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As filed with the Securities and Exchange Commission on February 12, 1998
Registration No. 333-44487
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM N-14/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[x]
PRE-EFFECTIVE AMENDMENT NO. _1_ [x]
POST-EFFECTIVE AMENDMENT NO. ___ [ ]
(Check appropriate box or boxes.)
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ARK FUNDS*
(Exact Name of Registrant as Specified in Charter)
One Freedom Valley Drive
Oaks, PA 19456
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (610) 676-1000
Kathryn L. Stanton
Vice President and Secretary
ARK Funds
One Freedom Valley Drive
Oaks, PA 19456
(Name and Address of Agent for Service)
Copies to:
Alan C. Porter, Esq. Matthew G. Maloney, Esq.
Piper & Marbury L.L.P. Dickstein Shapiro Morin & Oshinsky LLP
1200 Nineteenth Street, N.W. 2101 L Street, N.W.
Washington, DC 20036-2430 Washington, DC 20037-1526
It is proposed that this filing will become effective on or prior to February
19, 1998 pursuant to Rule 488.
No filing fee is required because an indefinite number of shares have
previously been registered pursuant to Rule 24f-2 under the Investment Company
Act of 1940. Pursuant to Rule 429, this Registration Statement relates to
shares previously registered on Form N-1A (File No. 33-53690).
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* Relating to shares of ARK Pennsylvania Tax-Free Portfolio.
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ARK FUNDS
CROSS REFERENCE SHEET
PART A
Item No. Heading
- -------- -------
1. Beginning of Registration Statement and
Outside Front Cover Page of Prospectus . . . . . . . . . . . . . Cover Page
2. Beginning and Outside Back Cover Page
of Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . Fees and Expenses
3. Fee Table, Synopsis Information and
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Comparative Fee
Tables; Risk Factors
4. Information about the Transaction . . . . . . . . . . . . . . . Summary; Risk Factors;
Information Relating to the
Proposed Reorganizations
5. Information about the Registrant . . . . . . . . . . . . . . . . Summary; Risk Factors;
Additional Information About
ARK Funds; Management's
Discussion of Acquiring Fund
Performance; Prospectus for the
ARK Funds, incorporated herein
by reference
6. Information about the Company
Being Acquired . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Risk Factors;
Additional Information About
Marketvest Funds
7. Voting Information . . . . . . . . . . . . . . . . . . . . . . . Summary; Information Relating
to Voting Matters
8. Interest of Certain Persons and Experts . . . . . . . . . . . . Not Applicable
9. Additional Information Required for Reoffering
by Persons Deemed to be Underwriters . . . . . . . . . . . . . . Not Applicable
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MARKETVEST FUNDS, INC.
MARKETVEST FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7010
February , 1998
Dear Shareholder:
On November 11, 1997, the boards of the Marketvest Funds, Inc. and
Marketvest Funds (collectively, the "Marketvest Funds") met to consider and
approve a proposal for reorganizing each portfolio of the Marketvest Funds, with
a portfolio of ARK Funds having similar investment objectives and policies. The
reorganizations are being proposed following the acquisition of Dauphin Deposit
Bank and Trust Company by First Maryland Bancorp in July 1997. After carefully
studying the merits of the proposal, the respective boards of the Marketvest
Funds determined that the reorganization of each portfolio of the Marketvest
Funds with a corresponding ARK Funds portfolio is in the best interests of the
shareholders of the Marketvest Funds.
Since the boards of the Marketvest Funds have approved combining the
Marketvest Funds with ARK Funds portfolios that have similar investment
objectives and policies, you and your fellow shareholders are being asked to
approve the proposal at a joint special meeting of Marketvest Funds'
shareholders to be held at Federated Investors Tower, 19th Floor, Pittsburgh,
Pennsylvania, on March , 1998. A proxy card is enclosed for use in conjunction
with the joint special meeting. This card represents shares you held as of the
record date, February 4, 1998. IT IS IMPORTANT THAT YOU COMPLETE, SIGN AND
RETURN YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE.
If you and the other shareholders of your fund approve the proposed
reorganization of your fund and certain other conditions are satisfied, you will
be able to continue your investment program through ownership in an ARK Funds
portfolio with similar investment objectives and policies. As a shareholder of
an ARK Funds portfolio, you will enjoy access, through the exchange privilege,
to a much larger family of funds, including types of funds that Marketvest Funds
currently do not offer. This will provide you with a convenient way to diversify
your investments.
I encourage you to review the attached materials in detail. Some of your
questions are answered on the next page. Some important facts about the proposed
reorganizations are outlined below.
- The reorganizations will not affect the value of your account. There
are no sales charges on the reorganizations.
- The reorganizations are not expected to result in any federal income
tax to any of the Marketvest Funds or their shareholders.
Since all of the Marketvest Funds are required to vote, we have grouped the
funds on one proxy statement to reduce costs. If you hold shares in more than
one fund, you will receive a proxy card for each fund you own. Please vote each
proxy card you receive.
Because the boards believe the proposed reorganizations will benefit all
shareholders, they encourage you to vote for the proposal. Should you have any
additional questions, we invite you to call the Marketvest Funds toll free at
1-800-MKT-VEST.
EDWARD C. GONZALES
President
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Q. WHY HAVE I RECEIVED THIS PACKAGE?
A. In July 1997, Dauphin Deposit Bank and Trust Company was acquired by First
Maryland Bancorp. First Maryland Bancorp is the parent company of Allied
Investment Advisors, Inc., investment adviser to ARK Funds. Subsequent to
this merger, the Marketvest Funds entered into an Agreement and Plan of
Reorganization with ARK Funds. Under the agreement, the assets of the
Marketvest Funds and ARK Funds will be combined, and your Marketvest Fund
shares will be exchanged for shares of an ARK portfolio having similar
investment objectives and policies. The boards of the Marketvest Funds have
approved the proposed reorganizations. You, as a Marketvest Fund
shareholder, are now being asked to approve the proposed reorganization of
your fund with the corresponding ARK Funds portfolio.
Q. WHY ARE THE REORGANIZATIONS BEING PROPOSED?
A. The boards of the Marketvest Funds believe that combining Marketvest Funds
and the ARK Funds could result in more efficient operations. Also, as a
result of these transactions, shareholders of the Marketvest Funds will
become part of a larger mutual-fund family with more fund portfolios
including some types of funds that Marketvest Funds currently do not offer.
As an ARK Funds shareholder, you will have access to these funds through the
ARK Funds' exchange privilege.
Q. HOW WILL THIS AFFECT ME AS A MARKETVEST FUND SHAREHOLDER?
A. You will become a shareholder of an ARK Funds portfolio with similar
investment objectives and policies as the Marketvest Fund you currently
hold. As an ARK Funds shareholder, you will have access to the wider array
of fund portfolios offered by ARK Funds.
There are no sales charges on this transaction. The shares of the ARK Funds
portfolio that you receive will have an aggregate net asset value equal to
the net asset value of the Marketvest Fund shares you held immediately
before the transaction.
Q. WILL THE REORGANIZATIONS RESULT IN ANY TAXES?
A. The Marketvest Funds or their shareholders will not incur any federal income
tax as a result of the reorganizations.
Q. WHAT FUND(S) WILL I HOLD FOLLOWING THE REORGANIZATIONS?
A. Marketvest Fund shareholders will receive shares of the following
corresponding ARK portfolios. Unlike Marketvest Funds, each ARK Funds
portfolio currently has two classes of shares outstanding, Retail Class and
Institutional Class. Marketvest Funds shareholders will receive
Institutional Class shares in the reorganizations.
MARKETVEST FUNDS ARK FUNDS
------------------------------------------ ------------------------------------------
Marketvest Short-Term Bond Fund ARK Short-Term Bond Portfolio
Marketvest Intermediate U.S. Government
Bond Fund ARK U.S. Government Bond Portfolio
Marketvest Pennsylvania Intermediate
Municipal Bond Fund ARK Pennsylvania Tax-Free Portfolio
Marketvest Equity Fund ARK Value Equity Portfolio
Marketvest International Equity Fund ARK International Equity Selection
Portfolio
Q. WILL THE INVESTMENT ADVISER CHANGE?
A. Yes. Dauphin Deposit Bank and Trust Company currently serves as investment
adviser to the Marketvest Funds. Allied Investment Advisors, Inc. serves as
investment adviser to the ARK Funds and will continue as investment adviser
following these transactions. These two companies are wholly-owned by First
Maryland Bancorp. Following the Reorganizations, several portfolio managers
of Dauphin Deposit Bank and Trust Company will be joining Allied Investment
Advisors, Inc.
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Q. HOW DO THE MARKETVEST FUNDS BOARDS RECOMMEND THAT I VOTE?
A. After careful consideration, the boards of the Marketvest Funds unanimously
recommend that you vote "FOR" the proposed reorganizations.
Q. HOW DO I CONTACT YOU?
A. If you have any questions, call the Marketvest Funds toll-free at
1-800-MKT-VEST, Monday through Friday, 8:00 a.m. to 5:00 p.m. (Eastern
Time).
PLEASE VOTE.
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
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MARKETVEST FUNDS, INC.
MARKETVEST FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7010
NOTICE IS HEREBY GIVEN that a Joint Special Meeting of the shareholders of
Marketvest Funds, Inc. and Marketvest Funds (collectively, the "Marketvest
Funds") will be held at Federated Investors, Federated Investors Tower, 19th
Floor, Pittsburgh, Pennsylvania, on March , 1998 at 10 o'clock a.m., Eastern
Time, for the following purposes:
ITEM 1. To consider and act upon a proposal to approve an Agreement and
Plan of Reorganization (the "Reorganization Agreement"), between
the Marketvest Funds and ARK Funds, and the transactions
contemplated thereby, including: (a) the transfer of all of the
assets and stated liabilities of each portfolio of the Marketvest
Funds (collectively, the "Acquired Funds") to a corresponding
portfolio of ARK Funds (collectively, the "Acquiring Funds") in
exchange for shares of such Acquiring Fund; (b) the distribution of
the Acquiring Fund shares so received by an Acquired Fund pro rata
to shareholders of the Acquired Funds; and (c) the termination and
deregistration of the Acquired Funds and the Marketvest Funds.
ITEM 2. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The proposed reorganizations and related matters are described in the
attached Prospectus/Proxy Statement. A copy of the Reorganization Agreement is
attached to the Prospectus/Proxy Statement as Appendix A.
Only shareholders of record on February 4, 1998 are entitled to notice of
and to vote at the Joint Special Meeting and any adjournment thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD. THIS IS IMPORTANT TO ENSURE A QUORUM AT
THE MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY
ATTENDING THE MEETING AND VOTING IN PERSON.
VICTOR R. SICLARI
Secretary
February , 1998
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PROSPECTUS/PROXY STATEMENT
DATED FEBRUARY , 1998
ARK FUNDS
OAKS, PENNSYLVANIA 19456
TELEPHONE 1-800-ARK-FUND
MARKETVEST FUND, INC.
MARKETVEST FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7010
TELEPHONE 1-800-MKT-VEST
This Prospectus/Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Marketvest Funds, Inc. and
the Board of Trustees of Marketvest Funds (collectively, the "Marketvest Funds")
in connection with the Joint Special Meeting (the "Meeting") of shareholders to
be held at Federated Investors, Federated Investors Tower, 19th Floor,
Pittsburgh, Pennsylvania, on March , 1998 at 10 o'clock a.m., Eastern Time, at
which shareholders will be asked to consider and approve a proposed Agreement
and Plan of Reorganization, dated as of January 15, 1998 (the "Reorganization
Agreement"), by and among the Marketvest Funds and ARK Funds.
The Marketvest Funds and ARK Funds are open-end, series, management
investment companies whose investment advisers are wholly-owned by First
Maryland Bancorp. In reviewing the proposed reorganizations (each such
transaction between a portfolio of the Marketvest Funds and the corresponding
ARK Funds portfolio is referred to individually as a "Reorganization" and
collectively, as the "Reorganizations"), the Marketvest Funds' boards
considered, among other things, that the investment advisers of the Marketvest
Funds and ARK Funds are under common control, that each Reorganization would
constitute a tax-free reorganization and that the interests of shareholders
would not be diluted as a result of the Reorganizations.
This Prospectus/Proxy Statement constitutes the proxy statement of the
Marketvest Funds for the Meeting and the prospectus for the shares of ARK Funds
that have been registered with the Securities and Exchange Commission ("SEC")
and are to be issued in connection with the Reorganization of the Marketvest
Pennsylvania Intermediate Municipal Bond Fund. The investment operations of
Marketvest Short-Term Bond Fund, Marketvest Intermediate U.S. Government Bond
Fund, Marketvest Equity Fund and Marketvest International Equity Fund will be
continued by the ARK Short-Term Bond Portfolio, ARK U.S. Government Bond
Portfolio, ARK Value Equity Portfolio and ARK International Equity Selection
Portfolio, respectively, and this Prospectus/Proxy Statement does not constitute
a prospectus (because none is required) for the shares that will be issued by
these ARK Funds portfolios in connection with the Reorganizations of the
corresponding portfolios of the Marketvest Funds.
This Prospectus/Proxy Statement sets forth the information that a
shareholder should know before voting on the Reorganization Agreement (and
related transactions) and should be retained for future reference. The
Prospectus dated February , 1998 relating to the shares of the Acquiring
Funds, which describes the operations of the Acquiring Funds, is incorporated
herein by reference. Additional information is contained in: (i) the Statement
of Additional Information dated February , 1998, relating to this
Prospectus/Proxy Statement; (ii) the Statement of Additional Information dated
February , 1998, relating to the shares of the Acquiring Funds; (iii) the ARK
Funds' Annual Report for the fiscal year ended April 30, 1997, and Semi-Annual
Report for the six-months ended October 31, 1997; (iv) the Combined Prospectus
and Combined Statement of Additional Information, each dated June 30, 1997, as
supplemented, relating to the Acquired Funds; and (v) the Combined Annual Report
for the fiscal year ended February 28, 1997, and Combined Semi-Annual Report for
the six-months ended August 31, 1997, relating to the Acquired Funds. The
Prospectus dated February , 1998, Annual Report and Semi-Annual Report of the
Acquiring Funds accompany this Prospectus/Proxy Statement. The Statement of
Additional Information dated February , 1998, relating to this
Prospectus/Proxy Statement, the Statement of Additional Information of the
Acquiring Funds and the Combined Prospectus and the Combined Statement of
Additional Information, each dated June 30, 1997, as supplemented, relating to
the Acquired Funds, are incorporated herein by reference and are available upon
request without charge by writing or calling ARK Funds or Marketvest Funds at
their respective addresses and telephone numbers above. The SEC maintains a Web
site (http://www.sec.gov) that contains the documents listed above, material
incorporated by reference and other information about ARK Funds and Marketvest
Funds.
This Prospectus/Proxy Statement is expected to be first sent to shareholders
no later than February , 1998.
(Continued on the following page)
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THE SECURITIES OF ARK FUNDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF ARK FUNDS AND MARKETVEST FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, THE FIRST NATIONAL BANK OF MARYLAND, DAUPHIN DEPOSIT
BANK AND TRUST COMPANY OR ANY DEPOSITORY INSTITUTION, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTING IN SHARES OF ARK FUNDS INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
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The Reorganization Agreement provides that each portfolio of the Marketvest
Funds (an "Acquired Fund" and collectively, the "Acquired Funds") will transfer
substantially all of its assets and stated liabilities to the portfolio of ARK
Funds (an "Acquiring Fund" and collectively, the "Acquiring Funds") identified
below:
ACQUIRED FUNDS ACQUIRING FUNDS
- --------------------------------------------------------- ----------------------------------------------
Marketvest Short-Term Bond Fund ARK Short-Term Bond Portfolio
Marketvest Intermediate U.S. Government Bond Fund ARK U.S. Government Bond Portfolio
Marketvest Pennsylvania Intermediate Municipal Bond Fund ARK Pennsylvania Tax-Free Portfolio
Marketvest Equity Fund ARK Value Equity Portfolio
Marketvest International Equity Fund ARK International Equity Selection Portfolio
In exchange for the transfer of assets and liabilities, each Acquired Fund
will receive Institutional Class shares of the corresponding Acquiring Fund
identified above. Each Acquired Fund will then make a liquidating distribution
to its shareholders of the Acquiring Fund shares, so that a shareholder of an
Acquired Fund at the time of the Reorganization will receive Institutional Class
shares of the corresponding Acquiring Fund with the same aggregate net asset
value as the shareholder had in the Acquired Fund immediately before the
Reorganization. Following the Reorganizations, the Acquired Funds and the
Marketvest Funds will be terminated and deregistered as described in the
Reorganization Agreement.
ARK Pennsylvania Tax-Free Portfolio is currently conducting investment
operations as described in this Prospectus/Proxy Statement. ARK Short-Term Bond
Portfolio, ARK U.S. Government Bond Portfolio, ARK Value Equity Portfolio and
ARK International Equity Selection Portfolio have recently been organized for
the purpose of continuing the investment operations of Marketvest Short-Term
Bond Fund, Marketvest Intermediate U.S. Government Bond Fund, Marketvest Equity
Fund and Marketvest International Equity Fund, respectively, and are not
expected to commence operations until the consummation of the Reorganizations.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY MARKETVEST FUNDS OR ARK FUNDS.
TABLE OF CONTENTS
PAGE
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Summary............................................................................... 1
Proposed Reorganizations............................................................ 1
Reasons for Reorganizations......................................................... 1
Federal Income Tax Consequences..................................................... 1
Overview of Marketvest Funds and ARK Funds.......................................... 1
Marketvest Pennsylvania Intermediate Municipal Bond Fund and ARK Pennsylvania
Tax-Free Portfolio.............................................................. 1
Certain Arrangements with Service Providers -- Marketvest Funds.................. 2
Certain Arrangements with Service Providers -- ARK Funds......................... 2
Comparative Fee Tables........................................................... 3
Expense Ratios -- Acquired Funds................................................. 8
Expense Ratios -- Acquiring Funds................................................ 9
Purchases........................................................................ 10
Exchanges........................................................................ 10
Dividends and Distributions...................................................... 11
Redemption Procedures............................................................ 11
Voting Information.................................................................. 11
Risk Factors.......................................................................... 12
Investment Objectives and Policies.................................................. 12
Investment Practices and Risks...................................................... 12
Investment Limitations.............................................................. 15
Other Information................................................................... 18
Information Relating to the Proposed Reorganizations.................................. 18
Description of the Reorganization Agreement......................................... 18
Capitalization...................................................................... 20
Federal Income Tax Consequences..................................................... 22
Information Relating to Voting Matters................................................ 22
General Information................................................................. 22
Shareholder and Board Approvals..................................................... 23
Quorum.............................................................................. 23
Annual Meetings..................................................................... 24
Additional Information about ARK Funds................................................ 24
Additional Information about Marketvest Funds......................................... 24
Management's Discussion of Acquiring Fund Performance................................. 25
Other Business........................................................................ 25
Shareholder Inquiries................................................................. 25
Appendix A............................................................................ A-1
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SUMMARY
The following is a summary of certain information relating to the proposed
Reorganizations, the parties thereto and the related transactions, and is
qualified by reference to the more complete information contained elsewhere in
this Prospectus/Proxy Statement, the Statement of Additional Information
relating to this Prospectus/Proxy Statement, the Combined Prospectus and
Combined Statement of Additional Information of the Marketvest Funds, Marketvest
Funds' Combined Annual Report and most recent Combined Semi-Annual Report. The
Prospectus and Statement of Additional Information of ARK Funds, and the
Reorganization Agreement attached to this Prospectus/Proxy Statement as Appendix
A.
PROPOSED REORGANIZATIONS. Based upon their evaluation of the relevant
information presented to them, and in light of their fiduciary duties under
federal and state law, the Board of Directors of Marketvest Funds, Inc. and the
Board of Trustees of Marketvest Funds, and the Board of Trustees of ARK Funds,
including in each case the directors/trustees who are not "interested persons"
within the meaning of the Investment Company Act of 1940, as amended (the "1940
Act"), have determined that each of the proposed Reorganizations is in the best
interests of shareholders of each Acquired Fund and each Acquiring Fund,
respectively, and that the interests of existing shareholders of the Acquired
Funds and the Acquiring Funds, respectively, will not be diluted as a result of
such Reorganizations.
REASONS FOR THE REORGANIZATIONS. The primary reasons for each of the
proposed Reorganizations are: (a) the acquisition of Dauphin Deposit
Corporation, the parent company of Dauphin Deposit Bank and Trust Company, the
Acquired Funds' investment adviser, by First Maryland Bancorp, the parent
company of Allied Investment Advisors, Inc., the Acquiring Funds' investment
adviser, (b) the fact that the investment advisers of the Acquired Funds and the
Acquiring Funds are under common control, (c) the fact that shareholder
interests would not be diluted in the proposed Reorganizations, (d) the status
of each Reorganization as a tax-free reorganization, (e) the similarity of the
investment objective and policies of each Acquired Fund and the corresponding
Acquiring Fund, (f) the improved marketing opportunities that could result from
each Reorganization, and (g) the opportunity for the shareholders of each
Acquired Fund to participate in a larger family of mutual funds through the
exchange privilege offered by ARK Funds.
FEDERAL INCOME TAX CONSEQUENCES. Shareholders of each Acquired Fund will
not recognize any gain or loss for federal income tax purposes on the receipt of
shares of the corresponding Acquiring Fund. Neither the Acquired Funds nor the
Acquiring Funds will incur any gain or loss for federal tax purposes as a result
of the Reorganizations. See "Information Relating to the Proposed
Reorganizations -- Federal Income Tax Consequences."
OVERVIEW OF MARKETVEST FUNDS AND ARK FUNDS. The investment objectives and
policies of Marketvest Short-Term Bond Fund and ARK Short-Term Bond Portfolio,
Marketvest Intermediate U.S. Government Bond Fund and ARK U.S. Government Bond
Portfolio, Marketvest Equity Fund and ARK Value Equity Portfolio, and Marketvest
International Equity Fund and ARK International Equity Selection Portfolio are
substantially similar. However, the ARK Short-Term Bond Portfolio and ARK U.S.
Government Bond Portfolio may each invest up to 5% of total assets in
lower-quality debt securities; the corresponding Marketvest Funds do not have a
similar provision in their investment policies.
The investment objective and policies of the Marketvest Pennsylvania
Intermediate Municipal Bond Fund are similar to those of the ARK Pennsylvania
Tax-Free Portfolio as described below.
MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND AND ARK PENNSYLVANIA
TAX-FREE PORTFOLIO
Under normal market conditions, the Marketvest Pennsylvania Intermediate
Municipal Bond Fund and the ARK Pennsylvania Tax-Free Portfolio invest at least
80% and 65%, respectively, of their net assets in Pennsylvania municipal
securities. In addition, the Marketvest Pennsylvania Intermediate Municipal Bond
Fund invests its assets so that, under normal circumstances, at least 65% of the
value of its total assets will be invested in securities of Pennsylvania
issuers.
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See "Risk Factors" below and in the prospectuses of the Marketvest Funds
and ARK Funds, which are incorporated herein by reference, for a further
description of the similarities and differences between the investment
objectives, policies and limitations of the Acquired Funds and the Acquiring
Funds.
CERTAIN ARRANGEMENTS WITH SERVICE PROVIDERS -- MARKETVEST FUNDS
Pursuant to an investment advisory contract with both Marketvest Funds,
Inc. and Marketvest Funds, investment decisions for the Acquired Funds are made
by Dauphin Deposit Bank and Trust Company ("Dauphin Deposit"), the Acquired
Funds' investment adviser, subject to the direction of the Marketvest Funds'
boards. Dauphin Deposit continually conducts investment research and supervision
for each Acquired Fund and is responsible for the purchase or sale of portfolio
instruments, for which it receives an annual investment advisory fee from the
assets of each Acquired Fund (as described in the comparative fee tables below).
Dauphin Deposit may voluntarily waive some or all of its fee from time to time
in its sole discretion.
Edgewood Services Inc., a subsidiary of Federated Investors, is the
principal distributor for shares of the Acquired Funds.
Pursuant to the provisions of a distribution plan adopted in accordance
with Rule 12b-1 under the 1940 Act, each Acquired Fund may pay the distributor
of its shares an amount computed at an annual rate of up to 0.25% of the average
daily net asset value of that Acquired Fund to finance any activity which is
principally intended to result in the sale of that Acquired Fund's shares. No
fees have been paid under the distribution plan.
Federated Administrative Services ("FAS"), a subsidiary of Federated
Investors, provides the Acquired Funds with administrative personnel and
services necessary to operate each Acquired Fund. Such services include certain
legal and accounting services. FAS receives an annual administrative fee equal
to 0.15% of the Acquired Funds' average aggregate daily net assets. The
administrative fee received during any fiscal year is subject to an aggregate
minimum of at least $75,000 per Acquired Fund. FAS may voluntarily waive all or
a portion of its fee from time to time in its sole discretion.
Dauphin Deposit is custodian for the securities and cash of the Acquired
Funds. Federated Shareholder Services Company ("FSSC") is the transfer agent and
dividend disbursing agent for the Acquired Funds, and Federated Services Company
("FSCo") provides certain portfolio accounting services to the Acquired Funds.
FSSC and FSCo are subsidiaries of Federated Investors.
CERTAIN ARRANGEMENTS WITH SERVICE PROVIDERS -- ARK FUNDS
Allied Investment Advisors, Inc. ("AIA") serves as the investment adviser
to each Acquiring Fund and is entitled to receive investment advisory fees,
which are accrued daily and paid monthly, from each Acquiring Fund (as described
in the comparative fee tables below). AIA may voluntarily waive some or all of
its fee from time to time in its sole discretion. See "Management" in the
Prospectus of ARK Funds accompanying this Prospectus/ Proxy Statement, which is
incorporated herein by reference, for additional information on AIA.
SEI Investments Distribution Co., a wholly-owned subsidiary of SEI
Investments Company, serves as the distributor for each Acquiring Fund.
