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MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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Dear Investor:
We are pleased to present this report for the six months ended December 31,
1998, a period that was a strong one for our fund family. While the volatility
can be disconcerting, historically it has also presented investors with
opportunities, and that was certainly the case this time as well.
As the period opened, aftershocks from the turmoil in Asia were reaching our
shores, and signs that our economy was slowing were beginning to appear. Then,
in August, the Russian economic collapse triggered the implosion of a highly
leveraged private hedge fund, Long Term Capital Management. Liquidity
evaporated, and markets worldwide fell sharply.
In the United States, the correction was swift and severe and created a two-tier
market. Having been in a correction since early April, most smaller and mid-cap
stocks lost another 30%. The biggest and best-known names, in comparison,
dropped some 19% to 20%. In the bond markets, investors fled to U.S. Treasury
securities, and as a result, all other fixed-income securities faltered.
THE MARKETS REBOUND
Many of the situations that triggered the decline had eased somewhat by late
September. Citing a desire to cushion the U.S. economy against weakness abroad
and to sustain growth domestically, the Federal Reserve Board (Fed) rose to the
rescue and made the first of three cuts in short-term interest rates. Also, a
group of investment banks, encouraged by the Fed, moved to provide Long Term
Capital Management with the capital to gradually unwind its positions. Finally,
in other markets worldwide, governments indicated a willingness to make
structural economic reforms. As a result, liquidity began to trickle back into
the markets.
As the dust settled, investors took note of the U.S. economy's impressive
strength in the face of the global dislocation. Corporate earnings were sliding,
but the underpinnings of the economy were unchanged. Interest rates were low;
unemployment was at the lowest levels in over 25 years; and while the economy
was not growing at a torrid pace, it was still growing. Seeing a relatively
stable environment ahead, investors grew positive once again, and the markets
rebounded throughout the fall.
STOCKS: CAUTIOUSLY OPTIMISTIC
In the stock market, the move upward in the fall was a powerful one, and broader
than earlier in the year. Very simply, in the wake of the correction, the
valuations of many smaller and mid-capitalization stocks were so attractive that
they could not be ignored. As the year drew to a close, however, investor
sentiment continued to favor the biggest and best-known names, and herein lies
our concern for the market in the near-term.
Over the past several years, while earnings have increased at a record pace,
stock prices have increased even faster. But earnings are now expected to
soften. Despite widespread acknowledgment of this, lower numbers may disappoint
investors used to seeing their expectations regularly exceeded. Consequently, we
expect the marketplace to be rather volatile in the months ahead.
BONDS: CALMER SEAS AHEAD
Having been more volatile in the second half of 1998 than they were in the
entire previous decade, the fixed-income markets also stabilized and rebounded
in the fall. Going forward, we expect that the environment in the U.S. bond
market should continue to improve. With nonexistent inflation and a stable,
albeit slower, economy, we anticipate that interest rates should continue to
move downward in 1999. Spreads should continue to move to more "normal" levels.
As a result, we believe the
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MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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months ahead will be good ones for fixed-income investors. While excitement may
be in shorter supply, real yields over inflation are now providing, and in our
view should continue to provide, a nice return.
THE LONG-TERM OUTLOOK
Looking out longer term, we believe it is clear that world demand may begin
slowing. The decline will be primarily in manufacturing demand--and the United
States is now a service-oriented economy. Consequently, we believe it is
unlikely that we will suffer any severe or deep recession due to current
problems overseas in the coming year. Of course, given the environment
worldwide, a mild recession is a possibility, though a somewhat remote one. The
U.S. banking system is in its strongest shape in decades. The Federal Reserve
still has plenty of room to lower interest rates. Also, given the current
situation, our economy has little competition from poorer performing economies
overseas.
Consequently, we are optimistic about the long-term prospects for both stocks
and bonds. The stable, low interest rate, and low inflation environment we see
ahead has proven in the past to be very favorable for the financial markets.
Moreover, as the baby boomer generation moves ever closer to retirement, the
demand for equities and fixed-income investments can only grow stronger.
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 Fund performance over the past six
months and expectations for the future. We urge you to read this material.
Finally, we thank you for your continued confidence in the 1st Source Monogram
family of funds. As always, we will continue to seek investment opportunities
that may help you meet your long-term goals, while monitoring investment risk.
If you have any questions or require any assistance, please do not hesitate to
contact your account representative or to call the Funds direct at
1-800-766-8938.
Sincerely,
Ralph C. Shive, CFA
Pascal M. "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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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 six months ended
December 31, 1998, the Fund's total return was -2.11% (without sales load).+
In comparison, the Russell 1000 Value Index(1) produced a total return of
3.10%, and the Lipper Equity Income Average(2) returned 1.80%.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. Clearly, the volatility that resulted from events in Asia and in our own
market had an impact on the Fund's performance. Throughout the period,
investors favored larger cap stocks, not because their fundamentals were
necessarily any stronger than the smaller cap stocks, but simply because
they were perceived to have higher liquidity and less risk. As a result,
most smaller and mid-cap issues lagged the averages--and those with a
value-orientation suffered the most. Among the sectors that were the hardest
hit were those tied to the turmoil of the bond market. As a result, the
performance of the Fund's holdings in REITs (real estate investment trusts)
and insurance were disappointing. In spite of the environment, however,
several of the Fund's positions performed extremely well. In
telecommunications, Frontier Corp. (1.9% of the Fund's portfolio), a
long-distance data communication provider, and Montana Power (2.5%), owner
of a fiber-optic network, also made solid contributions to performance. On
the consumer side, Bausch & Lomb (1.3%), Bristol-Myers Squibb Co. (2.1%) and
Abbott Labs (2.5%) were strong performers.*
Q. HOW DID YOU APPLY YOUR INVESTMENT STRATEGY DURING THE PERIOD?
A. As the stock prices of the large caps went higher, so did their
price-to-earnings (P/E) ratios--and with this, many issues outside the
"Nifty Fifty" grew even more attractive on a relative basis. Throughout
October, we reemployed the cash reserves that had been built up during the
August correction and invested in what we believed were the most compelling
of these situations. Browning Ferris (1.5%) and Sherwin Williams (0.9%) are
both stable consumer names that we added to the portfolio. Also, positions
were added in both A.G. Edwards (1.1%) and Paine Webber (1.1%), the
brokerage stocks we believed were extremely oversold during the period.*
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1st Source Monogram Funds
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Q. WHAT'S YOUR MARKET OUTLOOK FOR THE NEXT SIX MONTHS?
A. Certainly, events in the global marketplace will have an impact, but there
is no reason to believe that the United States will not remain the world's
stalwart. Of concern are the high price levels of stocks as earnings are
slowing. The market may be rather volatile while investors digest this
situation. At the same time, the U.S. capitalist system is the most creative
in the world--and just as they have in the past, U.S. corporations now
produce value and, in our view, will continue to do so. The long-term
prospects remain very bright.
Consequently, while we will approach the market cautiously in the short
term, we are optimistic. Now, we believe, is a time of very real opportunity
for those who seek investments that offer a combination of income and growth
at a reasonable price. As always, however, in the search for these
investments, we will maintain our quality standards will, continue to and
maintain a well-diversified portfolio in order to reduce risk for our
shareholders.
+ With the maximum sales load of 5.00%, the six-month return would have been
-6.99%.
(1) The Russell 1000 Value Index is an unmanaged index that contains 1,000
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 their
portfolios in equities.
* 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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1st Source Monogram Funds
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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 (sector-rotation), 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 six-month period ended December 31, 1998, the Fund's total return
was -0.41% (without sales load)+. Over the same time period, the S&P 500
Stock Index(1) produced a total return of 9.36%.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. John Truschel, Standish, Ayer & Wood:
The market's powerful rebound throughout the fall was broader than its
advance earlier in the year. Nonetheless, the largest gains were
concentrated among the largest capitalization stocks. While the stocks of
smaller companies with fundamentals just as strong and reasonably priced did
advance, they lagged the large-caps due to neglect more than anything else.
Ironically, the vast majority of these issues have far less exposure, if any
at all, to events overseas than do the larger capitalization issues
currently dominating the market's attention.
A. Robert Marcin, Miller Anderson & Sherrerd:
Investors fled to the biggest and best-known names in the market in the
second half of the year--regardless of price-to-earnings (P/E) ratios. As a
result, the low P/E style of investing did rather poorly over the course of
the period. At the same time, however, several mega-cap stocks qualified for
investment and were purchased by the Fund. Among the group were IBM (0.79%
of the Fund's portfolio) and Ford (0.79%). Both posted very strong returns
for the period. Outstanding as their performance was, however, it could not
compensate for the underperformance of virtually all others outside the
"Nifty Fifty."*
A. Bob Takazawa, Loomis Sayles & Company:
Disconcerted by the risks of recession, deflation and the credit crunch in
the third quarter, investors sold high-growth, nondefensive mid-cap stocks.
In the fourth quarter, however, these fears had eased as governments
worldwide--including our own Federal Reserve--lowered interest rates, which
helped to stabilize the environment. The market rebounded, and this time,
the advance was broader than it had been earlier in the year. As a result,
while our holdings underperformed in the third quarter, they did extremely
well in the fourth quarter as investors became less risk averse.
