As filed with the Securities and Exchange Commission on March 20, 2003.
Registration No. 333-_____
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ___ [ ] Post-Effective Amendment No. ___
(Check appropriate box or boxes)
Exact Name of Registrant as
Specified in Charter: Area Code and Telephone Number:
THE CATHOLIC FUNDS, INC. (414) 278-6550
Address of Principal Executive Offices (Number, Street, City, State, Zip Code):
1100 WEST WELLS STREET
MILWAUKEE, WISCONSIN 53233
Name and Address of
Agent for Service: With copies to:
Theodore F. Zimmer, Esq. Charles M. Weber, Esq. Leonard A. Pierce, Esq.
c/o The Catholic Funds, Inc. Quarles & Brady LLP Hale and Dorr LLP
1100 West Wells Street 411 East Wisconsin Avenue 60 State Street
Milwaukee, Wisconsin Milwaukee, Wisconsin Boston, Massachusetts
53233 53202 02109
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective under the Securities Act of 1933,
as amended.
It is proposed that this filing will become effective on April 19, 2003,
pursuant to Rule 488.
Title of Securities Being Registered: Class C and Class I shares of the
Catholic Equity Fund, a series of the Registrant.
The Registrant has previously registered an indefinite number of its shares
pursuant to Section 24(f) under the Investment Company Act of 1940, as amended.
Accordingly, no filing fee is due in reliance on Section 24(f).
April __, 2003
Dear Catholic Values Investment Trust Equity Fund Shareholder:
I am writing to you about a matter of primary importance to all of our
Catholic Values Investment Trust ("CVIT") Equity Fund shareholders. We have
appreciated the confidence you have placed in us and your support of the CVIT
Equity Fund. However, we believe that your interests would be better served if
the CVIT Equity Fund would combine with and become a part of the Catholic Equity
Fund, a series of The Catholic Funds, Inc., in a transaction structured as a
tax-free reorganization.
Although there are differences between investment objectives and principal
strategies of the Catholic Equity Fund and those of the CVIT Fund, both Funds
generally seek capital appreciation and dividend income by investing primarily
in stocks of well-established companies in a manner consistent with core
Catholic values. The Catholic Equity Fund specifically seeks a total return
from dividends and capital gains which is equal to the S&P 500, less the Fund's
operating expenses, by investing in a portfolio of common stocks that
approximately parallels the composition of the Index. However, the Catholic
Equity Fund does not invest in companies that directly participate in abortion
and engages in advocacy activities to influence the practices of companies so
that they better reflect and promote the dignity and primacy of the human
person. The annual operating expenses of the Catholic Equity Fund are
significantly lower than the expenses of the CVIT Fund (after fee waivers and
expense reimbursements). Based on total net assets of each Fund as of December
31, 2002, the proposed transaction would result in a combined Fund of
approximately $21.6 million in assets, allowing it to take better advantage of
economies of scale. The Catholic Equity Fund also offers classes of shares that
are similar to those of the CVIT Fund. The Catholic Equity Fund is managed and
distributed by Catholic Financial Services Corporation, which is owned by a
Catholic fraternal alliance headed by Catholic Knights. We believe the Catholic
Equity Fund offers an appealing alternative for CVIT Fund shareholders.
The attached Proxy Statement/Prospectus describes and seeks your approval
of an Agreement and Plan of Reorganization (the "Agreement") involving the CVIT
Equity Fund and the Catholic Equity Fund, and explains the similarities and
differences between the two Funds. As a result of the transactions proposed in
the Agreement (the "Reorganization"), substantially all of the assets and stated
liabilities of the CVIT Equity Fund would be transferred to the Catholic Equity
Fund, and you would receive shares of the Catholic Equity Fund in exchange for
your CVIT Equity Fund shares. Immediately following the transfer, the dollar
value of your account would be the same as it was immediately before the
transfer and you would receive Class C or Class I shares that correspond with
your holdings of Individual Shares or Institutional Service Shares of the CVIT
Fund. You would not recognize any gain or loss for federal income tax purposes
on the exchange. The Board of Trustees of CVIT has unanimously approved the
transaction for the reasons described in the Proxy Statement/Prospectus.
This package contains information about the proposed Reorganization and
includes all the material you will need to vote. The current prospectus for the
Catholic Equity Fund and its most recent annual report are also enclosed for
your convenience.
The Trustees of CVIT unanimously recommend that you vote "FOR" the
Agreement. The Trustees believe that the Agreement and the Reorganization are
in your best interests as a shareholder of the CVIT Equity Fund. Your vote is
essential to approve the proposal.
Please read the enclosed Proxy Statement/Prospectus carefully and cast your
vote by completing and returning the enclosed proxy card or voting by telephone
as instructed on the proxy card. To help avoid additional expense, be sure to
vote promptly. If you have any questions, please call us at 1-888-974-4486. We
will be glad to help you.
Thank you for your consideration and continued support.
Sincerely,
Peter M. Donovan
President
CATHOLIC VALUES INVESTMENT TRUST EQUITY FUND
225 STATE STREET
BOSTON, MASSACHUSETTS 02109
1-888-974-4486
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
ON MAY 21, 2003
To the Shareholders of the Catholic Values Investment Trust Equity Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of the Catholic Values Investment Trust Equity Fund (the "CVIT
Fund"), a mutual fund series of Catholic Values Investment Trust ("CVIT"), will
be held on Wednesday, May 21, 2003, at 1100 AM Eastern Time, at the offices
of Wright Investors' Service, Inc., 440 Wheelers Farms Road, Milford,
Connecticut. The purpose of the Meeting is to consider and act upon the
following proposal:
1. To approve an Agreement and Plan of Reorganization (the "Agreement")
providing for the transfer of substantially all of the assets and
stated liabilities of the CVIT Fund to the Catholic Equity Fund, a
series of The Catholic Funds, Inc., in exchange solely for shares of
the Catholic Equity Fund, followed by the pro rata distribution of
such shares of the Catholic Equity Fund to the CVIT Fund shareholders.
2. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Trustees of CVIT has fixed the close of business on March 13,
2003, as the record date for the determination of shareholders of the CVIT Fund
entitled to notice of, and to vote at, the Meeting and any adjournments thereof.
By Order of the Board of Trustees
_________________________, Secretary
April __, 2003
YOUR VOTE IS IMPORTANT - PLEASE RETURN YOUR PROXY CARD PROMPTLY
SHAREHOLDERS ARE URGED TO INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY
CARD, DATE AND SIGN IT, AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IN
ORDER TO AVOID THE ADDITIONAL EXPENSE OF A SECOND SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING YOUR PROXY PROMPTLY, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
CATHOLIC VALUES INVESTMENT TRUST EQUITY FUND
225 STATE STREET
BOSTON, MASSACHUSETTS 02109
1-888-974-4486
CATHOLIC EQUITY FUND
(A SERIES OF THE CATHOLIC FUNDS, INC.)
1100 WEST WELLS STREET
MILWAUKEE, WISCONSIN 53233
1-877-222-2402
PROXY STATEMENT/PROSPECTUS
APRIL 18, 2003
This Proxy Statement/Prospectus is being furnished in connection with the
solicitation of proxies by the Board of Trustees of Catholic Values Investment
Trust ("CVIT") for use at a Special Meeting of Shareholders of the Catholic
Values Investment Trust Equity Fund (the "CVIT Fund"), a series of CVIT, to be
held at 1100 AM Eastern Time on Wednesday, May 21, 2003, at the offices of
Wright Investors' Service, Inc., 440 Wheelers Farms Road, Milford, Connecticut
(the "Meeting"). Proxy materials are first being mailed to shareholders of the
CVIT Fund on April __, 2003.
The primary purpose of the Meeting is to consider and vote on the Agreement
and Plan of Reorganization (the "Agreement") involving the CVIT Fund and the
Catholic Equity Fund, a series of The Catholic Funds, Inc. ("The Catholic
Funds"). A copy of the Agreement is attached hereto as Appendix A.
-----------
Pursuant to the Agreement, the Catholic Equity Fund would acquire
substantially all of the assets of the CVIT Fund and assume CVIT Fund's
liabilities that are reflected in the computation of its net asset value and
other ordinary operating liabilities of the CVIT Fund, but only such
liabilities. In exchange, the Catholic Equity Fund would issue to the CVIT Fund
shares of the Catholic Equity Fund having an aggregate net asset value equal to
the aggregate value of the CVIT Fund assets so acquired, less the CVIT Fund
liabilities so assumed. Shares of the Catholic Equity Fund received by the CVIT
Fund in the transaction would then be distributed pro rata to shareholders of
the CVIT Fund, and the CVIT Fund would be dissolved and discontinued as a
separate mutual fund series of CVIT. It is expected that the dollar value of
each CVIT Fund shareholder's account in the Catholic Equity Fund immediately
after these proposed transactions (the "Reorganization") would be the same as
the dollar value of such shareholder's account in the CVIT Fund immediately
prior to the Reorganization. Shareholders of Individual Shares of the CVIT Fund
would receive Class C shares of the Catholic Equity Fund, and shareholders of
Institutional Service Shares of the CVIT Fund would receive Class I shares of
the Catholic Equity Fund. The Reorganization is intended to qualify as a tax-
free reorganization so that shareholders of the CVIT Fund will not recognize any
gain or loss through the exchange of shares in the Reorganization. No sales
charge or commission will be imposed upon the Catholic Equity Fund shares is-
sued, or on the CVIT Fund shares surrendered, in the Reorganization. Holders of
Individual Shares of the CVIT Fund will be credited with the amount of time they
held such shares for purposes of determining the contingent deferred sales
charge applicable to the subsequent redemption of Class C shares of the Catholic
Equity Fund they receive in the Reorganization.
The Catholic Equity Fund is a series of The Catholic Funds, an open-end,
series management investment company. The investment objective of the Catholic
Equity Fund is to obtain a total return from dividends and capital gains which
is equal to the total return of the S&P 500 Index, less the Fund's operating
expenses. The Catholic Equity Fund invests primarily in a portfolio of common
stocks that approximately parallels the composition of the S&P 500 Index. The
Catholic Equity Fund, however, does not invest in companies that directly
participate in abortion through the manufacture of their products or the
provision of their services and engages in advocacy activities with respect of
companies whose practices are inconsistent with the dignity of the human person.
The investment objective of the CVIT Fund seeks long-term growth of capital and
reasonable current income from investments consistent with the core values of
the Catholic Church. The CVIT Fund invests at least 80% of its net assets in
the equity securities of well-established companies, that are included on the
quality oriented Approved Wright Investment Lists. (The Catholic Equity Fund
and the CVIT Fund are collectively referred to herein as the "Funds.")
The principal executive office of The Catholic Funds and the Catholic
Equity Fund is located at 1100 West Wells Street, Milwaukee, Wisconsin 53233,
telephone: 1-877-222-2402. The principal executive office of CVIT and the CVIT
Fund is located at 440 Wheelers Farms Road, Milford, Connecticut 06460,
telephone: 1-888-974-4486.
This Proxy Statement/Prospectus sets forth concisely the information that
shareholders of the CVIT Fund should know before voting on the Agreement and the
Reorganization. It also constitutes an offering of shares of the Catholic
Equity Fund. Please read this Proxy Statement/Prospectus carefully and retain
it for future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
CATHOLIC EQUITY FUND SHARES TO BE ISSUED IN THE REORGANIZATION OR DETERMINED IF
THIS PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. TO STATE OTHERWISE IS
A CRIME.
A Statement of Additional Information of the Catholic Equity Fund, dated
March __, 2003, relating to this Proxy Statement/Prospectus (the "Reorganization
SAI") has been filed with the Securities and Exchange Commission (the "SEC" or
the "Commission") and is incorporated herein by reference. Copies of the Reor-
ganization SAI may be obtained without charge by writing to The Catholic Funds,
1100 West Wells Street, Milwaukee, Wisconsin 53233, or by calling 1-877-222-
2402.
In addition, the Prospectus and Statement of Additional Information of the
Catholic Equity Fund, each dated January 31, 2003 (the "Catholic Equity Fund
Prospectus" and the "Catholic Equity Fund SAI," respectively), and the Annual
Report to Shareholders of the Catholic Equity Fund for the year ended
September 30, 2002 (the "Catholic Equity Fund Annual Report") have been filed
with the Commission and are incorporated by reference herein. The Catholic
Equity Fund Prospectus and the Catholic Equity Fund Annual Report accompany this
Proxy Statement/Prospectus, and the Catholic Equity Fund SAI may be obtained
without charge by writing to or calling The Catholic Funds at the above address
or telephone number.
The Prospectus and Statement of Additional Information of the CVIT Fund,
each dated May 1, 2002 (as supplemented) (the "CVIT Fund Prospectus" and the
"CVIT Fund SAI," respectively), and the Annual Report to Shareholders of the
CVIT Fund for the year ended December 31, 2002 (the "CVIT Fund Annual Report")
have been filed with the Commission, are incorporated by reference herein and
may be obtained without charge by writing to CVIT, c/o Wright Investors' Service
Distributors, Inc., 440 Wheelers Farms Road, Milford, Connecticut 06460, or by
calling 1-888-974-4486.
TABLE OF CONTENTS
PAGE
----
SUMMARY.....................................................................5
Introduction...........................................................5
The Agreement..........................................................6
Reasons for the Proposed Reorganization................................7
Federal Tax Consequences...............................................8
Comparison of the Funds................................................8
RISK FACTORS...............................................................16
Market Risk...........................................................16
Objective Risk........................................................16
Index Correlation Risk................................................17
Catholic Values Risk..................................................17
PERFORMANCE OF THE CATHOLIC EQUITY FUND....................................17
FURTHER INFORMATION ABOUT THE FUNDS........................................17
APPROVAL OF THE AGREEMENT AND REORGANIZATION...............................17
Description of the Agreement..........................................17
Ineligible Securities.................................................19
Other Terms...........................................................19
Agreement Between Advisers............................................21
Background to the Reorganization......................................22
Reasons for the Proposed Reorganization...............................23
Federal Tax Considerations............................................24
DESCRIPTION OF SECURITIES TO BE ISSUED AND RIGHTS OF SHAREHOLDERS..........25
Catholic Equity Fund..................................................25
CVIT Fund.............................................................26
CAPITALIZATION.............................................................27
OWNERSHIP OF FUND SHARES...................................................28
Catholic Equity Fund..................................................28
CVIT Fund.............................................................28
VOTING INFORMATION.........................................................28
MISCELLANEOUS..............................................................30
Auditors..............................................................30
Interests of Experts and Counsel......................................30
Other Matters.........................................................30
Available Information.................................................30
SUMMARY
This Proxy Statement/Prospectus is being furnished to the shareholders of
the CVIT Fund in connection with the solicitation of proxies by the Board of
Trustees of CVIT to be used at a Special Meeting of Shareholders of the CVIT
Fund to be held on Wednesday, May 21, 2003, at 11:00 AM Eastern Time, at the
offices of Wright Investors' Service, Inc., 440 Wheelers Farms Road, Milford,
Connecticut. The primary purpose of the Meeting is to consider and vote on the
Agreement and the Reorganization contemplated thereby, pursuant to which the
Catholic Equity Fund would acquire substantially all of the assets of the CVIT
Fund and assume the liabilities of the CVIT Fund that are reflected in the
computation of its net asset value and other ordinary operating liabilities of
the CVIT Fund, but only such liabilities. In exchange, the Catholic Equity Fund
would issue Class C and Class I shares of the Catholic Equity Fund, which shares
would be distributed, pro rata, to the holders of Individual and Institutional
Service Shares, respectively, of the CVIT Fund. The CVIT Fund would then be
liquidated and discontinued as a designated series of CVIT.
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus (including the Agreement attached hereto as
Appendix A), as well as the Catholic Equity Fund Prospectus, which accompanies
- ----------
this Proxy Statement/Prospectus and is incorporated by reference herein. The
Catholic Equity Fund Prospectus describes the investment objective and principal
strategies of the Catholic Equity Fund and provides information about the
shareholder fees and operating expenses of, management and other services
provided to, and purchases and redemptions of shares of, the Catholic Equity
Fund. This summary is not intended to be complete and is qualified in all
respects by reference to the more detailed information appearing elsewhere in
this Proxy Statement/Prospectus, the Agreement and the Catholic Equity Fund
Prospectus.
INTRODUCTION
Shareholders of the CVIT Fund will be asked at the Meeting to approve the
Agreement and the Reorganization contemplated thereby and as described herein.
If approved, the Reorganization is expected to be completed as of the close of
business on or about April 30, 2003 or such other date as the parties may
determine (the "Closing Date"), assuming that all conditions to closing have
been satisfied.
The Catholic Equity Fund is a mutual fund series of The Catholic Funds.
The Catholic Funds currently offers shares of the Catholic Money Market Fund in
addition to the Catholic Equity Fund. The Catholic Funds was organized in 1998
as a Maryland corporation. Catholic Financial Services Corporation, an
affiliate of Catholic Knights ("CFSC"), is the investment advisor to the
Catholic Equity Fund and distributor of its shares.
The CVIT Fund is a mutual fund series of CVIT, a registered open-end man-
agement investment company organized as a Massachusetts business trust. The
CVIT Fund is the only mutual fund series of CVIT. Wright Investors' Service,
Inc. ("Wright") is the investment advisor to the CVIT Fund, and Wright
Investors' Services Distributors, Inc. ("WISDI") is the distributor of its
shares.
THE AGREEMENT
The Agreement describes the essential terms of the proposed Reorganization
and is set forth in full as Appendix A to this Proxy Statement/Prospectus.
----------
Pursuant to the Agreement, the Catholic Equity Fund would acquire substantially
all of the assets of the CVIT Fund and assume the CVIT Fund's liabilities that
are reflected in the computation of its net asset value and other ordinary
operating liabilities of the CVIT Fund, but only such liabilities. In exchange,
the Catholic Equity Fund would issue to the CVIT Fund Class C and Class I shares
of the Catholic Equity Fund having an aggregate net asset value equal to the
aggregate value of the CVIT Fund assets so acquired, less the CVIT Fund liabili-
ties so assumed. The CVIT Fund would then immediately make a pro rata distribu-
tion of such Catholic Equity Fund shares to the CVIT Fund shareholders. As a
result of the Reorganization, each CVIT Fund shareholder will receive that
number of full and fractional Catholic Equity Fund shares equal in value to such
shareholder's pro rata interest in the net assets transferred to the Catholic
Equity Fund as of the close of business on the Closing Date. Accordingly, the
shareholders of the CVIT Fund will become shareholders of the Catholic Equity
Fund. It is expected that the value of each shareholder's account in the
Catholic Equity Fund immediately after the Reorganization would be the same as
the value of such shareholder's account in the CVIT Fund immediately prior to
the Reorganization. Holders of Individual Shares of the CVIT Fund would receive
Class C shares of the Catholic Equity Fund, and holders of Institutional Service
Shares of the CVIT Fund would receive Class I shares of the Catholic Equity
Fund.
CVIT Fund shareholders will not pay any sales load or sales commissions on
the Catholic Equity Fund shares they receive in the Reorganization or on the
CVIT Fund shares they surrender in the Reorganization. Shareholders of the CVIT
Fund who receive Class C shares of the Catholic Equity Fund in exchange for
their Individual Shares of the CVIT Fund will be credited with the period of
time they held their Individual Shares for purposes of determining whether the
1% contingent deferred sales charge will apply to their subsequent redemption of
the Class I shares of the Catholic Equity Fund. Additionally, it is a condition
precedent to the closing of the Reorganization that CVIT and The Catholic Funds
receive a legal opinion to the effect that the Reorganization will qualify as a
tax-free reorganization for federal income tax purposes. Assuming the
Reorganization so qualifies, shareholders of the CVIT Fund will not recognize
any income, gain or loss for federal income tax purposes as a result of the
exchange in the Reorganization of their shares in the CVIT Fund for shares of
the Catholic Equity Fund. For further information about the tax consequences of
the Reorganization, see "Additional Information About the Agreement - Federal
Tax Consequences" below.
Contemporaneously with the closing and the distribution of the Catholic
Equity Fund shares to the CVIT Fund shareholders, the CVIT Fund will satisfy its
liabilities that are not assumed by the Catholic Equity Fund (if any), liquidate
and be discontinued as a separate series of CVIT. CVIT itself will also be
dissolved.
The Funds will not bear any of the fees, costs and expenses incurred in
connection with the Reorganization ("Reorganization Costs"). Instead, CFSC and
Wright will pay all Reorganization Costs in the manner described under "Approval
of the Agreement and Reorganization - Agreement Between Advisors" below.
REASONS FOR THE PROPOSED REORGANIZATION
Although it has been in operation for more than five years, the CVIT Fund
has not experienced satisfactory growth. At December 31, 2002, the CVIT Fund's
aggregate net assets were $6,506,417. Moreover, the CVIT Fund has declined in
size significantly after averaging $29 million in total net assets in 2000.
During the existence of the CVIT Fund, Wright has waived fees and paid other
expenses of the Fund in an amount of $357,844 and $367,843 respectively in an
attempt to keep the Fund's expense ratios at reasonable levels. There is no
assurance that Wright will continue to subsidize the CVIT Fund. Management of
CVIT does not believe that the CVIT Fund will be able to attract a significant
volume of new or additional investment in order to reach satisfactory economies
of scale.
As a result, CVIT management explored alternatives for the CVIT Fund,
including sales and marketing initiatives, continuation of the Fund's current
operations, liquidation of the Fund and combinations with other mutual funds.
Management and the CVIT Board of Trustees determined to consider possible
combinations with other mutual funds with similar objectives, strategies and
commitments to core Catholic values.
The Board of Trustees of CVIT discussed and considered a possible
transaction between the CVIT Fund and Catholic Equity Fund at meetings held on
September 19 and December 19, 2002. The Board formally approved the
Reorganization and the Agreement on March 13, 2003, subject to CVIT Fund
shareholder approval.
The CVIT Board believes the Reorganization offers the following benefits to
the CVIT Fund shareholders:
o The reputation, substantial experience and commitment of CFSC and
Catholic Knights in marketing a broad range of financial products
to American Catholics;
o A continuation of the shareholders' investment in a fund that
seeks capital appreciation and dividend income through
investments in stocks of well-established companies;
o The ability to invest in a fund that strives to promote core
Catholic values, namely, the principle that human life deserves
protection from the moment of conception and that every person is
entitled to be treated with dignity and justice;
o The annual operating expenses of the Catholic Equity Fund are
significantly lower than those of the CVIT Fund after fee waivers
and expense reimbursements;
o Potential lower annual fund operating expenses, greater buying
power and other economies of scale associated with a larger
combined fund;
o The Catholic Equity Fund offers Class C and Class I shares which
are similar in their transaction fee and operating expense
structures, and in addition offers Class A shares which have a
front-end sales load and lower annual operating expenses than the
Class C shares; and
o Alternatives to the Reorganization, such as a taxable liquidation
of the CVIT Fund or continuation of the CVIT Fund without expense
subsidization from Wright, are less desirable than the
Reorganization, which would be tax-free to the CVIT Fund
shareholders.
For these and other reasons, the Board of Trustees of CVIT, including the
trustees who are not "interested persons" of CVIT (as that term is defined in
the 1940 Act), has concluded that the Reorganization is in the best interests of
the shareholders of the CVIT Fund.
THE BOARD OF TRUSTEES OF CVIT UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF
THE CVIT FUND VOTE FOR APPROVAL OF THE AGREEMENT AND THE REORGANIZATION.
The Board of Directors of The Catholic Funds also approved the Reor-
ganization. The Catholic Funds Board believes the Reorganization, which will
increase the current size of the Catholic Equity Fund, will present the
opportunity for economies of scale that in turn may lower annual fund operating
expenses.
FEDERAL TAX CONSEQUENCES
A condition to completion of the Reorganization is the receipt of a legal
opinion that the Reorganization will constitute a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, no gain or loss will be recognized for federal
income tax purposes by the shareholders of the CVIT Fund or by the CVIT Fund or
the Catholic Equity Fund as a result of the Reorganization.
COMPARISON OF THE FUNDS
Below is a brief comparison of the principal features of the Catholic
Equity Fund and the CVIT Fund. For more detailed information about the Catholic
Equity Fund, please refer to the Catholic Equity Fund Prospectus which
accompanies this Proxy Statement/Prospectus. For more detailed information
about the CVIT Fund, please refer to the CVIT Fund Prospectus which was
previously delivered to you.
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
Although the Catholic Equity Fund and the CVIT Fund both generally seek
capital appreciation and dividend income by investing in stocks of well-
established companies in a manner consistent with core Catholic values, there
are some important differences between the two Funds' objectives and strategies.
Catholic Equity Fund. The Catholic Equity Fund specifically seeks to
--------------------
obtain a total return from dividends and capital gains which is equal to
the total return of the S&P 500 Index, less the Fund's operating expenses. The
Fund attempts to achieve its objective by investing in a portfolio of common
stocks that approximately parallels the composition of the S&P 500 Index, except
that the Fund will not invest in companies that directly participate in
abortion. The Catholic Equity Fund is thus passively managed.
CVIT Fund. The CVIT Fund, on the other hand, seeks long-term growth of
---------
capital and reasonable current income from investments consistent with the
core values of the Catholic Church. Reasonable income means the income that can
be achieved from an equity portfolio. The CVIT Fund normally invests at least
80% of its net assets in the equity securities of well-established companies,
which are included on the quality-oriented Approved Wright Investment List. Up
to 30% of the Fund's investments may be in foreign securities or American
Depository Receipts. Wright uses bottom-up fundamental analysis to determine
which companies in its Worldscope(R) database meet or exceed standards of in-
vestment quality.
Catholic Values. Both Funds screen investments in companies to determine
---------------
whether they engage in activities that are inconsistent with certain
Catholic values, yet there are some differences in how the screens operate.
The Catholic Equity Fund strives to invest its assets in a manner that
promotes two specific core Catholic values which the Board of Directors of The
Catholic Funds has selected from among many core Catholic values: namely, the
principles that human life deserves protection from the moment of conception and
that every person is entitled to be treated with dignity and justice because
every human being is created in the image and likeness of God. The Catholic
Equity Fund will avoid investing in companies that, through the manufacture of
their products or the provision of their services, directly participate in
abortion. If the Catholic Equity Fund invests in a company whose employment and
other business practices are substantially inconsistent with the dignity and
primacy of the human person, CFSC will engage in advocacy activities designed to
influence the company's practices to better reflect and promote the dignity of
the human person. The Catholic Funds' Board of Directors may from time to time
select different or additional core Catholic values to implement in the
investment program of the Catholic Equity Fund. Following guidelines
established by the Board, CFSC is responsible for screening investments in
companies that directly participate in abortion and for initiating advocacy
activities with respect to companies whose business practices are inconsistent
with the dignity of the human person. CFSC's decisions are subject to the
oversight of a Catholic Screen Committee appointed by the Board.
