<PAGE> 1
SEMI-ANNUAL REPORT
1ST SOURCE
MONOGRAM
FUNDS(SM)
Semi-Annual Report
September 30, 2000
<PAGE> 2
TABLE OF CONTENTS
1ST SOURCE MONOGRAM FUNDS
SEMI-ANNUAL REPORT-SEPTEMBER 30, 2000
<TABLE>
<S> <C>
Letter From the Investment Adviser.......................... 1
1st Source Monogram Income Equity Fund...................... 2
1st Source Monogram Diversified Equity Fund................. 8
1st Source Monogram Special Equity Fund..................... 14
1st Source Monogram Income Fund............................. 20
Notes to Financial Statements............................... 25
</TABLE>
<PAGE> 3
LETTER FROM THE INVESTMENT ADVISER
DEAR INVESTOR:
We are pleased to present this report for the six-month period ended
September 30, 2000. Economic growth was strong early in the period, causing some
investors to worry that the Federal Reserve Board (the "Fed") would raise
interest rates to ward off inflation. The Fed did raise interest rates in May by
50 basis points (0.50%). That rate hike combined with earlier interest-rate
increases helped to slow the economy somewhat. The Fed maintained a neutral
monetary policy for the rest of the period.
Broad market indices were volatile and posted losses during the period. The
Dow Jones Industrial Average(1) began the period at 10,922, declined to as low
as 10,299, and then recovered to end the period at 10,650. The technology-heavy
Nasdaq Composite Index(2) began the period at 4,572.83, fell sharply to 3,164.55
in May as tech stocks corrected, and ended the period at 3,672.82.
A RETURN TO VALUE
The equity markets during the period were characterized by a return to value
stocks. Growth stocks in the technology and telecommunications sectors had
dramatically outperformed other segments of the market during the past several
years, resulting in extremely high valuations for those issues and low
valuations for value stocks. But investors during the period sold many tech
stocks due to worries about higher interest rates and disappointing earnings
growth. Furthermore, the weak European currency (Euros) hurt the profits of many
large technology companies, which receive a great deal of revenue from Europe.
The period also saw the re-emergence of small-cap and mid-cap stocks, which
outperformed large caps after trailing for years. Investors recognized that
valuations of smaller firms' stock had become very attractive after their long
period of underperformance. Smaller firms also benefited from the Euro's
weakness, because they have much less exposure to Europe's economy than do large
corporations.
The bond market performed well following the Fed's May rate hike. Investors
saw the slowing economy as a sign that the Fed would not raise interest rates
again any time soon. Short-term bonds, which are most affected by the Fed's
action, especially benefited from that environment. For example, the yield on
the two-year Treasury note fell 51 basis points (0.51%), from 6.48% at the
beginning of the period to 5.97% at the end.
GOING FORWARD
We anticipate continued market volatility during the next several months,
due to uncertainty about corporate earnings and about the coming presidential
election. We expect the Fed to maintain its neutral monetary policy, as its
earlier rate hikes continue to slow the economy. While we do not expect a
recession in the near future, the current economic expansion is the longest in
history, and we feel the economy will likely contract at some point.
We are encouraged by the recoveries of value stocks and shares of small- and
mid-sized firms. We believe that such stocks could be well positioned to
continue strong performance going forward. Many stocks in the health-care
services, financial services, consumer cyclicals, and commodity sectors still
trade at low valuations compared to their growth rates, and have promising
potential.
A neutral Fed policy should also help stabilize the bond market. In our
opinion, bonds will likely trade in a relatively narrow range going forward. The
shift in investors' focus during the past six months from expensive technology
shares to Old Economy value and small-cap stocks highlights the importance of
maintaining a diversified portfolio. Such a portfolio will provide the best
mixture of risk and reward over the long term.
IN CLOSING...
On the following pages, your Fund managers discuss how the market
environment affected your Funds, and how that environment affected their
investment decisions. They also offer their outlooks for the markets in the
coming months. You also will find detailed financial information and a schedule
of investments for each Fund. We encourage you to read this material closely.
Thank you for your continued confidence in the 1st Source Monogram Funds. We
look forward to providing you with investment management services in the months
and years to come. If you have questions or require assistance, please contact
your account representative, or call the 1st Source Monogram Funds directly at
1-800-766-8938.
Sincerely,
Ralph C. Shive, CFA
Brian A. Bythrow, CFA
Paul W. Gifford, CFA
Kevin A. Carey
------------------
(1) The Dow Jones Industrial Average is a price-weighted average based on the
price movements of 30 blue-chip stocks.
(2) The Nasdaq Composite Index is a market-capitalization price-only index that
tracks the performance of domestic common stocks traded on the regular
Nasdaq market, as well as national market system-traded foreign common
stocks and American Depositary Receipts.
1
<PAGE> 4
1ST SOURCE MONOGRAM FUNDS
1ST SOURCE MONOGRAM INCOME EQUITY FUND
RALPH C. SHIVE, CFA
Q. HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED SEPTEMBER 30,
2000?
A. The Fund's total return during the six-month period was 5.62% (without the
sales load).(+) The Fund's benchmark, the Russell 1000 Value Index,(1)
returned 2.81%. The Lipper Equity Income Funds Average(2) returned 4.53%.
Q. WHAT WAS THE STOCK MARKET ENVIRONMENT LIKE DURING THE PERIOD?
A. Value stocks rebounded during the period, following several years during
which they lagged aggressive growth stocks. Investors were worried about
rising interest rates and technology companies' profits, so they moved money
into undervalued sectors of the market. Value-oriented stocks in industries
such as health-care services, financial services, commodities, and consumer
cyclicals benefited from that trend.
Small-cap and mid-cap stocks also performed well after a long period of
underperforming large-company shares. We believe one reason for the new
trend was the weakness of the Euro relative to the Dollar. Small companies
do less business in Europe than large companies do, and therefore were less
affected by the Euro's decline.
Q. HOW DID YOU MANAGE THE FUND IN THAT ENVIRONMENT?
A. We reduced the Fund's exposure to technology stocks early in the period,
because we were concerned that their valuations had risen to unjustifiable
heights. That approach helped the Fund's performance, as tech stocks fell
sharply. We used the cash generated from those sales to invest in shares
that offered good total return prospects relative to their valuations. We
found such opportunities in industries such as health-care services,
financial services and utilities. The Fund also benefited from its strong
weighting in mid-cap stocks, which performed well during the period.*
Q. WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET DURING THE COMING MONTHS?
A. We believe investors are concerned about corporate earnings, because many
large firms have warned that their profits will fall short of expectations.
Most of those problems appear to be occurring in growth sectors such as
technology and telecommunications. Value stocks remain attractive, in part
because they still carry relatively low valuations due to their poor
performance during the past several years. Moreover, those low valuations
are leading to takeovers, which tend to boost share prices. We will continue
to seek out and invest in stocks that offer the best potential total return
at reasonable valuations.
------------------
(+) With the maximum sales load of 5.00%, the Fund's return for the six-month
period would have been 0.31%.
(1) The Russell 1000 Value Index is an unmanaged index that contains 1,000
securities with a less-than-average growth orientation. Securities in this
index generally have lower price-to-book and price/earnings ratios, higher
dividend yields and lower forecasted growth values than the Growth Universe.
This index does not reflect the deduction of fees associated with a mutual
fund, such as investment management and fund accounting fees. The
performance of the Fund reflects the deduction of fees for these value-added
services.
(2) The Lipper Equity Income Funds Average is an average of funds that seek
relatively high current income and growth of income through investing 60% or
more of its portfolio in equities. Lipper is an independent mutual fund
performance monitor whose results are based on total return and do not
reflect a sales charge. Investors cannot invest directly in an index,
although they can invest in its underlying securities.
