<PAGE> 1
UNITED STATES TRUST COMPANY OF BOSTON
Boston Trust Logo
To: Boston Balanced Fund Shareholders
From: Domenic Colasacco
Date: March 31, 2000
Re: Portfolio Review and Economic Outlook
INVESTMENT PERFORMANCE
FUND NET ASSET VALUE: $28.89
<TABLE>
<CAPTION>
Since
6 Months Year Year Year Year Inception
Ended Ended Ended Ended Ended 12/1/95 to
3/31/00 1999 1998 1997 1996 3/31/00
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Boston Balanced Fund* 5.26% 4.57% 19.28% 27.05% 14.43% 15.07%
Morningstar-Balanced
Mutual Fund Average(1) 10.10% 8.60% 12.30% 18.20% 13.10% N/A
Standard & Poor's 500
Stock Index(2) 17.52% 21.04% 28.59% 33.37% 22.97% 25.37%
Lehman Brothers
Government/Corporate
Bond Index(3) 2.26% -2.15% 9.46% 9.75% 2.90% 5.49%
90-Day U.S. Treasury
Bills(4) 2.55% 4.60% 4.80% 5.14% 5.03% 4.94%
</TABLE>
* After all expenses at an annual rate of 1%, the Adviser's expense limitation.
For more information on all Boston Trust Funds, including a Prospectus that
outlines fees, charges and other operating expenses, call 1 (800) 441-8782
X4050. Please read the Prospectus carefully before investing or sending money.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF UNITED STATES TRUST
COMPANY OF BOSTON OR 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
<PAGE> 2
---------------
(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 the underlying securities.
(3) Lehman Brothers Government/Corporate 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 the 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.
2
<PAGE> 3
THE COVENTRY GROUP
BOSTON BALANCED FUND
MARKET & PERFORMANCE SUMMARY
Stock prices were extremely volatile through the six-month period ending
March 31, 2000. Led by gains in technology companies, the primary stock indices
moved to record levels during the fourth quarter of 1999. The new year began
with a brief, sharp stock price decline, only to be followed by the most
speculative, emotional, greed-driven, perverse market period I have experienced
over the past twenty-five years. From the third week in January through the
first week of March, stocks of many marginal start-up companies in the
technology and biotechnology sectors rose by 50% to 100%, while stocks of most
established, profitable corporations in other industries dropped sharply. Then,
beginning about March 10th, price trends reversed abruptly, a pattern that has
only intensified through the first few days of April. As I write this report on
April 8th, values of most mutual funds that focus investments on speculative
sectors have forfeited the gains recorded through early March, while those that
concentrate holdings in more established companies, such as Boston Balanced
Fund, have recouped earlier losses.
Although Boston Balanced Fund's volatility was muted by the bond holdings
and the broad diversity and higher quality of the equity investments,
performance during the past six months also reflected the volatile market trends
noted above. At its lowest point in February, the Fund's net asset value had
declined by roughly 7% from the level reached at year-end 1999. The entire drop
was recovered by the end of the quarter, as stock prices of more established
companies improved. Nevertheless, results for the period were below those of
most other balanced funds, and modest compared to the 15.1% average annual
return achieved since inception in 1995. In the following sections of this
report, I address some of the factors we believe will influence the direction of
stock and bond prices in the months ahead. I also summarize the current
investment position of Boston Balanced Fund, and our thoughts about prospects
for resuming a sustained, above-average performance trend.
ECONOMIC SUMMARY & OUTLOOK
From the standpoint of stock and bond values, the most favorable aspect of
our long running economic expansion has been low inflation amid above average
growth in the Gross Domestic Product (GDP). That we continue to experience
modest inflation is particularly welcome given the historically low level of
unemployment. Inflationary pressures have been alleviated primarily by new
technology, which has fostered outstanding growth in labor productivity.
Inflation has also been restrained by the continuously evolving and expanding
business models which companies utilize in their decision making regarding
moving manufacturing abroad in order to reduce labor expenses. The majority of
displaced workers have been able to locate alternate employment within our
growing economy, while society in general has benefited from greater price
stability.