The CVIT Fund's investments are reviewed by a Catholic Advisory Board which
is comprised of lay members familiar with the basic tenets and core teaching of
the Roman Catholic Church. The Catholic Advisory Board identifies companies
whose products, services and/or activities are substantially consistent with the
core Catholic Church teachings, based on the best publicly available
information. Those core Catholic teachings include but are not limited to the
sanctity of human life. The Catholic Advisory Board has sole discretion in
determining which companies meet the religious criteria.
For more information on the investment objectives, principal strategies and
securities selection process of the Funds, please review the Catholic Equity
Fund Prospectus and the CVIT Fund Prospectus.
RISK FACTORS
The primary risks of both the Catholic Equity Fund and the CVIT Fund
include market risk, objective risk and Catholic values risk. The investment
practices of the Catholic Equity Fund described above may result in risks which
are different from those currently associated with the investment practices of
the CVIT Fund. See "Risk Factors" starting on page 15.
SIZE OF FUNDS; BACKGROUND
At December 31, 2002, the Catholic Equity Fund had an aggregate net asset
value of $15.1 million, compared to $6.5 million for the CVIT Fund.
The Catholic Equity Fund commenced operations on April 2, 2002 with the
consideration of three other equity funds designated a series of The Catholic
Funds: Catholic Disciplined Capital Appreciation Fund, Catholic Large-Cap Growth
Fund, and Catholic Equity Income Fund. The Catholic Disciplined Capital
Appreciation Fund was deemed the surviving fund for purposes of financial
accounting and historical performance. The Catholic Equity Fund offers Class A,
Class C and Class I (institutional) shares.
The CVIT Fund commenced operations on May 1, 1997 and offers Individual
Shares and Institutional Service Shares.
EXPENSES
The following table sets forth the fees and expenses that you may pay if
you buy and hold shares of the Funds, including pro forma fees and expenses for
the Catholic Equity Fund estimated by management (giving effect to the
Reorganization), for the fiscal year ended December 31, 2002.
CATHOLIC PRO FORMA
EQUITY FUND CVIT FUND COMBINED FUND
----------- --------- -------------
(For the Fiscal Year (For the Fiscal Year
Ended September 30, 2002) Ended December 31, 2002)
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INDIVIDUAL INSTITUTIONAL
CLASS C CLASS I SHARES SERVICE SHARES CLASS C CLASS I
------- ------- ------ -------------- ------- -------
Maximum Sales Charge (Load) None None None None None None
Imposed on Purchases (as a
percentage of offering price)
Maximum Sales Charge (Load) None None None None None
Imposed on Reinvested None
Dividends/ Distributions
Maximum Deferred Sales Charge 1.00%(1) None 1.00%(1) None 1.00%(1) None
(Load) <F1> <F1> <F1>
Redemption Fee None(2) None(2) None None None(2) None(2)
<F2> <F2> <F2> <F2>
Exchange Fee None(3) None(3) None None None None
<F3> <F3>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FORM FUND ASSETS)
INDIVIDUAL INSTITUTIONAL
CLASS C CLASS I SHARES SERVICE SHARES CLASS C CLASS I
------- ------- ------ -------------- ------- -------
Management Fees 0.50% 0.50% 0.75% 0.75% 0.50% 0.50%
Distribution (12b-1) Fees 0.75% None 0.75% 0.25% 0.75% None
Other Expenses 2.46%(4) 2.05%(4) 2.60% 2.10% 1.23%(4) 1.23%(4)
<F4> <F4> <F4> <F4>
Total Annual Fund Operating 3.71% 2.55% 4.10% 3.10% 2.48% 1.73%
Expenses
Less: Fee Waivers and Expense (2.51)%(5) (1.85)%(5) (2.11)%(6) (1.60)%(6) (1.28)%(5) (1.03)%(5)
Reimbursement <F5> <F5> <F6> <F6> <F5> <F5>
----- ----- ----- ----- ----- -----
Total Net Annual Fund 1.20% 0.70% 1.99% 1.50% 1.20% 0.70%
Operating Expenses
(1)<F1> The contingent deferral sales charge applicable to redemption of
Class C shares of the Catholic Equity Fund and Individual Shares of the
CVIT Fund terminates one year after the shares are purchased. The
Catholic Equity Fund will credit holders of Individual Shares of the
CVIT Fund with the period of time they owned such shares in determining
the contingent deferral sales charge applicable to the subsequent
redemption of Class C shares of the Catholic Equity Fund they receive
in the Reorganization.
(2)<F2> The Catholic Equity Fund charges $15.00 for each wire redemption.
(3)<F3> The Catholic Equity Fund charges $5.00 for each telephonic exchange.
(4)<F4> "Other Expenses" for the Catholic Equity Fund are based on management
estimates for the current fiscal year ending September 30, 2003.
(5)<F5> CFSC has contractually committed for a period of one year after the
Reorganization, to reimburse the Catholic Equity Fund to the extent the
Fund's total annual operating expenses (as a percentage of average
daily net assets) exceed 1.20% for Class C shares and 0.70% for Class I
shares.
(6)<F6> Under a written agreement, Wright waives a portion of its advisory fee
and assumes operating expenses to the extent necessary to limit the
CVIT Fund's expense ratios to 1.99% for Individual Shares and 1.50% for
Institutional Service Shares.
EXAMPLE
The following Example is intended to help you compare the cost of investing
in the Funds (and investing in the combined Fund on a pro forma basis, giving
effect to the Reorganization) with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those time periods.
The Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same (with applicable fee waivers and
expense reimbursements for the Funds in effect for one year). Although your ac-
tual costs may be higher or lower, based on these assumptions, your costs would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
CATHOLIC EQUITY FUND:
Class C $222 $902 $1,703 $3,796
Class I $ 72 $617 $1,189 $2,746
CVIT FUND:
Individual Shares $302 $624 $1,073 $2,317
Institutional Service $153 $474 $ 818 $1,791
Shares
PRO FORMA COMBINED FUND:
Class C $222 $650 $1,205 $2,719
Class I $ 72 $444 $842 $1,955
COMPENSATION OF CLASSES OF SHARES
Catholic Equity Fund. The Catholic Equity Fund offers three classes of
---------------------
shares - Class A, Class C and Class I. Only Class C and Class I shares will be
issued in the Reorganization.
Class A shares, which are available to retail investors only through
brokers, have a 4% maximum front-end sales load and a 0.25% distribution (or
12b-1 fee). The minimum initial investment amount is $1,000 and $50 for
additional purchases.
Class C shares, which are available to retail investors who purchase
directly without the assistance of a broker or who pay a separate fee to a
broker, have a 1% contingent deferred sales charge on redemptions (which is
eliminated after the shares have been held for at least one year) and a 0.75%
12b-1 fee. The minimum initial investment amount is $1,000 and $50 for
additional purchases. Class C shares will be issued in the Reorganization to
the holders of Individual Shares of the CVIT Fund.
Class I shares available to institutional investors, including
corporations, partnerships, limited liability companies, business associations,
trusts, endowment funds, churches, parishes, fraternal benefit societies or
other religious or fraternal organizations or associations and other legal
entities that are not alter egos of natural persons, provided that the investor
was not formed for the specific purpose of investing in the Catholic Equity
Fund. Class I shares have no front-end sales charge, contingent deferred sales
charge or 12b-1 fee. The minimum initial purchase amount is $10,000 and $1,000
for additional purchases. Class I shares will be issued in the Reorganization
to the holders of Institutional Service Shares of the CVIT Fund.
CVIT Fund. The CVIT Fund offers two classes of shares - Individual Shares
---------
and Institutional Service Shares. Individual Shares have a 1% contingent
deferred sales charge on redemptions (which is eliminated after the shares have
been held for at least one year) and a 0.75% 12b-1 fee and can charge an
additional 0.25% service fee. The minimum initial investment amount is $1,000
with no minimum for additional purchases.
Institutional Service Shares have no front-end sales charge or contingent
deferred sales charge, but have a 0.25% 12b-1 fee. The minimum initial
investment amount is $250,000 with no minimum for additional purchases.
DIVIDENDS AND DISTRIBUTIONS
The Catholic Equity Fund distributes net investment income annually and net
realized long- or short-term capital gains at least annually.
The CVIT Fund distributes net investment income at least semi-annually and
net realized capital gains annually (normally in December).
Each Fund automatically receives dividends and distributions in additional
Fund shares unless shareholders request that they be paid in cash.
TAXATION
A sale or exchange of shares of either Fund generally is a taxable event
and may result in a capital gain or loss.
Distributions, whether received in cash or additional Fund shares, are
subject to federal income tax. Income dividends are taxed as ordinary income.
Capital gains distributions are taxable at different rates depending on the
length of time a Fund held the assets that were sold.
ORGANIZATION AND MANAGEMENT
Catholic Equity Fund
- --------------------
The Catholic Equity Fund is a mutual fund series of The Catholic Funds,
Inc., a Maryland corporation organized in 1998 and registered as an open-end,
management investment company. The Catholic Equity Fund commenced operations on
April 2, 2002, as a result of the consolidation of three equity fund series of
The Catholic Funds. The Catholic Funds currently consists of two series,
namely, the Catholic Equity Fund and the Catholic Money Market Fund.
Catholic Financial Services Corporation, 1100 West Wells Street, Milwaukee,
Wisconsin 53233, serves as the investment adviser to the Catholic Equity Fund
and distributor of its shares. CFSC receives an annual advisory fee of 0.50% of
the Fund's average daily net assets. CFSC is a Wisconsin corporation organized
in 1994. The majority of its stock is held by Catholic Knights Financial
Services, which is a wholly-owned subsidiary of Catholic Knights, a non-profit
fraternal benefit society. The balance of the stock of CFSC is owed by Catholic
Order of Foresters, Catholic Knights of America and Catholic Union of Texas, The
KJT. These four owners of CFSC are referred to as the Catholic Fraternal
Alliance.
The Catholic Fraternal Alliance provides whole and universal life
insurance, term insurance and a variety of fixed-return annuity products to
individual Catholics in more than 30 states. As a group, the Catholic Fraternal
Alliance ranks in the top 15% of life insurers in the United States in terms of
life insurance in force and total assets, with more than $5 billion of life
insurance in force and more than $1 billion of total assets under management.
The Catholic Fraternal Alliance has more than 230,000 members who belong to one
of more than 750 lodges throughout the country. The Catholic Fraternal Alliance
provides $8.5 million in charitable and benevolent funding, as well as related
services to its members, their Catholic parishes and communities.
Mellon Equity Associates, LLP ("Mellon"), 500 Grand Street, Suite 4200,
Pittsburgh, Pennsylvania 15258, serves as sub-adviser to the Catholic Equity
Fund. Mellon is an independently run, wholly-owned subsidiary of Mellon
Financial Corporation. The firm became a separate legal entity from the equity
management group of The Mellon Bank trust department in 1987. Mellon manages
nearly $23 billion in assets for approximately 140 clients. CFSC pays Mellon a
sub-advisory fee of 0.12% on the first $50 million of the Catholic Equity Fund's
average daily net assets and 0.06% of the Fund's average daily net assets in
excess of $50 million.
CVIT Fund
- ---------
The CVIT Fund is a mutual fund series of CVIT, a Massachusetts business
trust organized in 1996 and registered as an open-end, management investment
company. The CVIT Fund commenced operations on May 1, 1997, CVIT currently
consists of one series, namely, the CVIT Fund.
Wright Investors' Service, Inc., 440 Wheelers Farms Road, Milford,
Connecticut 06460, serves as the investment adviser to the CVIT Fund. Wright
Investors' Service Distributors, Inc. is distributor of shares of the CVIT Fund.
Both Wright and WISDI are owned by The Winthrop Corporation. Wright receives an
annual advisory fee of 0.75% of the CVIT Fund's average daily net assets.
Wright manages approximately $3 billion of assets in portfolios of all sizes and
styles as well as a family of mutual funds.
PORTFOLIO MANAGEMENT
Catholic Equity Fund
- --------------------
The investment portfolio of Catholic Equity Fund is managed by Thomas J.
Durante, an employee of Mellon. Mr. Durante specializes in the management of
indexed and enhanced-indexed equity portfolios for Mellon. Before joining
Mellon in 2000, Mr. Durante was a controller of funds at Dreyfus Corporation for
over 18 years. Mr. Durante earned a Bachelor of Science degree in accounting
from Fairfield University.
CVIT Fund
- ---------
An investment committee of senior officers of Wright controls the
investment selections, policies and procedures of the CVIT Fund. These officers
are all experienced analysts with different areas of expertise and more than 95
years of combined service with Wright. Recommendations of Wright are reviewed by
an independent Catholic Advisory Board who vetoes recommended companies that
offer a product or service or engage in a practice that is contrary to the
teaching of the Roman Catholic Church.
OTHER SERVICE PROVIDERS TO THE FUNDS
Catholic Equity Fund
- --------------------
U.S. Bancorp Fund Services, LLP, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, serves as transfer agent for the Catholic Equity Fund. U.S.
Bank, N.A., 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, serves as
custodian of the portfolio securities and cash held by The Catholic Fund.
PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, is the independent auditor for the Catholic Equity Fund.
CVIT Fund
- ---------
Forum Shareholder Services, LLC, Two Portland Square, Portland, Maine
04101, is the transfer agent for the CVIT Fund. IBT, 200 Clarendon Street,
Boston, Massachusetts 02116, serves as custodian of portfolio securities and
cash held by CVIT Fund. Eaton Vance is administrator for the Fund. Deloitte &
Touche LLP, 220 Berkeley Street, Boston, Massachusetts 02116 is independent
accountant for the CVIT Fund.
RISK FACTORS
In evaluating whether to approve the Agreement and invest in the Catholic
Equity Fund, shareholders should carefully consider the following summary of
risk factors relating to both the Catholic Equity Fund and the CVIT Fund, in
addition to the other information set forth in this Proxy Statement/Prospectus.
A complete description of risk factors for each Fund is set forth in the
prospectuses of the Funds and their respective statements of additional
information. The risks associated with investing in the Catholic Equity Fund
are similar to the risks associated with investing in the CVIT Fund in that both
Funds primarily invest in stocks of well-established companies and avoid
companies whose business activities are inconsistent with core Catholic values,
although there are some key differences in the risks associated with the two
Funds.
MARKET RISK
Both the CVIT Fund and the Catholic Equity Fund are subject to market risk,
which is the risk that stocks generally will rise and fall over short and even
extended periods. Equity markets tend to move in cycles. A Fund's net asset
value (and share price) will likely fluctuate with these price changes and
market fluctuation.
OBJECTIVE RISK
Both Funds are subject to objective risk, which is the risk that the
individual stocks in a Fund's portfolio may not perform in a manner that is
consistent with the stock markets generally. Accordingly, factors may
particularly affect the stocks held by a Fund and thus the Fund's net asset
value, although the markets may not be so affected. Both Funds invest in "blue
chip" and other well-established companies and there may be times when such
larger capitalization stocks underperform the overall stock market.
The CVIT Fund is subject to management risk, which is the risk that the
strategies and stocks selected for investment by the CVIT Fund may not produce
the expected or desired results. In other words, the CVIT Fund may pick the
wrong stocks from time to time. The Catholic Equity Fund is passively managed
in that it seeks to replicate the composition of the S&P 500 Index and thus is
not subject to management risk, although its performance will generally
correlate with that of the S&P 500.
INDEX CORRELATION RISK
Because the Catholic Equity Fund will not invest in companies that
participate directly in abortion, the composition of the Fund's investment
portfolio will not precisely replicate that of the S&P 500 Index at all times.
Also, unlike the S&P 500 Index, the Catholic Equity Fund incurs transaction
costs and operating expenses, which will reduce the total return of the Fund as
compared to that of the S&P 500 Index.
CATHOLIC VALUES RISK
Both Funds strive to avoid investing in companies that engage in activities
that are inconsistent with core Catholic values. This religious screen may mean
that a Fund may not own securities of certain companies even though without the
screen the Fund may find the investment attractive. The religious screen may
also mean that the Catholic Equity Fund's holdings may not precisely replicate
the S&P 500 Index. Moreover, a Fund may be required to dispose of securities in
its portfolio at a disadvantageous time, causing a loss to the Fund or otherwise
adverse tax consequences.
PERFORMANCE OF THE CATHOLIC EQUITY FUND
Information about the performance of the Catholic Equity Fund, including
management's discussion of its performance, for the year ended September 30,
2002 is contained in the Catholic Equity Fund Annual Report which accompanies
this Proxy Statement/ Prospectus.
FURTHER INFORMATION ABOUT THE FUNDS
For more information about the Catholic Equity Fund, including information
on its investment objectives, principal strategies and risks, expenses,
management, purchase, redemption and exchange procedures, and shareholder
services, please read the Catholic Equity Fund Prospectus which is incorporated
by reference into and accompanies this Proxy Statement/Prospectus.
For similar information about the CVIT Fund, please read the CVIT Pro-
spectus, which is incorporated by reference into this Proxy
Statement/Prospectus. The CVIT Fund Prospectus was previously delivered to you
and is available upon request without change by calling CVIT at 1-888-974-4486.
APPROVAL OF THE AGREEMENT AND REORGANIZATION
The Board of Trustees of CVIT unanimously recommends that the shareholders
of the CVIT Fund vote to approve the Agreement and Plan of Reorganization con-
templated thereby. The Board of Trustees approved the Agreement based on its
belief that the Agreement is in the best interests of the shareholders of the
CVIT Fund.
DESCRIPTION OF THE AGREEMENT
The terms and conditions of the proposed Reorganization are set forth in
the Agreement. Significant provisions of the Agreement are summarized below;
however, this summary is qualified in its entirety by reference to the
Agreement, a copy of which is attached as Appendix A to this Proxy
----------
Statement/Prospectus.
The Agreement contemplates the transfer of substantially all of the assets
and ordinary operating liabilities of the CVIT Fund to the Catholic Equity Fund
in exchange solely for shares of the Catholic Equity Fund, and the pro rata
distribution of such shares of the Catholic Equity Fund to the shareholders of
the CVIT Fund. If approved by the shareholders of the CVIT Fund, the
Reorganization would occur as of the close of business on April 30, 2003 (the
"Closing Date") or such other date as the parties may determine.
Under the Agreement, the Catholic Equity Fund would acquire substantially
all of the property, rights and assets of the CVIT Fund, including without
limitation all portfolio securities, cash, cash equivalents, and dividend and
interest receivables owned by the CVIT Fund. The Catholic Equity Fund would
also assume the liabilities of the CVIT Fund that are reflected in the
computation of its net asset value and other ordinary operating liabilities of
the CVIT Fund, but only such liabilities, and discharge them when and as they
are due or otherwise in accordance with their terms. After the Closing Date,
the CVIT Fund will liquidate and cease to be a designated series of CVIT.
In consideration for the assets and liabilities of the CVIT Fund
transferred in the Reorganization, the Catholic Equity Fund would issue to the
CVIT Fund Class C and Class I shares of the Catholic Equity Fund having an
aggregate net asset value equal to the value of the assets, less the
liabilities, so transferred by the CVIT Fund. The assets of the CVIT Fund and
the per share net asset value of the Catholic Equity Fund shares would be valued
as of the close of trading on the New York Stock Exchange on the Closing Date.
All such valuations would be conducted in accordance with the policies and
procedures of the Catholic Equity Fund as described in the accompanying Catholic
Equity Fund Prospectus, or in the Catholic Equity Fund SAI.
As of the close of business on the Closing Date, the CVIT Fund would
distribute pro rata to its shareholders of record the shares of the Catholic
Equity Fund received by the CVIT Fund. Such distribution would be accomplished
by opening accounts on the books of the Catholic Equity Fund in the names of
shareholders of the CVIT Fund and by transferring the shares credited to the
account of the CVIT Fund on the books of the Catholic Equity Fund. Each account
opened would represent the respective pro rata number and class of Catholic
Equity Fund shares due to each CVIT Fund shareholder. Fractional shares of the
Catholic Equity Fund would be rounded to the nearest thousandth of a share.
Holders of Individual Shares of the CVIT Fund would receive Class C shares of
the Catholic Equity Fund, and holders of Institutional Service Shares of the
CVIT Fund would receive Class I shares of the Catholic Equity Fund. The
class(es) of shares of the Catholic Equity Fund to be received by each
shareholder would therefore correspond to the class(es) of shares of the CVIT
Fund held by such shareholder, such that each shareholder would receive, for
each share of CVIT Fund owned by such shareholder, the number of shares of the
corresponding Catholic Equity Fund class that equals the net asset value of the
shareholder's CVIT Fund shares immediately prior to the Reorganization.
Accordingly, every shareholder of the CVIT Fund would own shares of the
Catholic Equity Fund immediately after the Reorganization that correspond with
the class(es) of CVIT Fund shares held previously and that have an aggregate net
asset value equal to the aggregate net asset value of such shareholder's CVIT
Fund shares immediately prior to the Reorganization. Moreover, because the
Catholic Equity Fund shares would be issued at net asset value in exchange for
the net assets of the CVIT Fund, and the aggregate net value of those assets
would equal the aggregate value of the Catholic Equity Fund shares issued in
exchange therefor, the net asset value per share of the Catholic Equity Fund
would not change as a result of the Reorganization. Thus, the Reorganization
would not result in economic dilution to any CVIT Fund or Catholic Equity Fund
shareholder.
On or prior to the Closing Date, the CVIT Fund would declare and pay a
dividend to its shareholders of record so that, for the short taxable year that
ends on the Closing Date, it would have declared an aggregate amount of
dividends that: (a) is equal to at least the sum of its respective net capital
gain and 90% of its investment company taxable income for such year, and (b) is
sufficient to avoid any excise tax for the calendar year in which the Closing
Date occurs.
INELIGIBLE SECURITIES
Certain of the securities held by the CVIT Fund may be ineligible for
investment by the Catholic Equity Fund. Such securities include any stocks of
companies that are not included in the S&P 500 Index. Following approval of the
Agreement by the CVIT Fund shareholders and until the Closing, Wright will use
its reasonable best efforts to sell such securities. As promptly as practicable
following the Closing, the Catholic Equity Fund will sell all securities
transferred to it by the CVIT Fund that the Catholic Equity Fund cannot hold
consistent with its investment objective and program. In addition, the Catholic
Equity Fund promptly will purchase or sell stocks of companies on the S&P 500
Index in order to maintain the Fund's approximate correlation to the Index.
OTHER TERMS
CVIT (on behalf of the CVIT Fund) and The Catholic Funds (on behalf of the
Catholic Equity Fund) have each made representations and warranties in the
Agreement that are customary in a transaction such as the Reorganization. Such
representations and warranties do not survive the Closing Date and CVIT Fund
shareholders would not be liable for breaches thereof.
The completion of the Reorganization is subject to certain conditions set
forth in the Agreement, including the following:
(a) The Reorganization must have been approved by the CVIT Fund
shareholders;
(b) CVIT and The Catholic Funds must have received a legal opinion
from Quarles & Brady LLP that the Reorganization will not result
in recognition of gain or loss for federal income tax purposes by
the CVIT Fund shareholders, the CVIT Fund or the Catholic Equity
Fund;
(c) The Registration Statement on Form N-14 (the "Registration State-
ment") must have become effective under the Securities Act of
1933, no stop order suspending the effectiveness thereof shall
have been issued with respect thereto, and to the knowledge of
the parties to the Agreement, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened
or contemplated under the Securities Act; and
(d) The transactions described in the related agreement between
Wright, as the investment adviser of the CVIT Fund, and CFSC, as
the investment adviser of the Catholic Equity Fund, must be
consummated concurrently with the closing of the transactions
described in the Reorganization Agreement.
One of the provisions of the agreement between CFSC and Wright is that CFSC
may terminate that agreement if cumulative net redemptions of the CVIT Fund from
and after March 13, 2003 (the date of that agreement) exceed $2.0 million.
Accordingly, if cumulative net redemptions should exceed that threshold, CFSC
may terminate its agreement with Wright, which in turn would result in a
termination of the Reorganization Agreement and the Reorganization would not
occur.
Notwithstanding approval of the CVIT Fund's shareholders, the
Reorganization may be terminated at any time prior to the Closing Date:
(a) By mutual written consent of the parties;
(b) By either party if the closing shall not have occurred by
June 25, 2003;
(c) By either party upon a misrepresentation, breach of warranty or
failure to perform any agreement or covenant by the other party
in any of its representations, warranties, agreements or
covenants set forth in the Agreement; or
(d) By the Board of Directors of The Catholic Funds or by the Board
of Trustees of CVIT if circumstances should develop that, in the
good faith opinion of such Board, make proceeding with the
consummation of the transactions described in the Agreement not
in the best interests of the shareholders of the Catholic Equity
Fund or of the CVIT Fund, respectively.
Neither the CVIT Fund nor the Catholic Equity Fund will be required to pay
any costs, fees, and expenses incurred in connection with the Agreement and the
transactions contemplated thereby ("Reorganization Costs"), such as legal fees,
accounting fees and costs of printing and mailing this Proxy
Statement/Prospectus and related proxy materials, soliciting the approval of the
CVIT Fund shareholders and conducting the Meeting. The Reorganization Costs
will be paid by CFSC and Wright. See "Agreement Between Advisers" below.
AGREEMENT BETWEEN ADVISERS
Wright and CFSC have entered into a purchase agreement (the "Purchase
Agreement") under which Wright will convey to CFSC the books and records and
other assets directly relating to, and used in connection with, the investment
advisory services Wright performs on behalf of the CVIT Fund. In addition,
Wright will provide to CFSC assistance and cooperation in connection with the
Reorganization, including using its commercially reasonable efforts to obtain
shareholder approval to the Reorganization, and will notify CFSC promptly in the
event that it becomes reasonably likely that the Reorganization will not be
approved or otherwise will not proceed.
