Joining the growing number of banks that offer no-load mutual funds, First National Bank of Maryland has introduced a fee-free fund family.

First Maryland decided to launch no-load funds to "leverage our branch distribution network" and establish an "equal footing with other companies that offer mutual funds," said Jennifer Lambdin, a senior vice president and investment officer with the bank.

Initially, the Baltimore-based bank's Ark funds will be made available only to customers who have established trust, custodial, or money management relationships with the bank.

First Maryland plans to make these funds, which include a selection of money market, fixed-income, and equity portfolios, available to customers through its branches.

"We win have a retail class of shares in the next six months, pending SEC approval," Ms. Lambdin said.

Right now, the funds offered are a trust class of funds which by definition must be no-load, Ms. Lambdin said.

99% Conversion Rate

First Maryland has about $500 million of assets in the Ark funds, which were launched in June. The assets all came through the conversion of trust accounts.

The bank had about a 99% conversion rate on the variable net-asset funds, she said. Of the $800 million of money market assets, about $300 million is in the Ark money market, she said.

Keeping Funds at Home

By introducing its own no-fee fund family, First Maryland hopes to stem the tide of money from the bank to mutual funds.

"It's no secret that money has been flowing out to mutual funds," Ms. Lambdin said. "We wanted the capability to keep business in-house."

With 70 years' experience managing money, First Maryland has ample ability in this field, Ms. Lambdin said.

Instead of sweeping money into funds managed outside, the bank can keep the business at home. Also, "we wanted more control," she said.

From the trust side, creating the Ark funds enables First Maryland to better compete with other companies that offer mutual funds, Ms. Lambdin said. Specifically, the change gives trust customers daily liquidity and the ability to look up their holdings in newspapers.

Demand Seen

There also has been demand from retail clients, Ms. Lambdin said. When the bank expands the products to retail customers, it will have the ability to charge a load, she said. A decision about whether to charge fees to other customers has not been made.

When the funds are introduced to First Maryland's non-trust customers, the bank plans to use direct mail, posters, and other advertising techniques. Salespeople will be compensated on a commission basis.

The Ark Funds now include a Treasury money market, a tax-free money market, income, growth and income, and capital growth portfolios.

The company would like to expand and perhaps include a tax-free bond fund, an international fund, and others, Ms. Lambdin said.

What's in the Name

The name "Ark" was chosen for the funds because it combines symbols used by both the state of Maryland and Allied Irish Banks PLC, the bank's parent company.

Maryland's symbol is the ark and dove, and the ark is an ancient Celtic symbol that Allied Irish uses as its corporate logo, Mg. Lambdin said.

And there was another reason. "Ark is at the beginning of the alphabet," making it easier for customers to find in newspapers' increasingly crowded mutual fund listings, she said with a laugh.

First Maryland's assets, as of Dec. 31, 1992, were about $6.8 billion. The 187-year-old bank has $24.4 billion of assets under administration, with $2.4 billion under investment management at the end of last year.

Fidelity Distributors Corp. acts as administrator and distributor for the funds. U.S. Trust Company of New York is the transfer agent.At a Glance:The Ark FundsFunds: 7Assets: $500 millionInvestment First Nationaladviser: Bank of MarylandSponsor and Fidelityadministrator: Distributors Corp.Transfer U.S. Trustagent: Company of New York

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