Under a shareholder services plan in effect with respect to the
Institutional Class of each Acquiring Fund, the Acquiring Fund may pay
shareholder services fees to securities dealers and other financial institutions
(including affiliates of First Maryland Bancorp), at an annual rate of up to
0.15% of the average net assets of the Institutional Class shares attributable
to their customers, for providing ongoing shareholder support services to
customers with accounts in such class. The Board of Trustees of ARK Funds has
approved an annual shareholder services fee rate of 0.06% of the average net
assets of the Institutional Class of each Acquiring Fund.
SEI Fund Resources ("SFR") provides administrative services to each
Acquiring Fund. SEI Investments Management Corporation, a wholly-owned
subsidiary of SEI Co., is the owner of all beneficial interest
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in SFR. For its services, SFR receives a fee, which is calculated daily and paid
monthly, at an annual rate of 0.13% of the aggregate average net assets of the
Acquiring Funds. SFR may voluntarily waive all or a portion of its fee from time
to time in its sole discretion. Pursuant to a separate agreement with SFR, FMB
Trust Company, National Association performs sub-administration services on
behalf of each ARK Funds portfolio, for which it receives a fee from SFR at the
annual rate of up to 0.0275% of aggregate average daily net assets of the
Acquiring Funds. See "Management" in the Prospectus of ARK Funds accompanying
this Prospectus/ Proxy Statement, which is incorporated herein by reference, for
additional information about SFR.
FMB Trust Company, National Association is custodian for the securities and
cash of ARK Funds. SFR provides transfer agent and related services for the
Acquiring Funds and has subcontracted the transfer agency services to State
Street Bank and Trust Company which maintains shareholder accounts and records
for the Acquiring Funds.
COMPARATIVE FEE TABLES
The tables set forth below show (a) shareholder transaction expenses and
estimated annual operating expenses for each Acquired Fund (other than the
Marketvest International Equity Fund) for the fiscal year ended February 28,
1997, estimated shareholder transaction expenses and estimated annual operating
expenses for the Marketvest International Equity Fund, for the fiscal year
ending February 28, 1998, and shareholder transaction expenses and estimated
annual operating expenses for the Institutional Class of each Acquiring Fund as
of April 30, 1997 for its fiscal year ended on such date, in each case restated
to reflect expenses the Acquired Funds and the Institutional Class of shares of
the Acquiring Funds, respectively, expect to incur during the current fiscal
year, and (b) pro forma information for each Acquiring Fund assuming the
Reorganization of such Acquiring Fund had taken place on October 31, 1997.
Unless otherwise noted, the information in the expense tables and the
examples reflects voluntary fee waivers and/or reimbursements. The assumption in
the example of a 5% annual return is required by the SEC for all mutual funds,
and is not a prediction of any fund's future performance. THE EXAMPLES SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF ANY FUND.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
3
13
PRO FORMA
MARKETVEST SHORT-TERM ARK SHORT-TERM ARK SHORT-TERM
BOND FUND BOND PORTFOLIO BOND PORTFOLIO
--------------------- -------------- --------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases
and reinvested dividends............... 3.50% None None
Deferred sales charges imposed on
redemptions............................ None None None
Redemption Fee........................... None None None
Exchange Fee............................. None None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage of average
net assets)
Advisory Fee (after waiver)(1)........... 0.60% 0.70% 0.70%
12b-1 Fee (after waiver)(2).............. 0.00% N/A N/A
Shareholder Services Fees (after
waiver)(3)............................. N/A 0.06% 0.06%
Other Expenses (after waiver)(4)......... 0.30% 0.18% 0.18%
Total Operating Expenses (after
waivers)(5)............................ 0.90% 0.94% 0.94%
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of the
shares after the number of years indicated:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Marketvest Short-Term Bond Fund.......... $ 44 $63 $83 $142
ARK Short-Term Bond Portfolio............ 10 30 52 115
Pro Forma ARK Short-Term Bond
Portfolio.............................. 10 30 52 115
- ---------------
(1) Absent fee waivers, advisory fees would be 0.75%.
(2) The Marketvest Short-Term Bond Fund is not currently paying or accruing
12b-1 fees. The Marketvest Short-Term Bond Fund can pay up to 0.25% as a
12b-1 fee to the distributor of the Marketvest Funds.
(3) Absent fee waivers, shareholder services fees for the Institutional Class of
the ARK Short-Term Bond Portfolio would be 0.15%.
(4) Other Expenses for the Marketvest Short-Term Bond Fund have been reduced to
reflect the voluntary waiver of 0.03% of the administrative fee by the
administrator. Absent such waiver, Other Expenses for the Marketvest
Short-Term Bond Fund would be 0.33%. The administrator can terminate these
voluntary waivers and reimbursements at any time at their sole discretion.
(5) Absent fee waivers, total operating expenses would be 1.08%, 1.08% and
1.08%, respectively.
4
14
MARKETVEST
INTERMEDIATE PRO FORMA
U.S. GOVERNMENT ARK U.S. GOVERNMENT ARK U.S. GOVERNMENT
BOND FUND BOND PORTFOLIO BOND PORTFOLIO
--------------- ------------------- -------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases
and reinvested dividends............. 3.50% None None
Deferred sales charges imposed on
redemptions.......................... None None None
Redemption Fee......................... None None None
Exchange Fee........................... None None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage of average
net assets)
Advisory Fee (after waiver)(1)......... 0.60% 0.65% 0.65%
12b-1 Fee (after waiver)(2)............ 0.00% N/A N/A
Shareholder Services Fees(3)........... N/A 0.06% 0.06%
Other Expenses (after waiver)(4)....... 0.25% 0.19% 0.19%
Total Operating Expenses (after
waivers)(5).......................... 0.85% 0.90% 0.90%
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of the
shares after the number of years indicated:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Marketvest Intermediate U.S. Bond Fund
Government............................. $ 43 $61 $80 $136
ARK U.S. Government Bond Portfolio....... 9 29 50 111
Pro Forma ARK U.S. Government Bond
Portfolio.............................. 9 29 50 111
- ---------------
(1) Absent fee waivers, advisory fees would be 0.75%.
(2) The Marketvest Intermediate U.S. Government Bond Fund is not currently
paying or accruing 12b-1 fees. The Marketvest Intermediate U.S. Government
Bond Fund can pay up to 0.25% as a 12b-1 fee to the distributor of the
Marketvest Funds.
(3) Absent fee waivers, shareholder services fees for the Institutional Class of
the ARK U.S. Government Bond Portfolio would be 0.15%
(4) Other Expenses for the Marketvest Intermediate U.S. Government Bond Fund
have been reduced to reflect the voluntary waiver of 0.03% of the
administrative fee by the administrator. Absent such waiver, Other Expenses
for the Marketvest Intermediate U.S. Government Bond Fund would be 0.28%.
The administrator can terminate these voluntary waivers and reimbursements
at any time at their sole discretion.
(5) Absent fee waivers, total operating expenses would be 1.03%, 1.09% and
1.09%, respectively.
5
15
MARKETVEST
PENNSYLVANIA PRO FORMA
INTERMEDIATE MUNICIPAL ARK PENNSYLVANIA ARK PENNSYLVANIA
BOND FUND TAX-FREE PORTFOLIO TAX-FREE PORTFOLIO
---------------------- ------------------ ------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases
and reinvested dividends.............. 3.50% None None
Deferred sales charges imposed on
redemptions........................... None None None
Redemption Fee.......................... None None None
Exchange Fee............................ None None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage of average
net assets)
Advisory Fee(1)......................... 0.60% 0.65% 0.65%
12b-1 Fee (after waiver)(2)............. 0.00% N/A N/A
Shareholder Services Fees(3)............ N/A 0.06% 0.06%
Other Expenses (after waiver)(4)........ 0.23% 0.23% 0.18%
Total Operating Expenses (after
waivers)(5)........................... 0.83% 0.94% 0.89%
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of the
shares after the number of years indicated:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Marketvest Pennsylvania Intermediate
Municipal Bond Fund.................... $ 43 $61 $79 $134
ARK Pennsylvania Tax-Free Portfolio...... 10 30 52 115
Pro Forma ARK Pennsylvania Tax-Free
Portfolio.............................. 9 28 49 110
- ---------------
(1) Absent fee waiver, the advisory fee for the Marketvest Pennsylvania
Intermediate Municipal Bond Fund would be 0.75%.
(2) The Marketvest Pennsylvania Intermediate Municipal Bond Fund is not
currently paying or accruing 12b-1 fees. The Marketvest Pennsylvania
Intermediate Municipal Bond Fund can pay up to 0.25% as a 12b-1 fee to the
distributor of the Marketvest Funds.
(3) Absent fee waivers, shareholder services fees for the Institutional Class of
the ARK Pennsylvania Tax-Free Portfolio would be 0.15%
(4) Other Expenses for the Marketvest Pennsylvania Intermediate Municipal Bond
Fund have been reduced to reflect the voluntary waiver of 0.04% of the
administrative fee by the administrator. Absent such waiver, Other Expenses
for the Marketvest Pennsylvania Intermediate Municipal Bond Fund would be
0.27%. The administrator can terminate this voluntary waiver at any time at
its sole discretion.
(5) Absent fee waivers, total operating expenses would be 1.02%, 1.03% and
0.98%, respectively.
6
16
PRO FORMA
MARKETVEST EQUITY ARK VALUE EQUITY ARK VALUE EQUITY
FUND PORTFOLIO PORTFOLIO
----------------- ---------------- ----------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases and
reinvested dividends..................... 4.75% None None
Deferred sales charges imposed on
redemptions.............................. None None None
Redemption Fee............................. None None None
Exchange Fee............................... None None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage of average net
assets)
Advisory Fee (after waiver)(1)............. 0.80% 0.87% 0.87%
12b-1 Fee (after waiver)(2)................ 0.00% N/A N/A
Shareholder Services Fees(3)............... N/A 0.06% 0.06%
Other Expenses (after waiver)(4)........... 0.25% 0.13% 0.13%
Total Operating Expenses (after
waivers)(5).............................. 1.05% 1.06% 1.06%
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of the
shares after the number of years indicated:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Marketvest Equity Fund................... $ 58 $79 $ 103 $170
ARK Value Equity Portfolio............... 11 34 58 129
Pro Forma ARK Value Equity Portfolio..... 11 34 58 129
- ---------------
(1) Absent fee waivers, advisory fees would be 1.00%.
(2) The Marketvest Equity Fund is not currently paying or accruing 12b-1 fees.
The Marketvest Equity Fund can pay up to 0.25% as a 12b-1 fee to the
distributor of the Marketvest Funds.
(3) Absent fee waivers, shareholder services fees for the Institutional Class of
the ARK Value Equity Portfolio would be 0.15%
(4) Other Expenses for the Marketvest Equity Fund have been reduced to reflect
the voluntary waiver of 0.01% of the administrative fee by the
administrator. Absent such waiver, Other Expenses for the Marketvest Equity
Fund would be 0.26%. The administrator can terminate this voluntary waiver
at any time at its sole discretion.
(5) Absent fee waivers, total operating expenses would be 1.26%, 1.28% and
1.28%, respectively.
7
17
PRO FORMA
MARKETVEST ARK ARK
INTERNATIONAL EQUITY INTERNATIONAL EQUITY INTERNATIONAL EQUITY
FUND SELECTION PORTFOLIO SELECTION PORTFOLIO
-------------------- -------------------- --------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases
and reinvested dividends.............. 1.50% None None
Deferred sales charges imposed on
redemptions........................... None None None
Redemption Fee.......................... None None None
Exchange Fee............................ None None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage of average
net assets)
Advisory Fee (after waiver)(1).......... 0.50% 0.55% 0.55%
12b-1 Fee (after waiver)(2)............. 0.00% N/A N/A
Shareholder Services Fees(3)............ N/A 0.06% 0.06%
Other Expenses (after waiver)(4)........ 0.25% 0.20% 0.20%
Total Operating Expenses (after
waivers)(5)........................... 0.75% 0.81% 0.81%
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of the
shares after the number of years indicated:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Marketvest International Equity Fund..... $ 23 $39 -- --
ARK International Equity Selection
Portfolio.............................. 8 26 45 100
Pro Forma ARK International Equity
Selection Portfolio.................... 8 26 45 100
- ---------------
(1) Absent fee waivers, advisory fees would be 0.65%.
(2) The Marketvest International Equity Fund is not currently paying or accruing
12b-1 fees. The Marketvest International Equity Fund can pay up to 0.25% as
a 12b-1 fee to the distributor of the Marketvest Funds.
(3) Absent fee waivers, shareholder services fees for the Institutional Class of
the ARK International Equity Selection Portfolio would be 0.15%
(4) Other Expenses of the Marketvest International Equity Fund have been reduced
to reflect voluntary waiver of 0.17% of the administrative fee by the
administrator and reimbursement of certain expenses by the adviser. Absent
such waiver, Other Expenses for the Marketvest International Equity Fund
would be 0.42%. The administrator and adviser can terminate these voluntary
waivers and reimbursements at any time at their sole discretion.
(5) Absent fee waivers, total operating expenses would be 1.07%, 1.00% and
1.00%, respectively.
EXPENSE RATIOS -- ACQUIRED FUNDS
The following table sets forth (a) the ratios of operating expenses to
average net assets of each Acquired Fund (other than the Marketvest
International Equity Fund) for the fiscal year ended February 28, 1997, (i)
after fee waivers and expense reimbursements, and (ii) absent fee waivers and
expense reimbursements, and (b) the annualized ratios of operating expenses to
average net assets of each Acquired Fund for the six-months ended August 31,
1997, (i) after fee waivers and expense reimbursements and (ii) absent fee
waivers and expense reimbursements.
8
18
FISCAL YEAR ENDED FEBRUARY 28, 1997
RATIO OF OPERATING EXPENSES RATIO OF OPERATING EXPENSES
TO AVERAGE NET ASSETS TO AVERAGE NET ASSETS
AFTER FEE ABSENT FEE
WAIVERS AND EXPENSE WAIVERS AND EXPENSE
ACQUIRED FUND REIMBURSEMENTS REIMBURSEMENTS
- ---------------------------------------------- --------------------------- ---------------------------
Marketvest Short-Term Bond Fund............... 0.90% 1.08%
Marketvest Intermediate U.S. Government Bond
Fund........................................ 0.85% 1.03%
Marketvest Pennsylvania Intermediate Municipal
Bond Fund................................... 0.83% 1.02%
Marketvest Equity Fund........................ 1.05% 1.26%
SIX-MONTHS ENDED AUGUST 31, 1997
RATIO OF OPERATING EXPENSES RATIO OF OPERATING EXPENSES
TO AVERAGE NET ASSETS TO AVERAGE NET ASSETS
AFTER FEE ABSENT FEE
WAIVERS AND EXPENSE WAIVERS AND EXPENSE
ACQUIRED FUND REIMBURSEMENTS REIMBURSEMENTS
- ---------------------------------------------- --------------------------- ---------------------------
Marketvest Short-Term Bond Fund............... 0.83% 1.02%
Marketvest Intermediate U.S. Government Bond
Fund........................................ 0.80% 0.99%
Marketvest Pennsylvania Intermediate Municipal
Bond Fund................................... 0.81% 1.00%
Marketvest Equity Fund........................ 1.02% 1.22%
Marketvest International Equity Fund.......... 0.75% 1.16%
EXPENSE RATIOS -- ACQUIRING FUNDS
The following table sets forth (a) the ratios of operating expenses to
average net assets of the Institutional Class of the ARK Pennsylvania Tax-Free
Portfolio for the fiscal year ended April 30, 1997, (i) after fee waivers and
expense reimbursements and (ii) absent fee waivers and expense reimbursements,
and (b) the annualized ratios of operating expenses to average net assets of the
Institutional Class of the ARK Pennsylvania Tax-Free Portfolio for the
six-months ended October 31, 1997, (i) after fee waivers and expense
reimbursements, and (ii) absent fee waivers and expense reimbursements.
FISCAL YEAR ENDED APRIL 30, 1997
RATIO OF OPERATING EXPENSES RATIO OF OPERATING EXPENSES
TO AVERAGE NET ASSETS TO AVERAGE NET ASSETS
AFTER FEE ABSENT FEE
WAIVERS AND EXPENSE WAIVERS AND EXPENSE
ACQUIRING FUND REIMBURSEMENTS REIMBURSEMENTS
- ---------------------------------------------- --------------------------- ---------------------------
ARK Pennsylvania Tax-Free Portfolio........... 0.63% 0.76%
SIX-MONTHS ENDED OCTOBER 31, 1997
RATIO OF OPERATING EXPENSES RATIO OF OPERATING EXPENSES
TO AVERAGE NET ASSETS TO AVERAGE NET ASSETS
AFTER FEE ABSENT FEE
WAIVERS AND EXPENSE WAIVERS AND EXPENSE
ACQUIRING FUND REIMBURSEMENTS REIMBURSEMENTS
- ---------------------------------------------- --------------------------- ---------------------------
ARK Pennsylvania Tax-Free Portfolio........... 0.60% 0.72%
The ARK Short-Term Bond Portfolio, ARK U.S. Government Bond Portfolio, ARK
Value Equity and ARK International Equity Selection Portfolio have recently been
organized for the purpose of continuing the investment operations of the
Marketvest Short-Term Bond Fund, Marketvest Intermediate U.S. Government
9
19
Fund, Marketvest Equity Fund and Marketvest International Equity Fund,
respectively, had not commenced operations as of October 31, 1997, and are not
expected to commence operations until the consummation of the Reorganizations.
PURCHASES
Except for the shares to be issued in connection with the Reorganizations,
Institutional Class shares of the Acquiring Funds are sold to individuals,
institutions and other entities that have established trust, custodial or money
management relationships with First National Bank of Maryland ("First National")
or its affiliates. Institutional Class shares may be purchased by eligible
investors at their net asset value without a sales charge next calculated after
an investment is received and accepted. Marketvest Fund shareholders may
reinvest their dividends in Institutional Class shares of the Acquiring Funds
but additional share purchases of Institutional Class shares may only be made by
Marketvest Fund shareholders who are otherwise eligible to purchase
Institutional Class shares. Share purchases may be made Monday through Friday,
except on certain holidays. The net asset value of each Acquiring Fund is
calculated as of the close of regular trading (normally 4:00 p.m. Eastern Time)
on the New York Stock Exchange. The following minimum investments apply to
Institutional Class shares of the Acquiring Funds unless they are waived:
To open an account................................ $100,000*
To add to an account.............................. N/A
Minimum account balance........................... 250,000*
- ---------------
* The minimum initial investment required to open an account is $100,000. Within
six months, a registered Institutional Class shareholder must reach and
maintain an aggregate balance of $250,000. Both the minimum initial investment
and aggregate balance requirements are being waived for all Marketvest Fund
shareholders in the Reorganizations. However, additional purchases of
Institutional Class shares may be made only if a shareholder is otherwise
eligible to purchase Institutional Class shares.
Shares of the Acquired Funds are sold on a continuous basis at net asset
value plus any applicable sales charge. The maximum sales charge is 4.75% for
the Marketvest Equity Fund; 3.50% for the Marketvest Short-Term Bond Fund,
Marketvest Intermediate U.S. Government Bond Fund and Marketvest Pennsylvania
Intermediate Municipal Bond Fund; and 1.50% for the Marketvest International
Equity Fund. Purchases may be made Monday through Friday, except on certain
holidays. The net asset value of each Acquired Fund is calculated as of the
close of regular trading (normally 4:00 p.m., Eastern Time) on the New York
Stock Exchange. The following minimum investments apply to purchases of shares
of the Acquired Funds unless they are waived:
To open an account.................................. $1,000*
To add to an account................................ 50
Minimum account balance............................. 1,000
- ---------------
* The minimum investment to open an account for the Marketvest International
Equity Fund is $10,000.
Participants in the Acquired Funds' systematic investment program may
direct the deduction of the purchase price for shares of any Acquired Fund from
an eligible deposit account. If the Reorganization of any such Acquired Fund is
approved and consummated as set forth herein, all amounts so deducted will be
automatically invested in the corresponding Acquiring Fund.
EXCHANGES
All or a portion of shares of any of the Acquiring Funds may be exchanged
on any business day at their net asset value for shares of the same class of one
or more of the other Acquiring Funds or any other ARK Funds portfolio. Shares of
the Acquired Funds may be exchanged at their net asset value plus any sales
charge differential for the shares of any of the other Acquired Funds.
10
20
DIVIDENDS AND DISTRIBUTIONS
ARK Short-Term Bond Portfolio, ARK U.S. Government Bond Portfolio and ARK
Pennsylvania Tax-Free Portfolio pay dividends from net investment income
monthly. ARK Value Equity Portfolio pays dividends from net investment income
quarterly. ARK International Equity Selection Portfolio pays dividends from net
investment income annually. Commencing March 1, 1998, income dividends on all
Acquiring Funds will be declared daily and paid monthly, quarterly or annually,
as described above. Each Acquiring Fund distributes net realized capital gains,
if any, at least annually. Holders of shares of the Acquiring Funds may elect to
have their dividends and distributions automatically reinvested in additional
shares at the net asset value next determined after payment, to receive their
dividends and distributions in cash, or to receive a combination of additional
shares and cash. If a shareholder fails to select an option, all dividends and
distributions are reinvested in additional shares.
Marketvest Short-Term Bond Fund, Marketvest Intermediate U.S. Government
Bond Fund, and Marketvest Pennsylvania Intermediate Municipal Bond Fund declare
dividends daily and pay dividends from net investment income monthly. Marketvest
Equity Fund declares and pays dividends from net investment income monthly.
Marketvest International Equity Fund declares and pays dividends from net
investment income annually. Each Acquired Fund distributes net realized capital
gains, if any, at least annually. Dividends and distributions are automatically
reinvested in additional shares on the payment dates at the ex-dividend date net
asset value without a sales charge, unless cash payments are requested in
writing.
REDEMPTION PROCEDURES
The shares of the Acquiring Funds and the Acquired Funds are redeemable on
any business day at a price equal to the net asset value of the shares the next
time it is calculated after receipt of a redemption request in good order.
VOTING INFORMATION. This Prospectus/Proxy Statement is being furnished in
connection with the solicitation of proxies by the Board of Directors of
Marketvest Funds, Inc. and the Board of Trustees of Marketvest Funds in
connection with the Joint Special Meeting of Shareholders to be held at
Federated Investors, Federated Investors Tower, 19th Floor, Pittsburgh,
Pennsylvania, on March , 1998, at 10 o'clock a.m., Eastern Time, (such meeting
and any adjournment thereof hereinafter referred to as the "Meeting"). Only
shareholders of record at the close of business on February 4, 1998 will be
entitled to notice of and to vote at the Meeting. Each share or fraction thereof
is entitled to one vote or fraction thereof. Shares of each Acquired Fund will
be counted separately. Shares represented by a properly executed proxy will be
voted in accordance with the instructions thereon, or if no instruction is made,
the persons named as proxies will vote in favor of each proposal set forth in
the Notice of Meeting. Proxies may be revoked at any time before they are
exercised by submitting a written notice of revocation or a subsequently
executed proxy or by attending the Meeting and voting in person. For additional
information, including a description of the shareholder vote required for
approval of the Reorganization Agreement and related transactions contemplated
thereby, see "Information Relating to Voting Matters."
11
21
RISK FACTORS
The following discussion summarizes some of the more significant
similarities and differences in the investment objectives, policies, practices
and risk factors of the Acquired Funds and the Acquiring Funds and is qualified
in its entirety by the prospectuses and statements of additional information of
the Acquired Funds and the Acquiring Funds, which are incorporated herein by
reference.
INVESTMENT OBJECTIVES AND POLICIES. The investment objective and policies
of the Marketvest Short-Term Bond Fund and ARK Short-Term Bond Portfolio, of the
Marketvest Intermediate U.S. Government Bond Fund and ARK U.S. Government Bond
Portfolio, of the Marketvest Equity Fund and ARK Value Equity Portfolio, or of
the Marketvest International Equity Fund and ARK International Equity Selection
Portfolio are substantially similar. However, the ARK Short-Term Bond Portfolio
and ARK U.S. Government Bond Portfolio may each invest up to 5% of total assets
in lower-quality debt securities; the corresponding Marketvest Funds do not have
a similar provision in their investment polices. The investment objective and
policies of the Marketvest Pennsylvania Intermediate Municipal Bond Fund are
similar to those of the ARK Pennsylvania Tax-Free Portfolio. There are, however,
certain material differences.
Marketvest Pennsylvania Intermediate Municipal Bond Fund and ARK
Pennsylvania Tax-Free Portfolio. The investment objective of each of the
Marketvest Pennsylvania Intermediate Municipal Bond Fund and the ARK
Pennsylvania Tax-Free Portfolio is to provide current income which is exempt
from federal regular income tax and the state income taxes imposed by the
Commonwealth of Pennsylvania. Each fund pursues its investment objective by
investing primarily in Pennsylvania municipal securities. Under normal market
conditions, the Marketvest Pennsylvania Intermediate Municipal Bond Fund and the
ARK Pennsylvania Tax-Free Portfolio invest at least 80% and 65%, respectively,
of their net assets in Pennsylvania municipal securities. In addition, the
Marketvest Pennsylvania Intermediate Municipal Bond Fund invests its assets so
that, under normal circumstances, at least 65% of the value of its total assets
will be invested in securities of Pennsylvania issuers. Up to 20% of each fund
may generate income that is subject to the federal income tax, including the
alternative minimum tax.
See the Combined Prospectus of the Marketvest Funds and the Prospectus of
ARK Funds, which are incorporated herein by reference, for a further description
of the similarities and differences between the investment objectives and
policies of the Acquired Funds and the Acquiring Funds.
INVESTMENT PRACTICES AND RISKS. This section describes certain practices
and risks that are generally common to a number of the Acquired Funds and
Acquiring Funds.
Fixed-Income Securities. The market value of fixed-income securities will
change in response to interest rate changes and other factors. During periods of
falling interest rates, the value of outstanding fixed-income securities
generally rises. Conversely, during periods of rising interest rates, the value
of such securities generally declines. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the credit rating
of any fixed-income security and in the ability of an issuer to make payments of
interest and principal also affect the value of these investments. Changes in
the value of portfolio securities will not necessarily affect cash income
derived from those securities but will affect the net asset value of the fund's
shares. Each of the Acquired Funds and the Acquiring Funds may invest in
fixed-income securities consistent with its investment objective and policies.
