<PAGE> 1
Walden Logo
Walden Asset Management
A Division of United States Trust Company of Boston
To: Walden Social Balanced Fund Shareholders
From: Stephen K. Moody
Date: September 30, 1999
Subject: Portfolio Review and Economic Outlook for the Quarter Ending -
September 30, 1999
Fund NAV: $9.60
<TABLE>
<CAPTION>
Since Inception
Quarter 6/22/99
------- ---------------
<S> <C> <C>
Walden Social Balanced Fund*................................ -5.60% -4.00%
Stocks: Standard & Poors 500 Index**........................ -6.25
Bonds: Lehman Bros Govt/Corp Index**........................ 0.54
Cash: U.S. 3 Month Treasury Bills........................... 1.11
</TABLE>
WALDEN ASSET MANAGEMENT SERVES AS INVESTMENT ADVISOR TO THE WALDEN SOCIAL
BALANCED FUND AND RECEIVES A FEE FOR ITS SERVICES.
* 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 Walden 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 OR LOSS WHEN THEY REDEEM SHARES. DISTRIBUTED BY BISYS FUND
SERVICES.
THE FINANCIAL MARKETS AND THE WALDEN SOCIAL BALANCED FUND
This quarter the hot economy, resulting higher interest rates, the falling
dollar and negative trade balance all gave the market, which we had thought
overvalued at the end of June, jitters. If one defines a drop of 10% from peak
prices (July 13th) as a correction, we had a correction. For the quarter, the
Standard & Poors 500 Index dropped 6.2% and the portion of the Fund invested in
equities dropped even more, some 8.3%. Rising interest rates lowered bond
returns (using the Lehman Brothers Government/Corporate Bond Index) to 0.5%.
Cash was king, though one could hardly call Treasury bill returns of 1.3% even a
princely return. The Social Balanced Fund portfolio was not immune, declining
some 5.6%.
Last quarter the shift in market leadership among equities had been
unprecedented for its magnitude: it was a shift from growth to value and from
large to small. This quarter, however, the equity market reverted modestly to
the
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THE COVENTRY GROUP
WALDEN SOCIAL BALANCED FUND
longer-term trend of the past five years, reversing some of what happened in the
prior quarter. Large capitalization stocks again outperformed small. The S&P 100
large cap index dropped a -4.6% versus a -8.7% for the S&P 400 midcap index.
Returns to large stocks were only slightly better than the S&P 600 small cap
index, however, which declined 5.0%. Growth outperformed value. Using the BARRA
Growth and Value division of the S&P 500, growth declined 3.7% versus a decline
of 9.6% for value stocks. The equities of most, but not all, higher quality
companies performed in line with the market. As for sectors of the economy,
technology was the leader, actually up 4.4% for the quarter, and smaller
technology did especially well. The poorest performing sectors were
transportation (airlines, for example) and consumer stable stocks (like
Coca-Cola, which is not in the portfolio).
For the past twelve months, however, equity market returns were handsome,
rising off the lows experienced during the Asian crisis in the Fall of 1998. The
S&P 500 was up 27.8%. Most of the generalizations for the quarter about the
performance of different segments of the market remain true for the past twelve
months as well. Using the indices referred to above, larger stocks were up
36.4%; mid-sized up 24.0%; and small up 16.6%. Growth did better than value, up
32.2% versus 19.3%. Equities in the technology sector were up 74.4%;
communications services up 36.9%; utilities faired worst, declining 5.0%.
The conflicting sets of expectations that are driving the current
financial markets are no different than they have been. One scenario envisions
an overheating of the U.S. economy and a rapid global recovery, leading to
inflation, rising interest rates and a resulting recession. This set of
expectations, which is currently in ascendancy, contrasts with another, the
continuation of the present reality, a sustainable level of growth, healthy
corporate profits, very low inflation, and a slowly recovering global economy.
Each day new information or thoughtful opinion from government or industry
leaders makes news. The market, certainly overvalued on any fundamental basis,
is vulnerable and blows in the direction that the news points. For example, near
the end of many of the recent calendar quarters, as companies that are going to
report problems pre-announce their shortfalls to prevent leaks, the equity
market slides. And then, at the beginning of the next quarter, the equity
markets rally as earnings news for most companies proves positive. There are
other sources of volatility as well. The result is a series of swings, up and
down, as the market participants remain deeply cognizant that the market cannot
be this high or go higher unless the more benign case of modest growth and
healthy profits continues.
OUR ECONOMIC OUTLOOK
We continue to think the positive case, a sustainable level of growth, low
inflation, and recovering corporate profits, will come to pass in the next
twelve months as it has in the past twelve
With this positive long-term outlook, we continue to favor equities. As of
quarter end, fully discretionary balanced accounts at USTC were between 65 and
seventy percent in equities. Because we remain concerned about the direction of
interest rates, the fixed income portion (bonds and money market instruments) of
the portfolio remains relatively short, with average maturities of less than 4
years, substantially below the maturities of the Lehman Brothers
Government/Corporate Bond Index of 9.9 years.
