<PAGE>
ERNST WORLD FUNDS
ERNST GLOBAL ASSET ALLOCATION FUND
ERNST ASIA FUND
ERNST GLOBAL RESOURCES FUND
[LOGO]
ERNST & COMPANY
INVESTMENT ADVISER
ANNUAL REPORT TO SHAREHOLDERS
MARCH 31, 1997
<PAGE>
Report From National Mutual Funds Management Ernst Global Asset Allocation Fund
- --------------------------------------------------------------------------------
Dear Shareholders:
The Ernst Global Asset Allocation Fund commenced operations on July 2, 1996,
and reached full investment in early August. Performance since inception
continues to be pleasing. For the period from commencement of operations to
March 31, 1997, the Fund gained 6.27% (excluding sales charges), as compared
with 6.28% for a composite total return based on a 60% allocation to the Morgan
Stanley Capital International World Free Index and a 40% allocation to the
Lipper Global Government Bond Index.
European equity markets were the strongest performing stock markets since the
Fund's inception and the Fund benefited from its overweighting to these
markets. The Fund's strong performance is also attributable to a number of
well-timed switches in and out of cash over the period under review. The only
negatively performing stock market in the period has been the Japanese market,
where the Fund is neutrally weighted.
PORTFOLIO COMPOSITION
At the end of September 1996 the Fund was fully invested with an overweighting
to European and Asian equity markets (through foreign currency futures
contracts) and U.S. bonds. In the fourth quarter of 1996, we reduced exposure
to U.S. equities, and in early December, prior to Federal Reserve Chairman
Greenspan's comments regarding "asset values," we reduced the Fund's equity
exposure to France and Hong Kong and reduced the position in U.S. bonds. Cash
was temporarily raised to 23%.
In mid to late December, we took advantage of lower prices to purchase
positions in the Australian equity and bond markets, with cash being reduced
back to approximately 10%. Equity positions were again reduced in February,
prompted by stronger than anticipated U.S. growth, and the Fund's cash
*Portfolio composition is subject to change.
levels were raised to almost 30%*, where they remained at the end of the fiscal
year.
During the fiscal year, the Global Asset Allocation Fund maintained a position
in index futures contracts. It has been necessary to remain in index futures
while funding levels are still low in order to achieve a greater degree of
global diversification and thus, act in the best interest of shareholders.
The composition of the Fund as of March 31, 1997, is presented below*:
<TABLE>
<CAPTION>
% OF
% OF TOTAL EQUITIES
PORTFOLIO EXPOSURE
---------- --------
<S> <C> <C> <C>
EQUITIES (INDEX FUTURES) 39.2%
U.S................................................. 6.5% 16.6%
Germany............................................. 7.0 17.9
France.............................................. 4.8 12.2
Japan............................................... 5.6 14.3
Hong Kong........................................... 6.9 17.6
Australia........................................... 2.4 6.1
UK.................................................. 6.0 15.3
----
100%
====
GOVERNMENT BONDS 30.7
US................................................. 24.0
Australia.......................................... 6.7
SHORT-TERM INVESTMENTS............................... 30.1
-----
TOTAL................................................ 100.0%
=====
</TABLE>
ECONOMIC OVERVIEW
We expect world growth to plateau this year as the U.S. and Japan slow, while
Core Europe and China pick up. The U.S. economy is currently growing strongly.
It was this strength coupled with concerns over the future path of inflation
that prompted the Fed to tighten monetary policy in March. Japanese growth is
losing momentum as the fiscal stimulus is unwound, and the banking system
remains fragile. Core Europe will continue its recovery, benefiting from
competitive exchange rates, low interest rates and low inflation.
- --------------------------------------------------------------------------------
-1-
<PAGE>
Report From National Mutual Funds Management Ernst Global Asset Allocation Fund
- --------------------------------------------------------------------------------
Inflation is expected to remain under control. In the US, inflation is likely
to be much the same as it was last year, although the risks are on the upside.
In Japan, inflation is expected to increase in 1997 due to the increase in the
consumption tax. Price pressures in core Europe are expected to remain subdued
this year, with inflation rates similar to those recorded in 1996.
We expect at least one more tightening of monetary policy in the U.S., as the
economy continues to show strength in the near term. Cash rates are likely to
be unchanged in Germany, France and the U.K., although there is the possibility
that monetary policy will be tightened in the U.K. following the election, on
the back of concerns over inflation.
GLOBAL BOND MARKETS
We believe the prospects for international bonds over the next quarter are
relatively poor.
. In the United States, the Federal Reserve has raised interest rates following
a renewed acceleration of economic activity over the past two quarters.
. In Europe, the possibility of a delay to European Monetary Union and a
gradual pick up in economic activity are causing investors to lighten
positions.
. In Japan, the market has rallied to record low yields.
Accordingly, an underweight exposure to bonds is recommended over the next
quarter.
GLOBAL EQUITY MARKETS
The key conclusions of our analysis:
. The U.S. equity market continues to offer little fundamental value. Earnings
growth is expected to be single digit and come in below market expectations
the bond market is likely to range trade; and valuations are expensive on a
historic basis.
However, there is no obvious trigger to cause a bear market in the U.S., as
earnings growth will remain positive; inflation is not expected to rise and
no change in short-term rates is forecast. On the basis of our core outlook,
it is difficult to justify a return above 10%, and the risks of either weak
growth or higher rates are likely to lead to a decline in the market.
. The Japanese equity market has a too-bearish growth outlook priced in.
However, it may be the second half of the year before the market gets
comfortable with the economic outlook. The momentum of growth though, even on
our numbers, is not strong enough to generate anything other than a bounce
within a range trading pattern.
. The Continental European markets have priced in strong profit growth for this
year. The momentum of double-digit earnings growth is likely to carry through
into next year, and with no tightening in short rates and neutral valuation
levels, the European markets can continue to perform, although at a more
subdued pace than the past six months.
. The medium-term outlook for the U.K. market is positive, with earnings growth
in the order of 10%, attractive valuations and a neutral bond market. Over
the next quarter, the election may inject some uncertainty, and there is a
strong chance that if, as expected, Labor gets elected, they will accede to
Bank of England pressure and raise rates.
. Fundamental conditions within Asia are improving. Earnings momentum is likely
to pick up this year due to stronger G7 growth and a gradual easing of
monetary policies. The interest rate environment is supportive, with steady
U.S. cash rates and declining domestic cash rates due to improving trade
balances. Valuation levels are within the neutral band.
- --------------------------------------------------------------------------------
-2-
<PAGE>
Report From National Mutual Funds Management Ernst Global Asset Allocation Fund
- --------------------------------------------------------------------------------
Our relative ranking of international equity markets from best prospects to
worst is Continental Europe, Asia, U.K., Japan and then the U.S.
SUMMARY
Our methodology involves an active process that results in periodic adjustment
of investment allocation as part of the management of the Fund. Since inception
in July 1996, we have made several strategic reallocations of Fund investments
in keeping with our philosophy. We will continue to review our allocations with
regard to changes in economic, market and political dynamics.
Respectfully,
/s/ Richard Greenfield
Richard Greenfield
National Mutual Funds Management (Global), Ltd.
Melbourne, Australia
April 18, 1997
Ernst Global Asset Allocation Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
60% MSCI World
Free Index/40%
Ernst Global Asset Ernst Global Asset Lipper Global
Allocation Fund Allocation Fund Goverment Bond MSCI World
(Load) (No Load) Index Free Index
<S> <C> <C> <C> <C>
7/2/96 9,452 10,000 10,000 10,000
3/31/97 10,044 10,627 10,628 10,620
</TABLE>
Aggregate
Total Return*--3/31/97
<TABLE>
<CAPTION>
w/o w/5.5%
sales sales
charge charge
<S> <C> <C>
Since Inception
(7/2/96) 6.27% 0.44%
</TABLE>
The Morgan Stanley Capital International World Free Index measures performance
of 22 global stock markets. The Lipper Global Government Bond Index measures
performance of the 30 largest mutual funds with that investment objective. The
indices are not managed and do not reflect the deduction of expenses associated
with a mutual fund.