* The Fund's portfolio composition is subject to change.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE PER SHARE WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
2
<PAGE> 5
1ST SOURCE MONOGRAM INCOME EQUITY FUND SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
COMMON STOCKS - 92.8%
SECURITY DESCRIPTION SHARES VALUE
-------------------------------------- ---------- -----------
AEROSPACE/DEFENSE - 4.3%
Esterline Technologies Corp. ......... 55,000 $ 1,082,813
Raytheon Co. ......................... 30,000 853,125
-----------
1,935,938
-----------
AUTOMOTIVE - 4.4%
Dana Corp. ........................... 28,000 602,000
Ford Motor Company.................... 26,222 663,744
Superior Industries International..... 21,000 630,000
Wabash National Corp.(b).............. 10,000 91,250
-----------
1,986,994
-----------
BUILDING MATERIALS - 3.0%
Armstrong Holdings Inc................ 23,000 274,563
Carpenter Technology Corp. ........... 36,800 1,071,800
-----------
1,346,363
-----------
CHEMICALS - 2.8%
Dow Chemical Co. ..................... 21,000 523,687
Hercules, Inc. ....................... 20,000 282,500
Polyone Corporation(b)................ 65,000 475,313
-----------
1,281,500
-----------
COMPUTERS - 4.6%
Diebold, Inc. ........................ 34,000 903,125
Electronic Data Systems Corp. ........ 14,000 581,000
Hewlett-Packard Co. .................. 6,000 582,000
-----------
2,066,125
-----------
CONSUMER GOODS & SERVICES - 9.4%
American Greetings Corp. ............. 27,000 472,500
Avon Products, Inc. .................. 15,000 613,125
Cooper Tire & Rubber Co. ............. 53,000 533,313
McKesson HBOC, Inc. .................. 40,000 1,222,499
Sabre Holdings Corp.(b)............... 19,226 556,352
Sherwin-Williams Co. ................. 40,000 855,000
-----------
4,252,789
-----------
ELECTRONIC COMPONENTS - 5.9%
Dallas Semiconductor Corp. ........... 27,000 887,624
Parker-Hannifin Corp. ................ 19,000 641,250
Rockwell International, Inc. ......... 25,000 756,250
Thomas & Betts Corp. ................. 23,000 401,063
-----------
2,686,187
-----------
FINANCIAL SERVICES - 4.8%
National City Corp. .................. 28,000 619,500
Union Planters Corp. ................. 19,434 642,537
Waddell & Reed Financial, Inc. ....... 30,000 930,000
-----------
2,192,037
-----------
FOOD & RELATED - 4.4%
Panamerican Beverages................. 20,000 340,000
Quaker Oats Co. ...................... 15,000 1,186,875
Ralston-Ralston Purina Group.......... 20,000 473,750
-----------
2,000,625
-----------
FOREST & PAPER PRODUCTS - 2.0%
Temple-Inland, Inc. .................. 8,000 303,000
Weyerhaeuser Co. ..................... 15,000 605,625
-----------
908,625
-----------
COMMON STOCKS, CONTINUED
SECURITY DESCRIPTION SHARES VALUE
-------------------------------------- ---------- -----------
INSURANCE - 4.6%
Lincoln National Corp. ............... 20,000 $ 962,500
St. Paul Companies, Inc. ............. 22,412 1,105,192
-----------
2,067,692
-----------
MACHINERY & EQUIPMENT - 3.1%
Stewart & Stevenson Services,
Inc.(b)............................. 20,000 348,750
Trinity Industries, Inc. ............. 24,000 561,000
W.W. Grainger, Inc. .................. 19,000 499,938
-----------
1,409,688
-----------
MEDIA - 3.9%
A.H. Belo Corp. Series A.............. 42,000 774,375
Tribune Co. .......................... 23,000 1,003,375
-----------
1,777,750
-----------
MEDICAL - 4.1%
Bergen Brunswig Corp. ................ 70,000 818,125
Biomet, Inc. ......................... 30,000 1,050,000
-----------
1,868,125
-----------
METALS - DIVERSIFIED - 1.8%
Alcoa, Inc.(b)........................ 10,000 253,125
Brush Wellman, Inc. .................. 25,000 540,625
-----------
793,750
-----------
OIL & GAS - 7.5%
Phillips Petroleum Co. ............... 17,000 1,066,749
Southwest Gas Corp. .................. 25,900 542,281
Texaco, Inc. ......................... 15,000 787,500
USX -- Marathon Group, Inc. .......... 35,000 993,125
-----------
3,389,655
-----------
PHARMACEUTICALS - 5.4%
Abbott Laboratories................... 16,000 761,000
Bristol-Myers Squibb Co. ............. 14,000 799,750
Merck & Co., Inc. .................... 12,000 893,250
-----------
2,454,000
-----------
REAL ESTATE INVESTMENT TRUST - 2.2%
Captec Net Lease Realty, Inc. ........ 30,000 341,250
Hospitality Properties Trust.......... 12,000 280,500
Thornburg Mortgage Asset Corp. ....... 41,300 387,188
-----------
1,008,938
-----------
RETAIL - 2.4%
Dillard's, Inc. ...................... 15,000 159,375
KMart Corp.(b)........................ 45,000 270,000
Longs Drug Stores, Inc. .............. 35,000 669,375
-----------
1,098,750
-----------
TELECOMMUNICATIONS - 7.6%
Andrew Corp. ......................... 17,000 445,188
General Motors Corp. -- Class H....... 20,000 743,600
Harris Corp. ......................... 28,000 796,249
Montana Power Co. .................... 22,000 734,250
SBC Communications, Inc. ............. 14,000 700,000
-----------
3,419,287
-----------
TRANSPORTATION - 1.2%
Ryder System, Inc. ................... 29,000 534,688
-----------
</TABLE>
Continued
3
<PAGE> 6
1ST SOURCE MONOGRAM INCOME EQUITY FUND SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
COMMON STOCK, CONTINUED
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------------------------- ---------- -----------
UTILITIES - 3.4%
American Electric Power Co. .......... 19,000 $ 743,375
Reliant Energy, Inc. ................. 17,000 790,500
-----------
1,533,875
-----------
TOTAL COMMON STOCKS
(Cost $37,667,052).............................. 42,013,381
-----------
PREFERRED STOCKS - 1.8%
PHARMACEUTICALS - 1.8%
Biovail Corp.(b)...................... 11,000 825,000
-----------
TOTAL PREFERRED STOCKS
(Cost $529,086)................................. 825,000
-----------
CONVERTIBLE BONDS - 2.6%
HEALTH & PERSONAL CARE - 1.6%
Sunrise Assisted Living, Inc., 5.50%,
6/15/02, Callable 12/15/00 @
102.20.............................. $ 800,000 $ 713,000
-----------
SHIPBUILDING - 1.0%
Friede Goldman Halter, Inc., 4.50%,
9/15/04, Callable 12/15/00 @
102.57.............................. 800,000 446,000
-----------
TOTAL CONVERTIBLE BONDS
(Cost $1,373,686)............................... 1,159,000
-----------
REPURCHASE AGREEMENTS - 2.7%
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------------------------- ---------- -----------
Fifth Third Bank, 5.88%, due 10/2/00,
maturity value $1,238,806
(collateralized by $1,301,191, GNMA,
5.68%, 11/1/18, market value
$1,269,118)......................... $1,238,199 $ 1,238,199
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $1,238,199)............................... 1,238,199
-----------
TOTAL INVESTMENTS
(Cost $40,808,023)(a) - 99.9%................... 45,235,580
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.1%.............................. 31,440
-----------
NET ASSETS - 100.0%............................... $45,267,020
===========
</TABLE>
------------------
(a) Cost differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation........................ $9,876,242
Unrealized depreciation........................ (5,448,685)
----------
Net unrealized appreciation.................... $4,427,557
==========
</TABLE>
(b) Represents a non-income producing security.
<TABLE>
<S> <C>
GNMA --Government National Mortgage Association
</TABLE>
See notes to financial statements.
4
<PAGE> 7
1ST SOURCE MONOGRAM INCOME EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (cost
$40,808,023)........................... $45,235,580
Interest receivable...................... 24,241
Dividends receivable..................... 43,296
Deferred organization costs.............. 2,102
Prepaid expenses......................... 2,178
-----------
TOTAL ASSETS......................... 45,307,397
LIABILITIES:
Accrued expenses and other liabilities:
Investment advisory.................... $30,552
Administration......................... 1,471
Other.................................. 8,354
-------
TOTAL LIABILITIES.................... 40,377
-----------
NET ASSETS............................... $45,267,020
===========
COMPOSITION OF NET ASSETS:
Capital.................................. $37,537,101
Accumulated net investment income........ 57,029
Accumulated net realized gains from
investment transactions................ 3,245,333
Unrealized appreciation from
investments............................ 4,427,557
-----------
NET ASSETS............................... $45,267,020
===========
Shares Outstanding (par value $0.01,
unlimited number of authorized
shares)................................ 4,017,091
===========
Net Asset Value and Redemption Price per
share.................................. $11.27
------
------
Maximum Sales Charge..................... 5.00%
-----
Maximum Offering Price per share
(Net Asset Value/(100%-Maximum Sales
Charge))............................... $11.86
------
------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest................................. $ 54,777
Dividend................................. 680,829
----------
TOTAL INVESTMENT INCOME.............. 735,606
EXPENSES:
Investment advisory...................... $192,780
Administration........................... 48,195
Distribution............................. 60,237
Other.................................... 37,627
--------
Total expenses before voluntary fee
reductions......................... 338,839
Voluntary fee reductions............. (60,237)
----------
NET EXPENSES......................... 278,602
----------
NET INVESTMENT INCOME.................... 457,004
----------
NET REALIZED/UNREALIZED GAINS/(LOSSES)
FROM INVESTMENTS:
Net realized gains from investment
transactions........................... 1,212,143
Change in unrealized appreciation from
investments............................ 1,054,976
----------
Net realized/unrealized gains from
investments............................ 2,267,119
----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS............................. $2,724,123
==========
</TABLE>
See notes to financial statements.
5
<PAGE> 8
1ST SOURCE MONOGRAM INCOME EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
SEPTEMBER 30, YEAR ENDED
2000 MARCH 31,
(UNAUDITED) 2000
------------- ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income..................................... $ 457,004 $ 1,046,408
Net realized gains from investment transactions........... 1,212,143 5,964,862
Change in unrealized appreciation/depreciation from
investments............................................. 1,054,976 (1,282,624)
------------ ------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS.............. 2,724,123 5,728,646
------------ ------------
DIVIDENDS:
Net investment income..................................... (444,626) (1,087,542)
Net realized gains from investment transactions........... -- (4,793,055)
------------ ------------
CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS............. (444,626) (5,880,597)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................... 11,577,769 16,935,163
Dividends reinvested...................................... 433,206 5,782,156
Cost of shares redeemed................................... (15,990,657) (26,501,007)
------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS........ (3,979,682) (3,783,688)
------------ ------------
CHANGE IN NET ASSETS........................................ (1,700,185) (3,935,639)
NET ASSETS:
Beginning of period....................................... 46,967,205 50,902,844
------------ ------------
End of period............................................. $ 45,267,020 $ 46,967,205
============ ============
SHARE TRANSACTIONS:
Issued.................................................... 1,087,891 1,534,426
Reinvested................................................ 40,154 549,589
Redeemed.................................................. (1,470,873) (2,352,785)
------------ ------------
CHANGE IN SHARES............................................ (342,828) (268,770)
============ ============
</TABLE>
See notes to financial statements.
6
<PAGE> 9
1ST SOURCE MONOGRAM INCOME EQUITY FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
SEPTEMBER 30, YEAR ENDED JULY 1, 1998 TO YEAR ENDED SEPTEMBER 25, 1996
2000 MARCH 31, MARCH 31, JUNE 30, TO JUNE 30,
(UNAUDITED) 2000 1999(a) 1998 1997(b)
------------- ---------- --------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 10.77 $ 11.00 $ 12.60 $ 12.28 $ 10.00
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income............ 0.10 0.25 0.20 0.27 0.20
Net realized and unrealized
gains/(losses) from investment
transactions................... 0.50 0.94 (0.26) 1.79 2.32
------- ------- ------- ------- -------
Total from investment
activities..................... 0.60 1.19 (0.06) 2.06 2.52
------- ------- ------- ------- -------
DIVIDENDS:
Net investment income............ (0.10) (0.26) (0.20) (0.27) (0.19)
Net realized gains from
investment transactions........ -- (1.16) (1.34) (1.47) (0.05)
------- ------- ------- ------- -------
Total dividends.................. (0.10) (1.42) (1.54) (1.74) (0.24)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD..... $ 11.27 $ 10.77 $ 11.00 $ 12.60 $ 12.28
======= ======= ======= ======= =======
TOTAL RETURN (EXCLUDES SALES
CHARGE).......................... 5.62%(c) 11.35% 0.04%(c) 18.15% 25.58%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000's).......................... $45,267 $46,967 $50,903 $52,450 $39,196
Ratio of expenses to average net
assets........................... 1.16%(d) 1.18% 1.21%(d) 1.21% 1.37%(d)
Ratio of net investment
income/(loss) to average net
assets........................... 1.90%(d) 2.18% 2.29%(d) 2.16% 2.38%(d)
Ratio of expenses to average net
assets(e)........................ 1.41%(d) 1.43% 1.46%(d) 1.46% 1.62%(d)
Portfolio turnover................. 19% 43% 34% 70% 38%
</TABLE>
(a) Subsequent to the annual report at June 30, 1999, the fund changed its
fiscal year end to March 31.
