<PAGE> 1
[Boston Trust Logo]
United States Trust Company of Boston
BOSTON BALANCED FUND
SEMI-ANNUAL REPORT
SEPTEMBER 30, 2000
<PAGE> 2
TABLE OF CONTENTS
SEMI-ANNUAL REPORT-SEPTEMBER 30, 2000
<TABLE>
<S> <C>
BOSTON BALANCED FUND:
Investment Performance.................................... 1
Letter to Shareholders.................................... 2
Schedule of Portfolio Investments......................... 5
Financial Statements...................................... 7
Financial Highlights...................................... 9
Notes to Financial Statements............................. 10
</TABLE>
<PAGE> 3
[BOSTON TRUST LOGO]
United States Trust Company of Boston
BOSTON BALANCED FUND
INVESTMENT PERFORMANCE
SEPTEMBER 30, 2000
FUND NET ASSET VALUE: $28.60
<TABLE>
<CAPTION>
Annualized
Calendar Year Year Year Year Since Inception
Quarter Year Ended Ended Ended Ended 12/1/95 to
to Date to Date 9/30/00 9/30/99 9/30/98 9/30/97 9/30/00
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Boston Balanced Fund*.......... -0.76% -0.94% 4.20% 4.57% 19.28% 27.05% 13.17%
Morningstar-Balanced Mutual
Fund Average(1).............. 2.20% 3.70% 11.70% 8.60% 12.30% 18.20% N/A
Standard & Poor's 500 Stock
Index(2)..................... -0.97% -1.39% 13.28% 21.04% 28.59% 33.37% 21.52%
Lehman Brothers Government/
Credit Bond Index(3)......... 2.87% 7.16% 6.72% -2.15% 9.46% 9.75% 5.85%
90-Day U.S. Treasury
Bills(4)..................... 1.52% 4.25% 5.51% 4.60% 4.80% 5.14% 5.04%
</TABLE>
* After all expenses at an annual rate of 1%, the Investment Adviser's expense
limitation.
For more information on the Boston Balanced Fund, including a prospectus that
outlines fees, charges and other operating expenses, call 1 (800) 282-8782
x4050. Please read the prospectus carefully before investing or sending money.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK AND ARE NOT
INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY AGENCY. THE VALUE OF THE FUND
SHARES AND RETURNS WILL FLUCTUATE AND INVESTORS MAY HAVE A GAIN OR LOSS WHEN
THEY REDEEM SHARES. DISTRIBUTED BY BISYS FUND SERVICES LIMITED PARTNERSHIP.
---------------
(1) Morningstar-Balanced Mutual Fund Average is an average of funds on which
Morningstar reports, which have a stated prospectus objective of being a
balanced fund. If a fund in this average is a multiclass fund, all
classes are used. MORNINGSTAR RETURN measures a fund's performance
relative to its class based on total returns.
(2) Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market as a whole. The performance of
the index does not reflect the deduction of expenses associated with a
mutual fund, such as investment management and fund accounting fees. The
Fund's performance 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.
(3) Lehman Brothers Government/Credit Bond Index is an unmanaged index
generally representative of the performance of U.S. Treasury, U.S.
government agencies and corporate debt securities. The performance of the
index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management and fund accounting fees. The Fund's
performance 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.
(4) 90-Day U.S. Treasury Bills are represented by the U.S. Treasury Bill
Total Return Index. Treasury bills are government guaranteed and offer a
fixed rate of return. Return and principal of stocks and bonds will vary
with market conditions. Treasury bills are less volatile than longer term
fixed-income securities and are guaranteed as to timely payment of
principal and interest by the U.S. Government.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NOT AN INDICATION
OF FUTURE RESULTS. THE INVESTMENT RETURN AND NET ASSET VALUE WILL FLUCTUATE SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
1
<PAGE> 4
BOSTON BALANCED FUND LETTER TO SHAREHOLDERS
SEPTEMBER 30, 2000
MARKET & PERFORMANCE SUMMARY
As has been the case throughout the year, during the third quarter the
stock market once again resembled an environmentally responsible forest products
company. Rather than clear-cutting stock prices across all sectors, which is
typical of a bear market, investors selectively felled individual stocks
following reports of even the slightest shortfalls in expected sales or profits.
