<PAGE> 1
[Boston Trust Logo]
UNITED STATES TRUST COMPANY OF BOSTON
To: All Shareholders/Boston Balanced Fund
From: Domenic Colasacco
Re: Portfolio Manager's Report - September 30, 1999
Fund NAV: $28.69
COMPARATIVE PERFORMANCE
<TABLE>
<CAPTION>
Annualized
Year 3 Year Since
Quarter to Year Annualized Inception
Ending Date Ended Ended 12/1/95 to
9/30/99 9/30/99 9/30/99 9/30/99 9/30/99
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Boston Balanced Fund* -5.06% -0.59% 10.58% 17.08% 15.64%
Standard & Poor's 500** -6.25% 5.36% 27.80% 25.10% 24.12%
Lehman G/C Bond Index** 0.54% -1.75% -1.63% 6.75% 5.61%
90 Day U.S. Treasury Bill 1.11% 3.35% 4.41% 4.86% 4.90%
</TABLE>
* After all expenses at an annual rate of 1%, the Advisor's expense
limitation. Results shown are past performance which is not an indication of
future returns.
** The S & P 500 Index is a broad market capitalization-weighted average
of U. S. companies. The Lehman Government/Corporate Index is comprised of
roughly 70% U. S. Treasury and Agency Obligations and 30% SEC registered
corporate bonds.
For more information on all Boston Trust Funds, including a Prospectus
that outlines fees, charges and other operating expenses, call 1 (800) 441-8782
X4050. Please read the Prospectus carefully before investing or sending money.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF UNITED STATES TRUST
COMPANY OF BOSTON OR ANY BANK AND ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE
BOARD OR ANY AGENCY. THE VALUE OF THE FUND SHARES AND RETURNS WILL FLUCTUATE AND
INVESTORS MAY HAVE A GAIN OR LOSS WHEN THEY REDEEM SHARES. DISTRIBUTED BY BISYS
FUND SERVICES.
1
<PAGE> 2
THE COVENTRY GROUP
BOSTON BALANCED FUND
MARKET & PERFORMANCE SUMMARY - THIRD QUARTER, 1999
Although we were spared the alarming headlines of a year ago, for the
second summer in a row we experienced a broad-based decline in the stock market.
Last year's price drop was prompted by investor fear that Asia's economic
turmoil would lead our own economy into recession. As actual economic
developments last fall proved those fears to be unfounded, stock indices quickly
recouped the summer's losses, and then most proceeded to new highs. This year,
rising interest rates and concern about an acceleration of inflation were the
catalysts for the price drop.
The Boston Balanced Fund was not able to avoid the impact of the broad
decline in stock values during the quarter, as the downtrend left few stocks,
sectors or equity investment styles unscathed. Nor did bond holdings provide
much of a cushion, as the rise in interest rates depressed bond principal
values. The result was a decline in the Fund's net asset value that offset
virtually all of the gain achieved during the first half of the year. As
disappointing as the first nine months of 1999 are to all of us, the important
question is whether we are simply in the midst of another short term price
decline, or if we are at the beginning of a longer term bear market that will
erase a large part of the outstanding gains of the past several years. As I
outline in the following sections of this memorandum, we continue to believe
that the overall economic trend will support further corporate profit growth
through at least next year, with comparatively low inflation and interest rates.
If we are correct in this view, stocks are likely to resume an upward trend in
the months ahead, just as they did a year ago. The Fund continues to have close
to 70% of total assets in stocks, an allocation that will allow for full
participation in a market recovery.