The Purchase Agreement contains a covenant whereby Wright agrees that, for
a period of three years following the completion of the Reorganization, it will
not, either directly or indirectly, anywhere in the United States: (a) sponsor,
manage, advise, sub-advise or distribute a registered open-end or closed-end
investment company that has an investment objective or strategy of investing any
substantial portion of its assets in securities of companies that are screened
or reviewed to determine whether their products, services or activities are
consistent with certain or all of the core values taught by the Catholic Church;
or (b) sponsor or distribute a private investment fund or other pooled
investment vehicle which is excluded from the definition of an investment
company under provisions of the Investment Company Act of 1940 and has such an
investment objective or strategy.
Wright also agrees in the Purchase Agreement to not, for a period of three
years following the completion of the Reorganization, solicit shareholders of
the CVIT Fund to purchase any investment product that is competitive with shares
of the CVIT Fund. For this purpose such an investment product is considered
competitive only if it is either:
o A registered open-end or closed-end investment company sponsored,
managed, advised, sub-advised or distributed by Wright that has
an investment objective or strategy of investing any substantial
amount of its assets in securities of companies that are screened
or reviewed to determine whether their products, services or
activities are consistent with certain or all of the core values
taught by the Catholic Church; or
o A private investment fund or other pooled investment vehicle
sponsored or distributed by Wright which is excluded from the
definition of an investment company under provisions of the
Investment Company Act of 1940 and has such an investment
objective or strategy.
These covenants do not prohibit Wright or its affiliates from providing
investment advisory, sub-advisory and management services to any person or
entity that is a client of Wright or one of its affiliates at the time when the
Reorganization is completed, in addition to being a shareholder of the CVIT
Fund, provided such services are otherwise consistent with Wright's covenant not
to compete, as described in the preceding paragraph.
In consideration of all of the foregoing, CFSC will pay Wright an amount in
cash equal to $2,500 times the number of months (or portions thereof) that
elapse from January 1, 2003 to the completion of the Reorganization. However,
if, during that period, Wright discontinues or modifies its current fee waiver
and expense reimbursement practices with respect to the CVIT Fund, then CFSC's
payment obligation will be calculated from January 1, 2003 up to the date on
which Wright ceases or modifies its fee waiver and expense reimbursement
practices.
CFSC and Wright have agreed to pay all of the Reorganization costs as well
as the legal fees and other costs associated with the Purchase Agreement between
CFSC and Wright (collectively, the "Transaction Costs") as follows: CFSC will
pay the first $25,000 of aggregate Transaction Costs; CFSC and Wright will each
pay 50% of aggregate Transaction Costs up to the next $65,000 of aggregate
Transaction Costs; and any aggregate Transaction Costs in excess of $90,000 will
be paid by CFSC. For purposes hereof, a maximum of $15,000 in legal fees
incurred by Wright or CVIT will be considered in the calculation of Transaction
Costs. Any such legal fees in excess of $15,000 will be paid by Wright.
BACKGROUND TO THE REORGANIZATION
Although it has been in operation for more than five years, the CVIT Fund
has not experienced satisfactory growth. At December 31, 2002, the CVIT Fund's
aggregate net assets were $6.5 million. Moreover, the CVIT Fund has declined in
size significantly after averaging $29 million in total net assets in 2000.
During the existence of the CVIT Fund, Wright has waived fees and/or paid other
expenses of the Fund in an amount of $357,844 and $367,843 respectively in an
attempt to keep the Fund's expense ratios at reasonable levels. There is no
assurance that Wright will continue to subsidize the CVIT Fund. Management of
CVIT does not believe that the CVIT Fund will be able to attract a significant
volume of new or additional investment in order to reach satisfactory economies
of scale.
As a result, CVIT management explored alternatives for the CVIT Fund,
including sales and marketing initiatives, continuation of the Fund's current
operations, liquidation of the Fund and combinations with other mutual funds.
Management and the CVIT Board of Trustees determined to consider possible
combinations with other mutual funds with similar objectives, strategies and
commitments to core Catholic values.
The CVIT Board of Trustees specifically discussed the possibility of a
transaction between the CVIT Fund and the Catholic Equity Fund on December 19,
2002, and considered and unanimously approved the Agreement and the
Reorganization on March 13, 2003. Prior to that meeting, the CVIT Board
reviewed materials about The Catholic Funds, CFSC, the Catholic Equity Fund and
the Reorganization, as well as drafts of the Agreement and this Proxy
Statement/Prospectus. At the meeting, the CVIT Board reviewed and discussed the
information they had received, asked questions of management about the terms of
the Reorganization and its benefits to the CVIT Fund shareholders, consulted
with legal counsel, and considered alternatives.
The Catholic Funds Board of Directors considered and approved the Agreement
and the Reorganization at a meeting held on January 28, 2003. The Catholic
Funds Board determined that the Reorganization was in the best interests of the
Catholic Equity Fund shareholders. The Reorganization will present the
opportunity for lower operating expenses and other economies of scale and
increase the Catholic Equity Fund's profile among Catholic investors.
REASONS FOR THE PROPOSED REORGANIZATION
The Board of Trustees of CVIT has unanimously determined that the Reorgani-
zation is in the best interests of the shareholders of the CVIT Fund. In
reaching such conclusion, the CVIT Board considered the following factors:
(1) The fact that both Funds generally seek capital appreciation and
dividend income by investing in stocks of well-established
companies;
(2) The reputation, experience and commitment of CFSC and Catholic
Knights to offer mutual funds that promote Catholic values;
(3) The distribution capabilities of CFSC and its anticipated ability
to increase the size of the Catholic Equity Fund following the
Reorganization through new sales of shares;
(4) The management fees and annual operating expenses of each Fund,
including the facts that the management fees and the annual
operating expenses of the Catholic Equity Fund are less than
those of the CVIT Fund, particularly so after fee waivers and
expense reimbursements;
(5) The commitment of CFSC to waive its fees and/or reimburse fund
expenses for a period of one year following the Reorganization so
that the Catholic Equity Fund's annual operating expenses do not
exceed 1.20% for Class C shares and 0.70% for Class I shares;
(6) The terms of the Agreement, including the structure of the
Reorganization to be tax-free to the CVIT Fund shareholders and
the fact that no sales charge will be imposed on the Catholic
Equity Fund shares issued, or the CVIT Fund shares surrendered,
in the Reorganization;
(7) The similarity in sales load and fee structures between Class C
shares and Class I shares of the Catholic Equity Fund compared to
the Individual Shares and Institutional Service Shares of the
CVIT Fund;
(8) The Catholic Funds' commitment to credit the CVIT Fund sharehold-
ers with the period of time in which they held Individual Shares
of the CVIT Fund for purposes of determining the applicability of
the contingent deferred sales load on their subsequent redemption
of the Class C shares of the Catholic Equity Fund they receive in
the Reorganization;
(9) The potential benefits and detriments to the CVIT Fund sharehold-
ers, and viability, of alternatives to the Reorganization, in-
cluding liquidation of the CVIT Fund, a sale to another
comparable mutual fund or continuing to offer the CVIT Fund
without expense subsidization from Wright.
The unanimous decision by the CVIT Board of Trustees to approve the
Agreement and recommend that the shareholders of the CVIT Fund vote in favor of
the Reorganization was made primarily because the Reorganization would be a
means of combining the CVIT Fund with a fund that, like the CVIT Fund, generally
seeks capital appreciation and dividend income by investing in stocks of well-
established companies and that applies a screen so that its investments are
consistent with core Catholic values. Also, the Catholic Equity Fund's annual
operating expenses are considerably lower than those of the CVIT Fund, and the
combination of the two Funds offer the potential for lower operating expenses in
the future. The Board also concluded that the Reorganization is superior to all
other alternatives reasonably available.
FEDERAL TAX CONSIDERATIONS
The Reorganization is conditional upon receipt by CVIT and The Catholic
Funds of the opinion from Quarles & Brady LLP described below. No rulings have
been requested from the Internal Revenue Service with respect to these matters
and the opinion of Quarles & Brady LLP is not binding on the Internal Revenue
Service or the courts. Additionally, the opinion of Quarles & Brady LLP is
based upon various representations and assumptions described therein.
The opinion is based on the current provisions of the Code, existing
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. No attempt has been made to comment on all
federal income tax consequences of the Reorganization that may be relevant to
particular holders, including holders that are subject to special rule such as
dealers in securities, foreign persons, insurance companies, and tax exempt
entities.
In the opinion of Quarles & Brady LLP, the principal Federal income tax
consequences that will result from the Reorganization, under currently
applicable law, are as follows: (i) the Reorganization will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code, and the CVIT
Fund and the Catholic Equity Fund will each be a "party to" the Reorganization
within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by the CVIT Fund upon the transfer of substantially all of its assets
to the Catholic Equity Fund in exchange solely for shares of the Catholic Equity
Fund [and the assumption by the Catholic Equity Fund of certain of the CVIT
Fund's liabilities]; (iii) no gain or loss will be recognized by the Catholic
Equity Fund upon its receipt of substantially all of the assets of the CVIT Fund
in exchange solely for shares of the Catholic Equity Fund [or upon its
assumption of certain of the CVIT Fund's liabilities]; (iv) no gain or loss will
be recognized by the CVIT Fund or the Catholic Equity Fund on the distribution
to the CVIT Fund shareholders of the shares of the Catholic Equity Fund received
by the CVIT Fund in the Reorganization; (v) no gain or loss will be recognized
by any shareholder of the CVIT Fund upon the liquidation of the CVIT Fund and
the related surrender of their shares of the CVIT Fund in exchange for shares of
the Catholic Equity Fund; (vi) the tax basis of the shares of the Catholic
Equity Fund to be received by a shareholder of the CVIT Fund will be the same as
the tax basis of the shares of the CVIT Fund surrendered in the Reorganization;
(vii) the holding period of the shares of the Catholic Equity Fund to be re-
ceived by a shareholder of the CVIT Fund will include the holding period for
which such shareholder held the shares of the CVIT Fund exchanged therefore,
provided that such shares of the CVIT Fund are a capital asset in the hands of
such shareholder as of the Closing; (viii) the Catholic Equity Fund's basis in
the assets acquired from the CVIT Fund will be the same as the basis of such
assets in the hands of the CVIT Fund immediately prior to the Reorganization;
(ix) the holding period of the assets of the CVIT Fund in the hands of the
Catholic Equity Fund will include the period during which such assets were being
held by the CVIT Fund; and (x) the Catholic Equity Fund will succeed to and take
into account as of the Closing Date the items of the CVIT Fund described in
Section 381(c) of the Code, subject to the conditions and limitations specified
in Sections 381(b) and (c), 382, 383 and 384 of the Code and the applicable
Treasury Regulations thereunder.
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF THE CVIT FUND. CVIT FUND SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE
REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS.
DESCRIPTION OF SECURITIES TO BE ISSUED AND RIGHTS OF SHAREHOLDERS
CATHOLIC EQUITY FUND
The Catholic Equity Fund is a separate, non-diversified series of The
Catholic Funds, a diversified, open-end management investment company organized
as a corporation under the laws of the State of Maryland. The authorized
capital stock of The Catholic Funds consists of one billion shares of common
stock, par value $.001 per share, of which one hundred million shares are
authorized for issuance by the Catholic Equity Fund. Shares of The Catholic
Funds are currently divided into two mutual fund series (the Catholic Equity
Fund and the Catholic Money Market Fund), each with distinct investment
objectives, policies and strategies. Shares of each series are further divided
into classes; which differ by their sales load and 12b-1 fee structure. The
Catholic Equity Fund currently has three classes of shares (Class A, Class C and
Class I shares). The Board of Directors of The Catholic Funds may authorize the
issuance of additional series and, within each series, individual classes, and
may increase or decrease the number of shares in each series or class.
The separate classes of shares within the mutual fund series of The
Catholic Funds have identical dividend, liquidation and other rights. However,
each class bears its separate distribution and shareholder serving expenses and
may have its own sales load structure. At the discretion of the Board, each
class may pay a different share of other expenses (not including advisory or
custodial fees or other expenses related to the management of the fund's assets)
if the separate classes incur those expenses in different amounts or if one
class receives services of a different kind or to a different degree than
another class within each fund. Each fund allocates all other expenses to each
class of its shares on the basis of the net asset value of that class in rela-
tion to the net asset value of the fund.
Shares of the Catholic Equity Fund are redeemable and exchangeable as
described in the Catholic Equity Fund Prospectus and SAI. Shares have no pref-
erence, pre-emptive, subscription or conversion rights.
Each share has one vote (and each fractional share has a corresponding
fractional vote) on each matter presented to shareholders. All shares vote
together on matters that affect all shareholders uniformly, such as the election
of directors. On matters affecting a particular fund (such as approval of
advisory contracts and changes in fundamental investment policies), a separate
vote of the shares of that series is required. On matters that uniquely affect
a particular class of shares, a separate vote by the shareholders of that class
of shares is required.
As a Maryland corporation, The Catholic Funds is not required to hold, and
in the future does not plan to hold, annual shareholder meetings unless required
by law or deemed appropriate by the Board of Trustees. However, special
meetings may be called for purposes such as electing or removing directors,
changing fundamental policies or approving an investment advisory contract.
CVIT FUND
The CVIT Fund is a separate, non-diversified series of CVIT, a diversified,
open-end management investment company organized as a business trust under the
laws of the Commonwealth of Massachusetts. CVIT is authorized to issue an
unlimited number of shares of beneficial interest without par value. Shares of
CVIT are currently divided into one series (i.e., the CVIT Fund), and the CVIT
Fund currently has two classes of shares. The Board of Trustees of CVIT may
amend CVIT's Declaration of Trust to authorize the issuance of additional series
and, within each series, separate classes.
Shares of the CVIT Fund are redeemable and exchangeable as described in the
CVIT Fund Prospectus and SAI. Shares have no preference, pre-emptive,
subscription or conversion rights.
Each share has one vote (and each fractional share has a corresponding
fractional vote) on each matter presented to shareholders. All shares vote
together on matters that affect all shareholders uniformly, such as the election
of directors. On matters affecting a particular fund (such as approval of
advisory contracts and changes in fundamental investment policies), a separate
vote of the shares of that series is required.
As a Massachusetts business trust, CVIT is not required to hold, and in the
future does not plan to hold, annual shareholder meetings unless required by law
or deemed appropriate by the Board of Trustees. However, special meetings may
be called for purposes such as electing or removing directors, changing funda-
mental policies or approving an investment advisory contract.
CVIT's Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law; however, nothing in
the Declaration of Trust protects a trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust contains an express disclaimer of shareholder
liability in connection with CVIT property or the acts, obligations or affairs
of CVIT. The Declaration of Trust also provides for indemnification out of CVIT
property of any shareholder held personally liable for the claims and
liabilities to which a shareholder may become subject by reason of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
CVIT itself would be unable to meet its obligations. The risk of any
shareholder incurring any liability for the obligations of CVIT is extremely
remote.
CAPITALIZATION
The following table shows the capitalization of the Catholic Equity Fund
and the CVIT Fund, respectively, as of September 30, 2002, and the unaudited pro
forma capitalization of the Class C and Class I shares of the Catholic Equity
Fund as of that date giving effect to the Reorganization:
Catholic Equity Fund CVIT Fund Pro Forma Combined Fund
-------------------- --------- -----------------------
Individual Institutional
Class C Class I Shares Shares Class C Class I
------- ------- ---------- ------------- ------- -------
Net Assets $3,432 $9,831,101 $2,865,112 $3,546,841 $2,868,544 $13,377,942
Net Asset Value Per $6.48 $6.49 $7.58 $7.78 $6.48 $6.49
Share
Shares Outstanding 530 1,514,717 378,206 456,148 442,677 2,061,316
The Catholic Equity Fund also has outstanding Class A shares. At
September 30, 2002, the net assets of the Class A shares were $2,865,775, the
net asset value per Class A Share was $6.48, and the number of outstanding
Class A shares was 442,072.
OWNERSHIP OF FUND SHARES
CATHOLIC EQUITY FUND
As of March 13, 2003, no person was known to own of record or beneficially
5% or more of the outstanding shares or any class of shares of the Catholic
Equity Fund, other than as set forth below:
NO. AND CLASS PERCENTAGE OF PERCENTAGE OF
HOLDER OF SHARES CLASS OWNED FUND OWNED
------ --------- ----------- ----------
Catholic Knights 1,213,512 Class I Shares 67.30% 53.90%
Attn: Russ Kafka
1100 W. Wells St.
Milwaukee WI 53233-2332
Catholic Order of Foresters 229,585 Class I Shares 12.73% 10.20%
Attn: Greg Temple
355 Shuman Blvd.
Naperville IL 60563-8494
Marshall & Ilsley Trust Co. 217,574 Class I Shares 12.07% 9.66%
FBO Catholic Knights Home Office
Employees Pension Plan Trust
#910209006
1000 N. Water Street, Floor 14
Milwaukee WI 53202-6648
M&I Trust 116,690 Class I Shares 6.47% 5.18%
FBO Catholic Knights Agent
Pension Plan
P.O. Box 2977
Milwaukee WI 53202-2977
The Catholic Equity Fund is not "controlled" (as defined in the 1940 Act)
by any person.
To the knowledge of The Catholic Funds, the beneficial ownership of shares
of the Catholic Equity Fund by the officers and directors of The Catholic Funds
as a group constituted less than 1% of the outstanding shares of the Catholic
Equity Fund.
CVIT FUND
As of March 13, 2003, no person was known to own of record or beneficially
5% or more of the outstanding shares of the CVIT Fund, other than as set forth
below:
NO. AND CLASS PERCENTAGE OF PERCENTAGE OF
HOLDER OF SHARES CLASS OWNED FUND OWNED
------ --------- ----------- ----------
Trustlynx & Co. Company # TM6 104,457 Institutional 23.87% 13.40%
P.O. Box 173736 Service Shares
Denver CO 80217
FR Gabriel Richard High School 89,428 Institutional 20.38% 11.44%
530 Elizabeth St. Service Shares
Ann Arbor MI 48103
Archdiocese Of New York 87,554 Institutional 19.96% 11.20%
c/o Michael Christ Service Shares
1011 First Avenue
Room 1940
New York NY 10022
Seraphic Mass Assoc. 50,938 Institutional 11.61% 6.52%
Mission Office Service Shares
3600 Butler Street
Pittsburg PA 15201
The CVIT Fund is not "controlled" (as defined in the 1940 Act) by any
person.
To the knowledge of CVIT, the beneficial ownership of shares of the CVIT
Fund by the officers and directors of CVIT as a group constituted less than 1%
of the outstanding shares of the CVIT Fund.
VOTING INFORMATION
Solicitation of proxies will be conducted principally by the mailing of
this Proxy Statement/Prospectus and the accompanying proxy card. Proxies also
may be solicited in person, or by telephone or facsimile, or, without special
compensation, by officers of CVIT or by officers and employees of Wright, as
well as by officers and employees of The Catholic Funds or CFSC. Upon request,
the CVIT Fund will reimburse brokers, dealers, banks and voting trustees, or
their nominees, for reasonable expenses incurred in forwarding copies of the
proxy materials to the beneficial owners of shares which such persons hold of
record.
Any proxy which is properly executed and returned in time to be voted at
the Meeting will be voted in accordance with the instructions marked thereon.
In the absence of such instructions, the proxy will be voted "FOR" approval of
the Agreement. The duly appointed proxies may, in their discretion, vote upon
such other matters as may come before the Meeting or any adjournments thereof.
A shareholder may revoke his or her proxy at any time prior to its exercise by
delivering written notice of revocation to the Secretary of CVIT or by executing
and delivering a later dated proxy to CVIT or by attending the Meeting in person
to vote the shares of the CVIT Fund held by such shareholder.
The presence at the Meeting, in person or by proxy, of shareholders
representing a majority of all CVIT Fund shares outstanding (Individual Shares
and Institutional Service Shares combined) and entitled to vote on the proposal
constitutes a quorum for the transaction of business. Abstentions and broker
non-votes (proxies from brokers or other nominee owners indicating that such
persons have not received instructions from the beneficial owners or other
persons entitled to vote the shares as to a matter with respect to which the
brokers or other nominee owners do not have discretionary power to vote) will be
treated as present for purposes of determining the presence or absence of a
quorum.
Approval of the Agreement and the Reorganization contemplated thereby
requires that a majority of all of the Individual and Institutional Service
Classes of shares of the CVIT Fund voted at the Meeting must be voted in favor
of the Agreement and the Reorganization. The Individual and Institutional
Service Classes of shares will vote and be counted together on this matter. Ac-
cordingly, abstentions and broker non-votes will have no effect on the outcome
of the vote, assuming the required quorum is met without them.
In the event that sufficient votes in favor of the proposal are not
received by the scheduled time of the Meeting, the persons named as proxies in
the enclosed proxy may propose and vote in favor of one or more adjournments of
the Meeting in order to permit further solicitation of proxies without the
necessity of further notice. Any such adjournment will require the affirmative
vote of a majority of the shares present at the session of the Meeting to be
adjourned.
Shareholders of record of the CVIT Fund at the close of business on
March 13, 2003 (the "Record Date") will be entitled to notice of and to vote at
the Meeting or any adjournment thereof. Each such shareholder will be entitled
to one vote for each share (and a fractional vote for each fractional share)
held by such shareholder on each matter presented at the Meeting. As of the
Record Date, there were a total of 791,384 Individual Shares and Institutional
Service Shares of the CVIT Fund outstanding.
Under Massachusetts law, shareholders of the CVIT Fund will not be entitled
to any appraisal or similar rights in connection with the Reorganization
contemplated by the Agreement. However, shareholders may redeem their shares of
the CVIT Fund at net asset value prior to the closing of the proposed Reor-
ganization in the manner specified in the CVIT Fund Prospectus.
MISCELLANEOUS
AUDITORS
PricewaterhouseCoopers LLP serves as independent accountants and auditors
to the Catholic Equity Fund. Deloitte and Touche LLP has no direct or indirect
financial interest in The Catholic Funds or the Catholic Equity Fund, except for
the fees it receives as auditors and independent public accountants. No
representative of Deloitte and Touche LLP is expected to be present at the
Meeting.
Deloitte and Touche LLP serves as independent accountants and auditors to
the CVIT Fund. PricewaterhouseCoopers LLP has no direct or indirect financial
interest in CVIT or the CVIT Fund, except for the fees it receives in its
capacity as auditors and accountants.
INTERESTS OF EXPERTS AND COUNSEL
No expert or counsel named herein has a substantial interest in CVIT, The
Catholic Funds, either Fund, the Reorganization, or any other transaction
contemplated by this Proxy Statement/Prospectus.
OTHER MATTERS
The Board of Trustees of CVIT has not been informed and is not aware that
any other matter will be brought before the Meeting. However, unless expressly
indicated otherwise on the enclosed form of proxy, proxies may be voted with
discretionary authority with respect to any other matter that may properly be
presented at the Meeting or any adjournment thereof. Shareholders of any mutual
fund series of CVIT wishing to submit proposals for inclusion in a proxy
statement and form of proxy for any future shareholder meetings should send
their written proposals to the Secretary of CVIT, 225 State Street, Boston,
Massachusetts 02109.
AVAILABLE INFORMATION
The Catholic Funds has filed with the Commission a Registration Statement
with respect to the shares of the Catholic Equity Fund offered hereby. As
permitted by the rules and regulations of the Commission, this Proxy State-
ment/Prospectus omits certain information, exhibits and undertakings contained
in the Registration Statement. Such additional information can be inspected at
the Public Reference Room of the Commission at 450 Fifth Street N.W.,
Washington, D.C. 20549. Copies of the Registration Statement can be obtained
from the Commission at prescribed rates by writing to the Commission at any such
address. For further information, reference is made to the Registration
Statement and to the exhibits thereto.
In addition to the above, the Catholic Equity Fund and the CVIT Fund are
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and the 1940 Act, and in accordance therewith, file reports
and other information with the SEC. Proxy materials, reports and other informa-
tion about the Catholic Equity Fund and the CVIT Fund which are of public record
also can be inspected and copied at Commission's Public Reference Room. Copies
of these materials can be inspected and copied at the Commission's principal and
regional offices described above and can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information Ser-
vices, SEC, Washington, D.C. 20549. The Commission also maintains a website at
http:\\www.sec.gov that will contain certain other publicly available documents
about The Catholic Funds, the Catholic Equity Fund, CVIT and the CVIT Fund.
No person has been authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus
and, if given or made, such other information or representations must not be
relied upon as having been authorized by The Catholic Funds or CVIT. This Proxy
Statement/Prospectus does not constitute an offer to sell securities in any
state or other jurisdiction to any person to whom it would be unlawful to make
the offer in that state or jurisdiction.
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made as of
this 13th day of March, 2003, by and between Catholic Values Investment Trust, a
Massachusetts business trust ("CVIT"), on behalf of the Catholic Values
Investment Trust Equity Fund (the "CVIT Fund"), and The Catholic Funds, Inc., a
Maryland corporation ("CFI"), acting on behalf of the Catholic Equity Fund (the
"CFI Fund").
R E C I T A L S
WHEREAS, CVIT is registered with the Securities and Exchange Commission
(the "SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), currently consisting of a
single series or investment portfolio, namely the CVIT Fund;
WHEREAS, CFI is registered with the SEC as an open-end management
investment company under the 1940 Act, currently consisting of two separate
series or investment portfolios, including the CFI Fund;
WHEREAS, the Board of Trustees of CVIT and the Board of Directors of CFI
have each approved this Agreement and the transactions described herein;
WHEREAS, the CVIT Fund and the CFI Fund have similar investment objectives
and principal strategies;
WHEREAS, the parties desire to provide for the reorganization of the CVIT
Fund through the acquisition by CFI on behalf of the CFI Fund of substantially
all of the property, assets and goodwill of the CVIT Fund and the assumption by
CFI on behalf of the CFI Fund of the stated and certain other liabilities of the
CVIT Fund in exchange for Class C and Class I shares of common stock of the CFI
Fund; the distribution of such shares of the CFI Fund to the holders of
individual shares and institutional shares of beneficial interests in the CVIT
Fund according to their respective ownership interests; and the liquidation of
the CVIT Fund as soon as practicable thereafter; and
WHEREAS, this Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of the Internal Revenue Code
of 1986, as amended.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Advisers Act" means the Investment Advisers Act of 1940, as
amended, and all of the rules and regulations adopted thereunder by the SEC.
1.2 "Agreement" means this Agreement and Plan of Reorganization,
together with all schedules and exhibits attached hereto, as the same may be
amended from time to time in accordance with the terms hereof.
