<PAGE> 1
As filed with the Securities and Exchange Commission on July 30, 1999
Securities Act No. 33-44964
Investment Company Act File No. 811-6526
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
--
Post-Effective Amendment No. 58 [X]
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 60 [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 on August 1, 1999 pursuant
to paragraph (b) of Rule 485.
<PAGE> 2
QUESTIONS?
Call 1-800-766-8938 or your
investment representative.
LOGO
INCOME EQUITY FUND
DIVERSIFIED EQUITY FUND
SPECIAL EQUITY FUND
INCOME FUND
---------------
PROSPECTUS DATED AUGUST 1, 1999
---------------
1ST SOURCE BANK
Investment Adviser
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
1ST SOURCE MONOGRAM FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
Carefully review this 3 1st Source Monogram Income Equity Fund
important section for a 6 1st Source Monogram Diversified Equity Fund
summary of each Fund's 9 1st Source Monogram Special Equity Fund
investment, risks and fees. 12 1st Source Monogram Income Fund
INVESTMENT OBJECTIVES AND STRATEGIES
LOGO
This section contains 15 1st Source Monogram Income Equity Fund
details on each Fund's 16 1st Source Monogram Diversified Equity Fund
investment strategies and 17 1st Source Monogram Special Equity Fund
risks. 18 1st Source Monogram Income Fund
19 Investment Risks
SHAREHOLDER INFORMATION
LOGO
Consult this section to 21 Pricing of Fund Shares
obtain details on how shares 21 Purchasing and Adding to Your Shares
are valued, how to purchase, 24 Selling Your Shares
sell and exchange shares, 27 Distribution Arrangements/Sales Charges
related charges and payments 30 Exchanging Your Shares
of dividends. 30 Dividends, Distributions and Taxes
FUND MANAGEMENT
LOGO
Review this section for 31 The Investment Adviser
details on the people and 31 Portfolio Managers
organizations who oversee 32 The Distributer and Administrator
the Funds and their
investments.
FINANCIAL HIGHLIGHTS
LOGO
Review this section for 33 1st Source Monogram Income Equity Fund
details on the selected 34 1st Source Monogram Diversified Equity Fund
financial statements of the 35 1st Source Monogram Special Equity Fund
Funds. 36 1st Source Monogram Income Fund
</TABLE>
2
<PAGE> 4
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME EQUITY FUND
RISK/RETURN SUMMARY OF THE 1ST SOURCE
MONOGRAM INCOME EQUITY FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Income Equity Fund seeks capital appreciation with current income as a
secondary objective.
PRINCIPAL The Fund invests primarily in common stocks and securities convertible into
INVESTMENT STRATEGIES common stocks of companies with market capitalization of at least $100
million which the Adviser believes pay above average dividends or interest.
PRINCIPAL Because the value of the Fund's investments will fluctuate with market
INVESTMENT RISKS conditions, so will the value of your investment in the Fund. You could lose
money on your investment in the Fund, or the Fund could underperform other
investments. Some of the Fund's holdings may underperform its other
holdings. The Fund may invest a portion of its assets in foreign securities
which can carry additional risks such as changes in currency exchange rates,
a lack of adequate company information and political instability.
WHO MAY Consider investing in the Fund if you are:
WANT TO INVEST? - investing for a long-term goal such as retirement (five year or longer
investment horizon)
- looking to add a growth component to your portfolio
- willing to accept higher risks of investing in the stock market in
exchange for potentially higher long term returns
This Fund will not be appropriate for someone:
- seeking monthly income
- pursuing a short-term goal or investing emergency reserves
- seeking safety of principal
</TABLE>
3
<PAGE> 5
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME EQUITY FUND
PERFORMANCE BAR CHART AND TABLE(1)
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
<TABLE>
<CAPTION>
<S> <C>
1989 20.36
90 -5.35
91 18.10
92 15.13
93 24.79
94 -2.13
95 25.89
96 17.59
97 27.54
98 4.80
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns. Of
course, past performance does not indicate
how the Fund will perform in the future.
Best
quarter: Q2 1997 +13.88%
Worst
quarter: Q4 1987 -20.63%
The chart and table on this
page show how the Income
Equity Fund has performed
and how its performance has
varied from year to year.
The bar chart shows changes
in the Fund's yearly
performance for each of the
last ten years to
demonstrate that the Fund's
value varied at differing
times. The table below
compares the Fund's
performance over time to
that of the Russell 1000
Value Index.(2) The quoted
performance for the Fund
includes the performance of
a corresponding collective
investment fund (the
"Collective Fund") that was
previously managed by the
Adviser beginning on
November 30, 1985 and which
transferred all of its
assets to the Fund at the
time the Fund commenced
operations as a registered
investment company on
September 25, 1996.()(3)
AVERAGE ANNUAL TOTAL
RETURNS
(for periods ending
December 31, 1998)(4)
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
INCOME EQUITY FUND 11/30/85 4.80% 14.13% 14.11% 13.47%
RUSSELL 1000 VALUE INDEX(2) 11/30/85 15.63% 20.85% 17.39% 17.74%
</TABLE>
(1) Both chart and table assume reinvestment of dividends and distributions.
(2) A widely recognized, unmanaged index that contains 1,000 securities with a
less-than-average growth orientation.
(3) The Fund's investment objective and policies are substantially similar to
those of the Collective Fund. The Collective Fund was not registered under
the Investment Company Act of 1940 (the "1940 Act") and therefore was not
subject to certain investment restrictions imposed by the 1940 Act. If the
Collective Fund had been registered under the 1940 Act, its performance
might have been adversely affected.
(4) For the period January 1, 1999 through June 30, 1999 the aggregate
(non-annualized) total return was 16.30% versus 12.87% for the Russell 1000
Value Index(2).
4
<PAGE> 6
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME EQUITY FUND
- -
FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum sales charge (load) imposed
on purchases 5.00%(1)
Maximum deferred sales charge (load) None
Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets)
Management Fee(s) .80%
Distribution and Service (12b-1)
Fee(s)(2) .25%
Other Expenses 0.41%
Total Fund Operating Expenses(2) 1.46%
</TABLE>
(1) Lower sales charges are available
depending upon the amount invested. See
"Distribution Arrangements."
(2) The Distributor is currently limiting
the distribution fees paid by the Fund for
the current fiscal year to 0.00%. TOTAL FUND
OPERATING EXPENSES AFTER THIS FEE LIMITATION
ARE EXPECTED TO BE 1.21%. This expense
limitation may be revised or canceled at any
time.
This table describes the
fees and expenses that you
may pay if you buy and
hold shares of the Income
Equity Fund.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INCOME EQUITY FUND $641 $939 $1,258 $2,159
</TABLE>
Use this table to compare
fees and expenses with those
of other Funds. It
illustrates the amount of
fees and expenses you would
pay, assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
- reinvestment of dividends
and distributions
Because this example is
hypothetical and for
comparison purposes only,
your actual costs will be
different.
- -
5
<PAGE> 7
LOGO
RISK/RETURN SUMMARY AND FUND EXPENSES DIVERSIFIED EQUITY
FUND
RISK/RETURN SUMMARY OF THE 1ST SOURCE
MONOGRAM DIVERSIFIED EQUITY FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Diversified Equity Fund seeks capital appreciation.
PRINCIPAL The Fund invests primarily in common stocks and securities convertible into
INVESTMENT STRATEGIES common stocks of companies with market capitalization of $100 million or
greater. The assets of the Fund are allocated among three different
Sub-Advisers representing the following investment styles: (1) investing in
companies believed to have strong value measures whose stock is traded at a
price below its perceived value; (2) investing in companies believed to have
growth potential; and (3) investing in companies that have accelerating
earnings but whose valuations do not yet reflect this positive trend.
PRINCIPAL Because the value of the Fund's investments will fluctuate with market
INVESTMENT RISKS conditions, so will the value of your investment in the Fund. You could lose
money on your investment in the Fund, or the Fund could underperform other
investments. Some of the Fund's holdings may underperform its other
holdings. The Fund may invest a portion of its assets in foreign securities
which can carry additional risks such as changes in currency exchange rates,
a lack of adequate company information and political instability.
WHO MAY Consider investing in the Fund if you are:
WANT TO INVEST? - Investing for a long-term goal such as retirement (Five Year or Longer
Investment Horizon)
- Looking to add a growth component to your portfolio
- Willing to accept higher risks of investing in the stock market in
exchange for potentially higher long term returns
This Fund will not be appropriate for someone:
- Seeking monthly income
- Pursuing a short-term goal or investing emergency reserves
- Seeking safety of principal
</TABLE>
6
<PAGE> 8
RISK/RETURN SUMMARY AND FUND EXPENSES DIVERSIFIED EQUITY FUND
PERFORMANCE BAR CHART AND TABLE(1)
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
<TABLE>
<CAPTION>
<S> <C>
1989 33.63
90 -0.22
91 32.96
92 5.66
93 9.76
94 -1.72
95 30.80
96 19.13
97 24.61
98 15.26
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns. Of
course, past performance does not indicate
how the Fund will perform in the future.
Best
quarter: Q1 1987 +18.94%
Worst
quarter: Q4 1987 -22.09%
The chart and table on this
page show how the
Diversified Equity Fund has
performed and how its
performance has varied from
year to year. The bar chart
shows changes in the Fund's
yearly performance for each
of the last ten years to
demonstrate that the Fund's
value varied at differing
times. The table below
compares the Fund's
performance over time to
that of the S&P 500
Index.(2) The quoted
performance for the Fund
includes the performance of
a corresponding collective
investment fund (the
"Collective Fund") that was
previously managed by the
Adviser beginning on June
30, 1985, and which
transferred all of its
assets to the Fund at the
time the Fund commenced
operations as a registered
investment company on
September 23, 1996.(3)
AVERAGE ANNUAL TOTAL
RETURNS
(for periods ending
December 31, 1998)(4)
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
DIVERSIFIED EQUITY FUND 06/30/85 15.26% 17.08% 16.29% 12.84%
S&P 500 INDEX(2) 06/30/85 28.58% 24.06% 19.19% 18.12%
</TABLE>
(1) Both chart and table assume reinvestment of dividends and distributions.
(2) A widely recognized, unmanaged index of common stocks generally
representative of the U.S. stock market as a whole.
(3) The Fund's investment objective and policies are substantially similar to
those of the Collective Fund. The Collective Fund was not registered under
the Investment Company Act of 1940 (the "1940 Act") and therefore was not
subject to certain investment restrictions imposed by the 1940 Act. If the
Collective Fund had been registered under the 1940 Act, its performance
might have been adversely affected.
(4) For the period January 1, 1999 through June 30, 1999 the aggregate
(non-annualized) total return was 8.16% versus 12.38% for the S&P 500
Index(2).
7
<PAGE> 9
RISK/RETURN SUMMARY AND FUND EXPENSES DIVERSIFIED EQUITY FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum sales charge (load) imposed
on purchases 5.00%(1)
Maximum deferred sales charge (load) None
Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets)
Management Fee(s) .99%
Distribution and Service (12b-1)
Fee(s)(2) .25%
Other Expenses 0.44%
Total Fund Operating Expenses 1.68%
</TABLE>
(1) Lower sales charges are available
depending upon the amount invested. See
"Distribution Arrangements."
(2) The Distributor is currently limiting
the distribution fees paid by the Fund for
the current fiscal year to 0.00%. TOTAL FUND
OPERATING EXPENSES AFTER THIS FEE LIMITATION
ARE EXPECTED TO BE 1.43%. This expense
limitation may be revised or canceled at any
time.
This table describes the
fees and expenses that you
may pay if you buy and
hold shares of the
Diversified Equity Fund.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
DIVERSIFIED EQUITY FUND $662 $1,003 $1,367 $2,388
</TABLE>
Use this table to compare
fees and expenses with those
of other Funds. It
illustrates the amount of
fees and expenses you would
pay, assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
- reinvestment of dividends
and distributions
Because this example is
hypothetical and for
comparison purposes only,
your actual costs will be
different.
8
<PAGE> 10
LOGO
RISK/RETURN SUMMARY AND FUND EXPENSES SPECIAL EQUITY FUND
RISK/RETURN SUMMARY OF THE 1ST SOURCE
MONOGRAM SPECIAL EQUITY FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Special Equity Fund seeks capital appreciation.
PRINCIPAL The Fund invests primarily in common stocks and securities
INVESTMENT STRATEGIES convertible into common stocks of companies with market
capitalizations ranging on average between $100 million and
$2 billion which the Adviser believes have growth potential.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments. Some
of the Fund's holdings may underperform its other holdings.
The Fund may invest a portion of its assets in foreign
securities which can carry additional risks such as changes
in currency exchange rates, a lack of adequate company
information and political instability.
WHO MAY Consider investing in the Fund if you are:
WANT TO INVEST? - investing for a long-term goal such as retirement (five
year or longer investment horizon)
- looking to add a growth component to your portfolio
- willing to accept higher risks of investing in the stock
market in exchange for potentially higher long term returns
This Fund will not be appropriate for someone:
- seeking monthly income
- pursuing a short-term goal or investing emergency reserves
- seeking safety of principal
</TABLE>
9
<PAGE> 11
RISK/RETURN SUMMARY AND FUND EXPENSES SPECIAL EQUITY FUND
PERFORMANCE BAR CHART AND TABLE(1)
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
<TABLE>
<CAPTION>
<S> <C>
1989 22.67
90 -11.96
91 65.12
92 8.97
93 17.67
94 -10.97
95 33.82
96 22.07
97 2.81
98 0.57
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns. Of
course, past performance does not indicate
how the Fund will perform in the future.
Best
quarter: Q1 1991 +29.63%
Worst
quarter: Q3 1990 -25.60%
The chart and table on this
page show how the Special
Equity Fund has performed
and how its performance has
varied from year to year.
The bar chart shows changes
in the Fund's yearly
performance for each of the
last ten years to
demonstrate that the Fund's
value varied at differing
times. The table below
compares the Fund's
performance over time to
that of the Russell 2000
Index.(2) The quoted
performance for the Fund
includes the performance of
a corresponding collective
investment fund (the
"Collective Fund") that was
previously managed by the
Adviser beginning on
November 30, 1985 and which
transferred all of its
assets to the Fund at the
time the Fund commenced
operations as a registered
investment company on
September 20, 1996.(3)
AVERAGE ANNUAL TOTAL
RETURNS
(for periods ending
December 31, 1998)(4)
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
SPECIAL EQUITY FUND 11/30/85 0.57% 8.55% 13.17% 12.13%
RUSSELL 2000 INDEX(2) 11/30/85 -2.55% 11.86% 12.92% 11.67%
</TABLE>
(1) Both chart and table assume reinvestment of dividends and distributions.
(2) A widely recognized, unmanaged index of common stocks which generally
represents the performance of domestically traded common stocks of small to
mid-sized companies.
(3) The Fund's investment objective and policies are substantially similar to
those of the Collective Fund. The Collective Fund was not registered under
the Investment Company Act of 1940 (the "1940 Act") and therefore was not
subject to certain investment restrictions imposed by the 1940 Act. If the
Collective Fund had been registered under the 1940 Act, its performance
might have been adversely affected.
(4) For the period January 1, 1999 through June 30, 1999 the aggregate
(non-annualized) total return was -1.52% versus 5.26% for the Russell 2000
Index(2).
