<PAGE> 1
As filed with the Securities and Exchange Commission on May 14, 1999
Securities Act No. 33-44964
Investment Company Act File No. 811-6526
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
--
Post-Effective Amendment No. 46 [X]
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 48 [X]
--
THE COVENTRY GROUP
------------------
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
---------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number: (614) 470-8000
-----------------
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1775 Eye Street, NW
Washington, D.C. 20006
----------------------
(Name and Address of Agent for Service)
With Copies to:
---------------
Walter B. Grimm
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
It is proposed that this filing will become effective 75 days after filing
pursuant to paragraph (a)(2) of Rule 485 or on such earlier date as the
Commission may designate pursuant to paragraph (a)(3) of Rule 485.
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
DATED MAY __, 1999
- --------------------------------------------------------------------------------
UNITED STATES TRUST COMPANY OF BOSTON
PROSPECTUS FOR THE FOLLOWING BOSTON TRUST PORTFOLIOS:
Boston Balanced Fund
Boston Equity Fund
[ ], 1999
- --------------------------------------------------------------------------------
Investment Adviser
------------------
United States Trust Company of Boston
40 Court Street
Boston, Massachusetts 02108
Telephone: (617) 726-7250
Neither the Securities and Exchange Commission nor any other regulatory body has
approved the securities being offered by this prospectus or determined whether
this prospectus is accurate and complete. It is unlawful for anyone to make any
representation to the contrary.
1
<PAGE> 3
BOSTON TRUST
TABLE OF CONTENTS
-----------------
RISK/RETURN SUMMARY AND FUND EXPENSES
3 BOSTON BALANCED FUND
6 BOSTON EQUITY FUND
CAREFULLY REVIEW THIS IMPORTANT SECTION FOR A SUMMARY OF EACH FUND'S
INVESTMENTS, RISKS AND FEES.
INVESTMENT OBJECTIVES AND STRATEGIES
7 BOSTON BALANCED FUND
8 BOSTON EQUITY FUND
9 INVESTMENT RISKS
THIS SECTION CONTAINS DETAILS ON EACH FUND'S INVESTMENT STRATEGIES AND
RISKS.
SHAREHOLDER INFORMATION
11 PRICING OF FUND SHARES
11 PURCHASING AND ADDING TO YOUR SHARES
13 SELLING YOUR SHARES
16 EXCHANGING YOUR SHARES
17 DIVIDENDS, DISTRIBUTIONS AND TAXES
CONSULT THIS SECTION TO OBTAIN DETAILS ON HOW SHARES ARE VALUED, HOW TO
PURCHASE, SELL AND EXCHANGE SHARES, RELATED CHARGES AND PAYMENTS OF
DIVIDENDS
FUND MANAGEMENT
16 THE INVESTMENT ADVISER
17 PORTFOLIO MANAGERS
2
<PAGE> 4
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
BOSTON BALANCED FUND
INVESTMENT OBJECTIVE The Balanced Fund seeks long-term
capital growth and income through
an actively managed portfolio of
stocks, bonds and money market
instruments.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests in stocks, bonds
and money market instruments, with
at least 25% of assets in
fixed-income senior securities.
PRINCIPAL INVESTMENT RISKS Because the value of the Fund's
investments will fluctuate with
market conditions and interest
rates, the value of your investment
in the Fund will also vary. You
could lose money on your investment
in the Fund, or the Fund could
underperform other investments.
WHO MAY WANT TO INVEST? Consider investing in the Fund if
you are:
- Investing for a period of time
in excess of 3 to 5 years
- Able to bear the risk of market
value fluctuations in the
short-term
- Looking for a combination of
exposure to stock investments
for growth, and bond
investments for greater
stability of income and
principal
This Fund will not be appropriate
for anyone:
- Investing for a period of time
less than 3 to 5 years
- Not comfortable with market
fluctuations in the short-term
- Looking primarily for a high
level of current income
3
<PAGE> 5
BOSTON BALANCED FUND (CONTINUED)
- --------------------------------
The chart and table on this page show how the Balanced Fund has performed and
how its performance has varied from year to year. The bar chart shows changes in
the Fund's yearly performance since its inception on December 1, 1995, to
demonstrate that the Fund has both gained and lost value during its three year
history. The table below it compares the Fund's performance over time to that of
a blended benchmark index consisting of the S&P 500 Index (50%),2 the Lehman
Government/Corporate Index (40%)3 and the 90 day U.S. Treasury Bill (10%).
Performance Bar Chart and Table (1)
Year-by-Year Total Returns as of 12/31/98
<TABLE>
<S> <C> <C> <C>
1996 1997 1998
---- ---- ----
14.39% 27.08% 19.27%
</TABLE>
The bar chart above does not reflect the impact of any applicable sales
charges or account fees which would reduce returns. Of course, past
performance does not indicate how the Fund will perform in the future.
--------------------------------------------------------------------------
Best quarter: Q2 1997 12.0%
Worst quarter: Q3 1998 -6.13%
--------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
Fund
Inception Past Year Since Inception
BALANCED FUND 12/1/95 19.27% 20.01%
BLENDED COMPOSITE INDEX 12/1/95 18.91% 17.49%
The table assumes that shareholders redeem all their fund shares at the end of
the period indicated.
________________
1 Both charts assume reinvestment of dividends and distributions.
2 A widely recognized, unmanaged index of common stocks.
3 A widely recognized, unmanaged index generally representative of the
bond market as a whole.
4
<PAGE> 6
BOSTON BALANCED FUND (CONTINUED)
- --------------------------------
ANNUAL FEES AND EXPENSES
- ------------------------
As an investor in the Balanced Fund,
you will pay the following fees and Shareholder
expenses. Shareholder transaction Transaction
fees are paid from your account. Fees (fees
Annual Fund operating expenses are paid by you
paid out of Fund assets, and are directly)
included in the calculation of share
price. Maximum sales
charge (load)
on purchases n/a
------------------------------------
Maximum deferred
sales charge (load) n/a
Annual Fund
Operating
Expenses
(expenses paid from
Fund assets)
------------------------------------
Management fee 0.75%
------------------------------------
Distribution and
Service (12b-1) fee n/a
------------------------------------
Other expenses 0.27%*
------------------------------------
Total Fund
Operating expenses 1.02%*
------------------------------------
Fee Waiver and/or
Expense Reimbursement 0.02%*
------------------------------------
Net Expenses 1.00%*
------------------------------------
* The Adviser has entered into an expense limitation agreement with the
Trust to limit the Total Fund Operating Expenses of the Balanced Fund
to 1.00% of its average daily net assets for its current fiscal year.
Without this expense limitation agreement, the Total Fund Operating
Expenses for the Balanced Fund would have been 1.02%.
5
<PAGE> 7
BOSTON BALANCED FUND (CONTINUED)
- --------------------------------
EXPENSE EXAMPLE
Use this table to compare fees and expenses with those of other funds. The table
illustrates the amount of fees and expenses you would pay, assuming the
following:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison purposes only, your
actual costs will be different.
<TABLE>
<CAPTION>
BALANCED FUND 1 3 5 10
Year Years Years Years
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
$102 $318 $552 $1,225
-------------------------------------------------------------------
</TABLE>
BOSTON EQUITY FUND
INVESTMENT OBJECTIVE The Equity Fund seeks long-term capital
growth through an actively managed portfolio
of stocks.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity
securities.
PRINCIPAL INVESTMENT RISKS Because the value of the Fund's investments
will fluctuate with market conditions, the
value of your investment in the Fund will
also vary. You could lose money on your
investment in the Fund, or the Fund could
underperform other investments.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Investing for a period of time in
excess of 3 to 5 years
- Looking for a high-quality,
well-diversified, all-equity
portfolio that provides the
potential for growth of your
investment
This Fund will not be appropriate for
anyone:
- Investing for a period of time less
than 3 to 5 years
- Not comfortable with market value
fluctuations
- Looking for current income
6
<PAGE> 8
BOSTON EQUITY FUND (CONTINUED)
- ------------------------------
ANNUAL FEES AND EXPENSES
- ------------------------
As an investor in the Equity Fund,
you will pay the following fees and Shareholder
expenses. Shareholder transaction Transaction
fees are paid from your account. Fees (fees
Annual Fund operating expenses are paid by you
paid out of Fund assets, and are directly)
included in the calculation of share
price. Maximum sales
charge (load) n/a
on purchases
-------------------------------------
Maximum deferred
sales charge (load) n/a
Annual Fund
Operating
Expenses
(expenses paid from
Fund assets)
-------------------------------------
Management fee 0.75%
-------------------------------------
Distribution and
Service (12b-1) Fee n/a
-------------------------------------
Other expenses 0.36%*
-------------------------------------
Total Fund
Operating expenses 1.11%*
-------------------------------------
Fee Waiver and/or
Expense Reimbursement 0.11%*
-------------------------------------
Net Expenses 1.00%*
-------------------------------------
* The Adviser has entered into an expense limitation agreement with the
Trust to limit the Total Fund Operating Expenses of the Equity Fund to
1.00% of its average daily net assets for its current fiscal year.
Without this expense limitation agreement, the Total Fund Operating
Expenses for the Equity Fund's initial fiscal year are estimated to be
1.11%.
7
<PAGE> 9
BOSTON EQUITY FUND (CONTINUED)
- ------------------------------
EXPENSE EXAMPLE
Use this table to compare fees and expenses with those of other Funds. It
illustrates the amount of fees and expenses you would pay, assuming the
following:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison purposes only, your
actual costs will be different.
<TABLE>
<CAPTION>
EQUITY FUND 1 3 5 10
Year Years Years Years
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
$102 $318 $552 $1,225
-------------------------------------------------------------------
</TABLE>
8
<PAGE> 10
INVESTMENT OBJECTIVES AND STRATEGIES
BOSTON BALANCED FUND
- -------------------------------------------------------------------------------
Ticker Symbol: BMGFX
INVESTMENT OBJECTIVE
The investment objective of the Balanced Fund is to seek long-term
capital growth and income through an actively managed portfolio of stocks, bonds
and money market instruments.
POLICIES AND STRATEGIES
Consistent with the Balanced Fund's investment objective, the Fund:
- maintains an actively managed portfolio of stocks, bonds and
money market instruments
- will generally invest at least 25% of its total assets in
fixed-income senior securities
- may purchase both common stock and preferred stock
- will purchase primarily investment grade bonds
- may invest up to 20% of its total assets in fixed-income
securities that are considered non-investment grade
Portfolio Turnover. The annual rate of portfolio turnover is not
expected to exceed 100%. In general, the Adviser will not consider the rate of
portfolio turnover to be a limiting factor in determining when or whether to
purchase or sell securities in order to achieve the Fund's objective.
In the event that the Adviser determines that market conditions are not
suitable for the Fund's typical investments, the Adviser may, for temporary
defensive purposes during such unusual market conditions, invest all or any
portion of the Fund's assets in money market instruments.
9
<PAGE> 11
BOSTON EQUITY FUND
================================================================================
Ticker Symbol: BTBEX
INVESTMENT OBJECTIVE
The investment objective of the Equity Fund is to seek long-term growth
of capital.
POLICIES AND STRATEGIES
Consistent with the Equity Fund's investment objective, the Fund:
- will invest substantially all, but in no event less than 65%,
of the value of its total assets in equity securities
- will invest in the following types of equity securities:
common stocks, preferred stocks, securities convertible or
exchangeable into common stocks, warrants and any rights to
purchase common stocks
- may invest in fixed income securities consisting of corporate
notes, bonds and debentures that are rated investment grade at
the time of purchase
- may invest in obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government (excluding U.S.
Treasury instruments)
- may invest in the securities of foreign issuers and may
acquire sponsored and unsponsored American Depositary Receipts
and European Depositary Receipts
- may engage in repurchase transactions pursuant to which the
Fund purchases a security and simultaneously commits to resell
that security to the seller (either a bank or a securities
dealer) at an agreed upon price on an agreed upon date
(usually within seven days of purchase)
- may lend securities to qualified brokers, dealers, banks and
other financial institutions for the purpose of realizing
additional income
- may invest in other investment companies
In the event that the Adviser determines that current market conditions
are not suitable for the Fund's typical investments, the Adviser may, for
temporary defensive purposes, invest all or any portion of the Fund's assets in
money market instruments, U.S. Government securities and repurchase agreements.
10
<PAGE> 12
INVESTMENT RISKS
================================================================================
Any investment in the Funds is subject to investment risks,
including the possible loss of the principal amount invested.
Generally, the Funds will be subject to the following risks:
- - MARKET RISK: Market risk refers to the risk related to investments in
securities in general and the daily fluctuations in the securities
markets. The Funds' performance per share will change daily based on
many factors, including fluctuation in interest rates, the quality of
the instruments in each Fund's investment portfolio, national and
international economic conditions and general market conditions.
- - INTEREST RATE RISK: Interest rate risk refers to the risk that the
value of either Fund's fixed income securities can change in response
to changes in prevailing interest rates causing volatility and possible
loss of value as rates increase.
- - CREDIT RISK: Credit risk refers to the risk related to the credit
quality of the issuer of a security held in either Fund's portfolio.
The Funds could lose money if the issuer of a security is unable to
meet its financial obligations.
- - YEAR 2000 RISK: Like other funds and business organizations around the
world, the Funds could be affected adversely if the computer systems
used by the Adviser and the Funds' other service providers do not
properly process and calculate date related information for the year
2000 and beyond. In addition, Year 2000 issues may affect adversely
companies in which the Funds invest where, for example, such companies
incur substantial costs to address Year 2000 issues or suffer losses
caused by the failure to do so adequately, and in a timely manner.
The Funds have been advised that the Adviser and the Funds'
other service providers (i.e., Administrator, Transfer Agent, Fund
Accounting Agent, Custodian and Distributor) have developed and are
implementing clearly defined and documented plans intended to minimize
risks associated with Year 2000 issues with regard to services critical
to the Funds' operations. Internal efforts include a commitment of
adequate staff and funding to identify and remedy Year 2000 issues, and
specific actions such as taking inventory of software systems,
determining inventory items that may not function properly after
December 31, 1999, reprogramming or replacing such systems, and
retesting for Year 2000 readiness.
In the event that any systems upon which the Funds are
dependent are not Year 2000 ready by December 31, 1999, administrative
errors and account maintenance failures would likely occur.