1.3 "CFI" means The Catholic Funds, Inc., a Maryland corporation.
1.4 "CFI Fund" means the Catholic Equity Fund, a designated series
or investment portfolio of CFI.
1.5 "CFI Prospectus/SAI" means the Prospectus and/or Statement of
Additional Information (as the case may be), each dated January 31, 2003 (as may
be supplemented or amended hereafter), of CFI relating to the CFI Fund.
1.6 "CFI Fund Regulatory Approvals" shall have the meaning set
forth in Section 6.9 of this Agreement.
1.7 "CFI Fund Shares" means the Class C shares and Class I shares
of common stock, par value $.001 per share, of the CFI Fund to be issued
pursuant to this Agreement, as described in Section 2.1 hereof.
1.8 "CFSC" means Catholic Financial Services Corporation, the
investment adviser to the CFI Fund.
1.9 "Closing" means the closing of the Reorganization and the
other transactions contemplated by this Agreement as defined in Section 3 of
this Agreement.
1.10 "Closing Date" means May 21, 2003, or such other date as the
parties may mutually determine in writing, provided that all of the conditions
precedent to Closing have then been satisfied (or waived).
1.11 "Code" means the Internal Revenue Code of 1986, as amended.
1.12 "Custodian" means U.S. Bank, N.A., acting in its capacity as
custodian for the assets of the CFI Fund, including the assets of the CVIT Fund
being transferred to the CFI Fund.
1.13 "CVIT" means Catholic Values Investment Trust, a Massachusetts
business trust.
1.14 "CVIT Fund" means the Catholic Values Investment Trust Equity
Fund, a designated series or investment portfolio of CVIT.
1.15 "CVIT Fund Assets" means the portfolio securities, cash, cash
equivalents, dividend and interest receivables, and other properties, rights and
assets owned by the CVIT Fund as of the close of business on the Closing Date.
1.16 "CVIT Fund Liabilities" means all of the liabilities (and in
no event unknown liabilities) of the CVIT Fund that either (a) are reflected in
the calculation of the net asset value of the CVIT Fund as of the close of
business on the Closing Date, (b) constitute ordinary operating liabilities of
the CVIT Fund (including without limitation liabilities associated with
securities transactions subject to settlement and contractual liabilities) that
are not required under generally accepted accounting principles to be included
in the calculation of the CVIT Fund's net asset value or (c) are set forth on
Schedule 1.16 hereto, and only such liabilities.
1.17 "CVIT Fund Regulatory Approvals" shall have the meaning set
forth in Section 5.11 of this Agreement.
1.18 "CVIT Fund Shareholders" means the holders of record of the
issued and outstanding individual class and institutional class of shares of
beneficial interests in the CVIT Fund as of the close of business on the Closing
Date.
1.19 "CVIT Fund Shareholder Meeting" means a meeting of the
shareholders of the CVIT Fund to be convened in accordance with applicable law
and the Declaration of Trust and Bylaws of CVIT to consider and vote upon the
approval of this Agreement and the Reorganization contemplated hereby.
1.20 "CVIT Fund Shares" means the issued and outstanding individual
class and institutional class of shares of beneficial interest of the CVIT Fund.
1.21 "CVIT Fund Total Closing NAV" shall mean the value of the CVIT
Fund Assets (excluding the Excluded Assets), calculated as provided in
Section 2.2(b), minus the value of the CVIT Fund Liabilities, calculated as
provided in Section 2.2(b).
1.22 "CVIT Prospectus/SAI" means the Prospectus and/or Statement of
Additional Information (as the case may be), each dated May 1, 2002 (as may be
supplemented or amended hereafter), of CVIT relating to the CVIT Fund.
1.23 "Effective Time" means 5:00 p.m. Central Time on the Closing
Date.
1.24 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all of the rules and regulations adopted thereunder by the SEC.
1.25 "Excluded Assets" shall have the meaning set forth in
Section 2.4 of this Agreement.
1.26 "1940 Act" means the Investment Company Act of 1940, as
amended, and all of the rules and regulations adopted thereunder by the SEC.
1.27 "Proxy Materials" shall have the meaning set forth in
Section 4.1 of this Agreement.
1.28 "Registration Statement" shall have the meaning set forth in
Section 4.1 of this Agreement.
1.29 "Reorganization" means the transactions described in and
contemplated by this Agreement, including the transfer of the CVIT Fund Assets
(other than the Excluded Assets) and the CVIT Fund Liabilities to the CFI Fund
in exchange for, and against delivery to the CVIT Fund of, CFI Fund Shares and
the distribution of the CFI Fund Shares to the CVIT Fund Shareholders in
liquidation of the CVIT Fund.
1.30 "Required CVIT Fund Shareholder Vote" shall have the meaning
specified in Section 7.4 of this Agreement.
1.31 "SEC" means the United States Securities and Exchange
Commission.
1.32 "Securities Act" means the Securities Act of 1933, as amended,
and all rules and regulations adopted thereunder by the SEC.
1.33 "US Bancorp Fund Services" shall have the meaning specified in
Section 2.7 of this Agreement.
1.34 "Wright Investors" means Wright Investors' Service, Inc., the
investment adviser to the CVIT Fund.
2. REORGANIZATION OF THE CVIT FUND
2.1 Transfer of CVIT Fund Assets; Assumption of the CVIT Fund
--------------------------------------------------------------
Liabilities; Issuance of CFI Fund Shares. Subject to the terms and conditions
- -----------------------------------------
set forth herein, and in reliance upon the representations and warranties
contained herein, at the Effective Time, CVIT, on behalf of the CVIT Fund, shall
sell, convey, transfer and deliver all of the CVIT Fund Assets (excluding the
Excluded Assets) to the Custodian on behalf of the CFI Fund in consideration of,
in exchange for, and against delivery to the CVIT Fund by US Bancorp Fund
Services on behalf of the CFI Fund of, that number of CFI Fund Shares
(including, if applicable, fractional shares rounded to the nearest thousandth
of one whole share) having an aggregate net asset value equal to the value of
the CVIT Fund Assets (exclusive of the Excluded Assets), net of the CVIT Fund
Liabilities, all computed in accordance with Section 2.2 of this Agreement. As
of the Effective Time and upon delivery of such assets to the Custodian, the CFI
Fund shall receive good and marketable title to such assets free and clear of
all liens, security interests, pledges or encumbrances of any and every kind
(other than those arising under applicable securities laws, liens for taxes not
yet due and payable, and contractual restrictions on the transfer of the CVIT
Fund Assets). Moreover, at the Effective Time, CVIT on behalf of the CVIT Fund
shall transfer the CVIT Fund Liabilities to the CFI Fund, and the CFI Fund shall
assume all such liabilities and discharge them in accordance with their terms.
The CFI Fund Shares so delivered to the CVIT Fund shall consist of the number of
both Class C and Class I shares of the CFI Fund determined in accordance with
Section 2.2(c) of this Agreement. Immediately following receipt of the CFI Fund
Shares, the CVIT Fund shall distribute such shares to the CVIT Fund Shareholders
in liquidation of the CVIT Fund, with the CVIT Fund Shareholders who owned
individual shares of the CVIT Fund receiving their pro rata share of the Class C
CFI Fund Shares and the CVIT Fund Shareholders who owned institutional shares of
the CVIT Fund receiving their pro rata share of the Class I CFI Fund Shares.
2.2 Computation of Net Asset Value.
------------------------------
(a) When Determined. The net asset value of the CFI Fund
Shares and the value of the CVIT Fund Assets and the CVIT Fund Liabilities
shall, in each case, be determined as of the close of business on the New York
Stock Exchange on the Closing Date.
(b) Valuations. The net asset value of the CFI Fund Shares
shall be computed in accordance with the practices and procedures of the CFI
Fund described in the CFI Prospectus/SAI. The value of the CVIT Fund Assets
shall be computed in accordance with the practices and procedures of the CFI
Fund described in the CFI Prospectus/SAI; provided, however, that if such
computation is inconsistent with the computation of the value of the CVIT Fund
Assets determined in accordance with the practices and policies of the CVIT
Fund, the parties hereto shall confer and mutually agree on such valuation.
Notwithstanding the foregoing, CVIT Fund Assets for which market quotes are not
available, if any, shall be valued as mutually agreed by the parties hereto.
The value of the CVIT Fund Liabilities shall be computed as the aggregate amount
of the liabilities that are to be reflected on a balance sheet for the CVIT Fund
and included in the computation of the CVIT Fund's net asset value as of the
close of business on the Closing Date in accordance with generally accepted
accounting principles ("GAAP") consistently applied with the accounting methods,
treatments, principles, procedures and assumptions used by the CFI Fund in
calculating its net asset value; provided, however, that if such computation is
-----------------
inconsistent with the computation of the value of the CVIT Fund Liabilities
determined in accordance with GAAP consistently applied with the accounting
methods, treatments, principles, procedures and assumptions used by the CVIT
Fund in calculating its net asset value, the parties hereto shall confer and
mutually agree upon such valuation. For purposes of computing the value of the
CVIT Fund Liabilities, operating liabilities that are not required under GAAP to
be included in the computation of the CVIT Fund's net asset value shall have no
value. The stock transfer books of the CVIT Fund shall be permanently closed as
of the close of business on the Closing Date, and only purchase orders and re-
quests for the redemption of shares of the CVIT Fund received in proper form
prior to the close of regular trading on the New York Stock Exchange on the
Closing Date shall be accepted by the CVIT Fund. Purchase orders and redemption
requests received thereafter shall be deemed to be purchase and redemption
requests for the CFI Fund (assuming that the transactions contemplated by this
Agreement have been consummated).
(c) CFI Fund Shares. The number of CFI Fund Shares
(including fractional shares, if any) to be issued to the CVIT Fund shall be
determined separately for each class. The number of Class C CFI Fund Shares
(including fractional shares, if any) to be issued shall be determined by
dividing that portion of the CVIT Fund Total Closing NAV attributable to the
individual class CVIT Fund Shares by the net asset value of a single Class C CFI
Fund Share, determined in accordance with Section 2.2(b) hereof. The number of
Class I CFI Fund Shares (including fractional shares, if any) to be issued shall
be determined by dividing that portion of the CVIT Fund Total Closing NAV
attributable to the institutional class CVIT Fund Shares by the net asset value
of a single Class I CFI Fund Share, determined in accordance with Section 2.2(b)
hereof.
(d) Computations. Except as otherwise provided in
Section 2.2(b), all computations of value shall be made by CFSC (or such other
person as is responsible for regularly pricing the CFI Fund's portfolio
securities). CFI shall cause CFSC (or such other person) to deliver to CVIT a
copy of its valuation report at or prior to the Closing.
(e) Shadow Valuation. Promptly following the date of this
Agreement, CVIT and CFI shall each cause a valuation of the CVIT Fund Assets and
CVIT Fund Liabilities to be conducted in accordance with their respective
valuation policies and practices as of the close of business on a mutually
acceptable date, which in any event shall not be more than 30 days after the
date of this Agreement. This shadow pricing procedure shall, at the request of
either party, be repeated as of the close of business on a mutually acceptable
date which is not more than 10 days prior to the Closing Date.
2.3 List of Assets.
--------------
(a) The CVIT Fund Assets shall consist of all property and
rights, including without limitation all cash, cash equivalents, securities and
dividend and interest receivables owned by the CVIT Fund as of the close of
business on the Closing Date.
(b) Promptly following the signing of this Agreement, the
CVIT Fund will provide the CFI Fund and the Custodian with a list of its assets
as of a date agreed upon by the parties. On the Closing Date, the CVIT Fund
will provide the CFI Fund with a list of the CVIT Fund Assets.
2.4 Excluded Assets. There shall be excluded from the assets of
---------------
the CVIT Fund described in Section 2.3 to be transferred to CFI (i) all causes
of actions, claims and rights, if any, of the CVIT Fund against third parties
in connection with the unknown liabilities, if any, not assumed by CFI on behalf
of the CFI Fund in accordance with this Agreement, (ii) the CVIT Fund's tail
insurance policy, and (iii) all cash, cash equivalents and securities in an
amount estimated by CVIT to be sufficient to pay all liabilities of the CVIT
Fund that have accrued but remain unpaid as of the close of business on the
Closing Date including, without limitation: (a) amounts owed or to be owed to
any CVIT Fund Shareholder, including declared but unpaid dividends and capital
gains distributions; and (b) accounts payable, taxes and other accrued and
unpaid expenses, if any, not being assumed by CFI on behalf of the CFI Fund or
incurred in connection with this Agreement or estimated to be incurred after the
Closing Date in connection with winding up the affairs of, and liquidating, the
CVIT Fund (together, the "Excluded Assets").
2.5 Declaration of Dividends and Capital Gain Distributions by the
---------------------------------------------------------------
CVIT Fund. On or prior to the Closing Date, the CVIT Fund will declare a
- ---------
dividend to shareholders of record of the CVIT Fund as of or prior to the
Closing Date so that, for the short taxable year of the CVIT Fund ending on the
date on which the CVIT Fund is completely liquidated and discontinued, the CVIT
Fund will have declared an aggregate amount of dividends which: (a) is equal to
at least the sum of its net capital gain (within the meaning of
Section 852(b)(3) of the Code), offset by any capital loss carry forward allowed
pursuant to Section 1212 of the Code, and ninety percent (90%) of its investment
company taxable income (determined under Section 852(b)(2) of the Code, but
without regard to Section 852(b)(2)(D) of the Code) for such taxable year; and
(b) is sufficient to avoid any excise tax on the CVIT Fund under Section 4982 of
the Code for the calendar year in which the Closing Date occurs, provided that
the dividends that have been so declared but have not been paid on or before
such Closing Date are in fact paid by the CVIT Fund prior to the end of such
calendar year to the shareholders of the CVIT Fund as of the record date for
determining shareholders entitled to receive payment of such dividend.
2.6 Liquidation. In connection with the Closing, the CVIT Fund
-----------
shall be liquidated and CVIT shall pay or make provisions for all of the CVIT
Fund's debts, liabilities, taxes and obligations of any kind (other than the
CVIT Fund Liabilities), directly attributable to, and equal in amount to, the
Excluded Assets as described in Section 2.4 hereof, and distribute all remaining
assets, including the CFI Fund Shares received by it in the Reorganization and
the balance, if any, of the Excluded Assets, pro rata to the CVIT Fund
Shareholders in accordance with their ownership of shares of the CVIT Fund.
2.7 Issuance of CFI Fund Shares. On the Closing Date, CVIT shall
---------------------------
instruct US Bancorp Fund Services, LLC ("US Bancorp Fund Services"), the
transfer agent of the CFI Fund, to record on the books and records of the CFI
Fund the interest of each of the CVIT Fund Shareholders in the CFI Fund Shares,
in accordance with their pro rata interest in the individual and institutional
classes of CVIT Fund Shares in the name of such CVIT Fund Shareholder. Upon
liquidation of the CVIT Fund, all CVIT Fund Shares then issued and outstanding
shall thereupon be cancelled on the books of CVIT. CFI or US Bancorp Fund
Services shall forward a confirmation to each of the CVIT Fund Shareholders of
their ownership of the CFI Fund Shares. No redemption or repurchase of such CFI
Fund Shares credited to any CVIT Fund Shareholder in respect of his or her CVIT
Fund Shares which are represented by an unsurrendered stock certificate shall be
permitted until such certificate has been surrendered to CSFC or US Bancorp Fund
Services for cancellation, or if such certificate is lost or misplaced, until a
lost certificate affidavit has been executed and delivered to CSFC or US Bancorp
Fund Services.
2.8 Liabilities and Expenses. An unaudited Statement of Assets
-------------------------
and Liabilities of the CVIT Fund will be prepared by the Treasurer of CVIT and
delivered to CFI on the Closing Date. The Statement of Assets and Liabilities
of the CVIT Fund will be prepared in conformity with generally accepted
accounting principles consistently applied from the prior audited period
(except for year-end adjustments and the absence of footnotes). The CFI Fund
shall assume the CVIT Fund Liabilities and discharge them when and as they are
due or otherwise in accordance with their terms.
2.9 Termination, Winding Up. After the Closing, the CVIT Fund
-----------------------
shall not conduct any business except in connection with the winding up of its
affairs and shall file, or make provision for filing of, all reports it is
required by law to file. After the Closing, the CVIT Fund shall be liquidated
and shall cease to be a designated series of CVIT under Massachusetts law.
2.10 Books and Records. Copies of all books and records of or
-----------------
pertaining to the CVIT Fund, including those concerning its obligations under
the 1940 Act, the Code, state blue sky laws or otherwise concerning this
Agreement, will, at Closing, be delivered to CFI. Following the Closing, CVIT
shall be entitled to have access to such books and records as necessary to
prepare required reports, tax returns and other documents and, to the extent
required by applicable laws, to retain copies of such books and records.
3. CLOSING
3.1 Closing Date. The closing of the Reorganization (the
------------
"Closing") shall take place at the Effective Time. The Closing Date shall take
place no later than ten (10) calendar days following approval by CVIT
shareholders of this Agreement and the Reorganization and the satisfaction of
all conditions precedent to Closing (except those which have been waived in
writing or which by their terms can be satisfied only at Closing) or such other
time as may be agreed to by CFI and CVIT in writing.
3.2 Portfolio Securities. Portfolio securities held by the CVIT
--------------------
Fund and represented by a certificate or written instrument shall be presented
by it or on its behalf to the Custodian for examination no later than one
business day preceding the Closing Date. Such portfolio securities (together
with any cash or other assets) to be transferred to the CFI Fund pursuant to
Section 2.1 hereof shall be delivered by the CVIT Fund to the Custodian at the
Closing in conformity with applicable custody provisions under the 1940 Act and
duly endorsed in proper form for transfer in such condition as to constitute
good delivery thereof in accordance with the custom of brokers. Portfolio
securities and instruments deposited with securities depositories, as defined in
Rule 17f-4 under the 1940 Act, shall be delivered at the Closing by book entry
in accordance with customary practices of such depositories and the Custodian.
The cash delivered shall be in the form of a federal funds wire, pursuant to the
instructions provided prior to the Closing Date by CFI or the Custodian.
3.3 Postponement of Valuation. In the event that on the Closing
--------------------------
Date it is impracticable for the net assets of the CFI Fund or the CVIT Fund to
be fairly valued in the judgment of either CFI or CVIT, as the case may be, the
Closing Date shall be postponed until the first business day after the day when
it is practicable for the net assets of the CFI Fund and the CVIT Fund to be
fairly valued in the judgment of both CFI and CVIT. The Closing Date shall be
postponed as necessary to coordinate with any such postponement of the Closing
Date.
3.4 The CVIT Fund Shareholders. CVIT shall deliver (or cause to
--------------------------
be delivered) to CFI (a) at the Closing, a list, certified by the CVIT Fund's
transfer agent, of the names, addresses and taxpayer identification numbers of
the CVIT Fund Shareholders of record and the record number of outstanding CVIT
Fund Shares of each class owned by each shareholder, all as of the close of
business on the Closing Date (after giving effect to the payment of dividends
and any reinvestment of such dividends, described in Section 2.5 of this
Agreement), and (b) as soon as practicable after the Closing all records
(including Internal Revenue Service forms, certificates, certifications and
correspondence) relating to the CVIT Fund Shareholders' taxpayer identification
numbers and their liability for or exemption from back-up withholding. CFI
shall cause US Bancorp Fund Services to issue and deliver to CVIT Fund
Shareholders a confirmation evidencing delivery of CFI Fund Shares to be
credited on the Closing Date to the CVIT Fund Shareholders as provided in Sec-
tion 2.7 of this Agreement. At the Closing, each party shall deliver to the
other such bills of sale, assignments, assumption agreements, receipts or other
documents as such other party or its counsel may reasonably request to effect
the consummation of the transactions contemplated by the Agreement.
4. COVENANTS
4.1 Registration Statement. CFI will, in consultation with CVIT,
----------------------
prepare and file with the SEC a registration statement on Form N-14 under the
Securities Act, relating to the CFI Fund Shares to be issued to the CVIT Fund
shareholders pursuant to the Reorganization ("Registration Statement"). The
Registration Statement shall include a combined proxy statement/prospectus,
notice of meeting, form of proxy and statement of additional information ("Proxy
Materials") that comply in all material respects with the applicable provisions
of the Exchange Act, the 1940 Act and the Securities Act, including without
limitation Section 14(a) of the Exchange Act, Section 20(a) of the 1940 Act and
Section 6 of the Securities Act. CVIT will be entitled to review and comment on
the Registration Statement and the Proxy Materials included therein. CVIT will
further provide CFI with such other information and documents relating to CVIT,
Wright Investors and the CVIT Fund as are reasonably necessary for the
preparation of the Registration Statement and the Proxy Materials.
4.2 Shareholders Meeting. CVIT will call a meeting of
--------------------
shareholders of the CVIT Fund to consider and act upon this Agreement and such
other matters set forth in the Proxy Materials. CFI will furnish CVIT with
sufficient copies of the Proxy Materials and of the currently effective
prospectus and annual reports for the CFI Fund for inclusion in or with the
Proxy Materials and with such other information relating to the CFI Fund as is
reasonably necessary in connection with the distribution of the Proxy Materials.
Promptly following the effective date of the Registration Statement, CVIT will
mail to each shareholder of record of the CVIT Fund entitled to vote at the CVIT
Fund Shareholder Meeting the Proxy Materials (other than the statement of
additional information).
4.3 Shareholder Information. Prior to the Closing Date, CVIT will
-----------------------
provide CFI with such information as CFI reasonably requests concerning the
beneficial ownership of the shares of the CVIT Fund.
4.4 Cooperation. From and after the date of this Agreement and
-----------
until the Closing Date (or such earlier date as this Agreement may be terminated
in accordance with Section 11.1), CFI and CVIT will each use commercially
reasonable efforts to take, or cause to be taken, all action, and do or cause to
be done, all things reasonably necessary, proper or advisable to consummate and
make effective the Reorganization contemplated by this Agreement.
4.5 Earnings and Profits. As promptly as practicable, but in any
--------------------
case within sixty (60) days after the Closing Date, CVIT shall furnish or cause
to be furnished to CFI such information as CFI reasonable requests to enable CFI
to determine the CVIT Fund's earnings and profits for federal income tax
purposes that will be carried over to the CFI Fund pursuant to Section 381 of
the Code.
4.6 Final Tax Returns. After the Closing Date, CVIT shall prepare
-----------------
and file all federal and other tax returns and reports of the CVIT Fund required
by law to be filed with respect to all periods ending through and after the
Closing Date but not theretofore filed and shall deliver copies of the same to
CFI.
4.7 Authorizations to Continue the CFI Fund. CFI agrees to obtain
----------------------------------------
the approvals and authorizations required by the Securities Act, the 1940 Act
and such of the state Blue Sky and securities laws as it may deem appropriate to
enable it to continue its operations and the operations of the CFI Fund after
the Closing Date.
4.8 Right to Inspect the Books and Records. Until the Closing
--------------------------------------
Date (or such earlier date as this Agreement may be terminated in accordance
with Section 11.1):
(a) CFI and its agents, attorneys, accountants, employees,
contractors and other authorized representatives shall have the right, during
normal business hours and upon reasonable notice, to the extent that CFI
reasonably deems appropriate, to examine the books and records of the CVIT Fund,
and to make such tests, surveys, appraisals, investigations and other
inspections in such manner as CFI may reasonably deem necessary, provided that
such examination, tests, surveys, appraisals, investigations and inspections
will not interfere with the conduct of the CVIT Fund's business.
(b) CFI shall make available to CVIT, and CVIT's agents,
attorneys, accountants, employees, contractors and other authorized
representatives shall have the right, during normal business hours and upon
reasonable notice to the extent CVIT reasonably deems appropriate, to examine,
the books and records of the CFI Fund, and to make such tests, surveys,
appraisals, investigations and other inspections in such manner as CVIT may
reasonably deem necessary, provided that such examination, tests, surveys, ap-
praisals, investigations and inspections shall not interfere with the conduct of
the CFI Fund's business.
4.9 Tax Free Reorganization. From and after the date of this
-----------------------
Agreement and until the Closing Date (or such earlier date as this Agreement may
be terminated in accordance with Section 11.1), each of the parties shall use
its commercially reasonable efforts to cause the Reorganization to qualify, and
will not knowingly take any action, cause any action to be taken, fail to take
any action or cause any action to fail to be taken which action or failure to
act could prevent the Reorganization from qualifying as a reorganization under
the provisions of Section 368(a) of the Code.
4.10 Tail Insurance Policy. Prior to the Closing Date, CVIT shall
---------------------
acquire an insurance policy (the "Tail Insurance Policy") which meets the
following requirements: (a) provides insurance coverage for CVIT, its officers
and trustees against losses from lawsuits, regulatory investigations and other
claims made against them for their negligent acts, errors, omissions or other
wrongful acts committed prior to the Reorganization which relate to the business
and operations of the CVIT Fund prior to the Closing Date; (b) provides a
maximum coverage amount of at least One Million and 00/100 Dollars
($1,000,000.00); (c) constitutes a paid up policy for a period of at least three
years following the Closing Date; and (d) names as an additional insured CFI
with respect to the CFI Fund.
5. REPRESENTATIONS AND WARRANTIES OF CVIT
CVIT, on behalf of the CVIT Fund, represents and warrants to CFI as
follows:
5.1 Capitalization; CVIT Fund Shares. The capitalization of CVIT
---------------------------------
consists of an unlimited number of shares of beneficial interest, without par
value, currently consisting of a single series divided into a class of
individual shares and a class of institutional shares. The CVIT Fund is a
separate series of CVIT and has an unlimited number of shares authorized for
issuance. All issued and outstanding shares of the CVIT Fund are, and at the
Closing Date will be, duly and validly issued, fully paid, non-assessable, fully
transferable and entitled to full voting rights, and duly registered with the
SEC and duly registered or qualified for sale pursuant to the blue sky laws of
each state in which offers and sales have been made, except where exempt from
state registration or qualification requirements. All such shares will, at the
time of Closing, be held of record by the persons and in the amounts set forth
in the list of shareholders of record provided to the CFI Fund pursuant to
Section 3.4 hereof. The CVIT Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of its shares, nor is
there outstanding any security convertible into any of its shares.