10
<PAGE> 12
RISK/RETURN SUMMARY AND FUND EXPENSES SPECIAL EQUITY FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum sales charge (load) imposed
on purchases 5.00%(1)
Maximum deferred sales charge (load) None
Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets)
Management Fee(s) .80%
Distribution and Service (12b-1)
Fee(s)(2) .25%
Other Expenses 0.44%
Total Fund Operating Expenses 1.49%
</TABLE>
(1) Lower sales charges are available
depending upon the amount invested. See
"Distribution Arrangements."
(2) The Distributor is currently limiting
the distribution fees paid by the Fund for
the current fiscal year to 0.00%. TOTAL FUND
OPERATING EXPENSES AFTER THIS FEE LIMITATION
ARE EXPECTED TO BE 1.24%. This expense
limitation may be revised or canceled at any
time.
This table describes the
fees and expenses that you
may pay if you buy and
hold shares of the Special
Equity Fund.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
SPECIAL EQUITY FUND $644 $947 $1,273 $2,191
</TABLE>
Use this table to compare
fees and expenses with those
of other Funds. It
illustrates the amount of
fees and expenses you would
pay, assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
- reinvestment of dividends
and distributions
Because this example is
hypothetical and for
comparison purposes only,
your actual costs will be
different.
- -
11
<PAGE> 13
logo
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
RISK/RETURN SUMMARY OF THE 1ST SOURCE
MONOGRAM INCOME FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Income Fund seeks current income consistent with the preservation of
capital.
PRINCIPAL The Fund invests primarily in debt securities of all types, including high
INVESTMENT STRATEGIES grade corporate bonds and U.S. Government bonds.
PRINCIPAL Because the value of the Fund's investments will fluctuate with market
INVESTMENT RISKS conditions and interest rates, so will the value of your investment in the
Fund. You could lose money on your investment in the Fund, or the Fund could
underperform other investments. Some of the Fund's holdings may underperform
its other holdings.
WHO MAY Consider investing in the Fund if you are:
WANT TO INVEST? - looking to add a monthly income component to your portfolio
- seeking higher potential returns than provided by money market funds
- willing to accept the risks of price and dividend fluctuations
This Fund will not be appropriate for someone:
- investing emergency reserves
- seeking safety of principal
</TABLE>
12
<PAGE> 14
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
PERFORMANCE BAR CHART AND TABLE(1)
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
<TABLE>
<CAPTION>
<S> <C>
1989 10.35
90 6.36
91 14.95
92 6.50
93 9.65
94 -3.79
95 16.55
96 2.56
97 7.82
98 6.82
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns. Of
course, past performance does not indicate
how the Fund will perform in the future.
Best
quarter: Q4 1985 +6.65%
Worst
quarter: Q1 1994 -2.34%
The chart and table on this
page show how the Income
Fund has performed and how
its performance has varied
from year to year. The bar
chart shows changes in the
Fund's yearly performance
for each of the last ten
years to demonstrate that
the Fund has gained and
lost value at differing
times. The table below
compares the Fund's
performance over time to
that of the Lehman Brothers
Intermediate
Government/Corporate Bond
Index.(2) The quoted
performance for the Fund
includes the performance of
a corresponding collective
investment fund (the
"Collective Fund") that was
previously managed by the
Adviser beginning on June
30, 1985 and which
transferred all of its
assets to the Fund at the
time the Fund commenced
operations as a registered
investment company on
September 24, 1996.(3)
AVERAGE ANNUAL TOTAL
RETURNS
(for periods ending
December 31, 1998)(4)
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
INCOME FUND 6/30/85 6.82% 5.78% 7.63% 7.64%
LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND
INDEX(2) 6/30/85 8.42% 6.59% 8.50% 8.63%
</TABLE>
(1) Both chart and table assume reinvestment of dividends and distributions.
(2) An unmanaged index generally representative of the performance of government
and corporate bonds with maturities of less than 10 years.
(3) The Fund's investment objective and policies are substantially similar to
those of the Collective Fund. The Collective Fund was not registered under
the Investment Company Act of 1940 (the "1940 Act") and therefore was not
subject to certain investment restrictions imposed by the 1940 Act. If the
Collective Fund had been registered under the 1940 Act, its performance
might have been adversely affected.
(4) For the period January 1, 1999 through June 30, 1999 the aggregate
(non-annualized) total return was -1.84% versus -2.28 for the Lehman
Brothers Intermediate Government/Corporate Bond Index(2).
13
<PAGE> 15
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum sales charge (load) imposed
on purchases 4.00%(1)
Maximum deferred sales charge (load) None
Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets)
Management Fee(s) .55%
Distribution and Service (12b-1)
Fee(s)(2) .25%
Other Expenses 0.37%
Total Fund Operating Expenses 1.17%
</TABLE>
(1) Lower sales charges are available
depending upon the amount invested. See
"Distribution Arrangements."
(2) The Distributor is currently limiting
the distribution fees paid by the Fund for
the current fiscal year to 0.00%. TOTAL FUND
OPERATING EXPENSES AFTER THIS FEE LIMITATION
ARE EXPECTED TO BE 0.92%. This expense
limitation may be revised or canceled at any
time.
This table describes the
fees and expenses that you
may pay if you buy and
hold shares of the Income
Fund.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INCOME FUND $514 $757 $1,018 $1,764
</TABLE>
Use this table to compare
fees and expenses with those
of other Funds. It
illustrates the amount of
fees and expenses you would
pay, assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
- reinvestment of dividends
and distributions
Because this example is
hypothetical and for
comparison purposes only,
your actual costs will be
different.
14
<PAGE> 16
logo
INVESTMENT OBJECTIVES AND STRATEGIES
1ST SOURCE MONOGRAM INCOME EQUITY FUND
TICKER SYMBOL: FMIEX
INVESTMENT OBJECTIVE
The primary investment objective of the Income Equity Fund is to seek capital
appreciation with current income as a secondary objective.
- - POLICIES AND STRATEGIES
The Fund invests primarily in common stocks and securities convertible into
common stocks of companies with market capitalization of at least $100
million which the Adviser believes pay above average dividends or interest.
Consistent with the Income Equity Fund's investment objective, the Fund:
- invests substantially all, but in no event less than 65%, of its total
assets in equity securities
- invests in the following types of equity securities: common stocks,
preferred stocks, securities convertible into or exchangeable for
common stocks, warrants and any rights to purchase common stocks
- may invest in fixed income securities consisting of corporate notes,
bonds and debentures that are rated investment grade at the time of
purchase
- may invest in obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government
- may invest in the securities of foreign issuers and may acquire
sponsored and unsponsored American Depositary Receipts
- may invest in securities of real estate investment trusts (also known
as REITs)
- may engage in repurchase transactions pursuant to which the Fund
purchases a security and simultaneously commits to resell that
security to the seller (either a bank or a securities dealer) at an
agreed upon price on an agreed upon date (usually within seven days of
purchase)
- may engage in options transactions
- may engage in futures transactions as well as invest in options on
futures contracts solely for hedging purposes
- may lend securities to qualified brokers, dealers, banks, and other
financial institutions for the purpose of realizing additional income
- may invest in other investment companies
15
<PAGE> 17
INVESTMENT OBJECTIVES AND STRATEGIES
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
TICKER SYMBOL: FMDEX
INVESTMENT OBJECTIVE
The primary investment objective of the Diversified Equity Fund is to seek
capital appreciation.
- - POLICIES AND STRATEGIES
The Fund invests primarily in common stocks and securities convertible into
common stocks of companies with market capitalizations of $100 million or
greater. The assets of the Fund are allocated among three different
Sub-Advisers representing the following investment styles: (1) investing in
companies believed to have strong value measures whose stock is traded at a
price below its perceived value; (2) investing in companies believed to have
growth potential; and (3) investing in companies that have accelerating
earnings but whose valuations do not yet reflect this positive trend.
Consistent with the Diversified Equity Fund's investment objective, the Fund:
- invests substantially all, but in no event less than 65%, of its total
assets in equity securities
- invests in the following types of equity securities: common stocks,
preferred stocks, securities convertible into or exchangeable for
common stocks, warrants and any rights to purchase common stocks
- may invest in fixed income securities consisting of corporate notes,
bonds and debentures that are rated investment grade at the time of
purchase
- may invest in obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government
- may invest in the securities of foreign issuers and may acquire
sponsored and unsponsored American Depositary Receipts
- may invest in securities of real estate investment trusts (also known
as REITs)
- may engage in repurchase transactions pursuant to which the Fund
purchases a security and simultaneously commits to resell that
security to the seller (either a bank or a securities dealer) at an
agreed upon price on an agreed upon date (usually within seven days of
purchase)
- may engage in options transactions
- may engage in futures transactions as well as invest in options on
futures contracts solely for hedging purposes
- may lend securities to qualified brokers, dealers, banks, and other
financial institutions for the purpose of realizing additional income
- may invest in other investment companies
16
<PAGE> 18
INVESTMENT OBJECTIVES AND STRATEGIES
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
TICKER SYMBOL: FMSPX
INVESTMENT OBJECTIVE
The primary investment objective of the Special Equity Fund is to seek
capital appreciation.
- - POLICIES AND STRATEGIES
The Fund invests primarily in common stocks and securities convertible into
common stocks of companies with market capitalizations ranging on average
between $100 million and $2 billion which the Adviser believes have growth
potential.
Consistent with the Special Equity Fund's investment objective, the Fund:
- invests substantially all, but in no event less than 65%, of its total
assets in equity securities
- invests in the following types of equity securities: common stocks,
preferred stocks, securities convertible into or exchangeable for
common stocks, warrants and any rights to purchase common stocks
- may invest in fixed income securities consisting of corporate notes,
bonds and debentures that are rated investment grade at the time of
purchase
- may invest in obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government
- may invest in the securities of foreign issuers and may acquire
sponsored and unsponsored American Depositary Receipts
- may invest in securities of real estate investment trusts (also known
as REITs)
- may engage in repurchase transactions pursuant to which the Fund
purchases a security and simultaneously commits to resell that
security to the seller (either a bank or a securities dealer) at an
agreed upon price on an agreed upon date (usually within seven days of
purchase)
- may engage in options transactions
- may engage in futures transactions as well as invest in options on
futures contracts solely for hedging purposes
- may lend securities to qualified brokers, dealers, banks, and other
financial institutions for the purpose of realizing additional income
- may invest in other investment companies
17
<PAGE> 19
INVESTMENT OBJECTIVES AND STRATEGIES
1ST SOURCE MONOGRAM INCOME FUND
TICKER SYMBOL: FMEQX
INVESTMENT OBJECTIVE
The investment objective of the Income Fund is to seek current income
consistent with the preservation of capital.
- - POLICIES AND STRATEGIES
The Fund invests primarily in debt securities of all types, including
variable and floating rate securities.
Consistent with the Income Fund's investment objective, the Fund:
- invests substantially all, but in no event less than 65%, of its total
assets in debt securities
- invests in fixed income securities consisting of bonds, fixed income
preferred stocks, debentures, notes, zero-coupon securities,
mortgage-related and other asset-backed securities, state municipal or
industrial revenue bonds, obligations issued or guaranteed by agencies
or instrumentalities of the U.S. Government, debt securities
convertible into, or exchangeable for, common stocks, foreign debt
securities, guaranteed investment contracts, income participation
loans, first mortgage loans and participation certificates in pools of
mortgages issued or guaranteed by agencies or instrumentalities of the
U.S. Government
- may engage in repurchase transactions pursuant to which the Fund
purchases a security and simultaneously commits to resell that
security to the seller (either a bank or a securities dealer) at an
agreed upon price on an agreed upon date (usually within seven days of
purchase)
- may engage in options transactions
- may engage in futures transactions as well as invest in options on
futures contracts solely for hedging purposes
- may lend securities to qualified brokers, dealers, banks, and other
financial institutions for the purpose of realizing additional income
- may purchase securities on a when-issued or delayed-delivery basis in
which a security's price and yield are fixed on a specific date but
payment and delivery are scheduled for a future date beyond the
standard settlement period
- may invest in other investment companies
In the event that the Adviser determines that current market conditions are
not suitable for the Fund's typical investments, the Adviser may instead, for
temporary defensive purposes during such unusual market conditions, invest
all or any portion of the Fund's assets in money market instruments and
repurchase agreements.
18
<PAGE> 20
INVESTMENT OBJECTIVES AND STRATEGIES
INVESTMENT RISKS
RISK FACTORS: ALL FUNDS
An 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:
EQUITY RISK: The value of the equity securities held by the Fund, and thus of
the Fund's shares, can fluctuate-at times dramatically. The prices of equity
securities are affected by various factors, including market conditions,
political and other events, and developments affecting the particular issuer
or its industry or geographic sector. The fact that the Adviser follows a
specific discipline can provide no assurance against a decline in the value
of the Fund's shares.
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.
FOREIGN SECURITIES RISK: Investments in securities of non-U.S. issuers have
special risks. These risks include international economic and political
developments, foreign government actions including restrictions on payments
to non-domestic persons such as the Fund, less regulation, less information,
currency fluctuations and interruptions in currency flow. Investments in
foreign securities also entail higher costs. The Fund's investments in
foreign securities may be in the form of sponsored or unsponsored depositary
receipts, such as American Depositary Receipts ("ADRs"), Global Depositary
Receipts ("GDRs") and European Depositary Receipts ("EDRs"). Ownership of
unsponsored depositary receipts may not entitle the Fund to financial and
other reports from the issuer of the underlying security, and certain costs
related to the receipts that would otherwise be borne by the issuer of a
sponsored depositary receipt may be passed through, in whole or in part, to
holders of the receipts.
INTEREST RATE RISK: Interest rate risk refers to the risk that the value of
the Funds' fixed income securities can change in response to changes in
prevailing interest rates causing volatility and possible loss of value as
rates increase.
CREDIT RISK: Credit risk refers to the risk related to the credit quality of
the issuer of a security held in a Fund's portfolio. The Funds could lose
money if the issuer of a security is unable to meet its financial
obligations.
YEAR 2000 RISK: Like other funds and business organizations around the world,
the Funds could be adversely affected if the computer systems used by the
Adviser, the Sub-Adviser and the Fund's other service providers do not
properly process and calculate date related information for the year 2000 and
beyond. In addition, Year 2000 issues may adversely affect 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
adequately or timely do so.
19
<PAGE> 21
INVESTMENT OBJECTIVES AND STRATEGIES
INVESTMENT RISKS
CONTINUED
The Funds have been informed 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 to services critical
to the Funds' operations associated with Year 2000 issues. Internal efforts
include a commitment to dedicate 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. The Funds' Adviser and service providers
are likewise seeking assurances from their respective vendors and suppliers
that such entities are addressing any Year 2000 issues, and each provider
intends to engage, where appropriate, in private and industry or "streetwide"
interface testing of systems 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
accurately assessed 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 financial condition of
those of the Funds. The Funds and the Adviser will continue to closely
monitor developments relating to this issue, including development by the
Adviser and the Funds' service providers of contingency plans for providing
back-up computer services in the event of a systems failure or the inability
of any provider to achieve Year 2000 readiness. Separately, the Adviser will
monitor potential investment risk related to Year 2000 issues.
Investments in the Funds are not deposits of 1st Source Bank or any of its
affiliates and are not insured or guaranteed by the Federal Deposit Insurance
Corporation (the "FDIC") or any other government agency.
20
<PAGE> 22
logo
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
---------------------------
HOW NAV IS CALCULATED
The NAV is calculated by
adding the total value of a
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
newspapers.
---------------------------
Per share net asset value (NAV) for
each of the Funds is determined and
its shares are priced at the close of
regular trading on the New York Stock
Exchange, normally at 4:00 p.m.