While the ultimate costs or consequences of incomplete or
untimely resolution of Year 2000 issues by the Adviser or the Funds'
service providers cannot be assessed accurately at this time, the Funds
currently have no reason to believe that the Year 2000 plans of the
Adviser and each Fund's service providers will not be completed by
December 31, 1999, or that the anticipated costs associated with full
implementation of their plans will have a material adverse impact on
either their business operations or the financial condition of the
Funds. The Funds and the Adviser will continue to monitor closely
developments relating to this issue, including establishment by the
Adviser and the Funds' service providers of contingency plans.
11
<PAGE> 13
SHAREHOLDER INFORMATION
-----------------------
PRICING OF FUND SHARES
- ----------------------
How NAV is Calculated
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
Total Assets - Liabilities
--------------------------
Number of Shares
Outstanding
You can find each Fund's NAV daily in The Wall Street Journal and other
financial newspapers.
The net asset value per share of each Fund is determined at the time
trading closes on the New York Stock Exchange ("NYSE") (currently 4:00 p.m.,
Eastern Standard Time, Monday through Friday), except on business holidays when
the NYSE is closed. The NYSE recognizes the following holidays: New Year's Day,
President's Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day, Fourth
of July, Labor Day, Thanksgiving Day, and Christmas Day. Any other holiday
recognized by the NYSE will be considered a business holiday on which the net
asset value of each Fund will not be calculated.
Your order for purchase, sale or exchange of shares is priced at the
next NAV calculated after your order is accepted by the Funds. This is what is
known as the offering price.
Each Fund's securities are generally valued at current market prices.
If market quotations are not available, prices will be based on fair value as
determined by the Funds' Trustees.
PURCHASING AND ADDING TO YOUR SHARES
------------------------------------
You may purchase the Funds through the Distributor or through investment
representatives, who may charge additional fees and may require higher minimum
investments or impose other limitations on buying and selling shares. If you
purchase shares through an investment representative, that party is responsible
for transmitting orders by close of business and may have an earlier cut-off
time for purchase and sale requests. Consult your investment representative for
specific information.
The minimum initial investment in the Funds is $2,000. Subsequent investments
must be at least $500. BISYS Fund Services (the "Distributor") acts as
Distributor of each Fund's shares. Shares of the Funds are offered continuously
for purchase at the net asset value per share of the Fund next determined after
a purchase order is received. Investors may purchase shares of the Funds by
check or wire, as described below.
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted.
A Fund or the Adviser may waive its minimum purchase requirement, or the
Distributor may reject a purchase order, if it is deemed to be in the best
interest of either Fund and its shareholders.
12
<PAGE> 14
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
By Regular Mail or Overnight Service
Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, certified check or money order payable to either "Boston
Balanced Fund" or "Boston Equity Fund", as applicable.
3. Mail to: Boston Trust Mutual Funds, c/o United States Trust Company of
Boston, 40 Court Street, Boston, MA 02108.
Subsequent Investment:
1. Subsequent investments should be made by check payable to the
applicable fund and mailed to the address indicated above. Your account
number should be written on the check.
By Wire Transfer
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
For initial investment: Before wiring funds, you should call 1-800-441-8782,
ext. 4050, or 1-617-695-4050 to advise that an initial investment will be made
by wire and to receive an account number.
Follow the instructions below after receiving your account number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
United States Trust Company of Boston
Routing Number: ABA #0110-0133-1
DDA# 0003004512
Include:
Your name
Your account number
Fund name
SELLING YOUR SHARES
- -------------------
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Funds, its transfer agent, or your
investment representative. Normally you will receive your proceeds within a week
after your request is received. See section on "General Policies on Selling
Shares" below.
- -------------------------------------------------------------------------------
WITHDRAWING MONEY FROM YOUR
FUND INVESTMENT
A request for a withdrawal in cash from either Fund constitutes a redemption or
sale of shares for a mutual fund shareholder.
- --------------------------------------------------------------------------------
13
<PAGE> 15
INSTRUCTIONS FOR SELLING SHARES
By telephone 1. Call 1-800-441-8782, ext. 4050 with
(unless you have declined instructions as to how you wish to receive
telephone sales privileges) your funds (mail, wire, electronic
transfer).
By mail 2(a). Call 1-800-441-8782, ext. 4050 to
request redemption forms or write a letter
of instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2(b). Mail to:
BOSTON TRUST MUTUAL FUNDS
c/o United States Trust Company of Boston
40 Court Street
Boston, MA 02108
By overnight service See instruction 2 above.
Send to:
BOSTON TRUST MUTUAL FUNDS
c/o United States Trust Company of Boston
40 Court Street
Boston, MA 02108
By Wire transfer Call 1-800-441-8782, ext. 4050 to request
You must indicate this option a wire transfer.
on your application.
If you call by 4 p.m. Eastern Standard
Time, your payment will normally be wired
to your bank on the next business day.
The Funds may charge a wire
transfer fee.
Note: Your financial
institution may also charge a
separate fee.
GENERAL POLICIES ON SELLING SHARES
- ----------------------------------
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Circumstances under which redemption requests require a signature guarantee
include, but may not be limited to, each of the following:
- Redemptions over $10,000
- Your account registration or the name(s) on your account has changed
within the last 15 days
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- The redemption proceeds are being transferred to another Fund account
with a different registration
A signature guarantee can be obtained from a financial institution,
such as a bank, broker-dealer, credit union, clearing agency, or savings
association.
14
<PAGE> 16
VERIFYING TELEPHONE REDEMPTIONS
The Funds make every effort to ensure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, you cannot redeem any
portion of it until the Transfer Agent is satisfied that the check has cleared
(which may require up to 15 business days). You can avoid this delay by
purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
REDEMPTION IN KIND
The Funds reserve the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(a redemption fee of more than 1% of the Fund's net assets). If either Fund
deems it advisable for the benefit of all shareholders, redemption in kind will
consist of securities equal in market value to your shares. When you convert
these securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below $500, the Fund may ask you to increase your balance.
If it is still below $500 after 60 days, the Fund may close your account and
send you the proceeds at the then current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or
(2) remain uncashed for six months, your account will be changed automatically
so that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in the
Fund.
15
<PAGE> 17
EXCHANGING YOUR SHARES
You can exchange your shares in one Fund for shares of another Boston Trust
Mutual Fund. No transaction fees are charged for exchanges.
You must meet the minimum investment requirements for the Fund into which you
are exchanging.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to Boston Trust Mutual Funds,
c/o United States Trust Company of Boston, 40 Court Street, Boston, MA 02108, or
by calling 1-800-441-8782, ext. 4050. Please provide the following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security
number)
- Dollar value or number of shares to be exchanged
- The name of the Fund from which the exchange is to be made
- The name of the Fund into which the exchange is being made
Please refer to "Selling your Shares" for important information about
telephone transactions.
NOTES ON EXCHANGES
- - To prevent disruption in the management of the Funds, exchange activity
may be limited to 4 exchanges within a calendar year.
- - The registration and tax identification numbers of the two accounts must
be identical.
- - The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon a 60-day notice to shareholders.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income a Fund receives in the form of dividends is paid out, less expenses,
to its shareholders. Income dividends and capital gains distributions on the
Funds are paid usually annually.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
An exchange of shares is considered a sale, and any related gains may be subject
to applicable taxes.
Dividends are taxable as ordinary income. Taxation on capital gains
distributions will vary with the length of time the Fund has held the security -
not how long the shareholder has been in the Fund.
Dividends are taxable in the year in which they are paid, even if they appear on
your account statement in the following year.
You will be notified in January of each year about the federal tax status of
distributions made by the Funds. Depending on your state of residence,
distributions also may be subject to state and local taxes, including
withholding taxes. There is a penalty on certain pre-retirement distributions
from retirement accounts. Consult your tax adviser about the federal, state and
local tax consequences in your particular circumstances.
Foreign shareholders may be subject to special withholding requirements.
The Funds are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Funds with their certified taxpayer identification number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
16
<PAGE> 18
FUND MANAGEMENT
THE INVESTMENT ADVISER
United States Trust Company of Boston, (the "Adviser"), 40 Court
Street, Boston, Massachusetts 02108, is the investment adviser for the Funds.
The Adviser is a Massachusetts-chartered banking and trust company established
in 1895 and is a wholly-owned subsidiary of UST Corp., a Massachusetts bank
holding company. The Trust Department of the Adviser has managed assets as a
fiduciary for over 50 years. The Adviser began offering professional investment
management services in 1974 with the establishment of its Asset Management
Division. Neither the Adviser nor UST Corp. is affiliated with United States
Trust Company of New York.
PORTFOLIO MANAGERS
The following individuals serve as portfolio managers for the Funds and are
primarily responsible for the day-to-day management of the Funds' portfolios:
Balanced Fund: Mr. Domenic Colasacco, President of United States Trust
Company, is the Balanced Fund's portfolio manager. He has been
United States Trust Company's Chief Investment Officer since
1980. Mr. Colasacco is a Chartered Financial Analyst and a
member of the Boston Security Analyst's Society.
Equity Fund: Mr. Robert Lincoln, Senior Vice President and Chief Economic
Strategist of the United States Trust Company, is the
portfolio manager of the Equity Fund. Mr. Lincoln joined the
Adviser in 1984 after serving as a Group Vice President at
Charles River Associates, a Boston-based economic and
financial consulting firm. Mr. Lincoln earned his B.A. degree
(magna cum laude) in Economics and his M.A. in Economics from
Harvard University.
The Statement of Additional Information has more detailed information about the
Adviser.
THE DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services is the Funds' distributor and administrator and is located
at 3435 Stelzer Road, Columbus, OH 43219.
17
<PAGE> 19
FINANCIAL HIGHLIGHTS
- --------------------
The financial highlights table is intended to help you understand the
Balanced Fund's financial performance since its inception on December 1, 1995.
(Information is not presented for the Equity Fund because that Fund did not
commence operations until __________, 1999, and therefore no financial data
is yet available). Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned on an investment in the Balanced Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by Ernst & Young, LLC, whose report, along with the Fund's financial
statements, are included in the annual report of the Balanced Fund, which is
available upon request.
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------- ---------------- ----------------- ---------------------
SIX MONTHS YEAR YEAR DECEMBER 1, 1995*
ENDED ENDED ENDED THROUGH
DECEMBER 31, 1998(#) JUNE 30, 1998(++) JUNE 30, 1997(++) JUNE 30, 1996(++)
- ------------------------------------------------- --------------------- ---------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........... $29.21 $23.70 $19.31 $18.41
------ ------ ------ ------
Income from investment operations:
Net investment income ...................... 0.26 0.46 0.47 0.25
Net realized and unrealized gain
on investments............................ 0.97 5.94 4.36 0.69
------ ------ ------ ------
Total from investment operations............... 1.23 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) -0- -0-
------ ------ ------ ------
Total distributions............................ (1.58) (0.89) (0.44) (0.04)
------ ------ ------ ------
Net asset value, end of period................. $28.86 $29.21 $23.70 $19.31
====== ====== ====== ======
Total return................................... 4.42% 27.55% 25.40% 5.14%
Ratios/supplemental data:
Net assets, end of period (millions)........... $138.2 $121.9 $82.0 $61.8
Ratio of expenses to average net assets:
Before expense reimbursement................ 0.96%+ 1.00% 1.02% 1.00%+
After expense reimbursement................. 0.96%+ 1.00% 1.02% 1.00%+
Ratio of net investment income to
average net assets:
Before expense reimbursement................ 1.98%+ 1.85% 2.24% 2.43%+
After expense reimbursement................. 1.98%+ 1.85% 2.25% 2.43%+
Portfolio turnover rate........................ 10.26% 22.71% 30.78% 17.69%
* Commencement of operations.
+ Annualized.
++ Per share data has been restated to give effect to a 4-for-1 stock split
to shareholders of record as of the close of business on January 9, 1998.
# Unaudited.
</TABLE>
18
<PAGE> 20
CAPITAL STRUCTURE
- -----------------
The Coventry Group was organized as a Massachusetts business trust on
January 8, 1992. Overall responsibility for the management of the Funds is
vested in its Board of Trustees. Shareholders are entitled to one vote for each
full share held and a proportionate fractional vote for any fractional shares
held, and will vote in the aggregate and not by series except as otherwise
expressly required by law. An annual or special meeting of shareholders to
conduct necessary business is not required by the Coventry Group's Declaration
of Trust, the 1940 Act or other authority, except under certain circumstances.
Absent such circumstances, the Coventry Group does not intend to hold annual or
special meetings.
19
<PAGE> 21
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS:
Each Fund's annual and semi-annual reports to shareholders contain additional
investment information. In the annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected each
Fund's performance during its most recent fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
- --------------------------------------------------------------------------------
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING THE FUNDS AT:
BOSTON TRUST MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-________
- --------------------------------------------------------------------------------
You can also review each Fund's reports and the SAI at the Public Reference Room
of the Securities and Exchange Commission. You can get text-only copies:
- For a fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009 or calling
1-800-SEC-0330.
- Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-6526.
20
<PAGE> 22
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
DATED MAY __, 1999
- --------------------------------------------------------------------------------
UNITED STATES TRUST COMPANY OF BOSTON
PROSPECTUS FOR THE FOLLOWING BOSTON TRUST PORTFOLIOS:
Walden Social Balanced Fund
Walden Social Equity Fund
[ ], 1999
- --------------------------------------------------------------------------------
Investment Adviser
------------------
Walden Asset Management, a division of
United States Trust Company of Boston
40 Court Street
Boston, Massachusetts 02108
Telephone: (617) 726-7250
Neither the Securities and Exchange Commission nor any other regulatory body has
approved the securities being offered by this prospectus or determined whether
this prospectus is accurate and complete. It is unlawful for anyone to make any
representation to the contrary.
1
<PAGE> 23
WALDEN MUTUAL FUNDS
TABLE OF CONTENTS
RISK/RETURN SUMMARY AND FUND EXPENSES
3 Walden Social Balanced Fund
6 Walden Social Equity Fund
Carefully review this important section for a summary of each Fund's
investments, risks and fees.
INVESTMENT OBJECTIVES AND STRATEGIES
7 Walden Social Balanced Fund
8 Walden Social Equity Fund
9 Investment Risks
This section contains details on each Fund's investment strategies and
risks.
