<PAGE> 1
LETTER FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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Dear Investor:
We are pleased to present this report for the period ended March 31, 1999. When
all was said and done, both stocks and bonds had made forward progress, but the
ride in both markets was a very bumpy one, indeed.
In August, markets worldwide went into a tailspin due to troubles in the Asian,
Latin American and Russian economies. Stocks dropped dramatically. Fixed-income
investors fled to the safety and liquidity of U.S. Treasury securities, to the
virtual exclusion of all others. Then, in the fall, with the help of interest
rate cuts in the United States and attempts by governments worldwide to put
their economic houses in order, the situation eased. Liquidity trickled back
into the bond markets, and stocks moved higher.
As the New Year opened, the Dow Jones Industrial Average(1) was moving briskly
toward the 10,000 level. Before the end of the first quarter of 1999, led by
technology and telecommunication stocks, the market crashed through the 10,000
level. But, the major indices were heavily weighted in larger cap issues, and
the story for the average stock was much different.
BEHIND THE NUMBERS
As had been the case before August, when stocks again rebounded in the fall,
sentiment clearly favored larger cap growth issues. Internet-related stocks that
held out a vague promise of potentially explosive earnings also did extremely
well. Earnings and fundamental strength appeared to be irrelevant. Very simply,
any one stock's success seemed to depend almost entirely on its size or
"sizzle".
Lacking these characteristics, the average mid-and small-cap stock strengthened
somewhat in the fall but for the period overall, lagged far behind the leaders.
Moreover, the strong flow of money toward the high-fliers exacerbated liquidity
problems in the rest of the marketplace, particularly in the small-cap sector.
By the end of the period, the market favorites had flown so high and the average
stock had dropped so noticeably that the valuation gap between them had widened
to historic levels.
GOING FORWARD: A RETURN TO BASICS
This brings us to where we are today, a situation that is both frustrating and
exhilarating for rational investors focused on fundamentals. After flying so
high for so long, the fundamental picture for many of the market leaders is not
pretty. For many, growth in the year ahead is projected to be flat. By contrast,
while their stock prices wilted, many mid-cap and small-cap companies blossomed
operationally in the low interest rate and benign inflation environment of the
past year. We expect growth in these sectors to be somewhere in the range of 15%
in the year ahead. Also, due to valuations in these groups, merger and
acquisition activity has been very high this year, which has made a number of
already strong companies even stronger. In short, these stocks now present
opportunities that are far too attractive to ignore any longer.
Given their performance over the past several years, and after hearing time and
time again that the tide is about to turn, the investing public is skeptical.
Nonetheless, seldom have such fundamentally solid stocks been priced so low
relative to the market's favorites. As we go to press, there are indications
that investors are finally beginning to realize this. Of course, it is
impossible to state with any certainty that the recent strengthening will
translate into a powerful trend.
It is possible, however, to state with absolute certainty that all market
cycles, no matter how powerful or seductive, do eventually end. Whether it
happens in the coming weeks or months, the reign of the large-caps will end, and
investors will return to basics, i.e., an emphasis on value and fundamentals. As
a result, we are optimistic about our Funds' prospects in the months ahead.
Having taken full advantage of the tremendous opportunities available in value,
small-and mid-cap stocks over the past nine months, all are well-positioned for
the shift in sentiment when it does come.
(1)Dow Jones Industrial Average is a price-weighted average based on the
performance of 30 blue-chip stocks.
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<PAGE> 2
LETTER FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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BONDS: QUIETER DAYS AHEAD
We are also optimistic about the prospects for the fixed-income markets and our
holdings. Despite troubles in the global market, the underpinnings of our
economy are still strong, inflation is benign, and interest rates are low.
Growth, in the year past, hit levels somewhat higher than had been anticipated,
but given that this was the seventh year of expansion, the economy is unlikely
to keep growing at such a red-hot pace this period. Even if consumer demand at
home remains high, the world markets are still getting back on their feet, and
demand from these quarters will remain light for some time to come.
Consequently, we expect to see a slowing economy slow in the coming months.
While there appears to be no inflation now, whatever pressures might be building
should be dampened by a drop off in activity. Given this, we expect to see
interest rates work their way lower in the months ahead. As a result, the
environment should be a positive one for fixed income investors. At the same
time, however, a bit of caution may be warranted. External events always have
the potential to impact the marketplace. Escalation of the conflict in Kosovo,
for instance, could trigger a round of volatility.
IN CLOSING. . .
In the pages that follow, you will find detailed financial information and a
schedule of investments for each of our Funds. This report also includes
interviews with our Fund managers outlining performance over the past nine
months and expectations for the future. We urge you to read this material
closely.
Finally, we thank you for your continued confidence in us. We look forward to
providing you with superior investment management and serving your needs now and
in the years ahead. As always, if you have any questions or require any
assistance, please do not hesitate to contact your account representative or to
call the Funds directly at 1-800-766-8938.
Sincerely,
Ralph C. Shive, CFA
Pascal "Pat" Romano, CFA
Brian A. Bythrow
NOTICE TO SHAREHOLDERS
PLEASE BE ADVISED OF THE FOLLOWING FACTS ABOUT MUTUAL FUNDS:
- YOUR PRINCIPAL IS AT RISK
- NOT AN OBLIGATION OF 1ST SOURCE BANK
- NO FDIC COVERAGE
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<PAGE> 3
1st Source Monogram Funds
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INCOME EQUITY FUND
RALPH C. SHIVE, CFA
Q. HOW DID THE FUND PERFORM DURING THE PERIOD?
A. Over the course of the period ended March 31, 1999(+), the Fund's total
return was 0.04% (without sales load).(++) In comparison, the Russell 1000
Value Index(1) produced a total return of 4.57%, and the Lipper Equity
Income Funds Average had a return of 1.72%.(2)
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. All in all, it was a very challenging period for anyone invested in all but
the biggest and best known stocks, particularly for those invested in the
technology and telecommunications sectors. Anything internet-related also
did extremely well. The average stock, however, lagged the market's
favorites, and hence, the indices, which are so heavily-weighted in the big
names. In fact, on the day the Dow crested 10,000, more stocks posted new
lows than new highs. Very simply, fundamental strength, cash flow and growth
prospects just did not have the attraction for investors that a well-known
name, or the vague promise of potentially explosive earnings "someday" did.
The mid-cap and small-caps were among the most neglected during the period.
And among those that were the hardest hit were those tied to the turmoil in
the bond markets, like those in the REIT (real estate investment trusts) and
insurance sectors. But the low valuations in these sectors did create a
positive environment for mergers and acquisitions. The portfolio benefited
as several of our companies, like Frontier Corp. (2.9% of the Fund's
portfolio) and Browning Ferris (2.0%) were taken over at significant
premiums.(**)
Q. HOW DID YOU APPLY YOUR INVESTMENT STRATEGY DURING THE PERIOD?
A. Clearly, momentum drove stock prices over the past nine months, much to the
detriment of mid-cap and smaller cap value stocks. But, we believe that,
inevitably, sentiment will swing back to these sectors. As a result, while
it was a tough environment, it was also, when viewed from a long-term
perspective, a time of tremendous opportunity. Focused on yield and value,
we moved quickly to take advantage of the decline in valuations among
out-of-favor sectors. Therefore, we were able to add or expand positions, at
low prices, in a number of companies with attractive risk/reward
characteristics and relatively low price-to-earnings ratios.
Q. WHAT IS YOUR MARKET OUTLOOK FOR THE NEXT SIX MONTHS?
A. Regardless of the headlines about a skyrocketing stock market, we believe,
on average, stocks have been in a "stealth bear market" for some time now.
It is a truly confounding and frustrating environment for those focused on
value. Currently, while many of the bigger technology names sport P/E ratios
in the range of 100 or over, and many of the internet stocks have yet to
post any earnings to use in such calculations, smaller and mid-cap stocks
are selling at 8 to 12 times earnings. This is a situation that cannot, and
will not, last forever. Long term, stock prices are driven by earnings, not
enthusiasm nor euphoria.
While it is impossible to predict precisely when market sentiment will
shift, in our opinion, it will. Given that the valuation gap between the
large caps and virtually all others in the market is so wide, that moment
may come much sooner than later. Having aggressively capitalized on the
environment of the past year, the portfolio is very well positioned for the
shift, and we are optimistic about its prospects in the year ahead.
(+) During the past year the Fund change it's fiscal period end from June 30 to
March 31.
(++)With the maximum sales load of 5.00%, the Fund's return for the period would
have been -4.94%.
(**) The Fund's portfolio composition is subject to change.
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-3-
<PAGE> 4
1st Source Monogram Funds
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[Income Equity Fund Graph]
<TABLE>
<CAPTION>
LIPPER EQUITY INCOME
FUNDS AVERAGE(2) RUSSELL 1000 VALUE INDEX(1) INCOME EQUITY FUND(*)
-------------------- --------------------------- ---------------------
<S> <C> <C> <C>
3/89 10000 10000 9500
3/90 10822 11312 10725
3/91 11593 12109 11141
3/92 13067 13490 12459
3/93 15243 16651 15163
3/94 15671 17308 17336
3/95 17180 19249 18006
3/96 21775 25696 22213
3/97 25074 30340 25488
3/98 34562 44651 34939
3/99 35219 46903 34305
</TABLE>
The quoted performance of the 1st Source Monogram Income Equity Fund includes
performance of certain collective trust fund ("Commingled") accounts advised by
1st Source Bank, for periods dating back to 11/30/85, and prior to the mutual
fund's commencement of operations on 9/25/96, as adjusted to reflect the
expenses associated with the mutual fund. The Commingled accounts were not
registered with the Securities & Exchange Commission and, therefore, were not
subject to the investment restrictions imposed by law on registered mutual
funds. If the Commingled accounts had been registered, the Commingled accounts'
performance may have been adversely affected.
(1)The Russell 1000 Value Index is an unmanaged index that contains 1000
securities with a less-than-average growth orientation. Securities in this
index generally have lower price-to-book and price/earnings ratios, higher
dividend yields and lower forecasted growth values than the Growth Universe.
This index is unmanaged and does not reflect the deduction of fees associated
with a mutual fund, such as investment management and fund accounting fees.
The performance of the Fund reflects the deduction of fees for these
value-added services.
(2)The Lipper Equity Income Average consists of funds that seek relatively high
current income and growth of income through investing 60% or more of its
portfolio in equities.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE PER SHARE WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
- --------------------------------------------------------------------------------
-4-
<PAGE> 5
1st Source Monogram Funds
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INCOME FUND
PASCAL "PAT" ROMANO, CFA
Q. HOW DID THE FUND PERFORM DURING THE PERIOD?
A. For the period ended March 31, 1999(+), the Fund produced a total return of
3.00% (without the sales load).(++) In comparison, the Lehman Brothers
Intermediate Government/Corporate Bond Index(1) produced a total return of
4.59%. Keep in mind, however, that this index tracks the performance of
intermediate bonds over a wider quality range. The Fund invests only in
securities rated "A" or better.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. Very simply, the period ended March 31, 1999, was a tumultuous period in the
fixed-income markets for all but the most conservative investors.
During the first half of the period, aftershocks from the turmoil in
economies abroad reached our shores. Investors fled en masse to the safety
and security of Treasury securities, and liquidity dried up in virtually all
other sectors. In an effort to restore confidence, the Federal Reserve cut
interest rates in the second half of 1998. The environment eased, and
liquidity trickled back into the markets throughout the fall. News of the
economy's faster-than-expected growth in the fourth quarter, however,
increased uneasiness again in the opening months of 1999.
At that point, volatility increased, but the reaction was relatively mild in
comparison to last summer, and, we believe, appropriate. Historically, the
fourth quarter is strong, and the economy was in little danger of
overheating. Moreover, if the economy was in fact accelerating dramatically,
investors seemed to feel that the Fed might move to reverse its third and
final cut later in the year. Consequently, after acting as a safe haven for
investors in the latter months of 1998, Treasuries wilted as 1999 opened.
Q. HOW DID YOU APPLY YOUR INVESTMENT STRATEGY DURING THE PERIOD?
A. As always, throughout the period, our focus was firmly fixed on quality, and
the portfolio's assets were invested only in securities rated "A" or better.