- ------
*Past performance is not predictive of future results. Investment return and
principal value of the Fund will fluctuate, so that shares, when redeemed, may
be worth more or less than their original cost.
Foreign investing involves a greater degree of risk and volatility.
- --------------------------------------------------------------------------------
-3-
<PAGE>
Report From Koeneman Capital Management Ernst Asia Fund
- -------------------------------------------------------------------------------
Dear Shareholders:
As shown in the table below, the Fund's total return far exceeded the Morgan
Stanley Capital International All Country Far East Free Index for the year
ended March 31, 1997, and for the period since inception in December 1995. The
principal factor is the fact that the MSCI Index, being capitalization
weighted, is dominated by Japan (which would be about 80-90% of the Index).
Japan has had negative returns of late, pulling down the index. By contrast,
the Ernst Asia Fund had a weight of about 18-24% in Japan over the period.
The Fund also performed favorably compared to the Morningstar universe of
Pacific Funds, beating the universe average over the last year and since
inception. Again, funds that excluded Japan would on average have done better
than funds that included Japan over the recent year. Both types of funds are
included in the Morningstar universe, which even includes single country
funds.
COMPARATIVE RETURNS, PERIODS ENDING MARCH 31, 1997
<TABLE>
<CAPTION>
CUMULATIVE SINCE
1 YEAR INCEPTION (12/6/95)
------ -------------------
<S> <C> <C>
Asia Fund (excluding
sales charge)....................................... -2.57% 6.98%
Morningstar Average.................................. -4.3 2.1
MSCI Index........................................... -20.1 6.1
Japan (Topix Index).................................. -15.4 -8.2
</TABLE>
As for the Asia ex Japan component of the Fund, the Fund benefited from high
exposure to Hong Kong and Taiwan, as well as exposure to the Philippines. The
Fund's Hong Kong exposure was maintained in the 20-26% range over most of the
last year. Taiwan was brought up to about 16% of the portfolio over the second
half of the year, while the Phillippines averaged about 3-4% of the portfolio.
The Fund also benefited from its zero exposure to Thailand and the reduction
in exposure in Singapore toward the second half of 1996. However, exposure to
Korea (averaged 3-5% of portfolio) detracted from return, as did zero exposure
to Indonesia and Malaysia.
Stock selection was generally good in the Fund, with stock picking in most
countries exceeding the relevant local index. One major holding has been
HongKong Bank which has appreciated by 56% over the last year. With a
recovering property market and low interest rates, HongKong Bank has benefited
from higher mortgage volumes and better spreads. Even in Japan, in spite of
the decline in the market, Japanese stock selection has been good. The
portfolio has been underweighted in Japanese banks, and overweighted in
exporters. This was to avoid the bad loan problem in the banks, and to benefit
from the weak yen, which benefits exporters. For example, Toyota (1.88%) has
appreciated by 43% over the last year, in a market that declined 21% over the
same time period.
With the extremely strong U.S. dollar, currency has hurt the portfolio,
particularly the exposure to Japanese yen. The yen has depreciated 15% against
the U.S. dollar over the year ending March 1997. The other Asian currencies
track the U.S. dollar and have had only slight impact on the portfolio.
Our current target allocations are as follows*:
<TABLE>
<CAPTION>
COUNTRY TARGET %
- ------- --------
<S> <C>
China.................................................................. --
Hong Kong.............................................................. 24
India.................................................................. --
Indonesia.............................................................. 3
Japan.................................................................. 18
Korea.................................................................. --
Malaysia............................................................... 5
Philippines............................................................ 4
Singapore.............................................................. 7
Taiwan................................................................. --
Thailand............................................................... 4
---
Total Equities......................................................... 65%
===
</TABLE>
*Portfolio composition is subject to change.
- -------------------------------------------------------------------------------
-4-
<PAGE>
Report From Koeneman Capital Management Ernst Asia Fund
- --------------------------------------------------------------------------------
The top ten holdings as of March 31, 1997, as a percentage of the total
portfolio value are as follows:
<TABLE>
<CAPTION>
% OF
STOCK NAME PORTFOLIO*
- ---------- ----------
<S> <C>
Sun Hung Kai Props................................................... 3.3
Formosa Fund......................................................... 3.1
Taipei Fund.......................................................... 3.0
Cheung Kong (Holdings)............................................... 2.5
Hong Kong Electric................................................... 2.4
Henderson Land Dev................................................... 2.3
Swire Pacific........................................................ 2.3
Hutchison Whampoa.................................................... 2.2
Honda Motors Co...................................................... 2.2
Berjaya Sports Toto Bhd.............................................. 2.2
</TABLE>
MARKET EXPECTATIONS GOING FORWARD
The factors of relevance at the moment include U.S. interest rates, the
direction of the U.S. dollar and global economic growth. With the possibility
of rising U.S. interest rates, our outlook for Asia is cautious. Another
potential negative would be a continuing appreciation of the U.S. dollar. With
most Asia currencies linked to the U.S. dollar, the Asian currencies are being
pulled upwards in tandem with the dollar. This hurts the competitiveness of the
Asian economies. The Asian economies are very export oriented and are more
sensitive to dollar strength than the U.S. itself. This export orientation
means that global economic growth is also a key factor for the Asian economies.
Aside from these cyclical considerations, the long-term growth story in Asia
remains intact.
For these reasons, we are maintaining a relatively high cash position in the
portfolio in anticipation of more buying opportunities in the future.
We have reduced our Taiwan exposure, as the market has appreciated strongly.
Taiwanese interest rates have started to increase. We maintain a fully weighted
position in Hong Kong, and have started to increase Singapore exposure because
of the Singapore market decline and the fact that the Singapore Dollar has
started to decline, improving the country's competitiveness.
Thus, while the long-term story on Asia remains intact, the current environment
is more one for building a long-term position in Asia, rather than expecting
any dramatic short-term gains.
Respectfully,
/s/ Geoffrey E. Wong
Geoffrey E. Wong
/s/ John K. Koeneman
John K. Koeneman
Koeneman Capital Management Pte Ltd.
Singapore
April 21, 1997
*Portfolio composition is subject to change.
- --------------------------------------------------------------------------------
-5-
<PAGE>
Report From Koeneman Capital Management Ernst Asia Fund
- --------------------------------------------------------------------------------
Ernst Asia Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Morningstar weighted
MSCI AC average return of
Ernst Asia Ernst Asia Far East International/
Fund (Load) Fund (No Load) Free Index Pacific Funds
<S> <C> <C> <C> <C>
12/6/95 9,579 10,000 10,000 10,000
3/31/96 10,498 10,960 10,502 10,674
3/31/97 10,247 10,698 8,387 10,213
</TABLE>
Average Annual
Total Return*--3/31/97
<TABLE>
<CAPTION>
w/o w/4.25%
sales sales
charge charge
<S> <C> <C>
1 Year -2.57% -6.73%
Since Inception
(12/6/95) 5.25% 1.87%
</TABLE>
The Morgan Stanley Capital International All Country Far East Free Index
measures performance of the stock markets in eight developed and emerging market
countries in the Far East, and the Morningstar weighted average return of
International/Pacific Funds measures the performance of over 100 mutual funds
with that investment objective. The MSCI AC Far East Free Index is not managed
and does not reflect the deduction of expenses associated with a mutual fund.
- ------
* Past performance is not predictive of future results. Investment return and
principal value of the Fund will fluctuate, so that shares, when redeemed,
may be worth more or less than their original cost.
Foreign investing involves a greater degree of risk and volatility.
