ARK FUNDS (LOGO)
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ANNUAL REPORT APRIL 30, 1996
U.S. Treasury Money Market Portfolio
U.S. Government Money Market Portfolio
Money Market Portfolio
Tax-Free Money Market Portfolio
Short-Term Treasury Portfolio
Income Portfolio
Growth and Income Portfolio
Blue Chip Equity Portfolio
Capital Growth Portfolio
Special Equity Portfolio
International Equity Portfolio
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Table of Contents
Letter to Shareholders 1
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Money Market Overview 2
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Management's Discussion & Analysis 5
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Independent Auditors' Report 13
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Statement of Net Assets 14
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Statement of Operations 36
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Statement of Changes in Net Assets 38
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Financial Highlights 40
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Notes to Financial Statements 42
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Notice to Shareholders 47
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This report and the financial statements contained herein are submitted for the
general information of the shareholders of the ARK Funds. The report is not
authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus for each of the Portfolios included.
Shares in the Portfolios are not deposits or obligations of, or guaranteed or
endorsed by, The First National Bank of Maryland or any of its affiliates, and
not insured by the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other government agency. Investing in the shares involves
investment risks including the possible loss of principal amount invested.
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APRIL 30, 1996
ARK FUNDS (LOGO)
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A picture of Jennifer W. Lambdin
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LETTER TO SHAREHOLDERS
DEAR ARK FUNDS SHAREHOLDER:
We are pleased to provide you with the ARK Funds Annual Report for the
fiscal year ended April 30, 1996. Our third year of operation, this fiscal year
proved to be a successful one for ARK Funds as assets under management increased
61% from the previous year, surpassing $2.3 billion.
ARK Funds continued to grow, not only in terms of assets, but also in
terms of new products and services. New product introductions included the
introduction of the Institutional Class of the Short-Term Treasury, Blue Chip
Equity and Special Equity Portfolios, the introduction of the Institutional II
Class of the U.S. Treasury Money Market, U.S. Government Money Market, Money
Market, and Tax-Free Money Market Portfolios, and the introduction of the Retail
Class of the U.S. Treasury Money Market Portfolio. In addition, we added a
checkwriting feature to our Retail Class money market Portfolios.
To review the past year in economic terms, the data indicates that 1995
was one of the best years for the U.S. economy since the 1950s. Moderate growth,
very low inflation, and declining interest rates set the stage for financial
markets that hit new highs. Gross Domestic Product numbers for 1995 indicate
that the economy grew at a modest but acceptable rate of 2%. Within this
environment, corporate profit growth exceeded expectations and owners of
financial assets were rewarded with favorable returns.
Throughout 1996, we should see a continuation of moderate economic
growth. Although inflation remains relatively benign, recent trends raise a few
cautionary flags. After a year that saw the Consumer Price Index increase by
2.8%, there are signs that this measure of inflation might be above 3% in 1996.
Commodity prices are up, unemployment is down and wages could move higher later
in the year. All of this bears monitoring in an important election year.
Looking forward, ARK Funds will continue to establish its presence as
First Maryland Bancorp's proprietary mutual fund family by offering a variety of
new products and services. We at ARK Funds would like to take this opportunity
to thank you for choosing ARK Funds as a means to meet your investment needs. We
look forward to helping you meet your financial goals in the years ahead.
(/S/ JENNIFER W. LAMBDIN
JENNIFER W. LAMBDIN, CFA
CHIEF INVESTMENT OFFICER
FIRST NATIONAL BANK OF MARYLAND
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MONEY MARKET OVERVIEW
This past year was a very exciting and successful year as the ARK Funds
money market Portfolios continued to outperform the appropriate IBC/Donoghues
averages, and assets topped $1.9 billion. We also introduced the U.S. Treasury
Money Market Portfolio to our retail accounts. The environment for money market
investors was dominated by the Federal Reserve easing monetary policy in July of
1995 for the first time since September of 1992. Throughout the year, the money
market Portfolios continued to meet the objectives of providing preservation of
principal, daily liquidity and high current income. To achieve these objectives,
we actively manage the Portfolios utilizing a conservative and
highly-disciplined relative value approach that emphasizes security selection.
To provide a high level of current income, we identify market
inefficiencies and short-lived trading opportunities and seek to take advantage
of these opportunities through our active management style. To provide for
preservation of principal, our credit evaluation process focuses on the
quantitative and qualitative factors that highlight the issuer's ability to
maintain its credit rating and leading industry position. Corporate issuers are
approved, monitored and frequently reviewed by our Investment Policy Committee
to ensure that high credit quality is maintained. To provide for daily
liquidity, we determine the appropriate average maturity of the Portfolios by
considering our shareholders' liquidity needs, expected monetary policy, the
yield curve and implied forward interest rate analysis.
The money market Portfolios experienced a significant increase in
assets during the year. Total money market assets increased 55% to $1.9 billion
at fiscal year end. The U.S. Government Money Market Portfolio, which is rated
AAA by Standard & Poors Ratings Group and Aaa by Moody's Investors Service,
Inc., reached the $1 billion level.
The money market interest rate environment during 1995 was influenced
by the Federal Reserve's easing of monetary policy on three occasions: July and
December of 1995, and again in January of 1996. The change in policy was in
response to favorable inflation news and expectations for continued sluggish
economic growth. In response to this interest rate environment, our strategy was
to extend and maintain longer average maturities for each Portfolio during 1995.
However, during the first quarter of 1996, we began to shorten the average
maturity of each Portfolio as we did not agree with the consensus view of
expectations in the marketplace for the Federal Reserve to continue easing
monetary policy. The consensus view of money market investors exhibited a
dramatic shift in expectations starting in mid-February as economic statistics
revealed that the economy was growing at a faster pace than had been
anticipated. These events resulted in short-term interest rates rising by over
1/2 of 1 percent, as the yield on one-year Treasury bills increased from 4.8% to
5.45%. Our investment decisions regarding average maturity, portfolio structure
and security selection provided a highly competitive money market yield
consistently throughout the fiscal year. The Retail Class of the Tax-Free Money
Market Portfolio was included in THE WALL STREET JOURNAL'S Mutual Fund Scorecard
as one of the top performing money market funds as ranked by Lipper Analytical
Services Inc. for the 12 months ended February 29, 1996.
Looking forward, given the current uncertainty regarding monetary
policy, our strategy is to remain cautious while selectively purchasing
longer-dated higher-yielding securities. We will continue to actively manage the
money market Portfolios utilizing our conservative and highly-disciplined
relative value approach.
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APRIL 30, 1996
ARK FUNDS (LOGO)
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U.S. TREASURY MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE:
The U.S. Treasury Money Market Portfolio seeks to maximize current income while
providing liquidity and security of principal by investing in instruments which
are issued or guaranteed as to principal and interest by the U.S. government,
and thus constitute direct obligations of the United States. The Portfolio seeks
to maintain a constant net asset value of $1.00 per share, although there is no
guarantee that it will be able to do so.
THIRTY-DAY YIELD COMPARISON
A line graph depicting the thirty-day yield comparison between the ARK Funds
U.S.Treasury Money Market Portfolio Institutional Class and Donoghue's Money
Fund Average: 100% U.S. Treasury from May 31, 1995 through April 30, 1996.
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ARK Funds U.S. Treasury Donoghue's Money
Money Market Portfolio Fund Average;
Institutional Class 100% U.S. Treasury
5/31/95 5.56 5.24
6/30/95 5.52 5.18
7/31/95 5.37 5.08
8/31/95 5.31 5.02
9/30/95 5.20 4.98
10/31/95 5.18 4.90
11/30/95 5.27 4.90
12/31/95 5.20 4.91
1/31/96 4.99 4.87
2/29/96 4.94 4.61
3/31/96 4.84 4.50
4/30/96 4.82 4.52
MATURITY DISTRIBUTION AS OF APRIL 30, 1996
A bar chart depicting the maturity distribution as of April 30, 1996 for the
ARK Funds U.S. Treasury Money Market Portfolio.
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1-7 Days 11%
8-14 Days 8%
15-30 Days 16%
31-60 Days 7%
61-90 Days 11%
91-180 Days 40%
181-397 Days 7%
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE:
The U.S. Government Money Market Portfolio seeks to maximize current income
while providing security of principal by investing in instruments which are
issued or guaranteed as to principal and interest by the U.S. government or any
of its agencies or instrumentalities, or in repurchase agreements backed by such
instruments. The Portfolio seeks to maintain a constant net asset value of $1.00
per share, although there is no guarantee that it will be able to do so.
THIRTY-DAY YIELD COMPARISON
A line graph depicting the thirty-day yield comparison between the ARK Funds
U.S. Government Money Market Portfolio Institutional Class and Donoghue's Money
Fund Average: Government Only-Institutional Only from May 31, 1995 through
April 30, 1996.
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ARK Funds U.S. Government Donoghue's Money
Money Market Portfolio Fund Average;
Institutional Class Government-Only Institutional-Only
5/31/95 5.85 5.65
6/30/95 5.81 5.62
7/31/95 5.65 5.49
8/31/95 5.57 5.41
9/30/95 5.60 5.39
10/31/95 5.57 5.35
11/30/95 5.58 5.37
12/31/95 5.55 5.33
1/31/96 5.38 4.88
2/29/96 5.11 4.80
3/31/96 5.07 4.91
4/30/96 5.00 4.90
MATURITY DISTRIBUTION AS OF APRIL 30, 1996
A bar chart depicting the maturity distribution as of April 30, 1996 for the
ARK Funds U.S. Government Money Market Portfolio.
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1-7 Days 69%
8-14 Days 2%
15-30 Days 3%
31-60 Days 3%
61-90 Days 3%
91-180 Days 6%
181-397 Days 14%
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MONEY MARKET OVERVIEW (CONCLUDED)
MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE:
The Money Market Portfolio seeks to maximize current income while providing
liquidity and security of principal by investing in a broad range of short-term,
high-quality U.S. dollar-denominated debt securities. The Portfolio seeks to
maintain a constant net asset value of $1.00 per share, although there is no
guarantee that it will be able to do so.
THIRTY-DAY YIELD COMPARISON
A line graph depicting the thirty-day yield comparison among the ARK Funds
Money Market Portfolio Institutional Class, Donoghue's Money Fund Average:
First Tier Institutional Only, ARK Funds Money Market Portfolio Retail Class,
and Donoghue's Money Fund Average: First Tier from May 31, 1995 through
April 30, 1996.
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ARK Funds Donoghue's Money Fund
Money Market Portfolio Average; First Tier
Institutional Class Institutional Only
5/31/95 5.99 5.81
6/30/95 5.95 5.77
7/31/95 5.85 5.65
8/31/95 5.77 5.27
9/30/95 5.73 5.25
10/31/95 5.71 5.51
11/30/95 5.70 5.51
12/31/95 5.63 5.49
1/31/96 5.50 5.36
2/29/96 5.25 5.12
3/31/96 5.18 5.04
4/30/96 5.13 5.03
ARK Funds Donoghue's
Money Market Portfolio Money Fund Average;
Retail Class First Tier
5/31/95 5.64 5.47
6/30/95 5.61 5.43
7/31/95 5.51 5.33
8/31/95 5.43 5.23
9/30/95 5.40 5.19
10/31/95 5.38 5.17
11/30/95 5.39 5.17
12/31/95 5.32 5.16
1/31/96 5.19 5.03
2/29/96 4.94 4.80
3/31/96 4.87 4.69
4/30/96 4.82 4.68
MATURITY DISTRIBUTION AS OF APRIL 30, 1996
A bar chart depicting the maturity distribution as of April 30, 1996 for the
ARK Funds Money Market Portfolio.
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1-7 Days 36%
8-14 Days 12%
15-30 Days 8%
31-60 Days 13%
61-90 Days 5%
91-180 Days 13%
181-397 Days 13%
TAX-FREE MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE:
The Tax-Free Money Market Portfolio seeks to provide a high level of interest
income by investing primarily in high-quality municipal obligations that are
exempt from federal income taxes. The Portfolio seeks to maintain a constant
net asset value of $1.00 per share, although there is no guarantee that it will
be able to do so.
THIRTY-DAY YIELD COMPARISON
A line graph depicting the thirty-day yield comparison among the ARK Funds
Tax-Free Money Market Portfolio Institutional Class, Donoghue's Tax-Free Money
Fund Average: Institutional Only, ARK Funds Tax-Free Money Market Portfolio
Retail Class, and Donoghue's Tax-Free Money Fund Average: Stockbroker & General
Purpose from May 31, 1995 through April 30, 1996.
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ARK Funds Tax-Free Donoghue's Tax-Free
Money Market Portfolio Money Fund Average;
Institutional Class Institutional Only
5/31/95 4.25 3.95
6/30/95 3.69 3.54
7/31/95 3.47 3.33
8/31/95 3.56 3.44
9/30/95 3.64 3.51
10/31/95 3.64 3.48
11/30/95 3.66 3.51
12/31/95 3.91 3.75
1/31/96 3.30 3.18
2/29/96 3.19 3.05
3/31/96 3.08 3.00
4/30/96 3.30 3.18
ARK Funds Tax-Free Donoghue's Tax-Free
Money Market Portfolio Money Fund Average;
Retail Class Stockbroker & General Purpose
5/31/95 4.19 3.69
6/30/95 3.63 3.28
7/31/95 3.41 3.07
8/31/95 3.50 3.18
9/30/95 3.59 3.24
10/31/95 3.59 3.20
11/30/95 3.60 3.24
12/31/95 3.86 3.48
1/31/96 3.24 2.93
2/29/96 3.08 2.81
3/31/96 2.92 2.75
4/30/96 3.10 2.93
MATURITY DISTRIBUTION AS OF APRIL 30, 1996
A bar chart depicting the maturity distribution as of April 30, 1996 for the
ARK Funds Tax-Free Money Market Portfolio.
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1-7 Days 55%
8-14 Days 3%
15-30 Days 5%
31-60 Days 14%
61-90 Days 11%
91-180 Days 6%
181-397 Days 6%
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APRIL 30, 1996
ARK FUNDS (LOGO)
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MANAGEMENT'S DISCUSSION & ANALYSIS
INCOME PORTFOLIO
INVESTMENT OBJECTIVE:
The Income Portfolio seeks to provide a high level of current income with a
secondary objective of capital growth, consistent with reasonable risk, by
investing primarily in a broad range of fixed-income securities. The Portfolio
seeks to maintain an average maturity between five and ten years.
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $100,000 in the ARK Income
Portfolio, Institutional Class from July 31, 1993 through April 30, 1996 as
compared with the growth of $100,000 investment in the Lehman Brothers
Aggregate Bond Index and the Lipper Intermediate Investment Grade Debt Funds
Average.
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ARK Funds Lipper Intermediate
Income Portfolio, Lehman Brothers Investment Grade Debt
Institutional Class Aggregate Bond Index Funds Average
7/31/93 100,000 100,000 100,000
4/30/94 99,863 98,354 98,536
4/30/95 106,355 105,563 104,448
4/30/96 115,353 114,673 112,490
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the ARK Income
Portfolio, Retail Class from April 30, 1994 through April 30, 1996 as
compared with the growth of $10,000 investment in the Lehman Brothers Aggregate
Bond Index and the Lipper Intermediate Investment Grade Debt Funds Average.
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ARK Funds Lipper Intermediate
Income Portfolio, Lehman Brothers Investment Grade Debt
Retail Class Aggregate Bond Index Funds Average
4/30/94 10,000 10,000 10,000
4/30/95 10,623 10,733 10,600
4/30/96 11,488 11,659 11,416
Institutional Class Retail Class
One Year Life of Portfolio One Year Life of Portfolio
Cumulative
Total Returns 8.46% 15.45% 8.14% 14.65%
Average Annual
Total Returns 8.46% 5.29% 8.14% 6.90%
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning July 16, 1993. Retail Class
shares were offered beginning April 12, 1994. Performance for the Retail Class
excludes the maximum 4.50% sales charge which has been waived since inception.
The performance of the Lehman Brothers Aggregate Bond Index and the Lipper
Intermediate Investment Grade Debt Funds Average does not include annual
operating expenses which are incurred by the Portfolio. The performance
reflected in the graphs begins at July 31, 1993 for the Institutional Class and
at April 30, 1994 for the Retail Class. The performance reflected in the table
begins at the inception dates.
PORTFOLIO REVIEW AND OUTLOOK
INCOME PORTFOLIO
The Institutional Class of the Income Portfolio returned 8.46% and the
Retail Class returned 8.14% from May 1, 1995 to April 30, 1996, compared to
8.63% for the Lehman Brothers Aggregate Bond Index. Since inception (7/16/93),
the Institutional Class has had a cumulative total return of 15.45% versus
14.44% for the Lehman Brothers Aggregate Bond Index and the Retail Class has had
a cumulative total return of 14.65% since its inception (4/12/94).
The bond market had double digit returns over the past year as the
economy wallowed in a slow growth, low inflation environment, and interest rates
fell dramatically during 1995. The Federal Reserve's monetary policy was
stimulative throughout the year easing short-term interest rates three times in
response to continuing weakness in the economy and lower interest rates around
the globe. Until most recently, inflation has remained under control,
contributing to the market's slow decline for most of 1995. A fourth quarter
1995 government shutdown due to the lack of progress on federal budget
negotiations lead to a cut-off in the flow of economic data, leaving bond market
participants in the lurch as to the actual strength of the economy. Since
economic data has begun to flow again, remarkably strong jobs growth and a
run-up in some commodities prices, especially oil, has caused bond investors to
fear that the economy is in fact heating up and the "soft landing" scenario has
faded. Interest rates have risen almost 1% over the first four months of 1996.
Bond investors' attention is now focused on the underlying strength in
the economy. It will take a series of weak economic reports to alleviate the
anxiety that is now entrenched in the market. The Federal Reserve will most
likely wait for additional economic data before proceeding with any changes to
monetary policy, and bonds should continue to trade in a range between
63/4-73/8% until more data can be deciphered. We continue to believe that
economic growth will be temperate and that infla-
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MANAGEMENT'S DISCUSSION & ANALYSIS (CONTINUED)
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INCOME PORTFOLFIO (CONTINUED)
tion will be modest. We expect congressional focus to remain on the race for the
White House, not on budget negotiations, and expect this to contribute to
volatility in the bond market.
We were constructive on the bond market for most of the Portfolio's
fiscal year, positioned with a slightly longer duration than our benchmark index
taking advantage of the decline in interest rates. The Portfolio's exposure to
mortgage-backed securities and select corporate issuers boosted performance,
adding incremental return with contained risk. At current levels, bonds appear
to be fairly valued and we have reduced duration to a neutral stance in relation
to the index. We continue to regard mortgage-backed securities as providing
strong relative returns given the environment of a neutral to bear market;
therefore, we maintain a slight overweighting in this sector. We view the
corporate sector as neutral, but believe that there are still specific
opportunities. We believe that the upcoming year will be an "earn your coupon"
year at best, and therefore, sector and credit decisions will be important
factors in determining returns.
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GROWTH AND INCOME PORTFOLIO
INVESTMENT OBJECTIVE:
The investment objective of the Growth and Income Portfolio is to seek long-term
total returns from both capital appreciation and current income. While the
Portfolio does attempt to provide current income, its focus is on growth of
principal. The Portfolio seeks to achieve its objective by investing in a
diversified mix of stocks and bonds. Our equity security selection process is
derived from a bottom-up approach that focuses on a stock's price/earnings (P/E)
ratio relative to the projected long-term growth rate. Using a combination of
large, medium, and small capitalization companies, we try to maintain a
diversified portfolio with broad industry representation. Our fixed-income
strategy seeks to achieve superior returns by actively managing the maturity and
sector structure of the bonds in which the Portfolio invests.
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $100,000 in the ARK Growth and
Income Portfolio, Institutional Class from July 31, 1993 through April 30, 1996
as compared with the growth of $100,000 investment in the Lehman Brothers
Aggregate Bond Index, the Lipper Balanced Funds Average and the S&P 500
Composite Index.