The Federal Reserve has fully recognized these favorable trends. With the
exception of Chairman Greenspan's periodic warnings regarding the imminent
threat of inflation, the Fed's only action has been a series of small interest
rate hikes intended to moderate real GDP growth closer to the 3% rate the
Federal Reserve deems to
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.
3
<PAGE> 4
THE COVENTRY GROUP
BOSTON BALANCED FUND
be sustainable and non-inflationary. Should the Federal Reserve truly become
concerned about an imminent inflationary spiral, we would likely see either more
rapid interest rate hikes or substantive measures to limit credit availability.
Investors have also recognized the favorable confluence of technology driven
productivity gains and stable unit labor costs. The result has been
comparatively low long-term interest rates and continuing high price valuations
for most companies that have been able to sustain profit margins within an
environment of limited pricing flexibility. At this time, we see scant evidence
of either an economic recession or rising inflation rate in the months ahead.
While sudden, even deep, stock market declines are always possible, we are
unlikely to experience a prolonged bear market if we are correct in this
favorable economic assessment. Our primary economic and market concern is that
even small increases in short-term interest rates will surely restrict stock
prices and may eventually lead to a recession should this trend persist long
enough.
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: From 1995 through early 1999, most of the investment
strategy questions we received about the Fund involved asset allocation, in
particular fear that sharply rising stock prices and valuations would inevitably
give way to a general stock market decline. More recently, after five
consecutive years of stocks performing far better than bonds, most investors
have accepted as fact that stocks are more attractive to own than bonds.
Although our instincts tell us to be more concerned during periods of low
investor fear, the still favorable economic backdrop leads us to share the
prevailing view that stocks are likely to outperform bonds for at least another
year. The Fund is invested accordingly, with stocks comprising close to 70% of
total assets, above the level of roughly 60% maintained by most other balanced
funds.
PORTFOLIO COMPOSITION: Periods of diverse stock sector behavior, such as
we have experienced over the past year, usually bring many questions regarding
the composition of the equity segment of the Fund; this past quarter and year
have not been exceptions. Most inquiries have involved the extent and types of
technology stock investments we hold. Up until just a few weeks ago, almost the
only way to have earned an attractive return was to have a very large allocation
to technology stocks. Virtually all other stock investments, whether in large or
small companies, offset the gains recorded within the technology sector. We have
been wary of the valuations across the entire technology stock sector for some
time. It is not only the newly founded technology companies without appreciable
sales and continuing operating losses that reached extraordinary market values.
Even for established companies, multiples of 20 to 25 times sales are now
common, as are earnings valuations exceeding 100. Nevertheless, we feel there is
little doubt that the technology industry will continue to experience the most
rapid growth in our economy for many years to come. Faced with a desire to
participate in the favorable business growth trends, yet aware of the risk of
high stock valuations, we decided early on to concentrate the Fund's investments
in those technology companies with the best business franchises and the least
assailable competitive positions. Our
Portfolio composition is subject to change.
4
<PAGE> 5
THE COVENTRY GROUP
BOSTON BALANCED FUND
objective has been to participate prudently in industry growth and to avoid the
worst of the potential price declines if industry growth moderates or investor
enthusiasm for technology stocks wanes. In the aggregate, this higher quality
investment strategy led to trailing relative technology sector performance until
the past month, when stocks of newer, smaller and more speculative technology
companies began to drop sharply. While we take some comfort in being invested in
more established companies, we have no misconceptions about the high risk
inherent in even the best quality technology stocks should industry sales and
earnings growth falter. The Fund's broad industry diversification will be the
best defense against a widespread technology sector price decline. Even though
technology is the largest sector in the Fund, it represents just a third of the
stock segment value and less than one-quarter of total Fund assets.
SECURITY SELECTION: Our preference for higher quality stocks is not
limited to the technology sector. Indeed, it has been part of our overall core
equity style since the Fund's inception in 1995. Over the years a higher quality
security selection strategy has aided rather than hindered the Fund's results.
