[LOGO] ARK FUNDS SEMI-ANNUAL REPORT OCTOBER 31, 1996
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TABLE OF CONTENTS
LETTER TO SHAREHOLDERS 1
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ECONOMIC OVERVIEW 2
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STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS 3
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STATEMENT OF ASSETS AND LIABILITIES 25
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STATEMENT OF OPERATIONS 26
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STATEMENT OF CHANGES IN NET ASSETS 28
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FINANCIAL HIGHLIGHTS 30
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NOTES TO FINANCIAL STATEMENTS 32
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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 depositary institution,
are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other government agency. Investing in the shares involves
investment risks including the possible loss of principal amount invested.
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OCTOBER 31, 1996
LETTER TO SHAREHOLDERS
DEAR ARK FUNDS SHAREHOLDER:
We are pleased to provide you with the ARK Funds Semi-Annual Report for
the period ending October 31, 1996. This year has already proved to be an
exciting one for ARK Funds as we approach $3 billion in assets and our fund
family continues to grow.
New product introductions for this year include the launch of the
Retail Class of the Short-Term Treasury, Special Equity, Blue Chip Equity and
the International Equity Portfolios. Our November conversion of six common trust
funds into ARK Funds will also substantially enhance our portfolio lineup. These
new ARK portfolios include the Maryland Tax-Free, Pennsylvania Tax-Free,
Intermediate Fixed Income, Equity Income, Mid-Cap Equity and Stock Portfolios
and will be available initially in the Institutional Class.
This year we also introduced The ARK Funds Review, our quarterly
investment newsletter for retail shareholders in which we will provide helpful
tips about investing, educational articles and information on new products and
services available from ARK Funds. In addition, we are looking forward to the
introduction of the ARK Funds Phoneline, our new automated information line that
will provide prices, yields and returns for the Retail Class ARK Funds 24 hours
a day via a touch-tone phone.
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 will continue to
grow the ARK Funds family with the goal of providing a wide range of products to
meet the needs of both institutional and retail investors. We look forward to
helping you to meet your financial goals in the years ahead.
/S/WILLIAM H. COWIE, JR.
WILLIAM H. COWIE, JR.
CHAIRMAN
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1
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ECONOMIC OVERVIEW
As we enter the final weeks of 1996, the U.S. economy continues to move
at a moderate pace. Gross domestic product numbers appear to be a replay of
1995, with overall economic growth expected to come in at an acceptable rate of
2.6%. Unemployment, at 5.2%, remains near a six-year low, and inflation has held
steady at just under 3% as measured by the Consumer Price Index.
Completing six years of economic expansion does give cause for some
concern (the average is 4+ years), but at this juncture, we have no reason to
believe that the growth will end in 1997. In fact, we estimate GDP growth of
about 2.5% for full year '97, which would be a slightly slower rate of growth
from 1996, and would fall within the Fed's estimate of non-inflationary growth
potential. Our only inflationary concern is wage pressure, which could also have
an impact on corporate profits.
1996 has been a very rewarding year for investors in U.S. equities,
especially for those who owned stocks of large, well-established, multinational
companies. Domestic fixed income investors, however, experienced a difficult
year, as nagging inflation fears caused interest rates to rise, depressing bond
prices.
Looking ahead to 1997, we believe that a continuation of modest
economic growth, restrained inflation and reasonable interest rates should
provide a solid underpinning for the financial markets, although certainly
periodic setbacks are to be expected.
/S/JENNIFER W. LAMBDIN, CFA
JENNIFER W. LAMBDIN, CFA
CHIEF INVESTMENT OFFICER
FIRST NATIONAL BANK OF MARYLAND
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OCTOBER 31, 1996
STATEMENT OF NET ASSETS (UNAUDITED)
ARK FUNDS: U.S. TREASURY MONEY MARKET PORTFOLIO
A Pie chart depicting percentage of total portfolio investments as follows:
U.S. TREASURY BILLS -- 64%
U.S. TREASURY NOTES -- 36%
% OF TOTAL PORTFOLIO INVESTMENTS
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PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
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U.S. TREASURY OBLIGATIONS - 106.8%
U.S. Treasury Bills (A)
5.020%, 12/12/96 $24,838 $ 24,696
5.095%, 12/12/96 24,669 24,526
5.115%, 12/12/96 14,450 14,366
5.135%, 12/12/96 10,856 10,793
5.140%, 12/12/96 24,898 24,752
5.165%, 12/19/96 25,000 24,828
5.090%, 01/16/97 1,825 1,805
5.150%, 02/20/97 5,465 5,378
5.045%, 03/20/97 25,000 24,513
5.050%, 03/20/97 2,769 2,715
5.085%, 03/20/97 17,539 17,195
5.080%, 04/03/97 16,393 16,039
5.085%, 04/03/97 8,575 8,390
5.140%, 04/03/97 2,404 2,351
5.105%, 04/17/97 4,179 4,080
5.125%, 04/17/97 2,552 2,491
5.285%, 07/24/97 1,394 1,340
5.290%, 07/24/97 1,431 1,375
5.140%, 08/21/97 2,508 2,403
5.175%, 08/21/97 389 373
5.230%, 08/21/97 3,475 3,327
5.318%, 08/21/97 12,181 11,654
5.425%, 08/21/97 2,547 2,435
U.S. Treasury Notes
4.375%, 11/15/96 50,000 49,983
7.250%, 11/15/96 25,000 25,018
7.500%, 12/31/96 46,529 46,689
8.500%, 04/15/97 10,000 10,121
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TOTAL U.S. TREASURY OBLIGATIONS
(Cost $363,636) $363,636
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DESCRIPTION VALUE (000)
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TOTAL INVESTMENTS - 106.8%
(Cost $363,636) $363,636
OTHER ASSETS AND LIABILITIES, NET - (6.8%) $(23,241)
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization - no par value)
based on 261,374,908 outstanding shares
of beneficial interest 261,369
Portfolio Shares of Retail Class (unlimited
authorization - no par value) based
on 10,640,464 outstanding shares of
beneficial interest 10,640
Portfolio Shares of Institutional II Class
(unlimited authorization - no par
value) based on 68,371,591 outstanding
shares of beneficial interest 68,372
Accumulated net realized gain on investments 14
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TOTAL NET ASSETS - 100.0% $340,395
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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $1.00
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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $1.00
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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL II CLASS $1.00
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(A) THE ANNUALIZED DISCOUNT YIELD AT TIME OF PURCHASE IS SHOWN AS THE RATE ON
THE STATEMENT OF NET ASSETS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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STATEMENT OF NET ASSETS (UNAUDITED)
ARK FUNDS: U.S. GOVERNMENT MONEY MARKET PORTFOLIO
A Pie chart depicting percentage of total portfolio investments as follows:
U.S. TREASURY NOTES -- 2%
VARIABLE RATE GOVERNMENT AGENCY OBLIGATIONS -- 16%
REPURCHASE AGREEMENTS -- 35%
FIXED RATE GOVERNMENT AGENCY OBLIGATIONS -- 47%
% OF TOTAL PORTFOLIO INVESTMENTS
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PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
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U.S. GOVERNMENT AGENCY OBLIGATIONS - 63.6%
Federal Farm Credit Bank
5.850%, 08/01/97 $15,000 $15,011
11.900%, 10/20/97 7,033 7,429
Federal Home Loan Bank
5.780%, 11/01/96 (A) 25,000 25,024
6.950%, 11/08/96 10,000 10,004
5.250%, 01/09/97 1,350 1,336
5.200%, 01/10/97 10,000 9,899
5.210%, 01/10/97 25,000 24,747
5.250%, 02/07/97 25,000 24,643
5.300%, 03/05/97 10,000 10,000
5.035%, 03/06/97 15,000 14,992
5.240%, 03/26/97 40,000 39,156
5.660%, 04/08/97 5,000 5,000
Federal Home Loan Mortgage Corporation
5.245%, 11/06/96 50,000 49,964
5.250%, 11/07/96 25,000 24,978
5.420%, 12/06/96 25,000 24,868
5.280%, 12/12/96 25,000 24,850
5.370%, 12/12/96 40,000 39,755
5.195%, 12/20/96 50,000 49,646
5.600%, 10/31/97 10,100 10,097
Federal National Mortgage Association
5.220%, 11/01/96 (A) 25,000 24,999
5.245%, 11/01/96 (A) 25,000 24,995
5.430%, 11/01/96 (A) 25,000 25,001
5.460%, 11/05/96 (A) 25,000 24,991
5.370%, 11/07/96 (A) 25,000 24,989
5.280%, 11/12/96 25,000 24,960
5.235%, 11/17/96 (A) 25,000 24,992
5.440%, 11/21/96 20,000 19,998
5.430%, 12/09/96 50,000 49,713
5.370%, 12/18/96 19,000 18,997
5.460%, 12/20/96 (A) 25,000 24,989
5.430%, 02/05/97 25,000 24,638
5.230%, 04/28/97 25,000 24,354
5.640%, 09/03/97 10,000 9,971
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PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
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Tennessee Valley Authority
4.600%, 12/15/96 $15,250 $ 15,242
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TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $774,228) $ 774,228
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U.S. TREASURY OBLIGATION - 1.7%
U.S. Treasury Note
6.875%, 02/28/97 20,000 20,117
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TOTAL U.S. TREASURY OBLIGATION
(Cost $20,117) $ 20,117
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REPURCHASE AGREEMENTS - 34.8%
CS First Boston
5.580%, dated 10/31/96,
matures 11/01/96, repurchase
price $104,102,575
(collateralized by U.S.
Treasury Note, total par
value $104,455,000, 6.50%,
08/15/97: total market value
$106,626,678) 104,086 104,086
Goldman Sachs
5.540%, dated 10/31/96,
matures 11/01/96, repurchase
price $220,033,856
(collateralized by U.S.
Treasury Bond, total par
value $242,743,000,
6.00%, 02/15/26: total
market value $224,626,456) 220,000 220,000
Smith Barney 5.560%, dated
10/31/96, matures 11/01/96,
repurchase price $100,015,444
(collateralized by various
U.S. Treasury STRIPS, total
par value $468,365,000,
5/15/03- 11/15/21: total
market value $102,000,159) 100,000 100,000
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TOTAL REPURCHASE AGREEMENTS
(Cost $424,086) $ 424,086
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TOTAL INVESTMENTS - 100.1%
(Cost $1,218,431) $1,218,431
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OTHER ASSETS AND LIABILITIES, NET - (0.1%) $ (979)
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OCTOBER 31, 1996
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DESCRIPTION VALUE (000)
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NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization - no par value)
based on 1,186,532,990 outstanding shares
of beneficial interest $1,186,525
Portfolio Shares of Institutional II Class
(unlimited authorization - no par value)
based on 30,875,604 outstanding shares of
beneficial interest 30,876
Accumulated net realized gain on investments 51
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TOTAL NET ASSETS - 100.0% $1,217,452
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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $1.00
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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL II CLASS $1.00
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(A) VARIABLE RATE SECURITY - THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT AS OF OCTOBER 31, 1996. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
STRIPS-SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL OF SECURITIES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: MONEY MARKET PORTFOLIO
A Pie chart depicting percentage of total portfolio investments as follows:
COMMERCIAL PAPER -- 13%
REPURCHASE AGREEMENTS -- 16%
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 4%
CERTIFICATES OF DEPOSIT -- 10%
VARIABLE RATE DEBT -- 26%
CORPORATE AND MUNICIPAL DEBT -- 31%
% OF TOTAL PORTFOLIO INVESTMENTS
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PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
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CORPORATE OBLIGATIONS - 41.9%
Abbey National
5.110%, 03/15/97 $ 5,000 $ 4,999
American Express Centurion
Bank
5.450%, 11/01/96 (A) 10,000 10,000
Asset Backed Securities
Investment Trust
5.375%, 11/15/96 (A) 10,000 10,000
Associates Corporation of
North America
5.875%, 08/15/97 2,000 2,000
Capital One Funding
5.420%, 11/07/96 (A) 5,000 5,000
5.420%, 11/07/96 (A) (B) 4,807 4,807
CIT Group Holdings
7.625%, 12/05/96 7,500 7,513
8.000%, 01/13/97 9,000 9,043
Ford Motor Credit
5.676%, 11/27/96 (A) 10,000 10,012
8.000%, 12/01/96 3,000 3,007
General Electric Capital
5.460%, 11/05/96 (A) 5,000 4,997
7.850%, 02/01/97 7,000 7,035
General Electric Engine
Receivables
5.432%, 11/04/96 (A) (B) 3,400 3,400
General Motors Acceptance
7.550%, 01/14/97 4,500 4,521
5.000%, 01/27/97 5,450 5,445
7.850%, 05/08/97 5,000 5,046
7.750%, 05/12/97 5,000 5,043
Goldman Sachs
5.925%, 01/03/97 (A) 2,500 2,501
Merrill Lynch
5.380%, 11/01/96 (A) 5,000 4,999
5.605%, 12/11/96 (A) 5,000 5,000
6.000%, 05/12/97 (A) 5,000 5,000
Norwest
7.750%, 12/31/96 7,000 7,027
7.875%, 01/30/97 10,000 10,060
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STATEMENT OF NET ASSETS (UNAUDITED)
MONEY MARKET PORTFOLIO CONTINUED
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PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
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PHH
5.345%, 11/08/96 (A) $10,000 $ 9,996
PNC Bank N.A., Ohio
5.275%, 11/05/96 (A) 10,000 9,996
Wells Fargo
5.613%, 12/18/96 (A) 10,000 10,006
Xerox Credit
5.430%, 11/05/96 (A) 10,000 9,995
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TOTAL CORPORATE OBLIGATIONS
(Cost $176,448) $176,448
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TAXABLE MUNICIPAL BONDS - 14.4%
CALIFORNIA - 2.8%
Oakland Alameda County
5.410%, 11/25/96 11,935 11,935
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TOTAL CALIFORNIA $ 11,935
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INDIANA - 3.6%
City of Whiting, Industrial
Sewage & Solid Waste Project
5.400%, 11/25/96 15,000 15,000
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TOTAL INDIANA $ 15,000
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MASSACHUSETTS - 3.6%
Industrial Finance Authority
5.400%, 11/25/96 15,000 15,000
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TOTAL MASSACHUSETTS $ 15,000
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NEW YORK - 2.4%
General Obligation
5.603%, 01/22/97 10,000 10,000
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TOTAL NEW YORK $ 10,000
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NORTH CAROLINA - 1.5%
Durham, Certificates of
Participation, Series B
5.420%, 11/06/96 (A) 1,500 1,500
Winston-Salem, Certificates of
Participation
5.600%, 11/12/96 5,000 5,000
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TOTAL NORTH CAROLINA $ 6,500
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PENNSYLVANIA - 0.5%
Economic Development Financing
Authority, Series A1 (RB)
5.350%, 11/07/96 (A) 700 700
5.350%, 11/07/96 (A) 1,600 1,600
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TOTAL PENNSYLVANIA $ 2,300
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TOTAL TAXABLE MUNICIPAL BONDS