(b) Period from commencement of operations.
(c) Not annualized.
(d) Annualized.
(e) During the period, certain fees were voluntarily reduced. If such fee
reductions had not occurred, the ratio would have been as indicated.
See notes to financial statements.
7
<PAGE> 10
1ST SOURCE MONOGRAM FUNDS
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
BRIAN A. BYTHROW, CFA
KEVIN A. CAREY
Q. HOW DID THE DIVERSIFIED EQUITY FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED
SEPTEMBER 30, 2000?
A. Kevin Carey:
The Fund posted a total return of -3.09% (without the sales load).(+) That
compares to a -3.60% return for the Fund's benchmark, the S&P 500 Stock
Index,(1) during the same time period.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. Kevin Carey:
Growth stocks during the period experienced significant volatility. Shares
of technology and telecommunications firms suffered losses due to investors'
concerns about the stocks' high valuations and the firms' future earnings
growth. Weakness in the European currency, the Euro, also dampened stock
market performance of many large firms that derive a considerable portion of
their revenues from Europe.
Q. HOW DID YOU POSITION THE FUND IN THAT ENVIRONMENT?
A. Kevin Carey:
We maintained our strategy of investing in shares of large, dominant
companies capable of growing their sales and earnings. We found attractive
opportunities in sectors such as financial services, health care, insurance,
and consumer goods. In the insurance and financial sector, we added MetLife
(0.93% of the Fund's net assets), and increased our existing positions in
J.P. Morgan (1.45%) and Charles Schwab (1.41%). In the health-care sector,
we added Pfizer (2.10%), which became our largest health-care position, and
increased our position in Guidant (1.35%). We also added to the Fund's
positions in Walgreen's (0.89%) and RadioShack (1.87%) in the consumer
sector.*
A. Brian Bythrow:
We reduced the Fund's exposure to technology stocks, based on our belief
that many tech shares were overvalued. That strategy benefited the Fund, as
tech stocks performed poorly during the period. We increased the Fund's cash
position from approximately 4% of assets at the beginning of the period to
9% by the end. We believe that approach enabled us to take advantage of
market volatility by purchasing shares of strong companies when their shares
traded at attractive valuations.*
Q. WHAT IS YOUR OUTLOOK FOR THE MARKET DURING THE COMING MONTHS?
A. Brian Bythrow:
Historically, presidential elections are followed by a stock market rally.
We expect that pattern to repeat itself this year, with a rally beginning in
late November. However, economic growth appears to be slowing somewhat, and
many stocks still trade above their historical valuations. Therefore, we
believe the S&P 500 will probably not post the type of outsized gains that
investors have witnessed during the past few years.
A. Kevin Carey:
In this environment, we will maintain our top-down investing strategy. We
will continue to focus on sectors with solid year-over-year growth rates and
appealing valuations compared to the S&P 500. The sectors that look
attractive to us are financial services, energy and health care. Within
those sectors, we will choose shares of companies with strong growth
prospects. We also will invest in select technology stocks that trade at
attractive valuations.
------------------
(+) With the maximum sales load of 5.00%, the Fund's return for the six-month
period would have been -7.97%.
(1) The S&P 500 Stock Index is an unmanaged index that generally reflects the
performance of the U.S. stock market as a whole. This index does not reflect
the deduction of fees associated with a mutual fund, such as investment
management and fund accounting fees. The performance of the Fund reflects
the deduction of fees for these value-added services. Investors cannot
invest directly in an index, although they can invest in the underlying
securities.
* The Fund's portfolio composition is subject to change.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE PER SHARE WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
8
<PAGE> 11
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
COMMON STOCKS - 89.1%
SECURITY DESCRIPTION SHARES VALUE
----------------------------------------- ------- -----------
BANKING - 5.2%
Bank of America Corp. ................... 14,700 $ 769,913
J.P. Morgan & Co. ....................... 5,700 931,237
MBNA Corp. .............................. 10,000 385,000
PNC Bank Corp. .......................... 5,500 357,500
Wells Fargo & Co. ....................... 19,400 891,188
-----------
3,334,838
-----------
BEVERAGES - 0.7%
Coca-Cola Co. ........................... 7,800 429,975
-----------
BROADCASTING & PUBLISHING - 0.6%
Viacom Inc. Class B(b)................... 6,510 380,835
-----------
COMPUTER SOFTWARE - 6.7%
Citrix Systems, Inc.(b).................. 10,000 200,625
Microsoft Corp.(b)....................... 21,000 1,265,250
Oracle Corp.(b).......................... 20,000 1,575,000
Sun Microsystems, Inc.(b)................ 11,000 1,284,250
-----------
4,325,125
-----------
COMPUTERS - 5.6%
Apple Computer, Inc.(b).................. 8,000 206,000
Compaq Computer Corp. ................... 15,000 413,700
Dell Computer Corp.(b)................... 10,000 308,125
EMC Corp.(b)............................. 14,000 1,387,750
Hewlett-Packard Co. ..................... 4,000 388,000
International Business Machines Corp. ... 8,000 900,000
-----------
3,603,575
-----------
COSMETICS & TOILETRIES - 0.5%
Procter & Gamble Co. .................... 5,200 348,400
-----------
DATA PROCESSING & REPRODUCTION - 0.4%
First Data Corp. ........................ 7,300 285,156
-----------
DEFENSE - 0.8%
United Technologies Corp. ............... 7,800 540,150
-----------
ELECTRONIC COMPONENTS - 5.2%
Cypress Semiconductor Corp.(b)........... 10,700 444,719
Emerson Electric Co. .................... 6,000 402,000
Intel Corp. ............................. 14,000 582,750
SCI Systems, Inc.(b)..................... 10,000 410,000
Solectron Corp.(b)....................... 20,000 922,500
Texas Instruments, Inc. ................. 12,000 566,250
-----------
3,328,219
-----------
ELECTRONICS - 0.5%
AVX Corp. ............................... 12,000 312,750
-----------
FINANCIAL SERVICES - 7.7%
American Express Co. .................... 18,900 1,148,175
Citigroup, Inc. ......................... 33,133 1,791,253
Fannie Mae............................... 3,800 271,700
Morgan Stanley Dean Witter & Co. ........ 8,800 804,650
Schwab (Charles) Corp. .................. 25,500 905,250
-----------
4,921,028
-----------
HOUSEHOLD PRODUCTS - 0.8%
Kimberly-Clark Corp. .................... 5,000 279,062
The Clorox Company....................... 6,200 245,288
-----------
524,350
-----------
COMMON STOCKS, CONTINUED
SECURITY DESCRIPTION SHARES VALUE
----------------------------------------- ------- -----------
INSTRUMENTS-SCIENTIFIC - 2.4%
PE Corp. Biosystems Group................ 10,000 $ 1,165,000
Waters Corp.(b).......................... 4,400 391,600
-----------
1,556,600
-----------
INSURANCE - 2.4%
American International Group, Inc. ...... 9,900 947,307
MetLife, Inc. ........................... 22,700 594,456
-----------
1,541,763
-----------
MANUFACTURING - 4.0%
General Electric Co. .................... 36,000 2,076,750
Tyco International Ltd. ................. 10,000 518,750
-----------
2,595,500
-----------
MEDICAL - 2.8%
Beckman Coulter, Inc. ................... 3,900 300,788
Genentech, Inc.(b)....................... 1,800 334,238
Guidant Corp.(b)......................... 12,300 869,455
Medtronic, Inc. ......................... 5,600 290,150
-----------
1,794,631
-----------
MULTIMEDIA - 1.5%
America Online, Inc.(b).................. 10,000 537,500
Time Warner, Inc. ....................... 5,100 399,075
-----------
936,575
-----------
NETWORKING SOFTWARE - 2.6%
Cisco Systems, Inc.(b)................... 30,000 1,657,500
-----------
OIL & GAS - 7.3%
BP Amoco PLC, ADR........................ 12,600 667,800
Enron Corp. ............................. 6,000 525,750
Exxon Mobil Corp. ....................... 15,000 1,336,875
Nabors Industries, Inc.(b)............... 10,400 544,960
Schlumberger Ltd.(b)..................... 4,200 345,713
The Coastal Corp. ....................... 12,800 948,800
Transocean Sedco Forex, Inc. ............ 5,184 303,912
-----------
4,673,810
-----------
PHARMACEUTICALS - 6.8%
Amgen, Inc.(b)........................... 7,500 523,711
Johnson & Johnson........................ 8,400 789,075
Merck & Co., Inc. ....................... 17,000 1,265,438
Pfizer, Inc. ............................ 30,000 1,348,124
Schering-Plough Corp. ................... 10,000 465,000
-----------
4,391,348
-----------
RESTAURANTS - 1.2%
McDonald's Corp. ........................ 12,200 368,288
Starbucks Corp.(b)....................... 10,500 420,656
-----------
788,944
-----------
RETAIL - 8.4%
Home Depot, Inc. ........................ 16,050 851,653
Kohl's Corp. ............................ 12,000 692,250
RadioShack Corp. ........................ 18,600 1,202,024
Safeway, Inc.(b)......................... 10,200 476,213
Wal-Mart Stores, Inc. ................... 33,000 1,588,124
Walgreen Co. ............................ 15,000 569,063
-----------
5,379,327
-----------
</TABLE>
Continued
9
<PAGE> 12
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
COMMON STOCKS, CONTINUED
SECURITY DESCRIPTION SHARES VALUE
----------------------------------------- ------- -----------
TELECOMMUNICATIONS - 11.3%
Ciena Corp.(b)........................... 10,000 $ 1,228,124
Comcast Corp.(b)......................... 10,000 409,375
JDS Uniphase Corp.(b).................... 8,000 757,500
Lucent Technologies, Inc. ............... 15,000 458,438
Motorola, Inc. .......................... 12,000 339,000
NEXTEL Communications(b)................. 8,000 374,000
Nortel Networks Corp. ................... 18,000 1,072,125
Qwest Communications International(b).... 12,000 576,750
SBC Communications, Inc. ................ 20,000 1,000,000
Tellabs, Inc.(b)......................... 9,000 429,750
Worldcom, Inc.(b)........................ 20,000 607,500
-----------
7,252,562
-----------
TRANSPORTATION - 3.2%
FedEx Corp.(b)........................... 10,000 443,400
General Motors Corp. .................... 5,000 325,000
Harley-Davidson, Inc. ................... 16,600 794,725
United Parcel Service, Inc. Class B...... 9,300 524,288
-----------
2,087,413
-----------
UTILITIES - 0.5%
Williams Co., Inc. ...................... 7,000 295,750
-----------
TOTAL COMMON STOCKS (Cost $45,443,836)... 57,286,124
-----------
WARRANTS - 0.0%
MANAGEMENT SERVICES - 0.0%
PER-SE Technologies(b)................... 330 0
-----------
TOTAL WARRANTS
(Cost $0).............................. 0
-----------
REPURCHASE AGREEMENTS -- 11.0%
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
----------------------------------------- ------- -----------
Fifth Third Bank, 5.88%, due 10/2/00,
maturity value $7,050,821
(collateralized by $7,307,378 FHLMC,
6.50%, 2/1/09, market value
$7,227,896)............................ $7,047,367 $ 7,047,367
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $7,047,367)............................... 7,047,367
-----------
TOTAL INVESTMENTS
(Cost $52,491,203)(a) - 100.1%.................. 64,333,491
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.1)%....