Bonds rated Baa by Moody's or BBB by Standard & Poors, or with equivalent
ratings by other nationally recognized statistical rating organizations
("NRSROs"), may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds. Debt securities rated lower than Baa by Moody's or BBB by Standard &
Poors, or with equivalent ratings by other NRSROs, (sometimes referred to as
"junk bonds") have poor protection against default in payment of principal and
interest. These securities are often considered to be speculative and involve
greater risk of loss or price changes due to changes in the issuer's capacity to
pay. Market prices of lower-rated debt securities may fluctuate more often than
those of
12
22
higher-rated securities, and may decline significantly in periods of general
economic difficulty which may follow rising interest rates. Unrated securities
are not necessarily of lower quality than rated securities, but they may not be
attractive to as many buyers. The Marketvest International Equity Fund and the
corresponding Acquiring Fund may invest up to 35% of their total assets in
lower-quality debt securities. The ARK Short-Term Bond Portfolio and the ARK
U.S. Government Bond Portfolio, each an Acquiring Fund, may invest up to 5% in
such securities.
Municipal Obligations. The Marketvest Pennsylvania Intermediate Bond Fund
and the ARK Pennsylvania Tax-Free Portfolio invest primarily in municipal
obligations. The other funds may invest in such obligations to the extent
permitted by their investment policies. Municipal securities are issued to raise
money for various public purposes, including general purpose financing for state
and local governments as well as financing for specific projects or public
facilities. Municipal securities may be backed by the full taxing power of a
municipality or by the revenues from a specific project or by the credit of a
private organization. Some municipal securities are insured by private insurance
companies, while others may be supported by letters of credit furnished by
domestic or foreign banks. Yields on municipal obligations depend on a variety
of factors, including the general conditions of the money markets and of the
municipal bond and municipal note markets, the size of a particular offering,
the maturity of the obligation, and the rating of the issue. Municipal
obligations with longer maturities tend to produce higher yields and generally
are subject to potentially greater price fluctuations than obligations with
shorter maturities.
Equity Securities Generally. Investments in equity securities are subject
to market risks which may cause their prices to fluctuate. Accordingly, the
Acquired Funds and the Acquiring Funds investing in equity securities may be
more suitable for long-term investors who can bear the risk of short-term
fluctuations. Changes in the value of portfolio securities will not necessarily
affect income derived from those securities but will affect the net asset value
of the fund's shares. Equity securities held by a fund may not perform well
during certain market cycles and may not respond to general market movements to
the same extent as other securities.
Foreign Securities. Each of the Acquired Funds and Acquiring Funds may
invest in foreign securities to the extent permitted by their investment
policies. The Marketvest International Equity Fund and the corresponding
Acquiring Fund invest primarily in the securities of investment companies
investing in foreign securities. Investing in the securities of foreign issuers
involves special risks not typically associated with investing in U.S.
companies. These risks include differences in accounting, auditing and financial
reporting standards, generally higher commission rates on foreign portfolio
transactions, the possibility of expropriation or confiscatory taxation, adverse
changes in investment or exchange control regulations, political instability
which could affect U.S. investment in foreign countries, and potential
restrictions on the flow of international capital and currencies. Foreign
issuers may also be subject to less government regulation than U.S. companies.
Moreover, the dividends and interest payable on foreign securities may be
subject to foreign withholding taxes, thus reducing the net amount of income
available for distribution to a fund's shareholders. Further, foreign securities
often trade with less frequency and volume than domestic securities and,
therefore, may exhibit greater price volatility. Investing in emerging markets
involves special considerations (in addition to those relating to foreign
investment generally) which include, among others, greater political
uncertainty, an economy's dependence on revenues from particular commodities or
on international aid or development assistance, currency transfer restrictions,
a limited number of potential buyers for securities, and delays and disruptions
in securities settlement procedures. Changes in foreign exchange rates will
affect, favorably or unfavorably, the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar.
Non-Diversification. Investing in the Marketvest Pennsylvania Intermediate
Bond Fund and the ARK Pennsylvania Tax-Free Portfolio, which are non-diversified
funds, may entail greater risk than investing in a diversified fund because the
concentration in securities of relatively-fewer issuers could result in greater
fluctuation in the total market value of the fund's holdings. Any economic,
political or regulatory developments affecting the value of the securities the
fund holds could have a greater impact on the total value of its holdings than
would be the case if the securities were diversified among more issuers.
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Pennsylvania's economy is based on a mixture of manufacturing, mining,
trade, medical and health services, education and financial institutions.
Pennsylvania's continued dependence on manufacturing, mining, steel and coal,
however, has made the state vulnerable to cyclical fluctuations, foreign imports
and environmental concerns. Pennsylvania's population and per capita income have
been increasing slightly over the past five years, and its employment and
unemployment rates have generally not been significantly different over the past
five years from that of the United States. Pennsylvania is engaged in certain
litigation matters which are described in the Statement of Additional
Information of the Acquiring Funds incorporated herein by reference.
Delayed Delivery or Purchases on a When-Issued Basis. Delayed delivery or
purchases of securities on a when-issued basis are transactions where the price
of the securities is fixed at the time of commitment and the delivery and
payment ordinarily takes place beyond customary settlement time. The interest
rate to be realized on these securities is fixed as of the purchase date and no
interest accrues to the buyer before settlement. The securities are subject to
market fluctuation due to changes in market interest rates; the securities are
also subject to fluctuation in value pending settlement based upon public
perception of the creditworthiness of the issuer of these securities. Liquid
assets sufficient to make payments for the securities to be purchased are
segregated at the trade date. Each of the Acquired Funds and Acquiring Funds may
purchase securities on a delayed delivery or when-issued basis and may dispose
of the when-issued commitment prior to settlement which may result in short-term
profits or losses.
Repurchase Agreements. A repurchase agreement is an agreement where a
person buys a security and simultaneously commits to sell the security to the
seller at an agreed-upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. A fund which buys
the security bears a risk of loss in the event the other party defaults on its
obligations and the fund is delayed or prevented from exercising its right to
dispose of the collateral securities or if the fund realizes a loss on the sale
of the collateral securities. Each Acquired Fund and Acquiring Fund may enter
into repurchase agreements. Each Acquired Fund and Acquiring Fund will only
enter into repurchase agreements with banks and other recognized financial
institutions which are deemed by its investment adviser to be creditworthy
pursuant to guidelines established by its Board of Directors/Trustees.
Reverse Repurchase Agreements. Each of the Acquired Funds and the
Acquiring Funds may enter into reverse repurchase agreements. Reverse repurchase
agreements involve the sale of securities held by a fund and the agreement by
the fund to repurchase the securities at an agreed-upon price, date and interest
payment. When a fund enters into reverse repurchase transactions, it will
maintain appropriate liquid assets in a segregated custodial account to cover
the value of the securities subject to the agreement. The segregation of assets
could impair the fund's ability to meet its current obligations or impede
investment management if a large portion of the fund's assets are involved.
Reverse repurchase agreements are considered to be a form of borrowing.
Securities Lending. Consistent with applicable regulatory requirements and
in order to generate additional income, each of the Acquired Funds and the ARK
Short-Term Bond Portfolio and ARK U.S. Government Bond Portfolio may lend
portfolio securities to broker-dealers and other institutional borrowers. It is
the current view of the SEC that a fund may engage in loan transactions only
under the following conditions: (1) the fund must receive 100% collateral in the
form of cash or cash equivalents (e.g., U.S. Treasury bills, notes or other
liquid securities) from the borrower; (2) the borrower must increase the
collateral whenever the market value of the securities loaned (determined on a
daily basis) rises above the value of the collateral; (3) after giving notice,
the fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the borrower, as well
as amounts equivalent to any dividends, interest, or other distributions on the
securities loaned and to any increase in market value; (5) the fund may pay only
reasonable custodian fees in connection with the loan; and (6) the Board of
Directors/Trustees must be able to vote proxies on the securities loaned, either
by terminating the loan or by entering into an alternative arrangement with the
borrower. Each of the funds will not make loans where the value of securities
loaned by it would exceed 33 1/3% of its total assets. In the event of the
bankruptcy of the other party to a securities loan, a fund could experience
delays in recovering either the securities loaned or
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24
cash. To the extent that, in the meantime, the value of the securities loaned
has increased or the value of the securities purchased has decreased, the fund
could experience a loss.
Options. The Acquiring Funds and the Marketvest Equity Fund and Marketvest
International Equity Fund may engage in options transactions from time to time.
A put option gives a fund, in return for a premium, the right (but not the
obligation) to sell the underlying security to the writer or seller of the
option at a specified price during the term of the option. A call option gives a
fund, in return for a premium, the right (but not the obligation) to buy the
underlying securities from the seller at a specified price during the term of
the option. The Marketvest Equity Fund and Marketvest International Equity Fund
may write covered put and call options on portfolio securities to attempt to
hedge all or a portion of their portfolio investments or to attempt to increase
their current income. Each of these funds may only write call options either on
securities held in its portfolio or on securities which it has the right to
obtain without payment of further consideration (or has segregated cash in the
amount of any additional consideration). In the case of put options, the
eligible Marketvest Funds will segregate cash, U.S. Treasury obligations or
other liquid securities with a value equal to or greater than the exercise price
of the underlying securities. In contrast, under normal conditions, no Acquiring
Fund will hedge more than 25% of its total assets by engaging in options
transactions and futures (see "Futures and Options on Futures" below). In
addition, each Acquiring Fund will not write puts where the value of the
underlying investment exceeds 25% (including the value of futures held by the
fund) of its total assets and will not buy calls with a value exceeding 5% of
its total assets. There are risks associated with options transactions,
including that the success of a hedging strategy will depend on the ability of
the investment adviser to predict movements in the prices of individual
securities, market fluctuations and movements in interest rates; there may be an
imperfect correlation between the movement in prices of securities held by a
fund and price movements of the related options; and there may not be a liquid
secondary market for options.
Futures and Options on Futures. Futures contracts provide for the future
sale by one party and purchase by another party of a specified amount of a
specified security at a specified future time and at a specified price. An
option on a futures contract gives the purchaser the right, in exchange for a
premium, to assume a position in a futures contract at a specified exercise
price during the term of the option. Each of the Acquiring Funds and the
Marketvest Equity Fund and Marketvest International Equity Fund may enter into
futures contracts and options on futures contracts, provided that, with respect
to the Marketvest Funds' positions in futures contracts and related options
contracts that are not for "bona fide hedging purposes", the sum of its initial
margin deposits on open futures contracts plus the amount paid for premiums for
unexpired options on futures contracts does not exceed 5% of the liquidation
value of its net assets after taking into account unrealized profits and
unrealized losses on any such contracts and excluding the value of any options
that are "in-the-money" at the time of purchase. In every other instance, each
of the Acquiring Funds and the Marketvest Equity Fund and Marketvest
International Equity Fund use futures contracts and related options, within
their respective investment limitations noted in "Options" above, only for bona
fide hedging purposes, i.e., to offset unfavorable changes in the value of
securities otherwise held or expected to be acquired for investment purposes.
There are risks associated with these hedging activities. See "Options" above.
Other Considerations. Certain other investments and investment techniques
permitted for the Acquired Funds and the Acquiring Funds pose special risks in
addition to those described above. See the Combined Prospectus and Combined
Statement of Additional Information of the Marketvest Funds and the Prospectus
and Statement of Additional Information of ARK Funds for more information. By
itself no fund constitutes a balanced investment plan. There is no assurance
that a fund will achieve its investment objective. Investors should review the
investment objective, policies and practices of a fund and carefully consider
their ability to assume the risks involved.
INVESTMENT LIMITATIONS. None of the Acquiring Funds or the Acquired Funds
may change their fundamental investment limitations without the affirmative vote
of the holders of a majority of the outstanding voting securities (as defined in
the 1940 Act) of such Acquiring Fund or Acquired Fund. However, investment
limitations that are not fundamental policies may be changed by the appropriate
Board of Directors/Trustees without shareholder approval. The investment
limitations of the Acquired Funds and the corresponding Acquiring Funds are
similar, but not identical.
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25
Concentration of Investments. As a fundamental policy, none of the
Acquiring Funds or the Acquired Funds may purchase any securities which would
cause more than 25% of the total assets of such fund to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry. This limitation does not apply to investments in
obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities. The Marketvest International Equity Fund may, however, invest
in investment companies that concentrate their assets within one industry. The
ARK International Equity Selection Portfolio will not concentrate its assets in
any one industry or in underlying funds which concentrate their assets in any
industry. Under certain unusual circumstances, the Fund could be indirectly
concentrated in one or more industries. If this were to occur, the Fund's
adviser would consider whether to maintain or change its investments in
underlying funds. In addition, the Marketvest Pennsylvania Intermediate
Municipal Bond Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be invested in any
one industry or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects. However,
the funds may invest as temporary investments more than 25% of the value of its
assets in cash or cash items.
Loans. As a fundamental policy, none of the Acquiring Funds or Acquired
Funds may make loans, except that a fund may (a) purchase or hold debt
instruments; (b) enter into repurchase agreements; and (c) engage in securities
lending, in each case where permitted by its investment objective, policies and
limitations.
Diversification of Investments. As a fundamental policy, none of the
Acquiring Funds (other than the ARK Pennsylvania Tax-Free Portfolio) or the
Acquired Funds (other than the Marketvest Pennsylvania Intermediate Municipal
Bond Fund) may acquire more than 10% of the voting securities of any one issuer,
or invest more than 5% of its total assets in the securities of an issuer;
provided that the foregoing limitation does not apply to 25% of the total assets
of any of the Acquired Funds or the Acquiring Funds. For purposes of the
foregoing, with respect to the Acquiring Funds and the Acquired Funds,
securities issued or guaranteed by the United States, its agencies or
instrumentalities, are excluded and with respect to the ARK International Equity
Selection Portfolio and the Marketvest International Equity Fund, securities of
other investment companies are excluded.
The ARK Pennsylvania Tax-Free Portfolio and the Marketvest Pennsylvania
Intermediate Municipal Bond Fund are non-diversified funds and may invest their
assets without regard to the restrictions set forth above.
Issuing Senior Securities or Borrowing Money. As a fundamental policy,
none of the Acquiring Funds or the Acquired Funds may borrow or issue senior
securities, except that (a) an Acquiring Fund may borrow money from banks and
may enter into reverse repurchase agreements and (b) an Acquired Fund may borrow
money in an amount not to exceed 33 1/3% of its total assets as a temporary
measure for extraordinary or emergency purposes (which may include the need to
meet shareholder redemption requests). None of the Acquiring Funds or the
Acquired Funds will purchase any securities for its portfolio at any time at
which its borrowings equal or exceed 5% of its total assets. None of the
Acquiring Funds or the Acquired Funds will borrow for investment purposes.
Pledging Assets. As a fundamental policy, none of the Acquired Funds may
pledge, mortgage, or hypothecate assets except to secure temporary borrowings
permitted in the preceding paragraph. For purposes of this limitation, with
respect to the Acquired Funds, the following will not be deemed to be pledges
(where applicable): margin deposits for the purchase and sale of financial
futures contracts and related options and segregation or collateral arrangements
made in connection with options activities or the purchase of securities on a
when-issued basis. The Acquiring Funds do not have a fundamental policy
regarding the pledging of assets.
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26
Investing in Real Estate and Commodities. As a fundamental policy, none of
the Acquiring Funds or the Acquired Funds may purchase or sell real estate,
including real estate limited partnership interests (except that the Marketvest
International Equity Fund may purchase such limited partnership interests),
commodities and commodities contracts, but excluding interests in a pool of
securities that are secured by interests in real estate. Each of the Acquiring
Funds and the Acquired Funds may, however, subject to compliance with other
investment policies, invest in companies which invest in real estate. Each of
the Acquiring Funds and the Marketvest Equity Fund and Marketvest International
Equity Fund may invest in futures contracts and options thereon to the extent
permitted by its investment objective, policies and limitations.
Selling Short or Buying on Margin. As a non-fundamental policy, none of
the Acquiring Funds or the Acquired Funds may make short sales of securities,
maintain a short position or purchase securities on margin, except that the
Acquiring Funds may sell securities short if they own or have the right to
obtain securities equivalent in kind and amount to the securities sold short.
The Acquired Funds may obtain short-term credits as necessary for the clearance
of purchases and sales of portfolio securities and, with respect to the
Marketvest Equity Fund and Marketvest International Equity Fund, the deposit of
initial and variation margins in futures contracts are not considered purchasing
securities on margin. For both the Acquiring Funds and the Acquired Funds,
transactions in futures contracts and options are not deemed to constitute
selling securities short.
Underwriting. As a fundamental policy, none of the Acquiring Funds or the
Acquired Funds may act as an underwriter of securities of other issuers, except
as it may deemed an underwriter under federal securities laws in selling a
security held by it.
Investing in Securities of Other Investment Companies. As a
non-fundamental policy, none of the Acquiring Funds or the Acquired Funds may
purchase securities of other investment companies except as permitted by the
1940 Act and the rules and regulations thereunder. The Marketvest International
Equity Fund and ARK International Equity Selection Portfolio invest primarily in
other mutual funds. See the Combined Prospectus of the Marketvest Funds and the
Prospectus of ARK Funds, which are incorporated herein by reference, for a
further description of the investment practices and risks of these funds.
Investment companies typically incur fees that are separate from those fees
incurred directly by the Acquiring Fund or the Acquired Fund. An Acquiring
Fund's or an Acquired Fund's purchase of such investment company securities
results in the layering of expenses, such that shareholders would indirectly
bear a proportionate share of the operating expenses of such investment
companies, including advisory fees.
Puts, Calls or Other Options. The Acquiring Funds and the Marketvest
Equity Fund and Marketvest International Equity Fund may write or purchase puts,
calls or other options or combinations thereof subject to compliance with other
investment policies. The Marketvest Equity and International Equity Funds may
write covered put and call options on portfolio securities held in its portfolio
or on securities which it has the right to obtain without payment of further
consideration (or has segregated cash in the amount of any additional
consideration). In the case of put options, the eligible Marketvest Funds will
segregate cash, U.S. Treasury obligations or other liquid securities with a
value equal to or greater than the exercise price of the underlying securities.
In contrast, under normal conditions no Acquiring Fund will hedge more than 25%
of its total assets by engaging in options transactions and futures. In
addition, each Acquiring Fund will not write puts where the value of the
underlying investment exceeds 25% (including the value of futures held by the
fund) of its total assets and will not buy calls with a value exceeding 5% of
its total assets. See "Risk Factors -- Options" and "-- Futures and Options on
Futures".
Restricted and Illiquid Securities. As a non-fundamental policy, none of
the Acquiring Funds or Acquired Funds will invest in illiquid securities in an
amount exceeding, in the aggregate, 15% of its net assets. Repurchase agreements
providing for settlement in more than seven days after notice, over-the-counter
options, non-negotiable time deposits with maturities over seven days, certain
holdings of shares of other investment companies owned by the Marketvest
International Equity Fund or the ARK International Equity Portfolio, and certain
restricted securities not determined by the board to be liquid are also be
counted toward such percentage limitation.
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27
The foregoing limitation does not apply to restricted securities held by
any of the Acquiring Funds or the Acquired Funds if it is determined by or under
procedures established by the applicable Board of Trustees/Directors that, based
on trading markets for the specific restricted security in question, such
security is not illiquid.
The absence of a trading market for restricted or illiquid securities can
make it difficult to ascertain a market value for these securities. Disposing of
illiquid securities may involve time-consuming negotiation and legal expense,
and it may be difficult or impossible to sell illiquid securities promptly at an
acceptable price.
OTHER INFORMATION. ARK Funds, Marketvest Funds, Inc. and Marketvest Funds
are registered as open-end management investment companies under the 1940 Act.
Currently ARK Funds offers eighteen investment portfolios, Marketvest Funds,
Inc. offers three investment portfolios and Marketvest Funds offers two
investment portfolios. ARK Short-Term Bond Portfolio, ARK U.S. Government Bond
Portfolio, ARK Value Equity and ARK International Equity Selection Portfolio
will be offered by ARK Funds after their Reorganizations with the corresponding
Acquired Funds.
Marketvest Funds, Inc. is organized as a Maryland corporation and is
subject to the provisions of its charter and bylaws. ARK Funds and Marketvest
Funds are organized as Massachusetts business trusts and are subject to the
provisions of their respective declarations of trust and bylaws.
Shares of ARK Funds, Marketvest Funds, Inc. and Marketvest Funds: (i) are
entitled to one vote for each full share held and a proportionate fractional
vote for each fractional share held; (ii) will vote in the aggregate by fund and
not by class or series except as otherwise expressly required by law or when
class voting is permitted by the respective Board of Directors/Trustees; and
(iii) are entitled to participate equally in the dividends and investment income
and in the net distributable assets of the respective class and series of such
fund on liquidation. In addition, shares of the Acquiring Funds and Acquired
Funds have no preemptive rights and only such conversion and exchange rights as
the respective boards of trustees/directors may grant in their discretion. When
issued for payment as described in their prospectuses, Acquiring Fund shares and
Acquired Fund shares are fully paid and non-assessable by such entities except,
in the case of ARK Funds and Marketvest Funds shares, as required under
Massachusetts law.(1) Neither Marketvest Funds, Inc., Marketvest Funds nor ARK
Funds is required under applicable law to hold annual shareholder meetings and
each intends to do so only if required by the 1940 Act. Shareholders have the
right to remove trustees or directors. To the extent required by law, Marketvest
Funds, Inc., Marketvest Funds and ARK Funds will assist in shareholder
communications in such matters.
The foregoing is only a summary. Shareholders may obtain copies of the
charter and bylaws of Marketvest Funds, Inc. and the declaration of trust and
bylaws of ARK Funds and Marketvest Funds upon written request at the addresses
shown on the cover page of this Prospectus/Proxy Statement.
INFORMATION RELATING TO THE PROPOSED REORGANIZATIONS
Marketvest Funds, Inc., Marketvest Funds and ARK Funds have entered into an
Agreement and Plan of Reorganization (the "Reorganization Agreement") which
provides that each Acquired Fund is to be acquired by an Acquiring Fund.
Significant provisions of the Reorganization Agreement are summarized below;
however, this summary is qualified in its entirety by reference to the
Reorganization Agreement, a copy of which is attached as Appendix A to this
Prospectus/Proxy Statement.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. The Reorganization Agreement
provides that at the Closing Date (as defined in the Reorganization Agreement)
of the Reorganization of each Acquired Fund, substantially all of the assets and
stated liabilities of such Acquired Fund will be acquired by the Acquiring
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Fund identified in the table below opposite its name and the shareholders of
such Acquired Fund shall receive Institutional Class shares of the Acquiring
Fund identified below opposite the name of such Acquired Fund:
ACQUIRED FUNDS ACQUIRING FUNDS
---------------------------------------- ----------------------------------------
Marketvest Short-Term Bond Fund ARK Short-Term Bond Portfolio
Marketvest Intermediate U.S. Government ARK U.S. Government Bond Portfolio
Bond Fund
Marketvest Pennsylvania Intermediate ARK Pennsylvania Tax-Free Portfolio
Municipal Bond Fund
Marketvest Equity Fund ARK Value Equity Portfolio
Marketvest International Equity Fund ARK International Equity Selection
Portfolio
In exchange for the transfer of the assets of each Acquired Fund and the
assumption of the stated liabilities of each Acquired Fund, ARK Funds will issue
to each Acquired Fund, at the Closing Date of the Reorganization of such
Acquired Fund, a number of full and fractional Institutional Class shares of the
applicable Acquiring Fund. The number of shares of the Acquiring Fund so issued
will have an aggregate net asset value equal to the value of the assets of the
Acquired Fund. In determining the value of the assets of an Acquired Fund, each
security will be priced in accordance with the policies and procedures of ARK
Funds as described in its then current Prospectus and Statement of Additional
Information and in accordance with applicable provisions of the 1940 Act.
- ---------------
(1) Under Massachusetts law, shareholders of a business trust could, under
certain circumstances, be held personally liable for the obligations of the
business trust. However, each of the declarations of trust of ARK Funds and
Marketvest Funds disclaims shareholder liability for acts or obligations of
the fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the fund or
its trustees. Each of the declarations of trust provide for indemnification
out of the series property for all losses and expenses of any shareholder
held personally liable for the obligations of the series. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability
is considered remote since it is limited to circumstances in which a
disclaimer is inoperative and the series or the trust itself would be unable
to meet its obligations.
The Reorganization Agreement provides that each Acquired Fund will declare
and pay a dividend on or prior to the Closing Date of the Reorganization of such
Acquired Fund in order to distribute to its shareholders all of its investment
company taxable income and net tax-exempt interest income earned, and all of its
net capital gains realized, up to and including the Closing Date of the
Reorganization of such Acquired Fund.
At the Closing Date each Acquired Fund will liquidate and distribute pro
rata to the record holders of its shares at such Closing Date the Institutional
Class shares of the Acquiring Fund identified in the table above to be received
by the holders of such Acquired Fund. All of the issued and outstanding shares
of each Acquired Fund will be canceled on the books of Marketvest Funds, Inc. or
Marketvest Funds, as the case may be, at the Closing Date of the Reorganization
of that Acquired Fund and will thereafter represent only the right to receive
the Institutional Class shares of the Acquiring Fund identified in the table
above, and the Acquired Fund's transfer book will be closed permanently. As soon
as practicable after the Reorganizations, Marketvest Funds, Inc. and Marketvest
Funds will make all filings and take all other steps as are necessary and proper
to effect their complete dissolution, and will file an application pursuant to
Section 8(f) of the 1940 Act for an order declaring that they have ceased to be
investment companies. After the Closing Date of the Reorganization of an
Acquired Fund, Marketvest Funds, Inc. or Marketvest Funds will not conduct any
business on behalf of that Acquired Fund, and after all of the Reorganizations
have been consummated, Marketvest Funds, Inc. and Marketvest Funds will not
conduct any business, except in connection with the liquidation of the Acquired
Funds, the dissolution of the Marketvest Funds, Inc. and the termination of the
Marketvest Funds, and the deregistration of Marketvest Funds, Inc. and
Marketvest Funds.