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ARK Funds Growth and
Income Portfolio, S&P 500
Institutional Class Composite Index
7/31/93 100,000 100,000
4/30/94 103,770 102,690
4/30/95 107,660 120,600
4/30/96 130,164 157,032
Lipper Balanced Lehman Brothers
Funds Average Aggregate Bond Index
7/31/93 100,000 100,000
4/30/94 101,488 98,530
4/30/95 110,368 105,560
4/30/96 132,541 114,670
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the ARK Growth and
Income Portfolio, Retail Class from March 31, 1994 through April 30, 1996
as compared with the growth of $10,000 investment in the Lehman Brothers
Aggregate Bond Index, the Lipper Balanced Funds Average and the S&P 500
Composite Index.
[GRAPHIC OMITTED]
ARK Funds Growth and
Income Portfolio, S&P 500
Retail Class Composite Index
3/31/94 10,000 10,000
4/30/94 10,059 10,128
4/30/95 10,394 11,894
4/30/96 12,497 15,488
Lipper Balanced Lehman Brothers
Funds Average Aggregate Bond Index
3/31/94 10,000 10,000
4/30/94 10,017 9,920
4/30/95 10,894 10,647
4/30/96 13,082 11,566
Institutional Class Retail Class
One Year Life of Portfolio One Year Life of Portfolio
Cumulative
Total Returns 20.90% 29.90% 20.23% 19.32%
Average Annual
Total Returns 20.90% 9.83% 20.23% 8.60%
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning July 16, 1993. Retail Class
shares were offered beginning March 9, 1994. Performance for the Retail Class
excludes the maximum 4.75% sales charge which has been waived since inception.
The performance of the Lehman Brothers Aggregate Bond Index, the Lipper Balanced
Funds Average and S&P 500 Composite Index does not include annual operating
expenses which are incurred by the Portfolio. The performance reflected in the
graphs begins at July 31, 1993 for the Institutional Class and at March 31, 1994
for the Retail Class. The performance reflected in the table begins at the
inception dates.
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APRIL 30, 1996
ARK FUNDS (LOGO)
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PORTFOLIO REVIEW AND OUTLOOK
GROWTH AND INCOME PORTFOLIO
The investment markets provided some dissappointments but many rewards
during the fiscal year ended April 30, 1996. During the period, stocks
experienced one of their best runs, lead particularly by small stocks, and
specifically technology and health care issues. The bond market showed a bit of
the Dr. Jekyll and Mr. Hyde syndrome. Interest rates fell for most of 1995, as
the economy slowed and inflation moderated. The result was a very powerful rally
in bond prices. However, sentiment, and performance, has reversed for
fixed-income investments so far in 1996, with yields and prices reversing much
of last year's moves.
In this ever-changing environment, the Growth and Income Portfolio was
able to generate superior returns. In fact, the results for the period exceed
those for the Lipper Balanced Fund median. This outperformance was achieved
because of three factors. First, our asset allocation, which is a very important
strategic decision, emphasized stocks over bonds and cash for the entire period.
This posture may change in the coming months, as we explain later. Second, our
bond strategy positioned our fixed-income investments to best benefit from the
powerful rally last year. Third, our equity investments were centered in the
right companies within the right industries, namely technology, healthcare,
finance, and consumer cyclical.
Looking forward, the Portfolio will continue to seek superior returns
while controlling risk through a balanced, diversified investment strategy.
Returns have been the main focus of investors over the past 12 to 15 months. We
have a hunch that risk will begin to emerge again as a key consideration,
though, which would cause us to adjust our stock/bond/cash mix more towards
bonds and cash.
Looking forward, there will be several factors that will impact the
investment markets, and our investment strategy. The strength of the economy,
the direction of interest rates, and the trend of inflation will continue to be
prime considerations. However, this year will also add political uncertainty. We
continue to believe that inflation will remain controlled and that the economy
will muddle along at a rate less than that experienced in the first quarter of
1996. Within this environment, interest rates should be fairly stable, and
equity prices should move higher, albeit at a much more moderate pace than we
have experienced over the last year. Although we remain constructive on U.S.
equities, keep in mind that stocks correct 10% even during bull market runs.
There has not been such a correction since 1990, so the probability of a
pullback has increased.
In general, our stock selection process will continue to focus on
companies with a dominant market position, strong earnings growth potential, and
conservative valuation characteristics. In a world where boundaries are falling,
not only across borders, but across industries and technologies, we are excited
by the changes and opportunities that we see emerging and will seek to position
the Portfolio so that our shareholders benefit.
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MANAGEMENT'S DISCUSSION & ANALYSIS (CONTINUED)
CAPITAL GROWTH PORTFOLIO
INVESTMENT OBJECTIVE:
The investment objective of the Capital Growth Portfolio is to provide long-term
capital appreciation. The Portfolio invests primarily in common stock and
securities convertible into common stock. The Portfolio's adviser seeks to
identify securities of companies likely to consistently produce above-average
earnings growth. The stocks of these companies are purchased with the intention
of holding them for the long-term, although this is not required or guaranteed.
INSTITUTIONAL CLASS: VALUE OF A $100, 000 INVESTMENT
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $100,000 in the ARK Capital
Growth Portfolio, Institutional Class from July 31, 1993 through April 30, 1996
as compared with the growth of $100,000 investment in the S&P 500 Composite
Index.
ARK Funds Capital
Growth Fund, S&P 500
Institutional Class Composite Index
7/31/93 100,000 100,000
4/30/94 102,876 102,690
4/30/95 106,219 120,599
4/30/96 131,308 157,032
RETAIL CLASS: VALUE OF A $10,000 INVESTMENT
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the ARK Capital
Growth Portfolio, Retail Class from March 31, 1994 through April 30, 1996 as
compared with the growth of $10,000 investment in the S&P 500 Composite Index.
[GRAPHIC OMITTED]
ARK Funds Capital
Growth Portfolio, S&P 500
Retail Class Composite Index
3/31/94 10,000 10,000
4/30/94 9,951 10,128
4/30/95 10,224 11,894
4/30/96 12,600 15,488
Institutional Class Retail Class
One Year Life of Portfolio One Year Life of Portfolio
Cumulative
Total Returns 23.62% 31.04% 23.24% 18.36%
Average Annual
Total Returns 23.62% 10.18% 23.24% 8.18%
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning July 16, 1993. Retail Class
shares were offered beginning March 9, 1994. Performance for the Retail Class
excludes the maximum 4.75% sales charge which has been waived since inception.
The performance of the S&P 500 Composite Index does not include annual operating
expenses which are incurred by the Portfolio. The performance reflected in the
graphs begins at July 31, 1993 for the Institutional Class and at March 31, 1994
for the Retail Class. The performance reflected in the table begins at the
inception dates.
================================================================================
PORTFOLIO REVIEW AND OUTLOOK
CAPITAL GROWTH PORTFOLIO
The fiscal year ended April 30, 1996 rewarded Portfolio investors
patient enough to wait out the disappointing markets of 1994. The Portfolio's
investments were particularly aided by a very strong U.S. equity market which
boasted calendar year results among the best this century. Good performance was
accentuated by below average risk in the markets as measured by the low number
of days where the market changed by 1% or more.
As good as the past 12 months were for Portfolio investors, as of
February 1996 the Portfolio is guided by a new manager. However, the objective
of growth through capital appreciation continues unabated. The primary focus is
on individual stock selection that focuses on earnings growth. No doubt, this
type of selection process leads to emphasis of traditional growth companies in
sectors such as technology, healthcare, finance and business services as well as
certain consumer areas. Particular attention is paid to valuation parameters for
each selection in determining purchases and sales.
Assisting our analysis is an assessment of the broad economic picture.
During 1996, the most important events will be the Presidential election and
platforms taken by the candidates as well as the tone of the Federal Reserve's
monetary policy. As of the date of this printing, we still believe that the slow
growth of the U.S. economy will continue into 1997. The Federal Reserve, which
was so instrumental in fueling 1995's stellar stock and bond markets through
expansionary monetary policy, will most likely become a bystander for most of
1996. Lastly, we expect several events will impact certain industries as 1996
progresses--the Olympics will affect the consumer markets, the rise of the U.S.
dollar will affect multinational companies, and the maturity of the business
cycle will affect capital equipment spending.
As the market digests its most recent gains, we believe that the recent
sale of traditional growth securities offers the Portfolio an opportunity to
purchase selected investments that should perform well in this economic
scenario.
- -------
8
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
SPECIAL EQUITY PORTFOLIO
INVESTMENT OBJECTIVE:
The Special Equity Portfolio seeks to provide capital appreciation by investing
primarily in securities of (1) a company with a market capitalization of $1.2
billion or less at the time of the Portfolio's investment and deemed by the
portfolio manager to have above average growth potential; or (2) a company
experiencing a "special situation"; that is, an unusual and possibly
non-repetitive development taking place in the company.
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $100,000 in the ARK Special
EquityPortfolio, Institutional Class from July 31, 1995 through April 30, 1996
as compared with the growth of $100,000 investment in the Frank Russel 2000
Index.
[GRAPHIC OMITTED]
ARK Funds Special
Equity Portfolio, Frank Russell
Institutional Class 2000 Index
7/31/95 100,000 100,000
4/30/96 137,992 117,578
Institutional Class
One Year Life of Portfolio
Cumulative
Total Returns N/A 48.34%
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning July 13, 1995. The performance
of the Frank Russell 2000 Index does not include annual operating expenses which
are incurred by the Portfolio. The performance reflected in the graph begins at
July 31, 1995. The performance reflected in the table begins at the inception
date.
================================================================================
Portfolio Review and Outlook
Special Equity Portfolio
The Institutional Class of the Special Equity Portfolio was established
on July 13, 1995, and for its first fiscal period ended April 30, 1996,
exhibited superior performance. The 48.34% return from inception was ahead of
both large and small stock equity indexes (Russell 2000 up 19.6%) as well as any
representative average of small capitalization funds. Key to the Portfolio's
success was overweightings in technology, both hardware and software, as well as
medical industry groups.
Semiconductors and semiconductor equipment stocks led the technology
market through the first half of 1995, but self-destructed during the fourth
quarter as "chip" prices began to fall due to high inventory levels. This group,
however, was replaced by computer software companies, particularly those
involved in client/server applications. The really big excitement came from
Internet access stocks such as Netscape, UUNET Technologies and Spyglass. The
Portfolio also participated in several IPOs. Telecommunication issues were also
very rewarding, and such stocks as Pairgain, Teltrend and Aspect
Telecommunications provided strong leadership.
While large capitalization stocks generally outperformed throughout
1994 and 1995, investor interest began to rotate more into smaller
capitalization issues early in 1996. Rotation was clearly evident among industry
groups, too, as the long neglected retailers and consumer non-durable stocks
began to move up. The Portfolio participated in
-------
9
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS (CONTINUED)
================================================================================
SPECIAL EQUITY PORTFOLFIO (CONTINUED)
this shift by establishing positions in Charming Shoppes (a special
situation), Gadzooks and Dollar Tree Stores. Healthcare remained strong with
biotechnology represented by Neose Technologies and IDEC Pharmaceuticals.
Further emphasis will be placed on transaction processing service companies
since this is a key element in controlling business costs. Fair Isaac & Company
and Transaction Systems Architects currently represent the Portfolio in this
business segment.
The outlook for small cap investors in 1996 is, on the whole, positive
since investors continue to invest heavily in equity mutual funds, especially
aggressive growth and small company funds. This trend should help stabilize
small company funds although returns could be slowed by increased speculation
and a higher level of companies coming to the public market through IPOs. A
modestly more cautious strategy will be instituted coming into the summer. This
could include higher cash levels and the management of a generally lower
price/earnings ratio for the Portfolio.
Over the long run, the returns from small company growth stocks warrant
higher risk levels as investors will continue to pay a premium for consistent
revenue and earnings growth, which should be easier to attain with smaller
companies rather than larger multinational issues.
Given the strength of the U.S. dollar and possible negative currency
adjustment to net income for the large U.S. multinational corporations, we
believe that investors in small company funds should "stay the course" in 1996.
INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT OBJECTIVE
The investment objective of the International Equity Portfolio is to provide
long-term capital appreciation. The Portfolio invests primarily in a diversified
range of blue-chip equity securities drawn from the EAFE (Europe, Australia, Far
East) stock markets.
INSTITUTIONAL CLASS: VALUE OF A $100,000 INVESTMENT
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $100,000 in the ARK
International Equity Portfolio, Institutional Class from December 31, 1994
through April 30, 1996 as compared with the growth of $100,000 investment in
the Morgan Stanley MSCI EAFE Index.
[GRAPHIC OMITTED]
ARK Funds International
Equity Portfolio, Morgan Stanley
Institutional Class MSCI EAFE index
12/31/94 100,000 100,000
4/30/95 101,500 105,690
4/30/96 117,400 117,617
Past performance of the Portfolio is not predictive of future performance.
Institutional Class shares were offered beginning December 30, 1994. The
performance of the Morgan Stanley MSCI EAFE Index does not include annual
operating expenses which are incurred by the Portfolio. The performance
reflected in the graph begins at December 31, 1994. The performance reflected in
the table begins at the inception date.
================================================================================
PORTFOLIO REVIEW AND OUTLOOK
INTERNATIONAL EQUITY PORTFOLIO
International equity markets produced generally strong performances
over the 12-month period ended April 30, 1996, although returns to U.S.-based
investors were held back somewhat by the strength of the dollar, particularly
against the Japanese Yen. Over the period under review, the Portfolio produced a
total return of 15.66%,
- -------
10
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
================================================================================
INTERNATIONAL EQUITY PORTFOLFIO (CONTINUED)
compared with a total return of 11.7% on the MSCI EAFE Index.
In London, the stock market rose 21.3%, as measured by the FT All-Share
Index. As in the United States, a sluggish economy and falling inflation paved
the way for renewed interest rate cuts, with the Base Rate being reduced from
6.75% to 6.50% in December, with a further cut to 6.25% following early in the
new year. The most critical ingredient in the United Kingdom's strong
performance was the favorable technical situation prevailing in the stock
market. Thanks to a wave of takeovers, along with share buy-backs from some
companies and a general dearth of rights issues, the net supply of equity paper
available on the market contracted significantly, for the first time in many
years. Given a relatively strong cash flow into institutions, stock prices were
inevitably bid sharply upward. Looking ahead, it is unlikely that interest rates
will be cut any further, in the light of a recent modest uptick in inflationary
pressures, while political uncertainty related to the impending general election
may constrain equity returns somewhat over the coming months.
Continental European markets have also performed well, with a net rise
(in U.S. dollar terms) of 14.7% on the MSCI Europe Ex U.K. Index. Economic
sluggishness has been even more marked in Europe than in the U.S. or the U.K.,
especially in recent months. Unemployment in most countries has not fallen at
all from the 1993 recession levels, resulting in weak consumer demand, and most
governments are implementing very tight fiscal policies in an effort to meet the
qualification criteria for Economic and Monetary Union. As a result, interest
rates all around the Continent have been falling steadily through the period,
led by Germany, and bond markets performed well, in line with international
trends. The valuation of equity markets benefited from this background, while
corporate profits grew strongly in 1995, in spite of the unsupportive economic
environment. A further ongoing positive feature in Europe has been the growing
willingness of public companies to place more emphasis on serving shareholder
interests. Recent months have provided considerable evidence of this trend, with
the embracing of such developments as more transparent financial accounts from
German banks, proposed share buy-backs from some companies, and a variety of
radical mergers, spin-offs and asset disposals.
The Japanese market has gone through an exceptionally volatile phase.
Stock prices fell steadily up to June 1995, driven down by fears of extended
recession and associated concerns for the health of the financial system.
Adverse external factors included trade tensions with the U.S., a sharp rise in
the Yen exchange rate, and the negative impact on confidence from the Kobe
earthquake and a spate of terrorist gas attacks on public transport targets.
However, equities rebounded sharply in the middle of the year, prompted by a
fresh commitment on the part of the authorities to take whatever policy action
was needed to get the economy moving forward again. Within a couple of months,
official interest rates were cut to 0.5%, the government announced a 14 trillion
Yen fiscal
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11
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS (CONCLUDED)
================================================================================
INTERNATIONAL EQUITY PORTFOLIO (CONTINUED)
stimulus package, and the Bank of Japan intervened in the currency markets to
drive the Yen sharply lower against the dollar. Later in the year, the
government introduced a scheme to bail out the troubled housing loan companies,
one of the dangerously weak links in the financial system. With renewed optimism
on economic recovery, foreign investors were heavy buyers of the Tokyo market,
helping to push it ahead to register a net gain, for the 12 months, of 28.6%,
which was just 3.1% in dollar terms as a result of the Yen's depreciation. Part
of the Portfolio's Yen exposure was hedged into U.S. dollars, by way of forward
sales, during the second half of 1995. This helped to protect the Portfolio from
the adverse impact of the falling Yen, and significantly enhanced overall
performance.
Markets in the Pacific Ex Japan region were sluggish for much of the
year, but moved ahead in recent months as inflows of international investment
picked up again, following 18 months of relative neglect. Markets in this region
tend to be particularly sensitive to movements in U.S. interest rates, and the
declines in the latter from July onward proved to be supportive. For the
12-month period overall, the MSCI Pacific Basin Ex Japan Index (expressed in
U.S. dollar terms) rose by 21.5%. Within the region, there was considerable
divergence among individual markets. Hong Kong, the largest market of the group,
rose 31.1%, helped by better sentiment in the local property market following a
poor spell in 1994. The best performer was Indonesia (up 49.8%), while Thailand
and Taiwan were relatively disappointing with rises of 5.0% and 5.3%
respectively.
The distribution of the Portfolio as of April 30, 1996 is shown in the
following table:
U.K....................... 11.3%
Continental Europe........ 28.3%
Japan..................... 44.1%
Pacific Ex Japan.......... 11.3%
Cash...................... 5.0%
The Pacific Ex Japan bloc is overweighted against the MSCI EAFE Index,
and Japan itself is neutrally positioned. The U.K. market is underweighted,
while Continental Europe also has a marginal underweighting.
Looking ahead, the global environment for stock markets is supportive,
with a combination of low interest rates, subdued inflation and moderate growth
in most of the major economies. We expect to see positive returns from equities,
although possibly not on the scale of the past 12 months.