Q. HOW DID YOU APPLY YOUR INVESTMENT STRATEGY DURING THE PERIOD?
A. John Truschel, Standish, Ayer & Wood:
While activity in the large-cap sector monopolized investors' attention
during the period, other sectors presented real opportunity. When the market
rebounded in early November and December, we took advantage of the
environment and realigned the portfolio. Stocks of fast-growing companies
with unrealistically high P/E ratios were eliminated in favor of more
reasonably priced stocks from companies with strong momentum and solid
long-term prospects.
A. Robert Marcin, Miller Anderson & Sherrerd:
As always, we looked for companies with solid earnings growth, strong
fundamentals and cheap valuations. In the environment of the period,
however, this strategy was out of style. Moreover, it had been out of style
for some time. As a result, many smaller and mid-cap
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1st Source Monogram Funds
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stocks were at very attractive valuations prior to the August downdraft, and
they only grew more so as the market dropped. Throughout the fall, we
capitalized on many of these opportunities. Positions were added or
strengthened in many smaller and mid-cap companies that we believe will do
well in the year ahead.
A. Bob Takazawa, Loomis Sayles & Company:
Because nothing had changed with regard to the fundamental strength of our
holdings, we stood pat as the market moved downward in August and September.
In addition, believing that this was just a temporary interruption in the
market's growth, we took advantage of the opportunity to add positions in
the technology sector--a group that was particularly hard hit in the dog
days of the decline. As a result, we were overweighted in technology
throughout the fall--and benefited handsomely as these stocks rebounded and
moved higher.
Q. WHAT'S YOUR OUTLOOK FOR THE SIX MONTHS AHEAD?
A. John Truschel, Standish, Ayer & Wood:
Given the current valuations of large-cap issues, we could see a relative
bear market in some of these stocks in the months ahead; however, we remain
optimistic about other sectors of the market. Many of these stocks remain
reasonably priced, and this is where we believe investors will turn when
market sentiment inevitably changes. At the same time, we expect that when
it does change, returns are far more likely to be closer to long-term
averages rather than the "irrational exuberant" returns the large-caps
produced over the past year.
A. Robert Marcin, Miller Anderson & Sherrerd:
As we begin 1999, the relative discount in the low P/E sector of the
marketplace is the lowest it has been in decades. Eventually, as I said
earlier, we believe market sentiment will shift. Of course, no one can
precisely predict when this will happen, but as earnings slow in the coming
months, we may see the shift sooner rather than later. At that point, we
expect to see a fairly dramatic rotation. Moreover, when investors focus on
this sector, we believe they will find a number of fundamentally sound
companies. As a result, we are optimistic about the prospects for the low
P/E sector of the market and for our holdings, in particular, going forward.
A. Bob Takazawa, Loomis Sayles & Company:
Looking ahead, we expect to see the stock market's growth continue to
broaden, due primarily to interest rate cuts worldwide. While demand has
weakened in Asia, Latin America and even Europe of late, these cuts should
spark a rebound and help the earnings of high-growth companies. Given their
current valuations, these stocks in general have the potential to do very
well in the coming months. Specifically, we are optimistic about the
prospects for high-growth companies in the oil services and
telecommunication sectors. Contrary to current wisdom, we expect telecom
spending to be just as strong in 1999 as it was in 1998. In the oil services
arena, a stronger Asia should lead to an increase in demand and, hence, in
oil prices. Under pressure for much of the past year, the services sector is
an area we expect to see advance significantly.
+ With the maximum sales charge of 5.00%, the Fund's six-month return for the
period would have been -5.39%.
(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.
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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1st Source Monogram Funds
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SPECIAL EQUITY FUND+
BRIAN A. BYTHROW
Q. HOW DID THE FUND PERFORM DURING THE PERIOD?
A. Over the course of the period, investors' sentiments favored larger
capitalization issues--and smaller-cap stocks suffered from neglect. As a
result, for the six months ended December 31, 1998, the Russell 2000
Index(1) lost 7.12%. In comparison, our portfolio did extremely well. For
the period, the Fund generated a total return of 2.52% (without sales
load).++
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. As had been the case earlier in the year, investors' attentions were focused
on the very biggest and best-known names throughout much of this period.
Perceived to be "safe" and "liquid," these stocks soared as events unfolded
in Asia and Russia, and as our own economy showed signs of weakening. By
July, it appeared to us that this segment of the market was extremely
overvalued, and any turmoil here would lead to greater turmoil in the
marketplace as a whole. At that point, we increased the Fund's cash position
by selling off several of its riskier holdings. As a result, when the market
did correct in August, the Fund suffered far less than many others. Also,
this put us in position to capitalize on many of the opportunities the
correction left in its wake in the small-cap sector.
Q. WHAT TYPES OF STOCKS WERE ADDED TO THE PORTFOLIO?
A. Primarily, we added small-cap stocks available at low valuations. Keep in
mind that the average Nasdaq stock had not kept pace with the advance of the
larger cap issues earlier in the year--and then, in the correction, such
stocks lost on average another 30% of their value. Taking advantage of this
opportunity, we added a number of semi-conductor companies to the portfolio
in late September. All went on to post gains of over 50% through the end of
the period. We also increased our position in Ames Department Stores (2.0%)
and Brightpoint (3.4%), a cellular phone distributor. Both securities
doubled in size during the fourth quarter. Finally, many of the portfolio's
holdings recovered some 20% to 30% of their July valuations by the end of
the period.*
Q. WHAT SECTORS ACCOUNTED FOR THE STRENGTH OF THE COMEBACK?
A. Very simply, when all was said and done, the portfolio was heavily weighted
in health-care, technology and consumer stocks--the sectors that took the
hardest hits in August and early September. While all finished 1998 on a
strong note, and there were standout performers in each, none of these
sectors by the year's end had made up all the ground lost.
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1st Source Monogram Funds
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Q. WHAT IS YOUR OUTLOOK FOR SMALL CAPS IN THE SIX MONTHS AHEAD?
A. Despite the gains of the past several months, small-cap stocks are still, in
general, undervalued relative to the valuations of larger cap stocks. Also,
unlike the larger caps, many of these companies will see earnings growth in
the coming year. At the moment, however, this sector of the market is still
overlooked, and the few investors who do take a look tend to have a
"rent-a-stock" mentality, e.g., they seek to turn over positions for quick
gains.
We believe the large-cap issues will not, however, reign supreme forever. It
is our belief that at some point the small caps will become too attractive
to ignore. In short, the question now is not "if" but "when"--and "when" is
impossible to predict precisely. But, having taken full advantage of the
opportunities the market's correction presented, and by strengthening our
holdings in sound companies with solid prospects for above-average growth,
we believe the Fund is very well positioned for that day when it does
arrive.
+ 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.
++ With the maximum sales charge of 5.00%, the Fund's return for the six-month
period would have been -2.63%.
(1) The Russell 2000 Index is an unmanaged index that generally 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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INCOME FUND
PASCAL M. "PAT" ROMANO, CFA
Q. HOW DID THE FUND PERFORM DURING THE PERIOD?
A. For the six months ended December 31, 1998, the Fund's total return was
3.95% (without the sales load).+ In comparison, the Lehman Brothers
Intermediate Government/Corporate Bond Index(1) produced a total return of
4.80%. Keep in mind, however, that this index tracks the performance of
intermediate bonds over a wide quality range. The Fund invests only in
securities rated "A" or better.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. Without question, the environment in the fixed-income markets over this
period was more volatile than it had been in decades. Worried about the
stability of markets abroad, the situation with Long Term Capital Management
here in the United States, and the fact that our economy was slowing,
investors sought quality and safety--and stormed into Treasuries in late
summer. Spreads widened between these and virtually all other fixed-income
securities and then widened further as hedge funds had to liquidate their
positions to survive.
The Fed eased rates in early September to accommodate this unwinding. As a
result, liquidity, which had all but evaporated in August, was restored. By
the period's end, after additional Fed rate decreases, the environment was
more stable, and spreads were returning to more "normal" positions.
Nonetheless, the period was a rough one for all but the most conservative
fixed-income investors.
Q. HOW DID YOU APPLY YOUR INVESTMENT STRATEGY DURING THE PERIOD?
A. Given the rather volatile environment, the Fund was lightly weighted in
corporate securities as the period began. Moreover, as always, holdings were
focused on higher quality securities. Consequently, the Fund did suffer as
liquidity dried up, but the impact was somewhat muted. As the market
rebounded in the fall, we remained cautious. Resisting the temptation to
chase technical factors, we did not actively trade in the market. Due to
this conservative stance, the Fund fell slightly short of its benchmark, the
Lehman Brothers Intermediate Government/Corporate Bond Index. Nevertheless,
given the circumstances, we feel that caution was well warranted.
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Q. WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. Going forward, we expect that the environment should continue to improve.
Inflationary pressures are nonexistent, and interest rates are low. While
our economy's growth is slowing, we believe this is a deceleration rather
than the beginning of a decline. But, if this is, in fact, a decline, the
Federal Reserve still has plenty of room to lower rates in the months ahead.
As a result, we are optimistic about the prospects for the fixed-income
markets. Of course, at any point, an extraneous event domestically or
globally could trigger another round of volatility. With that caveat, we
expect the marketplace to be less exciting going forward than it has been
recently. And, given a quieter environment, we expect to focus more on
coupon and interest payments than on capital gains in the coming months.
+ With the maximum sales charge of 4.00%, the Fund's six-month return for the
period would have been -0.20%.
(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.
