<PAGE> 1
As filed with the Securities and Exchange Commission on June 22, 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
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
--
Post-Effective Amendment No. 52 [X]
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 54 [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 PROPSECTUS 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 COMPLETEION
DATED JUNE __, 1999
- --------------------------------------------------------------------------------
UNITED STATES TRUST COMPANY OF BOSTON
PROSPECTUS FOR THE FOLLOWING PORTFOLIOS:
Walden/BBT Domestic Social Index Fund
Walden/BBT International Social Index Fund
[ ], 1999
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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> 3
WALDEN/BBT SOCIAL INDEX FUNDS
TABLE OF CONTENTS
-----------------
RISK/RETURN SUMMARY AND FUND EXPENSES
3 WALDEN/BBT DOMESTIC SOCIAL INDEX FUND
6 WALDEN/BBT INTERNATIONAL SOCIAL INDEX FUND
CAREFULLY REVIEW THIS IMPORTANT SECTION FOR A SUMMARY OF EACH FUND'S
INVESTMENTS, RISKS AND FEES.
INVESTMENT OBJECTIVES AND STRATEGIES
7 WALDEN/BBT DOMESTIC SOCIAL INDEX FUND
8 WALDEN/BBT INTERNATIONAL SOCIAL INDEX 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 MANAGER
REVIEW THIS SECTION FOR DETAILS ON THE PEOPLE AND ORGANIZATIONS WHO OVERSEE
THE FUNDS AND THEIR INVESTMENTS
2
<PAGE> 4
RISK/RETURN SUMMARY AND FUND EXPENSES
================================================================================
WALDEN/BBT DOMESTIC SOCIAL INDEX FUND
- -------------------------------------
INVESTMENT OBJECTIVE The Domestic Social Index Fund seeks
long-term capital growth through a portfolio
of stocks intended to parallel the
investment performance of the Standard &
Poor's 500 Index (the "S&P 500 Index"),
while incorporating social investment
objectives. The S&P 500 Index contains 500
frequently traded, large capitalization
common stocks listed on the New York Stock
Exchange, the American Stock Exchange and on
NASDAQ.
PRINCIPAL INVESTMENT The Fund invests primarily in equity
STRATEGIES securities and utilizes "indexing"
techniques to approximate the performance of
the S&P 500 Index. The percentage of each
stock held in the Fund generally will be
based on that stock's weighting in the S&P
500 Index. Modifications, as necessary, will
adjust for securities which are not included
due to social investment criteria.
PRINCIPAL INVESTMENT RISKS The Fund is subject to stock market risk.
Therefore, the value of the Fund's
investments will fluctuate with market
conditions and 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.
The Fund's investment results may fail to
match the results of the S&P 500 Index.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
o Interested in ensuring that your
investments are consistent with your
social concerns and values
o Investing for a period of time in excess
of 3 to 5 years
o Able to bear the risk of market value
fluctuations in the short-term
o Looking for exposure to stock
investments for growth.
This Fund will not be appropriate for
someone:
o Investing for a period of time less than
3 to 5 years
o Not comfortable with market fluctuations
in the short-term
o Looking primarily for a high level of
current income
3
<PAGE> 5
WALDEN/BBT DOMESTIC SOCIAL INDEX FUND (CONTINUED)
- -------------------------------------------------
ANNUAL FEES AND EXPENSES
- ------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Domestic Social Index Fund.
<TABLE>
<S> <C>
Shareholder
Transaction
Fees (fees
paid directly
from your
investment)
Maximum Sales
Charge (load)
on Purchases n/a
- ------------------------------------------------------
Maximum
Deferred n/a
Sales Charge
(load)
- ------------------------------------------------------
Account Maintenance
Fee (for accounts
under $8,000) $25/year*
- ------------------------------------------------------
Annual Fund
Operating
Expenses
(expenses that are
deducted from
Fund assets)
- ------------------------------------------------------
Management Fees 0.50%
- ------------------------------------------------------
Distribution and n/a
Service (12b-1) Fees
- ------------------------------------------------------
Other Expenses 0.43%**
- ------------------------------------------------------
Total Fund
Operating Expenses 0.93%**
- ------------------------------------------------------
Fee Waiver and/or
Expense
Reimbursement 0.18%**
- ------------------------------------------------------
NET EXPENSES 0.75%**
- ------------------------------------------------------
</TABLE>
* The account maintenance fee will be deducted from your annual
distribution of the Fund's dividends. If your distribution is less than
the fee, fractional shares will be redeemed automatically to make up
the difference.