2
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THE COVENTRY GROUP
WALDEN SOCIAL BALANCED FUND
SOCIAL RESEARCH AND ACTION
Social change efforts were many at Walden this quarter, including with
companies not in the Walden Social Balanced Fund portfolio but held in other
Walden accounts. (Walden Social Balanced Fund holdings are in BOLD) AMR, parent
of American Airlines, increased its environmental commitment by agreeing to
endorse the CERES Principles of environmental commitment and public
accountability. For nearly two years Walden has spearheaded the effort to bring
AMR into the CERES forum, the first major airline to do so. The multi-year
timeframe underscores our experience that corporate change comes slowly, as well
as the importance of investor constancy toward achieving long-lasting social
objectives. We continue to be the lead investor representative for several major
companies considering the CERES approach, including XEROX, Deere, and
Harley-Davidson.
Working with the Interfaith Center on Corporate Responsibility (ICCR), we
have played a lead role in helping develop a shareholder resolution strategy for
firms involved in genetically modified (GMO) foods. This topic is receiving
almost daily attention in major US and international journals; ranging from
debates on the risks posed by GMO foods to the environment and human health; to
consumer, corporate and governmental reactions; and concerns over free trade.
Our work will assist shareholder activists in introducing new shareholder
resolutions that address this issue from seed producers to grocery stores. In
addition to our plans to target several domestic companies for shareholder
dialogue, we have written to Novartis and Schering, two European firms with
significant interests in GMO foods.
Over these past several months we have finalized our global proxy
guidelines with a focus on our four major markets: the United Kingdom, Germany,
France and Japan. Strong corporate governance on issues of independence,
transparency and accountability is an essential first step toward effective
international shareholder advocacy. Walden's efforts to learn more about
Japanese corporate governance, the least open of our overseas markets, through a
questionnaire to our top Japan-based companies received a response from more
than 80 percent of the companies queried. A summary of our findings will appear
in the upcoming edition of Values. Sakura Shimizu, a Northeastern University
cooperative student, was of great assistance in achieving these results.
We continued to extend our reach into the realm of international advocacy
in home office visits to three leading European banks: Deutsche Bank, Credit
Suisse and UBS. All these banks are UNEP signatories (United Nations
Environmental Programme), and as such, have committed to integrating social and
environmental factors into their credit and financing decisions. At each bank,
Walden's Lauren Compere met with key environmental and credit officials to learn
how they put their UNEP commitments into practice. While she characterizes their
efforts as mixed, Lauren was impressed by the banks' level of openness and
interest in our assessment of their progress.
We have stepped up our discussions with Coca-Cola. While we are staying
abreast of recent allegations of race discrimination, our primary dialogue focus
is on public controversy around recycled content (or lack thereof) in bottles.
We have organized a mid-month meeting with Coca-Cola and others in the social
investment community to continue the dialogue. We have also assumed greater
leadership in coordinating the large investor coalition addressing equal
employment opportunity concerns at HOME DEPOT. The company is planning to meet
with us in November.
3
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THE COVENTRY GROUP
WALDEN SOCIAL BALANCED FUND
WALDEN AND Y2K
This is our first quarterly review on Walden Asset Management letterhead,
reflecting our increasing use of the Walden name to identify our social
investing division. Our investment management team is unchanged, with the
exception of the return of Geeta Aiyer, with whom we are all delighted to be
working again. Walden now represents a critical mass, significant client assets
(over $1.2 billion) and a deeply shared commitment to substantive social change.
On another issue altogether, as we head into the last few months in which
we can address Y2K technology issues, we continue to be confident that
disruptions to our computer systems are relatively unlikely to occur. We are in
conformity with all regulatory directives concerning Y2K and have completed
remediation of all our 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. Of course, we
cannot guarantee that computer-related services will not be interrupted as we
enter the Year 2000. For that reason, we have adopted a comprehensive
contingency plan, which would be implemented if there were a failure of any of
the critical computer-related systems on which we rely. In the coming months, we
will monitor actively all Y2K-related issues, including issues related to your
investments, so that we can continue to provide service to you as we enter the
next century.
Sincerely,
/s/ Stephen K. Moody
Stephen K. Moody
Portfolio Manager and Senior Vice President
United States Trust Company
4
<PAGE> 5
To: All Shareholders/Walden Social Equity Fund
From: Robert Lincoln
Re: Portfolio Manager's Report - September 30, 1999
Fund NAV: $9.46
COMPARATIVE PERFORMANCE
<TABLE>
<CAPTION>
Quarter Ending 9/30/99 Since Inception 6/20/99
---------------------- -----------------------
<S> <C> <C>
Walden Social Equity Fund*............................. -7.89% -5.40%
Standard & Poor's 500**................................ -6.25% -4.58%
</TABLE>
WALDEN ASSET MANAGEMENT SERVES AS INVESTMENT ADVISOR TO THE WALDEN SOCIAL EQUITY
FUND AND RECEIVES A FEE FOR ITS SERVICES.