Eastern time on days the Exchange is
open.
Your order for purchase, sale or
exchange of shares is priced at the
next NAV calculated after your order
is accepted by the Fund plus any
applicable sales charge as noted in
the section on "Distribution
Arrangements/Sales Charges." This is
what is known as the offering price.
Each Fund's securities are generally
valued at current market prices. If
market quotations are not available,
prices will be based on fair value as
determined by the Funds' Trustees.
- - PURCHASING AND ADDING TO YOUR SHARES
<TABLE>
<CAPTION>
MINIMUM MINIMUM
INITIAL SUBSEQUENT
ACCOUNT TYPE INVESTMENT INVESTMENT
<S> <C> <C>
Regular
(non-retirement) $1,000 $25
----------------------------------------------------------
Retirement $1,000 $25
----------------------------------------------------------
Automatic Investment
Plan Regular $ 25 $25
----------------------------------------------------------
Retirement $ 250 $25
</TABLE>
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 may waive its minimum purchase
requirement and the Distributor may reject
a purchase order if it considers it in the
best interest of the Fund and its
shareholders
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.
21
<PAGE> 23
SHAREHOLDER INFORMATION
- -
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
BY REGULAR MAIL
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, bank draft or money order payable to "[name of Fund]."
3. Mail to: 1st Source Monogram Funds, P.O. Box 182084, Columbus, OH
43218-2084
Subsequent:
1. Use the investment slip attached to your account statement. Or, if
unavailable,
2. Include the following information on a piece of paper:
- Fund name
- Amount invested
- Account name
- Account number
Include your account number on your check.
3. Mail to: 1st Source Monogram Funds, P.O. Box 182084, Columbus, OH
43218-2084
BY OVERNIGHT SERVICE
SEE INSTRUCTIONS 1-2 ABOVE FOR SUBSEQUENT INVESTMENTS.
4. Send to: 1st Source Monogram Funds,
c/o BISYS Fund Services,
Attn: Shareholder Services, 3435 Stelzer Road, Columbus, OH 43219.
BY WIRE TRANSFER
Note: Your bank may charge a wire transfer fee.
For initial investment:
Fax the completed application, along with a request for a confirmation number
to 1-614-470-8718. Follow the instructions below after receiving your
confirmation number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
Name of Bank: Fifth Third Bank
Routing Number: ABA #042000314
DDA#: 99941125
Include:
Your name
Your confirmation number
AFTER INSTRUCTING YOUR BANK TO WIRE THE FUNDS, CALL 1-800-766-8938 TO ADVISE
US OF THE AMOUNT BEING TRANSFERRED AND THE NAME OF YOUR BANK
You can add to your account by using the convenient options described below.
The Funds reserve the right to change or eliminate these privileges at any
time with 60 days notice.
22
<PAGE> 24
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
AUTO INVEST PLAN
You can make automatic investments in the Funds from your bank account.
Automatic investments can be as little as $25, once you've invested the $25
minimum required to open the account.
To invest regularly from your bank account:
- Complete the Auto Invest Plan portion on your Account Application.
Make sure you note:
- Your bank name, address and ABA number
- Your checking or savings account number
- The amount you wish to invest automatically (minimum $25)
- How often you want to invest (monthly or quarterly)
- Attach a voided personal check or savings deposit slip.
-----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested dividends and
distributions. Capital gains are distributed at least annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE
OWNED YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION
DATE, SOME OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A
DISTRIBUTION AND MAY BE SUBJECT TO INCOME TAX.
-----------------------------------------------------------------------------
23
<PAGE> 25
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
INSTRUCTIONS FOR SELLING SHARES
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are
technically selling shares when you request
a withdrawal in cash. This is also known as
redeeming shares or a redemption of 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 Fund, 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.
BY TELEPHONE (unless you have declined telephone sales privileges)
1. Call 1-800-766-8938 with instructions as to how you wish to receive your
funds (check, wire, electronic transfer).
BY MAIL
1. Call 1-800-766-8938 to request redemption forms or write a letter of
instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to: 1st Source Monogram Funds P.O. Box 182084 Columbus, OH
43218-2084
BY OVERNIGHT SERVICE
SEE INSTRUCTION 1 ABOVE UNDER "BY MAIL."
2. Send to: 1st Source Monogram Funds, Attn: Shareholder Services, 3435
Stelzer Road, Columbus, OH 43219
WIRE TRANSFER
You must indicate this option on your application.
The Fund may charge a wire transfer fee.
Note: Your financial institution may also charge a separate fee.
Call 1-800-766-8938 to request a wire transfer.
If you call by 4 p.m. Eastern time, your payment will normally be wired to
your bank on the next business day.
AUTOMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly or
quarterly basis. The minimum withdrawal is $100. To activate this feature:
- Make sure you've checked the appropriate box and completed the Automatic
Withdrawal section of the Account Application. Or call 1-800-766-8938.
- Include a voided personal check.
- Your account must have a value of $5,000 or more to start withdrawals.
- If the value of your account falls below $500, you may be asked to add
sufficient funds to bring the account back to $500, or the Fund may close
your account and mail the proceeds to you.
24
<PAGE> 26
SHAREHOLDER INFORMATION
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. Redemption requests requiring a signature guarantee which include each of
the following:
- Redemptions over $10,000
- Your account registration or the name(s) in your account has changed
within the last 15 days
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- The redemption proceeds are being transferred to another Fund account
with a different registration.
A signature guarantee can be obtained from a financial institution, such as a
bank, broker-dealer, credit union, clearing agency, or savings association.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Given these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Transfer Agent may be liable for losses due to
unauthorized transactions.
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 SEC 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 a Fund's
operations (for example, more than 1% of the Fund's net assets). If a 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 current NAV.
25
<PAGE> 27
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
CONTINUED
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash: If
distribution checks are returned and marked as "undeliverable" or 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 your
account at the then current NAV.
- - DISTRIBUTION ARRANGEMENTS/SALES CHARGES
This section describes the sales charges and fees you will pay as an investor
in the Funds and ways to qualify for reduced sales charges.
<TABLE>
<S> <C>
Sales Charge (Load) Front-end sales charge; reduced sales charges available.
Distribution and Service Subject to annual distribution and shareholder servicing
(12b-1) Fee fees of up to .25% of the Fund's total assets.
</TABLE>
CALCULATION OF SALES CHARGE
Shares of the Funds are sold at their public offering price. This price
includes the initial sales charge. Therefore, part of the money you invest
will be used to pay the sales charge. The remainder is invested in Fund
shares. The sales charge decreases with larger purchases. There is no sales
charge on reinvested dividends and distributions.
26
<PAGE> 28
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
The current sales charge rates for each of the Funds are as follows:
FOR THE INCOME EQUITY, DIVERSIFIED EQUITY AND SPECIAL EQUITY FUNDS
<TABLE>
<CAPTION>
DEALER DISCOUNTS
AND BROKERAGE
COMMISSIONS
SALES CHARGE SALES CHARGE AS % OF
YOUR AS A % OF AS A % OF PUBLIC OFFERING
INVESTMENT OFFERING PRICE YOUR INVESTMENT PRICE
<S> <C> <C> <C>
Less than $50,000 5.00% 5.26% 4.50%
------------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17% 3.60%
------------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09% 2.70%
------------------------------------------------------------------------------------------
$250,000 but less than $500,000 2.00% 2.04% 1.80%
------------------------------------------------------------------------------------------
$500,000 but less than $1,000,000 1.50% 1.52% 1.35%
------------------------------------------------------------------------------------------
$1,000,000 and above 0.00% 0.00% 0.00%
</TABLE>
FOR THE INCOME FUND
<TABLE>
<CAPTION>
DEALER DISCOUNTS
AND BROKERAGE
COMMISSIONS
SALES CHARGE SALES CHARGE AS % OF
YOUR AS A % OF AS A % OF PUBLIC OFFERING
INVESTMENT OFFERING PRICE YOUR INVESTMENT PRICE
<S> <C> <C> <C>
Less than $50,000 4.00% 4.17% 3.60%
------------------------------------------------------------------------------------------
$50,000 but less than $100,000 3.50% 3.63% 3.15%
------------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09% 2.70%
------------------------------------------------------------------------------------------
$250,000 but less than $500,000 2.00% 2.04% 1.80%
------------------------------------------------------------------------------------------
$500,000 but less than $1,000,000 1.50% 1.52% 1.35%
------------------------------------------------------------------------------------------
$1,000,000 and above 0.00% 0.00% 0.00%
</TABLE>
27
<PAGE> 29
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
SALES CHARGE REDUCTIONS
Reduced sales charges are available to shareholders with investments of
$50,000 or more. In addition, you may qualify for reduced sales charges under
the following circumstances:
LETTER OF INTENT: You inform the Fund in writing that you intend to purchase
enough shares over a 13-month period to qualify for a reduced sales charge.
You must include a minimum of 5% of the total amount you intend to purchase
with your letter of intent.
RIGHTS OF ACCUMULATION: When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for reduced
sales charges, your added investment will qualify for the reduced sales
charge.
COMBINATION PRIVILEGE: Combine accounts of multiple Funds or accounts of
immediate family household members (spouse and children under 21) to achieve
reduced sales charges.
SALES CHARGE WAIVERS
The following qualify for waivers of front end and sales charges:
(1) Accounts for which FSC, the Adviser, banks and trust companies or one of
their affiliates acts in a fiduciary, advisory, agency, custodial (other
than for individual retirement accounts), or similar capacity;
(2) Officers, trustees, directors, employees and retired employees (including
spouses and children under the age of 21 of the foregoing) of FSC, the
Adviser, the Group, BISYS and any affiliates thereof;
(3) Purchasers pursuant to the terms of a pay-roll deduction plan, a 401 (k)
plan or a 403 (b) plan which by its terms permits purchases of Shares of
the Funds;
(4) Purchasers using solely the proceeds from a distribution from an account
for which the Adviser or an affiliate serves in a trust, fiduciary or
agency capacity (this waiver only applies to the initial purchase of
Shares with such proceeds);
(5) Brokers, dealers and agents for their own account, who have a sales
agreement with the Distributor, and their employees (and their spouses
and children under the age of 21);
(6) Orders placed on behalf of other investment companies distributed by the
BISYS Group, Inc. or its affiliated companies, including the Distributor;
(7) Investment advisers or financial planners regulated by a federal or state
governmental authority who are purchasing Shares for their own account or
for an account for which they are authorized to make investment decisions
(i.e., a discretionary account) and who charge a management, consulting
or other fee for their services, and clients of such investment advisers
or financial planners who place trades for their own accounts if the
accounts are linked to the master account of such investment adviser or
financial planner on the books and records of a broker or agent; and
(8) Investors purchasing Shares with proceeds from a redemption of shares of
another open-end investment company (other than the Group) on which a
sales charge was paid if (i) such redemption occurred within sixty (60)
days prior to the date of the purchase order and (ii) satisfactory
evidence of the purchaser's eligibility is provided to the Distributor at
the time of purchase (e.g., a confirmation of the redemption).
The Distributor and the Adviser, at their expense, may provide compensation
to dealers in connection with sales of Shares of a Fund.
- -
28
<PAGE> 30
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
DISTRIBUTION AND SERVICE (12b-1) FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and
distribution of a Fund's shares and/or for providing shareholder services.
12b-1 fees are paid from Fund assets on an ongoing basis, and will increase
the cost of your investment. Long-term shareholders may pay indirectly more
than the equivalent of the maximum permitted front-end sales charge due to
the recurring nature of 12b-1 distribution and service fees.
ADMINISTRATIVE SERVICES PLAN
The Funds participate in an Administrative Services Plan pursuant to which
each Fund is authorized to pay compensation to banks and other financial
institutions, which may include the Advisers, which agree to provide certain
ministerial, recordkeeping and/or administrative support services for their
customers or account holders who invest in the Funds. The Funds pay a fee
under the Administrative Services Plan an annual rate of up to 0.25% of the
average daily net asset value of shares of that Fund owned by such customers
of such organizations for whom services are provided.
- - EXCHANGING YOUR SHARES
You can exchange your shares in one Fund for shares of another 1st Source
Monogram Fund, usually without paying additional sales charges (see "Notes"
below). No transaction fees are charged for exchanges.
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to 1st Source Monogram
Funds, c/o BISYS Fund Services Ohio, Inc. 3435 Stelzer Road, Columbus OH
43219, or by calling 1-800-766-8938. Please provide the following
information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security number)
- Dollar value or number of shares to be exchanged
- The name of the Fund from which the exchange is to be made
- The name of the Fund into which the exchange is being made
See "Selling Your Shares" for important information about telephone
transactions.
NOTES ON EXCHANGES
- To prevent disruption in the management of the Funds, due to market
timing strategies, exchange activity may be limited to 4 exchanges within
a calendar year.
- The registration and tax identification numbers of the two accounts must
be identical.
- The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon a 60-day notice to shareholders.
- Exchanges from the Income Fund will pay any difference in sales charges
when exchanging shares into another Fund.
29
<PAGE> 31
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
CONTINUED
1ST SOURCE MONOGRAM
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
A 1st Source Monogram IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement
programs. A 1st Source Monogram IRA contribution may be tax-deductible and
earnings are tax-deferred. Under the Tax Reform Act of 1986, the tax
deductibility of IRA contributions is restricted or eliminated for
individuals who participate in certain employer pension plans and whose
annual income exceeds certain limits. Existing IRAs and future contributions
up to the IRA maximums, whether deductible or not, still earn income on a
tax-deferred basis.
All 1st Source Monogram IRA distribution requests must be made in writing to
BISYS Fund Services. Any additional deposits to a 1st Source Monogram IRA
must distinguish the type and year of the contribution.
For more information on a 1st Source Monogram IRA call the Funds at
1-800-766-8938. Shareholders are advised to consult a tax adviser regarding
IRA contribution and withdrawal requirements and restrictions.
- - DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income a Fund receives in the form of dividends is paid out, less
expenses, to its shareholders. Income dividends on the Funds (other than the
Special Equity Fund) are usually paid monthly. Dividends on the Special
Equity Fund are paid quarterly. Capital gains for all Funds are distributed
at least annually.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
An exchange of shares is considered a sale, and any related gains may be
subject to applicable taxes.
Dividends are taxable as ordinary income. Taxation on capital gains will vary
with the length of time the Fund has held the security -- not how long the
shareholder has been in the Fund.
Dividends are taxable in the year in which they are declared, even if they
are paid and appear on your account statement the following year.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements.
There is a penalty on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
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.
30
<PAGE> 32
logo
FUND MANAGEMENT
THE INVESTMENT ADVISER
1st Source Bank, 100 North Michigan Street, South Bend, Indiana 46601, is the
investment adviser for each Fund. The Adviser is a wholly owned subsidiary of
1st Source Corporation, a publicly held bank holding company. The Adviser,
which was founded in 1936, and its affiliates administer and manage, on
behalf of their clients, trust assets of approximately $1.8 billion. The
Adviser has over 60 years of banking experience.
1st Source Bank makes the day-to-day investment decisions for the Funds. In
addition, 1st Source Bank continuously reviews, supervises and administers
each Fund's investment programs. For these advisory services, the Funds paid
the following fees during the fiscal year ended March 31, 1999:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 03/31/99
<S> <C>
------------------------------
Income Equity Fund 0.80%
------------------------------
Diversified Equity Fund 0.99%
------------------------------
Special Equity Fund 0.80%
------------------------------
Income Fund 0.55%
-------------------------------------------------------------------------------------
</TABLE>
- - PORTFOLIO MANAGERS
The following individuals serve as portfolio managers for the Funds and are
primarily responsible for the day-to-day management of the Funds' portfolios:
<TABLE>
<S> <C>
INCOME EQUITY FUND
RALPH SHIVE Mr. Shive has served as Vice President and an Investment
Officer of the Adviser since September 1989. Mr. Shive has
worked as an analyst and portfolio manager for 20 years
after receiving his BBA from Southern Methodist University.