- --------------------------------------------------------------------------------
-6-
<PAGE>
Report From National Mutual Funds Management Ernst Global Resources Fund
- --------------------------------------------------------------------------------
Dear Shareholders:
For the year ended March 31, 1997, the Fund returned -2.53% (excluding sales
charges), compared with the Morgan Stanley Capital International World Free
Index of 9.8% and the Morningstar Specialty/Natural Resources Funds average of
14.2%. The fund remained heavily weighted towards metals and mining and
underweighted in energy. The majority of competitor funds were overweighted in
U.S. domestic energy stocks and therefore produced superior returns for the
year.
On a more positive note, the quarter ended March 31, 1997, produced better
results, with metal and mining stocks outperforming energy stocks. The Fund was
even for the period, with a 0% return, while the Morningstar average declined -
4.3%.
PORTFOLIO COMPOSITION
While the composition of the Fund's investments is subject to change, as of
March 31, 1997, the top ten equity holdings were as follows*:
<TABLE>
<CAPTION>
PERCENT OF
COMPANY SECTOR TOTAL ASSETS
- ----------------------- -------------------- ------------
<S> <C> <C>
Freeport McMoran Diversified Mining 5.3%
Oil Search Ltd. Oil & Gas Production 5.2
Phelps Dodge Corp. Copper Mining 5.0
Alcan Aluminum Ltd. Aluminum 4.8
Kaiser Aluminum Corp. Aluminum 4.8
Inco, Ltd. Diversified Metal 4.7
Cominco Ltd. Diversified Metal 4.7
Savage Resources Ltd. Diversified Minerals 4.7
Aluminum Co. of America Aluminum 4.6
RTZ Corp. plc Diversified Minerals 4.5
</TABLE>
INVESTMENT STRATEGY
Global growth is the key ingredient for significant capital appreciation within
the global resource market. The US economy is currently experiencing very
strong growth, and notwithstanding further interest rate action, we expect
growth to be above trend from the second half of 1997 through 1998.
The growth profile in Europe and Asia has been less robust; however, this
situation is finally improving and we believe 1998 will be very positive for
global growth. Within this economic framework, we believe 1998 will be a good
year for global resources, and in particular metal stocks should finally
produce some strong returns.
In terms of the fund structure, we will remain overweighted in metals/mining
but to a lesser extent than in the past year. The primary reason for this
change is that we have witnessed a large correction of energy-related stocks
over the last quarter and believe energy prices (oil, gas, LNG) have also
corrected to reasonable levels. Therefore, we will be increasing our exposure
to the sector.
Our target allocation will be 70% metals/mining and 30% energy. Within
metals/mining, our key exposures will be aluminium/zinc and nickel related
stocks and diversified mining companies. We will be underweighted in gold
stocks and neutral bulk commodities (iron ore and coal) and steel.
Within energy, we will have a balanced mix of large international integrated
producers and exploration/ growth companies and will have some exposure to
service companies.
MARKET EXPECTATIONS
The second half of 1997 should be positive for the Ernst Global Resources Fund.
We expect metal prices to rise approximately 10-20% and energy prices to rise
5-10%. We have begun to position the Fund to derive maximum benefit from the
resulting equity returns in these sectors. We will continue to monitor
developments in world markets and to allocate assets based on our view of the
opportunities.
Respectfully,
/s/ Paul Willis /s/ Tony Fernie
Paul Willis Tony Fernie
National Mutual Funds Management (Global), Ltd.
Melbourne, Australia
May 5, 1997
*Portfolio composition is subject to change.
- --------------------------------------------------------------------------------
-7-
<PAGE>
Report From National Mutual Funds Management Ernst Global Resources Fund
- --------------------------------------------------------------------------------
Ernst Asia Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Morgan Stanley Morningstar weighted
Ernst Global Ernst Global Capital average return of
Resources Resources International Specialty/Natural
Fund (Load) Fund (No Load) World Free Index Resources Funds
<S> <C> <C> <C> <C>
12/11/95 9,579 10,000 10,000 10,000
3/31/96 10,220 10,670 10,523 11,267
3/31/97 9,962 10,400 11,530 12,870
</TABLE>
Average Annual
Total Return*--3/31/97
<TABLE>
<CAPTION>
w/o w/4.25%
sales sales
charge charge
<S> <C> <C>
1 Year -2.53% -6.64%
Since Inception
(12/11/95) 3.05% -0.29%
</TABLE>
The Morgan Stanley Capital International World Free Index measures performance
of 22 global stock markets. The Morningstar weighted average return of
Specialty/Natural Resources Funds measures the performance of over 40 mutual
funds with that investment objective. The MSCI World Free Index is not managed
and does not reflect the deduction of expenses associated with a mutual fund.
- ------
*Past performance is not predictive of future results. Investment return and
principal value of the Fund will fluctuate, so that shares, when redeemed, may
be worth more or less than their original cost.
Foreign investing involves a greater degree of risk and volatility.
This material must be preceded or accompanied by a current prospectus.
BISYS Fund Services, Distributor
5/97
- --------------------------------------------------------------------------------
-8-
<PAGE>
TABLE OF CONTENTS
Report of Independent Accountants
Page 10
Statements of Assets and Liabilities
Page 11
Statements of Operations
Page 12
Statements of Changes in Net Assets
Page 13
Schedules of Portfolio Investments
Page 14
Notes to Financial Statements
Page 20
Financial Highlights
Page 27
-9-
<PAGE>
Report of Independent Accountants Ernst World Funds
- -------------------------------------------------------------------------------
To the Shareholders and Trustees,
The Coventry Group--Ernst World Funds
We have audited the accompanying statements of assets and liabilities of the
Ernst World Funds (comprising, respectively of the Ernst Global Asset
Allocation Fund, the Ernst Asia Fund, and the Ernst Global Resources Fund)
including the schedules of portfolio investments, as of March 31, 1997, and
the related statements of operations, changes in net assets, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Ernst World Funds'
management. Our responsibility is to express as opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of March 31, 1997, by correspondence with the custodian and brokers,
or other auditing procedures where confirmations from brokers were not
received. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds comprising the Ernst World Funds as of March 31, 1997,
and the results of their operations, the changes in their net assets, and
their financial highlights for the periods presented, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
May 20, 1997
- -------------------------------------------------------------------------------
-10-
<PAGE>
COVENTRY GROUP
ERNST WORLD FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<CAPTION>
ERNST
ERNST GLOBAL GLOBAL
ASSET ALLOCATION ERNST ASIA RESOURCES
FUND FUND FUND
---------------- ---------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost
$5,911,205, $5,404,122, and
$10,312,602, respectively).......... $5,878,859 $5,384,494 $10,577,123
Interest and dividends receivable.... 50,345 12,192 33,397
Foreign currency (cost $0, $702,208,
and $769, respectively)............. -- 701,490 769
Receivable from brokers for
investments sold.................... -- 223,397 --
Receivable for forward currency
contracts........................... -- -- 148,658
Receivable for capital shares issued. -- -- 1,437
Reclaims receivable.................. -- -- 1,923
Unamortized organization costs....... 37,477 11,350 16,185
Prepaid expenses and other assets.... 1,482 4,805 2,733
---------- ---------- -----------
Total Assets..................... 5,968,163 6,337,728 10,782,225
---------- ---------- -----------
LIABILITIES:
Payable for forward currency
contracts........................... -- -- 150,602
Accrued expenses and other payables:
Investment advisory fees........... 5,508 5,408 9,266
Administration fees................ 616 616 616
Distribution and shareholder
service fees...................... 1,252 1,352 2,316
Custodian.......................... 5,900 2,144 2,003
Printing........................... 6,037 3,134 4,587
Accounting and transfer agent fees. 8,781 5,684 6,297
Legal and audit fees............... 19,697 4,137 9,168
Net variation margin on open
futures contracts................. 40,205 -- --
Other.............................. -- 7 32
---------- ---------- -----------
Total Liabilities................ 87,996 22,482 184,887
---------- ---------- -----------
NET ASSETS:
Paid-in capital...................... 5,569,303 6,205,639 10,422,734
Distributions in excess of net
investment income................... (9,880) (10,978) (12,842)
Net unrealized appreciation
(depreciation) from investments..... (1,910) 23,116 171,363
Net unrealized appreciation
(depreciation) from translation of
assets and liabilities in foreign
currencies.......................... (13) (43,371) 91,266
Accumulated undistributed net
realized gains (losses) from
investment transactions including
futures contracts................... 325,769 114,732 (12,730)
Accumulated undistributed net
realized gains (losses)
from foreign currency transactions . (3,102) 26,108 (62,453)
---------- ---------- -----------
Net Assets........................... $5,880,167 $6,315,246 $10,597,338
========== ========== ===========
Outstanding shares................... 553,628 615,259 1,019,169
========== ========== ===========
Net asset value and redemption price
per share........................... $10.62 $10.26 $10.40
========== ========== ===========
Maximum sales charge................. 5.50% 4.25% 4.25%
========== ========== ===========
Maximum offering price per share..... $11.24 $10.72 $10.86
========== ========== ===========
</TABLE>
See notes to financial statements.