* 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.
For more information on all Walden 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.
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 Walden Social Equity 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. As disappointing as the
recent results 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.
5
<PAGE> 6
THE COVENTRY GROUP
WALDEN SOCIAL EQUITY FUND
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 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 & Poors 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. (Walden Social Equity Fund
holdings are in bold.) 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
6
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THE COVENTRY GROUP
WALDEN SOCIAL EQUITY FUND
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,
MCCLATCHY, LEGGETT & PLATT and CARLISLE CORP. 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 emphasize or de-emphasize certain stock groups and
equity styles, and of course select strong individual companies. We have not
changed this view. 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. 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 slightly trailed the S & P
500 return during the third quarter. 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.
SOCIAL RESEARCH AND ACTION
Social change efforts were many at Walden this quarter, including with
companies not in the Walden Social Equity Fund portfolio but held in other
Walden accounts. AMR CORPORATION, parent of American Airlines, has ramped up its
environmental commitment by agreeing to endorse the CERES Principles of
environmental commitment and public accountability. For nearly two years Walden
has spearheaded the effort to bring AMR into the CERES forum, the first major
airline to do so. The multi-year timeframe underscores our experience that
corporate change comes slowly, as well as the importance of investor constancy
toward achieving long-lasting social objectives. We continue to be the lead
investor representative for several major companies considering the CERES
approach, including XEROX, Deere, and Harley-Davidson.
Working with the Interfaith Center on Corporate Responsibility (ICCR), we
have played a lead role in helping develop a shareholder resolution strategy for
firms involved in genetically modified (GMO) foods. This topic is receiving
almost daily attention in major US and international journals; ranging from
debates on the risks posed by GMO foods to the environment and human health; to
consumer, corporate and governmental reactions; and concerns over free trade.
Our work will assist shareholder activists in introducing new shareholder
resolutions that address this issue from seed producers to grocery stores. In
addition to our plans to target several domestic companies for shareholder
dialogue, we have written to Novartis and Schering, two European firms with
significant interests in GMO foods.
7
<PAGE> 8
THE COVENTRY GROUP
WALDEN SOCIAL EQUITY FUND
Over these past several months we have finalized our global proxy
guidelines with a focus on our four major markets: the United Kingdom, Germany,
France and Japan. Strong corporate governance on issues of independence,
transparency and accountability is an essential first step toward effective
international shareholder advocacy. Walden's efforts to learn more about
Japanese corporate governance, the least open of our overseas markets, through a
questionnaire to our top Japan-based companies received a response from more
than 80 percent of the companies queried. A summary of our findings will appear
in the upcoming edition of Values. Sakura Shimizu, a Northeastern University
cooperative student, was of great assistance in achieving these results.
We continued to extend our reach into the realm of international advocacy
in home office visits to three leading European banks: Deutsche Bank, Credit
Suisse and UBS. All these banks are UNEP signatories (United Nations
Environmental Programme), and as such, have committed to integrating social and
environmental factors into their credit and financing decisions. At each bank,
Walden's Lauren Compere met with key environmental and credit officials to learn
how they put their UNEP commitments into practice. While she characterizes their
efforts as mixed, Lauren was impressed by the banks' level of openness and
interest in our assessment of their progress.
We have stepped up our discussions with Coca-Cola. While we are staying
abreast of recent allegations of race discrimination, our primary dialogue focus
is on public controversy around recycled content (or lack thereof) in bottles.
We have organized a mid-month meeting with Coca-Cola and others in the social
investment community to continue the dialogue. We have also assumed greater
leadership in coordinating the large investor coalition addressing equal
employment opportunity concerns at Home Depot. The company is planning to meet
with us in November.
On another issue altogether, as we head into the last few months in which
we can address Y2K technology issues, we continue to be confident that
disruptions to our computer systems are relatively unlikely to occur. We are in
conformity with all regulatory directives concerning Y2K and have completed
remediation of all our 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. Of course, we
cannot guarantee that computer-related services will not be interrupted as we
enter the Year 2000. For that reason, we have adopted a comprehensive
contingency plan, which would be implemented if there were a failure of any of
the critical computer-related systems on which we rely. In the coming months, we
will monitor actively all Y2K-related issues, including issues related to your
investments, 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 Fund, I
thank you for your continued confidence in our services. Please feel free to
contact either me or my colleagues at (617) 726-7256 should you have any
questions about our investment views or your account.