ECONOMIC SUMMARY & OUTLOOK
To paraphrase Mark Twain, forecasts of the demise of the favorable
economic trend we have enjoyed since the early 1980's have been greatly
exaggerated on many occasions. Virtually every year a few respected economists
(and of course most new political candidates) make a plausible case that we are
about to enter a recession, or that a return to the high rates of inflation
experienced in the 1970's is around the corner. In reality, the United States
has experienced just one recession during the past seventeen years, and
inflation has averaged about 3% since 1982. In recent years, real economic
growth has actually been well above the historic norm, with inflation barely
reaching a 2% annual rate. Our strong currency, and an evolving economic
structure under which companies manufacture both capital goods and consumer
products abroad at lower cost, have subdued inflation. Moreover, technological
advances have led to above average gains in productivity through the 1990's. We
give credit as well to our government for maintaining a successful balance
between fiscal and monetary policy.
This confluence of favorable events may not last forever, but economic
trends do not end simply due to old age. Typically, periods of rising inflation
or recession follow poor administrative decisions by government policy makers,
outside factors (for example the oil embargo of the 1970's), or sustained
imbalances that develop in either labor or capital resources. At this time, raw
materials, capital, and the worldwide labor pool are abundant. There is also no
evidence that the beneficial effect of technology enhancements, which aid both
inflation and productivity, is abating. One of the areas often cited as a
harbinger of rising inflation is the shortage of low-wage, service sector labor
in the United States, which includes jobs ranging from retail trade clerks to
bank tellers. Within our current full
2
<PAGE> 3
THE COVENTRY GROUP
BOSTON BALANCED FUND
employment environment, these workers have received comparatively rapid wage
increases in recent years. While harmful to the profit margins of the businesses
affected, these costs do not account for a sufficient level of total wages to
raise our overall inflation rate meaningfully. That said, rising inflation still
represents a far greater risk to stock values over the next year than does a
potential economic recession. We will continue to monitor inflation indicators
closely, but are unlikely to become concerned unless either economy-wide wage
costs rise above a 5% - 6% annual rate or productivity gains stall.
INVESTMENT STRATEGY
By their nature these quarterly updates focus on current developments and
strategy. Yet financial market trends do not always fit into convenient
three-month or even annual intervals. Periodically it is worthwhile to step back
and consider where we are in the longer-term cycle. The current phase of the
nearly twenty year bull market we have enjoyed began in 1995. Since then, the
Standard & Poor's 500 stock index has approximately tripled in value, rising
from just over 450 to roughly 1300. Over this period, corporate profits have
increased by about 75%, surely an excellent gain, but not enough to be solely
responsible for the entire rise in stock prices. Equally important has been the
increase in the valuation of corporate profits from less than 15 to more than 25
times reported earnings. A combination of lower interest rates and investor
confidence about future economic stability and profit growth has supported the
move to current record valuation levels.
A review of average stock valuation levels alone does not provide the
whole story, however, since the average is influenced by the prices of a select
group of large companies that are growing rapidly. (Fund holdings are displayed
in bold face). Most operate in the technology and pharmaceutical industries, and
also include such issues as General Electric, Wal-Mart and PROCTOR & GAMBLE.
Valuations for these companies range from about 30 to over 60 times earnings for
a few of the leading technology firms such as MICROSOFT, CISCO SYSTEMS and
LUCENT. Then there are the large Internet related companies (America Online,
Yahoo! and Amazon to name a few) that have an aggregate market capitalization in
the hundreds of billions of dollars without recording any meaningful profits!
Once we look past these large, premium priced companies, we find that the
balance of the market today is filled with many well managed, solid businesses
that are available at more historically reasonable valuations ranging from just
10 to 20 times earnings. Examples in the fund include WILMINGTON TRUST, GANNETT,
LEGGETT & PLATT and EMERSON ELECTRIC. These companies will not grow as quickly
as some of the technology leaders, but all enjoy a solid business franchise and
are able to generate surplus cash flow that is being used to pay dividends, buy
back stock or complete acquisitions intended to enhance shareholder value.
Even more than usual, charting a successful investment strategy course for
the Fund at this time must focus on more than the overall stock and bond
allocation. To achieve superior returns we must also correctly emphasize or
de-emphasize certain stock groups and equity styles, and of course select strong
individual companies. Regarding asset allocation, for the past five years I have
consistently noted our belief that stocks will provide a higher total return
than bonds or money market instruments as long as the favorable economic trend
remains intact. We have not changed this view, and expect to retain the stock
allocation at a relatively high level compared to most balanced funds in light
of our still optimistic economic forecast.