- -------
12
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
INDEPENDENT AUDITORS' REPORT
THE TRUSTEES AND SHAREHOLDERS
ARK FUNDS
We have audited the accompanying statements of net assets of the U.S. Treasury
Money Market Portfolio, U.S. Government Money Market Portfolio, Money Market
Portfolio, Tax-Free Money Market Portfolio, Short-Term Treasury Portfolio,
Income Portfolio, Growth and Income Portfolio, Blue Chip Equity Portfolio,
Capital Growth Portfolio, Special Equity Portfolio and International Equity
Portfolio, portfolios of ARK Funds, ("the Funds"), as of April 30, 1996 and the
related statements of operations for the year then ended for the U.S. Treasury
Money Market Portfolio, U.S. Government Money Market Portfolio, Money Market
Portfolio, Tax-Free Money Market Portfolio, Income Portfolio, Growth and Income
Portfolio, Capital Growth Portfolio and International Equity Portfolio, for the
period from March 20, 1996 (inception of operations) to April 30, 1996 for
Short-Term Treasury Portfolio, for the period from April 1, 1996 (inception of
operations) to April 30, 1996 for Blue Chip Equity Portfolio and for the period
from July 13, 1995 (inception of operations) to April 30, 1996 for Special
Equity Porfolio, the statements of changes in net assets for each of the periods
presented on pages 38 and 39, and the financial highlights for each of the
periods presented on pages 40 and 41. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
U.S. Treasury Money Market Portfolio, U.S. Government Money Market Portfolio,
Money Market Portfolio, Tax-Free Money Market Portfolio, Short-Term Treasury
Portfolio, Income Portfolio, Growth and Income Portfolio, Blue Chip Equity
Portfolio, Capital Growth Portfolio, Special Equity Portfolio and International
Equity Portfolio, portfolios of ARK Funds, as of April 30, 1996, and the results
of their operations, the changes in their net assets and the financial
highlights for each of the periods specified in the first paragraph above in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
June 7, 1996
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13
<PAGE>
STATEMENT OF NET ASSETS
ARK FUNDS: U.S. TREASURY MONEY MARKET PORTFOLIO
[GRAPHIC OMITTED]
% OF TOTAL PORTFOLIO INVESTMENTS
A pie chart depicting the percentage of Portfolio Assets of the
U.S. Treasury Money Market Portfolio
U.S. Treasury Bills -- 51%
U.S. Treasury Notes -- 49%
- ----------------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------------
U.S. Treasury Obligations-99.6%
U.S. Treasury Bills
5.376%, 05/02/96 $36,128 $ 36,123
5.265%, 05/09/96 25,170 25,141
5.327%, 05/16/96 11,516 11,491
5.228%, 05/30/96 18,486 18,410
5.711%, 07/25/96 10,000 9,872
4.795%, 08/08/96 25,525 25,196
5.109%, 08/22/96 9,439 9,292
5.100%, 09/05/96 22,753 22,352
5.047%, 11/14/96 11,677 11,366
U.S. Treasury Notes
7.375%, 05/15/96 25,000 25,020
5.875%, 05/31/96 25,000 25,012
7.875%, 07/15/96 25,000 25,129
6.250%, 08/31/96 50,000 50,149
6.500%, 09/30/96 25,000 25,120
8.500%, 04/15/97 10,000 10,256
- ----------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $329,929,028) $329,929
- ----------------------------------------------------------------
Total Investments - 99.6%
(Cost $329,929,028) $329,929
- ----------------------------------------------------------------
Other Assets and Liabilities, Net-0.4% $ 1,308
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Description Value (000)
- ----------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class (unlimited
authorization - no par value) based on
275,243,431 outstanding shares of
beneficial interest $ 275,239
Portfolio Shares of Retail Class (unlimited
authorization - no par value) based on
8,758,066 outstanding shares of
beneficial interest 8,758
Portfolio Shares of Institutional II Class (unlimited
authorization - no par value)
based on 47,223,661 outstanding shares of
beneficial interest 47,222
Accumulated net realized gain on
investments 18
- ----------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $331,237
- ----------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $1.00
- ----------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $1.00
- ----------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL II CLASS $1.00
- ----------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- -------
14
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
ARK FUNDS: U.S. GOVERNMENT MONEY
MARKET PORTFOLIO
[GRAPHIC OMITTED]
A pie chart depicting the percentage of Portfolio Assets of the
U.S. Government Money Market Portfolio
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Treasury Notes -- 4%
Variable Rate
Government Agency
Obligations -- 16%
Repurchase Agreements -- 39%
Government Agency
Obligations -- 41%
- ---------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ---------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 57.0%
Federal Farm Credit Bank
5.230%, 05/01/96 (A) $25,000 $ 24,998
5.840%, 08/01/96 10,000 9,997
Federal Home Loan Bank
5.270%, 05/01/96 (A) 10,000 10,000
5.500%, 05/02/96 (A) 8,000 8,000
5.310%, 06/26/96 32,000 31,739
5.650%, 07/08/96 10,850 10,839
5.260%, 07/24/96 25,000 24,697
5.317%, 10/21/96 50,000 48,757
5.027%, 11/08/96 10,000 10,097
5.410%, 01/10/97 10,000 9,633
5.420%, 01/10/97 25,000 24,081
5.200%, 03/06/97 15,000 14,979
Federal Home Loan Bank,
Callable 06/05/96 @ 100
5.300%, 03/05/97 10,000 10,000
Federal Home Loan Bank,
Callable 07/08/96 @ 100
5.660%, 04/08/97 5,000 5,000
Federal Home Loan Mortgage
Corporation
5.300%, 05/01/96 150,000 150,000
Federal National Mortgage
Association
5.210%, 05/01/96 (A) 25,000 24,993
5.245%, 05/01/96 (A) 25,000 24,990
5.435%, 05/01/96 (A) 10,000 10,000
5.590%, 05/02/96 25,000 24,996
5.240%, 05/07/96 (A) 15,000 14,996
5.330%, 05/07/96 (A) 25,000 25,000
5.570%, 05/10/96 18,400 18,375
5.348%, 05/17/96 (A) 25,000 24,984
5.420%, 10/11/96 10,000 9,761
5.510%, 12/18/96 19,000 18,984
Tennessee Valley Authority
5.035%, 12/15/96 15,250 15,209
- ---------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $605,104,827) $ 605,105
- ---------------------------------------------------------
- ---------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ---------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 3.9%
U.S. Treasury Notes
5.420%, 11/30/96 $ 20,000 $ 20,120
4.980%, 02/28/97 10,000 10,152
5.046%, 02/28/97 10,000 10,146
- ---------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $40,417,656) $ 40,418
- ---------------------------------------------------------
REPURCHASE AGREEMENTS - 39.2%
CS First Boston
5.300%, dated 04/30/96
matures 05/01/96, repurchase
price $185,898,704
(collateralized by various U.S.
Treasury Bonds, total par
value $182,107,000, 7.125%-
7.625%, 08/15/22-02/15/25:
total market value
$190,445,164) 185,871 185,871
Goldman Sachs
5.300%, dated 04/30/96,
matures 05/01/96, repurchase
price $155,022,819
(collateralized by various
FHLB, FHLMC, and FNMA
Discount Notes, total par
value $160,169,000,
05/30/96-10/16/96:
total market value
$158,100,513) 155,000 155,000
Smith Barney
5.330%, dated 04/30/96,
matures 05/01/96, repurchase
price $75,011,104
(collateralized by U.S.
Treasury Note, total
par value $76,762,000, 6.250%,
04/30/01: total market value
$76,500,088) 75,000 75,000
- ---------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $415,871,340) $ 415,871
- ---------------------------------------------------------
TOTAL INVESTMENTS - 100.1%
(Cost $1,061,393,823) $1,061,394
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (0.1%) $ (609)
- ---------------------------------------------------------
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15
<PAGE>
STATEMENT OF NET ASSETS
ARK FUNDS: U.S. GOVERNMENT MONEY
MARKET PORTFOLIO
- ---------------------------------------------------------
Description Value (000)
- ---------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class (unlimited
authorization - no par value)
based on 1,043,715,241 outstanding
shares of beneficial interest $1,043,708
Portfolio Shares of Institutional II
Class (unlimited authorization - no par
value) based on17,026,230 outstanding shares
of beneficial interest 17,026
Accumulated net realized gain on
investments 51
- ---------------------------------------------------------
TOTAL NET ASSETS - 100.0% $1,060,785
- ---------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $1.00
- ---------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL II CLASS $1.00
- ---------------------------------------------------------
(A) VARIABLE RATE SECURITY - THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT AS OF APRIL 30, 1996. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
FHLB-FEDERAL HOME LOAN BANK
FHLMC-FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA-FEDERAL NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: MONEY MARKET PORTFOLIO
[GRAPHIC OMITTED]
A pie chart depicting the percentage of Portfolio Assets of the
Money Market Portfolio
% OF TOTAL PORTFOLIO INVESTMENTS
Repurchase Agreements -- 10%
U.S. Government Agency
Obligations -- 3%
Variable Rate Debt-- 30%
Corporate and Municipal Debt -- 57%
- ----------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------
CORPORATE OBLIGATIONS - 37.0%
Abbey National
5.160%, 03/17/97 $ 5,000 $ 4,998
American Express Centurion
Bank
5.390%, 05/01/96 (A) 10,000 10,000
Associates Corporation of
North America
5.750%, 10/15/96 2,500 2,519
Bank of New York, Delaware
5.880%, 10/25/96 5,000 5,000
Capital One Funding
5.380%, 05/02/96 (A) (B) 4,904 4,904
CIT Group Holdings
5.650%, 12/05/96 7,500 7,585
5.660%, 01/13/97 5,000 5,078
5.212%, 01/13/97 4,000 4,075
First Union
5.370%, 05/01/96 (A) 5,000 5,000
5.290%, 05/01/96 (A) 10,000 9,996
Ford Motor Credit
5.700%, 07/22/96 5,000 4,938
5.700%, 10/01/96 5,000 5,045
5.100%, 12/01/96 3,000 3,049
General Electric Capital
5.640%, 07/30/96 4,000 4,019
General Electric Engine
Receivables
5.450%, 05/06/96 (A) (B) 4,200 4,200
General Motors Acceptance
Corporation
6.040%, 05/01/96 5,000 5,000
5.580%, 05/07/96 (A) 5,000 5,000
5.209%, 01/14/97 4,500 4,572
5.380%, 01/27/97 5,450 5,435
Goldman Sachs
5.770%, 07/04/96 (A) 2,500 2,506
Merrill Lynch
5.380%, 06/10/96 (A) 5,000 4,997
5.280%, 06/11/96 (A) 5,000 4,999
6.000%, 07/12/96 (A) 5,000 5,000
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16
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
- ----------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------
NationsBank
5.900%, 08/15/96 $ 10,000 $ 9,968
Norwest
5.325%, 12/31/96 7,000 7,109
4.960%, 01/30/97 5,000 5,105
PNC Bank N.A., Ohio
5.400%, 05/07/96 (A) 10,000 9,991
Wachovia
5.850%, 08/05/96 10,000 10,009
Wells Fargo
5.440%, 06/20/96 (A) 8,000 8,001
Xerox Credit
5.380%, 05/07/96 (A) 10,000 9,990
- ----------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $178,088,205) $178,088
- ----------------------------------------------------------
COMMERCIAL PAPER - 22.7%
Abbey National
5.220%, 05/29/96 10,000 9,960
Anheuser Busch
5.310%, 05/13/96 15,000 14,974
Beta Finance
5.226%, 06/26/96 4,000 3,968
5.380%, 09/12/96 11,500 11,275
CAFCO
5.320%, 06/26/96 5,000 4,959
Ciesco
5.300%, 06/03/96 10,000 9,952
Delaware Funding
5.350%, 05/21/96 10,000 9,971
H.J. Heinz
5.320%, 05/09/96 4,800 4,794
PepsiCo
5.310%, 05/14/96 14,500 14,472
Pitney Bowes
5.325%, 06/14/96 10,000 9,935
Smith Barney
5.330%, 05/14/96 10,000 9,981
Walt Disney
5.300%, 09/17/96 5,000 4,900
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $109,141,672) $109,141
- ----------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 11.3%
Federal Farm Credit Bank
5.470%, 01/24/97 15,000 14,416
Federal Home Loan Bank
5.270%, 05/01/96 (A) 10,000 10,000
Federal Home Loan Mortgage
Corporation
5.500%, 05/01/96 (A) 5,000 4,999
5.700%, 05/01/96 (A) 5,000 5,000
- ----------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------
Federal National Mortgage
Association
5.440%, 05/01/96 (A) $10,000 $10,000
Student Loan Marketing
Association
5.280%, 05/07/96 (A) 8,020 8,020
5.300%, 05/07/96 (A) 2,000 2,000
- ----------------------------------------------------------
TOTAL U.S.GOVERNMENT & AGENCY OBLIGATIONS
(Cost $54,435,495) $54,435
- ----------------------------------------------------------
TAXABLE MUNICIPAL BONDS - 11.9%
CALIFORNIA - 2.8%
Oakland Alameda County
5.150%, 05/13/96 13,735 13,735
- ----------------------------------------------------------
TOTAL CALIFORNIA $13,735
- ----------------------------------------------------------
INDIANA - 2.1%
City of Whiting, Industrial
Sewage & Solid Waste
5.375%, 07/16/96 10,000 10,000
- ----------------------------------------------------------
TOTAL INDIANA $10,000
- ----------------------------------------------------------
MASSACHUSETTS - 3.1%
Industrial Finance Authority
5.170%, 06/24/96 14,800 14,800
- ----------------------------------------------------------
TOTAL MASSACHUSETTS $14,800
- ----------------------------------------------------------
NEW YORK - 2.1%
General Obligation
5.340%, 08/21/96 10,000 10,000
- ----------------------------------------------------------
TOTAL NEW YORK $10,000
- ----------------------------------------------------------
NORTH CAROLINA - 1.3%
Durham, Taxable Certificates,
Series B
5.430%, 05/01/96 (A) 1,500 1,500
Winston-Salem, Certificates
of Participation
5.360%, 05/20/96 5,000 5,000
- ----------------------------------------------------------
TOTAL NORTH CAROLINA $ 6,500
- ----------------------------------------------------------
PENNSYLVANIA - 0.5%
Economic Development Financing
Authority Revenue Bonds,
Series A1
5.450%, 05/02/96 (A) 2,400 2,400
- ----------------------------------------------------------
TOTAL PENNSYLVANIA $ 2,400
- ----------------------------------------------------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $57,435,000) $57,435
- ----------------------------------------------------------
-------
17
<PAGE>
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO CONTINUED
- ----------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------
CERTIFICATES OF DEPOSIT - 6.2%
ABN Amro Euro
5.360%, 05/15/96 $10,000 $ 10,001
Bayerische Veriensbank Euro
5.360%, 05/07/96 10,000 10,000
Royal Bank of Canada (A)
5.390%, 05/01/96 10,000 9,995
- ----------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $29,995,584) $ 29,996
- ----------------------------------------------------------
ASSET BACKED SECURITIES - 0.7%
The Money Store
Class A-4 Notes, Series 1995-1
5.510%, 05/15/96 (A) 3,600 3,600
- ----------------------------------------------------------
TOTAL ASSET BACKED SECURITIES
(Cost $3,600,000) $ 3,600
- ----------------------------------------------------------
REPURCHASE AGREEMENTS - 9.7%
CS First Boston
5.300%, dated 04/30/96,
matures 05/01/96, repurchase
price $26,913,528 (collateralized
by various U.S. Treasury Bonds,
total par value $21,735,000,
9.125%-12.000%, 05/15/05-
05/15/18: total market value
$28,476,283) 26,910 26,910
Goldman Sachs
5.300%, dated 04/30/96,
matures 05/01/96, repurchase
price $20,002,944 (collateralized
by various FHLB, FHLMC, and
FNMA Discount Notes, total
par value $20,667,000
05/30/96-10/16/96: total market
value $20,403,003) 20,000 20,000
- ----------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $46,909,566) $ 46,910
- ----------------------------------------------------------
TOTAL INVESTMENTS - 99.5%
(Cost $479,605,522) $479,605
- ----------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.5% $ 2,231
- ----------------------------------------------------------
- ----------------------------------------------------------
Description Value (000)
- ----------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class (unlimited
authorization - no par value)
based on 348,319,321 outstanding
shares of beneficial interest $348,315
Portfolio Shares of Retail Class (unlimited
authorization - no par value) based
on 104,694,542 outstanding shares of
beneficial interest 104,692
Portfolio Shares of Institutional II Class
(unlimited authorization - no par
value) based on 28,789,367 outstanding
shares of beneficial interest 28,789
Accumulated net realized gain on
investments 40
- ----------------------------------------------------------
TOTAL NET ASSETS - 100.0% $481,836
- ----------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $1.00
- ----------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $1.00
- ----------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL II CLASS $1.00
- ----------------------------------------------------------
(A) VARIABLE RATE SECURITY - RATE DISCLOSED IS AS OF APRIL 30, 1996. THE DATE
SHOWN IS THE NEXT SCHEDULED RESET DATE.
(B) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS.
