<PAGE>
The Shelby Fund
- -------------------------------------------------------------------------------
Dear Shareholder:
The third quarter of 1997 produced the second best quarterly return in the
fund's history, second only to the first quarter of 1991 which revolved around
the Persian Gulf War. The 21.54% return for the quarter compared very
favorably to the 14.88% return from the Russell 2000 and 7.49% from the S&P
500. From the market bottom, which approximately occurred near May 1st, the
fund is up 46.77% versus 33.14% from the Russell 2000 and 19.14% from the S&P
500. We feel extremely good about the prospects for the small to mid cap
growth segment of the marketplace. Typically, leadership changes hands during
a bear market or correction, and the pendulum has definitely begun to swing
back in our favor. During the month of August, the S&P 500 experienced an 8.5%
decline from top to bottom. Our stocks held up extremely well and when you
look at the results from August 1st to September 30th, the fund returned
10.41% versus a loss of.43% from the S&P 500.
The largest contributors to these gains were Uniphase (6.90% of the
portfolio), Landry's Seafood (4.58%), Marine Drilling (3.35%) and Sirrom
Capital (3.06%). We have held a significant position in the energy sector for
most of the year, primarily in the drilling and service stocks. This industry
experienced a prolonged downturn from the mid 1980's to the early 1990's in
which 80% of the capacity was wrung out of the business. Now, it is virtually
one of the few industries in this country which has any pricing flexibility
whatsoever. As a result, this is a business which not only is experiencing
significant revenue growth, but strengthening margins as well. This segment
produced 38% of our gain during the quarter. Despite these impressive gains,
we feel these stocks have a lot left in them, as they are very under-owned
institutionally and are selling at less than market multiples.
Revenue growth, due to previously mentioned pricing inflexibility is going to
be the major theme going forward. One hundred-seven companies in the S&P 500
reported a decline in revenues for the second quarter. The aggregate revenue
growth rate declined to 6.7% for the quarter, down from 10.5% for the five
year period. It is our opinion, that this is the driving force behind the
change in leadership that we saw during the last two months of the third
quarter. Investors will be searching for revenue growth and that will lead
them to the smaller to mid-size companies. The dollar continues to strengthen,
and this also bodes well for this segment of the market. The market
capitalization for the S&P 500 is just under $7.3 trillion, while it is only
$1.16 trillion for the Russell 2000. Broken down even further, the S&P Mid-Cap
index has a market capitalization of only $870 billion and the S&P Small-Cap
index has a market capitalization of $370 billion. In addition, there is over
$3.7 trillion in short term instruments. A 10% rotation out of the S&P 500 and
short term instruments alone could provide an extreme boost to small to mid-
cap valuations. Our stocks are selling at only 20% premium to the market, but
are growing three to four times as fast. We are very excited about where the
portfolio is positioned and we look forward to what could be a very profitable
fourth quarter.
/s/ B. Anthony Weber /s/ Darrell R. Wells
B. Anthony Weber Darrell R. Wells
Investment Advisor Investment Advisor
October 29, 1997
- -------------------------------------------------------------------------------
-1-
<PAGE>
The Shelby Fund
- -------------------------------------------------------------------------------
The performance of the Fund is measured against the Standard & Poor's 500
Index, an unmanaged index generally representative of the U.S. stock market,
Standard & Poor's Mid-Cap Index, an index of mid-cap stocks, Standard & Poor's
Small-Cap Index, an index of small-cap stocks and the Russell 2000 Index, an
index of small cap stocks. These indices do not reflect the deduction of
expenses associated with a mutual fund, such as investment management and fund
accounting fees. However, the Fund's performance reflects the deduction of the
fees for these value-added services.
Performance data represents past performance and is not predictive of future
performance. Investment return and the principal value of an investment in the
Fund will fluctuate so that an investor's share, when redeemed, may be worth
more or less than their original cost. The composition of the Fund's holdings
is subject to change.