(71,706)
-----------
NET ASSETS - 100.0%............................... $64,261,785
===========
</TABLE>
------------------
(a) Cost differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation....................... $15,225,076
Unrealized depreciation....................... (3,382,788)
-----------
Net unrealized appreciation................... $11,842,288
===========
</TABLE>
(b) Represents a non-income producing security.
ADR --American Depositary Receipt
FHLMC--Federal Home Loan Mortgage Corporation
See notes to financial statements.
10
<PAGE> 13
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (cost
$45,443,836)........................... $57,286,124
Repurchase agreements.................... 7,047,367
-----------
Total investments.................... 64,333,491
Interest receivable...................... 2,302
Dividends receivable..................... 26,532
Deferred organization costs.............. 3,693
Prepaid expenses......................... 793
-----------
TOTAL ASSETS......................... 64,366,811
LIABILITIES:
Accrued expenses and other liabilities:
Investment advisory.................... $42,440
Administration......................... 2,126
Other.................................. 60,460
-------
TOTAL LIABILITIES.................... 105,026
-----------
NET ASSETS............................... $64,261,785
===========
COMPOSITION OF NET ASSETS:
Capital.................................. $47,889,746
Accumulated net investment loss.......... (120,776)
Accumulated net realized gains from
investment transactions................ 4,650,527
Unrealized appreciation from
investments............................ 11,842,288
-----------
NET ASSETS............................... $64,261,785
===========
Shares Outstanding (par value $0.01,
unlimited number of authorized
shares)................................ 5,857,994
===========
Net Asset Value and Redemption Price per
share.................................. $10.97
------
------
Maximum Sales Charge..................... 5.00%
------
Maximum Offering Price per share
(Net Asset Value/(100%-Maximum Sales
Charge))............................... $11.55
------
------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest................................ $ 61,378
Dividend................................ 229,269
-----------
TOTAL INVESTMENT INCOME............. 290,647
EXPENSES:
Investment advisory..................... $321,935
Administration.......................... 65,038
Distribution............................ 81,291
Other................................... 85,201
--------
Total expenses before voluntary and
contractual fee reductions........ 553,465
Voluntary and contractual fee
reductions........................ (142,733)
-----------
NET EXPENSES........................ 410,732
-----------
NET INVESTMENT LOSS..................... (120,085)
-----------
NET REALIZED/UNREALIZED GAINS/(LOSSES)
FROM INVESTMENTS:
Net realized gains from investment
transactions.......................... 3,926,069
Change in unrealized appreciation from
investments........................... (6,642,182)
-----------
Net realized/unrealized losses from
investments........................... (2,716,113)
-----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS............................ $(2,836,198)
===========
</TABLE>
See notes to financial statements.
11
<PAGE> 14
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
SEPTEMBER 30, YEAR ENDED
2000 MARCH 31,
(UNAUDITED) 2000
------------- -----------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment loss....................................... $ (120,085) $ (225,409)
Net realized gains from investment transactions........... 3,926,069 5,018,694
Change in unrealized appreciation/depreciation from
investments............................................. (6,642,182) 9,607,238
----------- -----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS.............. (2,836,198) 14,400,523
----------- -----------
DIVIDENDS:
Net realized gains from investment transactions........... -- (12,924,461)
----------- -----------
CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS............. -- (12,924,461)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................... 8,891,293 19,329,425
Dividends reinvested...................................... -- 12,826,694
Cost of shares redeemed................................... (17,380,766) (43,405,790)
----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS........ (8,489,473) (11,249,671)
----------- -----------
CHANGE IN NET ASSETS........................................ (11,325,671) (9,773,609)
NET ASSETS:
Beginning of period....................................... 75,587,456 85,361,065
----------- -----------
End of period............................................. $64,261,785 $75,587,456
=========== ===========
SHARE TRANSACTIONS:
Issued.................................................... 812,939 1,732,814
Reinvested................................................ -- 1,239,294
Redeemed.................................................. (1,629,595) (3,876,545)
----------- -----------
CHANGE IN SHARES............................................ (816,656) (904,437)
=========== ===========
</TABLE>
See notes to financial statements.
12
<PAGE> 15
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
SEPTEMBER 30, YEAR ENDED JULY 1, 1998 YEAR ENDED SEPTEMBER 23, 1996
2000 MARCH 31, TO MARCH 31, JUNE 30, TO JUNE 30,
(UNAUDITED) 2000 1999(a) 1998 1997(b)
------------- ---------- -------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 11.32 $ 11.26 $ 13.31 $ 11.80 $ 10.00
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment loss............... (0.02) (0.03) (0.02) (0.02) (0.01)
Net realized and unrealized
gains/(losses) from investment
transactions.................... (0.33) 2.05 (0.11) 3.00 2.03
------- ------- ------- ------- -------
Total from investment
activities...................... (0.35) 2.02 (0.13) 2.98 2.02
------- ------- ------- ------- -------
DIVIDENDS:
Net realized gains from investment
transactions.................... -- (1.96) (1.92) (1.47) (0.22)
------- ------- ------- ------- -------
Total dividends................... -- (1.96) (1.92) (1.47) (0.22)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD...... $ 10.97 $ 11.32 $ 11.26 $ 13.31 $ 11.80
======= ======= ======= ======= =======
TOTAL RETURN(EXCLUDES SALES
CHARGE)........................... (3.09%)(c) 19.60% (0.59%)(c) 27.85% 20.42% (c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period(000's)..................... $64,262 $75,587 $85,361 $98,083 $74,990
Ratio of expenses to average net
assets............................ 1.26% (d) 1.33% 1.43% (d) 1.48% 1.62% (d)
Ratio of net investment
income/(loss) to average net
assets............................ (0.37%)(d) (0.28%) (0.24%)(d) (0.18%) (0.10%)(d)
Ratio of expenses to average net
assets(e)......................... 1.70% (d) 1.62% 1.68% (d) 1.73% 1.87% (d)
Portfolio turnover.................. 8% 104% 108% 95% 77%
</TABLE>
(a) Subsequent to annual report at June 30, 1999, the fund changed its fiscal
year end to March 31.
(b) Period from commencement of operations.
(c) Not annualized.
(d) Annualized.
(e) During the period, certain fees were voluntarily and contractually reduced.
If such fee reductions had not occurred, the ratio would have been as
indicated.
See notes to financial statements.
13
<PAGE> 16
1ST SOURCE MONOGRAM FUNDS
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
BRIAN A. BYTHROW, CFA
Q. HOW DID THE FUND PERFORM DURING THE PERIOD?
A. The Fund posted a total return of -1.23% (without the sales load)(+) during
the six-month period from April 1, 2000, through September 30, 2000. The
Fund's benchmark index, the Russell 2000 Index,(1) generated a total return
of - 2.72%.
Q. HOW DID SMALL-COMPANY STOCKS PERFORM DURING THE PERIOD?
A. Economic growth was strong, while inflation remained low. Small-company
stocks outperformed shares of large companies, due to small caps' attractive
valuations and strong earnings-growth rates relative to large caps.
The sell-off in the technology and telecommunications sectors that began in
the spring continued during the period. Investors sold Internet and other
technology shares due to concerns about their valuations and future
prospects. Investors favored sectors such as health care, oil and gas and
financial services. Health care stocks performed well early in the period as
fears of potentially restrictive government legislation of prescription
drugs eased. Oil and gas stocks posted solid gains as oil prices continued
to rise. Regional banks, especially in California, performed well as a
series of Federal Reserve Board interest rate hikes appeared to end.