-11-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
ERNST
ERNST GLOBAL ERNST GLOBAL
ASSET ALLOCATION ASIA RESOURCES
FUND (A) FUND FUND
---------------- --------- ---------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income......................... $195,762 $ 62,307 $ 20,252
Dividend income......................... -- 82,110 184,545
Foreign tax withholding................. -- (7,738) (5,779)
-------- --------- ---------
Total Income.......................... 195,762 136,679 199,018
-------- --------- ---------
EXPENSES:
Investment advisory fees................ 43,877 60,569 102,553
Administration fees..................... 27,945 37,500 37,500
Distribution and shareholder service
fees................................... 9,972 15,139 25,637
Custodian fees.......................... 8,976 10,732 9,383
Legal and audit fees.................... 29,406 20,632 34,174
Organization costs...................... 11,494 11,074 12,505
Trustees' fees and expenses............. 544 541 813
Accounting and transfer agent fees...... 39,544 57,896 57,929
Registration and filing fees............ 10,160 2,302 5,567
Printing costs.......................... 16,604 2,692 7,612
Other................................... 519 535 459
-------- --------- ---------
Total expenses........................ 199,041 219,612 294,132
Less: Fee waivers....................... -- (14,717) (26,057)
-------- --------- ---------
Net Expenses.......................... 199,041 204,895 268,075
-------- --------- ---------
Net Investment Loss..................... (3,279) (68,216) (69,057)
-------- --------- ---------
REALIZED AND UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gains (losses) from
investment transactions................ 31,460 237,625 (73,561)
Net realized gains (losses) from futures
contracts.............................. 291,208 -- --
Net realized gains (losses) from foreign
currency transactions.................. (3,102) 29,306 (62,453)
Net change in unrealized appreciation
(depreciation) from
investments............................ (1,910) (308,019) (66,512)
Net change in unrealized appreciation
(depreciation) from
translation of assets and liabilities
in foreign currencies.................. (13) (36,441) (1,974)
-------- --------- ---------
Net realized and unrealized gains
(losses) from investments and
foreign currencies..................... 317,643 (77,529) (204,500)
-------- --------- ---------
Change in net assets resulting from
operations............................. $314,364 $(145,745) $(273,557)
======== ========= =========
</TABLE>
- ------
(a) For the period from July 2, 1996 (commencement of operations) through March
31, 1997.
See notes to financial statements.
-12-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ERNST GLOBAL
ASSET ALLOCATION
FUND ERNST ASIA FUND ERNST GLOBAL RESOURCES FUND
---------------- ----------------------- ------------------------------
JULY 2, YEAR DECEMBER 6, YEAR DECEMBER 11,
1996 TO ENDED 1995 TO ENDED 1995 TO
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1997 (A) 1997 1996 (A) 1997 1996 (A)
---------------- ---------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS
Net investment loss.... $ (3,279) $ (68,216) $ (44,544) $ (69,057) $ (18,294)
Net realized gains
(losses) from
investment
transactions.......... 31,460 237,625 192,408 (73,561) 5,076
Net realized gains
(losses) from futures
contracts............. 291,208 -- -- -- --
Net realized gains
(losses) from foreign
currency transactions. (3,102) 29,306 37,884 (62,453) (3,763)
Net change in
unrealized
appreciation
(depreciation) from
investments........... (1,910) (308,019) 331,135 (66,512) 237,875
Net change in
unrealized
appreciation
(depreciation) from
translation of assets
and liabilities in
foreign currencies.... (13) (36,441) (6,930) (1,974) 93,240
---------- ---------- ---------- ------------- -------------
Change in net assets
resulting from
operations............. 314,364 (145,745) 509,953 (273,557) 314,134
---------- ---------- ---------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS:
In excess of net
investment income...... (3,500) (64,549) -- -- --
From net realized gains
on investments......... -- (190,052) -- -- --
---------- ---------- ---------- ------------- -------------
Change in net assets
from shareholder
distributions.......... (3,500) (254,601) -- -- --
---------- ---------- ---------- ------------- -------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 5,575,623 656,307 5,355,155 420,536 10,142,690
Dividends reinvested... 3,500 254,529 -- -- --
Cost of shares
redeemed.............. (9,820) (60,352) -- (6,465) --
---------- ---------- ---------- ------------- -------------
Change in net assets
from share
transactions.......... 5,569,303 850,484 5,355,155 414,071 10,142,690
---------- ---------- ---------- ------------- -------------
Change in net assets... 5,880,167 450,138 5,865,108 140,514 10,456,824
NET ASSETS:
Beginning of period.... -- 5,865,108 -- 10,456,824 --
---------- ---------- ---------- ------------- -------------
End of period.......... $5,880,167 $6,315,246 $5,865,108 $ 10,597,338 $ 10,456,824
========== ========== ========== ============= =============
SHARE TRANSACTIONS:
Issued................. 554,219 62,232 534,392 40,126 979,696
Reinvested............. 329 24,427 -- -- --
Redeemed............... (920) (5,792) -- (653) --
---------- ---------- ---------- ------------- -------------
Change in shares........ 553,628 80,867 534,392 39,473 979,696
========== ========== ========== ============= =============
</TABLE>
- ------
(a) Period from commencement of operations.
See notes to financial statements.
-13-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
ERNST GLOBAL ASSET ALLOCATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- --------------------------------------------------------- ----------
<C> <S> <C>
U.S. TREASURY NOTES (24.0%):
$350,000 5.88%, 2/15/04........................................... $ 330,969
500,000 6.88%, 5/15/06........................................... 497,031
500,000 8.75%, 5/15/20........................................... 583,750
----------
Total U.S. Treasury Notes 1,411,750
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ ----------
<C> <S> <C>
TIME DEPOSITS (76.0%):
UNITED STATES (76.0%):
$4,467,109 Union Bank of California, 4.83%, dated 03/31/97 due
04/1/97 (b).......................................... $4,467,109
----------
Total Time Deposits 4,467,109
----------
Total Investments (Cost--$5,911,205) (a) $5,878,859
==========
</TABLE>
- ------
Percentages indicated are based on net assets of $5,880,167.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............ $ 0
Unrealized depreciation............ (32,346)
--------
Net unrealized depreciation........ $(32,346)
========
</TABLE>
(b) The Fund has temporarily invested in futures contracts. As of March 31,
1997, $220,191 of time deposits was reserved for these contracts.