3
<PAGE> 4
THE COVENTRY GROUP
BOSTON BALANCED FUND
With respect to emphasis within the equity segment, over a year ago we
began moving gradually from the premium priced large growth companies noted
above toward greater representation in the more reasonably valued sectors of the
market. As I first outlined in my year-end, 1998 report, we have retained
significant exposure to large growth companies, but have owned comparatively
less than their weighting in the S & P 500 index since the summer of 1998. The
under-representation was the primary reason the Fund's equity segment slightly
trailed the S & P 500 return during the third quarter, and lagged by a wider
margin over the past twelve months. Large company growth stocks, especially
those in the technology sector, have been virtually the only areas of the market
to post above average gains this year. In hindsight, the move toward more
reasonably valued stocks was premature. It was consistent, however, with our
established investment approach of seeking long term capital growth within a
lower risk, diversified equity style. We are confident that in time the wide
valuation gap that has opened between the select group of large capitalization
growth companies and the wider universe of good quality, small to medium size
companies will narrow. The timing of the momentum shift is difficult to
forecast, but our long-term experience is that investment in strong businesses
at reasonable valuations ultimately will be well rewarded, as it has been since
the Fund's inception in 1995. Please refer to the attached Fund Summary for a
complete list of the individual investments, as well as detail of the sector
emphasis.
Let me conclude with what I hope is a second to last note on Year 2000
computer issues, or Y2K. We continue to be confident that disruptions to our
computer systems are unlikely to occur. My understanding is that we are in
conformity with all regulatory directives concerning Y2K, and have completed
remediation of all our mission critical systems. In addition, we have conducted
successful testing with our significant third-party vendors as part of our
effort to assess the viability of our interconnected systems. It is impossible
to guarantee that computer-related services will not be interrupted as we enter
the Year 2000. Accordingly, we have adopted a comprehensive contingency plan,
which will be implemented in the unlikely event that there is a failure of any
of the critical computer-related systems on which we rely. In the coming months,
we will monitor all Y2K-related issues so that we can continue to provide
service to you as we enter the next century.
On behalf of all of us at United States Trust, as advisor to the Boston
Balanced Fund, I thank you for your continued confidence in our services. Please
feel free to contact either me or my colleagues at (617) 726-7252 should you
have any questions about our investment views or your account.
Sincerely,
/s/ Domenic Colasacco
Domenic Colasacco
Portfolio Manager and President,
United States Trust Company of Boston
4
<PAGE> 5
THE COVENTRY GROUP
BOSTON BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount COMMON STOCKS -- (66.3%): Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMUNICATION SERVICES -- (6.8%):
20,000 Alltel Corp. .......................................... $ 1,407,500
30,000 Ameritech Corp. ....................................... 2,015,625
60,000 AT&T Corp. ............................................ 2,610,000
60,000 Bellsouth Corp. ....................................... 2,700,000
10,000 MCI Worldcom, Inc. (b)................................. 718,750
------------
9,451,875
------------
CONSUMER CYCLICALS -- (7.9%):
20,000 Costco Wholesale Corp. (b)............................. 1,440,000
50,000 Ford Motor Co. ........................................ 2,509,375
40,000 Gannett, Inc. ......................................... 2,767,499
25,000 Johnson Controls, Inc. ................................ 1,657,813
75,000 Leggett & Platt, Inc. ................................. 1,476,563
30,000 McClatchy Newspapers, Inc., Class A.................... 1,072,500