The expenses of ARK Funds, Marketvest Funds, Inc. and Marketvest Funds in
connection with the Reorganizations will be borne by First Maryland Bancorp or
its subsidiaries.
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The consummation of the Reorganization with respect to each Acquired Fund
is subject to certain conditions. The Reorganization of each Acquired Fund will
be contingent upon the approval of the Reorganization Agreement by the majority
of the shareholders (as described below) of such Acquired Fund. The
Reorganizations are also conditioned upon the issuance of an order by the SEC
permitting the transactions contemplated by the Reorganization Agreement. The
order was requested as a result of the ownership of Dauphin Deposit and First
National Bank of Maryland or their affiliates of 5% or more of the shares of the
Acquired Funds and Acquiring Funds, respectively. In addition, the
Reorganization of each Acquired Fund will be contingent upon: (a) the receipt of
certain legal opinions described in the Reorganization Agreement (see Appendix A
attached hereto), (b) the continuing accuracy of the representations and
warranties in the Reorganization Agreement, and (c) the performance in all
material respects of the agreements in the Reorganization Agreement. If these
conditions are satisfied, the Closing Date of the Reorganization of the
Marketvest Short-Term Bond Fund, Marketvest Intermediate U.S. Government Bond
Fund and Marketvest Pennsylvania Intermediate Municipal Bond Fund is expected to
be March , 1998. The Closing Date of the Reorganizations of the Marketvest
Equity Fund and Marketvest International Equity Fund, if these conditions are
met, is expected to be March , 1998.
Marketvest Funds, Inc., Marketvest Funds and ARK Funds may mutually agree
to terminate the Reorganization Agreement with respect to a Reorganization at or
prior to the Closing Date of such Reorganization. In addition, either Marketvest
Funds, Inc. or Marketvest Funds, on the one hand, or ARK Funds, on the other
hand, may waive the other party's breach of a provision or failure to satisfy a
condition of the Reorganization Agreement.
At a meeting held on November 11, 1997, the Board of Directors of
Marketvest Funds, Inc. and the Board of Trustees of Marketvest Funds unanimously
approved the Reorganization of each Acquired Fund based upon the belief that
each such Reorganization would be in the best interest of each Acquired Fund and
its shareholders. In approving the Reorganization Agreement, the boards
considered the following factors, among others: (a) the acquisition of Dauphin
Deposit Corporation by First Maryland Bancorp, (b) the fact that the investment
advisers of the Acquired Funds and the Acquiring Funds are under common control,
(c) the fact that shareholder interests would not be diluted in the proposed
Reorganizations, (d) the status of each Reorganization as a tax-free
reorganization, (e) the similarity of the investment objective and policies of
each Acquired Fund and the corresponding Acquiring Fund, (f) the improved
marketing opportunities that could result from each Reorganization, and (g) the
opportunity for the shareholders of each Acquired Fund to participate in a
larger family of mutual funds through the exchange privilege offered by ARK
Funds.
After consideration of the foregoing factors and other relevant
information, the Board of Directors of Marketvest Funds, Inc. and the Board of
Trustees of Marketvest Funds unanimously approved the Reorganization Agreement
and directed that it be submitted to the shareholders of each Acquired Fund for
approval. THE BOARDS RECOMMEND THAT SHAREHOLDERS VOTE IN FAVOR OF THE
REORGANIZATION AGREEMENT.
At a meeting held on November 7, 1997, the Board of Trustees of ARK Funds
also unanimously approved the Reorganization Agreement, finding that each of the
Reorganizations was in the best interests of the Acquiring Fund and the
shareholders of the Acquiring Fund and that the interests of the existing
shareholders of the ARK Funds currently in operation would not be diluted by the
consummation of the Reorganizations.
CAPITALIZATION. Because the Marketvest Pennsylvania Intermediate Bond Fund
will be combined in the Reorganization with the ARK Pennsylvania Tax-Free
Portfolio, the total capitalization after such Reorganization is expected to be
greater than the current capitalization of the Marketvest Pennsylvania
Intermediate Bond Fund. The ARK Short-Term Bond Portfolio, ARK U.S. Government
Bond Portfolio, ARK Value Equity and ARK International Equity Selection
Portfolio will have only nominal assets before their Reorganizations with the
Marketvest Short-Term Bond Fund, Marketvest Intermediate U.S. Government Bond
Fund, Marketvest Equity Fund and Marketvest International Equity Fund,
respectively. After these Reorganizations, these Acquiring Funds will have the
same capitalizations as the corresponding Acquired Funds prior to the
Reorganizations. The following table sets forth as of December 31, 1997: (a) the
capitalization of each Acquired Fund and the Institutional Class of the
corresponding Acquiring Fund, and
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(b) the pro forma capitalization of the Institutional Class of each Acquiring
Fund as adjusted to give effect to the Reorganization proposed with respect to
such Acquiring Fund. If consummated, the capitalization of each Acquired Fund
and the Institutional Class of the ARK Pennsylvania Tax-Free Portfolio is likely
to be different at the Closing Date of their Reorganization as a result of daily
share purchase and redemption activity.
MARKETVEST PRO FORMA
SHORT-TERM ARK SHORT-TERM ARK SHORT-TERM
BOND FUND BOND PORTFOLIO(1) BOND PORTFOLIO
--------------- ------------------- -------------------
Total Net Assets..................... $ 136,304,063 $ 100 $ 136,304,163
Shares Outstanding................... 13,680,653 10 13,680,663
Net Asset Value Per Share............ $ 9.96 $ 10 $ 9.96
MARKETVEST
INTERMEDIATE PRO FORMA
U.S. GOVERNMENT ARK U.S. GOVERNMENT ARK U.S. GOVERNMENT
BOND FUND BOND PORTFOLIO(1) BOND PORTFOLIO
--------------- --------------- ---------------
Total Net Assets..................... $ 263,490,165 $ 100 $ 263,490,265
Shares Outstanding................... 26,693,086 10 26,693,096
Net Asset Value Per Share............ $ 9.87 $ 10 $ 9.87
MARKETVEST PRO FORMA
PENNSYLVANIA ARK PENNSYLVANIA ARK PENNSYLVANIA
INTERMEDIATE TAX-FREE TAX-FREE
MUNICIPAL FUND PORTFOLIO(2) PORTFOLIO(2)
--------------- --------------- ---------------
Total Net Assets..................... $ 197,619,533 $ 24,438,038 $ 222,057,571
Shares Outstanding................... 19,301,401 2,370,681 21,688,288
Net Asset Value Per Share............ $ 10.24 $ 10.31 $ 10.24
PRO FORMA
MARKETVEST ARK VALUE EQUITY ARK VALUE EQUITY
EQUITY FUND PORTFOLIO(1) PORTFOLIO(3)
--------------- --------------- ---------------
Total Net Assets..................... $ 568,417,855 $ 100 $ 568,417,955
Shares Outstanding................... 44,036,913 10 44,036,921
Net Asset Value Per Share............ $ 12.91 $ 10 $ 12.91
PRO FORMA
MARKETVEST ARK INTERNATIONAL ARK INTERNATIONAL
INTERNATIONAL EQUITY SELECTION EQUITY
EQUITY FUND PORTFOLIO(1) SELECTION PORTFOLIO
--------------- --------------- ---------------
Total Net Assets..................... $ 34,487,010 $ 100 $ 34,487,110
Shares Outstanding................... 3,416,259 10 3,416,269
Net Asset Value Per Share............ $ 10.09 $ 10 $ 10.09
- ---------------
(1) The ARK Short-Term Bond Portfolio, U.S. Government Bond Portfolio, Value
Equity Portfolio and International Equity Selection Portfolio were created
for purposes of the Reorganizations. Assets and outstanding shares shown
reflect initial seed money that will be infused prior to the
Reorganizations.
(2) The information shown for the ARK Pennsylvania Tax-Free Portfolio and Pro
Forma ARK Pennsylvania Tax-Free Portfolio reflects amounts for the
Institutional Class only. The aggregate total net assets for the Retail
Class and Institutional Class of the ARK Pennsylvania Tax-Free Portfolio and
the Pro Forma ARK Pennsylvania Tax-Free Portfolio is $26,773,604 and
$224,393,137, respectively.
(3) ARK Value Equity Portfolio has entered into an Agreement and Plan of
Reorganization with the ARK Stock Portfolio. The reorganization, which is
subject to certain conditions including shareholder approval, is expected to
close in March 1998. The pro forma total net assets, shares outstanding and
net asset value per share of the ARK Value Equity Portfolio adjusted to
reflect the closing of the aforementioned reorganization would be
$610,301,504, 47,282,207 and $12.91, respectively.
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FEDERAL INCOME TAX CONSEQUENCES. The consummation of the Reorganization of
each Acquired Fund is conditioned upon the receipt of an opinion of Piper &
Marbury L.L.P. substantially to the effect that for federal income tax purposes:
(a) the transfer of all of the assets of such Acquired Fund, and the assumption
by the corresponding Acquiring Fund of stated liabilities of such Acquired Fund,
in exchange for Institutional Class shares of such Acquiring Fund, and the
distribution of said shares to the shareholders of such Acquired Fund, as
provided in the Reorganization Agreement, will constitute a reorganization
within the meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), and, with respect to such reorganization, the Acquired
Fund and the Acquiring Fund will each be considered "a party to a
reorganization" within the meaning of Section 368(b) of the Code; (b) in
accordance with Sections 361(a), 361(c)(1) and 357(a) of the Code, no gain or
loss will be recognized by such Acquired Fund as a result of such transactions;
(c) in accordance with Section 1032 of the Code, no gain or loss will be
recognized by such Acquiring Fund as a result of such transactions; (d) in
accordance with Section 354(a)(1) of the Code, no gain or loss will be
recognized by the shareholders of such Acquired Fund on the distribution to them
by such Acquired Fund of shares of any class of such Acquiring Fund in exchange
for their shares of such Acquired Fund; (e) in accordance with Section 358(a)(1)
of the Code, the aggregate basis of Acquiring Fund shares received by each
shareholder of such Acquired Fund will be the same as the aggregate basis of the
shareholder's Acquired Fund shares immediately prior to the transaction; (f) in
accordance with Section 362(b) of the Code, the basis of the assets of the
Acquired Fund in the hands of such Acquiring Fund will be the same as the basis
of such assets of the Acquired Fund in the hands of such Acquired Fund
immediately prior to the exchange; (g) in accordance with Section 1223 of the
Code, a shareholder's holding period for Acquiring Fund shares will be
determined by including the period for which the shareholder held the shares of
such Acquired Fund exchanged therefor, provided that the shareholder held such
shares of such Acquired Fund as a capital asset; and (h) in accordance with
Section 1223 of the Code, the holding period of such Acquiring Fund with respect
to the assets of such Acquired Fund will include the period for which such
assets were held by such Acquired Fund.
ARK Funds, Marketvest Funds, Inc. and Marketvest Funds have not sought a
tax ruling from the Internal Revenue Service (the "IRS"), but are acting in
reliance upon the opinion of counsel discussed above. Such opinion of counsel
will rely, as to certain factual matters, on certificates of officers of ARK
Funds, Marketvest Funds, Inc. and Marketvest Funds. That opinion is not binding
on the IRS and does not preclude the IRS from adopting a contrary position.
Shareholders should consult their own advisers concerning the potential tax
consequences to them, including state and local income taxes.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Prospectus/Proxy Statement is being provided in
connection with the solicitation of proxies by the Board of Directors of
Marketvest Funds, Inc. and the Board of Trustees of Marketvest Funds in
connection with the Meeting. Solicitation of proxies will occur principally by
mail, but officers and service contractors of Marketvest Funds, Inc. and
Marketvest Funds may also solicit proxies by telephone, telegraph or personal
interview. Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting to Marketvest Funds, Inc. or Marketvest Funds, as
appropriate, a written notice of revocation or a subsequently executed proxy or
by attending the Meeting and voting in person.
Only shareholders of record at the close of business on February 4, 1998
will be entitled to vote at the Meeting. On that date, there were outstanding
and entitled to be voted: shares of Marketvest Short-Term Bond Fund,
shares of Marketvest Intermediate U.S. Government Bond Fund,
shares of Marketvest Pennsylvania Intermediate Municipal Bond Fund,
shares of Marketvest Equity Fund, and shares of Marketvest
International Equity Fund. Each share or fraction thereof is entitled to one
vote or fraction thereof. Shares of each Acquired Fund will be counted
separately.
If the accompanying proxy is executed and returned in time for the Meeting,
the shares covered thereby will be voted in accordance with the proxy on all
matters that may properly come before the Meeting or any adjournment thereof.
For information on adjournments of the Meeting, see "Quorum" below.
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SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement (and the
transactions contemplated thereby) are being submitted for approval at the
Meeting by the shareholders with respect to each Acquired Fund in accordance
with the provisions of the charter of Marketvest Funds, Inc., the declaration of
trust of Marketvest Funds, and the requirements of the 1940 Act. With respect to
the Marketvest Pennsylvania Intermediate Municipal Bond Fund and Marketvest
International Equity Fund, the Reorganizations must be approved by the lesser of
(a) 67% of the shares of the Acquired Fund present at the Meeting, if the
holders of more than 50% of the outstanding shares of the Acquired Fund are
present in person or by proxy, or (b) more than 50% of the outstanding shares of
such Acquired Fund. With respect to the Marketvest Short-Term Bond Fund,
Marketvest Intermediate U.S. Government Bond Fund and Marketvest Equity Fund,
the Reorganizations must be approved by a majority of the outstanding shares
entitled to vote.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a proposal
because instructions have not been received from the beneficial owners) will be
counted for purposes of determining whether or not a quorum is present for
purposes of convening the Meeting. With respect to each Reorganization proposal,
abstentions and broker non-votes will have the same effect as votes cast against
such Reorganization proposal.
The vote of the shareholders of the Acquiring Funds is not being solicited
because their approval or consent is not necessary for the Reorganizations to be
consummated.
At February 4, 1998, Dauphin Deposit and its affiliates held of record
%, %, %, % and % of the shares of Marketvest Short-Term
Bond Fund, Marketvest Intermediate U.S. Government Bond Fund, Marketvest
Pennsylvania Intermediate Municipal Bond Fund, Marketvest Equity Fund and
Marketvest International Equity Fund, respectively. As a result Dauphin Deposit
may be deemed to be a "controlling person" of each Acquired Fund under the 1940
Act.
At February 4, 1998, the name, address and share ownership of the persons
who beneficially owned 5% or more of the shares of any Acquired Fund are as
follows:
After giving effect to the Reorganizations, Dauphin Deposit and the above
mentioned 5% shareholders of the Acquired Funds will own of record the following
percentages of the outstanding shares of the following Acquiring Funds:
At February 4, 1998, the directors, trustees and officers of Marketvest
Funds, Inc. and Marketvest Funds, as a group, owned less than 1% of the
outstanding shares of each Acquired Fund.
At February 4, 1998, First National Bank of Maryland ("First National") and
its affiliates held of record % of the shares of ARK Pennsylvania Tax-Free
Portfolio. As a result First National may be deemed to be a "controlling person"
of this Acquiring Fund under the 1940 Act.
At February 4, 1998, the name, address, and share ownership of the persons
who beneficially owned 5% or more of the Acquiring Funds' outstanding shares are
as follows:
After giving effect to the Reorganizations, First National and the above
mentioned 5% shareholders will own of record the following percentages of the
outstanding shares of the following Acquiring Funds:
At February 4, 1998, the trustees and officers of ARK Funds owned less than
1% of the outstanding shares of each Acquiring Fund.
QUORUM. In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient votes to
approve the Reorganization Agreement and the transactions contemplated thereby
are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those shares
affected by the adjournment that are represented at the Meeting in person or by
proxy. If a quorum is present, the persons named as proxies will vote in favor
of such adjournments if they determine that adjournment and additional
solicitation is reasonable and in the best interest of shareholders of the
Acquired Funds. A shareholder vote may be taken with respect to one or more
Acquired Funds prior to any such adjournment if sufficient votes have been
received for approval with respect to any such Acquired
23
33
Fund. A quorum is constituted with respect to an Acquired Fund by the presence
in person or by proxy of the holders of more than 50% of the outstanding shares
of the Acquired Fund entitled to vote at the Meeting. Abstentions and broker
non-votes are not considered votes cast and will have the effect of votes cast
against the proposal. See "Shareholder and Board Approvals" above.
ANNUAL MEETINGS. Marketvest Funds do not presently intend to hold annual
meetings of shareholders for the election of trustees and other business unless
and until such time as less than a majority of the trustees holding office have
been elected by the shareholders, at which time the trustees then in office will
call a shareholders' meeting for the purpose of electing trustees. Shareholders
have the right to call a meeting of shareholders to consider the removal of one
or more trustees or to act on other matters and such meetings will be called
when requested in writing by the holders of record of 10% or more of Marketvest
Funds' outstanding shares. To the extent required by law, Marketvest Funds will
assist in shareholder communications on such matters.
ADDITIONAL INFORMATION ABOUT ARK FUNDS
Additional information about each of the Acquiring Funds is included in the
Prospectus of ARK Funds which accompanies this Prospectus/Proxy Statement and is
incorporated by reference herein. Additional information may also be obtained
from the Statement of Additional Information relating to this Prospectus/ Proxy
Statement and the Statement of Additional Information of ARK Funds and the
Annual Report for the fiscal year ended April 30, 1997 and the Semi-Annual
Report for the six-months ended October 31, 1997, which have been filed with the
SEC. ARK Funds is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, as applicable, and in accordance with
such requirements must file reports, proxy statements and other information with
the SEC. These materials can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's Regional Offices at 7 World Trade Center, 13th Floor, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained
from the Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. at
rates prescribed by the SEC or from the SEC's Internet Web site at
http://www.sec.gov.
It is expected that following the closing of the Reorganizations, the Board
of Trustees of ARK Funds will consider increasing the number of trustees from
five to six. It is also expected that Mr. Richard Seidel, who is currently a
director/trustee of Marketvest Funds, will be considered as a candidate to fill
the vacancy created on the Board of Trustees.
ADDITIONAL INFORMATION ABOUT MARKETVEST FUNDS
Additional information about each of the Acquired Funds is included in the
Combined Prospectus of Marketvest Funds, Inc. and Marketvest Funds which is
incorporated by reference herein. Additional information may also be obtained
from the Statement of Additional Information relating to this Prospectus/ Proxy
Statement and the Combined Statement of Additional Information of Marketvest
Funds, Inc. and Marketvest Funds, the Annual Reports for the fiscal year ended
February 28, 1997 and the Semi-Annual Reports for the six-months ended August
31, 1997, which have been filed with the SEC. Marketvest Funds, Inc. and
Marketvest Funds are subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, as applicable, and in accordance with
such requirements must file reports, proxy statements and other information with
the SEC. These materials can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's Regional Offices at 7 World Trade Center, 13th Floor, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained
from the Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. at
rates prescribed by the SEC or from the SEC's Internet Web site at
http://www.sec.gov.
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MANAGEMENT'S DISCUSSION OF ACQUIRING FUND PERFORMANCE
As of the date of this Prospectus/Proxy Statement, the ARK Short-Term Bond
Portfolio, ARK U.S. Government Bond Portfolio, ARK Value Equity Portfolio and
ARK International Equity Selection Portfolio had not yet commenced operations.
The following discussion relates to the performance of the ARK Pennsylvania
Tax-Free Portfolio for its fiscal year ended April 30, 1997:
The Institutional Class of the ARK Pennsylvania Tax-Free Portfolio was
established on November 18, 1996 and for its fiscal period ended April 30, 1997
returned 1.32%. The Retail Class of the ARK Pennsylvania Tax-Free Portfolio was
established on January 2, 1997 and for its fiscal period ended April 30, 1997
returned 0.60%.
Over the twelve months ended April 30, 1997, municipal investments only
slightly under-performed their taxable counterparts on an absolute basis;
however, on an after-tax basis they substantially outperformed. Yields on
municipal securities, like taxables, have traded during the same period in a
narrow range, with longer-term rates actually falling approximately 10 basis
points. After the issue of tax reform faded in early 1996, performance of the
municipal market was aided by the narrowing of the trading relationship between
municipals and U.S. Treasuries. The market recovered from trading at close to
90% of the Treasury market in the first quarter of 1996 to trading its "normal"
75 to 80% of U.S. Treasuries.
With the back-up in municipal rates due to tax reform concerns early 1996,
the investment advisor of the ARK Pennsylvania Tax-Free Portfolio lengthened the
duration of the Portfolio, taking advantage of the situation on an after-tax
basis. The Portfolio continues to focus on issues specific to Pennsylvania with
little to no exposure to the alternative minimum tax sector. As the market
traded in a narrow range over fiscal 1997 and with the near-term expectation for
higher interest rates, the primary focus in the Portfolio was to gain call
protection where appropriate. This was accomplished by purchasing high coupon
bonds that had a reduced likelihood of being called, and by purchasing somewhat
higher yielding issues with special situations. The maturity focus of the
Portfolio continues to be in the 15 to 20 year sector.
The Portfolio's investment advisor watches the effects that reform will
begin to have on the state and local governments as responsibilities, such as
welfare reform, are shifted away from the federal government. Healthcare reform,
although dead for most of 1996, will most likely come into play again in the
future. The surge in hospital mergers that has occurred over the past several
years should continue to prove positive for some select hospitals and healthcare
organizations. In Pennsylvania, the Portfolio's investment advisor will be
watching to see what the impact on county budgets will be due to recent court
decisions declaring unconstitutional the personal property tax that is levied by
many counties. The Portfolio's investment advisor continues to expect the
municipal market to perform well relative to taxable bonds, as demand from
insurance companies and retail investors alike will most likely continue to
outweigh new issuance supply.
OTHER BUSINESS
The Board of Directors of Marketvest Funds, Inc. and the Board of Trustees
of Marketvest Funds know of no other business to be brought before the Meeting.
However, if any other matters come before the Meeting, it is the intention that
proxies which do not contain specific restrictions to the contrary will be voted
on such matters in accordance with the judgment of the persons named in the
enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Marketvest Group of Funds in
writing at the address on the cover page of this Prospectus/Proxy Statement or
by telephoning 1-800-MKT-VEST.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") made as of January
15, 1998, by and among Marketvest Funds, Inc. a Maryland corporation, Marketvest
Funds, a Massachusetts business trust (individually, an "Acquired Company" and
collectively, the "Acquired Companies"), and ARK Funds, a Massachusetts business
trust (the "Acquiring Company").
WITNESSETH:
WHEREAS, the parties hereto desire that substantially all of the assets and
stated liabilities of the separately designated series of the Acquired Companies
(individually, an "Acquired Fund" and collectively, the "Acquired Funds") be
transferred to, and be acquired and assumed by, certain of the separately
designated series of the Acquiring Company (individually, an "Acquiring Fund"
and collectively, the "Acquiring Funds") in exchange for shares of the Acquiring
Funds which shall thereafter be distributed by the Acquired Companies to the
shareholders of the Acquired Funds, all upon the terms and conditions
hereinafter set forth (each such transaction of an Acquired Fund with the
corresponding Acquiring Fund, a "Reorganization"); and
WHEREAS, the parties intend that each of ARK Short-Term Bond Portfolio, ARK
U.S. Government Bond Portfolio, ARK Value Equity Portfolio and ARK International
Equity Selection Portfolio will have nominal assets and liabilities before its
Reorganization with Marketvest Short-Term Bond Fund, Marketvest Intermediate
U.S. Government Bond Fund, Marketvest Equity Fund, and Marketvest International
Equity Fund, respectively, and that each such Acquiring Fund will continue the
investment operations of the corresponding Acquired Fund after its
Reorganization; and
WHEREAS, the parties intend that, in connection with the Reorganizations,
the Acquired Funds and the Acquired Companies will be terminated and the
Acquired Companies will be deregistered as described in this Agreement; and
WHEREAS, the parties wish to enter into a definitive agreement setting
forth the terms and conditions of the foregoing transactions and to adopt this
Agreement as a "plan of reorganization" within the meaning of Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein, the parties hereto agree
as follows:
ARTICLE I
TRANSFER OF ASSETS IN EXCHANGE FOR SHARES; ASSUMPTION
OF LIABILITIES; LIQUIDATION OF ACQUIRED FUNDS
Subject to the terms and conditions of this Agreement, the Acquired
Companies and the Acquiring Company agree to effect the following transactions
in respect of the Reorganizations:
1.1 Transfer of Acquired Fund Assets; Issuance of Acquiring Fund
Shares. At the Closing (as defined in Section 1.6) of a Reorganization, an
Acquired Company, on behalf of the Acquired Fund, shall transfer to the
Acquiring Company all of the assets of the Acquired Fund, in exchange for and
against delivery by the Acquiring Company of a number of shares (including
fractional shares) of the Institutional Class of the corresponding Acquiring
Fund specified in Section 1.5 having an aggregate net asset value equal to the
value of the assets of the Acquired Fund so transferred (the "Acquiring Fund
Shares"), in each case determined and adjusted as provided in Section 1.3.
Portfolio securities of an Acquired Fund shall be delivered to FMB Trust
Company, National Association, the custodian for the Acquiring Company (the
"Custodian"), to be held for the account of such Acquired Fund, on the Closing
Date (as defined in Section 1.6) for the Reorganization of such Acquired Fund,
duly endorsed in proper form for transfer and in such condition as to
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36
constitute good delivery thereof, in accordance with the custom of brokers, and
shall be accompanied by all necessary stock transfer stamps, if any, or a check
for the appropriate purchase price thereof. If an Acquired Company shall be
unable to make timely delivery of any portfolio securities of an Acquired Fund
as herein required, the Acquiring Company may, in the exercise of its reasonable
discretion, waive such delivery, provided that the Acquired Company has timely
delivered such documents, including assignment and escrow agreements, due bills,
confirmation slips and the like, as may reasonably be requested by the Acquiring
Company and the Custodian. Cash of an Acquired Fund shall be delivered by an
Acquired Company on the Closing Date for the Reorganization of such Acquired
Fund and shall be in the form of currency or a wire transfer in federal funds,
payable to the order of "FMB Trust Company, National Association, as custodian
for ARK Funds" and indicating the appropriate Acquired Fund to which it relates.