Sincerely,
/s/ Robert A. Lincoln
Robert A. Lincoln
Portfolio Manager and Senior Vice President
United States Trust Company
8
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THE COVENTRY GROUP
WALDEN SOCIAL BALANCED
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares COMMON STOCKS (67.8%): Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMUNICATION SERVICES -- (7.5%):
1,675 Alltel Corp. .......................................... $ 117,878
1,600 Ameritech Corp. ....................................... 107,500
2,850 AT&T Corp. ............................................ 123,975
3,000 Bellsouth Corp. ....................................... 135,000
1,000 Centurytel, Inc. ...................................... 40,625
1,500 MCI Worldcom, Inc. (b)................................. 107,813
800 Vodafone Airtouch PLC, ADR............................. 190,200
------------
822,991
------------
CONSUMER CYCLICALS -- (7.6%):
1,100 Costco Wholesale Corp. (b)............................. 79,200
5,000 Dollar General......................................... 154,375
1,000 Home Depot, Inc. ...................................... 68,625
600 Honda Motor Co. Ltd.................................... 49,088
6,000 La-Z-Boy, Inc. ........................................ 114,375
3,000 Leggett & Platt, Inc. ................................. 59,063
2,500 Modine Manufacturing Co. .............................. 58,281
2,000 Omnicom Group.......................................... 158,374
3,500 Tjx Companies, Inc. ................................... 98,219
------------
839,600
------------
CONSUMER PRODUCTS -- (8.0%):
2,600 Newell Rubbermaid, Inc. ............................... 74,263
3,000 Aptargroup, Inc. ...................................... 80,250
2,100 Cintas Corp. .......................................... 121,407
2000 Gillette............................................... 67,875
1,500 Hannaford Brothers Co. ................................ 105,656
2,800 Avon Products, Inc. ................................... 69,475
3,000 Colgate-Palmolive Co. ................................. 137,250
2,100 CVS Corp. ............................................. 85,706
2,000 Sysco Corp. ........................................... 70,125
3,000 Walgreen Co. .......................................... 76,125
------------
888,132
------------
</TABLE>
See Notes to Financial Statements.
9
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THE COVENTRY GROUP
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SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
ENERGY AND RESOURCE -- (2.3%):
2,300 BP Amoco, ADR.......................................... $ 254,869
------------
FINANCE (8.5%):
4,000 T. Rowe Price Associates, Inc. ........................ 109,750
1,600 Wilmington Trust Corp. ................................ 77,700
1,875 American International Group........................... 163,008
4,000 BankBoston Corp. ...................................... 173,500
3,000 Fannie Mae............................................. 188,062
800 Northern Trust Corp. .................................. 66,800
1,600 State Street Corp. .................................... 103,400
1,500 Wells Fargo Company.................................... 59,438
------------
941,658
------------
HEALTH CARE -- (10.4%):
1,000 Amgen, Inc. (b)........................................ 81,500
2,500 Boston Scientific Corp. (b)............................ 61,719
2,000 Cardinal Health, Inc. ................................. 109,000
1,000 Genzyme Corp. General Division (b)..................... 45,063
1,000 Guidant Corp........................................... 53,625
2,400 Johnson & Johnson...................................... 220,499
4,400 Medtronic, Inc. ....................................... 156,200
2,600 Merck & Co., Inc. ..................................... 168,513
1,700 Patterson Dental Company (b)........................... 84,256
2,400 Schering-Plough Corp. ................................. 104,700
1,200 Stryker Corp. ......................................... 61,350
------------
1,146,425
------------
</TABLE>
See Notes to Financial Statements.
10
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THE COVENTRY GROUP
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SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
INDUSTRIAL MATERIAL -- (3.1%):
1,800 Bemis Co. ............................................. $ 60,975
2,000 Consolidated Papers, Inc. ............................. 53,750
2,000 Praxair, Inc. ......................................... 92,000
5,000 RPM, Inc. ............................................. 60,938
1,300 Avery Dennison Corp. .................................. 68,575
336,238
------------
PRODUCER PRODUCTS -- (4.7%):
2,000 Baldor Electric Co. ................................... 37,875
3,100 Miller (Herman) Inc. .................................. 74,109
2,000 Teleflex, Inc. ........................................ 79,000
3,000 Illinois Tool Works, Inc. ............................. 223,687
1,000 Ingersoll Rand Co. .................................... 54,938
1,000 Grainger W.W., Inc. ................................... 48,063
------------
517,672
------------
TECHNOLOGY -- (14.8%):
2,000 Affiliated Computer Services, Inc. Class A (b)......... 81,250
1,800 Applied Materials, Inc. (b)............................ 140,175
2,800 Cisco Systems, Inc. (b)................................ 191,975
800 EMC Corp. (b).......................................... 57,150
2,500 Ericsson (L.M.), ADR................................... 78,125
1,600 Hewlett-Packard Co. ................................... 147,200
1,200 IBM Corp. ............................................. 145,650
2,400 Intel Corp. ........................................... 178,350
4,000 Lucent Technologies, Inc. ............................. 259,500
3,100 Microsoft Corp. (b).................................... 280,743
100 Nokia Corp. ........................................... 8,981
1,500 Xerox Corp. ........................................... 62,906
------------
1,632,005
------------
TRANSPORTATION (0.9%):
6,500 Southwest Airlines Co. ................................ 98,719
------------
Total Common Stocks.................................... 7,478,309
------------
</TABLE>
See Notes to Financial Statements.