Mr. Shive is also a Chartered Financial Analyst.
SPECIAL EQUITY FUND
BRIAN A. BYTHROW Mr. Bythrow joined the Adviser in April 1998. From May 1996
to April 1998, Mr. Bythrow served as an equity analyst with
First of America Investment Corp. From January 1995 to May
1996, Mr. Bythrow worked as a credit analyst with Shoreline
Bank, and from July 1994 to December 1994, he was a
financial adviser with Pentad Securities.
INCOME FUND
PASCAL M. ROMANO Mr. Romano joined the Adviser in January 1998. From January
1996 to January 1998, Mr. Romano had served as Assistant
Vice President, Trust Officer and a portfolio manager with
Citizens Banking Corporation. From 1985 to December 1995,
Mr. Romano was employed by Alexander Hamilton Life Insurance
Company where for the last three years he served as
Assistant Vice President and portfolio manager. Mr. Romano
is also a Chartered Financial Analyst.
</TABLE>
31
<PAGE> 33
FUND MANAGEMENT
PORTFOLIO MANAGERS
CONTINUED
<TABLE>
<S> <C>
DIVERSIFIED EQUITY FUND The Adviser has retained three sub-investment advisers to
each manage a portion of the Fund's assets: Miller Anderson
& Sherrerd LLP ("Miller Anderson"); Loomis Sayles & Company,
L.P. ("Loomis"); and Standish, Ayer & Wood, Inc.
("Standish")
</TABLE>
The following describes each of the three Sub-Advisers and the individuals at
the Sub-Advisers who manage the portions of the Fund's assets allocated to
them:
<TABLE>
<S> <C>
Miller Anderson was founded in 1969 and is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Miller Anderson has approximately $62.5 billion in assets
under management, of which approximately $3.9 billion is
managed using Miller Anderson's value style. The Miller
Anderson value strategy is team managed by Robert Marcin,
Nicholas Kouch, and Richard Behler. Robert J. Marcin, CFA is
primarily responsible for the day-to-day management of that
portion of the Diversified Equity Fund's portfolio managed
by Miller Anderson. Mr. Marcin has been a Partner with
Miller Anderson since 1994 and has had more than 15 years of
investment experience.
Loomis is a limited partnership, the sole general partner of
which is Loomis, Sayles & Company, Incorporated. Loomis was
founded in 1926 and has approximately $68 billion in assets
under management. Robert Takazawa, Jr. is primarily
responsible for the day-to-day management of that portion of
the Diversified Equity Fund's portfolio managed by Loomis.
Mr. Takazawa has been a Vice President of Loomis since
January, 1994 and has had more than 25 years of investment
experience.
Standish is a Massachusetts corporation founded in 1933 that
is owned and operated by its Directors. Standish currently
manages over $46 billion in assets. Ralph S. Tate, CFA is
primarily responsible for the day-to-day management of that
portion of the Diversified Equity Fund's portfolio managed
by Standish. Mr. Tate has been a Managing Director of
Standish since 1995. Mr. Tate is also President of Standish
International Management Company, L.P.
</TABLE>
The Statement of Additional Information has more detailed information about
the Adviser and other service providers.
- - THE DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services, LP is each Fund's distributor and BISYS Fund Services
Ohio, Inc. is each Fund's administrator. Their address is 3435 Stelzer Road,
Columbus, OH 43219.
CAPITAL STRUCTURE. The Coventry Group was organized as a Massachusetts
business trust on January 8, 1992 and overall responsibility for the
management of the Funds is vested in the 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.
32
<PAGE> 34
logo
FINANCIAL HIGHLIGHTS INCOME EQUITY FUND
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each Fund's
financial performance since its inception. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in a
Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, independent
certified public accountants for the Funds, whose report, along with each
Fund's financial statements, are included in the annual report of the Funds,
which is available upon request.
<TABLE>
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30,
1999(A) 1998 1997(b)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.60 $ 12.28 $ 10.00
------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.20 0.27 0.20
Net realized and unrealized gains (losses) on
investments (0.26) 1.79 2.32
------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.06) 2.06 2.52
------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
From net investment income (0.20) (0.27) (0.19)
From net capital gains (1.34) (1.47) (0.05)
------------------------------------------------------------------------------------------------------------------
Total distributions (1.54) (1.74) (0.24)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.00 $ 12.60 $ 12.28
------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 0.04%(c) 18.15% 25.58%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $ 50,903 $ 52,450 $ 39,196
Ratio of expenses to average net assets 1.21%(d) 1.21% 1.37%(d)
Ratio of net investment income to average net
assets 2.29%(d) 2.16% 2.38%(d)
Ratio of expenses to average net assets* 1.46%(d) 1.46% 1.62%(d)
Portfolio turnover rate 34.41% 70.46% 38.49%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) For the period from July 1, 1998 through March 31, 1999.
(b) Commencement of operations of the Fund began September 25, 1996.
(c) Not annualized.
(d) Annualized.
33
<PAGE> 35
FINANCIAL HIGHLIGHTS DIVERSIFIED EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30,
1999(A) 1998 1997(b)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.31 $ 11.80 $ 10.00
------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (0.02) (0.02) (0.01)
Net realized and unrealized gains (losses) on
investments (0.11) 3.00 2.03
------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.13) 2.98 2.02
------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
From net investment income -- -- --
From net capital gains (1.92) (1.47) (0.22)
------------------------------------------------------------------------------------------------------------------
Total distributions (1.92) (1.47) (0.22)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.26 $ 13.31 $ 11.80
------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) (0.59)%(c) 27.85% 20.42%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $ 85,361 $ 98,083 $ 74,990
Ratio of expenses to average net assets 1.43%(d) 1.48% 1.62%(d)
Ratio of net investment income to average net
assets (0.24)%(d) (0.18)% (0.10)%(d)
Ratio of expenses to average net assets* 1.68%(d) 1.73% 1.87%(d)
Portfolio turnover rate 107.94% 95.13% 76.54%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) For the period from July 1, 1998 through March 31, 1999.
(b) Commencement of operations of the Fund began September 23, 1996.
(c) Not annualized.
(d) Annualized.
34
<PAGE> 36
FINANCIAL HIGHLIGHTS SPECIAL EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30,
1999(A) 1998 1997(b)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.63 $ 9.59 $ 10.00
------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income -- -- --
Net realized and unrealized gains (losses) on
investments (0.44) 0.17 (0.10)
------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.44) 0.17 (0.10)
------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
From net investment income (0.01) -- --
From net capital gains -- (0.13) --
In excess of realized gains -- -- (0.31)
------------------------------------------------------------------------------------------------------------------
Total distributions (0.01) (0.13) (0.31)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.18 $ 9.63 $ 9.59
------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) (4.55)%(c) 1.86% (1.03)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $ 30,946 $ 35,441 $ 30,524
Ratio of expenses to average net assets 1.24%(d) 1.27% 1.39%(d)
Ratio of net investment income to average net
assets 0.02%(d) 0.04% 0.05%(d)
Ratio of expenses to average net assets* 1.49%(d) 1.52% 1.65%(d)
Portfolio turnover rate 247.95% 124.55% 152.81%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
** Amount is less than $0.005.
(a) For the period from July 1, 1998 through March 31, 1999.
(b) Commencement of operations of the Fund began September 20, 1996.
(c) Not annualized.
(d) Annualized.
35
<PAGE> 37
FINANCIAL HIGHLIGHTS INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30,
1999(a) 1998 1997(b)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.34 $ 10.13 $ 10.00
------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.41 0.60 0.44
Net realized and unrealized gains (losses) on
investments (0.10) 0.21 0.12
------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.31 0.81 0.56
------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
From net investment income (0.41) (0.60) (0.43)
From net capital gains (0.25) -- --
In excess of realized gains -- -- --
------------------------------------------------------------------------------------------------------------------
Total distributions (0.66) (0.60) (0.43)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.99 $ 10.34 $ 10.13
------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 3.00%(c) 8.24% 5.71%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $ 67,251 $ 65,975 $ 54,789
Ratio of expenses to average net assets 0.92%(d) 0.92% 1.05%(d)
Ratio of net investment income to average net
assets 5.23%(d) 5.90% 5.71%(d)
Ratio of expenses to average net assets* 1.17%(d) 1.17% 1.30%(d)
Portfolio turnover rate 301.44% 208.32% 118.33%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) For the period from July 1, 1998 through March 31, 1999.
(b) Commencement of operations of the Fund began September 24, 1996.
(c) Not annualized.
(d) Annualized.
36
<PAGE> 38
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 39
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS:
The Funds' annual and semi-annual reports to shareholders contain additional
information on each Fund's investments. 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 last 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 RECEIVE FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION
AND DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING A BROKER THAT SELLS THE
FUNDS. OR CONTACT THE FUNDS AT:
1ST SOURCE MONOGRAM FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-766-8938
You can review each Fund's reports and the SAI at the Public Reference Room of
the Securities and Exchange Commission. You can get text-only copies:
- - For a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
- - Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-6526.
1stS 0001899
<PAGE> 40
1st Source Monogram Income Equity Fund
1st Source Monogram Diversified Equity Fund
1st Source Monogram Special Equity Fund
1st Source Monogram Income Fund
Each an Investment Portfolio of
The Coventry Group
Statement of Additional Information
August 1, 1999
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the prospectus for the 1st Source Monogram Income Equity
Fund, 1st Source Monogram Diversified Equity Fund, 1st Source Monogram Special
Equity Fund and 1st Source Monogram Income Fund dated the same date as the date
hereof (the "Prospectus"), hereinafter referred to collectively as the "Funds"
and singly, a "Fund". The Funds are separate investment portfolios of The
Coventry Group (the "Group"), an open-end management investment 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
3435 Stelzer Road, Columbus, Ohio 43219, or by telephoning toll free (800)
766-8938.
<PAGE> 41
STATEMENT OF ADDITIONAL INFORMATION
THE COVENTRY GROUP
The Coventry Group (the "Group") is an open-end management investment
company which currently offers its shares in separate series. This Statement of
Additional Information deals with four of such portfolios, 1st Source Monogram
Diversified Equity Fund (the "Diversified Equity Fund"), 1st Source Monogram
Income Equity Fund (the "Income Equity Fund"), 1st Source Monogram Special
Equity Fund (the "Special Equity Fund") and 1st Source Monogram Income Fund (the
"Income Fund"). 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.
BANK OBLIGATIONS. Each of the Funds may invest in bank obligations such
as bankers' acceptances, certificates of deposit, and demand and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks having, at the time of investment, capital, surplus,
and undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements).
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return. Certificates of deposit and
demand and time deposits will be those of domestic banks and savings and loan
associations, if (a) at the time of investment the depository institution has
capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements), or (b) the principal
amount of the instrument is insured in full by the Federal Deposit Insurance
Corporation.
COMMERCIAL PAPER. Commercial paper consists of unsecured promissory
notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return.
The Funds will purchase commercial paper consisting of issues rated at
the time of purchase by one or more appropriate nationally recognized
statistical rating organizations ("NRSRO") (e.g., Standard & Poor's Corporation
and Moody's Investors Service, Inc.) in one of the two highest rating categories
for short-term debt obligations. The Funds may also invest in commercial paper
that is not rated but that is determined by the Adviser or the applicable
Sub-
- 2 -
<PAGE> 42
Adviser, as the case may be, to be of comparable quality to instruments that
are so rated by an NRSRO that is neither controlling, controlled by, or under
common control with the issuer of, or any issuer, guarantor, or provider of
credit support for, the instruments. For a description of the rating symbols of
the NRSROs, see the Appendix.
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand
notes, in which the Income Fund may invest, are unsecured demand notes that
permit the indebtedness thereunder to vary and provide for periodic adjustments
in the interest rate according to the terms of the instrument. Because master
demand notes are direct lending arrangements between a Fund and the issuer, they
are not normally traded. Although there is no secondary market in the notes, a
Fund may demand payment of principal and accrued interest at any time within 30
days. While such notes are not typically rated by credit rating agencies,
issuers of variable amount master demand notes (which are normally
manufacturing, retail, financial and other business concerns), must satisfy, for
purchase by the Income Fund, the same criteria as set forth above for commercial
paper for such Fund. The Adviser will consider the earning power, cash flow, and
other liquidity ratios of the issuers of such notes and will continuously
monitor their financial status and ability to meet payment on demand. In
determining average weighted portfolio maturity, a variable amount master demand
note will be deemed to have a maturity equal to the longer of the period of time
remaining until the next interest rate adjustment or the period of time
remaining until the principal amount can be recovered from the issuer through
demand.
FOREIGN INVESTMENT. Investments in securities issued by foreign issuers,
including ADRs, may subject the Funds to investment risks that differ in some
respects from those related to investment in obligations of U.S. domestic
issuers or in U.S. securities markets. Such risks include future adverse
political and economic developments, possible seizure, nationalization, or
expropriation of foreign investments, less stringent disclosure requirements,
the possible establishment of exchange controls or taxation at the source, or
the adoption of other foreign governmental restrictions. A Fund will acquire
such securities only when the Adviser or the applicable Sub-Adviser, as the case
may be, believes the risks associated with such investments are minimal.
U.S. GOVERNMENT OBLIGATIONS. Each Fund may invest in obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities.
Obligations of certain agencies and instrumentalities of the U.S. Government are
supported by the full faith and credit of the U.S. Treasury; others are
supported by the right of the issuer to borrow from the Treasury; others are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.
VARIABLE AND FLOATING RATE SECURITIES. The Income Fund may acquire
variable and floating rate securities, subject to such Fund's investment
objectives, policies and restrictions. A variable rate security is one whose
terms provide for the adjustment of its interest rate on set dates and which,
upon such adjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate security is one whose terms provide
for the adjustment of its interest rate whenever a specified interest rate
changes and which, at any time,
- 3 -
<PAGE> 43
can reasonably be expected to have a market value that approximates its par
value. Such securities are frequently not rated by credit rating agencies;
however, unrated variable and floating rate securities purchased by the Income
Fund will be determined by the Adviser to be of comparable quality at the time
of purchase to rated instruments eligible for purchase under such Fund's
investment policies. In making such determinations, the Adviser will consider
the earning power, cash flow and other liquidity ratios of the issuers of such
notes (such issuers include financial, merchandising, bank holding and other
companies) and will continuously monitor their financial condition. Although
there may be no active secondary market with respect to a particular variable or
floating rate security purchased by the Income Fund, the Income Fund may resell
the security at any time to a third party. The absence of an active secondary
market, however, could make it difficult for the Income Fund to dispose of a
variable or floating rate security in the event the issuer of the security
defaulted on its payment obligations and the Income Fund could, as a result or
for other reasons, suffer a loss to the extent of the default. To the extent
that there exists no readily available market for such security and the Income
Fund is not entitled to receive the principal amount of a note within seven
days, such a security will be treated as an illiquid security for purposes of
calculation of such Fund's limitation on investments in illiquid securities, as
set forth in the Income Fund's investment restrictions. Variable or floating
rate securities may be secured by bank letters of credit.