During the final week of the quarter, INTEL CORP., Apple Computer, Inc. and
Eastman-Kodak Co. became the latest examples among notable companies of this
year-long trend. Previous notables that fell sharply included AT&T Corp., Dell
Computer Corp., Du Pont (E.I.) de Nemours, LUCENT TECHNOLOGIES, INC., Microsoft
Corp. and PROCTER & GAMBLE CO. Each is now selling for roughly one-half the peak
price reached over the past year. Even though many stocks have risen, the
collective price decline of these and other key companies has caused the values
of all the primary stock indices to drop. At September 30th, the Standard &
Poor's 500 Stock Index(1) was down 1.4% from the year-end 1999 level. The Dow
Jones Industrial Average(2) closed down by approximately 7%, while the more
volatile, technology stock laden NASDAQ Composite Index(3) dropped by nearly
10%. Without a reversal during the fourth quarter, 2000 will be the first
calendar year since 1990 to post a decline across most stock averages.
Although the Boston Balanced Fund did not own all of the disappointing
investments noted above, we held a sufficient number to cause a slight decline
in the Fund's unit value of -0.76% for the quarter and -0.94% year-to-date. As
summarized in the Investment Strategy section of this report, this year has been
among our least effective periods for individual stock selection in the Fund.
With average selection, the Fund would have posted a gain of a few percentage
points through September rather than a small loss. In contrast, since the Fund's
inception in 1995, security selection has almost always added value. While very
disappointed with recent results, we are confident that in time a positive
performance trend could resume in light of the continued growth in sales and
earnings recorded by most of the companies held in the Fund. Steady and reliable
dividend and interest income also may aid future Fund performance. In the
following sections of this report, I update our thoughts on the economy and the
financial markets, and outline the steps we have taken in the Fund to address
better the current challenging investment environment.
ECONOMIC SUMMARY & OUTLOOK
The prevailing economic environment is about as good as we have experienced
over the past 50 years. We are in the longest running economic expansion on
record, inflation has remained low, interest rates moderate, employment and
income levels rising, and there is a job for virtually anyone who is willing and
able to work. Moreover, the Federal Government has a budget surplus, a rarity in
the last 100 years, and there is bi-partisan agreement that surpluses will
continue for the next decade. Characteristically, in this campaign season, our
elected officials have taken all the credit for our comparative economic
prosperity.
For many years, we have noted that high labor productivity, not political
initiative, deserves most of the credit for keeping our inflation rate low. A
more stable and cooperative global economic structure is the other key
contributor to low inflation. It is in this area that governments, through
negotiation of trade agreements and promotion of greater political stability,
have aided the process. Comparative political stability in most countries over
the past 5 - 10 years has encouraged more corporations to procure goods and
services from lower cost emerging markets. Lower costs enable companies to sell
at lower prices and still achieve an attractive profit margin. The productivity
and outsourcing trends have been so powerful that even a near doubling in oil
prices over the past year has failed to re-ignite
---------------
1 Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market as a whole. The performance of the
index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management and fund accounting fees. The Fund's
performance 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.
2 Dow Jones Industrial Average is an unmanaged index that is representative of
30 blue-chip U.S. stocks. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. The Fund's performance 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.
3 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 Depository Receipts. Investors cannot invest directly in an index,
although they can invest in its underlying securities.
Portfolio holdings are in bold and subject to change.
2
<PAGE> 5
BOSTON BALANCED FUND LETTER TO SHAREHOLDERS
SEPTEMBER 30, 2000
inflation. The Federal Reserve has implicitly confirmed the low risk of
inflation through its decision to keep interest rates unchanged over the past
four months. The decision not to raise interest rates also reflects initial
evidence of selective economic weakness in the United States, and particularly
parts of Europe and Asia. Nevertheless, we do not believe we are about to enter
a worldwide economic recession given the lack of inventory imbalances, and
current monetary and fiscal policies. In short, we expect a continuing favorable
economic environment in the year ahead.
"IF THE ECONOMY IS SO GOOD, WHY AREN'T THE STOCK MARKET AND FUND PERFORMING
BETTER?" Many Fund participants have asked us this question in recent months.
Sometimes a good simple question is difficult to answer. I will outline three
possible reasons. First, stock prices usually reflect current perceptions of
probable future events. Accordingly, it is possible that we are too optimistic
about the future economy compared to the views of investors generally. That is,
the disappointing market trend this year may be a harbinger of a deteriorating
future economic environment we have yet to foresee.
