------------------------------------------------
STEEL & STEEL WORKS -- 0.2%
AK STEEL HOLDING 3,500 61
CARPENTER TECHNOLOGY 1,100 27
PRECISION CASTPARTS 1,050 31
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS $ 119
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 2.1%
CENTURYTEL 6,862 277
CINCINNATI BELL 10,700 223
COMSAT 925 17
72
73
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
TELEPHONE & DATA SYSTEMS 3,100 $ 357
WINSTAR COMMUNICATIONS* 15,000 582
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 1,456
- --------------------------------------------------------------------------------
TESTING LABORATORIES -- 0.9%
MEDIMMUNE* 4,000 448
QUINTILES TRANSNATIONAL* 8,300 154
- --------------------------------------------------------------------------------
TOTAL TESTING LABORATORIES $ 602
- --------------------------------------------------------------------------------
TRANSPORTATION SERVICES -- 0.1%
GATX 2,550 85
- --------------------------------------------------------------------------------
TOTAL TRANSPORTATION SERVICES $ 85
- --------------------------------------------------------------------------------
TRUCKING -- 0.3%
CNF TRANSPORTATION 4,400 145
JB HUNT TRANSPORT SERVICES 2,100 27
PITTSTON BRINK'S GROUP 1,600 31
- --------------------------------------------------------------------------------
TOTAL TRUCKING $ 203
- --------------------------------------------------------------------------------
WATER UTILITIES -- 0.2%
AMERICAN WATER WORKS 5,600 163
- --------------------------------------------------------------------------------
TOTAL WATER UTILITIES $ 163
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $52,772) $68,593
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.8%
FIRST BOSTON
5.330%, dated 10/29/99, matures
11/01/99, repurchase price $1,919,541
(collateralized by U.S. Government
Agency Instrument: total market
value $1,980,849) $1,919 1,919
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,919) $ 1,919
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.5%
(Cost $54,691) $70,512
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (1.5%) $(1,038)
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 4,507,137 outstanding
shares of beneficial interest $44,175
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 13,974 outstanding shares
of beneficial interest 207
Distribution in excess of net investment income (1)
Accumulated net realized gain on investments 9,272
Net unrealized appreciation on investments 15,821
================================================================================
TOTAL NET ASSETS -- 100.0% $69,474
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $15.37
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $15.37
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($15.37 / 95.25%) $16.14
================================================================================
*NON-INCOME PRODUCING SECURITY
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
73
74
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
Continued concern over the Federal Reserve's intentions, Y2K worries and a
weakening U.S. dollar led to a generally flat stock market performance over the
six-month period ending October 31, 1999. The Standard & Poor's 500 gained 2.7%,
while a major index of small-cap stocks, the Russell 2000, declined 0.3% during
the period.
The Institutional Class of the ARK Small-Cap Equity Portfolio, however,
enjoyed excellent performance, with a gain of 51.7% over this period. The "keys
to victory" were overweighted positions in wireless telephone stocks such as
VoiceStream, Rural Cellular, Price Communications and Omnipoint; and
semiconductor producers and equipment providers such as Cyprus Semiconductor,
Dallas Semiconductor, Cymer and Kulicke & Soffa. In addition, Internet-related
shares such as USWeb, CD Radio and Freeshop.com have been successful performers.
The Portfolio's outlook for 2000 is bright as the stock market appears to
be broadening as investors search for newer, more dynamic names. We strongly
believe that small-cap "growth stocks" will remain market leaders and, as
such, the Portfolio will maintain large positions in telecommunications,
Internet-based systems, software, and wireless and semiconductor equipment.
Healthcare, previously a high-growth industry, has been adversely affected by
political rhetoric and will probably not be attractive until after the November
elections. Energy service stocks have on the whole lagged the increase in oil
prices, although this could change if investors decide these price increases are
here to stay. We expect the IPO (initial public offering) market to remain
strong next year, which will help investors maintain their interest in small-cap
stocks.
PERFORMANCE AS OF
OCTOBER 31, 1999
Institutional Retail RUSSELL 2000 Lipper
Class Class A GROWTH MID-CAP*
- --------------------------------------------------------------------------------
One Year
Total Return 91.02% 90.87% 29.28% 57.77%
- --------------------------------------------------------------------------------
One Year
Total Return
with Load N/A 81.87% N/A N/A
- --------------------------------------------------------------------------------
Annualized 3 Year
Total Return 27.88% 27.62% 9.65% 17.70%
- --------------------------------------------------------------------------------
Annualized 3 Year
Total Return
With Load N/A 25.57% N/A N/A
- --------------------------------------------------------------------------------
Annualized Total
Return Inception
to Date 27.12% 18.26% N/A N/A
- --------------------------------------------------------------------------------
Annualized Total
Return Inception
to Date With Load N/A 16.62% 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 shown in the table begins at the inception dates for the
Institutional and the Retail Class A shares.
The performance of the Frank Russell 2000 Growth Index does not include
operating expenses which are incurred by the Portfolio.
* Due to new Lipper reclassification, the Small-Cap Equity Portfolio has been
reclassified as mid-cap by Lipper.
74
75
ARK FUNDS SEMI ANNUAL REPORT OCTOBER 31, 1999
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
[pie chart omitted]
Repurchase Agreements -- 3%
Miscellaneous Business Services -- 24%
Telephones & Telecommunications -- 22%
Communication Equipment -- 17%
Technology -- 16%
Computers & Services -- 10%
Miscellaneous -- 6%
Financial -- 2%
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 102.8%
BANKS/FINANCE -- 1.9%
E-STAMP 1,600 $ 37
ILLUMINET HOLDINGS* 11,000 511
INTERWOVEN* 5,500 431
- --------------------------------------------------------------------------------
TOTAL BANKS/FINANCE $ 979
- --------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 6.4%
FREESHOP.COM* 45,000 762
RADIO UNICA COMMUNICATIONS* 12,500 358
SPANISH BROADCASTING SYSTEMS,
CL A* 11,000 293
TRUE NORTH COMMUNICATIONS 10,000 403
YOUNG & RUBICAM 30,000 1,372
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $3,188
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 1.6%
STOLT COMEX SEAWAY S.A., ADR* 75,000 802
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 802
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION SUPPLIES -- 2.0%
MOBILE MINI* 45,000 982
- --------------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION SUPPLIES $ 982
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 13.1%
ALTIGEN COMMUNICATIONS* 30,000 356
CD RADIO* 25,000 637
CIENA* 30,000 1,057
DIGITAL MICROWAVE* 60,000 892
DIGITAL LIGHTWAVE* 30,000 518
METRICOM* 10,000 439
MICROCELL TELECOMMUNICATIONS* 75,000 1,425
POWERWAVE TECHNOLOGIES* 10,000 651
SAWTEK* 15,000 615
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $6,590
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 1.6%
LEGATO SYSTEMS* 15,000 806
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 806
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES -- 4.6%
EMULEX* 14,600 $ 2,277
JUPITER COMMUNICATIONS* 500 17
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 2,294
- --------------------------------------------------------------------------------
DRUGS -- 0.2%
SUPERGEN* 4,129 116
- --------------------------------------------------------------------------------
TOTAL DRUGS $ 116
- --------------------------------------------------------------------------------
INTERNET SERVICES -- 6.5%
AGILE SOFTWARE* 20,000 1,960
24/7 MEDIA* 20,000 1,296
- --------------------------------------------------------------------------------
TOTAL INTERNET SERVICES $ 3,256
- --------------------------------------------------------------------------------
MACHINERY -- 0.9%
KULICKE & SOFFA INDUSTRIES* 15,000 442
- --------------------------------------------------------------------------------
TOTAL MACHINERY $ 442
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 20.9%
BREAKAWAY SOLUTIONS* 500 27
BSQUARE* 1,000 40
DATA RETURN 1,000 15
FLYCAST COMMUNICATIONS* 25,000 1,259
KANA COMMUNICATIONS* 10,500 883
MARIMBA* 50,500 1,439
NETCENTIVES * 250 4
PUMA TECHNOLOGY* 25,000 925
SPLITROCK SERVICES* 40,000 875
TIBCO SOFTWARE* 37,500 1,463
TREND MICRO* 80,000 1,580
USWEB* 35,000 1,356
ZIPLINK* 50,000 594
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $10,460
- --------------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS -- 1.5%
CHIEFTAN INTERNATIONAL* 21,700 415
TUBOSCOPE* 30,000 334
- --------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 749
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 1.7%
CONSOLIDATED GRAPHICS* 5,500 110
RAZORFISH* 10,000 738
- --------------------------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 848
- --------------------------------------------------------------------------------
RETAIL -- 0.1%
GAIAM, CL A* 9,700 62
- --------------------------------------------------------------------------------
TOTAL RETAIL $ 62
- --------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS -- 13.7%
AMKOR TECHNOLOGY* 30,000 606
CYMER* 15,000 554
CYPRESS SEMICONDUCTOR* 30,000 767
DALLAS SEMICONDUCTOR 10,000 589
FAIRCHILD SEMICONDUCTOR
INTERNATIONAL, CL A* 25,000 631
INTERNATIONAL RECTIFIER 50,000 972
JNI 6,500 347
SDL* 10,000 1,233
SEMTECH* 30,000 1,149
SILICON IMAGE* 500 22
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 6,870
- --------------------------------------------------------------------------------
75
76
EQUITY PORTFOLIOS
SMALL-CAP EQUITY PORTFOLIO CONTINUED
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS -- 23.1%
AIRGATE PCS* 25,800 $ 1,290
CLEARNET, CL A* 80,000 1,760
ITC DELTACOM* 15,000 360
ITXC 9,000 407
RAMBUS* 8,000 541
RCN* 15,000 718
RURAL CELLULAR, CL A* 35,000 2,107
SHARED TECHNOLOGIES CELLULAR* 50,000 463
TRITON PCS HOLDINGS, CL A* 10,200 360
VOICESTREAM WIRELESS* 20,000 1,975
WESTERN WIRELESS, CL A* 30,000 1,586
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $11,567
- --------------------------------------------------------------------------------
WHOLESALE -- 3.0%
BALTIMORE TECHNOLOGIES* 15,000 488
PRICE COMMUNICATIONS* 46,500 1,011
- --------------------------------------------------------------------------------
TOTAL WHOLESALE $ 1,499
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $40,744) $51,510
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.6%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99, repurchase
price $1,819,185 (collateralized
by U.S. Government Agency
Instruments: total market
value $1,873,924) $1,818 1,818
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,818) $ 1,818
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 106.4%
(Cost $42,562) $53,328
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (6.4%) $(3,210)
================================================================================
MARKET
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 2,424,296 outstanding
shares of beneficial interest $24,597
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 189,198 outstanding shares
of beneficial interest 2,389
Accumulated net realized gain on investments 12,366
Net unrealized appreciation on investments 10,766
================================================================================
TOTAL NET ASSETS -- 100.0% $50,118
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $19.19
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $19.08
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($19.08 / 95.25%) $20.03
================================================================================
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
76
77
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
INTERNATIONAL EQUITY SELECTION PORTFOLIO
[photo omitted]
BRETT A. HOFFACKER, CFP
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
BRETT A. HOFFACKER, CFP, IS A PRINCIPAL OF ALLIED INVESTMENT ADVISORS, INC. HE
IS THE PORTFOLIO MANAGER OF THE INTERNATIONAL EQUITY SELECTION PORTFOLIO. HE HAS
MORE THAN 15 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE.
REVIEW AND OUTLOOK
For the six-month period ended October 31, 1999, it is difficult to discern
overall regional trends in market returns. On a micro basis, individual country
returns seemed to be dependant upon economic and market events specific to each
country. Examples include the problems with Korean giant Daewoo, political and
civil unrest in Indonesia, the end of the war in Kosovo and the emergence of
Japan from recession. On a macro level, however, there are two themes which have
influenced foreign market performance. The first theme is the corporate
restructuring and consolidation activity, which has been under way overseas.
This, in association with more shareholder-friendly management teams, have
driven profit margins and earnings, thus providing a strong underpinning for
bullish foreign equity markets. The second theme recognizes the strength in the
U.S. and overseas economies, which has raised the specter of higher interest
rates as central banks move to preempt inflation. This rising interest rate
scenario has dampened returns and promoted volatility in both the stock and bond
markets.
The Portfolio's underlying fund managers had to guide their funds through
a variety of factors in order to outperform the EAFE Index for the period.
Country selection was of course important, as being overweighted in the Japanese
market proved beneficial. Sector selection added value to those funds with
exposure to technology and telecommunication stocks. Management of currency
positions was also decisive in a period of volatile currency markets. In fact,
the strength of the yen vs. the U.S. dollar more than tripled the return on the
Nikkei 225 when translated into U.S. dollars. Growth-oriented funds outperformed
value funds while small- and mid-cap funds bested their large-cap competitors.
The ARK International Equity Selection Portfolio outperformed both the
EAFE and Lipper indices for the period. Only six of the Portfolio's underlying
foreign funds underperformed the EAFE Index. Four of these funds were our only
value style positions, while the remaining two incorporated a growth-at-a-
reasonable-price style. During the period, we made several changes to the
Portfolio. We eliminated positions in the Montgomery International Growth Fund
and Harbor International Growth Fund as they continued to underperform their
respective indexes and peer group. We added the Scudder International Growth
Fund, Scout Worldwide Fund and the Pilgrim International Small Company Fund to
the Portfolio. These changes maintained our growth-style exposure and
diversified the Portfolio into the mid-cap arena. As of 10/31/99, the Portfolio
was comprised of 16 mutual funds, which is six more than it held on 10/31/98. We
are comfortable with the diversification provided by this number of funds.
77
78
EQUITY PORTFOLIOS MANAGEMENT DISCUSSION AND ANALYSIS
Y2K is an important topic for both domestic and international investors.
Depending upon country and capitalization weighting, international funds are
seen to carry more risks than domestic funds. We are cautiously optimistic that
Y2K will have an insignificant effect on the Portfolio as our emerging market
and small-cap exposure is minimal. We are also confident that our underlying
fund managers are prepared for any Y2K dislocations that may occur. We look to
the very successful Euro conversion, which took place on 12/31/98, as a model
for how Y2K will generally transpire.