CAFCO-CORPORATE ASSET FUNDING INCORPORATED
FHLB-FEDERAL HOME LOAN BANK
FHLMC-FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA-FEDERAL NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- -------
18
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
ARK FUNDS: TAX-FREE MONEY MARKET PORTFOLIO
A pie chart depicting the percentage of Portfolio Assets of the
Tax-Free Money Market Portfolio
[GRAPHIC OMITTED]
% OF TOTAL PORTFOLIO INVESTMENTS
Revenue Bonds -- 9%
Variable Rate Demand
Notes -- 54%
Tax & Revenue Anticipation
Notes -- 10%
General Obligation Issues -- 6%
Tax-Exempt Commercial
Paper --21%
- ----------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------
MUNICIPAL BONDS & NOTES - 98.3%
ARIZONA - 2.7%
Maricopa County, School
District #11 (TAN)
4.450%, 07/31/96 $ 2,700 $ 2,704
- ----------------------------------------------------------
TOTAL ARIZONA $ 2,704
- ----------------------------------------------------------
COLORADO - 4.5%
State Educational Facilities
Authority, Pro Rodeo Hall of
Fame Project, LOC: Bank One (RB)
4.250%, 05/07/96 (A) 2,700 2,700
State Student Obligations Bond
Authority, LOC: SLMA (RB)
4.100%, 05/07/96 (A) 1,775 1,775
- ----------------------------------------------------------
TOTAL COLORADO $ 4,475
- ----------------------------------------------------------
FLORIDA - 10.5%
Dade County, Water & Sewer
System, Series 1994
(RB) (FGIC)
4.100%, 05/07/96 (A) 1,000 1,000
Dade County, Capital Asset,
Series 1990, LOC: Sanwa
Bank (RB)
4.600%, 05/07/96 (A) 1,600 1,600
State Housing Finance Authority (RB)
4.150%, 05/07/96 (A) 3,835 3,835
Indian Trace, Community
Development District, Series A,
Pre-refunded 11/01/99 @ 100
(RB) (MBIA)
4.100%, 05/07/96 (A) 100 100
Sunshine State (TECP)
3.500%, 07/16/96 1,130 1,130
3.450%, 07/16/96 2,900 2,900
- ----------------------------------------------------------
TOTAL FLORIDA $10,565
- ----------------------------------------------------------
- ----------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------
GEORGIA - 2.2%
Burke County, Oglethorpe Power,
Series A (RB) (FGIC)
4.100%, 05/07/96 (A) $ 900 $ 900
De Kalb County, Industrial
Development Authority, LOC:
PNC Bank (RB)
4.300%, 05/07/96 (A) 1,300 1,300
- ----------------------------------------------------------
TOTAL GEORGIA $ 2,200
- ----------------------------------------------------------
ILLINOIS - 7.0%
Elmhurst, Joint Commission On
Accreditation of Health Bank,
LOC: Sanwa Bank (RB)
4.350%, 05/07/96 (A) 1,355 1,355
State Health Facility Authority,
Methodist Medical Center,
Series 1985, LOC:
Sumitomo (RB)
3.950%, 05/07/96 (A) 2,700 2,700
State Revenue Anticipation
Certificate
4.500%, 06/10/96 3,000 3,002
- ----------------------------------------------------------
TOTAL ILLINOIS $ 7,057
- ----------------------------------------------------------
INDIANA - 2.7%
Sullivan, LOC: National Rural
Electric (TECP)
3.400%, 07/17/96 2,710 2,710
- ----------------------------------------------------------
TOTAL INDIANA $ 2,710
- ----------------------------------------------------------
IOWA - 4.0%
Iowa School Corporation, Warrant
Certificates Anticipation Notes,
Series-B (FSA) (RAN)
4.250%, 01/30/97 1,000 1,006
Iowa School Corporation Warrant
Certificates Cash Anticipation
Program-Series A (FSA) (RAN)
4.750%, 06/28/96 1,000 1,001
State Higher Education Authority,
St. Ambrose University Project,
LOC: Norwest Bank (RB)
4.100%, 05/07/96 (A) 2,000 2,000
- ----------------------------------------------------------
TOTAL IOWA $ 4,007
- ----------------------------------------------------------
KENTUCKY - 2.5%
Jefferson County, Louisville
Gas & Electric (TECP)
3.350%, 06/06/96 2,000 2,000
Pendleton County,
LOC: PNC Bank, (RB)
3.970%, 07/01/96 (A) 500 500
- ----------------------------------------------------------
TOTAL KENTUCKY $ 2,500
- ----------------------------------------------------------
-------
19
<PAGE>
STATEMENT OF NET ASSETS
TAX-FREE MONEY MARKET PORTFOLIO CONTINUED
- ----------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------
LOUISIANA - 1.2%
State Public Facilities Authority,
Hospital Equipment Financing-
Series A, LOC: Sumitomo
Bank (RB)
4.600%, 05/07/96 (A) $ 1,200 $1,200
- ----------------------------------------------------------
TOTAL LOUISIANA $1,200
- ----------------------------------------------------------
MARYLAND - 8.9%
Baltimore, Industrial Development
Authority,
LOC: Dai Ichi Kango Bank (RB)
4.350%, 05/07/96 (A) 4,000 4,000
State Health & Higher Education
Facilities Authority, Hospital
and University Improvements,
LOC: FNB Chicago (RB)
4.050%, 05/07/96 (A) 1,100 1,100
State Health & Higher Education
Facilities Authority, Loyola
College, LOC: Sanwa Bank (RB)
3.650%, 05/01/96 (A) 1,700 1,700
Washington Suburban Sanitation
District, Pre-refunded
@ 102 (GO)
7.250%, 01/01/97 (B) 2,000 2,085
- ----------------------------------------------------------
TOTAL MARYLAND $8,885
- ----------------------------------------------------------
MASSACHUSETTS - 2.0%
State Health & Educational
Facilities Authority, Harvard
University Issue, Series L
(TECP)
3.300%, 05/15/96 1,000 1,000
State, Series A, Pre-refunded
@ 102 (GO)
7.125%, 10/01/96 (B) 1,000 1,035
- ----------------------------------------------------------
TOTAL MASSACHUSETTS $2,035
- ----------------------------------------------------------
MICHIGAN - 4.8%
Detroit, Water Supply Systems
(RB) (FGIC)
4.150%, 05/07/96 (A) 1,800 1,800
State Underground Storage Tanks
Project, LOC: CIBC (RB)
4.050%, 05/07/96 (A) 3,000 3,000
- ----------------------------------------------------------
TOTAL MICHIGAN $4,800
- ----------------------------------------------------------
MINNESOTA - 1.9%
Minneapolis, LOC: Bayerische
Vereinsbank (GO)
4.080%, 05/07/96 (A) 1,900 1,900
- ----------------------------------------------------------
TOTAL MINNESOTA $1,900
- ----------------------------------------------------------
- ----------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------
MISSISSIPPI - 0.7%
Jackson County, Port Facility,
Series 1993, LOC:
Chevron (RB)
4.000%, 05/01/96 (A) $ 700 $ 700
- ----------------------------------------------------------
TOTAL MISSISSIPPI $ 700
- ----------------------------------------------------------
MISSOURI - 1.0%
Columbia, Series A, LOC:
Toronto Dominion Bank (RB)
4.200%, 05/07/96 (A) 1,000 1,000
- ----------------------------------------------------------
TOTAL MISSOURI $1,000
- ----------------------------------------------------------
MONTANA - 5.3%
Forsyth, Portland General Electric
Colstrip Project, Series 1983 A,
LOC: UBS (RB)
4.150%, 05/07/96 (A) 4,700 4,700
Forsyth, Portland General Electric
Colstrip Project, Series 1983 D,
LOC: Swiss Bank (RB)
4.150%, 05/07/96 (A) 600 600
- ----------------------------------------------------------
TOTAL MONTANA $5,300
- ----------------------------------------------------------
NEW HAMPSHIRE - 3.2%
State Pollution Control, LOC:
CIBC (RB)
4.150%, 05/07/96 (A) 3,200 3,200
- ----------------------------------------------------------
TOTAL NEW HAMPSHIRE $3,200
- ----------------------------------------------------------
NEW YORK - 0.6%
New York City Series B-4
(MBIA) (GO)
4.000%, 05/01/96 (A) 600 600
- ----------------------------------------------------------
TOTAL NEW YORK $ 600
- ----------------------------------------------------------
NORTH CAROLINA - 2.0%
Durham, Water & Sewer Utility
System (RB)
4.100%, 05/07/96 (A) 2,000 2,000
- ----------------------------------------------------------
TOTAL NORTH CAROLINA $2,000
- ----------------------------------------------------------
PENNSYLVANIA - 11.8%
Allegheny County (GO)(AMBAC)
4.400%, 05/01/96 1,000 1,000
Bucks County, Industrial
Development Authority, LOC:
ABN-Amro (RB)
3.750%, 05/07/96 (A) 2,200 2,200
Bucks County, Series A (GO)
5.300%, 03/01/97 1,500 1,520
Lehigh County, Industrial
Development Authority,
Series A, LOC: Rabo Bank (RB)
3.750%, 05/07/96 (A) 1,700 1,700
Lehigh County (TECP) (MBIA)
3.300%, 06/03/96 2,500 2,500
- -------
20
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
- ----------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------
Philadelphia Hospital & Higher
Education Facilities Authority
(RB) (FGIC)
3.850%, 07/01/96 $ 1,000 $ 1,000
Temple University (RB)
5.000%, 05/22/96 2,000 2,001
- ----------------------------------------------------------
TOTAL PENNSYLVANIA $11,921
- ----------------------------------------------------------
RHODE ISLAND - 4.0%
State (TAN)
4.500%, 06/28/96 4,000 4,005
- ----------------------------------------------------------
TOTAL RHODE ISLAND $ 4,005
- ----------------------------------------------------------
SOUTH CAROLINA - 2.3%
Public Service Authority LOC:
NationsBank (TECP)
3.400%, 05/14/96 2,300 2,300
- ----------------------------------------------------------
TOTAL SOUTH CAROLINA $ 2,300
- ----------------------------------------------------------
TENNESSEE - 1.5%
Jefferson County, Industrial
Development Authority,
Ball Project, LOC: PNC Bank (RB)
4.300%, 05/07/96 (A) 1,500 1,500
- ----------------------------------------------------------
TOTAL TENNESSEE $ 1,500
- ----------------------------------------------------------
TEXAS - 9.0%
Department of Housing &
Community Affairs (TECP)
(FGIC)
3.550%, 05/30/96 2,615 2,615
Dallas-Fort Worth International
Airport (RB) (MBIA)
3.750%, 11/01/96 1,550 1,551
Municipal Power Agency,
LOC: J. P. Morgan
(TECP) (BAN)
3.400%, 07/17/96 2,600 2,600
Higher Education Authority,
Series B (RB) (FGIC)
4.100%, 05/07/96 (A) 1,245 1,245
State Transportation Authority,
Series A (TAN)
4.750%, 08/30/96 1,000 1,002
- ----------------------------------------------------------
TOTAL TEXAS $ 9,013
- ----------------------------------------------------------
WISCONSIN - 1.0%
Milwaukee, Redevelopment
Authority, West Wisconsin &
1600 North Martin Project,
LOC: FSA (RB)
6.400%, 09/03/96 1,000 1,008
- ----------------------------------------------------------
TOTAL WISCONSIN $ 1,008
- ----------------------------------------------------------
- ----------------------------------------------------------
Principal
Description Amount (000) Value (000)
- ----------------------------------------------------------
WYOMING - 1.0%
Gillette County, LOC: Deutsche
Bank (TECP)
3.200%, 05/13/96 $ 1,000 $ 1,000
- ----------------------------------------------------------
TOTAL WYOMING $ 1,000
- ----------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $98,584,682) $ 98,585
- ----------------------------------------------------------
TOTAL INVESTMENTS - 98.3%
(Cost $98,584,682) $ 98,585
- ----------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 1.7% $ 1,720
- ----------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class (unlimited
authorization - no par value)
based on 74,738,581 outstanding
shares of beneficial interest $ 74,739
Portfolio Shares of Retail Class (unlimited
authorization - no par value) based
on 16,178,911 outstanding shares of
beneficial interest 16,179
Portfolio Shares of Institutional II Class
(unlimited authorization - no par
value) based on 9,386,740 outstanding
shares of beneficial interest 9,387
- ----------------------------------------------------------
TOTAL NET ASSETS - 100.0% $100,305
- ----------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $1.00
- ----------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $1.00
- ----------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL II CLASS $1.00
- ----------------------------------------------------------
(A) VARIABLE RATE SECURITY - THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT AS OF APRIL 30, 1996. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(B) THE PRE-REFUNDED DATE IS SHOWN AS THE MATURITY DATE ON THE STATEMENT OF NET
ASSETS.
AMBAC-AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
BAN-BOND ANTICIPATION NOTE
CIBC-CANADIAN IMPERIAL BANK CORPORATION
FGIC-FEDERAL GUARANTY INSURANCE CORPORATION
FSA-FINANCIAL SECURITY ASSISTANCE
GO-GENERAL OBLIGATION
LOC-LETTER OF CREDIT
MBIA-MUNICIPAL BOND INSURANCE ASSOCIATION
RAN-REVENUE ANTICIPATION NOTE
RB-REVENUE BOND
SLMA-STUDENT LOAN MARKETING ASSOCIATION
TAN-TAX ANTICIPATION NOTE
TECP-TAX EXEMPT COMMERCIAL PAPER
UBS-UNION BANK OF SWITZERLAND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-------
21
<PAGE>
STATEMENT OF NET ASSETS
ARK FUNDS: SHORT-TERM TREASURY PORTFOLIO
[GRAPHIC OMITTED]
A pie chart depicting the percentage of Portfolio Assets of the
Short-Term Treasury Portfolio
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Treasury Bills -- 5%
U.S. Treasury
Notes -- 95%
- ---------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 98.9%
U.S. Treasury Bill
5.035%, 08/08/96 $ 846 $ 834
U.S. Treasury Notes
6.875%, 03/31/97 2,500 2,527
8.500%, 04/15/97 2,500 2,565
6.375%, 06/30/97 2,000 2,013
5.375%, 11/30/97 500 495
8.125%, 02/15/98 2,250 2,328
5.125%, 06/30/98 2,000 1,962
5.250%, 07/31/98 3,000 2,946
5.500%, 11/15/98 3,000 2,953
- ---------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $18,706,406) $18,623
- ---------------------------------------------------------
TOTAL INVESTMENTS - 98.9%
(Cost $18,706,406) $18,623
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 1.1% $ 200
- ---------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class (unlimited
authorization - no par value)
based on 1,890,622 outstanding
shares of beneficial interest $18,906
Net unrealized depreciation on investments (83)
- ---------------------------------------------------------
TOTAL NET ASSETS - 100.0% $18,823
- ---------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $9.96
- ---------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: INCOME PORTFOLIO
A pie chart depicting the percentage of Portfolio Assets of the Income Portfolio
% OF TOTAL PORTFOLIO INVESTMENTS
Cash -- 2% Industrial -- 17% Finance -- 4% Yankee Bonds -- 9%
Asset Backed Securities--1%
Treasury -- 35%
Mortgage-Backed
Securities -- 32%
- ---------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 34.5%
U.S. Treasury Notes
7.375%, 11/15/97 $ 2,000 $ 2,040
5.375%, 05/31/98 25,000 24,663
7.125%, 09/30/99 2,000 2,049
7.500%, 10/31/99 1,500 1,554
7.750%, 11/30/99 3,000 3,132
6.375%, 01/15/00 20,500 20,521
U.S. Treasury Bonds
6.125%, 05/15/98 3,500 3,503
6.250%, 08/15/23 5,350 4,825
8.000%, 11/15/21 1,500 1,657
- ---------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $65,460,031) $63,944
- ---------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS - 32.1%
Federal Home Loan Mortgage
Corporation
9.000%, 01/01/02 129 135
7.980%, 09/08/04 1,000 1,011
8.350%, 10/06/04 1,500 1,524
7.900%, 04/27/05 1,000 1,020
14.750%, 03/01/10 58 66
Federal Home Loan Mortgage
Corporation (CMO)
10.000%, 06/15/19 486 500
Federal Home Loan Mortgage
Corporation (GTD)
9.000%, 09/15/08 53 62
12.450%, 09/15/09 41 44
- -------
22
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
- ---------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
Federal National Mortgage
Association
7.000%, 08/01/25 $ 503 $ 484
7.000%, 09/01/25 3,938 3,796
7.000%, 02/01/26 8,119 7,827
7.000%, 03/01/26 21,764 20,981
Federal National Mortgage
Association (CMO)
10.000%, 01/25/16 342 353
Government National Mortgage
Association
7.500%, 10/15/23 2,177 2,151
7.500%, 12/15/23 1,891 1,869
7.000%, 02/15/24 2,855 2,749
7.000%, 05/15/24 5,669 5,460
7.500%, 05/15/24 4,408 4,356
7.500%, 10/15/24 3,197 3,159
Government National Mortgage
Association II
7.000%, 09/20/25 1,979 1,896
- ---------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS
(Cost $60,373,763) $59,443
- ---------------------------------------------------------
CORPORATE OBLIGATIONS - 20.5%
360 Communication
7.500%, 03/01/06 5,500 5,259
AMR
9.270%, 08/13/98 1,000 1,049
Case Equipment
7.250%, 01/15/16 1,565 1,453
Chemical Bank
6.700%, 08/15/08 3,000 2,813
General Motors
8.800%, 03/01/21 2,000 2,210
GPA Delaware
8.750%, 12/15/98 1,250 1,258
Nabisco
7.050%, 07/15/07 2,000 1,912
Pacific Bell
7.500%, 02/01/33 4,000 3,790
Salomon
8.900%, 02/16/98 2,300 2,366
TCI Communications
8.750%, 08/01/15 3,000 2,925
Texas Utility Electric
9.750%, 05/01/21 4,000 4,405
TKR Cable
10.500%, 10/30/07 3,250 3,595
Viacom International
8.000%, 07/07/06 3,500 3,255
Williams Holdings
6.250%, 02/01/06 1,745 1,608
- ---------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $38,816,236) $37,898
- ---------------------------------------------------------
- ---------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
YANKEE BONDS - 8.5%
Export-Import Bank of Korea
7.850%, 11/01/96 $1,000 $ 1,007
Hydro-Quebec
7.500%, 04/01/16 3,150 3,052
Merita Bank
6.500%, 01/15/06 3,500 3,264
Quebec Province
7.500%, 07/15/23 3,000 2,861
Saga Petroleum
9.125%, 07/15/14 1,750 1,934
Santander Financial Issuances
7.000%, 04/01/06 3,665 3,555
- ---------------------------------------------------------
TOTAL YANKEE BONDS
(Cost $15,970,056) $ 15,673
- ---------------------------------------------------------
ASSET-BACKED SECURITIES - 0.9%
Goldman Sachs Trust 2
Series B Cl 3
8.950%, 07/01/17 266 276
Goldman Sachs Trust 2
Series D Cl 3
9.200%, 08/01/17 82 86
MDC Asset Investors Trust
Series V Cl 2
9.325%, 12/01/17 15 16
Standard Credit Card Master
Trust Series 1995-10 Cl A
5.900%, 02/07/01 1,250 1,232
- ---------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $1,630,370) $ 1,610
- ---------------------------------------------------------
REPURCHASE AGREEMENT - 2.6%
CS First Boston
5.300%, dated 04/30/96, matures
05/01/96, repurchase price
$4,894,048 (collateralized by
various U.S. Treasury Bonds, total
par value $3,676,000, 10.375%-
12.000%, 05/15/05-11/15/12:
total market value $5,005,697) 4,893 $ 4,893
- ---------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $4,893,328) $ 4,893
- ---------------------------------------------------------
TOTAL INVESTMENTS - 99.1%
(Cost $187,143,784) $183,461
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.9% $ 1,685
- ---------------------------------------------------------
-------
23
<PAGE>
STATEMENT OF NET ASSETS
INCOME PORTFOLIO CONTINUED
- ---------------------------------------------------------
Description Value (000)
- ---------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class (unlimited
authorization - no par value)
based on 18,466,197 outstanding
shares of beneficial interest $185,721
Portfolio Shares of Retail Class (unlimited
authorization - no par value) based
on 422,344 outstanding shares of
beneficial interest 4,309
Undistributed net investment income 4
Accumulated net realized loss on
investments (1,205)
Net unrealized depreciation on investments (3,683)
- ---------------------------------------------------------
TOTAL NET ASSETS - 100.0% $185,146
- ---------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $9.80
- ---------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $9.91
- ---------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE -
RETAIL CLASS ($9.91 (DIVIDE) 95.50%) $10.38
- ---------------------------------------------------------
CMO-COLLATERALIZED MORTGAGE OBLIGATION
GTD-GUARANTEED MORTGAGE CERTIFICATES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: GROWTH AND INCOME PORTFOLIO
A pie chart depicting the percentage of Portfolio Assets of the
Growth and Income Portfolio
% OF TOTAL PORTFOLIO INVESTMENTS
[GRAPHIC OMITTED]
Cash -- 3%
Treasuries -- 13%
Corporate -- 7%
Mortgage Backed Securities
Asset Backed Securities
CMO -- 11%
Basic Industry -- 5%
Healthcare -- 5%
Transportation -- 8%
Finance -- 6%
Consumer Non-Durable -- 11%
Technology -- 17%
Capital Goods -- 8%
Energy -- 6%
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
COMMON STOCKS - 64.3%
AIR TRANSPORTATION - 0.9%
Delta Air Lines 5,000 $ 402
Southwest Airlines 20,000 595
- ---------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 997
- ---------------------------------------------------------
AIRCRAFT - 0.8%
Lockheed Martin 10,000 806
- ---------------------------------------------------------
TOTAL AIRCRAFT $ 806
- ---------------------------------------------------------
AUTOMOTIVE - 4.7%
Chrysler 10,000 627
Ford Motor 17,200 617
General Motors 15,000 814
Gentex* 25,000 988
Magna International, Cl A 22,000 1,020
Top Source Technologies* 150,000 966
- ---------------------------------------------------------
TOTAL AUTOMOTIVE $5,032
- ---------------------------------------------------------
BANKS - 2.1%
Marshall & Ilsley 25,000 675
Mellon Bank 15,000 806
Norwest 20,000 722
- ---------------------------------------------------------
TOTAL BANKS $2,203
- ---------------------------------------------------------
BEAUTY PRODUCTS - 0.9%
Colgate-Palmolive 12,000 920
- ---------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 920
- ---------------------------------------------------------
BROADCASTING, NEWSPAPERS &
ADVERTISING - 2.1%
Evergreen Media, Cl A* 20,000 785
Time Warner 20,000 817
Viacom, Cl B* 15,000 615
- ---------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS &
ADVERTISING $2,217
- ---------------------------------------------------------
BUILDING & CONSTRUCTION - 2.6%
Empresas ICA S.A. ADR 48,000 666
Fluor 11,000 727
Lone Star Industries 25,000 897
Southdown 20,000 470
- ---------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $2,760
- ---------------------------------------------------------
- -------
24
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
CHEMICALS - 2.8%
Dow Chemical 9,000 $ 800
IMC Global 16,000 590
W.R. Grace 8,500 659
Morton International 25,000 884
- ---------------------------------------------------------
TOTAL CHEMICALS $2,933
- ---------------------------------------------------------
COMPUTER EQUIPMENT
NETWORKING - 0.3%
Madge, NV* 10,000 295
- ---------------------------------------------------------
TOTAL COMPUTER EQUIPMENT
NETWORKING $ 295
- ---------------------------------------------------------
COMPUTERS & SERVICES - 2.2%
Ceridian* 12,000 573
Compaq Computer* 15,000 699
Sun Microsystems* 20,000 1,085
- ---------------------------------------------------------