Q. HOW DID YOU APPLY YOUR INVESTMENT STRATEGY DURING THIS PERIOD?
A. Our strategy is to find fast-growing companies whose shares are priced low
relative to the firms' growth rates. We found opportunities during the
period in financial services, oil, gas, and health care, and we increased
the Fund's exposure to all three sectors. Some individual holdings that
helped the Fund's performance included health care firm Advanced Paradigm
(1.34% of the Fund's net assets), up 166% for the period, and generic drug
maker Biovail (2.27%). In the oil and gas sector, EOG Resources (1.08%)
posted strong gains. Among our financial-services holdings, credit card
company Metris (1.18%) performed well as interest rates began to stabilize.*
We reduced the Fund's exposure to technology and telecommunications stocks
from 50% of the Fund's assets to 25%. That strategy benefited the Fund as
tech and telecomm shares continued to suffer.*
Q. WHAT IS YOUR OUTLOOK FOR SMALL-COMPANY STOCKS GOING FORWARD?
A. We believe that small-cap stocks are just beginning an extended period of
outperformance relative to large-company shares. Small firms' growth rates
are faster than those of larger firms, and their shares trade at more
attractive valuations. We have a positive outlook for such sectors as health
care and financial services. As always, we will look to invest in reasonably
priced shares of small and medium-sized companies with above-average growth
rates. Such an approach should serve investors best over the long term.
------------------
(+) With the maximum sales load of 5.00%, the Fund's return for the six-month
period would have been -6.20%.
(1) The Russell 2000 Index is an unmanaged index that represents the performance
of domestically traded common stocks of small to mid-sized companies. This
index does not reflect the deduction of fees associated with a mutual fund,
such as investment management and fund accounting fees. The performance of
the Fund reflects the deduction of fees for these value-added services.
Investors cannot invest directly in an index, although they can invest in
its underlying securities.
* The Fund's portfolio composition is subject to change.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE PER SHARE WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
14
<PAGE> 17
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
COMMON STOCKS - 86.5%
SECURITY DESCRIPTION SHARES VALUE
-------------------------------------- ---------- -----------
ADVERTISING - 2.0%
Canwest Global Comm Corp. ............ 15,195 $ 200,384
Corus Entertainment, Inc.(b).......... 2,500 71,563
Lamar Advertising Co.(b).............. 6,000 227,250
-----------
499,197
-----------
BANKING - 5.8%
Capitol Federal Financial............. 15,000 219,375
Colorado Business Bankshares.......... 9,000 152,578
East West Bancorp, Inc. .............. 15,000 293,437
First Essex Bancorp................... 8,000 169,000
GBC Bancorp./California............... 6,000 204,375
Greater Bay Bancorp................... 3,000 208,313
UCBH Holdings, Inc. .................. 6,000 214,875
-----------
1,461,953
-----------
COMPUTER NETWORKING - 1.3%
Avocent Corp(b)....................... 6,000 330,750
-----------
COMPUTER SOFTWARE - 3.1%
Aremissoft Corp.(b)................... 5,000 187,499
Citrix Systems, Inc.(b)............... 6,000 120,375
DSET Corp.(b)......................... 6,000 123,750
Informix Corp.(b)..................... 15,000 61,875
Netsmart Technologies, Inc.(b)........ 20,000 77,500
Parametric Technology
Corporation(b)...................... 13,000 142,188
Source Information Mgmt. Co.(b)....... 10,000 68,125
-----------
781,312
-----------
CONSTRUCTION - 0.8%
Nationsrent, Inc.(b).................. 20,000 78,750
Washington Group International
Inc.(b)............................. 10,000 114,375
-----------
193,125
-----------
CONSUMER DURABLES - 1.9%
Daktronics, Inc.(b)................... 15,000 202,500
Koala Corp.(b)........................ 7,000 112,438
Rayovac Corp.(b)...................... 6,000 102,750
Southwall Technologies(b)............. 10,000 61,250
-----------
478,938
-----------
COSMETICS & TOILETRIES - 0.5%
Guest Supply(b)....................... 7,000 129,063
-----------
EDUCATION - 2.3%
ITT Educational Services, Inc.(b)..... 7,000 189,875
Smartforce PLC, ADR(b)................ 5,000 236,875
Sylvan Learning Systems, Inc.(b)...... 10,000 148,125
-----------
574,875
-----------
ELECTRONICS - 15.1%
Amphenol Corp.(b)..................... 4,000 227,750
AVX Corp. ............................ 6,000 156,375
Belden, Inc. ......................... 6,000 141,750
Celestica, Inc.(b).................... 5,000 346,249
Digital Biometrics, Inc.(b)........... 20,000 125,000
Diodes, Inc.(b)....................... 6,000 92,250
DMC Stratex Networks(b)............... 3,000 48,188
Flextronics International Ltd.(b)..... 5,000 410,624
Galileo Technology Ltd.(b)............ 6,000 190,500
General Semiconductor, Inc.(b)........ 9,000 109,688
Harmonic, Inc.(b)..................... 4,000 96,000
COMMON STOCKS, CONTINUED
SECURITY DESCRIPTION SHARES VALUE
-------------------------------------- ---------- -----------
ELECTRONICS, CONTINUED
International Rectifier Corp.(b)...... 4,000 $ 202,250
Kemet Corp.(b)........................ 6,000 165,750
Measurement Specialties, Inc.(b)...... 6,000 289,500
Optimal Robotics Corp.(b)............. 3,000 120,750
PC Connection, Inc.(b)................ 4,000 228,000
Power Integrations, Inc.(b)........... 8,000 111,500
Richardson Electronics................ 10,000 167,500
Robotic Vision Systems, Inc.(b)....... 9,000 53,719
Tidel Technologies, Inc.(b)........... 15,000 104,063
Transwitch Corp. ..................... 6,000 382,499
-----------
3,769,905
-----------
ENVIRONMENTAL SERVICES - 1.0%
Stericycle, Inc.(b)................... 10,000 245,000
-----------
FINANCIAL SERVICES - 5.1%
Alliance Capital Management Holding
L.P. ............................... 3,000 150,375
Allied Capital Corp. ................. 6,000 124,500
Concord EFS, Inc.(b).................. 6,000 213,094
Doral Financial Corp. ................ 8,000 129,500
Metris Co., Inc. ..................... 7,500 296,249
Microfinancial, Inc. ................. 15,000 135,000
National Discount Brokers Group(b).... 5,000 154,688
NCO Group, Inc.(b).................... 7,000 83,125
-----------
1,286,531
-----------
FOOD & RELATED - 1.5%
Constellation Brands Inc.(b).......... 3,000 162,938
Monterey Pasta Co.(b)................. 20,000 101,250
Suprema Specialties, Inc.(b).......... 15,000 120,703
-----------
384,891
-----------
FOREST & PAPER PRODUCTS - 0.5%
Longview Fibre Co. ................... 10,000 120,000
-----------
HEALTH & PERSONAL CARE - 11.8%
Abaxis, Inc.(b)....................... 15,000 86,250
Advance Paradigm, Inc. ............... 8,000 337,500
America Service Group, Inc.(b)........ 13,000 338,000
Amsurg Corp.(b)....................... 10,000 140,000
Biotech Holdrs Trust(b)............... 3,000 584,812
Caremark Rx, Inc.(b).................. 14,000 157,500
Exactech, Inc.(b)..................... 8,000 139,000
IMS Health, Inc. ..................... 7,000 145,250
Interpore International(b)............ 6,000 45,000
LCA-Vision, Inc.(b)................... 15,000 43,594
Lifemark Corp.(b)..................... 10,000 85,000
Molecular Devices Corp.(b)............ 3,000 294,750
Total Renal Care Holdings(b).......... 25,000 187,500
Universal Health Services(b).......... 3,000 256,875
Zevex International, Inc.(b).......... 15,000 88,125
-----------
2,929,156
-----------
INSTRUMENTS-SCIENTIFIC - 1.2%
PerkinElmer, Inc. .................... 3,000 313,125
-----------
INSURANCE - 0.8%
Philadelphia Consolidated Holding
Corp. .............................. 10,000 208,750
-----------
</TABLE>
Continued
15
<PAGE> 18
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
COMMON STOCKS, CONTINUED
SECURITY DESCRIPTION SHARES VALUE
-------------------------------------- ---------- -----------
LEISURE & RECREATIONAL PRODUCTS - 1.2%
Bally Total Fitness Holding
Corp.(b)............................. 7,500 $ 187,500
Extended Stay America, Inc.(b)........ 8,000 106,000
-----------
293,500
-----------
OIL & GAS - 10.1%
Core Laboratories NV(b)............... 6,000 147,375
Cross Timbers Oil Co. ................ 12,000 230,250
Denbury Resources, Inc.(b)............ 20,000 140,000
EOG Resources, Inc. .................. 7,000 272,125
Equitable Resources, Inc. ............ 3,000 190,125
Hanover Compressor Co.(b)............. 9,000 296,438
Key Energy Services, Inc.(b).......... 40,000 392,499
Meridian Resource Corp.(b)............ 30,000 206,250
Noble Drilling Corp.(b)............... 5,000 251,250
Santa Fe International Corp. ......... 5,000 225,313
Vintage Petroleum, Inc. .............. 8,000 182,000
-----------
2,533,625
-----------
PHARMACEUTICALS - 9.2%
Akorn, Inc.(b)........................ 15,000 165,938
Andrx Group(b)........................ 3,000 280,125
Biovail Corp.(b)...................... 7,000 570,063
Elan Corp. PLC, ADR(b)................ 7,540 412,814
King Pharmaceuticals, Inc.(b)......... 4,500 150,469
Medicis Pharmaceuticals(b)............ 5,000 307,500
SICOR, Inc.(b)........................ 20,000 205,000
Teva Pharmaceutical Industries
Ltd.(b).............................. 3,000 219,563
-----------
2,311,472
-----------
REAL ESTATE - 1.8%
Alexandria Real Estate Equities....... 6,000 205,875
Catellus Development Corp.(b)......... 11,000 192,500
Kennedy-Wilson, Inc.(b)............... 10,000 55,000
-----------
453,375
-----------
RESTAURANTS - 0.3%
Taco Cabana -- Class A(b)............. 20,000 86,250
-----------
RETAIL - 3.7%
Ames Department Stores, Inc.(b)....... 13,000 75,156
Fred's, Inc.(b)....................... 15,000 336,563
Gottschalks, Inc.(b).................. 20,000 122,500
Hollywood Entertainment Corp.(b)...... 10,000 74,375
Racing Champions Corp.(b)............. 50,000 56,250
Tandycrafts, Inc.(b).................. 26,500 61,281
Ulimate Electronics, Inc.(b).......... 5,000 205,625
-----------
931,750
-----------
STEEL - 0.4%
Schnitzer Steel Industries, Inc. ..... 7,000 99,750
-----------
TELECOMMUNICATIONS - 2.8%
Dobson Communications Corp.(b)........ 7,000 102,813
Gilat Satellite Networks Ltd.(b)...... 3,000 230,625
Montana Power Co. .................... 5,000 166,875
Powertel, Inc.(b)..................... 2,500 190,156
-----------
690,469
-----------
TRANSPORTATION - 0.3%
Mobile Mini, Inc.(b).................. 4,000 77,000
-----------
COMMON STOCKS, CONTINUED
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------------------------- ---------- -----------
UTILITIES - 2.0%
El Paso Electric Co.(b)............... 15,000 206,550
GTS Duratek(b)........................ 15,000 116,250
Independent Energy Holdings, PLC.