Also, given our apprehension over events abroad in early 1998, the Fund was
lightly weighted in corporate securities as the period began. Consequently,
the Fund did suffer as liquidity dried up for all but Treasury securities,
but the impact was somewhat muted. In the fall, as the markets rebounded, we
remained cautious. Believing interest rates would fall, maturities were
lengthened. Treasuries, however, wilted as 1999 opened, and investors grew
more confident that the world economy was improving. Consequently, the
underperformance of this group was a drag on the Fund's overall performance.
Nonetheless, given the lightning speed at which investor sentiment shifted
during the past period, we believe this conservative positioning of our
assets was well-warranted.
Q. WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. Very simply, we believe it is unrealistic to expect that, after seven years
of expansion, the pace of growth seen in the fourth quarter of 1998 could be
sustainable. It is also, we believe, somewhat unrealistic to expect that our
economy will not experience some fallout from events abroad in the year
past, or in the year ahead. While many of these economies are making
progress toward structural reform, others have made only token efforts. Much
work remains to be done and must be done. As a result, in the months ahead,
we expect to see our economy decelerate and interest rates to decline which,
we anticipate, will create a positive environment in the fixed-income
markets.
At the same time, however, we remain somewhat cautious. Historically,
markets have not shrugged off conflict, and it is important to keep in mind
that an external event such as an escalation or expansion of the situation
in Kosovo could trigger a round of volatility.
(+) During the past year the Fund change it's fiscal period end from June 30 to
March 31.
(++) With the maximum sales charge of 4.00%, the Fund's return for the period
would have been -1.11%.
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<PAGE> 6
1st Source Monogram Funds
- --------------------------------------------------------------------------------
[Income Fund Graph]
<TABLE>
<CAPTION>
LEHMAN INCOME FUND(*)
BROTHERS INTERMEDIATE GOV'T/CORPORATE BOND --------------
INDEX(1)
------------------------------------------
<S> <C> <C>
'3/89' 10000.00 9600.00
'3/90' 11140.00 10399.00
'3/91' 12486.00 11430.00
'3/92' 13833.00 12728.00
'3/93' 15555.00 14209.00
'3/94' 15937.00 14591.00
'3/95' 16648.00 15074.00
'3/96' 18239.00 16488.00
'3/97' 19116.00 17104.00
'3/98' 20964.00 18684.00
'3/99' 22339.00 19608.00
</TABLE>
The quoted performance of the 1st Source Monogram Income Fund includes
performance of certain collective trust fund ("Commingled") accounts advised by
1st Source Bank, for periods dating back to 6/30/85, and prior to the mutual
fund's commencement of operations on 9/24/96, as adjusted to reflect the
expenses associated with the mutual fund. The Commingled accounts were not
registered with the Securities & Exchange Commission and, therefore, were not
subject to the investment restrictions imposed by law on registered mutual
funds. If the Commingled accounts had been registered, the Commingled accounts'
performance may have been adversely affected.
(1)The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index considered to be representative of the performance of
government and corporate bonds with maturities of less than ten years. This
index is unmanaged and does not reflect the deduction of fees associated with
a mutual fund, such as investment management and fund accounting fees. The
performance of the Fund reflects the deduction of fees for these value-added
services.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE PER SHARE WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
- --------------------------------------------------------------------------------
-6-
<PAGE> 7
1st Source Monogram Funds
- --------------------------------------------------------------------------------
SPECIAL EQUITY FUND(1)
BRIAN A. BYTHROW
Q. HOW DID THE FUND PERFORM DURING THE PERIOD?
A. Over the course of the period, investors' sentiment favored larger
capitalization issues, and smaller cap stocks suffered from neglect. As a
result, for the period ended March 31, 1999(+), the Russell 2000 Index(3)
returned a -12.16% return. In comparison, our portfolio did well. For the
same period, the Fund generated a total return of -4.55% (without sales
load).(++)
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. Bottom-line, investors and the media focused on large-cap stocks throughout
the period ended March 31, 1999. As the market declined in August due to
troubles abroad, these stocks took the lightest blows, bounced back quickly
and helped to push the Dow Jones Industrial Average over the 10,000 level.
Small-cap stocks, on the other hand, despite their relatively greater
fundamental strength and earnings growth, were bloodied in August, then
recovered somewhat throughout the fall, but still trailed far behind the
market's favorites. By the end of the period, the valuations of smaller cap
issues relative to large-caps were the lowest they had been in decades. What
made the situation all the more painful was the fact that in the strong
growth, low interest rate, and benign inflation environment, the vast
majority of smaller capitalization companies flourished operationally during
the period.
Q. HOW DID YOU APPLY YOUR INVESTMENT STRATEGY DURING THE PERIOD?
A. On signs that our own economy was weakening early in the period, several of
our Fund's riskier holdings were sold off in July. Consequently, when the
market did correct in August, our performance suffered only to a small
degree. In addition, this move increased our cash position, which enabled us
to capitalize on a number of the extremely attractive opportunities the
correction left in its wake.
Throughout the fall, the Fund's weighting in technology, semi-conductor and
select consumer stocks was increased, and subsequently, these sectors did
well as small-caps got back on their feet. By the period's end, many of the
other holdings in the Fund's portfolio had bounced back to within range of
their July valuations. Yet, this was not enough to keep pace with the
large-caps or with the few small capitalization issues investors chased
during the period, namely the Internet stocks. But, given the
roller-coaster-like volatility of such stocks, the Fund did not have any
holdings among this group.
Q. WHAT IS YOUR OUTLOOK FOR SMALL CAPS IN THE SIX MONTHS AHEAD?
A. It is often difficult to remember that all market cycles do end. The
discouraging results of the past period coupled with the market's apparently
unlimited enthusiasm for the large-caps and the Internet, make it
particularly hard this time. But, inevitably, investors' infatuation with
these stocks will diminish, and that point, we believe, may not be too far
off. Clearly, over the past period, valuations in the small-cap sector were
very low and grew lower as the companies in the sector blossomed, and yet,
investors were not impressed.
Now, however, numbers tell such a compelling story that, as we go to press,
there are indications that sentiment is changing. Currently, small-cap
issues held in our portfolio are, on average, selling at 20 times projected
earnings and are expected to grow approximately 30% over the coming year.(2)
Growth among the large-caps, by contrast, is projected to fall in the coming
year, and their stocks are selling at approximately 30 times earnings. With
strong growth available at extremely reasonable prices in the small-cap
sector, we believe investors are unlikely to continue paying unreasonable
prices for flat growth much longer.(**)
(1)Small capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure. Historically, smaller
companies' stocks have experienced a greater degree of market volatility than
average.
(2)Source: WWW.I/B/E/S-Institutional Brokers Estimate System.com
(+)During the past year the Fund change it's fiscal period end from June 30 to
March 31.
(++)With the maximum sales charge of 5.00%, the Fund's return for the period
would have been -9.35%.
- --------------------------------------------------------------------------------
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<PAGE> 8
1st Source Monogram Funds
- --------------------------------------------------------------------------------
[Special Equity Fund Graph]
<TABLE>
<CAPTION>
SPECIAL EQUITY FUND(*) RUSSELL 2000 INDEX(3)
---------------------- ---------------------
<S> <C> <C>
'3/89' 9500 10000
'3/90' 11034 10554
'3/91' 12391 11270
'3/92' 15253 13639
'3/93' 16669 15666
'3/94' 18793 17390
'3/95' 19207 18347
'3/96' 26405 23676
'3/97' 25844 24885
'3/98' 31745 35340
'3/99' 28394 29595
</TABLE>
The quoted performance of the 1st Source Monogram Special Equity Fund
includes performance of certain collective trust fund ("Commingled") accounts
advised by 1st Source Bank, for periods dating back to 11/30/85, and prior to
the mutual fund's commencement of operations on 9/20/96, as adjusted to reflect
the expenses associated with the mutual fund. The Commingled accounts were not
registered with the Securities & Exchange Commission and, therefore, were not
subject to the investment restrictions imposed by law on registered mutual
funds. If the Commingled accounts had been registered, the Commingled accounts'
performance may have been adversely affected.
(3)The Russell 2000 Index is an unmanaged index that represents the performance
of domestically traded common stocks of small to mid-sized companies. This
index is unmanaged and does not reflect the deduction of fees associated with
a mutual fund, such as investment management and fund accounting fees. The
performance of the Fund reflects the deduction of fees for these value-added
services.
(**)The Fund's portfolio composition is subject to change.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE PER SHARE WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
- --------------------------------------------------------------------------------
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<PAGE> 9
1st Source Monogram Funds
- --------------------------------------------------------------------------------
DIVERSIFIED EQUITY FUND
The Diversified Equity Fund is a multi-style, multi-manager portfolio with three
subadvisors representing the sector rotation, value and growth styles. The
following interview is with portfolio managers John Truschel of Standish, Ayer &
Wood (blending value and growth), Robert Marcin of Miller Anderson & Sherrerd
LLP (value) and Bob Takazawa of Loomis Sayles & Company LP (growth).
Q. HOW DID THE FUND PERFORM DURING THE PERIOD?
A. For the period ended March 31, 1999(+), the Fund's total return was -0.59%
(without sales load).(++) Over the same time period, the S&P 500 Index(1)
produced a total return of 14.67%.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. John Truschel, Standish, Ayer & Wood:
Earnings appeared to be somewhat irrelevant during the period. Investors
favored growth, and only the most highly visible growth, and were willing to
pay for it. As a result, despite their high valuations, a very small group
of large-cap growth stocks prospered, and virtually all other stocks were
trampled underfoot. We focused on stocks that offer growth at a reasonable
price, the portfolio held only a few names among them: Sun Microsystems
(2.80% of the Fund's portfolio) and Amgen (1.92%) benefited in this
environment. In general, our other holdings were traded in a narrow range or
declined slightly over the period.(*)
A. Robert Marcin, Miller Anderson & Sherrerd:
The low price-to-earnings (P/E) style of investing was simply not in style
during the period. Regardless of balance sheet strength, cash or growth
prospects, investors simply were not interested. The several mega-cap stocks
that did qualify for investment by the Fund performed well over the course
of the period. Among these were Ford (0.67%), IBM (0.66%), Citigroup
(0.64%), and Chase (0.85%). Citigroup, in particular, did so well that its
P/E moved beyond the Fund's universe, and we took the gain at what proved to
be the stock's high point during the year. Outstanding as the performance of
these few names was, however, it could not compensate for the
underperformance of the portfolio's other holdings, which suffered from
neglect.(*)
A. Bob Takazawa, Loomis Sayles & Company:
Throughout the year, investors chased growth but given the tumultuous state
of the world markets, were only willing to invest in the largest, most
liquid of companies to get it. Consequently, while the average mid-cap and
small-cap stock declined, the market averages, which are heavily weighted
toward the biggest names soared over 10,000. Among the best performers in
this group were the technology and telecommunications stocks, which held out
the promise of very strong growth in the coming years. The portfolio
benefited as among the many names it held were EMC Corp. (1.23%), America
Online (2.26%), Sun Microsystems (2.80%), AT&T (1.11%), and MCI WorldCom
(1.31%).(*)
Q. HOW DID YOU APPLY YOUR INVESTMENT STRATEGY DURING THE PERIOD?
A. John Truschel, Standish, Ayer & Wood:
Any manager with any type of traditional background in valuations found the
environment very disconcerting. Many of our holdings exhibited growth rates
much faster than average; their earnings surprises tended to be positive;
and their balance sheets were very strong. Nonetheless, we stood strong
throughout the period, knowing that eventually, given the valuations and the
potential of our holdings, sentiment would change. Moreover, in the fall, we
realigned the portfolio in an effort to capitalize on several even more
attractive opportunities that the August debacle left in its wake. But the
market simply did not care about or reward these efforts.
(+)During the past year the Fund change it's fiscal period end from June 30 to
March 31.
(++)With the maximum sales charge of 5.00%, the Fund's return for the period
would have been -5.55%.
(1)The S&P 500 Stock Index is an unmanaged index that generally reflects the
performance of the U.S. Stock Market as a whole. This index is unmanaged and
does not reflect the deduction of fees associated with a mutual fund, such as
investment management and fund accounting fees. The performance of the Fund
reflects the deduction of fees for these value-added services.