There have been exceptions to this pattern, the most salient being the period
from November 1998 through early March 2000. At this time it is too early to
know with certainty whether the past few weeks are an aberration in the nearly
15 month speculative trend, or the beginning of a return to favor for stocks of
more established companies. Our educated suspicion is the latter in light of
growing investor awareness that many newly formed companies are exhausting their
initial IPO funding without ever reaching profitability. Few will be given a
second funding, leading to further sharp stock price drops and ultimate business
failure. We believe Boston Balanced Fund's higher quality stock emphasis will
resume a favorable performance trend in the months ahead.
On behalf of all of us at United States Trust, I thank you for your
continued confidence in our services. Please feel free to contact either me or
my colleagues at (617) 726-7252 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 composition is subject to change.
5
<PAGE> 6
THE COVENTRY GROUP
BOSTON BALANCED FUND
<TABLE>
<CAPTION>
S&P 500 SECTOR WEIGHTS 1995 1996 1997 1998 1999
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Basic Materials 6% 6% 5% 3% 3%
Capital Goods 10% 10% 9% 8% 8%
Communications Svcs 9% 6% 6% 8% 8%
Consumer Cyclicals 10% 10% 9% 9% 10%
Consumer Staples 16% 16% 16% 15% 11%
Energy 9% 9% 8% 6% 5%
Finance 13% 15% 17% 14% 13%
Healthcare 10% 10% 11% 12% 9%
Technology 10% 13% 13% 19% 30%
Transportation 2% 0% 1% 1% 1%
Utilities 5% 4% 3% 3% 2%
</TABLE>
6
<PAGE> 7
THE COVENTRY GROUP
BOSTON BALANCED FUND
Value of $10,000 vs Benchmark Indices
AVERAGE ANNUAL
TOTAL RETURN
For the Inception
Period Ended to
03/31/00(1) 03/31/00(2)
(0.63)%(3) 15.07%
<TABLE>
<CAPTION>
BLEND (S&P 500 STOCK
INDEX(5), LEHMAN BROTHERS
GOV'T/CORP BOND INDEX(6)
MORNINGSTAR BALANCE AND 90-DAY U.S. TREASURY
BOSTON BALANCED FUND MUTUAL FUND(4) AVERAGE ANNUAL BILLS(7)
-------------------- ------------------- -------------------------
<S> <C> <C> <C>
10000 10000 10000
12/95 10123.3 10141.3 10156
10265.2 10389.3 10351
6/96 10510.2 10625.5 10625
10874.8 10907.8 10880
12/96 11583.9 11484.9 11502
11773 11488.2 11643
6/97 13180 12654.3 12932
13930.8 13501.1 13665
12/97 14717.6 13662.2 14056
16381 14697.4 15306
6/98 16812.7 14863.6 15756
15782.4 13939.3 15028
12/98 17555.4 15483.5 16935
17567.5 15652 17423
6/99 18382.6 16334.7 18178
17452 15647.3 17464
12/99 18357.1 16786.3 19144
18369.8 17213.8 19590
</TABLE>
The chart represents a historical investment of $10,000 in the Boston Balanced
Fund from December 1, 1995 to March 31, 2000, and represents the reinvestment of
dividends and capital gains in the Fund.
(1) For the period from July 1, 1999 through March 31, 2000. Subsequent to the
annual report at June 30, 1999, the Fund changed its fiscal year end to
March 31.
(2) Commenced operations on December 1, 1995.
(3) Not annualized
(4) 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.
(5) 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
the underlying securities.
(6) Lehman Brothers Government/Corporate 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
the underlying securities.
(7) 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.