The quoted performance of The Shelby Fund includes performance of certain
common trust funds and collective investment funds (the "Commingled Funds")
which were managed with full investment authority by principals of SMC
Capital, Inc. prior to the establishment of the Fund on July 1, 1994. The
assets of the Commingled funds were converted into assets of the Fund upon the
establishment of the Fund. These Commingled funds were operated with the same
investment objective and used investment strategies and techniques that are in
all material respects equivalent to those used for the Fund. During the time
period of their existence the Commingled funds were not registered under the
Investment Company Act of 1940 (the "1940 Act") and therefore were not subject
to certain investment restrictions that are imposed under the 1940 Act. If the
Commingled funds had been registered under the 1940 Act, the Commingled funds'
performance may have been adversely affected.
For more complete information, including charges and expenses, call 1-800-774-
3529 for a prospectus, which you should read carefully before you investment
or send money. Shares are distributed by BISYS Fund Services.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, SHELBY COUNTY TRUST BANK OR ITS AFFILIATES, AND SHARES ARE NOT
FEDERALLY INSURED BY THE FDIC OR ANY OTHER AGENCY. AN INVESTMENT IN MUTUAL
FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
- -------------------------------------------------------------------------------
-2-
<PAGE>
TABLE OF CONTENTS
Statement of Assets and Liabilities
Page 4
Statement of Operations
Page 5
Statements of Changes in Net Assets
Page 6
Schedule of Portfolio Investments
Page 7
Notes to Financial Statements
Page 9
Financial Highlights
Page 13
-3-
<PAGE>
THE COVENTRY GROUP
THE SHELBY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value............................................. $122,393,972
Repurchase agreements............................................. 251,637
------------
Total Investments (cost $88,773,001).......................... 122,645,609
Receivable from brokers for investments sold...................... 2,206,016
Prepaid expenses and other assets................................. 3,195
------------
Total Assets.................................................. 124,854,820
------------
LIABILITIES:
Payable to brokers for investments purchased...................... 1,971,233
Accrued expenses and other payables:
Investment advisory fees........................................ 97,077
Administration fees............................................. 1,977
Accounting and transfer agent fees.............................. 2,550
Legal and audit fees............................................ 14,025
Custodian....................................................... 2,667
Printing........................................................ 18,912
Trustees........................................................ 1,145
Other........................................................... 2,103
------------
Total Liabilities............................................... 2,111,689
------------
NET ASSETS:
Capital........................................................... 80,659,458
Undistributed (distributions in excess of) net investment income
(loss)........................................................... (518,595)
Net unrealized appreciation from investments...................... 33,872,608
Accumulated undistributed net realized gains from investment
transactions..................................................... 8,729,660
------------
Net Assets.................................................... $122,743,131
============
Outstanding units of beneficial interest (shares)................. 7,714,207
============
Net asset value--offering and redemption price per share.......... $ 15.91
============
</TABLE>
See notes to financial statements.
-4-
<PAGE>
THE COVENTRY GROUP
THE SHELBY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income................................................... $ 96,562
Dividend income................................................... 76,309
-----------
Total Income.................................................... 172,871
-----------
EXPENSES:
Investment advisory fees.......................................... 518,959
Administration fees............................................... 103,970
Custodian and accounting fees..................................... 24,145
Legal and audit fees.............................................. 15,411
Trustees' fees.................................................... 2,820
Transfer agent fees............................................... 12,957
Registration and filing fees...................................... 4,254
Printing costs.................................................... 9,981
Other............................................................. 2,772
-----------
Total Expenses before expenses voluntarily reduced.............. 695,269
Expenses voluntarily reduced.................................... (26,126)
-----------
Net expenses.................................................... 669,143
-----------
Net investment loss............................................... (496,272)
-----------
REALIZED/UNREALIZED GAINS FROM INVESTMENTS:
Net realized gains (losses) from investment transactions.......... 5,406,679
Net change in unrealized appreciation (depreciation) from
investments....................................................... 32,649,598
-----------
Net realized/unrealized gains (losses) from investments........... 38,056,277
-----------
Change in net assets resulting from operations.................... $37,560,005
===========
</TABLE>
See notes to financial statements.