** The Adviser has entered into an expense limitation agreement with the
Trust to limit the Total Fund Operating Expenses of the Domestic Social
Index Fund to 0.75% of its average daily net assets for its current
fiscal year. Without this expense limitation agreement, the Total Fund
Operating Expenses for the Domestic Social Index Fund's initial fiscal
year are estimated to be 0.93%. The Fund has agreed to repay the
Adviser for amounts waived or reimbursed by the Adviser pursuant to the
expense limitation agreement provided that such repayment does not
cause the Fund's Total Fund Operating Expenses to exceed 0.75% of its
average daily net assets and the repayment is made within three years
after the year in which the Adviser incurred the expense.
4
<PAGE> 6
WALDEN/BBT DOMESTIC SOCIAL INDEX 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:
o $10,000 investment
o 5% annual return
o redemption at the end of each period
o 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>
DOMESTIC SOCIAL INDEX FUND 1 3 5 10
- -------------------------- Year Years Years Years
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
$77 $278 $497 $1127
- ----------------------------------------------------------------
</TABLE>
WALDEN/BBT INTERNATIONAL SOCIAL INDEX FUND
------------------------------------------
INVESTMENT OBJECTIVE The International Social Index Fund seeks
long-term capital growth through a portfolio of
international equities intended to parallel the
performance of the Morgan Stanley Capital
International/Europe, Asia and Far East Index
(the "MSCI/EAFE Index"). The MSCI/EAFE Index is
comprised of stocks traded on the exchanges in
Europe, Asia and the Far East.
PRINCIPAL INVESTMENT The Fund invests primarily in international
STRATEGIES equity securities and utilizes "indexing"
techniques to approximate the performance of
the MSCI/EAFE Index. The percentage of each
stock held in the Fund generally will be based
on that stock's weighting in the MSCI/EAFE
Index. Modifications, as necessary, will adjust
for securities which are not included due to
social investment criteria.
PRINCIPAL INVESTMENT RISKS The Fund is subject to stock market risk.
Therefore, the value of the Fund's investments
will fluctuate with market conditions and the
value of your investment in the Fund will also
vary. The Fund is also subject to foreign
investment risk because it invests primarily in
foreign issuers. Foreign investments may be
more risky than domestic U.S. investments due
to unstable international political and
economic conditions, currency exchange rates
and a lack of liquidity. You could lose money
on your investment in the Fund, or the Fund
could underperform other investments. The
Fund's investment results may fail to match the
results of the MSCI/EAFE Index.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
o Interested in ensuring that your investments
are consistent with your social concerns and
values
o Investing for a period of time in excess of
3 to 5 years
o Looking for a high-quality,
well-diversified, all-equity portfolio that
provides the potential for growth of your
investment
o Comfortable with market value fluctuations
in the short-term
This Fund will not be appropriate for someone:
o Investing for a period of time less than 3
to 5 years
o Not comfortable with market value
fluctuations in the short term
o Looking for current income
5
<PAGE> 7
WALDEN/BBT INTERNATIONAL SOCIAL INDEX FUND (CONTINUED)
- ------------------------------------------------------
ANNUAL FEES AND EXPENSES
- ------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the International Social Index Fund.
<TABLE>
<S> <C>
Shareholder
Transaction
Fees (fees
paid directly
from your
investment)
Maximum Sales
Charge (load)
on Purchases n/a
- ------------------------------------------------------
Transaction Fee
on Purchases 1.00%*
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) n/a
- ------------------------------------------------------
Annual Fund
Operating
Expenses
(expenses that
are deducted
from Fund
assets)
- ------------------------------------------------------
Management Fees 0.50%
- ------------------------------------------------------
Distribution and
Service (12b-1) Fees n/a
- ------------------------------------------------------
Other Expenses 0.41%**
- ------------------------------------------------------
Total Fund
Operating Expenses 0.91%**
- ------------------------------------------------------
</TABLE>
* The transaction fee on purchases is deducted from all purchases
(including exchanges from other purchases (including exchanges from
other affiliated funds) but not from reinvested dividends and capital
gains.