(Cost $60,735) $ 60,735
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COMMERCIAL PAPER - 12.9%
Beta Finance
5.500%, 03/12/97 10,000 9,800
CAFCO
5.375%, 12/16/96 15,000 14,899
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PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
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Ciesco
5.375%, 12/09/96 $15,000 $14,915
First Data
5.370%, 01/14/97 15,000 14,834
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TOTAL COMMERCIAL PAPER
(Cost $54,448) $54,448
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CERTIFICATES OF DEPOSIT - 10.5%
ABN Amro New York
6.120%, 07/14/97 4,000 3,999
Bank One
7.800%, 12/30/96 5,000 5,017
5.690%, 10/28/97 5,000 4,997
Bayerische Veriensbank Euro
5.520%, 12/03/96 10,000 10,001
Huntington National
6.200%, 07/08/97 5,000 5,014
Northern Trust
5.070%, 02/28/97 5,000 4,985
Royal Bank of Canada
5.450%, 11/01/96 (A) 10,000 9,999
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TOTAL CERTIFICATES OF DEPOSIT
(Cost $44,012) $44,012
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U.S. GOVERNMENT AGENCY OBLIGATIONS - 4.0%
Federal Farm Credit Bank
5.230%, 01/24/97 15,000 14,817
Student Loan Marketing
Association
5.350%, 11/05/96 (A) 2,000 2,000
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TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $16,817) $16,817
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REPURCHASE AGREEMENTS - 15.7%
CS First Boston
5.580%, dated 10/31/96,
matures 11/01/96, repurchase
price $35,849,034 (collateralized
by U.S. Treasury Note,
total par value $37,695,000,
5.750%, 08/15/03: total market
value $36,646,703) 35,844 35,844
Goldman Sachs
5.540%, dated 10/31/96,
matures 11/01/96, repurchase
price $30,004,617 (collateralized
by U.S. Treasury Note, total
par value $33,420,000, 6.00%,
02/15/96: total market
value $30,925,778) 30,000 30,000
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TOTAL REPURCHASE AGREEMENTS
(Cost $65,844) $ 65,844
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OCTOBER 31, 1996
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DESCRIPTION VALUE (000)
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TOTAL INVESTMENTS - 99.4%
(Cost $418,304) $418,304
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OTHER ASSETS AND LIABILITIES, NET - 0.6% $ 2,401
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NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization - no par value)
based on 251,855,716 outstanding shares
of beneficial interest 251,851
Portfolio Shares of Retail Class (unlimited
authorization - no par value) based
on 118,536,293 outstanding shares of
beneficial interest 118,534
Portfolio Shares of Institutional II Class
(unlimited authorization - no par value)
based on 50,277,943 outstanding shares of
beneficial interest 50,278
Accumulated net realized gain on investments 42
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TOTAL NET ASSETS - 100.0% $420,705
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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $1.00
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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $1.00
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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL II CLASS $1.00
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(A) VARIABLE RATE SECURITY - THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT AS OF OCTOBER 31, 1996. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(B) SECURITY EXEMPT FROM REGISTRATION UNDER RULE144A 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
RB-REVENUE BOND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: TAX-FREE MONEY MARKET PORTFOLIO
A pie chart depicting percentage of total portfolio investments as follows:
VARIABLE RATE MUNICIPAL OBLIGATIONS -- 71%
FIXED RATE MUNICIPAL OBLIGATIONS -- 29%
% OF TOTAL PORTFOLIO INVESTMENTS
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PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
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MUNICIPAL BONDS & NOTES - 99.7%
CALIFORNIA - 3.0%
Anaheim, LOC: ABN-Amro
(COP) (AMBAC)
3.400%, 11/07/96 (A) $ 1,800 $ 1,800
California State (RAN)
4.500%, 06/30/97 1,500 1,505
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TOTAL CALIFORNIA $3,305
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COLORADO - 4.9%
Arapahoe County, School District
#005 Cherry Creek (TAN)
4.500%, 06/30/97 1,000 1,004
Colorado State Educational
Facilities Authority, Pro Rodeo
Hall of Fame Project, LOC:
Bank One (RB)
3.600%, 11/07/96 (A) 2,570 2,570
Colorado State Student
Obligations Bond Authority,
LOC: SLMA (RB)
3.500%, 11/07/96 (A) 1,775 1,775
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TOTAL COLORADO $5,349
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FLORIDA - 8.5%
Sunshine State (TECP)
3.700%, 01/08/97 3,700 3,700
Lee County, Housing Finance
Authority (RB) (FNMA)
3.500%, 11/07/96 (A) 1,700 1,700
Florida State Housing Finance
Authority (RB) (FNMA)
3.500%, 11/07/96 (A) 3,835 3,835
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TOTAL FLORIDA $9,235
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GEORGIA - 3.0%
Burke County, Oglethorpe Power
Project, Series A
(RB) (FGIC)
3.500%, 11/07/96 (A) 900 900
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STATEMENT OF NET ASSETS (UNAUDITED)
TAX-FREE MONEY MARKET PORTFOLIO CONTINUED
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PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
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De Kalb County, Housing
Authority, Winters Creek
Apartments Project (RB)
(FNMA)
3.600%, 11/07/96 (A) $ 1,000 $ 1,000
De Kalb County, Industrial
Development Authority, LOC:
Credit Suisse (RB)
3.850%, 11/07/96 (A) 1,300 1,300
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TOTAL GEORGIA $ 3,200
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ILLINOIS - 2.7%
Elmhurst, Joint Commission on
Accreditation of Health Bank,
LOC: Sanwa Bank (RB)
3.750%, 11/07/96 (A) 335 335
Illinois State Health Facility
Authority, Methodist Medical
Center, Series 1985, LOC:
Sumitomo Bank (RB)
3.750%, 11/07/96 (A) 2,600 2,600
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TOTAL ILLINOIS $ 2,935
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INDIANA - 7.2%
Indiana State Educational Facilities
Authority, University of Notre
Dame Du Lac Project, LOC:
FNB Chicago (RB)
3.450%, 11/07/96 (A) 5,300 5,300
Sullivan, LOC: National Rural
Utilities (TECP)
3.700%, 01/10/97 2,500 2,500
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TOTAL INDIANA $ 7,800
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IOWA - 6.0%
Iowa School Corporation, Warrant
Certificates Anticipation Notes,
Series A (FSA) (RAN)
4.750%, 06/27/97 2,000 2,010
Iowa School Corporation, Warrant
Certificates Anticipation Notes,
Series B (FSA) (RAN)
4.250%, 01/30/97 1,000 1,002
Iowa State Higher Education
Authority, St. Ambrose
University Project, LOC:
Norwest Bank (RB)
3.650%, 11/07/96 (A) 2,000 2,000
Storm Lake, Buena Vista College
Project, LOC: Norwest (RB)
3.650%, 11/07/96 (A) 1,500 1,500
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TOTAL IOWA $ 6,512
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PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
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KENTUCKY - 0.9%
Trimble County (TECP)
3.700%, 01/08/97 $ 1,000 $ 1,000
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TOTAL KENTUCKY $ 1,000
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LOUISIANA - 1.1%
Louisiana State Public Facilities
Authority, Hospital
Equipment Financing, Series A,
LOC: Sumitomo Bank (RB)
3.900%, 11/07/96 (A) 1,200 $ 1,200
- -----------------------------------------------------------
TOTAL LOUISIANA $ 1,200
- -----------------------------------------------------------
MARYLAND - 8.1%
Baltimore, Industrial Development
Authority, LOC: Dai Ichi
Kango Bank (RB)
3.700%, 11/07/96 (A) 4,000 4,000
Maryland State Health & Higher
Education Facilities Authority,
Hospital & University
Improvements, LOC: FNB
Chicago (RB)
3.550%, 11/07/96 (A) 1,100 1,100
Maryland State Health & Higher
Education Facilities Authority,
Loyola College Project, LOC:
Sanwa Bank (RB)
3.600%, 11/01/96 (A) 1,600 1,600
Washington Suburban Sanitation
District, Pre-refunded
@ 102 (GO)
7.250%, 01/01/97 (B) 2,000 2,051
- -----------------------------------------------------------
TOTAL MARYLAND $ 8,751
- -----------------------------------------------------------
MICHIGAN - 2.0%
Detroit, Water Supply Systems
(RB) (FGIC)
3.550%, 11/07/96 (A) 2,200 2,200
- -----------------------------------------------------------
TOTAL MICHIGAN $ 2,200
- -----------------------------------------------------------
MINNESOTA - 4.1%
Minneapolis, LOC: Bayerische
Vereinsbank (GO)
3.560%, 11/07/96 (A) 1,900 1,900
Minneapolis, Mount Sinai
Medical Building, LOC:
Norwest Bank (RB)
3.550%, 11/07/96 (A) 1,500 1,500
Minnesota School District Credit
Enhancement, Tax & Aid
Anticipation Borrowing
Program, Series 1996-B (COP)
4.500%, 09/09/97 1,000 1,006
- -----------------------------------------------------------
TOTAL MINNESOTA $ 4,406
- -----------------------------------------------------------
MISSOURI - 2.4% COLUMBIA, SERIES A, LOC:
Toronto Dominion Bank
(RB)
3.550%, 11/07/96 (A) 1,000 1,000
- ----------
8
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
- ----------------------------------------------------------------
PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------------------------------------------------------------
Missouri State Health &
Educational Facilities Authority,
Washington University Project,
Series B, LOC: Morgan (RB)
3.650%, 11/01/96 (A) $ 1,600 $ 1,600
- ----------------------------------------------------------------
TOTAL MISSOURI $ 2,600
- ----------------------------------------------------------------
MONTANA - 5.9%
Forsyth, Portland General Electric
Colstrip Project, Series 1983-A,
LOC: Swiss Bank (RB)
3.550%, 11/07/96 (A) 1,000 1,000
3.550%, 11/07/96 (A) 300 300
Forsyth, Portland General Electric,
Colstrip Project, Series 1983-A,
LOC: UBS (RB)
3.500%, 11/07/96 (A) 3,000 3,000
Montana State, Health Facilities
Authority, Pooled Loan Program A,
LOC: FGIC (RB)
3.550%, 11/07/96 (A) 2,100 2,100
- ----------------------------------------------------------------
TOTAL MONTANA $ 6,400
- ----------------------------------------------------------------
NEVADA - 2.8%
Clark County, Airport
Improvement Authority,
Series A (RB) (MBIA)
3.500%, 11/07/96 (A) 3,000 3,000
- ----------------------------------------------------------------
TOTAL NEVADA $ 3,000
- ----------------------------------------------------------------
NEW HAMPSHIRE - 3.0%
State Pollution Control, LOC:
CIBC (RB)
3.550%, 11/07/96 (A) 3,200 3,200
- ----------------------------------------------------------------
TOTAL NEW HAMPSHIRE $ 3,200
- ----------------------------------------------------------------
NEW YORK - 0.5%
New York, Series B-7
(AMBAC) (GO)
3.550%, 11/01/96 (A) 500 500
- ----------------------------------------------------------------
TOTAL NEW YORK $ 500
- ----------------------------------------------------------------
NORTH CAROLINA - 4.6%
Durham, Water & Sewer Utility
System (RB)
3.500%, 11/07/96 (A) 2,000 2,000
Winston Salem (COP)
3.550%, 11/07/96 (A) 3,000 3,000
- ----------------------------------------------------------------
TOTAL NORTH CAROLINA $ 5,000
- ----------------------------------------------------------------
PENNSYLVANIA - 10.2%
Bucks County, Industrial
Development Authority, LOC:
ABN-Amro (RB)
3.600%, 11/07/96 (A) 2,200 2,200
Bucks County, Series A (GO)
5.300%, 03/01/97 1,500 1,508
Lehigh County, Industrial
Development Authority, Series A,
LOC: Rabo Bank (RB)
3.600%, 11/07/96 (A) 1,700 1,700
- ----------------------------------------------------------------
PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
- ----------------------------------------------------------------
Lehigh County (TECP) (MBIA)
3.800%, 01/13/97 $2,500 $ 2,500
Montgomery County, Higher
Education & Health Authority
(RB) (AMBAC)
3.500%, 11/07/96 (A) (B) 1,100 1,100
Philadelphia Hospital & Higher
Education Authority,
Pennsylvania Hospital Project,
Series C (RB) (FGIC)
3.900%, 07/01/97 1,000 1,000
Wyomissing, School District,
Pre-refunded @ 100
(GO) (FGIC)
5.400%, 11/01/97 (B) 1,010 1,025
- ----------------------------------------------------------------
TOTAL PENNSYLVANIA $11,033
- ----------------------------------------------------------------
Rhode Island - 1.8%
Rhode Island State (TAN)
4.500%, 06/30/97 2,000 2,006
- ----------------------------------------------------------------
TOTAL RHODE ISLAND $ 2,006
- ----------------------------------------------------------------
TENNESSEE - 1.4%
Jefferson County, Industrial
Development Authority,
Ball Project,
LOC: PNC Bank (RB)
3.850%, 11/07/96 (A) 1,500 1,500
- ----------------------------------------------------------------
TOTAL TENNESSEE $ 1,500
- ----------------------------------------------------------------
TEXAS - 8.8%
Dallas-Fort Worth International
Airport (RB) (MBIA)
3.750%, 11/01/96 1,550 1,550
Texas State Higher Education
Authority, Series B
(RB) (FGIC)
3.550%, 11/07/96 (A) 1,965 1,965
Texas State Municipal Power
Agency (TECP)
3.700%, 01/10/97 2,750 2,750
Texas State, Southwest Higher
Education Authority, Southern
Methodist University Project,
LOC: Morgan (RB)
3.600%, 11/01/96 (A) 600 600
Texas State (TRAN)
4.750%, 08/29/97 2,660 2,680
- ----------------------------------------------------------------
TOTAL TEXAS $ 9,545
- ----------------------------------------------------------------
UTAH - 4.6%
Emery County, Pacificorp Project,
Series 1991, LOC: Credit
Suisse (RB)
3.550%, 11/07/96 (A) 5,000 5,000
- ----------------------------------------------------------------
TOTAL UTAH $ 5,000
- ----------------------------------------------------------------
----------
9
<PAGE>
STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS (UNAUDITED)
TAX-FREE MONEY MARKET PORTFOLIO CONCLUDED
- -----------------------------------------------------------------
PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
- -----------------------------------------------------------------
WASHINGTON - 2.2%
Washington State, Public Power
Supply System, Nuclear Project
#1 1993-1A3, LOC: National
Westminister Bank (RB)
3.500%, 11/07/96 (A) $ 2,400 $ 2,400
- -----------------------------------------------------------------
TOTAL WASHINGTON $ 2,400
- -----------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost $108,077) $108,077
- -----------------------------------------------------------------
TOTAL INVESTMENTS - 99.7%
(Cost $108,077) $108,077
- -----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.3% $ 334
- -----------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -
no par value) based on 81,141,603
outstanding shares of beneficial
interest 81,142
Portfolio Shares of Retail Class
(unlimited authorization -
no par value) based
on 15,287,511 outstanding shares
of beneficial interest 15,288
Portfolio Shares of Institutional
II Class (unlimited authorization
- no par value) based on 11,981,284
outstanding shares of beneficial
interest 11,981
- -----------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $108,411
- -----------------------------------------------------------------
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 OCTOBER 31, 1996. THE DATE SHOWN IS THE NEXT
SCHEDULED RESET DATE.