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<PAGE> 11
TABLE OF CONTENTS
Statements of Assets and Liabilities
PAGE 12
Statements of Operations
PAGE 13
Statements of Changes in Net Assets
PAGE 14
Schedules of Portfolio Investments
PAGE 16
Notes to Financial Statements
PAGE 28
Financial Highlights
PAGE 34
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THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
INCOME DIVERSIFIED SPECIAL
EQUITY EQUITY EQUITY INCOME
FUND FUND FUND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (cost $40,272,532;
$79,514,638; $26,531,448; and $63,870,233,
respectively)................................. $44,430,290 $91,068,461 $28,383,477 $64,201,611
Repurchase agreements (cost $5,934,043;
$561,117; $4,510,724; and $963,877,
respectively)................................. 5,934,043 561,117 4,510,724 963,877
----------- ----------- ----------- -----------
Total Investments......................... 50,364,333 91,629,578 32,894,201 65,165,488
Interest and dividends receivable............... 111,210 87,238 993,597 923,899
Unamortized organization costs.................. 7,088 12,078 6,762 10,177
Prepaid expenses and other assets............... 4,790 4,093 1,095 4,671
----------- ----------- ----------- -----------
Total Assets.............................. 50,487,421 91,732,987 33,895,655 66,104,235
----------- ----------- ----------- -----------
LIABILITIES:
Payable for investments purchased............... -- 79,499 1,251,270 --
Accrued expenses and other payables:
Investment advisory fees.................... 33,034 73,742 20,481 30,559
Administration fees......................... 1,062 1,895 686 1,432
Other....................................... 21,868 36,351 20,589 28,232
----------- ----------- ----------- -----------
Total Liabilities........................... 55,964 191,487 1,293,026 60,223
----------- ----------- ----------- -----------
NET ASSETS:
Capital......................................... 45,701,993 73,665,081 30,372,364 65,900,377
Undistributed (distributions in excess of) net
investment income............................. 23,884 (85,450) (4,075) 7,637
Net unrealized appreciation (depreciation) on
investments................................... 4,157,758 11,553,823 1,852,029 331,378
Accumulated undistributed net realized gains
(losses) on investment transactions........... 547,822 6,408,046 382,311 (195,380)
----------- ----------- ----------- -----------
Net Assets.................................. $50,431,457 $91,541,500 $32,602,629 $66,044,012
=========== =========== =========== ===========
Outstanding units of beneficial interest
(shares)...................................... 4,665,625 8,113,066 3,307,395 6,466,220
=========== =========== =========== ===========
Net asset value -- redemption price per share... $ 10.81 $ 11.28 $ 9.86 $ 10.21
=========== =========== =========== ===========
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............................... $ 11.38 $ 11.87 $ 10.38 $ 10.64
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
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<PAGE> 13
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF OPERATIONS
FOR SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
INCOME DIVERSIFIED SPECIAL
EQUITY EQUITY EQUITY INCOME
FUND FUND FUND FUND
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income....................... $ 248,642 $ 104,092 $ 191,143 $2,001,681
Dividend income....................... 658,533 440,901 28,745 --
----------- ------------ ----------- ----------
Total Income........................ 907,175 544,993 219,888 2,001,681
----------- ------------ ----------- ----------
EXPENSES:
Investment advisory fees.............. 197,673 468,321 120,511 181,388
Administration fees................... 49,419 87,949 30,128 65,959
12b-1 fees............................ 61,778 109,935 37,660 82,449
Other................................. 47,872 73,532 36,300 53,908
----------- ------------ ----------- ----------
Total Expenses........................ 356,742 739,737 224,599 383,704
Less: expenses voluntarily
reduced........................ (61,778) (109,935) (37,660) (82,449)
----------- ------------ ----------- ----------
Net Expenses.......................... 294,964 629,802 186,939 301,255
----------- ------------ ----------- ----------
Net Investment Income (Loss).......... 612,211 (84,809) 32,949 1,700,426
----------- ------------ ----------- ----------
REALIZED/UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gains (losses) on
investment transactions............. 1,636,127 10,309,635 2,685,899 881,385
Change in unrealized appreciation/
depreciation on investments......... (3,519,163) (10,866,400) (2,024,601) (20,424)
----------- ------------ ----------- ----------
Net realized/unrealized gains (losses)
on investments...................... (1,883,036) (556,765) 661,298 860,961
----------- ------------ ----------- ----------
Change in net assets resulting from
operations.......................... $(1,270,825) $ (641,574) $ 694,247 $2,561,387
=========== ============ =========== ==========
</TABLE>
See notes to financial statements.
-13-
<PAGE> 14
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCOME EQUITY FUND DIVERSIFIED EQUITY FUND
--------------------------- ---------------------------
FOR THE FOR THE
SIX MONTHS FOR YEAR SIX MONTHS FOR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1998 1998 1998 1998
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss)....... $ 612,211 $ 1,011,118 $ (84,809) $ (161,686)
Net realized gains (losses) on
investment transactions......... 1,636,127 6,789,017 10,309,635 13,166,299
Net change in unrealized
appreciation/depreciation on
investments..................... (3,519,163) (415,826) (10,866,400) 8,399,708
------------ ------------ ------------ ------------
Change in net assets resulting from
operations......................... (1,270,825) 7,384,309 (641,574) 21,404,321
------------ ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income......... (644,510) (985,708) -- --
From net realized gains on
investments..................... (5,549,465) (5,026,674) (13,464,080) (9,785,732)
------------ ------------ ------------ ------------
Change in net assets from shareholder
distributions...................... (6,193,975) (6,012,382) (13,464,080) (9,785,732)
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued........ 11,603,307 16,097,747 13,689,132 20,560,375
Dividends reinvested............... 5,918,530 5,820,966 13,109,770 9,643,385
Cost of shares redeemed............ (12,075,972) (10,035,797) (19,234,969) (18,728,640)
------------ ------------ ------------ ------------
Change in net assets from capital
transactions....................... 5,445,865 11,882,916 7,563,933 11,475,120
------------ ------------ ------------ ------------
Change in net assets................. (2,018,935) 13,254,843 (6,541,721) 23,093,709
NET ASSETS:
Beginning of period................ 52,450,392 39,195,549 98,083,218 74,989,509
------------ ------------ ------------ ------------
End of period...................... $ 50,431,457 $ 52,450,392 $ 91,541,497 $ 98,083,218
============ ============ ============ ============
SHARE TRANSACTIONS:
Issued............................. 976,496 1,270,185 1,105,376 1,643,723
Reinvested......................... 552,967 497,282 1,196,147 873,495
Redeemed........................... (1,028,127) (794,106) (1,557,988) (1,502,834)
------------ ------------ ------------ ------------
Change in shares..................... 501,336 973,361 743,535 1,014,384
============ ============ ============ ============
</TABLE>
See notes to financial statements.
-14-
<PAGE> 15
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SPECIAL EQUITY FUND INCOME FUND
--------------------------- ---------------------------
FOR THE FOR THE
SIX MONTHS FOR YEAR SIX MONTHS FOR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1998 1998 1998 1998
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss)........ $ 32,949 $ 12,948 $ 1,700,426 $ 3,583,038
Net realized gains (losses) on
investment transactions.......... 2,685,899 (796,672) 881,385 725,350
Net change in unrealized
appreciation/depreciation on
investments...................... (2,024,601) 1,351,263 (20,424) 461,944
----------- ------------ ------------ ------------
Change in net assets resulting from
operations.......................... 694,247 567,539 2,561,387 4,770,332
----------- ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income.......... (38,294) (15,078) (1,741,269) (3,582,178)
From net realized gains on
investments...................... -- (452,546) (1,586,392) --
----------- ------------ ------------ ------------
Change in net assets from shareholder
distributions....................... (38,294) (467,624) (3,327,661) (3,582,178)
----------- ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued......... 5,205,918 15,510,945 11,262,548 17,944,091
Dividends reinvested................ 36,604 450,173 3,193,308 3,466,908
Cost of shares redeemed............. (8,736,968) (11,144,152) (13,620,656) (11,412,595)
----------- ------------ ------------ ------------
Change in net assets from capital
transactions........................ (3,494,446) 4,816,966 835,200 9,998,404
----------- ------------ ------------ ------------
Change in net assets.................. (2,838,493) 4,916,881 68,926 11,186,558
NET ASSETS:
Beginning of period................. 35,441,122 30,524,241 65,975,086 54,788,528
----------- ------------ ------------ ------------
End of period....................... $32,602,629 $ 35,441,122 $ 66,044,012 $ 65,975,086
=========== ============ ============ ============
SHARE TRANSACTIONS:
Issued.............................. 611,410 1,539,687 1,076,811 1,739,371
Reinvested.......................... 4,411 47,382 310,577 337,542
Redeemed............................ (989,313) (1,087,999) (1,299,378) (1,106,996)
----------- ------------ ------------ ------------
Change in shares...................... (373,492) 499,070 88,010 969,917
=========== ============ ============ ============
</TABLE>
See notes to financial statements.