** The Other Expenses and the Total Fund Operating Expenses are estimated
for the Fund's initial fiscal year. The Adviser has entered into an
expense limitation agreement with the Trust to limit the Total Fund
Operating Expenses of the International Social Index Fund to 1.00% of
its average daily net assets for its current fiscal year, if
applicable. The Fund has agreed to repay the Adviser for amounts waived
or reimbursed by the Adviser pursuant to the expense limitation
agreement provided that such repayment does not cause the Fund's Total
Fund Operating Expenses to exceed 1.00% of its average daily net assets
and the repayment is made within three years after the year in which
the Adviser incurred the expense.
6
<PAGE> 8
WALDEN/BBT INTERNATIONAL SOCIAL INDEX 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:
o $10,000 investment
o 5% annual return
o redemption at the end of each period
o 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>
INTERNATIONAL SOCIAL INDEX FUND 1 3 5 10
- ------------------------------- Year Years Years Years
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
$93 $290 $504 $1120
- ----------------------------------------------------------------
</TABLE>
7
<PAGE> 9
INVESTMENT OBJECTIVES AND STRATEGIES
SOCIAL RESPONSIBILITY CRITERIA OF EACH FUND
WALDEN/BBT DOMESTIC SOCIAL INDEX FUND
The Walden/BBT Domestic Social Index Fund seeks to assist in the
betterment of society, primarily through the use of shareholder advocacy. The
Fund will endeavor to use its position as shareholder to advocate for and
initiate actions that increase the respect shown by companies for human dignity,
social welfare and our natural environment. To this end, it will strive to
exclude companies that appear to be inextricably committed to industries or
products that are inherently harmful. These include tobacco, weapons, alcoholic
beverages and gaming activities.
With regard to the companies in its portfolio of holdings, the Fund may
address the following areas through communication and shareholder initiatives:
respect and care for the natural environment; elimination of discrimination
against employees and other constituencies; racial and gender diversity of
boards of directors, management and officers; fair wages; fair practices with
unions and union organizing efforts; safe, healthy and rewarding workplace
conditions; positive employee participation; safe and useful products; respect
and support for human rights; and full and honest disclosure on issues of
corporate responsibility.
The Fund may lend its name, voice, and efforts to influence public
policy as a way of ending harmful or unjust business practices.
Specifically, the Fund avoids investing in companies that, to the
Advisor's knowledge:
o Earn significant revenues from tobacco products, alcoholic
beverages or gaming activities.
o Earn significant revenues from the manufacture or sale of
military weapons systems or firearms.
These criteria may be supplemented or amended whenever the Advisor, in
its sole discretion, believes such supplements or amendments are needed to
satisfy the Fund's social or financial objectives.
8
<PAGE> 10
WALDEN/BBT INTERNATIONAL SOCIAL INDEX FUND
The Walden/BBT International Social Index Fund seeks to assist in the
betterment of society through the use of socially responsive investment
criteria, shareholder dialogue, and proxy voting. The Fund will look for
opportunities to encourage companies to improve their social performance.
The Fund seeks to invest in companies that the Advisor believes:
o Are above average in their industry for environmental
performance, employment practices, community relations, and
product quality.
The Fund avoids investing in companies that, to the Advisor's
knowledge:
o Earn significant revenues from tobacco, alcoholic beverages,
or gaming activities.
o Earn significant revenues from the manufacture or sale of
military weapon systems or firearms.
o Have critical, direct involvement in nuclear power production.
o Significantly support human rights abuses.
These criteria may be supplemented or amended whenever the Advisor, in
its sole discretion, believes such supplements or amendments are needed to
satisfy the Fund's social or financial objectives.
WALDEN/BBT DOMESTIC SOCIAL INDEX FUND
================================================================================
Ticker Symbol: WDSIX
INVESTMENT OBJECTIVE
The investment objective of the Domestic Index Fund is to seek
long-term capital growth through a portfolio of stocks intended to parallel the
performance of the S&P 500 Index, while incorporating social investment
objectives.
POLICIES AND STRATEGIES
Selection of stocks for the Fund is a two-part process. Initially, the
Advisor chooses stocks from a universe comprised of the S&P 500 Index and
certain other domestic stocks that meet the Fund's social criteria. From this
pool, the Advisor then selects stocks that it feels will best help the Fund most
closely parallel the performance of the S&P 500 Index.