Looking ahead, we believe the opportunities for international investing
are excellent. Most global economies are in either a growth or recovery mode.
Corporate, and in some situations governmental restructuring is becoming a
worldwide phenomenon. Merger activity is becoming common on a cross-border
basis. As for rising interest rates, it would seem that central banks have the
upper hand on inflation, which is positive for the markets in the long run.
These factors, coupled with the current valuation levels of the U.S. markets,
certainly increase the attractiveness and potential of international markets for
investors.
PERFORMANCE AS OF
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
Institutional Retail MORGAN STANLEY Lipper
Class Class A* MSCI EAFE International
- --------------------------------------------------------------------------------
One Year
Total Return 24.96% 24.84% 23.03% 25.56%
- --------------------------------------------------------------------------------
One Year
Total Return
with Load N/A 22.91% N/A N/A
- --------------------------------------------------------------------------------
Annualized 3 Year
Total Return 12.85% 12.82% 12.17% 12.90%
- --------------------------------------------------------------------------------
Annualized 3 Year
Total Return
With Load N/A 12.25% N/A N/A
- --------------------------------------------------------------------------------
Annualized 5 Year
Total Return 11.14% 11.12% 9.21% 9.50%
- --------------------------------------------------------------------------------
Annualized 5 Year
Total Return
With Load N/A 10.79% N/A N/A
- --------------------------------------------------------------------------------
Annualized Total
Return Inception
to Date 10.93% 10.92% N/A N/A
- --------------------------------------------------------------------------------
Annualized Total
Return Inception
to Date With Load N/A 10.73% N/A N/A
- --------------------------------------------------------------------------------
Past performance of the Portfolio is not predictive of future performance.
Performance presented prior to March 29, 1998 for the Institutional Class
reflects the performance of the Marketvest International Equity Fund, which is
the successor to a collective trust fund. The 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 shown in the table begins at May 31, 1991 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 Retail Class A shares is 7.24% without load and
6.24% with load.
The performance of the MSCI EAFE Index does not include operating expenses that
are incurred by the Portfolio.
STATEMENTS OF NET ASSETS
% OF TOTAL PORTFOLIO INVESTMENTS
[pie chart omitted]
Mutual Funds -- 95%
Repurchase Agreements -- 5%
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MUTUAL FUNDS -- 95.2%
American Advantage
International
Equity Fund 96,612 $ 1,870
American Century
International
Growth Fund 181,893 2,054
American Funds Europacific
Growth Fund 65,572 2,360
Artisan International Fund 96,809 2,025
BT Institutional
International
Equity Fund 131,070 1,911
Federated International
Small Company Fund,
Class A 31,972 924
Fidelity Diversified
International Fund 102,735 2,191
Glenmede International
Institutional Portfolio 112,557 2,006
Harbor International Fund 48,854 1,988
Janus Overseas Fund 89,130 2,258
Pilgrim International
Small Cap Growth Fund,
Class Q 9,773 310
Putnam International
Growth Fund 95,198 2,283
Scudder International Fund 36,709 2,145
Scudder Japan Fund 127,437 2,020
Templeton Foreign Fund,
Class I 117,157 1,165
UMB Scout Worldwide Fund 50,765 1,079
- --------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $24,514) $28,589
- --------------------------------------------------------------------------------
78
79
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 5.2%
FIRST BOSTON
5.330%, dated 10/29/99,
matures 11/01/99, repurchase
price $1,547,769 (collateralized
by U.S. Government Agency
Instruments: total market
value $1,595,381) $1,547 $ 1,547
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,547) $ 1,547
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.4%
(Cost $26,061) $30,136
================================================================================
OTHER ASSETS AND LIABILITIES, NET -- (0.4%) $ (111)
================================================================================
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 2,249,641 outstanding
shares of beneficial interest 22,887
Portfolio Shares of Retail Class A (unlimited
authorization -- no par value)
based on 160,234 outstanding shares
of beneficial interest 1,820
Undistributed net investment income 48
Accumulated net realized gain on investments 1,195
Net unrealized appreciation on investments 4,075
================================================================================
TOTAL NET ASSETS -- 100.0% $30,025
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $12.46
================================================================================
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- RETAIL CLASS A $12.46
================================================================================
MAXIMUM OFFERING PRICE PER SHARE --
RETAIL CLASS A ($12.46 / 98.50%) $12.65
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
79
80
STATEMENTS OF OPERATIONS (000) (UNAUDITED)
FOR THE PERIOD ENDED OCTOBER 31, 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 26,201 2,696 41,021 10,011 1,237
------- ------ ------- ------- ------
Total Investment Income 26,201 2,696 41,021 10,011 1,237
------- ------ ------- ------- ------
EXPENSES:
Administrator Fees 646 107 1,043 274 32
Less: Waiver of Administrator Fees -- -- -- -- --
Investment Advisory Fees 1,242 205 2,006 528 85
Less: Waiver of Investment
Advisory Fees (650) (131) (882) (126) --
Custodian Fees 61 6 145 37 6
Transfer Agency Fees 50 8 80 21 2
Professional Fees 34 5 56 13 2
Registration Fees (29) 11 (40) (7) 4
Distribution Fees--Retail Class A 329 57 157 32 27
Less: Waiver of Distribution Fees--
Retail Class A -- -- -- -- (10)
Distribution Fees--Retail Class B -- -- -- -- --
Distribution Fees--
Institutional II Class 179 30 102 81 --
Printing Fees 53 9 95 25 3
Trustee Fees 10 2 19 5 --
Amortization of Deferred
Organization Costs -- -- -- -- 2
Miscellaneous Fees 9 2 32 6 1
Shareholder Servicing Fees--
Institutional Class 369 59 1,008 216 26
Less: Waiver of Shareholder
Servicing Fees--
Institutional
Class (172) (27) (470) (101) (16)
Shareholder Servicing Fees--
Retail Class A 197 34 94 19 10
Less: Waiver of Shareholder
Servicing Fees--Retail Class A (118) (21) (57) (11) (10)
Shareholder Servicing Fees--
Retail Class B -- -- -- -- --
------- ------ ------- ------- ------
Total Expenses 2,210 356 3,388 1,012 164
------- ------ ------- ------- ------
Net Investment Income 23,991 2,340 37,633 8,999 1,073
------- ------ ------- ------- ------
Net Realized Gain (Loss)
on Investments(1) -- (8) 4 31 (208)
Net Change in Unrealized
Depreciation on Investments -- -- -- -- (441)
------- ------ ------- ------- ------
Net Realized and Unrealized
Gain (Loss) on Investments (1) -- (8) 4 (410)
------- ------ ------- ------- ------
Net Increase (Decrease) in
Net Assets Resulting
from Operations $23,990 $2,340 $37,625 $ 9,003 $ 663
======= ====== ======= ======= ======
SHORT-TERM MARYLAND PENNSYLVANIA INTERMEDIATE U.S. GOVERNMENT
BOND TAX-FREE TAX-FREE FIXED INCOME BOND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- ------------ ------------ --------------- ---------
INVESTMENT INCOME:
Dividends $ -- $ -- $ -- $ 40 $ 158 $ 178
Interest 3,025+ 3,318 5,553 3,185+ 6,871+ 11,484+
------ ------- -------- ------- ------- -------
Total Investment Income 3,025 3,318 5,553 3,225 7,029 11,662
------ ------- -------- ------- ------- -------
EXPENSES:
Administrator Fees 66 83 140 68 147 235
Less: Waiver of Administrator Fees -- -- -- -- -- --
Investment Advisory Fees 383 413 701 315 849 1,086
Less: Waiver of Investment
Advisory Fees (25) (102) -- (58) (102) (163)
Custodian Fees 19 10 26 13 27 32
Transfer Agency Fees 5 6 11 5 11 18
Professional Fees 4 4 9 3 9 11
Registration Fees (3) 8 7 6 (3) 12
Distribution Fees--Retail Class A -- 49 6 -- 4 12
Less: Waiver of Distribution Fees--
Retail Class A -- (8) (1) -- (1) (2)
Distribution Fees--Retail Class B -- -- -- -- -- 1
Distribution Fees--
Institutional II Class -- -- -- -- -- --
Printing Fees 5 7 14 2 12 20
Trustee Fees 1 1 3 1 3 4
Amortization of Deferred
Organization Costs 4 -- 7 1 4 --
Miscellaneous Fees 3 4 4 3 3 6
Shareholder Servicing Fees--
Institutional Class 76 71 159 79 168 265
Less: Waiver of Shareholder
Servicing Fees--
Institutional
Class (46) (14) (42) (21) (45) (53)
Shareholder Servicing Fees--
Retail Class A -- 25 3 -- 2 6
Less: Waiver of Shareholder
Servicing Fees--Retail Class A -- (25) (3) -- (2) (6)
Shareholder Servicing Fees--
Retail Class B -- -- -- -- -- 1
------ ------- -------- ------- ------- -------
Total Expenses 492 532 1,044 417 1,086 1,485
------ ------- -------- ------- ------- -------
Net Investment Income 2,533 2,786 4,509 2,808 5,943 10,177
------ ------- -------- ------- ------- -------
Net Realized Gain (Loss)
on Investments(1) (338) (2,230) (113) (925) (4,492)
Net Change in Unrealized
Depreciation on Investments (977) (8,070) (14,203) (2,839) (5,789) (8,840)
------ ------- -------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments (1,185) (8,408) (16,433) (2,952) (6,714) (13,332)
------ ------- -------- ------- ------- -------
Net Increase (Decrease) in
Net Assets Resulting
from Operations $1,348 $(5,622) $(11,924) $ (144) $ (771) $(3,155)
====== ======= ======== ======= ====== =======
+ 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.
80 & 81
81
STATEMENTS OF OPERATIONS (000) (UNAUDITED)
FOR THE PERIOD ENDED OCTOBER 31, 1999
EQUITY VALUE EQUITY BLUE CHIP CAPITAL
BALANCED INCOME EQUITY INDEX EQUITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- ---------
INVESTMENT INCOME:
Dividends $ 376 $ 1,304 $ 3,553 $ 668 $1,181 $ 350
Interest 2,070 47 129 53 178 173
------ ------- -------- ------ ------ -------
Total Investment Income 2,446 1,351 3,682 721 1,359 523
------ ------- -------- ------ ------ -------
EXPENSES:
Administrator Fees 111 64 332 68 135 85
Less: Waiver of Administrator Fees -- -- -- (32) -- --
Investment Advisory Fees 556 346 2,554 105 726 461
Less: Waiver of Investment
Advisory Fees (77) (30) (332) (69) (104) (33)
Custodian Fees 10 6 59 26 24 11
Transfer Agency Fees 9 5 26 5 10 7
Professional Fees 6 1 21 4 8 5
Registration Fees 17 6 (23) 13 5 16
Distribution Fees-- Retail Class A 61 7 10 12 159 54
Less: Waiver of Distribution Fees --
Retail Class A (23) (2) (4) (4) (87) (20)
Distribution Fees-- Retail Class B 16 -- 1 -- 17 15
Distribution Fees --
Institutional II Class -- -- -- -- -- --
Printing Fees 10 5 29 6 13 8
Trustee Fees 2 1 6 1 2 1
Amortization of Deferred
Organization Costs -- 1 5 1 2 --
Miscellaneous Fees 5 1 8 3 36 7
Shareholder Servicing Fees --
Institutional Class 102 72 379 74 109 76
Less: Waiver of Shareholder Servicing
Fees-- Institutional Class (7) (5) (25) (74) (7) (5)
Shareholder Servicing Fees--
Retail Class A 23 3 4 4 43 20
Less: Waiver of Shareholder Servicing
Fees-- Retail Class A (23) (3) (4) (4) (43) (20)
Shareholder Servicing Fees--
Retail Class B 5 -- -- -- 6 5
------ ------- -------- ------ ------ -------
Total Expenses 803 478 3,046 139 1,054 693
------ ------- -------- ------ ------ -------
Net Investment Income (Loss) 1,643 873 636 582 305 (170)
------ ------- -------- ------ ------ -------
Net Realized Gain (Loss)
on Investments 1,768 2,205 18,996 1,607 (294) 9,139
Net Change in Unrealized Appreciation
(Depreciation) on Investments 6,377 (6,653) (35,212) 1,171 6,425 12,253
------ ------- -------- ------ ------ -------
Net Realized and Unrealized
Gain (Loss) on Investments 8,145 (4,448) (16,216) 2,778 6,131 21,392
------ ------- -------- ------ ------ -------
Net Increase (Decrease) in Net Assets
Resulting from Operations $9,788 $(3,575) $(15,580) $3,360 $6,436 $21,222
====== ======= ======== ====== ====== =======
MID-CAP SMALL-CAP INTERNATIONAL
EQUITY EQUITY EQUITY SELECTION
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ----------------
INVESTMENT INCOME:
Dividends $ 294 $ 27 $ 133
Interest 15 54 37
------ ------- ------
Total Investment Income 309 81 170
------ ------- ------
EXPENSES:
Administrator Fees 44 25 18
Less: Waiver of Administrator Fees -- -- --
Investment Advisory Fees 269 154 89
Less: Waiver of Investment
Advisory Fees (20) (2) (14)
Custodian Fees 9 15 10
Transfer Agency Fees 3 2 1
Professional Fees 2 1 1
Registration Fees 7 6 1
Distribution Fees-- Retail Class A -- 5 4
Less: Waiver of Distribution Fees --
Retail Class A -- (2) (1)
Distribution Fees-- Retail Class B -- -- --
Distribution Fees --
Institutional II Class -- -- --
Printing Fees 4 2 1
Trustee Fees 1 1 --
Amortization of Deferred
Organization Costs 1 -- 1
Miscellaneous Fees 2 1 1
Shareholder Servicing Fees --
Institutional Class 50 27 19
Less: Waiver of Shareholder Servicing
Fees-- Institutional Class (3) (2) (1)
Shareholder Servicing Fees--
Retail Class A -- 2 1
Less: Waiver of Shareholder Servicing
Fees-- Retail Class A -- (2) (1)
Shareholder Servicing Fees--
Retail Class B -- -- --
------ ------- ------
Total Expenses 369 233 130
------ ------- ------
Net Investment Income (Loss) (60) (152) 40
------ ------- ------
Net Realized Gain (Loss)
on Investments 3,537 8,323 168
Net Change in Unrealized Appreciation
(Depreciation) on Investments (521) 8,923 2,842
------ ------- ------
Net Realized and Unrealized
Gain (Loss) on Investments 3,016 17,246 3,010
------ ------- ------
Net Increase (Decrease) in Net Assets
Resulting from Operations $2,956 $17,094 $3,050
====== ======= ======
The accompanying notes are an integral part of the financial statements.