11
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THE COVENTRY GROUP
WALDEN SOCIAL BALANCED
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares CORPORATE BONDS -- (10.5%): Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
50,000 Amr Corp., 10.57%, 1/15/01............................. $ 52,285
250,000 At&T Corporation, 7.00%, 05/15/05...................... 251,026
250,000 Heinz (H.J.) Co., 6.875%, 1/15/03...................... 253,057
200,000 Leggett & Platt, Inc., 7.185%, 4/24/02................. 203,020
50,000 May Department Stores, 9.875%, 12/1/02................. 54,748
150,000 Pacific Bell, 6.875%, 5/15/06.......................... 149,928
200,000 Sysco Corp., 6.50%, 6/15/05............................ 197,504
------------
Total Corporate Bonds.................................. 1,161,568
------------
MORTGAGES (7.3%):
- -----------------------------------------------------------------------------------------------------
400,000 FNMA, 7.00%, 12/25/19.................................. 401,869
134,315 FNMA, 7.15%, 8/25/20................................... 134,463
261,632 GNMA, 7.50%, 10/15/25.................................. 263,096
------------
Total Mortgages........................................ 799,428
------------
TAXABLE MUNICIPAL BONDS AND NOTES (0.5%):
- -----------------------------------------------------------------------------------------------------
CALIFORNIA (0.5%):
California (State Of), 8.15%, 9/1/01, U.S. Taxable
50,000 Muni................................................... 51,762
------------
Total Taxable Municipal Bonds and Notes................ 51,762
------------
CERTIFICATES OF DEPOSIT -- (1.4%):
- -----------------------------------------------------------------------------------------------------
50,000 Community Capital Bank, 4.57%, 7/20/04................. 50,000
50,000 Shorebank Pacific, 4.55%, 7/13/04...................... 50,000
50,000 Vermont Development Credit, 5.20%, 7/13/04............. 50,000
------------
Total Certificates of Deposit.......................... 150,000
------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 13
THE COVENTRY GROUP
WALDEN SOCIAL BALANCED
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND
Shares GOVERNMENT AGENCY OBLIGATIONS -- (11.5%): Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
100,000 FFCB, 5.95%, 3/5/08...................................... $ 95,605
100,000 FFCB, 5.80%, 6/17/05..................................... 96,093
400,000 FHLB, 4.565%, 10/16/00................................... 394,798
200,000 FHLB, 5.90%, 3/26/09..................................... 189,186
300,000 FMLB, 6.185%, 5/6/08..................................... 290,794
106,000 FNMA, 5.125%, 2/13/04.................................... 100,958
100,000 HUD 94A Pohatcong, 7.13%, 8/1/12, Callable 8/1/03 @ 100.. 99,737
------------
Total U.S. Government and Government Agency
Obligations.............................................. 1,267,171
------------
SHORT-TERM INVESTMENTS -- (1.2%):
- -----------------------------------------------------------------------------------------------------
130,924 SEI Daily Income Government II Fund...................... $ 130,924
------------
Total Short-Term Investments............................. 130,924
------------
TOTAL (COST $11,515,673) (A).............................
$ 11,039,162
============
</TABLE>
Percentages indicated are based on net assets of $ 11,023,444.
- ---------------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation (depreciation) of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................... $ 214,563
Unrealized depreciation.................................... (691,073.56)
------------
Net unrealized appreciation....................... $(476,510.53)
============
</TABLE>
(b) Non-income producing securities.
FFCB -- Federal Farm Credit Bank
FHLB -- Federal Home Loan Bank
FNMA -- Fannie Mae
See Notes to Financial Statements.