The Fund may also engage in shareholder dialogue with companies to
encourage them to improve
9
<PAGE> 11
their social or environmental performance.
The Fund avoids investing in companies that, to the Advisor's
knowledge:
o Derive significant revenues from the manufacture of weapons
systems.
o Derive significant revenues from tobacco products, alcoholic
beverages, or gaming activities.
The Fund's guidelines are subject to change without shareholder
approval.
10
<PAGE> 12
WALDEN/BBT INTERNATIONAL SOCIAL INDEX FUND
================================================================================
Ticker Symbol: WISIX
INVESTMENT OBJECTIVE
The investment objective of the International Social Index Fund is to
seek long-term growth of capital through a portfolio of international equities
intended to parallel the performance of the MSCI/EAFE Index, while incorporating
social investment objectives.
POLICIES AND STRATEGIES
Selection of stocks for the Fund is a two-part process. Initially, the
Advisor chooses stocks from a universe comprised of the MSCI EAFE Index and
other international stocks that meet the Fund's social criteria. From this pool,
the Advisor selects stocks that it feels will help the Fund most closely
parallel the performance of the MSCI EAFE Index. The Fund may invest in stocks
that do not meet completely all of the Fund's stringent social criteria, in
order that the Fund achieve its financial objectives.
The Fund may also engage in shareholder dialogue with companies to
encourage them to improve their social or environmental performance.
The Fund seeks to invest in companies that are above average in their
respective industries for environmental performance and management, employment
practices, or marketing of socially beneficial products.
The Fund avoids investing in companies that, to the Advisor's
knowledge:
o Directly support human rights abuses.
o Have essential involvement in nuclear power production.
o Derive significant revenues from the manufacture or sale of
weapons systems.
o Derive significant revenues from tobacco products, alcoholic
beverages, or gaming activities.
The Fund's guidelines are subject to change without shareholder
approval.
Consistent with the Fund's investment objective, the Fund:
o may invest in the following types of foreign equity
securities: common stocks, preferred stocks, securities
convertible or exchangeable into common stocks, warrants and
any rights to purchase common stocks
o may invest in sponsored and unsponsored American Depositary
Receipts, European Depositary Receipts and Global Depositary
Receipts.
o may buy or sell foreign currencies
o may enter into forward foreign currency exchange contracts
o may buy or sell options, futures on options or futures
relating to foreign currencies
o may purchase and write exchange-listed put and call options on
stock indices
11
<PAGE> 13
o may engage in interest rate swaps
o may invest in certain restricted and illiquid securities
o 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)
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:
o 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.
o 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.
o 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.
o 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
12
<PAGE> 14
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.
o FOREIGN INVESTMENT RISK: SPECIFIC RISK FACTOR FOR THE INTERNATIONAL
SOCIAL INDEX FUND:
The International Social Index Fund invests primarily in foreign
securities which are subject to investment risks different from those associated
with domestic securities. Foreign investments may be riskier than domestic U.S.
investments because of unstable international political and economic conditions,
foreign controls or investment and currency exchange rates, withholding taxes,
or a lack of adequate company information, lack of liquidity and lack of
governmental regulation.
Investments in the Funds are not deposits of United States Trust
Company of Boston or any of its affiliates and are not insured or guaranteed by
the Federal Deposit Insurance Corporation (the "FDIC") or any other government
agency.
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 (NAV) 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 known as
the offering price.
Each Fund's securities are valued generally at current market prices.
If market quotations are not available, prices will be based on fair value as
determined by the Funds' Trustees.
13
<PAGE> 15
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 Domestic Social Index Fund is $2,000 and
the minimum initial investment in the International Social Index Fund is
$50,000. 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
respective Fund next determined after a purchase order is received. Investors
may purchase shares of the Funds by check or wire, as described below.
The International Social Index Fund imposes a portfolio transaction fee on share
purchases equal to 1.0% of the dollar amount invested. This fee, which is not a
sales charge, is paid directly to the Fund and not to any other party. The fee
is deducted automatically from the amount invested and cannot be paid
separately. The fee applies to the initial investment in the Fund (including
purchases made as a result of exchanges from another affiliated fund) and all
subsequent purchases, but not to reinvested dividend or capital gains
distributions. The purpose of the portfolio transaction fee is to allocate
transaction costs associated with Fund purchases to the shareholder making the
transaction and thus insulate other shareholders from those transaction costs.