82 & 83
82
STATEMENTS OF CHANGES IN NET ASSETS (000) (UNAUDITED)
FOR THE YEAR OR PERIOD INDICATED
MONEY MARKET TAX-FREE MONEY U.S. GOVERNMENT MONEY
PORTFOLIO MARKET PORTFOLIO MARKET PORTFOLIO
-------------------------- -------------------------- --------------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98
to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99
----------- ---------- ----------- ---------- ----------- ----------
OPERATIONS:
Net Investment Income $ 23,991 $ 38,711 $ 2,340 $ 4,512 $ 37,633 $ 80,722
Net Realized Gain (Loss)
on Investments (1) 10 -- -- (8) (1)
Net Change in Unrealized
Appreciation (Depreciation)
on Investments -- -- -- -- -- --
---------- ---------- -------- -------- ---------- ----------
Net increase (Decrease) in
Net Assets from Operations 23,990 38,721 2,340 4,512 37,625 80,721
---------- ---------- -------- -------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (12,010) (19,775) (1,151) (2,499) (31,668) (69,381)
Retail Class A (6,160) (10,377) (614) (732) (2,823) (4,222)
Retail Class B (1) -- -- -- -- --
Institutional II Class (5,822) (8,559) (575) (1,281) (3,145) (7,109)
Net Capital Gains
Institutional Class -- -- -- -- -- --
Retail Class A -- -- -- -- -- --
Retail Class B -- -- -- -- -- --
---------- ---------- -------- -------- ---------- ----------
Total Distributions (23,993) (38,711) (2,340) (4,512) (37,636) (80,712)
---------- ---------- -------- -------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 404,470 971,963 49,026 97,664 1,178,572 2,187,318
Shares Issued in Lieu of
Cash Distributions 78 9 -- -- -- 6
Shares Redeemed (434,593) (671,287) (52,557) (110,212) (1,246,196) (2,045,108)
---------- ---------- -------- -------- ---------- ----------
Total Institutional Class
Share Transactions (30,045) 300,685 (3,531) (12,548) (67,624) 142,216
---------- ---------- -------- -------- ---------- ----------
Retail Class A:
Shares Issued 161,003 181,887 47,140 66,991 251,031 448,117
Shares Issued in Lieu of
Cash Distributions 5,411 10,182 476 730 -- --
Shares Redeemed (135,141) (133,624) (30,585) (59,358) (227,909) (422,346)
---------- ---------- -------- -------- ---------- ----------
Total Retail Class A
Share Transactions 31,273 58,445 17,031 8,363 23,122 25,771
---------- ---------- -------- -------- ---------- ----------
Retail Class B:
Shares Issued 23 22 -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
---------- ---------- -------- -------- ---------- ----------
Total Retail Class B
Share Transactions 23 22 -- -- -- --
---------- ---------- -------- -------- ---------- ----------
(624,756) (400,547) (49,399) (132,836) (247,339) (617,804)
---------- ---------- -------- -------- ---------- ----------
Total Institutional II Class
Share Transactions 29,745 146,754 (10,034) 14,101 (18,128) 50,515
---------- ---------- -------- -------- ---------- ----------
Increase (Decrease) in Net Assets from
Shareholder Transactions 30,996 505,906 3,466 9,916 (62,630) 218,502
---------- ---------- -------- -------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS 30,993 505,916 3,466 9,916 (62,641) 218,511
NET ASSETS:
Beginning of period 1,002,696 496,780 154,980 145,064 1,674,245 1,455,734
---------- ---------- -------- -------- ---------- ----------
End of period $1,033,689 $1,002,696 $158,446 $154,980 $1,611,604 $1,674,245
========== ========== ======== ======== ========== ==========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 404,470 971,963 49,026 97,664 1,178,572 2,187,318
Shares Issued in Lieu of
Cash Distributions 78 9 -- -- -- 6
Shares Redeemed (434,593) (671,287) (52,557) (110,212) (1,246,196) (2,045,108)
---------- ---------- -------- -------- ---------- ----------
Total Institutional Class share
Transactions (30,045) 300,685 (3,531) (12,548) (67,624) 142,216
---------- ---------- -------- -------- ---------- ----------
Retail Class A:
Shares Issued 161,003 181,887 47,140 66,991 251,031 448,117
Shares Issued in Lieu of
Cash Distributions 5,411 10,182 476 730 -- --
Shares Redeemed (135,141) (133,624) (30,585) (59,358) (227,909) (422,346)
---------- ---------- -------- -------- ---------- ----------
Total Retail Class A
share Transactions 31,273 58,445 17,031 8,363 23,122 25,771
---------- ---------- -------- -------- ---------- ----------
Retail Class B:
Shares Issued 23 22 -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
---------- ---------- -------- -------- ---------- ----------
Total Retail Class B share Transactions 23 22 -- -- -- --
---------- ---------- -------- -------- ---------- ----------
Institutional II Class:
Shares Issued 654,501 547,301 39,365 146,937 229,209 668,319
Shares Issued in Lieu of
Cash Distributions -- -- -- -- 2 --
Shares Redeemed (624,756) (400,547) (49,399) (132,836) (247,339) (617,804)
---------- ---------- -------- -------- ---------- ----------
Total Institutional II Class
share Transactions 29,745 146,754 (10,034) 14,101 (18,128) 50,515
---------- ---------- -------- -------- ---------- ----------
Net Increase (Decrease) in
share Transactions 30,996 505,906 3,466 9,916 (62,630) 218,502
========== ========== ======== ======== ========== ==========
U.S. TREASURY MONEY SHORT-TERM SHORT-TERM
MARKET PORTFOLIO TREASURY PORTFOLIO BOND PORTFOLIO
-------------------------- -------------------------- --------------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98
to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99
----------- ---------- ----------- ---------- ----------- ----------
OPERATIONS:
Net Investment Income $ 8,999 $ 19,115 $ 1,073 $ 2,057 $ 2,533 $ 6,748
Net Realized Gain (Loss)
on Investments 4 18 31 246 (208) 360
Net Change in Unrealized
Appreciation (Depreciation)
on Investments -- -- (441) (140) (977) (402)
-------- -------- ------- ------- -------- --------
Net increase (Decrease) in
Net Assets from Operations 9,003 19,133 663 2,163 1,348 6,706
-------- -------- ------- ------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (6,163) (12,857) (782) (1,396) (2,531) (6,738)
Retail Class A (523) (1,205) (291) (661) -- --
Retail Class B -- -- -- -- -- --
Institutional II Class (2,313) (5,053) -- -- -- --
Net Capital Gains
Institutional Class -- -- -- (154) -- --
Retail Class A -- -- -- (73) -- --
Retail Class B -- -- -- -- -- --
-------- -------- ------- ------- -------- --------
Total Distributions (8,999) (19,115) (1,073) (2,284) (2,531) (6,738)
-------- -------- ------- ------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 201,323 374,307 4,392 12,880 14,122 28,513
Shares Issued in Lieu of
Cash Distributions 3 6 65 294 1,351 3,946
Shares Redeemed (181,248) (347,083) (3,247) (3,926) (27,697) (52,969)
-------- -------- ------- ------- -------- --------
Total Institutional Class
Share Transactions 20,078 27,230 1,210 9,248 (12,224) (20,510)
-------- -------- ------- ------- -------- --------
Retail Class A:
Shares Issued 60,743 41,393 2,031 3,506 -- --
Shares Issued in Lieu of
Cash Distributions 322 874 283 735 -- --
Shares Redeemed (56,931) (57,939) (3,553) (4,613) -- --
-------- -------- ------- ------- -------- --------
Total Retail Class A
Share Transactions 4,134 (15,672) (1,239) (372) -- --
-------- -------- ------- ------- -------- --------
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 172,532 375,294 -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- --
Shares Redeemed (207,747) (330,888) -- -- -- --
-------- -------- ------- ------- -------- --------
Total Institutional II Class
Share Transactions (35,215) 44,406 -- -- -- --
-------- -------- ------- ------- -------- --------
Increase (Decrease) in Net Assets from
Shareholder Transactions (11,003) 55,964 (29) 8,876 (12,224) (20,510)
-------- -------- ------- ------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS (10,999) 55,982 (439) 8,755 (13,407) (20,542)
NET ASSETS:
Beginning of period 448,815 392,833 48,094 39,339 111,127 131,669
-------- -------- ------- ------- -------- --------
End of period $437,816 $448,815 $47,655 $48,094 $ 97,720 $111,127
======== ======== ======= ======= ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 201,323 374,307 441 1,278 1,435 2,855
Shares Issued in Lieu of
Cash Distributions 3 6 7 29 137 395
Shares Redeemed (181,248) (347,083) (326) (389) (2,812) (5,301)
-------- -------- ------- ------- -------- --------
Total Institutional Class share
Transactions 20,078 27,230 122 918 (1,240) (2,051)
-------- -------- ------- ------- -------- --------
Retail Class A:
Shares Issued 60,743 41,393 203 346 -- --
Shares Issued in Lieu of
Cash Distributions 322 874 29 73 -- --
Shares Redeemed (56,931) (57,939) (357) (457) -- --
-------- -------- ------- ------- -------- --------
Total Retail Class A
share Transactions 4,134 (15,672) (125) (38) -- --
-------- -------- ------- ------- -------- --------
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 172,532 375,294 -- -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- --
Shares Redeemed (207,747) (330,888) -- -- -- --
-------- -------- ------- ------- -------- --------
Total Institutional II Class
share Transactions (35,215) 44,406 -- -- -- --
-------- -------- ------- ------- -------- --------
Net Increase (Decrease) in
share Transactions (11,003) 55,964 (3) 880 (1,240) (2,051)
======== ======== ======= ======= ======== ========
MARYLAND PENNSYLVANIA INTERMEDIATE FIXED
TAX-FREE PORTFOLIO TAX-FREE PORTFOLIO INCOME PORTFOLIO
-------------------------- -------------------------- --------------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98
to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99
----------- ---------- ----------- ---------- ----------- ----------
OPERATIONS:
Net Investment Income $ 2,786 $ 5,046 $ 4,509 $ 8,898 $ 2,808 $ 5,160
Net Realized Gain (Loss)
on Investments (338) 897 (2,230) 1,627 (113) 601
Net Change in Unrealized
Appreciation (Depreciation)
on Investments (8,070) 484 (14,203) 1,420 (2,839) (1,060)
-------- -------- -------- -------- -------- --------
Net increase (Decrease) in
Net Assets from Operations (5,622) 6,427 (11,924) 11,945 (144) 4,701
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (2,082) (3,855) (4,433) (8,692) (2,815) (5,150)
Retail Class A (703) (1,192) (75) (120) -- --
Retail Class B -- -- -- -- -- --
Institutional II Class -- -- -- -- -- --
Net Capital Gains
Institutional Class -- (598) -- (1,246) -- (464)
Retail Class A -- (189) -- (18) -- --
Retail Class B -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions (2,785) (5,834) (4,508) (10,076) (2,815) (5,614)
-------- -------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 5,690 20,695 8,118 27,331 14,690 30,623
Shares Issued in Lieu of
Cash Distributions 25 638 47 1,331 390 926
Shares Redeemed (3,140) (9,967) (24,103) (21,218) (5,185) (14,545)
-------- -------- -------- -------- -------- --------
Total Institutional Class
Share Transactions 2,575 11,366 (15,938) 7,444 9,895 17,004
-------- -------- -------- -------- -------- --------
Retail Class A:
Shares Issued 7,171 12,753 1,014 2,081 -- --
Shares Issued in Lieu of
Cash Distributions 651 1,381 62 127 -- --
Shares Redeemed (6,312) (7,150) (613) (980) -- --
-------- -------- -------- -------- -------- --------
Total Retail Class A
Share Transactions 1,510 6,984 463 1,228 -- --
-------- -------- -------- -------- -------- --------
Retail Class B:
Shares Issued 50 -- 53 -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Retail Class B
Share Transactions 50 -- 53 -- -- --
-------- -------- -------- -------- -------- --------
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 4,135 18,350 (15,422) 8,672 9,895 17,004
-------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS (4,272) 18,943 (31,854) 10,541 6,936 16,091
NET ASSETS:
Beginning of period 127,441 108,498 228,300 217,759 100,419 84,328
-------- -------- -------- -------- -------- --------
End of period $123,169 $127,441 $196,446 $228,300 $107,355 $100,419
======== ======== ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 573 2,015 823 2,654 1,510 3,043
Shares Issued in Lieu of
Cash Distributions 3 62 5 129 40 91
Shares Redeemed (318) (974) (2,470) (2,058) (535) (1,449)
-------- -------- -------- -------- -------- --------
Total Institutional Class share
Transactions 258 1,103 (1,642) 725 1,015 1,685
-------- -------- -------- -------- -------- --------
Retail Class A:
Shares Issued 722 1,241 106 202 -- --
Shares Issued in Lieu of
Cash Distributions 66 134 6 12 -- --
Shares Redeemed (637) (695) (62) (95) -- --
-------- -------- -------- -------- -------- --------
Total Retail Class A
share Transactions 151 680 50 119 -- --
-------- -------- -------- -------- -------- --------
Retail Class B:
Shares Issued 5 -- 5 -- -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Retail Class B share Transactions 5 -- 5 -- -- --
-------- -------- -------- -------- -------- --------
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 414 1,783 (1,587) 844 1,015 1,685
======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of the financial statements.