Another, and in our view more likely, explanation involves the fact that
investor emotion quite often drives stock prices well beyond reasonable and
sustainable valuations. We expressed just this concern at year-end 1999 with
respect to the entire technology group, and the so-called dot.com stocks in
particular. For these latter companies, January, 2000 valuations as a whole
could not be justified by even the most optimistic, plausible business growth
projections. As substantive real businesses failed to develop, stock prices
collapsed, in some cases by as much as 90% or more. In our view, the process of
unwinding the internet-related speculative excess is not over. The more
established technology companies that we have included in the Fund have fared
better, but even here slower than anticipated growth (not impending business
failure) has led many to post disappointing stock performance. The most
significant price declines have been among those companies with primary
dependence on sales of personal computers, which this year have experienced a
lower than projected rate of growth. Other companies, such as Lucent
Technologies, Inc. and Motorola Inc., which have failed to keep pace with
competitors in key business lines, have also suffered severely.
A third salient contributor to the stagnant stock market trend involves
company specific profit shortfalls among many mature, large companies in a broad
range of industries. In most cases, the respective common stocks did not even
begin at extraordinary valuations. Examples include the aforementioned Du Pont
(E.I.) de Nemours, Eastman Kodak Co. and Procter & Gamble Co., as well as Xerox
Corp. The profit disappointments relate as much to a combination of global
competitive forces as they do to the overall level of economic activity.
Competitive market share and pricing battles among large and small corporations
occur routinely over time. We have just had more than the usual number this
year, unfortunately even among some of the companies we hold in the Fund.
INVESTMENT STRATEGY
Boston Balanced Fund seeks to generate above average returns relative to
other balanced funds over the long term with below average investment risk. In
pursuit of this objective, we utilize three primary investment strategy
components -- asset allocation, portfolio composition and individual security
selection. I will summarize our current thoughts on each.
ASSET ALLOCATION: Through the third quarter we completed a modest reduction
in the Fund's equity allocation from 69% of total assets to 63%. The reduction
occurred primarily by selling a portion of the technology stocks, as well as the
specific companies we viewed as vulnerable to continuing profit disappointments.
Since we still do not expect a severe, broad based, economically induced stock
market decline, we view this lower equity allocation as temporary. Unless our
economic view changes, in the months ahead we expect to re-invest the proceeds
into stocks of companies that are well positioned to register business growth in
the years ahead.
PORTFOLIO COMPOSITION: includes economic sector and industry emphasis,
company size, financial stability, geographic diversity and relative stock
valuation. Collectively, these factors comprise the most important and difficult
decisions in equity portfolio management. Through the third quarter, most,
though not all, of the decisions we made this year added value. Among the
positives were our decisions to maintain above average exposure in the
healthcare and financial sectors, and a below average holding in technology
stocks. Avoiding companies with the highest
---------------
Portfolio composition is subject to change.
3
<PAGE> 6
BOSTON BALANCED FUND LETTER TO SHAREHOLDERS
SEPTEMBER 30, 2000
valuations of earnings also aided results, particularly subsequent to the first
quarter, as did owning very few internationally based companies since most
foreign markets have lagged this year. Conversely, having only limited holdings
in energy companies has been an opportunity loss given the sharp rise in oil and
gas prices. Returns have also been reduced substantially by the investments we
made in telecommunications service companies. Finally, the Fund's concentration
in large companies detracted from performance in view of the generally superior
returns provided by stocks of small and mid-size corporations.
Looking forward, we expect to retain current sector emphasis in healthcare,
finance, and, unless prices continue to drop sharply, below average holdings in
technology issues. We still believe the valuation disparities among companies
projected to have the highest growth rates compared to those with reliable but
slower business growth are too wide. Relative to the market generally, the Fund
holds very few stocks with price-earnings ratios above 50, and no companies
without any earnings at all. With respect to size, we have added several
mid-size companies this year, and expect to expand this part of the portfolio in
future periods.