At the Closing of a Reorganization of an Acquired Fund, the Acquiring Company
shall issue and deliver to the Acquired Company a confirmation evidencing the
Acquiring Fund Shares credited to the account of the Acquired Fund, or provide
evidence satisfactory to the Acquired Company that the Acquiring Fund Shares
have been credited to the Acquired Fund's account on the books of the Acquiring
Company. It is expressly agreed that no sales charge will be imposed upon
issuance of the Acquiring Fund Shares or their distribution to shareholders of
the Acquired Funds as provided in Section 1.7.
1.2 Acquired Fund Assets. The assets of an Acquired Fund to be acquired
by the Acquiring Company on behalf of an Acquiring Fund hereunder shall consist
of all property of such Acquired Fund, including, without limitation, all cash,
securities, commodities and futures interests, dividends or interest receivable,
and any deferred or prepaid expenses shown as an asset on the statement of
assets and liabilities of the Acquired Fund delivered pursuant to Section 2.5.
1.3 Valuation. The value of the assets of an Acquired Fund to be acquired
by the Acquiring Company shall be computed by the Acquiring Company as of the
close of regular trading on the New York Stock Exchange, Inc. (the "Exchange")
on the Closing Date for the Reorganization of such Acquired Fund, using the
valuation policies and procedures set forth in the then-current prospectus and
statement of additional information of the Acquiring Company. The valuation of
such assets by the Acquiring Company shall be subject to review by the Acquired
Company and to such adjustments, if any, as may be agreed to by the Acquiring
Company. The aggregate net asset value of the Acquiring Fund Shares shall be
computed by the Acquiring Company using the net asset value per share of the
Acquiring Fund as of the close of regular trading on the Exchange on such
Closing Date. The share transfer books of the Acquired Company in respect of the
Acquired Fund shall be permanently closed as of the close of business on the
business day immediately preceding the Closing Date and no transfer of shares of
the Acquired Fund shall thereafter be made on such books. An Acquired Company
shall only accept purchase orders or redemption requests for shares of an
Acquired Fund received prior to the close of regular trading on the Exchange on
the business day immediately preceding the Closing Date for its Reorganization;
purchase orders or redemption requests received thereafter shall be deemed to be
orders to purchase or requests for redemption of shares of the corresponding
Acquiring Fund, as the case may be, and shall be executed at the net asset value
per share determined as set forth in the then-current prospectus and statement
of additional information of the Acquiring Company, provided that the
Reorganization of the Acquired Fund is consummated.
1.4 Acquired Fund Liabilities. At the Closing of the Reorganization of an
Acquired Fund, the Acquiring Fund shall assume all liabilities, expenses, costs,
charges and reserves of the Acquired Fund reflected on the statement of assets
and liabilities of the Acquired Fund delivered pursuant to Section 2.5. Each
Acquiring Fund shall assume only such liabilities of the corresponding Acquired
Fund and shall not assume any other liabilities, whether absolute or contingent,
known or unknown, accrued or unaccrued.
1.5 Acquired Funds; Corresponding Acquiring Funds. The assets of each
Acquired Fund shall be acquired by the Acquiring Fund identified opposite its
name in Schedule 1.5 attached hereto.
1.6 Closings; Closing Dates. The closing of the Reorganizations of
Marketvest Short-Term Bond Fund, Marketvest Intermediate U.S. Government Bond
Fund and Marketvest Pennsylvania Intermediate Municipal Bond Fund shall take
place beginning after the close of business on March 6, 1998, and the closing of
the Reorganizations of Marketvest Equity Fund and Marketvest International
Equity Fund shall take place
A-2
37
beginning after the close of business on March 13, 1998, at the offices of Piper
& Marbury L.L.P., 36 South Charles Street, Baltimore, Maryland, or at such other
time and place as may be agreed upon by the parties. In the event that on such
date (i) the Exchange is closed or trading thereon is restricted, or (ii)
trading or the reporting of trading on the Exchange or elsewhere is disrupted so
that accurate appraisal of the value of the assets of the Acquired Fund or the
aggregate net asset value of the Acquiring Fund Shares is impractical, the
Reorganization shall be postponed until the business day next following the day
on which trading shall have been fully resumed and reporting shall have been
restored, or such other day as may be agreed upon by the parties. The closing of
a Reorganization is referred to herein as a "Closing" and the date on which the
Closing shall take place is referred to herein as a "Closing Date."
1.7 Distribution of Acquiring Fund Shares. As soon after the Closing of
the Reorganization of an Acquired Fund as is conveniently practicable, and in
any event within two business days after the Closing, the Acquired Company shall
distribute pro rata to the shareholders of the Acquired Fund of record as of the
close of business on the Closing Date for such Reorganization (the "Acquired
Fund Shareholders"), the Acquiring Fund Shares received by the Acquired Fund
hereunder. The Acquired Company shall accomplish such distribution by delivering
a written instruction, signed by the principal executive officer of the Acquired
Company and certified by an authorized signatory of Federated Shareholder
Services Company, the transfer agent of the Acquired Companies, to State Street
Bank and Trust Company, the transfer agent for the Acquiring Company (the
"Transfer Agent"), directing the Transfer Agent to open accounts on the books of
the Acquiring Company in the names of the Acquired Fund Shareholders and
transfer to such accounts the respective pro rata interest, in full and
fractional (to three decimal places) shares, of each such shareholder in the
Acquiring Fund Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Company. The Acquiring Company agrees to instruct the
Transfer Agent to comply with such instructions. All issued and outstanding
shares of the Acquired Fund and all certificates, if any, indicating ownership
of such shares shall simultaneously be canceled on the books of the Acquired
Company, although from and after the Closing of the Reorganization of an
Acquired Fund each certificate which theretofore represented shares of such
Acquired Fund shall evidence ownership of the corresponding Acquiring Fund
Shares on the basis hereinabove set forth. No redemption or repurchase of any
Acquiring Fund Shares credited to Acquired Fund Shareholders and represented by
unsurrendered certificates shall be permitted until such certificates have been
surrendered for cancellation. The Acquiring Company shall not issue certificates
representing Acquiring Fund Shares in connection with such distributions.
Promptly after the distribution described above, the Acquiring Company shall
cause appropriate notification to be mailed to the Acquired Fund Shareholders
informing each such shareholder of the number of Acquiring Fund Shares credited
to his account and confirming the registration thereof in his name. All
distributions on the Acquiring Fund Shares shall be paid to the Acquired Fund
Shareholders in cash or invested in additional shares of the Acquiring Fund at
the net asset thereof on the respective payment dates in accordance with
instructions previously given by such shareholders to the transfer agent of the
Acquired Company.
1.8 Payment of Transfer Taxes. Any transfer taxes payable upon issuance
of Acquiring Fund Shares in a name other than the name of an Acquired Fund
Shareholder shall, as a condition of such issuance and transfer, be paid by the
person to whom such Acquiring Fund Shares are to be issued and transferred.
1.9 Liquidation of Acquired Funds. (a) As soon as conveniently
practicable after the distribution required pursuant to Section 1.7 has been
made in respect of an Acquired Fund, an Acquired Company shall take, in
accordance with applicable law, all such action as may be necessary to effect a
complete liquidation of the Acquired Fund.
(b) As soon as conveniently practicable after consummation of the
Reorganizations provided for herein, the Acquired Companies shall, in accordance
with applicable law, make all filings and take all such action as may be
necessary to effect their dissolution or termination, and shall file an
application for an order of the Securities and Exchange Commission (the
"Commission") pursuant to Section 8(f) of the Investment Company Act of 1940, as
amended (the "1940 Act"), declaring that the Acquired Companies have ceased to
be investment companies, and shall take all such other action as may be
necessary to deregister under the 1940 Act. The Acquiring Company shall provide
assistance to the Acquired Company in order to effect the above-mentioned
actions.
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1.10 Reporting. Any reporting obligation of an Acquired Company in
respect of an Acquired Fund is and shall remain the responsibility of the
Acquired Company until the Acquired Company is deregistered under the 1940 Act.
The Acquiring Company shall provide assistance to the Acquired Company to the
extent any such reporting obligations relate to the Reorganizations and shall
provide all information regarding the Acquiring Company and the Reorganizations
as may be necessary in order for the Acquired Companies to comply with their
reporting obligations.
ARTICLE II
COVENANTS AND AGREEMENTS
2.1 Conduct of Business. After the date of this Agreement and on or prior
to the Closing Date of the Reorganization of an Acquired Fund, an Acquired
Company and the Acquiring Company will conduct the businesses of the Acquired
Fund and the Acquiring Fund, respectively, only in the ordinary course, it being
understood that such ordinary course of business shall include the declaration
and payment of customary dividends and distributions.
2.2 Shareholders' Meeting. The Acquired Companies shall call, convene and
hold a meeting of shareholders of the Acquired Funds as soon as practicable in
accordance with applicable law, for the purpose of approving this Agreement and
the transactions herein contemplated, and for such other purposes as may be
necessary or desirable, and the directors/trustees of the Acquired Companies
shall, subject to the exercise of their fiduciary duties, recommend a favorable
vote thereon. The Acquired Companies shall solicit the proxies of shareholders
of the Acquired Funds to vote on the matters to be acted upon at such meeting.
2.3 Registration Statement; Combined Prospectus/Proxy Statement. The
Acquired Companies shall prepare preliminary proxy materials to be filed with
the Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act"), relating to the meeting of shareholders referred to in Section 2.2, in
the form of a combined prospectus/proxy statement and related statement of
additional information included in the registration statement on Form N-14 of
the Acquiring Company filed with the Commission under the Securities Act of
1933, as amended (the "1933 Act"), in connection with this Agreement. Such
registration statement in the form in which it shall become effective and, in
the event any post-effective amendment thereto becomes effective prior to the
Closing Date, such registration statement as amended, is referred to herein as
the "Registration Statement." The combined prospectus/proxy statement and
related statement of additional information in the form first filed with the
Commission pursuant to Rule 497(c) under the 1933 Act is referred to herein as
the "Prospectus/Proxy Statement." The Acquired Companies and the Acquiring
Company will each use its best efforts to cause the Registration Statement to
become effective under the 1933 Act as soon as practicable and agree to
cooperate in such efforts. Upon effectiveness of the Registration Statement, the
Acquired Companies will cause the Prospectus/Proxy Statement to be delivered to
shareholders of the Acquired Funds entitled to vote on this Agreement and the
transactions herein contemplated in accordance with applicable law.
2.4 Information. Throughout the period prior to the Closing, the Acquired
Companies and the Acquiring Company shall furnish to one another, and the
other's accountants, legal counsel and other representatives, all such
information concerning the Acquiring Funds or the Acquired Funds and their
businesses and properties as may reasonably be requested by the other, or by
such representatives.
2.5 Financial Statements. At the Closing of the Reorganization of an
Acquired Fund, an Acquired Company shall deliver to the Acquiring Company a
statement of assets and liabilities of the Acquired Fund, together with a
schedule of portfolio investments as at the close of business on the Closing
Date. These financial statements shall be prepared in accordance with generally
accepted accounting principles and shall be unaudited. The Acquired Company
shall also deliver to the Acquiring Company on or before such Closing Date the
detailed tax-basis accounting records for each security to be transferred to the
Acquiring Fund hereunder, which shall be prepared in accordance with the
requirements for specific identification tax-lot accounting and clearly reflect
the bases used for determination of gain and loss realized on the partial sale
of any security to be transferred to the Acquiring Fund. As promptly as
practicable thereafter, the Acquired
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Company shall furnish the Acquiring Company, in such form as is reasonably
satisfactory to the Acquiring Company, a statement of the earnings and profits
of the Acquired Fund for federal income tax purposes, which statement shall be
certified by the treasurer of the Acquired Company.
2.6 Final Dividend. On or before the Closing Date of the Reorganization
of an Acquired Fund, the Acquired Company shall declare and pay a dividend or
dividends on the shares of the Acquired Fund which, together with all previous
dividends, shall have the effect of distributing to the shareholders of the
Acquired Fund all of the Acquired Fund's investment company taxable income and
net tax-exempt interest income for the final taxable period of the Acquired Fund
(computed without regard to any deduction for dividends paid) and all of its net
capital gains realized in the final taxable period of the Acquired Fund (after
reduction for any capital loss carry-forward).
2.7 Other Necessary Action. The Acquired Companies and the Acquiring
Company shall each take all necessary corporate or other action and use its best
efforts to complete all filings (including articles of transfer to be filed as
contemplated in Section 4.3(d) herein) and obtain all governmental and other
consents and approvals required for consummation of the transactions
contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Acquired Companies. Each Acquired
Company hereby represents and warrants to the Acquiring Company as follows:
(a) The Acquired Company is a corporation or business trust duly
organized and validly existing in good standing under the laws of its state
of organization and has full corporate power to conduct its business as it
is now being conducted and to own the properties and assets it now owns.
The Acquired Company is qualified to transact business as a foreign
corporation in all jurisdictions in which it conducts any business or owns
any properties or assets, except where the failure to be so qualified does
not cause a material adverse effect on the Acquired Funds.
(b) The Acquired Company is registered with the Commission pursuant to
Section 8 of the 1940 Act as an open-end management investment company.
(c) The audited financial statements for the fiscal year ended
February 28, 1997, and unaudited financial statements for the six-months
ended August 31, 1997, of the Acquired Funds delivered to the Acquiring
Company by the Acquired Company have been prepared in accordance with
generally accepted accounting principles consistently followed throughout
the periods covered by such statements, and fairly present the financial
position and results of operations of the Acquired Funds at the dates of
such statements and for the periods covered thereby.
(d) Since August 31, 1997, the Acquired Company on behalf of the
Acquired Funds has not incurred any material liabilities or obligations,
direct or contingent, or entered into any material transactions, not in the
ordinary course of business, and there has not been any material adverse
change, or any development involving a prospective material adverse change,
in the condition (financial or other), earnings, business or properties of
the Acquired Funds (other than changes in the ordinary course of business,
including, without limitation, dividends and distributions in the ordinary
course and changes in net asset value per share).
(e) There is no litigation, proceeding or governmental investigation
pending or, to the knowledge of the Acquired Company, threatened or in
prospect against or relating to the Acquired Funds, the properties or
business of the Acquired Funds, or this Agreement.
(f) Each Acquired Fund has qualified and elected to be treated as a
regulated investment company under Subchapter M of the Code for each of its
taxable years. All federal and other tax returns and reports of the
Acquired Funds required by law to have been filed have been filed, and all
federal and other taxes payable pursuant to such returns and reports have
been paid so far as due, or provision has been
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made for the payment thereof, and, to the Acquired Company's knowledge, no
such return is currently under audit and no assessment has been asserted
with respect to any such return.
(g) The Prospectus/Proxy Statement complies in all material respects
with the applicable requirements of the 1933 Act, the 1934 Act and the 1940
Act and the applicable rules and regulations of the Commission thereunder;
and the Prospectus/Proxy Statement (and any supplement thereto) does not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that the Acquired Companies make no representations or warranties
as to the information contained in or omitted from the Prospectus/Proxy
Statement (or any supplement thereto) in reliance upon and in conformity
with information relating to the Acquiring Company or the Acquiring Funds
and furnished to the Acquired Company by the Acquiring Companies
specifically for use in connection with the Prospectus/Proxy Statement (or
any supplement thereto).
(h) Ernst & Young LLP, who have certified the financial statements of
the Acquired Funds filed with the Commission as part of the Registration
Statement, are, to the knowledge of the Acquired Funds, independent public
accountants as required by the 1933 Act and the rules and regulations of
the Commission thereunder.
(i) The execution, delivery and performance of this Agreement by the
Acquired Company have been duly authorized by its board of
directors/trustees, and this Agreement constitutes a valid and legally
binding obligation of the Acquired Company, enforceable against the
Acquired Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
the rights of creditors generally and the exercise of judicial discretion
in accordance with general principles of equity.
(j) The Acquired Company is not in default under any agreement, lease,
contract, indenture, or other instrument or obligation to which it is a
party or by which it or any of its properties or assets are bound and which
default is of material significance in respect of the business or financial
condition of the Acquired Funds. The consummation of the transactions
herein contemplated and the fulfillment of the terms hereof will not
conflict with or violate or result in a breach of any of the terms or
provisions of, or constitute a default under, any agreement or other
instrument to which the Acquired Company is a party, or the charter or
bylaws of the Acquired Company, or any order, rule or regulation applicable
to the Acquired Company of any court or of any governmental or other
regulatory body having jurisdiction.
(k) The Acquired Company has good and marketable title to the assets
of the Acquired Funds to be transferred to the Acquiring Funds pursuant to
this Agreement, and, subject to the approval of shareholders of the
Acquired Company, has full right, power and authority to sell, assign,
transfer and deliver such assets hereunder, and upon delivery and payment
for such assets, the Acquiring Funds will acquire good and marketable title
thereto, free and clear of all liens, mortgages, pledges, encumbrances,
charges, claims and equities, and subject to no restrictions on the
transfer thereof, except as disclosed to and accepted by the Acquiring
Company.
3.2 Representations and Warranties of Acquiring Company. The Acquiring
Company hereby represents and warrants to each of the Acquired Companies as
follows:
(a) The Acquiring Company is a business trust duly organized and
validly existing in good standing under the laws of the Commonwealth of
Massachusetts and has corporate power to conduct its business as it is now
being conducted and to own the properties and assets it now owns. The
Acquiring Company is qualified to transact business in all jurisdictions in
which it conducts any business or owns any properties or assets, except
where the failure to be so qualified does not cause a material adverse
effect on the Acquiring Funds.
(b) The Acquiring Company is registered with the Commission pursuant
to Section 8 of the 1940 Act as an open-end management investment company.
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(c) The authorized capitalization of the Acquiring Company
representing the beneficial interest in the Acquiring Funds consists of an
unlimited number of shares of beneficial interest, without par value,
designated as Retail Class shares and Institutional Class shares of "ARK
Short-Term-Term Bond Portfolio," "ARK U.S. Government Bond Portfolio," "ARK
Pennsylvania Tax-Free Portfolio," "ARK Value Equity Portfolio" and "ARK
International Equity Selection Portfolio." All of the issued and
outstanding shares of the Acquiring Funds have been duly and validly issued
and are fully paid and non-assessable. The Acquiring Fund Shares to be
issued and delivered by the Acquiring Company pursuant to this Agreement
have been duly authorized for issuance and, when issued and delivered as
provided herein, will be validly issued, fully paid and non-assessable.
(d) The current prospectus and statement of additional information of
the Acquiring Company comply in all material respects with the applicable
requirements of the 1933 Act and the 1940 Act and the applicable rules and
regulations of the Commission thereunder and do not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(e) The audited financial statements for the fiscal year ended April
30, 1997, and unaudited financial statements for the six-months ended
October 31, 1997, of the Acquiring Funds delivered to the Acquired
Companies by the Acquiring Company have been prepared in accordance with
generally accepted accounting principles consistently followed throughout
the periods covered by such statements, and fairly present the financial
position and results of operations of the Acquiring Funds at the dates of
such statements and for the periods covered thereby.
(f) Since October 31, 1997, the Acquiring Company on behalf of the
Acquiring Funds has not incurred any material liabilities or obligations,
direct or contingent, or entered into any material transactions, not in the
ordinary course of business, and there has not been any material adverse
change, or any development involving a prospective material adverse change,
in the condition (financial or other), earnings, business or properties of
the Acquiring Funds (other than changes in the ordinary course of business,
including, without limitation, dividends and distributions in the ordinary
course and changes in net asset value per share).
(g) There is no litigation, proceeding or governmental investigation
pending or, to the knowledge of the Acquiring Company, threatened or in
prospect against or relating to the Acquiring Funds, the properties or
business of the Acquiring Funds, or this Agreement.
(h) The ARK Pennsylvania Tax-Free Portfolio has qualified and elected
to be treated as a regulated investment company under Subchapter M of the
Code for each of its taxable years. Each other Acquiring Fund intends to
qualify and elect to be treated as a regulated investment company under
Subchapter M of the Code for each of its taxable years. All federal and
other tax returns and reports of the Acquiring Funds required by law to
have been filed have been filed, and all federal and other taxes payable
pursuant to such returns and reports have been paid so far as due, or
provision has been made for the payment thereof, and, to the Acquiring
Company's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any such return.
(i) The Registration Statement and Prospectus/Proxy Statement comply
in all material respects with the applicable requirements of the 1933 Act,
the 1934 Act and the 1940 Act and the applicable rules and regulations of
the Commission thereunder; and the Prospectus/Proxy Statement (and any
supplement thereto) does not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the Acquiring Company makes
no representations or warranties as to the information contained in or
omitted from the Prospectus/Proxy Statement (or any supplement thereto) in
reliance upon and in conformity with information relating to the Acquired
Companies or the Acquired Funds and furnished to the Acquiring Company by
the Acquired Companies specifically for use in connection with the
Prospectus/Proxy Statement (or any supplement thereto).
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(j) The execution, delivery and performance of this Agreement by the
Acquiring Company have been duly authorized by its board of trustees, and
this Agreement constitutes a valid and legally binding obligation of the
Acquiring Company, enforceable against the Acquiring Company in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and the exercise of judicial discretion in accordance with
general principles of equity.
(k) The Acquiring Company is not in default under any agreement,
lease, contract, indenture, or other instrument or obligation to which it
is a party or by which it or any of its properties or assets are bound and
which default is of material significance in respect of the business or
financial condition of the Acquiring Funds. The consummation of the
transactions herein contemplated and the fulfillment of the terms hereof
will not conflict with or violate or result in a breach of any of the terms
or provisions of, or constitute a default under, any agreement or other
instrument to which the Acquiring Company is a party, or the charter or
by-laws of the Acquiring Company, or any order, rule or regulation
applicable to the Acquiring Company of any court or of any governmental or
other regulatory body having jurisdiction.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions Precedent to Obligations of Acquired Companies. The
obligations of an Acquired Company to consummate the Reorganization of an
Acquired Fund shall be subject, at its election, to the performance by the
Acquiring Company of all of the obligations to be performed by it hereunder on
or before the Closing Date for the Reorganization of such Acquired Fund and, in
addition thereto, to the following further conditions:
(a) The transactions contemplated by this Agreement shall have been
duly approved by the requisite affirmative vote of the shareholders of the
Acquired Fund.
(b) The Acquiring Company shall have furnished to the Acquired Company
a certificate of the Acquiring Company, signed by the principal executive
officer and the principal financial officer of the Acquiring Company, dated
such Closing Date, to the effect that the signers of such certificate have
carefully examined the Registration Statement, the Prospectus/Proxy
Statement (and any supplement thereto) and this Agreement and that:
(i) the representations and warranties of the Acquiring Company in
this Agreement are true and correct in all material respects on and as
of such Closing Date with the same effect as if made on such Closing
Date and the Acquiring Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at
or prior to the Closing of the Reorganization of the Acquired Fund;
(ii) since the date of the most recent financial statements of the
corresponding Acquiring Fund included in the Registration Statement and
Prospectus/Proxy Statement (or any supplement thereto), there has been
no material adverse change in the condition (financial or other),
earnings, business or properties of such Acquiring Fund (other than
changes in the ordinary course of business, including, without
limitation, dividends and distributions in the ordinary course and
changes in net asset value per share), except as set forth in or
contemplated in the Registration Statement and Prospectus/Proxy
Statement.
(iii) the Registration Statement has become effective under the
1933 Act and no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Acquiring Company's knowledge,
threatened.
(c) Prior to such the Closing Date, the Acquiring Company shall have
furnished to the Acquired Company such further information, certificates
and documents, including certified copies of the proceedings of its board
of trustees, as the Acquired Company may reasonably request.
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4.2 Conditions Precedent to Obligations of Acquiring Companies. The
obligations of the Acquiring Company to consummate the Reorganization of an
Acquired Fund shall be subject, at its election, to the performance by the
Acquired Company of all of the obligations to be performed by it hereunder on or
before the Closing Date for the Reorganization of such Acquired Fund and, in
addition thereto, to the following further conditions:
(a) The Acquired Company shall have furnished to the Acquiring Company
a certificate of the Acquired Company, signed by the principal financial
officer of the Acquired Company, dated such Closing Date, to the effect
that the signer of such certificate has carefully examined the unaudited
financial statements of the Acquired Fund delivered to the Acquiring
Company pursuant to Section 2.5 and that such financial statements have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods covered by such statements and
fairly present the financial position and results of operations of the
Acquired Fund at the dates of such statements and for the periods covered
thereby.
(b) The Acquired Company shall have furnished to the Acquiring Company
a certificate of the Acquired Company, signed by the principal executive
officer and the principal financial officer of the Acquired Company, dated
such Closing Date, to the effect that the signers of such certificate have
carefully examined the Registration Statement, the Prospectus/Proxy
Statement (and any supplement thereto) and this Agreement and that:
(i) the representations and warranties of the Acquired Company in
this Agreement are true and correct in all material respects on and as
of such Closing Date with the same effect as if made on such Closing
Date and the Acquired Company has compiled with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at
or prior to the Closing of the Reorganization of the Acquired Fund; and
(ii) since the date of the most recent financial statements of the
Acquired Fund included in the Registration Statement and
Prospectus/Proxy Statement (or any supplement thereto), there has been
no material adverse change in the condition (financial or other),
earnings, business or properties of the Acquired Fund (other than
changes in the ordinary course of business, including, without
limitation, dividends and distributions in the ordinary course and
changes in net asset value per share), except as set forth in or
contemplated in the Registration Statement and Prospectus/Proxy
Statement (or any supplement thereto).
(c) The Acquiring Company shall have received (i) a certificate of an
authorized signatory of the Custodian stating that the portfolio
securities, cash and other assets of the Acquired Fund have been delivered
as provided in Section 1.1 and (ii) a certificate of an authorized
signatory of the Transfer Agent stating that its records contain the names
and addresses of the Acquired Fund Shareholders and the number and
percentage of ownership of the Acquiring Fund Shares to be transferred to
the accounts of such shareholders upon the consummation of the
Reorganization of the Acquired Fund.