(B) PRE-REFUNDED SECURITY - THE PRE-REFUNDED DATE IS SHOWN AS THE MATURITY DATE
ON THE STATEMENT OF NET ASSETS.
AMBAC-AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
COP-CERTIFICATE OF PARTICIPATION
FGIC-FEDERAL GUARANTY INSURANCE CORPORATION
FNMA-FEDERAL NATIONAL MORTGAGE ASSOCIATION
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
TRAN-TAX AND REVENUE ANTICIPATION NOTE
UBS-UNION BANK OF SWITZERLAND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: SHORT-TERM TREASURY PORTFOLIO
A Pie chart depicting percentage of total portfolio investments as follows:
U.S. TREASURY BONDS -- 16%
U.S. TREASURY BILLS -- 17%
U.S. TREASURY NOTES -- 67%
% OF TOTAL PORTFOLIO INVESTMENTS
- -----------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 96.8%
U.S. Treasury Bills
4.880%, 12/12/96 $ 47 $ 47
4.872%, 12/19/96 540 536
5.394%, 07/24/97 343 330
5.163%, 08/21/97 5,307 5,084
U.S. Treasury Bond
6.000%, 08/15/99 5,653 5,667
U.S. Treasury Notes
6.875%, 03/31/97 500 503
8.500%, 04/15/97 2,500 2,535
5.375%, 11/30/97 500 499
8.125%, 02/15/98 2,250 2,318
5.250%, 07/31/98 3,000 2,978
6.250%, 07/31/98 2,000 2,018
5.875%, 08/15/98 3,069 3,076
6.000%, 09/30/98 6,905 6,938
5.500%, 11/15/98 3,000 2,984
- -----------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $35,431) $35,513
- -----------------------------------------------------------
TOTAL INVESTMENTS - 96.8%
(Cost $35,431) $35,513
- -----------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 3.2% $ 1,175
- -----------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization - no par value)
based on 2,053,369 outstanding shares of
beneficial interest 20,527
Portfolio Shares of Retail Class (unlimited
authorization - no par value) based on
1,605,450 outstanding shares of
beneficial interest 16,054
Accumulated net realized gain on investments 25
Net unrealized appreciation on investments 82
- -----------------------------------------------------------
TOTAL NET ASSETS - 100.0% $36,688
- -----------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $10.03
- -----------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $10.03
- -----------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE -
RETAIL CLASS ($10.03 / 95.50%) $10.50
- -----------------------------------------------------------
- ----------
10
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
ARK FUNDS: INCOME PORTFOLIO
A Pie chart depicting percentage of total portfolio investments as follows:
U.S. GOVERNMENT AGENCY OBLIGATIONS-- 2%
REPURCHASE AGREEMENT -- 16%
MORTGAGE RELATED -- 4%
U.S. TREASURY OBLIGATIONS -- 23%
YANKEE BONDS -- 4%
ASSET BACKED SECURITIES-- 2%
CORPORATE OBLIGATIONS -- 17%
U.S. GOVERNMENT MORTGAGE- BACKED OBLIGATIONS -- 32%
% OF TOTAL PORTFOLIO INVESTMENTS
- -----------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS - 36.6%
Federal Home Loan Mortgage
Corporation
8.500%, 09/01/26 $ 2,683 $ 2,781
Federal Home Loan Mortgage
Corporation (CMO)
10.000%, 06/15/19 354 365
Federal Home Loan Mortgage
Corporation (GTD)
9.000%, 09/15/08 43 51
12.450%, 09/15/09 30 32
Federal National Mortgage
Association
8.000%, 04/13/05 7,500 7,610
7.000%, 07/01/11 2,000 2,001
7.000%, 08/01/11 2,890 2,892
7.000%, 08/01/25 490 481
7.000%, 09/01/25 3,666 3,597
7.500%, 11/01/26 (B) 15,000 15,005
7.500%, 11/01/26 (B) 13,500 13,521
Federal National Mortgage
Association (CMO)
10.000%, 01/25/16 238 244
Government National Mortgage
Association
7.500%, 10/15/23 2,081 2,087
7.500%, 12/15/23 1,809 1,815
7.000%, 02/15/24 2,733 2,681
7.000%, 05/15/24 5,470 5,366
7.500%, 05/15/24 4,160 4,173
7.500%, 10/15/24 2,973 2,982
Government National Mortgage
Association II
7.000%, 09/20/25 1,943 1,896
- -----------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS
(Cost $68,851) $69,580
- -----------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.0%
Federal Home Loan Mortgage
Corporation
9.000%, 01/01/02 102 106
7.980%, 09/08/04 1,000 1,008
- -----------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
8.350%, 10/06/04 $1,500 $ 1,528
7.900%, 04/27/05 1,000 1,012
14.750%, 03/01/10 51 58
- -----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $3,701) $ 3,712
- -----------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 26.3%
U.S. Treasury Bonds
10.375%, 11/15/12 4,000 5,186
6.000%, 02/15/26 550 502
U.S. Treasury Notes
7.375%, 11/15/97 2,000 2,036
6.125%, 05/15/98 3,500 3,524
5.375%, 05/31/98 6,855 6,823
7.125%, 09/30/99 2,000 2,063
7.750%, 11/30/99 3,000 3,150
6.375%, 01/15/00 5,000 5,065
5.875%, 06/30/00 1,000 996
6.375%, 09/30/01 5,000 5,056
10.750%, 08/15/05 8,000 10,343
7.000%, 07/15/06 3,500 3,655
6.500%, 10/15/06 1,700 1,716
- -----------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $49,271) $50,115
- -----------------------------------------------------------
CORPORATE OBLIGATIONS - 19.3%
AMR
9.270%, 08/13/98 1,000 1,050
Banc One
9.875%, 03/01/09 1,000 1,226
Case Equipment
7.250%, 01/15/16 3,000 2,899
Conseco
10.500%, 12/15/04 1,500 1,770
Continental Cablevision (A)
8.300%, 05/15/06 1,500 1,598
Federated Department Store
8.500%, 06/15/03 2,000 2,080
First Nationwide (A)
10.625%, 10/01/03 1,000 1,050
General Motors
8.800%, 03/01/21 2,000 2,268
Kroger
8.150%, 07/15/06 1,500 1,524
Lehman Brothers Holdings
7.250%, 10/15/03 1,500 1,511
Loewen Group International (A)
8.250%, 10/15/03 2,000 2,050
Nabisco
7.050%, 07/15/07 2,000 1,965
Pacific Bell
7.500%, 02/01/33 2,000 1,950
Southern California Edison
8.875%, 06/01/24 1,384 1,434
TCI Communications
8.750%, 08/01/15 3,000 2,839
----------
11
<PAGE>
SCHEDULE OF INVESTMENTS/STATEMENT OF NET ASSETS (UNAUDITED)
INCOME PORTFOLIO CONCLUDED
- -----------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
Texas Utility Electric
9.750%, 05/01/21 $ 4,000 $ 4,555
TKR Cable
10.500%, 10/30/07 3,250 3,603
Viacom International
8.000%, 07/07/06 1,500 1,410
- -----------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $36,411) $36,782
- -----------------------------------------------------------
YANKEE BONDS - 5.3%
Bell Canada
9.500%, 10/15/10 2,425 2,955
Hydro-Quebec
7.500%, 04/01/16 3,150 3,185
Merita Bank
6.500%, 01/15/06 2,000 1,910
Saga Petroleum
9.125%, 07/15/14 1,750 1,978
- -----------------------------------------------------------
TOTAL YANKEE BONDS
(Cost $9,857) $10,028
- -----------------------------------------------------------
MORTGAGE RELATED - 4.4%
Countrywide Funding
Series 1994-4 A12
6.950%, 04/25/24 4,554 4,162
Goldman Sachs Trust 2
Series B Cl 3
8.950%, 07/01/17 232 232
IMC Home Equity Loan
Trust 1996-4 Cl A1
6.590%, 07/25/11 1,500 1,503
MDC Asset Investors
Trust Series V Cl 2
9.325%, 12/01/17 11 11
Prudential Home Mortgage
1993-36 A1
6.850%, 10/25/23 2,413 2,413
- -----------------------------------------------------------
TOTAL MORTGAGE RELATED
(Cost $8,205) $ 8,321
- -----------------------------------------------------------
ASSET-BACKED SECURITIES - 2.5%
Premier Auto Trust 96-2 A4
6.575%, 10/06/00 3,500 3,543
Standard Credit Card Master
Trust Series 1995-10 Cl A
5.900%, 02/07/01 1,250 1,245
- -----------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $4,748) $ 4,788
- -----------------------------------------------------------
- -----------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
REPURCHASE AGREEMENT - 17.7%
CS First Boston
5.580%, dated 10/31/96
matures 11/01/96,
repurchase price $33,760,090
(collateralized by various U.S.
Treasury Notes, total par
value $34,838,000, 5.750%-
6.500%, 08/15/97-08/15/03:
total market value
$34,506,254) $33,755 $ 33,755
- -----------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $33,755) $ 33,755
- -----------------------------------------------------------
TOTAL INVESTMENTS - 114.1% OF NET ASSETS
(Cost $214,799) $217,081
- -----------------------------------------------------------
(A) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS.
(B) WHEN - ISSUED SECURITY
CMO-COLLATERALIZED MORTGAGE OBLIGATION
GTD-GUARANTEED MORTGAGE CERTIFICATES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----------
12
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
ARK FUNDS: BALANCED PORTFOLIO
A Pie chart depicting percentage of total portfolio investments as follows:
MORTGAGE RELATED -- 1%
CORPORATE OBLIGATIONS -- 9%
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 14%
ASSET BACKED SECURITIES -- 1%
U.S. TREASURY OBLIGATIONS -- 14%
REPURCHASE AGREEMENTS -- 3%
COMMON STOCKS -- 58%
% OF TOTAL PORTFOLIO INVESTMENTS
- ------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCKS - 58.4%
AIRCRAFT - 1.4%
Boeing 6,000 $ 572
Lockheed Martin 10,000 896
- ------------------------------------------------------------
TOTAL AIRCRAFT $1,468
- ------------------------------------------------------------
AUTOMOTIVE - 2.1%
Breed Technologies 20,000 460
General Motors 15,000 808
Magna International, Cl A 18,000 902
- ------------------------------------------------------------
TOTAL AUTOMOTIVE $2,170
- ------------------------------------------------------------
BANKS - 3.5%
Banc One 15,000 636
Chase Manhattan 14,000 1,201
Mellon Bank 15,000 977
Norwest 20,000 878
- ------------------------------------------------------------
TOTAL BANKS $3,692
- ------------------------------------------------------------
BEAUTY PRODUCTS - 2.7%
Colgate-Palmolive 12,000 1,104
Gillette 10,000 747
Procter & Gamble 10,000 990
- ------------------------------------------------------------
TOTAL BEAUTY PRODUCTS $2,841
- ------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING - 0.5%
Evergreen Media, Cl A* 18,400 497
- ------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 497
- ------------------------------------------------------------
BUILDING & CONSTRUCTION - 0.7%
Fluor 11,000 720
- ------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION $ 720
- ------------------------------------------------------------
CHEMICALS - 2.6%
IMC Global 15,000 562
Monsanto 20,000 793
Morton International 15,000 591
Nalco Chemical 20,000 728
- ------------------------------------------------------------
TOTAL CHEMICALS $2,674
- ------------------------------------------------------------
- ------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------
COMPUTER SOFTWARE - 1.7%
Award Software International* 34,000 $ 238
Computer Associates
International 15,000 887
Microsoft* 5,000 686
- ------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $1,811
- ------------------------------------------------------------
COMPUTERS & SERVICES - 3.1%
Ceridian* 20,000 992
Dialogic* 18,000 617
Micron Electronics* 15,000 223
Sun Microsystems* 12,000 732
U.S. Robotics* 10,000 629
- ------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $3,193
- ------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.4%
Motorola 10,000 460
- ------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $ 460
- ------------------------------------------------------------
DRUGS - 3.2%
Bristol-Myers Squibb 6,000 634
Dura Pharmaceuticals* 25,000 863
Pfizer 10,000 828
Schering Plough 15,000 960
- ------------------------------------------------------------
TOTAL DRUGS $3,285
- ------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.9%
General Electric 10,000 967
- ------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $ 967
- ------------------------------------------------------------
ENTERTAINMENT - 0.6%
Walt Disney 10,000 659
- ------------------------------------------------------------
TOTAL ENTERTAINMENT $ 659
- ------------------------------------------------------------
FINANCIAL SERVICES - 1.7%
Dean Witter Discover 12,000 706
Federal Home Loan Mortgage
Corporation 11,000 1,111
- ------------------------------------------------------------
TOTAL FINANCIAL SERVICES $1,817
- ------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 5.3%
CPC International 14,000 1,104
General Mills 15,000 857
PepsiCo 40,000 1,185
Philip Morris 13,000 1,204
Unilever NV 7,500 1,147
- ------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $5,497
- ------------------------------------------------------------
HEALTH CARE - 2.5%
Abbott Laboratories 12,500 633
American Home Products 11,000 674
Johnson & Johnson 15,000 739
Medtronic 9,009 580
- ------------------------------------------------------------
TOTAL HEALTH CARE $2,626
- ------------------------------------------------------------
HOTELS & LODGING - 0.7%
HFS* 10,000 732
- ------------------------------------------------------------
TOTAL HOTELS & LODGING $ 732
- ------------------------------------------------------------
----------
13
<PAGE>
STATEMENT OF NET ASSETS (UNAUDITED)
BALANCED PORTFOLIO CONTINUED
- ------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------
INSURANCE - 1.5%
Aetna 15,000 $1,003
American International Group 5,500 597
- ------------------------------------------------------------
TOTAL INSURANCE $1,600
- ------------------------------------------------------------
LEISURE PRODUCTS - 1.1%
Mattel 40,000 1,155
- ------------------------------------------------------------
TOTAL LEISURE PRODUCTS $1,155
- ------------------------------------------------------------
MACHINERY - 0.8%
Deere 20,000 835
- ------------------------------------------------------------
TOTAL MACHINERY $ 835
- ------------------------------------------------------------
MARINE TRANSPORTATION - 1.0%
Carnival 35,000 1,054
- ------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $1,054
- ------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 2.5%
Baxter International 20,000 832
Boston Scientific* 15,000 816
Guidant 20,000 923
- ------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $2,571
- ------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 1.1%
CUC International* 45,000 1,102
- ------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $1,102
- ------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES - 0.8%
Loewen Group 20,000 793
- ------------------------------------------------------------
TOTAL MISCELLANEOUS CONSUMER SERVICES $ 793
- ------------------------------------------------------------
PAPER & PAPER PRODUCTS - 0.6%
International Paper 15,000 641
- ------------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 641
- ------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 2.9%
Burlington Resources 20,000 1,007
Transocean Offshore 17,500 1,107
Triton Energy, Cl A* 20,000 893
- ------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $3,007
- ------------------------------------------------------------
PETROLEUM REFINING - 1.5%
Exxon 10,000 886
Unocal 18,000 659
- ------------------------------------------------------------
TOTAL PETROLEUM REFINING $1,545
- ------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 0.6%
Eastman Kodak 8,000 638
- ------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT & SUPPLIES $ 638
- ------------------------------------------------------------
- ------------------------------------------------------------
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
RETAIL - 4.8%
Cracker Barrel Old
Country Stores 30,000 $ 611
Home Depot 12,800 701
McDonald's 22,000 976
Outback Steakhouse* 25,000 580
Sears Roebuck 20,000 968
Wal-Mart Stores 45,000 1,198
- ------------------------------------------------------------
TOTAL RETAIL $ 5,034
- ------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 1.4%
Intel 8,000 879
LSI Logic* 20,000 530
- ------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 1,409
- ------------------------------------------------------------
TECHNOLOGY - 3.8%
3Com* 12,500 845
Cisco Systems* 15,000 928
Hewlett Packard 25,000 1,103
IBM 8,000 1,032
- ------------------------------------------------------------
TOTAL TECHNOLOGY $ 3,908
- ------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 0.4%
Lightbridge* 25,000 241
RMH Teleservices* 20,000 148
- ------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 389
- ------------------------------------------------------------
- ------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $54,201) $60,790
- ------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 14.2%
U.S. Treasury Bonds
8.000%, 11/15/21 $ 720 828
6.000%, 02/15/26 650 593
U.S. Treasury Notes
6.875%, 02/28/97 400 402
7.375%, 11/15/97 2,000 2,036
7.875%, 04/15/98 1,050 1,082
7.500%, 10/31/99 1,950 2,031
8.500%, 02/15/00 1,500 1,612
7.750%, 02/15/01 1,500 1,595
6.625%, 06/30/01 2,000 2,042
7.500%, 11/15/01 1,000 1,059
7.000%, 07/15/06 1,250 1,305
6.500%, 10/15/06 200 202
- ------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $14,431) $14,787
- ------------------------------------------------------------
- ----------
14
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
- -------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS - 13.4%
Federal Home Loan Mortgage Corporation
8.500%, 11/01/01 $ 52 $ 54
9.000%, 01/01/02 113 119
9.500%, 07/01/02 12 13
7.980%, 09/08/04 350 353
7.900%, 04/27/05 500 506
6.500%, 04/01/08 1,072 1,056
6.500%, 10/15/21 1,000 981
8.500%, 09/01/26 298 309