------------
10,923,750
------------
CONSUMER PRODUCTS -- (6.8%):
20,000 American Greetings Corp., Class A...................... 515,000
20,000 Anheuser Busch Co., Inc. .............................. 1,401,250
15,000 Clorox, Inc. .......................................... 573,750
10,000 Gillette Co. .......................................... 339,375
25,000 Procter & Gamble Co. .................................. 2,343,750
100,000 Sysco Corp. ........................................... 3,506,250
10,000 William Wrigley, Jr. Co. .............................. 688,125
------------
9,367,500
------------
ENERGY AND RESOURCE -- (2.4%):
5,000 Atlantic Richfield Co. ................................ 443,125
5,000 BP Amoco, ADR.......................................... 554,063
30,000 Exxon Corp. ........................................... 2,278,125
------------
3,275,313
------------
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
THE COVENTRY GROUP
BOSTON BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
FINANCE -- (9.2%):
25,000 Bank of America Corp. ................................. $ 1,392,188
50,000 BankBoston Corp. ...................................... 2,168,749
20,000 Chubb Corp. ........................................... 996,250
40,000 Cincinnati Financial Corp. ............................ 1,501,250
25,000 Fannie Mae............................................. 1,567,188
30,000 First Virginia Banks, Inc. ............................ 1,306,875
75,000 T. Rowe Price Associates, Inc. ........................ 2,057,812
35,000 Wilmington Trust Corp. ................................ 1,699,688
------------
12,690,000
------------
HEALTH CARE -- (10.1%):
40,000 Johnson & Johnson...................................... 3,675,000
70,000 Medtronic, Inc. ....................................... 2,485,000
30,000 Merck & Co., Inc. ..................................... 1,944,375
84,000 Pfizer, Inc. .......................................... 3,018,750
65,000 Schering-Plough Corp. ................................. 2,835,625
------------
13,958,750
------------
INDUSTRIAL MATERIALS -- (0.4%):
5,000 PPG Industries, Inc. .................................. 300,000
25,000 RPM, Inc. ............................................. 304,688
------------
604,688
------------
PRODUCER PRODUCTS -- (6.5%):
12,500 Carlisle Cos., Inc. ................................... 493,750
40,000 Donaldson Co., Inc. ................................... 927,500
5,000 Eaton Corp. ........................................... 431,563
50,000 Emerson Electric Co. .................................. 3,159,375
20,000 Grainger W.W., Inc. ................................... 961,250
40,000 Illinois Tool Works, Inc. ............................. 2,982,500
------------
8,955,938
------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 7
THE COVENTRY GROUP
BOSTON BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
TECHNOLOGY -- (15.0%):
10,000 Applied Materials, Inc. (b)............................ $ 778,750
50,000 Automatic Data Processing, Inc. ....................... 2,231,250
20,000 Cisco Systems, Inc. (b)................................ 1,371,250
15,000 Hewlett-Packard Co. ................................... 1,380,000
30,000 IBM Corp. ............................................. 3,641,250
25,000 Intel Corp. ........................................... 1,857,813
60,000 Lucent Technologies, Inc. ............................. 3,892,499
50,000 Microsoft Corp. (b).................................... 4,528,124
25,000 Xerox Corp. ........................................... 1,048,438
------------
20,729,374
------------
TRANSPORTATION -- (1.2%):
15,000 AMR Corp. (b).......................................... 817,500
17,000 Delta Air Lines, Inc. ................................. 824,500
------------
1,642,000
------------
Total Common Stocks.................................... 91,599,188
------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 8
THE COVENTRY GROUP
BOSTON BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount CORPORATE BONDS -- (10.3%): Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1,000,000 Albertson's, Inc., 6.66%, 7/21/08...................... $ 988,631