(d) Prior to such Closing Date, the Acquired Company shall have
furnished to the Acquiring Company such further information, certificates
and documents, including certified copies of the proceedings of its board
of directors/trustees and shareholders, as the Acquiring Company may
reasonably request.
4.3 Other Conditions Precedent. The obligations of the parties hereto to
consummate the Reorganization of an Acquired Fund shall be subject to the
fulfillment, prior to or at the Closing of the Reorganization of such Acquired
Fund, of each of the following conditions:
(a) The Acquired Companies and the Acquiring Company shall have
received a legal opinion or opinions satisfactory to the parties and their
counsel, to the effect that, if the transactions contemplated
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by this Agreement are consummated in accordance with the terms hereof, for
federal income tax purposes:
(i) the transfer by each Acquired Fund of all of its assets and
liabilities to the corresponding Acquiring Fund in exchange for shares
of the corresponding Acquiring Fund, and the distribution of such shares
to the shareholders of the Acquired Fund, as provided in this Agreement,
will constitute a "reorganization" within the meaning of Section
368(a)(1) of the Code and each such Fund will be a "a party to the
reorganization" within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by the Acquired Fund on the
transfer of its assets to the corresponding Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption of the stated
liabilities of the Acquired Fund, and no gain or loss will be recognized
by the Acquired Fund on the distribution of the Acquiring Fund Shares to
the Acquired Fund Shareholders;
(iii) no gain or loss will be recognized by the Acquiring Fund upon
the receipt of the assets of the Acquired Fund in exchange for the
Acquiring Fund Shares and the assumption of the stated liabilities of
the Acquired Fund;
(iv) the adjusted basis of each asset of the Acquired Fund in the
hands of the Acquiring Fund will be the same as the adjusted basis of
such asset in the hands of the Acquired Fund immediately prior to the
Reorganization;
(v) the holding period of each asset of the Acquired Fund in the
hands of the Acquiring Fund will include the holding period of such
asset in the hands of the Acquired Fund immediately prior to the
Reorganization;
(vi) no gain or loss will be recognized by the Acquired Fund
Shareholders upon the receipt of the Acquiring Fund Shares (including
fractional shares) solely in exchange for shares of the Acquired Fund;
(vii) the adjusted basis of the Acquiring Fund Shares (including
fractional shares) received by each Acquired Fund Shareholder will be
the same as the adjusted basis of the shares of the Acquired Fund
surrendered in exchange therefor; and
(viii) the holding period of the Acquiring Fund Shares (including
fractional shares) received by each Acquired Fund Shareholder will
include the holding period of the shares of the Acquired Fund
surrendered in exchange therefor, provided that such shares were held as
a capital asset in the hands of the Acquired Fund Shareholder on the
date of the exchange.
(b) The Acquired Companies and the Acquiring Company shall have
received such legal opinion or opinions, as may be mutually satisfactory to
the parties and their counsel.
(c) The Commission shall have issued an order pursuant to Section
17(b) of the 1940 Act permitting consummation of the transactions
contemplated by this Agreement.
(d) In the case of the Reorganizations of Marketvest Short-Term Bond
Fund, Marketvest Intermediate U.S. Government Fund and Marketvest Equity
Fund, articles of transfer shall have been filed with and accepted for
record by the Maryland State Department of Assessments and Taxation.
(e) All state securities law and all other governmental approvals
necessary or advisable in the opinion of counsel to consummate the
transactions contemplated by this Agreement shall have been received and
shall not contain any provision which is unduly burdensome.
(f) No suit, action or other proceeding against an Acquired Company or
the Acquiring Company or their respective officers or directors/trustees
shall be threatened or pending before any court or governmental agency in
which it will be, or it is, sought to restrain or prohibit any of the
transactions contemplated by this Agreement or to obtain damages or other
relief in connection with this Agreement or the transactions contemplated
hereby.
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ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated with respect to the
Reorganization of an Acquired Fund and the transactions contemplated hereby with
respect to such Reorganization abandoned any time prior to the Closing of such
Reorganization (notwithstanding any approval of this Agreement and the
transactions herein contemplated by the shareholders of the Acquired Fund):
(i) by mutual written consent of the Acquired Company and the
Acquiring Company duly authorized by or on behalf of their respective
boards of directors/trustees;
(ii) by either party at any time after June 30, 1998, if the Closing
has not occurred on or prior to such date; provided, however, that the
right to terminate under this clause (ii) shall not be available to a party
whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of such Closing to occur on or before
such date;
(iii) by either party if there shall be any law or regulation that
makes consummation of the transactions contemplated by this Agreement
illegal or otherwise prohibited or if any judgment, injunction, order or
decree enjoining a party from consummating the transactions herein
contemplated is entered and such judgment, injunction, order or decree
shall become final and nonappealable; or
(iv) by the Acquired Company if the shareholders of the Acquired Fund
shall have voted upon and not approved the transactions contemplated by
this Agreement.
The party desiring to terminate this Agreement pursuant to clause (ii), (iii) or
(iv) shall give notice of such termination to the other party in the manner
specified in Section 6.1.
5.2 Effect of Termination. If this Agreement is validly terminated as
permitted by Section 5.1, this Agreement will forthwith become null and void and
there will be no liability or obligation of either party (or any shareholder,
director/trustee, officer, employee, agent, consultant or representative
thereof) to the other party; provided, however, that nothing contained in this
Section 5.2 shall relieve either party from liability for any breach of this
Agreement, including, but not limited to, any liability of such party for any
and all damages, costs and expenses (including, but not limited to, reasonable
attorneys' fees) sustained or incurred by the other party as a result of such
breach.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices, requests and other communications to a party
hereunder shall be in writing (including facsimile or similar writing),
addressed to such party and given at or sent to the following address:
(a) in the case of the Acquired Companies:
Marketvest Funds, Inc.
Marketvest Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Attention: Secretary
Facsimile: (412) 288-8141
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with a copy to:
Matthew G. Maloney, Esq.
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, DC 20037-1526
Facsimile: (202) 887-0689
(b) in the case of the Acquiring Company:
ARK Funds
One Freedom Valley Drive
Oaks, PA 19456
Attention: Secretary
Facsimile: (610) 676-1040
with a copy to:
Alan C. Porter, Esq.
Piper & Marbury L.L.P.
1200 Nineteenth Street, N.W.
Washington, DC 20036-2430
Facsimile: (202) 223-2085
or such other address or facsimile number as any party may hereafter specify for
the purpose by notice to the other parties. Each such notice, request or other
communication shall be effective (i) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified in this Section 6.1 and the
appropriate answer back is received, or (ii) if given by any other means, when
delivered at the address specified in this Section 6.1.
6.2 Amendments; Waivers. Any provision of this Agreement may be amended
or waived prior to the Closing of the Reorganization of an Acquired Fund, if,
and only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by each party or, in the case of a waiver, by the party against
which the waiver is to be effective; provided that after the adoption of this
Agreement by the shareholders of such Acquired Fund, no such amendment or waiver
shall, without the further approval of such shareholders, alter or change any of
the terms or conditions of this Agreement if such alteration or change would
adversely affect the shareholders of the Acquired Fund.
6.3 Successors. The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the consent of the
other party hereto.
6.4 Broker's or Finder's Fees. The parties represent and warrant to each
other that the transactions contemplated by this Agreement have been negotiated
directly between them, without the intervention of any person as a result of any
action by them in such a manner as to give rise to a valid claim for a brokerage
commission, finder's fee or like payment.
6.5 Expenses. The Acquired Companies and the Acquiring Company each
hereby acknowledge that First Maryland Bancorp will pay all expenses incurred in
connection with entering into and carrying out the transactions contemplated by
this Agreement, whether or not the transactions contemplated hereby are
consummated. Such expenses include, without limitation, (i) expenses associated
with the preparation and filing of the Registration Statement; (ii) fees and
expenses for registration or qualification of the Acquiring Fund Shares under
the 1933 Act and state securities or "blue sky" laws; (iii) fees and
disbursements of legal counsel and accountants; and (iv) postage, printing and
proxy solicitation costs.
A-12
47
6.6 Governing Law. This Agreement shall be construed in accordance with
and governed by the law of the State of Maryland.
6.7 Survival. The covenants, agreements, representations and warranties
of the parties in respect of the Reorganization of an Acquired Fund contained
herein shall not survive, and shall be extinguished by, the Closing of such
Reorganization.
6.8 Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
6.9 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by either party hereto.
6.10 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
6.11 Parties in Interest. Nothing expressed or implied herein is intended
or shall be construed to confer upon any person, other than the parties hereto,
any rights or remedies under or by reason of this Agreement or the transactions
contemplated hereby.
6.12 Limitation of Liability. (a) A copy of the declaration of trust of
ARK Funds is on file with the Secretary of State of the Commonwealth of
Massachusetts, and it is expressly agreed that this instrument is executed on
behalf of ARK Funds by the trustees or officers thereof in such capacities, and
not individually, and that the obligations of this instrument are not binding
upon any of the trustees, officers or shareholders of ARK Funds personally, but
are binding only upon the assets and property of the Acquiring Funds.
(b) A copy of the declaration of trust of Marketvest Funds is on file with
the Secretary of State of the Commonwealth of Massachusetts, and it is expressly
agreed that this instrument is executed on behalf of Marketvest Funds by the
trustees or officers thereof in such capacities, and not individually, and that
the obligations of this instrument are not binding upon any of the trustees,
officers or shareholders of Marketvest Funds personally, but are binding only
upon the assets and property of the Marketvest Funds.
(c) The parties specifically acknowledge and agree that any liability under
this Agreement, or in connection with the transactions herein contemplated, to
the Acquiring Company with respect to an Acquiring Fund, or to an Acquired
Company with respect to an Acquired Fund, shall be discharged only out of the
assets of that Acquiring Fund or Acquired Fund, as the case may be, and that no
other Acquiring Fund, series of the Acquiring Company or Acquired Fund shall be
liable with respect thereto.
* * *
A-13
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
ATTEST: MARKETVEST FUNDS, INC.
/s/ TIMOTHY S. JOHNSON By /s/ VICTOR R. SICLARI
- -------------------------------------------- --------------------------------------------
Victor R. Siclari
Secretary
ATTEST: MARKETVEST FUNDS
/s/ TIMOTHY S. JOHNSON By /s/ VICTOR R. SICLARI
- -------------------------------------------- --------------------------------------------
Victor R. Siclari
Secretary
ATTEST: ARK FUNDS
/s/ LESLIE KONDZIELA By /s/ KATHRYN L. STANTON
- -------------------------------------------- --------------------------------------------
Kathryn L. Stanton
Secretary
A-14
49
SCHEDULE 1.5
MARKETVEST FUNDS ARK FUNDS
----------------------------------------- -----------------------------------------
Marketvest Short-Term Bond Fund ARK Short-Term Bond Portfolio
Marketvest Intermediate U.S. Government ARK U.S. Government Bond Portfolio
Bond Fund
Marketvest Pennsylvania Intermediate ARK Pennsylvania Tax-Free Portfolio
Municipal Bond Fund
Marketvest Equity Fund ARK Value Equity Portfolio
Marketvest International Equity Fund ARK International Equity Selection
Portfolio
50
ARK FUNDS
CROSS REFERENCE SHEET
PART B
Item No. Heading
- -------- -------
10. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . Table of Contents
12. Additional Information about the Registrant . . . . . . . . . . Statement of Additional
Information of ARK Funds dated
February ___, 1998
13. Additional Information about the Company
Being Acquired . . . . . . . . . . . . . . . . . . . . . . . . . Combined Statements of
Additional Information of the
Marketvest Funds, Inc. and
Marketvest Funds dated June 30,
1997
14. Financial Statements . . . . . . . . . . . . . . . . . . . . . . Cover Page; Pro Forma Financial Statements:
ARK Pennsylvania Tax-Free
Portfolio and Marketvest
Pennsylvania Intermediate
Municipal Bond Fund.
51
MARKETVEST FUNDS, INC.
MARKETVEST FUNDS
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
ARK FUNDS
Oaks, Pennsylvania 19456
STATEMENT OF ADDITIONAL INFORMATION
(Joint Special Meeting of Shareholders of the Marketvest Group of Funds)
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Prospectus/Proxy Statement dated February __, 1998
for the Joint Special Meeting of Shareholders of the Marketvest Funds
to be held on March __, 1998. Copies of the Prospectus/Proxy Statement may be
obtained at no charge by calling the Marketvest Funds at 1-800-MKT-VEST.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the
Prospectus/Proxy Statement.
Further information about the Acquiring Funds is contained in and
incorporated herein by reference to the ARK Funds' Statement of Additional
Information dated February __, 1998, a copy of which is included herewith. The
audited financial statements and related independent auditor's report for the
Acquiring Funds contained in the Annual Report for the fiscal year ended April
30, 1997 are hereby incorporated herein by reference and accompany this
Statement of Additional Information. The unaudited financial statements for
the Acquiring Funds contained in the Semi-Annual Report for the six-months
ended October 31, 1997 are hereby incorporated herein by reference and
accompany this Statement of Additional Information. No other parts of the
Annual Report and Semi-Annual Report are incorporated by reference herein.
Further information about the Acquired Funds is contained in and
incorporated by reference to the Marketvest Group of Funds Combined Statement of
Additional Information dated June 30, 1997, as supplemented, a copy of which is
included herewith. The audited financial statements and related independent
accountant's report for the Acquired Funds contained in the respective Annual
Reports for the fiscal year ended February 28, 1997 are hereby incorporated
herein by reference. The unaudited financial statements for the Acquired Funds
for the six months ended August 31, 1997 contained in the respective Semi-Annual
Reports are hereby incorporated herein by reference. No other parts of the
Annual Reports and Semi-Annual Reports are incorporated by reference herein.
The date of this Statement of Additional Information is February __, 1998.
52
TABLE OF CONTENTS
Page
----
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Pro Forma Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
53
GENERAL INFORMATION
The shareholders of Marketvest Funds, Inc. and Marketvest Funds
(collectively, "Marketvest Funds") are being asked to approve or disapprove an
Agreement and Plan of Reorganization (the "Reorganization Agreement") dated as
of January 15, 1998, among Marketvest Funds, Inc., Marketvest Funds and ARK
Funds, and the transactions contemplated thereby. The Reorganization Agreement
contemplates the transfer of substantially all of the assets and stated
liabilities of Marketvest Short-Term Bond Fund, Marketvest Intermediate U.S.
Government Bond Fund, Marketvest Pennsylvania Intermediate Municipal Bond Fund,
Marketvest Equity Fund and Marketvest International Equity Fund (each, an
"Acquired Fund" and collectively, the "Acquired Funds") to a corresponding
portfolio of ARK Funds (each, an "Acquiring Fund" and collectively, the
"Acquiring Funds") in exchange for full and fractional Institutional Class
shares representing interests in such corresponding Acquiring Funds (each such
transaction, a "Reorganization" and collectively, the "Reorganizations"). The
shares issued by ARK Funds will have an aggregate net asset value equal to the
aggregate net asset value of the shares of the respective Acquired Funds that
are outstanding immediately before the Closing Date (as defined in the
Reorganization Agreement) of the Reorganization.
Following the exchange, each of the Acquired Funds will make a liquidating
distribution of the corresponding Acquiring Fund shares to its shareholders.
Each shareholder owning shares of a particular Acquired Fund at the Closing
Date will receive Institutional Class shares of the corresponding Acquiring
Fund of equal value, plus the right to receive any unpaid dividends and
distributions that were declared before the Closing Date on shares in such
Acquired Fund. Upon completion of the Reorganizations, the Marketvest Group of
Funds will be terminated or dissolved under state law and deregistered under
the Investment Company Act of 1940.
The Joint Special Meeting of Shareholders of the Marketvest Group of Funds
to consider the Reorganization Agreement and the related transactions will be
held at 10 o'clock a.m., Eastern Time, on March __, 1998, at Federated
Investors, Federated Investors Tower, 19th Floor, Pittsburgh, Pennsylvania. For
further information about the transaction, see the Prospectus/Proxy Statement.
Banking laws and regulations generally permit a bank or bank affiliate to
act as an investment adviser and to purchase shares of an investment company as
agent for and upon the order of a customer. However, banking laws and
regulations, including the Glass-Steagall Act as currently interpreted by the
Board of Governors of the Federal Reserve System, prohibit a bank holding
company registered under the Bank Holding Company Act of 1956, as amended, or
any affiliate thereof from sponsoring, organizing, controlling, or distributing
the shares of a registered, open-end investment company continuously engaged in
the issuance of its shares, and prohibit banks generally from issuing,
underwriting, selling or distributing securities such as shares of the
Acquiring Funds. Judicial or administrative decisions or interpretations of,
as well as changes in, either federal or state statutes or regulations relating
to the activities of banks and their affiliates could prevent First National
Bank of Maryland or its affiliates from continuing to perform all or a part of
the activities described above. If banks or bank affiliates were prohibited
from so acting,
54
changes in the operation of the ARK Funds might occur. It is not anticipated,
however, that any such change would affect the net asset value of the Acquiring
Funds' shares or result in any financial loss to any shareholder.
- 2 -
55
ARK PENNSYLVANIA TAX FREE PORTFOLIO
Introduction To Pro Forma Combining Statements
October 31, 1997
The accompanying unaudited Pro Forma Combining Statements of Assets and
Liabilities, Pro Forma Combining Statements of Operations and Pro Forma
Combining Schedules of Investments reflect the accounts of the ARK Pennsylvania
Tax Free Portfolio (the "ARK Fund") and the Marketvest Pennsylvania Intermediate
Municipal Bond Fund (the "Marketvest Fund").
These statements have been derived from the underlying accounting
records of the ARK Fund and the Marketvest Fund that were used in calculating
net asset values for the six months ended October 31, 1997. The Pro forma
Combining Statements of Operations have been prepared based upon the fee and
expense structure of the ARK Fund.
Under the proposed agreement and plan of reorganization, all outstanding shares
of the Marketvest Fund will be exchanged for Institutional Class shares of the
ARK Fund.
56
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
MUNICIPAL BONDS AND NOTES 96.86% 100.05%
PENNSYLVANIA 96.86% 97.81%
Abington, School District,
Callable 05/15/07 @ 100
(GO) (FGIC)
5.300%, 05/15/21 500 $497
Allegheny County, Series C-39,
Callable 05/01/02 @ 102
(GO) (AMBAC)
5.600%, 05/01/04 300 320
Allegheny County, PA HDA, Refunding
Revenue Bonds, 5.70% (Magee Womens
Hospital)/(Original Issue Yield: 5.85%), 10/1/2001 1,790 1,881
Allegheny County, PA HDA, Revenue Bonds,
5.20% (Magee Womens Hospital)/(FGIC
INS)/(Original Issue Yield: 5.30%), 10/1/2005 1,000 1,037
Allegheny County, PA HDA, Revenue Bonds,
5.375% (Children's Hospital of
Pittsburgh)/(Original Issue Yield: 5.641%),
7/1/2017 2,800 2,790
Allegheny County, Hospital
Development Authority, Pittsburgh
Mercy Health System Project,
Callable 08/15/06 @ 102
(RB) (AMBAC)
5.625%, 08/15/18 500 509
Allegheny County, Hospital
Development Authority,
Presbyterian Health Center
Project, Series C (RB)
(MBIA)
3.600%, 11/06/97 (A) 400 400
Allegheny County, Redevelopment
Authority, Home
Improvement (RB)
6.700%, 02/01/99 500 513
Allegheny County, PA IDA, Refunding
Revenue Bonds, 6.80% (MBIA Insurance
Corporation INS), 3/1/2015 3,500 3,836
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES 97.21%
PENNSYLVANIA 96.96%
Abington, School District,
Callable 05/15/07 @ 100
(GO) (FGIC)
5.300%, 05/15/21 500 $ 497
Allegheny County, Series C-39,
Callable 05/01/02 @ 102
(GO) (AMBAC)
5.600%, 05/01/04 300 320
Allegheny County, PA HDA, Refunding
Revenue Bonds, 5.70% (Magee Womens
Hospital)/(Original Issue Yield: 5.85%), 10/1/2001 1,790 1,881
Allegheny County, PA HDA, Revenue Bonds,
5.20% (Magee Womens Hospital)/(FGIC
INS)/(Original Issue Yield: 5.30%), 10/1/2005 1,000 1,037
Allegheny County, PA HDA, Revenue Bonds,
5.375% (Children's Hospital of
Pittsburgh)/(Original Issue Yield: 5.641%),
7/1/2017 2,800 2,790
Allegheny County, Hospital
Development Authority, Pittsburgh
Mercy Health System Project,
Callable 08/15/06 @ 102
(RB) (AMBAC)
5.625%, 08/15/18 500 509
Allegheny County, Hospital
Development Authority,
Presbyterian Health Center
Project, Series C (RB)
(MBIA)
3.600%, 11/06/97 (A) 400 400
Allegheny County, Redevelopment
Authority, Home
Improvement (RB)
6.700%, 02/01/99 500 513
Allegheny County, PA IDA, Refunding
Revenue Bonds, 6.80% (MBIA Insurance
Corporation INS), 3/1/2015 3,500 3,836
Page 1 of 15
57
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Allegheny County, PA GO UT Bonds (Series C
45), 5.10% (FGIC INS), 10/1/2007 5,000 5,177
Allentown, PA Area Hospital Authority,
Refunding Revenue Bonds, 6.50% (Original
Issue Yield: 6.65%), 11/15/2008 2,665 2,854
Allentown, Callable 07/15/03