RESTRICTED SECURITIES. Securities in which the Funds may invest include
securities issued by corporations without registration under the Securities Act
of 1933, as amended (the "1933 Act"), such as securities issued in reliance on
the so-called "private placement" exemption from registration which is afforded
by Section 4(2) of the 1933 Act ("Section 4(2) securities"). Section 4(2)
securities are restricted as to disposition under the Federal securities laws,
and generally are sold to institutional investors such as the Funds who agree
that they are purchasing the securities for investment and not with a view to
public distribution. Any resale must also generally be made in an exempt
transaction. Section 4(2) securities are normally resold to other institutional
investors through or with the assistance of the issuer or investment dealers who
make a market in such Section 4(2) securities, thus providing liquidity. Any
such restricted securities will be considered to be illiquid for purposes of a
Fund's limitations on investments in illiquid securities unless, pursuant to
procedures adopted by the Board of Trustees of the Group, the Adviser or
Subadviser, as the case may be, has determined such securities to be liquid
because such securities are eligible for resale under Rule 144A under the 1933
Act and are readily saleable. Each Fund will limit its investment in Section
4(2) securities to not more than 10% of its net assets.
OPTIONS TRADING. Each Fund may purchase and write (sell) put and call
options. A put option gives the purchaser the right to sell the underlying
security at the stated exercise price at any time prior to the expiration date
of the option, regardless of the market price of the security. A call option
gives the purchaser of the option the right to buy, and a writer has the
obligation to sell, the underlying security at the stated exercise price at any
time prior to the expiration of the option, regardless of the market price of
the security. The premium paid to the writer is consideration for undertaking
the obligations under the option contract. Put and call options purchased by the
Funds will be valued at the last sale price, or in the absence of such a price,
at the mean between bid and asked price.
When a Fund writes a call option, an amount equal to the net premium
(the premium less
- 4 -
<PAGE> 44
the commission) received by the Fund is included in the liability section of the
Fund's statement of assets and liabilities as a deferred credit. The amount of
the deferred credit will be subsequently marked-to-market to reflect the current
value of the option written. The current value of the traded option is the last
sale price or, in the absence of a sale, the mean between bid and asked price.
If an option expires on the stipulated expiration date or if the Fund enters
into a closing purchase transaction, it will realize a gain (or a loss if the
cost of a closing purchase transaction exceeds the net premium received when the
option is sold) and the deferred credit related to such option will be
eliminated. If a call option is exercised, the Fund may deliver the underlying
security in the open market. In either event, the proceeds of the sale will be
increased by the net premium originally received and the Fund will realize a
gain or loss.
Each Fund may also purchase or sell (write) index options. Index options
(or options on securities indices) are similar in many respects to options on
securities except that an index option gives the holder the right to receive,
upon exercise, cash instead of securities, if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
FUTURES CONTRACTS. As discussed in the Prospectus, each of the Funds may
enter into futures contracts. This investment technique is designed primarily to
hedge against anticipated future changes in market conditions which otherwise
might adversely affect the value of securities which a Fund holds or intends to
purchase. For example, when interest rates are expected to rise or market values
of portfolio securities are expected to fall, a Fund can seek through the sale
of futures contracts to offset a decline in the value of its portfolio
securities. When interest rates are expected to fall or market values are
expected to rise, a Fund, through the purchase of such contracts, can attempt to
secure better rates or prices for the Fund than might later be available in the
market when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Futures transactions involve brokerage costs and require a Fund to
segregate liquid assets, such as cash, U.S. Government securities or other
liquid securities, to cover its performance under such contracts. A Fund may
lose the expected benefit of futures transactions if interest rates, securities
prices or foreign exchange rates move in an unanticipated manner. Such
unanticipated changes may also result in poorer overall performance than if the
Fund had not entered into any futures transactions. In addition, the value of a
Fund's futures positions may not prove to be perfectly or even highly correlated
with the value of its portfolio securities, limiting the Fund's ability to hedge
effectively against interest rate and/or market risk and giving rise to
additional risks. There is no assurance of liquidity in the secondary market for
purposes of closing out futures positions.
REGULATORY RESTRICTIONS. To the extent required to comply with
Securities and Exchange Commission Release No. IC-10666, when purchasing a
futures contract or writing a put option, a Fund will maintain in a segregated
account cash or liquid securities equal to the value of such contracts.
- 5 -
<PAGE> 45
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being classified as a "commodity
pool operator," a Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits for futures
contracts held by such Fund plus premiums paid by it for open options on futures
would exceed 5% of such Fund's total assets. A Fund will not engage in
transactions in financial futures contracts or options thereon for speculation,
but only to attempt to hedge against changes in market conditions affecting the
values of securities which such Fund holds or intends to purchase.
WHEN-ISSUED SECURITIES. The Income Fund may purchase securities on a
"when-issued" basis (i.e., for delivery beyond the normal settlement date at a
stated price and yield). When such Fund agrees to purchase securities on a
"when-issued" basis, the Fund's custodian will set aside cash or liquid
portfolio securities equal to the amount of the commitment in a separate
account. Normally, the Income Fund's custodian will set aside portfolio
securities to satisfy the purchase commitment, and in such a case, such Fund may
be required subsequently to place additional assets in the separate account in
order to assure that the value of the account remains equal to the amount of the
Income Fund's commitment. It may be expected that the Income Fund's net assets
will fluctuate to a greater degree when it sets aside portfolio securities to
cover such purchase commitments than when it sets aside cash. In addition,
because the Income Fund will set aside cash or liquid portfolio securities to
satisfy its purchase commitments in the manner described above, such Fund's
liquidity and the ability of the Adviser to manage it might be affected in the
event its commitments to purchase "when-issued" securities ever exceeded 25% of
the value of its total assets. Under normal market conditions, however, the
Income Fund's commitment to purchase "when-issued" or "delayed-delivery"
securities will not exceed 25% of the value of its total assets.
When the Income Fund engages in "when-issued" transactions, it relies on
the seller to consummate the trade. Failure of the seller to do so may result in
the Income Fund's incurring a loss or missing the opportunity to obtain a price
considered to be advantageous. The Income Fund will engage in "when-issued"
delivery transactions only for the purpose of acquiring portfolio securities
consistent with such Fund's investment objectives and policies and not for
investment leverage.
MORTGAGE-RELATED SECURITIES. The Income Fund may, consistent with its
investment objective and policies, invest in mortgage-related securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities or
issued by nongovernmental entities.
Mortgage-related securities, for purposes of the Prospectus and this
Statement of Additional Information, represent pools of mortgage loans assembled
for sale to investors by various governmental agencies such as the Government
National Mortgage Association and government-related organizations such as the
Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation, as well as by nongovernmental issuers such as commercial banks,
savings and loan institutions, mortgage bankers and private mortgage insurance
companies. Although certain mortgage-related securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not so secured. If the Income Fund purchases a
mortgage-related security at a premium, that portion may be lost if there is a
decline in the market value of the security whether resulting from
- 6 -
<PAGE> 46
changes in interest rates or prepayments in the underlying mortgage collateral.
As with other interest-bearing securities, the prices of such securities are
inversely affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true, since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment, thereby shortening the
average life of the security and shortening the period of time over which income
at the higher rate is received. Conversely, when interest rates are rising, the
rate of prepayment tends to decrease, thereby lengthening the average life of
the security and lengthening the period of time over which income at the lower
rate is received. For these and other reasons, a mortgage-related security's
average maturity may be shortened or lengthened as a result of interest rate
fluctuations and, therefore, it is not possible to predict accurately the
security's return to the Income Fund. In addition, regular payments received in
respect of mortgage-related securities include both interest and principal. No
assurance can be given as to the return the Income Fund will receive when these
amounts are reinvested.
The Income Fund may also invest in mortgage-related securities which are
collateralized mortgage obligations structured on pools of mortgage pass-through
certificates or mortgage loans. Mortgage-related securities will be purchased
only if rated in the three highest bond rating categories assigned by one or
more appropriate NRSROs, or, if unrated, which the Adviser deems to be of
comparable quality.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States. FNMA is
a government-sponsored organization owned entirely by private stockholders.
Fannie Maes are guaranteed as to timely payment of the principal and interest by
FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as "Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the
United States, created pursuant to an Act of Congress, which is owned entirely
by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States
or by any Federal Home Loan Banks and do not constitute a debt or obligation of
the United States or of any Federal Home Loan Bank. Freddie Macs entitle the
holder to timely payment of interest, which is guaranteed by FHLMC. FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When FHLMC does not guarantee timely
payment of principal, FHLMC may remit the amount due on account of its guarantee
of ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
- 7 -
<PAGE> 47
REPURCHASE AGREEMENTS. Securities held by each of the Funds may be
subject to repurchase agreements. Under the terms of a repurchase agreement, a
Fund would acquire securities from banks and registered broker-dealers which the
Adviser or the applicable Sub-Adviser, as the case may be, deems creditworthy
under guidelines approved by the Group's Board of Trustees, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon date
and price. The repurchase price would generally equal the price paid by the Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The seller
under a repurchase agreement will be required to maintain continually the value
of collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest). This requirement will be continually
monitored by the Adviser. If the seller were to default on its repurchase
obligation or become insolvent, the Fund holding such obligation would suffer a
loss to the extent that the proceeds from a sale of the underlying portfolio
securities were less than the repurchase price under the agreement, or to the
extent that the disposition of such securities by the Fund were delayed pending
court action. Additionally, there is no controlling legal precedent confirming
that a Fund would be entitled, as against a claim by such seller or its receiver
or trustee in bankruptcy, to retain the underlying securities, although the
Board of Trustees of the Group believes that, under the regular procedures
normally in effect for custody of a Fund's securities subject to repurchase
agreements and under federal laws, a court of competent jurisdiction would rule
in favor of the Group if presented with the question. Securities subject to
repurchase agreements will be held by that Fund's custodian or another qualified
custodian or in the Federal Reserve/Treasury book-entry system. Repurchase
agreements are considered to be loans by a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectus, each of
the Funds may borrow funds by entering into reverse repurchase agreements in
accordance with that Fund's investment restrictions. Pursuant to such
agreements, a Fund would sell portfolio securities to financial institutions
such as banks and broker-dealers, and agree to repurchase the securities at a
mutually agreed-upon date and price. Each Fund intends to enter into reverse
repurchase agreements only to avoid otherwise selling securities during
unfavorable market conditions to meet redemptions. At the time a Fund enters
into a reverse repurchase agreement, it will place in a segregated custodial
account assets such as U.S. Government securities or other liquid securities
consistent with the Fund's investment restrictions having a value equal to the
repurchase price (including accrued interest), and will subsequently continually
monitor the account to ensure that such equivalent value is maintained at all
times. Reverse repurchase agreements involve the risk that the market value of
the securities sold by a Fund may decline below the price at which a Fund is
obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by a Fund under the 1940 Act.
SECURITIES OF OTHER INVESTMENT COMPANIES. Each Fund may invest in
securities issued by other investment companies. Each Fund currently intends to
limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total assets will be
invested in the securities of any one investment company; (b) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group; and (c) not more than 3% of the outstanding
voting stock of any one investment company will be owned by such Fund. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of that company's expenses, including
advisory fees. These expenses would be in
- 8 -
<PAGE> 48
addition to the advisory and other expenses that such Fund bears directly in
connection with its own operations. Investment companies in which the Funds may
investment may also impose a sales or distribution charge in connection with the
purchase or redemption of their shares and other types of commissions or
charges. Such charges will be payable by such Fund and, therefore, will be borne
directly by shareholders.
INVESTMENT RESTRICTIONS
Each Fund's investment objective is a non-fundamental policy and may be
changed without a vote of the holders of a majority of such Fund's outstanding
Shares. The following investment restrictions may be changed with respect to a
particular Fund only by a vote of the majority of the outstanding Shares of that
Fund (as defined under "ADDITIONAL INFORMATION - Vote of a Majority of the
Outstanding Shares").
Each of the Funds may not:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements secured by such obligations, if, immediately after such
purchase, more than 5% of such Fund's total assets would be invested in such
issuer or such Fund would hold more than 10% of the outstanding voting
securities of such issuer, except that up to 25% of a Fund's total assets may be
invested without regard to such limitations. There is no limit to the percentage
of assets that may be invested in U.S. Treasury bills, notes, or other
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or repurchase agreements secured by such obligations.
2. Purchase any securities which would cause more than 25% of such
Fund's total assets at the time of purchase to be invested in securities of one
or more issuers conducting their principal business activities in the same
industry; provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements secured by such obligations; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services. For example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
3. Borrow money or issue senior securities except as and to the extent
permitted by the 1940 Act or any rule, order or interpretation thereunder.
4. Make loans, except that each Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objective and policies, make time deposits with financial institutions, and
enter into repurchase agreements.
5. Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities and except as may
be necessary to make margin payments in connection with derivative securities
transactions;
- 9 -
<PAGE> 49
6. Underwrite the securities issued by other persons, except to the
extent that the Fund may be deemed to be an underwriter under certain securities
laws in the disposition of "restricted securities;"
7. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities and securities secured by
real estate or interests therein are not prohibited by this restriction); and
8. Purchase or sell commodities or commodities contracts, except to the
extent disclosed in the current Prospectus of the Fund.
The following additional investment restrictions may be changed without
the vote of a majority of the outstanding Shares of a Fund. Each Fund may not:
1. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
to the extent permitted by the 1940 Act, or pursuant to any exemptions
therefrom;
2. Engage in any short sales; and
3. Mortgage or hypothecate the Fund's assets in excess of one-third of
the Fund's total assets.
If any percentage restriction or requirement described above is
satisfied at the time of investment, a later increase or decrease in such
percentage resulting from a change in asset value will not constitute a
violation of such restriction or requirement. However, should a change in net
asset value or other external events cause a Fund's investments in illiquid
securities, repurchase agreements with maturities in excess of seven days and
other instruments in such Fund which are not readily marketable to exceed the
limit set forth in such Fund's Prospectus for its investment in illiquid
securities, the Fund will act to cause the aggregate amount of such securities
to come within such limit as soon as reasonably practicable. In such an event,
however, such Fund would not be required to liquidate any portfolio securities
where the Fund would suffer a loss on the sale of such securities.
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 will generally 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.
- 10 -
<PAGE> 50
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each Fund is
determined and the Shares of each Fund are priced as of the Valuation Time on
each Business Day of that Fund. A "Business Day" of a Fund is a day on which the
New York Stock Exchange is open for trading and any other day (other than a day
on which no Shares of that Fund are tendered for redemption and no order to
purchase any Shares of that Fund is received) during which there is sufficient
trading in portfolio instruments that such Fund's net asset value per share
might be materially affected. 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.
Investments in securities for which market quotations are readily
available are valued based upon their current available prices in the principal
market in which such securities are normally traded. Unlisted securities for
which market quotations are readily available are valued at such market value.
Securities and other assets for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of the
Trustees of the Group. Short-term securities (i.e., with maturities of 60 days
or less) are valued at either amortized cost or original cost plus accrued
interest, which approximates current value.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of each of the Funds are sold on a continuous basis by BISYS, and
BISYS has agreed to use appropriate efforts to solicit all purchase orders. In
addition to purchasing Shares directly from BISYS, Shares may be purchased
through procedures established by BISYS in connection with the requirements of
accounts at the Adviser or the Adviser's affiliated entities (collectively,
"Entities"). Customers purchasing Shares of the Funds may include officers,
directors, or employees of the Adviser or the Entities.
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.