-15-
<PAGE> 16
THE COVENTRY GROUP
1ST SOURCE MONOGRAM INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS (79.4%):
Automotive Parts (2.1%):
36,000 Excel Industries, Inc. ....... $ 630,000
45,000 Simpson Industries, Inc. ..... 435,938
-----------
1,065,938
-----------
Banking (2.9%):
9,000 National City Corp. .......... 652,500
17,434 Union Planters Corp........... 789,978
-----------
1,442,478
-----------
Chemicals (2.4%):
7,000 Dow Chemical Co. ............. 636,563
21,500 Lubrizol Corp. ............... 552,281
-----------
1,188,844
-----------
Communications Equipment (1.3%):
18,000 Harris Corp. ................. 659,250
-----------
Computer Services (2.2%):
22,000 Electronic Data Systems
Corp. ...................... 1,105,500
-----------
Computers (1.6%):
11,500 Hewlett Packard Co. .......... 785,594
-----------
Consumer Goods & Services (1.4%):
17,000 American Greetings Corp. ..... 698,063
-----------
Electronic Components (3.1%):
22,600 Dallas Semiconductor Corp. ... 920,950
19,000 Parker-Hannifin Corp. ........ 622,250
-----------
1,543,200
-----------
Environmental Services (1.5%):
27,000 Browning-Ferris Industries,
Inc. ....................... 767,813
-----------
Financial Services (4.3%):
15,000 A.G. Edwards, Inc. ........... 558,750
40,000 Alliance Capital Management
-LP......................... 1,030,000
15,000 Paine Webber Group, Inc. ..... 579,375
-----------
2,168,125
-----------
Food & Related (1.3%):
10,600 Quaker Oats Co. .............. 630,700
-----------
Forest & Paper Products (2.9%):
10,000 Georgia Pacific Corp. ........ 585,625
17,000 Weyerhaeuser Co. ............. 863,813
-----------
1,449,438
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Insurance (5.6%):
22,000 Conseco, Inc. ................ $ 672,375
12,000 La Salle RE Holdings.......... 261,000
9,000 Lincoln National Corp. ....... 736,312
12,412 Saint Paul Companies, Inc. ... 431,317
45,000 TIG Holdings, Inc. ........... 700,312
-----------
2,801,316
-----------
Investment Companies (1.5%):
32,100 Waddell & Reed Financial,
Inc. ....................... 760,369
-----------
Machinery & Equipment (0.5%):
32,000 AGCO Corp. ................... 252,000
-----------
Medical Instruments (1.3%):
11,000 Bausch & Lomb Inc. ........... 660,000
-----------
Mining (0.4%):
15,000 De Beers Centenary............ 191,250
-----------
Motor Vehicles (1.7%):
15,000 Ford Motor Co. ............... 880,312
-----------
Office Equipment & Services (1.7%):
42,000 A.H. Belo Corp.- Series A..... 837,375
-----------
Oil -- Integrated Companies (5.6%):
12,000 Atlantic Richfield Co. ....... 783,000
7,000 Mobil Corp. .................. 609,875
12,000 Phillips Petroleum Co. ....... 511,500
20,800 Star Gas Partners L.P. ....... 313,300
20,000 USX -- Marathon Group
Corp. ...................... 602,500
-----------
2,820,175
-----------
Paint & Related Products (0.9%):
15,000 Sherwin-Williams Co. ......... 440,625
-----------
Pharmaceuticals (6.3%):
26,000 Abbott Laboratories........... 1,274,000
8,000 Bristol-Myers Squibb Co. ..... 1,070,500
6,000 Merck & Co., Inc. ............ 886,125
-----------
3,230,625
-----------
Publishing (3.4%):
31,100 Readers Digest Association.... 783,331
14,000 Tribune Co. .................. 924,000
-----------
1,707,331
-----------
</TABLE>
Continued
-16-
<PAGE> 17
THE COVENTRY GROUP
1ST SOURCE MONOGRAM INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Real Estate Investment Trust (5.8%):
53,000 Burnham Pacific Properties,
Inc. ....................... $ 639,312
40,000 CAPTEC Net Lease Realty,
Inc. ....................... 500,000
14,875 Equity Residential Property... 601,508
12,000 Hospitality Properties
Trust....................... 289,500
31,000 Prentiss Properties Trust..... 691,687
34,000 Thornburg Mortgage Asset
Corp. ...................... 259,250
-----------
2,981,257
-----------
Retail (4.1%):
27,000 Claires Stores, Inc. ......... 553,500
21,000 Dillards Inc., Class A........ 595,875
25,000 Long's Drug Stores, Inc. ..... 937,500
-----------
2,086,875
-----------
Steel (2.1%):
25,000 Allegheny Teledyne, Inc. ..... 510,937
16,800 Carpenter Technology Corp. ... 570,150
-----------
1,081,087
-----------
Telecommunications (1.9%):
28,000 Frontier Corp. ............... 952,000
-----------
Tires & Rubber Products (1.3%):
33,000 Cooper Tire & Rubber Co. ..... 674,437
-----------
Tobacco (0.6%):
10,000 RJR Nabisco Holdings Corp. ... 296,875
-----------
Transportation-Air (1.5%):
13,000 AMR Corp. Del (b)............. 771,875
-----------
Transportation-Misc. (1.5%):
29,000 Ryder System, Inc. ........... 754,000
-----------
Utilities-Electric (4.7%):
13,000 American Electric Power,
Co. ........................ 611,813
16,000 Houston Industries, Inc. ..... 514,000
22,000 Montana Power Co. ............ 1,244,375
-----------
2,370,188
-----------
Total Common Stocks........... 40,054,915
-----------
PREFERRED STOCKS (3.3%):
Computers (0.8%):
10,000 Budget Group Capital Trust,
6.25%, 6/15/05 (c).......... 385,000
-----------
Financial Services (1.1%):
10,000 KMart Financing Corp., 7.75%,
6/15/16, Callable 6/17/99 @
52.71....................... 579,375
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
PREFERRED STOCKS, CONTINUED:
Hotels & Motels (0.6%):
22,000 Signature Inns, Inc. ......... $ 305,250
-----------
Metals -- Diversified (0.4%):
5,000 Cypress Amax Minerals Co.,
8.00%, 12/31/49, Callable
@12/18/99 @ 51.20........... 176,875
-----------
Telecommunications (0.4%):
17,000 Cellnet Funding LLC, 7.00%,
6/1/10, Callable 6/1/01 @... 221,000
-----------
Total Preferred Stocks........ 1,667,500
-----------
CONVERTIBLE BONDS (5.4%):
Computer Software (1.0%):
500,000 Learning Co., 5.50%, 11/1/00,
Callable 11/1/99 @ 101.10
(c)......................... 493,125
-----------
Computers (1.1%):
600,000 Data General Corp., 6.00%,
5/15/04, Callable 5/18/00 @
103.43...................... 563,250
-----------
Industrial Goods & Services (1.7%):
550,000 Integrated Device Technology
5.50%, 6/1/02, Callable
6/1/99 @ 101.38............. 376,750
150,000 IVAX Corp. 6.50%, 11/15/01,
Continually Callable @
100.00...................... 141,750
450,000 Mascotech 4.50%, 12/15/03,
Callable 12/15/99 @
101.50...................... 364,500
-----------
883,000
-----------
Medical -- Wholesale Drug Distribution (0.9%):
400,000 Fuisz Technologies Ltd.,
7.00%, 10/15/04, Callable
10/19/00 @ 104.00 (c)....... 432,500
-----------
Oil & Gas Services (0.7%):
600,000 Halter Marine, 4.50%, 9/15/04,
Callable 9/15/00 @ 102.57... 336,000
-----------
Total Convertible Bonds....... 2,707,875
-----------
</TABLE>
Continued
-17-
<PAGE> 18
THE COVENTRY GROUP
1ST SOURCE MONOGRAM INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
REPURCHASE AGREEMENT (11.8%):
$5,934,043 Fifth Third Bank Repurchase
Agreement, 12/31/98, 3.82%,
matures 1/4/99,
(Collateralized by
$5,886,000, FNMA Pool
#313004, 7.50%, 7/1/11,
market value =
$6,053,386)................. $ 5,934,043
-----------
Total Repurchase Agreement.... 5,934,043
-----------
Total (Cost $46,206,575)
(a)......................... $50,364,333
===========
</TABLE>
- ---------
Percentages indicated are based on net assets of $50,431,457.
(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......................... $ 8,752,079
Unrealized depreciation......................... (4,594,321)
-----------
Net unrealized appreciation..................... $ 4,157,758
===========
</TABLE>
(b) Represents non-income producing securities.
(c) 144A Security which is restricted as to resale to institutional investors.
See notes to financial statements.
-18-
<PAGE> 19
THE COVENTRY GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS (99.1%):
Advertising (0.4%):
6,500 Omnicom Group, Inc............ $ 377,000
-----------
Apparel (0.8%):
15,100 VF Corp. ..................... 707,813
-----------
Apparel Manufacturers (1.0%):
7,600 Jones Apparel Group, Inc.