84 & 85
83
STATEMENTS OF CHANGES IN NET ASSETS (000) (UNAUDITED)
FOR THE YEAR OR PERIOD INDICATED
U.S. GOVERNMENT INCOME BALANCED EQUITY INCOME
BOND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------- ----------------------- ----------------------- -----------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98
to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99
----------- ---------- ----------- ---------- ----------- ---------- ----------- ----------
OPERATIONS:
Net Investment Income (Loss) $ 5,943 $ 14,387 $ 10,177 $ 20,055 $ 1,643 $ 2,634 $ 873 $ 2,169
Net Realized Gain (Loss)
on Investments (925) (243) (4,492) (1,205) 1,768 6,985 2,205 1,092
Net Change in Unrealized
Appreciation (Depreciation)
on Investments (5,789) (1,367) (8,840) (4,352) 6,377 12,888 (6,653) 580
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (Decrease)
in Net Assets
from Operations (771) 12,777 (3,155) 14,498 9,788 22,507 (3,575) 3,841
-------- -------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (5,840) (14,354) (9,891) (19,650) (1,252) (2,218) (848) (2,101)
Retail Class A (69) (44) (212) (442) (263) (383) (30) (68)
Retail Class B -- -- (9) (5) (27) (8) -- --
Institutional II Class -- -- -- -- -- -- -- --
Net Capital Gains
Institutional Class -- -- -- (135) -- (4,969) -- (5,723)
Retail Class A -- -- -- (3) -- (903) -- (208)
Retail Class B -- -- -- -- -- (17) -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (5,909) (14,398) (10,112) (20,235) (1,542) (8,498) (878) (8,100)
-------- -------- -------- -------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 6,882 30,771 21,373 68,793 31,215 26,622 1,453 4,716
Shares Issued in Lieu of Cash
Distributions 1,645 4,327 6,750 13,474 1,239 7,142 20 5,770
Shares Redeemed (48,715) (43,799) (28,392) (42,508) (6,986) (23,947) (11,492) (11,908)
-------- -------- -------- -------- -------- -------- -------- --------
Total Institutional Class Share
Transactions (40,188) (8,701) (269) 39,759 25,468 9,817 (10,019) (1,422)
-------- -------- -------- -------- -------- -------- -------- --------
Retail Class A:
Shares Issued 966 2,454 546 2,761 7,815 12,311 254 961
Shares Issued in Lieu of Cash
Distributions 69 41 190 406 258 1,262 29 270
Shares Redeemed (549) (250) (1,761) (1,331) (2,844) (3,919) (465) (858)
-------- -------- -------- -------- -------- -------- -------- --------
Total Retail Class A Share
Transactions 486 2,245 (1,025) 1,836 5,229 9,654 (182) 373
-------- -------- -------- -------- -------- -------- -------- --------
Retail Class B:
Shares Issued -- -- 253 309 3,561 2,436 -- --
Shares Issued in Lieu of Cash
Distributions -- -- 8 4 27 25 -- --
Shares Redeemed -- -- (110) (29) (224) (72) -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total Retail Class B
Share Transactions -- -- 151 284 3,364 2,389 -- --
-------- -------- -------- -------- -------- -------- -------- --------
Increase (Decrease) in
Net Assets from
Shareholder Transactions (39,702) (6,456) (1,143) 41,879 34,061 21,860 (10,201) (1,049)
-------- -------- -------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN
NET ASSETS (46,382) (8,077) (14,410) 36,142 42,307 35,869 (14,654) (5,308)
NET ASSETS:
Beginning of period 257,569 265,646 365,335 329,193 147,801 111,932 104,763 110,071
-------- -------- -------- -------- -------- -------- -------- --------
End of period $211,187 $257,569 $350,925 $365,335 $190,108 $147,801 $ 90,109 $104,763
======== ======== ======== ======== ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 721 3,103 2,175 6,702 2,119 1,998 120 399
Shares Issued in Lieu of Cash
Distributions 172 436 691 1,311 84 529 2 498
Shares Redeemed (5,064) (4,418) (2,905) (4,115) (475) (1,756) (968) (1,018)
-------- -------- -------- -------- -------- -------- -------- --------
Total Institutional Class share
Transactions (4,171) (879) (39) 3,898 1,728 771 (846) (121)
-------- -------- -------- -------- -------- -------- -------- --------
Retail Class A:
Shares Issued 100 247 55 266 533 900 22 80
Shares Issued in Lieu of Cash
Distributions 7 4 19 39 17 94 2 23
Shares Redeemed (57) (25) (177) (129) (193) (291) (40) (73)
-------- -------- -------- -------- -------- -------- -------- --------
Total Retail Class A share
Transactions 50 226 (103) 176 357 703 (16) 30
-------- -------- -------- -------- -------- -------- -------- --------
Retail Class B:
Shares Issued -- -- 25 30 242 173 -- --
Shares Issued in Lieu of Cash
Distributions -- -- 1 1 2 2 -- --
Shares Redeemed -- -- (11) (3) (15) (5) -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total Retail Class B share
Transactions -- -- 15 28 229 170 -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net Increase (Decrease)
in share Transactions (4,121) (653) (127) 4,102 2,314 1,644 (862) (91)
======== ======== ======== ======== ======== ======== ======== ========
VALUE EQUITY EQUITY INDEX BLUE CHIP EQUITY CAPITAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------- ----------------------- ----------------------- -----------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98
to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99
----------- ---------- ----------- ---------- ----------- ---------- ----------- ----------
OPERATIONS:
Net Investment Income (Loss) $ 636 $ 3,425 $ 582 $ 801 $ 305 $ 807 $ (170) $ (93)
Net Realized Gain (Loss)
on Investments 18,996 54,074 1,607 1,263 (294) 4,389 9,139 4,150
Net Change in Unrealized
Appreciation (Depreciation)
on Investments (35,212) (2,152) 1,171 14,031 6,425 25,069 12,253 19,500
-------- -------- -------- ------- -------- -------- -------- --------
Net increase (Decrease)
in Net Assets
from Operations (15,580) 55,347 3,360 16,095 6,436 30,265 21,222 23,557
-------- -------- -------- ------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (652) (3,675) (544) (763) (223) (613) -- --
Retail Class A (5) (12) (25) (24) (55) (233) -- --
Retail Class B -- -- -- -- -- (1) -- --
Institutional II Class -- -- -- -- -- -- -- --
Net Capital Gains
Institutional Class -- (29,764) -- (765) -- (2,118) -- (2,133)
Retail Class A -- (110) -- (26) -- (1,065) -- (549)
Retail Class B -- (1) -- -- -- (15) -- (9)
-------- -------- -------- ------- -------- -------- -------- --------
Total Distributions (657) (33,562) (569) (1,578) (278) (4,045) -- (2,691)
-------- -------- -------- ------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 10,499 18,207 31,485 36,359 34,809 55,745 23,804 34,103
Shares Issued in Lieu of Cash
Distributions 212 31,209 387 1,408 90 2,439 -- 2,133
Shares Redeemed (81,677) (179,386) (3,192) (10,344) (12,521) (13,286) (10,829) (13,384)
-------- -------- -------- ------- -------- -------- -------- --------
Total Institutional Class Share
Transactions (70,966) (129,970) 28,680 27,423 22,378 44,898 12,975 22,852
-------- -------- -------- ------- -------- -------- -------- --------
Retail Class A:
Shares Issued 2,504 3,997 1,786 3,230 5,098 12,673 7,092 6,681
Shares Issued in Lieu of Cash
Distributions 2 63 25 50 54 1,265 -- 538
Shares Redeemed (435) (917) (298) (283) (3,839) (8,656) (1,436) (2,746)
-------- -------- -------- ------- -------- -------- -------- --------
Total Retail Class A Share
Transactions 2,071 3,143 1,513 2,997 1,313 5,282 5,656 4,473
-------- -------- -------- ------- -------- -------- -------- --------
Retail Class B:
Shares Issued 293 156 -- -- 2,846 2,968 3,631 2,136
Shares Issued in Lieu of Cash
Distributions -- 1 -- -- -- 16 -- 8
Shares Redeemed (15) -- -- -- (210) (91) (116) (112)
-------- -------- -------- ------- -------- -------- -------- --------
Total Retail Class B
Share Transactions 278 157 -- -- 2,636 2,893 3,515 2,032
-------- -------- -------- ------- -------- -------- -------- --------
Increase (Decrease) in
Net Assets from
Shareholder Transactions (68,617) (126,670) 30,193 30,420 26,327 53,073 22,146 29,357
-------- -------- -------- ------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN
NET ASSETS (84,854) (104,885) 32,984 44,937 32,485 79,293 43,368 50,223
NET ASSETS:
Beginning of period 540,544 645,429 91,885 46,948 189,653 110,360 115,239 65,016
-------- -------- -------- ------- -------- -------- -------- --------
End of period $455,690 $540,544 $124,869 $91,885 $222,138 $189,653 $158,607 $115,239
======== ======== ======== ======= ======== ======== ======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 706 1,284 2,270 3,026 1,739 3,145 1,197 2,106
Shares Issued in Lieu of Cash
Distributions 14 2,260 28 115 5 139 -- 131
Shares Redeemed (5,421) (12,501) (231) (804) (627) (741) (548) (822)
-------- -------- -------- ------- -------- -------- -------- --------
Total Institutional Class share
Transactions (4,701) (8,957) 2,067 2,337 1,117 2,543 649 1,415
-------- -------- -------- ------- -------- -------- -------- --------
Retail Class A:
Shares Issued 164 279 129 255 254 721 361 410
Shares Issued in Lieu of Cash
Distributions -- 5 2 4 3 72 -- 33
Shares Redeemed (30) (66) (22) (22) (191) (501) (73) (175)
-------- -------- -------- ------- -------- -------- -------- --------
Total Retail Class A share
Transactions 134 218 109 237 66 292 288 268
-------- -------- -------- ------- -------- -------- -------- --------
Retail Class B:
Shares Issued 20 11 -- -- 143 163 184 122
Shares Issued in Lieu of Cash
Distributions -- -- -- -- -- 1 -- --
Shares Redeemed (1) -- -- -- (11) (5) (6) (6)
-------- -------- -------- ------- -------- -------- -------- --------
Total Retail Class B share
Transactions 19 11 -- -- 132 159 178 116
-------- -------- -------- ------- -------- -------- -------- --------
Net Increase (Decrease)
in share Transactions (4,548) (8,728) 2,176 2,574 1,315 2,994 1,115 1,799
======== ======== ======== ======= ======== ======== ======== ========
MID-CAP EQUITY SMALL-CAP EQUITY INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO SELECTION PORTFOLIO
-------------------------- -------------------------- --------------------------
5/1/99 5/1/98 5/1/99 5/1/98 5/1/99 5/1/98
to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99 to 10/31/99 to 4/30/99
----------- ---------- ----------- ---------- ----------- ----------
OPERATIONS:
Net Investment Income (Loss) $ (60) $ 24 $ (152) $ (135) $ 40 $ 369
Net Realized Gain (Loss)
on Investments 3,537 5,867 8,323 4,402 168 1,446
Net Change in Unrealized
Appreciation (Depreciation)
on Investments (521) (961) 8,923 (1,611) 2,842 (3,646)
------- ------- ------- ------- ------- -------
Net increase (Decrease)
in Net Assets
from Operations 2,956 4,930 17,094 2,656 3,050 (1,831)
------- ------- ------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class -- (30) -- -- -- (350)
Retail Class A -- -- -- -- -- (11)
Retail Class B -- -- -- -- -- --
Institutional II Class -- -- -- -- -- --
Net Capital Gains
Institutional Class -- (2,330) -- (732) -- (573)
Retail Class A -- -- -- (57) -- (20)
Retail Class B -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total Distributions -- (2,360) -- (789) -- (954)
------- ------- ------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 5,344 12,969 2,876 4,108 4,607 6,844
Shares Issued in Lieu of Cash
Distributions -- 2,343 -- 689 -- 863
Shares Redeemed (2,681) (9,514) (2,847) (3,317) (3,120) (22,764)
------- ------- ------- ------- ------- -------
Total Institutional Class Share
Transactions 2,663 5,798 29 1,480 1,487 (15,057)
------- ------- ------- ------- ------- -------
Retail Class A:
Shares Issued 207 -- 477 587 345 1,486
Shares Issued in Lieu of Cash
Distributions -- -- -- 57 -- 31
Shares Redeemed -- -- (292) (406) (39) (16)
------- ------- ------- ------- ------- -------
Total Retail Class A Share
Transactions 207 -- 185 238 306 1,501
------- ------- ------- ------- ------- -------
Retail Class B:
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total Retail Class B
Share Transactions -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Increase (Decrease) in
Net Assets from
Shareholder Transactions 2,870 5,798 214 1,718 1,793 (13,556)
------- ------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN
NET ASSETS 5,826 8,368 17,308 3,585 4,843 (16,341)
NET ASSETS:
Beginning of period 63,648 55,280 32,810 29,225 25,182 41,523
------- ------- ------- ------- ------- -------
End of period $69,474 $63,648 $50,118 $32,810 $30,025 $25,182
======= ======= ======= ======= ======= =======
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 355 961 195 369 393 631
Shares Issued in Lieu of Cash
Distributions -- 177 -- 63 -- 83
Shares Redeemed (177) (726) (187) (324) (266) (2,199)
------- ------- ------- ------- ------- -------
Total Institutional Class share
Transactions 178 412 8 108 127 (1,485)
------- ------- ------- ------- ------- -------
Retail Class A:
Shares Issued 14 -- 32 53 30 132
Shares Issued in Lieu of Cash
Distributions -- -- -- 5 -- 3
Shares Redeemed -- -- (21) (36) (3) (2)
------- ------- ------- ------- ------- -------
Total Retail Class A share
Transactions 14 -- 11 22 27 133
------- ------- ------- ------- ------- -------
Retail Class B:
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total Retail Class B share
Transactions -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Net Increase (Decrease)
in share Transactions 192 412 19 130 154 (1,352)
======= ======= ======= ======= ======= =======
The accompanying notes are an integral part of the financial statements.