SHAREHOLDER INFORMATION
11 Pricing of Fund Shares
11 Purchasing and Adding to Your Shares
13 Selling Your Shares
16 Exchanging Your Shares
17 Dividends, Distributions and Taxes
Consult this section to obtain details on how shares are valued, how to
purchase, sell and exchange shares, related charges and payments of
dividends
FUND MANAGEMENT
16 The Investment Adviser
17 Portfolio Managers
2
<PAGE> 24
RISK/RETURN SUMMARY AND FUND EXPENSES
- -------------------------------------------------------------------------------
WALDEN SOCIAL BALANCED FUND
- ---------------------------
INVESTMENT OBJECTIVE The Balanced Fund seeks long-term capital
growth and income through an actively
managed portfolio of stocks, bonds and money
market instruments.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests in stocks, bonds and money
market instruments, with at least 25% of
assets in fixed-income senior securities.
PRINCIPAL INVESTMENT RISKS Because the value of the Fund's investments
will fluctuate with market conditions and
interest rates, the value of your investment
in the Fund will also vary. You could lose
money on your investment in the Fund, or the
Fund could underperform other investments.
Who may want to invest? Consider investing in the Fund if you are:
- Interested in ensuring that your
investments are consistent with
your social concerns and values
- Investing for a period of time in
excess of 3 to 5 years
- Able to bear the risk of market
value fluctuations in the
short-term
- Looking for a combination of
exposure to stock investments for
growth, and bond investments for
greater stability of income and
principal
This Fund will not be appropriate for
anyone:
- Investing for a period of time less
than 3 to 5 years
- Not comfortable with market
fluctuations in the short-term
- Looking primarily for a high level
of current income
3
<PAGE> 25
WALDEN SOCIAL BALANCED FUND (CONTINUED)
- ---------------------------------------
ANNUAL FEES AND EXPENSES
- ------------------------
As an investor in the Balanced Fund,
you will pay the following fees and Shareholder
expenses. Shareholder transaction Transaction
fees are paid from your account. Fees (fees
Annual Fund operating expenses are paid by you
paid out of Fund assets, and are directly)
included in the calculation of share
price. Maximum sales
charge (load)
on purchases n/a
------------------------------------
Maximum deferred
sales charge (load) n/a
Annual Fund
Operating
Expenses
(expenses paid from
Fund assets)
------------------------------------
Management fee 0.75%
------------------------------------
Distribution and
Service (12b-1) fee n/a
------------------------------------
Other expenses 0.33%*
------------------------------------
Total Fund
Operating expenses 1.08%*
------------------------------------
Fee Waiver and/or
Expense Reimbursement 0.08%*
------------------------------------
Net Expenses 1.00%*
------------------------------------
* The Adviser has entered into an expense limitation agreement with the
Trust to limit the Total Fund Operating Expenses of the Balanced Fund
to 1.00% of its average daily net assets for its current fiscal year.
Without this expense limitation agreement, the Total Fund Operating
Expenses for the Balanced Fund's initial fiscal year are estimated to
be 1.08%.
4
<PAGE> 26
WALDEN SOCIAL BALANCED FUND (CONTINUED)
- ---------------------------------------
EXPENSE EXAMPLE
Use this table to compare fees and expenses with those of other funds. The table
illustrates the amount of fees and expenses you would pay, assuming the
following:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison purposes only, your
actual costs will be different.
<TABLE>
<CAPTION>
Balanced Fund 1 3 5 10
Year Years Years Years
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
$102 $318 $552 $1,225
-------------------------------------------------------------------
</TABLE>
WALDEN SOCIAL EQUITY FUND
-------------------------
INVESTMENT OBJECTIVE The Equity Fund seeks long-term capital
growth through an actively managed portfolio
of stocks.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity
securities.
PRINCIPAL INVESTMENT RISKS Because the value of the Fund's investments
will fluctuate with market conditions, the
value of your investment in the Fund will
also vary. You could lose money on your
investment in the Fund, or the Fund could
underperform other investments.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Interested in ensuring that your
investments are consistent with
your social concerns and values
- Investing for a period of time in
excess of 3 to 5 years
- Looking for a high-quality,
well-diversified, all-equity
portfolio that provides the
potential for growth of your
investment
- Comfortable with market value
fluctuations in the short-term
This Fund will not be appropriate for
anyone:
- Investing for a period of time less
than 3 to 5 years
- Not comfortable with market value
fluctuations
- Looking for current income
5
<PAGE> 27
WALDEN SOCIAL EQUITY FUND (CONTINUED)
- -------------------------------------
ANNUAL FEES AND EXPENSES
As an investor in the Equity Fund,
you will pay the following fees and Shareholder
expenses. Shareholder transaction Transaction
fees are paid from your account. Fees (fees
Annual Fund operating expenses are paid by you
paid out of Fund assets, and are directly)
included in the calculation of share
price. Maximum sales
charge (load) n/a
on purchases
-----------------------------------
Maximum deferred
sales charge (load) n/a
Annual Fund
Operating
Expenses
(expenses paid from
Fund assets)
-----------------------------------
Management fee 0.75%
-----------------------------------
Distribution and
Service (12b-1) Fee n/a
-----------------------------------
Other expenses 0.38%*
-----------------------------------
Total Fund
Operating expenses 1.13%*
-----------------------------------
Fee Waiver and/or
Expense Reimbursement 0.13%*
-----------------------------------
Net Expenses 1.00%*
-----------------------------------
* The Adviser has entered into an expense limitation agreement with the
Trust to limit the Total Fund Operating Expenses of the Equity Fund to
1.00% of its average daily net assets for its current fiscal year.
Without this expense limitation agreement, the Total Fund Operating
Expenses for the Equity Fund's initial fiscal year are estimated to be
1.13%.
6
<PAGE> 28
WALDEN SOCIAL EQUITY FUND (CONTINUED)
- -------------------------------------
EXPENSE EXAMPLE
Use this table to compare fees and expenses with those of other Funds. It
illustrates the amount of fees and expenses you would pay, assuming the
following:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison purposes only, your
actual costs will be different.
<TABLE>
<CAPTION>
EQUITY FUND 1 3 5 10
Year Years Years Years
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
$102 $318 $552 $1,225
-------------------------------------------------------------------
</TABLE>
7
<PAGE> 29
INVESTMENT OBJECTIVES AND STRATEGIES
SOCIAL RESPONSIBILITY CRITERIA
Investments of the Funds will satisfy certain social responsibility criteria.
Among the criteria on which we evaluate companies are:
- - PRODUCT SAFETY AND DESIRABILITY: Do companies produce tobacco or
alcohol? Are they honest with consumers?
- - WORKPLACE ISSUES: Do companies engage in equal employment and fair
labor practices? Do they provide safe working conditions?
- - ENVIRONMENTAL IMPACT: Are companies curbing emissions and waste? Are
they complying with environmental regulations? Do they own or operate
nuclear power plants?
- - INTERNATIONAL OPERATIONS: Are companies upholding human rights and
environmental standards abroad?
- - WEAPONS CONTRACTING: Are companies directly involved in the production
of weapons systems?
WALDEN SOCIAL BALANCED FUND
================================================================================
Ticker Symbol: WSBEX
INVESTMENT OBJECTIVE
The investment objective of the Social Balanced Fund is to seek
long-term capital growth and income through an actively managed portfolio of
stocks, bonds and money market instruments.
POLICIES AND STRATEGIES
Consistent with the Social Balanced Fund's investment objective, the
Fund:
- maintains an actively managed portfolio of stocks, bonds and
money market instruments
- will generally invest at least 25% of its total assets in
fixed-income senior securities
- may purchase both common stock and preferred stock
- will purchase primarily investment grade bonds
- may invest up to 20% of its total assets in fixed-income
securities that are considered non-investment grade
8
<PAGE> 30
Portfolio Turnover. The annual rate of portfolio turnover is not
expected to exceed 100%. In general, the Adviser will not consider the rate of
portfolio turnover to be a limiting factor in determining when or whether to
purchase or sell securities in order to achieve the Fund's objective.
In the event that the Adviser determines that market conditions are not
suitable for the Fund's typical investments, the Adviser may, for temporary
defensive purposes during such unusual market conditions, invest all or any
portion of the Fund's assets in money market instruments.
WALDEN SOCIAL EQUITY FUND
================================================================================
Ticker Symbol: WSEFX
INVESTMENT OBJECTIVE
The investment objective of the Social Equity Fund is to seek long-term
growth of capital.
POLICIES AND STRATEGIES
Consistent with the Social Equity Fund's investment objective, the
Fund: will invest substantially all, but in no event less than 65%, of
the value of its total assets in equity securities
- will invest in the following types of equity securities:
common stocks, preferred stocks, securities convertible or
exchangeable into common stocks, warrants and any rights to
purchase common stocks
- may invest in fixed income securities consisting of corporate
notes, bonds and debentures that are rated investment grade at
the time of purchase
- may invest in obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government (excluding U.S.
Treasury instruments)
- may invest in the securities of foreign issuers and may
acquire sponsored and unsponsored American Depositary Receipts
and European Depositary Receipts
- may engage in repurchase transactions pursuant to which the
Fund purchases a security and simultaneously commits to resell
that security to the seller (either a bank or a securities
dealer) at an agreed upon price on an agreed upon date
(usually within seven days of purchase)
- may lend securities to qualified brokers, dealers, banks and
other financial institutions for the purpose of realizing
additional income
- may invest in other investment companies
In the event that the Adviser determines that current market conditions
are not suitable for the Fund's typical investments, the Adviser may, for
temporary defensive purposes, invest all or any portion of the Fund's assets in
money market instruments and U.S. Government securities.
9
<PAGE> 31
INVESTMENT RISKS
================================================================================
Any investment in the Funds is subject to investment risks, including
the possible loss of the principal amount invested.
Generally, the Funds will be subject to the following risks:
- MARKET RISK: Market risk refers to the risk related to
investments in securities in general and the daily
fluctuations in the securities markets. The Funds' performance
per share will change daily based on many factors, including
fluctuation in interest rates, the quality of the instruments
in each Fund's investment portfolio, national and
international economic conditions and general market
conditions.
- INTEREST RATE RISK: Interest rate risk refers to the risk that
the value of either Fund's fixed income securities can change
in response to changes in prevailing interest rates causing
volatility and possible loss of value as rates increase.
- CREDIT RISK: Credit risk refers to the risk related to the
credit quality of the issuer of a security held in either
Fund's portfolio. The Funds could lose money if the issuer of
a security is unable to meet its financial obligations.
- YEAR 2000 RISK: Like other funds and business organizations
around the world, the Funds could be affected adversely if the
computer systems used by the Adviser and the Funds' other
service providers do not properly process and calculate date
related information for the year 2000 and beyond. In addition,
Year 2000 issues may affect adversely companies in which the
Funds invest where, for example, such companies incur
substantial costs to address Year 2000 issues or suffer losses
caused by the failure to do so adequately, and in a timely
manner.
The Funds have been advised that the Adviser and the Funds' other
service providers (i.e., Administrator, Transfer Agent, Fund Accounting Agent,
Custodian and Distributor) have developed and are implementing clearly defined
and documented plans intended to minimize risks associated with Year 2000 issues
with regard to services critical to the Funds' operations. Internal efforts
include a commitment of adequate staff and funding to identify and remedy Year
2000 issues, and specific actions such as taking inventory of software systems,
determining inventory items that may not function properly after December 31,
1999, reprogramming or replacing such systems, and retesting for Year 2000
readiness.
In the event that any systems upon which the Funds are dependent are
not Year 2000 ready by December 31, 1999, administrative errors and account
maintenance failures would likely occur.
While the ultimate costs or consequences of incomplete or untimely
resolution of Year 2000 issues by the Adviser or the Funds' service providers
cannot be assessed accurately at this time, the Funds currently have no reason
to believe that the Year 2000 plans of the Adviser and each Fund's service
providers will not be completed by December 31, 1999, or that the anticipated
costs associated with full implementation of their plans will have a material
adverse impact on either their business operations or the financial condition of
the Funds. The Funds and the Adviser will continue to monitor closely
developments relating to this issue, including establishment by the Adviser and
the Funds' service providers of contingency plans.
10
<PAGE> 32
SHAREHOLDER INFORMATION
-----------------------
PRICING OF FUND SHARES
- ----------------------
How NAV is Calculated
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
Total Assets - Liabilities
--------------------------
Number of Shares
Outstanding
You can find each Fund's NAV daily in The Wall Street Journal and other
financial newspapers.
The net asset value per share of each Fund is determined at the time
trading closes on the New York Stock Exchange ("NYSE") (currently 4:00 p.m.,
Eastern Standard Time, Monday through Friday), except on business holidays when
the NYSE is closed. The NYSE recognizes the following holidays: New Year's Day,
President's Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day, Fourth
of July, Labor Day, Thanksgiving Day, and Christmas Day. Any other holiday
recognized by the NYSE will be considered a business holiday on which the net
asset value of each Fund will not be calculated.
Your order for purchase, sale or exchange of shares is priced at the
next NAV calculated after your order is accepted by the Funds. This is what is
known as the offering price.
Each Fund's securities are generally valued at current market prices.
If market quotations are not available, prices will be based on fair value as
determined by the Funds' Trustees.
PURCHASING AND ADDING TO YOUR SHARES
- ------------------------------------
You may purchase the Funds through the Distributor or through investment
representatives, who may charge additional fees and may require higher minimum
investments or impose other limitations on buying and selling shares. If you
purchase shares through an investment representative, that party is responsible
for transmitting orders by close of business and may have an earlier cut-off
time for purchase and sale requests. Consult your investment representative for
specific information.
The minimum initial investment in the Funds is $2,000. Subsequent investments
must be at least $500. BISYS Fund Services (the "Distributor") acts as
Distributor of each Fund's shares. Shares of the Funds are offered continuously
for purchase at the net asset value per share of the Fund next determined after
a purchase order is received. Investors may purchase shares of the Funds by
check or wire, as described below.
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted.
A Fund or the Adviser may waive its minimum purchase requirement, or the
Distributor may reject a purchase order, if it is deemed to be in the best
interest of either Fund and its shareholders.
11
<PAGE> 33
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
By Regular Mail or Overnight Service
Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, certified check or money order payable to either "Walden
Social Balanced Fund" or "Walden Social Equity Fund", as applicable.