SECURITY SELECTION: As noted previously, within the first three quarters of
this year individual stock selection has been the most disappointing of the
three primary investment strategy components. Stated simply, we held too many
stocks of companies that experienced sales and earnings progress below
anticipated levels. In my first and second quarter reports, I mentioned examples
such as Lucent Technologies, Inc., Procter & Gamble Co., AT&T Corp., Microsoft
Corp. and COSTCO WHOLESALE CORP. During the third quarter, Intel, which was
among the Fund's largest individual equity investments, fell by nearly 40%
following a report that sales would fall short of prior projections by about 7%,
mostly due to weak sales in Europe. Although we do not plan to change the core
equity strategy that has worked so well for so long, we recognize that within
the current market environment even small, temporary earnings disappointments
are resulting in severe stock price reactions. In part, we hope to take
advantage of such irrational investor behavior by buying stocks of fundamentally
strong companies we do not already own that are experiencing temporary business
set-backs. We also wish to alleviate a repeat of the type of damage to the
Fund's future performance that is caused by sharp price declines in individual
stocks. Clearly, we expect to complete more effective security analysis of
company business trends in the future. That said, we are in a treacherous market
with many surprises from a wide range of companies. Greater diversification
among individual stocks is the safety-net to achieve this goal should the recent
trend continue. We began such an initiative toward more diversification during
the quarter, and will continue the process in the months ahead.
* * *
On behalf of all of us at United States Trust Company of Boston, I thank
you for your continued confidence in our services. Please feel free to contact
either me or my colleagues at (617) 726-7250 should you have any questions about
our investment views or your account.
Sincerely,
/s/ Domenic Colasacco
Domenic Colasacco
Portfolio Manager and President
United States Trust Company of Boston
---------------
Portfolio holdings are in bold and subject to change.
4
<PAGE> 7
BOSTON BALANCED FUND SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
COMMON STOCKS - 62.7%
SECURITY DESCRIPTION SHARES VALUE
------------------------------------- ---------- ------------
BASIC MATERIALS - 1.0%
Donaldson Co., Inc................... 40,000 $ 880,000
RPM, Inc............................. 50,000 453,125
------------
1,333,125
------------
CAPITAL GOODS - 1.1%
Illinois Tool Works.................. 25,000 1,396,875
------------
COMMUNICATION SERVICES - 2.5%
Alltel Corp.......................... 15,000 782,813
Bellsouth Corp....................... 25,000 1,006,250
CenturyTel, Inc...................... 15,000 408,750
SBC Communications, Inc.............. 20,000 1,000,000
------------
3,197,813
------------
CONSUMER CYCLICALS - 6.6%
BJ's Wholesale Club, Inc.(b)......... 20,000 682,500
Costco Wholesale Corp.(b)............ 40,000 1,397,499
Emerson Electric Co.................. 25,000 1,674,999
Ford Motor Co........................ 25,000 632,813
Gannett Co., Inc..................... 15,000 795,000
Home Depot, Inc...................... 15,000 795,938
Johnson Controls, Inc................ 25,000 1,329,688
Leggett & Platt, Inc................. 35,000 553,438
McClatchy Co......................... 15,000 527,813
------------
8,389,688
------------
CONSUMER PRODUCTS - 1.3%
Anheuser-Busch Co., Inc.............. 40,000 1,692,500
------------
CONSUMER STAPLES - 4.6%
Clorox Co............................ 25,000 989,063
Gillette Co.......................... 25,000 771,875
Procter & Gamble Co.................. 20,000 1,340,000
Sysco Corp........................... 60,000 2,778,750
------------
5,879,688
------------
ENERGY - 2.7%
BP Amoco PLC, ADR.................... 10,000 530,000
Exxon Mobil Corp..................... 32,500 2,896,563
------------
3,426,563
------------
FINANCIAL SERVICES - 12.2%
American International Group......... 7,500 717,656
Bank of America Corp................. 25,000 1,309,375
Cincinnati Financial Corp............ 25,000 887,500
Fannie Mae........................... 30,000 2,145,000
Fleet Boston Financial Corp.......... 50,000 1,950,000
Morgan Stanley Dean Witter & Co...... 25,000 2,285,937
T. Rowe Price Associates............. 75,000 3,520,312