ADR(b)............................... 7,000 55,528
Southwest Water Co. .................. 10,000 131,875
-----------
510,203
-----------
TOTAL COMMON STOCKS
(Cost $16,154,259).................... 21,693,965
-----------
RIGHTS - 0.0%
PHARMACEUTICALS - 0.0%
Elan Corp PLC, ADR.................... 4,000 $ 3,875
-----------
TOTAL RIGHTS
(Cost $0)............................ 3,875
-----------
CONVERTIBLE BONDS - 0.8%
ELECTRONIC COMPONENTS - 0.8%
Advanced Micro Devices, 6.00%, 5/15/05
Callable 5/15/02 @ 102.57............ $ 150,000 201,375
-----------
TOTAL CONVERTIBLE BONDS
(Cost $146,437).................................. 201,375
-----------
INVESTMENT COMPANIES - 2.1%
I Shares Trust Russell 2000........... 5,000 518,125
-----------
TOTAL INVESTMENT COMPANIES
(Cost $503,575).................................. 518,125
-----------
REPURCHASE AGREEMENTS - 8.3%
Fifth Third Bank, 5.88%, due 10/2/00,
maturity value $2,089,665
(collateralized by $2,094,026 FNMA,
8.00%, 10/1/16, market value
$2,144,375).......................... 2,088,642 2,088,642
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $2,088,642)................................ 2,088,642
-----------
TOTAL INVESTMENTS
(Cost $18,892,913)(a) - 97.7%.................... 24,505,982
OTHER ASSETS IN EXCESS OF LIABILITIES - 2.3%...... 588,275
-----------
NET ASSETS - 100.0%............................... $25,094,257
===========
</TABLE>
------------------
(a) Cost differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation........................ $7,207,706
Unrealized depreciation........................ (1,594,637)
----------
Net unrealized appreciation.................... $5,613,069
==========
</TABLE>
(b) Represents non-income producing security.
<TABLE>
<S> <C> <C>
ADR --American Depositary Receipt
FNMA--Federal National Mortgage Association
NV --Naamloze Vennootschaap (Dutch Corp.)
PLC --Public Limited Company
</TABLE>
See notes to financial statements.
16
<PAGE> 19
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (cost
$18,892,913)........................... $24,505,982
Interest receivable...................... 4,082
Dividends receivable..................... 6,368
Receivable for investments sold.......... 605,282
Deferred organization costs.............. 2,118
Prepaid expenses......................... 331
-----------
TOTAL ASSETS......................... 25,124,163
LIABILITIES:
Accrued expenses and other liabilities:
Investment advisory.................... $16,601
Administration......................... 817
Other.................................. 12,488
-------
TOTAL LIABILITIES.................... 29,906
-----------
NET ASSETS............................... $25,094,257
===========
COMPOSITION OF NET ASSETS:
Capital.................................. $14,363,625
Accumulated net investment loss.......... (58,698)
Accumulated net realized transactions.... 5,176,261
Unrealized appreciation from
investments............................ 5,613,069
-----------
NET ASSETS............................... $25,094,257
===========
Shares Outstanding (par value $0.01,
unlimited number of authorized
shares)................................ 1,844,007
===========
Net Asset Value and Redemption Price per
share.................................. $13.61
------
------
Maximum Sales Charge..................... 5.00%
------
Maximum Offering Price per share (Net
Asset Value/(100% - Maximum Sales
Charge))............................... $14.33
------
------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest................................... $ 63,485
Dividend................................... 41,122
---------
TOTAL INVESTMENT INCOME................ 104,607
EXPENSES:
Investment advisory........................ $99,785
Administration............................. 24,947
Distribution............................... 31,182
Transfer agent............................. 9,753
Other...................................... 28,276
-------
Total expenses before voluntary fee
reductions........................... 193,943
Voluntary fee reductions............... (31,182)
---------
NET EXPENSES........................... 162,761
---------
NET INVESTMENT LOSS........................ (58,154)
---------
NET REALIZED /UNREALIZED GAINS /(LOSSES)
FROM INVESTMENTS:
Net realized gains from investment
transactions............................. 510,936
Change in unrealized appreciation from
investments.............................. (784,531)
---------
Net realized/unrealized losses from
investments.............................. (273,595)
---------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS............................... $(331,749)
=========
</TABLE>
See notes to financial statements.
17
<PAGE> 20
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
SEPTEMBER 30, YEAR ENDED
2000 MARCH 31,
(UNAUDITED) 2000
------------- ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment loss....................................... $ (58,154) $ (3,183)
Net realized gains from investment transactions........... 510,936 5,214,593
Change in unrealized appreciation/depreciation from
investments............................................. (784,531) 5,698,189
----------- ------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS.............. (331,749) 10,909,599
----------- ------------
DIVIDENDS:
Net investment income..................................... -- (299)
----------- ------------
CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS............. -- (299)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................... 5,535,019 8,937,457
Dividends reinvested...................................... -- 294
Cost of shares redeemed................................... (7,040,883) (23,860,813)
----------- ------------
CHANGE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS........ (1,505,864) (14,923,062)
----------- ------------
CHANGE IN NET ASSETS........................................ (1,837,613) (4,013,762)
NET ASSETS:
Beginning of period....................................... 26,931,870 30,945,632
----------- ------------
End of period............................................. $25,094,257 $ 26,931,870
=========== ============
SHARE TRANSACTIONS:
Issued.................................................... 436,460 860,633
Reinvested................................................ -- 32
Redeemed.................................................. (546,597) (2,277,234)
----------- ------------
CHANGE IN SHARES............................................ (110,137) (1,416,569)
=========== ============
</TABLE>
See notes to financial statements.
18
<PAGE> 21
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE FOR THE PERIOD FOR THE SEPTEMBER
SEPTEMBER 30, YEAR ENDED JULY 1, 1998 TO YEAR ENDED 20, 1998
2000 MARCH 31, MARCH 31, JUNE 30, TO JUNE 30,
(UNAUDITED) 2000 1999(a) 1998 1997(b)
------------- ---------- --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 13.78 $ 9.18 $ 9.63 $ 9.59 $ 10.00
---------- -------- ---------- -------- ----------
INVESTMENT ACTIVITIES:
Net investment income/(loss)............. (0.03) 0.00* 0.00* 0.00* 0.00*
Net realized and unrealized gains/(loss)
from investment transactions........... (0.14) 4.60 (0.44) 0.17 (0.10)
---------- -------- ---------- -------- ----------
Total from investment activities......... (0.17) 4.60 (0.44) 0.17 (0.10)
---------- -------- ---------- -------- ----------
DIVIDENDS:
Net investment income.................... -- (0.00)* (0.00)* (0.00)* (0.00)*
Tax return of capital.................... -- -- (0.01) -- --
Net realized gains from investment
transactions........................... -- -- -- (0.13) --
In excess of net realized gains from
investment transactions................ -- -- -- -- (0.31)
---------- -------- ---------- -------- ----------
Total dividends.......................... -- (0.00)* (0.01) (0.13) (0.31)
---------- -------- ---------- -------- ----------
NET ASSET VALUE, END OF PERIOD............. $ 13.61 $ 13.78 $ 9.18 $ 9.63 $ 9.59
========== ======== ========== ======== ==========
TOTAL RETURN (EXCLUDES SALES CHARGE)....... (1.23%)(c) 50.11% (4.55%)(c) 1.86% (1.03%)(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's)........ $ 25,094 $ 26,932 $ 30,946 $ 35,441 $ 30,524
Ratio of expenses to average net assets.... 1.31%(d) 1.25% 1.24% (d) 1.27% 1.39%(d)
Ratio of net investment income/(loss) to
average net assets....................... (0.47%)(d) (0.01%) 0.02% (d) 0.04% 0.05%(d)
Ratio of expenses to average net
assets(e)................................ 1.56%(d) 1.50% 1.49% (d) 1.52% 1.65%(d)
Portfolio turnover......................... 88% 174% 248% 125% 153%
</TABLE>
* Less than $0.005 per share.
(a) Subsequent to the annual report at June 30, 1999, the fund changed its
fiscal year end to March 31.
(b) Period from commencement of operations.
(c) Not annualized.
(d) Annualized.
(e) During the period, certain fees were voluntarily reduced. If such fee
reductions had not occurred, the ratio would have been as indicated.
See notes to financial statements.
19
<PAGE> 22
1ST SOURCE MONOGRAM FUNDS
1ST SOURCE MONOGRAM INCOME FUND
PAUL W. GIFFORD, CFA
Q. HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED SEPTEMBER 30,
2000?
A. The Fund posted a 4.20% total return (without the sales load)(+) during the
six-month period. That compares to a total return of 4.62% for the Fund's
benchmark, the Lehman Brothers Intermediate Government/Credit Bond Index.(1)
Q. WHAT WERE CONDITIONS LIKE IN THE BOND MARKET DURING THE PERIOD?
A. The economy grew at a rapid pace early in the period. For example, the Gross
Domestic Product (GDP) growth in the second quarter of 2000 was an
annualized 5.6%--far above the Federal Reserve's (the "Fed") targeted growth
rate. The Fed raised short-term interest rates by 50 basis points (0.50%) in
May in an effort to slow the economy and prevent higher inflation. This was
the sixth rate hike by the Fed since June 1999. These rate increases seemed
to slow the economy later in the period, giving investors confidence that
the Fed would not raise rates again in the immediate future.