Federal National Mortgage Association
10.500%, 12/01/00 9 11
7.000%, 02/01/07 465 465
9.750%, 09/25/18 260 283
7.000%, 02/01/26 1,353 1,329
7.500%, 08/01/26 1,972 1,976
Government National Mortgage Association
7.500%, 10/15/23 1,250 1,254
7.500%, 12/15/23 1,204 1,208
7.000%, 05/15/24 2,734 2,683
7.000%, 02/15/24 1,366 1,341
- -------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $13,767) $13,941
- -------------------------------------------------------------
CORPORATE OBLIGATIONS - 9.1%
Associates of North America
9.700%, 05/01/97 500 510
Bell Canada
9.500%, 10/15/10 450 548
Case Equipment
7.250%, 01/15/16 650 628
Conseco
10.500%, 12/15/04 500 590
Continental Cablevision
8.300%, 05/15/06 (A) 250 266
Federated Department Store
8.500%, 06/15/03 500 520
Hydro-Quebec
7.500%, 04/01/16 375 379
Interamerican Development Bank
9.500%, 10/15/97 200 207
Kroger
8.150%, 07/15/06 250 254
Loewen Group International
8.250%, 10/15/03 (A) 500 513
Merita Bank
6.500%, 01/15/06 550 525
Nabisco
7.050%, 07/15/07 1,000 983
Pacific Bell
7.500%, 02/01/33 610 595
Saga Petroleum
9.125%, 07/15/14 250 283
- -------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -------------------------------------------------------------
Santander Financial
7.000%, 04/01/06 $ 600 $ 599
TCI Communications
8.750%, 08/01/15 350 331
Texas Utility Electric
9.750%, 05/01/21 600 683
TKR Cable
10.500%, 10/30/07 750 832
Viacom International
8.000%, 07/07/06 250 235
- -------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $9,374) $ 9,481
- -------------------------------------------------------------
MORTGAGE RELATED - 1.3%
Countrywide Funding
Series 1994-4 A
6.950%, 04/25/24 968 885
CMO Trust, Cl C
9.900%, 09/01/16 2 3
MDC Asset Investors Trust
8.940%, 03/01/18 52 54
Prudential Home Mortgage
Securities 1993-36 A1
6.850%, 10/25/23 427 427
- -------------------------------------------------------------
TOTAL MORTGAGE RELATED
(Cost $1,348) $ 1,369
- -------------------------------------------------------------
ASSET-BACKED SECURITIES - 1.1%
Premier Auto Trust 96-2 A4
6.575%, 10/06/00 675 683
Standard Credit Card Master
Trust, Cl A
5.900%, 02/07/01 450 448
- -------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $1,125) $ 1,131
- -------------------------------------------------------------
REPURCHASE AGREEMENT - 3.2%
CS First Boston
5.580%, dated 10/31/96
matures 11/01/96,
repurchase price $3,351,149
(collateralized by a U.S.
Treasury Note, total par
value $3,070,000, 9.125%,
05/15/99: total market value
$3,427,948) 3,351 3,351
- -------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $3,351) $ 3,351
- -------------------------------------------------------------
TOTAL INVESTMENTS - 100.7%
(Cost $97,597) $104,850
- -------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (0.7%) $ (761)
- -------------------------------------------------------------
----------
15
<PAGE>
STATEMENT OF NET ASSETS (UNAUDITED)
BALANCED PORTFOLIO CONCLUDED
- ------------------------------------------------------------
PRINCIPAL
DESCRIPTION AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -
no par value) based on 8,780,518
outstanding shares of beneficial
interest $ 87,711
Portfolio Shares of Retail Class
(unlimited authorization - no par
value) based on 395,413 outstanding
shares of beneficial interest 4,344
Undistributed net investment income 286
Accumulated net realized gain on investments 4,495
Net unrealized appreciation on investments 7,253
- ------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $104,089
- ------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $ 11.34
- ------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $ 11.32
- ------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE -
RETAIL CLASS ($11.32/95.25%) $ 11.88
- ------------------------------------------------------------
(A) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS.
* NON-INCOME PRODUCING SECURITY
CL-CLASS
CMO-COLLATERALIZED MORTGAGE OBLIGATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
ARK FUNDS: BLUE CHIP EQUITY PORTFOLIO
A Pie chart depicting percentage of total portfolio investments as follows:
MISCELLANEOUS -- 3%
U.S. AGENCY BACKED BONDS -- 8%
AMERICAN DEPOSITORY RECEIPTS -- 5%
HOUSEHOLD PRODUCTS -- 3%
UTILITIES -- 5%
RETAIL -- 5%
OIL--ENERGY -- 8%
FINANCIAL -- 14%
AUTO RELATED -- 3%
CHEMICALS AND DRUGS -- 14%
CONSUMER PRODUCTS -- 11%
DURABLE GOODS -- 21%
% OF TOTAL PORTFOLIO INVESTMENTS
- -----------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------
COMMON STOCKS - 90.8%
AIRCRAFT - 5.6%
Boeing 6,900 $ 656
Lockheed Martin 7,400 663
- -----------------------------------------------------------
TOTAL AIRCRAFT $1,319
- -----------------------------------------------------------
AUTOMOTIVE - 5.2%
Ford Motor 19,100 597
General Motors 11,500 620
- -----------------------------------------------------------
TOTAL AUTOMOTIVE $1,217
- -----------------------------------------------------------
BANKS - 5.6%
J.P. Morgan 7,800 674
Norwest 14,500 636
- -----------------------------------------------------------
TOTAL BANKS $1,310
- -----------------------------------------------------------
CHEMICALS - 2.6%
E.I. du Pont de Nemours 6,600 612
- -----------------------------------------------------------
TOTAL CHEMICALS $ 612
- -----------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 5.4%
Motorola 13,900 639
Philips Electronics, ADR 18,200 642
- -----------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $1,281
- -----------------------------------------------------------
COMPUTER SOFTWARE - 2.6%
Microsoft* 4,500 618
- -----------------------------------------------------------
TOTAL COMPUTER SOFTWARE $ 618
- -----------------------------------------------------------
COMPUTERS & SERVICES - 2.6%
Hewlett Packard 13,700 605
- -----------------------------------------------------------
TOTAL COMPUTERS & SERVICES $ 605
- -----------------------------------------------------------
DRUGS - 5.4%
Merck 8,700 645
Pfizer 7,600 629
- -----------------------------------------------------------
TOTAL DRUGS $1,274
- -----------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.7%
General Electric 6,500 629
- -----------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $ 629
- -----------------------------------------------------------
- -----------
16
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
- -----------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------
ENTERTAINMENT - 2.7%
Walt Disney 9,600 $ 632
- -----------------------------------------------------------
TOTAL ENTERTAINMENT 632
- -----------------------------------------------------------
FINANCIAL SERVICES - 5.6%
Associates First Capital 14,500 629
Federal National Mortgage
Association 17,900 700
- -----------------------------------------------------------
TOTAL FINANCIAL SERVICES $1,329
- -----------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 8.3%
Coca Cola 13,100 662
CPC International 8,100 639
Philip Morris 7,100 658
- -----------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $1,959
- -----------------------------------------------------------
HEALTHCARE PRODUCTS & SERVICES - 5.4%
Abbott Laboratories 12,200 618
Johnson & Johnson 13,500 665
- -----------------------------------------------------------
TOTAL HEALTHCARE PRODUCTS & SERVICES $1,283
- -----------------------------------------------------------
HOUSEHOLD PRODUCTS - 2.9%
Procter & Gamble 7,000 693
- -----------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 693
- -----------------------------------------------------------
INSURANCE - 2.6%
Chubb 12,400 620
- -----------------------------------------------------------
TOTAL INSURANCE $ 620
- -----------------------------------------------------------
PAPER & PAPER PRODUCTS - 1.8%
International Paper 10,000 428
- -----------------------------------------------------------
TOTAL PAPER & PAPER PRODUCTS $ 428
- -----------------------------------------------------------
PETROLEUM INTERNATIONAL - 7.8%
Chevron 9,300 611
Exxon 7,000 620
Royal Dutch Petroleum 3,700 612
- -----------------------------------------------------------
TOTAL PETROLEUM INTERNATIONAL $1,843
- -----------------------------------------------------------
RAILROADS - 5.2%
Burlington Northern Santa Fe 8,100 667
Tranz Rail Holdings, ADR* 34,000 557
- -----------------------------------------------------------
TOTAL RAILROADS $1,224
- -----------------------------------------------------------
RETAIL - 5.4%
Sears Roebuck 12,800 619
Wal-Mart Stores 24,400 650
- -----------------------------------------------------------
TOTAL RETAIL $1,269
- -----------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 5.4%
AT&T 18,300 638
SBC Communications 13,300 647
- -----------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $1,285
- -----------------------------------------------------------
- -----------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
- -----------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $20,089) $21,430
- -----------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION - 7.2%
Federal Home Loan Mortgage
5.530%, 11/01/96 $1,703 1,703
- -----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATION
(Cost $1,703) $ 1,703
- -----------------------------------------------------------
TOTAL INVESTMENTS - 98.0%
(Cost $21,792) $23,133
- -----------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 2.0% $ 467
- -----------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -
no par value) based on 1,831,314
outstanding shares of beneficial
interest 18,792
Portfolio Shares of Retail Class
(unlimited authorization - no par
value) based on 323,666 outstanding
shares of beneficial interest 3,425
Undistributed net investment income 19
Accumulated net realized gain on investments 23
Net unrealized appreciation on investments 1,341
- -----------------------------------------------------------
TOTAL NET ASSETS -100.0% $23,600
- -----------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $10.95
- -----------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $10.94
- -----------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE -
RETAIL CLASS ($10.94/95.25%) $11.49
- -----------------------------------------------------------
* NON-INCOME PRODUCING SECURITY
ADR-AMERICAN DEPOSITORY RECEIPTS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-----------
17
<PAGE>
STATEMENT OF NET ASSETS (UNAUDITED)
ARK FUNDS: CAPITAL GROWTH PORTFOLIO
A Pie chart depicting percentage of total portfolio investments as follows:
HOUSEHOLD PRODUCTS -- 2%
CONSUMER PRODUCTS -- 14%
RETAIL -- 9%
OIL-ENERGY -- 7%
BUILDING AND CONSTRUCTION -- 1%
FINANCIAL -- 15%
MISCELLANEOUS -- 2%
CHEMICALS AND DRUGS -- 12%
REPURCHASE AGREEMENTS -- 2%
DURABLE GOODS -- 36%
% OF TOTAL PORTFOLIO INVESTMENTS
- ------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCKS - 99.4%
AIRCRAFT - 2.4%
Lockheed Martin 10,000 $ 896
- ------------------------------------------------------------
TOTAL AIRCRAFT $ 896
- ------------------------------------------------------------
BANKS - 8.3%
Banc One 23,000 975
Chase Manhattan 12,500 1,072
Mellon Bank 7,000 456
Norwest 12,000 527
- ------------------------------------------------------------
TOTAL BANKS $3,030
- ------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING - 0.4%
Lamar Advertising* 5,500 151
- ------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $ 151
- ------------------------------------------------------------
CHEMICALS - 1.3%
Monsanto 12,000 475
- ------------------------------------------------------------
TOTAL CHEMICALS $ 475
- ------------------------------------------------------------
COMPUTER SOFTWARE - 5.8%
Award Software International* 33,000 231
Computer Associates
International 15,000 887
Infinity Financial* 10,000 164
Microsoft* 5,000 686
Trusted Information System* 10,000 135
- ------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $2,103
- ------------------------------------------------------------
COMPUTERS & SERVICES - 5.6%
Ceridian* 18,000 893
Micron Electronics* 35,000 521
Sun Microsystems* 2,800 171
U.S. Robotics* 7,500 472
- ------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $2,057
- ------------------------------------------------------------
DRUGS - 9.2%
Abbott Laboratories 15,000 759
American Home Products 10,000 612
Dura Pharmaceuticals* 16,000 552
Jones Medical Industries 9,400 409
Schering Plough 16,000 1,024
- ------------------------------------------------------------
TOTAL DRUGS $3,356
- ------------------------------------------------------------
- ------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------
ELECTRICAL EQUIPMENT - 3.2%
General Electric 12,000 $1,161
- ------------------------------------------------------------
TOTAL ELECTRICAL EQUIPMENT $1,161
- ------------------------------------------------------------
ENTERTAINMENT - 3.0%
Carnival 20,000 602
Walt Disney 7,000 461
- ------------------------------------------------------------
TOTAL ENTERTAINMENT $1,063
- ------------------------------------------------------------
FINANCIAL SERVICES - 4.2%
American Express 20,000 940
Federal Home Loan Mortgage
Corporation 6,000 606
- ------------------------------------------------------------
TOTAL FINANCIAL SERVICES $1,546
- ------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 9.2%
Coca Cola 10,000 505
CPC International 11,000 868
PepsiCo 30,000 889
Philip Morris 7,500 695
Unilever NV 2,500 382
- ------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO $3,339
- ------------------------------------------------------------
HOUSEHOLD PRODUCTS - 2.6%
Colgate Palmolive 5,000 460
Procter & Gamble 5,000 495
- ------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 955
- ------------------------------------------------------------
INSURANCE - 2.5%
American International Group 4,500 489
Travelers 8,000 434
- ------------------------------------------------------------
TOTAL INSURANCE $ 923
- ------------------------------------------------------------
LEISURE PRODUCTS - 2.1%
Mattel 27,000 780
- ------------------------------------------------------------
TOTAL LEISURE PRODUCTS $ 780
- ------------------------------------------------------------
MACHINERY - 2.6%
Caterpillar 7,000 480
Deere 11,000 459
- ------------------------------------------------------------
TOTAL MACHINERY $ 939
- ------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 6.6%
Becton Dickinson 20,000 870
Guidant 18,000 830
Johnson & Johnson 12,500 616
Medtronic 1,501 97
- ------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $2,413
- ------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 0.8%
CUC International* 12,500 306
- ------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $ 306
- ------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 3.2%
Apache 15,000 533
Transocean Offshore 10,000 632
- ------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $1,165
- ------------------------------------------------------------
- -----------
18
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
- ------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------
PETROLEUM REFINING - 3.4%
Chevron 6,000 $ 395
Exxon 5,000 443
Mobil 3,500 409
- ------------------------------------------------------------
TOTAL PETROLEUM REFINING $ 1,247
- ------------------------------------------------------------
PROFESSIONAL SERVICES - 0.7%
International Network Services* 7,500 268
- ------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 268
- ------------------------------------------------------------
RETAIL - 8.9%
Home Depot 12,000 657
McDonald's 8,000 355
Outback Steakhouse* 15,000 348
Sears Roebuck 18,000 871
TJX 12,500 500
Wal-Mart Stores 20,000 532
- ------------------------------------------------------------
TOTAL RETAIL $ 3,263
- ------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS - 3.8%
Intel 5,000 549
National Semiconductor* 20,000 385
SGS-Thomson Microelectronics* 8,500 445
- ------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS $ 1,379
- ------------------------------------------------------------
TECHNOLOGY - 7.1%
3Com* 16,600 1,123
Cisco Systems* 13,000 804
Hewlett Packard 15,000 662
- ------------------------------------------------------------
TOTAL TECHNOLOGY $ 2,589
- ------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 2.5%
Advanced Fibre Communication* 2,000 114
Lightbridge* 25,000 241
Newbridge Networks* 10,000 316
RMH Teleservices* 30,000 221
- ------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 892
- ------------------------------------------------------------
- ------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $32,993) $36,296
- ------------------------------------------------------------
- ------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
REPURCHASE AGREEMENT - 1.8%
CS First Boston
5.580%, dated 10/31/96,
matures 11/01/96,
repurchase price $652,403
(collateralized by U.S.