In this manner, the Fund attempts to track its index more closely.
The Domestic Social Index Fund assesses an annual account maintenance fee of $25
for each shareholder account. This fee, which is deducted from the Fund's annual
dividend, is waived for shareholders with an account balance of $8,000 or more
at the time of the annual contribution. The purpose of this fee is to allocate a
portion of the costs of maintaining shareholder accounts equally to all
accounts.
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.
14
<PAGE> 16
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/BBT Domestic Social Index Fund" or "Walden/BBT International
Social Index Fund", as applicable.
3. Mail to: Walden/BBT Funds, P.O. Box _________, Columbus, Ohio
43218-_____.
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 1-877-4-WALDEN 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:
[To be determined]
Routing Number: ABA #
DDA#
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.
- --------------------------------------------------------------------------------
15
<PAGE> 17
INSTRUCTIONS FOR SELLING SHARES
By telephone 1. Call 1-877-4-WALDEN with instructions as to how
(unless you have you wish to receive your funds (mail, wire, electronic
declined telephone transfer).
sales privileges)
By mail 2(a). Call 1-877-4-WALDEN to request redemption forms
or write a letter of instruction indicating:
o your Fund and account number
o amount you wish to redeem
o address where your check should be sent
o account owner signature
2(b). Mail to: WALDEN/BBT FUNDS
P.O. Box_________, Columbus, Ohio 43218-______
By overnight service See instruction 2(a) above.
Send to:
WALDEN/BBT FUNDS
c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, Ohio 43219
By Wire transfer Call 1-877-4-WALDEN to request a wire transfer.
You must indicate this
option on your If you call by 4 p.m. Eastern Standard Time, your
application. payment normally will 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:
o Redemptions over $10,000
o Your account registration or the name(s) on your account has changed
within the last 15 days
o The check is not being mailed to the address on your account
o The check is not being made payable to the owner of the account
o 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.
16
<PAGE> 18
VERIFYING TELEPHONE REDEMPTIONS
The Funds make every effort to ensure that telephone redemptions are made only
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 10 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 10 business days). You can avoid this delay by
purchasing shares with a wire transfer or 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.
17
<PAGE> 19
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/BBT Funds, P.O. Box
________, Columbus, Ohio 43218-_____ or by calling 1-877-4-WALDEN. Please
provide the following information:
o Your name and telephone number
o The exact name on your account and account number
o Taxpayer identification number (usually your Social Security number)
o Dollar value or number of shares to be exchanged
o The name of the Fund from which the exchange is to be made
o 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
o To prevent disruption in the management of the Funds, exchange activity
may be limited to 4 exchanges within a calendar year.
o The registration and tax identification numbers of the two accounts
must be identical.
o 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 gains from any sale or exchange
may be subject to applicable taxes.
Dividends are taxable as ordinary income. Distributions designated by a Fund as
long-term capital gain distributions will be taxable to you at your long-term
capital gains rate, regardless of how long you have held your shares.
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.
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.
This tax discussion is meant only as a general summary. Because each investor's
tax situation is unique, you should consult your tax adviser about the
particular consequences to you of investing in the Funds.
18
<PAGE> 20
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
socially responsive 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 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 in both Funds to achieve its financial and social objectives.
The Funds are engaged actively in promoting positive corporate change
through company dialogue and shareholder resolutions, social screening, public
policy testimony and technical assistance to non-profit entities.
The Funds are committed to making socially responsive investing an
effective instrument of social change at home and abroad. Walden has an in-house
social research process to fully harness the power of shareholder activism.
Through dialogue with management and in partnership with other agents of change,
Walden and the Funds use their leverage as shareholders to foster progressive
corporate practices.
The Funds work 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.
19
<PAGE> 21
PORTFOLIO MANAGER
The following individual serves as portfolio manager for the Funds and is
primarily responsible for the day-to-day management of each Fund's portfolio:
Ms. Geeta B. Aiyer, Senior Portfolio Manager of the Adviser, is the portfolio
manager for each Fund. Ms. Aiyer founded Walden Capital Management in 1994 and
joined the Adviser in 1998 when the Adviser acquired Walden. Ms. Aiyer had
served as a portfolio manager for the Adviser prior to her starting Walden in
1994. Ms. Aiyer earned an M.A. from the University of Delhi, India and an M.B.A.
from Harvard University. Ms. Aiyer is a Chartered Financial Analyst and a member
of the Boston Security Analysts Society.