(b)......................... 167,675
13,500 Liz Claiborne, Inc. .......... 426,094
5,600 Tommy Hilfiger Corp. (b)...... 336,000
-----------
929,769
-----------
Automotive Parts (0.8%):
7,700 Dana Corp. ................... 314,738
1,900 Eaton Corp. .................. 134,306
5,800 TRW, Inc. .................... 325,887
-----------
774,931
-----------
Banking (7.3%):
13,900 AmSouth Bancorporation........ 634,188
7,200 Bank One Corp. ............... 367,650
6,500 BankAmerica Corp. ............ 390,813
4,000 BankBoston Corp. ............. 155,750
4,600 BB&T Corp. ................... 185,437
10,400 Chase Manhattan Corp. ........ 707,850
6,400 Comerica Inc. ................ 436,400
4,600 Cullen/Frost Bankers, Inc. ... 252,425
8,700 First Tennessee National
Corp. ...................... 331,144
17,210 First Union Corp. ............ 1,046,582
40,100 MBNA Corp. ................... 999,994
8,500 PNC Bank Corp. ............... 460,062
4,400 Republic New York Corp. ...... 200,475
11,700 Wells Fargo Company........... 467,269
-----------
6,636,039
-----------
Building -- Residential/Commercial (0.2%):
5,900 Kaufman & Broad Home Corp. ... 169,625
-----------
Building Materials (1.1%):
4,700 Lafarge Corp. ................ 190,350
10,200 Owens Corning................. 361,463
7,300 Southdown, Inc. .............. 432,069
-----------
983,882
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Chemicals (1.5%):
12,300 Air Products & Chemicals,
Inc......................... $ 492,000
2,900 FMC Corp. (b)................. 162,400
7,200 IMC Global, Inc. ............. 153,900
3,400 Morton International, Inc. ... 83,300
9,600 Rohm & Haas Co. .............. 289,200
11,700 W.R. Grace & Co. (b).......... 183,544
-----------
1,364,344
-----------
Communications Equipment (0.4%):
6,300 Symbol Technologies, Inc. .... 402,806
-----------
Computer Services (1.3%):
6,000 America Online, Inc. (b)...... 960,000
7,400 Diebold Inc. ................. 264,087
-----------
1,224,087
-----------
Computer Software (3.2%):
16,400 Compuware Corp. (b)........... 1,281,250
5,100 Fiserv, Inc. (b).............. 262,331
11,800 Network Associates, Inc.
(b)......................... 781,750
15,000 Oracle Corp. (b).............. 646,875
-----------
2,972,206
-----------
Computers (5.2%):
8,700 Apple Computer, Inc. (b)...... 356,156
8,000 Compaq Computer Corp. ........ 335,500
10,300 EMC Corp. (b)................. 875,500
5,400 Intel Corp. .................. 640,237
3,900 International Business
Machines Corp. ............. 720,525
11,300 Sun Microsystems, Inc. (b).... 967,562
8,200 Synopsys, Inc. (b)............ 444,850
12,500 Unisys Corp. (b).............. 430,469
-----------
4,770,799
-----------
Construction (0.3%):
6,500 Centex Corp................... 292,906
-----------
Consumer Goods & Services (0.2%):
4,200 American Greetings Corp. ..... 172,463
-----------
Data Processing & Reproduction (0.5%):
13,700 First Data Corp. ............. 434,119
-----------
Data Processing Services (0.5%):
5,200 Automatic Data Processing,
Inc. ....................... 416,975
-----------
Defense (0.7%):
6,000 Cordant Technologies, Inc. ... 225,000
4,100 United Technologies Corp. .... 445,875
-----------
670,875
-----------
</TABLE>
Continued
-19-
<PAGE> 20
THE COVENTRY GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Distribution Services (0.3%):
19,400 Brightpoint, Inc. (b)......... $ 266,750
-----------
Diversified Products (0.3%):
10,100 Aeroquip-Vickers, Inc. ....... 302,369
-----------
Electrical Equipment (0.3%):
10,700 Arrow Electronics, Inc. (b)... 285,556
-----------
Electronic Components (3.5%):
10,900 American Power Conversion
Corp. (b)................... 527,968
5,400 Avnet, Inc. .................. 326,700
9,150 Parker-Hannifin Corp. ........ 299,663
13,400 Solectron Corp. (b)........... 1,245,362
11,050 Tektronix, Inc. .............. 332,191
6,000 Texas Instruments, Inc. ...... 513,375
-----------
3,245,259
-----------
Engines -- Internal Combustion (0.4%):
10,800 Cummins Engine Co., Inc. ..... 383,400
-----------
Financial Services (3.7%):
11,300 AmeriCredit Corp. (b)......... 156,081
13,600 Associates First Capital
Corp. ...................... 576,299
17,200 Fannie Mae.................... 1,272,800
10,300 MGIC Investment Corp. ........ 410,069
8,300 Paychex, Inc. ................ 426,931
13,950 Washington Mutual, Inc. ...... 532,716
-----------
3,374,896
-----------
Food & Related (2.1%):
800 Dole Food Co., Inc. .......... 24,000
9,800 Flowers Industries Inc. ...... 234,587
5,700 H.J. Heinz Co. ............... 322,762
15,500 IBP, Inc. .................... 451,438
11,600 SUPERVALU, INC................ 324,800
19,500 Universal Foods Corp. ........ 535,031
-----------
1,892,618
-----------
Foreign Agency (0.2%):
7,000 Stewart Enterprises,
Inc.-Class A................ 173,550
-----------
Forest & Paper Products (0.1%):
4,000 Westvaco Corp. ............... 107,250
-----------
Furniture & Furnishings (0.3%):
10,400 Herman Miller, Inc. .......... 279,500
-----------
Health & Personal Care (0.3%):
9,700 HCR Manor Care, Inc. (b)...... 284,938
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Healthcare Cost Containment (1.0%):
18,200 Allegiance Corp. ............. $ 848,575
5,500 Orthodontic Centers Of
America, Inc. (b)........... 106,906
-----------
955,481
-----------
Home Furnishings (0.2%):
7,500 Furniture Brands
International, Inc. (b)..... 204,375
-----------
Human Resources (0.8%):
10,300 Interim Services, Inc. ....... 240,763
16,400 Olsten Corp. ................. 120,950
7,700 Robert Half International,
Inc. (b).................... 344,093
-----------
705,806
-----------
Insurance (5.0%):
17,800 Allstate Corp. ............... 687,524
2,500 American General Corp. ....... 195,000
3,600 American International Group,
Inc. ....................... 347,850
6,600 Cigna Corp. .................. 510,262
14,500 Conseco, Inc. ................ 443,156
7,300 Everest Reinsurance Holdings,
Inc. ....................... 284,244
6,700 Exel Ltd. .................... 502,499
6,600 Hartford Financial Services
Group....................... 362,175
9,750 Old Republic International
Corp. ...................... 219,375
1,200 Protective Life Corp. ........ 47,775
9,300 ReliaStar Financial Corp. .... 428,963
5,700 The PMI Group, Inc. .......... 281,438
3,150 Transatlantic Holdings,
Inc. ....................... 238,022
-----------
4,548,283
-----------
Linen Supply & Related Items (0.4%):
5,200 Cintas Corp. ................. 366,275
-----------
Machine Tools & Related Products (0.2%):
9,200 Kennametal, Inc. ............. 195,500
-----------
Machine-Diversified (0.5%):
8,700 Sundstrand Corp. ............. 451,313
-----------
Machinery & Equipment (1.4%):
22,900 Case Corp. ................... 499,506
13,000 Harnischfeger Industries,
Inc. ....................... 132,438
9,600 Ingersoll-Rand Co. ........... 450,600
4,600 Tecumseh Products Co., Class
A........................... 214,475
-----------
1,297,019
-----------
</TABLE>
Continued
-20-
<PAGE> 21
THE COVENTRY GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Manufacturing (0.6%):
4,800 Crane Co. .................... $ 144,900
4,500 Owens-Illinois, Inc. (b)...... 137,813
6,900 Trinity Industries, Inc. ..... 265,650
-----------
548,363
-----------
Medical -- HMO (0.4%):
8,400 Columbia/HCA Healthcare
Corp. ...................... 207,900
12,640 Foundation Health Corp.- Class
A (b)....................... 150,890
-----------
358,790
-----------
Medical Services & Supplies (2.0%):
49,000 HEALTHSOUTH Corp. (b)......... 756,438
5,700 Steris Corp. (b).............. 162,094
16,300 Stryker Corp. ................ 897,518
-----------
1,816,050
-----------
Medical -- Health Management Organization (0.4%):
8,000 United Healthcare Corp. ...... 344,500
-----------
Medical -- Hospitals (0.4%):
13,800 Tenet Healthcare Corp. (b).... 362,250
-----------
Medical -- Information Systems (1.1%):
34,000 HBO & Co. .................... 975,375
-----------
Medical -- Instruments/Products (2.8%):
6,200 Beckman Coulter, Inc. ........ 336,350
13,600 Guidant Corp. ................ 1,499,399
3,100 Mallinckrodt, Inc. ........... 95,519
10,500 Safeskin Corp. (b)............ 253,313
13,300 Sybron International Corp.
(b)......................... 361,594
-----------
2,546,175
-----------
Medical -- Wholesale Drug Distribution (0.5%):
12,400 Bergen Brunswig Corp.-Class
A........................... 432,450
-----------
Metal Fabrication (0.3%):
7,200 Precision Castparts Corp. .... 318,600
-----------
Motor Vehicles (1.9%):
12,300 Ford Motor Co. ............... 721,856
14,200 General Motors Corp. ......... 1,016,188
-----------
1,738,044
-----------
Multimedia (1.7%):
25,000 Time Warner Inc. ............. 1,551,563
-----------
Office Equipment & Services (0.7%):
5,200 Xerox Corporation............. 613,600
-----------
Office Supplies & Forms (0.1%):
3,400 Standard Register Co. ........ 105,188
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Oil & Gas (3.1%):
4,300 Ashland, Inc. ................ $ 208,013
2,300 Chevron Corp. ................ 190,756
40,700 Cooper Cameron Corp. (b)...... 997,151
6,000 Exxon Corp. .................. 438,750
37,100 Noble Drilling Corp. (b)...... 479,981
3,500 SEACOR SMIT, Inc. (b)......... 173,031
11,100 The Coastal Corp. ............ 387,806
-----------
2,875,488
-----------
Oil & Gas -- Exploration/Production (2.7%):
38,000 Anadarko Petroleum Corp. ..... 1,173,250
6,300 British Petroleum Co., Plc.