-5-
<PAGE>
THE COVENTRY GROUP
THE SHELBY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, MARCH 31,
1997 1997
------------- -----------
(UNAUDITED)
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment loss................................ $ (496,272) $ (699,845)
Net realized gains from investment transactions.... 5,406,679 5,614,714
Net change in unrealized appreciation
(depreciation) from investments................... 32,649,598 (7,698,343)
------------ -----------
Change in net assets resulting from operations...... 37,560,005 (2,783,474)
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income......................... -- --
From net realized gains from investment
transactions...................................... -- (3,312,679)
------------ -----------
Change in net assets from shareholder distributions. -- (3,312,679)
------------ -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued........................ 3,813,471 11,030,463
Dividends reinvested............................... -- 3,303,173
Cost of shares redeemed............................ (8,766,954) (13,458,122)
------------ -----------
Change in net assets from share transactions........ (4,953,483) 875,514
------------ -----------
Change in net assets................................ 32,606,522 (5,220,639)
NET ASSETS:
Beginning of period................................ 90,136,609 95,357,248
------------ -----------
End of period...................................... $122,743,131 $90,136,609
============ ===========
SHARE TRANSACTIONS:
Issued............................................. 304,106 864,830
Reinvested......................................... -- 261,120
Redeemed........................................... (691,862) (1,091,777)
------------ -----------
Change in shares.................................... (387,756) 34,173
============ ===========
</TABLE>
See notes to financial statements.
-6-
<PAGE>
THE COVENTRY GROUP
THE SHELBY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (99.7%):
Advertising (1.5%):
70,650 Outdoor Systems, Inc.(b).............................. $ 1,854,563
------------
Apparel Manufacturers (3.9%):
73,100 Ashworth, Inc.(b)..................................... 749,275
117,600 Cutter & Buck, Inc.(b)................................ 2,425,500
63,100 Polo Ralph Lauren, Corp.(b)........................... 1,652,431
------------
4,827,206
------------
Airlines (0.6%):
18,400 Continental Airlines, Inc.(b)......................... 724,500
------------
Banks (1.6%):
81,400 Riggs National Corp................................... 1,917,988
------------
Computer & Periphals (2.5%):
117,500 Iomega Corp.(b)....................................... 3,069,688
------------
Computer Services (2.3%):
79,800 Data Dimensions, Inc.(b).............................. 2,773,050
------------
Entertainment (2.9%):
46,800 Signature Resorts, Inc.(b)............................ 2,223,000
64,600 Vistana, Inc.(b)...................................... 1,388,900
------------
3,611,900
------------
Financial Services (4.6%):
40,300 E*TRADE Group, Inc.(b)................................ 1,894,100
72,400 Sirrom Capital Corp................................... 3,755,750
------------
5,649,850
------------
Household Goods--Appliances, Furnishings, Electric (1.9%):
152,300 TurboChef, Inc.(b).................................... 2,379,688
------------
Human Resources (1.8%):
38,300 CORESTAFF, Inc.(b).................................... 1,239,962
48,500 Hall, Kinion & Associates, Inc.(b).................... 1,024,562
------------
2,264,524
------------
Management Consulting Services (0.3%):
22,800 Corporate Family Solutions, Inc.(b)................... 384,750
------------
Manufacturing--Toys (2.3%):
91,000 Equity Marketing, Inc.(b)............................. 2,764,125
------------
Oil & Gas Exploration, Production, & Services (2.1%):
16,000 Nuevo Energy Co.(b)................................... 766,000
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
70,800 Oryx Energy Co.(b).................................... $ 1,800,975
------------
2,566,975
------------
Oil Field Equipment & Supplies (1.3%):
31,900 Varco International, Inc.(b).......................... 1,547,150
------------
Oil--Drilling & Gas Wells (19.9%):
38,200 Evi, Inc.(b).......................................... 2,444,800
30,200 Falcon Drilling Company, Inc.(b)...................... 1,066,437
65,000 Global Marine, Inc.(b)................................ 2,161,250