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.
20
<PAGE> 22
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: 1-877-4-WALDEN
- --------------------------------------------------------------------------------
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:
o For a duplicating fee, by writing the Public Reference
Section of the Commission, Washington, D.C.
20549-6009 or calling 1-800-SEC-0330.
o Free from the Commission's Website
at http://www.sec.gov.
Investment Company Act file no. 811-6526.
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<PAGE> 23
WALDEN/BBT DOMESTIC SOCIAL INDEX FUND
WALDEN/BBT INTERNATIONAL SOCIAL INDEX 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 prospectus for Walden/BBT Domestic Social Index
Fund and Walden/BBT International Social Index Fund (collectively, the "Funds"),
dated the same date as the date hereof (the "Prospectus"). 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 the Prospectus. Copies of the Prospectus may
be obtained by writing the Funds at 40 Court Street, Boston, Massachusetts
02108, or by telephoning toll free (800) 441-8782, ext. 4050.
<PAGE> 24
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 two such portfolios: Walden/BBT
Domestic Social Index Fund and Walden/BBT International Social Index Fund (the
"Funds"). Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus. Capitalized terms
not defined herein are defined in the Prospectus. No investment in shares of a
Fund should be made without first reading the 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 Prospectus.
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 Adviser.
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 maturities. A Fund may not enter
into a repurchase agreement with more than seven days to
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<PAGE> 25
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
Adviser 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> 26
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. If a security's rating is
reduced while it is held by a Fund, the Adviser 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.
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
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<PAGE> 27
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 regulation, enter into certain offsetting positions) to
cover its obligations under options and futures contracts to avoid leveraging of
the Fund.
Stock Index Options
The Funds may purchase and write exchange-listed put and call
options on stock indices to hedge against risks of market-wide price movements.
A stock index measures the movement of a certain group of stocks by assigning
relative values to the common stocks included in the index. Options on stock
indices do not involve the delivery of an underlying security; instead, the
option represents the holder's right to obtain from the writer in cash a fixed
multiple of the amount by which the exercise price exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the underlying
index on the exercise date. When a Fund writes an option on a stock index, it
will deposit cash or cash equivalents or a combination of both in an amount
equal to the market value of the option, in a segregated account with the
custodian, and will maintain the account while the option is open.
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.
ADDITIONAL INVESTMENT INFORMATION RELATING TO THE INTERNATIONAL INDEX FUND
Foreign Securities
The International Index Fund may invest all of its assets in
foreign securities. Foreign investments can involve significant risks in
addition to the risks inherent in U.S.
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<PAGE> 28
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 Fund 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.
Currency Transactions
The International Index Fund may make use of active currency
management from time to time. To effectively manage the currency fluctuation and
related effects that such exposures give rise to, the Fund may buy or sell
foreign currencies; enter into forward foreign currency exchange contracts; buy
or sell options, futures or options on futures relating to foreign currencies;
purchase securities indexed to the performance of one or more foreign
currencies; and/or use currency management techniques to hedge against adverse
movements in exchange rates.
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<PAGE> 29
Such management actions as those described above are of a routine
nature, are undertaken only within the limits of and in accordance with the
investment policies of the Fund, and are, typically, limited in scope and
duration.
The International Fund may conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or by entering into forward contracts to
purchase or sell foreign currencies. A forward contract involves an obligation
to purchase or sell a specific currency amount at a future date, which may be
any fixed number of days from the date of the contract. These transactions will
require that the Fund segregate cash or liquid securities to the extent the
Fund's obligations are not otherwise "covered," by the Fund owning or having the
right to acquire or sell the underlying currency.
When the Adviser believes that the currency of a particular
country may suffer a significant decline against the U.S. dollar or against
another currency, the Fund may enter into a forward contract to sell, for a
fixed amount of U.S. dollars or other appropriate currency, the amount of
foreign currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures.
At the maturity of a forward contract, the Fund may either sell a portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions. The Fund's ability to engage in forward contracts may also be
limited by tax considerations.