Wachovia Corp........................ 10,000 566,875
Wilmington Trust Corp................ 40,000 2,145,000
------------
15,527,655
------------
HEALTH CARE - 12.8%
Biomet, Inc.......................... 7,500 262,500
Johnson & Johnson.................... 40,000 3,757,499
Medtronic, Inc....................... 60,000 3,108,750
Merck & Co., Inc..................... 30,000 2,233,125
Pfizer, Inc.......................... 75,000 3,370,313
COMMON STOCKS, CONTINUED
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------- ---------- ------------
HEALTH CARE, CONTINUED
Saint Jude Medical, Inc.(b).......... 10,000 $ 510,000
Schering-Plough Corp................. 65,000 3,022,500
------------
16,264,687
------------
PRODUCER PRODUCTS - 3.0%
Carlisle Cos., Inc................... 37,100 1,539,650
General Electric Co.................. 40,000 2,307,500
------------
3,847,150
------------
TECHNOLOGY - 13.8%
Agilent Technologies, Inc.(b)........ 6,000 293,625
Applied Materials, Inc.(b)........... 20,000 1,186,250
Automatic Data Processing............ 15,000 1,003,125
Cisco Systems, Inc.(b)............... 35,000 1,933,750
EMC Corp.(b)......................... 20,000 1,982,500
Hewlett-Packard Co................... 15,000 1,455,000
IBM Corp............................. 10,000 1,125,000
Intel Corp........................... 40,000 1,665,000
Lucent Technologies, Inc............. 40,000 1,222,500
Microsoft Corp.(b)................... 40,000 2,409,999
Nokia Corp., ADR..................... 4,000 159,250
Oracle Corp.(b)...................... 12,500 984,375
Sanmina Corp.(b)..................... 6,000 561,750
Sun Microsystems, Inc.(b)............ 10,000 1,167,500
Telefonaktiebolaget LM Ericsson,
ADR................................ 10,000 148,125
Texas Instruments, Inc............... 5,000 235,938
------------
17,533,687
------------
TRANSPORTATION - 1.1%
United Parcel Service, Inc........... 25,000 1,409,375
------------
TOTAL COMMON STOCKS
(Cost $53,905,391)............................. 79,898,806
------------
CORPORATE OBLIGATIONS - 9.2%
BASIC MATERIALS - 0.2%
Weyerhaeuser Co., 7.25%, 7/1/13...... $ 300,000 286,424
------------
CONSUMER CYCLICALS - 2.0%
Eaton Corp., 8.90%, 8/15/06.......... 500,000 532,273
Honeywell, Inc., 7.00%, 3/15/07...... 500,000 499,317
Leggett & Platt, Inc., 7.19%,
4/24/02(c)......................... 1,000,000 1,008,736
Leggett & Platt, Inc., 6.25%,
9/9/08(c).......................... 500,000 472,368
------------
2,512,694
------------
CONSUMER STAPLES - 1.8%
Albertson's, Inc., 6.66%, 7/21/08.... 1,000,000 928,955
Procter & Gamble Co., 5.25%,
9/15/03............................ 1,000,000 970,848
Sysco Corp., 6.50%, 6/15/05.......... 375,000 371,661
------------
2,271,464
------------
ENERGY - 0.3%
Atlantic Richfield Co., 8.50%,
4/1/12............................. 300,000 331,496
------------
FINANCIAL SERVICES - 4.1%
Ford Credit Corp., 7.75%, 11/15/02... 425,000 431,943
Ford Credit Corp., 6.63%, 6/30/03.... 300,000 296,612
Ford Credit Corp., 7.20%, 6/15/07.... 1,000,000 989,628
</TABLE>
Continued
5
<PAGE> 8
BOSTON BALANCED FUND SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
CORPORATE OBLIGATIONS, CONTINUED
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------- ---------- ------------
FINANCIAL SERVICES, CONTINUED
General Electric Capital Corp.,
7.38%, 9/15/04..................... $1,000,000 $ 1,019,716
General Electric Capital Corp.,
8.30%, 9/20/09..................... 1,000,000 1,065,289
General Motors Acceptance Corp.,
9.63%, 12/15/01.................... 825,000 850,414
General Motors Acceptance Corp.,
8.50%, 1/1/03...................... 300,000 309,068
UnumProvident Corp., 5.88%,
10/15/03........................... 400,000 377,956
------------
5,340,626
------------
HEALTH CARE - 0.8%
American Home Products Corp., 7.90%,
2/15/05............................ 925,000 958,411
------------
TOTAL CORPORATE OBLIGATIONS
(Cost $12,103,107)............................. 11,701,115
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 19.4%
FEDERAL FARM CREDIT BANK - 3.0%
5.39%, 9/15/04....................... 2,000,000 1,919,370
5.80%, 6/17/05....................... 2,000,000 1,938,092
------------
3,857,462
------------
FEDERAL HOME LOAN BANK - 10.1%
5.33%, 3/20/01....................... 2,000,000 1,988,510
7.25%, 5/15/03....................... 2,000,000 2,036,100
5.29%, 2/11/04....................... 2,000,000 1,927,504