131,700 Marine Drilling Cos., Inc.(b)......................... 4,115,625
111,100 Noble Drilling Corp.(b)............................... 3,582,975
95,800 Reading & Bates Corp.(b).............................. 3,981,688
102,800 Rowan Companies, Inc.(b).............................. 3,662,250
219,900 Unit Corp.(b)......................................... 3,367,219
------------
24,382,244
------------
Pharmaceuticals (2.8%):
107,500 BioChem Pharmaceuticals, Inc.(b)...................... 3,386,250
------------
Restaurants (12.1%):
114,400 Apple South, Inc...................................... 2,202,200
50,100 CKE Restaurants Inc................................... 2,104,200
191,500 Landry's Seafood Restaurants, Inc.(b)................. 5,625,313
70,200 Papa John's International, Inc.(b).................... 2,399,963
102,800 PJ America, Inc.(b)................................... 1,773,300
94,200 Total Entertainment Restaurant Corp.(b).............. 741,825
------------
14,846,801
------------
Retail Stores (0.8%):
123,300 Musicland Stores Corp.(b)............................. 994,106
------------
Semiconductors (7.1%):
36,400 Helix Technology Corp................................. 2,253,388
86,200 Mattson Technology, Inc.(b)........................... 1,255,288
45,100 Ultratech Stepper, Inc.(b)............................ 1,533,400
73,800 Vitesse Semiconductor Corp.(b)........................ 3,657,713
------------
8,699,789
------------
Shoes, Leathergood, Clothing & Accessories (3.5%):
295,700 Genesco, Inc.(b)...................................... 4,324,612
------------
Software & Computer Services (1.9%):
71,700 Avid Technology, Inc.(b).............................. 2,330,250
------------
</TABLE>
Continued
-7-
<PAGE>
THE COVENTRY GROUP
THE SHELBY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Technology (4.1%):
30,800 Cyberoptics Corp.(b).................................. $ 1,039,500
50,600 Digital Link Corp.(b)................................. 958,237
95,900 FORE Systems, Inc.(b)................................. 1,888,031
31,500 Spine-Tech, Inc.(b)................................... 1,185,188
------------
5,070,956
------------
Telecommunication Equipment (4.5%):
70,600 DSC Communications Corp.(b)........................... 1,901,787
127,600 PairGain Technologies, Inc.(b)........................ 3,636,600
------------
5,538,387
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Telecommunications (13.4%):
1,100 At Home Corp.(b)..................................... $ 25,437
65,900 Ciena Corp.(b)....................................... 3,264,108
79,400 Premiere Technolgies, Inc.(b)........................ 2,709,525
39,200 Tellabs, Inc.(b)..................................... 2,018,800
106,500 Uniphase Corp.(b).................................... 8,466,750
------------
16,484,620
------------
Total Common Stocks 122,393,972
------------
REPURCHASE AGREEMENTS (0.2%):
$251,637 Fifth Third Bank, 5.1%, dated 9/30/97, due 10/1/97
(Collateralized by $251,000 Federal Home Loan
Mortgage Corp., 7.50%, 2/1/12, market value---
$257,039)............................................ 251,637
------------
Total Repurchase Agreements 251,637
------------
Total (Cost--$88,773,001)(a) $122,645,609
============
</TABLE>
- ------
Percentages indicated are based on net assets of $122,743,131.
(a) Represents cost for federal tax purposes and differs from market value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.. $35,023,385
Unrealized depreciation.. (1,150,777)
-----------
Net unrealized $33,872,608
appreciation.............
===========
</TABLE>
(b) Represents non-income producing securities.
See notes to financial statements.
-8-
<PAGE>
THE COVENTRY GROUP
THE SHELBY FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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. Between the date of organization and the date
of commencement of operations (July 1, 1994) of The Shelby Fund (the
"Fund"), a series of the Group, the Fund earned no investment income and had
no operations other than incurring organizational expenses. The Fund's
investment objective is to seek capital appreciation by investing primarily
in a diversified portfolio of equity securities.
The Fund is authorized to issue an unlimited number of shares which are
units of beneficial interest with a par value of $0.01 per share. Sale of
shares of the Fund may be made to the general public.