(*)The Fund's portfolio composition is subject to change.
- --------------------------------------------------------------------------------
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<PAGE> 10
1st Source Monogram Funds
- --------------------------------------------------------------------------------
A. Robert Marcin, Miller Anderson & Sherrerd:
Throughout the period, we maintained our focus and looked for companies with
solid earnings growth, strong fundamentals and cheap valuations. Hurt by the
downdrafts of August, the small- and mid-cap sectors offered many
opportunities. Consequently, while the market's attention was occupied
elsewhere, we capitalized on the situation and added or strengthened our
positions in companies with strong long-term prospects that most closely fit
our investment parameters.
A. Bob Takazawa, Loomis Sayles & Company:
Believing that the downdraft in August was a correction rather the start of
a recession in the United States or a meltdown of the global market, we
seized the moment. Hard hit as investors fled, many stocks in the technology
sector were available at very attractive prices. Positions were added or
strengthened to the point that the portfolio was overweighted in technology
in the second half of the period. Subsequently, this group led the market up
to and over the 10,000 level. With regard to the rest of our holdings, which
lagged the technology stocks, we stood strong and continue to do so,
believing the market will eventually broaden.
Q. WHAT IS YOUR OUTLOOK FOR THE SIX MONTHS AHEAD?
A. John Truschel, Standish, Ayer & Wood:
We expect the year ahead to be a better one than the period just past.
Markets around the world are beginning to recover from the Asian flu. As
these economies rebound, we expect to see demand, particularly demand in
basic industries, bounce back. All of this is positive for our economy and
particularly for companies beyond the high fliers of the past period. As the
period drew to a close, we saw evidence that investors were looking beyond
the chosen few and beginning to move money towards areas sensitive to the
global economy.
A. Robert Marcin, Miller Anderson & Sherrerd:
As the period drew to a close, valuations in the low P/E sector of the
marketplace relative to large-caps were lower than they had been in years.
The global economy is beginning to rebound. With this, we are beginning to
see an improvement in market psychology toward the sectors that have been
out of favor for more than two years now: the small-cap, mid-cap, value, low
P/E, and economically sensitive sectors. More specifically, we expect that
those companies involved in economically sensitive industries, consumer
goods, basic industries, and capital goods to be among the first
beneficiaries of the change in market sentiment we see ahead.
A. Bob Takazawa, Loomis Sayles & Company:
Having seen many pro-growth policies enacted and interest rates cut in
markets around the world during the past several months, we are optimistic
about the market's prospects going forward. Moreover, in recent weeks, we
have seen profit-taking in the growth sector, and the start of what may be a
migration toward the value stocks. But, while we may see value stocks
rebound in the months ahead, we do not expect them to take over market
leadership. The environment, we believe, will be much more selective. Some
growth stocks will continue to do well, as will some value stocks. But much
to the relief of investors focused on earnings and fundamentals, the market
will no longer be totally one-sided.
- --------------------------------------------------------------------------------
-10-
<PAGE> 11
1st Source Monogram Funds
- --------------------------------------------------------------------------------
[Diversified Equity Fund Graph]
<TABLE>
<CAPTION>
DIVERSIFIED EQUITY FUND(*) S&P 500 STOCK INDEX(1)
-------------------------- ----------------------
<S> <C> <C>
'3/89' 9500.00 10000.00
'3/90' 11577.00 11915.00
'3/91' 13393.00 13628.00
'3/92' 15133.00 15134.00
'3/93' 17079.00 17438.00
'3/94' 17546.00 17690.00
'3/95' 19104.00 20446.00
'3/96' 24451.00 26998.00
'3/97' 27309.00 32339.00
'3/98' 38788.00 47893.00
'3/99' 39724.00 56733.00
</TABLE>
The quoted performance of the 1st Source Monogram Diversified Equity Fund
includes performance of certain collective trust fund ("Commingled") accounts
advised by 1st Source Bank, for periods dating back to 6/30/85, and prior to the
mutual fund's commencement of operations on 9/23/96, as adjusted to reflect the
expenses associated with the mutual fund. The Commingled accounts were not
registered with the Securities & Exchange Commission and, therefore, were not
subject to the investment restrictions imposed by law on registered mutual
funds. If the Commingled accounts had been registered, the Commingled accounts'
performance may have been adversely affected.
(1)The S&P 500 Stock Index is an unmanaged index that generally reflects the
performance of the U.S. stock market as a whole. This index is unmanaged and
does not reflect the deduction of fees associated with a mutual fund, such as
investment management and fund accounting fees. The performance of the Fund
reflects the deduction of fees for these value-added services.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE PER SHARE WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
- --------------------------------------------------------------------------------
-11-
<PAGE> 12
TABLE OF CONTENTS
Statements of Assets and Liabilities
PAGE 13
Statements of Operations
PAGE 14
Statements of Changes in Net Assets
PAGE 16
Schedules of Portfolio Investments
PAGE 18
Notes to Financial Statements
PAGE 30
Financial Highlights
PAGE 36
Report of Independent Accountants
PAGE 38
-12-
<PAGE> 13
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1999
<TABLE>
<CAPTION>
INCOME DIVERSIFIED SPECIAL
EQUITY EQUITY EQUITY INCOME
FUND FUND FUND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (cost $44,337,430;
$73,022,171; $21,565,542; and $65,894,430
respectively)............................... $48,992,635 $81,899,403 $22,264,953 $64,919,059
Repurchase agreements, at cost................ 333,446 1,476,286 8,093,242 3,165,664
----------- ----------- ----------- -----------
Total Investments....................... 49,326,081 83,375,689 30,358,195 68,084,723
Interest and dividends receivable............. 166,331 80,987 8,571 1,207,970
Receivables from brokers for investments
sold........................................ 1,457,155 2,940,367 1,468,661 --
Unamortized organization costs................ 6,451 10,989 6,145 9,263
Prepaid expenses and other assets............. 438 -- 275 464
----------- ----------- ----------- -----------
Total Assets............................ 50,956,456 86,408,032 31,841,847 69,302,420
----------- ----------- ----------- -----------
LIABILITIES:
Payable for investments purchased............. -- 933,788 862,875 1,993,260
Accrued expenses and other payables:
Investment advisory fees.................. 34,200 74,665 20,735 31,158
Administration fees....................... 1,388 2,340 839 1,839
Accounting fees........................... 452 384 288 862
Other..................................... 17,572 35,790 11,478 24,763
----------- ----------- ----------- -----------
Total Liabilities....................... 53,612 1,046,967 896,215 2,051,882
----------- ----------- ----------- -----------
Net Assets.............................. $50,902,844 $85,361,065 $30,945,632 $67,250,538
=========== =========== =========== ===========
NET ASSETS:
Capital....................................... $45,300,471 $67,628,890 $30,792,642 $68,631,885
Undistributed (distributions in excess of) net
investment income........................... 55,794 (161) (85) 46,689
Net unrealized appreciation (depreciation) on
investments................................. 4,655,205 8,877,232 699,411 (975,371)
Accumulated undistributed net realized gains
(losses) on investment transactions......... 891,374 8,855,104 (546,336) (452,665)
----------- ----------- ----------- -----------
Net Assets.............................. $50,902,844 $85,361,065 $30,945,632 $67,250,538
=========== =========== =========== ===========
Outstanding units of beneficial interest
(shares).................................... 4,628,689 7,579,087 3,370,713 6,734,765
=========== =========== =========== ===========
Net asset value -- redemption price per
share....................................... $ 11.00 $ 11.26 $ 9.18 $ 9.99
=========== =========== =========== ===========
Maximum Sales Charge.......................... 5.00% 5.00% 5.00% 4.00%
=========== =========== =========== ===========
Maximum Offering Price (NAV/(1-Maximum Sales
Charge) of net asset value adjusted to
nearest cent) per share..................... $ 11.58 $ 11.85 $ 9.66 $ 10.41
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
-13-
<PAGE> 14
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
INCOME EQUITY FUND DIVERSIFIED EQUITY FUND
------------------------ --------------------------
PERIOD YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, MARCH 31, JUNE 30,
1999(a) 1998 1999(a) 1998
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income......................... $ 328,448 $ 428,967 $ 123,807 $ 357,831
Dividend income......................... 968,532 1,147,471 654,122 790,275
----------- ---------- ------------ -----------
Total Income....................... 1,296,980 1,576,438 777,929 1,148,106
----------- ---------- ------------ -----------
EXPENSES:
Investment advisory fees................ 296,820 374,402 682,319 970,429
Administration fees..................... 74,205 93,601 131,181 176,443
12b-1 fees.............................. 92,761 117,001 163,975 220,552
Transfer agent fees..................... 23,267 29,653 24,898 36,199
Accounting fees......................... 15,007 20,243 26,987 35,425
Custodian fees.......................... 3,633 6,186 18,121 24,513
Other................................... 35,565 41,235 52,209 66,783
----------- ---------- ------------ -----------
Total Expenses..................... 541,258 682,321 1,099,690 1,530,344
Less: expenses voluntarily
reduced.......................... (92,761) (117,001) (163,975) (220,552)
----------- ---------- ------------ -----------
Net Expenses............................ 448,497 565,320 935,715 1,309,792
----------- ---------- ------------ -----------
Net Investment Income (Loss)............ 848,483 1,011,118 (157,786) (161,686)
----------- ---------- ------------ -----------
REALIZED/UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gains (losses) on
investment transactions............... 1,989,853 6,789,017 12,914,962 13,166,299
Change in unrealized
appreciation/depreciation on
investments........................... (3,021,716) (415,826) (13,542,991) 8,399,708
----------- ---------- ------------ -----------
Net realized/unrealized gains (losses)
on investments........................ (1,031,863) 6,373,191 (628,029) 21,566,007
----------- ---------- ------------ -----------
Change in net assets resulting from
operations............................ $ (183,380) $7,384,309 $ (785,815) $21,404,321
=========== ========== ============ ===========
</TABLE>
- ---------------
(a) For the period from July 1, 1998 through March 31, 1999.
See notes to financial statements.
-14-
<PAGE> 15
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SPECIAL EQUITY FUND INCOME FUND
------------------------ ------------------------
PERIOD YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, MARCH 31, JUNE 30,
1999(a) 1998 1999(a) 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income............................ $ 244,871 $ 322,881 $ 3,045,797 $3,958,259
Dividend income............................ 41,146 122,383 -- 186,767
----------- ---------- ----------- ----------
Total Income.......................... 286,017 445,264 3,045,797 4,145,026
----------- ---------- ----------- ----------
EXPENSES:
Investment advisory fees................... 181,817 272,600 272,447 334,179
Administration fees........................ 45,455 68,151 99,072 121,521
12b-1 fees................................. 56,818 85,188 123,839 151,899
Transfer agent fees........................ 20,748 33,006 12,799 33,185
Accounting fees............................ 9,993 14,267 18,281 24,106
Custodian fees............................. 5,316 6,696 6,441 7,083
Other...................................... 17,569 37,596 47,820 41,914
----------- ---------- ----------- ----------
Total Expenses........................ 337,716 517,504 580,699 713,887
Less: expenses voluntarily reduced.... (56,818) (85,188) (123,839) (151,899)
----------- ---------- ----------- ----------
Net Expenses............................... 280,898 432,316 456,860 561,988
----------- ---------- ----------- ----------
Net Investment Income (Loss)............... 5,119 12,948 2,588,937 3,583,038
----------- ---------- ----------- ----------
REALIZED/UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gains (losses) on investment
transactions............................. 1,757,252 (796,672) 624,093 725,350
Change in unrealized
appreciation/depreciation on
investments.............................. (3,177,218) 1,351,263 (1,327,173) 461,944
----------- ---------- ----------- ----------
Net realized/unrealized gains (losses) on
investments.............................. (1,419,966) 554,591 (703,080) 1,187,294
----------- ---------- ----------- ----------
Change in net assets resulting from
operations............................... $(1,414,847) $ 567,539 $ 1,885,857 $4,770,332
=========== ========== =========== ==========
</TABLE>
- ---------------
(a) For the period from July 1, 1998 through March 31, 1999.