Bonds performed well in that environment, due to investors' belief that the
Fed was finished raising interest rates. That positive outlook was most
beneficial to short-term issues, which are most affected by Fed policy. For
example, the yield on a two-year Treasury fell from 6.48% at the beginning
of the period to 5.97% by the end. By contrast, the yield on a 30-year
Treasury rose slightly, from 5.84% to 5.88%, during the period.
Q. HOW DID YOU MANAGE THE FUND IN THAT ENVIRONMENT?
A. We anticipated that the Fed would hold off on any further rate hikes, so we
increased the Fund's duration to a position longer than that of its
benchmark index. We also increased the Fund's exposure to bonds with
maturities of three to five years. Our strategy helped boost the Fund's
performance, because that portion of the yield curve outperformed other
segments.
We also maintained the Fund's high-quality portfolio, investing in issues
with very strong credit ratings. The average credit rating of the Fund's
portfolio was AA1. We believe this approach helped the Fund's performance,
as concerns about corporations' credit risk and ability to meet earnings
expectations rose during the period. The additional yield available from
lower-rated issues was not enough to justify the extra credit risk on such
bonds.*
Q. WHAT IS YOUR OUTLOOK FOR THE BOND MARKET, AND HOW WILL YOU MANAGE THE FUND IN
THAT ENVIRONMENT?
A. It appears that the Fed's restrictive monetary policy is beginning to have
the desired effect. Economic growth will probably decline somewhat from its
recent strong levels. Therefore, we believe that the Fed will maintain a
neutral policy in the immediate future. Bond yields should stabilize and
trade in a relatively narrow range in that environment.
We will maintain the Fund's current strategy in the coming months, keeping a
large position in the three- to five-year sector of the bond market. We will
also maintain the Fund's concentration in high-quality issues, which should
experience strong demand due to continued concerns about corporate revenue
and earnings growth. In particular, we will favor mortgage-backed and
asset-backed bonds for their attractive yields and extremely strong credit
quality.
------------------
(+) With the maximum sales load of 4.00%, the Fund's return for the six-month
period would have been 0.00%.
(1) The Lehman Brothers Intermediate Government/Credit Bond Index is an
unmanaged index considered representative of the performance of government
and corporate bonds with maturities of less than ten years. This index does
not reflect the deduction of fees associated with a mutual fund, such as
investment management and fund accounting fees. The performance of the Fund
reflects the deduction of fees for these value-added services. Investors
cannot invest directly in an index, although they can invest in its
underlying securities.
* The Fund's portfolio composition is subject to change.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE PER SHARE WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
20
<PAGE> 23
1ST SOURCE MONOGRAM INCOME FUND SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSET BACKED SECURITIES - 7.4%
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------- ----------- -----------
FINANCIAL SERVICES - 7.4%
Dayton Hudson Credit Card Master
Trust, 6.25%, 8/25/05.............. $ 2,000,000 $ 1,982,260
Discover Card Master Trust,
5.85%, 1/17/06..................... 1,000,000 974,600
Structured Asset Mortgage
Investments, Inc., 1998-12 A2,
6.05%, 2/25/29..................... 1,000,000 984,732
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $3,915,809)............................... 3,941,592
-----------
CORPORATE OBLIGATIONS - 33.8%
FINANCIAL SERVICES - 18.7%
Bear Stearns Co., 6.25%, 7/15/05..... 3,000,000 2,873,217
Ford Motor Credit, Co., 7.50%,
6/15/03............................ 5,000,000 5,047,340
Transamerica, 6.80%, 12/14/01........ 2,000,000 1,996,320
-----------
9,916,877
-----------
INDUSTRIAL GOODS & SERVICES - 7.8%
American Home Products, 7.90%,
2/15/05............................ 2,000,000 2,070,344
Procter & Gamble, 8.00%, 11/15/03.... 2,000,000 2,087,474
-----------
4,157,818
-----------
MANUFACTURING - CAPITAL GOODS - 3.7%
Eaton Corp., 6.95%, 11/15/04......... 2,000,000 1,991,862
-----------
UTILITIES - 3.6%
Pennsylvania Electric Co., 5.75%,
4/1/04............................. 2,000,000 1,907,672
-----------
TOTAL CORPORATE OBLIGATIONS
(Cost $18,424,748).............................. 17,974,229
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 16.7%
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 13.0%
5.50%, 1/1/07........................ 2,071,962 1,984,055
7.00%, 6/1/15........................ 2,940,629 2,928,775
7.00%, 8/15/07....................... 2,000,000 2,003,160
-----------
6,915,990
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS, CONTINUED
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------- ----------- -----------
TENNESSEE VALLEY AUTHORITY - 3.7%
6.13%, 7/15/03....................... $ 2,000,000 $ 1,966,014
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $8,860,408)............................... 8,882,004
-----------
U.S. TREASURY OBLIGATIONS - 40.5%
U.S. TREASURY NOTES - 40.5%
7.25%, 5/15/04....................... 3,000,000 3,127,500
6.50%, 5/15/05....................... 10,000,000 10,250,000
6.13%, 8/15/07....................... 6,000,000 6,063,750
6.50%, 2/15/10....................... 2,000,000 2,082,500
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $22,140,314).............................. 21,523,750
-----------
REPURCHASE AGREEMENTS - 0.1%
Fifth Third Bank 5.88%, due 10/2/00,
maturity value $44,529
(collateralized by $45,397 FNMA,
7.00%, 4/1/26 market value
$46,669)........................... 39,465 39,465
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $39,465).................................. 39,465
-----------
TOTAL INVESTMENTS (Cost $53,380,744)(a) - 98.5%...
52,361,040
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.5%......
809,898
-----------
NET ASSETS - 100.0%............................... $53,170,938
===========
</TABLE>
------------------
(a) Cost differs from value by net unrealized depreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation....................... $ 69,066
Unrealized depreciation....................... (1,088,770)
-----------
Net unrealized depreciation................... $(1,019,704)
===========
</TABLE>
<TABLE>
<S> <C> <C>
FNMA--Federal National Mortgage Association
</TABLE>
See notes to financial statements.
21
<PAGE> 24
1ST SOURCE MONOGRAM INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (cost
$53,380,744)........................... $52,361,040
Interest receivable...................... 862,177
Deferred organization costs.............. 3,209
Prepaid expenses......................... 647
-----------
TOTAL ASSETS......................... 53,227,073
LIABILITIES:
Accrued expenses and other liabilities:
Investment advisory.................... $23,977
Administration......................... 1,747
Other.................................. 30,411
-------
TOTAL LIABILITIES.................... 56,135
-----------
NET ASSETS............................... $53,170,938
===========
COMPOSITION OF NET ASSETS:
Capital.................................. $57,046,822
Accumulated net investment income........ 32,622
Accumulated net realized losses from
investment transactions................ (2,888,802)
Unrealized depreciation from
investments............................ (1,019,704)
-----------
NET ASSETS............................... $53,170,938
===========
Shares Outstanding (par value $0.01,
unlimited number of authorized
shares)................................ 5,519,226
===========
Net Asset Value and Redemption Price per
share.................................. $9.63
------
------
Maximum Sales Charge..................... 4.00%
------
Maximum Offering Price per share
(Net Asset Value/(100%- Maximum Sales
Charge))............................... $10.03
------
------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest................................. $1,874,850
----------
TOTAL INVESTMENT INCOME.............. 1,874,850
EXPENSES:
Investment advisory...................... $149,221
Administration........................... 54,263
Distribution............................. 67,820
Other.................................... 56,239
--------
Total expenses before voluntary fee
reductions......................... 327,543
Voluntary fee reductions............. (67,820)
----------
NET EXPENSES......................... 259,723
----------
NET INVESTMENT INCOME.................... 1,615,127
----------
NET REALIZED/UNREALIZED GAINS/(LOSSES)
FROM INVESTMENTS:
Net realized losses from investment
transactions........................... (1,061,248)
Change in unrealized depreciation from
investments............................ 1,651,021
----------
Net realized/unrealized gains from
investments............................ 589,773
----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS............................. $2,204,900
==========
</TABLE>
See notes to financial statements.
22
<PAGE> 25
1ST SOURCE MONOGRAM INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
SEPTEMBER 30, YEAR ENDED
2000 MARCH 31,
(UNAUDITED) 2000
------------- -----------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income..................................... $ 1,615,127 $ 3,570,951
Net realized losses from investment transactions.......... (1,061,248) (1,374,889)
Change in unrealized appreciation/(depreciation) from
investments............................................. 1,651,021 (1,695,354)
----------- -----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS.............. 2,204,900 500,708
----------- -----------
DIVIDENDS:
Net investment income..................................... (1,594,557) (3,605,588)
----------- -----------
CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS............. (1,594,557) (3,605,588)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................... 6,838,535 19,389,440
Dividends reinvested...................................... 1,581,420 3,570,542
Cost of shares redeemed................................... (13,170,315) (29,794,685)
----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS........ (4,750,360) (6,834,703)
----------- -----------
CHANGE IN NET ASSETS........................................ (4,140,017) (9,939,583)
NET ASSETS:
Beginning of period....................................... 57,310,955 67,250,538
----------- -----------
End of period............................................. $53,170,938 $57,310,955
=========== ===========
SHARE TRANSACTIONS:
Issued.................................................... 717,195 1,998,293
Reinvested................................................ 166,129 369,884
Redeemed.................................................. (1,382,742) (3,084,298)
----------- -----------
CHANGE IN SHARES............................................ (499,418) (716,121)
=========== ===========
</TABLE>
See notes to financial statements.