Treasury Note, total par
value $600,000, 9.125%,
05/15/99: total market value
$669,957) $652 $ 652
- ------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $652) $ 652
- ------------------------------------------------------------
TOTAL INVESTMENTS - 101.2%
(Cost $33,645) $36,948
- ------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (1.2%) $ (435)
- ------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional
Class (unlimited authorization -
no par value) based on 2,778,302
outstanding shares of beneficial
interest 26,694
Portfolio Shares of Retail Class (unlimited
authorization - no par value) based on
254,006 outstanding shares of
beneficial interest 2,843
Undistributed net investment income 382
Accumulated net realized gain on investments 3,291
Net unrealized appreciation on investments 3,303
- ------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $36,513
- ------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $12.04
- ------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - RETAIL CLASS $12.01
- ------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE -
RETAIL CLASS ($12.01/95.25%) $12.61
- ------------------------------------------------------------
*NON-INCOME PRODUCING SECURITY
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-----------
19
<PAGE>
SCHEDULE OF INVESTMENTS (UNAUDITED)
ARK FUNDS: SPECIAL EQUITY PORTFOLIO
A Pie chart depicting percentage of total portfolio investments as follows:
AMERICAN DEPOSITORY RECEIPT -- 1%
MISCELLANEOUS -- 4%
UTILITIES -- 1%
OIL-ENERGY -- 7%
RETAIL -- 2%
FINANCIAL OPTIONS -- 2%
CONSUMER PRODUCTS -- 3%
U.S. AGENCY BACKED BONDS -- 32%
REAL ESTATE INVESTMENT TRUST -- 2%
FINANCIAL -- 10%
CHEMICALS AND DRUGS -- 3%
DURABLE GOODS -- 33%
% OF TOTAL PORTFOLIO INVESTMENTS
- ------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCKS - 71.5%
AIR TRANSPORTATION - 0.4%
Great Lakes Aviation Limited* 40,700 $117
- ------------------------------------------------------------
TOTAL AIR TRANSPORTATION $117
- ------------------------------------------------------------
BANKS - 1.9%
New York Bancorp 4,100 139
Southern National 10,000 346
- ------------------------------------------------------------
TOTAL BANKS $485
- ------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING - 3.7%
American Radio Systems* 5,000 152
Catalina Marketing* 4,000 204
Evergreen Media, Cl A* 5,000 135
Outdoor Systems* 10,000 447
- ------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING $938
- ------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.0%
Ultrak* 10,000 264
- ------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT $264
- ------------------------------------------------------------
COMPUTERS & SERVICES - 2.8%
Ciber* 5,000 178
HCIA* 10,000 277
Natural Microsystems* 5,000 266
- ------------------------------------------------------------
TOTAL COMPUTERS & SERVICES $721
- ------------------------------------------------------------
COMPUTER SOFTWARE - 2.5%
Cognos* 5,000 157
Computer Learning Centers* 10,000 268
Hyperion Software* 10,000 204
- ------------------------------------------------------------
TOTAL COMPUTER SOFTWARE $629
- ------------------------------------------------------------
CONSUMER PRODUCTS - 0.7%
Vans* 10,000 166
- ------------------------------------------------------------
TOTAL CONSUMER PRODUCTS $166
- ------------------------------------------------------------
- ------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------
DRUGS - 4.2%
Chirex* 8,000 $ 80
Jones Medical Industries 10,000 435
NBTY* 12,000 187
North American Vaccine* 5,000 111
Rexall Sundown* 10,000 271
- ------------------------------------------------------------
TOTAL DRUGS $1,084
- ------------------------------------------------------------
ELECTRICAL TECHNOLOGY - 3.3%
Nichols Research* 10,000 348
TNP Enterprises 9,000 233
United Television 2,900 255
- ------------------------------------------------------------
TOTAL ELECTRICAL TECHNOLOGY $ 836
- ------------------------------------------------------------
FINANCIAL SERVICES - 8.0%
Aames Financial 10,000 446
Americredit* 10,000 190
Associates First Capital 5,000 217
IMC Mortgage* 15,000 562
Imperial Credit Industries* 20,000 362
Quick & Reilly Group 10,000 264
- ------------------------------------------------------------
TOTAL FINANCIAL SERVICES $2,041
- ------------------------------------------------------------
GAS/NATURAL GAS - 1.9%
Laclede Gas 8,000 187
Questar 8,000 288
- ------------------------------------------------------------
TOTAL GAS/NATURAL GAS $ 475
- ------------------------------------------------------------
HOUSEHOLD FURNITURE & FIXTURES - 1.1%
O'Sullivan Industries
Holdings* 25,000 291
- ------------------------------------------------------------
TOTAL HOUSEHOLD FURNITURE & FIXTURES $ 291
- ------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.1%
American Safety Razor* 10,000 124
Armor All Products 10,000 168
- ------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS $ 292
- ------------------------------------------------------------
INSURANCE - 5.0%
American Travelers* 25,000 859
Fremont General 10,000 294
HCC Insurance Holdings 5,000 128
- ------------------------------------------------------------
TOTAL INSURANCE $1,281
- ------------------------------------------------------------
LEASING & RENTING - 1.2%
Leasing Solutions* 10,000 315
- ------------------------------------------------------------
TOTAL LEASING & RENTING $ 315
- ------------------------------------------------------------
MACHINERY - 0.2%
Engineered Support System 5,000 48
- ------------------------------------------------------------
TOTAL MACHINERY $ 48
- ------------------------------------------------------------
MARINE TRANSPORTATION - 1.0%
Teekay Shipping 8,000 249
- ------------------------------------------------------------
TOTAL MARINE TRANSPORTATION $ 249
- ------------------------------------------------------------
20
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
- -------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 5.5%
Healthcor Holdings* 30,000 $ 285
Nellcor* 5,000 97
Optical Sensors* 10,000 87
Physician Sales & Services* 10,000 212
Physio-Control International* 10,000 195
Vivus* 10,000 335
Xomed Surgical Products* 7,500 194
- -------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES $1,405
- -------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES - 6.8%
Cambridge Technology Partners* 15,000 495
E*TRADE Group* 5,000 56
Fiserv* 5,000 192
G&K Services 5,000 145
National Data 4,000 164
Saville Systems Ireland ADR* 5,000 216
Sitel* 10,000 198
Vanstar* 5,000 119
Xlconnect Solutions* 5,000 146
- -------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES $1,731
- -------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 8.5%
Comstock Resources* 25,000 322
Helmerich &Payne 10,000 541
KN Energy 8,000 299
Oryx Energy* 10,000 192
Parker & Parsley Petroleum 10,000 288
Stone Energy* 25,000 525
- -------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS $2,167
- -------------------------------------------------------------
PHARMACEUTICAL PREPARTIONS - 0.4%
Sparta Pharmaceuticals Unit* 66,666 100
- -------------------------------------------------------------
TOTAL PHARMACEUTICAL PREPARATIONS $ 100
- -------------------------------------------------------------
PROFESSIONAL SERVICES - 1.2%
Cognizant* (A) 5,000 156
Devry* 3,000 150
- -------------------------------------------------------------
TOTAL PROFESSIONAL SERVICES $ 306
- -------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 3.6%
Apartment Investment
& Management 12,000 279
Health Care Property Investors 8,000 281
United Dominion Realty 25,000 353
- -------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUST $ 913
- -------------------------------------------------------------
RETAIL - 4.1%
Cash America International 20,000 145
CKE Restaurants 5,000 149
Landry's Seafood Restaurants* 6,000 123
Papa John's International* 3,000 149
Paul Harris Stores* 20,000 222
Tech Data* 10,000 258
- -------------------------------------------------------------
TOTAL RETAIL $1,046
- -------------------------------------------------------------
- -------------------------------------------------------------
SHARES/PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- -------------------------------------------------------------
TELEPHONES & TELECOMMUNICATIONS - 0.4%
ATC Communications Group* 5,000 $ 95
- -------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS $ 95
- -------------------------------------------------------------
WHOLESALE - 1.0%
Fleming 15,000 261
- -------------------------------------------------------------
TOTAL WHOLESALE $ 261
- -------------------------------------------------------------
- -------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $18,218) $18,256
- -------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATION - 35.1%
Federal Home Loan Mortgage
5.530%, 11/01/96 $8,962 8,963
- -------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATION
(Cost $8,963) $ 8,963
- -------------------------------------------------------------
INDEX OPTIONS - 1.9%
Nasdaq 100 Index
December 630 Put* (200) (45)
Nasdaq 100 Index
December 660 Put* 150 62
Nasdaq 100 Index
December 670 Put* 100 51
Nasdaq 100 Index
December 710 Put* 50 54
Nasdaq 100 Index
January 700 Put* (100) (134)
Nasdaq 100 Index
January 740 Put* 100 248
Philadelphia Semiconductor
Index March 155 Put* (275) (148)
Philadelphia Semiconductor
Index March 185 Put* 275 416
- -------------------------------------------------------------
TOTAL INDEX OPTIONS
(Cost $1,055) $ 504
- -------------------------------------------------------------
TOTAL INVESTMENTS - 108.5% OF NET ASSETS
(Cost $28,236) $27,723
- -------------------------------------------------------------
(A) WHEN ISSUED SECURITY
* NON-INCOME PRODUCING SECURITY
ADR-AMERICAN DEPOSITORY RECEIPTS
CL-CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-----------
21
<PAGE>
STATEMENT OF NET ASSETS (UNAUDITED)
ARK FUNDS: INTERNATIONAL EQUITY PORTFOLIO
A pie chart dipicting the percentage of totla portfolio investments as follows:
CASH -- 8%
OTHER FAR EAST -- 11%
CONTINENTAL EUROPE -- 31%
JAPAN -- 38%
UNITED KINGDOM -- 12%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------
FOREIGN COMMON STOCKS - 91.1%
AUSTRALIA - 1.7%
Broken Hill Proprietary 333 $ 4
Burns Phillip 7,203 11
National Australia Bank 1,366 15
RTZ-CRA Group 1,075 17
Western Mining 1,971 12
- --------------------------------------------------------------
TOTAL AUSTRALIA $ 59
- --------------------------------------------------------------
FRANCE - 6.3%
Accor 330 41
AXA 500 31
Cie Generale des Eaux 409 49
Groupe SEB 273 55
Total, Series B 460 36
- --------------------------------------------------------------
TOTAL FRANCE $212
- --------------------------------------------------------------
GERMANY - 5.6%
Bayer 1,120 42
Deutsche Bank 600 28
Douglas Holding 500 21
Mannesmann 180 70
RWE 700 29
- --------------------------------------------------------------
TOTAL GERMANY $190
- --------------------------------------------------------------
HONG KONG - 2.5%
Cheung Kong Holdings 2,606 21
First Pacific 18,000 25
HSBC Holdings 1,200 24
Swire Pacific, Series A 1,736 15
- --------------------------------------------------------------
TOTAL HONG KONG $ 85
- --------------------------------------------------------------
INDONESIA - 0.9%
PT Indosat, ADR 1,000 30
- --------------------------------------------------------------
TOTAL INDONESIA $ 30
- --------------------------------------------------------------
- --------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------
ITALY - 1.1%
Benetton Group 3,200 $ 38
- --------------------------------------------------------------
TOTAL ITALY $ 38
- --------------------------------------------------------------
JAPAN - 38.2%
Akita Bank 2,000 13
Asahi Chemical Industries 5,000 31
Asahi Diamond Industrial 3,000 31
Asahi Glass 3,000 32
Chiyoda 3,000 56
DDI 6 45
Fukuda 2,000 16
Hitachi 4,000 36
Hitachi Metals 3,000 25
Matsushita Electric 3,000 48
Mitsubishi Heavy Industries 7,000 54
Mitsui 6,000 49
Mitsui Trust & Banking 4,000 39
Miura 1,000 15
Mizuno 5,000 39
Nagase 5,000 43
Nippon Telegraph & Telephone 3 21
Nippon Yusen Kabushik 7,000 35
Nomura Securities 2,000 33
Ohsho Food Service 2,000 35
Olympus Optical 6,000 54
Orix 1,000 37
Royal 1,000 23
Sagami Railway 6,000 25
Sankyo 1,000 25
Shimachu 2,000 55
Shinki 1,000 26
Shohkoh Fund 200 42
Sodick* 2,000 20
Sumitomo Electric 4,000 53
Taiko Bank 5,000 21
Tokio Marine & Fire Insurance 3,000 33
Tokyo Tungsten 1,000 8
Toppan Printing 4,000 49
Toshiba 8,000 50
Toyota Motor 2,000 47
Tsudakoma 3,000 17
Tsuzuki Denki* 1,000 9
- --------------------------------------------------------------
TOTAL JAPAN $1,290
- --------------------------------------------------------------
MALAYSIA - 3.0%
Arab Malaysian Merchant Bank 3,000 $ 16
Genting Berhad 1,000 7
Land and General 4,500 10
Malayan Banking 3,000 30
UMW Holdings Berhad 8,266 38
- --------------------------------------------------------------
TOTAL MALAYSIA $ 101
- --------------------------------------------------------------
NETHERLANDS - 6.2%
ABN-Amro Holdings 1,032 58
Aegon 1,313 67
Ahold 650 38
Koninklijke PTT Nederland 621 22
Verenigde Nederlandse Uigevbedri 1,400 25
- --------------------------------------------------------------
TOTAL NETHERLANDS $ 210
- --------------------------------------------------------------
- -----------
22