5.82%, 7/13/05....................... 2,000,000 1,940,758
7.02%, 9/25/06....................... 1,500,000 1,530,066
5.04%, 10/14/08...................... 500,000 446,437
7.00%, 8/15/14....................... 3,000,000 2,996,187
------------
12,865,562
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 6.3%
4.75%, 12/21/00...................... 3,000,000 2,989,455
5.38%, 3/15/02....................... 3,000,000 2,955,741
7.25%, 1/15/10....................... 2,000,000 2,065,948
------------
8,011,144
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $24,982,146)............................. 24,734,168
------------
INVESTMENT COMPANIES - 4.2%
SECURITY DESCRIPTION SHARES VALUE
------------------------------------- ---------- ------------
SEI Daily Income Government II Fund.. 2,200,589 $ 2,200,589
Valiant U.S. Treasury Money Market
Portfolio.......................... 3,143,046 3,143,046
------------
TOTAL INVESTMENT COMPANIES
(Cost $5,343,635).............................. 5,343,635
------------
TOTAL INVESTMENTS
(Cost $96,334,279)(a) - 95.5%.................. 121,677,724
OTHER ASSETS IN EXCESS OF LIABILITIES - 4.5%.....
5,712,261
------------
NET ASSETS - 100.0%.............................. $127,389,985
============
</TABLE>
------------------
(a) Cost differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation....................... $28,777,538
Unrealized depreciation....................... (3,434,093)
-----------
Net unrealized appreciation................... $25,343,445
===========
</TABLE>
(b) Represents non-income producing security.
(c) Security exempt from registration under Rule 144a of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional buyers.
<TABLE>
<S> <C>
ADR-- American Depositary Receipt
PLC-- Public Limited Company
</TABLE>
See notes to financial statements.
6
<PAGE> 9
BOSTON BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (cost
$96,334,279).......................... $121,677,724
Interest receivable..................... 478,316
Dividends receivable.................... 69,479
Receivable for investments sold......... 5,184,767
Prepaid expenses........................ 14,711
------------
TOTAL ASSETS........................ 127,424,997
LIABILITIES:
Payable to custodian.................... $10,218
Accrued expenses and other liabilities:
Investment adviser.................... 15,029
Administration........................ 3,148
Other................................. 6,617
-------
TOTAL LIABILITIES................... 35,012
------------
NET ASSETS.............................. $127,389,985
============
COMPOSITION OF NET ASSETS:
Capital................................. $ 91,910,568
Accumulated net investment income....... 1,823,307
Accumulated net realized gains from
investment transactions............... 8,312,665
Unrealized appreciation from
investments........................... 25,343,445
------------
NET ASSETS.............................. $127,389,985
============
Shares Outstanding (par value $0.001,
unlimited number of authorized
shares)............................... 4,454,620
============
Net Asset Value, Offering Price and
Redemption Price per share............ $28.60
============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest................................ $ 1,120,827
Dividend................................ 685,058
-----------
TOTAL INVESTMENT INCOME............. 1,805,885
EXPENSES:
Investment adviser...................... $493,890
Administration.......................... 131,705
Custodian............................... 14,678
Transfer agency......................... 11,205
Other................................... 45,013
--------
Total expenses before voluntary fee
reductions and contractual
reimbursements.................... 696,491
Voluntary fee reductions and
contractual reimbursements........ (35,509)
-----------
NET EXPENSES........................ 660,982
-----------
NET INVESTMENT INCOME................... 1,144,903
-----------
NET REALIZED/UNREALIZED LOSSES FROM
INVESTMENTS:
Net realized gains from investment
transactions.......................... 1,838,523
Change in unrealized appreciation from
investments........................... (4,304,566)
-----------
Net realized/unrealized losses from
investments........................... (2,466,043)
-----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS............................ $(1,321,140)
===========
</TABLE>
See notes to financial statements.