7
<PAGE> 8
THE COVENTRY GROUP
BOSTON BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
DESCRIPTION AMOUNT VALUE
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS (69.4%):
BASIC MATERIALS (0.4%):
RPM, Inc.................................................... 50,000 $ 550,000
------------
CAPITAL GOODS (1.0%):
Illinois Tool Works......................................... 25,000 1,381,250
------------
COMMUNICATION SERVICES (5.1%):
Alltel Corp. ............................................... 20,000 1,261,250
AT&T Corp. ................................................. 35,000 1,968,750
Bellsouth Corp. ............................................ 25,000 1,175,000
CenturyTel, Inc. ........................................... 30,000 1,113,750
SBC Communications, Inc. ................................... 20,000 840,000
Vodafone AirTouch PLC....................................... 10,000 555,625
------------
6,914,375
------------
CONSUMER CYCLICALS (8.7%):
BJ's Wholesale Club, Inc. (b)............................... 20,000 772,500
Costco Wholesale Corp. (b).................................. 40,000 2,102,499
Emerson Electric Co. ....................................... 25,000 1,321,875
Ford Motor Co. ............................................. 25,000 1,148,438
Gannett Co., Inc. .......................................... 25,000 1,759,375
Home Depot, Inc. ........................................... 15,000 967,500
Johnson Controls, Inc. ..................................... 25,000 1,351,563
Leggett & Platt, Inc. ...................................... 75,000 1,612,500
McClatchy Co. .............................................. 25,000 818,750
------------
11,855,000
------------
CONSUMER PRODUCTS (0.9%):
Anheuser-Busch Co., Inc. ................................... 20,000 1,245,000
------------
</TABLE>
See notes to financial statements.
8
<PAGE> 9
THE COVENTRY GROUP
BOSTON BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
DESCRIPTION AMOUNT VALUE
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
CONSUMER STAPLES (3.3%):
Clorox Co. ................................................. 10,000 $ 325,000
Gillette Co. ............................................... 25,000 942,188
Procter & Gamble Co. ....................................... 20,000 1,125,000
Sysco Corp. ................................................ 60,000 2,141,250
------------
4,533,438
------------
ENERGY (2.2%):
BP Amoco PLC................................................ 10,000 530,625
Exxon Mobil Corp. .......................................... 32,500 2,528,906
------------
3,059,531
------------
FINANCIAL SERVICES (11.2%):
American International Group................................ 5,000 547,500
Bank of America Corp. ...................................... 25,000 1,310,938
Cincinnati Financial Corp. ................................. 25,000 940,625
Fannie Mae.................................................. 30,000 1,693,125
Fleet Boston Financial Corp. ............................... 50,000 1,825,000
Morgan Stanley Dean Witter & Co. ........................... 25,000 2,039,063
T. Rowe Price Associates.................................... 75,000 2,962,499
Wachovia Corp. ............................................. 30,000 2,026,875
Wilmington Trust Corp. ..................................... 40,000 1,945,000
------------
15,290,625
------------
HEALTH CARE (10.1%):
Biomet, Inc. ............................................... 5,000 181,875
Johnson & Johnson........................................... 40,000 2,802,500
Medtronic, Inc. ............................................ 70,000 3,600,625
Merck & Co., Inc. .......................................... 30,000 1,863,750
Pfizer, Inc. ............................................... 80,000 2,925,000
Schering-Plough Corp. ...................................... 65,000 2,388,750
------------
13,762,500
------------
</TABLE>
See notes to financial statements.
9
<PAGE> 10
THE COVENTRY GROUP
BOSTON BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
DESCRIPTION AMOUNT VALUE
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
PRODUCER PRODUCTS (3.3%):
Carlisle Cos., Inc. ........................................ 40,000 $ 1,600,000
Donaldson Co., Inc. ........................................ 40,000 902,500
General Electric Co. ....................................... 12,500 1,939,844
------------
4,442,344
------------
TECHNOLOGY (22.3%):
Applied Materials, Inc. (b)................................. 25,000 2,356,250
Automatic Data Processing................................... 15,000 723,750
Cisco Systems, Inc. (b)..................................... 50,000 3,865,625
EMC Corp. (b)............................................... 15,000 1,875,000
Hewlett-Packard Co. ........................................ 20,000 2,651,250
IBM Corp. .................................................. 25,000 2,950,000
Intel Corp. ................................................ 32,000 4,222,000
Lucent Technologies, Inc. .................................. 55,000 3,341,250
Microsoft Corp. (b)......................................... 45,000 4,781,250
Nokia Corp. ................................................ 1,000 217,250
Oracle Corp. (b)............................................ 12,500 975,781
Sanmina Corp. (b)........................................... 10,000 675,625
Sun Microsystems, Inc. (b).................................. 12,000 1,124,438
Texas Instruments, Inc. .................................... 5,000 800,000
------------
30,559,469
------------
TRANSPORTATION & SHIPPING (0.9%):
United Parcel Service, Inc. ................................ 20,000 1,260,000
------------
TOTAL COMMON STOCKS......................................... 94,853,532
------------
CORPORATE BONDS (9.5%):
Albertson's, Inc., 6.66%, 7/21/08........................... $1,000,000 954,318
American Home Products Corp., 7.90%, 2/15/05................ 925,000 947,046
Atlantic Richfield Co., 8.50%, 4/1/12....................... 300,000 325,180
Eaton Corp., 8.90%, 8/15/06................................. 500,000 532,183
Ford Credit Corp., 7.75%, 11/15/02.......................... 425,000 428,122
Ford Credit Corp., 6.625%, 6/30/03.......................... 300,000 293,340
</TABLE>
See notes to financial statements.