OPEN FUTURES CONTRACTS AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
CURRENT
OPENING MARKET
# OF POSITIONS VALUE
CONTRACTS CONTRACT TYPE COUNTRY (000) (000)
--------- --------------------------------- ------------- --------- -------
<C> <S> <C> <C> <C>
LONG CONTRACTS--BONDS
4 Australian, June 1997 Australia $ 403 $ 396
====== ======
10 year Australian Treasury Bonds
LONG CONTRACTS--EQUITIES
3 Australian SPI, June 1997 Australia 140 142
3 CAC Index, June 1997 France 273 280
2 DAX (DTB), June 1997 Germany 345 410
2 FTSE 100, June 1997 Great Britain 360 354
5 Hang Sang Index, June 1997 Hong Kong 410 402
1 SPX (CME), June 1997 U.S. 397 379
3 TOPIX Index, June 1997 Japan 337 330
------ ------
$2,262 $2,297
====== ======
</TABLE>
See notes to financial statements.
-14-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
ERNST ASIA FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- --------------------------------------------------------- ----------
<C> <S> <C>
COMMON STOCKS (57.5%):
HONG KONG (20.4%):
Banks (3.7%):
6,000 Hang Seng Bank Ltd....................................... $ 61,943
4,800 HSBC Holdings plc........................................ 111,498
13,500 Wing Hang Bank Ltd....................................... 59,233
----------
232,674
----------
Diversified (3.8%):
16,000 Hutchison Whampoa Ltd.................................... 120,273
15,500 Swire Pacific Ltd. "A"................................... 122,016
----------
242,289
----------
Hotels (0.7%):
29,250 Hong Kong & Shanghai Hotel Ltd........................... 46,240
----------
Real Estate (9.1%):
60,000 Amoy Properties Ltd...................................... 63,492
15,000 Cheung Kong (Holdings) Ltd............................... 132,113
15,000 Henderson Land Development Co., Ltd...................... 124,370
17,000 Sun Hung Kai Properties Ltd.............................. 179,894
20,000 Wharf (Holdings) Ltd..................................... 76,526
----------
576,395
----------
Utilities (3.1%):
10,000 Asia Satellite Telecommunications Holdings Ltd. (b)...... 25,745
9,500 China Light & Power Co. Ltd. ............................ 41,805
37,000 Hongkong Electric Holdings Ltd........................... 130,591
----------
198,141
----------
Total Hong Kong 1,295,739
----------
INDONESIA (3.2%):
Automobiles (0.7%):
13,000 Astra International--Foreign............................. 42,232
----------
Banks (0.2%):
20,664 Bank International Indonesia--Foreign.................... 15,707
----------
Building Products (0.6%):
14,000 Semen Gresik--Foreign.................................... 34,840
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- --------------------------------------------------------- ----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
INDONESIA, CONTINUED:
Commercial Services (0.5%):
37,500 Citra Marga Nusaphala Persada--Foreign................... $ 33,580
----------
Diversified Operations (0.5%):
21,000 Indocement Tunggal--Foreign.............................. 29,738
----------
Pharmaceuticals (0.2%):
11,500 Darya Varia Laboratoria--Foreign......................... 14,369
----------
Real Estate (0.3%):
13,500 Kawasan Industri Jababeka--Foreign....................... 18,414
----------
Transportation Services (0.2%):
11,000 Steady Safe Transportation--Foreign...................... 13,057
----------
Total Indonesia 201,937
----------
JAPAN (21.8%):
Automobiles (3.4%):
4,000 Honda Motor Co., Ltd..................................... 119,215
4,000 Toyota Motor Corp........................................ 101,123
----------
220,338
----------
Banks (3.4%):
9,000 77 Bank.................................................. 68,985
6,000 Asahi Bank, Ltd.......................................... 37,703
5,000 Bank of Tokyo--Mitsubishi................................ 77,942
3,000 Sanwa Bank Ltd........................................... 32,227
----------
216,857
----------
Electronic & Electrical (4.9%):
5,000 Canon, Inc............................................... 107,019
4,000 Matsushita Electric Industrial Co., Ltd.................. 62,354
7,000 Matsushita Electric Works................................ 63,888
7,000 Nichicon Corp............................................ 74,065
----------
307,326
----------
Food Processing & Packaging (1.0%):
3,000 Nissin Food Products..................................... 62,515
----------
Heavy Machinery (1.6%):
8,000 Amada Co., Ltd........................................... 57,831
</TABLE>
Continued
-15-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
ERNST ASIA FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- --------------------------------------------------------- ----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
JAPAN, CONTINUED:
HEAVY MACHINERY, CONTINUED:
6,000 Komatsu Ltd.............................................. $ 43,857
----------
101,688
----------
Insurance (0.8%):
5,000 Tokio Marine & Fire Insurance............................ 50,883
----------
Machine Tools (0.9%):
8,000 Makino Milling Machine................................... 54,341
----------
Pharmaceuticals (1.7%):
7,000 Daiichi Pharmaceuticals Co., Ltd......................... 106,292
----------
Radio & Television (1.6%):
7,000 Tokyo Broadcasting System................................ 99,507
----------
Retail--Consumer Electronics (0.9%):
4,000 Deodeo Corp.............................................. 58,154
----------
Steel--Producers (0.5%):
11,000 Nippon Steel Corp........................................ 30,207
----------
Textile Manufacturing (1.1%):
6,000 Onward Kashiyama Co., Ltd................................ 69,300
----------
Total Japan 1,377,408
----------
MALAYSIA (5.0%):
Banks (1.4%):
13,000 Commerce Asset Holdings Berhad........................... 91,235
----------
Diversified Operations (1.7%):
58,000 Magnum Corp. Berhad...................................... 109,951
----------
Leisure & Recreation (1.9%):
23,000 Berjaya Sports Toto Berhad............................... 117,816
----------
Total Malayasia 319,002
----------
THE PHILIPPINES (3.3%):
Banks (0.5%):
1,320 Metropolitan Bank & Trust Co............................. 34,295
540 Union Bank of the Philippines (b)........................ 594
----------
34,889
----------
Beverages--Wine/Spirits (0.3%):
5,200 La Tondena Distillers, Inc............................... 13,905
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------------- ---------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
THE PHILIPINES, CONTINUED:
BEVERAGES--WINE/SPIRITS, CONTINUED:
700 San Miguel Corp. Class "B"................................ $ 2,429
---------
16,334
---------
Construction (0.1%):
5,800 DMCI Holdings, Inc. (b)................................... 4,125
---------
Diversified Operations (0.1%):
12,000 Metro Pacific Corp........................................ 3,641
---------
Electronics & Electrical (0.1%):
14,000 Ionics Circuit, Inc....................................... 9,425
---------
Food--Miscellaneous/Diversified (0.1%):
20,700 Universal Robina Corp..................................... 9,422
---------
Paper & Related Products (0.1%):
26,000 PICOP Resources, Inc...................................... 4,240
---------
Real Estate (1.1%):
7,813 Ayala Land, Inc. "B"...................................... 8,890
39,000 Belle Corp. (b)........................................... 12,426
42,600 C & P Homes, Inc.......................................... 20,197
60,000 Filinvest Land, Inc. (b).................................. 19,116
24,000 Filinvest Development Corp................................ 6,827
---------
67,456
---------
Retail (0.2%):
51,000 Uniwide Holdings, Inc. (b)................................ 13,154
---------
Utilities--Electric (0.7%):
1,790 Manila Electric Co., "B".................................. 14,258
500 Philippine Long Distance Telephone Co..................... 30,059
---------
44,317
---------
Total Philippines 207,003
---------
SOUTH KOREA (0.0%):
Mining--Diversified (0.0%):
99 Yukong--GDR (b)........................................... 1,002
---------
Utilities--Telecommunication (0.0%):
70 Korea Mobile Telecommunications--ADR...................... 718
---------
Total South Korea 1,720
---------
</TABLE>
Continued
-16-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
ERNST ASIA FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- --------------------------------------------------------- ----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
THAILAND (3.8%):
Banks (1.8%):
8,000 Bangkok Bank plc......................................... $ 77,613
5,000 Thai Farmers Bank plc--Foreign........................... 32,531
----------
110,144
----------
Electronics & Electrical (0.6%):
3,200 K.R. Precision plc (b)................................... 21,436
2,200 K.R. Precision plc--Foreign (b).......................... 14,907
----------
36,343
----------
Entertainment (0.1%):
900 BEC World plc (b)........................................ 8,593
----------
Financial Services (0.4%):
10,400 Industrial Finance Corp.