5.2 Title. The CVIT Fund has, and at the Closing Date will have,
-----
good and marketable title to the CVIT Fund Assets, subject to no liens, security
interests, pledges or other encumbrances of any kind (other than those arising
under applicable securities laws, liens for taxes not yet due and payable, and
contractual restrictions on the transfer of the CVIT Fund Assets), and full
right, power and authority to sell, convey, assign, deliver and otherwise
transfer the CVIT Fund Assets hereunder, and upon delivery and payment for the
CVIT Fund Assets, the CFI Fund will acquire clear title thereto, subject to no
legal restrictions on the full transfer thereof, other than such restrictions as
might arise under the Securities Act. No financing statement covering all or
any portion of assets and naming the CVIT Fund, as debtor, has been filed in any
public office, and the CVIT Fund has not signed any financing statement or
security agreement as debtor or borrower which financing statement or security
agreement covers all or any portion of the CVIT Fund Assets.
5.3 No Distribution. The CVIT Fund is not acquiring the CFI Fund
---------------
Shares for the purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.
5.4 Authority.
---------
(a) CVIT has the full legal power and authority to enter into
and perform this Agreement, and, except for obtaining the Required CVIT Fund
Shareholder Vote, the execution, delivery and performance of this Agreement by
CVIT and the consummation of the Reorganization contemplated by this Agreement
in accordance with its terms by CVIT have been duly and validly authorized by
CVIT's board of Trustees and will not violate any provision of law, or the
declaration of trust or bylaws of CVIT, or result in the forfeiture or
cancellation of any license, permit, consent, approval, accreditation or au-
thorization respecting the CVIT Fund and required in order for the CVIT Fund to
liquidate and distribute to the CVIT Fund Shareholders the CFI Fund Shares as
contemplated by this Agreement, or result, or with the passage of time will
result, in the violation, breach, termination, cancellation or acceleration of
any provision of or constitute a default under or result in the creation of any
lien, claim or encumbrance pursuant to any court order, judgment, decree, order
or any indenture, license, permit, authorization, contract or other instrument
to which CVIT is a party or by which any of its properties may be bound, which
violation, forfeiture, cancellation, breach, termination, acceleration, default
or creation would reasonably be expected to have a material adverse effect on
the CVIT Fund Assets taken as a whole.
(b) The Board of Trustees of CVIT has taken all necessary
action to authorize and approve the execution, delivery and performance of this
Agreement by CVIT and all of the transactions contemplated hereby and, when
executed and delivered by CVIT and approved by the requisite number of
shareholders of the CVIT Fund as described in Section 7.4 hereof and assuming
due authorization, execution and delivery by CFI, this Agreement will constitute
the legal, valid and binding obligation of CVIT, enforceable against CVIT in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity, including those limiting the availability
of specific performance, injunctive relief and other equitable remedies and
those providing for equitable defenses.
5.5 Organization and Qualification of CVIT and the CVIT Fund.
--------------------------------------------------------
CVIT is duly organized and validly existing as a business trust in good standing
under the laws of the Commonwealth of Massachusetts, has full trust power and
authority to own its assets and to conduct its business as it is now being
conducted, and is duly qualified or registered to do business and is in good
standing in each jurisdiction which requires such qualification or registration
or is subject to no material liability by reason of its failure to be so quali-
fied. The CVIT Fund is a duly designated series of beneficial interests of
CVIT.
5.6 Operations. Since December 31, 2001, the business of the CVIT
----------
Fund has been conducted in the usual, regular and ordinary manner in material
compliance with the requirements of all applicable federal and state laws.
5.7 Material Agreements. CVIT has delivered or made available to
-------------------
CFI complete and accurate copies of all material contracts, agreements,
understandings or other commitments of the CVIT Fund, each of which is in effect
and valid and enforceable against the CVIT Fund and, to the knowledge of CVIT,
is valid and enforceable against the other party in accordance with its terms ,
except, in the case of both CVIT and the other party, as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity, including those
limiting the availability of specific performance, injunctive relief and other
equitable remedies and those providing for equitable defenses.
5.8 Third Party Consents. Except for obtaining the Required CVIT
--------------------
Fund Shareholder Vote, there are no approvals or consents of any third parties
necessary or required for CVIT validly and legally to enter into this Agreement
and to perform its obligations hereunder, except where the failure to obtain
such consent or approval would not reasonably be expected to have a material
adverse effect on the CVIT Fund.
5.9 Absence of Certain Changes. Since December 31, 2001:
---------------------------
(a) there has been no material adverse change in the financial condition,
results of operation, business, assets or liabilities of the CVIT Fund (other
than changes occurring in the ordinary course of business, including without
limitation changes in the value of the assets of the CVIT Fund and the
redemption of CVIT Fund Shares) or the status of the CVIT Fund as a regulated
investment company under the Code; and (b) there has not been any change in
accounting methods, principles or practices of the CVIT Fund having a material
adverse effect on the financial condition or results of operations of the CVIT
Fund, nor any resignation of the independent certified public accountants and
auditors of the CVIT Fund due to a conflict or disagreement with management of
the CVIT Fund or otherwise.
5.10 Litigation. No litigation, claim, action or proceeding is
----------
pending or, to the knowledge of CVIT, threatened against or relating to CVIT or
the CVIT Fund before any court or governmental or regulatory authority seeking
injunctive relief or monetary damages which, if adversely determined, would
reasonably be expected to have material adverse effect on the Reorganization or
on the operations or financial position of the CVIT Fund or on the CVIT Fund
Assets taken as a whole. To the knowledge of CVIT, CVIT is not under
investigation for violation of any law or regulation related to the business or
operations of the CVIT Fund.
5.11 Regulatory Compliance. CVIT and the CVIT Fund have all
----------------------
licenses, permits, approvals, authorizations and registrations required by any
federal, state and local laws, authorities and agencies in connection with the
operation of the CVIT Fund's business as presently being conducted and the
ownership of its assets, except where the lack thereof would reasonably be
expected to have a material adverse effect on the CVIT Fund ("CVIT Fund
Regulatory Approvals"). All such CVIT Fund Regulatory Approvals are in full
force and effect, and to the knowledge of CVIT, no suspension or cancellation of
any of them is threatened or pending.
5.12 Proxy Materials. On the effective date of the Registration
---------------
Statement, at the time of the CVIT Fund Shareholders Meeting (and any
adjournment thereof) and on the Closing Date, the information provided by CVIT
in writing for inclusion in the Proxy Materials shall be accurate and complete
in all material respects, shall comply in all material respects with the
provisions of the Securities Act, the Exchange Act and the 1940 Act, and shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statement therein,
in light of the circumstances under which it was made, not misleading; provided,
however, that no representation or warranty is made with respect to information
regarding CFSC, CFI or the CFI Fund included in the Proxy Materials.
5.13 Certain Additional Representations and Warranties as to the
-----------------------------------------------------------
CVIT Fund.
- ---------
(a) The investment advisory agreement and underwriting agree-
ment to which CVIT Fund is a party or is subject are and will remain in full
force and effect through the Closing Date, and were duly approved and comply in
all material respects with the 1940 Act, the Exchange Act, the Advisers Act, and
rules and regulations of the National Association of Securities Dealers, Inc.
(the "NASD").
(b) Wright Investors; Services Distributors, Inc. ("WISDI")
is the principal underwriter for the CVIT Fund, and Wright Investors is the
investment adviser for the CVIT Fund. To the knowledge of CVIT, WISDI is and
has been duly registered or licensed as broker-dealer under the Exchange Act and
the securities laws of each state or other jurisdiction wherein the nature of
its activities in connection with the CVIT Fund requires such registration or
licensing, a member in good standing of the NASD, and a member in good standing
in the Securities Investors Protection Corporation, with all assessments due
thereto having been paid, or is not required to be such a member. To the
knowledge of CVIT, Wright Investors is duly registered as an investment adviser
under the Advisers Act.
(c) There are no judgments, special consent judgments or SEC
orders, to the knowledge of CVIT, with regard to Wright Investors, WISDI or its
administrator, transfer agent or custodian currently in effect which have had or
would reasonably be expected to have a material adverse effect on the business
or operations of the CVIT Fund as presently conducted. All orders of exemption
issued to CVIT or the CVIT Fund by any regulatory agency, including the SEC and
the Internal Revenue Service, which are necessary for the conduct of the
business of CVIT or the CVIT Fund have been obtained and are currently in full
force and effect, no proceeding has been commenced to revoke any such order and,
to the knowledge of CVIT, no such proceeding is contemplated by any such
regulatory agency.
(d) CVIT is and will continue through the Closing Date to be
duly registered with the SEC as an open-end management investment company under
the 1940 Act and, with respect to the CVIT Fund, is in material compliance with
the 1940 Act, including the requirements to file semi-annual or annual reports
with the SEC. The prospectuses, statements of additional information and, as
applicable, sales materials of CVIT on behalf of the CVIT Fund have been filed
with the SEC, applicable state securities authorities and the NASD (where
required to be so filed). CVIT, on behalf of the CVIT Fund, has filed with the
SEC and other applicable federal or state agencies or authorities such notices
or reports required under applicable federal or state laws, rules or regulations
for the sale of its shares, the conduct of its business and the ownership of its
assets, except, in each case, where the failure to file any such notice or
report would not reasonably be expected to have a material adverse effect on the
CVIT Fund.
(e) [INTENTIONALLY OMITTED]
(f) Shares of the CVIT Fund have been duly registered under
the Securities Act by means of a registration statement (or post-effective
amendment thereto) on Form N-1A, said registration statement has become
effective under the Securities Act, no stop order suspending the effectiveness
of such registration statement has been issued, no proceedings for that purpose
have been instituted or threatened by the SEC. Such registration statement has,
at all times since January 1, 2002 complied in all material respects with the
requirements of the Securities Act and the 1940 Act, and such registration
statement, with respect to the CVIT Fund, has not included at any time since
January 1, 2002 any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All proxy statements, supplements, and other reports, documents or
other materials relating to the CVIT Fund filed by or on behalf of the CVIT Fund
with the SEC on or after January 1, 2002 (i) were prepared in all material re-
spects in accordance with the applicable requirements of the Securities Act, the
1940 Act, the Exchange Act and the rules and regulations under each of them, as
applicable (ii) as of their respective dates did not contain any untrue
statement of a material fact, and (iii) as of their respective dates did not
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(g) The audited annual financial statements listed on Sched-
ule 5.13(g) attached hereto with respect to the CVIT Fund for all periods on or
after January 1, 2002 present fairly in all material respects the CVIT Fund's
financial position as of the relevant dates described therein and results of its
operations and changes in its net assets for the periods described therein.
(h) The independent public accountants for the CVIT Fund have
been selected and ratified in accordance with the applicable provisions of the
1940 Act.
(i) CVIT has, and up to and including the Closing Date will
have, on behalf of the CVIT Fund, properly prepared, executed and timely filed,
or caused to be timely filed a proper request for extension with respect to, all
federal, state and local tax returns for income, franchise, sales, withholding,
excise and other taxes required to be filed by it. All taxes, assessments, fees
and other governmental charges owed by the CVIT Fund and which have become due
(whether or not shown on any returns) have been paid by it. All of such tax
returns are complete and accurate in all material respects and have been
prepared in all material respects in accordance with all applicable legal
requirements. No material tax liabilities, disallowances or assessments
relating to the business or assets of the CVIT Fund have been assessed or, to
CVIT's knowledge, proposed. No tax return filed on behalf of the CVIT Fund is
currently being audited by the Internal Revenue Service or by any state or local
tax authority. The reserves and provisions, if any, for taxes on the books of
the CVIT Fund are adequate for the payment of all taxes for the purposes and the
periods to which they pertain, including through the Effective Time. Without in
any way limiting the representations and warranties set forth above or in other
Sections of this Agreement, the CVIT Fund qualifies as a "regulated investment
company" under Section 851 (Subchapter M) of the Code, and has so qualified
during its entire existence. The CVIT Fund will, at the Closing, satisfy, and
consummation of the Reorganization contemplated by this Agreement will not cause
it to fail to satisfy for any period ending on or before the Closing Date, the
requirements of Subchapter M of the Code.
6. REPRESENTATIONS AND WARRANTIES OF CFI
CFI, on behalf of the CFI Fund, represents and warrants to CVIT as follows:
6.1 Capitalization; CFI Fund Shares. The capitalization of CFI
--------------------------------
consists of one billion (1,000,000,000) shares of common stock, $.001 par value,
currently divided into two different series and, with respect to one such
series, subdivided into three different classes. The CFI Fund has a total of
one hundred million (100,000,000) shares authorized for issuance, consisting of
Class A, Class C and Class I Common Stock. The CFI Fund Shares to be issued and
delivered to the CVIT Fund for the account of the CVIT Fund Shareholders
pursuant to the terms of this Agreement will, at the Closing Date, have been
duly authorized and, when so issued and delivered, will be duly and validly
issued, fully paid, non-assessable, fully transferable, entitled to full voting
rights, duly registered with the SEC pursuant to an effective Registration
Statement on Form N-14, and duly registered or qualified for sale pursuant to
the blue sky laws of each state where a CVIT Fund Shareholder resides, except
where exempt from such state registration or qualification requirements. No
shareholder of the CFI Fund will have any preemptive right or right of subscrip-
tion or purchase in respect of any such CFI Fund Shares.
6.2 Authority of the CFI Fund.
-------------------------
(a) CFI has the full legal power and authority to enter into
and perform this Agreement and the execution, delivery and performance of this
Agreement and the consummation the Reorganization in accordance with its terms
will not violate any provision of law, the articles of incorporation or bylaws
of CFI or result in the forfeiture or cancellation of any license, permit,
consent, approval, accreditation or authorization respecting the CFI Fund or its
business, or result in the violation, breach, termination, cancellation or
acceleration of any provision of or constitute a default under or result in the
creation of any lien, claim or encumbrance pursuant to any indenture, license,
permit, authorization, court order, judgment, decree, contract or other
instrument to which the CFI Fund is a party or by which any of its properties
may be bound which would reasonably be expected to have a material adverse
effect on the assets of the CFI Fund or the business of the CFI Fund or on the
ability of the parties hereto to consummate the Reorganization.
(b) The Board of Directors of CFI has taken all necessary
action to authorize and approve the execution, delivery and performance of this
Agreement by CFI and all of the transactions contemplated hereby, and when
executed and delivered by CFI this Agreement will constitute the legal, valid
and binding obligation of CFI, enforceable against CFI in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws relating to the enforcement of creditors' rights generally and by general
principles of equity, including those limiting the availability of specific
performance, injunctive relief and other equitable remedies and those providing
for equitable defenses.
6.3 Organization and Qualification of CFI and the CFI Fund. CFI
------------------------------------------------------
is duly organized and validly existing as a corporation in good standing under
the laws of Maryland, has full power and authority to own its assets and to
conduct its business as it is now being conducted, and is duly qualified or
registered to do business and is in good standing in each jurisdiction which
requires such qualification or registration or is subject to no material
liability by reason of its failure to be so qualified. The CFI Fund is a duly
designated series of shares of capital stock of CFI.
6.4 Operations. Since April 2, 2002, the business of the CFI Fund
----------
has been conducted in the usual, regular and ordinary manner in material
compliance with the requirements of all applicable federal and state laws.
Furthermore, between the date hereof and the Effective Time (or such earlier
date as this Agreement may be terminated in accordance with Section 11.1), CFI
will continue to operate the business of the CFI Fund as presently conducted,
and CFI has no plan or intention to make any significant changes in the business
of the CFI Fund following the Effective Time.
6.5 Material Agreements. The CFI Fund has delivered or made
--------------------
available to CVIT complete and accurate copies of all material contracts,
agreements, understandings or other commitments of the CFI Fund, each of which
is in effect and valid and enforceable against the CFI Fund and, to the
knowledge of CFI is valid and enforceable against the other party in accordance
with its terms, except, in the case of both CFI and the other party, as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of equity,
including those limiting the availability of specific performance, injunctive
relief and other equitable remedies and those providing for equitable defenses.
6.6 Third Party Consents. Except for the effectiveness of the
--------------------
Registration Statement, there are no approvals or consents of any third parties
necessary or required for CFI validly and legally to enter into this Agreement
and to perform its obligations hereunder.
6.7 Absence of Certain Changes. Since April 2, 2002: (a) there
--------------------------
has been no material adverse change in the financial condition, results of
operations, business, assets or liabilities of the CFI Fund (other than changes
occurring in the ordinary course of business, including without limitation
changes in the value of the assets of the CFI Fund) or the status of the CFI
Fund as a regulated investment company under the Code; and (b) there has not
been any change in accounting methods, principles or practices of the CFI Fund
having a material adverse effect on the financial condition or results of
operations of the CFI Fund, nor any resignation of the independent certified
public accountants and auditors of the CFI Fund due to a conflict or
disagreement with management of the CFI Fund or otherwise.
6.8 Litigation. No litigation, claim, action or proceeding is
----------
pending or, to the knowledge of CFI, threatened against or relating to CFI or
the CFI Fund, before any court or governmental or regulatory authority seeking
injunctive relief or monetary damages which, if adversely determined, would
reasonably be expected to have material adverse effect on the Reorganization or
on the operations or financial position of the CFI Fund. To the knowledge of
CFI, CFI is not under investigation for violation of any law or regulation
related to the business or operations of the CFI Fund.
6.9 Regulatory Compliance. CFI and the CFI Fund have all permits,
----------------------
licenses, permits, approvals, authorizations and registrations required by any
federal, state and local laws, authorities and agencies in connection with the
operation of the CFI Fund's business as presently conducted and the ownership of
its assets ("CFI Fund Regulatory Approvals"), except where the lack of which
would reasonably be expected to have a material adverse effect on the CFI Fund.
All such CFI Fund Regulatory Approvals are in full force and effect, and to the
knowledge of CFI, no suspension or cancellation of any of them is threatened.
6.10 Information in Registration Statement on Form N-14. The
--------------------------------------------------
Registration Statement, including the Proxy Materials, when effective, shall
comply in all material respects with the provisions of the Securities Act, the
Exchange Act, the 1940 Act and the regulations thereunder, and shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statement therein, in
light of the circumstances under which such statement was made, not misleading;
provided however, that no representation or warranty is made with respect to
information regarding CVIT or the CVIT Fund provided in writing by or on behalf
of either of them for inclusion in the Proxy Materials.
6.11 Certain Additional Representations and Warranties as to the
-----------------------------------------------------------
CFI Fund.
- --------
(a) The investment advisory agreement, sub-advisory
agreement, underwriting agreement and distribution plan to which the CFI Fund is
a party or is subject are in full force and effect and will remain in full force
and effect through the Closing Date, and were duly approved and comply in all
respects with the 1940 Act, the Exchange Act, the Advisers Act, and the rules
and regulations of the NASD.
(b) CFSC is the principal underwriter and investment adviser
for the CFI Fund. To the knowledge of CFI, CFSC is and has been (i) duly
registered or licensed as broker-dealer under the Exchange Act and the
securities laws of each state or other jurisdiction wherein the nature of its
activities in connection with CFI requires such registration or licensing,
(ii) a member in good standing of the NASD, (iii) a member in good standing in
the Securities Investors Protection Corporation, with all assessments due
thereto having been paid, or is not required to be such a member; and (iv) duly
registered as an investment adviser under the Advisers Act.
(c) There are no judgments, special consent judgments or SEC
orders on or with regard to CFI or the CFI Fund or, to the knowledge of CFI,
with regard to its adviser, distributor, administrator, transfer agent or
custodian, currently in effect which have had or would reasonably be expected to
have a material adverse effect on the business or operations of the CFI Fund as
presently conducted. All orders of exemption issued to CFI or the CFI Fund, by
any regulatory agency, including the SEC and the Internal Revenue Service, which
are necessary for the conduct of the business of CFI or the CFI Fund have been
obtained and are currently in full force and effect, no proceeding has been
commenced to revoke any such order and, to the knowledge of CFI, no such
proceeding is contemplated by any such regulatory agency.
(d) CFI is, and will continue to be through the Closing Date,
duly registered with the SEC as an open-end management investment company under
the 1940 Act and, with respect to the CFI Fund, is in material compliance with
the 1940 Act, and the SEC regulations promulgated thereunder, including the
requirements to file semi-annual or annual reports with the SEC. The
prospectuses, statements of additional information and, as applicable, sales
materials of CFI on behalf of the CFI Fund have been duly filed with the SEC,
applicable state securities authorities and the NASD (where required to be so
filed). CFI on behalf of the CFI Fund has filed with the SEC and other
applicable federal or state agencies or authorities such notices or reports
required under applicable federal or state laws, rules or regulations for the
sale of its shares, the conduct of its business or the ownership of its assets,
except, in each case, where the failure to file any such notice or report would
not reasonably be expected to have a material adverse effect on the CFI Fund.
(e) [INTENTIONALLY OMITTED.]
(f) Shares of the CFI Fund have been duly registered under
the Securities Act by means of a registration statement (or post-effective
amendment thereto) on Form N-1A, such registration statement has become
effective under the Securities Act, no stop order suspending the effectiveness
of such registration statement has been issued, no proceedings for that purpose
have been instituted or threatened by the SEC and such registration statement
has remained and continues to remain effective. Such registration statement
has, at all times when a prospectus with respect to the securities to which
such registration statement relates has been required to be delivered, complied
in all material respects with the requirements of the Securities Act and the
1940 Act, and such registration statement, with respect to the CFI Fund has not
included at any time any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All proxy statements, supplements, and other reports, documents
or other material relating to the CFI Fund filed with the SEC on or after
January 1, 2002 (i) were prepared in all materials respects in accordance with
the applicable requirements of the Securities Act, the Exchange Act, the 1940
Act, and the rules and regulations under each of them, as applicable (ii) as of
their respective dates did not contain any untrue statement of a material fact,
and (iii) as of their respective dates did not omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(g) The audited annual financial statements listed on Sched-
ule 6.11(g) attached hereto with respect to the CFI Fund for all periods on or
after October 1, 2001 present fairly in all material respects the CFI Fund's
financial position as of the relevant dates described therein and results of its
operations and changes in its net assets for the periods described therein.
(h) The independent public accountants for the CFI Fund have
been selected and ratified in accordance with the applicable provisions of the
1940 Act.
(i) CFI has, and up to and including the Closing Date will
have, on behalf of the CFI Fund, properly prepared, executed and timely filed,
or caused to be timely filed a proper request for extension with respect to, all
federal, state and local tax returns for income, franchise, sales, withholding,
excise and other taxes applicable to it. All taxes, assessments, fees and other
governmental charges owed by the CFI Fund (whether or not shown on any returns)
have been paid. All of such returns are complete and accurate in all material
respects and have been prepared in accordance with all applicable legal
requirements. No material tax liabilities, disallowances or assessments
relating to the business or assets of the CFI Fund have been assessed or
proposed, and CFI is not aware of any reasonable basis for any such assessment.
No tax return filed on behalf of the CFI Fund is currently being audited by the
Internal Revenue Service or by any state or local tax authorities. The reserves
and provisions, if any, for taxes on the books of the CFI Fund are adequate for
the payment of all taxes for the purposes and periods to which they pertain.
Without in any way limiting the representations and warranties set forth above
or in other Sections of this Agreement, the CFI Fund qualifies as a "regulated
investment company" under Section 851 (Subchapter M) of the Code, and has so
qualified during its entire existence.
6.12 Representations Regarding the Reorganization.
--------------------------------------------
(a) CFI has no plan or intention to reacquire any of the
shares of the CFI Fund issued in the Reorganization, except to the extent
required by the 1940 Act to redeem any of such shares presented for redemption.
(b) The CFI Fund has no plan or intention to sell or
otherwise dispose of any of the CVIT Fund Assets to be acquired in the
Reorganization pursuant to Section 2.1 hereof, other than in the ordinary course
of its business and to the extent necessary to maintain its status as a
"regulated investment company" under the Code.
(c) Following the Reorganization, the CFI Fund intends to
continue the "historic business" of the CVIT Fund (within the meaning of
Section 1.368-1(d) of the Income Tax Regulations under the Code).
6.13 Undisclosed Liabilities. The CFI Fund does not have any
-----------------------
liabilities, except for (a) liabilities reflected in the calculation of the CFI
Fund's net asset value or (b) ordinary operating liabilities of the CFI Fund
(including without limitation liabilities associated with securities
transactions subject to settlement and contractual liabilities) that are not
required under generally accepted accounting principles to be included in the
calculation of the CFI Fund's net asset value.
6.14 Certain Disqualifications. Neither CFI nor, to CFI's
--------------------------
knowledge, any "affiliated person" of CFI has been convicted of any felony or
misdemeanor, described in Section 9(a)(1) of the 1940 Act, nor, to CFI's
knowledge has any affiliated person of CFI been the subject, or presently is the
subject, of any proceeding or investigation with respect to any disqualification
- -------
that would be a basis for denial, suspension or revocation of registration as an
investment adviser under Section 203(e) of the Investment Advisers Act or Rule
206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the Exchange
Act, or for disqualification as an investment adviser, employee, officer or
director of an investment company under Section 9 of the 1940 Act.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF CVIT
The obligations of CVIT under this Agreement are, at the option of CVIT,
subject to the fulfillment (or waiver by CVIT) at or prior to the Closing Date
of each of the following conditions:
7.1 Accuracy of Representations, Warranties and Covenants. The
-----------------------------------------------------
representations and warranties of CFI set forth in Section 6 hereof shall be
true and correct in all material respects as of the date when made and as of the
Closing Date, except (i) for changes contemplated or permitted by this Agreement
and (ii) for those representations and warranties that address matters only as
of a particular date (which shall be true and correct in all material respects
as of such date). CFI shall have duly performed and complied in all material
respects with all agreements, covenants and conditions required by this Agree-
ment to be performed or complied with by it prior to or on the Closing Date.
CFI shall have delivered to CVIT a certificate of its President dated as of the
Closing Date to the effect set forth in this Section 7.1.
7.2 Consummation of Agreement Between Advisers. The transactions
------------------------------------------
described in the Purchase Agreement by and between CFSC and Wright Investors,
dated March 13, 2003, shall be consummated on the Closing Date concurrent with
the consummation of the transactions described in this Agreement.
7.3 Approval of Legal Matters by Counsel. There shall have been
--------------------------------------
furnished to counsel for the CVIT, certified copies of such corporate records of
CFI relating to the CFI Fund and copies of such documents as such counsel may
reasonably have requested. All legal matters and proceedings in connection with
this Agreement and the transactions contemplated hereby shall be reasonably
satisfactory to counsel for CVIT.