2.SIGNIFICANT ACCOUNTING PRINCIPLES:
The following is a summary of significant accounting policies followed by
the Fund 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 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, commercial paper, corporate
bonds, U.S. Government securities and U.S. Government agency securities
of The Shelby Fund are valued at their market values determined on the
basis of the latest available bid quotation in the principal market
(closing sales prices if the principal market is an exchange) in which
such securities are normally traded. Investments in investment companies
are valued at their respective net asset values as reported by such
companies. Securities, including restricted securities, for which market
quotations are not readily available, are valued at fair market value by
the investment adviser under the supervision of the Group's Board of
Trustees. The differences between the cost and market values of
investments held by the Fund are reflected as either unrealized
appreciation or depreciation.
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 pro rata amortization
of premium or discount. Dividend income is recorded on the ex-dividend
date. Gains or losses realized on sales of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
Continued
-9-
<PAGE>
THE COVENTRY GROUP
THE SHELBY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
(UNAUDITED)
REPURCHASE AGREEMENTS:
The Fund may acquire repurchase agreements from financial institutions
such as banks and broker dealers which the investment adviser, Shelby
County Trust 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 the 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 held by the Fund's custodian or another qualified custodian or in the
Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by the Fund under the 1940 Act.
OPTIONS TRANSACTIONS:
The Fund enters into options transactions only as a hedge against
fluctuations in the value of securities which the Fund holds or intends
to purchase. During the six months ended September 30, 1997, the Fund
entered into no options transactions.
When the Fund writes a covered call or put option, an amount equal to the
net premium received is included in the Fund's statement of assets and
liabilities as a liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. If an
option expires on its stipulated expiration date or if the Fund enters
into a closing purchase transaction, a gain or loss is realized. If a
written call option is exercised, a gain or loss is realized for the sale
of the underlying security and the proceeds from the sale are increased
by the premium originally received. If a written put option is exercised,
the cost of the security acquired is decreased by the premium originally
received.
When the Fund purchases a call or put option, an amount equal to the
premium paid is included in the Fund's statement of assets and
liabilities as an investment, and is subsequently marked-to-market to
reflect the current market value of the option. If an option expires on
the stipulated expiration date or if the Fund enters into a closing sale
transaction, a gain or loss is realized. If the Fund exercises a call
option, the cost of the security acquired is increased by the premium
paid for the call. If the Fund exercises a put option, a gain or loss is
realized from the sale of the underlying security, and the proceeds from
such sale are decreased by the premium originally paid. Written and
purchased options are non- income producing securities.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared and paid quarterly and
distributable net realized capital gains, if any, are declared and
distributed at least annually for the Fund.
Continued
-10-
<PAGE>
THE COVENTRY GROUP
THE SHELBY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
(UNAUDITED)
Dividends from net investment income and from net realized capital gains
are determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. These differences are
primarily due to differing treatments for organization costs and
deferrals of certain losses.
FEDERAL INCOME TAXES:
It is the policy of the Fund 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.
OTHER:
Expenses that are directly related to the Fund are charged directly to
the Fund. Expenses relating to the Group are prorated to all the
investment portfolios of the Group, including the Fund, on the basis of
each Fund's relative net assets.
ORGANIZATION COSTS:
All expenses in connection with the Fund's organization and registration
under the 1940 Act and the Securities Act of 1933 were paid by the Fund.
Such expenses are being amortized over a period of two years commencing
with the date of the initial public offering.
3.PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
six months ended September 30, 1997 were $94,070,425 and $88,040,930,
respectively.
4.RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Fund by Shelby County Trust
Bank. Under the terms of the investment advisory agreement, Shelby County
Trust Bank is entitled to receive fees computed daily based on a percentage
of the average net assets of the Fund. SMC Capital, Inc. is the sub-
investment adviser for the Fund.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
an Ohio limited partnership, and BISYS Fund Services Ohio, Inc. are
subsidiaries of The BISYS Group, Inc.