7
<PAGE> 10
BOSTON BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE PERIOD FOR THE
SEPTEMBER 30, JULY 1, 1999 YEAR ENDED
2000 TO MARCH 31, JUNE 30,
(UNAUDITED) 2000(a) 1999
------------- -------------- ------------
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income..................................... $ 1,144,903 $ 1,841,822 $ 2,493,008
Net realized gains from investment transactions........... 1,838,523 6,513,493 5,272,757
Change in unrealized appreciation from investments........ (4,304,566) (8,664,700) 4,778,353
------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS.............. (1,321,140) (309,385) 12,544,118
------------ ------------ ------------
DIVIDENDS:
Net investment income..................................... -- (2,542,217) (2,187,510)
Net realized gains from investment transactions........... -- (3,617,083) (4,866,093)
------------ ------------ ------------
CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS............. -- (6,159,300) (7,053,603)
------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................... 1,783,535 11,554,039 24,299,269
Dividends reinvested...................................... -- 6,157,511 7,046,375
Cost of shares redeemed................................... (9,558,143) (21,776,689) (11,757,251)
------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS........ (7,774,608) (4,065,139) 19,588,393
------------ ------------ ------------
CHANGE IN NET ASSETS........................................ (9,095,748) (10,533,824) 25,078,908
NET ASSETS:
Beginning of period....................................... 136,485,733 147,019,557 121,940,649
------------ ------------ ------------
End of period (including accumulated net investment income
of $1,823,307, $678,404, and $1,378,799,
respectively)........................................... $127,389,985 $136,485,733 $147,019,557
============ ============ ============
SHARE TRANSACTIONS:
Issued.................................................... 62,340 401,491 840,998
Reinvested................................................ -- 214,398 253,466
Redeemed.................................................. (332,202) (756,831) (404,136)
------------ ------------ ------------
CHANGE IN SHARES............................................ (269,862) (140,942) 690,328
============ ============ ============
</TABLE>
(a) Subsequent to the annual report at June 30, 1999, the Fund changed its
fiscal year end to March 31.
See notes to financial statements.
8
<PAGE> 11
BOSTON BALANCED FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE PERIOD DECEMBER 1,
SEPTEMBER 30, JULY 1, 1999 FOR THE YEARS ENDED JUNE 30, 1995(C) THROUGH
2000 TO MARCH 31, ------------------------------- JUNE 30,
(UNAUDITED) 2000(a) 1999 1998(b) 1997(b) 1996(b)
------------- -------------- -------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $ 28.89 $ 30.22 $ 29.21 $ 23.70 $ 19.31 $ 18.41
-------- -------- -------- -------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income................ 0.27 0.40 0.52 0.46 0.47 0.25
Net realized and unrealized
gains/(losses) from investments
transactions....................... (0.56) (0.43) 2.07 5.94 4.36 0.69
-------- -------- -------- -------- ------- -------
Total from investment activities..... (0.29) (0.03) 2.59 6.40 4.83 0.94
-------- -------- -------- -------- ------- -------
DIVIDENDS:
Net investment income................ -- (0.54) (0.49) (0.45) (0.44) (0.04)
Net realized gains from investment
transactions....................... -- (0.76) (1.09) (0.44) -- --
-------- -------- -------- -------- ------- -------
Total dividends...................... -- (1.30) (1.58) (0.89) (0.44) (0.04)
-------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD......... $ 28.60 $ 28.89 $ 30.22 $ 29.21 $ 23.70 $ 19.31
======== ======== ======== ======== ======= =======
TOTAL RETURN........................... (1.00)%(e) (0.63)%(e) 9.34% 27.55% 25.40% 5.14%(e)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's).... $127,390 $136,486 $147,020 $121,941 $82,033 $61,771
Ratio of expenses to average net
assets............................... 1.00%(f) 1.00%(f) 0.95% 1.00% 1.00% 1.00%(f)
Ratio of net investment income to
average net assets................... 1.74%(f) 1.75%(f) 1.87% 1.85% 2.25% 2.43%(f)
Ratio of expenses to average net
assets............................... 1.06%(d)(f) 1.09%(d)(f) 0.95% 1.00% 1.02%(d) 1.00%(f)
Portfolio turnover..................... 3% 29% 24% 23% 31% 18%
</TABLE>
(a) Subsequent to the annual report at June 30, 1999, the Fund changed its
fiscal year end to March 31.