7.4 Approval by CVIT Fund Shareholders. All necessary approvals
----------------------------------
of the shareholders of the CVIT Fund with respect to the Reorganization under
this Agreement shall have been obtained. The CVIT Fund Shareholder Meeting
shall have been duly called and held in accordance with the provisions of the
1940 Act, Massachusetts law and the declaration of trust and bylaws of CVIT,
including compliance with the notice and quorum requirements thereunder, and at
such meeting this Agreement and the Reorganization shall have been approved by
the requisite vote of the CVIT Fund Shareholders in accordance with the
provisions of the declaration of trust and by-Laws of CVIT (the "Required CVIT
Fund Shareholder Vote"). Notwithstanding anything herein to the contrary,
neither party hereto may waive the conditions set forth in this Section 7.4.
7.5 Receipt of Closing Documents. CVIT shall have received all of
----------------------------
the closing documents referred to in Section 9.2 hereof.
7.6 Registration Statement. The Registration Statement on Form N-
----------------------
14 shall have become effective under the Securities Act, no stop orders
suspending the effectiveness thereof shall have been issued, and no
investigation or proceeding for that purpose shall have been instituted or
threatened under the Securities Act.
7.7 Tax Opinion. CVIT shall have received an opinion from Quarles
-----------
& Brady LLP (based on such representations from CFI in substantially the form
attached hereto as Exhibit B and from CVIT in substantially the form attached
---------
hereto as Exhibit C), addressed to CVIT and CFI, which opinion may be relied
---------
upon by CVIT and the CVIT Fund Shareholders, dated as of the Closing Date, with
respect to the federal income tax consequences of the Reorganization described
in Exhibit A. Notwithstanding anything herein to the contrary, neither party
---------
hereto may waive the conditions set forth in this Section 7.7.
7.8 No Adverse Proceedings. There shall not have been pending on
----------------------
the Closing Date any action, suit or other proceeding seeking to restrain or
enjoin the Reorganization. Notwithstanding anything herein to the contrary,
neither party hereto may waive the conditions set forth in this Section 7.8.
8. Conditions Precedent to Obligations of CFI
The obligations of CFI under this Agreement are, at its option, subject to
the fulfillment (or waiver by CFI) at or prior to the Closing Date of each of
the following conditions:
8.1 Accuracy of Representations, Warranties and Covenants. The
--------------------------------------------------------
representations and warranties of CVIT set forth in Section 5 hereof shall be
true and correct in all material respects as of the date when made and as of the
Closing Date, except (i) for changes contemplated or permitted by this Agreement
and (ii) for those representations and warranties that address matters only as
of a particular date (which shall be true and correct in all material respects
as of such date). CVIT shall have duly performed and complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it prior to or on the Closing Date. CVIT shall
have delivered to CFI on the Closing Date a certificate of its President or Vice
President dated as of the Closing Date to the effect set forth in this
Section 8.1.
8.2 Consummation of Agreement Between Advisers. The transactions
-------------------------------------------
described in the Purchase Agreement by and between CFSC and Wright Investors,
dated March 13, 2003, shall be consummated on the Closing Date concurrent with
the consummation of the transactions described in this Agreement.
8.3 Approval of Legal Matters by Counsel. There shall have been
------------------------------------
furnished to counsel for CFI certified copies of such corporate and business
records of the CVIT Fund and copies of such documents as such counsel may
reasonably have requested. All legal matters and proceedings in connection with
this Agreement and the transactions contemplated hereby and thereby shall have
been reasonably satisfactory to counsel for CFI.
8.4 Approval by CVIT Fund Shareholders. The Required CVIT Fund
-----------------------------------
Shareholder Vote shall have been obtained. Notwithstanding anything herein to
the contrary, neither party hereto may waive the condition set forth in this
Section 8.4.
8.5 Receipt of Closing Documents. CFI shall have received all of
----------------------------
the closing documents referred to in Section 9.1 hereof.
8.6 Registration Statement. The Registration Statement shall have
----------------------
become effective under the Securities Act, no stop order suspending the
effectiveness thereof shall have been issued and no investigation or proceeding
for that purpose shall have been instituted or threatened under the Securities
Act.
8.7 Tax Opinion. CFI shall have received an opinion from
------------
Quarles & Brady LLP (based on such representations from CFI in substantially the
form attached hereto as Exhibit B and from CVIT in substantially the form
attached hereto as Exhibit C) addressed to CFI and CVIT, and dated as of the
Closing Date, with respect to the federal income tax consequences of the
Reorganization described in Exhibit A. Notwithstanding anything herein to the
contrary, neither party hereto may waive the conditions set forth in this
Section 8.7.
8.8 No Adverse Proceedings. There shall not have been pending on
----------------------
the Closing Date any action, suit or other proceeding seeking to restrain or
enjoin the Reorganization. Notwithstanding anything herein to the contrary,
neither party hereto may waive the conditions set forth in this Section 8.8.
8.9 Statement of CVIT Fund Assets and Liabilities. The CVIT Fund
----------------------------------------------
shall have delivered to CFI a statement of CVIT Fund Assets and the CVIT Fund
Liabilities, together with a list of the CVIT Fund's securities and other assets
showing the respective adjusted bases and holding periods thereof for income tax
purposes, as of the Closing Date, certified by the Treasurer of CVIT.
8.10 Certain CVIT Fund Assets. At the close of business on the
-------------------------
Closing Date, the CVIT Fund Assets to be acquired by the CFI Fund shall include
no assets that the CFI Fund may not legally acquire.
8.11 Shareholders List. The CVIT Fund shall have delivered to the
-----------------
CFI Fund a list of the CVIT Fund Shareholders and the number of shares of
beneficial interest of the CVIT Fund they held as of the close of business on
the Closing Date, certified by the CVIT Fund's transfer agent.
9. CLOSING DOCUMENTS
9.1 Documents to be Delivered to CFI. CVIT agrees to deliver to
---------------------------------
CFI on the Closing Date the following:
(a) Bills of Sale, Assignments and Transfers. Good and
--------------------------------------------
sufficient bills of sale, assignments, instruments of conveyance, and other
instruments of transfer, duly executed by CVIT, in the forms reasonably
satisfactory to CFI and its counsel, with such reasonable and customary
covenants or warranties as shall be necessary to assign and transfer to and vest
in the CFI Fund clear title to all the CVIT Fund Assets, free and clear of any
and all liabilities, liens, claims and encumbrances except those specifically
permitted by this Agreement.
(b) Certificate of Secretary. Certificate of the Secretary
-------------------------
of CVIT dated as of the Closing Date certifying (i) the accuracy and
effectiveness of the declaration of trust of CVIT, (ii) the accuracy and
effectiveness of bylaws of CVIT, (iii) the adoption, accuracy and effectiveness
of board and shareholder resolutions contemplated hereby, and (iv) the
incumbency of certain officers of CVIT and the genuineness of the specimen
signatures of those officers of CVIT executing documents.
(c) Certificate of Good Standing. Certificate of Good
-------------------------------
Standing (or comparable certification) regarding CVIT issued as of a recent date
(within 30 days of the Closing Date) by the Massachusetts Secretary of State.
(d) Certificate of Tail Insurance. A certificate of
---------------------------------
insurance certifying that CVIT has obtained the Tail Insurance Policy meeting
the requirements of Section 4.10 of this Agreement.
(e) Other Documents. Such other customary certificates
----------------
(similar to the certificate of good standing of CVIT in its jurisdiction of
incorporation and certificates as to the incumbency of officers and the adoption
of authorizing resolutions) as shall reasonably be required by CFI and its
counsel.
9.2 Documents to be Delivered to CVIT. CFI agrees to deliver to
----------------------------------
CVIT on the Closing Date the following:
(a) Officer's Certificate. Certificate of the President of
---------------------
CFI, dated as of the Closing Date, certifying that the conditions precedent set
forth in Section 7.1 have been fulfilled.
(b) Assumption Agreement. An assumption agreement duly exe-
--------------------
cuted by CFI on behalf of the CFI Fund in the form reasonably satisfactory to
CVIT and its counsel, with such reasonable and customary covenants and
warranties as shall be necessary for the CFI Fund to assume all the CVIT Fund
Liabilities.
(c) Certificate of Secretary of CFI. Certificate of the
----------------------------------
Secretary of CFI dated as of the Closing Date certifying (i) the accuracy and
effectiveness of articles of incorporation of CFI, (ii) the accuracy and
effectiveness of bylaws of CFI, (iii) the adoption, accuracy and effectiveness
of the board resolutions contemplated hereby, and (iv) the incumbency of certain
officers of CFI and genuineness of the specimen signatures of those officers of
CFI executing documents.
(d) Issuance of Shares. The CFI Fund Shares to be issued
-------------------
pursuant hereto.
(e) Good Standing Certificate. Certificate of Good Standing
-------------------------
regarding CFI issued as of a recent date by the Maryland Department of
Assessments and Taxation.
(f) Other Documents. Such other customary certificates
----------------
(similar to the certificate of good standing of CVIT in its jurisdiction of
incorporation and certificates as to the incumbency of officers and the adoption
of authorizing resolutions) as shall reasonably be required by CVIT and its
counsel.
10. Further Agreements
10.1 Costs and Expenses. Each party will be responsible for all
-------------------
costs, fees, and expenses it incurs in connection with this Agreement and the
transactions contemplated hereby; provided, however, that the parties understand
that CFSC and Wright Investors have agreed to a sharing arrangement for their
payment of all such expenses pursuant to the terms of the Purchase Agreement of
even date herewith by and between them. Each of the parties hereto represents
and warrants that it has not incurred any obligation or liability, contingent or
otherwise, for broker's, finder's or adviser's fees in connection with the
transactions provided for herein and each agrees to hold the other harmless from
and against all such liability arising out of contracts, express or implied,
which may be asserted against the non-contracting parties.
10.2 Recommendation and Solicitation of Shareholder Vote. The
-------------------------------------------------------
Board of Trustees of CVIT will recommend that shareholders of the CVIT Fund
approve the Reorganization and shall use reasonable efforts (which need not
include the expenditures of any monies) to solicit the Required CVIT Fund
Shareholder Vote; provided, however, that the Board of Trustees of CVIT shall
have no obligation to make any such recommendation or to exercise any such
solicitation efforts if circumstances should develop that, in the good faith
opinion of such Board as reflected by resolution duly adopted by such Board,
make proceeding with the Reorganization not in the best interests of the
shareholders of the CVIT Fund.
10.3 Information to Be Furnished. CFI will furnish CVIT with
-----------------------------
copies of all written comments or the substance of oral communications received
from the staff of the SEC with regard to the Registration Statement, and the
parties will cooperate with each other in revising, if necessary, the
Registration Statement to comply with such comments. CFI shall not file the
Registration Statement or any amendment without the prior consent of CVIT or its
counsel.
10.4 Conduct of Business of the CVIT Fund and the CFI Fund. From
-------------------------------------------------------
and after the date of this Agreement and through the Closing Date (or such
earlier date as this Agreement may be terminated in accordance with
Section 11.1), CVIT shall, with regard to the CVIT Fund: (a) maintain its
books, accounts and records in accordance with generally accepted accounting
principles and practices consistently applied; (b) materially comply with all
laws applicable to the conduct of its business; (c) conduct its business only in
the usual, regular and ordinary course and in substantially the same manner as
heretofore conducted, and not introduce any method of operation in respect of
such business, except in a manner consistent with prior practice; (d) without
the written consent of CFI, make no change in its declaration of trust or bylaws
which would materially affect the CVIT Fund; (e) use its commercially reasonable
efforts to preserve its business organization intact, and to preserve the
goodwill of the CVIT Fund shareholders and others having business relations with
it; (f) not take or fail to take any action which would, or with the passage of
time could, jeopardize its qualification as a "regulated investment company"
under Section 851 of the Code; and (g) except as contemplated by this Agreement,
not enter into any other transactions other than in the ordinary course of
business. Notwithstanding the foregoing or anything else in this Agreement to
the contrary, (i) CVIT with respect to the CVIT Fund shall be permitted to take
all actions or inactions which are required or prohibited by this Agreement and
(ii) the parties recognize that the CVIT Fund intends to cease offering its
shares to the public and not to effect certain registrations otherwise required
in connection therewith.
From and after the date of this Agreement and through the Closing
Date (or such earlier date as this Agreement may be terminated in accordance
with Section 11.1), CFI shall with regard to the CFI Fund: (a) maintain its
books, accounts and records in accordance with generally accepted accounting
principles and practices consistently applied; (b) materially comply with all
laws applicable to the conduct of its business; (c) conduct its business only in
the usual, regular and ordinary course and in substantially the same manner as
heretofore conducted, and not introduce any method of operation in respect of
such business, except in a manner consistent with prior practice; (d) without
the written consent of CVIT, make no change in its articles of incorporation or
bylaws that would materially affect the CFI Fund; (e) use its commercially
reasonable efforts to preserve its business organization intact, and to preserve
the goodwill of its investors and others having business relations with it;
(f) not take or fail to take any action which would, or with the passage of time
could, jeopardize its qualification as a "regulated investment company" under
Section 851 of the Code; and (g) except as contemplated by this Agreement, not
enter into any other transactions that may have a material adverse effect on the
CFI Fund or the Reorganization, other than in the ordinary course of business.
10.5 Nonsurvival of Representations, Warranties or Covenants.
--------------------------------------------------------------
Except as set forth in Sections 10.6, 10.7, 10.8 below and except with respect
to (i) the opinion of Quarles & Brady LLP with respect to the federal income tax
consequences of the Reorganization and (ii) the assumption agreement delivered
by CFI to CVIT, none of the representations, warranties or covenants in this
Agreement or in any certificate or instrument delivered pursuant to this
Agreement shall survive the Closing Date and no party shall, therefore, have any
recourse therefor against any other party in connection therewith. This Sec-
tion shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Closing Date.
10.6 Obligations of Parties.
----------------------
(a) CFI and CVIT hereby acknowledge and agree that the CFI
Fund is a separate investment portfolio of CFI, that CFI is executing this
Agreement on behalf of the CFI Fund, and that, subject to Section 10.1, any
amounts payable by CFI under or in connection with this Agreement shall be
payable solely from the revenues and assets of the CFI Fund.
(b) CFI and CVIT hereby acknowledge and agree that the CVIT
Fund is a separate investment portfolio of CVIT, that CVIT is executing this
Agreement on behalf of the CVIT Fund, and that, subject to Section 10.1, any
amounts payable by CVIT under or in connection with this Agreement shall be
payable solely from the revenues and assets of the CVIT Fund.
10.7 Final Tax Returns and Forms 1099 of the CVIT Fund.
-------------------------------------------------
After the Closing, CVIT shall prepare, or shall cause its agents to
prepare, any federal, state or local tax returns, including any Forms 1099,
required to be filed by CVIT with respect to the CVIT Fund's final taxable year
and shall further cause such tax returns and Forms 1099 to be duly filed with
the appropriate taxing authorities.
10.8 Cooperation and Exchange of Information. CFI and CVIT will
----------------------------------------
provide each other and their respective representatives with such cooperation
and information as either of them reasonably may request of the other in filing
any tax returns, amended return or claim for refund, determining a liability for
taxes or a right to a refund of taxes or participating in or conducting any
audit or other proceeding in respect of taxes. Such cooperation and information
shall include providing copies of relevant tax returns or portions thereof,
together with accompanying schedules and related work papers and documents
relating to rulings or other determinations by taxing authorities. Each party
shall make its employees and officers available on a mutually convenient basis
to provide explanations of any documents or information provided hereunder to
the extent, if any, that such party's employees are familiar with such documents
or information. Each party will retain for a period of six (6) years following
the Closing all returns, schedules and work papers and all material records or
other documents relating to tax matters of the CVIT Fund and the CFI Fund for
its taxable period first ending after the Closing and for all prior taxable
periods. Any information obtained under this Section 10.8 shall be kept
confidential except as may be otherwise necessary in connection with the filing
of returns or claims for refund.
11. TERMINATION
11.1 General Provisions. This Agreement may not be terminated at
------------------
any time prior to the Closing Date by any party, except that this Agreement may
be terminated:
(a) By mutual written consent of the parties hereto:
(b) By either CFI, on the one hand, or CVIT, on the other
hand, by written notice to the other, if the Closing shall not have occurred on
or before June 25, 2003, or such later date to which the parties shall have
extended this Agreement by mutual written consent;
(c) By CFI, if there has been a misrepresentation, breach of
warranty or failure to perform any agreement or covenant on the part of CVIT in
any of its representations, warranties, agreements or covenants set forth in
this Agreement resulting in the failure of any condition in Section 8 hereof;
(d) By CVIT, if there has been a misrepresentation, breach of
warranty or failure to perform any agreement or covenant on the part of CFI in
any of its representations, warranties, agreements or covenants set forth in
this Agreement resulting in the failure of any condition in Section 7 hereof;
(e) By resolution of the Board of Trustees of CVIT if
circumstances should develop that, in the good faith opinion of such Board, make
proceeding with this Agreement not in the best interests of the CVIT Fund's
shareholders; and
(f) By resolution of the Board of Directors of CFI if
circumstances should develop that, in the good faith opinion of such Board, make
proceeding with this Agreement not in the best interests of the CFI Fund's
shareholders.
Any termination of this Agreement pursuant to this Section 11.1
shall be by notice in writing to the other party, and shall be effective upon
the terminating party's delivery of such notice to the breaching party; provided
that, in the event termination is pursuant to Clause 11.1(c) or 11.1(d), then
the termination shall not become effective unless the breaching party fails to
cure the breach (if curable) specified in the notice to the reasonable
satisfaction of the terminating party within a reasonable period of time
specified in the notice, which in any event need not be more than thirty (30)
days.
11.2 Effect of Termination. In the event of the termination of
----------------------
this Agreement pursuant to Section 11.1 hereof or if the Closing does not occur
by reason of any of the conditions in Sections 7 and 8 hereof not being
satisfied, then there shall be no other liability on the part of any party (or
its trustees, directors, officers, agents or shareholders) to the other (or its
trustees, directors, officers, agents or shareholders); provided, however, that
such termination shall not preclude liability attaching to a party who has
caused the termination hereof by willful act or willful failure to act in
violation of the terms and provisions of this Agreement.
12. AMENDMENT
This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
13. WAIVER
Any terms or provisions of this Agreement may be waived in writing at any
time by the party which is entitled to the benefits thereof, or their respective
counsel. The failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect such party's right
at a later time to enforce the same. No waiver by any party of a condition or
of the breach of any term, covenant, representation or warranty of this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed to be or construed as a further or continuing waiver of any such
condition or beach or a waiver of any other condition or of the breach of any
other term, covenant, representation or warranty of this Agreement.
14. MISCELLANEOUS PROVISIONS
14.1 Headings. The Article and Section headings contained in this
--------
Agreement will have reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14.2 Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of Wisconsin, except to the
extent affected by the Massachusetts Business Trust Law (M.GL.CH182) and the
1940 Act.
14.3 Notices. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given: (a) when delivered personally; (b) upon receipt of a transmission
confirmation (with a confirming copy sent by overnight courier) if sent by
facsimile or like transmission; (c) on the next business day when sent by
Federal Express, United Parcel Service, Express Mail or other reputable
overnight courier; and (d) on the second business day when mailed by registered
or certified mail (return receipt requested). All such communications shall be
addressed to the appropriate party at the following address or fax number (or
at such other address or fax number for a party as shall be specified by such
party by like notice):
If to CFI or the CFI Fund at: The Catholic Funds, Inc.
1100 West Wells Street
Milwaukee, Wisconsin 53233
Attention: President
Fax: (414) 278-6558
With a copy to: Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Fredrick G. Lautz
Fax: (414) 978-8900
If to CVIT Catholic Values Investment Trust
or the CVIT Fund: Wright International Financial Center
440 Wheelers Farm Road
Milford, Connecticut 06460
Attention: A.M. Moody III
Fax: (203) 783-4463
With a copy to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Leonard A. Pierce
Fax: (617) 526-5000
Written notice given by any other method shall be deemed effective only when
actually received by the party to whom given. Either party may give any notice,
request, demand, claim, or other communication hereunder using any other means
(including personal delivery, expedited courier, messenger service, telex,
ordinary mail, or electronic mail), but no such notice, request, demand, claim
or other communication shall be deemed to have been duly given unless and until
it actually is received by the party for whom it is intended.
14.4 Further Assurance. Each of the parties hereto hereby agrees
-----------------
that after the Closing Date it will from time to time, upon the reasonable
request of another party hereto, take such further action as the other may
reasonably request to carry out the transfer and sale of assets contemplated by
this Agreement, including, without limitation, the execution and delivery of all
further evidences and instruments of transfer and assignment.
14.5 Execution and Counterparts. This Agreement may be executed in
--------------------------
any number of counterparts, each of which shall be deemed an original and all of
which shall together constitute one agreement.
14.6 Miscellaneous. This Agreement (a) constitutes the entire
-------------
agreement and supersedes all other prior agreements and undertakings, both
written and oral, between the parties, with respect to the subject matter
hereof; (b) is not intended to confer upon any other person any rights or
remedies hereunder, it being expressly agreed that there are no third party
beneficiaries of this Agreement; (c) shall be binding upon and inure to the
benefit of the CFI Fund and the CVIT Fund, and their respective permitted
successors and assigns; and (d) may not be assigned by any party without the
prior written consent of the other.
14.7 Publicity. Neither the parties to this Agreement nor their
---------
respective directors, trustees, officers, stockholders, employees or agents
shall issue any press release or other announcement with respect to this
Agreement, or otherwise make any disclosures relating thereto to the press
without the prior consent of the other parties, which consent shall not be
unreasonably withheld; provided, however, that such consent shall not be re-
quired where such release, announcement or disclosure is required by applicable
law or the rules or regulations of a securities exchange, other self-regulatory
authority or governmental agency.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
CATHOLIC VALUES INVESTMENT TRUST
(ON BEHALF OF THE CATHOLIC VALUES INVESTMENT
TRUST EQUITY FUND)
By: /s/Peter M. Donovan
----------------------------------------
Peter M. Donovan, President
THE CATHOLIC FUNDS, INC.
(ON BEHALF OF THE CATHOLIC EQUITY FUND)
By: /s/Theodore F. Zimmer
----------------------------------------
Theodore F. Zimmer, President
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL __, 2003
FOR THE REORGANIZATION
OF THE
CATHOLIC VALUES INVESTMENT TRUST EQUITY FUND
(A SERIES OF CATHOLIC VALUES INVESTMENT TRUST)
INTO
CATHOLIC EQUITY FUND
(A SERIES OF THE CATHOLIC FUNDS, INC.)
THE CATHOLIC FUNDS, INC.
1100 WEST WELLS STREET
MILWAUKEE, WISCONSIN 53233
This Statement of Additional Information is not a prospectus, and should be
read in conjunction with the Proxy Statement/Prospectus dated April __, 2003,
relating to the reorganization of the Catholic Values Investment Trust Equity
Fund ("CVIT Fund"), a mutual fund series of Catholic Values Investment Trust
("CVIT"), into the Catholic Equity Fund, a mutual fund series of The Catholic
Funds, Inc. ("The Catholic Funds"). In connection with the Reorganization, the
Catholic Equity Fund would acquire substantially all of the assets of the CVIT
Fund and assume the CVIT Fund's liabilities that are reflected in the
computation of its net asset value and certain other ordinary operating
expenses. In exchange, the Catholic Equity Fund would issue to the CVIT Fund
Class C and Class I shares of the Catholic Equity Fund having an aggregate net
asset value equal to the aggregate value of the assets (net of the liabilities)
transferred by the CVIT Fund. The CVIT Fund would distribute the shares of the
Catholic Equity Fund so received to its shareholders on a pro rata basis, and
the CVIT Fund subsequently would be liquidated and discontinued as a separate
series of CVIT. As a result of the Reorganization, shareholders of the CVIT
Fund would become shareholders of the Catholic Equity Fund, with the holders of
Individual Shares of the CVIT Fund receiving Class C shares of the Catholic
Equity Fund and the holders of Institutional Service Shares of the CVIT Fund re-
ceiving Class I shares of the Catholic Equity Fund. The aggregate net asset
value of the shares of the Catholic Equity Fund received by each shareholder of
the CVIT Fund in the Reorganization would be equal, immediately following the
Reorganization, to the aggregate net asset value of the shares of the CVIT Fund
held by such shareholder immediately prior to the Reorganization. The
Reorganization is expected to be tax-free to the CVIT Fund shareholders.
The information otherwise required to be set forth in this Statement of
Additional Information is included in: (i) the Statement of Additional
Information of the Catholic Equity Fund, dated January 31, 2003 (the "Catholic
Equity Fund SAI"); (ii) the Statement of Additional Information of the CVIT
Fund, dated May 1, 2002 (the "CVIT SAI"); (iii) the Annual Report to
Shareholders of the Catholic Equity Fund for the year ended September 30, 2002
(the "Catholic Equity Fund Annual Report"); and (iv) the Annual Report to
Shareholders of the CVIT Fund for the year ended December 31, 2002 (the "CVIT
Fund Annual Report"). The Catholic Equity Fund SAI, the CVIT Fund SAI, the
Catholic Equity Fund Annual Report and the CVIT Fund Annual Report are incorpo-
rated by reference herein.
A copy of the Proxy Statement/Prospectus, the Prospectus of the Catholic
Equity Fund, dated January 31, 2003, the Catholic Equity Fund SAI and the
Catholic Equity Annual Report may be obtained free of charge by writing to
Catholic Financial Services Corporation, 1100 West Wells Street, Milwaukee,
Wisconsin 53233, or by calling 1-877-222-2402. A copy of the Prospectus of the
CVIT Fund, dated May 1, 2002 (as supplemented), the CVIT Fund SAI and the CVIT
Fund Annual Report may be obtained free of charge by writing to CVIT, c/o Wright
Investors' Service Distributors, Inc., 440 Wheelers Farms Road, Milford,
Connecticut 06460, or by calling 1-888-074-4486.
ADDITIONAL INFORMATION ABOUT THE CATHOLIC FUNDS AND
THE CATHOLIC EQUITY FUND
For additional information about The Catholic Funds and the Catholic Equity
Fund, please see the Catholic Equity Fund SAI, which is incorporated by
reference herein.
ADDITIONAL INFORMATION ABOUT CVIT AND
THE CVIT FUND
For additional information about CVIT and the CVIT Fund, please see the
CVIT Fund SAI, which is incorporated by reference herein.