3. Mail to: Walden Mutual Funds, c/o United States Trust Company of
Boston, 40 Court Street, Boston, MA 02108.
Subsequent Investment:
1. Subsequent investments should be made by check payable to the
applicable fund and mailed to the address indicated above. Your account
number should be written on the check.
By Wire Transfer
Note: Your bank may charge a wire transfer fee.
For initial investment: Before wiring funds, you should call 1-800-441-8782,
ext. 4050, or 1-617-695-4050 to advise that an initial investment will be made
by wire and to receive an account number.
Follow the instructions below after receiving your account number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
United States Trust Company of Boston
Routing Number: ABA #0110-0133-1
DDA# 0003004512
Include:
Your name
Your account number
Fund name
SELLING YOUR SHARES
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Funds, its transfer agent, or your
investment representative. Normally you will receive your proceeds within a week
after your request is received. See section on "General Policies on Selling
Shares" below.
- -------------------------------------------------------------------------------
WITHDRAWING MONEY FROM YOUR
FUND INVESTMENT
A request for a withdrawal in cash from either Fund constitutes a redemption or
sale of shares for a mutual fund shareholder.
- --------------------------------------------------------------------------------
12
<PAGE> 34
INSTRUCTIONS FOR SELLING SHARES
<TABLE>
<S> <C>
By telephone 1. Call 1-800-441-8782, ext. 4050 with instructions as to how
(unless you have declined you wish to receive your funds (mail, wire, electronic
telephone sales privileges) transfer).
By mail 2(a). Call 1-800-441-8782, ext. 4050 to request redemption
forms or write a letter of instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2(b). Mail to:
WALDEN MUTUAL FUNDS
c/o United States Trust Company of Boston
40 Court Street
Boston, MA 02108
By overnight service See instruction 2 above.
Send to:
WALDEN MUTUAL FUNDS
c/o United States Trust Company of Boston
40 Court Street
Boston, MA 02108
By Wire transfer Call 1-800-441-8782, ext. 4050 to request a wire transfer.
You must indicate this option
on your application. If you call by 4 p.m. Eastern Standard Time, your payment will
normally be wired to your bank on the next business day.
The Funds may charge a wire
transfer fee.
Note: Your financial
institution may also charge a
separate fee.
</TABLE>
GENERAL POLICIES ON SELLING SHARES
- ----------------------------------
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Circumstances under which redemption requests require a signature guarantee
include, but may not be limited to, each of the following:
- Redemptions over $10,000
- Your account registration or the name(s) on your account has changed
within the last 15 days
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- The redemption proceeds are being transferred to another Fund account
with a different registration
A signature guarantee can be obtained from a financial institution,
such as a bank, broker-dealer, credit union, clearing agency, or savings
association.
13
<PAGE> 35
VERIFYING TELEPHONE REDEMPTIONS
The Funds make every effort to ensure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, you cannot redeem any
portion of it until the Transfer Agent is satisfied that the check has cleared
(which may require up to 15 business days). You can avoid this delay by
purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
REDEMPTION IN KIND
The Funds reserve the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(a redemption of more than 1% of the Fund's net assets). If either Fund deems it
advisable for the benefit of all shareholders, redemption in kind will consist
of securities equal in market value to your shares. When you convert these
securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below $500, the Fund may ask you to increase your balance.
If it is still below $500 after 60 days, the Fund may close your account and
send you the proceeds at the then current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or
(2) remain uncashed for six months, your account will be changed automatically
so that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in the
Fund.
14
<PAGE> 36
EXCHANGING YOUR SHARES
- ----------------------
You can exchange your shares in one Fund for shares of another Boston Trust
Mutual Fund. No transaction fees are charged for exchanges.
You must meet the minimum investment requirements for the Fund into which you
are exchanging.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to Walden Mutual Funds, c/o
United States Trust Company of Boston, 40 Court Street, Boston, MA 02108, or by
calling 1-800-441-8782, ext. 4050. Please provide the following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security
number)
- Dollar value or number of shares to be exchanged
- The name of the Fund from which the exchange is to be made
- The name of the Fund into which the exchange is being made
Please refer to "Selling your Shares" for important information about telephone
transactions.
NOTES ON EXCHANGES
- - To prevent disruption in the management of the Funds, exchange
activity may be limited to 4 exchanges within a calendar year.
- - The registration and tax identification numbers of the two accounts
must be identical.
- - The Exchange Privilege (including automatic exchanges) may be changed
or eliminated at any time upon a 60-day notice to shareholders.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income a Fund receives in the form of dividends is paid out, less expenses,
to its shareholders. Income dividends and capital gains distributions on the
Funds usually are paid annually.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
An exchange of shares is considered a sale, and any related gains may be subject
to applicable taxes.
Dividends are taxable as ordinary income. Taxation on capital gains
distributions will vary with the length of time the Fund has held the security -
not how long the shareholder has been in the Fund.
Dividends are taxable in the year in which they are paid, even if they appear on
your account statement in the following year.
You will be notified in January of each year about the federal tax status of
distributions made by the Funds. Depending on your state of residence,
distributions also may be subject to state and local taxes, including
withholding taxes. There is a penalty on certain pre-retirement distributions
from retirement accounts. Consult your tax adviser about the federal, state and
local tax consequences in your particular circumstances.
Foreign shareholders may be subject to special withholding requirements.
The Funds are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Funds with their certified taxpayer identification number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
15
<PAGE> 37
FUND MANAGEMENT
- ---------------
WALDEN ASSET MANAGEMENT,
A DIVISION OF THE INVESTMENT ADVISER
United States Trust Company of Boston, (the "Adviser"), 40 Court
Street, Boston, Massachusetts 02108, is the investment adviser for the Funds and
has designated its Walden division to fulfill its obligations with respect to
the Funds. The Adviser is a Massachusetts-chartered banking and trust company
established in 1895 and is a wholly-owned subsidiary of UST Corp., a
Massachusetts bank holding company. The Trust Department of the Adviser has
managed assets as a fiduciary for over 50 years. The Adviser began offering
professional investment management services in 1974 with the establishment of
its Asset Management Division. Neither the Adviser nor UST Corp. is affiliated
with United States Trust Company of New York.
SOCIAL INVESTING
For many, the primary goal of socially responsive investing is moral
consistency: not owning and profiting from investments in companies which
violate personal ethical standards. This goal is achieved best by using specific
social criteria to screen potential investments.
For others, the goal of socially responsive investing is social change.
Recognizing corporations as key participants in effecting social and economic
justice, this strategy uses the power of ownership to influence corporate
behavior. Walden Asset Management utilizes both social screening and social
change strategies to achieve its financial and social objectives.
Walden is engaged actively in promoting positive corporate change
through company dialogues and shareholder resolutions, social screening, public
policy testimony and technical assistance to nonprofits.
Walden is committed to making socially responsive investing an
effective instrument of social change at home and abroad. Walden has an in-house
social research process that fully harnesses the power of shareholder activism.
Through dialogue with management and in partnership with other agents of
change, Walden uses its leverage as a shareholder to foster progressive
corporate practices.
Walden is working to focus companies on the sustainability of their
profits by urging corporate management to treat their workers, customers,
communities and the environment as valuable, long-term assets. Our research and
advocacy work is dedicated to finding the practical linkages between these
constituencies, and helping use shareholder power productively.
For a quarter century, Walden Asset Management has been at the
forefront of building relationships and developing tools to effect social
change. Walden strives to be responsive to evolving social concerns and to stay
at the forefront of research and activism on emerging social issues.
Consistent with these social investing principles, each Fund seeks to
invest in companies that:
- - Are above average in their industry for environmental performance and
management, have innovative programs for pollution prevention and resource
conservation, comply with environmental regulations, conduct comprehensive
environmental auditing, and develop products that help the environment.
- - Are above average in their industry for labor relations, worker safety
programs, employee benefits, equal employment opportunity and affirmative
action, encourage employee ownership and participation, and support
families and communities.
- - Adhere to policies and practices that respect fundamental human rights.
16
<PAGE> 38
- - Strive to be responsible corporate citizens, and respond openly to social
concerns through public disclosure of information.
The Funds avoid investing in companies that, to the Adviser's
knowledge:
- - Have below average performance in the area of pollution control and poor
compliance records for environmental regulations; have equity ownership in
nuclear power plants, or significant involvement in the nuclear power fuel
cycle.
- - Have substandard performance in the hiring and promotion of women and
minorities, or have a pattern of violating fair labor standards or health
and safety regulations.
- - Derive significant revenues from the manufacture of weapons systems, hand
guns, tobacco products, alcoholic beverages, or from gaming activities.
- - Significantly support human right abuses.
Each Fund's social guidelines are subject to change without shareholder
approval.
PORTFOLIO MANAGERS
The following individuals serve as portfolio managers for the Funds and are
primarily responsible for the day-to-day management of the Funds' portfolios:
Balanced Fund: Mr. Stephen Moody, Senior Vice President and Chairman of the
Adviser's Social Investment Policy Committee, is the
portfolio manager of the Balanced Fund. Prior to joining the
Adviser in 1980, Mr. Moody served as research director of
the Council on Economic Priorities, and economic consultant
to the Shalan Foundation and Natural Resources Defense
Council. Mr. Moody earned his B.A. from the University of
California at Berkeley and an MA in Economics from the
Graduate Faculty of the New School for Social Research. He
is a member of the American Economic Association and the
Boston Security Analysts Society.
Equity Fund: Mr. Robert Lincoln, Senior Vice President and Chief Economic
Strategist of the United States Trust Company, is the
portfolio manager of the Equity Fund. Mr. Lincoln joined the
Adviser in 1984 after serving as a Group Vice President at
Charles River Associates, a Boston-based economic and
financial consulting firm. Mr. Lincoln earned his B.A.
degree (magna cum laude) in Economics and his M.A. in
Economics from Harvard University.
The Statement of Additional Information has more detailed information about the
Adviser.
THE DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services is the Funds' distributor and administrator and is located
at 3435 Stelzer Road, Columbus, OH 43219.
17
<PAGE> 39
CAPITAL STRUCTURE
- -----------------
The Coventry Group was organized as a Massachusetts business trust on
January 8, 1992. Overall responsibility for the management of the Funds is
vested in its Board of Trustees. Shareholders are entitled to one vote for each
full share held and a proportionate fractional vote for any fractional shares
held, and will vote in the aggregate and not by series except as otherwise
expressly required by law. An annual or special meeting of shareholders to
conduct necessary business is not required by the Coventry Group's Declaration
of Trust, the 1940 Act or other authority, except under certain circumstances.
Absent such circumstances, the Coventry Group does not intend to hold annual or
special meetings.
For more information about the Funds, the following documents are available
free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Each Fund's annual and semi-annual reports to
shareholders contain additional investment information. In the annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected each Fund's performance during its
most recent fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment
policies. It is incorporated by reference and is legally considered a part
of this prospectus.
---------------------------------------------------------------------------
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER
INFORMATION AND DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING THE
FUNDS AT:
WALDEN MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-________
---------------------------------------------------------------------------
You can also review each Fund's reports and the SAI at the Public Reference
Room of the Securities and Exchange Commission. You can get text-only
copies:
- For a fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009 or calling
1-800-SEC-0330.
- Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-6526.
18
<PAGE> 40
BOSTON BALANCED FUND
BOSTON EQUITY FUND
WALDEN SOCIAL BALANCED FUND
WALDEN SOCIAL EQUITY FUND
Each an Investment Portfolio of
The Coventry Group
Statement of Additional Information
[ ], 1999
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the prospectuses for (1) Boston Balanced Fund and
Boston Equity Fund and (2) Walden Social Balanced Fund and Walden Social Equity
Fund (collectively, the "Funds"), each dated the same date as the date hereof
(the "Prospectuses"). The Funds are separate investment portfolios of The
Coventry Group (the "Group"), an open-end investment management company. This
Statement of Additional Information is incorporated in its entirety into each of
the Prospectuses. Copies of the Prospectuses may be obtained by writing the
BT/Walden Funds at 40 Court Street, Boston, Massachusetts 02108, or by
telephoning toll free (800) 441-8782, ext. 4050.
<PAGE> 41
STATEMENT OF ADDITIONAL INFORMATION
THE COVENTRY GROUP
The Coventry Group (the "Group") is an open-end investment
management company which offers currently its shares in separate series. This
Statement of Additional Information deals with four such portfolios: Boston
Balanced Fund, Boston Equity Fund, Walden Social Balanced Fund and Walden Social
Equity Fund (the "Funds"). Much of the information contained in this Statement
of Additional Information expands upon subjects discussed in the Prospectuses.
Capitalized terms not defined herein are defined in the Prospectuses. No
investment in shares of a Fund should be made without first reading the
applicable Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
The following policies supplement the investment objectives
and policies of each Fund as set forth in the Prospectuses.
Money Market Instruments
Money market instruments selected for investment by the Funds
include high grade, short-term obligations, including those issued or guaranteed
by the U.S. Government, its agencies and instrumentalities, U.S.
dollar-denominated certificates of deposit, time deposits and bankers'
acceptances of U.S. banks (generally banks with assets in excess of $1 billion),
repurchase agreements with recognized dealers and banks and commercial paper
(including participation interests in loans extended by banks to issuers of
commercial paper) that at the date of investment are rated A-1 by S&P or P-1 by
Moody's, or, if unrated, of comparable quality as determined by the Advisor.
Repurchase Agreements
The Funds may enter into repurchase agreements. Under such
agreements, the seller of a security agrees to repurchase it at a mutually
agreed upon time and price. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price on repurchase. In either case, the income to the Fund
is unrelated to the interest rate on the security itself. Such repurchase
agreements will be made only with banks with assets of $500 million or more that
are insured by the Federal Deposit Insurance Corporation or with Government
securities dealers recognized by the Federal Reserve Board and registered as
broker-dealers with the Securities and Exchange Commission ("SEC") or exempt
from such registration. The Funds will enter generally into repurchase
agreements of short durations, from overnight to one week, although the
underlying securities generally have longer
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<PAGE> 42
maturities. A Fund may not enter into a repurchase agreement with more than
seven days to maturity if, as a result, more than 5% of the value of the Fund's
net assets would be invested in illiquid securities including such repurchase
agreements.