10
<PAGE> 11
THE COVENTRY GROUP
BOSTON BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
DESCRIPTION AMOUNT VALUE
----------- ---------- ------------
<S> <C> <C>
CORPORATE BONDS -- (CONTINUED)
Ford Credit Corp., 7.20%, 6/15/07........................... $1,000,000 $ 975,580
General Electric Capital Corp., 7.375%, 9/15/04............. 1,000,000 1,006,608
General Electric Capital Corp., 8.30%, 9/20/09.............. 1,000,000 1,076,385
General Motors Acceptance Corp., 9.625%, 12/15/01........... 825,000 853,398
General Motors Acceptance Corp., 8.50%, 1/1/03.............. 300,000 306,658
Honeywell, Inc., 7.00%, 3/15/07............................. 500,000 487,689
Leggett & Platt, Inc., 7.185%, 4/24/02 (c).................. 1,000,000 1,000,378
Leggett & Platt, Inc., 6.25%, 9/9/08 (c).................... 500,000 470,822
Paccar Financial Corp., 6.12%, 4/17/00...................... 1,000,000 999,768
Proctor & Gamble Co., 5.25%, 9/15/03........................ 1,000,000 945,592
Sears Roebuck & Co., 9.46%, 6/20/00......................... 300,000 301,454
Sysco Corp., 6.50%, 6/15/05................................. 375,000 363,293
Unum Provident Corp., 5.88%, 10/15/03....................... 400,000 378,301
Weyerhaeuser Co., 7.25%, 7/1/13............................. 300,000 294,399
------------
TOTAL CORPORATE BONDS....................................... 12,940,514
------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (20.3%):
Fannie Mae, 5.33%, 6/9/00................................... 2,000,000 1,995,790
Fannie Mae, 4.75%, 12/21/00................................. 3,000,000 2,959,185
Fannie Mae, 5.375%, 3/15/02................................. 3,000,000 2,914,719
Fannie Mae, 7.25%, 1/15/10.................................. 2,000,000 2,014,384
FFCB, 4.85%, 11/4/03........................................ 400,000 372,692
FFCB, 5.39%, 9/15/04........................................ 2,000,000 1,873,382
FFCB, 5.80%, 6/17/05........................................ 2,000,000 1,890,892
FHLB, 5.55%, 8/17/00........................................ 3,000,000 2,993,916
FHLB, 5.33%, 3/20/01........................................ 2,000,000 1,975,170
FHLB, 5.285%, 2/11/04....................................... 2,000,000 1,880,176
FHLB, 5.815%, 7/13/05....................................... 2,000,000 1,890,592
FHLB, 7.015%, 9/25/06....................................... 1,500,000 1,493,583
FHLB, 5.038%, 10/14/08...................................... 500,000 432,132
FHLB, 7.00%, 8/15/14........................................ 3,000,000 2,956,581
------------
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS..... 27,643,194
------------
</TABLE>
See notes to financial statements.