23
<PAGE> 26
1ST SOURCE MONOGRAM INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEAR FOR THE PERIOD YEAR SEPTEMBER
SEPTEMBER 30, ENDED JULY 1, 1998 TO ENDED 24, 1996
2000 MARCH 31, MARCH 31, JUNE 30, TO JUNE 30,
(UNAUDITED) 2000 1999 (a) 1998 1997(b)
-------------- ------------------ ----------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $ 9.52 $ 9.99 $ 10.34 $ 10.13 $ 10.00
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income........... 0.29 0.55 0.41 0.60 0.44
Net realized and unrealized
gains from
investment transactions....... 0.11 (0.46) (0.10) 0.21 0.12
------- ------- ------- ------- -------
Total from investment
activities.................... 0.40 0.09 0.31 0.81 0.56
------- ------- ------- ------- -------
DIVIDENDS:
Net investment income........... (0.29) (0.56) (0.41) (0.60) (0.43)
Net realized gains from
investment transactions....... -- -- (0.18) -- --
In excess of net realized gains
from investment
transactions.................. -- -- (0.07) -- --
------- ------- ------- ------- -------
Total dividends................. (0.29) (0.56) (0.66) (0.60) (0.43)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.... $ 9.63 $ 9.52 $ 9.99 $ 10.34 $ 10.13
======= ======= ======= ======= =======
TOTAL RETURN (EXCLUDES SALES
CHARGE)......................... 4.20%(c) 0.96% 3.00%(c) 8.24% 5.71%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000's)......................... $53,171 $57,311 $67,251 $65,975 $54,789
Ratio of expenses to average net
assets.......................... 0.96%(d) 0.90% 0.92%(d) 0.92% 1.05%(d)
Ratio of net investment income to
average net assets.............. 5.96%(d) 5.69% 5.23%(d) 5.90% 5.71%(d)
Ratio of expenses to average net
assets(e)....................... 1.21%(d) 1.15% 1.17%(d) 1.17% 1.30%(d)
Portfolio turnover................ 63% 67% 301% 208% 118%
</TABLE>
(a) Subsequent to the annual report at June 30, 1999, the fund changed its
fiscal year end to March 31.
(b) Period from commencement of operations.
(c) Not annualized.
(d) Annualized.
(e) During the period, certain fees were voluntarily reduced. If such fee
reductions had not occurred, the ratio would have been as indicated.
See notes to financial statements.
24
<PAGE> 27
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
1. ORGANIZATION:
The Coventry Group (the "Group") was organized on January 8, 1992 as a
Massachusetts business trust, and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The 1st Source Monogram Income Equity Fund ("Income
Equity Fund"), 1st Source Monogram Diversified Equity Fund ("Diversified
Equity Fund"), 1st Source Monogram Special Equity Fund ("Special Equity
Fund"), and 1st Source Monogram Income Fund ("Income Fund"), (collectively,
the "Funds" and individually, a "Fund") are series within the Group.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed
by the Funds in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles of the
United States of America. The preparation of financial statements requires
management to make estimates and assumptions that may affect the reported
amounts of income and expenses for the period. Actual results could differ
from those estimates.
SECURITIES VALUATION:
The value of each equity security is based either on the last sale price
on a national securities exchange, or in the absence of recorded sales, at
the closing bid prices on such exchanges, or at the quoted bid price in the
over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair market value as
determined in good faith by or at the direction of the Group's Board of
Trustees.
Bonds and other fixed income securities (other than short-term
obligations but including listed issues) are valued on the basis of
valuations furnished by a pricing service, the use of which has been
approved by the Group's Board of Trustees. In making such valuations, the
pricing service utilizes both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, and trading characteristics other than
market data and without exclusive reliance upon quoted prices or exchanges
or over-the-counter prices, since such valuations are believed to reflect
more accurately the fair value of such securities. All debt portfolio
securities with a remaining maturity of 60 days or less are valued at
amortized cost. Under the amortized cost method, discount or premium, if
any, is accreted or amortized, respectively, on a constant (straight-line)
basis to the maturity of the security.
REPURCHASE AGREEMENTS:
The Funds may enter into repurchase agreements with a bank or
broker-dealers which the Adviser or applicable Sub-Adviser deems
creditworthy. The repurchase price generally equals the price paid by a 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, is required to maintain the collateral
held pursuant to the agreement, with a market value equal to or greater than
the repurchase price (including accrued interest). Collateral subject to
repurchase agreements is held by the Funds' custodian or another qualified
custodian or in the Federal Reserve/Treasury book-entry system.
DERIVATIVES:
A derivative is defined as a financial instrument whose value is derived
from the performance of underlying assets, interest rate and currency
exchange rates, or indices, and include (but are not limited to) structured
debt obligations, interest rates, futures contracts, options, forward
currency contracts, and swaps. Risks of entering into such transactions
include the potential inability of the dealer to meet its obligations and
unanticipated movements in the value of the security or the underlying
assets or indices. It is possible that the Funds will incur a loss as a
result of their investments in derivative instruments. It is the policy of
the Funds, to the extent that there exists no readily available market for
such securities, that the investment will be treated as an illiquid security
for purposes of calculating the Funds' limitations on investments in
illiquid securities as set forth in the Funds' investment restrictions.
There were no derivatives held at September 30, 2000.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on trade date. Securities gains
and losses are calculated on the identified cost basis. Interest income is
recognized on the accrual basis and includes, where applicable, the
amortization or accretion of a premium or discount. Dividend income is
recorded on the ex-dividend date.
Continued
25
<PAGE> 28
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
EXPENSES:
Expenses directly attributable to a Fund are charged directly to the
Fund. Expenses relating to the Group are allocated proportionately to each
Fund within the Group according to the relative net assets of each Fund or
on another reasonable basis.
ORGANIZATION COSTS:
All expenses in connection with each Fund's organization and
registration under the 1940 Act and the Securities Act of 1933 were paid by
that Fund. Such expenses are amortized over a period of five years
commencing with the date of the initial public offering.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared and distributed
monthly for all of the Funds, except the Special Equity Fund. Dividends for
the Special Equity Fund are declared and distributed quarterly. Dividends
from net realized gains, if any, are declared and distributed annually for
all Funds.
The amount of dividends from net investment income and net realized
gains are determined in accordance with federal income tax regulations which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are
reclassified to capital: temporary differences do not require
reclassification. For the six months ended September 30, 2000, no
reclassifications have been made.
FEDERAL INCOME TAXES:
Each Fund is a separate taxable entity for federal tax purposes. Each
Fund has qualified and intends to qualify each year as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, as
amended and to distribute substantially all of their taxable net investment
income and net realized gains, if any, to their shareholders. Accordingly,
no provision for Federal income tax is required.
3. RELATED PARTY TRANSACTIONS:
INVESTMENT ADVISER:
1st Source Bank, (the "Investment Adviser"), acts as the investment
adviser to the Funds. For its services, the Investment Adviser, is entitled
to receive a fee, computed daily and paid monthly, based on the average
daily net assets of the fund, at the following annual percentage rates:
<TABLE>
<CAPTION>
NAME FEE RATE
---- --------
<S> <C>
Income Equity Fund.......................................... 0.80%
Diversified Equity Fund..................................... 0.99
Special Equity Fund......................................... 0.80
Income Fund................................................. 0.55
</TABLE>
ADMINISTRATION:
BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), who serves the Group as
Administrator, is a wholly owned subsidiary of The BISYS Group, Inc., with
whom certain officers and trustees of the Group are also officers of the
Administrator. Such officers are paid no fees directly by the Funds for
serving as officers of the Group. Under the terms of the administration
agreement, BISYS Ohio receives an annual fee, computed daily and paid
monthly, based on the average daily net assets of each Fund, at the annual
rate of 0.20%.
DISTRIBUTION:
BISYS Fund Services Limited Partnership ("BISYS"), a wholly owned
subsidiary of The BISYS Group, Inc., serves the Group as the Fund's
distribution agent. The Group has adopted a Distribution and Shareholder
Service Plan in accordance with Rule 12b-1 under the 1940 Act, pursuant to
which each Fund is authorized to pay or reimburse BISYS, as distributor, a
periodic amount, calculated at an annual rate not to exceed 0.25% of the
average daily net asset value of each Fund. These fees may be used by BISYS
to pay banks, including the Investment Adviser, broker-dealers and other
institutions, or to reimburse BISYS or its affiliates, for distribution and
shareholder services in connection with the distribution of Fund shares.
Continued
26
<PAGE> 29
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
ADMINISTRATIVE SERVICES PLAN:
The Group has adopted a Administrative Services Plan, pursuant to which
each Fund is authorized to pay compensation to banks and other financial
institutions, which may include 1st Source Bank, its correspondent and
affiliated banks and BISYS, for providing ministerial, record keeping and/or
administrative support services to their customers who are the beneficial or
record owners of a Fund. The compensation which may be paid under the
Administrative Services Plan is a fee computed daily at an annual rate of up
to 0.25% of the average net assets of each Fund. As of the date of this
report, the Group with respect to the Funds has entered into no such
servicing agreements.
TRANSFER AGENCY AND CUSTODIAN:
BISYS Ohio provides transfer agency services to the Funds. Fifth Third
Bank serves as custodian for the Funds. For their services to the Funds,
BISYS Ohio and Fifth Third Bank receive a fee accrued daily and paid
monthly.
FEE REDUCTIONS AND REIMBURSEMENTS:
The Investment Adviser and BISYS have agreed to reduce a portion of
their fees. For the period September 30, 2000, expenses of the Funds were
reduced by the amounts detailed below:
<TABLE>
<CAPTION>
CONTRACTUAL FEE REDUCTIONS VOLUNTARY FEE REDUCTIONS
INVESTMENT ADVISORY DISTRIBUTION
-------------------------- ------------------------
<S> <C> <C>
Income Equity Fund.......................................... $ -- $60,237
Diversified Equity Fund..................................... 61,442 81,291
Special Equity Fund......................................... -- 31,182
Income Fund................................................. -- 67,820
</TABLE>
4. PURCHASES AND SALES OF SECURITIES:
Fund purchases and sales, excluding short-term securities, for the
period ended September 30, 2000 were:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- -----------
<S> <C> <C>
Income Equity Fund.......................................... $8,859,605 $10,764,354
Diversified Equity Fund..................................... 5,027,902 20,294,756
Special Equity Fund......................................... 20,214,098 22,209,893
Income Fund................................................. 33,123,625 36,537,996
</TABLE>
27
<PAGE> 30
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 31
1ST SOURCE
MONOGRAM
FUNDS(SM)
INVESTMENT ADVISER
1st Source Bank
100 North Michigan Street
South Bend, IN 46601
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
FOR ADDITIONAL INFORMATION, CALL:
1-800-766-8938
This material must be preceded or accompanied
by a current prospectus.
11/00