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<PAGE> 51
The names of the Trustees and officers of the Group, their addresses,
pages and principal occupations during the past five years are as follows:
<TABLE>
<CAPTION>
Name, Address and Age Position(s) Held Principal Occupation
With the Group During Past 5 Years
<S> <C> <C>
Walter B. Grimm* Chairman, President and From June 1992 to present,
3435 Stelzer Road Trustee employee of BISYS Fund
Columbus, Ohio 43219 Services.
Age: 53
Maurice G. Stark Trustee Retired. Until December 31,
505 King Avenue 1994, Vice President-Finance
Columbus, Ohio 43201 and Treasurer, Battelle
Age 63 Memorial Institute (scientific
research and development
service corporation).
Michael M. Van Buskirk Trustee From June 1991 to present,
37 West Broad Street Executive Vice President of
Suite 1001 The Ohio Bankers'
Columbus, Ohio 43215-4162 Association (trade
Age: 51 association); from September
1987 to June 1991,
Vice President-Communications,
TRW Information Systems Group
(electronic and space
engineering).
John H. Ferring IV Trustee From 1979 to present,
105 Bolte Lane President and Owner of Plaze,
St. Clair, Missouri Incorporated, St. Clair,
Age: 46 Missouri
J. David Huber Vice President From June 1987 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 Services
Age: 52
Jennifer R. Brooks Vice President From October, 1988 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 Services
Age: 33
</TABLE>
- 12 -
<PAGE> 52
<TABLE>
<CAPTION>
Name, Address and Age Position(s) Held Principal Occupation
With the Group During Past 5 Years
<S> <C> <C>
Gary R. Tenkman Treasurer From April 1998 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 Services; from September
Age: 29 1990 to March 1998,
employee of Ernst & Young
LLP.
George L. Stevens Secretary From September 1996 to
3435 Stelzer Road present, employee of BISYS
Columbus, Ohio 43219 Fund Services; from
Age: 48 September 1995 to September
1996, Independent Consultant;
from September 1989 to
September 1995, Senior Vice
President, AmSouth Bank, N.A.
Alaina V. Metz Assistant Secretary From June 1995 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 Services; from May 1989 to
Age: 31 June 1995, employee of
Alliance Capital Management.
</TABLE>
- -----------------
* Mr. Grimm is considered to be an "interested person" of the Group as defined
in the 1940 Act.
As of the date of this Statement of Additional Information, the Group's
Officers and Trustees, as a group, own less than 1% of the Funds' outstanding
Shares.
The officers of the Group receive no compensation directly from the
Group for performing the duties of their offices. BISYS Fund Services receives
fees from the Funds for acting as Administrator. BISYS Fund Services Ohio, Inc.
receives fees from the Funds for acting as transfer agent and for providing
certain fund accounting services. Messrs. Huber, Tenkman, Stevens, and Grimm,
and Ms. Metz and Ms. Brooks are employees of BISYS Fund Services.
- 13 -
<PAGE> 53
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 fiscal year 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
Retirement Compensation
Benefits Est. Annual From Registrant
Aggregate Accrued As Benefits and Fund
Compensation Part of Fund Upon Complex Paid
Name of Trustee from the Funds Expenses Retirement to Trustees
--------------- -------------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Walter B. Grimm $ 0 $0 $0 $ 0
Maurice G. Stark $2,749 $0 $0 $10,000
Michael Van Buskirk $2,749 $0 $0 $10,000
John H. Ferring IV $1,786 $0 $0 $ 5,750
</TABLE>
INVESTMENT ADVISER
Investment advisory and management services are provided to the Funds by
1st Source Bank (the "Adviser"), pursuant to an Investment Advisory Agreement
dated as of October 23, 1998. Under the terms of the Investment Advisory
Agreement, the Adviser has agreed to provide, either directly or through one or
more subadvisers, investment advisory services as described in the Prospectus 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: (1) for the Diversified Equity
Fund, ninety-nine one-hundredths of one percent (0.99%) of such Fund's average
daily net assets; (2) for both the Income Equity Fund and the Special Equity
Fund, eighty one-hundredths of one percent (0.80%) of such Fund's average daily
net assets; and (3) for the Income Fund, fifty-five one-hundredths of one
percent (0.55%) of such Fund's average daily net assets. 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.
For each of the past three fiscal periods, the Adviser earned the
amounts indicated below with respect to its investment advisory services
provided to the Funds pursuant to the Investment Advisory Agreement.
- 14 -
<PAGE> 54
<TABLE>
<CAPTION>
Fiscal Period Ended Fiscal Year Ended Fiscal Period Ended
------------------- ----------------- -------------------
March 31, 1999(1) June 30, 1998 June 30, 1997(2)
----------------- ------------- ----------------
<S> <C> <C> <C>
Diversified Equity Fund $682,319 $970,429 $579,272
Income Equity Fund $296,820 374,402 207,742
Special Equity Fund $181,817 272,600 166,740
Income Fund $292,447 334,179 210,181
</TABLE>
- ----------------------
(1) During the period the fiscal year end of the Funds was changed from June
30 to March 31. Accordingly, the information presented is for the
nine-month period from July 1, 1998 to March 31, 1999.
(2) Commenced operations September 23, 1996, September 25, 1996, September
20, 1996 and September 24, 1996, respectively.
Unless sooner terminated, the Investment Advisory Agreement will
continue in effect until October 23, 2000, 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 under "GENERAL INFORMATION
Miscellaneous" in the Funds' Prospectus), 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.
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.
The Adviser has licensed the name "1st Source Monogram" to the Funds on
a royalty-free basis, and the Adviser has reserved to itself the right to grant
the non-exclusive right to use the name "1st Source Monogram" to any other
person. At such time as the Investment Advisory Agreement is no longer in
effect, the Adviser may require the Funds to cease using the name "1st Source
Monogram."
SUB-ADVISERS
Pursuant to the terms of the Investment Advisory Agreement, the Adviser
has entered into three separate Sub-Investment Advisory Agreements each dated as
of October 23, 1998 (collectively, the "Sub-Advisory Agreements"). The first
Sub-Advisory Agreement is with Miller Anderson & Sherrerd LLP, One Tower Bridge,
Suite 1100, West Conshohocken, Pennsylvania
- 15 -
<PAGE> 55
19428 ("Miller Anderson"). The second Sub-Advisory Agreement is with Loomis,
Sayles & Company, L.P., 3 First National Plaza, Suite 5450, Chicago, Illinois
60600 ("Loomis"). The third Sub-Advisory Agreement is with Standish, Ayer &
Wood, Inc., One Financial Center, Boston, Massachusetts 02111 ("Standish").
Pursuant to the terms of such Sub-Investment Advisory Agreements, Miller
Anderson, Loomis and Standish have each been retained by the Adviser to manage
the investment and reinvestment of a portion of the assets of the Diversified
Equity Fund, subject to the direction and control of the Adviser and the Group's
Board of Trustees.
Under this arrangement, the Sub-Advisers are responsible for the
day-to-day management of the Diversified Equity Fund's assets, investment
performance, policies and guidelines, and maintaining certain books and records,
and the Adviser is responsible for selecting and monitoring the performance of
each of the Sub-Advisers, and for reporting the activities of the Sub-Advisers
in managing the Diversified Equity Fund to the Group's Board of Trustees. For
their services provided and expenses assumed pursuant to their respective
Sub-Investment Advisory Agreement with the Adviser, the Sub-Advisers receive
from the Adviser a fee (computed daily and paid quarterly as a percentage of the
Diversified Equity Fund's average daily net assets managed by that Sub-Adviser)
at the following annual rates: for Miller Anderson, 0.625% up to $25,000,000 and
0.375% of the excess over $25,000,000; for Loomis, 0.40% of average daily net
assets managed; and for Standish, 0.45% of average daily net assets managed.
Miller Anderson was founded in 1969 and is wholly owned by Morgan
Stanley, Dean Witter, Discover & Co.
Loomis was founded in 1926 and established its Chicago office in 1952.
Loomis' sole general partner is Loomis, Sayles & Company, Incorporated.
Standish was founded in 1933 and is owned and operated by its Directors.
For each of the past three periods, the Sub-Advisers earned the amounts
indicated below with respect to their subinvestment advisory services to the
Diversified Equity Fund pursuant to the Sub-Investment Advisory Agreements:
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Period Ended
----------------- ----------------- -------------------
Sub-Adviser March 31, 1999(1) June 30, 1998 June 30, 1997(1)
- ----------- ----------------- ------------- ----------------
<S> <C> <C> <C>
Miller Anderson $103,244 $171,687 $109,119
Loomis $ 95,610 $159,750 89,219
Columbus Circle Investors(2) N/A $193,721 121,527
Standish(3) $127,297 N/A N/A
</TABLE>
- ----------------------
(1) Commenced operations September 23, 1996.
- 16 -
<PAGE> 56
(2) Columbus Circle Investors ceased serving as a sub-investment adviser
effective October 23, 1998.
(3) Standish began serving as a sub-investment adviser effective October 23,
1998.
(4) During the period the fiscal year end of the Funds was changed from June 30
to March 31. Accordingly, the information presented is for the nine-month
period from July 1, 1998 to March 31, 1999.
Unless sooner terminated, each of the Sub-Investment Advisory Agreements
continue in effect as to the Diversified Equity Fund until October 23, 2000, and
thereafter for successive one-year periods if 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 such Fund (as defined under "GENERAL INFORMATION --
Miscellaneous" in the Funds' Prospectus), and a majority of the Trustees who are
not parties to the Sub-Investment Advisory Agreements or interested persons (as
defined in the 1940 Act) of any party to the Sub-Investment Advisory Agreements
by votes cast in person at a meeting called for such purpose. Each of the
Sub-Investment Advisory Agreements are terminable as to the Diversified Equity
Fund at any time on 60 days' written notice without penalty by the Fund, by vote
of a majority of the outstanding shares of that Fund, or on 60 days' prior
written notice from the Sub-Adviser. Such Agreements also terminate
automatically in the event of any assignment, as defined in the 1940 Act.
Each of the Sub-Investment Advisory Agreements provide that the
respective Sub-Advisers shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Group in connection with the performance
of their duties, 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
respective Sub-Advisers in the performance of their duties, or from reckless
disregard of their duties and obligations thereunder.
- 17 -
<PAGE> 57
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement with respect to each Fund,
other than the Diversified Equity 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. Pursuant to the Sub-Investment Advisory
Agreements, the Sub-Advisers determine, subject to the supervision of the
Adviser and the overall general supervision of the Group's Board of Trustees and
in accordance with the Diversified Equity Fund's investment objectives and
policies, which securities are to be purchased and sold by such Fund, and which
brokers are to be eligible to execute such Fund's portfolio transactions.
Purchases and sales of portfolio securities with respect to the Income
Fund usually are principal transactions in which portfolio securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. 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 or the applicable Sub-Adviser,
as the case may be, 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 or the applicable Sub-Adviser, as the case may be, may receive
orders for transactions on behalf of the Funds. The Adviser and each Sub-Adviser
are authorized to pay a broker-dealer who provides such brokerage and research
services a commission for executing each such Fund's brokerage transactions
which is in excess of the amount of commission another broker would have charged
for effecting that transaction if, but only if, the Adviser or Sub-Adviser, as
the case may be, 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 or Sub-Adviser, as the case may be, is considered to be in addition
to and not in lieu of services required to be performed by such Adviser or
Sub-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 or Sub-Adviser, as the case may be, 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.
- 18 -
<PAGE> 58
Under the Investment Advisory Agreement and Sub-Advisory Agreements, the Adviser
and Sub-Advisers are 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 and/or the Sub-Advisers do follow
such a practice, they will do so on a basis which is fair and equitable to the
Group and the Funds.
While the Adviser and the Sub-Advisers generally seek competitive
commissions, the Group may not necessarily pay the lowest commission available
on each brokerage transaction, for reasons discussed above. For the nine-month
fiscal period ended March 31, 1999, the Funds paid the following brokerage
commissions in connection with their respective portfolio transactions:
<TABLE>
<CAPTION>
Fund Brokerage Commissions
---- ---------------------
<S> <C>
Diversified Equity Fund $167,793
Income Equity Fund $ 95,332
Special Equity Fund $111,185
Income Fund 0
</TABLE>
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, the Sub-Advisers, 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 or any of the Sub-Advisers. 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, 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 or the Sub-Adviser, as the case may be, believes to be equitable to
the Fund and such other fund, investment company or account. In some instances,
this investment procedure may adversely affect 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 and the Sub-Advisers 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 and the Sub- Advisory Agreements,
in making investment recommendations for the Funds, neither the Adviser nor any
Sub-Adviser will inquire or take into consideration whether an issuer of
securities proposed for purchase or sale by the Group is a customer of the
Adviser, any Sub-Adviser, any of their parents or subsidiaries or affiliates
and, in dealing with its customers, the Adviser, the Sub-Advisers, their
respective parents, subsidiaries,
- 19 -
<PAGE> 59
and affiliates will not inquire or take into consideration whether securities of
such customers are held by the Funds or any other fund of the Group.
GLASS-STEAGALL ACT
In 1971, the United States Supreme Court held in INVESTMENT COMPANY
INSTITUTE V. CAMP that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM V.
INVESTMENT COMPANY INSTITUTE that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the BOARD
OF GOVERNORS case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
The Adviser believes that it possesses the legal authority to perform
the services for the Funds contemplated by the Prospectus, this Statement of
Additional Information and the Investment Advisory Agreement without violation
of applicable statutes and regulations. Future changes in either Federal or
state statutes and regulations relating to the permissible activities of banks
or bank holding companies and the subsidiaries or affiliates of those entities,
as well as further judicial or administrative decisions or interpretations of
present and future statutes and regulations, could prevent or restrict the
Adviser from continuing to perform such services for the Group. In addition,
current state securities laws on the issue of the registration of banks as
brokers or dealers may differ from the interpretation of federal law, and banks
and financial institutions may be required to register as dealers pursuant to
the laws of a specific state. Depending upon the nature of any changes in the
services which could be provided by the Adviser, the Board of Trustees of the
Group would review the Group's relationship with the Adviser and consider taking
all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of the Adviser and/or the Adviser's
affiliated and correspondent banks in connection with Customer purchases of
Shares of any of the Funds, those banks might be required to alter materially or
discontinue the services offered by them to Customers. It is not anticipated,
however, that any change in the Group's method of operations would affect its
net asset value per share or result in financial losses to any Customer.
- 20 -
<PAGE> 60
ADMINISTRATOR
BISYS serves as administrator (the "Administrator") to the Funds
pursuant to a Management and Administration Agreement dated as of October 23,
1998 (the "Administration Agreement"). The Administrator assists in supervising
all operations of each Fund (other than those performed by the Adviser under the
Investment Advisory Agreement, by the Sub-Advisers under the Sub-Advisory
Agreements, by The Fifth Third Bank under the Custody Agreement and by BISYS
Fund Services, Inc. under the Transfer Agency Agreement and Fund Accounting
Agreement). 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
other than those performed by the Adviser under the Investment Advisory
Agreement, by the Sub-Advisers under the Sub-Investment Advisory Agreements, by
The Fifth Third Bank under the Custody Agreement and by BISYS Fund Services,
Inc. under the Transfer Agency and Fund Accounting Agreements. 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 twenty one-hundredths of one percent (.20%) of that Fund's average daily net
assets.