of Thailand (b)......................................... 27,627
----------
Oil & Gas Production (0.5%):
1,900 PTT Exploration & Production plc......................... 28,235
----------
Restaurants (0.4%):
1,800 Pizza Co. (Thailand) Ltd................................. 12,681
2,000 Pizza Co. (Thailand) Ltd.--Foreign....................... 14,090
----------
26,771
----------
Total Thailand 237,713
----------
Total Common Stocks 3,640,522
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- ----------
<C> <S> <C>
WARRANTS (0.1%):
HONG KONG (0.0%):
2,250 Hong Kong & Shanghai Hotel Ltd. (b).................... $ 409
----------
THE PHILIPPINES (0.1%):
1,800 Philippine National Bank (b)........................... 5,428
----------
Total Warrants 5,837
----------
TIME DEPOSITS (22.4%):
UNITED STATES (22.4%):
353,645 State Street Bank & Trust, 5.19%, dated 3/31/97, due
4/7/97................................................ 353,645
1,058,615 Union Bank of California, 4.83%, dated 3/31/97, due
4/1/97................................................ 1,058,615
----------
TOTAL TIME DEPOSITS 1,412,260
----------
INVESTMENT COMPANIES (5.2%):
TAIWAN (5.2%):
15 Formosa Fund IDR (b)................................... 164,625
15 Taipei Fund IDR (b).................................... 161,250
----------
Total Investment Companies 325,875
----------
Total Investments (Cost--$5,406,433) (a) $5,384,494
==========
</TABLE>
- ------
Percentages indicated are based on net assets of $6,315,246.
(a) Represents cost for federal income tax purposes and differs from cost for
financial reporting purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting by
approximately $2,311. Cost for federal income tax purposes differs from
value by net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........... $ 325,945
Unrealized depreciation........... (347,884)
---------
Net unrealized depreciation....... $ (21,939)
=========
</TABLE>
(b) Represents non-income producing securities.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
IDR--International Depository Receipt.
plc--Public Limited Company
See notes to financial statements.
-17-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
ERNST GLOBAL RESOURCES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- -------------------------------------------------------- ----------
<C> <S> <C>
COMMON STOCKS (93.0%):
AUSTRALIA (36.7%):
Diversified Minerals (10.2%):
23,475 CRA Ltd................................................. $ 347,039
475,000 Savage Resources Ltd.................................... 495,195
38,500 WMC Ltd................................................. 243,235
----------
1,085,469
----------
Gold Mining (5.4%):
200,000 Centaur Mining & Exploration (b)........................ 274,346
39,600 Delta Gold NL........................................... 58,356
21,100 Newcrest Mining......................................... 69,134
70,077 Normandy Mining Ltd..................................... 95,083
19,000 Plutonic Resources Ltd.................................. 73,721
----------
570,640
----------
Metals--Diversified (1.9%):
105,000 Pasminco Ltd............................................ 202,550
----------
Metals--Fabrication (1.4%):
40,000 RGC Ltd................................................. 151,439
----------
Mining--Diversified (5.0%):
24,800 The Broken Hill Proprietary Company Ltd................. 330,469
150,000 M.I.M. Holdings Ltd..................................... 201,056
----------
531,525
----------
Oil & Gas Production (9.9%):
80,200 Novus Petroleum......................................... 202,423
260,300 Oil Search Ltd.......................................... 550,895
39,300 Woodside Petroleum...................................... 289,384
----------
1,042,702
----------
Precious Metals (2.9%):
93,200 North Ltd............................................... 303,176
----------
Total Australia 3,887,501
----------
BRITAIN (4.5%):
Diversified Minerals (4.5%):
30,450 RTZ Corp. plc........................................... 481,740
----------
Total Britain 481,740
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- -------------------------------------------------------- ----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
CANADA (4.7%):
Metal--Diversified (4.7%):
18,400 Cominco Ltd. ........................................... $ 502,814
----------
Total Canada 502,814
----------
FRANCE (3.1%):
Metal--Aluminum (3.1%):
8,000 Pechiney S.A............................................ 324,776
----------
Total France 324,776
----------
SOUTH AFRICA (1.8%):
Diversified Minerals (1.8%):
40,000 Gencorp Ltd............................................. 185,498
----------
Total South Africa 185,498
----------
UNITED STATES (42.2%):
Copper Mining (4.9%):
7,200 Phelps Dodge Corp....................................... 526,500
----------
Gold Mining (9.7%):
11,000 Ashanti Goldfields Co. Ltd.............................. 162,800
8,110 Ashanti Goldfields GDR.................................. 111,512
20,073 Barrick Gold Corp....................................... 476,734
7,100 Newmont Mining.......................................... 275,125
----------
1,026,171
----------
Metal--Aluminum (16.6%):
15,070 Alcan Aluminum Ltd...................................... 510,496
7,100 Alumax, Inc. (b)........................................ 245,838
7,270 Aluminum Company of America............................. 494,360
46,280 Kaiser Aluminum Corp. (b)............................... 509,080
----------
1,759,774
----------
Metal--Diversified (5.0%):
920 Cominco Ltd............................................. 24,955
15,478 Inco, Ltd............................................... 504,970
----------
529,925
----------
Mining--Diversified (6.0%):
18,700 Freeport McMoRan Copper & Gold.......................... 568,012
1,700 Newmont Gold Co......................................... 68,212
----------
636,224
----------
Total United States 4,478,594
----------
Total Common Stock 9,860,923
----------
</TABLE>
Continued
-18-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
ERNST GLOBAL RESOURCES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
WARRANTS (0.1%):
Australia (0.1%):
30,000 Savage Resources (b)................................... $ 7,760
-----------
Total Warrants 7,760
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
TIME DEPOSITS (6.7%):
United States (6.7%):
708,440 Union Bank of California, 4.83%, dated 3/31/97, due
4/1/97............................................... $ 708,440
-----------
Total Time Deposits 708,440
-----------
Total Investments (Cost--$10,312,602) (a) $10,577,123
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $10,597,338.
(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........... $ 998,660
Unrealized depreciation........... (734,139)
---------
Net unrealized appreciation....... $ 264,521
=========
</TABLE>
(b) Represents non-income producing securities.
<TABLE>
<CAPTION>
VALUE ON
SETTLEMENT CURRENT UNREALIZED
FORWARD FOREIGN CURRENCY CONTRACTS EXPIRING DATE VALUE DEPRECIATION
- ---------------------------------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Currency Sold:
French Francs........................ 06/20/97 $148,658 $150,602 ($1,944)
--------
Payable for Forward Foreign Currency
Contracts............................ $150,602
========
</TABLE>
See notes to financial statements.
-19-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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 Ernst Global Asset Allocation Fund, the
Ernst Asia Fund, and the Ernst Global Resources Fund (individually, a
"Fund"; collectively, the "Funds"), each a series of the Group, commenced
operations July 2, 1996, December 6, 1995, and December 11, 1995,
respectively. Between the date of organization and the date of commencement
of operations, the Funds earned no investment income and had no operations
other than incurring organizational costs. Each Fund seeks long-term capital
appreciation.