(b)......................... 598,500
36,900 Cross Timbers Oil Co. ........ 276,750
22,040 Ocean Energy Inc. (b)......... 139,128
10,400 Ultramar Diamond Shamrock
Corp. ...................... 252,200
-----------
2,439,828
-----------
Oil & Gas Drilling (0.4%):
26,200 Nabors Industries, Inc. (b)... 355,338
-----------
Oil -- Gas Services (2.1%):
30,800 Halliburton Co. .............. 912,450
38,100 Rowan Cos., Inc. (b).......... 381,000
14,300 Schlumberger Ltd. ............ 659,588
-----------
1,953,038
-----------
Oil -- Integrated Companies (0.1%):
2,900 Phillips Petroleum Co. ....... 123,613
-----------
Pharmaceuticals (4.3%):
6,200 AmeriSource Health Corp.
(b)......................... 403,000
7,200 Amgen, Inc. (b)............... 752,849
15,100 Eli Lilly & Co. .............. 1,342,012
9,100 Mylan Laboratories, Inc. ..... 286,650
9,800 Omnicare, Inc. ............... 340,550
3,000 Pfizer, Inc. ................. 376,313
7,800 Schering-Plough Corp. ........ 430,950
-----------
3,932,324
-----------
Photography (0.3%):
3,900 Eastman Kodak Co. ............ 280,800
-----------
Pipelines (0.5%):
12,200 El Paso Energy Corp. ......... 424,713
-----------
Publishing-Newspaper (0.5%):
8,800 Knight Ridder, Inc. .......... 449,900
-----------
</TABLE>
Continued
-21-
<PAGE> 22
THE COVENTRY GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Railroad (0.1%):
1,800 Burlington Northern Santa Fe
Corp........................ $ 60,750
-----------
Real Estate Investment Trust (0.6%):
5,100 Equity Office Properties
Trust....................... 122,400
6,700 Liberty Property Trust........ 164,988
8,400 Prentiss Properties Trust..... 187,425
5,200 Starwood Hotels & Resorts
(b)......................... 117,975
-----------
592,788
-----------
Restaurants (1.8%):
10,450 CKE Restaurants, Inc. ........ 307,622
24,400 Starbucks Corp. (b)........... 1,369,450
-----------
1,677,072
-----------
Retail (8.9%):
23,600 Bed Bath & Beyond, Inc. (b)... 805,350
14,400 Borders Group, Inc. (b)....... 359,100
18,000 CVS Corporation............... 989,999
8,800 Dillards Inc., Class A........ 249,700
14,000 Home Depot, Inc. ............. 856,625
7,500 Kohl's Corp. (b).............. 460,781
5,000 Office Depot, Inc. (b)........ 184,688
6,400 Ross Stores, Inc. ............ 252,000
10,200 Safeway, Inc. (b)............. 621,563
6,600 Sears Roebuck & Co. .......... 280,500
3,800 Tech Data Corp. (b)........... 152,950
7,100 The Kroger Co. (b)............ 429,550
17,700 TJX Cos., Inc. ............... 513,300
18,400 Toys "R" Us, Inc. (b)......... 310,500
9,300 Wal-Mart Stores, Inc.......... 757,369
14,700 Walgreen Co. ................. 860,868
-----------
8,084,843
-----------
Retail Automotive (0.6%):
18,200 Navistar International Corp.
(b)......................... 518,700
-----------
Savings & Loans (0.4%):
3,500 Golden West Financial
Corp. ...................... 320,906
-----------
Steel (0.4%):
9,800 Inland Steel Industries,
Inc. ....................... 165,375
6,800 USFreightways Corp. .......... 198,050
-----------
363,425
-----------
Telecommunication & Satellite (0.2%):
14,500 DSP Communications, Inc.
(b)......................... 222,031
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Telecommunications (4.1%):
18,900 Ascend Communications, Inc.
(b)......................... $ 1,242,674
18,700 Bell Atlantic Corp. .......... 991,100
27,300 Ciena Corp. (b)............... 399,263
20,000 Comcast Corp. ................ 1,148,750
-----------
3,781,787
-----------
Textile (0.2%):
5,000 Springs Industries, Inc. ..... 207,188
-----------
Tires & Rubber Products (0.5%):
9,300 Goodyear Tire & Rubber Co. ... 469,069
-----------
Tobacco (1.6%):
18,700 Philip Morris Cos., Inc. ..... 1,000,450
14,500 RJR Nabisco Holdings Corp. ... 430,469
-----------
1,430,919
-----------
Transportation (0.1%):
1,900 CNF Transportation, Inc. ..... 71,369
-----------
Transportation -- Air (1.1%):
10,200 AMR Corp. Del (b)............. 605,625
3,900 Continental Airlines Class B.
(b)......................... 130,650
5,800 Delta Air Lines, Inc. ........ 301,600
-----------
1,037,875
-----------
Utilities -- Electric (1.7%):
3,100 Cinergy Corp. ................ 106,563
10,000 DTE Energy Co. ............... 428,749
2,611 Duke Energy Corp. ............ 167,267
5,600 Entergy Corp. ................ 174,300
4,300 FPL Group, Inc. .............. 264,987
4,600 GPU, Inc. .................... 203,263
5,900 The Southern Company.......... 171,469
-----------
1,516,598
-----------
Utilities -- Telephone (3.5%):
5,600 AT & T Corp. ................. 421,400
14,800 BellSouth Corp. .............. 738,150
9,500 Century Telephone Enterprises,
Inc. ....................... 641,250
19,700 MCI Worldcom, Inc. (b)........ 1,413,474
-----------
3,214,274
-----------
Total Common Stocks........... 90,736,361
-----------
DEPOSITARY RECEIPTS (0.4%):
2,700 S & P 500 Depositary Receipt
(b)......................... 332,100
-----------
Total Depositary Receipts..... 332,100
-----------
</TABLE>
Continued
-22-
<PAGE> 23
THE COVENTRY GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
REPURCHASE AGREEMENT (0.6%):
$ 561,117 Fifth Third Bank Repurchase
Agreement, 12/31/98, 3.82%,
matures 1/4/99,
(Collateralized by $558,000
FNMA Pool #313004, 7.50%,
7/1/11, market value =
$573,867)................... $ 561,117
-----------
Total Repurchase Agreement.... 561,117
-----------
Total (Cost $80,075,755)
(a)......................... $91,629,578
===========
</TABLE>
- ---------
Percentages indicated are based on net assets of $91,541,500.
(a) Represents cost for federal income tax purposes and differs from market
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $17,868,682
Unrealized depreciation......................... (6,314,859)
-----------
Net unrealized appreciation..................... $11,553,823
===========
</TABLE>
(b) Represents non-income producing securities.
See notes to financial statements.
-23-
<PAGE> 24
THE COVENTRY GROUP
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS (85.4%):
Advertising (1.2%):
10,000 Ha-Lo Industries, Inc., (b)... $ 376,250
-----------
Automotive Parts (1.0%):
13,000 Tower Automotive, Inc. (b).... 324,187
-----------
Building -- Residential/Commercial (0.5%):
15,000 Fairfield Communities, Inc.
(b)......................... 165,938
-----------
Business Equipment & Services (2.2%):
24,000 Sylvan Learning Systems, Inc.
(b)......................... 732,000
-----------
Commercial Goods & Services (0.4%):
7,500 Carey International, Inc.
(b)......................... 131,250
-----------
Computer Software (13.9%):
9,500 Aspen Technologies, Inc.
(b)......................... 137,750
24,000 Axent Technologies, Inc.
(b)......................... 733,500
15,000 Cambridge Technology Partners,
Inc. (b).................... 331,875
12,000 CBT Group PLC-ADR (b)......... 178,500
15,000 Ciber, Inc. (b)............... 419,063
6,000 Citrix Systems, Inc. (b)...... 582,374
8,000 Keane, Inc. (b)............... 319,500
20,000 Micromuse Inc. (b)............ 390,000
22,000 Parametric Technology
Corporation (b)............. 360,250
15,500 Rogue Wave Software, Inc.
(b)......................... 135,625
20,000 Smallworldwide PLC-ADR (b).... 250,000
36,940 The Descartes Systems Group,
Inc. (b).................... 244,112
10,000 Wind River Systems, Inc.
(b)......................... 470,000
-----------
4,552,549
-----------
Computers & Integrated Systems (0.9%):
15,000 Saville Systems PLC (b)....... 285,000
-----------
Computers & Manufacturing Memory Devices
(0.7%):
16,000 Maxtor Corp. (b).............. 224,000
-----------
Construction -- Engineering (1.1%):
15,000 URS Corp. (b)................. 350,625
-----------
Consulting Services (0.9%):
15,000 Hagler Bailly, Inc. (b)....... 300,000
-----------
Data Processing & Reproduction (1.2%):
13,000 Analytical Surveys, Inc.
(b)......................... 400,562
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Data Processing Services (2.5%):
20,000 Applied Graphics Technologies,
Inc. (b).................... $ 330,000
15,000 INSpire Insurance Solutions,
Inc. (b).................... 275,625
15,000 Remedy Corp. (b).............. 209,063
-----------
814,688
-----------
Distribution Services (3.4%):
80,000 Brightpoint, Inc. (b)......... 1,100,000
-----------
Electronic Components (8.0%):
22,000 Alliance Semiconductor
Corporation (b)............. 89,375
64,000 Amkor Technology, Inc. (b).... 692,000
7,500 Applied Micro Circuits Corp.