See notes to financial statements.
-15-
<PAGE> 16
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCOME EQUITY FUND DIVERSIFIED EQUITY FUND
------------------------------------------ ------------------------------------------
PERIOD FOR YEAR FOR PERIOD PERIOD FOR YEAR FOR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30, MARCH 31, JUNE 30, JUNE 30,
1999(a) 1998 1997(b) 1999(a) 1998 1997(b)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment
income(loss).......... $ 848,483 $ 1,011,118 $ 616,421 $ (157,786) $ (161,686) $ (54,090)
Net realized gains
(losses) on investment
transactions.......... 1,989,853 6,789,017 2,858,798 12,914,962 13,166,299 7,722,828
Net change in unrealized
appreciation/depreciation
on investments........ (3,021,716) (415,826) 4,364,604 (13,542,991) 8,399,708 5,132,388
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets
resulting from
operations.............. (183,380) 7,384,309 7,839,823 (785,815) 21,404,321 12,801,126
------------ ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................ (859,046) (985,708) (590,716) -- -- --
From net realized gains
on investments........ (5,549,465) (5,026,674) (158,589) (13,464,080) (9,785,732) (1,332,828)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from
shareholder
distributions........... (6,408,511) (6,012,382) (749,305) (13,464,080) (9,785,732) (1,332,828)
------------ ------------ ------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 15,400,045 16,097,747 42,293,659 19,352,100 20,560,375 84,469,233
Dividends reinvested.... 6,124,576 5,820,966 746,329 13,109,770 9,643,385 1,332,616
Cost of shares
redeemed.............. (16,480,278) (10,035,797) (10,934,957) (30,934,128) (18,728,640) (22,280,638)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from
capital transactions.... 5,044,343 11,882,916 32,105,031 1,527,742 11,475,120 63,521,211
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets...... (1,547,548) 13,254,843 39,195,549 (12,722,153) 23,093,709 74,989,509
NET ASSETS:
Beginning of period..... 52,450,392 39,195,549 -- 98,083,218 74,989,509 --
------------ ------------ ------------ ------------ ------------ ------------
End of period........... $ 50,902,844 $ 52,450,392 $ 39,195,549 $ 85,361,065 $ 98,083,218 $ 74,989,509
============ ============ ============ ============ ============ ============
SHARE TRANSACTIONS:
Issued.................. 1,327,864 1,270,185 4,149,432 1,610,936 1,643,723 8,361,129
Reinvested.............. 572,233 497,282 68,376 1,196,147 873,495 125,956
Redeemed................ (1,435,697) (794,106) (1,026,880) (2,597,527) (1,502,834) (2,131,938)
------------ ------------ ------------ ------------ ------------ ------------
Change in shares.......... 464,400 973,361 3,190,928 209,556 1,014,384 6,355,147
============ ============ ============ ============ ============ ============
</TABLE>
- ---------------
(a) For the period from July 1, 1998 through March 31, 1999.
(b) Commencement of operations of the Funds began September 25, 1996 and
September 23, 1996, respectively.
See notes to financial statements.
-16-
<PAGE> 17
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SPECIAL EQUITY FUND INCOME FUND
------------------------------------------ ------------------------------------------
PERIOD FOR YEAR FOR PERIOD PERIOD FOR YEAR FOR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30, MARCH 31, JUNE 30, JUNE 30,
1999(a) 1998 1997(b) 1999(a) 1998 1997(b)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income
(loss)..................... $ 5,119 $ 12,948 $ 10,227 $ 2,588,937 $ 3,583,038 $ 2,182,134
Net realized gains (losses)
on investment
transactions............... 1,757,252 (796,672) (253,355) 624,093 725,350 (215,572)
Net change in unrealized
appreciation/depreciation
on investments............. (3,177,218) 1,351,263 304,921 (1,327,173) 461,944 790,234
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from operations.............. (1,414,847) 567,539 61,793 1,885,857 4,770,332 2,756,796
------------ ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income... (6,474) (15,078) (10,227) (2,590,721) (3,582,178) (2,141,355)
From tax return of capital... (31,820) -- -- -- -- --
In excess of net investment
income..................... -- -- (337) -- -- --
From net realized gains on
investments................ -- (452,546) -- (1,133,720) -- --
In excess of net realized
gains on investments....... -- -- (801,015) (452,672) -- --
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from
shareholder distributions.... (38,294) (467,624) (811,579) (4,177,113) (3,582,178) (2,141,355)
------------ ------------ ------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued..................... 9,738,376 15,510,945 38,050,281 19,281,043 17,944,091 66,488,773
Dividends reinvested......... 36,604 450,173 811,083 4,012,826 3,466,908 2,132,592
Cost of shares redeemed...... (12,817,329) (11,144,152) (7,587,337) (19,727,161) (11,412,595) (14,448,278)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from
capital transactions......... (3,042,349) 4,816,966 31,274,027 3,566,708 9,998,404 54,173,087
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets........... (4,495,490) 4,916,881 30,524,241 1,275,452 11,186,558 54,788,528
NET ASSETS:
Beginning of period.......... 35,441,122 30,524,241 -- 65,975,086 54,788,528 --
------------ ------------ ------------ ------------ ------------ ------------
End of period................ $ 30,945,632 $ 35,441,122 $ 30,524,241 $ 67,250,538 $ 65,975,086 $ 54,788,528
------------ ------------ ------------ ------------ ------------ ------------
SHARE TRANSACTIONS:
Issued....................... 1,092,574 1,539,687 3,865,762 1,868,593 1,739,371 6,626,551
Reinvested................... 4,411 47,382 83,724 392,040 337,542 210,754
Redeemed..................... (1,407,159) (1,087,999) (767,669) (1,904,079) (1,106,996) (1,429,012)
------------ ------------ ------------ ------------ ------------ ------------
Change in shares............... (310,174) 499,070 3,181,817 356,554 969,917 5,408,293
============ ============ ============ ============ ============ ============
</TABLE>
- ---------------
(a) For the period from July 1, 1998 through March 31, 1999.
(b) Commencement of operations of the Funds began September 20, 1996 and
September 24, 1996, respectively.
See notes to financial statements.
-17-
<PAGE> 18
THE COVENTRY GROUP
1ST SOURCE MONOGRAM INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- --------- ------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (87.8%):
Automotive (1.8%):
18,000 General Motors Corp. -- Class H
(b).......................... $ 907,875
-----------
Automotive Parts (2.5%):
19,000 Dana Corp. .................... 722,000
58,000 Simpson Industries, Inc. ...... 558,250
-----------
1,280,250
-----------
Banking (2.9%):
9,000 National City Corp. ........... 597,375
19,434 Union Planters Corp. .......... 853,881
-----------
1,451,256
-----------
Building Materials (0.9%):
9,000 Southdown, Inc. ............... 483,188
-----------
Chemicals (3.8%):
7,000 Dow Chemical Co. .............. 652,313
50,000 M.A. Hanna Co. ................ 640,625
29,500 The Lubrizol Corp. ............ 663,750
-----------
1,956,688
-----------
Communications Equipment (1.0%):
18,000 Harris Corp. .................. 515,250
-----------
Computer Services (2.1%):
22,000 Electronic Data Systems
Corp. ....................... 1,071,125
-----------
Computers (1.5%):
11,500 Hewlett-Packard Co. ........... 779,844
-----------
Consumer Goods & Services (0.8%):
17,000 American Greetings Corp. ...... 431,375
-----------
Defense (1.0%):
9,000 Raytheon Co. -- Class B........ 527,625
-----------
Electrical & Electronic (1.3%):
8,000 Koninklijke Philips Electronics
N.Y.......................... 659,500
-----------
Electronic Components (3.0%):
22,600 Dallas Semiconductor Corp. .... 872,925
19,000 Parker-Hannifin Corp. ......... 650,750
-----------
1,523,675
-----------
Energy (1.4%):
27,000 Reliant Energy, Inc. .......... 703,688
-----------
Environmental Services (2.0%):
27,000 Browning-Ferris Industries,
Inc. ........................ 1,041,188
-----------
Financial Services (4.1%):
15,000 A.G. Edwards, Inc. ............ 490,313
40,000 Alliance Capital
Management-LP................ 1,012,500
15,000 Paine Webber Group, Inc. ...... 598,125
-----------
2,100,938
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- --------- ------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Food & Related (3.5%):
16,600 The Quaker Oats Co. ........... $ 1,038,538
27,100 Ralston-Ralston Purina Group... 723,231
-----------
1,761,769
-----------
Forest & Paper Products (3.3%):
10,000 Georgia-Pacific Group.......... 742,500
17,000 Weyerhaeuser Co. .............. 943,500
-----------
1,686,000
-----------
Insurance (4.2%):
22,000 Conseco, Inc. ................. 679,250
12,000 La Salle RE Holdings........... 177,000
9,000 Lincoln National Corp. ........ 889,875
12,412 The St. Paul Companies,
Inc. ........................ 385,548
-----------
2,131,673
-----------
Investment Companies (1.6%):
40,100 Waddell & Reed Financial,
Inc. ........................ 822,050
-----------
Machinery -- Diversified (3.0%):
60,000 AGCO Corp. .................... 393,750
38,600 Esterline Technologies Corp.
(b).......................... 499,388
15,000 W.W. Grainger,Inc. ............ 645,938
-----------
1,539,076
-----------
Medical Instruments (1.4%):
11,000 Bausch & Lomb Inc. ............ 715,000
-----------
Motor Vehicles (1.7%):
15,000 Ford Motor Co. ................ 851,250
-----------
Office Equipment & Services (1.5%):
42,000 A.H. Belo Corp. -- Series A.... 766,500
-----------
Oil -- Integrated Companies (2.2%):
12,000 Phillips Petroleum Co. ........ 567,000
20,000 USX-Marathon Group............. 550,000
-----------
1,117,000
-----------
Paint & Related Products (1.8%):
33,000 The Sherwin-Williams Co. ...... 928,125
-----------
Pharmaceuticals (6.4%):
26,000 Abbott Laboratories............ 1,217,126
16,000 Bristol-Myers Squibb Co. ...... 1,029,000
12,000 Merck & Co., Inc. ............. 962,250
-----------
3,208,376
-----------
Publishing (1.8%):
14,000 Tribune Co. ................... 916,125
-----------
</TABLE>
Continued
-18-
<PAGE> 19
THE COVENTRY GROUP
1ST SOURCE MONOGRAM INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- --------- ------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Real Estate Investment Trust (5.7%):
53,000 Burnham Pacific Properties,
Inc. ........................ $ 556,500
40,000 Captec Net Lease Realty,
Inc. ........................ 520,000
14,875 Equity Residential Properties
Trust........................ 613,595
12,000 Hospitality Properties Trust... 324,750
31,000 Prentiss Properties Trust...... 577,375
34,000 Thornburg Mortgage Asset
Corp. ....................... 293,250
-----------
2,885,470
-----------
Retail (4.1%):
27,000 Claire's Stores, Inc. ......... 813,376
21,000 Dillard's Inc., Class A........ 532,875
25,000 Longs Drug Stores Corp. ....... 760,938
-----------
2,107,189
-----------
Steel (2.3%):
25,000 Allegheny Teledyne, Inc. ...... 473,438
26,800 Carpenter Technology Corp. .... 695,125
-----------
1,168,563
-----------
Telecommunications (2.9%):
28,000 Frontier Corp. ................ 1,452,500
-----------
Tires & Rubber Products (1.2%):
33,000 Cooper Tire & Rubber Co. ...... 606,375
-----------
Transportation -- Air (1.5%):
13,000 AMR Corp. Del (b).............. 761,312
-----------
Transportation -- Misc. (1.6%):
29,000 Ryder System, Inc. ............ 801,125
-----------
Utilities -- Electric (4.4%):
19,000 American Electric Power Co. ... 754,063
20,000 The Montana Power Co. ......... 1,471,249
-----------
2,225,312
-----------
Utilities -- Telephone (1.6%):
15,000 U S WEST, Inc. ................ 825,937
-----------
Total Common Stocks............ 44,710,192
-----------
PREFERRED STOCKS (0.6%):
Hotels & Motels (0.6%):
22,000 Signature Inns, Inc., Series A,
Callable 2/1/00 @ 20.97...... 291,500
-----------
Total Preferred Stocks......... 291,500
-----------
CONVERTIBLE BONDS (7.8%):
Computer Software (1.0%):
500,000 The Learning Co., 5.50%,
11/1/00, Callable 11/1/99 @
101.10 (c)................... 507,500
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ------------------------------- -----------
<C> <S> <C>
CONVERTIBLE BONDS, CONTINUED:
Computers (2.2%):
10,000 Budget Group Capital Trust,
6.25%, 6/15/05, Callable
6/15/05 @ 50.50 (c).......... $ 356,250
1,000,000 Data General Corp., 6.00%,
5/15/04, Callable 5/18/00 @
103.43....................... 806,250
-----------
1,162,500
-----------
Industrial Goods & Services (1.8%):
778,000 Integrated Device Technology
5.50%, 6/1/02, Callable
6/1/99 @ 101.38.............. 552,380
450,000 Mascotech 4.50%, 12/15/03,
Callable 12/15/99 @ 101.50... 347,063
-----------
899,443
-----------
Medical -- Wholesale Drug Distribution
(0.5%):
400,000 Fuisz Technologies Ltd., 7.00%,
10/15/04, Callable 10/19/00 @
104.00 (c)................... 271,500
-----------
Oil & Gas Services (0.6%):
600,000 Halter Marine, 4.50%, 9/15/04,
Callable 9/15/00 @ 102.57.... 311,250
-----------
Retail (1.2%):
10,000 KMart Financing Corp., 7.75%,
6/15/16, Callable 6/17/99 @
52.71........................ 605,000
-----------
Telecommunications (0.5%):
17,000 Cellnet Funding LLC, 7.00%,
6/1/10, Callable 6/1/01 @.... 233,750
-----------
Total Convertible Bonds........ 3,990,943
-----------
REPURCHASE AGREEMENT (0.7%):
$333,446 Fifth Third Bank Repurchase
Agreement, 3/31/99, 4.40%,
matures 4/1/99,
(Collateralized by $341,000
FHLM, 6.00%, 9/1/13, market
value = $338,549)............ 333,446
-----------
Total Repurchase Agreement..... 333,446
-----------
Total (Cost $44,670,876) (a)... $49,326,081
===========
</TABLE>
Continued
-19-
<PAGE> 20
THE COVENTRY GROUP
1ST SOURCE MONOGRAM INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
- ---------
Percentages indicated are based on net assets of $50,902,844.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $ 9,687,770
Unrealized depreciation......................... (5,032,565)
-----------
Net unrealized appreciation..................... $ 4,655,205
===========
</TABLE>
(b) Represents non-income producing securities.