The Group is authorized to issue an unlimited number of shares of beneficial
interest with a par value of $0.01 per share. Sales of shares of the Funds
may be made to the general public.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their 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:
Portfolio securities for which market quotations are readily available
are valued based on their current available bid prices in the principal
market (closing sales prices if the principal market is an exchange) in
which such securities are normally traded. Unlisted securities for which
market quotations are not readily available, including restricted
securities and securities purchased in private transactions are valued at
their fair market value in the investment adviser's best judgment under
the supervision of the Group's Board of Trustees. Investments in debt
securities with remaining maturity of sixty days or less are valued based
on amortized cost which approximates market value. Investments in
investment companies are valued at their respective net asset values as
reported by such companies. Investments in foreign securities, currency
holdings and other assets and liabilities of the Funds are valued based
on quotations from the primary market in which they are traded and are
translated from the local currency to U.S. dollars using current exchange
rates. The differences between cost and market value of investments held
by the Funds are reflected as either unrealized appreciation or
depreciation.
Continued
-20-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1997
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. Realized gains or losses from sales of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
FOREIGN INVESTMENTS:
Investments in foreign securities are subject to certain risks that
differ in some respects from investments in securities of domestic
issuers. Such risks include trade balances and imbalances, related
economic policies, future adverse political, economic and social
developments, the possible imposition of withholding taxes on interest
and dividends, possible seizure, nationalization or expropriation of
foreign investments or deposits, currency blockage, less stringent
disclosure requirements, the possible establishment of exchange controls
or the adoption of other foreign governmental laws and restrictions.
Additional risks include the difficulty in obtaining or enforcing a court
judgment abroad, restrictions on foreign investment in other
jurisdictions, reduced levels of capital invested abroad, difficulties in
transaction settlement, different accounting and financial standards and
the possibility of price volatility and reduced liquidity in certain
foreign markets.
Certain countries may also impose substantial restrictions on investments
in their capital markets by foreign entities, including restrictions on
investments in issuers of industries deemed sensitive to relevant
national interests. These factors may limit the investment opportunities
available to the Funds and result in a lack of liquidity and a high price
volatility with respect to securities of issuers from developing
countries.
Withholding taxes on foreign dividends have been provided for in
accordance with the Funds' understanding of applicable countries' tax
rules and rates.
The accounting records of the Funds are maintained in U.S. dollars.
Investment securities, other assets and liabilities of the Funds
denominated in a foreign currency are translated into U.S. dollars at the
current exchange rate. Purchases and sales of securities, income receipts
and expense payments are translated to U.S. dollars at the exchange rate
on the dates of the transactions.
The Funds isolate that portion of the results of operations resulting
from changes in currency exchange rates from the fluctuation arising from
changes in market prices of securities held. Reported net realized
foreign exchange gains or losses arise from sales and maturities of
portfolio securities, sales of foreign currencies, currency exchange
fluctuations between the trade and settlement dates of securities
Continued
-21-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1997
transactions, and the difference between the amounts of assets and
liabilities recorded and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and
losses arise from changes in the value of assets and liabilities,
including investments in securities, resulting from changes in currency
exchange rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:
In order to offset the risks associated with trading securities
denominated in foreign currencies, the Funds may enter into forward
foreign currency exchange contracts ("forwards"), which are agreements
between two parties to buy and sell a currency at a set price on a future
date. The market value of the forward fluctuates with the changes in
currency exchange rates. The forward is marked-to-market daily and the
change in market value is recorded by a Fund as unrealized appreciation
or depreciation. When the forward is closed, the Fund records a realized
gain or loss equal to the fluctuation in value during the period the
forward was open. A Fund could be exposed to risk if a counterparty is
unable to meet the terms of a forward or if the value of the currency
changes unfavorably.
The Funds may also enter foreign currency options which give the Funds,
as the option buyer, the right to buy or sell a stated amount of foreign
currency at the exercise price at a specified date or during the option
period. A call option gives the right, but not the obligation, to buy the
currency, while a put option gives the right, but not the obligation, to
sell the currency. The value of a call option rises if the underlying
currency appreciates while the value of a put option rises if the
underlying currency depreciates. While purchasing a foreign currency
option can protect a Fund against adverse movement in the value of the
foreign currency, it does not limit the gain which might result from a
favorable movement in the value of such currency. If the value of the
foreign currency option depreciated, the Fund would not have to exercise
the option but could acquire or sell the foreign currency needed for
settlement in the spot market.
FUTURES CONTRACTS:
The Funds may enter into contracts for the future delivery of securities
and futures contracts based on a specific security, class of securities
or an index. In addition, the Funds may enter into contracts for the
future delivery of foreign currencies and futures contracts based on a
specific foreign currency. At the time a Fund enters a futures contract,
an amount of cash, U.S. Government securities or other highly liquid debt
securities equal to the market value of the contract will be deposited in
a segregated account with the Fund's custodian. When writing futures
contracts, the Fund will maintain with its custodian liquid assets that,
when added to the amounts deposited with a futures commission merchant or
broker as margin, are at least equal to the value of the instruments
underlying the contract, or the Fund may cover its position by owning the
instruments underlying the contract. Futures contracts are subject to
risk that the interest rates, securities prices or foreign currency
exchange rates move in an unanticipated manner.
Continued
-22-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1997
OPTIONS TRANSACTIONS:
In order to hedge investment positions and facilitate buying and selling
securities, the Funds may purchase call and put options and may write
covered call options on individual securities and futures contracts. By
writing call options, the Funds receive a premium and become obligated
during the term of the option to sell securities at a set price if the
option is exercised. The Funds will write only covered call options,
thereby owning the underlying securities in the case of call options. To
cover put options, the Funds will segregate cash or securities with a
value at least equal to the exercise price. The risk in writing options
is that the market value of the underlying securities could move in the
opposite direction from what is anticipated. The Funds also have the
additional risk of not being able to enter into a closing transaction if
a liquid secondary market does not exist.
Upon writing a covered option, an amount equal to the premium is recorded
by the Funds as an asset or liability. The liability is marked-to-market
each day to reflect the current value of the option, resulting in
unrealized appreciation or depreciation. The Funds will realize a gain or
loss upon expiration or closing of the option transaction. When options
are exercised, the premium amount will be added to the proceeds from
selling call options or subtracted from the cost of purchasing put
options. For the year ended March 31, 1997, the Funds had no option
activity.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS:
The Funds may purchase securities on a when-issued or delayed-delivery
basis. A Fund will engage in when-issued or delayed-delivery transactions
only for purposes of acquiring portfolio securities consistent with its
investment objectives and policies, not for investment leverage. When-
issued securities are purchased for delivery beyond normal settlement
dates at a stated price and yield and thereby involve a risk that the
yield obtained in the transaction will be less than those available in
the market when delivery takes place. A Fund will generally not pay for
the securities nor earn income on them until they are received. The
custodian will set aside sufficient cash or liquid securities in a
separate account to make payment for the securities purchased. In when-
issued and delayed-delivery transactions, a Fund relies on the seller to
complete the transaction. The seller's failure to do so may cause a Fund
to miss a price or yield considered to be advantageous.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared and paid quarterly for
each Fund. Distributable net realized capital gains, if any, are declared
and distributed at least annually for each Fund.
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 foreign currency transactions,
organization costs,
Continued
-23-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1997
expiring capital loss carryforwards and deferrals of certain losses.
Permanent book and tax basis differences are reflected in the components
of net assets.
FEDERAL INCOME TAXES:
It is the policy of each Fund 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.
OTHER:
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.
ORGANIZATION COSTS:
All expenses in connection with the Funds' organization and registration
under the 1940 Act and the Securities Act of 1933 were paid by the Funds.