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
- -------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------------
SINGAPORE - 2.2%
DBS Land 3,000 9
Development Bank of Singapore 1,000 12
Keppel 2,000 15
Malayan Credit 3,000 5
Singapore Press, Series F 2,000 33
- -------------------------------------------------------------
TOTAL SINGAPORE $ 74
- -------------------------------------------------------------
SPAIN - 1.9%
Banco de Santander 654 34
Repsol 937 31
- -------------------------------------------------------------
TOTAL SPAIN $ 65
- -------------------------------------------------------------
SWEDEN - 3.0%
Atlas AB, Series A 2,502 52
Ericsson 900 24
Stora Kopparbergs, Series A 1,900 25
- -------------------------------------------------------------
TOTAL SWEDEN $101
- -------------------------------------------------------------
SWITZERLAND - 5.7%
Alusuisse-Lonza 50 37
BBC Brown Boveri 27 33
CS Holdings 100 10
Nestle SA 55 60
Roche Holdings 7 53
- -------------------------------------------------------------
TOTAL SWITZERLAND $193
- -------------------------------------------------------------
THAILAND - 0.8%
Finance One Public 3,000 8
Land and House 999 8
Total Access Communication 1,500 10
- -------------------------------------------------------------
TOTAL THAILAND $ 26
- -------------------------------------------------------------
UNITED KINGDOM - 12.0%
Barclays Bank 846 $ 13
BAT Industries 2,370 17
BOC Group 1,461 21
British Airport Authority 2,600 21
British Petroleum 2,083 22
Burton Group 3,600 9
General Accident 1,900 23
General Electric 3,707 23
GKN 1,000 19
Guinness 2,209 16
HSBC Holdings 700 15
Marks & Spencer 1,299 11
National Westminster 995 11
Prudential 3,043 23
Reuters Holdings 1,795 22
Sainsbury (J) 2,805 17
Shell Transportation & Trading 1,473 24
Smithkline Beecham, Series A 1,956 24
TI Group 1,000 9
TSB Group 1,867 12
Unilever 300 6
Vodafone Group 5,000 19
Zeneca Group 1,014 28
- -------------------------------------------------------------
TOTAL UNITED KINGDOM $ 405
- -------------------------------------------------------------
- -------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(Cost $2,919) $3,079
- -------------------------------------------------------------
FOREIGN PREFERRED STOCK - 1.6%
GERMANY - 1.6%
GEA 160 54
- -------------------------------------------------------------
TOTAL GERMANY $ 54
- -------------------------------------------------------------
- -------------------------------------------------------------
TOTAL FOREIGN PREFERRED STOCK
(Cost $56) $ 54
- -------------------------------------------------------------
U.S. TREASURY OBLIGATION - 2.8%
U.S. Treasury Bill
4.89%, 11/07/96 $95 95
- -------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATION
(Cost $95) $ 95
- -------------------------------------------------------------
TOTAL INVESTMENTS - 95.5%
(Cost $3,070) $3,228
- -------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 4.5% $ 151
- -------------------------------------------------------------
----------
23
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
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 11
Accumulated net realized gain on investments 66
Net unrealized appreciation on investments 158
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $3,379
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - INSTITUTIONAL CLASS $10.62
- --------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITY
ADR - AMERICAN DEPOSITORY RECEIPTS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----------
24
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
FOR THE PERIOD ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
SPECIAL
INCOME EQUITY
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
ASSETS:
Investments at market value (cost $214,799
and $28,236, respectively) $ 217,081 $ 27,723
Cash -- 4
Receivable for investment securities sold 15,295 3,406
Receivable for capital shares sold 161 60
Other assets 2,483 17
--------- ---------
Total assets 235,020 31,210
--------- ---------
LIABILITIES:
Distribution payable 952 --
Payable for investment securities purchased 43,657 5,672
Payable for capital shares repurchased 1 --
Other liabilities 247 --
--------- ---------
Total liabilities 44,857 5,672
--------- ---------
NET ASSETS:
Portfolio shares of Institutional Class
(unlimited authorization -- no par value)
based on 18,641,099 and 1,839,701
outstanding shares of beneficial interest,
respectively 187,515 19,571
Portfolio shares of Retail Class (unlimited
authorization -- no par value) based on
448,213 and 81,284 outstanding shares of
beneficial interest, respectively 4,567 1,167
Undistributed net investment income (loss) 3 (34)
Accumulated net realized gain (loss)
on investments (4,204) 5,347
Net unrealized appreciation (depreciation)
on investments 2,282 (513)
--------- ---------
NET ASSETS $ 190,163 $ 25,538
========= =========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE--INSTITUTIONAL CLASS $ 9.96 $ 13.29
========= =========
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE--RETAIL CLASS $ 10.07 $ 13.30
========= =========
MAXIMUM OFFERING PRICE PER SHARE--
RETAIL CLASS (1) $ 10.54 $ 13.96
========= =========
<FN>
(1)The offering price is calculated by dividing the Net Asset Value by 1 minus
the maximum sales charge of 4.50% and 4.75%, respectively.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
-----------
25
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
STATEMENT OF OPERATIONS (000) (UNAUDITED)
FOR THE PERIOD ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
U.S. U.S.
TREASURY GOVERNMENT TAX-FREE
MONEY MONEY MONEY MONEY SHORT-TERM
MARKET MARKET MARKET MARKET TREASURY INCOME BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ -- $ -- $ -- $ -- $ -- $ 383
Interest 9,464 31,205 12,384 2,104 612 6,351 1,488
Less: Foreign Taxes Withheld -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total Investment Income 9,464 31,205 12,384 2,104 612 6,351 1,871
EXPENSES:
Administrator Fees 235 752 294 78 14 122 66
Waiver of Administrator Fees -- -- (15) -- -- -- --
Investment Advisory Fees 451 1,445 565 150 38 467 282
Waiver/Contribution of Investment
Advisory Fees (108) (636) (339) (96) (5) -- --
Custodian Fees 36 116 45 14 3 19 13
Professional Fees 15 39 19 5 1 8 4
Registration Fees 27 94 29 12 7 11 8
Distribution Fees - Retail Class 11 -- 138 19 4 5 5
Waiver of Distribution Fees -
Retail Class (2) -- -- (4) (4) (1) (1)
Distribution Fees -
Institutional II Class 31 17 21 6 -- -- --
Printing Fees 6 17 8 2 -- 3 2
Trustee Fees 3 9 4 1 -- 2 1
Amortization of Deferred
Organization Costs 2 2 2 2 2 2 2
Miscellaneous Fees 2 17 3 1 -- 3 2
Shareholder Servicing Fees -
Retail Class 7 -- 83 11 1 3 3
Waiver of Shareholder Servicing
Fees - Retail Class (4) -- (50) (7) (1) (3) (3)
-------- -------- -------- -------- -------- -------- --------
Total Expenses 712 1,872 807 194 60 641 384
-------- -------- -------- -------- -------- -------- --------
Net Investment Income 8,752 29,333 11,577 1,910 552 5,710 1,487
-------- -------- -------- -------- -------- -------- --------
Net Realized Gain (Loss) On:
Investments (4) -- 2 -- 25 (2,999) 2,117
Foreign Currency Transactions -- -- -- -- -- -- --
Net Change in Unrealized
Appreciation (Depreciation)
on Investments -- -- -- -- 165 5,965 (2,540)
-------- -------- -------- -------- -------- -------- --------
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions (4) -- 2 -- 190 2,966 (423)
-------- -------- -------- -------- -------- -------- --------
Increase (Decrease) in Net
Assets Resulting from
Operations $ 8,748 $ 29,333 $ 11,579 $ 1,910 $ 742 $ 8,676 $ 1,064
======== ======== ======== ======== ======== ======== ========
</TABLE>
- ----------
26
<TABLE>
<CAPTION>
BLUE CHIP CAPITAL SPECIAL INTERNATIONAL
EQUITY GROWTH EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 148 $ 227 $ 14 $ 36
Interest 44 21 76 5
Less: Foreign Taxes Withheld -- -- -- (3)
-------- -------- -------- --------
Total Investment Income 192 248 90 38
EXPENSES:
Administrator Fees 10 24 19 2
Waiver of Administrator Fees -- -- -- --
Investment Advisory Fees 47 113 86 14
Waiver/Contribution of Investment
Advisory Fees (16) (113) -- (6)
Custodian Fees 2 5 9 8
Professional Fees 1 2 5 --
Registration Fees 6 7 4 3
Distribution Fees - Retail Class -- 3 -- --
Waiver of Distribution Fees -
Retail Class -- (3) -- --
Distribution Fees -
Institutional II Class -- -- -- --
Printing Fees -- 1 1 --
Trustee Fees -- -- -- --
Amortization of Deferred
Organization Costs 2 2 -- --
Miscellaneous Fees -- 1 -- 6
Shareholder Servicing Fees -
Retail Class -- 2 -- --
Waiver of Shareholder Servicing
Fees - Retail Class -- (2) -- --
-------- -------- -------- --------
Total Expenses 52 42 124 27
-------- -------- -------- --------
Net Investment Income 140 206 (34) 11
-------- -------- -------- --------
Net Realized Gain (Loss) On:
Investments 23 882 4,816 17
Foreign Currency Transactions -- -- -- (2)
Net Change in Unrealized
Appreciation (Depreciation)
on Investments 1,225 363 (7,545) (218)
-------- -------- -------- --------
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 1,248 1,245 (2,729) (203)
-------- -------- -------- --------
Increase (Decrease) in Net
Assets Resulting from
Operations $ 1,388 $ 1,451 $ (2,763) $ (192)
======== ======== ======== ========
</TABLE>
----------
27
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) (UNAUDITED)
<TABLE>
<CAPTION>
U.S. TREASURY U.S. GOVERNMENT
MONEY MARKET MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------- ---------------------------- ----------------------------
5/1/96 5/1/95 5/1/96 5/1/95 5/1/96 5/1/95
to 10/31/96 to 4/30/96 to 10/31/96 to 4/30/96 to 10/31/96 to 4/30/96
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ 8,752 $ 16,263 $ 29,333 $ 46,614 $ 11,577 $ 22,753
Net Realized Gain (Loss) from
Security Transactions
and Foreign Currency
Transactions (4) 14 -- 11 2 10
Net Change in Unrealized
Appreciation (Depreciation)
of Investments and Foreign
Currency -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in
Net Assets from Operations 8,748 16,277 29,333 46,625 11,579 22,763
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (7,074) (14,187) (28,503) (45,937) (7,818) (17,731)
Retail Class (206) (72) -- -- (2,695) (4,145)
Institutional II Class (1,472) (2,012) (830) (665) (1,064) (892)
Net Capital Gains
Institutional Class -- -- -- -- -- --
Retail Class -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions (8,752) (16,271) (29,333) (46,602) (11,577) (22,768)
----------- ----------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 276,121 418,427 1,038,594 2,007,796 286,486 860,169
Shares Issued in Lieu of
Cash Distributions 3 3 35 11 -- 1
Shares Redeemed (289,994) (364,250) (895,812) (1,615,184) (382,950) (789,681)
----------- ----------- ----------- ----------- ----------- -----------
Total Institutional Class
Share Transactions (13,870) 54,180 142,817 392,623 (96,464) 70,489
----------- ----------- ----------- ----------- ----------- -----------
RETAIL CLASS:
Shares Issued 10,915 11,195 -- -- 44,609 99,955
Shares Issued in Lieu of
Cash Distributions 206 72 -- -- 2,695 4,145
Shares Redeemed (9,239) (2,509) -- -- (33,462) (50,477)
----------- ----------- ----------- ----------- ----------- -----------
Total Retail Class Share
Transactions 1,882 8,758 -- -- 13,842 53,623
----------- ----------- ----------- ----------- ----------- -----------
Institutional II Class:
Shares Issued 95,407 157,259 163,429 144,979 66,036 70,265
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- --
Shares Redeemed (74,257) (110,035) (149,579) (127,953) (44,547) (41,476)
----------- ----------- ----------- ----------- ----------- -----------
Total Institutional II Class
Share Transactions 21,150 47,224 13,850 17,026 21,489 28,789
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net
Assets from Shareholder
Transactions 9,162 110,162 156,667 409,649 (61,133) 152,901
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS 9,158 110,168 156,667 409,672 (61,131) 152,896
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS:
Beginning of period 331,237 221,069 1,060,785 651,113 481,836 328,940
----------- ----------- ----------- ----------- ----------- -----------
End of period $ 340,395 $ 331,237 $ 1,217,452 $ 1,060,785 $ 420,705 $ 481,836
=========== =========== =========== =========== =========== ===========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 276,121 418,437 1,038,594 2,007,818 286,486 860,170
Shares Issued in Lieu of
Cash Distributions 3 3 35 11 -- 1
Shares Redeemed (289,994) (364,250) (895,812) (1,615,184) (382,950) (789,681)
----------- ----------- ----------- ----------- ----------- -----------
Total Institutional Class
Share Transactions (13,870) 54,190 142,817 392,645 (96,464) 70,490
----------- ----------- ----------- ----------- ----------- -----------
Retail Class:
Shares Issued 10,915 11,195 -- -- 44,609 99,955
Shares Issued in Lieu of
Cash Distributions 206 72 -- -- 2,695 4,145
Shares Redeemed (9,239) (2,509) -- -- (33,462) (50,477)
----------- ----------- ----------- ----------- ----------- -----------
Total Retail Class Share
Transactions 1,882 8,758 -- -- 13,842 53,623
----------- ----------- ----------- ----------- ----------- -----------
Institutional II Class:
Shares Issued 95,407 157,259 163,429 144,979 66,036 70,265
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- --
Shares Redeemed (74,257) (110,035) (149,579) (127,953) (44,547) (41,476)
----------- ----------- ----------- ----------- ----------- -----------