(b)......................... 254,766
48,000 Artisan Components, Inc.
(b)......................... 255,000
30,000 C. P. Clare Corp. (b)......... 153,750
10,000 Celestica, Inc. (b)........... 246,875
7,500 Level One Communications, Inc.
(b)......................... 266,250
10,000 MIPS Technologies, Inc. (b)... 320,000
15,000 National Semiconductor Corp.
(b)......................... 202,500
8,000 Unitrode Corp. (b)............ 140,000
-----------
2,620,516
-----------
Environmental Services (2.2%):
45,000 Stericycle, Inc. (b).......... 725,625
-----------
Financial Services (2.4%):
10,000 CMAC Investment Corp.......... 459,375
21,000 Franchise Mortgage Acceptance
Co. (b)..................... 162,750
3,700 NCO Group, Inc. (b)........... 166,500
-----------
788,625
-----------
Food & Related (2.4%):
9,000 Michael Foods, Inc............ 270,000
10,000 Suiza Foods Corp. (b)......... 509,375
-----------
779,375
-----------
Health & Personal Care (4.7%):
25,000 Capital Senior Living Corp.
(b)......................... 348,437
20,000 CareMatrix Corporation (b).... 612,500
19,000 HCR Manor Care, Inc. (b)...... 558,125
-----------
1,519,062
-----------
Healthcare Cost Containment (1.8%):
30,000 Orthodontic Centers Of
America, Inc. (b)........... 583,125
-----------
</TABLE>
Continued
-24-
<PAGE> 25
THE COVENTRY GROUP
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Household -- General Products (0.9%):
28,000 Home Products International,
Inc. (b).................... $ 278,250
-----------
Human Resources (0.9%):
12,000 Metamor Worldwide, Inc. (b)... 300,000
-----------
Insurance (1.3%):
8,000 Nationwide Financial Services,
Inc......................... 413,500
-----------
Internet Software & Services (0.5%):
5,000 Broadvision, Inc. (b)......... 160,000
-----------
Investment Companies (1.1%):
15,000 Tele-Communications TCI
Ventures Group (b).......... 353,438
-----------
Medical Services & Supplies (1.9%):
40,000 HEALTHSOUTH Corp. (b)......... 617,500
-----------
Medical -- Imaging Systems (3.0%):
7,500 Schick Technologies, Inc.
(b)......................... 75,937
30,000 Total Renal Care Holdings
(b)......................... 886,875
-----------
962,812
-----------
Medical -- Instruments/Products (4.8%):
7,500 Arterial Vascular Engineering,
Inc. (b).................... 393,750
25,000 ESC Medical Systems, Ltd.
(b)......................... 262,500
20,000 Henry Schein, Inc. (b)........ 895,000
-----------
1,551,250
-----------
Networking Software (2.7%):
20,000 Apex PC Solutions, Inc. (b)... 577,500
10,000 Newbridge Networks Corp.
(b)......................... 303,750
-----------
881,250
-----------
Office Equipment & Services (0.7%):
30,000 Splash Technologies Holdings,
Inc. (b).................... 223,125
-----------
Pharmaceuticals (4.6%):
20,000 King Pharmaceuticals, Inc.
(b)......................... 522,500
20,000 Omnicare, Inc................. 695,000
20,000 Schein Pharmaceutical, Inc.
(b)......................... 291,250
-----------
1,508,750
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Recreation Centers (1.1%):
15,000 Bally Total Fitness Holding
Corp. (b)................... $ 373,125
-----------
Retail (4.8%):
24,000 Ames Department Stores, Inc.
(b)......................... 648,000
15,000 Eagle Hardware & Garden, Inc.
(b)......................... 487,500
4,000 Micro Warehouse, Inc., (b).... 135,250
7,500 Regis Corp.................... 300,000
-----------
1,570,750
-----------
Savings & Loans (1.2%):
10,550 ITLA Capital Corp. (b)........ 159,569
12,000 Peoples Heritage Bancorp...... 240,000
-----------
399,569
-----------
Telecommunication & Satellite (1.1%):
6,500 Gilat Satellite Networks Ltd.
(b)......................... 358,312
-----------
Textile-Products (0.9%):
24,000 Dan River, Inc. (b)........... 282,000
-----------
Transportation-Air (0.8%):
8,000 Comair Holdings, Inc.......... 270,000
-----------
Utilities-Telephone (1.7%):
11,000 Qwest Communications
International, Inc.(b)...... 550,000
-----------
Total Common Stocks........... 27,827,008
-----------
DEPOSITARY RECEIPTS (1.7%):
4,500 S & P 500 Depositary Receipt
(b)......................... 553,500
-----------
Total Depositary Receipts..... 553,500
-----------
WARRANTS (0.0%):
5,000 Alza Corp. (b)................ 2,969
-----------
Total Warrants................ 2,969
-----------
</TABLE>
Continued
-25-
<PAGE> 26
THE COVENTRY GROUP
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
REPURCHASE AGREEMENT (13.8%):
$4,510,724 Fifth Third Bank Repurchase
Agreement, 12/31/98, 3.82%,
matures 1/4/99,
(Collateralized by
$4,474,000 FNMA Pool #
313004, 7.50%, 7/1/11,
market value =
$4,601,231)................. $ 4,510,724
-----------
Total Repurchase Agreement.... 4,510,724
-----------
Total (Cost $31,042,172)
(a)......................... $32,894,201
===========
</TABLE>
- ---------
Percentages indicated are based on net assets of $32,602,629.
(a) Cost for federal income tax purposes differs from market value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $ 4,293,739
Unrealized depreciation......................... (2,441,710)
-----------
Net unrealized appreciation..................... $ 1,852,029
===========
</TABLE>
(b) Represents non-income producing securities.
See notes to financial statements.
-26-
<PAGE> 27
THE COVENTRY GROUP
1ST SOURCE MONOGRAM INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
COMMERCIAL PAPER (4.7%):
Automotive (4.7%):
3,000,000 General Motors Acceptance
Corp., 6.88%, 7/15/01....... $ 3,091,113
-----------
Total Commercial Paper........ 3,091,113
-----------
CORPORATE BONDS (9.3%):
Financial Services (9.3%):
3,000,000 American General Finance
Corp., 6.25%, 12/18/02...... 3,058,290
3,000,000 Bear Stearns Co., 6.70%,
8/1/03...................... 3,078,786
-----------
Total Corporate Bonds......... 6,137,076
-----------
U.S. TREASURY OBLIGATIONS (45.6%):
3,000,000 6.75%, 4/30/00................ 3,078,750
6,000,000 7.50%, 11/15/01............... 6,448,128
7,000,000 6.25%, 8/31/02................ 7,356,566
4,000,000 7.25%, 5/15/04................ 4,482,500
4,000,000 6.50%, 5/15/05................ 4,383,752
4,000,000 6.13%, 8/15/07................ 4,371,252
-----------
Total U.S. Treasury
Obligations................. 30,120,948
-----------
U.S. GOVERNMENT AGENCIES (37.6%):
Fannie Mae (26.4%):
3,000,000 6.16%, 5/8/03, Callable 5/8/00
@ 100....................... 3,034,371
4,000,000 6.09%, 8/13/03, Callable
8/13/99 @ 100............... 4,018,156
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Fannie Mae, continued:
3,000,000 6.95%, 11/13/06, Callable
11/13/01 @ 100.............. $ 3,123,252
4,000,000 6.00%, 5/15/08................ 4,220,688
3,000,000 6.68%, 5/15/08, Callable
5/15/00 @ 100............... 3,055,599
-----------
17,452,066
-----------
Freddie Mac (4.8%):
3,000,000 6.24%, 10/6/04................ 3,152,820
-----------
Tennessee Valley Authority (6.4%):
4,000,000 6.38%, 6/15/05................ 4,247,588
-----------
Total U.S. Government
Agencies.................... 24,852,474
-----------
REPURCHASE AGREEMENT (1.5%):
$ 963,877 Fifth Third Bank Repurchase
Agreement, 12/31/98, 3.82%,
matures 1/4/99,
(Collateralized by $956,000
FNMA, 7.50%, 7/1/11, market
value -- $983,186).......... $ 963,877
-----------
Total Repurchase Agreement.... 963,877
-----------
Total (Cost $64,834,110)
(a)......................... $65,165,488
===========
</TABLE>
- ---------
Percentages indicated are based on net assets of $66,044,012.
(a) Cost for federal income tax purposes differs from market value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $ 479,925
Unrealized depreciation......................... (148,547)
---------
Net Unrealized appreciation..................... $ 331,378
=========
</TABLE>
See notes to financial statements.
-27-
<PAGE> 28
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(UNAUDITED)
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.
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 Group 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 discount. Dividend income is recorded on the ex-dividend date. Gains or
losses realized on sales of
Continued
-28-
<PAGE> 29
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1998
(UNAUDITED)
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.
REVERSE REPURCHASE AGREEMENTS:
The Funds may borrow for short-term purposes by entering into reverse
repurchase agreements. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually agreed-upon date
and price. At the time a Fund enters into a reverse repurchase agreement,
it places in a segregated custodial account assets having a value equal to
the repurchase price (including accrued interest), and will continually
monitor the account to ensure such equivalent value is maintained at all
times.
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.
Continued
-29-
<PAGE> 30
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1998
(UNAUDITED)
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 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.