925,000 American Home Products, 7.90%, 2/15/05................. 959,751
300,000 Atlantic Richfield Co., 8.50%, 4/1/12.................. 332,975
500,000 Eaton Corp., 8.90%, 8/15/06............................ 540,692
425,000 Ford Motor Credit Corp., 7.75%, 11/15/02............... 438,879
300,000 Ford Motor Credit Corp., 6.625%, 6/30/03............... 298,073
1,000,000 Ford Motor Credit Corp., 7.20%, 6/15/07................ 1,002,125
1,000,000 General Electric Capital Corp., 7.375%, 9/15/04........ 1,032,587
1,000,000 General Electric Capital Corp., 8.30%, 9/20/09......... 1,094,839
825,000 General Motors Acceptance Corp., 9.625%, 12/15/01...... 879,019
300,000 General Motors Acceptance Corp., 8.50%, 1/1/03......... 314,738
500,000 Honeywell, Inc., 7.00%, 3/15/07........................ 496,990
1,000,000 International Lease Finance Corp., 8.25%, 1/15/00...... 1,006,549
1,000,000 Leggett & Platt, Inc., 7.185%, 4/24/02................. 1,015,099
500,000 Leggett & Platt, Inc., 6.25%, 9/9/08................... 469,811
1,000,000 Paccar Financial Corp., 6.12%, 4/17/00................. 1,001,473
1,000,000 Proctor & Gamble Co., 5.25%, 9/15/03................... 960,728
300,000 Sears Roebuck & Co., 9.46%, 6/20/00.................... 306,487
375,000 Sysco Corp., 6.50%, 6/15/05............................ 370,320
400,000 Unum Corp., 5.88%, 10/15/03............................ 384,742
300,000 Weyerhauser Co., 7.25%, 7/1/13......................... 292,672
------------
Total Corporate Bonds.................................. 14,187,180
------------
<CAPTION>
U.S. GOVERNMENT AND GOVERNMENT AGENCY
OBLIGATIONS -- (20.2%):
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
400,000 FFCB, 4.85%, 11/4/03................................... 378,726
2,000,000 FFCB, 5.39%, 9/15/04................................... 1,913,342
2,000,000 FFCB, 5.80%, 6/17/05................................... 1,921,866
3,000,000 FHLB, 5.55%, 8/17/00................................... 2,993,412
2,000,000 FHLB, 5.33%, 3/20/01................................... 1,981,014
500,000 FHLB, 6.24%, 11/18/02.................................. 496,234
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 9
THE COVENTRY GROUP
BOSTON BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
2,000,000 FHLB, 5.285%, 2/11/04.................................. $ 1,917,032
1,500,000 FHLB, 7.015%, 9/25/06.................................. 1,539,308
500,000 FHLB, 5.038%, 10/14/08................................. 445,007
2,000,000 FNMA, 5.33%, 6/9/00.................................... 1,996,238
3,000,000 FNMA, 4.75%, 12/21/00.................................. 2,958,858
3,000,000 FNMA, 5.375%, 3/15/02.................................. 2,951,397
1,000,000 FNMA, 8.25%, 10/12/04.................................. 1,000,803
3,000,000 U.S. Treasury Bond, 7.50%, 11/15/16.................... 3,322,500
2,000,000 U.S. Treasury Note, 5.50%, 2/29/00..................... 2,003,126
------------
Total U.S. Government and Government Agency
Obligations............................................ 27,818,863
------------
<CAPTION>
SHORT-TERM INVESTMENTS -- (3.2%):
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
4,423,409 SEI Daily Income Government II Fund.................... 4,423,409
------------
Total Short-Term Investments........................... 4,423,409
------------
TOTAL (COST $108,304,247) (A).......................... $138,028,640
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $138,168,337.
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation (depreciation) of securities as follows:
<TABLE>
<C> <S> <C> <C>
Unrealized appreciation..................................... $ 34,463,803
Unrealized depreciation..................................... (4,739,410)
------------
Net unrealized appreciation................................. $ 29,724,392
============
</TABLE>
(b) Non-income producing securities.
FFCB -- Federal Farm Credit Bank
FHLB -- Federal Home Loan Bank
FNMA -- Fannie Mae
See Notes to Financial Statements.