86 & 87
84
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1999
(UNAUDITED) AND THE PERIODS ENDED APRIL 30,
REALIZED
AND DISTRIBU- DISTRIBU- NET
NET ASSET NET UNREALIZED TIONS TIONS ASSETS RATIO OF
VALUE, INVEST- GAINS OR FROM NET FROM NET ASSET TOTAL END OF EXPENSES
BEGINNING MENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END RETURN PERIOD TO AVERAGE
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD (A) (000) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1999* $1.00 0.02 -- (0.02) -- $1.00 5.02% $ 497,581 0.37%
1999 1.00 0.05 -- (0.05) -- 1.00 5.17 527,132 0.38
1998 1.00 0.05 -- (0.05) -- 1.00 5.55 226,439 0.33
1997 1.00 0.05 -- (0.05) -- 1.00 5.36 318,919 0.28
1996 1.00 0.06 -- (0.06) -- 1.00 5.78 348,343 0.25
1995 (1) 1.00 0.05 -- (0.05) -- 1.00 5.13 277,859 0.20
RETAIL CLASS A
1999* $1.00 0.02 -- (0.02) -- $1.00 4.77% $ 277,060 0.60%
1999 1.00 0.05 -- (0.05) -- 1.00 4.91 246,496 0.62
1998 1.00 0.05 -- (0.05) -- 1.00 5.25 188,048 0.62
1997 1.00 0.05 -- (0.05) -- 1.00 5.03 128,693 0.59
1996 1.00 0.05 -- (0.05) -- 1.00 5.44 104,703 0.58
1995 (2) 1.00 0.05 -- (0.05) -- 1.00 4.69 51,081 0.45
RETAIL CLASS B
1999* $1.00 0.02 -- (0.02) -- $1.00 4.06% $ 5,245 1.29%
1999 (3) 1.00 0.01 -- (0.01) -- 1.00 3.86* 22 1.30*
INSTITUTIONAL II CLASS
1999* $1.00 0.02 -- (0.02) -- $1.00 4.94% $ 259,003 0.44%
1999 1.00 0.05 -- (0.05) -- 1.00 5.11 229,046 0.43
1998 1.00 0.05 -- (0.05) -- 1.00 5.47 82,293 0.41
1997 1.00 0.05 -- (0.05) -- 1.00 5.25 62,960 0.38
1996 (4) 1.00 0.04 -- (0.04) -- 1.00 4.33+ 28,790 0.36*
- -------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1999* $1.00 0.01 -- (0.01) -- $1.00 2.98% $ 74,404 0.35%
1999 1.00 0.03 -- (0.03) -- 1.00 2.99 77,896 0.36
1998 1.00 0.03 -- (0.03) -- 1.00 3.45 90,446 0.32
1997 1.00 0.03 -- (0.03) -- 1.00 3.29 69,091 0.28
1996 1.00 0.04 -- (0.04) -- 1.00 3.61 74,739 0.22
1995 (1) 1.00 0.03 -- (0.03) -- 1.00 3.24 64,112 0.22
RETAIL CLASS A
1999* $1.00 0.01 -- (0.01) -- $1.00 2.74% $ 50,483 0.58%
1999 1.00 0.03 -- (0.03) -- 1.00 2.74 33,509 0.60
1998 1.00 0.03 -- (0.03) -- 1.00 3.16 25,144 0.61
1997 1.00 0.03 -- (0.03) -- 1.00 3.01 16,495 0.55
1996 1.00 0.03 -- (0.03) -- 1.00 3.53 16,179 0.34
1995 (5) 1.00 0.03 -- (0.03) -- 1.00 2.74 2,491 0.75
INSTITUTIONAL II CLASS
1999* $1.00 0.01 -- (0.01) -- $1.00 2.90% $ 533,559 0.42%
1999 1.00 0.03 -- (0.03) -- 1.00 2.94 43,575 0.41
1998 1.00 0.03 -- (0.03) -- 1.00 3.37 29,474 0.40
1997 1.00 0.03 -- (0.03) -- 1.00 3.19 16,727 0.38
1996 (6) 1.00 0.02 -- (0.02) -- 1.00 2.62+ 9,387 0.33*
- --------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
1999* $1.00 0.02 -- (0.02) -- $1.00 4.82% $1,360,433 0.40%
1999 1.00 0.05 -- (0.05) -- 1.00 5.00 1,428,064 0.40
1998 1.00 0.05 -- (0.05) -- 1.00 5.42 1,285,840 0.35
1997 1.00 0.05 -- (0.05) -- 1.00 5.22 1,250,778 0.32
1996 1.00 0.05 -- (0.05) -- 1.00 5.64 1,043,758 0.31
1995 (1) 1.00 0.05 -- (0.05) -- 1.00 5.00 651,113 0.25
RETAIL CLASS A
1999* $1.00 0.02 -- (0.02) -- $1.00 4.58% $ 127,159 0.63%
1999 1.00 0.05 -- (0.05) -- 1.00 4.75 104,037 0.64
1998 (7) 1.00 0.04 -- (0.04) -- 1.00 5.19* 78,265 0.67*
INSTITUTIONAL II CLASS
1999* $1.00 0.02 -- (0.02) -- $1.00 4.75% $ 124,012 0.47%
1999 1.00 0.05 -- (0.05) -- 1.00 4.95 142,144 0.45
1998 1.00 0.05 -- (0.05) -- 1.00 5.33 91,629 0.44
1997 1.00 0.05 -- (0.05) -- 1.00 5.12 37,284 0.42
1996 (6) 1.00 0.04 -- (0.04) -- 1.00 4.11+ 17,027 0.41*
RATIO
RATIO OF NET OF EXPENSES
INVESTMENT TO AVERAGE
INCOME (LOSS) NET ASSETS
TO AVERAGE (EXCLUDING
NET ASSETS WAIVERS)
- ---------------------------------------
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1999* 4.89% 0.57%
1999 5.01 0.60
1998 5.41 0.50
1997 5.23 0.43
1996 5.62 0.44
1995 (1) 5.13 0.46
RETAIL CLASS A
1999* 4.69% 0.82%
1999 4.79 0.85
1998 5.13 0.85
1997 4.92 0.83
1996 5.25 0.77
1995 (2) 4.88 0.97
RETAIL CLASS B
1999* 4.01% 1.43%
1999 (3) 3.76* 1.44*
INSTITUTIONAL II CLASS
1999* 4.84% 0.57%
1999 4.97 0.57
1998 5.33 0.55
1997 5.14 0.53
1996 (4) 5.37* 0.55*
- -------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1999* 2.94% 0.58%
1999 2.95 0.60
1998 3.39 0.51
1997 3.23 0.44
1996 3.54 0.45
1995 (1) 3.21 0.47
RETAIL CLASS A
1999* 2.69% 0.83%
1999 2.66 0.85
1998 3.11 0.86
1997 2.97 0.84
1996 3.33 0.90
1995 (5) 2.68 2.94
INSTITUTIONAL II CLASS
1999* 2.86% 0.58%
1999 2.87 0.57
1998 3.31 0.56
1997 3.14 0.54
1996 (6) 3.35* 0.58*
- --------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
1999* 4.71% 0.58%
1999 4.86 0.59
1998 5.29 0.49
1997 5.10 0.43
1996 5.45 0.44
1995 (1) 5.09 0.47
RETAIL CLASS A
1999* 4.49% 0.83%
1999 4.62 0.84
1998 (7) 4.98* 0.87*
INSTITUTIONAL II CLASS
1999* 4.64% 0.58%
1999 4.76 0.56
1998 5.21 0.55
1997 5.01 0.53
1996 (6) 5.25* 0.56*
The accompanying notes are an integral part of the financial statements.
88
85
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1999 (UNAUDITED)
AND THE PERIODS ENDED APRIL 30,
REALIZED
AND DISTRIBU- DISTRIBU- NET
NET ASSET NET UNREALIZED TIONS TIONS ASSETS RATIO OF
VALUE, INVEST- GAINS OR FROM NET FROM NET ASSET TOTAL END OF EXPENSES
BEGINNING MENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END RETURN PERIOD TO AVERAGE
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD (A) (000) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
- ------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
1999* $1.00 0.02 -- (0.02) -- $ 1.00 4.38% $310,084 0.45%
1999 1.00 0.04 -- (0.04) -- 1.00 4.58 289,930 0.45
1998 1.00 0.05 -- (0.05) -- 1.00 5.08 262,687 0.40
1997 1.00 0.05 -- (0.05) -- 1.00 5.00 225,924 0.37
1996 1.00 0.05 -- (0.05) -- 1.00 5.32 275,259 0.36
1995 (1) 1.00 0.05 -- (0.05) -- 1.00 4.60 221,069 0.38
RETAIL CLASS A
1999* $1.00 0.02 -- (0.02) -- $ 1.00 4.14% $ 23,713 0.68%
1999 1.00 0.04 -- (0.04) -- 1.00 4.33 19,632 0.69
1998 1.00 0.05 -- (0.05) -- 1.00 4.77 35,302 0.70
1997 1.00 0.05 -- (0.05) -- 1.00 4.71 13,673 0.64
1996 (8) 1.00 0.02 -- (0.02) -- 1.00 1.82+ 8,758 0.55*
INSTITUTIONAL II CLASS
1999* $1.00 0.02 -- (0.02) -- $ 1.00 4.31% $104,019 0.52%
1999 1.00 0.04 -- (0.04) -- 1.00 4.53 139,253 0.50
1998 1.00 0.05 -- (0.05) -- 1.00 4.99 94,844 0.48
1997 1.00 0.05 -- (0.05) -- 1.00 4.89 63,496 0.47
1996 (6) 1.00 0.04 -- (0.04) -- 1.00 3.87+ 47,220 0.47*
- -----------------------------
SHORT-TERM TREASURY PORTFOLIO
- -----------------------------
INSTITUTIONAL CLASS
1999* $10.03 0.23 (0.08) (0.23) -- $ 9.95 1.47%+ $ 35,011 0.62%
1999 10.05 0.48 0.03 (0.48) (0.05) 10.03 5.24 34,088 0.63
1998 9.96 0.53 0.10 (0.53) (0.01) 10.05 6.48 24,929 0.55
1997 9.96 0.50 -- (0.49) (0.01) 9.96 5.13 21,563 0.55
1996 (9) 10.00 0.06 (0.04) (0.06) -- 9.96 0.16+ 18,823 0.55*
RETAIL CLASS A
1999* $10.03 0.22 (0.09) (0.22) -- $ 9.94 1.27%+ $ 12,644 0.81%
1999 10.05 0.47 0.03 (0.47) (0.05) 10.03 5.04 14,006 0.82
1998 9.96 0.52 0.09 (0.51) (0.01) 10.05 6.23 14,410 0.78
1997 (10) 9.95 0.27 0.03 (0.28) (0.01) 9.96 3.39+ 22,937 0.67*
- -------------------------
SHORT-TERM BOND PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
1999* $ 9.94 0.25 (0.11) (0.25) -- $ 9.83 1.40%+ $ 97,720 0.96%
1999 9.95 0.51 (0.01) (0.51) -- 9.94 5.15 111,127 0.97
1998 9.96 0.09 (0.01) (0.09) -- 9.95 0.82+ 131,669 0.97*
1998++ 9.95 0.57 0.01 (0.57) -- 9.96 5.98 133,544 0.82
1997++ (11) 10.00 0.49 (0.05) (0.49) -- 9.95 4.49+ 146,178 0.90*
RATIO
RATIO OF NET OF EXPENSES
INVESTMENT TO AVERAGE
INCOME (LOSS) NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING TURNOVER
NET ASSETS WAIVERS) RATE
- ----------------------------------------------------
- ------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
1999* 4.30% 0.58% --
1999 4.47 0.59 --
1998 4.96 0.48 --
1997 4.88 0.43 --
1996 5.18 0.45 --
1995 (1) 4.59 0.47 --
RETAIL CLASS A
1999* 4.06% 0.83% --
1999 4.31 0.84 --
1998 4.66 0.85 --
1997 4.62 0.83 --
1996 (8) 4.71* 0.86* --
INSTITUTIONAL II CLASS
1999* 4.22% 0.58% --
1999 4.39 0.56 --
1998 4.88 0.54 --
1997 4.79 0.53 --
1996 (6) 4.98* 0.55* --
- -----------------------------
SHORT-TERM TREASURY PORTFOLIO
- -----------------------------
INSTITUTIONAL CLASS
1999* 4.48% 0.71% 50.19%
1999 4.79 0.72 70.64
1998 5.26 0.60 124.24
1997 5.11 0.60 147.86
1996 (9) (0.55)* 0.60* --
RETAIL CLASS A
1999* 4.29% 1.11% 50.19%
1999 4.61 1.12 70.64
1998 5.02 1.07 124.24
1997 (10) 5.07* 0.91* 147.86
- -------------------------
SHORT-TERM BOND PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
1999* 4.97% 1.10% 47.05%
1999 5.14 1.11 91.22
1998 5.14* 1.16* 108.18
1998++ 5.78 1.01 135.00
1997++ (11) 5.47* 1.08 112.00
89
86
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1999 (UNAUDITED)
AND THE PERIODS ENDED APRIL 30,
REALIZED
AND DISTRIBU- DISTRIBU- NET
NET ASSET NET UNREALIZED TIONS TIONS ASSETS RATIO OF
VALUE, INVEST- GAINS OR FROM NET FROM NET ASSET TOTAL END OF EXPENSES
BEGINNING MENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END RETURN PERIOD TO AVERAGE
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD (A) (000) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------
MARYLAND TAX-FREE PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
1999* $10.21 0.22 (0.66) (0.22) -- $ 9.55 (4.35)%+ $ 91,369 0.80%
1999 10.14 0.45 0.14 (0.45) (0.07) 10.21 5.86 95,046 0.76
1998 9.87 0.47 0.33 (0.47) (0.06) 10.14 8.15 83,215 0.68
1997 (12) 10.00 0.22 (0.13) (0.22) -- 9.87 0.89+ 79,608 0.67*
RETAIL CLASS A
1999* $10.21 0.21 (0.66) (0.21) -- $ 9.55 (4.41)%+ $ 31,750 0.93%
1999 10.14 0.43 0.14 (0.43) (0.07) 10.21 5.69 32,395 0.93
1998 9.87 0.44 0.34 (0.45) (0.06) 10.14 7.91 25,283 0.90
1997(13) 9.96 0.13 (0.07) (0.15) -- 9.87 0.63+ 7,997 0.91*
RETAIL CLASS B
1999*(27) $ 9.75 1.32 (0.19) (1.32) -- $ 9.56 11.47 + 50 1.69%
- -------------------------------
PENNSYLVANIA TAX-FREE PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1999* $ 10.23 0.21 (0.75) (0.21) -- $ 9.48 (5.35)%+ $192,386 0.96%
1999 10.14 0.41 0.15 (0.41) (0.06) 10.23 5.56 224,480 0.92
1998 10.28 0.07 (0.14) (0.07) -- 10.14 (0.66)+ 215,182 0.84*
1998++ 10.09 0.40 0.19 (0.40) -- 10.28 6.68 195,322 0.80
1997++(11) 10.00 0.40 0.09 (0.40) -- 10.09 5.03+ 221,393 0.83*
RETAIL CLASS A
1999* $10.22 0.20 (0.75) (0.20) -- $ 9.47 (5.43)%+ $ 4,009 1.11%
1999 10.13 0.39 0.15 (0.39) (0.06) 10.22 5.39 3,820 1.10
1998 (14) 10.26 0.04 (0.13) (0.04) -- 10.13 (0.94)+ 2,577 1.01*
RETAIL CLASS B
1999*(27) $ 9.71 1.02 (0.23) (1.02) -- $ 9.48 7.99+ $ 51 1.81%
RATIO
RATIO OF NET OF EXPENSES
INVESTMENT TO AVERAGE
INCOME (LOSS) NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING TURNOVER
NET ASSETS WAIVERS) RATE
- ------------------------------------------------
- ---------------------------
MARYLAND TAX-FREE PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
1999* 4.42% 0.99% 8.86%
1999 4.35 0.99 30.83
1998 4.62 0.77 22.40
1997 (12) 4.95* 0.72* 11.13
RETAIL CLASS A
1999* 4.29% 1.24% 8.86%
1999 4.18 1.29 30.83
1998 4.39 1.15 22.40
1997(13) 4.70* 1.10* 11.13
RETAIL CLASS B
1999*(27) 3.73% 1.86% 8.86%
- -------------------------------
PENNSYLVANIA TAX-FREE PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1999* 4.18% 1.00% 20.72%
1999 4.01 1.00 43.46
1998 3.84* 0.91* 3.50
1998++ 4.43 1.00 57.00
1997++(11) 4.41* 1.02* 86.00
RETAIL CLASS A
1999* 4.05% 1.31% 20.72%
1999 3.84 1.30 43.46
1998 (14) 3.72* 1.24* 3.50
RETAIL CLASS B
1999*(27) 3.51% 1.81% 20.72%
+ Returns are for the period indicated and have not been annualized.