Continued
-11-
<PAGE>
THE COVENTRY GROUP
THE SHELBY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
(UNAUDITED)
BISYS, with whom certain officers and trustees of the Group are affiliated,
serves the Fund as administrator. Such officers and trustees are paid no
fees directly by the Fund for serving as officers and trustees of the Group.
Under the terms of the administration agreement, BISYS' fees are computed
daily as a percentage of the average net assets of the Fund.
BISYS Fund Services Ohio, Inc. (the "Company"), serves the Fund as Transfer
Agent and Fund Accountant. Under the terms of the Transfer Agent and Fund
Accountant Agreements, the Company's fees are computed on the basis of the
number of shareholders and average net assets, respectively.
Fees may be voluntarily reduced to assist the Fund in maintaining
competitive expense ratios. Information regarding these transactions is as
follows for the six months ended September 30, 1997:
<TABLE>
<S> <C>
INVESTMent Advisory Fees:
Annual fee (percentage of average net assets)........................ 1.00%
ADMINISTRATION FEES:
Annual fee before voluntary fee reductions (percentage of average net
assets).............................................................. 0.20%
Voluntary fee reductions............................................. $26,126
TRANSFER AGENT & FUND ACCOUNTANT FEES:............................... $29,233
</TABLE>
-12-
<PAGE>
THE COVENTRY GROUP
THE SHELBY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS YEAR YEAR JULY 1,
ENDED ENDED ENDED 1994 TO
SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31,
1997 1997 1996 1995 (A)
------------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................... $ 11.13 $ 11.82 $ 10.99 $ 10.00
-------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income
(loss)..................... (0.06) (0.09) (0.06) 0.06
Net realized and unrealized
gains (losses) from
investments............... 4.84 (0.19) 3.44 1.04
-------- ------- ------- -------
Total from Investment
Activities............... 4.78 (0.28) 3.38 1.10
-------- ------- ------- -------
DISTRIBUTIONS:
Net investment income...... -- -- -- (0.06)
Net realized gains......... -- (0.41) (2.55) (0.05)
-------- ------- ------- -------
Total Distributions....... -- (0.41) (2.55) (0.11)
-------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD...................... $ 15.91 $ 11.13 $ 11.82 $ 10.99
======== ======= ======= =======
Total Return................ 42.95%(b) (2.80)% 31.41% 11.04%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)...................... $122,743 $90,137 $95,357 $64,157
Ratio of expenses to
average net assets......... 1.29%(c) 1.29% 1.33% 1.41%(c)
Ratio of net investment
income (loss)
to average net assets..... (0.95%)(c) (0.67%) (0.58%) 0.74%(c)
Ratio of expenses to
average net assets*........ 1.34%(c) 1.34% 1.38% 1.46%(c)
Ratio of net investment
income (loss) to average
net assets*............... (1.00%)(c) (0.72%) (0.63%) 0.69%(c)
Portfolio turnover......... 88.49% 204.06% 292.28% 101.86%
Average commission rate
paid (d)................... $ 0.0634(d)
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions for the six months ended September 30, 1997, divided by total
number of portfolio shares purchased and sold for which commissions were
charged. Disclosure is not required for prior periods.
See notes to financial statements.
-13-
<PAGE>
INVESTMENT ADVISER
Shelby County Trust Bank
P.O. Box 249
Shelbyville, Kentucky 40066
SUB-INVESTMENT ADVISER
SMC Capital, Inc.
4350 Brownsboro Rd.
Suite 310
Louisville, Kentucky 40207
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
AUDITORS
Arthur Andersen LLP
2300 Meidinger Tower
Louisville Galleria
Louisville, Kentucky 40202
11/97
LOGO
[THE SHELBY FUND LOGO APPEARS HERE]
SHELBY COUNTY TRUST BANK
INVESTMENT ADVISER
SMC CAPITAL, INC.
SUB-INVESTMENT ADVISER
SEMI-ANNUAL REPORT
TO
SHAREHOLDERS
SEPTEMBER 30, 1997
BISYS FUND SERVICES
3435 STELZER ROAD
COLUMBUS, OHIO 43219