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
-30-
<PAGE> 31
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1998
(UNAUDITED)
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
six months ended December 31, 1998, are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -----------
<S> <C> <C>
Income Equity Fund............................... $9,144,867 $11,413,896
Diversified Equity Fund.......................... 65,137,127 65,924,121
Special Equity Fund.............................. 33,128,017 32,555,955
Income Fund...................................... 139,087,344 144,281,570
</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, Inc.
("BISYS Services") are subsidiaries of The BISYS Group, Inc.
BISYS, with whom certain officers and trustees of the Group are affiliated,
serves the Funds as administrator and distributor. Such officers and
trustees are paid no fees directly by the Funds for serving as officers and
trustees of the Group. Under the terms of the administration agreement,
BISYS's fees are computed daily as a percentage of the average net assets
of each Fund. BISYS Fund Services, Inc. serves the Funds as transfer agent
and fund accountant.
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
-31-
<PAGE> 32
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1998
(UNAUDITED)
BISYS is also entitled to receive commissions on sales of shares of the
Funds. For the six months ended December 31, 1998, BISYS received $1,203
from commissions earned on sales of shares of the Funds, of which $95 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 six months ended December 31, 1998:
<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..... $61,778 $109,935 $37,660 $82,449
FUND ACCOUNTING FEES......... $ 9,939 $ 18,005 $ 6,974 $13,093
TRANSFER AGENT FEES.......... $16,493 $ 20,944 $17,928 $10,360
</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 .99% was
October 24, 1998.
5. SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of the 1st Source Monogram Funds (the
"Meeting") was held on October 16, 1998. The following proposals were
approved by the following votes:
Proposal #1: Approval of an Agreement and Plan of Reorganization and
Liquidation as a separate series of The Coventry Group, a
Massachusetts business trust.
-32-
<PAGE> 33
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
FUND NAME: VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED
- ---------- -------------- ------------- ---------------
<S> <C> <C> <C>
Income Equity Fund................. 2,380,286 0 83,009
Diversified Equity Fund............ 4,429,424 0 20,854
Special Equity Fund................ 1,882,081 0 33,679
Income Fund........................ 4,188,582 0 20,854
</TABLE>
Proposal #2a: Approval of a new Sub-Investment Advisory Agreement for the
Fund between 1st Source Bank and Standish, Ayer & Wood, Inc.
<TABLE>
<CAPTION>
FUND NAME: VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED
- ---------- -------------- ------------- ---------------
<S> <C> <C> <C>
Diversified Equity Fund............ 4,429,424 0 20,854
</TABLE>
Proposal #2b: Approval of a new Sub-Investment Advisory Agreement for the
Fund between 1st Source Bank and Loomis Sayles & Company,
L.P.
<TABLE>
<CAPTION>
FUND NAME: VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED
- ---------- -------------- ------------- ---------------
<S> <C> <C> <C>
Diversified Equity Fund............ 4,428,424 0 21,935
</TABLE>
Proposal #2c: Approval of a new Investment Advisory Agreement between The
Coventry Group on behalf of the Fund and 1st Source Bank.
<TABLE>
<CAPTION>
FUND NAME: VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED
- ---------- -------------- ------------- ---------------
<S> <C> <C> <C>
Diversified Equity Fund............ 4,428,343 0 21,935
</TABLE>
Proposal #2d: Approval of the adoption of a "multi-manager" arrangement for
the Fund.
<TABLE>
<CAPTION>
FUND NAME: VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED
- ---------- -------------- ------------- ---------------
<S> <C> <C> <C>
Diversified Equity Fund............ 4,428,334 0 29,944
</TABLE>
-33-
<PAGE> 34
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INCOME EQUITY FUND DIVERSIFIED EQUITY FUND
----------------------------------------- -----------------------------------------
SIX MONTHS FOR THE FOR THE SIX MONTHS FOR THE FOR THE
ENDED YEAR ENDED PERIOD ENDED ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31, JUNE 30, JUNE 30,
1998 1998 1997(a) 1998 1998 1997(a)
------------ ---------- ------------ ------------ ---------- ------------
(UNAUDITED) (UNAUDITED)
<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)................. 0.14 0.27 0.20 (0.01) (0.02) (0.01)
Net realized and
unrealized gains
(losses) on
investments............ (0.44) 1.79 2.32 (0.10) 3.00 2.03
------- ------- ------- ------- ------- -------
Total from Investment
Activities........... (0.30) 2.06 2.52 (0.11) 2.98 2.02
------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income.... (0.15) (0.27) (0.19) -- -- --
Net realized gains....... (1.34) (1.47) (0.05) (1.92) (1.47) (0.22)
------- ------- ------- ------- ------- -------
Total Distributions.... (1.49) (1.74) (0.24) (1.92) (1.47) (0.22)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................... $ 10.81 $ 12.60 $ 12.28 $ 11.28 $ 13.31 $ 11.80
======= ======= ======= ======= ======= =======
Total Return (excludes
sales charge)............ (2.11)%(b) 18.15% 25.58%(b) (0.41)%(b) 27.85% 20.42%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of
period (000)........... $50,431 $52,450 $39,196 $91,542 $98,083 $74,990
Ratio of expenses to
average net assets..... 1.19%(c) 1.21% 1.37%(c) 1.43%(c) 1.48% 1.62%(c)
Ratio of net investment
income (loss) to
average net assets..... 2.48%(c) 2.16% 2.38%(c) (0.19)%(c) (0.18)% (0.10)%(c)
Ratio of expenses to
average net assets*.... 1.44%(c) 1.46% 1.62%(c) 1.68%(c) 1.73% 1.87%(c)
Ratio of net investment
income (loss) to
average net assets*.... 2.23%(c) 1.91% 2.13%(c) (0.44)%(c) (0.43)% (0.35)(c)
Portfolio Turnover
Rate................... 21.12% 70.46% 38.49% 77.93% 95.13% 76.54%
</TABLE>
- ---------
<TABLE>
<C> <S>
* During the period certain fees were voluntarily reduced. If
such voluntary fee reductions had not occured, the ratios
would have been as indicated.
(a) Commencement of operations of the Funds began September 25,
1996 and September 23, 1996, respectively.
(b) Not annualized
(c) Annualized
</TABLE>
-34-
<PAGE> 35
THE COVENTRY GROUP
1ST SOURCE MONOGRAM FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SPECIAL EQUITY FUND INCOME FUND
----------------------------------------- -----------------------------------------
SIX MONTHS FOR THE FOR THE SIX MONTHS FOR THE FOR THE
ENDED YEAR ENDED PERIOD ENDED ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31, JUNE 30, JUNE 30,
1998 1998 1997(a) 1998 1998 1997(a)
------------ ---------- ------------ ------------ ---------- ------------
(UNAUDITED) (UNAUDITED)
<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)................. 0.01 -- -- 0.27 0.60 0.44
Net realized and
unrealized gains
(losses) on
investments............ 0.23 0.17 (0.10)(d) 0.13 0.21 0.12
------- ------- ------- ------- ------- -------
Total from Investment
Activities........... 0.24 0.17 (0.10) 0.40 0.81 0.56
------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income.... (0.01) ** ** (0.28) (0.60) (0.43)
Net realized gains....... -- (0.13) -- (0.25) -- --
In excess of realized
gains.................. -- -- (0.31) -- -- --
------- ------- ------- ------- ------- -------
Total Distributions.... (0.01) (0.13) (0.31) (0.53) (0.60) (0.43)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................... $ 9.86 $ 9.63 $ 9.59 $ 10.21 $ 10.34 $ 10.13
======= ======= ======= ======= ======= =======
Total Return (excludes
sales charge)............ 2.52%(b) 1.86% (1.03)%(b) 3.95%(b) 8.24% 5.71%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of
period (000)........... $32,603 $35,441 $30,524 $66,044 $65,975 $54,789
Ratio of expenses to
average net assets..... 1.24%(c) 1.27% 1.39%(c) 0.91%(c) 0.92% 1.05%(c)
Ratio of net investment
income (loss) to
average net assets..... 0.22%(c) 0.04% 0.05%(c) 5.16%(c) 5.90% 5.71%(c)
Ratio of expenses to
average net assets*.... 1.49%(c) 1.52% 1.65%(c) 1.16%(c) 1.17% 1.30%(c)
Ratio of net investment
income (loss) to
average net assets*.... (0.03)%(c) (0.21)% (0.21)%(c) 4.91%(c) 5.65% 5.46%(c)
Portfolio Turnover
Rate................... 144.36% 124.55% 152.81% 224.29% 208.32% 118.33%
------- ------- ------- ------- ------- -------
</TABLE>
- ---------
<TABLE>
<C> <S>
* During the period certain fees were voluntarily reduced. If
such voluntary fee reductions had not occured, the ratios
would have been as indicated.
** Amount is less than $0.005
(a) Commencement of operations of the Funds began September 20,
1996, and September 24, 1996, respectively.
(b) Not annualized
(c) Annualized
(d) 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.
</TABLE>
-35-
<PAGE> 36
A N N U A L R E P O R T
[1ST SOURCE MONOGRAM FUNDS LOGO]
[1ST SOURCE MONOGRAM FUNDS LOGO]
INVESTMENT ADVISER
1ST SOURCE BANK
100 NORTH MICHIGAN STREET
SOUTH BEND, IN 46601
SEMI-ANNUAL REPORT
DISTRIBUTOR DECEMBER 31, 1998
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.
2/99