11
<PAGE> 12
THE COVENTRY GROUP
BOSTON BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
DESCRIPTION AMOUNT VALUE
----------- ---------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (2.2%):
Valiant General Money Market Portfolio...................... 2,513,102 $ 2,513,102
Valiant U.S. Treasury Money Market Portfolio................ 457,582 457,582
------------
TOTAL SHORT-TERM INVESTMENTS................................ 2,970,684
------------
TOTAL INVESTMENTS (COST $108,759,913) (a) -- 101.4%......... 138,407,924
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.4)%............. (1,922,191)
------------
TOTAL NET ASSETS -- 100.0%.................................. $136,485,733
------------
------------
</TABLE>
---------------
Percentages indicated are based on net assets of $136,485,733.
(a) Represents cost for both federal income tax purposes and financial reporting
purposes and differs from market value by net unrealized appreciation of
securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............. $31,992,932
Unrealized depreciation............. (2,344,921)
-----------
Net unrealized appreciation......... $29,648,011
===========
</TABLE>
(b) Non-income producing securities.
(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.
FFCB -- Federal Farm Credit Bank
FHLB -- Federal Home Loan Bank
PLC -- Public Limited Company
See notes to financial statements.
12
<PAGE> 13
THE COVENTRY GROUP
BOSTON BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $108,759,913)................. $138,407,924
Interest and dividends receivable......................... 576,124
Receivable for capital shares issued...................... 141,000
Prepaid expenses.......................................... 7,519
------------
TOTAL ASSETS................................................ 139,132,567
------------
LIABILITIES:
Payable for investments purchased......................... 1,181,901
Payable for capital shares redeemed....................... 1,335,398
Accrued expenses and other payables:
Investment adviser fees................................ 48,306
Administration fees.................................... 2,775
Other payables......................................... 78,454
------------
TOTAL LIABILITIES........................................... 2,646,834
------------
NET ASSETS.................................................. $136,485,733
============
COMPOSITION OF NET ASSETS:
Capital................................................... $ 99,685,176
Accumulated undistributed net investment income........... 678,404
Accumulated undistributed net realized gains from
investment transactions................................ 6,474,142
Unrealized appreciation from investments.................. 29,648,011
------------
NET ASSETS.................................................. $136,485,733
============
Net Assets.................................................. $136,485,733
============
Shares Outstanding (par value $0.001, unlimited number of
shares authorized)........................................ 4,724,482
============
Net Asset Value, Offering Price and Redemption Price per
share..................................................... $ 28.89
============
</TABLE>
See notes to financial statements.
13
<PAGE> 14
THE COVENTRY GROUP
BOSTON BALANCED FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
MARCH 31, 2000 (a) JUNE 30, 1999
------------------ -------------
<S> <C> <C>
INVESTMENT INCOME:
Interest income........................................... $ 1,802,366 $ 2,522,028
Dividend income........................................... 1,091,624 1,235,133
----------- -----------
TOTAL INVESTMENT INCOME..................................... 2,893,990 3,757,161
----------- -----------
EXPENSES:
Investment adviser fees................................... 791,071 999,704
Administration fees....................................... 213,923 145,111
Accounting fees........................................... 9,795 42,479
Transfer agent fees....................................... 12,829 4,124
Custodian fees and expenses............................... 22,032 24,174
Other expenses............................................ 95,567 58,650
----------- -----------
Total expenses before fee reductions and
reimbursements....................................... 1,145,217 1,274,242
Fee reductions and reimbursements...................... (93,049) (10,089)
----------- -----------
Net expenses........................................... 1,052,168 1,264,153
----------- -----------
NET INVESTMENT INCOME....................................... 1,841,822 2,493,008
----------- -----------
REALIZED/UNREALIZED GAINS/(LOSSES) FROM INVESTMENTS:
Net realized gains from investment transactions........... 6,513,493 5,272,757
Change in unrealized appreciation/(depreciation) from
investments............................................ (8,664,700) 4,778,353
----------- -----------
Net realized/unrealized gains/(losses) from investments... (2,151,207) 10,051,110
----------- -----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS.............. $ (309,385) $12,544,118
=========== ===========
</TABLE>
---------------
(a) For period from July 1, 1999 through March 31, 2000. Subsequent to the
annual report at June 30, 1999, the Fund changed its fiscal year end to
March 31.
See notes to financial statements.