In the alternative, the Fund may engage in currency "cross
hedging" when, in the opinion of the Adviser, the historical relationship among
foreign currencies suggests that the Fund may achieve the same protection for a
foreign security at reduced cost through the use of a forward foreign currency
contract relating to a currency other than the U.S. dollar or the foreign
currency in which the security is denominated. By engaging in cross hedging
transactions, the Fund assumes the risk of imperfect correlations between the
subject currencies.
The International Index Fund may purchase and write put and call
options on foreign currencies (traded on U.S. and foreign exchanges or
over-the-counter). Call options on foreign currency written by the Fund will be
covered, which means that the Fund will own an equal amount of the underlying
foreign currency. With respect to put options on foreign currency written by the
Fund, the Fund will deposit cash or cash equivalents or a combination of both in
a segregated account with the custodian in an amount equal to the amount the
Fund would be required to pay upon exercise of the put.
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<PAGE> 30
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.
(A 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 Statement of Additional
Information).
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.)
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
- 8 -
<PAGE> 31
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 issued by UST Corp. (parent corporation
of the Adviser).
If a percentage restriction described in the Prospectus 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.
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 Prospectus, 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-
- 9 -
<PAGE> 32
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.
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 From June 1992 to present, employee of BISYS
3435 Stelzer Road and Trustee Fund Services
Columbus, Ohio 43219
Age: 53
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 and
Age: 63 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 President-Communications,
Age: 51 TRW Information Systems Group (electronic and
space engineering).
</TABLE>
- 10 -
<PAGE> 33
<TABLE>
<CAPTION>
Position(s) Held With the Principal Occupation During Past 5 Years
Name, Address and Age Group
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John H. Ferring IV Trustee From 1979 to present, President and Owner of
105 Bolte Lane Plaze, Incorporated, St. Clair, Missouri
St. Clair, Missouri
Age: 46
J. David Huber Vice President From June 1987 to present, employee of BISYS
3435 Stelzer Road Fund Services
Columbus, Ohio 43219
Age: 52
Jennifer R. Brooks Vice President From October, 1988 to present, employee of
3435 Stelzer Road BISYS Fund Services.
Columbus, Ohio 43219
Age: 32
Gary Tenkman Treasurer From April 1998 to present, employee of BISYS
3435 Stelzer Road Fund Services; from September 1990 to March
Columbus, Ohio 43219 1998, employee of Ernst & Young LLP.
Age: 28
George L. Stevens Secretary From September 1996 to present, employee of
3435 Stelzer Road BISYS Fund Services; from September 1995 to
Columbus, Ohio 43219 September 1996, Independent Consultant;
Age: 48 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 BISYS
3435 Stelzer Road Fund Services; from May 1989 to June 1995,
Columbus, Ohio 43219 employee of Alliance Capital Management.
Age: 31
</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 and Grimm and Ms. Metz and Ms. Brooks
are employees of BISYS Fund Services.
- 11 -
<PAGE> 34
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.
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
Name of Trustee the Funds Fund Expenses Upon Retirement to Trustee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walter B. Grimm $ 0 $0 $0 $ 0
Maurice G. Stark $7,500 $0 $0 $7,500
Michael Van Buskirk $7,500 $0 $0 $7,500
John H. Ferring IV $7,500 $0 $0 $7,500
</TABLE>
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: Walden/BBT Domestic Social Index Fund [ %] and
Walden/BBT International Social Index 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.
- 12 -
<PAGE> 35
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 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
- 13 -
<PAGE> 36
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 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
- 14 -
<PAGE> 37
inquire or take into consideration whether securities of such customers are held
by the Funds or any other fund of the Group.
ADMINISTRATOR
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 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
- 15 -
<PAGE> 38
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.
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
Fifth Third Bank, Cincinnati, Ohio (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 AND FUND ACCOUNTING SERVICES
BISYS serves as transfer agent and dividend disbursing agent (the
"Transfer Agent") for 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 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.
In addition, BISYS Fund Services, Inc. provides certain fund
accounting services to the Funds pursuant to a Fund Accounting Agreement dated
as of __________, 1999.
- 16 -
<PAGE> 39
Under such Agreement, BISYS Fund 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.
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
- 17 -
<PAGE> 40
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
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 Walden/BBT Domestic Social Index Fund [ ] and for the Walden/BBT
International Social Index 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.