TOTAL COMPUTERS & SERVICES $2,357
- ---------------------------------------------------------
COMPUTER SOFTWARE - 1.2%
Computer Associates
International 10,000 734
Microsoft* 5,000 567
- ---------------------------------------------------------
TOTAL COMPUTER SOFTWARE $1,301
- ---------------------------------------------------------
DRUGS - 2.8%
Alza* 25,000 713
Bristol-Myers Squibb 6,000 494
Pfizer 16,000 1,102
Pharmacia & Upjohn 17,000 650
- ---------------------------------------------------------
TOTAL DRUGS $2,959
- ---------------------------------------------------------
ENVIRONMENTAL SERVICES - 1.1%
Browning-Ferris Industries 20,000 645
Handex* 75,682 511
- ---------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES $1,156
- ---------------------------------------------------------
FINANCIAL SERVICES - 3.3%
American Express 20,000 970
Dean Witter Discover 7,000 381
Federal Home Loan Mortgage
Corporation 7,500 625
Federal National Mortgage
Association 16,000 490
Franklin Resources 7,000 401
Merrill Lynch 10,000 604
- ---------------------------------------------------------
TOTAL FINANCIAL SERVICES $3,471
- ---------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 3.1%
CPC International 12,000 829
General Mills 15,000 833
Philip Morris 9,000 811
RJR Nabisco Holdings 30,000 896
- ---------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $3,369
- ---------------------------------------------------------
HEALTHCARE - 2.2%
American Home Products 5,500 580
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
Humana* 35,000 $ 862
United Healthcare 15,000 878
- ---------------------------------------------------------
TOTAL HEALTHCARE $2,320
- ---------------------------------------------------------
HOTELS & LODGING - 4.0%
Circus Circus Enterprises* 25,000 919
Harrah's Entertainment* 32,400 1,118
LA Quinta Inns 25,000 731
Showboat 15,000 480
Trump Hotels and
Casino Resort* 30,000 971
- ---------------------------------------------------------
TOTAL HOTELS & LODGING $4,219
- ---------------------------------------------------------
INSURANCE - 0.6%
Chubb 7,000 662
- ---------------------------------------------------------
TOTAL INSURANCE $ 662
- ---------------------------------------------------------
MACHINERY - 3.5%
Baker Hughes 25,000 794
Brenco 58,000 749
Case 12,000 606
Caterpillar 8,000 512
Keystone International 23,500 514
Trinity Industries 15,000 523
- ---------------------------------------------------------
TOTAL MACHINERY $3,698
- ---------------------------------------------------------
MARINE TRANSPORTATION - 1.0%
Carnival 35,000 1,015
- ---------------------------------------------------------
TOTAL MARINE TRANSPORTATION $1,015
- ---------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 1.0%
CUC International* 30,000 986
Planning Sciences
International, ADR* 5,000 121
- ---------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS
SERVICES $1,107
- ---------------------------------------------------------
PAPER & PAPER PRODUCTS - 0.7%
International Paper 18,000 718
- ---------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 718
- ---------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 4.8%
Anadarko Petroleum 15,000 873
Burlington Resources 15,000 559
Sonat Offshore Drilling 12,500 686
Triton Energy, Cl A* 53,000 2,915
- ---------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $5,033
- ---------------------------------------------------------
PETROLEUM REFINING - 1.2%
Amoco 9,000 657
Unocal 18,000 578
- ---------------------------------------------------------
TOTAL PETROLEUM REFINING $1,235
- ---------------------------------------------------------
PRINTING & PUBLISHING - 0.5%
World Color Press* 20,000 480
- ---------------------------------------------------------
TOTAL PRINTING & PUBLISHING $ 480
- ---------------------------------------------------------
RAILROADS - 0.5%
CSX 10,000 513
- ---------------------------------------------------------
TOTAL RAILROADS $ 513
- ---------------------------------------------------------
-------
25
<PAGE>
STATEMENT OF NET ASSETS
GROWTH AND INCOME PORTFOLIO CONTINUED
- ---------------------------------------------------------
Shares/Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
RETAIL - 2.9%
Brinker International* 30,000 $ 525
Darden Restaurants* 50,000 687
Home Depot 21,000 995
Outback Steakhouse* 20,000 803
- ---------------------------------------------------------
TOTAL RETAIL $ 3,010
- ---------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 3.5%
Analog Devices* 20,000 515
Intel 10,000 677
Micron Technology 15,000 546
Silicon Valley Group* 10,000 268
Stormedia* 15,000 638
Texas Instruments 10,000 565
Trident International* 30,000 525
- ----------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 3,734
- ---------------------------------------------------------
TECHNOLOGY - 2.3%
Bay Networks* 20,000 630
3Com* 15,000 692
Hewlett Packard 5,000 529
IBM 5,000 538
- ---------------------------------------------------------
TOTAL TECHNOLOGY $ 2,389
- ---------------------------------------------------------
TELEPHONES & TELECOMMUNICATION - 4.7%
Act Networks* 20,000 590
American Portable Telecom* 25,000 375
AT&T 14,000 858
Loral Space & Communications* 15,000 216
Newbridge Networks* 15,000 965
SBC Communications 14,000 700
Telefonos de Mexico, ADR 20,500 697
U.S. West Media Group* 30,000 585
- ---------------------------------------------------------
TOTAL TELEPHONES &
TELECOMMUNICATION $ 4,986
- ---------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $58,267,129) $67,895
- ---------------------------------------------------------
PREFERRED CONVERTIBLE STOCKS - 0.3%
ALUMINUM - 0.3%
Reynolds Metals 7,000 337
- ---------------------------------------------------------
TOTAL ALUMINUM $ 337
- ---------------------------------------------------------
TOTAL PREFERRED CONVERTIBLE STOCKS
(Cost $336,350) $ 337
- ---------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 12.6%
U.S. Treasury Notes
6.875%, 02/28/97 150 151
7.375%, 11/15/97 2,000 2,040
7.875%, 04/15/98 1,500 1,549
7.500%, 10/31/99 1,950 2,020
8.500%, 02/15/00 1,500 1,606
7.750%, 02/15/01 1,500 1,581
7.500%, 11/15/01 1,500 1,569
- ---------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
U.S. Treasury Bond
8.000%, 11/15/21 $ 2,510 $ 2,773
- ---------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $12,834,642) $13,289
- ---------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS - 11.3%
Federal Home Loan Mortgage
Corporation
8.500%, 11/01/01 62 64
9.000%, 01/01/02 144 151
9.500%, 07/01/02 14 15
7.980%, 09/08/04 350 354
7.900%, 04/27/05 500 510
6.500%, 04/01/08 1,145 1,112
6.500%, 10/15/21 1,000 950
Federal National Mortgage
Association
10.500%, 12/01/00 11 13
7.000%, 02/01/07 504 499
9.750%, 09/25/18 303 317
7.000%, 02/01/26 1,381 1,332
Government National Mortgage
Association
7.500%, 10/15/23 1,308 1,293
7.500%, 12/15/23 1,259 1,244
7.000%, 02/15/24 1,427 1,375
7.000%, 05/15/24 2,833 2,730
- ---------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS
(Cost $12,019,954) $11,959
- ---------------------------------------------------------
CORPORATE OBLIGATIONS - 7.4%
360 Communication
7.500%, 03/01/06 1,000 956
Associates of North America
9.700%, 05/01/97 500 518
GPA Delaware
8.750%, 12/15/98 800 805
Interamerican Development Bank
9.500%, 10/15/97 200 210
Hydro-Quebec
7.500%, 04/01/16 375 363
Merita Bank
6.500%, 01/15/06 550 513
Nabisco
7.050%, 07/15/07 1,000 956
Saga Petroleum
9.125%, 07/15/14 250 276
Santander Financial
7.000%, 04/01/06 600 582
TCI Communications
8.750%, 08/01/15 350 341
Texas Utility Electric
9.750%, 05/01/21 600 661
TKR Cable
10.500%, 10/30/07 750 830
- --------
26
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
- ---------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
Viacom International
8.000%, 07/07/06 $ 500 $ 465
Williams Holdings
6.250%, 02/01/06 355 327
- ---------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $7,921,111) $ 7,803
- ---------------------------------------------------------
ASSET BACKED SECURITIES - 0.4%
Standard Credit Card Master
Trust, Cl A
5.900%, 02/07/01 450 443
- ---------------------------------------------------------
TOTAL ASSET BACKED SECURITIES
(Cost $449,588) $ 443
- ---------------------------------------------------------
MORTGAGE RELATED - 0.2%
CMO Trust, Cl C
9.900%, 09/01/16 63 64
Goldman Sachs Trust 2
9.200%, 08/01/17 70 73
MDC Asset Investors Trust
8.940%, 03/01/18 63 65
- ---------------------------------------------------------
TOTAL MORTGAGE RELATED
(Cost $206,430) $ 202
- ---------------------------------------------------------
OTHER INVESTMENTS - 0.3%
Mexico Fund 17,333 269
- ---------------------------------------------------------
TOTAL OTHER INVESTMENTS
(Cost $368,123) $ 269
- ---------------------------------------------------------
REPURCHASE AGREEMENT - 2.9%
CS First Boston
5.300%, dated 04/30/96,
matures 05/01/96, repurchase
price $3,025,726 (collateralized
by U.S. Treasury Bond, total
par value $2,427,000, 9.125%,
05/15/18: total market
value $3,095,917) 3,025 3,025
- ---------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $3,025,281) 3,025
- ---------------------------------------------------------
TOTAL INVESTMENTS - 99.7%
(Cost $95,428,608) $105,222
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.3% $ 334
- ---------------------------------------------------------
- ---------------------------------------------------------
Description Value (000)
- ---------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class (unlimited
authorization - no par value)
based on 8,987,461 outstanding shares
of beneficial interest $ 90,203
Portfolio Shares of Retail Class (unlimited
authorization - no par value) based
on 292,730 outstanding shares of
beneficial interest 3,182
Accumulated net realized gain on
investments 2,378
Net unrealized appreciation on investments 9,793
- ---------------------------------------------------------
TOTAL NET ASSETS - 100.0% $105,556
- ---------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $ 11.38
- ---------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $ 11.35
- ---------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE -
RETAIL CLASS ($11.35 (DIVIDE) 95.25%) $ 11.92
- ---------------------------------------------------------
* NON-INCOME PRODUCING SECURITY
ADR-AMERICAN DEPOSITORY RECEIPTS
CL-CLASS
CMO-COLLATERALIZED MORTGAGE OBLIGATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-------
27
<PAGE>
ARK FUNDS: BLUE CHIP EQUITY PORTFOLIO
A pie chart depicting the percentage of Portfolio Assets of the
Blue Chip Equity Portfolio
[GRAPHIC OMITTED]
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Government Obligations -- 8%
Basic Industry -- 6%
Consumer Durable -- 3%
Healthcare -- 12%
Capital Goods -- 3%
Technology -- 22%
Transportation -- 9%
Finance -- 12%
Consumer Non-Durable -- 15%
Energy -- 10%
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
COMMON STOCKS - 92.1%
AIRCRAFT - 5.9%
Boeing 4,000 $ 328
Rockwell International 6,000 351
- ---------------------------------------------------------
TOTAL AIRCRAFT $ 679
- ---------------------------------------------------------
BANKS - 6.1%
J.P. Morgan 4,200 353
Norwest 9,500 343
- ---------------------------------------------------------
TOTAL BANKS $ 696
- ---------------------------------------------------------
BEAUTY PRODUCTS - 3.0%
Procter & Gamble 4,100 346
- ---------------------------------------------------------
TOTAL BEAUTY PRODUCTS $ 346
- ---------------------------------------------------------
CHEMICALS - 2.9%
E.I. du Pont de Nemours 4,100 330
- ---------------------------------------------------------
TOTAL CHEMICALS $ 330
- ---------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 6.4%
Motorola 6,500 398
Philips Electronics, ADR 9,500 341
- ---------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $ 739
- ---------------------------------------------------------
COMPUTERS & SERVICES - 3.4%
Hewlett Packard 3,700 392
- ---------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 392
- ---------------------------------------------------------
COMPUTER SOFTWARE - 3.3%
Microsoft* 3,300 374
- ---------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 374
- ---------------------------------------------------------
DRUGS - 6.0%
Merck 5,600 339
Pfizer 5,100 351
- ---------------------------------------------------------
TOTAL DRUGS $ 690
- ---------------------------------------------------------
ELECTRICAL EQUIPMENT - 3.0%
General Electric 4,500 349
- ---------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $ 349
- ---------------------------------------------------------
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
ENTERTAINMENT - 2.9%
Walt Disney 5,400 $ 335
- ---------------------------------------------------------
TOTAL ENTERTAINMENT $ 335
- ---------------------------------------------------------
FINANCIAL SERVICES - 2.9%
Federal National Mortgage
Association 10,800 331
- ---------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 331
- ---------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 9.0%
Coca Cola 4,100 334
CPC International 5,000 346
Philip Morris 3,900 351
- ---------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 1,031
- ---------------------------------------------------------
HEALTHCARE PRODUCTS &
SERVICES - 6.1%
Abbott Laboratories 8,500 345
Johnson & Johnson 3,800 352
- ---------------------------------------------------------
TOTAL HEALTHCARE PRODUCTS
& SERVICES $ 697
- ---------------------------------------------------------
INSURANCE - 3.1%
Chubb 3,700 350
- ---------------------------------------------------------
TOTAL INSURANCE $ 350
- ---------------------------------------------------------
PAPER & PAPER PRODUCTS - 3.1%
International Paper 8,800 351
- ---------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 351
- ---------------------------------------------------------
PETROLEUM INTERNATIONAL - 9.3%
Chevron 6,200 360
Imperial Oil 8,700 352
Royal Dutch Petroleum 2,500 358
- ---------------------------------------------------------
TOTAL PETROLEUM INTERNATIONAL $ 1,070
- ---------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 3.5%
Xerox 2,700 396
- ---------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT &
SUPPLIES 396
- ---------------------------------------------------------
RAILROADS - 3.0%
Conrail 4,900 342
- ---------------------------------------------------------
TOTAL RAILROADS $ 342
- ---------------------------------------------------------
RETAIL - 3.2%
Wal-Mart Stores 15,200 363
- ---------------------------------------------------------
TOTAL RETAIL $ 363
- ---------------------------------------------------------
TELEPHONES & TELECOMMUNICATION - 6.0%
AT&T 5,700 349
SBC Communications 6,700 335
- ---------------------------------------------------------
TOTAL TELEPHONES &
TELECOMMUNICATION $ 684
- ---------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $10,429,340) $10,545
- ---------------------------------------------------------
- ----------
28
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
- ---------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.8%
Federal Home Loan Bank
5.300%, 05/01/96 900 $ 900
- ---------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $900,000) $ 900
- ---------------------------------------------------------
TOTAL INVESTMENTS - 99.9%
(Cost $11,329,340) $11,445
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.1% $ 11
NET ASSETS:
Portfolio Shares of Institutional Class (unlimited
authorization - no par value)
based on 1,131,525 outstanding
shares of beneficial interest 11,327
Undistributed net investment income 13
Net unrealized appreciation on investments 116
- ---------------------------------------------------------
TOTAL NET ASSETS - 100.0% $11,456
- ---------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $ 10.12
- ---------------------------------------------------------
* NON-INCOME PRODUCING SECURITY
ADR-AMERICAN DEPOSITORY RECEIPTS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: CAPITAL GROWTH PORTFOLIO
A pie chart depicting the percentage of Portfolio Assets of the
Capital Growth Portfolio
[GRAPHIC OMITTED]
% OF TOTAL PORTFOLIO INVESTMENTS
Cash -- 3%
Energy -- 3%
Healthcare -- 14%
Capital Goods -- 4%
Technology -- 36%
Transportation -- 8%
Finance -- 10%
Consumer Non-Durable -- 15%
Consumer Durable -- 7%
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
COMMON STOCKS - 99.3%
AIR TRANSPORTATION - 1.8%
Southwest Airlines 25,000 $ 744
- ---------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 744
- ---------------------------------------------------------
AIRCRAFT - 4.9%
Boeing 7,500 616
Lockheed Martin 12,000 967
Rockwell International 8,000 468
- ---------------------------------------------------------
TOTAL AIRCRAFT $2,051
- ---------------------------------------------------------
AUTOMOTIVE - 1.5%
Ford Motor 17,500 628
- ---------------------------------------------------------
TOTAL AUTOMOTIVE $ 628
- ---------------------------------------------------------
BANKS - 3.0%
Banc One 16,850 586
Mellon Bank 12,000 645
- ---------------------------------------------------------
TOTAL BANKS $1,231
- ---------------------------------------------------------
BEAUTY PRODUCTS - 3.0%
Colgate Palmolive 5,000 383
Procter & Gamble 10,000 845
- ---------------------------------------------------------
TOTAL BEAUTY PRODUCTS $1,228
- ---------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING - 0.9%
Evergreen Media, Cl A* 10,000 393
- ---------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS &
ADVERTISING $ 393
- ---------------------------------------------------------
BUILDING & CONSTRUCTION - 1.4%
Fluor 9,000 595
- ---------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 595
- ---------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 5.6%
ADC Telecommunications* 11,000 462
Inter-Tel* 25,000 528
Paging Network* 15,000 352
Premiere Technologies* 10,000 378
Teltrend* 12,000 592
- ---------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $2,312
- ---------------------------------------------------------
-------
29
<PAGE>
STATEMENT OF NET ASSETS
CAPITAL GROWTH PORTFOLIO CONTINUED
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
COMPUTERS & SERVICES - 5.5%
Ceridian* 10,000 $ 477
Compaq Computer* 10,000 466
Sun Microsystems* 25,000 1,356
- ---------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 2,299
- ---------------------------------------------------------
COMPUTER SOFTWARE - 2.7%
Computer Associates
International 7,500 550
Microsoft* 5,000 567
- ---------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 1,117
- ---------------------------------------------------------
DRUGS - 6.9%
Merck 7,000 424
Pfizer 12,000 826
Schering Plough 20,000 1,148
Watson Pharmaceuticals* 10,000 475
- ---------------------------------------------------------
TOTAL DRUGS $ 2,873
- ---------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.2%
General Electric 12,000 930
- ---------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $ 930
- ---------------------------------------------------------
ELECTRICAL SERVICES - 0.5%
Portland General 6,500 191
- ---------------------------------------------------------
TOTAL ELECTRICAL SERVICES $ 191
- ---------------------------------------------------------
ENTERTAINMENT - 1.0%
Walt Disney 7,000 434
- ---------------------------------------------------------
TOTAL ENTERTAINMENT $ 434
- ---------------------------------------------------------
FINANCIAL SERVICES - 6.5%
American Express 20,000 970
ContiFinancial* 10,000 319
FNMA 15,000 459
Merrill Lynch 16,000 966
- ---------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 2,714
- ---------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 5.8%
Coca Cola 8,000 652
Coca Cola Femsa, S.A., ADR 20,000 538
CPC International 18,000 1,244
- ---------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 2,434
- ---------------------------------------------------------
HEALTH CARE - 7.3%
American Home Products 5,000 527
Becton Dickinson 6,700 540
Humana* 20,000 493
Johnson & Johnson 5,000 462
Medtronic 8,000 425
United Healthcare 10,000 585
- ---------------------------------------------------------
TOTAL HEALTH CARE $ 3,032
- ---------------------------------------------------------
HOTELS & LODGING - 5.4%
Harrah's Entertainment* 28,000 966
HFS* 7,000 359
ITT* 10,000 609
Trump Hotels & Casino Resort* 10,000 324
- ---------------------------------------------------------
TOTAL HOTELS & LODGING $ 2,258
- ---------------------------------------------------------
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
INSURANCE - 0.3%
Travelers/Aetna Property
Casualty, Cl A* 4,000 $ 110
- ---------------------------------------------------------
TOTAL INSURANCE $ 110
- ---------------------------------------------------------
MACHINERY - 2.3%
Case 10,000 505
Caterpillar 7,000 448
- ---------------------------------------------------------
TOTAL MACHINERY $ 953
- ---------------------------------------------------------
MEASURING DEVICES - 0.2%
Thermoquest* 5,000 $ 82
- ---------------------------------------------------------
TOTAL MEASURING DEVICES $ 82
- ---------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 1.0%
CUC International* 12,000 394
- ---------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 394
- ---------------------------------------------------------
PETROLEUM REFINING - 2.8%
Chevron 10,000 580
Mobil 5,000 575
- ---------------------------------------------------------
TOTAL PETROLEUM REFINING $ 1,155
- ---------------------------------------------------------
RETAIL - 6.9%
Borders Group* 15,000 480
CompUSA* 14,000 485
Gap 16,000 482
Home Depot 20,000 947
Sears Roebuck 10,000 499
- ---------------------------------------------------------