For each of the past three fiscal periods, the Administrator earned and
voluntarily waived the amounts indicated below with respect to its services to
the Funds pursuant to the Administration Agreement:
- 21 -
<PAGE> 61
<TABLE>
<CAPTION>
Fiscal Period Ended Fiscal Year Ended Fiscal Period Ended
------------------- ----------------- -------------------
March 31, 1999(1) June 30, 1998 June 30, 1997(2)
----------------- ------------- ----------------
Fees Fees Fees Fees Fees Fees
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Diversified Equity Fund $131,181 -- $176,443 -- $105,323 --
Income Equity Fund $ 74,205 -- 93,601 -- 51,936 --
Special Equity Fund $ 45,455 -- 68,151 -- 41,685 $2,171
Income Fund $ 97,072 -- 121,521 -- 76,430 --
</TABLE>
- -----------------
(1) During the period the fiscal year end of the Funds was changed from June
30 to March 31. Accordingly, the information presented is for the
nine-month period from July 1, 1998 to March 31, 1999.
(2) Commenced operations September 23, 1996, September 25, 1996, September
20, 1996 and September 24, 1996, respectively.
Unless sooner terminated as provided therein, the Administration
Agreement has an initial term expiring on October 23, 2001. The Administration
Agreement thereafter shall be renewed automatically for successive one-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then-current
term. The Administration Agreement is terminable with respect to a particular
Fund only upon mutual agreement of the parties to the Administration Agreement
and for cause (as defined in the Administration Agreement) by the party alleging
cause, on not less than 60 days' notice by the Group's Board of Trustees or by
the Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or any loss suffered by
any Fund in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or
negligence in the performance of its duties, or from the reckless disregard by
the Administrator of its obligations and duties thereunder.
DISTRIBUTOR
BISYS serves as agent for each of the Funds in the distribution of its
Shares pursuant to a Distribution Agreement dated as of October 23, 1998 (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.
- 22 -
<PAGE> 62
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 with the Group, but may retain all or a portion of the
sales charge imposed upon sales of Shares of each of the Funds.
For the fiscal period ended March 31, 1999, BISYS as distributor
received the following amounts in commissions for sales of shares of the Funds
and reallowed the indicated amounts to other dealers:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, 1999(1)
Commissions Amounts Reallowed
----------- -----------------
Received to Dealers
-------- ----------
<S> <C> <C>
Diversified Equity Fund $981.93 $883.35
Income Equity Fund $201.39 $181.01
Special Equity Fund $334.97 $302.04
Income Fund $ 7.59 $ 0.00
</TABLE>
(1) During the period the fiscal year end of the Funds was changed from June
30 to March 31. Accordingly, the information presented is for the
nine-month period from July 1, 1998 to March 31, 1999.
The Group has adopted a Distribution and Shareholder Service Plan (the
"Plan") with respect to the Funds pursuant to Rule 12b-1 under the 1940 Act
under which each Fund is authorized to pay BISYS in an amount not in excess, on
an annual basis, of 0.25% of the average daily net asset value of the Shares of
that Fund (the "12b-1 Fee"). Payments of the 12b-1 Fee to BISYS will be used (i)
to compensate Participating Organizations (as defined below) for providing
distribution assistance relating to a Fund's Shares, (ii) for promotional
activities intended to result in the sale of Shares and distribution of
prospectuses to other than current shareholders, and (iii) to compensate
Participating Organizations for providing shareholder services with respect to
their customers who are, from time to time, beneficial and record holders of
Shares. Participating Organizations include banks (including affiliates of the
Adviser), broker-dealers, the Adviser, BISYS and other institutions. Payments to
such Participating Organizations may be made pursuant to agreements entered into
with BISYS.
As required by Rule 12b-1, the Plan was approved by the initial
Shareholder of each of the Funds and by the Board of Trustees, including a
majority of the Trustees who are not interested persons of any of the Funds and
who have no direct or indirect financial interest in the operation of the Plan
(the "Independent Trustees"). The Plan may be terminated as to a Fund by vote of
a majority of the Independent Trustees, or by vote of majority of the
outstanding Shares of that Fund. Any change in the Plan that would materially
increase the distribution cost to a Fund requires Shareholder approval. The
Trustees review quarterly a written report of such costs
- 23 -
<PAGE> 63
and the purposes for which such costs have been incurred. The Plan may be
amended by vote of the Trustees including a majority of the Independent
Trustees, cast in person at a meeting called for that purpose. For so long as
the Plan is in effect, selection and nomination of those Trustees who are not
interested persons of the Group shall be committed to the discretion of such
disinterested persons. All agreements with any person relating to the
implementation of the Plan may be terminated at any time on 60 days' written
notice without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the majority of the outstanding Shares of the Fund. The
Plan will continue in effect for successive one-year periods, provided that each
such continuance is specifically approved (i) by the vote of a majority of the
Independent Trustees, and (ii) by a vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose. The Board of
Trustees has a duty to request and evaluate such information as may be
reasonably necessary for them to make an informed determination of whether the
Plan should be implemented or continued. In addition the Trustees in approving
the Plan must determine that there is a reasonable likelihood that the Plan will
benefit each Fund and its Shareholders.
The Board of Trustees of the Group believes that the Plan is in the best
interests of each Fund since it encourages Fund growth and maintenance of Fund
assets. As a Fund grows in size, certain expenses, and therefore total expenses
per Share, may be reduced and overall performance per Share may be improved.
BISYS may enter into, from time to time, Rule 12b-1 Agreements with
selected dealers pursuant to which such dealers will provide certain services in
connection with the distribution of a Fund's Shares including, but not limited
to, those discussed above.
For the fiscal year ended March 31, 1999, the Funds incurred the
following amounts pursuant to the Plan for payments to have been made to BISYS
for certain distribution and shareholder services described above:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
March 31, 1999(1)
-----------------
<S> <C>
Diversified Equity Fund $163,975
Income Equity Fund $ 92,761
Special Equity Fund $ 56,818
Income Fund $123,839
</TABLE>
- ------------------
(1) During the period the fiscal year end of the Funds was changed from June
30 to March 31. Accordingly, the information presented is for the
nine-month period from July 1, 1998 to March 31, 1999.
- 24 -
<PAGE> 64
ADMINISTRATIVE SERVICES PLAN
As described in the Prospectus, the Group has also adopted an
Administrative Services Plan (the "Services Plan") under which each Fund is
authorized to pay certain financial institutions, including the Adviser, its
correspondent and affiliated banks, and BISYS (a "Service Organization"), to
provide certain ministerial, record keeping, and administrative support services
to their customers who own of record or beneficially Shares in a Fund. Payments
to such Service Organizations are made pursuant to Servicing Agreements between
the Group and the Service Organization. The Services Plan authorizes each Fund
to make payments to Service Organizations in an amount, on an annual basis, of
up to 0.25% of the average daily net asset value of that Fund. The Services Plan
has been approved by the Board of Trustees of the Group, including a majority of
the Trustees who are not interested persons of the Group (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Services Plan or in any Servicing Agreements thereunder (the "Disinterested
Trustees"). The Services Plan may be terminated as to a Fund by a vote of a
majority of the Disinterested Trustees. The Trustees review quarterly a written
report of the amounts expended pursuant to the Services Plan and the purposes
for which such expenditures were made. The Services Plan may be amended by a
vote of the Trustees, provided that any material amendments also require the
vote of a majority of the Disinterested Trustees. For so long as the Services
Plan is in effect, selection and nomination of those Disinterested Trustees
shall be committed to the discretion of the Group's Disinterested Trustees. All
Servicing Agreements may be terminated at any time without the payment of any
penalty by a vote of a majority of the Disinterested Trustees. The Services Plan
will continue in effect for successive one-year periods, provided that each such
continuance is specifically approved by a majority of the Board of Trustees,
including a majority of the Disinterested Trustees. As of the date hereof, the
Group has not entered into any such servicing agreements.
CUSTODIAN
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263
(the "Custodian"), has been selected to serve as the Funds' custodian pursuant
to the Custody Agreement dated as of October 23, 1998. 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 Fund Services, Inc. serves as transfer agent and dividend
disbursing agent (the "Transfer Agent") for all of the Funds pursuant to the
Transfer Agency Agreement dated as of October 23, 1998. Pursuant to such
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.
- 25 -
<PAGE> 65
In addition, BISYS Fund Services, Inc. provides certain fund accounting
services to the Funds pursuant to a Fund Accounting Agreement dated as of
October 23, 1998. BISYS Fund Services, Inc. receives a fee from each Fund for
such services equal to the greater of (a) a fee computed at an annual rate of
three one-hundredths of one percent (.03%) of that Fund's average daily net
assets, or (b) $50,000 minus the fee paid by such Fund under its Management and
Administration Agreement with BISYS of the same date. 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.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 100 East Broad Street, Columbus, Ohio 43215,
has been selected as independent accountants for the Funds for their current
fiscal year. PricewaterhouseCoopers LLP performs an annual audit of the Funds'
financial statements and provides other related services. Reports of their
activities are provided to the Group's Board of Trustees.
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.
- 26 -
<PAGE> 66
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectus and this
Statement of Additional Information, the Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Group,
shareholders of a fund are entitled to receive the assets available for
distribution belonging to that fund, and a proportionate distribution, based
upon the relative asset values of the respective funds, of any general assets
not belonging to any particular fund which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Group shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each fund affected by the matter. For purposes of 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 effectively acted 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 could, under certain
circumstances, 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 July 2, 1999, 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: 1st Source Bank, P. O. Box 1602, South Bend, Indiana 46634 owned of record
and beneficially 99.42% of the issued and outstanding Shares of the Income Fund,
97.64% of the issued and outstanding Shares of the Income Equity Fund, 98.67% of
the issued and outstanding Shares of the Diversified Equity Fund and 97.49% of
the issued and outstanding Shares of the Special Equity Fund.
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES
As used in the Prospectus and this Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of the votes of Shareholders of that Fund present at a meeting at which the
holders of more than 50% of the votes attributable to Shareholders of record of
that Fund are represented in person or by proxy, or (b) the holders of more than
50% of the outstanding votes of Shareholders of that Fund.
- 27 -
<PAGE> 67
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.
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
- 28 -
<PAGE> 68
ordinary income and distributed net realized capital gains will be taxable
income to Shareholders for federal income tax purposes, even if paid in
additional Shares of the Fund and not in cash.
The excess of net long-term capital gains over short-term capital losses
realized and distributed by a Fund and designated as capital gain dividends,
whether paid in cash or reinvested in Fund shares, will be taxable to
Shareholders. Capital gain dividends paid from the proceeds of sales of assets
held by a Fund for more than one year will generally be taxed at a maximum
federal income tax rate of 20%. Net capital gains from assets held for one year
or less will be taxed as ordinary income. Distributions will be subject to these
capital gains rates regardless of how long a Shareholder has held Fund shares.
Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset capital
gains and excess net capital loss may be carried back three years and forward
five years.
Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Each Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so designated may not exceed the amount received by the
Fund for its taxable year that qualifies for the dividends received deduction.
Because all of the Income Fund's net investment income is expected to be derived
from earned interest, it is anticipated that no distributions from that Fund
will qualify for the 70% dividends received deduction.
Foreign taxes may be imposed on a Fund by foreign countries with respect
to its income from foreign securities, if any. It is expected that, because less
than 50% in value of each Fund's total assets at the end of its fiscal year will
be invested in stocks or securities of foreign corporations, none of the Funds
will be entitled under the Code to pass through to its Shareholders their pro
rata share of the foreign taxes paid by the Fund. Any such taxes will be taken
as a deduction by such Fund.
Each Fund may be required by federal law to withhold and remit to the
U.S. Treasury 31% of taxable dividends, if any, and capital gain distributions
to any Shareholder, and the proceeds of redemption or the values of any
exchanges of Shares of a Fund by the Shareholder, if such Shareholder (1) fails
to furnish the Group with a correct taxpayer identification number, (2)
under-reports dividend or interest income, or (3) fails to certify to the Group
that he or she is not subject to such withholding. An individual's taxpayer
identification number is his or her Social Security number.
Information as to the Federal income tax status of all distributions
will be mailed annually to each Shareholder.
MARKET DISCOUNT. If a Fund purchases a debt security at a price lower
than the stated redemption price of such debt security, the excess of the stated
redemption price over the purchase price is "market discount". If the amount of
market discount is more than a de minimis amount, a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which the Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that
- 29 -
<PAGE> 69
principal payment first to the portion of the market discount on the debt
security that has accrued but has not previously been includable in income. In
general, the amount of market discount that must be included for each period is
equal to the lesser of (i) the amount of market discount accruing during such
period (plus any accrued market discount for prior periods not previously taken
into account) or (ii) the amount of the principal payment with respect to such
period. Generally, market discount accrues on a daily basis for each day the
debt security is held by a Fund at a constant rate over the time remaining to
the debt security's maturity or, at the election of the Fund, at a constant
yield to maturity which takes into account the semi-annual compounding of
interest. Gain realized on the disposition of a market discount obligation must
be recognized as ordinary interest income (not capital gain) to the extent of
the "accrued market discount."
ORIGINAL ISSUE DISCOUNT. Certain debt securities acquired by a Fund may
be treated as debt securities that were originally issued at a discount. Very
generally, original issue discount is defined as the difference between the
price at which a security was issued and its stated redemption price at
maturity. Although no cash income on account of such discount is actually
received by the Fund, original issue discount that accrues on a debt security in
a given year generally is treated for federal income tax purposes as interest
and, therefore, such income would be subject to the distribution requirements
applicable to regulated investment companies. Some debt securities may be
purchased by the Fund at a discount that exceeds the original issue discount on
such debt securities, if any. This additional discount represents market
discount for federal income tax purposes (see above).
OPTIONS, FUTURES AND FORWARD CONTRACTS. Any regulated futures
contracts and certain options (namely, nonequity options and dealer equity
options) in which a Fund may invest may be "section 1256 contracts." Gains (or
losses) on these contracts generally are considered to be 60% long-term and 40%
short-term capital gains or losses. Also, section 1256 contracts held by the
Fund at the end of each taxable year (and on certain other dates prescribed in
the Code) are "marked to market" with the result that unrealized gains or losses
are treated as though they were realized.
Transactions in options, futures and forward contracts undertaken by a
Fund may result in "straddles" for federal income tax purposes. The straddle
rules may affect the character of gains (or losses) realized by the Fund, and
losses realized by the Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the losses are
realized. In addition, certain carrying charges (including interest expense)
associated with positions in a straddle may be required to be capitalized rather
than deducted currently. Certain elections that a Fund may make with respect to
its straddle positions may also affect the amount, character and timing of the
recognition of gains or losses from the affected positions.
Because only a few regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to a Fund are not entirely
clear. The straddle rules may increase the amount of short-term capital gain
realized by the Fund, which is taxed as ordinary income when distributed to
Shareholders. Because application of the straddle rules may affect the character
of gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to Shareholders as
- 30 -
<PAGE> 70
ordinary income or long-term capital gain may be increased or decreased
substantially as compared to a fund that did not engage in such transactions.
CONSTRUCTIVE SALES. Certain Code provisions may affect the timing and
character of gain if a Fund engages in transactions that reduce or eliminate its
risk of loss with respect to appreciated financial positions. If a Fund enters
into certain transactions in property while holding substantially identical
property, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the
constructive sale. The character of gain from a constructive sale would depend
upon the Fund's holding period in the property. Loss from a constructive sale
would be recognized when the property was subsequently disposed of, and its
character would depend on the Fund's holding period and the application of
various loss deferral provisions of the Code.