For purposes of the Investment Company Act of 1940 (the "1940
Act"), a repurchase agreement is deemed to be a loan from the Fund to the seller
of the U.S. Government security subject to the repurchase agreement. In the
event of the insolvency or default of the seller, the Fund could encounter
delays and incur costs before being able to sell the security. Delays may
involve loss of interest or a decline in price of the U.S. Government security.
As with any unsecured debt instrument purchased for a Fund, the Investment
Advisor seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case the seller of the
U.S. Government security.
There is also the risk that the seller may fail to repurchase
the security. However, a Fund will always receive as collateral for any
repurchase agreement to which it is a party securities acceptable to it, the
market value of which is equal to at least 100% of the amount invested by the
Fund plus accrued interest, and the Fund will make payment against such
securities only upon physical delivery or evidence of book entry transfer to the
account of its Custodian. If the market value of the U.S. Government security
subject to the repurchase agreement becomes less than the repurchase price
(including interest), the Fund will direct the seller of the U.S. Government
security to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be unsuccessful in seeking to
impose on the seller a contractual obligation to deliver additional securities.
When-Issued Securities
The Funds are authorized to purchase securities on a
"when-issued" basis. The price of such securities, which may be expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for the when-issued securities take place at a later date.
Normally, the settlement date occurs within one month of the purchase; during
the period between purchase and settlement, no payment is made by the Fund to
the issuer and no interest accrues to the Fund. To the extent that assets of the
Fund are held in cash pending the settlement of a purchase of securities, the
Fund would earn no income; however, it is the Fund's intention to be fully
invested to the extent practicable and subject to the policies stated above.
While when-issued securities may be sold prior to the settlement date, any
purchase of such securities would be made with the purpose of actually acquiring
them unless a sale appears desirable for investment reasons. At the time the
Fund makes the commitment to purchase a security on a when-issued basis, it will
record the transaction and reflect the value of the security in determining its
net asset value. The market value of the when-issued securities may be more or
less than the purchase price. The Fund does not believe that its net asset value
or income will be affected adversely by its purchase of securities on a
when-issued basis. The Fund will designate liquid securities equal in value to
commitments for when-issued securities. Such segregated assets either will
mature or, if necessary, be sold on or before the settlement date.
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<PAGE> 43
Foreign Securities
Each Fund may invest up to 15% of its assets in foreign
securities. Foreign investments can involve significant risks in addition to the
risks inherent in U.S. investments. The value of securities denominated in or
indexed to foreign currencies, and of dividends and interest from such
securities, can change significantly when foreign currencies strengthen or
weaken relative to the U.S. dollar. Foreign securities markets generally have
less trading volume and less liquidity than U.S. markets, and prices on some
foreign markets can be highly volatile. Many foreign countries lack uniform
accounting and disclosure standards comparable to those applicable to U.S.
companies, and it may be more difficult to obtain reliable information regarding
an issuer's financial condition and operations. In addition, the costs of
foreign investing, including withholding taxes, brokerage commissions, and
custodial costs, generally are higher than for U.S. investments.
Foreign markets may offer less protection to investors than
U.S. markets. Foreign issuers, brokers, and securities markets may be subject to
less government supervision. Foreign securities trading practices, including
those involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It also may be difficult to
enforce legal rights in foreign countries.
Investing abroad also involves different political and
economic risks. Foreign investments may be affected by actions of foreign
governments adverse to the interests of U.S. investors, including the
possibility of expropriation or nationalization of assets, confiscatory
taxation, restrictions on U.S. investment or on the ability to repatriate assets
or convert currency into U.S. dollars, or other government intervention. There
may be a greater possibility of default by foreign governments or foreign
government-sponsored enterprises. Investments in foreign countries also involve
a risk of local political, economic, or social instability, military action or
unrest, or adverse diplomatic developments. There can be no assurance that the
Advisor will be able to anticipate or counter these potential events and their
impacts on a Fund's share price.
Securities of foreign issuers may be held by the Funds in the
form of American Depositary Receipts and European Depositary Receipts ("ADRs"
and "EDRs"). These are certificates evidencing ownership of shares of a
foreign-based issuer held in trust by a bank or similar financial institution.
Designed for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national market and currencies.
Each Fund may invest without regard to the 15% limitation
in securities of foreign issuers which are listed and traded on a domestic
national securities exchange.
Debt Securities and Ratings
Ratings of debt securities represent the rating agencies'
opinions regarding their quality, are not a guarantee of quality and may be
reduced after a Fund has acquired the security.
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<PAGE> 44
If a security's rating is reduced while it is held by a Fund, the Advisor will
consider whether the Fund should continue to hold the security, but the Fund is
not required to dispose of it. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not evaluate the risks of fluctuations in
market value. Also, rating agencies may fail to make timely changes in credit
ratings in response to subsequent events, so that an issuer's current financial
conditions may be better or worse than the rating indicates.
The Fund reserves the right to invest up to 20% of its assets
in securities rated lower than BBB by Standard & Poor's Ratings Group ("S&P") or
lower than Baa by Moody's Investors Service, Inc. ("Moody's"), but rated at
least B by S&P or Moody's (or, in either case, if unrated, deemed by the Advisor
to be of comparable quality). Lower-rated securities generally offer a higher
current yield than that available for higher grade issues. However, lower-rated
securities involve higher risks, in that they are especially subject to adverse
changes in general economic conditions and in the industries in which the
issuers are engaged, to changes in the financial condition of the issuers and to
price fluctuations in response to changes in interest rates. During periods of
economic downturn or rising interest rates, highly leveraged issuers may
experience financial stress which could adversely affect their ability to make
payments of interest and principal and increase the possibility of default. In
addition, the market for lower-rated debt securities has expanded rapidly in
recent years, and its growth paralleled a long economic expansion. At times in
recent years, the prices of many lower-rated debt securities declined
substantially, reflecting an expectation that many issuers of such securities
might experience financial difficulties. As a result, the yields on lower-rated
debt securities rose dramatically, but such higher yields did not reflect the
value of the income stream that holders of such securities expected, but rather,
the risk that holders of such securities could lose a substantial portion of
their value as a result of the issuers' financial restructuring or default.
There can be no assurance that such declines will not recur. The market for
lower-rated debt issues generally is smaller and less active than that for
higher quality securities, which may limit the Fund's ability to sell such
securities at fair value in response to changes in the economy or financial
markets. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may also decrease the values and liquidity of lower-rated
securities, especially in a smaller and less actively traded market.
Lower-rated debt obligations also present risks based on
payment expectations. If an issuer calls the obligation for redemption, the Fund
may have to replace the security with a lower-yielding security, resulting in a
decreased return to investors. Also, because the principal value of bonds moves
inversely with movements in interest rates, in the event of rising interest
rates, the value of the securities held by the Fund may decline proportionately
more than a fund consisting of higher-rated securities. If the Fund experiences
unexpected net redemptions, it may be forced to sell its higher-rated bonds,
resulting in a decline in the overall credit quality of the securities held by
the Fund and increasing the exposure of the Fund to the risks of lower-rated
securities. Investments in zero-coupon bonds may be more speculative and subject
to greater fluctuations in value due to changes in interest rates than bonds
that pay interest currently.
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<PAGE> 45
Options and Futures Contracts
To the extent consistent with its investment objectives and
policies, each Fund may purchase and write call and put options on securities,
securities indexes and on foreign currencies and enter into futures contracts
and use options on futures contracts, to the extent of up to 5% of its assets.
The Funds will engage in futures contracts and related options only for hedging
purposes and will not engage in such transactions for speculation or leverage.
Transactions in options on securities and on indexes involve
certain risks. For example, there are significant differences between the
securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when
the Fund seeks to close out an option position. If the Fund were unable to close
out an option that it had purchased on a security, it would have to exercise the
option in order to realize any profit or the option would expire worthless. If
the Fund were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security unless the option
expired without exercise. As the writer of a covered call option, the Fund
forgoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the exercise price of the call.
If trading were suspended in an option purchased by the Fund,
the Fund would not be able to close out the option. If restrictions on exercise
were imposed, the Fund might be unable to exercise an option it had purchased.
Except to the extent that a call option on an index written by the Fund is
covered by an option on the same index purchased by the Fund, movements in the
index may result in a loss to the Fund; such losses might be mitigated or
exacerbated by changes in the value of the Fund's securities during the period
the option was outstanding.
Use of futures contracts and options thereon also involves
certain risks. The variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio positions of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. Also, futures and
options markets may not be liquid in all circumstances and certain over the
counter options may have no markets. As a result, in certain markets, the Fund
might not be able to close out a transaction at all or without incurring losses.
Although the use of options and futures transactions for hedging should minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in the value of such position. If losses were to result from the use of
such transactions, they could reduce net asset value and possibly income. The
Fund may use these techniques to hedge against changes in interest rates or
securities prices or as part of its overall investment strategy. The Fund will
segregate liquid assets (or, as permitted by applicable
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<PAGE> 46
regulation, enter into certain offsetting positions) to cover its obligations
under options and futures contracts to avoid leveraging of the Fund.
Illiquid and Restricted Securities.
A fund may not invest more than 5% of its net assets in
illiquid securities, including (i) securities for which there is no readily
available market; (ii) securities the disposition of which would be subject to
legal restrictions (so-called "restricted securities"); and (iii) repurchase
agreements having more than seven days to maturity. A considerable period of
time may elapse between a Fund's decision to dispose of such securities and the
time when the Fund is able to dispose of them, during which time the value of
the securities could decline. Securities which meet the requirements of
Securities Act Rule 144A are restricted, but may be determined to be liquid by
the Trustees, based on an evaluation of the applicable trading markets.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been
adopted by each Fund and (unless otherwise noted) are fundamental and cannot be
changed without the affirmative vote of a majority of the Fund's outstanding
voting securities as defined in the 1940 Act. The Funds may not:
1. Make loans to others, except (a) through the purchase of
debt securities in accordance with its investment objectives and policies, or
(b) to the extent the entry into a repurchase agreement is deemed to be a loan.
2. (a) Borrow money, except from banks for temporary or
emergency purposes. Any such borrowing will be made only if immediately
thereafter there is an asset coverage of at least 300% of all borrowings.
(b) Mortgage, pledge or hypothecate any of its assets
except in connection with any such borrowings.
3. Purchase securities on margin, participate on a joint or
joint and several basis in any securities trading account, or underwrite
securities. (The Fund is not precluded from obtaining such short-term credit as
may be necessary for the clearance of purchases and sales of its portfolio
securities.)
4. Purchase or sell real estate, commodities or commodity
contracts (other than futures transactions for the purposes and under the
conditions described in the prospectus and in this SAI).
5. Invest 25% or more of the market value of its assets in the
securities of companies engaged in any one industry. (Does not apply to
investment in the securities of the U.S. Government, its agencies or
instrumentalities.)
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<PAGE> 47
6. Issue senior securities, as defined in the 1940 Act, except
that this restriction shall not be deemed to prohibit a Fund from (a) making any
permitted borrowings, mortgages or pledges, or (b) entering into options,
futures, forward or repurchase transactions.
7. Purchase the securities of any issuer, if as a result more
than 5% of the total assets of a Fund would be invested in the securities of
that issuer, other than obligations of the U.S. Government, its agencies or
instrumentalities, provided that up to 25% of the value of a Fund's assets may
be invested without regard to this limitation.
The Funds observe the following policies, which are not
deemed fundamental and which may be changed without shareholder vote. The Funds
may not:
1. Purchase any security if as a result a Fund would then hold
more than 10% of any class of securities of an issuer (taking all common stock
issues of an issuer as a single class, all preferred stock issues as a single
class, and all debt issues as a single class) or more than 10% of the
outstanding voting securities of a single issuer.
2. Invest in any issuer for purposes of exercising control or
management.
3. Invest in securities of other investment companies which
would result in a Fund owning more than 3% of the outstanding voting securities
of any one such investment company, a Fund owning securities of another
investment company having an aggregate value in excess of 5% of the value of the
Fund's total assets, or a Fund owning securities of investment companies in the
aggregate which would exceed 10% of the value of the Fund's total assets.
4. Invest, in the aggregate, more than 5% of its net assets in
securities with legal or contractual restrictions on resale, securities which
are not readily marketable and repurchase agreements with more than seven days
to maturity.
5. Invest more than 15% of its assets in securities of foreign
issuers (including American Depositary Receipts with respect to foreign issuers,
but excluding securities of foreign issuers listed and traded on a domestic
national securities exchange).
6. Invest in securities issued by UST Corp. (parent
corporation of the Advisor).
If a percentage restriction described in the Prospectuses or
this statement of additional information is adhered to at the time of
investment, a subsequent increase or decrease in a percentage resulting from a
change in the values of assets will not constitute a violation of that
restriction, except for the policies regarding borrowing and illiquid securities
or as otherwise specifically noted.
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<PAGE> 48
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Funds is
calculated by dividing the lesser of a Fund's purchases or sales of portfolio
securities for the year by the monthly average value of the portfolio
securities. The calculation excludes all securities whose remaining maturities
at the time of acquisition were one year or less.
The portfolio turnover rate may vary greatly from year to
year, as well as within a particular year, and may also be affected by cash
requirements for redemptions of Shares. High portfolio turnover rates generally
will result in higher transaction costs, including brokerage commissions, to a
Fund and may result in additional tax consequences to a Fund's Shareholders.
Portfolio turnover will not be a limiting factor in making investment decisions.
NET ASSET VALUE
As indicated in the Prospectuses, the net asset value of each
Fund is determined once daily as of the close of public trading on the New York
Stock Exchange (currently 4:00 p.m. Eastern Standard time) on each day that the
Exchange is open for trading. The New York Stock Exchange will not open in
observance of the following holidays: New Year's Day, Martin Luther King, Jr.'s
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas. The Funds do not expect to determine the net asset
value of their shares on any day when the Exchange is not open for trading even
if there is sufficient trading in portfolio securities on such days to
materially affect the net asset value per share.