TOTAL RETAIL $ 2,893
- ---------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 4.4%
Atmel* 12,000 480
Micron Technology 12,500 455
Tencor Instruments* 20,000 495
Trident International* 23,800 416
- ---------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 1,846
- ---------------------------------------------------------
TECHNOLOGY - 14.9%
3Com* 30,000 1,384
Bay Networks* 15,000 473
Cisco Systems* 10,000 519
Cybercash* 1,000 35
Hewlett Packard 7,000 741
IBM 5,700 613
Microcom* 15,000 366
Oracle Systems* 19,500 658
Spyglass* 20,000 583
United Technologies 4,000 442
Worldtalk Communications* 30,000 390
- ---------------------------------------------------------
TOTAL TECHNOLOGY $ 6,204
- ---------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 0.6%
SCB Computer Technology* 10,000 265
- ---------------------------------------------------------
TOTAL TELEPHONES &
TELECOMMUNICATIONS $ 265
- ---------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $38,426,047) $41,366
- ---------------------------------------------------------
- ---------
30
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
- ---------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
REPURCHASE AGREEMENT - 2.8%
CS First Boston
5.300%, dated 04/30/96,
matures 05/01/96, repurchase
price $1,181,727 (collateralized
by U.S. Treasury Bond, total
par value $1,143,000, 7.25%,
05/15/16: total market
value $1,211,023) $1,182 $ 1,182
- ---------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,181,553) $ 1,182
- ---------------------------------------------------------
TOTAL INVESTMENTS - 102.1%
(Cost $39,607,600) $42,548
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (2.1%) $ (877)
- ---------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class (unlimited
authorization - no par value)
based on 3,411,204 outstanding
shares of beneficial interest 34,134
Portfolio Shares of Retail Class (unlimited
authorization - no par value) based
on 182,593 outstanding shares of
beneficial interest 2,012
Undistributed net investment income 176
Accumulated net realized gain on
investments 2,409
Net unrealized appreciation on investments 2,940
- ---------------------------------------------------------
TOTAL NET ASSETS - 100.0% $41,671
- ---------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $ 11.60
- ---------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $ 11.56
- ---------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE -
RETAIL CLASS ($11.56 (DIVIDE) 95.25%) $ 12.14
- ---------------------------------------------------------
*NON-INCOME PRODUCING SECURITY
ADR-AMERICAN DEPOSITORY RECEIPTS
CL-CLASS
FNMA-FEDERAL NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: SPECIAL EQUITY PORTFOLIO
A pie chart depicting the percentage of Portfolio Assets of the
Special Equity Portfolio
[GRAPHIC OMITTED]
% OF TOTAL PORTFOLIO INVESTMENTS
U.S. Government Agency
Obligations -- 5%
Energy -- 4%
Consumer Durable -- 8%
Consumer Non-Durable -- 3%
Finance -- 2%
Basic Industry -- 2%
Healthcare -- 15%
Transportation -- 2%
Technology -- 59%
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
COMMON STOCKS - 96.9%
AIR TRANSPORTATION - 2.1%
Atlas Air* 2,500 $ 113
Mesaba Holdings* 50,000 581
- ---------------------------------------------------------
TOTAL AIR TRANSPORTATION $ 694
- ---------------------------------------------------------
BROADCASTING, NEWSPAPERS &
ADVERTISING - 2.5%
Evergreen Media, Class A* 14,000 550
Infinity Broadcasting* 9,000 261
Outdoor Systems* 1,000 23
- ---------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS &
ADVERTISING $ 834
- ---------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 8.7%
Davox* 25,000 622
DSP Communications* 20,000 795
Octel Communications* 8,000 358
Polycom* 10,000 89
Stratacom* 15,000 780
Teltrend* 6,000 296
- ---------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $2,940
- ---------------------------------------------------------
COMPUTERS & SERVICES - 10.6%
Applix* 13,000 507
CBT Group, ADR* 10,000 740
Checkfree* 4,000 77
Citrix Systems* 7,000 546
Documentum* 4,700 216
HCIA* 8,000 432
Health Payment Review* 15,000 645
Lexmark International Group* 6,000 130
Visio* 7,500 281
- ---------------------------------------------------------
TOTAL COMPUTERS & SERVICES $3,574
- ----------------------------------------------------------
DRUGS - 8.0%
Amrion* 30,000 465
Dura Pharmaceuticals* 9,000 481
Elan, ADR* 5,000 331
Idec Pharmaceuticals* 22,000 638
Neose Technologies* 35,000 766
- ---------------------------------------------------------
TOTAL DRUGS $2,681
- ---------------------------------------------------------
-------
31
<PAGE>
STATEMENT OF NET ASSETS
SPECIAL EQUITY PORTFOLIO CONTINUED
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
ELECTRICAL TECHNOLOGY - 1.3%
Smart Modular* 20,000 $ 453
- ---------------------------------------------------------
TOTAL ELECTRICAL TECHNOLOGY $ 453
- ---------------------------------------------------------
ENVIRONMENTAL SERVICES - 1.3%
Sanifill* 10,000 434
- ---------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES $ 434
- ---------------------------------------------------------
FINANCIAL SERVICES - 1.6%
Grupo Financiero Serfin, ADR 50,000 250
Onyx Acceptance* 15,000 285
- ---------------------------------------------------------
TOTAL FINANCIAL SERVICES $ 535
- ---------------------------------------------------------
MEASURING DEVICES - 4.9%
Epic Design Technology* 10,000 342
Fore Systems* 5,000 395
Thermo Instrument Systems* 20,000 660
Thermo Sentron* 10,000 157
Thermoquest* 5,000 83
- ---------------------------------------------------------
TOTAL MEASURING DEVICES $1,637
- ---------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 2.1%
InControl* 5,000 76
Innotech* 30,000 270
Pharmaceutical Product
Development* 1,100 46
Physician Sales & Services* 12,000 324
- ---------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $ 716
- ---------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 17.8%
Astea International* 15,000 443
Clarify* 10,000 399
CSG Systems International* 12,000 384
Data Processing Resources* 1,000 25
Fair, Isaac & Company 10,000 425
Intersolv* 15,000 163
Logic Works* 5,000 85
Metatools* 25,000 700
National Data 6,500 229
Physician Computer Networks* 10,000 112
Powercerv* 500 7
Prism Solutions* 7,000 228
Red Brick Systems* 4,000 237
Remedy* 6,000 471
Segue Software* 1,000 30
Sotheby's Holdings, Class A 30,000 424
Transaction Systems
Architects* 15,000 803
Wackenhut Corrections* 15,000 802
Workgroup Technology* 1,000 26
- ---------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $5,993
- ---------------------------------------------------------
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES - 1.8%
Accustaff* 20,000 $ 595
- ---------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER
SERVICES $ 595
- ---------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 3.8%
Belco Oil & Gas* 25,000 722
Global Marine* 50,000 569
- ---------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $ 1,291
- ---------------------------------------------------------
PRINTING & PUBLISHING - 1.2%
Gartner Group, Class A* 12,000 411
- ---------------------------------------------------------
TOTAL PRINTING & PUBLISHING $ 411
- ---------------------------------------------------------
PROFESSIONAL SERVICES - 5.2%
American Oncology Resources* 18,000 859
Apollo Group, Class A* 20,000 880
- ---------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 1,739
- ---------------------------------------------------------
RETAIL - 8.6%
Brookstone* 30,000 285
Charming Shoppes* 150,000 966
Dollar Tree Stores* 9,000 301
Gadzooks* 15,000 757
Men's Wearhouse* 10,000 370
Outback Steakhouse* 5,500 221
- ---------------------------------------------------------
TOTAL RETAIL $ 2,900
- ---------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 4.5%
Advanced Semiconductor
Materials International* 25,000 344
Alpha Industries* 50,000 562
Tencor Instruments* 10,000 248
Trident International* 20,000 350
- ---------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 1,504
- ---------------------------------------------------------
TELEPHONES & TELECOMMUNICATION - 8.4%
Act Networks* 12,272 362
Apac Teleservices* 6,500 504
Arch Communications Group* 8,000 190
Aspect Telecommunications* 9,000 517
Cascade Communications* 3,000 301
Microcom* 7,000 171
Pairgain Technologies* 8,000 764
- ---------------------------------------------------------
TOTAL TELEPHONES &
TELECOMMUNICATION $ 2,809
- ---------------------------------------------------------
TESTING LABORATORIES - 2.5%
Clintrials Research* 15,000 630
Curative Technologies* 10,000 224
- ---------------------------------------------------------
TOTAL TESTING LABORATORIES $ 854
- ---------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $25,565,839) $32,594
- ---------------------------------------------------------
- -----------
32
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
- ---------------------------------------------------------
Shares/Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 5.6%
Federal Home Loan Bank
5.300%, 05/01/96 $1,880 $ 1,880
- ---------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $1,880,000) $ 1,880
- ---------------------------------------------------------
WARRANTS - 1.2%
Wang Labs* 40,000 395
- ---------------------------------------------------------
TOTAL WARRANTS
(Cost $390,620) $ 395
- ---------------------------------------------------------
TOTAL INVESTMENTS - 103.7%
(Cost $27,836,459) $34,869
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (3.7%) $(1,248)
NET ASSETS:
Portfolio Shares of Institutional Class (unlimited
authorization - no par value)
based on 2,284,292 outstanding
shares of beneficial interest 26,058
Accumulated net realized gain on
investments 531
Net unrealized appreciation on investments 7,032
- ---------------------------------------------------------
TOTAL NET ASSETS - 100.0% $33,621
- ---------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS 14.72
- ---------------------------------------------------------
* NON-INCOME PRODUCING SECURITY
ADR-AMERICAN DEPOSITORY RECEIPTS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: INTERNATIONAL EQUITY PORTFOLIO
A pie chart depicting the percentage of Portfolio Assets of the
International Equity Portfolio
[GRAPHIC OMITTED]
% OF TOTAL PORTFOLIO INVESTMENTS
Cash -- 6%
Other Far East -- 11%
Continental Europe -- 28%
Japan -- 44%
United Kingdom -- 11%
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
FOREIGN COMMON STOCKS - 93.5%
AUSTRALIA - 1.8%
Broken Hill Proprietary 329 $ 5
Burns Phillip 7,203 15
National Australia Bank 1,366 12
RTZ-CRA Group 1,075 17
Western Mining 1,971 14
- ---------------------------------------------------------
TOTAL AUSTRALIA $ 63
- ---------------------------------------------------------
FRANCE - 6.3%
Accor 322 45
AXA 500 30
Cie Generale des Eaux 402 44
Groupe SEB 273 46
PSA Peugeot Citroen 300 42
Total, Series B 250 17
- ---------------------------------------------------------
TOTAL FRANCE $224
- ---------------------------------------------------------
GERMANY - 4.3%
Bayer 112 36
Deutsche Bank 600 29
Mannesmann 180 62
RWE 700 27
- ---------------------------------------------------------
TOTAL GERMANY $154
- ---------------------------------------------------------
HONG KONG - 2.1%
Cheung Kong Holdings 2,606 19
First Pacific 18,000 24
HSBC Holdings 1,200 18
Swire Pacific, Series A 1,736 15
- ---------------------------------------------------------
TOTAL HONG KONG $ 76
- ---------------------------------------------------------
INDONESIA - 1.0%
PT Indosat, ADR 1,000 35
- ---------------------------------------------------------
TOTAL INDONESIA $ 35
- ---------------------------------------------------------
ITALY - 1.1%
Benetton Group 3,200 38
- ---------------------------------------------------------
TOTAL ITALY $ 38
- ---------------------------------------------------------
-------
33
<PAGE>
Statement of Net Assets
International Equity Portfolio continued
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
JAPAN - 44.1%
Akita Bank 2,000 $ 15
Asahi Chemical Industries 5,000 38
Asahi Diamond Industrial 3,090 42
Asahi Glass 3,000 36
Chiyoda 3,000 70
Chudenko 1,000 35
DDI 6 52
Fukuda 2,000 21
Hitachi 3,000 32
Hitachi Metals 3,000 39
Japan Securities Finance 1,000 16
Matsushita Electric 3,000 53
Mitsubishi Heavy Industries 7,000 63
Mitsui 6,000 57
Mitsui Trust & Banking 4,000 48
Miura 1,000 19
Mizuno 5,000 50
Nagase 5,000 50
Nikon 2,000 27
Nippon Telegraph & Telephone 3 23
Nippon Yusen Kabushik 7,000 43
Nomura Securities 2,000 44
Olympus Optical 6,000 65
Orix 1,000 41
Royal 1,100 38
Sagami Railway 6,000 29
Sakura Bank 3,000 35
Sankyo 1,000 24
Shimachu 2,000 68
Shohkoh Fund 200 52
Sodick 2,000 26
Sumitomo Electric 4,000 57
Taiko Bank 5,000 25
Tokio Marine & Fire Insurance 3,000 41
Toppan Printing 4,000 59
Toshiba 8,000 62
Toyota Motor 2,000 46
Tsudakoma 3,000 24
Tsuzuki Denki* 1,000 11
- ---------------------------------------------------------
TOTAL JAPAN $1,576
- ---------------------------------------------------------
MALAYSIA - 2.5%
Arab Malaysian Merchant Bank* 3,000 14
Genting Berhad 1,000 9
Land and General 4,500 12
Malayan Banking 3,000 29
UMW Holdings Berhad 8,266 27
- ---------------------------------------------------------
TOTAL MALAYSIA $ 91
- ---------------------------------------------------------
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
NETHERLANDS - 4.9%
ABN-Amro Holdings 1,328 $ 69
Aegon 1,272 61
Koninklijke PTT Nederland 597 22
Verenigde Nederlandse
Uigevbedri 1,400 24
- ---------------------------------------------------------
TOTAL NETHERLANDS $ 176
- ---------------------------------------------------------
SINGAPORE - 2.4%
DBS Land 3,000 12
Development Bank of Singapore 1,000 13
Keppel 2,000 18
Malayan Credit 3,000 6
Singapore Press, Series F 2,000 38
- ---------------------------------------------------------
TOTAL SINGAPORE $ 87
- ---------------------------------------------------------
SPAIN - 1.8%
Banco de Santander 654 30
Repsol 937 34
- ---------------------------------------------------------
TOTAL SPAIN $ 64
- ---------------------------------------------------------
SWEDEN - 3.6%
Astra AB, Series A 810 36
Atlas AB, Series A 2,502 47
Ericsson 900 18
Stora Kopparbergs, Series A 1,900 26
- ---------------------------------------------------------
TOTAL SWEDEN $ 127
- ---------------------------------------------------------
SWITZERLAND - 4.9%
Alusuisse-Lonza 50 40
BBC Brown Boveri 17 20
Nestle SA 55 61
Roche Holdings 7 55
- ---------------------------------------------------------
TOTAL SWITZERLAND $ 176
- ---------------------------------------------------------
THAILAND - 1.4%
Finance One Public 3,000 21
Land and House 999 16
Total Access Communication 1,500 13
- ---------------------------------------------------------
TOTAL THAILAND $ 50
- ---------------------------------------------------------
UNITED KINGDOM - 11.3%
Barclays Bank 846 9
BAT Industries 2,370 18
Blue Circle Industries 400 2
BOC Group 1,461 20
British Airport Authority 2,600 21
British Petroleum 2,083 19
BTR 3,421 17
Cable & Wireless 2,781 22
Cadbury Schweppes 2,100 16
General Accident 1,900 18
General Electric 3,707 20
Guinness 2,209 16
- ----------
34
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
- ---------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------
UNITED KINGDOM, CONCLUDED
HSBC Holdings 700 $ 10
London Electricty 1,807 23
Marks & Spencer 3,099 21
National Westminster 995 9
Prudential 3,043 21
Reuters Holdings 1,795 20
Sainsbury (J) 2,805 16
Shell Transportation & Trading 1,473 19
SmithKline Beecham, Series A 1,956 21
TSB Group 2,367 11
Unilever 640 12
Zeneca Group 1,014 21
- ---------------------------------------------------------
TOTAL UNITED KINGDOM $ 402
- ---------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(Cost $2,957,557) $3,339
- ---------------------------------------------------------
FOREIGN PREFERRED STOCKS - 1.4%
GERMANY - 1.4%
GEA 160 50
- ---------------------------------------------------------
TOTAL GERMANY $ 50
- ---------------------------------------------------------
TOTAL FOREIGN PREFERRED STOCKS
(Cost $55,598) $ 50
- ---------------------------------------------------------
- ---------------------------------------------------------
Principal Market
Description Amount (000) Value (000)
- ---------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 4.8%
U.S. Treasury Bill
5.376%, 05/02/96 $85 $ 85
5.265%, 05/09/96 35 35
5.327%, 05/16/96 50 50
- ---------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $169,839) $ 170
- ---------------------------------------------------------
TOTAL INVESTMENTS - 99.7%
(Cost $3,182,994) $3,559
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.3% $ 12
- ---------------------------------------------------------
NET ASSETS:
Portfolio shares of Institutional Class (unlimited
authorization - no par value)
based on 318,029 outstanding shares of
beneficial interest 3,144
Undistributed net investment income 2
Accumulated net realized gain on
investments 49
Net unrealized appreciation on investments 376
- ---------------------------------------------------------
TOTAL NET ASSETS - 100.0% $3,571
- ---------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $11.23
- ---------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES
ADR-AMERICAN DEPOSITORY RECEIPT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-------
35
<PAGE>
STATEMENT OF OPERATIONS (000)
FOR THE YEAR OR PERIOD ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
U.S. TREASURY U.S. GOVERNMENT TAX-FREE SHORT-TERM
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET TREASURY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO (1) PORTFOLIO
------------- ------------- ------------ ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ -- $ -- $ -- $ -- $ --
Interest 17,457 49,271 24,057 3,626 115 7,550
Less: Foreign Taxes Withheld -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total Investment Income 17,457 49,271 24,057 3,626 115 7,550
EXPENSES:
Administrator Fees 439 1,185 575 134 3 154
Waiver of Administrator Fees (29) (232) (192) (61) -- --
Investment Advisory Fees 790 2,142 1,032 241 7 562
Waiver/Contribution of Investment
Advisory Fees (229) (913) (585) (156) (1) --
Custodian Fees 49 152 68 15 -- 21
Professional Fees 43 102 51 17 -- 16
Registration Fees 44 107 39 22 2 51
Waiver of Registration Fees -- (1) (1) (6) -- --
Distribution Fees - Retail Class 4 -- 198 24 -- 6
Waiver of Distribution Fees -
Retail Class (2) -- -- (20) -- (4)
Distribution Fees -
Institutional II Class 40 13 17 6 -- --
Printing Fees 10 36 14 2 -- 1
Trustee Fees 6 15 9 2 -- 2
Amortization of Deferred
Organization Costs 4 4 4 4 -- 4
Miscellaneous Fees 24 47 27 9 -- 9
Shareholder Servicing Fees -
Retail Class 2 -- 119 14 -- 3
Waiver of Shareholder Servicing
Fees - Retail Class (1) -- (71) (9) -- (3)
------- ------- ------- ------- ------- -------
Total Expenses 1,194 2,657 1,304 238 11 822
------- ------- ------- ------- ------- -------
Net Investment Income 16,263 46,614 22,753 3,388 104 6,728
------- ------- ------- ------- ------- -------
Net Realized Gain On:
Investments 14 11 10 4 -- 706
Foreign Currency Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
on Foreign Currency and Translation
of Other Assets and Liabilities
Denominated in Foreign Currency -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments -- -- -- -- (83) (3,654)
------- ------- ------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments and
Foreign Currency Transactions 14 11 10 4 (83) (2,948)
------- ------- ------- ------- ------- -------
Increase in Net Assets
Resulting from Operations $16,277 $46,625 $22,763 $ 3,392 $ 21 $ 3,780
======= ======= ======= ======= ======= =======
</TABLE>
- -----------
36
<TABLE>
<CAPTION>
GROWTH BLUE CHIP CAPITAL SPECIAL INTERNATIONAL
AND INCOME EQUITY GROWTH EQUITY EQUITY
PORTFOLIO PORTFOLIO (2) PORTFOLIO PORTFOLIO (3) PORTFOLIO
---------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 928 $ 9 $ 535 $ 118 $ 57
Interest 3,130 10 144 46 6
Less: Foreign Taxes Withheld -- -- -- -- (8)
------- ------- ------- ------- -------
Total Investment Income 4,058 19 679 164 55
EXPENSES:
Administrator Fees 144 1 64 14 5
Waiver of Administrator Fees -- (1) -- -- --
Investment Advisory Fees 567 5 271 65 26
Waiver/Contribution of Investment
Advisory Fees -- (5) (271) -- (45)
Custodian Fees 30 -- 21 4 19
Professional Fees 18 -- 11 5 10
Registration Fees 6 5 4 10 5
Waiver of Registration Fees -- -- -- -- --
Distribution Fees - Retail Class 5 -- 5 -- --
Waiver of Distribution Fees -
Retail Class (4) -- (5) -- --
Distribution Fees -
Institutional II Class -- -- -- -- --
Printing Fees 2 -- 1 -- (2)
Trustee Fees 2 -- 1 -- --
Amortization of Deferred
Organization Costs 4 -- 4 -- --
Miscellaneous Fees 7 1 6 1 32
Shareholder Servicing Fees -
Retail Class 2 -- 2 -- --
Waiver of Shareholder Servicing
Fees - Retail Class (2) -- (2) -- --
------- ------- ------- ------- -------
Total Expenses 781 6 112 99 50
------- ------- ------- ------- -------
Net Investment Income 3,277 13 567 65 5
------- ------- ------- ------- -------
Net Realized Gain On:
Investments 8,219 -- 8,217 531 119
Foreign Currency Transactions -- -- -- -- 53
Net Change in Unrealized Appreciation
on Foreign Currency and Translation
of Other Assets and Liabilities
Denominated in Foreign Currency -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments 7,402 116 275 7,032 300
------- ------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments and
Foreign Currency Transactions 15,621 116 8,492 7,563 472
------- ------- ------- ------- -------
Increase in Net Assets
Resulting from Operations $18,898 $ 129 $ 9,059 $ 7,628 $ 477
======= ======= ======= ======= =======
<FN>
(1) Commenced operations on March 20, 1996.