SECTION 988 GAINS OR LOSSES. Gains or losses attributable to
fluctuations in exchange rates which occur between the time a Fund accrues
income or other receivables or accrues expenses or other liabilities denominated
in a foreign currency and the time the Fund actually collects such receivables
or pays such liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of some investments, including debt securities
and certain forward contracts denominated in a foreign currency, gains or losses
attributable to fluctuations in the value of the foreign currency between the
acquisition and disposition of the position also are treated as ordinary gain or
loss. These gains and losses, referred to under the Code as "section 988" gains
or losses, increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its Shareholders as ordinary
income. If section 988 losses exceed other investment company taxable income
during a taxable year, the Fund would not be able to make any ordinary dividend
distributions, or distributions made before the losses were realized would be
recharacterized as a return of capital to Shareholders, rather than as an
ordinary dividend, reducing each Shareholder's basis in his or her Fund shares.
PASSIVE FOREIGN INVESTMENT COMPANIES. A Fund may invest in shares of
foreign corporations that may be classified under the Code as passive foreign
investment companies ("PFICs"). In general, a foreign corporation is classified
as a PFIC if at least one-half of its assets constitute investment-type assets,
or 75% or more of its gross income is investment-type income. If a Fund receives
a so-called "excess distribution" with respect to PFIC stock, the Fund itself
may be subject to a tax on a portion of the excess distribution, whether or not
the corresponding income is distributed by the Fund to Shareholders. In general,
under the PFIC rules, an excess distribution is treated as having been realized
ratably over the period during which the Fund held the PFIC shares. The Fund
will itself be subject to tax on the portion, if any, of an excess distribution
that is so allocated to prior Fund taxable years and an interest factor will be
added to the tax, as if the tax had been payable in such prior taxable years.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
- 31 -
<PAGE> 71
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
As summarized in the Prospectus under the heading "Performance
Information," 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.
For the 30-day period ended March 31, 1999, the yields for the Income
Equity Fund and the Income Fund were 1.22% and 5.39%, respectively, assuming the
imposition of the maximum sales charge, and 1.28% and 5.62%, respectively,
excluding the effect of any sales charge.
CALCULATION OF TOTAL RETURN
As summarized in the Prospectus under the heading "Performance
Information," 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.
- 32 -
<PAGE> 72
For the one year, five year and ten year periods ended March 31, 1999,
and the respective periods from commencement of operations to March 31, 1999,
the average annual total returns for the Diversified Equity Fund, the Income
Equity Fund, the Special Equity Fund and the Income Fund are set forth in the
following table. Such performance information includes the prior performance of
the respective collective investment funds ("CIFs") for such Funds during those
periods which had been restated to reflect the current fees for those Funds.
These CIFs were operated with the same investment objective and used investment
strategies and techniques that are in all material respects equivalent to those
used for the Funds. During the time period of their existence the CIFS were not
registered under the 1940 Act and therefore were not subject to certain
investment restrictions that are imposed under the 1940 Act. If the CIFs had
been registered under the 1940 Act, their performance may have been adversely
affected.
<TABLE>
AVERAGE ANNUAL TOTAL RETURN
<CAPTION>
With Maximum Sales Load (1) Without Sales Load
Since Since
Fund Inception 1 Year 5 Years 10 Years Inception 1 Year 5 Years 10 Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified 12.16% -2.71% 16.54% 14.80% 12.58% 2.41% 17.75% 15.38%
Equity(2)
Income 12.94% -6.73% 13.47% 13.11% 13.39% -1.81% 14.63% 13.70%
Equity(3)
Special 10.88% -15.02% 7.48% 11.00% 11.30% -10.55% 8.60% 11.57%
Equity(3)
Income(2) 7.12% 0.74% 5.22% 6.97% 7.43% 4.94% 6.09% 7.40%
</TABLE>
- --------------------
(1) The maximum sales load for the Diversified Equity, Income Equity and
Special Equity Funds is 5.00%. For the Income Fund, the maximum sales
load is 4.00%.
(2) Commenced operations June 30, 1985.
(3) Commenced operations November 30, 1985.
Of course, past performance is no guarantee as to future performance.
DISTRIBUTION RATES
Each of the Funds may from time to time advertise current distribution
rates which are calculated in accordance with the method disclosed in the
Prospectus.
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,
- 33 -
<PAGE> 73
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 and to other banking institutions.
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 will be 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 are
not necessarily 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. Fees imposed upon Customer accounts by the
Adviser or its affiliated or correspondent banks for cash management services
will reduce a Fund's effective yield and total return to Customers.
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.
Generally, shareholders owning not less than 20% of the outstanding shares of
the Group entitled to vote may cause the Trustees to call a special meeting.
However, the Group has represented to the Commission that the Trustees will call
a special meeting for the purpose of considering the removal of one or more
Trustees upon written request therefor from shareholders owning not less than
10% of the outstanding votes of the Group entitled to vote. At such a meeting, a
quorum of shareholders (constituting a majority of votes attributable to all
outstanding shares of the Group), by majority vote, has the power to remove one
or more Trustees.
- 34 -
<PAGE> 74
The Group is registered with the Commission as a management investment
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 omit certain
of the information contained in the Registration Statement filed with the
Commission. Copies of such information may be obtained from the Commission upon
payment of the prescribed fee.
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 Prospectus and this Statement of Additional Information.
FINANCIAL STATEMENTS
The financial statements of the Funds appearing in the Annual Report to
Shareholders for the fiscal year ended March 31, 1999 have been audited by
PricewaterhouseCoopers LLP, and are incorporated by reference herein.
- 35 -
<PAGE> 75
<TABLE>
TABLE OF CONTENTS
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES.............................................2
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS.............................2
INVESTMENT RESTRICTIONS.....................................................9
PORTFOLIO TURNOVER.........................................................10
NET ASSET VALUE...............................................................11
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................11
MANAGEMENT OF THE GROUP.......................................................11
TRUSTEES AND OFFICERS......................................................11
INVESTMENT ADVISER.........................................................14
SUB-ADVISERS...............................................................15
PORTFOLIO TRANSACTIONS.....................................................18
GLASS-STEAGALL ACT.........................................................20
ADMINISTRATOR..............................................................21
DISTRIBUTOR................................................................22
ADMINISTRATIVE SERVICES PLAN...............................................25
CUSTODIAN..................................................................25
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES...............................25
AUDITORS...................................................................26
LEGAL COUNSEL..............................................................26
ADDITIONAL INFORMATION........................................................26
DESCRIPTION OF SHARES......................................................26
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES...............................27
ADDITIONAL TAX INFORMATION.................................................28
YIELD......................................................................32
CALCULATION OF TOTAL RETURN................................................32
DISTRIBUTION RATES.........................................................33
PERFORMANCE COMPARISONS....................................................33
MISCELLANEOUS..............................................................34
FINANCIAL STATEMENTS.......................................................35
</TABLE>
- 36 -
<PAGE> 76
PART C
-----------
OTHER INFORMATION
-----------------
ITEM 23. EXHIBITS
(a)(1) Declaration of Trust(1)
(a)(2) Establishment and Designation of Series of Shares
(1st Source Monogram Income Equity Fund; 1st Source
Monogram Diversified Equity Fund; 1st Source
Monogram Special Equity Fund and 1st Source Monogram
Income 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.
(d)(1) Investment Advisory Agreement between Registrant and
1st Source Bank (with respect to the 1st Source
Monogram Funds)(3)
(d)(2) Sub-Investment Advisory Agreement between 1st Source
Bank and Miller Anderson & Sherrerd LLP (with
respect to the 1st Source Monogram Diversified
Equity Fund)(3)
(d)(3) Sub-Investment Advisory Agreement between 1st Source
Bank and Loomis, Sayles & Company, L.P. (with
respect to the 1st Source Monogram Diversified
Equity Fund)(3)
(d)(4) Sub-Investment Advisory Agreement between 1st Source
Bank and Standish, Ayer & Wood, Inc. (with respect
to the 1st Source Monogram Diversified Equity
Fund)(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)
(i) Not Applicable
(j) Consent of Independent Accountants
(k) Not Applicable
C-1
<PAGE> 77
(l) Not Applicable
(m) Distribution and Shareholder Services Plan(3)
(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. Filed with Post-Effective Amendment No. 42 on October 23, 1998.
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> 78
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> 79
(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
(a) 1st Source Bank, South Bend, Indiana ("FSB"), is the
investment adviser for 1st Source Monogram Special Equity
Fund, 1st Source Monogram Income Fund, 1st Source Monogram
Diversified Equity Fund and 1st Source Monogram Income Equity
Fund. FSB is a wholly-owned subsidiary of 1st Source
Corporation. To the knowledge of the Registrant, none of the
directors or officers of FSB, except those set forth below, is
or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain
officers and directors of FSB also hold positions with FSB's
parent, First Source Corporation. Set forth below are the
names and principal businesses of the directors of FSB who are
engaged in any other business, profession, vocation, or
employment of a substantial nature.
<TABLE>
<CAPTION>
Name Position with FSB Principal Occupation
- ---- ----------------- --------------------
<S> <C> <C>
Rev. E. William Beauchamp Director Executive Vice President University
of Notre Dame South Bend, IN 46556
Paul R. Bowles Director Former Senior Vice President-Clark
Equipment Company 1202 East Jefferson
South Bend, IN 46617 (off-highway
components and construction
machinery manufacturing)
Philip J. Faccenda Director President
Bear Financial, Inc.
1222 E. Erskine Manor Hill
South Bend, IN 46617
(venture capital)
Chairman, President, Chief Executive
Daniel B. Fitzpatrick Director Officer and Director
Quality Dining, Inc.
P.O. Box 416
South Bend, IN 46624
(quick service and casual dining
restaurant operator)
Terry L. Gerber Director President and Chief Executive
Officer
Gerber Manufacturing Company, Inc.
1417 Olivia Circle
South Bend, IN 46614
(manufacturer of police and
emergency outerwear)
Lawrence E. Hiler Director President
Hiler Industries
P.O. Box 639
La Porte, IN 46350
(metal casting)
Anne M. Hillman Director Civic Leader
3904 Nall Court
South Bend, IN 46614
Hollis E. Hughes, Jr. Director Executive Director
United Way of
St. Joseph County
3517 E. Jefferson
P.O. Box 6396
South Bend, IN 46660
H. Thomas Jackson Director Chairman
Bornemann Coated Fabrics
Bornemann Products
P.O. Box 208
Bremen, IN 46506
(vinyl sales)
William P. Johnson Director Chairman & CEO
Goshen Rubber Co., Inc.
1525 S. 10th
Goshen, IN 46527
(manufacturer of automotive rubber
parts)
Craig A. Kapson Director President
Jordan Ford, Toyota, Volvo, Lincoln
Mercury
609 E. Jefferson
Mishawaka, IN 46545
(automobile sales)
David L. Lerman Director President
Steel Warehouse Company, Inc.
2722 West Tucker Drive
South Bend, IN 46624
(warehouse storage)
Richard J. Pfeil Director Chairman and President
Koontz-Wagner Electric Co.
3801 Voorde Drive
South Bend, IN 46628
(electrical equipment repair,
construction and installation)
John T. Phair Director Vice President
The Holladay Corporation
220 Colfax, Suite 200
South Bend, IN 46601
(property management)
Mark D. Schwabero Director Executive Vice President
Bosch Braking Systems Corp.
401 N. Bendix Drive
South Bend, IN 46634
(manufacturers of automotive brakes
and brake
components)
Elmer H. Tepe Director President
E.H. Tepe Co.
c/o 1st Source Corporation
100 North Michigan Street
South Bend, IN 46634
(holding company)
</TABLE>
(b) Miller Anderson and Sherrerd LLP, West Conshohocken,
Pennsylvania ("Miller Anderson") is a sub-investment adviser
for 1st Source Monogram Diversified Equity Fund. Miller
Anderson is wholly owned by Morgan Stanley, Dean Witter,
Discover & Co., 1585 Broadway, New York, New York 10036. The
business and other connections of Miller Anderson's Officers
and Directors are set forth in the Uniform Application for
Investment Adviser Registration ("Form ADV") of Miller
Anderson as currently on file with the Commission and which is
incorporated by reference herein.
(c) Loomis Sayles & Company, L.P., Chicago, Illinois ("Loomis") is
a sub-investment adviser for 1st Source Monogram Diversified
Equity Fund. The sole general partner of Loomis is Loomis
Sayles & Company, Incorporated, One Financial Center, Boston,
Massachusetts 02111. The business and other connections of the
Officers and Directors of Loomis are set forth in the Form ADV
of Loomis as currently on file with the Commission and which
is incorporated by reference herein.
(d) Standish, Ayer & Wood, Inc., One Financial Center, Boston,
Massachusetts 02111 ("Standish") is a sub-investment adviser
for 1st Source Monogram Diversified Equity Fund. The business
and other connections of the Officers and Directors of
Standish are set forth in the Form ADV of Standish as
currently on file with the Commission and which is
incorporated by reference herein.
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
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 (other than the payment by the Registrant
of expenses incurred or paid by trustees, officers or
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.
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<PAGE> 80
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 July 30, 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) In connection with the 1st Source Monogram Funds,
the accounts, books and other documents required to
be maintained by the Registrant pursuant to Section
31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of 1st
Source Bank, 100 North Michigan Street, South Bend,
Indiana 46634 (records relating to its function as
investment adviser for the 1st Source Monogram
Funds); Miller Anderson & Sherrerd LLP, One Tower
Bridge, Suite 1100, West Conshohocken, Pennsylvania
19428 (records relating to its functions as a
sub-investment adviser to 1st Source Monogram
Diversified Equity Fund); Loomis Sayles & Company,
L.P., 3 First National Plaza, Suite 5450, Chicago,
Illinois 60600 (records relating to its functions as
a sub-investment adviser to 1st Source Monogram
Diversified Equity Fund); Standish, Ayer & Wood,
Inc., One Financial Center, Boston, Massachusetts
02111 (records relating to its functions as a
sub-investment adviser to 1st Source Monogram
Diversified Equity Fund); BISYS Fund Services, 3435
Stelzer Road, Columbus, Ohio 43219 (records relating
to its functions as general manager, administrator
and distributor), and BISYS Fund Services Ohio, Inc.,
3435 Stelzer Road, Columbus, Ohio 43219 (records
relating to its functions as transfer agent).
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS.
None
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<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 58 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 30th day of July, 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 July 30, 1999
- ------------------------
Walter B. Grimm** (Principal Executive Officer)
/s/ John H. Ferring IV Trustee July 30, 1999
- ------------------------
John H. Ferring IV***
/s/ Maurice G. Stark Trustee July 30, 1999
- ------------------------
Maurice G. Stark*
/s/ Michael M. Van Buskirk Trustee July 30, 1999
- ------------------------
Michael M. Van Buskirk*
/s/ Gary R. Tenkman Treasurer (Principal July 30, 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
<PAGE> 1
Exhibit 99(j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 58 to the Registration Statement of 1st Source Monogram Funds on Form N-1A
(File No. 33-44964) of our report dated May 14, 1999 on our audits of the
financial statements and financial highlights of the 1st Source Monogram Funds,
which report is included in the Annual Report to Shareholders for the year ended
March 31, 1999, which is incorporated by reference in Post-Effective Amendment
No. 58 to the Registration Statement. We also consent to the reference to our
Firm under the captions "Financial Highlights" in the Prospectus and
"Independent Accountants" and "Financial Statements" in the Statement of
Additional Information in this Post-Effective Amendment No. 58 to the
Registration Statement of the 1st Source Monogram Funds on Form N-1A (File No.
33-44964).
PricewaterhouseCoopers
Columbus, Ohio
July 30, 1999