Investments in securities for which market quotations are
readily available are valued based upon their current available prices in the
principal market in which such securities are normally traded. Unlisted
securities for which market quotations are readily available are valued at such
market value. Securities and other assets for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures established by and under the general supervision
of the Trustees of the Group. Short-term securities (i.e., with maturities of 60
days or less) are valued at either amortized cost or original cost plus accrued
interest, which approximates current value.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Group may suspend the right of redemption or postpone the
date of payment for Shares during any period when (a) trading on the New York
Stock Exchange (the "Exchange") is restricted by applicable rules and
regulations of the Commission, (b) the Exchange is closed for other than
customary weekend and holiday closings, (c) the Commission has by order
permitted such suspension, or (d) an emergency exists as a result of which (i)
disposal by the Group of securities owned by it is not reasonably practical, or
(ii) it is not reasonably practical for the Group to determine the fair value of
its net assets.
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<PAGE> 49
MANAGEMENT OF THE GROUP
TRUSTEES AND OFFICERS
Overall responsibility for management of the Group rests with
its Board of Trustees. The Trustees elect the officers of the Group to supervise
actively its day-to-day operations.
The names of the Trustees and officers of the Group, their
addresses, ages and principal occupations during the past five years are as
follows:
<TABLE>
<CAPTION>
Position(s) Held With the Principal Occupation During Past 5 Years
Name, Address and Age Group
- --------------------------------------- -------------------------------- --------------------------------------------
<S> <C> <C>
Walter B. Grimm Chairman, President and Trustee From June 1992 to present, employee of
3435 Stelzer Road BISYS Fund Services
Columbus, Ohio 43219
Age: 52
Maurice G. Stark Trustee From June 1991 to present, Executive Vice
505 King Avenue President-Finance and Treasurer, Battelle
Columbus, Ohio 43201 Memorial Institute (scientific research
Age: 62 and development service corporation).
Michael M. Van Buskirk Trustee From June 1991 to present, Executive Vice
37 West Board Street President of The Ohio Bankers' Association
Suite 1001 (trade association); from September 1987
Columbus, Ohio 43215-4162 to June 1991, Vice
Age: 50 President-Communications, TRW Information
Systems Group (electronic and space
engineering).
John H. Ferring IV Trustee From 1979 to present, President and Owner
105 Bolte Lane of Plaze, Incorporated, St. Clair, Missouri
St. Clair, Missouri
Age: 45
J. David Huber Vice President From June 1987 to present, employee of
3435 Stelzer Road BISYS Fund Services
Columbus, Ohio 43219
Age: 51
</TABLE>
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<PAGE> 50
<TABLE>
<CAPTION>
Position(s) Held With the Principal Occupation During Past 5 Years
Name, Address and Age Group
- --------------------------------------- -------------------------------- --------------------------------------------
<S> <C> <C>
Jeffrey C. Cusick Vice President From July 1995 to present, employee of
3435 Stelzer Road BISYS Fund Services; from October 1981 to
Columbus, Ohio 43219 July 1995, employee of Federated
Age: 38 Administrative Services.
Gary R. Tenkman Treasurer From April 1998 to present, employee of
3435 Stelzer Road BISYS Fund Services; from September 1990 to
Columbus, Ohio 43219 March 1998, employee of Ernst & Young LLP.
Age: 28
George L. Stevens Secretary From September 1996 to present, employee
3435 Stelzer Road of BISYS Fund Services; from September
Columbus, Ohio 43219 1995 to September 1996, Independent
Age: 47 Consultant; from September 1989 to
September 1995, Senior Vice President,
AmSouth Bank, N.A.
Alaina V. Metz Assistant Secretary From June 1995 to present, employee of
3435 Stelzer Road BISYS Fund Services; from May 1989 to June
Columbus, Ohio 43219 1995, employee of Alliance Capital
Age: 30 Management.
</TABLE>
- ------------
* Mr. Grimm is considered to be an "interested person" of the Group as
defined in the 1940 Act.
As of the date of this Statement of Additional Information, the Group's
Officers and Trustees, as a group, own less than 1% of the Funds' outstanding
Shares.
The officers of the Group receive no compensation directly from the
Group for performing the duties of their offices. BISYS Fund Services receives
fees from the Funds for acting as Administrator. BISYS Fund Services Ohio, Inc.
receives fees from the Funds for providing certain fund accounting services.
Messrs. Huber, Tenkman, Stevens, Grimm, and Cusick and Ms. Metz are employees of
BISYS Fund Services.
Trustees of the Group not affiliated with BISYS Fund Services receive
from the Group an annual fee of $1,000, plus $2,250 for each regular meeting of
the Board of Trustees attended and $1,000 for each special meeting of the Board
attended in person and $500 for other special meetings of the Board attended by
telephone and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Trustees who are affiliated with BISYS Fund
Services do not receive compensation from the Group.
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<PAGE> 51
For the twelve-month period ended March 31, 1999, the Trustees
received the following compensation from the Group and from certain other
investment companies (if applicable) that have the same investment adviser as
the Funds or an investment adviser that is an affiliated person of the Group's
investment adviser:
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits From Registrant and
Compensation from Accrued As Part of Est. Annual Benefits Fund Complex Paid to
Name of Trustee the Funds Fund Expenses Upon Retirement Trustee
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Walter B. Grimm $0 $0 $0 $0
Maurice G. Stark $0 $0 $0 $______
Michael Van Buskirk $0 $0 $0 $______
Chalmers P. Wylie* $0 $0 $0 $______
John H. Ferring IV** $0 $0 $0 $______
</TABLE>
* Mr. Wylie resigned as a Trustee effective May 14, 1998.
** Mr. Ferring was elected as a Trustee effective May 14, 1998.
INVESTMENT ADVISER
Investment advisory and management services are provided to
the Funds by United States Trust Company of Boston (the "Adviser"), pursuant to
an Investment Advisory Agreement dated as of ________, 1999. Under the terms of
the Investment Advisory Agreement, the Adviser has agreed to provide investment
advisory services as described in the Prospectuses of the Funds. For the
services provided and expenses assumed pursuant to the Investment Advisory
Agreement, each Fund pays the Adviser a fee, computed daily and paid monthly, at
the following annual rates: Boston Balanced Fund [ ] Boston Equity Fund[ ],
Walden Social Balanced Fund [ ], and Walden Social Equity Fund [ ]. The Adviser
may from time to time voluntarily reduce all or a portion of its advisory fee
with respect to a Fund to increase the net income of that Fund available for
distribution as dividends.
Unless sooner terminated, the Investment Advisory Agreement
will continue in effect until ________, 2001, and year to year thereafter for
successive annual periods if, as to each Fund, such continuance is approved at
least annually by the Group's Board of Trustees or by vote of a majority of the
outstanding Shares of the relevant Fund (as defined in the Funds' Prospectuses),
and a majority of the Trustees who are not parties to the Investment Advisory
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Investment Advisory Agreement by votes cast in person at a meeting called for
such purpose. The
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<PAGE> 52
Investment Advisory Agreement is terminable as to a Fund at any time on 60 days'
written notice without penalty by the Trustees, by vote of a majority of the
outstanding Shares of that Fund, or by the Adviser. The Investment Advisory
Agreement also terminates automatically in the event of any assignment, as
defined in the 1940 Act, or for reasons as set forth in the Agreement.
The Investment Advisory Agreement provides that the Adviser
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by a Fund in connection with the performance of the Investment Advisory
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the Adviser in the
performance of its duties, or from reckless disregard by the Adviser of its
duties and obligations thereunder.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement with respect to
each Fund, the Adviser determines, subject to the general supervision of the
Board of Trustees of the Group and in accordance with each such Fund's
investment objective and restrictions, which securities are to be purchased and
sold by a Fund, and which brokers are to be eligible to execute such Fund's
portfolio transactions.
Purchases from underwriters of portfolio securities generally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers may include the spread between
the bid and asked price.
Transactions on stock exchanges involve the payment of
negotiated brokerage commissions. Transactions in the over-the-counter market
are generally principal transactions with dealers. With respect to the
over-the-counter market, the Group, where possible, will deal directly with
dealers who make a market in the securities involved except in those
circumstances where better price and execution are available elsewhere.
Allocation of transactions, including their frequency, to
various brokers and dealers is determined by the Adviser in its best judgment
and in a manner deemed fair and reasonable to Shareholders. The primary
consideration is prompt execution of orders in an effective manner at the most
favorable price. Subject to this consideration, brokers and dealers who provide
supplemental investment research to the Adviser may receive orders for
transactions on behalf of the Funds. The Adviser is authorized to pay a
broker-dealer who provides such brokerage and research services a commission for
executing each such Fund's brokerage transactions which is in excess of the
amount of commission another broker would have charged for effecting that
transaction if, but only if, the Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker viewed in terms of that particular transaction
or in terms of all of the accounts over which it exercises investment
discretion. Any such research and other statistical and factual information
provided by brokers to a Fund or to the Adviser is considered to be in addition
to and not in lieu of services required to be performed by the Adviser under its
respective agreement regarding management of the Fund. The cost, value and
specific
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<PAGE> 53
application of such information are indeterminable and hence are not practicably
allocable among the Funds and other clients of the Adviser who may indirectly
benefit from the availability of such information. Similarly, the Funds may
indirectly benefit from information made available as a result of transactions
effected for such other clients. Under the Investment Advisory Agreement, the
Adviser is permitted to pay higher brokerage commissions for brokerage and
research services in accordance with Section 28(e) of the Securities Exchange
Act of 1934. In the event the Adviser does follow such a practice, it will do so
on a basis which is fair and equitable to the Group and the Funds.
While the Adviser generally seeks competitive commissions, the
Group may not necessarily pay the lowest commission available on each brokerage
transaction, for reasons discussed above.
Except as otherwise disclosed to the Shareholders of the Funds
and as permitted by applicable laws, rules and regulations, the Group will not,
on behalf of the Funds, execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with the Adviser, BISYS, or their
affiliates, and will not give preference to the Adviser's correspondents with
respect to such transactions, securities, savings deposits, repurchase
agreements, and reverse repurchase agreements.
Investment decisions for each Fund are made independently from
those for the other Funds, other funds of the Group or any other investment
company or account managed by the Adviser. Any such other fund, investment
company or account may also invest in the same securities as the Group on behalf
of the Funds. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund and another fund of the Group
managed by the Adviser, investment company or account, the transaction will be
averaged as to price and available investments will be allocated as to amount in
a manner which the Adviser believes to be equitable to the Fund and such other
fund, investment company or account. In some instances, this investment
procedure may affect adversely the price paid or received by a Fund or the size
of the position obtained by a Fund. To the extent permitted by law, the Adviser
may aggregate the securities to be sold or purchased for a Fund with those to be
sold or purchased for the other Funds or for other investment companies or
accounts in order to obtain best execution. As provided by the Investment
Advisory Agreement, in making investment recommendations for the Funds, the
Adviser will not inquire nor take into consideration whether an issuer of
securities proposed for purchase or sale by the Group is a customer of the
Adviser, any of its subsidiaries or affiliates and, in dealing with its
customers, the Adviser, its subsidiaries and affiliates will not inquire or take
into consideration whether securities of such customers are held by the Funds or
any other fund of the Group.
ADMINISTRATOR AND FUND ACCOUNTING SERVICES
BISYS serves as administrator (the "Administrator") to the
Funds pursuant to a Management and Administration Agreement dated as of
________, 1999 (the "Administration Agreement"). The Administrator assists in
supervising all operations of each Fund. The
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<PAGE> 54
Administrator is a broker-dealer registered with the Commission, and is a member
of the National Association of Securities Dealers, Inc. The Administrator
provides financial services to institutional clients.
Under the Administration Agreement, the Administrator has
agreed to maintain office facilities; furnish statistical and research data,
clerical, certain bookkeeping services and stationery and office supplies;
prepare the periodic reports to the Commission on Form N-SAR or any replacement
forms therefor; compile data for, assist the Group or its designee in the
preparation of, and file all of the Funds' federal and state tax returns and
required tax filings other than those required to be made by the Funds'
custodian and Transfer Agent; prepare compliance filings pursuant to state
securities laws with the advice of the Group's counsel; assist to the extent
requested by the Group with the Group's preparation of its Annual and
Semi-Annual Reports to Shareholders and its Registration Statement (on Form N-1A
or any replacement therefor); compile data for, prepare and file timely Notices
to the Commission required pursuant to Rule 24f-2 under the 1940 Act; keep and
maintain the financial accounts and records of each Fund, including calculation
of daily expense accruals; and generally assist in all aspects of the Funds'
operations. Under the Administration Agreement, the Administrator may delegate
all or any part of its responsibilities thereunder.
The Administrator receives a fee from each Fund for its
services as Administrator and expenses assumed pursuant to the Administration
Agreement, equal to a fee calculated daily and paid periodically, at the annual
rate equal to ________ one-hundredths of one percent (__%) of that Fund's
average daily net assets.
Unless sooner terminated as provided therein, the
Administration Agreement has an initial term expiring on [ ]. The Administration
Agreement thereafter shall be renewed automatically for successive one-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then-current
term. The Administration Agreement is terminable with respect to a particular
Fund only upon mutual agreement of the parties to the Administration Agreement
and for cause (as defined in the Administration Agreement) by the party alleging
cause, on not less than 60 days' notice by the Group's Board of Trustees or by
the Administrator.
The Administration Agreement provides that the Administrator
shall not be liable for any error of judgment or mistake of law or any loss
suffered by any Fund in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith,
or negligence in the performance of its duties, or from the reckless disregard
by the Administrator of its obligations and duties thereunder.
In addition, BISYS Fund Services, Inc. provides certain fund
accounting services to the Funds pursuant to a Fund Accounting Agreement dated
as of __________, 1999. BISYS Fund Services, Inc. receives a fee from each Fund
for such services equal to the greater of (a) a fee computed at an annual rate
of ___________ of one percent (.___%) of that Fund's average daily net assets,
or (b) __________ minus the fee paid by such Fund under its Management and
Administration Agreement with BISYS of the same date. Under such Agreement,
BISYS Fund
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<PAGE> 55
Services, Inc. maintains the accounting books and records for each Fund,
including journals containing an itemized daily record of all purchases and
sales of portfolio securities, all receipts and disbursements of cash and all
other debits and credits, general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts, including interest
accrued and interest received, and other required separate ledger accounts;
maintains a monthly trial balance of all ledger accounts; performs certain
accounting services for the Fund, including calculation of the net asset value
per share, calculation of the dividend and capital gain distributions, if any,
and of yield, reconciliation of cash movements with the Fund's custodian,
affirmation to the Fund's custodian of all portfolio trades and cash
settlements, verification and reconciliation with the Fund's custodian of all
daily trade activity; provides certain reports; obtains dealer quotations,
prices from a pricing service or matrix prices on all portfolio securities in
order to mark the portfolio to the market; and prepares an interim balance
sheet, statement of income and expense, and statement of changes in net assets
for each Fund.