13
<PAGE> 14
THE COVENTRY GROUP
WALDEN SOCIAL EQUITY
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares COMMON STOCKS (98.2%): Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMUNICATION SERVICES (8.5%):
5,427 Alltel Corp. .......................................... $ 381,925
4,700 Ameritech Corp. ....................................... 315,781
12,500 AT&T Corp. ............................................ 543,750
8,400 Bellsouth Corp. ....................................... 378,000
4,000 MCI Worldcom, Inc. (b)................................. 287,500
------------
1,906,956
------------
CONSUMER CYCLICALS -- 11.2%):
10,000 Bj's Wholesale Club Inc. (b)........................... 295,625
2,900 Costco Wholesale Corp. (b)............................. 208,800
10,000 La-Z-Boy, Inc. ........................................ 190,625
12,600 Leggett & Platt, Inc. ................................. 248,063
7,000 McClatchy Newspapers, Inc., Class A.................... 250,250
10,000 Modine Manufacturing Co. .............................. 233,125
5,000 Omnicom Group.......................................... 395,938
10,000 Tjx Companies, Inc. ................................... 280,625
800 Washington Post Co. ................................... 408,499
------------
2,511,550
------------
CONSUMER PRODUCTS -- (8.2%):
8,900 Aptargroup, Inc. ...................................... 238,075
3,300 Hannaford Brothers Co. ................................ 232,444
5,000 Kimberly Clark Corp. .................................. 262,500
8,000 Newell Rubbermaid, Inc. ............................... 228,500
3,600 Procter & Gamble Co. .................................. 337,500
15,500 Sysco Corp. ........................................... 543,469
------------
1,842,488
------------
ENERGY & RESOURCE -- (4.8%):
9,616 BP Amoco, ADR.......................................... 1,065,573
------------
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 15
THE COVENTRY GROUP
WALDEN SOCIAL EQUITY
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
FINANCE -- (13.9%):
10,000 BankBoston Corp. ...................................... $ 433,750
4,000 Chubb Corp. ........................................... 199,250
12,800 Cincinnati Financial Corp. ............................ 480,399
6,500 Fannie Mae............................................. 407,469
6,150 First Virginia Banks, Inc. ............................ 267,909
4,000 State Street Corp. .................................... 258,500
12,200 T. Rowe Price Associates, Inc. ........................ 334,738
2,800 Wachovia Corp. ........................................ 220,150
5,900 Wells Fargo Company.................................... 233,788
5,800 Wilmington Trust Corp. ................................ 281,663
------------
3,117,616
------------
HEALTH CARE -- (15.2%):
4,400 Amgen, Inc. (b)........................................ 358,600
5,800 Bristol-Myers Squibb Co. .............................. 391,500
7,437 Cardinal Health, Inc. ................................. 405,316
10,000 Dentsply International................................. 227,500
4,000 Guidant Corp. ......................................... 214,500
5,000 Idx Systems Corp (b)................................... 90,625
4,000 Johnson & Johnson...................................... 367,500
8,000 Manor Care Inc. (b).................................... 137,500
8,000 Medtronic, Inc. ....................................... 284,000
6,000 Merck & Co., Inc. ..................................... 388,875
6,500 Schering-Plough Corp. ................................. 283,563
5,000 Stryker Corp. ......................................... 255,625
------------
3,405,104
------------
INDUSTRIAL MATERIALS -- (2.8%):
6,400 Bemis Co. ............................................. 216,800
5,000 Praxair, Inc. ......................................... 230,000
14,300 RPM, Inc. ............................................. 174,281
------------
621,081
------------
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 16
THE COVENTRY GROUP
WALDEN SOCIAL EQUITY
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
PRODUCER PRODUCTS -- (11.2%):
6,900 Carlisle Cos., Inc..................................... $ 272,550
5,000 Grainger W.W., Inc. ................................... 240,313
6,100 Hubbell, Inc., Class B................................. 194,438
6,600 Illinois Tool Works, Inc. ............................. 492,112
5,000 Ingersoll Rand Co. .................................... 274,687
10,800 Miller (Herman) Inc. .................................. 258,188
5,800 Precision Castparts.................................... 176,900
5,000 Tecumseh Products Co.-Cl B............................. 225,625
5,000 Teleflex, Inc. ........................................ 197,500
5,000 Tennant Company Common................................. 169,375
------------
2,501,688
------------
TECHNOLOGY -- (21.6%):
6,000 Affiliated Computer Services, Inc. Class A (b)......... 243,750
7,000 Applied Materials, Inc. (b)............................ 545,124
5,000 Automatic Data Processing, Inc. ....................... 223,125
7,400 Cisco Systems, Inc. (b)................................ 507,363
7,000 Ericsson (L.M.), ADR................................... 218,750
5,700 Hewlett-Packard Co. ................................... 524,400
4,000 IBM Corp. ............................................. 485,500
7,300 Intel Corp. ........................................... 542,481
8,000 Lucent Technologies, Inc. ............................. 519,000
6,000 Microsoft Corp. (b).................................... 543,375
2,000 Sanmina Corp. (b)...................................... 154,750
8,000 Xerox Corp. ........................................... 335,500
------------
4,843,118
------------
</TABLE>
See Notes to Financial Statements.
16
<PAGE> 17
THE COVENTRY GROUP
WALDEN SOCIAL EQUITY
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Market Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
TRANSPORTATION -- (0.7%):
3,000 AMR Corp. (b).......................................... $ 163,500
------------
Total Common Stocks.................................... 21,978,674
------------
SHORT-TERM INVESTMENTS -- (1.8%):
- -----------------------------------------------------------------------------------------------------
405,623 SEI Daily Income Government II Fund.................... 405,623
------------
Total Short-Term Investments........................... 405,623
------------
TOTAL (COST $23,811,178) (a)........................... $ 22,384,297
============
</TABLE>
Percentages indicated are based on net assets of $22,391,853.