9
<PAGE> 10
THE COVENTRY GROUP
BOSTON BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost
$108,304,248)........................................ $138,028,640
Receivables:
Dividends and interest.......................... 690,796
Prepaid expenses and other assets..................... 50,561
------------
Total assets.............................. $138,769,997
------------
LIABILITIES
Cash Overdraft........................................ $ 466,904
Payables:
Advisory fees................................... 86,736
Administration fees............................. 11,461
Custody fees.................................... 2,989
Transfer agent fees............................. 2,378
Fund accounting fees............................ 3,596
Accrued expenses...................................... 27,596
------------
Total liabilities......................... 601,660
------------
NET ASSETS.................................................. $138,168,337
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($138,168,337/4,815,621 shares outstanding; unlimited
number of shares authorized without par value)......... $28.69
======
COMPONENTS OF NET ASSETS
Paid-in capital....................................... $102,326,141
Undistributed net investment income................... 2,014,787
Undistributed net realized gain on investments........ 4,103,017
Net unrealized appreciation on investments............ 29,724,392
------------
Net assets...................................... $138,168,337
============
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 11
THE COVENTRY GROUP
BOSTON BALANCED FUND
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED SEPTEMBER 30, 1999 (a)
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest........................................ $ 594,022
Dividends....................................... 404,892
-----------
Total income.............................. 998,914
-----------
Expenses
Advisory fees................................... $ 271,457
Administration fees............................. 75,359
Fund accounting fees............................ 1,236
Transfer agent fees............................. 4,679
Custody fees.................................... 7,547
Audit fees...................................... 12,393
Trustees fees................................... 2,812
Registration fees............................... 1,902
Legal fees...................................... 2,878
Insurance....................................... 709
Reports to shareholders......................... 8,580
Miscellaneous................................... 7,129
-----------
Total expenses............................ 396,681
Less waivers/ reimbursements.................... (33,755)
-----------
Net expenses.................................... 362,926
-----------
NET INVESTMENT INCOME..................... 635,988
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions.......... 525,285
Net change in unrealized appreciation on
investments.......................................... (8,588,319)
-----------
Net realized and unrealized gain (loss) on
investments.................................... (8,063,034)
-----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ $(7,427,046)
===========
</TABLE>
- ---------------
(a) For period from June 30, 1999 through September 30, 1999. Subsequent to the
annual report at June 30, 1999, the fund changed its fiscal year end to
March 31, 1999.
See Notes to Financial Statements.
11
<PAGE> 12
THE COVENTRY GROUP
BOSTON BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year
September 30, 1999 Ended
(Unaudited) (b) June 30, 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income................................. $ 635,988 $ 2,493,008
Net realized gain from security transactions.......... 525,285 5,272,757
Net change in unrealized appreciation on
investments......................................... (8,588,319) 4,778,353
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... (7,427,046) 12,544,118
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income................................. -- (2,187,510)
Net realized gain from security transactions.......... -- (4,866,093)
------------ ------------
NET DISTRIBUTIONS TO SHAREHOLDERS.................... -- (7,053,603)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from net
change in outstanding shares (a)..................... (1,424,174) 19,588,393
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.............. (8,851,220) 25,078,908
NET ASSETS
Beginning of year..................................... 147,019,557 121,940,649
------------ ------------
END OF PERIOD............................................... $138,168,337 $147,019,557
============ ============
</TABLE>
- ---------------
(a) A summary of capital shares transactions is as follows:
<TABLE>
<CAPTION>
Period Ending Year Ended
September 30, 1999 June 30, 1999
---------------------- -----------------------
Shares Value Shares Value
-------- ----------- -------- ------------
<S> <C> <C> <C> <C>
Shares sold......................................... 74,364 $ 2,216,332 840,998 $ 24,299,269
Shares issued in reinvestment of distribution....... -- -- 253,466 7,046,375
Shares issued in stock split........................ -- -- -- --
Shares redeemed..................................... (124,167) (3,640,506) (404,136) (11,757,251)
-------- ----------- -------- ------------
Net increase (decrease)............................. (49,803) $(1,424,174) 690,328 $ 19,588,393
======== =========== ======== ============
</TABLE>
(b) For period from June 30, 1999 through September 30, 1999. Subsequent to the
annual report at June 30, 1999, the fund changed its fiscal year end to
March 31, 1999.