(c) 144A Security which is restricted as to resale to institutional investors.
See notes to financial statements.
-20-
<PAGE> 21
THE COVENTRY GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS (96.0%):
Advertising (1.4%):
15,300 Omnicom Group, Inc............ $ 1,223,043
-----------
Air Transportation (0.2%):
3,500 Alaska Air Group, Inc. (b).... 166,250
-----------
Apparel (0.7%):
13,200 V.P. Corp..................... 622,875
-----------
Apparel Manufacturers (1.4%):
16,500 Jones Apparel Group, Inc.
(b)......................... 460,970
11,100 Liz Claiborne, Inc............ 362,137
5,100 Tommy Hilfiger Corp. (b)...... 351,262
-----------
1,174,369
-----------
Automotive Parts (0.7%):
7,700 Dana Corp..................... 292,601
1,600 Eaton Corp.................... 114,400
4,800 TRW, Inc...................... 218,400
-----------
625,401
-----------
Banking (5.4%):
7,100 AmSouth Bancorporation........ 323,050
5,900 Bank One Corp................. 324,870
5,500 BankAmerica Corp.............. 388,438
3,900 BankBoston Corp............... 168,919
8,900 The Chase Manhattan Corp...... 723,682
2,600 Comerica Inc.................. 162,338
4,600 Cullen/Frost Bankers, Inc..... 220,513
8,700 First Tennessee National
Corp........................ 318,637
3,910 First Union Corp.............. 208,941
3,800 Fleet Financial Group, Inc.... 142,975
15,200 Hibernia Corp. -Class A....... 199,500
26,800 MBNA Corp..................... 639,851
7,700 North Fork Bancorporation,
Inc......................... 162,662
7,900 PNC Bank Corp................. 438,945
3,600 Republic New York Corp........ 166,050
-----------
4,589,371
-----------
Building -- Residential/Commercial (0.2%):
5,900 Kaufman & Broad Home Corp. ... 133,119
-----------
Building Materials (0.9%):
4,700 Lafarge Corp. ................ 131,600
8,400 Owens Corning................. 267,225
7,300 Southdown, Inc. .............. 391,920
-----------
790,745
-----------
Chemicals (1.8%):
11,200 Air Products & Chemicals,
Inc......................... 383,601
2,400 FMC Corp. (b)................. 118,500
11,100 IMC Global, Inc............... 226,856
3,000 Morton International, Inc..... 110,250
7,800 Rohm & Haas Co................ 261,788
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
14,400 The Lubrizol Corp............. $ 324,001
10,200 W.R. Grace & Co. (b).......... 123,675
-----------
1,548,671
-----------
Communications Equipment (0.3%):
6,300 Symbol Technologies, Inc. .... 283,500
-----------
Computer Services (2.5%):
13,200 America Online, Inc. (b)...... 1,927,201
7,400 Diebold Inc. ................. 177,600
-----------
2,104,801
-----------
Computer Software (1.7%):
6,700 BMC Software, Inc............. 248,319
8,000 Fiserv, Inc. (b).............. 429,000
7,300 Network Associates, Inc.
(b)......................... 224,019
21,300 Oracle Corp. (b).............. 561,789
-----------
1,463,127
-----------
Computers (6.8%):
7,600 Apple Computer, Inc. (b)...... 273,125
8,200 EMC Corp. (b)................. 1,047,551
6,100 Intel Corp.................... 726,662
3,200 International Business
Machines Corp............... 567,201
19,100 Sun Microsystems, Inc. (b).... 2,386,306
8,200 Synopsys, Inc. (b)............ 440,750
10,500 Unisys Corp. (b).............. 290,719
-----------
5,732,314
-----------
Construction (0.3%):
6,500 Centex Corp................... 216,937
-----------
Consumer Goods & Services (0.1%):
4,200 American Greetings Corp. ..... 106,575
-----------
Containers & Packaging (1.1%):
18,300 Sealed Air Corp............... 900,129
-----------
Cosmetics & Toiletries (0.4%):
3,400 The Proctor & Gamble Co.,..... 332,987
-----------
Data Processing & Reproduction (0.6%):
11,200 First Data Corp. ............. 478,800
-----------
Defense (0.9%):
6,000 Cordant Technologies, Inc. ... 238,875
4,100 United Technologies Corp. .... 555,295
-----------
794,170
-----------
Distribution Services (0.1%):
19,400 Brightpoint, Inc. (b)......... 114,581
-----------
Electrical Equipment (0.2%):
8,800 Arrow Electronics, Inc. (b)... 132,000
-----------
</TABLE>
Continued
-21-
<PAGE> 22
THE COVENTRY GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Electronic Components (3.1%):
10,900 American Power Conversion
Corp. (b)................... $ 294,300
4,500 Avnet, Inc.................... 164,812
7,450 Parker-Hannifin Corp.......... 255,163
20,400 Solectron Corp. (b)........... 990,677
9,050 Tektronix, Inc................ 228,512
7,200 Texas Instruments, Inc........ 714,601
-----------
2,648,065
-----------
Engines -- Internal Combustion (0.4%):
9,600 Cummins Engine Co., Inc....... 341,400
-----------
Financial Services (3.7%):
4,200 Ambac Financial Group Inc..... 226,800
11,300 AmeriCredit Corp. (b)......... 148,313
7,300 Associates First Capital
Corp........................ 328,500
8,500 Citigroup Inc................. 542,938
4,000 Countrywide Credit Industries,
Inc......................... 150,000
9,200 Fannie Mae.................... 637,101
13,900 Paychex, Inc.................. 659,381
11,350 Washington Mutual, Inc........ 463,931
-----------
3,156,964
-----------
Food & Related (2.1%):
9,800 Flowers Industries Inc........ 241,325
5,700 H.J. Heinz Co................. 270,037
14,100 IBP, Inc...................... 262,613
6,300 Sara Lee Corp................. 155,925
3,900 Suiza Foods Corp. (b)......... 131,381
11,600 SUPERVALU, INC................ 239,250
6,200 The Earthgrains Co............ 137,562
17,300 Universal Foods Corp.......... 356,812
-----------
1,794,905
-----------
Foreign Agency (0.3%):
15,400 Stewart Enterprises, Inc.-
Class A..................... 247,363
-----------
Forest & Paper Products (0.1%):
3,300 Westvaco Corp................. 69,300
-----------
Funeral Services (0.2%):
13,100 Service Corp. International... 186,675
-----------
Health & Personal Care (0.3%):
9,700 HCR Manor Care, Inc. (b)...... 221,281
-----------
Healthcare Cost Containment (0.1%):
5,500 Orthodontic Centers Of
America, Inc. (b)........... 86,625
-----------
Hotels & Motels (0.2%):
5,200 Starwood Hotels & Resorts
Worldwide, Inc.............. 148,525
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Household Products (0.5%):
4,000 The Clorox Company............ $ 468,750
-----------
Human Resources (0.6%):
10,300 Interim Services, Inc......... 154,500
13,300 Olsten Corp................... 82,294
7,700 Robert Half International,
Inc. (b).................... 252,656
-----------
489,450
-----------
Instruments-Scientific (0.8%):
5,200 The Perkin-Elmer Corp......... 504,726
1,900 Waters Corp. (b).............. 199,619
-----------
704,345
-----------
Insurance (5.7%):
16,500 Allstate Corp................. 611,532
2,000 American General Corp......... 141,000
9,700 American International Group,
Inc......................... 1,170,062
5,400 Cigna Corp.................... 452,587
13,000 Conseco, Inc.................. 401,375
6,000 Everest Reinsurance Holdings,
Inc......................... 187,125
5,700 Hartford Financial Services
Group....................... 323,831
7,950 Old Republic International
Corp........................ 145,087
2,600 Protective Life Corp.......... 98,475
4,600 Providian Corp................ 506,000
8,400 ReliaStar Financial Corp...... 358,050
5,700 The PMI Group, Inc............ 264,337
2,650 Transatlantic Holdings,
Inc......................... 198,750
-----------
4,858,211
-----------
Internet Software & Services (0.7%)
3,400 CMGI Inc...................... 622,413
-----------
Linen Supply & Related Items (0.4%):
5,000 Cintas Corp................... 326,874
-----------
Machine Tools & Related Products (0.2%):
7,500 Kennametal, Inc............... 131,250
-----------
Machinery & Equipment (1.8%):
5,500 Applied Materials, Inc. (b)... 339,224
20,400 Case Corp..................... 517,649
10,600 Harnischfeger Industries,
Inc......................... 60,287
9,000 Ingersoll-Rand Co............. 446,625
4,100 Tecumseh Products Co., Class
A........................... 208,844
-----------
1,572,629
-----------
</TABLE>
Continued
-22-
<PAGE> 23
THE COVENTRY GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Manufacturing (0.4%):
4,800 Crane Co...................... $ 116,100
6,900 Trinity Industries, Inc....... 202,688
-----------
318,788
-----------
Medical -- HMO (0.4%):
6,900 Columbia/HCA Healthcare
Corp........................ 130,669
14,140 Foundation Health Corp. --
Class A. (b)................ 172,331
-----------
303,000
-----------
Medical Services & Supplies (2.0%):
77,800 HEALTHSOUTH Corp. (b)......... 807,164
5,700 Steris Corp. (b).............. 151,763
15,500 Stryker Corp.................. 781,779
-----------
1,740,706
-----------
Medical--Biotechnology (0.9%):
3,600 Biogen, Inc. (b).............. 411,525
4,100 Genentech, Inc. (b)........... 363,361
-----------
774,886
-----------
Medical--Health Management Organization
(0.7%):
11,900 Humana Inc.................... 205,275
7,000 United Healthcare Corp........ 368,375
-----------
573,650
-----------
Medical--Hospitals (0.3%):
14,700 Tenet Healthcare Corp. (b).... 278,381
-----------
Medical--Instruments/Products (2.5%):
5,000 Beckman Coulter, Inc.......... 220,000
25,200 Guidant Corp.................. 1,524,599
3,300 Henry Schein, Inc. (b)........ 83,325
11,400 Sybron International Corp.