Total Institutional II Class
Share Transactions 21,150 47,224 13,850 17,026 21,489 28,789
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in
Share Transactions 9,162 110,172 156,667 409,671 (61,133) 152,902
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
TAX-FREE SHORT-TERM
MONEY MARKET TREASURY
PORTFOLIO PORTFOLIO
---------------------------- ----------------------------
5/1/96 5/1/95 5/1/96 3/20/96
to 10/31/96 to 4/30/96 to 10/31/96 to 4/30/96
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ 1,910 $ 3,388 $ 552 $ 104
Net Realized Gain (Loss) from
Security Transactions
and Foreign Currency
Transactions -- 4 25 --
Net Change in Unrealized
Appreciation (Depreciation)
of Investments and Foreign
Currency -- -- 165 (83)
----------- ----------- ----------- -----------
Net Increase (Decrease) in
Net Assets from Operations 1,910 3,392 742 21
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (1,504) (2,862) (474) (104)
Retail Class (227) (319) (78) --
Institutional II Class (179) (211) -- --
Net Capital Gains
Institutional Class -- -- -- --
Retail Class -- -- -- --
----------- ----------- ----------- -----------
Total Distributions (1,910) (3,392) (552) (104)
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 71,885 131,718 2,642 18,961
Shares Issued in Lieu of
Cash Distributions -- -- -- --
Shares Redeemed (65,482) (121,091) (1,021) (55)
----------- ----------- ----------- -----------
Total Institutional Class
Share Transactions 6,403 10,627 1,621 18,906
----------- ----------- ----------- -----------
Retail Class:
Shares Issued 14,051 26,603 17,300 --
Shares Issued in Lieu of
Cash Distributions 227 319 78 --
Shares Redeemed (15,169) (13,234) (1,324) --
----------- ----------- ----------- -----------
Total Retail Class Share
Transactions (891) 13,688 16,054 --
----------- ----------- ----------- -----------
Institutional II Class:
Shares Issued 15,670 28,161 -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- --
Shares Redeemed (13,076) (18,774) -- --
----------- ----------- ----------- -----------
Total Institutional II Class
Share Transactions 2,594 9,387 -- --
----------- ----------- ----------- -----------
Increase (Decrease) in Net
Assets from Shareholder
Transactions 8,106 33,702 17,675 18,906
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS 8,106 33,702 17,865 18,823
----------- ----------- ----------- -----------
NET ASSETS:
Beginning of period 100,305 66,603 18,823 --
----------- ----------- ----------- -----------
End of period $ 108,411 $ 100,305 $ 36,688 $ 18,823
=========== =========== =========== ===========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 71,885 131,714 265 1,896
Shares Issued in Lieu of
Cash Distributions -- -- -- --
Shares Redeemed (65,482) (121,091) (102) (5)
----------- ----------- ----------- -----------
Total Institutional Class
Share Transactions 6,403 10,623 163 1,891
----------- ----------- ----------- -----------
Retail Class:
Shares Issued 14,051 26,603 1,730 --
Shares Issued in Lieu of
Cash Distributions 227 319 8 --
Shares Redeemed (15,169) (13,234) (132) --
----------- ----------- ----------- -----------
Total Retail Class Share
Transactions (891) 13,688 1,606 --
----------- ----------- ----------- -----------
Institutional II Class:
Shares Issued 15,670 28,161 -- --
Shares Issued in Lieu of
Cash Distributions -- -- -- --
Shares Redeemed (13,076) (18,774) -- --
----------- ----------- ----------- -----------
Total Institutional II Class
Share Transactions 2,594 9,387 -- --
----------- ----------- ----------- -----------
Net Increase (Decrease) in
Share Transactions 8,106 33,698 1,769 1,891
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- -----------
28
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
<TABLE>
<CAPTION>
BLUE CHIP
INCOME BALANCED EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------ ------------------------ ------------------------
5/1/96 5/1/95 5/1/96 5/1/95 5/1/96 4/1/96
to 10/31/96 to 4/30/96 to 10/31/96 to 4/30/96 to 10/31/96 to 4/30/96
----------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ 5,710 $ 6,728 $ 1,487 $ 3,277 $ 140 $ 13
Net Realized Gain (Loss) from
Security Transactions
and Foreign Currency
Transactions (2,999) 706 2,117 8,219 23 --
Net Change in Unrealized
Appreciation (Depreciation)
of Investments and Foreign
Currency 5,965 (3,654) (2,540) 7,402 1,225 116
--------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in
Net Assets from Operations 8,676 3,780 1,064 18,898 1,388 129
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (5,585) (6,384) (1,155) (3,166) (122) --
Retail Class (126) (102) (46) (32) (12) --
Institutional II Class -- -- -- -- -- --
Net Capital Gains
Institutional Class -- -- -- (3,544) -- --
Retail Class -- -- -- (53) -- --
--------- --------- --------- --------- --------- ---------
Total Distributions (5,711) (6,486) (1,201) (6,795) (134) --
--------- --------- --------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 17,176 134,768 9,276 27,190 7,830 11,327
Shares Issued in Lieu of
Cash Distributions -- -- 12 -- -- --
Shares Redeemed (15,382) (17,667) (11,780) (27,957) (365) --
--------- --------- --------- --------- --------- ---------
Total Institutional Class
Share Transactions 1,794 $ 117,101 (2,492) (767) 7,465 11,327
--------- --------- --------- --------- --------- ---------
Retail Class:
Shares Issued 1,375 7,481 1,795 2,896 3,531 --
Shares Issued in Lieu of
Cash Distributions 125 102 46 85 12 --
Shares Redeemed (1,242) (3,569) (679) (349) (118) --
--------- --------- --------- --------- --------- ---------
Total Retail Class Share
Transactions 258 4,014 1,162 2,632 3,425 --
--------- --------- --------- --------- --------- ---------
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 2,052 121,115 (1,330) 1,865 10,890 11,327
--------- --------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS 5,017 118,409 (1,467) 13,968 12,144 11,456
--------- --------- --------- --------- --------- ---------
NET ASSETS:
Beginning of period 185,146 66,737 105,556 91,588 11,456 --
--------- ---------
End of period $ 190,163 $ 185,146 $ 104,089 $ 105,556 $ 23,600 $ 11,456
========= ========= ========= ========= ========= =========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 1,748 13,309 834 2,469 734 1,132
Shares Issued in Lieu of
Cash Distributions -- -- 1 -- -- --
Shares Redeemed (1,573) (1,767) (1,042) (2,545) (34) --
--------- --------- --------- --------- --------- ---------
Total Institutional Class
Share Transactions 175 11,542 (207) (76) 700 1,132
--------- --------- --------- --------- --------- ---------
Retail Class:
Shares Issued 140 739 159 262 333 --
Shares Issued in Lieu of
Cash Distributions 12 10 4 8 1 --
Shares Redeemed (126) (357) (61) (31) (11) --
--------- --------- --------- --------- --------- ---------
Total Retail Class Share
Transactions 26 392 102 239 323 --
--------- --------- --------- --------- --------- ---------
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 201 11,934 (105) 163 1,023 1,132
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
CAPITAL SPECIAL INTERNATIONAL
GROWTH EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------ ------------------------ ------------------------
5/1/96 5/1/95 5/1/96 7/13/95 5/1/96 5/1/95
to 10/31/96 to 4/30/96 to 10/31/96 to 4/30/96 to 10/31/96 to 4/30/96
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income (Loss) $ 206 $ 567 $ (34) $ 65 $ 11 $ 5
Net Realized Gain (Loss) from
Security Transactions
and Foreign Currency
Transactions 882 8,217 4,816 531 15 172
Net Change in Unrealized
Appreciation (Depreciation)
of Investments and Foreign
Currency 363 275 (7,545) 7,032 (218) 300
--------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in
Net Assets from Operations 1,451 9,059 (2,763) 7,628 (192) 477
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class -- (638) -- (90) -- (70)
Retail Class -- (17) -- -- -- --
Institutional II Class -- -- -- -- --
Net Capital Gains
Institutional Class -- (3,005) -- -- -- (69)
Retail Class -- (125) -- -- -- --
--------- --------- --------- --------- --------- ---------
Total Distributions -- (3,785) -- (90) -- (139)
--------- --------- --------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Institutional Class:
Shares Issued 2,436 12,998 3,549 26,526 -- 154
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- 139
Shares Redeemed (9,876) (19,789) (10,036) (443) -- --
--------- --------- --------- --------- --------- ---------
Total Institutional Class
Share Transactions (7,440) (6,791) (6,487) 26,083 -- 293
--------- --------- --------- --------- --------- ---------
Retail Class:
Shares Issued 1,140 2,335 1,264 -- -- --
Shares Issued in Lieu of
Cash Distributions -- 141 -- -- -- --
Shares Redeemed (309) (862) (97) -- -- --
--------- --------- --------- --------- --------- ---------
Total Retail Class Share
Transactions 831 1,614 1,167 -- -- --
--------- --------- --------- --------- --------- ---------
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 (6,609) (5,177) (5,320) 26,083 -- 293
--------- --------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS (5,158) 97 (8,083) 33,621 (192) 631
--------- --------- --------- --------- --------- ---------
NET ASSETS:
Beginning of period 41,671 41,574 33,621 -- 3,571 2,940
--------- --------- --------- --------- --------- ---------
End of period $ 36,513 $ 41,671 $ 25,538 $ 33,621 $ 3,379 $ 3,571
========= ========= ========= ========= ========= =========
SHARES ISSUED AND REDEEMED:
Institutional Class:
Shares Issued 214 1,182 242 2,321 -- 15
Shares Issued in Lieu of
Cash Distributions -- -- -- -- -- 13
Shares Redeemed (847) (1,808) (686) (37) -- --
--------- --------- --------- --------- --------- ---------
Total Institutional Class
Share Transactions (633) (626) (444) 2,284 -- 28
--------- --------- --------- --------- --------- ---------
Retail Class:
Shares Issued 99 210 88 -- -- --
Shares Issued in Lieu of
Cash Distributions -- 13 -- -- -- --
Shares Redeemed (27) (80) (7) -- -- --
--------- --------- --------- --------- --------- ---------
Total Retail Class Share
Transactions 72 143 81 -- -- --
--------- --------- --------- --------- --------- ---------
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 (561) (483) (363) 2,284 -- 28
========= ========= ========= ========= ========= =========
</TABLE>
-------------
29
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1996 (UNAUDITED)
AND THE YEARS ENDED APRIL 30,
<TABLE>
<CAPTION>
RATIO RATIO OF
RATIO OF NET EXPENSES
NET OF INVESTMENT TO
NET ASSET REALIZED AND ASSET NET EXPENSES INCOME AVERAGE
VALUE, UNREALIZED DIVIDENDS DISTRIBUTIONS VALUE, ASSETS TO TO NET
BEGINNING NET GAINS OR FROM NET FROM END END OF AVERAGE AVERAGE ASSETS PORTFOLIO
OF PERIOD INVESTMENT (LOSSES) ON INVESTMENT CAPITAL OF TOTAL PERIOD NET NET (EXCLUDING TURNOVER
PERIOD INCOME INVESTMENTS INCOME GAINS PERIOD RETURN+ (000) ASSETS ASSETS WAIVERS) RATE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
1996*** $1.00 0.02 -- (0.02) -- $1.00 5.06%* $261,387 0.37%* 4.86%* 0.43%* --
1996 1.00 0.05 -- (0.05) -- 1.00 5.32 275,259 0.36 5.18 0.45 --
1995 1.00 0.05 -- (0.05) -- 1.00 4.60 221,069 0.38 4.59 0.47 --
1994(1) 1.00 0.03 -- (0.03) -- 1.00 2.48 137,826 0.43* 2.80* 0.51* --
RETAIL CLASS
1996*** $1.00 0.02 -- (0.02) -- $1.00 4.80%* $ 10,640 0.63%* 4.60%* 0.69%* --
1996 (2) 1.00 0.02 -- (0.02) -- 1.00 1.82 8,758 0.55* 4.71* 0.86* --
INSTITUTIONAL II CLASS
1996*** $1.00 0.02 -- (0.02) -- $1.00 4.95%* $ 68,368 0.47%* 4.76%* 0.53%* --
1996 (3) 1.00 0.04 -- (0.04) -- 1.00 3.87 47,220 0.47* 4.98* 0.55* --
- --------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
1996*** $1.00 0.03 -- (0.03) -- $1.00 5.31%*$1,186,576 0.32%* 5.06%* 0.43%* --
1996 1.00 0.05 -- (0.05) -- 1.00 5.64 1,043,758 0.31 5.45 0.44 --
1995 1.00 0.05 -- (0.05) -- 1.00 5.00 651,113 0.25 5.09 0.47 --
1994 (1) 1.00 0.03 -- (0.03) -- 1.00 2.70 271,437 0.35* 3.03* 0.62* --
INSTITUTIONAL II CLASS
1996*** $1.00 0.03 -- (0.03) -- $1.00 5.21%* $30,876 0.42%* 4.97%* 0.53%* --
1996 (3) 1.00 0.04 -- (0.04) -- 1.00 4.11 17,027 0.41* 5.25* 0.56* --
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
INSTITUTIONAL CLASS
1996*** $1.00 0.03 -- (0.03) -- $1.00 5.44%* $251,882 0.27%* 5.20%* 0.43%* --
1996 1.00 0.06 -- (0.06) -- 1.00 5.78 348,343 0.25 5.62 0.44 --
1995 1.00 0.05 -- (0.05) -- 1.00 5.13 277,859 0.20 5.13 0.46 --
1994 (1) 1.00 0.03 -- (0.03) -- 1.00 2.80 197,162 0.26* 3.16* 0.52* --
RETAIL CLASS
1996*** $1.00 0.02 -- (0.02) -- $1.00 5.12%* $118,545 0.58%* 4.89%* 0.74%* --
1996 1.00 0.05 -- (0.05) -- 1.00 5.44 104,703 0.58 5.25 0.77 --
1995 1.00 0.05 -- (0.05) -- 1.00 4.69 51,081 0.45 4.88 0.97 --
1994 (4) 1.00 -- -- -- -- 1.00 0.42 12 1.16* 2.26* 592.55* --
INSTITUTIONAL II CLASS
1996*** $1.00 0.03 -- (0.03) -- $1.00 5.34%* $50,278 0.37%* 5.10%* 0.53%* --
1996 (5) 1.00 0.04 -- (0.04) -- 1.00 4.33 28,790 0.36* 5.37* 0.55* --
- -------------------------------
TAX-FREE MONEY MARKET PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
1996*** $1.00 0.02 -- (0.02) -- $1.00 3.38%* $ 81,142 0.28%* 3.21%* 0.44%* --
1996 1.00 0.04 -- (0.04) -- 1.00 3.61 74,739 0.22 3.54 0.45 --
1995 1.00 0.03 -- (0.03) -- 1.00 3.24 64,112 0.22 3.21 0.47 --
1994 (1) 1.00 0.02 -- (0.02) -- 1.00 1.87 66,692 0.35* 2.10* 0.53* --
RETAIL CLASS
1996*** $1.00 0.01 -- (0.01) -- $1.00 3.19%* $ 15,288 0.54%* 2.96%* 0.85%* --
1996 1.00 0.03 -- (0.03) -- 1.00 3.53 16,179 0.34 3.33 0.90 --
1995 1.00 0.03 -- (0.03) -- 1.00 2.74 2,491 0.75 2.68 2.94 --