See Notes to Financial Statements.
12
<PAGE> 13
THE COVENTRY GROUP
BOSTON BALANCED FUND
NOTES TO FINANCIAL STATEMENTS AT SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Coventry Group (the "Group"), was organized as a Massachusetts
business trust on January 8, 1992 and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company. The accompanying financial statements and financial highlights are
those of the Boston Balanced Fund (the "Fund"), which reorganized and
transferred from Professionally Managed Portfolios to The Coventry Group on June
18, 1999. Due to this reorganization, the Fund has changed its fiscal year end
to March 31. The Group is authorized to issue an unlimited number of shares.
The Fund's investment objectives are as follows:
Boston Balanced Fund seeks long-term capital growth and income through an
actively managed portfolio of stocks, bonds and money market instruments.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments in securities traded on a national
securities exchange or included in the NASDAQ National Market System
are valued at the last reported sales price at the close of regular
trading on the last business day of the period; securities traded on an
exchange or NASDAQ for which there have been no sales and other
over-the-counter securities are valued at the last reported bid price.
Securities for which quotations are not readily available are valued at
their respective fair values as determined in good faith by the Board
of Trustees. Short-term investments are stated at cost, which when
combined with accrued interest, approximates market value.
U.S. Government securities with less than 60 days remaining to maturity
when acquired by the Fund are valued on an amortized cost basis. U.S.
Government securities with more than 60 days remaining to maturity are
valued at the current market value (using the mean between the bid and
ask price) until the 60th day prior to maturity, and are then valued at
amortized cost based upon the value on such date unless the Board of
Trustees determines during such 60-day period that this amortized cost
basis does not represent fair value.
B. Federal Income Taxes. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute in a timely manner, all of its
net investment income and net capital gains to shareholders.
Therefore, no federal income tax provision is required.
C. Security Transactions and Investment Income. Security transactions are
accounted for on the trade date. Net realized gains and losses on
investments sold are recorded on the first-in, first-out basis.
Interest
13
<PAGE> 14
THE COVENTRY GROUP
BOSTON BALANCED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
income is recorded on an accrual basis and includes, where applicable,
the amortization of premiums or accretion of discounts. Dividend
income is recorded on the ex-dividend date.
D. Dividends to Shareholders. Dividends from net investment income are
declared and paid annually. Distributable net realized capital gains,
if any, are declared and distributed at least annually. The amounts of
dividends from net investment income and of distributions from net
realized gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting
principals. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the
components of net assets based on their federal tax-basis treatment;
temporary differences do not require reclassification
E. Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles 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 during the reporting period.
Actual results could differ from those estimates.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the period ended September 30, 1999, United States Trust Company of
Boston (the "Adviser") provided the Fund with investment management services
under an Investment Advisory Agreement. As compensation for its services, the
Adviser was entitled to an annual fee, computed daily and paid monthly, equal to
0.75% of the Fund's average net assets.
The Adviser, which is a Massachusetts-chartered banking and trust company,
acts as the Fund's Custodian and Transfer Agent under the Custody and Transfer
Agency Agreements with the Fund.
BISYS Fund Services (the "Administrator"), an indirect, wholly owned
subsidiary of The BISYS Group, Inc. acts as the Fund's Administrator under an
Administration Agreement. For its services, the Administrator receives an annual
fee, computed daily and paid monthly, equal to 0.20% of the Fund's average net
assets. Previous to the close of business on June 18, 1999, the date the Fund
became a series of The Coventry Group, Investment Company Administration, L.L.C.
acted as the Fund's administrator.
BISYS Fund Services (the "Distributor") acts as the Fund's principal
underwriter in a continuous public offering of the Fund's shares. Previous to
the close of business on June 18, 1999, the date the Fund became a series of The
Coventry Group, First Fund Distributors, Inc. acted as the Fund's principal
underwriter.