(b)......................... 285,000
-----------
2,112,924
-----------
Medical--Wholesale Drug Distribution
(0.3%):
12,400 Bergen Brunswig Corp.- Class
A........................... 248,000
-----------
Metal Fabrication (0.2%):
4,500 Precision Castparts Corp...... 181,125
-----------
Motor Vehicles (1.8%):
10,100 Ford Motor Co................. 573,175
11,500 General Motors Corp........... 999,063
-----------
1,572,238
-----------
Multimedia (1.4%):
17,100 Time Warner Inc............... 1,215,171
-----------
Networking Software (0.8%):
6,300 Cisco Systems, Inc. (b)....... 690,245
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Office Equipment & Services (0.7%):
10,400 Xerox Corporation............. $ 555,100
-----------
Office Supplies & Forms (0.1%):
2,900 Standard Register Co.......... 86,094
-----------
Oil & Gas (2.0%):
4,300 Ashland, Inc.................. 176,031
2,300 Chevron Corp.................. 203,406
9,100 Cooper Cameron Corp. (b)...... 308,261
6,000 Exxon Corp.................... 423,375
2,700 SEACOR SMIT, Inc. (b)......... 145,294
14,500 The Coastal Corp.............. 478,500
-----------
1,734,867
-----------
Oil & Gas -- Exploration/Production (1.7%):
25,600 Anadarko Petroleum Corp....... 966,400
35,200 Cross Timbers Oil Co.......... 248,604
10,000 Ultramar Diamond Shamrock
Corp........................ 216,250
-----------
1,431,254
-----------
Oil & Gas Drilling (0.3%):
13,400 Nabors Industries, Inc. (b)... 243,713
-----------
Oil--Gas Services (1.0%):
21,400 Rowan Cos., Inc. (b).......... 271,510
9,900 Schlumberger Ltd.............. 595,855
-----------
867,365
-----------
Oil--Integrated Companies (0.7%):
6,300 BP Amoco -- PLC-ADR........... 635,906
-----------
Oil--Refining & Marketing (0.1%):
4,200 Tosco Corp.................... 104,213
-----------
Pharmaceuticals (5.5%):
10,000 AmeriSource Health Corp.
(b)......................... 341,875
21,900 Amgen, Inc. (b)............... 1,639,760
3,500 Eli Lilly & Co................ 297,062
9,100 Mylan Laboratories, Inc....... 249,681
9,800 Omnicare, Inc................. 186,813
8,600 Pfizer, Inc................... 1,193,250
10,900 Schering-Plough Corp.......... 602,906
3,900 Watson Pharmaceuticals, Inc.
(b)......................... 172,088
-----------
4,683,435
-----------
Photography (0.2%):
3,100 Eastman Kodak Co.............. 198,013
-----------
Pipelines (0.4%):
11,200 El Paso Energy Corp........... 366,100
-----------
Publishing-Newspaper (0.5%):
8,800 Knight Ridder, Inc............ 440,000
-----------
</TABLE>
Continued
-23-
<PAGE> 24
THE COVENTRY GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Railroad (0.1%):
3,200 Burlington Northern Santa Fe
Corp........................ $ 105,200
-----------
Real Estate Investment Trust (0.5%):
5,100 Equity Office Properties
Trust....................... 129,731
6,700 Liberty Property Trust........ 139,025
8,400 Prentiss Properties Trust..... 156,450
-----------
425,206
-----------
Restaurants (0.7%):
6,100 Brinker International, Inc.
(b)......................... 157,456
16,600 Starbucks Corp. (b)........... 465,840
-----------
623,296
-----------
Retail (7.6%):
14,700 CVS Corporation............... 698,250
7,200 Dillards Inc.- Class A........ 182,700
14,200 Home Depot, Inc............... 883,950
8,000 May Department Stores Co...... 313,000
5,000 Office Depot, Inc. (b)........ 184,063
6,400 Ross Stores, Inc.............. 280,400
10,200 Safeway, Inc. (b)............. 523,388
5,400 Sears Roebuck & Co............ 244,013
21,400 The Kroger Co. (b)............ 1,281,321
16,800 TJX Cos., Inc................. 571,200
15,100 Toys "R" Us, Inc. (b)......... 284,069
8,100 Wal-Mart Stores, Inc.......... 746,718
6,000 Walgreen Co................... 169,500
-----------
6,362,572
-----------
Retail Automotive (1.0%):
21,600 Navistar International Corp.
(b)......................... 868,050
-----------
Savings & Loans (0.7%):
6,100 Dime Bancorp, Inc............. 141,444
3,500 Golden West Financial Corp.... 334,250
5,600 Webster Financial Corp........ 161,700
-----------
637,394
-----------
Steel (0.4%):
8,800 Ryerson Tull, Inc............. 129,250
6,800 USFreightways Corp............ 223,550
-----------
352,800
-----------
Telecommunication & Satellite (0.3%):
14,500 DSP Communications, Inc.
(b)......................... 230,188
-----------
Telecommunications (2.4%):
17,300 Bell Atlantic Corp............ 894,193
11,200 Comcast Corp.................. 688,800
9,800 Sprint Corp. (PCS Group)
(b)......................... 434,264
-----------
2,017,257
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Textile (0.1%):
4,100 Springs Industries, Inc....... $ 110,956
-----------
Tires & Rubber Products (0.4%):
7,500 Goodyear Tire & Rubber Co..... 373,594
-----------
Tobacco (0.9%):
14,500 Philip Morris Cos., Inc....... 510,219
8,700 RJR Nabisco Holdings Corp..... 217,500
-----------
727,719
-----------
Transportation (0.1%):
1,900 CNF Transportation, Inc....... 71,844
-----------
Transportation-Air (1.2%):
4,100 AMR Corp. Del (b)............. 240,106
5,850 COMAIR Holdings, Inc. (b)..... 138,206
4,800 Delta Air Lines, Inc.......... 333,600
3,700 FDX Corp. (b)................. 343,407
-----------
1,055,319
-----------
Transportation-Misc. (0.0%):
1,000 Ryder System, Inc............. 27,625
-----------
Utilities-Electric (1.5%):
2,600 Cinergy Corp.................. 71,500
9,100 DTE Energy Co................. 349,781
2,111 Duke Energy Corp.............. 115,313
4,700 Entergy Corp.................. 129,250
4,300 FPL Group, Inc................ 228,975
3,800 GPU, Inc...................... 141,788
2,600 PECO Energy Co................ 120,250
4,800 The Southern Company.......... 111,900
-----------
1,268,757
-----------
Utilities-Telephone (4.3%):
11,858 AT & T Corp................... 946,430
14,800 BellSouth Corp................ 592,925
9,000 Century Telephone Enterprises,
Inc......................... 632,250
12,600 MCI Worldcom, Inc. (b)........ 1,115,889
1,900 Sprint Corp. (FON Group)...... 186,437
3,700 U S WEST, Inc................. 203,731
-----------
3,677,662
-----------
TOTAL COMMON STOCKS 81,899,403
-----------
</TABLE>
Continued
-24-
<PAGE> 25
THE COVENTRY GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
REPURCHASE AGREEMENT (1.7%):
$1,476,286 Fifth Third Bank Repurchase
Agreement, 3/31/98, 4.40%,
matures 4/1/99,
(Collateralized by
$1,508,000 FHLM, 6.00%,
9/1/13, market value =
$1,596,443)................. $ 1,476,286
-----------
Total Repurchase Agreement.... 1,476,286
-----------
Total (Cost $74,498,457)
(a)......................... $83,375,689
===========
</TABLE>
- ---------
Percentages indicated are based on net assets of $85,361,065.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting purposes in excess of federal income tax reporting of
$90,019. Cost for federal income tax purposes differs from market value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $15,314,061
Unrealized depreciation......................... (6,526,848)
-----------
Net unrealized appreciation..................... $ 8,787,213
===========
</TABLE>
(b) Represents non-income producing securities.
See notes to financial statements.
-25-
<PAGE> 26
THE COVENTRY GROUP
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- --------- ------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (66.7%):
Advertising (1.9%):
6,000 Lamar Advertising Co. (b)...... $ 203,625
13,000 Outdoor Systems, Inc. (b)...... 390,001
-----------
593,626
-----------
Audio/Video Products (0.6%):
2,500 Gemstar International Group
Limited (b).................. 188,125
-----------
Business Equipment & Services (1.3%):
15,000 Sylvan Learning Systems, Inc.
(b).......................... 410,625
-----------
Commercial Goods & Services (0.5%):
10,000 Carey International, Inc.
(b).......................... 162,500
-----------
Computer Graphics (1.0%):
7,500 Pixar, Inc. (b)................ 295,313
-----------
Computer Software (6.4%):
7,500 AVT Corp. (b).................. 179,063
7,500 Axent Technologies, Inc. (b)... 180,472
15,000 CBT Group PLC-ADR (b).......... 171,563
8,000 Keane, Inc. (b)................ 170,500
10,000 Micromuse Inc. (b)............. 459,999
29,000 Rogue Wave Software, Inc.
(b).......................... 232,000
40,000 The Descartes Systems Group,
Inc. (b)..................... 310,685
15,000 Wind River Systems, Inc. (b)... 267,188
-----------
1,971,470
-----------
Computers & Integrated Systems (0.8%):
10,000 Cadence Design Systems, Inc.
(b).......................... 257,500
-----------
Computers & Manufacturing Memory Devices (2.0%):
30,000 Maxtor Corp. (b)............... 211,875
5,000 VERITAS Software Corp. (b)..... 403,750
-----------
615,625
-----------
Data Processing & Reproduction (0.4%):
4,500 Analytical Surveys, Inc. (b)... 117,000
-----------
Electronic Components (8.7%):
20,000 Amkor Technology, Inc. (b)..... 157,500
48,000 Artisan Components, Inc. (b)... 249,000
30,000 C. P. Clare Corp. (b).......... 108,750
13,000 Celestica, Inc. (b)............ 421,688
7,500 Flextronics International Ltd.
(b).......................... 382,500
10,000 Level One Communications, Inc.
(b).......................... 486,249
7,500 MIPS Technologies, Inc. (b).... 457,499
7,500 Semtech Corp. (b).............. 239,063
3,500 Vitesse Semiconductor Corp.
(b).......................... 177,188
-----------
2,679,437
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- --------- ------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Environmental Services (2.2%):
50,000 Stericycle, Inc. (b)........... $ 671,875
-----------
Fiber Optics (1.9%):
30,000 International FiberCom, Inc.
(b).......................... 196,875
7,500 Metromedia Fiber Network, Inc.
(b).......................... 388,594
-----------
585,469
-----------
Financial Services (0.9%):
7,500 NCO Group, Inc. (b)............ 277,500
-----------
Health & Personal Care (0.5%):
7,900 CareMatrix Corporation (b)..... 150,100
-----------
Healthcare Cost Containment (0.5%):
10,000 Orthodontic Centers Of America,
Inc. (b)..................... 157,500
-----------
Household -- General Products (0.8%):
28,000 Home Products International,
Inc. (b)..................... 255,500
-----------
Investment Companies (1.3%):
4,000 DIAMONDS Trust, Series I....... 391,000
-----------
Manufacturing (0.4%):
20,000 Packaged Ice, Inc. (b)......... 125,000
-----------
Medical Services & Supplies (2.4%):
7,500 Agouron Pharmaceuticals, Inc.
(b).......................... 424,219
7,500 Hanger Orthopedic Group, Inc.