DISTRIBUTOR
BISYS serves as agent for each of the Funds in the
distribution of its Shares pursuant to a Distribution Agreement dated as of
_________, 1999 (the "Distribution Agreement"). Unless otherwise terminated, the
Distribution Agreement will continue in effect for successive annual periods if,
as to each Fund, such continuance is approved at least annually by (i) by the
Group's Board of Trustees or by the vote of a majority of the outstanding shares
of that Fund, and (ii) by the vote of a majority of the Trustees of the Group
who are not parties to the Distribution Agreement or interested persons (as
defined in the 1940 Act) of any party to the Distribution Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Distribution Agreement may be terminated in the event of any assignment, as
defined in the 1940 Act.
In its capacity as Distributor, BISYS solicits orders for the
sale of Shares, advertises and pays the costs of advertising, office space and
the personnel involved in such activities. BISYS receives no compensation under
the Distribution Agreement.
CUSTODIAN
United States Trust Company of Boston, 40 Court Street,
Boston, Massachusetts 02108 (the "Custodian"), serves as the Funds' custodian
pursuant to the Custody Agreement dated as of ________, 1999. The Custodian's
responsibilities include safeguarding and controlling the Funds' cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Funds' investments.
TRANSFER AGENCY SERVICES
United States Trust Company of Boston serves as transfer agent
and dividend disbursing agent (the "Transfer Agent") for all of the Funds
pursuant to the Transfer Agency Agreement dated as of _________, 1999. Pursuant
to such Transfer Agency Agreement, the Transfer Agent, among other things,
performs the following services in connection with each
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<PAGE> 56
Fund's shareholders of record: maintenance of shareholder records for each of
the Fund's shareholders of record; processing shareholder purchase and
redemption orders; processing transfers and exchanges of shares of the Funds on
the shareholder files and records; processing dividend payments and
reinvestments; and assistance in the mailing of shareholder reports and proxy
solicitation materials. For such services the Transfer Agent receives a fee
based on the number of shareholders of record.
AUDITORS
Arthur Andersen LLP, Boston, Massachusetts, has been selected
as independent auditors for the Funds for their current fiscal year. Arthur
Andersen LLP performs an annual audit of the Funds' financial statements and
provides other related services.
LEGAL COUNSEL
Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington,
D.C. 20006, is counsel to the Group.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Group is a Massachusetts business trust organized on
January 8, 1992. The Group's Declaration of Trust is on file with the Secretary
of State of Massachusetts. The Declaration of Trust authorizes the Board of
Trustees to issue an unlimited number of shares, which are shares of beneficial
interest, with a par value of $0.01 per share. The Group consists of several
funds organized as separate series of shares. The Group's Declaration of Trust
authorizes the Board of Trustees to divide or redivide any unissued shares of
the Group into one or more additional series by setting or changing in any one
or more respects their respective preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectus and this
Statement of Additional Information, the Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Group,
shareholders of a fund are entitled to receive the assets available for
distribution belonging to that fund, and a proportionate distribution, based
upon the relative asset values of the respective funds, of any general assets
not belonging to any particular fund which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as the Group shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each fund affected by the matter. For purposes of
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<PAGE> 57
determining whether the approval of a majority of the outstanding shares of a
fund will be required in connection with a matter, a fund will be deemed to be
affected by a matter unless it is clear that the interests of each fund in the
matter are identical, or that the matter does not affect any interest of the
fund. Under Rule 18f-2, the approval of an investment advisory agreement or any
change in investment policy would be acted effectively upon with respect to a
fund only if approved by a majority of the outstanding shares of such fund.
However, Rule 18f-2 also provides that the approval of principal underwriting
contracts and the election of Trustees may be effectively acted upon by
shareholders of the Group voting without regard to series.
Under Massachusetts law, shareholders, under certain
circumstances, could be held personally liable for the obligations of the Group.
However, the Declaration of Trust disclaims liability of the Shareholders,
Trustees or officers of the Group for acts or obligations of the Group, which
are binding only on the assets and property of the Group, and requires that
notice of the disclaimer be given in each contract or obligation entered into or
executed by the Group or the Trustees. The Declaration of Trust provides for
indemnification out of Group property for all loss and expense of any
shareholder held personally liable for the obligations of the Group. The risk of
a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Group itself would be unable to meet its
obligations, and thus should be considered remote.
As of [ ], the following is the only entity known to the Group
who owns of record or beneficially 5% or more of the outstanding Shares of any
Fund: for the Boston Balanced Fund [ ], Boston Equity Fund [ ], Walden Social
Balanced Fund [ ] and Walden Social Equity Fund.
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES
As used in the Prospectus and this Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of a Fund means
the affirmative vote, at a meeting of Shareholders duly called, of the lesser of
(a) 67% or more of the votes of Shareholders of that Fund present at a meeting
at which the holders of more than 50% of the votes attributable to Shareholders
of record of that Fund are represented in person or by proxy, or (b) the holders
of more than 50% of the outstanding votes of Shareholders of that Fund.
ADDITIONAL TAX INFORMATION
Set forth below is a discussion of certain U.S. federal income
tax issues concerning the Funds and the purchase, ownership, and disposition of
Fund shares. This discussion does not purport to be complete or to deal with all
aspects of federal income taxation that may be relevant to Shareholders in light
of their particular circumstances. This discussion is based upon present
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated thereunder, and judicial and administrative ruling
authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase,
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<PAGE> 58
ownership, or disposition of Fund shares, as well as the tax consequences
arising under the laws of any state, foreign country, or other taxing
jurisdiction.
Each of the Funds is treated as a separate entity for federal
income tax purposes and intends each year to qualify and elect to be treated as
a "regulated investment company" under the Code, for so long as such
qualification is in the best interest of that Fund's shareholders. To qualify as
a regulated investment company, each Fund must, among other things: diversify
its investments within certain prescribed limits; derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities, or currencies; and, distribute to its Shareholders at
least 90% of its investment company taxable income for the year. In general, a
Fund's investment company taxable income will be its taxable income subject to
certain adjustments and excluding the excess of any net mid-term or net
long-term capital gain for the taxable year over the net short-term capital
loss, if any, for such year.
A non-deductible 4% excise tax is imposed on regulated
investment companies that do not distribute in each calendar year (regardless of
whether they otherwise have a non-calendar taxable year) an amount equal to 98%
of their ordinary income for the calendar year plus 98% of their capital gain
net income for the one-year period ending on October 31 of such calendar year.
The balance of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, a Fund
would be subject to a non-deductible excise tax equal to 4% of the deficiency.
Although each Fund expects to qualify as a "regulated
investment company" and thus to be relieved of all or substantially all of its
federal income tax liability, depending upon the extent of its activities in
states and localities in which its offices are maintained, in which its agents
or independent contractors are located, or in which it is otherwise deemed to be
conducting business, a Fund may be subject to the tax laws of such states or
localities. In addition, if for any taxable year a Fund does not qualify for the
special tax treatment afforded regulated investment companies, all of its
taxable income will be subject to federal tax at regular corporate rates
(without any deduction for distributions to its Shareholders). In such event,
dividend distributions would be taxable to Shareholders to the extent of
earnings and profits, and would be eligible for the dividends received deduction
for corporations.
It is expected that each Fund will distribute annually to
Shareholders all or substantially all of the Fund's net ordinary income and net
realized capital gains and that such distributed net ordinary income and
distributed net realized capital gains will be taxable income to Shareholders
for federal income tax purposes, even if paid in additional Shares of the Fund
and not in cash.
The excess of net long-term capital gains over short-term
capital losses realized and distributed by a Fund and designated as capital gain
dividends, whether paid in cash or reinvested in Fund shares, will be taxable to
Shareholders. Capital gain dividends paid from the proceeds of sales of assets
held by a Fund for more than one year will generally be taxed at a
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<PAGE> 59
maximum federal income tax rate of 20%. Net capital gains from assets held for
one year or less will be taxed as ordinary income. Distributions will be subject
to these capital gains rates regardless of how long a Shareholder has held Fund
shares.
Capital gains of corporations are subject to tax at the same
rates applicable to ordinary income. Capital losses may be used only to offset
capital gains and excess net capital loss may be carried back three years and
forward five years.
Foreign taxes may be imposed on a Fund by foreign countries
with respect to its income from foreign securities, if any. It is expected that,
because less than 50% in value of each Fund's total assets at the end of its
fiscal year will be invested in stocks or securities of foreign corporations,
none of the Funds will be entitled under the Code to pass through to its
Shareholders their pro rata share of the foreign taxes paid by the Fund. Any
such taxes will be taken as a deduction by such Fund.
Each Fund may be required by federal law to withhold and remit
to the U.S. Treasury 31% of taxable dividends, if any, and capital gain
distributions to any Shareholder, and the proceeds of redemption or the values
of any exchanges of Shares of a Fund by the Shareholder, if such Shareholder (1)
fails to furnish the Group with a correct taxpayer identification number, (2)
under-reports dividend or interest income, or (3) fails to certify to the Group
that he or she is not subject to such withholding. An individual's taxpayer
identification number is his or her Social Security number.
Information as to the Federal income tax status of all
distributions will be mailed annually to each Shareholder.
MARKET DISCOUNT. If a Fund purchases a debt security at a
price lower than the stated redemption price of such debt security, the excess
of the stated redemption price over the purchase price is "market discount". If
the amount of market discount is more than a de minimis amount, a portion of
such market discount must be included as ordinary income (not capital gain) by
the Fund in each taxable year in which the Fund owns an interest in such debt
security and receives a principal payment on it. In particular, the Fund will be
required to allocate that principal payment first to the portion of the market
discount on the debt security that has accrued but has not previously been
includable in income. In general, the amount of market discount that must be
included for each period is equal to the lesser of (i) the amount of market
discount accruing during such period (plus any accrued market discount for prior
periods not previously taken into account) or (ii) the amount of the principal
payment with respect to such period. Generally, market discount accrues on a
daily basis for each day the debt security is held by a Fund at a constant rate
over the time remaining to the debt security's maturity or, at the election of
the Fund, at a constant yield to maturity which takes into account the
semi-annual compounding of interest. Gain realized on the disposition of a
market discount obligation must be recognized as ordinary interest income (not
capital gain) to the extent of the "accrued market discount."
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<PAGE> 60
ORIGINAL ISSUE DISCOUNT. Certain debt securities acquired by a
Fund may be treated as debt securities that were originally issued at a
discount. Very generally, original issue discount is defined as the difference
between the price at which a security was issued and its stated redemption price
at maturity. Although no cash income on account of such discount is actually
received by the Fund, original issue discount that accrues on a debt security in
a given year generally is treated for federal income tax purposes as interest
and, therefore, such income would be subject to the distribution requirements
applicable to regulated investment companies. Some debt securities may be
purchased by the Fund at a discount that exceeds the original issue discount on
such debt securities, if any. This additional discount represents market
discount for federal income tax purposes (see above).
OPTIONS, FUTURES AND FORWARD CONTRACTS. Any regulated futures
contracts and certain options (namely, nonequity options and dealer equity
options) in which a Fund may invest may be "section 1256 contracts." Gains (or
losses) on these contracts generally are considered to be 60% long-term and 40%
short-term capital gains or losses. Also, section 1256 contracts held by the
Fund at the end of each taxable year (and on certain other dates prescribed in
the Code) are "marked to market" with the result that unrealized gains or losses
are treated as though they were realized.
Transactions in options, futures and forward contracts
undertaken by a Fund may result in "straddles" for federal income tax purposes.
The straddle rules may affect the character of gains (or losses) realized by the
Fund, and losses realized by the Fund on positions that are part of a straddle
may be deferred under the straddle rules, rather than being taken into account
in calculating the taxable income for the taxable year in which the losses are
realized. In addition, certain carrying charges (including interest expense)
associated with positions in a straddle may be required to be capitalized rather
than deducted currently. Certain elections that a Fund may make with respect to
its straddle positions may also affect the amount, character and timing of the
recognition of gains or losses from the affected positions.
Because only a few regulations implementing the straddle rules
have been promulgated, the consequences of such transactions to a Fund are not
entirely clear. The straddle rules may increase the amount of short-term capital
gain realized by the Fund, which is taxed as ordinary income when distributed to
Shareholders. Because application of the straddle rules may affect the character
of gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to Shareholders as ordinary income or long-term capital gain may be
increased or decreased substantially as compared to a fund that did not engage
in such transactions.
CONSTRUCTIVE SALES. Certain Code provisions may affect the
timing and character of gain if a Fund engages in transactions that reduce or
eliminate its risk of loss with respect to appreciated financial positions. If a
Fund enters into certain transactions in property while holding substantially
identical property, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the
constructive sale. The character of gain from a constructive sale would depend
upon the Fund's
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holding period in the property. Loss from a constructive sale would be
recognized when the property was subsequently disposed of, and its character
would depend on the Fund's holding period and the application of various loss
deferral provisions of the Code.
SECTION 988 GAINS OR LOSSES. Gains or losses attributable to
fluctuations in exchange rates which occur between the time a Fund accrues
income or other receivables or accrues expenses or other liabilities denominated
in a foreign currency and the time the Fund actually collects such receivables
or pays such liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of some investments, including debt securities
and certain forward contracts denominated in a foreign currency, gains or losses
attributable to fluctuations in the value of the foreign currency between the
acquisition and disposition of the position also are treated as ordinary gain or
loss. These gains and losses, referred to under the Code as "section 988" gains
or losses, increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its Shareholders as ordinary
income. If section 988 losses exceed other investment company taxable income
during a taxable year, the Fund would not be able to make any ordinary dividend
distributions, or distributions made before the losses were realized would be
recharacterized as a return of capital to Shareholders, rather than as an
ordinary dividend, reducing each Shareholder's basis in his or her Fund shares.