++ Period ended February 28. See Note 8 of Notes to Financial Statements
regarding fund mergers.
* All ratios for the period have been annualized, except where otherwise
noted.
(A) Total return for the retail class does not include the one-time sales
charge.
(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.
(27) Commenced operations on September 9, 1999.
(28) Commenced operations on September 1, 1999.
The accompanying notes are an integral part of the financial statements.
90
87
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1999 (UNAUDITED)
AND THE PERIODS ENDED APRIL 30,
REALIZED
AND DISTRIBU- DISTRIBU- NET
NET ASSET NET UNREALIZED TIONS TIONS ASSETS RATIO OF
VALUE, INVEST- GAINS OR FROM NET FROM NET ASSET TOTAL END OF EXPENSES
BEGINNING MENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END RETURN PERIOD TO AVERAGE
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD (A) (000) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
- -----------------------------------
INTERMEDIATE FIXED INCOME PORTFOLIO
- -----------------------------------
INSTITUTIONAL CLASS
1999* $ 9.93 0.26 (0.29) (0.26) -- $ 9.64 (0.27)%+ $107,355 0.79%
1999 10.00 0.55 (0.02) (0.55) (0.05) 9.93 5.40 100,419 0.77
1998 9.80 0.60 0.23 (0.60) (0.03) 10.00 8.65 84,328 0.69
1997 (12) 10.00 0.28 (0.20) (0.28) -- 9.80 0.78+ 76,326 0.68*
- ------------------------------
U.S. GOVERNMENT BOND PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1999* $ 9.78 0.25 (0.27) (0.25) -- $ 9.51 (0.16)%+ $208,536 0.96%
1999 9.85 0.54 (0.07) (0.54) -- 9.78 4.82 255,329 0.93
1998 9.85 0.10 -- (0.10) -- 9.85 1.02+ 265,616 0.88*
1998++ 9.82 0.67 0.03 (0.67) -- 9.85 7.40 264,565 0.79
1997++ (11) 10.00 0.59 (0.18) (0.59) -- 9.82 4.18+ 259,042 0.85*
RETAIL CLASS A
1999* $ 9.79 0.25 (0.27) (0.25) -- $ 9.52 (0.22)%+ $ 2,651 1.10%
1999 9.85 0.54 (0.06) (0.54) -- 9.79 4.93 2,240 1.12
1998 (18) 9.88 0.81 (0.03) (0.81) -- 9.85 7.86+ 30 1.05*
- ----------------
INCOME PORTFOLIO
- ----------------
INSTITUTIONAL CLASS
1999* $10.08 0.28 (0.36) (0.28) -- $ 9.72 (0.81)%+ $343,268 0.82%
1999 10.25 0.59 (0.17) (0.59) -- 10.08 4.22 356,482 0.78
1998 9.82 0.61 0.43 (0.61) -- 10.25 10.84 322,304 0.73
1997 9.80 0.59 0.02 (0.59) -- 9.82 6.51 242,966 0.68
1996 9.60 0.61 0.20 (0.61) -- 9.80 8.46 180,962 0.73
1995 (15) 9.61 0.58 0.02 (0.58) (0.03) 9.60 6.53 66,441 0.74
RETAIL CLASS A
1999* $10.20 0.27 (0.36) (0.27) -- $ 9.84 (0.84)%+ $ 7,240 0.95%
1999 10.37 0.58 (0.16) (0.59) -- 10.20 4.08 8,573 0.95
1998 9.94 0.58 0.44 (0.59) -- 10.37 10.47 6,889 0.95
1997 9.91 0.59 0.01 (0.57) -- 9.94 6.32 4,102 0.89
1996 9.72 0.60 0.19 (0.60) -- 9.91 8.14 4,184 1.02
1995 (16) 9.62 0.55 0.05 (0.47) (0.03) 9.72 6.45 296 1.23
RETAIL CLASS B
1999* $10.08 0.24 (0.36) (0.24) -- $ 9.72 (1.22)%+ $ 417 1.70%
1999 (17) 10.40 0.35 (0.32) (0.35) -- 10.08 0.35+ 280 1.70*
- ------------------
BALANCED PORTFOLIO
- ------------------
INSTITUTIONAL CLASS
1999* $14.64 0.14 0.67 (0.13) -- $15.32 5.60%+ $150,382 0.90%
1999 13.24 0.28 2.03 (0.28) (0.63) 14.64 18.17 118,395 0.85
1998 11.43 0.30 3.04 (0.30) (1.23) 13.24 30.95 96,858 0.79
1997 11.38 0.33 0.53 (0.30) (0.51) 11.43 7.85 76,987 0.74
1996 10.04 0.34 1.71 (0.34) (0.37) 11.38 20.90 102,233 0.75
1995 (15) 10.16 0.33 0.03 (0.29) (0.19) 10.04 3.75 91,039 0.77
RETAIL CLASS A
1999* $14.59 0.14 0.67 (0.13) -- $15.27 5.56%+ $ 33,640 1.01%
1999 13.20 0.26 2.02 (0.26) (0.63) 14.59 17.97 26,927 1.01
1998 11.40 0.27 3.04 (0.28) (1.23) 13.20 30.67 15,074 1.02
1997 11.35 0.28 0.56 (0.28) (0.51) 11.40 7.66 6,164 0.96
1996 10.04 0.31 1.68 (0.31) (0.37) 11.35 20.23 3,323 1.09
1995 (19) 10.15 0.27 0.05 (0.24) (0.19) 10.04 3.33 549 1.26
RETAIL CLASS B
1999* $14.60 0.08 0.67 (0.09) -- $15.26 5.12%+ $ 6,086 1.77%
1999 (17) 12.58 0.16 2.67 (0.18) (0.63) 14.60 23.13+ 2,479 1.75*
RATIO
RATIO OF NET OF EXPENSES
INVESTMENT TO AVERAGE
INCOME (LOSS) NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING TURNOVER
NET ASSETS WAIVERS) RATE
- ----------------------------------------------
- -----------------------------------
INTERMEDIATE FIXED INCOME PORTFOLIO
- -----------------------------------
INSTITUTIONAL CLASS
1999* 5.35% 0.94% 17.77%
1999 5.49 0.95 52.87
1998 6.02 0.87 41.63
1997 (12) 5.55* 0.83* 17.18
- ------------------------------
U.S. GOVERNMENT BOND PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1999* 5.25% 1.09% 4.57%
1999 5.43 1.10 102.27
1998 6.04* 1.06* 13.77
1998++ 6.88 0.98 431.00
1997++ (11) 6.54* 1.03* 255.00
RETAIL CLASS A
1999* 5.14% 1.39% 4.57%
1999 5.11 1.41 102.27
1998 (18) 6.02* 1.33* 13.77
- ----------------
INCOME PORTFOLIO
- ----------------
INSTITUTIONAL CLASS
1999* 5.63% 0.94% 151.50%
1999 5.77 0.94 50.41
1998 6.05 0.77 154.87
1997 6.19 0.68 271.60
1996 6.00 0.73 107.33
1995 (15) 6.15 0.74 73.00
RETAIL CLASS A
1999* 5.49% 1.24% 151.50%
1999 5.59 1.24 50.41
1998 5.82 1.16 154.87
1997 5.96 1.09 271.60
1996 5.54 1.37 107.33
1995 (16) 5.66 27.63 73.00
RETAIL CLASS B
1999* 4.78% 1.79% 151.50%
1999 (17) 4.71* 1.79* 50.41
- ------------------
BALANCED PORTFOLIO
- ------------------
INSTITUTIONAL CLASS
1999* 1.96% 1.00% 21.83%
1999 2.12 1.00 56.70
1998 2.44 0.83 71.58
1997 2.79 0.74 124.22
1996 3.19 0.75 107.56
1995 (15) 3.32 0.77 81.00
RETAIL CLASS A
1999* 1.85% 1.40% 21.83%
1999 1.94 1.40 56.70
1998 2.20 1.33 71.58
1997 2.56 1.19 124.22
1996 2.51 1.55 107.56
1995 (19) 2.83 5.80 81.00
RETAIL CLASS B
1999* 1.13% 1.86% 21.83%
1999 (17) 0.99* 1.84* 56.70
91
88
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1999 (UNAUDITED)
AND THE PERIODS ENDED APRIL 30,
REALIZED
AND DISTRIBU- DISTRIBU- NET
NET ASSET NET UNREALIZED TIONS TIONS ASSETS RATIO OF
VALUE, INVEST- GAINS OR FROM NET FROM NET ASSET TOTAL END OF EXPENSES
BEGINNING MENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END RETURN PERIOD TO AVERAGE
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD (A) (000) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
- -----------------------
EQUITY INCOME PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
1999* $12.05 0.11 (0.55) (0.11) -- $11.50 (3.68)%+ $ 86,797 0.96%
1999 12.52 0.25 0.22 (0.25) (0.69) 12.05 4.17 101,104 0.91
1998 10.67 0.31 3.06 (0.31) (1.21) 12.52 33.04 106,643 0.84
1997 (12) 10.00 0.12 0.67 (0.12) -- 10.67 7.88+ 83,947 0.83*
RETAIL CLASS A
1999* $12.04 0.10 (0.55) (0.10) -- $11.49 (3.74)%+ $ 3,312 1.07%
1999 12.52 0.23 0.21 (0.23) (0.69) 12.04 3.92 3,659 1.08
1998 (20) 11.01 0.28 2.73 (0.29) (1.21) 12.52 28.73+ 3,428 1.07*
- ----------------------
VALUE EQUITY PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1999* $15.22 0.02 (0.50) (0.02) -- $14.72 (3.16)%+ $449,850 1.19%
1999 14.59 0.08 1.36 (0.09) (0.72) 15.22 10.48 536,827 1.14
1998 14.00 0.01 0.62 (0.01) (0.03) 14.59 4.51+ 645,202 1.08*
1998++ 11.91 0.15 3.45 (0.15) (1.36) 14.00 31.64 577,154 1.00
1997++ (11) 10.00 0.14 2.10 (0.14) (0.19) 11.91 22.77+ 540,889 1.05*
RETAIL CLASS A
1999* $15.22 0.01 (0.50) (0.01) -- $14.72 (3.19)%+ $ 5,411 1.31%
1999 14.60 0.05 1.36 (0.07) (0.72) 15.22 10.29 3,553 1.31
1998 (18) 14.55 -- 0.05 -- -- 14.60 0.34+ 227 1.26*
RETAIL CLASS B
1999* $15.16 (0.03) (0.51) -- -- $14.62 (3.56)%+ $ 429 2.06%
1999 (17) 12.93 0.01 2.97 (0.03) (0.72) 15.16 23.70+ 164 2.07*
- ----------------------
EQUITY INDEX PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1999* $13.87 0.08 0.32 (0.08) -- $14.19 2.87%+ $118,233 0.25%
1999 11.59 0.14 2.41 (0.14) (0.13) 13.87 22.37 86,911 0.23
1998 (21) 10.00 0.08 1.58 (0.07) -- 11.59 16.71+ 45,531 0.20
RETAIL CLASS A
1999* $13.84 0.06 0.32 (0.06) -- $14.16 2.76%+ $ 6,636 0.50%
1999 11.57 0.11 2.40 (0.11) (0.13) 13.84 22.05 4,974 0.48
1998 (22) 9.78 0.06 1.80 (0.07) -- 11.57 19.08+ 1,417 0.45*
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1999* $20.00 0.03 0.58 (0.03) -- $20.58 3.06%+ $156,422 0.97%
1999 17.01 0.10 3.41 (0.12) (0.40) 20.00 21.07 129,720 0.91
1998 12.39 0.14 4.70 (0.13) (0.09) 17.01 39.34 67,060 0.81
1997 10.12 0.17 2.28 (0.17) (0.01) 12.39 24.41 35,690 0.70
1996 (11) 10.00 -- 0.12 -- -- 10.12 1.20+ 11,456 0.65*
RETAIL CLASS A
1999* $19.98 0.02 0.57 (0.02) -- $20.55 2.95%+ $ 59,766 1.08%
1999 16.98 0.09 3.40 (0.09) (0.40) 19.98 20.96 56,771 1.07
1998 12.38 0.10 4.69 (0.10) (0.09) 16.98 38.93 43,300 1.04
1997 (23) 10.33 0.16 2.06 (0.16) (0.01) 12.38 21.74+ 13,211 0.86*
RETAIL CLASS B
1999* $19.93 (0.04) 0.55 -- -- $20.44 2.56%+ $ 5,950 1.83%
1999 (24) 17.07 0.01 3.28 (0.03) (0.40) 19.93 19.62+ 3,162 1.84*
RATIO
RATIO OF NET OF EXPENSES
INVESTMENT TO AVERAGE
INCOME (LOSS) NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING TURNOVER
NET ASSETS WAIVERS) RATE
- -------------------------------------------------
- -----------------------
EQUITY INCOME PORTFOLIO
- -----------------------
INSTITUTIONAL CLASS
1999* 1.77% 1.03% 28.93%
1999 2.10 1.04 56.03
1998 2.58 0.97 39.88
1997 (12) 2.47* 0.93* 34.38
RETAIL CLASS A
1999* 1.66% 1.43% 28.93%
1999 1.93 1.44 56.03
1998 (20) 2.39* 1.45* 39.88
- ----------------------
VALUE EQUITY PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1999* 0.25% 1.33% 13.20%
1999 0.58 1.34 32.21
1998 0.65* 1.20* 4.34
1998++ 1.17 1.20 30.00
1997++ (11) 1.48* 1.26* 37.00