(b).......................... 101,250
20,000 HEALTHSOUTH Corp. (b).......... 207,500
-----------
732,969
-----------
Medical -- Biotechnology (0.3%):
7,500 Serologicals Corp. (b)......... 101,719
-----------
Medical -- Imaging Systems (0.5%):
15,000 Total Renal Care Holdings, Inc.
(b).......................... 165,000
-----------
Medical -- Instruments/Products (0.8%):
9,000 Molecular Devices Corp. (b).... 243,000
-----------
Multimedia (1.6%):
15,000 Shaw Communications Inc. (b)... 482,813
-----------
Networking Software (3.2%):
3,500 Concord Communications, Inc.
(b).......................... 199,500
4,000 Legato Systems, Inc. (b)....... 206,500
10,000 Newbridge Networks Corp. (b)... 310,000
7,500 Visual Networks, Inc. (b)...... 280,313
-----------
996,313
-----------
</TABLE>
Continued
-26-
<PAGE> 27
THE COVENTRY GROUP
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- --------- ------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Oil & Gas Drilling (1.3%):
11,000 Noble Drilling Corp. (b)....... $ 190,438
11,000 Santa Fe International
Corp. ....................... 205,562
-----------
396,000
-----------
Pharmaceuticals (3.8%):
6,000 Biovail Corp. International
(b).......................... 231,000
15,000 King Pharmaceuticals, Inc.
(b).......................... 416,249
7,500 Omnicare, Inc. ................ 142,969
30,000 Schein Pharmaceutical, Inc.
(b).......................... 390,000
-----------
1,180,218
-----------
Pipelines (1.3%):
20,000 K N Energy, Inc. .............. 398,750
-----------
Radio (1.2%):
7,500 Cox Radio, Inc. -- Class A
(b).......................... 384,375
-----------
Railroad (1.1%):
6,000 Kansas City Southern
Industries, Inc. ............ 342,000
-----------
Recreation Centers (1.5%):
20,000 Bally Total Fitness Holding
Corp. (b).................... 477,500
-----------
Retail (9.4%):
15,000 Ames Department Stores, Inc.
(b).......................... 556,875
4,000 AnnTaylor Stores Corp. (b)..... 176,750
15,000 Eagle Hardware & Garden, Inc.
(b).......................... 572,812
15,000 Family Dollar Stores, Inc. .... 345,000
15,000 Fred's, Inc. .................. 165,000
12,500 Linens 'n Things, Inc. (b)..... 567,187
10,000 Restoration Hardware, Inc.
(b).......................... 220,000
7,500 Ross Stores, Inc. ............. 328,594
-----------
2,932,218
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Savings & Loans (0.5%):
10,550 ITLA Capital Corp. (b)........ $ 152,975
-----------
Telecommunication & Satellite (1.9%):
6,000 American Tower Corp. -- Class
A (b)....................... $ 147,000
7,500 Gilat Satellite Networks Ltd.
(b)......................... 450,000
5,000 USA Networks, Inc. (b)........ 179,063
-----------
776,063
-----------
Telecommunications (0.5%):
4,000 ECI Telecom Ltd. ............. 140,000
-----------
Transportation -- Air (0.9%):
12,000 COMAIR Holdings, Inc. (b)..... 283,500
-----------
Utilities -- Electric (1.8%):
7,500 Montana Power Co. ............ 551,719
-----------
Total Common Stocks........... 20,642,297
-----------
DEPOSITARY RECEIPTS (5.2%):
18,000 S & P 400 Mid-Cap Depositary
Receipt..................... 1,236,375
3,000 S & P 500 Depositary
Receipt..................... 385,500
-----------
Total Depositary Receipts..... 1,621,875
-----------
WARRANTS (0.0%):
5,000 Alza Corp. (b)................ 781
-----------
Total Warrants................ 781
-----------
REPURCHASE AGREEMENT (26.2%):
$8,093,242 Fifth Third Bank Repurchase
Agreement, 3/31/99, 4.40%,
matures 4/1/99,
(Collateralized by
$8,256,000 FHLM, 6.00%,
9/1/13, market value =
$8,196,660)................. 8,093,242
-----------
Total Repurchase Agreement.... 8,093,242
-----------
Total (Cost $29,658,784)
(a)......................... $30,358,195
===========
</TABLE>
Continued
-27-
<PAGE> 28
THE COVENTRY GROUP
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
- ---------
Percentages indicated are based on net assets of $30,945,632.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting purposes in excess of federal income tax reporting of
$23,556. Cost for federal income tax purposes differs from market value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $ 2,719,240
Unrealized depreciation......................... (2,043,385)
-----------
Net unrealized appreciation..................... $ 675,855
===========
</TABLE>
(b) Represents non-income producing securities
PLC -- Public Limited Company
ADR -- American Depository Receipt
See notes to financial statements.
-28-
<PAGE> 29
THE COVENTRY GROUP
1ST SOURCE MONOGRAM INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS (18.6%):
Financial Services (5.9%):
2,000,000 Bear Stearns, 6.15%, 3/2/04... $ 1,986,436
2,000,000 General Motors Acceptance
Corp. 6.15%, 4/5/07 ........ 1,993,260
-----------
3,979,696
-----------
Industrial Goods & Services (12.7%):
2,000,000 American Home Products, 7.90%,
2/15/05..................... 2,192,134
2,000,000 May Department Stores Co.,
9.88%, 6/15/00.............. 2,094,946
2,000,000 Procter & Gamble, 8.00%,
11/15/03.................... 2,186,588
2,000,000 Southern California Edison
Co., 6.38%, 1/15/06......... 2,023,674
-----------
8,497,342
-----------
Total Corporate Bonds......... 12,477,038
-----------
U.S. TREASURY OBLIGATIONS (68.7%):
6,000,000 6.75%, 4/30/00................ 6,112,500
6,000,000 7.50%, 11/15/01............... 6,345,000
8,000,000 6.25%, 8/31/02................ 8,262,504
8,000,000 7.25%, 5/15/04................ 8,715,000
8,000,000 6.50%, 5/15/05................ 8,482,504
8,000,000 6.13%, 8/15/07................ 8,365,000
-----------
Total U.S. Treasury
Obligations................. 46,282,508
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (9.2%):
Fannie Mae (4.6%):
3,000,000 6.95%, 11/13/06, Callable
11/13/01 @ 100.............. $ 3,072,621
-----------
Freddie Mac (4.6%):
3,000,000 6.24%, 10/6/04................ 3,086,892
-----------
Total U.S. Government
Agencies.................... 6,159,513
-----------
REPURCHASE AGREEMENT (4.7%):
$3,165,664 Fifth Third Bank Repurchase
Agreement, 3/31/99, 4.40%,
matures 4/1/99,
(Collateralized by
$3,229,000 FHLM, 6.00%,
9/13/99, market value --
$3,205,792)................. 3,165,664
-----------
Total Repurchase Agreement.... 3,165,664
-----------
Total (Cost $69,060,094)
(a)......................... $68,084,723
===========
</TABLE>
- ---------
Percentages indicated are based on net assets of $67,250,538.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting purposes in excess of federal income tax reporting of
$30,000. Cost for federal income tax purposes differs from market value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $ 57,171
Unrealized depreciation......................... (1,062,542)
-----------
Net unrealized depreciation..................... $(1,005,371)
===========
</TABLE>
See notes to financial statements.
-29-
<PAGE> 30
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
1. ORGANIZATION:
The Coventry Group (the "Group") was organized on January 8, 1992 as a
Massachusetts business trust, and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified open-end
management investment company. The Group offers shares of a number of
different series, the following series for which 1st Source Bank serves as
investment adviser: the 1st Source Monogram Income Equity Fund, the 1st
Source Monogram Diversified Equity Fund, the 1st Source Monogram Special
Equity Fund, and the 1st Source Monogram Income Fund (collectively, the
"Funds" and individually, a "Fund"). On October 24, 1998, the 1st Source
Monogram Funds were reorganized and moved from The Sessions Group to The
Coventry Group. In connection with this reorganization, the Funds changed
their fiscal year end to March 31.
The investment objectives of the Income Equity Fund are capital
appreciation with current income as a secondary objective. The investment
objective for each of the Diversified Equity Fund and the Special Equity
Fund is capital appreciation. The investment objective of the Income Fund
is current income consistent with preservation of capital.
The Group is authorized to issue an unlimited number of shares, which are
equal units of beneficial interest with a par value of $0.01 per share.
Sales of Fund shares may be made to the general public.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Funds in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The
preparation of financial statements requires management to make estimates
and assumptions that may affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of income and expenses for the period. Actual results could differ
from those estimates.
SECURITIES VALUATION:
Investments in common and preferred stocks, corporate bonds, commercial
paper, municipal securities, and U.S. Government securities of the Income
Equity Fund, the Diversified Equity Fund, the Special Equity Fund, and the
Income Fund are valued at their market values determined on the basis of
the current available prices in the principal market (closing sales prices
if the principal market is an exchange or NASDAQ National Market) in which
such securities are normally traded. Investments in investment companies
are valued at their net asset values as reported by such companies. Other
securities for which quotations are not readily available are valued at
their fair value under procedures established by the Group's Board of
Trustees. Investments in debt securities with remaining maturities of 60
days or less may be valued based upon the amortized cost method.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the amortization of premium
or
Continued
-30-
<PAGE> 31
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1999
discount. Dividend income is recorded on the ex-dividend date. Gains or
losses realized on sales of securities are determined by comparing the
identified cost of the security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS:
The Funds may acquire repurchase agreements from financial institutions
such as banks and broker-dealers which 1st Source Bank deems creditworthy
under guidelines approved by the Board of Trustees, subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price. The repurchase price generally equals the price paid by each Fund
plus interest negotiated on the basis of current short-term rates, which
may be more or less than the rate on the underlying portfolio securities.
The seller, under a repurchase agreement, is required to maintain the value
of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest). Securities subject to
repurchase agreements are transferred to an account of the Fund at a bank
custodian.
DERIVATIVES:
A derivative is defined as a financial instrument whose value is derived
from the performance of underlying assets, interest rate and currency
exchange rates, or indices, and include (but are not limited to) structured
debt obligations, interest rates, futures contracts, options, and forward
currency contracts. Risks of entering into such transactions include the
potential inability of the dealer to meet its obligations and unanticipated
movements in the value of the security or the underlying assets or indices.
It is possible that the Funds will incur a loss as a result of their
investments in derivative instruments. It is the policy of the Funds, to
the extent that there exists no readily available market for such
securities, that the investment will be treated as an illiquid security for
purposes of calculating the Funds' limitations on investments in illiquid
securities as set forth in the Funds' investment restrictions.
DIVIDENDS TO SHAREHOLDERS:
A dividend for each of the Funds, other than the Special Equity Fund, is
declared monthly at the close of business on the day of declaration and is
generally paid monthly. A dividend for the Special Equity Fund is declared
quarterly at the close of business on the day of declaration and is paid
quarterly. Distributable net realized capital gains for each Fund, if any,
are distributed at least annually.
Dividends from net investment income and net realized capital gains are
determined in accordance with Federal income tax regulations, which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for net investment losses, expiring
capital loss carry forwards, and deferral of certain losses.
These "book/tax" differences are either considered temporary or permanent
in nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the composition of net assets on their
federal tax-basis treatment; temporary differences do not require
reclassifications. Dividends and distributions to shareholders which exceed
net investment income and net realized gains
Continued
-31-
<PAGE> 32
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1999
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of
net realized gains. To the extent they exceed net investment income and net
realized gains for tax purposes, they are reported as distributions of
capital.
As of March 31, 1999, the following reclassifications have been made to
increase (decrease) the following components of net assets with offsetting
adjustments, if any, made to paid-in-capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED NET
UNDISTRIBUTED NET REALIZED GAIN/(LOSS)
INVESTMENT INCOME ON INVESTMENTS
----------------- --------------------
<S> <C> <C>
Income Equity Fund........................ $ 10,174 $ (10,174)
Diversified Equity Fund................... $158,266 $ (158,266)
Special Equity Fund....................... $ 31,820 --
Income Fund............................... $ (7) $ 7
</TABLE>
FEDERAL INCOME TAXES:
It is the policy of the Funds to continue to qualify as a regulated
investment company by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of net investment income and net
realized capital gains sufficient to relieve it from all, or substantially
all, Federal income taxes.