@ 100 (GO) (AMBAC)
5.650%, 07/15/08 500 523
Allentown, Callable 07/15/09
@ 100 (GO) (AMBAC)
5.650%, 07/15/10 250 267
Allentown, Sewer Systems,
Callable 07/15/09 @ 100
(RB) (AMBAC)
5.650%, 07/15/10 250 267
Bensalem Township, PA, GO UT Bonds,
5.55% (FGIS INS) 12/1/2010 1,390 1,452
Bensalem Township, PA, GO UT Bonds,
5.70% (FGIS INS) 12/1/2012 1,015 1,062
Bethehem, PA Area School District, GO UT Bonds,
5.70% (MBIA Insurance Corporation
INS), 3/1/2009 1,000 1,080
Bethehem, PA Area School District, GO UT Bonds,
5.75% (MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.80%), 3/1/2010 1,000 1,083
Bethehem, PA Area School District, GO UT
Bonds, 5.50% (FGIC INS), 9/1/2008 3,000 3,160
Bethehem, PA Area School District, GO UT
Bonds, 5.85% (MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.90%), 3/1/2012 1,635 1,782
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Allegheny County, PA GO UT Bonds (Series C
45), 5.10% (FGIC INS), 10/1/2007 5,000 5,177
Allentown, PA Area Hospital Authority,
Refunding Revenue Bonds, 6.50% (Original
Issue Yield: 6.65%), 11/15/2008 2,665 2,854
Allentown, Callable 07/15/03
@ 100 (GO) (AMBAC)
5.650%, 07/15/08 500 523
Allentown, Callable 07/15/09
@ 100 (GO) (AMBAC)
5.650%, 07/15/10 250 267
Allentown, Sewer Systems,
Callable 07/15/09 @ 100
(RB) (AMBAC)
5.650%, 07/15/10 250 267
Bensalem Township, PA, GO UT Bonds,
5.55% (FGIS INS) 12/1/2010 1,390 1,452
Bensalem Township, PA, GO UT Bonds,
5.70% (FGIS INS) 12/1/2012 1,015 1,062
Bethehem, PA Area School District, GO UT Bonds,
5.70% (MBIA Insurance Corporation
INS), 3/1/2009 1,000 1,080
Bethehem, PA Area School District, GO UT Bonds,
5.75% (MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.80%), 3/1/2010 1,000 1,083
Bethehem, PA Area School District, GO UT
Bonds, 5.50% (FGIC INS), 9/1/2008 3,000 3,160
Bethehem, PA Area School District, GO UT
Bonds, 5.85% (MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.90%), 3/1/2012 1,635 1,782
Page 2 of 15
58
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Bethehem, PA Area School District, GO UT
Bonds, 6.35% (United States Treasury
COL)/(AMBAC INS), 9/1/1999 1,000 1,043
Bucks County, Community
College Project, Callable
6/15/07 @ 100 (RB)
5.500%, 06/15/17 500 510
Burrell, PA School District, GO UT School
Improvements, 5.25% (Original Issue Yield:
5.45%), 11/15/2010 4,000 4,094
Central Bucks, PA School District, GO UT
Refunding Bonds, 6.30%, 2/1/2000 1,000 1,049
Chester County, PA HEFA, Refunding
Revenue Bonds, 5.30% (Main Line Health
Systems)/(MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.40%), 5/15/2007 3,045 3,155
Chester County, PA HEFA, Refunding
Revenue Bonds, 5.50% (Chester County
Hospital, PA)/(MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.70%), 7/1/2007 965 1,027
Chester County, PA HEFA, Refunding
Revenue Bonds, 5.625% (Chester County
Hospital, PA)/(MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.90%), 7/1/2010 1,675 1,749
Chester County, PA HEFA, Refunding
Revenue Bonds, 5.625% (MBIA Insurance
Corporation INS)/(Original Issue Yield:
5.85%), 7/1/2009 1,985 2,093
Chester County, Callable
12/15/03 @ 100 (GO)
5.300%, 12/15/05 500 520
Coatesville, PA School District, GO UT,
5.40% (FSA INS), 4/1/2013 2,000 2,043
Commonwealth of Pennsylvania, GO UT,
5.375% (FGIC INS), 5/15/2005 3,000 3,171
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Bethehem, PA Area School District, GO UT
Bonds, 6.35% (United States Treasury
COL)/(AMBAC INS), 9/1/1999 1,000 1,043
Bucks County, Community
College Project, Callable
6/15/07 @ 100 (RB)
5.500%, 06/15/17 500 510
Burrell, PA School District, GO UT School
Improvements, 5.25% (Original Issue Yield:
5.45%), 11/15/2010 4,000 4,094
Central Bucks, PA School District, GO UT
Refunding Bonds, 6.30%, 2/1/2000 1,000 1,049
Chester County, PA HEFA, Refunding
Revenue Bonds, 5.30% (Main Line Health
Systems)/(MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.40%), 5/15/2007 3,045 3,155
Chester County, PA HEFA, Refunding
Revenue Bonds, 5.50% (Chester County
Hospital, PA)/(MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.70%), 7/1/2007 965 1,027
Chester County, PA HEFA, Refunding
Revenue Bonds, 5.625% (Chester County
Hospital, PA)/(MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.90%), 7/1/2010 1,675 1,749
Chester County, PA HEFA, Refunding
Revenue Bonds, 5.625% (MBIA Insurance
Corporation INS)/(Original Issue Yield:
5.85%), 7/1/2009 1,985 2,093
Chester County, Callable
12/15/03 @ 100 (GO)
5.300%, 12/15/05 500 520
Coatesville, PA School District, GO UT,
5.40% (FSA INS), 4/1/2013 2,000 2,043
Commonwealth of Pennsylvania, GO UT,
5.375% (FGIC INS), 5/15/2005 3,000 3,171
Page 3 of 15
59
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Commonwealth of Pennsylvania, GO UT Bonds,
5.375% (FGIC INS), 5/15/2004 4,000 4,225
Commonwealth of Pennsylvania, GO UT
Refunding Bonds (Second Series), 5.30%
(Original Issue Yield: 5.40%), 7/1/1999 2,000 2,044
Commonwealth of Pennsylvania, GO UT
Refunding Bonds, 5.125% (AMBAC INS),
9/15/2005 5,000 5,197
Commonwealth of Pennsylvania, GO UT
Refunding Bonds, 5.375%, (FGIC INS)
11/15/2007 5,000 5,303
Conrad Weiser Area School
District, Pre-refunded @ 100
(GO) (MBIA)
6.700%, 12/15/04 (B) 500 568
Cornwall & Lebanon, Suburban
Joint School Authority,
Callable 03/01/04 @ 100
(RB) (FGIC)
5.750%, 03/01/08 500 527
Cumberland County, PA Municipal Authority,
Revenue Bond, 5.125% (Original Issue Yield:
5.50%), 10/1/2015 2,300 2,260
Cumberland County, Messiah
College Project, Callable
10/01/06 @ 100 (RB) (AMBAC)
5.125%, 10/01/15 500 492
Cumberland Valley, School District,
Callable 09/01/03 @ 100
(GO) (FGIC)
5.350%, 09/01/07 500 519
Dauphin County, PA General Authority,
Revenue Bonds, 4.45%, 9/1/2032 2,000 2,003
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Commonwealth of Pennsylvania, GO UT Bonds,
5.375% (FGIC INS), 5/15/2004 4,000 4,225
Commonwealth of Pennsylvania, GO UT
Refunding Bonds (Second Series), 5.30%
(Original Issue Yield: 5.40%), 7/1/1999 2,000 2,044
Commonwealth of Pennsylvania, GO UT
Refunding Bonds, 5.125% (AMBAC INS),
9/15/2005 5,000 5,197
Commonwealth of Pennsylvania, GO UT
Refunding Bonds, 5.375%, (FGIC INS)
11/15/2007 5,000 5,303
Conrad Weiser Area School
District, Pre-refunded @ 100
(GO) (MBIA)
6.700%, 12/15/04 (B) 500 568
Cornwall & Lebanon, Suburban
Joint School Authority,
Callable 03/01/04 @ 100
(RB) (FGIC)
5.750%, 03/01/08 500 527
Cumberland County, PA Municipal Authority,
Revenue Bond, 5.125% (Original Issue Yield:
5.50%), 10/1/2015 2,300 2,260
Cumberland County, Messiah
College Project, Callable
10/01/06 @ 100 (RB) (AMBAC)
5.125%, 10/01/15 500 492
Cumberland Valley, School District,
Callable 09/01/03 @ 100
(GO) (FGIC)
5.350%, 09/01/07 500 519
Dauphin County, PA General Authority,
Revenue Bonds, 4.45%, 9/1/2032 2,000 2,003
Page 4 of 15
60
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Dauphin County, PA General Authority,
Revenue Bonds, 5.00% TOBs (AMBAC INS),
Mandatory Tender 5,000 5,115
Dauphin County, PA General Authority,
Revenue Refunding Bonds, 5.10% (Pinnacle
Health System)/(MBIA Insurnace Corporation
INS)/(Original Issue Yield: 5.20%), 5/15/2008 830 848
Dauphin County, PA General Authority,
Revenue Refunding Bonds, 5.20% (Pinnacle
Health System)/(MBIA Insurnace Corporation
INS)/(Original Issue Yield: 5.30%), 5/15/2009 910 927
Delaware County, Callable
11/15/07 @ 100 (GO)
5.125%, 11/15/16 500 501
Delaware County, Dunwoody
Village Project (RB)
5.550%, 04/01/06 300 307
Delaware County, PA, Revenue Bonds, 6.00%,
(Original Issue Yield: 6.21%), 12/15/2020 4,000 4,140
Delaware Valley, PA Regional Finance
Authority, Revenue Bonds (Series A), 5.90%
(AMBAC INS)/(Original Issue Yield: 6.00%),
4/15/2016 2,000 2,093
Delaware Valley, PA School District, GO UT
Refunding Bonds (Series A), 6.50% (MBIA
Insurance Corporation INS), 4/1/2001 1,000 1,075
Erie County, PA Prison Authority, Revenue
Bonds, 6.30% (United States Treasury
COL)/(MBIA Insurance Corporation INS),
11/1/1999 1,500 1,565
Franklin, PA Regional School District, GO UT
Refunding Bonds (Series I), 6.25% (FGIC INS),
10/1/2001 1,000 1,009
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Dauphin County, PA General Authority,
Revenue Bonds, 5.00% TOBs (AMBAC INS),
Mandatory Tender 5,000 5,115
Dauphin County, PA General Authority,
Revenue Refunding Bonds, 5.10% (Pinnacle
Health System)/(MBIA Insurnace Corporation
INS)/(Original Issue Yield: 5.20%), 5/15/2008 830 848
Dauphin County, PA General Authority,
Revenue Refunding Bonds, 5.20% (Pinnacle
Health System)/(MBIA Insurnace Corporation
INS)/(Original Issue Yield: 5.30%), 5/15/2009 910 927
Delaware County, Callable
11/15/07 @ 100 (GO)
5.125%, 11/15/16 500 501
Delaware County, Dunwoody
Village Project (RB)
5.550%, 04/01/06 300 307
Delaware County, PA, Revenue Bonds, 6.00%,
(Original Issue Yield: 6.21%), 12/15/2020 4,000 4,140
Delaware Valley, PA Regional Finance
Authority, Revenue Bonds (Series A), 5.90%
(AMBAC INS)/(Original Issue Yield: 6.00%),
4/15/2016 2,000 2,093
Delaware Valley, PA School District, GO UT
Refunding Bonds (Series A), 6.50% (MBIA
Insurance Corporation INS), 4/1/2001 1,000 1,075
Erie County, PA Prison Authority, Revenue
Bonds, 6.30% (United States Treasury
COL)/(MBIA Insurance Corporation INS),
11/1/1999 1,500 1,565
Franklin, PA Regional School District, GO UT
Refunding Bonds (Series I), 6.25% (FGIC INS),
10/1/2001 1,000 1,009
Page 5 of 15
61
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Geisinger Authority, PA Health System,
Refunding Revenue Bonds, 5.70% (Original
Issue Yield: 5.75%), 7/1/2002 1,000 1,054
Fox Chapel, Sanitation Sewer
Authority, Callable 05/01/97
@ 100 (RB)
5.900%, 05/01/05 420 421
Geisinger Authority, PA Health System,
Revenue Bonds, 6.50% (Original Issue Yield:
7.591%), 7/1/2007 3,000 3,135
Harrisburg, School District
Authority, Series B, Callable
09/01/02 @ 100 (RB) (AMBAC)
5.650%, 09/01/05 250 261
Lancaster, Franklin & Marshall
College Project, Callable 04/15/02
@ 100 (RB) (MBIA)
6.500%, 04/15/06 250 270
Lancaster County, PA Hospital Authority,
Health Center Refunding Revenue Bonds,
4.75% (Masonic Homes), 11/15/2002 1,000 1,012
Lancaster County, Lancaster
General Hospital Project
(RB) (AMBAC)
5.800%, 07/01/01 500 527
Lansdale, Callable 06/01/02 @ 100
(GO) (AMBAC)
6.400%, 06/01/05 150 162
Lansdale, Callable 06/01/02 @ 100
(GO) (AMBAC)
6.500%, 06/01/06 100 108
Lehigh County, PA General Purpose Authority,
GO UT Refunding Bonds (Series A), 6.60%
(AMBAC INS)/(United States Treasurty PRF),
10/15/1999 (@100) 1,000 1,049
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Geisinger Authority, PA Health System,
Refunding Revenue Bonds, 5.70% (Original
Issue Yield: 5.75%), 7/1/2002 1,000 1,054
Fox Chapel, Sanitation Sewer
Authority, Callable 05/01/97
@ 100 (RB)
5.900%, 05/01/05 420 421
Geisinger Authority, PA Health System,
Revenue Bonds, 6.50% (Original Issue Yield:
7.591%), 7/1/2007 3,000 3,135
Harrisburg, School District
Authority, Series B, Callable
09/01/02 @ 100 (RB) (AMBAC)
5.650%, 09/01/05 250 261
Lancaster, Franklin & Marshall
College Project, Callable 04/15/02
@ 100 (RB) (MBIA)
6.500%, 04/15/06 250 270
Lancaster County, PA Hospital Authority,
Health Center Refunding Revenue Bonds,
4.75% (Masonic Homes), 11/15/2002 1,000 1,012
Lancaster County, Lancaster
General Hospital Project
(RB) (AMBAC)
5.800%, 07/01/01 500 527
Lansdale, Callable 06/01/02 @ 100
(GO) (AMBAC)
6.400%, 06/01/05 150 162
Lansdale, Callable 06/01/02 @ 100
(GO) (AMBAC)
6.500%, 06/01/06 100 108
Lehigh County, PA General Purpose Authority,
GO UT Refunding Bonds (Series A), 6.60%
(AMBAC INS)/(United States Treasurty PRF),
10/15/1999 (@100) 1,000 1,049
Page 6 of 15
62
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Lehigh County, PA General Purpose Authority,
Hospital Refunding Revenue Bonds (Series
1996A), 5.75% (Muhlenberg Hospital
Center)/(Original Issue Yield: 5.85%),
7/15/2010 1,270 1,309
Lehigh County, PA General Purpose Authority,
Revenue Bonds, 5.75% (Muhlenberg Hospital
Center)/(Original Issue Yield: 5.85%),
7/15/2010 1,730 1,783
Lehigh County, PA GO UT Bonds (Series A),
5.50% (Original Issue Yield: 5.60%),
11/15/2011 2,000 2,065
Lehigh County, PA GO UT Bonds (Series A),
5.55% (Original Issue Yield: 5.65%),
11/15/2012 2,100 2,168
Luzerne County, Callable 12/15/07
@ 100 (GO) (FGIC)
5.600%, 12/15/16 500 514
Montgomery County, Callable
10/15/01 @ 102 (GO)
5.200%, 10/15/02 300 314
5.750%, 10/15/10 500 522
Montgomery County, PA Higher Education and
Health Authority, Revenue Refunding Bonds,
5.25% (Holy Redeemer Health Care)/(AMBAC
INS), 10/1/2004 2,000 2,161
Montgomery County, Health &
Higher Education Authority,
Abington Memorial Hospital
Project, Series A, Callable 06/01/04
@ 102 (RB) (AMBAC)
5.125%, 06/01/14 500 491
Montgomery County, Health &
Higher Education Authority,
Beaver College Project, Callable
04/01/06 @ 102 (RB) (Connie Lee)
5.700%, 04/01/10 500 524
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Lehigh County, PA General Purpose Authority,
Hospital Refunding Revenue Bonds (Series
1996A), 5.75% (Muhlenberg Hospital
Center)/(Original Issue Yield: 5.85%),
7/15/2010 1,270 1,309
Lehigh County, PA General Purpose Authority,
Revenue Bonds, 5.75% (Muhlenberg Hospital
Center)/(Original Issue Yield: 5.85%),
7/15/2010 1,730 1,783
Lehigh County, PA GO UT Bonds (Series A),
5.50% (Original Issue Yield: 5.60%),
11/15/2011 2,000 2,065
Lehigh County, PA GO UT Bonds (Series A),
5.55% (Original Issue Yield: 5.65%),
11/15/2012 2,100 2,168
Luzerne County, Callable 12/15/07
@ 100 (GO) (FGIC)
5.600%, 12/15/16 500 514
Montgomery County, Callable
10/15/01 @ 102 (GO)
5.200%, 10/15/02 300 314
5.750%, 10/15/10 500 522
Montgomery County, PA Higher Education and
Health Authority, Revenue Refunding Bonds,
5.25% (Holy Redeemer Health Care)/(AMBAC
INS), 10/1/2004 2,000 2,161
Montgomery County, Health &
Higher Education Authority,
Abington Memorial Hospital
Project, Series A, Callable 06/01/04
@ 102 (RB) (AMBAC)
5.125%, 06/01/14 500 491
Montgomery County, Health &
Higher Education Authority,
Beaver College Project, Callable
04/01/06 @ 102 (RB) (Connie Lee)
5.700%, 04/01/10 500 524
Page 7 of 15
63
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Montgomery County, PA Higher Education and
Health Authority, Revenue Refunding Bonds,
5.50% (Holy Redeemer Health Care)/(AMBAC
INS), 10/1/2008 1,275 1,355
Montgomery County, Pennsylvania
Hill School Project, Callable
08/15/07 @ 100 (RB) (MBIA)
5.350%, 08/15/27 500 498
Montgomery County, Sewer
Authority, Callable 08/01/97
@ 100 (RB) (FGIC)
5.850%, 08/01/06 500 501
Norristown, School District
Authority, Callable 03/01/07
@ 100 (GO) (FGIC)
5.500%, 09/01/14 500 511
North Allegheny, PA School District, Series A
GO UT Refunding Bonds, 6.35% (AMBAC
INS)/(Original Issue Yield: 6.498%),
11/1/2012 1,045 1,118
Northampton County, Pennsylvania
Higher Education Authority,
Lehigh University, Callable
10/15/01 @ 102 (RB) (MBIA)
6.900%, 10/15/06 500 555
Northampton County, PA Higher Education
Authority, Refunding Revenue Bonds, 6.75% (Lehigh
University)/(MBIA Insurance
Corporation INS), 11/15/1999 1,550 1,635
Northampton County, PA Higher Education
Authority, Revenue Bonds, 5.75% (Lehigh
University)/(MBIA Insurance Corporation
INS), 8/15/2003 2,710 2,898
North Hills, School District
Authority, Callable 11/15/07
@ 100 (GO) (FGIC)
5.625%, 11/15/14 500 516
North Huntingdon Township,
(ETM) (GO)
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Montgomery County, PA Higher Education and
Health Authority, Revenue Refunding Bonds,
5.50% (Holy Redeemer Health Care)/(AMBAC
INS), 10/1/2008 1,275 1,355
Montgomery County, Pennsylvania
Hill School Project, Callable
08/15/07 @ 100 (RB) (MBIA)
5.350%, 08/15/27 500 498
Montgomery County, Sewer
Authority, Callable 08/01/97
@ 100 (RB) (FGIC)
5.850%, 08/01/06 500 501
Norristown, School District
Authority, Callable 03/01/07
@ 100 (GO) (FGIC)
5.500%, 09/01/14 500 511
North Allegheny, PA School District, Series A
GO UT Refunding Bonds, 6.35% (AMBAC
INS)/(Original Issue Yield: 6.498%),
11/1/2012 1,045 1,118
Northampton County, Pennsylvania
Higher Education Authority,
Lehigh University, Callable
10/15/01 @ 102 (RB) (MBIA)
6.900%, 10/15/06 500 555
Northampton County, PA Higher Education
Authority, Refunding Revenue Bonds, 6.75% (Lehigh
University)/(MBIA Insurance
Corporation INS), 11/15/1999 1,550 1,635
Northampton County, PA Higher Education
Authority, Revenue Bonds, 5.75% (Lehigh
University)/(MBIA Insurance Corporation
INS), 8/15/2003 2,710 2,898
North Hills, School District
Authority, Callable 11/15/07
@ 100 (GO) (FGIC)
5.625%, 11/15/14 500 516
North Huntingdon Township,
(ETM) (GO)
Page 8 of 15
64
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
5.750%, 04/01/08 305 323
North Wales, Water Authority,
Callable 11/01/05 @ 100
(RB) (FGIC)
5.600%, 11/01/16 500 507
Parkland, School District
Improvements, Callable 03/01/06
@ 100 (GO) (MBIA)
5.500%, 09/01/09 500 528
Pennridge, PA School District, GO UT Bonds,
6.40%, 3/15/2001 1,000 1,064
Pennsylvania Convention Center Authority,
Revenue Refunding Bonds, 6.75% (MBIA
Insurance Corporation INS)/(Original Issue
Yield: 6.875%), 9/1/2019 1,150 1,297
Pennsylvania Housing Finance Authority,
Refunding Revenue Bonds, 6.00%, 10/1/2013 1,500 1,589
Pennsylvania Infrastructure Investment
Authority, Revenue Bonds, 5.35% (Pennvest)
9/1/2025 1,575 1,646
Pennsylvania Infrastructure Investment
Authority, Revenue Bonds, 5.25% (MBIA
Insurance Corporation INS), 9/1/2007 2,720 2,841
Pennsylvania Infrastructure Investment
Authority, Revenue Bonds, 6.00% (MBIA
Insurance Corporation INS), 9/1/2006 1,000 1,102
Pennsylvania Intergovernmental Coop
Authority, Refunding Revenue Bonds, 4.85%
(FGIC INS), 6/15/2003 2,930 3,007
Pennsylvania Intergovernmental Coop
Authority, Refunding Revenue Bonds, 5.40%
(FGIC INS), 6/15/2009 2,145 2,226
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
5.750%, 04/01/08 305 323
North Wales, Water Authority,
Callable 11/01/05 @ 100
(RB) (FGIC)
5.600%, 11/01/16 500 507
Parkland, School District
Improvements, Callable 03/01/06
@ 100 (GO) (MBIA)
5.500%, 09/01/09 500 528
Pennridge, PA School District, GO UT Bonds,
6.40%, 3/15/2001 1,000 1,064
Pennsylvania Convention Center Authority,
Revenue Refunding Bonds, 6.75% (MBIA
Insurance Corporation INS)/(Original Issue
Yield: 6.875%), 9/1/2019 1,150 1,297
Pennsylvania Housing Finance Authority,
Refunding Revenue Bonds, 6.00%, 10/1/2013 1,500 1,589
Pennsylvania Infrastructure Investment
Authority, Revenue Bonds, 5.35% (Pennvest)
9/1/2025 1,575 1,646
Pennsylvania Infrastructure Investment
Authority, Revenue Bonds, 5.25% (MBIA
Insurance Corporation INS), 9/1/2007 2,720 2,841
Pennsylvania Infrastructure Investment
Authority, Revenue Bonds, 6.00% (MBIA
Insurance Corporation INS), 9/1/2006 1,000 1,102
Pennsylvania Intergovernmental Coop
Authority, Refunding Revenue Bonds, 4.85%
(FGIC INS), 6/15/2003 2,930 3,007
Pennsylvania Intergovernmental Coop
Authority, Refunding Revenue Bonds, 5.40%
(FGIC INS), 6/15/2009 2,145 2,226
Page 9 of 15
65
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Pennsylvania Intergovernmental Coop
Authority, Refunding Revenue Bonds, 5.50%
(Philadelphia Funding Program)/(FGIC
INS)/(Original Issue Yield: 5.65%), 6/15/2011 3,300 3,424
Pennsylvania State Higher Education Assistance
Agency, Revenue Refunding Bonds, 6.80%
(FGIC INS), 12/1/2000 5,020 5,319
Pennsylvania State, First Series,
Callable 05/15/06 @ 101.5
(GO) (FGIC)
5.375%, 05/15/14 500 509
Pennsylvania State, Second
Series (GO)
6.000%, 07/01/07 300 333
Pennsylvania State Convention
Center Authority, Series A,
(ETM) (RB) (FGIC)
6.700%, 09/01/16 265 314
Pennsylvania State Financing
Authority, Callable 11/01/03
@ 102 (RB)
6.600%, 11/01/09 400 435
Pennsylvania State Higher Education Facilities
Authority, Refunding Revenue Bonds (Series
A), 5.50% (University of
Pennsylvania)/(Original Issue Yield: 5.55%),
1/1/2009 3,000 3,125
Pennsylvania State Higher Education Facilities
Authority, Revenue Refunding Bonds, 5.35%
(Presbyterian Medical Center)/(Original Issue
Yield: 5.45%), 1/1/2008 3,750 3,911
Pennsylvania State Higher
Education Facilities Authority,
Series E, (ETM) (RB) (MBIA)
6.450%, 06/15/01 500 538
Pennsylvania State Higher Education Facilities
Authority, Revenue Refunding Bonds, 5.75%
(Drexel University)/(MBIA Insurance
Corporation INS)/5/1/2003 3,035 3,236 * 500 534
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Pennsylvania Intergovernmental Coop
Authority, Refunding Revenue Bonds, 5.50%
(Philadelphia Funding Program)/(FGIC
INS)/(Original Issue Yield: 5.65%), 6/15/2011 3,300 3,424
Pennsylvania State Higher Education Assistance
Agency, Revenue Refunding Bonds, 6.80%
(FGIC INS), 12/1/2000 5,020 5,319
Pennsylvania State, First Series,
Callable 05/15/06 @ 101.5
(GO) (FGIC)
5.375%, 05/15/14 500 509
Pennsylvania State, Second
Series (GO)
6.000%, 07/01/07 300 333
Pennsylvania State Convention
Center Authority, Series A,
(ETM) (RB) (FGIC)
6.700%, 09/01/16 265 314
Pennsylvania State Financing
Authority, Callable 11/01/03
@ 102 (RB)
6.600%, 11/01/09 400 435
Pennsylvania State Higher Education Facilities
Authority, Refunding Revenue Bonds (Series
A), 5.50% (University of
Pennsylvania)/(Original Issue Yield: 5.55%),
1/1/2009 3,000 3,125
Pennsylvania State Higher Education Facilities
Authority, Revenue Refunding Bonds, 5.35%
(Presbyterian Medical Center)/(Original Issue
Yield: 5.45%), 1/1/2008 3,750 3,911
Pennsylvania State Higher
Education Facilities Authority,
Series E, (ETM) (RB) (MBIA)
6.450%, 06/15/01 500 538
Pennsylvania State Higher Education Facilities
Authority, Revenue Refunding Bonds, 5.75%
(Drexel University)/(MBIA Insurance
Corporation INS)/5/1/2003 3,535 3,770
Page 10 of 15
66
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Pennsylvania State Higher
Education Facilities Authority,
University of Pennsylvania
Project, Callable 01/01/06 @
101 (RB)
5.600%, 01/01/10 500 523
Pennsylvania State Housing
Finance Agency, Callable
07/01/02 @ 102 (RB) (Fannie Mae)
6.400%, 07/01/12 500 526
Pennsylvania State IDA, Refunding Revenue
Bonds, 5.80% (AMBAC INS), 1/1/2008 1,000 1,081
Pennsylvania State IDA, Revenue Bonds, 6.00%
(AMBAC INS), 7/1/2006 3,000 3,311
Pennsylvania State IDA, Revenue Bonds, 6.00%
(AMBAC INS), 7/1/2007 5,000 5,529
Pennsylvania State Turnpike
Commission, Callable 12/01/02
@ 102 (RB) (FGIC)
6.000%, 12/01/12 400 425
Pennsylvania State University, Refunding
Revenue Bonds, 5.30% (Original Issue Yield:
5.40%), 8/15/2003 5,000 5,212
Pennsylvania State University,
Callable 03/01/02 @ 102 (RB)
5.950%, 03/01/03 500 539
Philadelphia Airport Parking
Authority, Callable 09/01/07
@ 101 (RB) (AMBAC)
5.500%, 09/01/18 500 504
Philadelphia Authority for Industrial
Development, Revenue Bonds, 5.50% (Girard
Estate Coal Mining Project)/(Original Issue
Yield: 5.75%), 11/15/2016 2,000 2,033
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Pennsylvania State Higher
Education Facilities Authority,
University of Pennsylvania
Project, Callable 01/01/06 @
101 (RB)
5.600%, 01/01/10 500 523
Pennsylvania State Housing
Finance Agency, Callable
07/01/02 @ 102 (RB) (Fannie Mae)
6.400%, 07/01/12 500 526
Pennsylvania State IDA, Refunding Revenue
Bonds, 5.80% (AMBAC INS), 1/1/2008 1,000 1,081
Pennsylvania State IDA, Revenue Bonds, 6.00%
(AMBAC INS), 7/1/2006 3,000 3,311
Pennsylvania State IDA, Revenue Bonds, 6.00%
(AMBAC INS), 7/1/2007 5,000 5,529
Pennsylvania State Turnpike
Commission, Callable 12/01/02
@ 102 (RB) (FGIC)
6.000%, 12/01/12 400 425
Pennsylvania State University, Refunding
Revenue Bonds, 5.30% (Original Issue Yield:
5.40%), 8/15/2003 5,000 5,212
Pennsylvania State University,
Callable 03/01/02 @ 102 (RB)
5.950%, 03/01/03 500 539
Philadelphia Airport Parking
Authority, Callable 09/01/07
@ 101 (RB) (AMBAC)
5.500%, 09/01/18 500 504
Philadelphia Authority for Industrial
Development, Revenue Bonds, 5.50% (Girard
Estate Coal Mining Project)/(Original Issue
Yield: 5.75%), 11/15/2016 2,000 2,033
Page 11 of 15
67
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Philadelphia Authority for Industrial
Development, Revenue Bonds, 6.00% (City of
Philadelphia Project)/(MBIA Insurance
Corporation INS), 2/15/2007 1,365 1,504