RETAIL CLASS A
1999* 0.10% 1.74% 13.20%
1999 0.29 1.74 32.21
1998 (18) 0.62* 1.67* 4.34
RETAIL CLASS B
1999* (0.67)% 2.19% 13.20%
1999 (17) (0.67)* 2.20* 32.21
- ----------------------
EQUITY INDEX PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1999* 1.13% 0.59% 39.45%
1999 1.20 0.61 34.04
1998 (21) 1.43 0.62 49.56
RETAIL CLASS A
1999* 0.87% 0.84% 39.45%
1999 0.92 1.00 34.04
1998 (22) 1.02* 1.08* 49.56
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1999* 0.34% 1.08% 13.03%
1999 0.63 1.07 38.78
1998 0.96 0.89 26.32
1997 1.55 0.90 46.91
1996 (11) 1.52* 1.38* 0.97
RETAIL CLASS A
1999* 0.24% 1.63% 13.03%
1999 0.49 1.62 38.78
1998 0.71 1.50 26.32
1997 (23) 1.29* 1.25* 46.91
RETAIL CLASS B
1999* (0.54)% 1.93% 13.03%
1999 (24) (0.43)* 1.94* 38.78
92
89
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1999 (UNAUDITED)
AND THE PERIODS ENDED APRIL 30,
REALIZED
AND DISTRIBU- DISTRIBU- NET
NET ASSET NET UNREALIZED TIONS TIONS ASSETS RATIO OF
VALUE, INVEST- GAINS OR FROM NET FROM NET ASSET TOTAL END OF EXPENSES
BEGINNING MENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END RETURN PERIOD TO AVERAGE
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD (A) (000) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------
CAPITAL GROWTH PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1999* $18.71 (0.02) 3.13 -- -- $21.82 16.62%+ $119,168 1.00%
1999 14.90 (0.01) 4.33 -- (0.51) 18.71 29.51 90,042 0.94
1998 11.92 0.02 4.96 (0.04) (1.96) 14.90 45.19 50,615 0.84
1997 11.60 0.11 1.41 (0.14) (1.06) 11.92 13.46 34,170 0.39
1996 10.20 0.16 2.17 (0.16) (0.77) 11.60 23.62 39,560 0.24
1995 (15) 10.19 0.14 0.16 (0.11) (0.18) 10.20 3.15 41,170 0.74
RETAIL CLASS A
1999* $18.58 (0.03) 3.10 -- -- $21.65 16.52%+ $ 33,074 1.16%
1999 14.82 (0.03) 4.30 -- (0.51) 18.58 29.34 23,035 1.09
1998 11.87 -- 4.93 (0.02) (1.96) 14.82 44.90 14,401 1.06
1997 11.56 0.09 1.41 (0.13) (1.06) 11.87 13.39 5,595 0.56
1996 10.18 0.12 2.15 (0.12) (0.77) 11.56 23.24 2,111 0.50
1995 (19) 10.18 0.08 0.18 (0.08) (0.18) 10.18 2.74 404 1.23
RETAIL CLASS B
1999* $18.61 (0.07) 3.07 -- -- $21.61 16.12%+ $ 6,365 1.87%
1999 (17) 13.53 (0.04) 5.63 -- (0.51) 18.61 41.88+ 2,162 1.87*
- ------------------------
MID-CAP EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1999* $14.70 (0.01) 0.68 -- -- $15.37 4.56%+ $ 69,259 1.10%
1999 14.11 0.01 1.16 (0.01) (0.57) 14.70 8.76 63,648 1.06
1998 10.17 0.04 4.61 (0.04) (0.67) 14.11 46.92 55,280 0.97
1997 (12) 10.00 0.03 0.17 (0.03) -- 10.17 1.98+ 27,059 0.90*
RETAIL CLASS A
1999*(28) $15.22 -- 0.15 -- -- $15.37 0.99 + 215 1.25%
- --------------------------
SMALL-CAP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1999* $12.65 (0.06) 6.60 -- -- $19.19 51.70%+ $ 46,509 1.20%
1999 11.86 (0.05) 1.17 -- (0.33) 12.65 9.89 30,562 1.16
1998 8.53 (0.02) 3.97 -- (0.62) 11.86 47.93 27,372 0.98
1997 14.72 (0.01) (2.97) -- (3.21) 8.53 (23.43) 17,746 0.95
1996 (25) 10.00 0.09 4.72 (0.09) -- 14.72 48.34+ 33,621 0.91*
RETAIL CLASS A
1999* $12.59 (0.06) 6.55 -- -- $19.08 51.55%+ $ 3,609 1.31%
1999 11.83 (0.07) 1.16 -- (0.33) 12.59 9.66 2,248 1.32
1998 8.53 (0.06) 3.98 -- (0.62) 11.83 47.57 1,853 1.21
1997 (23) 15.47 (0.01) (3.72) -- (3.21) 8.53 (27.14)+ 1,075 1.11*
- ----------------------------------------
INTERNATIONAL EQUITY SELECTION PORTFOLIO
- ----------------------------------------
INSTITUTIONAL CLASS
1999* $11.16 0.02 1.28 -- -- $12.46 11.65%+ $ 28,029 0.94%
1999 11.51 0.10 (0.18) (0.10) (0.17) 11.16 (0.50) 23,686 0.88
1998 10.85 -- 0.66 -- -- 11.51 6.08+ 41,510 0.78*
1998++ (26) 10.00 0.15 1.12 (0.23) (0.19) 10.85 12.95+ 35,858 0.75*
RETAIL CLASS A
1999* $11.16 0.01 1.29 -- -- $12.46 11.65%+ $ 1,996 1.05%
1999 11.51 0.08 (0.17) (0.09) (0.17) 11.16 (0.59) 1,496 1.05
1998*(18) 11.40 -- 0.11 -- -- 11.51 0.96+ 13 0.96*
RATIO
RATIO OF NET OF EXPENSES
INVESTMENT TO AVERAGE
INCOME (LOSS) NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING TURNOVER
NET ASSETS WAIVERS) RATE
- --------------------------------------------------
- --------------------------
CAPITAL GROWTH PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1999* (0.21)% 1.06% 60.08%
1999 (0.07) 1.04 118.46
1998 0.13 0.88 174.55
1997 0.92 0.85 246.14
1996 1.26 0.84 578.57
1995 (15) 1.35 0.85 182.00
RETAIL CLASS
1999* (0.33)% 1.52% 60.08%
1999 (0.23) 1.44 118.46
1998 (0.10) 1.37 174.55
1997 0.74 1.30 246.14
1996 1.05 1.65 578.57
1995 (19) 0.86 9.73 182.00
RETAIL CLASS B
1999* (1.07)% 1.92% 60.08%
1999 (17) (1.09)* 1.92* 118.46
- ------------------------
MID-CAP EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1999* (0.18)% 1.17% 25.10%
1999 0.04 1.18 61.81
1998 0.31 1.06 38.30
1997 (12) 0.65* 0.95* 14.74
RETAIL CLASS A
1999*(28) (0.35)% 1.61% 25.10%
- --------------------------
SMALL-CAP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1999* (0.78)% 1.22% 259.35%
1999 (0.48) 1.23 733.14
1998 (0.24) 1.02 410.72
1997 (0.12) 0.95 704.41
1996 (25) 0.60* 0.91* 286.80
RETAIL CLASS A
1999* (0.89)% 1.62% 259.35%
1999 (0.64) 1.63 733.14
1998 (0.46) 1.36 410.72
1997 (23) (0.13)* 1.21* 704.41
- ----------------------------------------
INTERNATIONAL EQUITY SELECTION PORTFOLIO
- ----------------------------------------
INSTITUTIONAL CLASS
1999* 0.30% 1.05% 14.39%
1999 1.04 1.04 101.86
1998 (0.52)* 1.22* 0.98
1998++ (26) 1.73* 1.20* 43.00
RETAIL CLASS A
1999* 0.22% 1.45% 14.39%
1999 0.80 1.30 101.86
1998*(18) (0.63)* 1.19* 0.98
+ Returns are for the period indicated and have not been annualized.
++ Period ended February 28. See Note 8 of Notes to Financial Statements
regarding fund mergers.
* All ratios for the period have been annualized, except where otherwise
noted.
(A) Total return for the retail class does not include the one-time sales
charge.
(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.
(27) Commenced operations on September 9, 1999.
(28) Commenced operations on September 1, 1999.
93
90
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 and Short-Term Bond Portfolio) offers both Institutional and
Retail Class A shares. The following Portfolios also offer Retail Class B
shares: Maryland Tax-Free Portfolio, Pennsylvania Tax-Free Portfolio,
Income Portfolio, Balanced Portfolio, Blue Chip Equity Portfolio, Capital
Growth Portfolio, Value Equity Portfolio and Money Market Portfolio (for
exchange purposes only). In addition, each money market Portfolio offers
Institutional II Class shares. Institutional class shares were originally
offered with the commencement of each Portfolio's operations. Retail Class
A shares commenced in April 1994 for the Income Portfolio; in March 1994
for the Tax-Free Money Market Portfolio, Money Market Portfolio, Balanced
Portfolio and Capital Growth Portfolio; in December 1995 for the U.S.
Treasury Money Market Portfolio; in May 1996 for the Blue Chip Equity
Portfolio and Small-Cap Equity Portfolio; in September 1996 for the
Short-Term Treasury Portfolio; in January 1997 for the Maryland Tax-Free
Portfolio; in May 1997 for the Equity Income Portfolio; in July 1997 for
the U.S. Government Money Market Portfolio; in November 1997 for the Equity
Index Portfolio; in March 1998 for the Pennsylvania Tax-Free Portfolio; in
April 1998 for the U.S. Government Bond Portfolio, Value Equity Portfolio
and International Equity Selection Portfolio; and in September 1999 for the
Mid-Cap Equity Portfolio. Retail Class B shares commenced in August 1998
for the Blue Chip Equity Portfolio, in September 1998 for the Income
Portfolio, Balanced Portfolio and Capital Growth Portfolio, in January 1999
for the Money Market Portfolio, and in September 1999 for the Maryland
Tax-Free Portfolio and Pennsylvania Tax-Free Portfolio. Institutional II
Class shares commenced in July 1995 for the U.S. Treasury Money Market
Portfolio, U.S. Government Money Market Portfolio, Money Market Portfolio
and Tax-Free Money Market Portfolio. Each class of shares has equal rights
as to earnings, assets and voting privileges, except that each class bears
different distribution and shareholder service expenses. Each class of
shares has exclusive voting rights with respect to matters that affect just
that class.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Portfolios.
The following is a summary of significant accounting policies followed by
the Portfolios. SECURITY
VALUATION -- Securities of the Portfolios are generally valued by
independent pricing services. Securities listed on a securities exchange
for which market quotations are readily available are valued at the last
reported sale price on the principal exchange on which they are traded on
the valuation date or, if there is no such reported sale on the valuation
date, at the most recently quoted bid price. Unlisted securities for which
market quotations are readily available are valued at the most recently
quoted bid price. Debt obligations exceeding sixty days to maturity for
which market quotations are readily available are valued at the most
recently quoted bid price. Debt obligations with sixty days or less to
maturity may be valued at their amortized cost.
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.