Certain officers and trustees of the Group are also officers and/or
directors of the Administrator and Distributor.
The Fund is responsible for its own operating expenses. The Adviser has
agreed to reduce fees payable to it by the Fund to the extent necessary to limit
the Fund's aggregate annual operating expenses to 1.00% of average net
14
<PAGE> 15
THE COVENTRY GROUP
BOSTON BALANCED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
assets through March 31, 2000. Any such reductions made by the Adviser in its
fees or payments or reimbursement of expenses which are the Fund's obligation
may be subject to reimbursement by the Fund within three years provided the Fund
is able to effect such reimbursement and remain in compliance with applicable
limitations. For the period ended September 30, 1999, the Adviser reimbursed the
Fund $21,067.
The Administrator voluntarily agreed to waive a portion of their fees. For
the period ended September 30, 1999 the Administrator waived $12,688.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, excluding
short-term securities, for the period ended September 30, 1999, were $5,374,458
and $6,725,513, respectively.
15
<PAGE> 16
THE COVENTRY GROUP
BOSTON BALANCED FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Year Year December 1, 1995
September 30, 1999 Ended Ended Ended through
(Unaudited) (a) June 30, 1999 June 30, 1998(b) June 30, 1997(b) June 30, 1996(b)(c)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $30.22 $29.21 $23.70 $19.31 $18.41
Income from investment
operations:
Net investment
income............. 0.13 0.52 0.46 0.47 0.25
Net realized and
unrealized gain on
investments......... (1.66) 2.07 5.94 4.36 0.69
------ ------ ------ ------ ------
Total from investment
operations............... (1.54) 2.59 6.40 4.83 0.94
------ ------ ------ ------ ------
Less distributions:
From net investment
income............. -- (0.49) (0.45) (0.44) (0.04)
From net capital
gains.............. -- (1.09) (0.44) -- --
------ ------ ------ ------ ------
Total distributions........ -- (1.58) (0.89) (0.44) (0.04)
------ ------ ------ ------ ------
Net asset value, end of
period................... $28.69 $30.22 $29.21 $23.70 $19.31
====== ====== ====== ====== ======
Total return............... (5.08%) 9.34% 27.55% 25.40% 5.14%
Ratios/supplemental data:
Net assets, end of period
(millions)............... $138.2 $147.0 $121.9 $ 82.0 $ 61.8
Ratio of expenses to
average net assets:
Before expense 1.09%
reimbursement...... (d) 0.95% 1.00% 1.02% 1.00%(c)
After expense 1.00%
reimbursement...... (d) 0.95% 1.00% 1.00% 1.00%(c)
Ratio of net investment
income to average net
assets:
Before expense 1.66%
reimbursement...... (d) 1.87% 1.85% 2.24% 2.43%(c)
After expense 1.75%
reimbursement...... (d) 1.87% 1.85% 2.25% 2.43%(c)
Portfolio turnover rate.... 3.95% 23.61% 22.71% 30.78% 17.69%
</TABLE>
- ---------
(a) For period from June 30,1999 through September 30, 1999. Subsequent to the
annual report at June 30, 1999, the fund changed in its fiscal year end to March
31, 1999.
(b) Per share data has been restated to give effect to a 4-for-1 stock split to
shareholders of record as of the close on January 9, 1998.
(c) Commencement of operations.
(d) Annualized.
See Notes to Financial Statements.
16
<PAGE> 17
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<PAGE> 18
Adviser, Custodian and Transfer Agent
United States Trust Company of Boston
40 Court Street
Boston, MA 02108
(617) 726-7250
-
Administrator & Distributor
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, OH 43219
-
Auditors
Arthur Andersen LLP
Huntington Center
41 South High Street
Columbus, OH 43215-6150
-
Legal Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
This report is intended for the shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
11/99
Boston Trust Logo
UNITED STATES TRUST COMPANY OF BOSTON
BOSTON BALANCED FUND
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1999