Philadelphia Higher Education
Facilities Authority, Moss
Rehabilitation Hospital Project
(RB) (AMBAC)
6.900%, 07/01/00 230 246
Philadelphia, PA Hospital & Higher Education
Facilities Authority, Refunding Revenue Bonds
(Series A), 5.25% (Children's Hospital of
Philadelphia)/(Original Issue Yield: 5.55%),
2/15/2007 3,250 3,361
Philadelphia, PA Hospital & Higher Education
Facilities Authority, Revenue Bonds (Series A),
5.625% (Children's Hospital of Philadelphia),
2/15/1999 1,500 1,530
Philadelphia, PA Hospital & Higher Education
Facilities Authority, Revenue Refunding Bonds,
7.00% (Magee Rehabilitation
Hospital)/(AMBAC INS)/(Original Issue Yield:
7.10%), 12/1/2010 1,000 1,108
Philadelphia, PA Hospital & Higher Education
Facilities Authority, Revenue Refunding Bonds,
7.625% (Albert Einstein Medical Center,
PA)/(Original Issue Yield: 7.767%), 4/1/2001 1,350 1,428
Philadelphia Industrial Development,
Callable 07/01/03 @ 102 (RB)
5.250%, 07/01/17 500 489
Philadelphia, PA Municipal Authority, Lease
Revenue Bonds, 7.10% (MBIA Insurance
Corporation INS) 11/15/2006 4,095 4,572
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Philadelphia Authority for Industrial
Development, Revenue Bonds, 6.00% (City of
Philadelphia Project)/(MBIA Insurance
Corporation INS), 2/15/2007 1,365 1,504
Philadelphia Higher Education
Facilities Authority, Moss
Rehabilitation Hospital Project
(RB) (AMBAC)
6.900%, 07/01/00 230 246
Philadelphia, PA Hospital & Higher Education
Facilities Authority, Refunding Revenue Bonds
(Series A), 5.25% (Children's Hospital of
Philadelphia)/(Original Issue Yield: 5.55%),
2/15/2007 3,250 3,361
Philadelphia, PA Hospital & Higher Education
Facilities Authority, Revenue Bonds (Series A),
5.625% (Children's Hospital of Philadelphia),
2/15/1999 1,500 1,530
Philadelphia, PA Hospital & Higher Education
Facilities Authority, Revenue Refunding Bonds,
7.00% (Magee Rehabilitation
Hospital)/(AMBAC INS)/(Original Issue Yield:
7.10%), 12/1/2010 1,000 1,108
Philadelphia, PA Hospital & Higher Education
Facilities Authority, Revenue Refunding Bonds,
7.625% (Albert Einstein Medical Center,
PA)/(Original Issue Yield: 7.767%), 4/1/2001 1,350 1,428
Philadelphia Industrial Development,
Callable 07/01/03 @ 102 (RB)
5.250%, 07/01/17 500 489
Philadelphia, PA Municipal Authority, Lease
Revenue Bonds, 7.10% (MBIA Insurance
Corporation INS) 11/15/2006 4,095 4,572
Page 12 of 15
68
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Philadelphia, PA School District, GO UT
Bonds (Series A), 5.35% (MBIA Insurance
Corporation INS), 7/1/2003 5,000 5,243
Philadelphia, PA School District, GO UT
Bonds (Series A), 5.85%, 7/1/2009 2,000 2,135
Philadelphia, PA School District, GO UT
Refunding Bonds, 5.30% (MBIA Insurance
Corporation INS)/(Original Issue Yield:
5.40%), 7/1/2004 3,500 3,666
Philadelphia, PA Water & Wastewater System,
Refunding Revenue Bonds, 5.50% (Original
Issue Yield: 5.61%), 6/15/2006 1,000 1,061
Philadelphia Water & Waste
Authority, Callable 08/01/07
@ 102 (RB) (AMBAC)
5.125%, 08/01/27 500 478
Philadelphia, PA Water & Wastewater System,
Refunding Revenue Bonds, 6.25% (MBIA
Insurance Corporation INS), 8/1/2007 3,000 3,378
Philadelphia, PA Water & Wastewater System,
Refunding Revenue Bonds, 6.25% (MBIA
Insurance Corporation INS), 8/1/2008 2,150 2,403
Philadelphia, PA Series A Revenue Bonds,
6.00% (FGIC INS), 6/15/2004 2,000 2,172
Punxsutawney Area School District,
Callable 04/15/05 @ 100
(GO) (MBIA)
5.750%, 04/15/10 500 526
Red Lion Area School District,
Callable 04/01/02 @ 100
(GO) (AMBAC)
5.850%, 04/01/05 100 106
Ridley Park, Taylor Hospital
Authority, Series A (RB)
6.000%, 12/01/05 500 514
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Philadelphia, PA School District, GO UT
Bonds (Series A), 5.35% (MBIA Insurance
Corporation INS), 7/1/2003 5,000 5,243
Philadelphia, PA School District, GO UT
Bonds (Series A), 5.85%, 7/1/2009 2,000 2,135
Philadelphia, PA School District, GO UT
Refunding Bonds, 5.30% (MBIA Insurance
Corporation INS)/(Original Issue Yield:
5.40%), 7/1/2004 3,500 3,666
Philadelphia, PA Water & Wastewater System,
Refunding Revenue Bonds, 5.50% (Original
Issue Yield: 5.61%), 6/15/2006 1,000 1,061
Philadelphia Water & Waste
Authority, Callable 08/01/07
@ 102 (RB) (AMBAC)
5.125%, 08/01/27 500 478
Philadelphia, PA Water & Wastewater System,
Refunding Revenue Bonds, 6.25% (MBIA
Insurance Corporation INS), 8/1/2007 3,000 3,378
Philadelphia, PA Water & Wastewater System,
Refunding Revenue Bonds, 6.25% (MBIA
Insurance Corporation INS), 8/1/2008 2,150 2,403
Philadelphia, PA Series A Revenue Bonds,
6.00% (FGIC INS), 6/15/2004 2,000 2,172
Punxsutawney Area School District,
Callable 04/15/05 @ 100
(GO) (MBIA)
5.750%, 04/15/10 500 526
Red Lion Area School District,
Callable 04/01/02 @ 100
(GO) (AMBAC)
5.850%, 04/01/05 100 106
Ridley Park, Taylor Hospital
Authority, Series A (RB)
6.000%, 12/01/05 500 514
Page 13 of 15
69
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Scranton-Lackawanna, PA Health & Welfare
Authority, Refunding Revenue Bonds, 5.625%
(Mercy Health Care Systems)/(MBIA Insurance
Corporation INS)/(Original Issue Yield:
5.75%), 1/1/2016 2,000 2,048
Scranton-Lackawanna, PA Health & Welfare
Authority, Revenue Bonds, 5.45% (Moses
Taylor Hospital Project), 7/1/2003 1,350 1,370
Scranton-Lackawanna, Health
& Welfare Authority, Mercy
Health Project, Series B
(RB) (MBIA)
5.100%, 01/01/07 500 515
South Allegheny School District,
Callable 10/01/05 @ 100
(GO) (MBIA)
5.100%, 10/01/06 500 520
South Western School District, PA York, UT
GO Bonds, 5.00% (FGIC INS), 6/15/1998 650 655
University of Pittsburgh, Refunding Revenue
Bonds, 5.50% (MBIA Insurance Corporation
LOC), 6/1/2002 3,440 3,611
Upper Merion, Municipal Utility
Authority, Callable 08/15/03
@ 100 (RB)
6.000%, 08/15/12 500 522
West Shore, Holy Spirit Hospital
Project, Callable 07/01/07 @
100 (RB) (MBIA)
5.600%, 01/01/13 500 510
York County (GO) (FGIC)
5.500%, 10/01/01 200 210
York County, PA Hospital Authority, Revenue
Bonds, 5.25% (York Hospital)/(AMBAC INS),
7/1/2004 1,010 1,051
York County, PA Hospital Authority, Revenue
Bonds, 5.25% (York Hospital)/(AMBAC INS),
7/1/2005 675 703
------------ -------
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Scranton-Lackawanna, PA Health & Welfare
Authority, Refunding Revenue Bonds, 5.625%
(Mercy Health Care Systems)/(MBIA Insurance
Corporation INS)/(Original Issue Yield:
5.75%), 1/1/2016 2,000 2,048
Scranton-Lackawanna, PA Health & Welfare
Authority, Revenue Bonds, 5.45% (Moses
Taylor Hospital Project), 7/1/2003 1,350 1,370
Scranton-Lackawanna, Health
& Welfare Authority, Mercy
Health Project, Series B
(RB) (MBIA)
5.100%, 01/01/07 500 515
South Allegheny School District,
Callable 10/01/05 @ 100
(GO) (MBIA)
5.100%, 10/01/06 500 520
South Western School District, PA York, UT
GO Bonds, 5.00% (FGIC INS), 6/15/1998 650 655
University of Pittsburgh, Refunding Revenue
Bonds, 5.50% (MBIA Insurance Corporation
LOC), 6/1/2002 3,440 3,611
Upper Merion, Municipal Utility
Authority, Callable 08/15/03
@ 100 (RB)
6.000%, 08/15/12 500 522
West Shore, Holy Spirit Hospital
Project, Callable 07/01/07 @
100 (RB) (MBIA)
5.600%, 01/01/13 500 510
York County (GO) (FGIC) -
5.500%, 10/01/01 200 210
York County, PA Hospital Authority, Revenue
Bonds, 5.25% (York Hospital)/(AMBAC INS),
7/1/2004 1,010 1,051
York County, PA Hospital Authority, Revenue
Bonds, 5.25% (York Hospital)/(AMBAC INS),
7/1/2005 675 703
------------
Page 14 of 15
70
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PROFORMA COMBINING SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
(UNAUDITED)
-------------------------------------------- ---------------------------------
MARKETVEST PA INTERMEDIATE ARK PENNSYLVANIA
MUNICIPAL BOND FUND TAX FREE PORTFOLIO
-------------------------------------------- ---------------------------------
PRINCIPAL MARKET PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000) AMOUNT (000) VALUE (000)
- ---------------------------------------------------------------------------------------------- ---------------------------------
Total Pennstlvania 201,116 25,109
------------- -----------------
COMMONWEALTH OF PUERTO RICO - 0
(GO) (MBIA)
6.500%, 07/01/08 500 576
------------- -----------------
Total Puerto Rico - 576
------------- -----------------
Total Municipal Bonds and Notes - 201,116 25,685
------------- -----------------
CASH EQUIVALENTS 0 0
PNC Pennsylvania Municipal Money
Market Portfolio 4,065 4,065
Federated Pennsylvania Muni
Cash Trust 139 139
------------- -----------------
Total Cash Equivalents 4,065 139
------------- -----------------
98.82% 100.59%
TOTAL INVESTMENTS (cost $199,307) $ 205,181 (cost $24,880) $ 25,824
============= ================
----------------------------------------
PROFORMA COMBINED
----------------------------------------
ARK PENNSYLVANIA
TAX FREE PORTFOLIO
----------------------------------------
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------------------
Total Pennstlvania 226,225
-------------
COMMONWEALTH OF PUERTO RICO 0
(GO) (MBIA)
6.500%, 07/01/08 500 576
-------------
Total Puerto Rico 576
-------------
Total Municipal Bonds and Notes 226,801
-------------
CASH EQUIVALENTS 0
PNC Pennsylvania Municipal Money
Market Portfolio 4,065 4,065
Federated Pennsylvania Muni
Cash Trust 139 139
-------------
Total Cash Equivalents 4,204
-------------
99.01%
TOTAL INVESTMENTS (cost $224,187) $ 231,005
=============
NOTE: THE CATEGORIES OF INVESTMENTS ARE SHOWN AS A PERCENTAGE OF NET ASSETS AS
OF OCTOBER 31, 1997.
THE FOLLOWING ACRONYMS ARE USED THROUGHOUT THIS PORTFOLIO:
AMBAC American Municipal Bond Assurance Corporation (A) Variable Rate Security - The
COL Collateralized rate reported on the Statement of
FGIC Financial Guaranty Insurance Corporation Net Assets is the rate in effect as
FSA Financial Security Assurance of October 31, 1997. The date
GO General Obligation shown is the next scheduled reset
H-DA Hospital Development Authority date.
HEFA Health and Education Facilities Authority
IDA Industrial Development Authority (B) The Pre-refunded date is shown
INS Insured as the maturity date on the
LOC Letter of Credit Statement of Net Assets.
MBIA Municipal Bond Investors Assurance
PRF Prerefunded AMBAC-American Municipal Bond Assurance Corporation
TOBs Tender Option Bonds ETM-Escrowed To Maturity
UT Unlimited Tax
FGIC-Financial Guaranty Insurance Company
GO-General Obligation
MBIA-Municipal Bond Insurance Association
RB-Revenue Bond
Page 15 of 15
71
ARK PENNSYLVANIA TAX-FREE PORTFOLIO
PROFORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
AS OF OCTOBER 31,1997
(000'S)
--------------- -------------------- ----------- ------------------
Marketvest
Pennsylvania ARK
Intermediate Pennsylvanian Tax- Proforma ARK Pennsylvania
Municipal Fund Free Portfolio Ajustments Tax-Free Portfolio
--------------- -------------------- ----------- ------------------
ASSETS:
Investments at market value (cost of 199,307,
$24,880 and $224,187, respectively) $ 205,181 $ 25,824 $ 231,005
Interest receivable 3,343 407 3,750
Receivable for investment securities sold 510 510
Receivable for capital shares sold - -
Other assets 34 34
------------- --------------- ---------------
Total assets 208,524 26,775 235,299
------------- --------------- ---------------
LIABILITIES:
Distribution payable 756 100 856
Payable for investment securities purchased 975 975
Payable for capital shares repurchased - -
Other liabilities 130 28 158
------------- --------------- ---------------
Total liabilities 886 1,103 1,989
------------- --------------- ---------------
NET ASSETS:
Portfolio shares, Institutional Class -
ARK Fund (based on 2,313,338 o/s shares) 22,650 (22,650)(a) -
Portfolio shares, Institutional Class -
Proforma ARK Fund (based on 20,364,999
o/s shares) 223,867 (a) 223,867
Portfolio shares, Institutional Class -
Marketvest Fund (based on 22,685,141 o/s shares) 201,217 (201,217)(a) -
Portfolio shares, Retail Class -
ARK Fund and Proforma ARK Fund (based on 196,794
o/s shares) 1,975 1,975
Undistributed net investment income -
Accumulated net realized gain on investments 547 103 650
Net unrealized appreciation on investments 5,874 944 6,818
------------- --------------- --------------- ---------------
TOTAL NET ASSETS $ 207,638 $ 25,672 $ - $ 233,310
============= =============== =============== ===============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE - INSTITUTIONAL CLASS $10.20 $10.23 $10.20
============= =============== ===============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -
RETAIL CLASS $10.22 $10.22
=============== ===============
MAXIMUM OFFERING PRICE PER SHARE - RETAIL CLASS
($10.22 / 95.50%) $10.70 $10.70
=============== ===============
72
ARK PENNSYLVANIA TAX FREE PORTFOLIO
PRO FORMA COMBINING STATEMENT OF OPERATIONS (000) (Unaudited)
FOR THE SIX MONTHS ENDED OCTOBER 31, 1997
--------------- ------------------- ----------- --------------------
Marketvest
Pennsylvania
Intermediate ARK Pennsylvania ARK Pennsylvania
Municipal Tax-Free Proforma Tax-Free
Fund Portfolio Ajustments Portfolio
--------------- ------------------- ------------ --------------------
INVESTMENT INCOME:
Interest 5,475 660 6,135
--------------- ----------------- --------------------
Total Investment Income 5,475 660 6,135
--------------- ----------------- --------------------
EXPENSES:
Administrator Fees 161 16 (23) (b) 154
Less: Waiver of Administrator Fees (49) - 49 (b) -
Investment Advisory Fees 802 63 (94) (b) 771
Less: Waiver of Investment Advisory Fees (160) (15) 175 (b) -
Transfer Agency Fees 11 - 11
Custodian Fees 14 5 19
Professional Fees 10 3 13
Registration Fees 8 1 9
Distribution Fees - Retail Class 3 3
Printing Fees 5 - (1) (c) 4
Trustee Fees 3 - 3
Amortization of Deferred Organization Costs 1 (1) (d) -
Miscellaneous Fees 50 1 (5) (c) 46
Shareholder Servicing Fees - Retail Class 1 1
Less: Waiver of Shareholder Servicing
Fees - Retail Class (1) (1)
--------------- ----------------- -------- --------------------
Total Expenses 855 79 100 1,034
--------------- ----------------- -------- --------------------
Net Investment Income (Loss) 4,620 581 (100) 5,101
--------------- ----------------- -------- --------------------
Net realized Gain (Loss) on Investments 1,027 11 1,038
Net Change in Unrealized Appreciation
(Depreciation) on Investments 4,436 738 5,174
--------------- ----------------- -------- --------------------
Net Realized and Unrealized Gain (Loss)
on Investments 5,463 749 - 6,212
--------------- ----------------- -------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 10,083 1,330 (100) 11,313
=============== ================= ======== ====================
(1) Commenced operations on November 18, 1996.
73
ARK PENNSYLVANIA TAX FREE PORTFOLIO
Notes To Pro Forma Financial Statements
(Unaudited)
1. BASIS OF COMBINATION
The unaudited Pro Forma Combining Statements of Assets and Liabilities, Pro
Forma Combining Statements of Operations and Pro Forma Combining Schedule of
Investments give effect to the proposed acquisition of the Marketvest
Pennsylvania Intermediate Municipal Bond Fund (the "Marketvest Fund") by the ARK
Pennsylvania Tax Free Portfolio (the ARK Fund). The proposed acquisition will
be accounted for by the method of accounting for tax-free mergers of investment
companies (sometimes referred to as the pooling without restatement method). The
acquisition will be accomplished by an exchange of all assets and liabilities of
the Marketvest Fund in exchange for Institutional Class shares of the ARK Fund.
The pro forma combining statements should be read in conjunction with the
historical financial statements of the constituent funds and the notes thereto
which are incorporated by reference in the Statement of Additional Information.
The ARK Pennsylvania Tax Free Portfolio is a portfolio offered by ARK Funds, an
open-end, management investment company registered under the investment Company
Act of 1940, as amended. The MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL
BOND FUND is a portfolio offered by Marketvest Funds an open-end, management
investment company also registered under the investment Company Act of 1940, as
amended.
PRO FORMA ADJUSTMENTS:
a) The pro forma combining statements of assets and liabilities
assumes the issuance of additional shares of the
Institutional Class of the ARK Fund as if the reorganization
were to have taken place on October 31, 1997 and is
based on the net asset value of the acquiring
fund. In addition, because the Marketvest Fund is the
surviving fund for accounting purposes, the pro forma
adjustments also reflect a reverse stock split of ARK Fund
shares that will take place simultaneous to the merger so as
to ensure that the NAV per share that carries forward for
historical reporting purposes is the NAV per share of the
Marketvest Fund at the time of the merger.
b) The pro forma adjustments to investment advisory fees
(including waivers) and administrative fees (including
waivers) reflect the difference in fees charged by the ARK
Fund based upon the effective fee schedule.
c) The pro forma adjustments to printing expenses and
miscellaneous expenses reflect the expected savings due to
the combination of the funds.
d) The pro forma adjustments to amortization of deferred
organization costs reflects the effect of the writeoff of
the asset and reimbursement to the fund by First National
Bank of Maryland.
74
ARK FUNDS
CROSS REFERENCE SHEET
PART C
Item No. Heading
- -------- -------
15. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . Indemnification
16. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibits
17. Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . Undertakings
75
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article VIII of the Agreement and Declaration of Trust filed as Exhibit 1
to the Registration Statement is incorporated herein by reference. The
Registrant participates in a group liability policy under which the Registrant
and its trustees, officers and affiliated persons are insured against certain
liabilities.
ITEM 16. EXHIBITS
(1) (a) Declaration of Trust dated October 22, 1992 is
incorporated by reference to Exhibit 1 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-53690) ("Form N-1A").
(b) Amended and Restated Declaration of Trust dated
March 19, 1993 is incorporated by reference to
Exhibit 1(b) to Form N-1A.
(c) Supplement dated March 23, 1993 to the Amended and
Restated Declaration of Trust dated March 19, 1993
is incorporated by reference to Exhibit 1(c) to
Form N-1A.
(2) By-Laws of the Registrant are incorporated by
reference to Exhibit 1(d) to Form N-1A.
(3) Not applicable.
(4) Agreement and Plan of Reorganization is included in
Part A.
(5) Not applicable.
(6) (a) Investment Advisory Agreement dated July 13, 1995,
between the Registrant and Allied Investment
Advisors, Inc. is incorporated by reference to
Exhibit 1(d) to Form N-1A.
(b) Investment Advisory Agreement between the Registrant
and Allied Investment Advisors, Inc.(relating to the
Acquiring Funds which are shell portfolios) is
incorporated by reference to Exhibit 5 to Form N-1A.
76
(7) Distribution Agreement dated November 1, 1995,
between the Registrant and SEI Financial Services
Company is incorporated herein by reference to
Exhibit 6(a) to Form N-1A.
(8) Not applicable.
(9) Custody Agreement dated as of April 1, 1997,
between the Registrant and FMB Trust Company,
National Association is incorporated herein by
reference to Exhibit 8 to Form N-1A.
(10) (a) Rule 18f-3 Plan is incorporated herein by reference
to Exhibit 18 to Form N-1A.
(b) Shareholder Services Plan for Institutional Class
Shares is incorporated by reference to Exhibit
15(c) to Form N-1A.
(11) Opinion and consent of legal counsel is
incorporated herein by reference to Registrant's
Form 24f-2 Notices filed with the SEC.
(12) Opinion and consent of Piper & Marbury L.L.P. as to
tax matters.*
(13) (a) Administration Agreement dated November 1, 1995,
between the Registrant and SEI Financial
Management Corporation is incorporated herein by
reference to Exhibit 6(b) to Form N-1A.
(b) Sub-Administration Agreement dated January 1, 1998,
between SEI Investments Management Corporation and
FMB Trust Company, National Association is
incorporated herein by reference to Exhibit 9 to
Form N-1A.
(c) Transfer Agency and Service Agreement dated
November 1, 1995, between the Registrant and SEI
Financial Management Corporation is incorporated
herein by reference to Exhibit 9 to Form N-1A.
(14) (a) Consent of KPMG Peat Marwick LLP, independent
auditors of the Registrant.**
(b) Consent of Ernst & Young LLP, independent auditors
of Marketvest Funds.**
(15) Not applicable.
(16) Powers of Attorney of Trustees of the Registrant
are incorporated by reference to Form N-1A.
- 2 -
77
(17) (a) Prospectus of the Registrant is incorporated herein
by reference to Registrant's Post-Effective
Amendment No. 17 to Form N-1A filed with the SEC on
February 6, 1998.
(b) Statement of Additional Information of the
Registrant is incorporated herein by reference to
Registrant's Post-Effective Amendment No. 17 to
Form N-1A filed with the SEC on February 6, 1998.
(c) Combined Prospectus for the Marketvest Group of
Funds dated June 30, 1997 is incorporated herein by
reference to Post-Effective Amendment No. 4 to
Marketvest Funds' Registration Statement on
Form N-1A filed with the SEC on June 26, 1997.
(d) Combined Statement of Additional Information of the
Marketvest Group of Funds dated June 30, 1997 is
incorporated herein by reference to Post-Effective
Amendment No. 4 to Marketvest Funds' Registration
Statement on Form N-1A filed with the SEC on
June 26, 1997.
(e) Annual Report to Shareholders of the Registrant for
the fiscal year ended April 30, 1997 is
incorporated herein by reference to Registrant's
filing with the SEC pursuant to Rule 30b-2 on June
27, 1997.
(f) Semi-Annual Report to Shareholders of the Registrant
for the six-months ending October 31, 1997 is
incorporated herein by reference to Registrant's
filing with the SEC pursuant to Rule 30b-2 on
December 29, 1997.
(g) Combined Annual Report to Shareholders of the
Marketvest Group of Funds for the fiscal year ended
February 28, 1997 is incorporated herein by
reference to Marketvest Funds' filing with the SEC
pursuant to Rule 30b-2 on April 21, 1997.
(h) Combined Semi-Annual Report to Shareholders of the
Marketvest Group of Funds for the six-months ended
August 31, 1997 is incorporated herein by reference
to Marketvest Funds' filing filed with the SEC
pursuant to Rule 30b-2 on October 30, 1997.
* To be filed by amendment.
** Filed herewith.
- 3 -
78
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of them.
- 4 -
79
SIGNATURES
As required by the Securities Act of 1933, this Pre-Effective Amendment No.
1 to the Registration Statement has been signed on behalf of the Registrant in
the City of Baltimore, and State of Maryland on the 12th day of February, 1998.
ARK FUNDS
By: /s/ David D. Downes
-----------------------------------------
David D. Downes, President
As required by the Securities Act of 1933, this Pre-Effective Amendment
No. 1 to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
/s/ David D. Downes
- ------------------------------- President (principal executive officer) and
David D. Downes Trustee
/s/ James F. Volk
- ------------------------------- Treasurer, Controller and Chief Financial Officer
James F. Volk (principal financial and accounting officer)
*
- ------------------------------- Trustee
William H. Cowie, Jr.
*
- ------------------------------- Trustee
Charlotte Kerr
*
- ------------------------------- Trustee
George K. Reynolds, III
*
- ------------------------------- Trustee
Thomas Schweizer
* By: /s/ Alan C. Porter February 12, 1998
-------------------------
Alan C. Porter
Attorney-in-Fact
An original power-of-attorney authorizing Alan C. Porter to execute amendments
to this Registration Statement for each trustee of the Registrant on whose
behalf this amendment to the Registration Statement is filed has been executed
and filed with the Securities and Exchange Commission.