PASSIVE FOREIGN INVESTMENT COMPANIES. A Fund may invest in
shares of foreign corporations that may be classified under the Code as passive
foreign investment companies ("PFICs"). In general, a foreign corporation is
classified as a PFIC if at least one-half of its assets constitute
investment-type assets, or 75% or more of its gross income is investment-type
income. If a Fund receives a so-called "excess distribution" with respect to
PFIC stock, the Fund itself may be subject to a tax on a portion of the excess
distribution, whether or not the corresponding income is distributed by the Fund
to Shareholders. In general, under the PFIC rules, an excess distribution is
treated as having been realized ratably over the period during which the Fund
held the PFIC shares. The Fund will itself be subject to tax on the portion, if
any, of an excess distribution that is so allocated to prior Fund taxable years
and an interest factor will be added to the tax, as if the tax had been payable
in such prior taxable years. Certain distributions from a PFIC as well as gain
from the sale of PFIC shares are treated as excess distributions. Excess
distributions are characterized as ordinary income even though, absent
application of the PFIC rules, certain excess distributions might have been
classified as capital gain.
A Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, a Fund would be required to include in its gross income its share
of the earnings of a PFIC on a current basis, regardless of whether
distributions were received from the PFIC in a given year. If this election were
made, the special rules, discussed above, relating to the taxation of excess
distributions, would not apply. In addition, another election would involve
marking to market the Fund's PFIC shares at the end of each taxable year, with
the result that unrealized gains would be treated as though they were realized
and reported as ordinary income. Any mark-to-market losses and any
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<PAGE> 62
loss from an actual disposition of PFIC shares would be deductible as ordinary
losses to the extent of any net mark-to-market gains included in income in prior
years.
YIELD
Yields of the Funds will be computed by annualizing net
investment income per share for a recent 30-day period and dividing that amount
by a Fund share's maximum offering price (reduced by any undeclared earned
income expected to be paid shortly as a dividend) on the last trading day of
that period. Net investment income will reflect amortization of any market value
premium or discount of fixed income securities (except for obligations backed by
mortgages or other assets) and may include recognition of a pro rata portion of
the stated dividend rate of dividend paying portfolio securities. The yield will
vary from time to time depending upon market conditions, the composition of the
particular Fund's portfolio and operating expenses of the Group allocated to
each Fund. These factors and possible differences in the methods used in
calculating yield should be considered when comparing a Fund's yield to yields
published for other investment companies and other investment vehicles. Yield
should also be considered relative to changes in the value of a Fund's Shares
and to the relative risks associated with the investment objectives and policies
of each of the Funds.
CALCULATION OF TOTAL RETURN
Average annual total return is a measure of the change in
value of an investment in a Fund over the period covered, which assumes any
dividends or capital gains distributions are reinvested in the Fund immediately
rather than paid to the investor in cash. Average annual total return will be
calculated by: (1) adding to the total number of Shares purchased by a
hypothetical $1,000 investment in that Fund all additional Shares which would
have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of Shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment and annualizing the
result for periods of less than one year.
PERFORMANCE COMPARISONS
Investors may judge the performance of the Funds by comparing
them to the performance of other mutual funds or mutual fund portfolios with
comparable investment objectives and policies through various mutual fund or
market indices such as those prepared by Dow Jones & Co., Inc. and Standard &
Poor's Corporation and to data prepared by Lipper Analytical Services, Inc., a
widely recognized independent service which monitors the performance of mutual
funds. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, Morningstar, Inc., Ibbotson
Associates, CDA/Wiesenberger, The New York Times, Business Week, U.S.A. Today
and local periodicals. In addition to performance information, general
information about these Funds that
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<PAGE> 63
appears in a publication such as those mentioned above may be included in
advertisements, sales literature and reports to shareholders. The Funds may also
include in advertisements and reports to shareholders information discussing the
performance of the Adviser in comparison to other investment advisers.
From time to time, the Group may include the following types
of information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principles (such
as the effects of inflation, the power of compounding and the benefits of dollar
cost averaging); (2) discussions of general economic trends; (3) presentations
of statistical data to supplement such discussions; (4) descriptions of past or
anticipated portfolio holdings for one or more of the Funds within the Group;
(5) descriptions of investment strategies for one or more of such Funds; (6)
descriptions or comparisons of various investment products, which may or may not
include the Funds; (7) comparisons of investment products (including the Funds)
with relevant market or industry indices or other appropriate benchmarks; (8)
discussions of fund rankings or ratings by recognized rating organizations; and
(9) testimonials describing the experience of persons that have invested in one
or more of the Funds. The Group may also include calculations, such as
hypothetical compounding examples, which describe hypothetical investment
results in such communications. Such performance examples must state clearly
that they are based on an express set of assumptions and are not indicative of
the performance of any Fund.
Current yields or total return will fluctuate from time to
time and may not be representative of future results. Accordingly, a Fund's
yield or total return may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and total
return are functions of a Fund's quality, composition and maturity, as well as
expenses allocated to such Fund.
MISCELLANEOUS
Individual Trustees are generally elected by the Shareholders
and, subject to removal by the vote of two-thirds of the Board of Trustees,
serve for a term lasting until the next meeting of shareholders at which
Trustees are elected. Such meetings are not required to be held at any specific
intervals.
The Group is registered with the Commission as an investment
management company. Such registration does not involve supervision by the
Commission of the management or policies of the Group.
The Prospectuses and this Statement of Additional Information
are not an offering of the securities herein described in any state in which
such offering may not lawfully be made. No salesperson, dealer, or other person
is authorized to give any information or make any representation other than
those contained in the Prospectuses and this Statement of Additional
Information.
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<PAGE> 64
FINANCIAL STATEMENTS
The financial statements of the Boston Balanced Fund appearing
in its Annual Report to Shareholders for the fiscal year ended [ ] have been
audited by Ernst & Young, LLP, and are incorporated by reference herein.
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<PAGE> 65
PART C
-----------
OTHER INFORMATION
-----------------
ITEM 23. EXHIBITS
(a) Declaration of Trust1
(b)(1) By-Laws(2)
(b)(2) Establishment and Designation of Series of Shares
(Boston Balanced Fund, Boston Equity Fund, Walden
Social Balanced Fund, and Walden Social Equity Fund)
(3)
(c) Certificates for Shares are not issued. Articles IV,
V, VI and VII of the Declaration of Trust, previously
filed as Exhibit (a) hereto, define rights of holders
of Shares(1)
(d) Investment Advisory Agreement between Registrant and
United States Trust Company of Boston(3)
(e) Distribution Agreement between Registrant and BISYS
Fund Services(3)
(f) Not Applicable
(g) Custody Agreement between Registrant and United
States Trust Company of Boston(3)
(h)(1) Management and Administration Agreement between the
Registrant and BISYS Fund Services(3)
(h)(2) Fund Accounting Agreement between the Registrant and
BISYS Fund Services(3)
(h)(3) Transfer Agency Agreement between the Registrant and
United States Trust Company of Boston(3)
(h)(4) Expense Limitation Agreement between the Registrant
and United States Trust Company of Boston(3)
(i) Not Applicable
(j) Consent of Independent Accountants(3)
(k) Not Applicable
C-1
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(l) Not Applicable
(m) Not Applicable
(n) Financial Data Schedules(3)
(o) Not Applicable
__________________
1. Filed with initial Registration Statement on January 8, 1992.
2. Filed with Post-Effective Amendment No. 2 on September 4, 1992.
3. To be filed by Amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 25. INDEMNIFICATION
Article IV of the Registrant's Declaration of Trust states
as follows:
SECTION 4.3. MANDATORY INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained
in paragraph
(b) below:
(i) every person who is, or has been, a Trustee
or officer of the Trust shall be indemnified
by the Trust to the fullest extent permitted
by law against all liability and against all
expenses reasonably incurred or paid by him
in connection with any claim, action, suit
or proceeding in which he becomes involved
as a party or otherwise by virtue of his
being or having been a Trustee or officer
and against amounts paid or incurred by him
in the settlement thereof; and (ii) the
words "claim," "action," "suit," or
"proceeding" shall apply to all claims,
actions, suits or proceedings (civil,
criminal, administrative or other, including
appeals), actual or threatened; and the
words "liability" and "expenses" shall
include, without limitation, attorneys fees,
costs, judgments, amounts paid in
settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be
provided hereunder to a Trustee or
officer:
(i) against any liability to the
Trust, a Series thereof, or the
Shareholders by reason of a final
adjudication by a court or other
body before which a proceeding was
brought
C-2
<PAGE> 67
that he engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties
involved in the conduct of his office;
(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in
good faith in the reasonable belief that his action
was in the best interest of the Trust; or
(iii) in the event of a settlement or other
disposition not involving a final adjudication as
provided in paragraph (b)(i) or (b)(ii) resulting in
a payment by a Trustee or officer, unless there has
been a determination that such Trustee or officer did
not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition; or (B)
based upon a review of readily available
facts (as opposed to a full trial-type
inquiry) by (1) vote of a majority of the
Disinterested Trustees acting on the matter
(provided that a majority of the
Disinterested Trustees then in office acts
on the matter) or (2) written opinion of
independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee or officer and shall inure to the benefit of the heirs,
executors, administrators and assigns of such person. Nothing contained
herein shall affect any rights to indemnification to which personnel of
the Trust other than Trustees and officers may be entitled by contract
or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a)
of this Section 4.3 may be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of
the recipient to repay such amount if it is ultimately determined that
he is not entitled to indemnification under this Section 4.3, provided
that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust
shall be insured against losses arising out of any such
advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter
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<PAGE> 68
(provided that a majority of the Disinterested Trustees acts
on the matter) or an independent legal counsel in a written
opinion shall determine, based upon a review of readily
available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the recipient ultimately
will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is
not (i) an Interested Person of the Trust (including anyone who has
been exempted from being an Interested Person by any rule, regulation
or order of the Commission), or (ii) involved in the claim, action,
suit or proceeding.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act, and therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities controlling persons of the Registrant
in connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees, officers or
controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issues.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND
THEIR OFFICERS AND DIRECTORS
Incorporated by reference to the responses in the current
Form 10-K of UST Corp., on file with the Commission.
ITEM 27. PRINCIPAL UNDERWRITER
(a) BISYS Fund Services, Limited Partnership ("BISYS Fund
Services") acts as distributor for Registrant. BISYS
Fund Services also distributes the securities of
Alpine Equity Trust, American Performance Funds, the
AmSouth Mutual Funds, The BB&T Mutual Funds Group,
ESC Strategic Funds, Inc., The Eureka Funds, Fifth
Third Funds, Governor Funds, Gradison Custodian
Trust, Gradison Growth Trust, Gradison-McDonald Cash
Reserves Trust, Gradison-McDonald Municipal Custodian
Trust, Hirtle Callaghan Trust, HSBC Funds Trust, HSBC
Mutual Funds Trust, INTRUST Funds Trust, The Infinity
Mutual Funds, Inc., The Kent Funds, Magna Funds, MMA
Praxis Mutual Funds, Mercantile Mutual Funds, Inc.,
Meyers Investment Trust, M.S.D.&T Funds, Pacific
Capital Funds, The Parkstone Advantage Fund, Puget
Sound Alternative Investment Series Trust, The
Republic Funds Trust, The Republic Advisors Funds
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<PAGE> 69
Trust, Sefton Funds Trust, SSgA International Liquidity Fund,
Summit Investment Trust, Variable Insurance Funds, The Victory
Portfolios, The Victory Variable Insurance Funds and The
Vintage Mutual Funds, Inc.
(b) Partners of BISYS Fund Services, as of May 1, 1999,
were as follows:
<TABLE>
<CAPTION>
Name and Principal Business Position and Offices with Underwriter Positions and Offices with Registrant
Address
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, New Jersey 07424
</TABLE>
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
(a) The accounts, books, and other documents required to
be maintained by Registrant pursuant to Section 31(a)
of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of
United States Trust Company of Boston (records
relating to its function as investment adviser,
transfer agent and custodian for the Funds); BISYS
Fund Services, 3435 Stelzer Road, Columbus, Ohio
43219 (records relating to its functions as general
manager, administrator and distributor).
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS.
None
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<PAGE> 70
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 46 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Washington in the District of Columbia on the 13th day of May, 1999.
THE COVENTRY GROUP
By: /s/ Walter B. Grimm
---------------------
Walter B. Grimm
By: /s/ Jeffrey L. Steele
--------------------------
Jeffrey L. Steele, as attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ----------- ------ ------
<S> <C> <C>
/s/Walter B. Grimm Chairman, President and Trustee May 13, 1999
- ------------------------
Walter B. Grimm** (Principal Executive Officer)
/s/ John H. Ferring IV Trustee May 13, 1999
- ------------------------
John H. Ferring IV***
/s/ Maurice G. Stark Trustee May 13, 1999
- ------------------------
Maurice G. Stark*
/s/ Michael M. Van Buskirk Trustee May 13, 1999
- ------------------------
Michael M. Van Buskirk*
/s/ Gary R. Tenkman Treasurer (Principal May 13, 1999
- ------------------------
Gary R. Tenkman**** Financial and Accounting Officer)
</TABLE>
By: /s/ Jeffrey L. Steele
--------------------------------------
Jeffrey L. Steele, as attorney-in-fact
* Pursuant to power of attorney filed with Pre-Effective Amendment
No. 3 on April 6, 1992.
** Pursuant to power of attorney filed with Post-Effective Amendment
No. 26 on May 1, 1996.
*** Pursuant to power of attorney filed with Post-Effective Amendment
No. 39 on July 31, 1998.
**** Pursuant to power of attorney filed herewith.
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<PAGE> 71
POWER OF ATTORNEY
Gary Tenkman whose signature appears below, does hereby constitute and
appoint Jeffrey L. Steele, Patrick W.D. Turley, Robert L. Tuch and David J.
Harris each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
The Coventry Group (the "Group"), to comply with the Investment Company Act
of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and
any rules regulations or requirements of the Securities and Exchange Commission
in respect thereof, in connection with the filing and effectiveness of any and
all amendments to the Group's Registration Statement on Form N-1A pursuant to
said Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned, Gary Tenkman, as Treasurer of the Group, any and all such
amendments filed with the Securities and Exchange Commission under said Acts,
and any other instruments or documents related thereto, and the undersigned does
hereby ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue thereof.
Date: May 12, 1999 /s/ Gary Tenkman
--------------------
Gary Tenkman