- ---------------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation (depreciation) of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 712,343
Unrealized depreciation..................................... (2,139,224)
===========
Net unrealized appreciation........................ $(1,426,881)
===========
</TABLE>
(b) Non-income producing securities.
See Notes to Financial Statements.
17
<PAGE> 18
THE COVENTRY GROUP
STATEMENTS OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WALDEN WALDEN
SOCIAL SOCIAL
BALANCED EQUITY
FUND FUND
------------- -------------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost $11,515,673;
$23,811,178)........................................ $11,039,162 $22,384,297
Cash
Receivables:
Dividends and interest.......................... 58,576 29,518
Prepaid expenses and other assets..................... 14,651 9,331
----------- -----------
Total assets.............................. $11,112,389 $22,423,146
----------- -----------
LIABILITIES
Cash overdraft........................................ $ 2,434 $ 6,706
Payables:
Payable for securities purchased................ 67,251 --
Advisory Fees................................... 6,907 14,221
Administration fees............................. 488 1,055
Custody Fees.................................... 797 78
Transfer Agent Fees............................. 2,135 2,470
Accrued expenses...................................... 8,933 6,763
----------- -----------
Total liabilities......................... 88,945 31,293
----------- -----------
NET ASSETS.................................................. $11,023,444 $22,391,853
=========== ===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($11,023,444/1,148,719 shares outstanding;
$22,391,853/2,367,360 shares outstanding; unlimited
number of shares authorized without par value)........ $9.60 $9.46
====== ======
COMPONENTS OF NET ASSETS
Paid-in capital....................................... $11,485,926 $23,659,820
Undistributed net investment income................... 53,933 17,328
Undistributed net realized gain (loss) on
investments......................................... (39,904) 141,586
Net unrealized appreciation (depreciation) on
investments......................................... (476,511) (1,426,881)
----------- -----------
Net assets...................................... $11,023,444 $22,391,853
=========== ===========
</TABLE>
See Notes to Financial Statements.
18
<PAGE> 19
THE COVENTRY GROUP
STATEMENTS OF OPERATIONS -- FOR THE PERIOD ENDING SEPTEMBER 30, 1999(a)
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WALDEN WALDEN
SOCIAL SOCIAL
BALANCED EQUITY
FUND FUND
------------- -------------
<S> <C> <C>
INVESTMENT INCOME
Income
Interest........................................ $ 25,052 $ --
Dividends....................................... 61,240 84,110
--------- -----------
Total income.............................. $ 86,292 $ 84,110
--------- -----------
Expenses
Advisory fees................................... $ 23,601 $ 49,686
Administration fees............................. 6,342 13,352
Transfer agent fees............................. 5,136 5,472
Custody fees.................................... 1,811 1,351
Audit fees...................................... 1,658 1,463
Trustees fees................................... 598 497
Registration fees............................... 527 418
Legal fees...................................... 565 529
Insurance....................................... 77 37
Reports to shareholders......................... 1,658 1,421
Miscellaneous................................... 5,719 4,673
--------- -----------
Total expenses............................ 47,692 78,899
Less waivers/reimbursements..................... (15,333) (12,117)
--------- -----------
Net expenses.................................... 32,359 66,782
--------- -----------
NET INVESTMENT INCOME..................... 53,933 17,328
--------- -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain (loss) from security transactions... (39,904) 141,586
Net change in unrealized appreciation on
investments......................................... (476,511) (1,426,881)
--------- -----------
Net realized and unrealized gain (loss) on
investments.................................. (516,415) (1,285,295)
--------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. $(462,482) $(1,267,967)
========= ===========
</TABLE>
- ---------------
(a) Funds commenced operations on June 20, 1999.
See Notes to Financial Statements.
19
<PAGE> 20
THE COVENTRY GROUP
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WALDEN SOCIAL WALDEN SOCIAL
BALANCED FUND EQUITY FUND
PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, 1999(b) SEPTEMBER 30, 1999(b)
--------------------- ---------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income........................ $ 53,933 $ 17,328
Net realized gain (loss) from security
transactions............................... (39,904) 141,586
Net change in unrealized appreciation on
investments................................ (476,511) (1,426,881)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. (462,482) (1,267,967)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net
change in outstanding shares(a)............ 11,485,926 23,659,820
----------- -----------
TOTAL INCREASE IN NET ASSETS................ 11,023,444 22,391,853
NET ASSETS
Beginning of year............................ -- --
----------- -----------
END OF PERIOD...................................... $11,023,444 $22,391,853
=========== ===========
</TABLE>
(a) A summary of capital share transactions is as follows:
<TABLE>
<CAPTION>
Period Ending Period Ending
September 30, 1999 September 30, 1999
----------------------- -----------------------
SHARES VALUE SHARES VALUE
-------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Shares sold................................... 1,186,582 $ 11,866,888 2,445,901 $24,458,972
Shares issued in reinvestment of
distribution................................ -- -- -- --
Shares issued in stock split.................. -- -- -- --
Shares redeemed............................... (37,863) (380,963) (78,540) (799,152)
-------- ------------ --------- -----------
Net increase.................................. 1,148,719 $ 11,485,925 2,367,361 $23,659,820
======== ============ ========= ===========
</TABLE>
- ---------------
(b) Fund commenced operations on June 20, 1999
See Notes to Financial Statements.