14
<PAGE> 15
THE COVENTRY GROUP
BOSTON BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED YEAR ENDED
MARCH 31, 2000 (a) JUNE 30, 1999 JUNE 30, 1998
------------------ ------------- -------------
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.......................... $ 1,841,822 $ 2,493,008 $ 1,807,541
Net realized gain from investment
transactions................................ 6,513,493 5,272,757 3,852,396
Change in unrealized
appreciation/(depreciation) from
investments................................. (8,664,700) 4,778,353 17,971,318
------------ ------------ ------------
Change in net assets resulting from operations... (309,385) 12,544,118 23,631,255
------------ ------------ ------------
DIVIDENDS TO SHAREHOLDERS:
Net investment income.......................... (2,542,217) (2,187,510) (1,584,936)
Net realized gains from investment
transactions................................ (3,617,083) (4,866,093) (1,549,116)
------------ ------------ ------------
Change in net assets from shareholder
dividends...................................... (6,159,300) (7,053,603) (3,134,052)
------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.................... 11,554,039 24,299,269 24,300,384
Dividends reinvested........................... 6,157,511 7,046,375 3,134,052
Cost of shares redeemed........................ (21,776,689) (11,757,251) (8,024,463)
------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL SHARE
TRANSACTIONS................................... (4,065,139) 19,588,393 19,409,973
------------ ------------ ------------
CHANGE IN NET ASSETS............................. (10,533,824) 25,078,908 39,907,176
NET ASSETS:
Beginning of period............................ 147,019,557 121,940,649 82,033,473
------------ ------------ ------------
End of period (including accumulated
undistributed net investment income of
$678,404, $1,378,799, and $1,073,301,
respectively)............................... $136,485,733 $147,019,557 $121,940,649
============ ============ ============
SHARE TRANSACTIONS:
Issued......................................... 401,491 840,998 656,792
Reinvested..................................... 214,398 253,466 31,030
Issued in stock split.......................... -- -- 2,770,018
Redeemed....................................... (756,831) (404,136) (147,984)
------------ ------------ ------------
CHANGE IN SHARES................................. (140,942) 690,328 3,309,856
============ ============ ============
</TABLE>
---------------
(a) For the period from July 1, 1999 through March 31, 2000. Subsequent to the
annual report at June 30, 1999, the Fund changed its fiscal year end to
March 31.
See notes to financial statements.
15
<PAGE> 16
THE COVENTRY GROUP
NOTES TO FINANCIAL STATEMENTS AT MARCH 31, 2000
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"), which
reorganized and transferred from the Professionally Managed Portfolios to
The Coventry Group on June 18, 1999. In connection with this reorganization,
the Fund subsequently changed its fiscal year end to March 31. The Group is
authorized to issue an unlimited number of shares, with no par value. Prior
to January 5, 1998, the Fund was known as Boston Managed Growth Fund.
The Fund's investment objective is to seek long-term capital growth and
income through an actively managed portfolio of stocks, bonds, and money
market instruments.
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.
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:
Investments in securities traded on a national securities exchange or
included in the NASDAQ National Market System are valued at the last
reported sales price at the close of regular trading. Securities traded on
an exchange or NASDAQ for which there have been no sales and other
over-the-counter securities are valued at the last reported bid price. Debt
securities are valued using the mean between the bid and ask price. Debt
securities with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates market value. Securities for which
quotations are not readily available are valued at their respective fair
values as determined in good faith by the Board of Trustees.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold ("trade date"). Interest income is recognized on the
accrual basis and includes, where applicable, the amortization of premium or
discount. Dividend income is recorded on the ex-dividend date. Securities
gains and losses are calculated on the identified cost basis.
EXPENSES:
Expenses that are directly related to the Fund are charged directly to
the Fund. Expenses relating to the Group are prorated to the Fund and any
other portfolios of the Group on the basis of relative net assets.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income, if any, and net realized gain, if
any, are declared and distributed annually.
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
16
<PAGE> 17
THE COVENTRY GROUP
NOTES TO FINANCIAL STATEMENTS AT MARCH 31, 2000 -- (CONTINUED)
"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. There were no "book/tax" differences as of March 31, 2000.
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.