94
91
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
95
92
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
- ---------------------------------------------------------------
U.S. Treasury
Money Market $ (5) $ 5 $ --
- ---------------------------------------------------------------
Pennsylvania
Tax-Free (1) 1 --
- ---------------------------------------------------------------
Equity Index -- 3 (3)
- ---------------------------------------------------------------
Blue Chip Equity -- 12 (12)
- ---------------------------------------------------------------
Capital Growth (90) 170 (80)
- ---------------------------------------------------------------
Mid-Cap Equity (65) 65 --
- ---------------------------------------------------------------
Small-Cap Equity (287) 247 40
- ---------------------------------------------------------------
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 Allfirst
Trust Company, N.A., the Custodian and Sub-Administrator of each of the
Portfolios. Pursuant to an investment advisory contract on behalf of each
Portfolio, Allied Investment Advisors, Inc. is entitled to receive fees for
its advisory services at the annual rates shown in the following table
based on the average net assets of the Portfolio.
PORTFOLIO ANNUAL RATE
-----------------------------------------------------------
Money Market .25%
-----------------------------------------------------------
Tax-Free Money Market .25%
-----------------------------------------------------------
U.S. Government Money Market .25%
-----------------------------------------------------------
U.S. Treasury Money Market .25%
-----------------------------------------------------------
Short-Term Treasury .35%
-----------------------------------------------------------
Short-Term Bond .75%
-----------------------------------------------------------
Maryland Tax-Free .65%
-----------------------------------------------------------
Pennsylvania Tax-Free .65%
-----------------------------------------------------------
Intermediate Fixed Income .60%
-----------------------------------------------------------
U.S. Government Bond .75%
-----------------------------------------------------------
Income .60%
-----------------------------------------------------------
Balanced .65%
-----------------------------------------------------------
Equity Income .70%
-----------------------------------------------------------
Value Equity 1.00%
-----------------------------------------------------------
Equity Index .20%
-----------------------------------------------------------
Blue Chip Equity .70%
-----------------------------------------------------------
Capital Growth .70%
-----------------------------------------------------------
Mid-Cap Equity .80%
-----------------------------------------------------------
Small-Cap Equity .80%
-----------------------------------------------------------
International Equity Selection .65%
-----------------------------------------------------------
Allied Investment Advisors, Inc. has agreed to waive a portion of its fees
or reimburse expenses on certain Portfolios in order to limit total
operating expenses of such Portfolios. The waivers are voluntary and may be
discontinued at any time.
SEI Investments Mutual Funds Services (the "Administrator") serves as
administrator and transfer agent for the Fund under an Administration
Agreement and Transfer Agency Agreement. The Administrator is entitled to
receive an annual fee of .13% of each Portfolio's average net assets, paid
monthly, for services performed under the administration agreement. The
Administrator has voluntarily agreed to waive a portion of its
administrative fees on certain Portfolios in order to limit total operating
expenses of such Portfolios. The waiver is voluntary and may be
96
93
NOTES TO FINANCIAL STATEMENTS
discontinued at any time. Pursuant to a separate agreement between Allfirst
Trust Company, N.A. and the Administrator, Allfirst Trust Company, N.A.
performs sub-administration services on behalf of the Portfolios, for which
it receives an annual fee, paid by the Administrator, of up to .0275% of
each Portfolio's net assets.
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, Mid-Cap Equity Portfolio, Small-Cap Equity Portfolio,
International Equity Selection Portfolio and Equity Index Portfolio; .55%
of average net assets of the Retail Class A shares of the Blue Chip Equity
Portfolio; .75% of the average net assets of the Retail Class B shares of
the Money Market Portfolio, Maryland Tax-Free Portfolio, Pennsylvania
Tax-Free Portfolio, Income Portfolio, Balanced Portfolio, Value Equity
Portfolio, Blue Chip Equity Portfolio and Capital Growth Portfolio; and
.15% of average net assets of the Institutional II Class shares of each of
the money market Portfolios. SIDCO has voluntarily agreed to waive a
portion of its fee on certain Portfolios in order to limit total operating
expenses of such Portfolios. The waiver is voluntary and may be
discontinued at any time.
The shareholder services fees paid under the Plans are to compensate
qualified intermediaries for shareholder services and account maintenance.
Under the respective Plans, the Retail Class A and Retail Class B shares of
a Portfolio may pay an annual fee of up to .25% of the average net assets
of the respective class shares attributable to their customers and the
Institutional Class shares of a Portfolio may pay an annual fee of up to
.15% of the average net assets of the Institutional Class shares
attributable to their customers. Currently, the Trustees have approved a
fee for the Retail Class A shares of .15%, a fee for the Retail Class B
shares of .25%, and a fee of 0.08% of the average net assets of the
Institutional Class shares of each of the money market Portfolios; 0.11% of
the average net assets of the Institutional Class shares of the ARK
Intermediate Fixed Income, Pennsylvania Tax-Free and U.S. Government Bond
Portfolios; 0.12% of the average net assets of the Institutional Class
shares of the ARK Income and Maryland Tax-Free Portfolios; and 0.14% of the
average net assets of the Institutional Class shares of the ARK Balanced,
Blue Chip, Capital Growth, Equity Income, International Equity Selection,
Mid-Cap Equity, Small-Cap Equity and Value Equity Portfolios. In addition,
a portion of the fee is being waived for the Retail Class A shares and
Institutional Class shares of each Portfolio. The waiver is voluntary and
may be discontinued at any time.
A contingent deferred sales charge (CDSC) is imposed on certain redemptions
of Retail Class B shares. The CDSC varies depending on the number of years
from the time of payment for the purchase of Retail Class B shares until
the redemption of such shares.
YEARS CONTINGENT DEFERRED
PURCHASES MADE SALES CHARGE
- --------------------------------------------------------------
First ....................... 5%
Second ...................... 4%
Third ....................... 3%
Fourth ...................... 3%
Fifth ....................... 2%
Sixth ....................... 1%
Seventh and Following ....... None
97
94
5. INVESTMENT TRANSACTIONS
The cost of securities purchased and the proceeds from the sale of
securities, other than short-term investments, during the period ended
October 31, 1999, were as follows:
PURCHASES SALES
PORTFOLIO (000) (000)
--------------------------------------------------------
Short-Term Treasury $ 22,084 $ 21,145
--------------------------------------------------------
Short-Term Bond 31,964 43,380
--------------------------------------------------------
Maryland Tax-Free 15,121 10,930
--------------------------------------------------------
Pennsylvania Tax-Free 43,622 59,822
--------------------------------------------------------
Intermediate Fixed Income 26,356 14,984
--------------------------------------------------------
U.S. Government Bond 9,191 40,859
--------------------------------------------------------
Income 496,457 503,447
--------------------------------------------------------
Balanced 50,114 33,016
--------------------------------------------------------
Equity Income 27,574 38,146
--------------------------------------------------------
Value Equity 65,497 131,940
--------------------------------------------------------
Equity Index 69,755 40,216
--------------------------------------------------------
Blue Chip Equity 48,865 25,907
--------------------------------------------------------
Capital Growth 89,611 75,223
--------------------------------------------------------
Mid-Cap Equity 18,497 16,644
--------------------------------------------------------
Small-Cap Equity 98,508 96,143
--------------------------------------------------------
International Equity Selection 5,380 3,707
--------------------------------------------------------
For federal income tax purposes, the cost of securities owned at October
31, 1999, was not materially different from the amounts reported for
financial reporting purposes. The aggregate gross unrealized appreciation
and depreciation of securities at October 31, 1999, for each Portfolio is
as follows:
NET
UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION/
SECURITIES SECURITIES (DEPRECIATION)
PORTFOLIO (000) (000) (000)
----------------------------------------------------------------
Short-Term Treasury $ 9 $ (432) $ (423)
----------------------------------------------------------------
Short-Term Bond 91 (1,209) (1,118)
----------------------------------------------------------------
Maryland Tax-Free 1,437 (4,838) (3,401)
----------------------------------------------------------------
Pennsylvania Tax-Free 988 (9,054) (8,066)
----------------------------------------------------------------
Intermediate Fixed Income 308 (2,785) (2,477)
----------------------------------------------------------------
U.S. Government Bond 25 (7,773) (7,748)
----------------------------------------------------------------
Income 1,723 (7,980) (6,257)
----------------------------------------------------------------
Balanced 44,443 (3,738) 40,705
----------------------------------------------------------------
Equity Income 24,823 (2,429) 22,394
----------------------------------------------------------------
Value Equity 178,640 (11,718) 166,922
----------------------------------------------------------------
Equity Index 27,231 (6,624) 20,607
----------------------------------------------------------------
Blue Chip Equity 60,367 (2,521) 57,846
----------------------------------------------------------------
Capital Growth 49,127 (1,807) 47,320
----------------------------------------------------------------
Mid-Cap Equity 20,343 (4,522) 15,821
----------------------------------------------------------------
Small-Cap Equity 11,353 (587) 10,766
----------------------------------------------------------------
International Equity
Selection 4,189 (114) 4,075
----------------------------------------------------------------
At October 31, 1999, the following Portfolios had capital loss
carryforwards:
CAPITAL LOSS
CARRYFORWARD
AMOUNT EXPIRATION
PORTFOLIO (000) DATE
----------------------------------------------------------------
Money Market $ 8 2006
----------------------------------------------------------------
U.S. Government Money Market 25 2005
5 2006
11 2007
----------------------------------------------------------------
U.S. Treasury Money Market 33 2007
Maryland Tax-Free 343 2007
----------------------------------------------------------------
Maryland Tax-Free 2,230 2007
----------------------------------------------------------------
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 October 31, 1999, income generated from the program during the year
ended October 31, 1999, the collateral purchased with cash received and
held at October 31, 1999, with respect to such loans were as follows (000):
INCOME RECEIVED
MARKET VALUE OF FROM SECURITIES
PORTFOLIO LOANED SECURITIES LENDING
----------------------------------------------------------
Short-Term Bond $ 8,096 $ 7
----------------------------------------------------------
Intermediate Fixed
Income 19,071 9
----------------------------------------------------------
U.S. Government
Bond 51,178 27
----------------------------------------------------------
Income 79,007 53
----------------------------------------------------------
MONEY OTHER FIXED
COLLATERAL REPURCHASE MARKET INCOME
PORTFOLIO AGREEMENTS INSTRUMENTS SECURITIES CASH TOTAL
- ----------------------------------------------------------------------------
Short-Term
Bond $ 3,830 $ 7 $ 4,576 $ 74 $ 8,487
- ----------------------------------------------------------------------------
Intermediate
Fixed
Income 8,000 23 12,204 164 20,391
- ----------------------------------------------------------------------------
U.S. Government
Bond 20,000 19 32,811 388 53,218
- ----------------------------------------------------------------------------
Income 51,000 605 31,941 352 83,898
98
95
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
October 31, 1999, the percentage of portfolio investments by each revenue
source was as follows:
MARYLAND PENNSYLVANIA
TAX-FREE PORTFOLIO TAX-FREE PORTFOLIO
----------------------------------------------------------
REVENUE BONDS:
----------------------------------------------------------
Education 13% 18%
----------------------------------------------------------
Health Care 21 21
----------------------------------------------------------
Transportation 5 --
----------------------------------------------------------
Utility 6 6
----------------------------------------------------------
Housing 3 1
----------------------------------------------------------
Public Facility 4 12
----------------------------------------------------------
Industrial -- 15
----------------------------------------------------------
Other 6 7
----------------------------------------------------------
General Obligations 42 20
----------------------------------------------------------
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 ISSUED APPRECIATION
----------------------------------------------------------------
Short-Term
Bond $134,474,724 13,484,762 $ 483,752
U.S. Government
Bond 265,737,020 26,918,180 170,754
Value Equity 596,269,138 41,299,581 186,298,370
International Equity
Selection 38,578,490 3,365,077 4,755,196
----------------------------------------------------------------
In addition, on March 20, 1998, the assets of the Marketvest Pennsylvania
Intermediate Municipal Bond Fund were reorganized into the ARK Pennsylvania
Tax-Free Portfolio. Under the Agreement and Plan of Reorganization,
18,933,932 shares of the Marketvest Pennsylvania Intermediate Municipal
Bond Fund were exchanged for 18,933,932 Institutional shares of the ARK
Pennsylvania Tax-Free Portfolio in a tax-free exchange. The value of the
Marketvest Pennsylvania Tax-Exempt Fund's net assets combined on March 20,
1998 prior to the merger was $194,492,162. The net assets of the Portfolio
immediately after the acquisition were $221,880,784.
In each of the acquisitions of the net assets of the Marketvest Funds
described above, the surviving entity for accounting and performance
purposes was the applicable Marketvest 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 were $644,230,476. The
surviving entity for accounting and performance purposes was the ARK Value
Equity Portfolio.
99
96
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.
100
97
NOTICE TO SHAREHOLDERS
(UNAUDITED)
For taxpayers filing on a calendar year basis, this notice is for informational
purposes only.
For the fiscal year ended October 31, 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
- --------------------------------------------------------------------------------------------------------------------------------
Money Market 0% 0% 100% 100% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Tax-Free Money Market 0% 0% 100% 100% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Government Money Market 0% 100% 0% 100% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Money Market 0% 100% 0% 100% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Maryland Tax-Free (2) 0% 0% 100% 100% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax-Free (2) 0% 0% 100% 100% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Income 0% 100% 0% 100% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Balanced 67% 33% 0% 100% 14% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Blue Chip Equity 51% 49% 0% 100% 63% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Short Term Treasury 3% 97% 0% 100% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Intermedite Fixed Income 7% 93% 0% 100% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Equity Income 69% 31% 0% 100% 92% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity 76% 24% 0% 100% 59% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Equity Index 0% 100% 0% 100% 44% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Capital Growth (2) 0% 0% 0% 0% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
Small-Cap Equity (2) 0% 0% 0% 0% 0% 0%
- --------------------------------------------------------------------------------------------------------------------------------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
(2) These portfolios changed their tax year-end from April 30 to October 31,
effective October 31, 1999. This change affects the tax accounting period
only.
101
98
NOTES
102
99
NOTES
103
100
NOTES
104