(b) Per share data has been restated to give effect to a 4-for-1 stock split to
shareholders of record as of the close on January 9, 1998.
(c) Commencement of operations.
(d) During the period, certain fees were voluntarily or contractually reduced.
If such fee reductions had not occurred, the ratio would have been as
indicated.
(e) Not annualized.
(f) Annualized.
See notes to financial statements.
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
1. ORGANIZATION:
The Coventry Group (the "Group") was organized as a Massachusetts
business trust on January 8, 1992 and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The accompanying financial statements and financial
highlights are those of the Boston Balanced Fund (the "Fund").
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies
followed by the Fund in preparation of the financial statements. These
policies are in conformity with generally accepted accounting principles in
the United States of America. The preparation of financial statements
requires management to make estimates and assumptions that affect the
reported amounts of income and expenses for the period. Actual results could
differ from those estimates.
SECURITY 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.
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.
EXPENSE ALLOCATION:
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.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income and net realized gains, if any, are
declared and distributed at least annually. Additional dividends are also
paid to the Fund's shareholders to the extent necessary to avoid the federal
excise tax on certain undistributed income and net realized gains of
registered investment companies.
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 in the United
States of America. 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 were made.
FEDERAL INCOME TAXES:
The Fund is a separate taxable entity for federal tax purposes. The 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 its taxable net investment income and net
realized gains, if any, to their shareholders. Accordingly, no provision for
federal income tax is required.
Continued
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
3. RELATED PARTY TRANSACTIONS:
INVESTMENT ADVISER:
United States Trust Company of Boston, (the "Investment Adviser"), acts
as the investment adviser to the Fund. 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 an annual rate of 0.75%.
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 Fund for
serving as officers and trustees 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 the Fund, at an
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. For the six months ended September 30, 2000, no payments
were made under the Distribution Agreement.
CUSTODIAN, TRANSFER AGENCY, AND FUND ACCOUNTING:
The Investment Adviser, a Massachusetts-chartered banking and trust
company, also acts as the Fund's custodian and transfer agent. Under the
custody agreement, the Investment Adviser is entitled to receive a fee of
0.02% on the first $100 million of net assets and 0.015% on net assets over
$100 million. This fee is computed daily and paid monthly based on the
average daily net assets. The Investment Adviser receives a fixed fee for
its services as the transfer agent. BISYS Ohio provides fund accounting
services for the Funds. For these services to the Funds, BISYS Ohio received
an annual fee accrued daily and paid monthly.
FEE REDUCTIONS AND REIMBURSEMENTS:
The Investment Adviser has agreed to reimburse the Fund for certain
expenses. Pursuant to its agreement, for the period ended September 30,
2000, the Investment Adviser reimbursed the Fund $2,582.
The Investment Adviser has agreed to reduce its fees payable by the Fund
to the extent necessary to limit the Fund's aggregate annual operating
expenses to 1.00% of the average daily net assets. Any such reductions made
by the Investment Adviser in its fees or payments or reimbursement of
expenses which are the Fund's obligation may be subject to repayment by the
Fund within three years provided the Fund is able to effect such repayment
and remain in compliance with applicable limitations.
BISYS Ohio has agreed to reduce its Administration fees. For the six
months ended September 30, 2000, BISYS Ohio voluntarily reduced $32,927 in
fees.
4. PURCHASES AND SALES OF SECURITIES:
Purchases of and proceeds from sales, excluding short-term securities,
for the Fund for the six months ended September 30, 2000, were $3,923,087
and $20,517,523 respectively.
11
<PAGE> 14
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<PAGE> 15
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 16
Investment Adviser, Custodian and Transfer Agent
United States Trust Company of Boston
40 Court Street
Boston, MA 02108
(617) 726-7250
-
Administrator
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, OH 43219
-
Distributor
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, OH 43219
-
Auditors
Arthur Andersen LLP
Huntington Center
41 South High Street
Columbus, OH 43215-6150
-
Legal Counsel
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006
This report is intended for the shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
11/00