1994 (6) 1.00 -- -- -- -- 1.00 0.20 50 1.25* 1.20* 32.17* --
INSTITUTIONAL II CLASS
1996*** $1.00 0.02 -- (0.02) -- $1.00 3.28%* $ 11,981 0.38%* 3.13%* 0.55%* --
1996 (3) 1.00 0.02 -- (0.02) -- 1.00 2.62 9,387 0.33* 3.35* 0.58* --
- -----------------------------
SHORT-TERM TREASURY PORTFOLIO
- -----------------------------
INSTITUTIONAL CLASS
1996*** $ 9.96 0.25 0.06 (0.24) -- $10.03 3.34% $ 20,591 0.55%* 5.04%* 0.60%* 80.21%
1996 (7) 10.00 0.06 (0.04) (0.06) -- 9.96 0.16 18,823 0.55* (0.55)* 0.60* --
RETAIL CLASS
1996***(8)$ 9.95 0.06 0.09 (0.07) -- $10.03 1.52% $ 16,097 0.56%* 5.05%* 1.06%* 80.21%
</TABLE>
- -------------
30
<PAGE>
[LOGO OMITTED]
OCTOBER 31, 1996
<TABLE>
<CAPTION>
NET
NET ASSET REALIZED AND ASSET NET
VALUE, UNREALIZED DIVIDENDS DISTRIBUTIONS VALUE, ASSETS
BEGINNING NET GAINS OR FROM NET FROM END END OF
OF PERIOD INVESTMENT (LOSSES) ON INVESTMENT CAPITAL OF TOTAL PERIOD
PERIOD INCOME INVESTMENTS INCOME GAINS PERIOD RETURN+ (000)
================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
INCOME PORTFOLIO
- ----------------
INSTITUTIONAL CLASS
1996*** $ 9.80 0.30 0.16 (0.30) -- $ 9.96 4.80% $185,648
1996 9.60 0.61 0.20 (0.61) -- 9.80 8.46 180,962
1995 9.61 0.58 0.02 (0.58) (0.03) 9.60 6.53 66,441
1994 (9) 10.00 0.38 (0.38) (0.38) (0.01) 9.61 (0.08) 54,289
RETAIL CLASS
1996*** $ 9.91 0.29 0.16 (0.29) -- $10.07 4.64% $ 4,515
1996 9.72 0.60 0.19 (0.60) -- 9.91 8.14 4,184
1995 9.62 0.55 0.05 (0.47) (0.03) 9.72 6.45 296
1994 (10) 9.69 0.02 (0.06) (0.03) -- 9.62 (0.41) 30
- ------------------
BALANCED PORTFOLIO
- ------------------
INSTITUTIONAL CLASS
1996*** $11.38 0.16 (0.07) (0.13) -- $11.34 0.80% $ 99,614
1996 10.04 0.34 1.71 (0.34) (0.37) 11.38 20.90 102,233
1995 10.16 0.33 0.03 (0.29) (0.19) 10.04 3.75 91,039
1994 (9) 10.00 0.19 0.17 (0.19) (0.01) 10.16 3.56 88,208
RETAIL CLASS
1996*** $11.35 0.15 (0.06) (0.12) -- $11.32 0.80% $ 4,475
1996 10.04 0.31 1.68 (0.31) (0.37) 11.35 20.23 3,323
1995 10.15 0.27 0.05 (0.24) (0.19) 10.04 3.33 549
1994 (11) 10.62 0.01 (0.43) (0.05) -- 10.15 (3.95) 166
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1996*** $10.12 0.10 0.82 (0.09) -- $10.95 9.10% $ 20,058
1996 (12) 10.00 -- 0.12 -- -- 10.12 1.20 11,456
RETAIL CLASS
1996***(15) $10.33 0.09 0.61 (0.09) -- $10.94 6.78% $ 3,542
- ------------------------
CAPITAL GROWTH PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1996*** $11.60 0.13 0.31 -- -- $12.04 3.79% $ 33,463
1996 10.20 0.16 2.17 (0.16) (0.77) 11.60 23.62 39,560
1995 10.19 0.14 0.16 (0.11) (0.18) 10.20 3.15 41,170
1994 (9) 10.00 0.06 0.21 (0.03) (0.05) 10.19 2.66 52,233
RETAIL CLASS
1996*** $11.56 0.04 0.41 -- -- $12.01 3.89% $ 3,050
1996 10.18 0.12 2.15 (0.12) (0.77) 11.56 23.24 2,111
1995 10.18 0.08 0.18 (0.08) (0.18) 10.18 2.74 404
1994 (11) 10.89 -- (0.71) -- -- 10.18 (6.52) 87
- ------------------------
SPECIAL EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1996*** $14.72 (0.03) (1.40) -- -- $13.29 (9.71)% $ 24,457
1996 (13) 10.00 0.09 4.72 (0.09) -- 14.72 48.34 33,621
RETAIL CLASS
1996***(15) $15.47 (0.01) (2.16) -- -- $13.30 (14.03)% $ 1,081
- ------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1996*** $11.23 0.03 (0.64) -- -- $10.62 (5.43)% $3,379
1996 10.13 0.19 1.37 (0.23) (0.23) 11.23 15.66 3,571
1995 (14) 10.00 0.03 0.10 -- -- 10.13 1.30 2,940
</TABLE>
<TABLE>
<CAPTION>
RATIO RATIO OF
RATIO OF NET EXPENSES
OF INVESTMENT TO
EXPENSES INCOME AVERAGE
TO TO NET
AVERAGE AVERAGE ASSETS PORTFOLIO AVERAGE
NET NET (EXCLUDING TURNOVER COMMISSION
ASSETS ASSETS WAIVERS) RATE RATE**
=========================================================================
<S> <C> <C> <C> <C> <C>
- ----------------
INCOME PORTFOLIO
- ----------------
INSTITUTIONAL CLASS
1996*** 0.68%* 6.10%* 0.68%* 151.90% --
1996 0.73 6.00 0.73 107.33 --
1995 0.74 6.15 0.74 73.00 --
1994 (9) 0.77* 4.90* 0.77* 20.00 --
RETAIL CLASS
1996*** 0.88%* 5.90%* 1.15%* 151.90% --
1996 1.02 5.54 1.37 107.33 --
1995 1.23 5.66 27.63 73.00 --
1994 (10) 1.72* 3.95* 55.35* 20.00 --
- ------------------
BALANCED PORTFOLIO
- ------------------
INSTITUTIONAL CLASS
1996*** 0.74%* 2.90%* 0.74%* 77.51% $0.0694
1996 0.75 3.19 0.75 107.56 --
1995 0.77 3.32 0.77 81.00 --
1994 (9) 0.81* 2.41* 0.81* 37.00 --
RETAIL CLASS
1996*** 0.94%* 2.73%* 1.30%* 77.51% $0.0694
1996 1.09 2.51 1.55 107.56 --
1995 1.26 2.83 5.80 81.00 --
1994 (11) 1.86* 1.36* 15.08* 37.00 --
- --------------------------
BLUE CHIP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
1996*** 0.65%* 1.78%* 0.85%* 17.78% $0.0761
1996 (12) 0.65* 1.52* 1.38* 0.97 --
RETAIL CLASS
1996***(15) 0.65%* 1.66%* 1.46%* 17.78% $0.0761
- ------------------------
CAPITAL GROWTH PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1996*** 0.22%* 1.08%* 0.82%* 130.76% $0.0741
1996 0.24 1.26 0.84 578.57 --
1995 0.74 1.35 0.85 182.00 --
1994 (9) 0.87* 0.78* 0.87* 41.00 --
RETAIL CLASS
1996*** 0.22%* 1.09%* 1.38%* 130.76% $0.0741
1996 0.50 1.05 1.65 578.57 --
1995 1.23 0.86 9.73 182.00 --
1994 (11) 1.92* (0.27)* 30.78* 41.00 --
- ------------------------
SPECIAL EQUITY PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
1996*** 0.86%* (0.24)%* 0.86%* 385.76% $0.0717
1996 (13) 0.91* 0.60* 0.91* 286.80 --
RETAIL CLASS
1996***(15) 0.87%* (0.19)%* 1.42%* 385.76% $0.0717
- ------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
1996*** 1.55%* 0.60%* 1.92%* 8.05% $0.0424
1996 1.55 0.15 2.96 37.16 --
1995 (14) 1.55* 0.97* 5.35* 2.00 --
<FN>
* ANNUALIZED
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL
YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
*** FOR THE PERIOD ENDED OCTOBER 31, 1996.
+ 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 SEPTEMBER 9, 1996.
(9) COMMENCED OPERATIONS ON JULY 16, 1993.
(10) COMMENCED OPERATIONS ON APRIL 12, 1994.
(11) COMMENCED OPERATIONS ON MARCH 9, 1994.
(12) COMMENCED OPERATIONS ON APRIL 1, 1996.
(13) COMMENCED OPERATIONS ON JULY 13, 1995.
(14) COMMENCED OPERATIONS ON DECEMBER 30, 1994.
(15) COMMENCED OPERATIONS ON MAY 16, 1996.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
-----------
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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, Balanced Portfolio (formerly the 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, in March 1994 for the Tax-Free Money Market Portfolio, Money Market
Portfolio, Balanced Portfolio and Capital Growth Portfolio, in December 1995 for
the U.S. Treasury Money Market Portfolio, in May 1996 for the Blue Chip Equity
Portfolio and Special Equity Portfolio, and in September 1996 for the Short-Term
Treasury Portfolio. Retail Class shares have not yet been issued for the U.S.
Government Money Market Portfolio. Institutional II Class shares commenced in
July 1995 for the U.S. Treasury Money Market Portfolio, U.S. Government Money
Market Portfolio, Money Market Portfolio and Tax-Free Money Market Portfolio.
Each class of shares has equal rights as to earnings, assets and voting
privileges, except that each class bears different distribution and shareholder
service expenses. Each class of shares has exclusive voting rights with respect
to matters that affect just that class.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported therein. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the net assets
of the 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 recently quoted bid price. Debt obligations
exceeding sixty days to maturity for which market quotations are readily
available are valued at the most recently quoted bid price. Debt
32
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OCTOBER 31, 1996
obligations with sixty days or less to maturity are valued at their amortized
cost.
When market quotations are not readily available, securities are valued
at fair value as determined in good faith under procedures established and
approved by the Board of Trustees.
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 a 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 Fund 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 invest-
------------
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ments in securities that is due to changes in 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 Portfolios enter into forward foreign currency contracts as hedges
against portfolio positions. Such contracts, that 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 Balanced
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
six-months ended October 31, 1996, differences are primarily due to wash sales,
which are temporary in nature.
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OCTOBER 31, 1996
OTHER - Security transactions are accounted for on the date the
security is purchased or sold (trade date). Net realized capital gains and
losses on the sale of investment securities are determined using the identified
cost method with the exception of the money market Portfolios, for which
original issue discounts and purchase premiums on securities held by the
Portfolios are accreted and amortized ratably to maturity using the effective
interest method. Dividend income is recognized on the ex-dividend date and
interest income is recognized using the accrual method.
3. INVESTMENT ADVISORY AND ADMINISTRATIVE FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Allied Investment Advisors, Inc. is the investment adviser to each of
the Portfolios, with the exception of the International Equity Portfolio, which
is advised by AIB Investment Managers Limited ("AIB I.M."). Allied Investment
Advisors, Inc. and AIB I.M. are affiliates of The First National Bank of
Maryland ("First Maryland"). Pursuant to an investment advisory contract on
behalf of each Portfolio, Allied Investment Advisors, Inc. and AIB I.M. (in the
case of the International Equity Portfolio), are entitled to receive fees 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%
Balanced .55%
Blue Chip Equity .60%
Capital Growth .60%
Special Equity .60%
International Equity .80%
Allied Investment Advisors, Inc. and AIB I.M. have agreed to waive a
portion of their fees or reimburse expenses on certain Portfolios in order to
limit total operating expenses of such Portfolios. The waivers are voluntary and
may be discontinued at anytime.
SEI Fund Resources serves as administrator and transfer agent for the
Fund under an Administration Agreement and Transfer Agency Agreement. SEI Fund
Resources is entitled to receive an annual fee of .13% of each Portfolio's
average net assets, paid monthly, for services performed under the agreement.
SEI Fund Resources 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. SEI Financial Services Company ("SFS") acts as distributor for the
Fund pursuant to a General Distribution Agreement on behalf of each Portfolio.
First 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 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, .40% of
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35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
average daily net assets of the Retail Class of the Short-Term Treasury
Portfolio, Balanced Portfolio, Capital Growth Portfolio and Special Equity
Portfolio, and .55% of average daily net assets of the Retail Class of the Blue
Chip 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
six-months ended October 31, 1996, were as follows:
U.S Government Other Investment
Securities Securities
------------------- ------------------
Purchases Sales Purchases Sales
(000) (000) (000) (000)
--------- -------- --------- --------
Short-Term Treasury Portfolio $ 27,542 $ 15,936 $ -- $ --
Income Portfolio 218,449 220,999 46,665 43,515
Balanced Portfolio 8,048 5,161 67,117 70,488
Blue Chip Equity Portfolio -- -- 12,184 2,547
Capital Growth Portfolio -- -- 48,781 55,097
Special Equity Portfolio -- -- 95,338 108,211
International Equity Portfolio 2,685 135 340 293
For federal income tax purposes, the cost of securities owned at
October 31, 1996 was not materially different from the amounts reported for
financial reporting purposes. The aggregate gross unrealized appreciation and
depreciation at October 31, 1996 for each Portfolio is as follows:
Net
Unrealized
Appreciated Depreciated Appreciation/
Securities Securities (Depreciation)
(000) (000) (000)
----------- ----------- --------------
Short-Term Treasury Portfolio 83 (1) 82
Income Portfolio 2,871 (589) 2,282
Balanced Portfolio 8,683 (1,430) 7,253
Blue Chip Equity Portfolio 1,675 (334) 1,341
Capital Growth Portfolio 4,020 (717) 3,303
Special Equity Portfolio 848 (1,361) (513)
International Equity Portfolio 375 (216) 159
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 are subject to a
maximum sales charge of 4.50% of the public offering price. Short-Term Treasury
Portfolio, Balanced Portfolio, Blue Chip Equity Portfolio, Capital Growth
Portfolio and Special Equity Portfolio are subject to a maximum sales charge of
4.75% 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 six months ended October 31, 1996.
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36
<PAGE>
INVESTMENT ADVISERS
Allied Investment Advisors, Inc.
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 Fund Resources
Oaks, Pennsylvania
DISTRIBUTOR
SEI Financial Services Company
Oaks, Pennsylvania
LEGAL COUNSEL
Piper & Marbury, L.L.P.
Baltimore, Maryland
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Boston, Massachusetts
CUSTODIAN
The First National Bank of Maryland
Baltimore, Maryland
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ARK FUNDS
This material must be preceded or
accompanied by a current prospectus. AK1031(96-12)