EXPERTS
The audited annual financial statements of the Catholic Equity Fund
incorporated by reference into this Statement of Additional Information have
been audited by PricewaterhouseCoopers LLP, independent public accountants, as
indicated in their report with respect thereto, which also is incorporated by
reference into this Statement of Additional Information, in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
The audited annual financial statements of the CVIT Fund incorporated by
reference into this Statement of Additional Information have been audited by
Deloitte & Touche LLP, independent public accountants, as indicated in their
report with respect thereto, which also is incorporated by reference into this
Statement of Additional Information, in reliance upon the authority of said firm
as experts in accounting and auditing in giving said report.
HISTORICAL FINANCIAL STATEMENTS
CATHOLIC EQUITY FUND
The following audited historical financial statements and notes thereto of
the Catholic Equity Fund, together with the Report of the Independent
Accountants thereon, are incorporated herein by reference from the Catholic
Equity Fund Annual Report:
(1) Statement of Assets and Liabilities for the Catholic Equity Fund as of
September 30, 2002;
(2) Statement of Operations for the Catholic Equity Fund for the year
ended September 30, 2002;
(3) Statements of Changes in Net Assets for the Catholic Equity Fund for
the years ended September 30, 2002 and September 30, 2001;
(4) Schedule of Investments of the Catholic Equity Fund as of
September 30, 2002;
(5) Financial Highlights for the Catholic Equity Fund; and
(6) Notes to Financial Statements.
CVIT FUND
The following audited historical financial statements and notes thereto of
the CVIT Fund, together with the Report of the Independent Accountants thereon,
are incorporated herein by reference from the CVIT Fund Annual Report:
(1) Statement of Assets and Liabilities for the CVIT Fund as of December
31, 2002;
(2) Statement of Operations for the CVIT Fund for the year ended December
31, 2002;
(3) Statements of Changes in Net Assets for the CVIT Fund for the years
ended December 31, 2002 and December 31, 2001;
(4) Schedule of Investments of the CVIT Fund as of December 31, 2002;
(5) Financial Highlights for the CVIT Fund; and
(6) Notes to Financial Statements.
PRO FORMA FINANCIAL STATEMENTS
Set forth below are the following unaudited pro forma financial statements:
(1) Unaudited Pro Forma Combining Statement of Assets and Liabilities for
the Catholic Equity Fund as of September 30, 2002 (assuming the
Reorganization had been consummated on such date);
(2) Unaudited Pro Forma Combining Statement of Operations for the Catholic
Equity Fund for the 12-month period ended September 30, 2002 (assuming
the Reorganization had been consummated on October 1, 2001);
(3) Unaudited Pro Forma Combining Schedule of Investments of the Catholic
Equity Fund as of September 30, 2002 (assuming the Reorganization had
been consummated on such date); and
(4) Notes to Pro Forma Financial Statements (Unaudited).
These unaudited pro forma financial statements should be read in conjunction
with, and are qualified in their entirety by, the historical financial
statements of the Catholic Equity Fund and CVIT Fund incorporated by reference
into this Statement of Additional Information. These unaudited pro forma
financial statements are intended for information purposes only, and are not
necessarily indicative of the future financial position or future results of the
Catholic Equity Fund.
UNAUDITED PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES FOR
THE CATHOLIC EQUITY FUND AND CATHOLIC VALUES INVESTMENT TRUST EQUITY FUND
AS OF SEPTEMBER 30, 2002
CATHOLIC VALUES THE CATHOLIC
INVESTMENT EQUITY FUND
THE CATHOLIC TRUST EQUITY PRO FORMA
EQUITY FUND FUND ADJUSTMENTS COMBINED
------------ --------------- ----------- -----------
ASSETS
- ------
Investments, at cost $17,348,566 $7,239,689 $ - $24,588,255
----------- ---------- ----------- -----------
Investments, at value $12,645,658 $6,277,592 $ - $18,923,250
Cash 2,990 66,898 - 69,888
Income receivable 18,663 7,692 - 26,355
Receivable for Fund shares sold 2,135 - - 2,135
Receivable from adviser 43,422 98,725 - 142,147
Other assets 33,976 - - 33,976
----------- ---------- ----------- -----------
TOTAL ASSETS 12,746,844 6,450,907 0 19,197,751
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
LIABILITIES
- -----------
Payable for investments purchased 1,911 - - 1,911
Accrued expenses and other liabilities 44,625 38,954 - 83,579
----------- ---------- ----------- -----------
TOTAL LIABILITIES 46,536 38,954 - 85,490
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
NET ASSETS $12,700,308 $6,411,953 $0 $19,112,261
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
NET ASSETS CONSIST OF:
- ----------------------
Paid in capital $19,351,424 $9,965,586 $- $29,317,010
Undistributed net investment income (loss) 59,541 (17,090) - 42,451
Undistributed net realized loss (2,007,749) (2,574,446) - (4,582,195)
Net unrealized depreciation on investments (4,702,908) (962,097) - (5,665,005)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
NET ASSETS $12,700,308 $6,411,953 $0 $19,112,261
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
CLASS A SHARES
- --------------
Net assets $2,865,775 N/A - $2,865,775
Shares authorized ($.001 par value) 100,000,000(1)<F9> 100,000,000
Shares issued and outstanding 442,072 - 442,072
Net asset value, redemption price and minimum
offering price per share $6.48 $6.48
Maximum offering price per share ($6.48/0.96) $6.75 $6.75
CLASS C SHARES
- --------------
Net assets $3,432 N/A $2,865,112 $2,868,544
Shares authorized ($.001 par value) 100,000,000(1)<F9> 100,000,000
Shares issued and outstanding 530 442,147 442,677
Net asset value and offering price per share $6.48 $6.48
CLASS I SHARES
- --------------
Net assets $9,831,101 N/A $3,546,841 $13,377,942
Shares authorized ($.001 par value) 100,000,000(1)<F9> 100,000,000
Shares issued and outstanding 1,514,717 546,599 2,061,316
Net asset value, redemption price and offering
price per share $6.49 $6.49
INDIVIDUAL SHARES
- -----------------
Net assets N/A $2,865,112 ($2,865,112) -
Shares authorized (no par value) unlimited
Shares issued and outstanding 378,206 (378,206) -
Net asset value, redemption price and offering $7.58 -
price per share
INSTITUTIONAL SERVICE SHARES
- ----------------------------
Net assets N/A $3,546,841 ($3,546,841) -
Shares authorized (no par value) unlimited
Shares issued and outstanding 456,148 (456,148) -
Net asset value, redemption price and offering $7.78 -
price per share
(1)<F9> Represents authorized shares of the Fund. Authorized shares are not
allotted to the separate classes.
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR
THE CATHOLIC EQUITY FUND AND CATHOLIC VALUES INVESTMENT TRUST EQUITY FUND
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2002
THE CATHOLIC
CATHOLIC VALUES EQUITY FUND
THE CATHOLIC INVESTMENT TRUST PRO FORMA
EQUITY FUND(1)<F10> EQUITY FUND ADJUSTMENTS COMBINED
------------------- ---------------- ----------- ------------
INVESTMENT INCOME
- -----------------
Dividend income $157,561(2)<F11> $125,401 $ - $282,962
Interest income 857 70 - 927
----------- ----------- -------- -----------
TOTAL INCOME 158,418 125,471 - 283,889
EXPENSES
Investment advisory fees 59,449 70,003 (4,794)(3)<F12> 124,658
Administration fee - 6,462 (6,462)(4)<F13> -
Advisory Board fees - 3,998 (2,998)(5)<F14> 1,000
Transfer agent fees and expenses 51,894 24,143 (9,600)(8)<F17> 66,437
Portfolio accounting fees 41,159 -(6)<F15> 9,208(8)<F17> 50,367
Federal and state registration fees 21,897 24,969 (19,269)(5)<F14> 27,597
Audit fees 20,096 23,746 (23,746)(5)<F14> 20,096
12b-1 fees - Class A 17,405 - - 17,405
12b-1 fees - Class C 5 - - 5
12b-1 fees - Individual Shares - 26,724 - 26,724
12b-1 fees - Institutional Service Shares - 14,171 (14,171)(7)<F16> -
Legal fees 11,749 6,229 (7,229)(5)<F14> 10,749
Printing and postage expenses 9,938 8,676 (3,633)(5)<F14> 14,981
Custody fees 5,672 60,720(6)<F15> (58,935)(8)<F17> 7,457
Directors' fees and expenses 1,935 15,463 (15,463)(5)<F14> 1,935
Organizational expense - 8,580 (8,580)(5)<F14> -
Other 7,312 9,380 (9,380)(5)<F14> 7,312
----------- ----------- -------- -----------
TOTAL EXPENSES 248,511 303,264 (175,052) 376,723
----------- ----------- -------- -----------
Less waivers and reimbursements by adviser (141,980) (149,516) 121,487 (170,009)
----------- ----------- -------- -----------
NET EXPENSES 106,531 153,748 (53,565) 206,714
----------- ----------- -------- -----------
NET INVESTMENT INCOME (LOSS) 51,887 (28,277) 53,565 77,175
----------- ----------- -------- -----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (957,717) (513,228) - (1,470,945)
Net change in unrealized appreciation/depreciation
on investments (3,719,227) (1,523,049) - (5,242,276)
----------- ----------- -------- -----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (4,676,944) (2,036,277) - (6,713,221)
----------- ----------- -------- -----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS ($4,625,057) ($2,064,554) $53,565 ($6,636,046)
----------- ----------- -------- -----------
----------- ----------- -------- -----------
(1)<F10> Effective at the close of business on April 2, 2002, The Catholic
Equity Fund acquired, through a non-taxable reorganization,
substantially all the assets of The Catholic Equity Income, Large-Cap
Growth and Disciplined Capital Appreciation Funds. The Catholic
Disciplined Capital Appreciation Fund was considered the accounting
survivor of the reorganization. Therefore, the information contained
in this statement reflects the operations of The Catholic Disciplined
Capital Appreciation Fund from October 1, 2001 through April 2, 2002
and The Catholic Equity Fund from April 3, 2002 through September 30,
2002.
(2)<F11> Net of $590 in foreign withholding taxes.
(3)<F12> The reduction in the advisory fee reflects the lower fee charged by
The Catholic Equity Fund's investment adviser, Catholic Financial
Services Corporation ("CFSC"), pursuant to the Investment Advisory
Agreement between CFSC and The Catholic Equity Fund.
(4)<F13> The decrease in administration fees reflects the fact that The
Catholic Equity Fund does not pay a separate administrative fee.
(5)<F14> The adjustments to advisory board fees, registration fees, audit fees,
legal fees, printing and postage expenses, directors' fees,
organizational expenses and other fees reflect the elimination of
duplicative costs or economies of scale.
(6)<F15> Custody fees include portfolio accounting fees.
(7)<F16> The decrease in 12b-1 fees reflects the fact that The Catholic Equity
Fund - Class I (into which the Institutional Services Shares are
merging) does not pay a 12b-1 fee.
(8)<F17> The adjustments to transfer agent fees, portfolio accounting fees and
custody fees reflect the elimination of duplicative costs as well as
the application of the fee arrangements with U.S. Bancorp Fund
Services, LLC and U.S. Bank, N.A.
UNAUDITED PRO FORMA COMBINING SCHEDULE OF INVESTMENTS FOR
THE CATHOLIC EQUITY FUND AND CATHOLIC VALUES INVESTMENT TRUST EQUITY FUND
AS OF SEPTEMBER 30, 2002
CATHOLIC THE CATHOLIC THE
VALUES CATHOLIC VALUES CATHOLIC
THE INVESTMENT EQUITY THE INVESTMENT EQUITY
CATHOLIC TRUST FUND CATHOLIC TRUST FUND
EQUITY EQUITY PRO FORMA EQUITY EQUITY PRO FORMA
FUND FUND COMBINED FUND FUND COMBINED
SHARES SHARES SHARES COMMON STOCK - 99.0% (P) VALUE VALUE ADJUSTMENTS VALUE
-------- ---------- --------- ------------------------ -------- ---------- ----------- ---------
700 1,350 2,050 3M Co. $76,979 $148,460 $225,439
2,700 2,700 Abbott Laboratories 109,080 109,080
500 500 ACE Limited 14,805 14,805
1,300 1,300 ADC Telecommunications, Inc.*<F18> 1,495 1,495
350 350 Adobe Systems Inc. 6,685 6,685
600 600 Advanced Micro Devices, Inc.* <F18> 3,204 3,204
900 900 The AES Corp.* <F18> 2,259 2,259
300 300 Aetna Inc. 10,743 10,743
900 2,325 3,225 AFLAC Inc. 27,621 71,354 98,975
800 800 Agilent Technologies, Inc.* <F18> 10,448 10,448
400 750 1,150 Air Products and Chemicals, Inc. 16,804 31,508 48,312
100 100 Alberto-Culver Co. - Class B 4,903 4,903
700 700 Albertson's, Inc. 16,912 16,912
1,500 1,500 Alcoa Inc. 28,950 28,950
200 200 Allegheny Energy, Inc. 2,620 2,620
100 100 Allegheny Technologies, Inc. 692 692
200 1,175 1,375 Allergan, Inc. 10,880 63,920 74,800
300 300 Allied Waste Industries, Inc.* <F18> 2,205 2,205
1,200 2,000 3,200 The Allstate Corp. 42,660 71,100 113,760
500 1,200 1,700 ALLTEL Corp. 20,065 48,156 68,221
700 700 Altera Corp.* <F18> 6,069 6,069
150 150 Ambac Financial Group, Inc. 8,083 8,083
200 550 750 Amerada Hess Corp. 13,576 37,334 50,910
200 200 Ameren Corp. 8,330 8,330
600 600 American Electric Power Co., Inc. 17,106 17,106
2,300 2,300 American Express Co. 71,714 71,714
100 100 American Greetings Corp. - Class A 1,610 1,610
4,537 2,325 6,862 American International Group, Inc. 248,174 127,178 375,352
300 300 American Power Conversion Corp.* <F18> 2,868 2,868
100 100 American Standard Companies Inc.* <F18> 6,362 6,362
207 207 AmerisourceBergen Corp. 14,784 14,784
2,190 2,190 Amgen Inc.* <F18> 91,323 91,323
300 300 AMR Corp.* <F18> 1,254 1,254
600 600 AmSouth BanCorp. 12,444 12,444
400 400 Anadarko Petroleum Corp. 17,816 17,816
600 600 Analog Devices, Inc.* <F18> 11,820 11,820
200 200 Andrew Corp.* <F18> 1,310 1,310
1,500 1,500 Anheuser-Busch Companies, Inc. 75,900 75,900
200 200 Anthem, Inc.* <F18> 13,000 13,000
7,700 7,700 AOL Time Warner Inc.* <F18> 90,090 90,090
500 500 Aon Corp. 10,245 10,245
240 1,450 1,690 Apache Corp. 14,268 86,203 100,471
300 300 Apollo Group, Inc. - Class A*<F18> 13,029 13,029
600 600 Apple Computer, Inc.* <F18> 8,700 8,700
400 400 Applera Corp. 7,320 7,320
2,700 2,700 Applied Materials, Inc.* <F18> 31,185 31,185
500 500 Applied Micro Circuits Corp.* <F18> 1,430 1,430
1,100 1,100 Archer-Daniels-Midland Co. 13,761 13,761
100 100 Ashland Inc. 2,679 2,679
6,500 6,500 AT&T Corp. 78,065 78,065
4,500 4,500 AT&T Wireless Services Inc.* <F18> 18,540 18,540
200 200 Autodesk, Inc. 2,534 2,534
1,050 1,050 Automatic Data Processing, Inc. 36,509 36,509
200 550 750 AutoZone, Inc.* <F18> 15,772 43,373 59,145
600 600 Avaya Inc.* <F18> 858 858
200 850 1,050 Avery Dennison Corp. 11,396 48,433 59,829
400 400 Avon Products, Inc. 18,440 18,440
600 600 Baker Hughes Inc. 17,418 17,418
100 650 750 Ball Corp. 5,039 32,754 37,793
2,600 5,000 7,600 Bank of America Corp. 165,880 319,000 484,880
1,300 1,300 The Bank of New York Co., Inc. 37,362 37,362
2,000 4,000 6,000 Bank One Corp. 74,800 149,600 224,400
100 100 C.R. Bard, Inc. 5,463 5,463
100 100 Bausch & Lomb Inc. 3,317 3,317
1,000 1,000 Baxter International Inc. 30,550 30,550
800 800 BB&T Corp. 28,032 28,032
200 1,100 1,300 The Bear Stearns Companies Inc. 11,280 62,040 73,320
400 400 Becton, Dickinson and Co. 11,360 11,360
500 1,425 1,925 Bed Bath & Beyond Inc.* <F18> 16,285 46,412 62,697
3,200 3,200 BellSouth Corp. 58,752 58,752
100 550 650 Bemis Co., Inc. 4,940 27,170 32,110
550 550 Best Buy Co., Inc.* <F18> 12,270 12,270
200 200 Big Lots, Inc.* <F18> 3,166 3,166
300 300 Biogen, Inc.* <F18> 8,781 8,781
500 500 Biomet, Inc. 13,315 13,315
300 1,200 1,500 BJ Services Co.* <F18> 7,800 31,200 39,000
100 100 The Black & Decker Corp. 4,193 4,193
400 400 BMC Software, Inc.* <F18> 5,228 5,228
1,400 1,400 The Boeing Co. 47,782 47,782
100 100 Boise Cascade Corp. 2,280 2,280
700 2,950 3,650 Boston Scientific Corp.* <F18> 22,092 93,102 115,194
3,300 3,300 Bristol-Myers Squibb Co. 78,540 78,540
400 400 Broadcom Corp. - Class A*<F18> 4,272 4,272
100 100 Brown-Forman Corp. - Class B 6,695 6,695
200 200 Brunswick Corp. 4,208 4,208
700 700 Burlington Northern Santa Fe Corp. 16,744 16,744
300 300 Burlington Resources Inc. 11,508 11,508
600 600 Calpine Corp.* <F18> 1,482 1,482
700 700 Campbell Soup Co. 15,456 15,456
400 400 Capital One Financial Corp. 13,968 13,968
800 800 Cardinal Health, Inc. 49,760 49,760
1,000 1,000 Carnival Corp. 25,100 25,100
600 600 Caterpillar Inc. 22,332 22,332
1,700 1,700 Cendant Corp.* <F18> 18,292 18,292
100 100 Centex Corp. 4,435 4,435
200 200 CenturyTel, Inc. 4,486 4,486
420 2,263 2,683 Charter One Financial, Inc. 12,482 67,242 79,724
1,786 1,786 ChevronTexaco Corp. 123,680 123,680
300 300 Chiron Corp.* <F18> 10,482 10,482
300 300 The Chubb Corp. 16,449 16,449
700 700 CIENA Corp.* <F18> 2,079 2,079
200 200 CIGNA Corp. 14,150 14,150
300 300 Cincinnati Financial Corp. 10,674 10,674
300 300 Cinergy Corp. 9,429 9,429
300 300 Cintas Corp. 12,576 12,576
300 300 Circuit City Stores - Circuit City Group 4,545 4,545
12,600 7,775 20,375 Cisco Systems, Inc.* <F18> 132,048 81,482 213,530
8,800 4,275 13,075 Citigroup Inc. 260,920 126,754 387,674
500 500 Citizens Communications Co.* <F18> 3,390 3,390
300 300 Citrix Systems, Inc.* <F18> 1,809 1,809
1,050 875 1,925 Clear Channel Communications, Inc.* <F18> 36,487 30,406 66,893
350 775 1,125 The Clorox Co. 14,063 31,140 45,203
200 200 CMS Energy Corp. 1,612 1,612
4,300 3,375 7,675 The Coca-Cola Co. 206,228 161,865 368,093
800 800 Coca-Cola Enterprises Inc. 16,992 16,992
900 900 Colgate-Palmolive Co. 48,555 48,555
1,600 1,600 Comcast Corp. - Class A*<F18> 33,376 33,376
300 300 Comerica Inc. 14,466 14,466
1,000 1,000 Computer Associates International, Inc. 9,600 9,600
300 300 Computer Sciences Corp.* <F18> 8,337 8,337
600 600 Compuware Corp.* <F18> 1,830 1,830
300 300 Comverse Technology, Inc.* <F18> 2,097 2,097
900 3,050 3,950 ConAgra Foods, Inc. 22,365 75,793 98,158
900 900 Concord EFS, Inc.* <F18> 14,292 14,292
1,214 1,214 ConocoPhillips 56,135 56,135
400 400 Consolidated Edison, Inc. 16,088 16,088
300 300 Constellation Energy Group, Inc. 7,437 7,437
300 300 Convergys Corp.* <F18> 4,509 4,509
100 100 Adolph Coors Co. - Class B 5,630 5,630
200 200 Cooper Industries, Ltd. - Class A 6,070 6,070
100 100 Cooper Tire & Rubber Co. 1,614 1,614
1,600 1,600 Corning Inc.* <F18> 2,560 2,560
800 800 Costco Wholesale Corp.* <F18> 25,896 25,896
200 200 Countrywide Credit Industries, Inc. 9,430 9,430
950 950 Countrywide Financial Corp. 44,793 44,793
100 100 Crane Co. 1,976 1,976
400 400 CSX Corp. 10,552 10,552
100 100 Cummins Inc. 2,362 2,362
700 700 CVS Corp. 17,745 17,745
200 200 Dana Corp. 2,616 2,616
300 300 Danaher Corp. 17,055 17,055
300 300 Darden Restaurants, Inc. 7,272 7,272
400 400 Deere & Co. 18,180 18,180
4,500 5,200 9,700 Dell Computer Corp.* <F18> 105,795 122,252 228,047
1,000 1,000 Delphi Corp. 8,550 8,550
200 200 Delta Air Lines, Inc. 1,858 1,858
100 100 Deluxe Corp. 4,506 4,506
300 300 Devon Energy Corp. 14,475 14,475
100 100 Dillard's, Inc. - Class A 2,018 2,018
3,400 3,400 The Walt Disney Co. 51,476 51,476
600 600 Dollar General Corp. 8,052 8,052
500 500 Dominion Resources, Inc. 25,365 25,365
200 200 R. R. Donnelley & Sons Co. 4,702 4,702
300 300 Dover Corp. 7,614 7,614
1,600 1,600 The Dow Chemical Co. 43,696 43,696
100 100 Dow Jones & Co., Inc. 3,841 3,841
300 1,150 1,450 DTE Energy Co. 12,210 46,805 59,015
1,700 1,700 E. I. du Pont de Nemours and Co. 61,319 61,319
1,500 1,500 Duke Energy Corp. 29,325 29,325
600 600 Dynegy Inc. - Class A 696 696
100 100 Eastman Chemical Co. 3,817 3,817
500 500 Eastman Kodak Co. 13,620 13,620
100 100 Eaton Corp. 6,374 6,374
500 725 1,225 eBay Inc.* <F18> 26,405 38,287 64,692
200 200 Ecolab Inc. 8,346 8,346
500 500 Edison International*<F18> 5,000 5,000
945 945 El Paso Corp. 7,815 7,815
200 200 Electronic Arts Inc.* <F18> 13,192 13,192
800 800 Electronic Data Systems Corp. 11,184 11,184
3,700 3,700 EMC Corp.* <F18> 16,909 16,909
700 700 Emerson Electric Co. 30,758 30,758
200 200 Engelhard Corp. 4,766 4,766
400 400 Entergy Corp. 16,640 16,640
200 200 EOG Resources, Inc. 7,192 7,192
200 200 Equifax Inc. 4,348 4,348
721 721 Equity Office Properties Trust 18,616 18,616
500 500 Equity Residential 11,970 11,970
600 600 Exelon Corp. 28,500 28,500
11,700 7,238 18,938 Exxon Mobil Corp. 373,230 230,892 604,122
300 300 Family Dollar Stores, Inc. 8,064 8,064
1,700 1,700 Fannie Mae 101,218 101,218
300 300 Federated Department Stores, Inc.* <F18> 8,832 8,832
500 500 FedEx Corp. 25,035 25,035
1,000 1,000 Fifth Third Bancorp 61,230 61,230
1,300 1,300 First Data Corp. 36,335 36,335
200 200 First Tennessee National Corp. 6,934 6,934
500 500 FirstEnergy Corp. 14,945 14,945
300 300 Fiserv, Inc.* <F18> 8,424 8,424
1,800 1,800 FleetBoston Financial Corp. 36,594 36,594
100 100 Fluor Corp. 2,444 2,444
3,000 3,000 Ford Motor Co. 29,400 29,400
300 300 Forest Laboratories, Inc.* <F18> 24,603 24,603
300 650 950 Fortune Brands, Inc. 14,187 30,739 44,926
300 300 FPL Group, Inc. 16,140 16,140
500 500 Franklin Resources, Inc. 15,550 15,550
1,200 1,200 Freddie Mac 67,080 67,080
200 200 Freeport-McMoRan Copper &
Gold, Inc. - Class B*<F18> 2,692 2,692
500 500 Gannett Co., Inc. 36,090 36,090
1,400 1,400 The Gap, Inc. 15,190 15,190
500 500 Gateway, Inc.* <F18> 1,485 1,485
300 300 General Dynamics Corp. 24,399 24,399
17,100 7,825 24,925 General Electric Co. 421,515 192,886 614,401
600 600 General Mills, Inc. 26,652 26,652
1,000 1,425 2,425 General Motors Corp. 38,900 55,432 94,332
300 300 Genuine Parts Co. 9,192 9,192
400 400 Genzyme Corp.* <F18> 8,244 8,244
400 400 Georgia-Pacific Corp. 5,236 5,236
1,800 1,325 3,125 The Gillette Co. 53,280 39,220 92,500
300 300 Golden West Financial Corp. 18,654 18,654
800 800 The Goldman Sachs Group, Inc. 52,824 52,824
200 200 Goodrich Corp. 3,776 3,776
300 300 The Goodyear Tire & Rubber Co. 2,667 2,667
200 200 W.W. Grainger, Inc. 8,510 8,510
100 400 500 Great Lakes Chemical Corp. 2,402 9,608 12,010
500 500 Guidant Corp.* <F18> 16,155 16,155
300 1,350 1,650 H&R Block, Inc. 12,603 56,714 69,317
600 600 H.J. Heinz Co. 20,022 20,022
700 700 Halliburton Co. 9,037 9,037
500 500 Harley-Davidson, Inc. 23,225 23,225