3. RELATED PARTY TRANSACTIONS WITH AFFILIATES:
United States Trust Company of Boston, (the "Investment Adviser"), acts
as investment adviser to the Fund. For its services as the investment
adviser, United States Trust Company of Boston is entitled to receive a fee,
computed daily and paid monthly at the annual rate of 0.75% of the average
daily net assets of the Fund.
The Investment Adviser, which is a Massachusetts-chartered banking and
trust company, 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. The Investment
Adviser receives a fixed fee for its services as the transfer agent.
BISYS Fund Services Limited Partnership (the "Distributor") and BISYS
Fund Services Ohio, Inc. (the "Administrator"), are wholly owned
subsidiaries of The BISYS Group, Inc. 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 of the Group. Under the terms
of the administration agreement, the Administrator receives an annual fee,
computed daily and paid monthly, equal to 0.20% of the Fund's average net
assets.
For the period ended March 31, 2000, the Administrator voluntarily
waived $55,735 in fees.
The Fund is responsible for its own operating expenses. The Investment
Adviser has agreed to reduce fees payable to it 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.
Pursuant to its agreement, for the period ended March 31, 2000, the
Investment Adviser reimbursed the Fund $37,314.
4. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales,
excluding short-term securities, for the period ended March 31, 2000, were
$38,480,883 and $38,493,241 respectively.
17
<PAGE> 18
THE COVENTRY GROUP
BOSTON BALANCED FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
<TABLE>
<CAPTION>
DECEMBER 1,
FOR THE FOR THE YEARS ENDED JUNE 30, 1995 (c) THROUGH
PERIOD ENDED ---------------------------- JUNE 30,
MARCH 31, 2000 (a) 1999 1998 (b) 1997 (b) 1996 (b)
------------------ ------ -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $30.22 $29.21 $23.70 $19.31 $18.41
INVESTMENT ACTIVITIES:
Net investment income................. 0.40 0.52 0.46 0.47 0.25
Net realized and unrealized
gains/(losses) from investment
transactions....................... (0.43) 2.07 5.94 4.36 0.69
------ ------ ------ ------ ------
Total from investment activities........ (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.......... $28.89 $30.22 $29.21 $23.70 $19.31
====== ====== ====== ====== ======
TOTAL RETURN............................ (0.63)%(e) 9.34% 27.55% 25.40% 5.14%(e)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(millions)......................... $136.5 $147.0 $121.9 $ 82.0 $ 61.8
Ratio of expenses to average net
assets............................. 1.00%(f) 0.95% 1.00% 1.00% 1.00%(f)
Ratio of net investment income to
average net assets................. 1.75%(f) 1.87% 1.85% 2.25% 2.43%(f)
Ratio of expenses to average net
assets............................. 1.09%(f)(d) 0.95% 1.00% 1.02%(d) 1.00%(f)
Portfolio turnover.................... 28.72% 23.61% 22.71% 30.78% 17.69%
</TABLE>
---------------
(a) For the period from July 1, 1999 through March 31, 2000. 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 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.
18
<PAGE> 19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
of the Boston Balanced Fund of the Coventry Group
We have audited the accompanying statement of assets and liabilities of the
Boston Balanced Fund of the Coventry Group (a Massachusetts business trust),
including the schedule of portfolio investments, as of March 31, 2000, and the
related statements of operations and changes in net assets, and financial
highlights for the periods ended March 31, 2000 and June 30, 1999. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The statement
of changes in net assets for the year ended June 30, 1998 and the financial
highlights for each of the three periods in the period ended June 30, 1998 were
audited by other auditors whose report dated July 31, 1998, expressed an
unqualified opinion on these statements and financial highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of March 31, 2000, by correspondence with the custodian and broker. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Boston Balanced Fund as of March 31, 2000, the results of its operations, the
changes in its net assets, and its financial highlights for the periods ended
March 31, 2000 and June 30, 1999, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Columbus, Ohio
May 16, 2000
19
<PAGE> 20
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 Price & Rhoads
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.
5/00
Boston Trust Logo
UNITED STATES TRUST COMPANY OF BOSTON
BOSTON BALANCED FUND
ANNUAL REPORT
MARCH 31, 2000