ORGANIZATION COSTS:
All expenses in connection with each Fund's organization and registration
under the 1940 Act and the Securities Act of 1933 were paid by that Fund.
Such expenses are amortized over a period of five years commencing with the
date of the initial public offering.
EXPENSES:
Expenses that are directly related to one of the Funds are charged directly
to that Fund. Expenses relating to the Funds collectively are prorated to
the Funds on the basis of each Fund's relative net assets. Other expenses
for the Group are prorated to the Funds and any other portfolios of the
Group on the basis of relative net assets.
Continued
-32-
<PAGE> 33
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1999
3. PURCHASES AND SALES OF SECURITIES:
The costs of purchases and proceeds from sales of securities (excluding
short-term securities) for the period ended March 31, 1999 (a) were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Income Equity Fund.............................. $ 18,281,568 $ 15,345,621
Diversified Equity Fund......................... 90,804,009 98,399,980
Special Equity Fund............................. 57,989,312 60,739,725
Income Fund..................................... 188,164,640 193,070,760
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Funds by 1st Source Bank.
Under the terms of the investment advisory agreement, 1st Source Bank is
entitled to receive fees based on a percentage of the average net assets of
each Fund.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), an Ohio limited partnership, and BISYS Fund Services Ohio, Inc.
("BISYS Ohio") are subsidiaries of The BISYS Group, Inc.
BISYS, with whom certain officers and trustees of the Group are affiliated,
serves the Funds as distributor. Such officers and trustees are paid no
fees directly by the Funds for serving as officers and trustees of the
Group. BISYS Ohio serves the Funds as administrator, transfer agent and
fund accountant. Under the terms of the administration agreement, BISYS's
fees are computed daily as a percentage of the average net assets of each
Fund.
The Group has adopted a Distribution and Shareholder Service Plan in
accordance with Rule 12b-1 under the 1940 Act, pursuant to which each Fund
is authorized to pay or reimburse BISYS, as distributor, a periodic amount,
calculated at an annual rate not to exceed 0.25% of the average daily net
asset value of each Fund. These fees may be used by BISYS to pay banks,
including 1st Source Bank, broker-dealers and other institutions, or to
reimburse BISYS or its affiliates, for distribution and shareholder
services in connection with the distribution of Fund shares.
The Group has adopted an Administrative Services Plan, pursuant to which
each Fund is authorized to pay compensation to banks and other financial
institutions, which may include 1st Source Bank, its correspondent and
affiliated banks and BISYS, for providing ministerial, record keeping
and/or administrative support services to their customers who are the
beneficial or record owners of a Fund. The compensation which may be paid
under the Administrative Services Plan is a fee computed daily at an annual
rate of up to 0.25% of the average net assets of each Fund. As of the date
of this report, no such servicing agreements have been entered into by the
Group with respect to the Funds.
Continued
-33-
<PAGE> 34
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1999
BISYS is also entitled to receive commissions on sales of shares of the
Funds. For the period ended March 31, 1999, BISYS received $1,526 from
commissions earned on sales of shares of the Funds, of which $1,366 was
reallowed to broker/dealers affiliated with 1st Source Bank.
Fees may be voluntarily reduced to assist the Funds in maintaining
competitive expense ratios. Information regarding these transactions is as
follows for the period ended March 31, 1999:
<TABLE>
<CAPTION>
INCOME DIVERSIFIED SPECIAL
EQUITY EQUITY EQUITY INCOME
FUND FUND FUND FUND
------- ----------- ------- --------
<S> <C> <C> <C> <C>
INVESTMENT ADVISORY:
Annual fee before voluntary fee
reductions (percentage of
average net assets)............. .80% .99%(*) .80% .55%
ADMINISTRATION FEES:
Annual fee before voluntary fee
reductions (percentage of
average net assets)............. .20% .20% .20% .20%
12B-1 FEES:
Annual fee before voluntary fee
reductions (percentage of
average net assets)............. .25% .25% .25% .25%
Voluntary fee reductions.......... $92,761 $163,975 $56,818 $123,839
</TABLE>
- ---------------
(*) For the period of July 1, 1998 through October 23, 1998 the Investment
Advisory fee was 1.10%, the effective date of the change to 0.99% was
October 24, 1998.
5. FEDERAL INCOME TAX INFORMATION (UNAUDITED):
During the period ended March 31, 1999 the Funds declared long-term capital
gain distributions as follows:
<TABLE>
<CAPTION>
LONG-TERM
20%
-----------
<S> <C>
Income Equity Fund.......................................... $ 4,013,003
Diversified Equity Fund..................................... $11,019,380
Income Fund................................................. $ 475,088
</TABLE>
Continued
-34-
<PAGE> 35
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1999
For corporate shareholders the following percentage of the total ordinary
income distributions paid during the period ended March 31, 1999 (a)
quality for the corporate dividends received deduction for the following
funds:
<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
Income Equity Fund.......................................... 51.11%
Diversified Equity Fund..................................... 18.01%
Special Equity Fund......................................... 100.00%
Income Fund................................................. 0.14%
</TABLE>
Capital losses incurred for the Income Fund after October 31, within the
Fund's fiscal year are deemed to arise on the first business day of the
following fiscal year for tax purposes. The Fund has incurred and will
elect to defer such capital losses of $422,665.
At March 31, 1999, the Special Equity Fund had net capital loss
carryforwards in the amount of $522,780 which will be available through
March 31, 2007 to offset future net capital gains, if any, to the extent
provided by the Treasury regulations. To the extent that these
carryforwards are used to offset future capital gains, it is probably that
these gains so offset will not be distributed to shareholders.
- ---------------
(a) For the period from July 1, 1998 through March 31, 1999.
-35-
<PAGE> 36
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INCOME EQUITY FUND DIVERSIFIED EQUITY FUND
----------------------------------------------- -----------------------------------------------
PERIOD FOR YEAR FOR PERIOD PERIOD FOR YEAR FOR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30, MARCH 31, JUNE 30, JUNE 30,
1999(a) 1998 1997(b) 1999(a) 1998 1997(b)
------------ ---------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 12.60 $ 12.28 $ 10.00 $ 13.31 $ 11.80 $ 10.00
------- ------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment
income(loss)........... 0.20 0.27 0.20 (0.02) (0.02) (0.01)
Net realized and
unrealized
gains(losses) on
investments............ (0.26) 1.79 2.32 (0.11) 3.00 2.03
------- ------- ------- ------- ------- -------
Total from Investment
Activities........... (0.06) 2.06 2.52 (0.13) 2.98 2.02
------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income.... (0.20) (0.27) (0.19) -- -- --
Net realized gains....... (1.34) (1.47) (0.05) (1.92) (1.47) (0.22)
------- ------- ------- ------- ------- -------
Total Distributions.... (1.54) (1.74) (0.24) (1.92) (1.47) (0.22)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................... $ 11.00 $ 12.60 $ 12.28 $ 11.26 $ 13.31 $ 11.80
======= ======= ======= ======= ======= =======
Total Return (excludes
sales charge)............ 0.04%(c) 18.15% 25.58%(c) (0.59)%(c) 27.85% 20.42%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of
period (000)........... $50,903 $52,450 $39,196 $85,361 $98,083 $74,990
Ratio of expenses to
average net assets..... 1.21%(d) 1.21% 1.37%(d) 1.43%(d) 1.48% 1.62%(d)
Ratio of net investment
income (loss) to
average net assets..... 2.29%(d) 2.16% 2.38%(d) (0.24)%(d) (0.18)% (0.10)%(d)
Ratio of expenses to
average net assets(*).. 1.46%(d) 1.46% 1.62%(d) 1.68%(d) 1.73% 1.87%(d)
Portfolio Turnover
Rate................... 34.41% 70.46% 38.49% 107.94% 95.13% 76.54%
</TABLE>
- ---------------
(*) During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occured, the ratios would have been as indicated.
(a) For the period from July 1, 1998 through March 31, 1999.
(b) Commencement of operations of the Funds began September 25, 1996 and
September 23, 1996, respectively.
(c) Not annualized
(d) Annualized
-36-
<PAGE> 37
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SPECIAL EQUITY FUND INCOME FUND
----------------------------------------------- -----------------------------------------------
PERIOD FOR YEAR FOR PERIOD PERIOD FOR YEAR FOR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30, MARCH 31, JUNE 30, JUNE 30,
1999(a) 1998 1997(b) 1999(a) 1998 1997(b)
------------ ---------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 9.63 $ 9.59 $ 10.00 $ 10.34 $ 10.13 $ 10.00
------- ------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment
income(loss)........... -- -- -- 0.41 0.60 0.44
Net realized and
unrealized
gains(losses) on
investments............ (0.44) 0.17 (0.10)(e) (0.10) 0.21 0.12
------- ------- ------- ------- ------- -------
Total from Investment
Activities........... (0.44) 0.17 (0.10) 0.31 0.81 0.56
------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income.... -- (**) (**) (0.41) (0.60) (0.43)
From tax return of
capital................ (0.01) -- -- -- -- --
Net realized gains....... -- (0.13) -- (.18) -- --
In excess of realized
gains.................. -- -- (0.31) (.07) -- --
------- ------- ------- ------- ------- -------
Total Distributions.... (0.01) (0.13) (0.31) (0.66) (0.60) (0.43)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................... $ 9.18 $ 9.63 $ 9.59 $ 9.99 $ 10.34 $ 10.13
======= ======= ======= ======= ======= =======
Total Return (excludes
sales charge)............ (4.55)%(c) 1.86% (1.03)%(c) 3.00%(c) 8.24% 5.71%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of
period (000)........... $30,946 $35,441 $30,524 $67,251 $65,975 $54,789
Ratio of expenses to
average net assets..... 1.24%(d) 1.27% 1.39%(d) 0.92%(d) 0.92% 1.05%(d)
Ratio of net investment
income (loss) to
average net assets..... 0.02%(d) 0.04% 0.05%(d) 5.23%(d) 5.90% 5.71%(d)
Ratio of expenses to
average net assets(*).. 1.49%(d) 1.52% 1.65%(d) 1.17%(d) 1.17% 1.30%(d)
Portfolio Turnover
Rate................... 247.95% 124.55% 152.81% 301.44% 208.32% 118.33%
</TABLE>
- ---------------
(*) During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(**) Amount is less than $0.005
(a) For the period from July 1, 1998 through March 31, 1999.
(b) Commencement of operations of the Funds began September 20, 1996, and
September 24, 1996, respectively.
(c) Not annualized
(d) Annualized
(e) The amount shown, while mathematically determinable by the summation of
amounts computed for as many periods during the year as shares were sold
or repurchased, is also the balancing figure derived from the other
figures in the statement and should be so computed. The amount shown for a
share outstanding throughout the period does not accord with the change in
the aggregate gains and losses in the portfolio of securities during the
period because of the timing of sales and purchases of Fund shares in
relation to fluctuating market values during the period.
-37-
<PAGE> 38
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees
1st Source Monogram Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, and the related statements of operations
and changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the 1st Source Monogram Income
Equity Fund, 1st Source Monogram Diversified Equity Fund, 1st Source Monogram
Special Equity Fund, and 1st Source Monogram Income Fund (separate portfolios
constituting 1st Source Monogram Funds, hereafter referred to as the "Funds") at
March 31, 1999, the results of each of their operations for the nine month
period ended March 31, 1999 and for the year ended June 30, 1998, the changes in
each of their net assets for the nine month period ended March 31, 1999, for the
year ended June 30, 1998 and for the period from inception through June 30,
1997, and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which include correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Columbus, Ohio
May 14, 1999
-38-
<PAGE> 39
ANNUAL REPORT
[1st Source
MONOGRAM FUNDS(SM) LOGO]
ANNUAL REPORT
MARCH 31, 1999
[1st Source
MONOGRAM FUNDS(SM) LOGO]
INVESTMENT ADVISER
1st Source Bank
100 North Michigan Street
South Bend, IN 46601
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
FOR ADDITIONAL INFORMATION, CALL:
1-800-766-8938
This material must be preceded or accompanied by a current prospectus.
5/99