(2) Commenced operations on April 1, 1996.
(3) Commenced operations on July 13, 1995.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
-------
37
<PAGE>
Statement of Changes in Net Assets (000)
For the Year or Period Ended April 30,
<TABLE>
<CAPTION>
U.S. Treasury U.S. Government Tax-Free
Money Market Money Market Money Market Money Market
Portfolio Portfolio Portfolio Portfolio
---------------- ------------------ ----------------- ----------------
1996 1995 1996 1995 1996 1995 1996 1995
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income $ 16,263 $ 7,946 $ 46,614 $ 24,683 $ 22,753 $ 13,830 $ 3,388 $ 2,156
Net Realized Gain (Loss) from
Security Transactions and
Foreign Currency Transactions 14 21 11 40 10 29 4 (3)
Net Change in Unrealized Appreciation
(Depreciation)
of Investments and Foreign Currency -- -- -- -- -- -- -- --
-------- -------- ---------- -------- -------- -------- -------- --------
Net Increase in Net Assets from Operations 16,277 7,967 46,625 24,723 22,763 13,859 3,392 2,153
-------- -------- ---------- -------- -------- -------- -------- --------
Distributions to Shareholders:
Net Investment Income
Institutional Class (14,187) (7,946) (45,937) (24,683) (17,731) (12,863) (2,862) (2,126)
Retail Class (72) -- -- -- (4,145) (967) (319) (30)
Institutional II Class (2,012) -- (665) -- (892) -- (211) --
Net Capital Gains
Institutional Class -- -- -- -- -- -- -- --
Retail Class -- -- -- -- -- -- -- --
-------- -------- ---------- -------- -------- -------- -------- --------
Total Distributions (16,271) (7,946) (46,602) (24,683) (22,768) (13,830) (3,392) (2,156)
-------- -------- ---------- -------- -------- -------- -------- --------
Capital Share Transactions:
Institutional Class:
Shares Issued 418,427 512,041 2,007,796 1,609,772 860,169 642,304 131,718 93,503
Shares Issued in Lieu of Cash Distributions 3 - 11 1 1 1 -- --
Shares Redeemed (364,250)(428,819) (1,615,184)(1,230,137) (789,681) (561,628) (121,091) (96,081)
-------- -------- ---------- -------- -------- -------- -------- --------
Total Institutional Class Share Transactions 54,180 83,222 392,623 379,636 70,489 80,677 10,627 (2,578)
-------- -------- ---------- -------- -------- -------- -------- --------
Retail Class:
Shares Issued 11,195 -- -- -- 99,955 65,336 26,603 3,169
Shares Issued in Lieu of Cash Distributions 72 -- -- -- 4,145 967 319 30
Shares Redeemed (2,509) -- -- -- (50,477) (15,243) (13,234) (757)
-------- -------- ---------- -------- -------- -------- -------- --------
Total Retail Class Share Transactions 8,758 -- -- -- 53,623 51,060 13,688 2,442
-------- -------- ---------- -------- -------- -------- -------- --------
Institutional II Class:
Shares Issued 157,259 -- 144,979 -- 70,265 -- 28,161 --
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- -- -- --
Shares Redeemed (110,035) -- (127,953) -- (41,476) -- (18,774) --
-------- -------- ---------- -------- -------- -------- -------- --------
Total Institutional II Class
Share Transactions 47,224 -- 17,026 -- 28,789 -- 9,387 --
-------- -------- ---------- -------- -------- -------- -------- --------
Increase (Decrease) in Net Assets from
Shareholder Transactions 110,162 83,222 409,649 379,636 152,901 131,737 33,702 (136)
-------- -------- ---------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets 110,168 83,243 409,672 379,676 152,896 131,766 33,702 (139)
-------- -------- ---------- -------- -------- -------- -------- --------
Net Assets:
Beginning of period 221,069 137,826 651,113 271,437 328,940 197,174 66,603 66,742
-------- -------- ---------- -------- -------- -------- -------- --------
End of period $331,237 $221,069 $1,060,785 $651,113 $481,836 $328,940 $100,305 $ 66,603
======== ======== ========== ======== ======== ======== ======== ========
Shares Issued and Redeemed:
Institutional Class:
Shares Issued 418,437 512,041 2,007,818 1,609,772 860,170 642,304 131,714 93,503
Shares Issued in Lieu of Cash Distributions 3 1 11 1 1 1 -- --
Shares Redeemed (364,250)(428,820) (1,615,184)(1,230,137) (789,681) (561,628) (121,091) (96,081)
-------- -------- ---------- -------- -------- -------- -------- --------
Total Institutional Class Share Transactions 54,190 83,222 392,645 379,636 70,490 80,677 10,623 (2,578)
-------- -------- ---------- -------- -------- -------- -------- --------
Retail Class:
Shares Issued 11,195 -- -- -- 99,955 65,336 26,603 3,168
Shares Issued in Lieu of Cash Distributions 72 -- -- -- 4,145 967 319 30
Shares Redeemed (2,509) -- -- -- (50,477) (15,243) (13,234) (756)
-------- -------- ---------- -------- -------- -------- -------- --------
Total Retail Class Share Transactions 8,758 -- -- -- 53,623 51,060 13,688 2,442
-------- -------- ---------- -------- -------- -------- -------- --------
Institutional II Class:
Shares Issued 157,259 -- 144,979 -- 70,265 -- 28,161 --
Shares Issued in Lieu of Cash Distributions -- -- -- -- - -- -- --
Shares Redeemed (110,035) -- (127,953) -- (41,476) -- (18,774) --
-------- -------- ---------- -------- -------- -------- -------- --------
Total Institutional II Class
Share Transactions 47,224 -- 17,026 -- 28,789 -- 9,387 --
-------- -------- ---------- -------- -------- -------- -------- --------
Net Increase (Decrease) in
Share Transactions 110,172 83,222 409,671 379,636 152,902 131,737 33,698 (136)
======== ======== ========== ======== ======== ======== ======== ========
</TABLE>
- ------------
38
The accompanying notes are an integral part of the financial statements
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
SHORT-TERM GROWTH BLUE CHIP
TREASURY INCOME AND INCOME EQUITY
PORTFOLIO(1) PORTFOLIO PORTFOLIO PORTFOLIO(2)
------------ -------------------- -------------------- ------------
1996 1996 1995 1996 1995 1996
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income $ 104 $ 6,728 $ 3,368 $ 3,277 $ 2,952 $ 13
Net Realized Gain (Loss) from
Security Transactions and
Foreign Currency Transactions -- 706 (2,172) 8,219 (2,148) --
Net Change in Unrealized Appreciation
(Depreciation) of Investments
and Foreign Currency (83) (3,654) 2,393 7,402 2,487 116
-------- -------- -------- -------- -------- --------
Net Increase in Net Assets from Operations 21 3,780 3,589 18,898 3,291 129
-------- -------- -------- -------- -------- --------
Distributions to Shareholders:
Net Investment Income
Institutional Class (104) (6,384) (3,384) (3,166) (2,567) --
Retail Class -- (102) (6) (32) (11) --
Institutional II Class -- -- -- --
Net Capital Gains
Institutional Class -- -- (167) (3,544) (1,672) --
Retail Class -- -- -- (53) (6) --
-------- -------- -------- -------- -------- --------
Total Distributions (104) (6,486) (3,557) (6,795) (4,256) --
-------- -------- -------- -------- -------- --------
Capital Share Transactions:
Institutional Class:
Shares Issued 18,961 134,768 25,893 27,190 20,508 11,327
Shares Issued in Lieu of Cash Distributions -- -- 1 -- 1 --
Shares Redeemed (55) (17,667) (13,773) (27,957) (16,710) --
-------- -------- -------- -------- -------- --------
Total Institutional Class Share Transactions 18,906 117,101 12,121 (767) 3,799 11,327
-------- -------- -------- -------- -------- --------
Retail Class:
Shares Issued -- 7,481 274 2,896 437 --
Shares Issued in Lieu of Cash Distributions -- 102 6 85 18 --
Shares Redeemed -- (3,569) (15) (349) (75) --
-------- -------- -------- -------- -------- --------
Total Retail Class Share Transactions -- 4,014 265 2,632 380 --
-------- -------- -------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Institutional II Class
Share Transactions -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Increase (Decrease) in Net Assets from
Shareholder Transactions 18,906 121,115 12,386 1,865 4,179 11,327
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets 18,823 118,409 12,418 13,968 3,214 11,456
-------- -------- -------- -------- -------- --------
Net Assets:
Beginning of period -- 66,737 54,319 91,588 88,374 --
-------- -------- -------- -------- -------- --------
End of period $ 18,823 $185,146 $ 66,737 $105,556 $ 91,588 $ 11,456
======== ======== ======== ======== ======== ========
Shares Issued and Redeemed:
Institutional Class:
Shares Issued 1,896 13,309 2,729 2,469 2,073 1,132
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed (5) (1,767) (1,452) (2,545) (1,693) --
-------- -------- -------- -------- -------- --------
Total Institutional Class Share Transactions 1,891 11,542 1,277 (76) 380 1,132
-------- -------- -------- -------- -------- --------
Retail Class:
Shares Issued -- 739 28 262 44 --
Shares Issued in Lieu of Cash Distributions -- 10 1 8 2 --
Shares Redeemed -- (357) (2) (31) (7) --
-------- -------- -------- -------- -------- --------
Total Retail Class Share Transactions -- 392 27 239 39 --
-------- -------- -------- -------- -------- --------
Institutional II Class:
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Institutional II Class
Share Transactions -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in
Share Transactions 1,891 11,934 1,304 163 419 1,132
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CAPITAL SPECIAL INTERNATIONAL
GROWTH EQUITY EQUITY
PORTFOLIO PORTFOLIO(3) PORTFOLIO(4)
-------------------- -------------------- ------------------
1996 1995 1996 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Operations:
Net Investment Income $ 567 $ 611 $ 65 $ 5 $ 9
Net Realized Gain (Loss) from
Security Transactions and
Foreign Currency Transactions 8,217 (2,230) 531 172 (4)
Net Change in Unrealized Appreciation
(Depreciation) of Investments
and Foreign Currency 275 2,593 7,032 300 75
-------- -------- -------- ------- -------
Net Increase in Net Assets from Operations 9,059 974 7,628 477 80
-------- -------- -------- ------- -------
Distributions to Shareholders:
Net Investment Income
Institutional Class (638) (508) (90) (70) --
Retail Class (17) (2) -- -- --
Institutional II Class -- -- -- -- --
Net Capital Gains
Institutional Class (3,005) (839) -- (69) --
Retail Class (125) (4) -- -- --
-------- -------- -------- ------- -------
Total Distributions (3,785) (1,353) (90) (139) --
-------- -------- -------- ------- -------
Capital Share Transactions:
Institutional Class:
Shares Issued 12,998 8,654 26,526 154 2,860
Shares Issued in Lieu of Cash Distributions -- 1 -- 139 --
Shares Redeemed (19,789) (19,330) (443) -- --
-------- -------- -------- ------- -------
Total Institutional Class Share Transactions (6,791) (10,675) 26,083 293 2,860
-------- -------- -------- ------- -------
Retail Class:
Shares Issued 2,335 319 -- -- --
Shares Issued in Lieu of Cash Distributions 141 5 -- -- --
Shares Redeemed (862) (16) -- -- --
-------- -------- -------- ------- -------
Total Retail Class Share Transactions 1,614 308 -- -- --
-------- -------- -------- ------- -------
Institutional II Class:
Shares Issued -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- --
Shares Redeemed -- -- -- -- --
-------- -------- -------- ------- -------
Total Institutional II Class
Share Transactions -- -- -- -- --
-------- -------- -------- ------- -------
Increase (Decrease) in Net Assets from
Shareholder Transactions (5,177) (10,367) 26,083 293 2,860
-------- -------- -------- ------- -------
Net Increase (Decrease) in Net Assets 97 (10,746) 33,621 631 2,940
-------- -------- -------- ------- -------
Net Assets:
Beginning of period 41,574 52,320 -- 2,940 --
-------- -------- -------- ------- -------
End of period $ 41,671 $ 41,574 $ 33,621 $ 3,571 $ 2,940
======== ======== ======== ======= =======
Shares Issued and Redeemed:
Institutional Class:
Shares Issued 1,182 883 2,321 15 290
Shares Issued in Lieu of Cash Distributions -- -- -- 13 --
Shares Redeemed (1,808) (1,972) (37) -- --
-------- -------- -------- ------- -------
Total Institutional Class Share Transactions (626) (1,089) 2,284 28 290
-------- -------- -------- ------- -------
Retail Class:
Shares Issued 210 32 -- -- --
Shares Issued in Lieu of Cash Distributions 13 1 -- -- --
Shares Redeemed (80) (2) -- -- --
-------- -------- -------- ------- -------
Total Retail Class Share Transactions 143 31 -- -- --
-------- -------- -------- ------- -------
Institutional II Class:
Shares Issued -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- --
Shares Redeemed -- -- -- -- --
-------- -------- -------- ------- -------
Total Institutional II Class
Share Transactions -- -- -- -- --
-------- -------- -------- ------- -------
Net Increase (Decrease) in
Share Transactions (483) (1,058) 2,284 28 290
======== ======== ======== ======= =======
<FN>
(1) COMMENCED OPERATIONS ON MARCH 20, 1996.
(2) COMMENCED OPERATIONS ON APRIL 1, 1996.
(3) COMMENCED OPERATIONS ON JULY 13, 1995.
(4) COMMENCED OPERATIONS ON DECEMBER 30, 1994.
</FN>
</TABLE>
-------
39
<PAGE>
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD ENDED APRIL 30,
<TABLE>
<CAPTION>
NET ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET ASSET
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL VALUE, END TOTAL
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN(DAGGER)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
1996 $1.00 0.05 -- (0.05) -- $1.00 5.32%
1995 1.00 0.05 -- (0.05) -- 1.00 4.60
1994(1) 1.00 0.03 -- (0.03) -- 1.00 2.48
RETAIL CLASS
1996 (2) 1.00 0.02 -- (0.02) -- 1.00 1.82
INSTITUTIONAL II CLASS
1996 (3) 1.00 0.04 -- (0.04) -- 1.00 3.87
- --------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
1996 $1.00 0.05 -- (0.05) -- $1.00 5.64%
1995 1.00 0.05 -- (0.05) -- 1.00 5.00
1994 (1) 1.00 0.03 -- (0.03) -- 1.00 2.70
INSTITUTIONAL II CLASS
1996 (3) 1.00 0.04 -- (0.04) -- 1.00 4.11
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1996 $1.00 0.06 -- (0.06) -- $1.00 5.78%
1995 1.00 0.05 -- (0.05) -- 1.00 5.13
1994 (1) 1.00 0.03 -- (0.03) -- 1.00 2.80
RETAIL CLASS
1996 1.00 0.05 -- (0.05) -- 1.00 5.44
1995 1.00 0.05 -- (0.05) -- 1.00 4.69
1994 (4) 1.00 -- -- -- -- 1.00 0.42
INSTITUTIONAL II CLASS
1996 (5) 1.00 0.04 -- (0.04) -- 1.00 4.33
- -------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1996 $1.00 0.04 -- (0.04) -- $1.00 3.61%
1995 1.00 0.03 -- (0.03) -- 1.00 3.24
1994 (1) 1.00 0.02 -- (0.02) -- 1.00 1.87
RETAIL CLASS
1996 1.00 0.03 -- (0.03) -- 1.00 3.53
1995 1.00 0.03 -- (0.03) -- 1.00 2.74
1994 (6) 1.00 -- -- -- -- 1.00 0.20
INSTITUTIONAL II CLASS
1996 (3) 1.00 0.02 -- (0.02) -- 1.00 2.62
- -----------------------------
SHORT-TERM TREASURY PORTFOLIO
- -----------------------------
INSTITUTIONAL CLASS
1996 (7) $10.00 0.06 (0.04) (0.06) -- $9.96 0.16%
- ----------------
INCOME PORTFOLIO
- ----------------
INSTITUTIONAL CLASS
1996 $ 9.60 0.61 0.20 (0.61) -- $9.80 8.46%
1995 9.61 0.58 0.02 (0.58) (0.03) 9.60 6.53
1994 (8) 10.00 0.38 (0.38) (0.38) (0.01) 9.61 (0.08)
RETAIL CLASS
1996 9.72 0.60 0.19 (0.60) -- 9.91 8.14
1995 9.62 0.55 0.05 (0.47) (0.03) 9.72 6.45
1994 (9) 9.69 0.02 (0.06) (0.03) -- 9.62 (0.41)
</TABLE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS PORTFOLIO
END OF TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
1996 $ 275,259 0.36% 5.18% 0.45% --
1995 221,069 0.38 4.59 0.47 --
1994(1) 137,826 0.43* 2.80* 0.51* --
RETAIL CLASS
1996 (2) 8,758 0.55* 4.71* 0.86* --
INSTITUTIONAL II CLASS
1996 (3) 47,220 0.47* 4.98* 0.55* --
- --------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
1996 $1,043,758 0.31% 5.45% 0.44% --
1995 651,113 0.25 5.09 0.47 --
1994 (1) 271,437 0.35* 3.03* 0.62* --
INSTITUTIONAL II CLASS
1996 (3) 17,027 0.41* 5.25* 0.56* --
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1996 $ 348,343 0.25% 5.62% 0.44% --
1995 277,859 0.20 5.13 0.46 --
1994 (1) 197,162 0.26* 3.16* 0.52* --
RETAIL CLASS
1996 104,703 0.58 5.25 0.77 --
1995 51,081 0.45 4.88 0.97 --
1994 (4) 12 1.16* 2.26* 592.55* --
INSTITUTIONAL II CLASS
1996 (5) 28,790 0.36* 5.37* 0.55* --
- -------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1996 $ 74,739 0.22% 3.54% 0.45% --
1995 64,112 0.22 3.21 0.47 --
1994 (1) 66,692 0.35* 2.10* 0.53* --
RETAIL CLASS
1996 16,179 0.34 3.33 0.90 --
1995 2,491 0.75 2.68 2.94 --
1994 (6) 50 1.25* 1.20* 32.17* --
INSTITUTIONAL II CLASS
1996 (3) 9,387 0.33* 3.35* 0.58* --
- -----------------------------
SHORT-TERM TREASURY PORTFOLIO
- -----------------------------
INSTITUTIONAL CLASS
1996 (7) $ 18,823 0.55%* (0.55)%* 0.60%* --
- ----------------
INCOME PORTFOLIO
- ----------------
INSTITUTIONAL CLASS
1996 $ 180,962 0.73% 6.00% 0.73% 107.33%
1995 66,441 0.74 6.15 0.74 73.00
1994 (8) 54,289 0.77* 4.90* 0.77* 20.00
RETAIL CLASS
1996 4,184 1.02 5.54 1.37 107.33
1995 296 1.23 5.66 27.63 73.00
1994 (9) 30 1.72* 3.95* 55.35* 20.00
</TABLE>
- ---------
40
<PAGE>
APRIL 30, 1996
ARK FUNDS (LOGO)
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
NET ASSET REALIZED AND DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM NET FROM NET ASSET
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL VALUE, END TOTAL
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN(DAGGER)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------
GROWTH AND INCOME PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
1996 $10.04 0.34 1.71 (0.34) (0.37) $11.38 20.90%
1995 10.16 0.33 0.03 (0.29) (0.19) 10.04 3.75
1994 (8) 10.00 0.19 0.17 (0.19) (0.01) 10.16 3.56
37.00
RETAIL CLASS
1996 10.04 0.31 1.68 (0.31) (0.37) 11.35 20.23
1995 10.15 0.27 0.05 (0.24) (0.19) 10.04 3.33
1994 (10) 10.62 0.01 (0.43) (0.05) -- 10.15 (3.95)
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1996 (11) $10.00 -- 0.12 -- -- $10.12 1.20%
- ------------------------
CAPITAL GROWTH PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1996 $10.20 0.16 2.17 (0.16) (0.77) $11.60 23.62%
1995 10.19 0.14 0.16 (0.11) (0.18) 10.20 3.15
1994 (8) 10.00 0.06 0.21 (0.03) (0.05) 10.19 2.66
RETAIL CLASS
1996 10.18 0.12 2.15 (0.12) (0.77) 11.56 23.24
1995 10.18 0.08 0.18 (0.08) (0.18) 10.18 2.74
1994 (10) 10.89 -- (0.71) -- -- 10.18 (6.52)
- ------------------------
SPECIAL EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1996 (12) $10.00 0.09 4.72 (0.09) -- $14.72 48.34%
- ------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1996 $10.13 0.19 1.37 (0.23) (0.23) $11.23 15.66%
1995 (13) 10.00 0.03 0.10 -- -- 10.13 1.30
</TABLE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES
RATIO OF INVESTMENT TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS PORTFOLIO
END OF TO AVERAGE TO AVERAGE (EXCLUDING TURNOVER
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------
GROWTH AND INCOME PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
1996 $ 102,233 0.75% 3.19% 0.75% 107.56%
1995 91,039 0.77 3.32 0.77 81.00
1994 (8) 88,208 0.81* 2.41* 0.81* 37.00
37.00
RETAIL CLASS
1996 3,323 1.09 2.51 1.55 107.56
1995 549 1.26 2.83 5.80 81.00
1994 (10) 166 1.86* 1.36* 15.08* 37.00
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1996 (11) $ 11,456 0.65%* 1.52%* 1.38%* 0.97%
- ------------------------
CAPITAL GROWTH PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1996 $ 39,560 0.24% 1.26% 0.84% 578.57%
1995 41,170 0.74 1.35 0.85 182.00
1994 (8) 52,233 0.87* 0.78* 0.87* 41.00
RETAIL CLASS
1996 2,111 0.50 1.05 1.65 578.57
1995 404 1.23 0.86 9.73 182.00
1994 (10) 87 1.92* (0.27)* 30.78* 41.00
- ------------------------
SPECIAL EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1996 (12) $ 33,621 0.91%* 0.60%* 0.91%* 286.80%
- ------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1996 $ 3,571 1.55% 0.15% 2.96% 37.16%
1995 (13) 2,940 1.55* 0.97* 5.35* 2.00
<FN>
* ANNUALIZED
(DAGGER) TOTAL RETURN FOR THE RETAIL CLASS DOES NOT INCLUDE THE ONE TIME SALES CHARGE.