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
year ended March 31, 1997 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- ----------
<S> <C> <C>
Ernst Global Asset Allocation Fund..................... $2,525,781 $1,113,359
Ernst Asia Fund........................................ 5,659,480 5,416,288
Ernst Global Resources Fund............................ 5,309,989 678,573
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Ernst & Company ("Ernst") serves as investment adviser to the Funds. Under
the terms of the investment advisory agreement, Ernst is entitled to receive
fees computed daily and paid monthly, at an annual rate of 1.10% of the
average daily net assets of the Ernst Global Asset Allocation Fund and 1.00%
of the average
Continued
-24-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1997
daily net assets of the Ernst Asia Fund and the Ernst Global Resources Fund.
Ernst supervises the investment management activities of the sub-advisers,
National Mutual Funds Management (Global), Ltd., for the Ernst Global Asset
Allocation Fund and the Ernst Global Resources Fund and Koeneman Capital
Management Pte Ltd., Singapore for the Ernst Asia Fund. From its fees, Ernst
pays to each sub-adviser 0.70% of the average daily net assets of the Ernst
Global Asset Allocation Fund and 0.60% of the average daily net assets of
the Ernst Asia Fund and the Ernst Global Resources Fund.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
an Ohio Limited Partnership, and BISYS Fund Services Ohio, Inc. ("BISYS
Ohio") are subsidiaries of the BISYS Group, Inc.
BISYS, with whom certain officers and trustees of the Group are affiliated,
serves as administrator to the Group. 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 based on 0.17% of the average daily net assets up to $500 million
of each Fund. The fees are reduced on a sliding scale to 0.05% of average
daily net assets in excess of $1 billion of each Fund. BISYS is entitled to
a minimum annual fee of $37,500 per Fund.
BISYS Ohio serves as transfer agent to the Funds. Pursuant to a Transfer
Agency Agreement, BISYS Ohio is entitled to a minimum annual fee of $20,000
per Fund plus a specified amount per shareholder account. BISYS Ohio also
serves as fund accountant to the Funds. Pursuant to a Fund Accounting
Agreement, BISYS Ohio receives fees based on 0.03% of average daily net
assets up to $500 million of each Fund. The fees are reduced on a sliding
scale to 0.01% of average daily net assets in excess of $1 billion of each
Fund. BISYS Ohio is entitled to a minimum annual fee of $20,000 per Fund.
The Funds have adopted a Distribution and Shareholder Service Plan in
accordance with Rule 12b-1 of 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
assets of each Fund. BISYS uses the fees to pay banks, broker-dealers and
other institutions, including BISYS and its affiliates, for administrative
and shareholder services and other similar services including distribution
services in connection with the distribution of Fund shares. For the year
ended March 31, 1997, BISYS received $54,654 of commissions from sales of
shares of the Funds all of which BISYS reallowed to dealers of the Funds'
shares including $9,586 to affiliates of the Funds.
Ernst and BISYS may periodically waive all or a portion of their fees to
assist the Funds in maintaining competitive expense ratios.
Continued
-25-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 1997
Information regarding these transactions is as follows for the year ended
March 31, 1997:
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY FEES
VOLUNTARILY
REDUCED
-------------
<S> <C>
Ernst Asia Fund................................................. $14,717
Ernst Global Resources Fund..................................... 26,057
</TABLE>
National Mutual Life, an affiliate of the sub-advisers National Mutual Funds
Management (Global), Ltd., owns shares as of March 31, 1997, with aggregate
values of $5,347,329, $5,368,494, and $10,114,832 of the Ernst Global Asset
Allocation Fund, Ernst Asia Fund, and Ernst Global Resources Fund,
respectively.
5. FEDERAL INCOME TAX INFORMATION (UNAUDITED):
Under current tax law, capital and currently losses realized after October
31 may be deferred and treated as occuring on the first day of the following
fiscal year. The Ernst Global Asset Allocation Fund and the Ernst Global
Resources Fund had deferred losses of $10,330 and $78,203 ($75,184 of
capital loss and $3,019 of currency loss), respectively.
-26-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
ERNST GLOBAL
ASSET ALLOCATION
FUND
----------------
JULY 2,
1996 TO
MARCH 31,
1997 (A)
----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $10.00
------
INVESTMENT ACTIVITIES
Net investment income (loss)................................. 0.00
Net realized and unrealized gains from investments and
foreign currencies......................................... 0.63
------
Total from Investment Activities............................ 0.63
------
DISTRIBUTIONS
Net investment income........................................ --
In excess of net investment income........................... (0.01)
Net realized gains........................................... --
------
Total Distributions......................................... (0.01)
------
NET ASSET VALUE, END OF PERIOD................................ $10.62
======
Total Return (excludes sales charge).......................... 6.27%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)............................ $5,880
Ratio of expenses to average net assets...................... 4.99%(c)
Ratio of net investment loss to average net assets........... (0.08)%(c)
Portfolio Turnover........................................... 77.00%
</TABLE>
- ------
(a) Period from commencement of operations.
(b) Not Annualized.
(c) Annualized.
See notes to financial statements.
-27-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
ERNST ASIA FUND
----------------------
YEAR DECEMBER 6,
ENDED 1995 TO
MARCH 31, MARCH 31,
1997 1996 (A)
--------- -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $10.98 $10.00
------- -------
INVESTMENT ACTIVITIES
Net investment income (loss)........................ (0.11) (0.08)
Net realized and unrealized gains (losses) from
investments and foreign currencies................. (0.17) 1.06
------- -------
Total from Investment Activities................... (0.28) 0.98
------- -------
DISTRIBUTIONS
Net investment income............................... -- --
In excess of net investment income.................. (0.11) --
Net realized gains.................................. (0.33) --
------- -------
Total Distributions................................ (0.44) --
------- -------
NET ASSET VALUE, END OF PERIOD....................... $10.26 $10.98
======= =======
Total Return (excludes sales charge)................. (2.57%) 9.80%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)................... $6,315 $5,865
Ratio of expenses to average net assets............. 3.38% 3.53%(c)
Ratio of net investment loss to average net assets.. (1.13)% (2.49)%(c)
Ratio of expenses to average net assets*............ 3.62% 5.41%(c)
Ratio of net investment loss to average net assets*. (1.37)% (4.37)%(c)
Portfolio Turnover.................................. 126.77% 45.83%
Average commission rate paid (d).................... $0.0154 $0.0110
</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 divided by total number of portfolio shares purchased and
sold for which commissions were charged.
See notes to financial statements.
-28-
<PAGE>
THE COVENTRY GROUP
ERNST WORLD FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
ERNST GLOBAL
RESOURCES FUND
-----------------------
YEAR DECEMBER 11,
ENDED 1995 TO
MARCH 31, MARCH 31,
1997 1996 (A)
--------- ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $10.67 $10.00
------- -------
INVESTMENT ACTIVITIES
Net investment income (loss)........................ (0.07) (0.02)
Net realized and unrealized gains (losses) from
investments and foreign currencies................ (0.20) 0.69
------- -------
Total from Investment Activities................... (0.27) 0.67
------- -------
DISTRIBUTIONS
Net investment income............................... -- --
Net realized gains.................................. -- --
------- -------
Total Distributions................................ 0.00 0.00
------- -------
NET ASSET VALUE, END OF PERIOD....................... $10.40 $10.67
======= =======
Total Return (excludes sales charge)................. (2.53)% 6.70%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)................... $10,597 $10,457
Ratio of expenses to average net assets............. 2.61% 3.54%(c)
Ratio of net investment loss to average net assets.. (0.67)% (1.11)%(c)
Ratio of expenses to average net assets*............ 2.87% 5.51%(c)
Ratio of net investment loss to average net assets*. (0.93)% (3.08)%(c)
Portfolio Turnover.................................. 7.20% 0.00%
Average commission rate paid (d).................... $0.0267 $0.0128
</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 divided by total number of portfolio shares purchased and
sold for which commissions were charged.
See notes to financial statements.
-29-