20
<PAGE> 21
THE COVENTRY GROUP
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
Walden Social Balanced Fund and Walden Social Equity Fund (individually, a
"Fund", collectively, the "Funds"), which commenced operations on June 20, 1999.
The Funds offer one class of shares of beneficial interest ("shares"). The Group
is authorized to issue an unlimited number of shares.
The Funds' investment objectives are as follows:
Walden Social Balanced Fund seeks long-term capital growth and income
through an actively managed portfolio of stocks, bonds and money market
instruments.
Walden Social Equity Fund seeks long-term capital growth through an
actively managed portfolio of stocks.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds. 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 Funds' 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 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.
21
<PAGE> 22
THE COVENTRY GROUP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
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 each Fund's average net assets.
The Adviser, which is a Massachusetts-chartered banking and trust company,
acts as the Funds' Custodian and Transfer Agent under the Custody and Transfer
Agency Agreements with the Funds.
BISYS Fund Services (the "Administrator"), an indirect, wholly owned
subsidiary of The BISYS Group, Inc. acts as the Funds' Administrator under an
Administration Agreement. For its services, the Administrator receives an annual
fee, computed daily and paid monthly, equal to 0.20% of each Fund's average net
assets.
BISYS Fund Services (the "Distributor") acts as the Funds' principal
underwriter in a continuous public offering of the Funds' shares.
Certain officers and trustees of the Group are also officers and/or
directors of the Administrator and Distributor.
The Funds are responsible for their own operating expenses. The Adviser has
agreed to reduce fees payable to it by the Funds to the extent necessary to
limit each Fund's aggregate annual operating expenses to 1.00% of average net
assets through March 31, 2000. Any such reductions made by the Adviser in its
fees or payments or reimbursement of expenses which are the Funds' obligation
may be subject to reimbursement by the Funds within three years provided the
Funds are able to effect such reimbursement and remain in compliance with
applicable limitations. For the period ended September 30, 1999 the Adviser
reimbursed the Funds as follows:
<TABLE>
<S> <C>
Walden Social Balanced Fund................................. $13,711
Walden Social Equity Fund................................... $ 8,702
</TABLE>
22
<PAGE> 23
THE COVENTRY GROUP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
The Administrator voluntarily agreed to waive a portion of their fees. For
the period ended September 30, 1999 the Administrator waived fees as follows:
<TABLE>
<S> <C>
Walden Social Balanced Fund................................. $1,621
Walden Social Equity Fund................................... $3,414
</TABLE>
NOTE 4 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, excluding
short-term securities, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- ----------
<S> <C> <C>
Walden Social Balanced Fund................................. $2,598,822 $1,814,080
Walden Social Equity Fund................................... $2,418,951 $2,875,863
</TABLE>
23
<PAGE> 24
THE COVENTRY GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Walden Social Walden Social
Balanced Fund Equity Fund
Period Ending Period Ending
September 30, 1999(a) September 30, 1999(a)
--------------------- ---------------------
<S> <C> <C>
Net asset value, beginning of period.................... $10.00 $10.00
Income from investment operations:
Net investment income............................. 0.05 0.01
Net realized and unrealized gain (loss) on
investments...................................... (0.45) (0.55)
------ ------
Total from investment operations........................ (0.40) (0.54)
------ ------
Net asset value, end of period.......................... $ 9.60 $ 9.46
====== ======
Total return............................................ (4.00%)(b) (5.40%)(b)
Ratios/supplemental data:
Net assets, end of period (millions).................... $ 11.0 $ 22.4
Ratio of expenses to average net assets:
Before expense reimbursement...................... 1.51%(c) 1.19%(c)
After expense reimbursement....................... 1.00%(c) 1.00%(c)
Ratio of net investment income to average net assets:
Before expense reimbursement...................... 1.71%(c) 0.26%(c)
After expense reimbursement....................... 2.22%(c) 0.45%(c)
Portfolio turnover rate................................. 16.97% 10.42%
</TABLE>
- ---------
(a) Fund commenced operations on June 20, 1999.
(b) Not annualized
(c) Annualized
See Notes to Financial Statements.
24
<PAGE> 25
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 26
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
Walden Logo
WALDEN ASSET MANAGEMENT
A Division of United States Trust Company of Boston
UNITED STATES TRUST COMPANY OF BOSTON
WALDEN SOCIAL BALANCED FUND
WALDEN SOCIAL EQUITY FUND
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1999