(1) COMMENCED OPERATIONS ON JUNE 14, 1993.
(2) COMMENCED OPERATIONS ON DECEMBER 15, 1995.
(3) COMMENCED OPERATIONS ON JULY 28, 1995.
(4) COMMENCED OPERATIONS ON MARCH 2, 1994.
(5) COMMENCED OPERATIONS ON JULY 21, 1995.
(6) COMMENCED OPERATIONS ON MARCH 15, 1994.
(7) COMMENCED OPERATIONS ON MARCH 20, 1996.
(8) COMMENCED OPERATIONS ON JULY 16, 1993.
(9) COMMENCED OPERATIONS ON APRIL 12, 1994.
(10) COMMENCED OPERATIONS ON MARCH 9, 1994.
(11) COMMENCED OPERATIONS ON APRIL 1, 1996.
(12) COMMENCED OPERATIONS ON JULY 13, 1995.
(13) COMMENCED OPERATIONS ON DECEMBER 30, 1994.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
-------
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
ARK Funds (the "Fund") is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company
organized as a Massachusetts business trust pursuant to a Declaration of Trust
dated October 22, 1992, and amended and restated on March 19, 1993. The Fund
consists of eleven diversified portfolios: U.S. Treasury Money Market Portfolio,
U.S. Government Money Market Portfolio, Money Market Portfolio, Tax-Free Money
Market Portfolio, Short-Term Treasury Portfolio, Income Portfolio, Growth and
Income Portfolio, Blue Chip Equity Portfolio, Capital Growth Portfolio, Special
Equity Portfolio and International Equity Portfolio (individually a "Portfolio"
and collectively the "Portfolios"). The Fund may issue an unlimited number of
shares of each of its Portfolios. Each Portfolio (with the exception of the
International Equity Portfolio) offers both Institutional and Retail Class
shares. In addition, each money market Portfolio offers Institutional II Class
shares. The International Equity Portfolio offers only Institutional Class
shares. Institutional Class shares were originally offered with the commencement
of each Portfolio's operations. Retail Class shares commenced in April 1994 for
the Income Portfolio, March 1994 for the Tax-Free Money Market Portfolio, Money
Market Portfolio, Growth and Income Portfolio and Capital Growth Portfolio and
in December 1995 for the U.S. Treasury Money Market Portfolio. Retail Class
shares have not yet been issued for the U.S. Government Money Market Portfolio,
Short-Term Treasury Portfolio, Blue Chip Equity Portfolio and Special Equity
Portfolio. Institutional II Class shares commenced in July 1995 for the U.S.
Treasury Money Market Portfolio, U.S. Government Money Market Portfolio, Money
Market Portfolio and Tax-Free Money Market Portfolio. Each class of shares has
equal rights as to earnings, assets and voting privileges, except that each
class bears different distribution and shareholder service expenses. Each class
of shares has exclusive voting rights with respect to matters that affect just
that class.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported therein. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the net assets
of the Fund.
The following is a summary of significant accounting policies followed
by the Portfolios.
SECURITY VALUATION - Securities listed on a securities exchange for
which market quotations are readily available are valued at the last quoted sale
price on the principal exchange on which they are traded on the valuation date
or, if there is no such reported sale on the valuation date, at the most recent
quoted bid price. Unlisted securities for which market quotations are readily
available are valued at the most recent quoted bid price. Debt obligations
exceeding sixty days to maturity for which market quotations are readily
available are valued at the most recently quoted bid price. Debt obligations
with sixty days or less to maturity are
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[GRAPHIC OMITTED]
valued at their amortized cost.
When market quotations are not readily available, securities are valued
at fair value as determined in good faith by procedures established and approved
by the Board of Directors.
Investment securities held by the money market Portfolios are stated at
amortized cost which approximates market value. Under the amortized cost method,
any discount or premium is amortized ratably to the maturity of the security and
is included in interest income.
INCOME TAXES - It is the intention of each Portfolio to qualify as a
regulated investment company and to distribute all of its taxable income.
Accordingly, no provision for federal income taxes is considered necessary.
The International Equity Portfolio may be subject to taxes imposed by
countries in which it invests with respect to its investments in issuers
existing or operating in such countries. Such taxes are generally based on
either income earned or repatriated. The International Equity Portfolio accrues
such taxes when the related income is earned.
NET ASSET VALUE PER SHARE - The net asset value per share of each class
of each Portfolio is calculated each business day. It is computed by dividing
the assets of each class of the Portfolio, less the class related liabilities,
by the number of outstanding shares of each class of the Portfolio.
CLASSES - Class-specific expenses are borne by that class. Income,
expenses, and realized and unrealized gains/losses are allocated to the
respective classes on the basis of relative daily net assets.
ORGANIZATIONAL COSTS - All organizational costs associated with the
start-up of the Portfolios are being amortized on a straight-line basis over a
period of sixty months. If any or all of the shares representing initial capital
of each Portfolio are redeemed by any holder thereof prior to the end of the
amortization period, the proceeds will be reduced by the unamortized
organization cost balance in the same proportion as the number of shares
redeemed bears to the initial shares outstanding immediately preceding the
redemption.
REPURCHASE AGREEMENTS - Securities pledged as collateral for repurchase
agreements are held by the custodian banks until maturity of the repurchase
agreements. Provisions of the repurchase agreements and procedures adopted by
the Fund require that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters an insolvency proceeding, realization of the collateral by
the Funds may be delayed or limited.
FOREIGN CURRENCY TRANSLATION - The books and records of the
International Equity Portfolio are maintained in U.S. dollars. Foreign currency
amounts are translated into U.S. dollars on the following basis: (I) market
value of investment securities, other assets and liabilities at the current rate
of exchange; and (II) purchases and sales of investment securities, income and
expenses at the relevant rates of exchange prevailing on the respective dates of
such transactions.
The International Equity Portfolio does not isolate that portion of
gains and losses on investments in securities which is due to changes in
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
market prices of such securities. The International Equity Portfolio does
isolate the effect of fluctuations in foreign currency rates when determining
the gain or loss upon sale or maturity of foreign currency denominated debt
obligations pursuant to the federal income tax regulations. Such amounts are
categorized as foreign currency gain or loss for both financial reporting and
income tax reporting purposes.
The International Equity Portfolio reports gains and losses on foreign
currency related transactions as realized and unrealized gains and losses for
financial reporting purposes, whereas such gains and losses, to the extent
realized, are treated as ordinary income or loss for federal income tax
purposes.
FORWARD FOREIGN CURRENCY CONTRACTS - With the exception of the Money
Market Portfolios, the Portfolios may enter into forward foreign currency
contracts as hedges against specific transactions or portfolio positions.
All commitments are "marked-to-market" daily at the applicable foreign
exchange rate and any resulting unrealized gains or losses are recorded
currently. The Portfolio realizes gains or losses at the time forward contracts
are extinguished, except that gains or losses on certain open contracts are
required to be recognized for U.S. federal income tax purposes at the close of
the Portfolio's taxable year and are generally treated as ordinary income for
such purposes.
The Portfolio enters into forward foreign currency contracts as hedges
against portfolio positions. Such contracts, which protect the value of a
Portfolio's investment securities against a decline in the value of currency, do
not eliminate fluctuations in the underlying prices of the securities. They
simply establish an exchange rate at a future date. Also, although such
contracts tend to minimize the risk of loss due to a decline in the value of a
hedged currency, at the same time they tend to limit any potential gain that
might be realized should the value of such foreign currency increase. In
addition, if the counterparty to the contract fails to deliver under the terms
of the contract, realization of any gains or losses could be delayed or limited.
DISTRIBUTIONS - Dividends from net investment income are declared daily
and paid monthly for each money market Portfolio. The Short-Term Treasury
Portfolio and Income Portfolio declare and pay dividends monthly, the Growth and
Income Portfolio and Blue Chip Equity Portfolio declare and pay dividends
quarterly, and the Capital Growth Portfolio, Special Equity Portfolio and
International Equity Portfolio declare and pay dividends annually from net
investment income. Distributions from net capital gains, if any, are declared
and paid at least annually by each Portfolio.
Distributions from net investment income and net realized capital gains
are determined in accordance with U.S. federal income tax regulations, which may
differ from those amounts determined under generally accepted accounting
principles. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, they are charged or
credited to paid-in-capital in the period that the difference arises. For the
year ended April 30, 1996, differences are primarily due to wash sales which are
temporary in nature.
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APRIL 30, 1996
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OTHER - Security transactions are accounted for on the date the
security is purchased or sold (trade date). Net realized capital gains and
losses on the sale of investment securities are determined using the identified
cost method with the exception of the money market portfolios, original issue
discounts and purchase premiums on securities held by the Portfolios are
accreted and amortized ratably to maturity using the effective interest method.
Dividend income is recognized on the ex-dividend date and interest income is
recognized using the accrual method.
3. INVESTMENT ADVISORY AND ADMINISTRATIVE
FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The First National Bank of Maryland ("First Maryland") is the investment adviser
to each of the Portfolios, with the exception of the International Equity
Portfolio, which is advised by AIB Investment Managers Limited ("AIB I.M."), an
affiliate of First Maryland. Pursuant to an investment advisory contract on
behalf of each Portfolio, First Maryland and AIB I.M. (in the case of the
International Equity Portfolio), are paid for their advisory services at the
annual rates shown in the following table based on the average net assets of the
Portfolio.
Portfolio Annual Rate
--------- -----------
U.S. Treasury Money Market .25%
U.S. Government Money Market .25%
Money Market .25%
Tax-Free Money Market .25%
Short-Term Treasury .35%
Income .50%
Growth and Income .55%
Blue Chip Equity .60%
Capital Growth .60%
Special Equity .60%
International Equity .80%
First Maryland has agreed to waive a portion of its fees on certain
Portfolios in order to limit total operating expenses of such Portfolios. The
waiver is voluntary and may be discontinued at anytime.
Effective November 1, 1995, SEI Financial Management Corporation
("SFM") serves as administrator and transfer agent to each Portfolio under an
Administration Agreement and Transfer Agency Agreement. SFM is entitled to
receive an annual fee of .13% of each Portfolio's average net assets, paid
monthly, for services performed under the agreement. SFM has voluntarily agreed
to waive a portion of its administrative fees on certain Portfolios in order to
limit total operating expenses of such Portfolios. The waiver is voluntary and
may be discontinued at any time. Effective November 1, 1995, SEI Financial
Services Company ("SFS") acts as distributor for the Portfolios pursuant to a
General Distribution Agreement on behalf of each Portfolio. Formerly, the
administrator and distributor was Fidelity Distributors Corporation
("Fidelity"), and the fund accounting service provider was Mutual Funds Service
Company ("MFSC").
The First National Bank of Maryland serves as custodian to each of the
Portfolios.
4. DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The Fund's Board of Trustees has adopted a Distribution Plan on behalf of the
Retail Class of each Portfolio and a Distribution and Service Plan on behalf of
the Institutional II Class of each money market Portfolio pursuant to Rule 12b-1
under the 1940 Act ("the Plan"). Under the Plan, SFS is
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<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
entitled to a fee of .75% of average daily net assets of the Retail and
Institutional II Classes of each Portfolio. However, the Trustees have
authorized payment of a fee to SFS of .25% of the average daily net assets of
the Retail Class of each money market Portfolio; .30% of average daily net
assets of the Retail Class of the Income Portfolio and .40% of average daily net
assets of the Retail Class of the Short-Term Treasury Portfolio, Growth and
Income Portfolio, Blue Chip Equity Portfolio, Capital Growth Portfolio and
Special Equity Portfolio, and .10% of the average daily net assets of the
Institutional II Class of each money market Portfolio. SFS has voluntarily
agreed to waive a portion of its fee on certain Portfolios in order to limit
total operating expenses of such Portfolios. The waiver is voluntary and may be
discontinued at any time.
In addition, the Board of Trustees has adopted a Shareholder Services
Plan on behalf of the Retail Class of the Portfolios to compensate qualified
recipients for individual shareholder services and account maintenance. The
recipients are paid a service fee at the annual rate of up to .25% of average
daily net assets of the Retail Class of each Portfolio or such lesser amount as
may be approved by the Trustees. Currently, the Trustees have approved a fee for
shareholder services of .15% of average daily net assets of the Retail Class of
each Portfolio, except the Short-Term Treasury Portfolio and Blue Chip Equity
Portfolio, for which the Trustees have approved a fee of .06%.
5. INVESTMENT TRANSACTIONS
The cost of securities purchases and the proceeds from the sale of securities,
other than short-term investments and U.S. government securities, during the
period ended April 30, 1996, were as follows:
Purchases Sales
(000) (000)
--------- --------
Short-Term Treasury Portfolio $ 17,887 $ --
Income Portfolio 79,471 31,408
Growth and Income Portfolio 98,484 90,771
Blue Chip Equity Portfolio 10,480 51
Capital Growth Portfolio 246,311 252,845
Special Equity Portfolio 66,707 41,283
International Equity Portfolio 1,371 1,153
For federal income tax purposes, the cost of securities owned at April
30, 1996 was not materially different from the amounts reported for financial
reporting purposes. The aggregate gross unrealized appreciation and depreciation
at April 30, 1996 for each Portfolio is as follows:
Net
Unrealized
Appreciated Depreciated Appreciation/
Securities Securities (Depreciation)
(000) (000) (000)
---------- ---------- ------------
Short-Term Treasury Portfolio $ -- $ (83) $ (83)
Income Portfolio 681 (4,504) (3,823)
Growth and Income Portfolio 11,719 (2,229) 9,490
Blue Chip Equity Portfolio 251 (136) 115
Capital Growth Portfolio 3,321 (506) 2,815
Special Equity Portfolio 7,291 (272) 7,019
International Equity Portfolio 414 (38) 376
At April 30, 1996, the Income Portfolio has the following capital loss
carryforwards and post October losses:
Expires Expires Post October 31, 1995
4/30/03 4/30/04 Deferred Losses
(000) (000) (000)
------- ------- ---------------------
Income Portfolio $230 $784 $48
6. OTHER MATTERS
Certain sales of Retail Class shares of the Income Portfolio, Growth and Income
Portfolio and Capital Growth Portfolio are subject to a maximum sales charge of
4.50%, 4.75% and 4.75%, respectively, of the public offering price. Effective
March 1, 1994, sales loads have been waived for all purchases of Retail Class
Shares. The sales load waiver was in effect through the fiscal year ended April
30, 1996.
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NOTICE TO SHAREHOLDERS (UNAUDITED)
For taxpayers filing on a calendar year basis, this notice is for informational
purposes only.
For the fiscal year ended April 30, 1996, each Portfolio is designating
qualifying dividends and exempt income with regard to distributions paid during
the year as follows:
<TABLE>
<CAPTION>
(A)* (B)* (C) (D)** (E)** (F)**
LONG TERM ORDINARY
CAPITAL GAINS INCOME TOTAL TAX
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIOS (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS(1) INTEREST TAX CREDIT
- ---------- ------------- ------------- ------------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Money Market 0% 100% 100% 0% 0% 0%
U.S. Government Money Market 0% 100% 100% 0% 0% 0%
Money Market 0% 100% 100% 0% 0% 0%
Tax-Free Money Market 0% 100% 100% 0% 100% 0%
Short-Term Treasury 0% 100% 100% 0% 0% 0%
Income 0% 100% 100% 0% 0% 0%
Growth and Income 0% 100% 100% 8% 0% 0%
Blue Chip Equity 0% 100% 100% 0% 0% 0%
Capital Growth 1% 99% 100% 5% 0% 0%
Special Equity 0% 100% 100% 1% 0% 0%
International Equity 0% 100% 100% 0% 0% 0%
<FN>
(1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction.
* Items (A) and (B) are based on a percentage of the Portfolio's total distributions.
** Items (D), (E) and (F) are based on a percentage of ordinary income distributions of the Portfolio.
</FN>
</TABLE>
Please consult your tax adviser for proper treatment of this information.
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NOTES
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INVESTMENT ADVISERS
The First National Bank of Maryland
Baltimore, Maryland
AIB Investment Managers Limited
Dublin, Ireland
TRUSTEES
William H. Cowie, Jr.
David D. Downes
Charlotte R. Kerr
George K. Reynolds, III
Thomas Schweizer
ADMINISTRATOR
SEI Financial Management Corporation
Wayne, Pennsylvania
DISTRIBUTOR
SEI Financial Services Company
Wayne, Pennsylvania
LEGAL COUNSEL
Piper & Marbury, L.L.P.
Washington, DC
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Boston, Massachusetts
CUSTODIAN
The First National Bank of Maryland
Baltimore, Maryland
ARK FUNDS (LOGO)
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This material must be preceded or
accompanied by a current prospectus.