- 18 -
<PAGE> 41
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, 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.
- 19 -
<PAGE> 42
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 will generally be taxable to Shareholders
as long-term capital gains, regardless of how long a Shareholder has held a
Fund's shares.
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
- 20 -
<PAGE> 43
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."
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
- 21 -
<PAGE> 44
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. Under certain circumstances, a Fund may
recognize gain from the constructive sale of an appreciated financial position.
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 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. Constructive sale
treatment does not apply to transactions closed in the 90-day period ending
with the 30th day after the close of the taxable year, if certain conditions are
met.
FOREIGN TAX CREDIT. A Fund may be subject to certain taxes
imposed by the countries in which it invests or operates. If the Fund qualifies
as a regulated investment company and if more the 50% of the value of the Fund's
total assets at the close of any taxable year consists of stocks or securities
of foreign corporations, the Fund may elect, for U.S. federal income tax
purposes, to treat any foreign taxes paid by the Fund that qualify as income or
similar taxes under U.S. income tax principles as having been paid by the Fund's
Shareholders. For any year for which the Fund makes such an election, each
Shareholder will be required to include in its gross income an amount equal to
its allocable share of such taxes paid by the Fund and the Shareholders will be
entitled, subject to certain limitations, to credit their portions of these
amounts against their U.S. federal income tax liability, if any, or to deduct
their portions from their U.S. taxable income, if any. No deduction for foreign
taxes may be claimed by individuals who do not itemize deductions. In any year
in which it elects to "pass through" foreign taxes to Shareholders, the Fund
will notify Shareholders within 60 days after the close of the Fund's taxable
year of the amount of such taxes and the sources of its income.
Generally, a credit for foreign taxes paid or accrued is subject
to the limitation that it may not exceed the Shareholder's U.S. tax attributable
to his or her total foreign source taxable income. For this purpose, the source
of a Fund's income flows through to its shareholders. Gains from the sale of
securities may have to be treated as derived from U.S. sources and certain
currency fluctuation gains, including Section 988 gains (defined below), may
have to be treated as derived from U.S. sources. The limitation of the foreign
tax credit is applied separately to foreign source passive income, including
foreign source passive income received from a Fund. Shareholders may be unable
to claim a credit for the full amount of their proportionate share of the
foreign taxes paid by the Fund. The foreign tax credit can be applied to offset
no more than 90% of the alternative minimum tax imposed on corporations and
individuals.
The foregoing is only a general description of the foreign tax
credit. Because application of the credit depends on the particular
circumstances of each shareholder, Shareholders are advised to consult their own
tax advisers.
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.
- 22 -
<PAGE> 45
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 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.
- 23 -
<PAGE> 46
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 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.
- 24 -
<PAGE> 47
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 Prospectus 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.
- 25 -
<PAGE> 48
PART C
-----------
OTHER INFORMATION
-----------------
ITEM 23. EXHIBITS
(a)(1) Declaration of Trust(1)
(a)(2) Establishment and Designation of Series of Shares
(Walden/BBT Domestic Social Index Fund and Walden/BBT
International Social Index Fund)(3)
(b) By-Laws(2)
(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 The Fifth
Third Bank(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 Ohio, Inc.(3)
(h)(3) Transfer Agency Agreement between the Registrant and
BISYS Fund Services Ohio, Inc.(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
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<PAGE> 49
(l) Not Applicable
(m) Not Applicable
(n) Not Applicable
(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> 50
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> 51
(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> 52
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 June 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);
BISYS Fund Services, 3435 Stelzer Road, Columbus,
Ohio 43219 (records relating to its functions as
general manager, transfer agent, administrator and
distributor).
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS.
None
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<PAGE> 53
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. 52 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 22nd day of June, 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 June 22, 1999
- ------------------------
Walter B. Grimm** (Principal Executive Officer)
/s/ John H. Ferring IV Trustee June 22, 1999
- ------------------------
John H. Ferring IV***
/s/ Maurice G. Stark Trustee June 22, 1999
- ------------------------
Maurice G. Stark*
/s/ Michael M. Van Buskirk Trustee June 22, 1999
- ------------------------
Michael M. Van Buskirk*
/s/ Gary R. Tenkman Treasurer (Principal June 22, 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 with Post-Effective Amendment
No. 46 on May 14, 1999.
C-6