200 200 Harrah's Entertainment, Inc.* <F18> 9,642 9,642
400 400 The Hartford Financial Services Group, Inc. 16,400 16,400
300 300 Hasbro, Inc. 3,339 3,339
200 200 Hercules Inc.* <F18> 1,842 1,842
200 200 Hershey Foods Corp. 12,410 12,410
5,207 5,207 Hewlett-Packard Co. 60,766 60,766
600 600 Hilton Hotels Corp. 6,828 6,828
4,000 4,000 The Home Depot, Inc. 104,400 104,400
1,400 1,400 Honeywell International Inc. 30,324 30,324
800 800 Household International, Inc. 22,648 22,648
300 300 Humana Inc.* <F18> 3,720 3,720
400 400 Huntington Bancshares Inc. 7,276 7,276
500 650 1,150 Illinois Tool Works Inc. 29,165 37,914 67,079
500 500 IMS Health Inc. 7,485 7,485
300 300 Ingersoll-Rand Co. 10,332 10,332
11,500 8,025 19,525 Intel Corp. 159,735 111,467 271,202
2,900 1,475 4,375 International Business Machines Corp. 169,331 86,125 255,456
200 200 International Flavors & Fragrances Inc. 6,370 6,370
200 200 International Game Technology*<F18> 13,828 13,828
800 1,400 2,200 International Paper Co. 26,712 46,746 73,458
600 600 The Interpublic Group of Companies, Inc. 9,510 9,510
400 1,675 2,075 Intuit Inc.* <F18> 18,212 76,263 94,475
200 925 1,125 ITT Industries, Inc. 12,466 57,655 70,121
300 1,775 2,075 Jabil Circuit, Inc.* <F18> 4,434 26,234 30,668
2,200 2,200 JDS Uniphase Corp.* <F18> 4,286 4,286
300 300 Jefferson-Pilot Corp. 12,030 12,030
500 500 John Hancock Financial Services, Inc. 13,900 13,900
5,200 5,200 Johnson & Johnson 281,216 281,216
200 1,125 1,325 Johnson Controls, Inc. 15,364 86,422 101,786
200 200 Jones Apparel Group, Inc.* <F18> 6,140 6,140
3,400 2,150 5,550 J.P. Morgan Chase & Co. 64,566 40,828 105,394
100 675 775 KB HOME 4,884 32,967 37,851
700 700 Kellogg Co. 23,275 23,275
150 150 Kerr-McGee Corp. 6,516 6,516
700 700 KeyCorp 17,479 17,479
200 200 KeySpan Corp. 6,700 6,700
850 850 Kimberly-Clark Corp. 48,144 48,144
200 200 Kinder Morgan, Inc. 7,090 7,090
400 400 King Pharmaceuticals, Inc.* <F18> 7,268 7,268
300 300 KLA-Tencor Corp.* <F18> 8,382 8,382
100 100 Knight-Ridder, Inc. 5,641 5,641
600 1,225 1,825 Kohl's Corp.* <F18> 36,486 74,492 110,978
1,400 1,400 The Kroger Co.* <F18> 19,740 19,740
300 950 1,250 Leggett & Platt, Inc. 5,937 18,800 24,737
400 400 Lehman Brothers Holdings Inc. 19,620 19,620
250 250 Lexmark International, Inc.* <F18> 11,750 11,750
1,900 1,900 Eli Lilly and Co. 105,146 105,146
900 900 Limited Brands 12,906 12,906
300 300 Lincoln National Corp. 9,165 9,165
500 500 Linear Technology Corp. 10,360 10,360
200 200 Liz Claiborne, Inc. 4,990 4,990
800 800 Lockheed Martin Corp. 51,736 51,736
300 300 Loews Corp. 12,867 12,867
200 200 Louisiana-Pacific Corp.* <F18> 1,294 1,294
1,300 2,600 3,900 Lowe's Companies, Inc. 53,820 107,640 161,460
700 700 LSI Logic Corp.* <F18> 4,445 4,445
6,100 6,100 Lucent Technologies Inc.* <F18> 4,636 4,636
200 200 Manor Care, Inc.* <F18> 4,496 4,496
500 500 Marathon Oil Corp. 11,340 11,340
400 400 Marriott International, Inc. - Class A 11,596 11,596
900 1,100 2,000 Marsh & McLennan Companies, Inc. 37,476 45,804 83,280
400 400 Marshall & Ilsley Corp. 11,156 11,156
800 800 Masco Corp. 15,640 15,640
700 700 Mattel, Inc. 12,607 12,607
600 600 Maxim Integrated Products, Inc.* <F18> 14,856 14,856
500 500 The May Department Stores Co. 11,385 11,385
100 100 Maytag Corp. 2,318 2,318
300 300 MBIA Inc. 11,985 11,985
2,150 2,150 MBNA Corp. 39,517 39,517
100 100 McDermott International, Inc.* <F18> 613 613
2,200 2,200 McDonald's Corp. 38,852 38,852
300 300 The McGraw-Hill Companies, Inc. 18,366 18,366
500 500 McKesson Corp. 14,165 14,165
300 300 MeadWestvaco Corp. 5,763 5,763
400 400 MedImmune, Inc.* <F18> 8,368 8,368
2,050 4,750 6,800 Medtronic, Inc. 86,346 200,070 286,416
800 800 Mellon Financial Corp. 20,744 20,744
3,850 3,850 Merck & Co. Inc. 175,984 175,984
100 100 Mercury Interactive Corp.* <F18> 1,716 1,716
100 100 Meredith Corp. 4,305 4,305
1,500 1,500 Merrill Lynch & Co., Inc. 49,425 49,425
1,200 1,200 MetLife, Inc. 27,312 27,312
200 200 MGIC Investment Corp. 8,166 8,166
1,000 1,000 Micron Technology, Inc.* <F18> 12,370 12,370
9,300 5,675 14,975 Microsoft Corp.* <F18> 406,782 248,224 655,006
100 100 Millipore Corp. 3,179 3,179
700 700 Mirant Corp.* <F18> 1,547 1,547
300 300 Molex Inc. 7,056 7,056
500 500 Monsanto Co. 7,645 7,645
300 1,350 1,650 Moody's Corp. 14,550 65,475 80,025
1,900 1,900 Morgan Stanley 64,372 64,372
3,800 4,200 8,000 Motorola, Inc. 38,684 42,756 81,440
200 200 Nabors Industries, Ltd.* <F18> 6,550 6,550
1,000 1,000 National City Corp. 28,530 28,530
300 300 National Semiconductor Corp.* <F18> 3,582 3,582
100 100 Navistar International Corp.* <F18> 2,168 2,168
200 200 NCR Corp.* <F18> 3,960 3,960
600 600 Network Appliance, Inc.* <F18> 4,398 4,398
300 300 The New York Times Co. - Class A 13,635 13,635
500 1,950 2,450 Newell Rubbermaid Inc. 15,435 60,196 75,631
700 700 Newmont Mining Corp. 19,257 19,257
1,500 4,400 5,900 Nextel Communications, Inc. - Class A*<F18> 11,325 33,220 44,545
100 100 Nicor Inc. 2,820 2,820
500 500 NIKE, Inc. - Class B 21,590 21,590
400 400 NiSource Inc. 6,892 6,892
200 950 1,150 Noble Corp.* <F18> 6,200 29,450 35,650
200 200 Nordstrom, Inc. 3,588 3,588
700 700 Norfolk Southern Corp. 14,133 14,133
300 300 North Fork BanCorp., Inc. 11,352 11,352
400 400 Northern Trust Corp. 15,088 15,088
200 200 Northrop Grumman Corp. 24,808 24,808
600 600 Novell, Inc.* <F18> 1,260 1,260
200 200 Novellus Systems, Inc.* <F18> 4,162 4,162
100 100 Nucor Corp. 3,790 3,790
300 300 NVIDIA Corp.* <F18> 2,568 2,568
600 2,550 3,150 Occidental Petroleum Corp. 17,028 72,369 89,397
500 500 Office Depot, Inc.* <F18> 6,170 6,170
300 300 Omnicom Group Inc. 16,704 16,704
9,400 4,200 13,600 Oracle Corp.* <F18> 73,884 33,012 106,896
150 150 PACCAR Inc. 5,068 5,068
300 2,125 2,425 Pactiv Corp.* <F18> 4,935 34,956 39,891
200 200 Pall Corp. 3,158 3,158
400 400 Parametric Technology Corp.* <F18> 720 720
200 200 Parker-Hannifin Corp. 7,642 7,642
625 625 Paychex, Inc. 15,169 15,169
400 400 J. C. Penney Co., Inc. 6,368 6,368
100 100 Peoples Energy Corp. 3,369 3,369
500 500 PeopleSoft, Inc.* <F18> 6,185 6,185
450 450 The Pepsi Bottling Group, Inc. 10,530 10,530
3,050 3,050 PepsiCo, Inc. 112,698 112,698
200 200 PerkinElmer, Inc. 1,090 1,090
10,700 10,700 Pfizer Inc. 310,514 310,514
700 700 PG&E Corp.* <F18> 7,882 7,882
200 200 Phelps Dodge Corp.* <F18> 5,126 5,126
3,700 3,700 Philip Morris Companies Inc. 143,560 143,560
100 100 Pinnacle West Capital Corp. 2,776 2,776
400 400 Pitney Bowes Inc. 12,196 12,196
300 300 Plum Creek Timber Co., Inc. 6,783 6,783
300 300 PMC-Sierra, Inc.* <F18> 1,164 1,164
500 500 PNC Financial Services Group 21,085 21,085
100 100 Power-One, Inc.* <F18> 298 298
300 500 800 PPG Industries, Inc. 13,410 22,350 35,760
300 300 PPL Corp. 9,762 9,762
300 300 Praxair, Inc. 15,333 15,333
600 600 Principal Financial Group, Inc.* <F18> 15,708 15,708
2,200 2,150 4,350 The Procter & Gamble Co. 196,636 192,167 388,803
400 1,500 1,900 Progress Energy, Inc. 16,348 61,305 77,653
400 400 The Progressive Corp. 20,252 20,252
500 500 Providian Financial Corp.* <F18> 2,450 2,450
1,000 1,000 Prudential Financial, Inc.* <F18> 28,560 28,560
400 400 Public Service Enterprise Group Inc. 12,200 12,200
100 100 Pulte Homes, Inc. 4,263 4,263
200 1,050 1,250 QLogic Corp.* <F18> 5,208 27,342 32,550
1,300 1,300 QUALCOMM Inc.* <F18> 35,906 35,906
200 200 Quintiles Transnational Corp.* <F18> 1,902 1,902
2,800 2,800 Qwest Communications
International Inc.* <F18> 6,384 6,384
300 300 RadioShack Corp. 6,018 6,018
300 300 Rational Software Corp.* <F18> 1,296 1,296
700 700 Raytheon Co. 20,510 20,510
100 100 Reebok International Ltd.* <F18> 2,505 2,505
400 400 Regions Financial Corp. 13,068 13,068
500 500 Reliant Energy, Inc.* <F18> 5,005 5,005
200 200 R.J. Reynolds Tobacco Holdings, Inc. 8,064 8,064
300 300 Robert Half International Inc.* <F18> 4,761 4,761
300 300 Rockwell Automation, Inc. 4,881 4,881
300 300 Rockwell Collins, Inc. 6,582 6,582
400 400 Rohm and Haas Co. 12,400 12,400
200 200 Rowan Companies, Inc. 3,728 3,728
200 200 T. Rowe Price Group Inc. 4,992 4,992
100 100 Ryder System, Inc. 2,493 2,493
200 200 Sabre Holdings Corp. 3,870 3,870
200 200 SAFECO Corp. 6,356 6,356
800 800 Safeway Inc.* <F18> 17,840 17,840
900 900 Sanmina-SCI Corp.* <F18> 2,493 2,493
1,300 1,300 Sara Lee Corp. 23,777 23,777
5,700 5,700 SBC Communications Inc. 114,570 114,570
2,250 2,250 The Charles Schwab Corp. 19,575 19,575
2,500 2,500 Schering-Plough Corp. 53,300 53,300
950 950 Schlumberger Ltd. 36,537 36,537
300 300 Scientific-Atlanta, Inc. 3,753 3,753
100 100 Sealed Air Corp.* <F18> 1,689 1,689
500 500 Sears, Roebuck and Co. 19,500 19,500
400 400 Sempra Energy 7,860 7,860
300 300 The Sherwin-Williams Co. 7,104 7,104
800 800 Siebel Systems, Inc.* <F18> 4,600 4,600
150 1,250 1,400 Sigma-Aldrich Corp. 7,391 61,588 68,979
300 1,350 1,650 Simon Property Group, Inc. 10,719 48,236 58,955
300 750 1,050 SLM Corp. 27,942 69,855 97,797
100 100 Snap-on Inc. 2,298 2,298
1,400 1,400 Solectron Corp.* <F18> 2,954 2,954
1,200 2,775 3,975 The Southern Co. 34,536 79,864 114,400
600 600 SouthTrust Corp. 14,550 14,550
1,300 1,300 Southwest Airlines Co. 16,978 16,978
1,800 1,800 Sprint Corp. - PCS Group*<F18> 3,528 3,528
1,600 1,600 Sprint Corp. - FON Group 14,592 14,592
100 100 The Stanley Works 3,267 3,267
800 800 Staples, Inc.* <F18> 10,232 10,232
700 700 Starbucks Corp.* <F18> 14,448 14,448
300 300 Starwood Hotels & Resorts Worldwide, Inc. 6,690 6,690
600 600 State Street Corp. 23,184 23,184
400 400 Stilwell Financial, Inc. 4,828 4,828
300 2,100 2,400 St. Jude Medical, Inc.* <F18> 10,710 74,970 85,680
400 400 The St. Paul Companies, Inc. 11,488 11,488
300 1,150 1,450 Stryker Corp. 17,280 66,240 83,520
5,600 5,600 Sun Microsystems, Inc.* <F18> 14,504 14,504
500 500 SunGard Data Systems Inc.* <F18> 9,725 9,725
100 100 Sunoco, Inc. 3,016 3,016
500 500 SunTrust Banks, Inc. 30,740 30,740
200 200 SUPERVALU INC. 3,230 3,230
400 400 Symbol Technologies, Inc. 3,068 3,068
500 500 Synovus Financial Corp. 10,310 10,310
1,100 1,675 2,775 Sysco Corp. 31,229 47,553 78,782
1,600 1,750 3,350 Target Corp. 47,232 51,660 98,892
300 300 TECO Energy, Inc. 4,764 4,764
200 200 Tektronix, Inc.* <F18> 3,286 3,286
700 700 Tellabs, Inc.* <F18> 2,849 2,849
100 100 Temple-Inland Inc. 3,863 3,863
300 300 Teradyne, Inc.* <F18> 2,880 2,880
3,000 3,000 Texas Instruments Inc. 44,310 44,310
200 200 Textron, Inc. 6,820 6,820
300 300 Thermo Electron Corp.* <F18> 4,839 4,839
100 100 Thomas & Betts Corp.* <F18> 1,409 1,409
300 300 Tiffany & Co. 6,429 6,429
900 1,675 2,575 The TJX Companies, Inc. 15,300 28,475 43,775
200 200 TMP Worldwide Inc.* <F18> 1,800 1,800
200 200 Torchmark Corp. 6,852 6,852
400 400 Toys "R" Us, Inc.* <F18> 4,072 4,072
500 500 Transocean Inc. 10,400 10,400
1,681 1,681 Travelers Property Casualty
Corp. - Class B*<F18> 22,744 22,744
500 500 Tribune Co. 20,905 20,905
200 200 TRW Inc. 11,710 11,710
100 100 Tupperware Corp. 1,662 1,662
500 875 1,375 TXU Corp. 20,855 36,496 57,351
3,300 3,300 Tyco International Ltd. 46,530 46,530
400 1,825 2,225 Union Pacific Corp. 23,148 105,613 128,761
300 300 Union Planters Corp. 8,238 8,238
600 600 Unisys Corp.* <F18> 4,200 4,200
1,900 1,350 3,250 United Parcel Service, Inc. - Class B 118,807 84,416 203,223
200 200 United States Steel Corp. 2,322 2,322
800 800 United Technologies Corp. 45,192 45,192
500 500 UnitedHealth Group Inc. 43,610 43,610
400 400 Univision Communications
Inc. - Class A*<F18> 9,120 9,120
400 400 Unocal Corp. 12,556 12,556
400 400 UnumProvident Corp. 8,140 8,140
3,300 3,300 U.S. Bancorp 61,314 61,314
300 300 UST Inc. 8,463 8,463
700 700 VERITAS Software Corp.* <F18> 10,269 10,269
4,637 3,575 8,212 Verizon Communications Inc. 127,239 98,098 225,337
200 200 V. F. Corp. 7,196 7,196
3,000 3,000 Viacom Inc. - Class B*<F18> 121,650 121,650
200 200 Visteon Corp. 1,894 1,894
200 200 Vulcan Materials Co. 7,232 7,232
2,400 2,400 Wachovia Corp. 78,456 78,456
1,800 4,300 6,100 Walgreen Co. 55,368 132,268 187,636
7,600 7,600 Wal-Mart Stores, Inc. 374,224 374,224
1,695 1,695 Washington Mutual, Inc. 53,342 53,342
1,100 1,100 Waste Management, Inc. 25,652 25,652
200 200 Waters Corp.* <F18> 4,850 4,850
200 200 Watson Pharmaceuticals, Inc.* <F18> 4,902 4,902
200 200 WellPoint Health Networks Inc.* <F18> 14,660 14,660
2,900 2,900 5,800 Wells Fargo & Co. 139,664 139,664 279,328
200 200 Wendy's International, Inc. 6,622 6,622
400 400 Weyerhaeuser Co. 17,508 17,508
100 100 Whirlpool Corp. 4,586 4,586
800 800 The Williams Companies, Inc. 1,808 1,808
200 200 Winn-Dixie Stores, Inc. 2,624 2,624
100 1,050 1,150 Worthington Industries, Inc. 1,870 19,635 21,505
400 1,800 2,200 Wm. Wrigley Jr. Co. 19,796 89,082 108,878
700 700 Xcel Energy, Inc. 6,517 6,517
1,300 1,300 Xerox Corp.* <F18> 6,435 6,435
600 600 Xilinx, Inc.* <F18> 9,503 9,503
200 200 XL Capital Ltd. - Class A 14,700 14,700
1,000 2,300 3,300 Yahoo! Inc.* <F18> 9,570 22,011 31,581
500 500 Yum! Brands, Inc.* <F18> 13,855 13,855
300 1,800 2,100 Zimmer Holdings, Inc.* <F18> 11,502 69,012 80,514
200 200 Zions BanCorp. 8,706 8,706
TOTAL COMMON STOCK
(cost $24,588,255) 12,645,658 6,277,592 - 18,923,250
----------- ---------- --------- -----------
TOTAL INVESTMENTS - 99.0% (p)<F19>
(cost $24,588,255) 12,645,658 6,277,592 - 18,923,250
----------- ---------- --------- -----------
OTHER ASSETS, LESS
LIABILITIES - 1.0% (p)<F19> 54,650 134,361 - 189,011
----------- ---------- --------- -----------
TOTAL NET ASSETS - 100.00% (p)<F19> $12,700,308 $6,411,953 - $19,112,261
----------- ---------- --------- -----------
----------- ---------- --------- -----------
*<F18> Non-income producing security.
(p)<F19> This percentage represents a percentage of the pro forma combined
net assets of the surviving fund.
NOTES TO COMBINING PRO FORMA FINANCIAL STATEMENTS OF
THE CATHOLIC EQUITY FUND AND CATHOLIC VALUES INVESTMENT TRUST EQUITY FUND
SEPTEMBER 30, 2002
(UNAUDITED)
1. BASIS OF COMBINATION
--------------------
The Catholic Equity Fund (the "Equity Fund") is a separate, diversified
series of The Catholic Funds, Inc. (the "Company") and The Catholic Values
Investment Trust Equity Fund (the "CVIT Fund") is a separate, diversified series
of the Catholic Values Investment Trust (the "Trust"), which are registered as
open-end management investment companies under the Investment Company Act of
1940, as amended. The Equity Fund was created at the close of business on April
2, 2002 when the three original Catholic Equity Funds reor-ganized to form the
single equity fund. The Catholic Disciplined Capital Appreciation Fund was
deemed to be the accounting survivor of the reorganization and its accounting
history is therefore included in the pro forma combined Statement of Operations
for the period October 1, 2001 through April 2, 2002.
The unaudited pro forma combined Statement of Assets and Liabilities,
Statement of Operations, and Schedule of Investments reflect the accounts of the
Equity Fund and the CVIT Fund as if the proposed reorganization occurred as of
and for the year ended September 30, 2002. These statements have been derived
from books and records utilized in calculating daily net asset value at
September 30, 2002. The Equity Fund will be the ac-counting survivor of the
reorganization.
The reorganization involves the transfer of substantially all of the assets
and stated liabilities of the CVIT Fund to the Equity Fund in exchange for
shares of common stock of the Equity Fund, and the pro rata distribution of such
shares of the Equity Fund to the shareholders of the CVIT Fund, as provided in
the Agreement and Plan of Reorganization. Shareholders of the Individual Shares
of the CVIT Fund would receive Class C Shares of the Equity Fund and
shareholders of Institutional Service Shares of the CVIT Fund would re-ceive
Class I Shares of the Equity Fund. The reorganization is intended to qualify as
a tax-free reorganization so that shareholders of the CVIT Fund will not
recognize any gain or loss through the exchange of shares in the reorganization.
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
The following is a summary of significant accounting policies consistently
followed by the Funds in preparation of their financial statements. These
policies are in conformity with accounting principles generally accepted in the
United States of America (i.e., GAAP).
A) INVESTMENT VALUATION
Securities traded over-the-counter or on a national securities exchange
are val-ued on the basis of market value in their principal and most
representative market. Se-curities where the principal and most representative
market is a national securities ex-change are valued at the latest reported sale
price on such exchange that day. Exchange-traded securities for which there
were no transactions that day are valued at the latest bid prices. Securities
traded on only over-the-counter markets are valued at the latest bid prices.
Debt securities (other than short-term obligations) are valued at prices
furnished by a pricing service, subject to review by the Funds' Adviser. Short-
term obligations (maturing within 60 days) are valued on an amortized cost
basis, which approximates market value. Securities for which quotations are not
readily available and other assets are valued at fair value as determined in
good faith by the Adviser under the supervision of the board of di-rectors.
B) FEDERAL INCOME TAXES
The Funds intend to comply with the requirements of Subchapter M of the
In-ternal Revenue Code necessary to qualify as regulated investment companies
and to make the requisite distributions of income and capital gains to their
shareholders sufficient to relieve it from all or substantially all federal
income tax. Therefore, no federal income tax provision has been recorded.
C) OTHER
Investment transactions are accounted for on the trade date. Dividend
in-come and distributions to shareholders are recorded on the ex-dividend date.
However, if the ex-dividend date has passed, certain dividends from foreign
securities are recorded as the Fund is informed of the ex-dividend date. Income
and realized and unrealized gains or losses on investments are allocated to each
class of shares based on its relative net assets. All discounts and premiums
are amortized on the effective interest method for tax and fi-nancial reporting
purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabili-ties at the date of the financial
statements, and the reported amounts of increases and de-creases in net assets
from operations during the reporting period. Actual results could dif-fer from
those estimates.
3. SERVICE PROVIDERS
-----------------
Catholic Financial Services Corporation (the "Adviser") will continue to
serve as the Equity Fund's investment adviser after the reorganization. Mellon
Equity Associates, LLP (the "Sub-Adviser") will continue to serve as the Equity
Fund's sub-adviser after the reor-ganization. U.S. Bancorp Fund Services, LLC
(the "Administrator") will continue to serve as the administrator, transfer
agent and fund accountant to the Equity Fund after the reorgani-zation. U.S.
Bank, N.A. will continue to serve as the custodian to the Equity Fund after the
reorganization. Catholic Financial Services Corporation will continue to act as
the distribu-tor to the Equity Fund after the reorganization.
4. INVESTMENT ADVISORY AND OTHER AGREEMENTS WITH RELATED PARTIES
-------------------------------------------------------------
Each of the Funds has entered into an agreement with its investment
adviser, with whom certain officers and directors of the Funds are affiliated,
to furnish investment advi-sory services to the Funds. The terms of these
agreements are as follows:
The Equity Fund pays the Adviser a monthly fee at the annual rate of 0.50%
of the Fund's average daily net assets. Pursuant to an expense cap agreement,
the Adviser agreed to waive its management fee and/or reimburse the Fund's
operating expenses (exclusive of brokerage, interest, taxes and extraordinary
expenses) to ensure that the Fund's operating expenses do not exceed 0.95%,
1.20% and 0.70% of the average daily net assets of the Equity Fund - Class A,
Class C and Class I shares, respectively. The Equity Fund - Class A's operating
expense for the year ended September 30, 2002 is a blended rate due to the ac-
counting history of the Disciplined Capital Appreciation Fund carrying over to
the Equity Fund. For the period October 1, 2001 to April 2, 2002, the
Disciplined Capital Appreciation Fund had an expense cap of 1.75% of the Fund's
average daily net assets. The expense cap agreement terminates on September 30,
2003.
Under the terms of the CVIT Fund's investment advisory agreement with
Wright Investors' Service, Inc. ("Wright"), the CVIT Fund pays Wright based upon
a percentage of average daily net assets which rate is adjusted as average daily
net assets exceed certain levels. For the twelve months ended September 30,
2002, the effective annual rate was 0.75%. To reduce the net loss of the CVIT
Fund, $113,928 of expenses were allocated to the investment adviser and Wright
waived $263 of its fee. In addition $35,325 of distribu-tion fees were waived
by the CVIT Fund.
The Funds have adopted Distribution Plans (the "Plans") pursuant to Rule
12b-1 un-der the Investment Company Act of 1940. The Plans authorize the
Company and the Trust to use annually 0.25% and 0.75% of the net assets for the
Equity Fund - Class A Shares and Class C Shares, respectively, and 0.25% and
0.75% of the net assets for the CVIT Fund - Individual Shares and Institutional
Service Shares, respectively, to finance certain activities relating to the
distribution of shares to investors.
5. CAPITAL SHARES
--------------
The share reconciliation includes an increase in the combined shares
outstanding due to the fact that, at September 30, 2002, the net asset value per
share of the Equity Fund - Class C ($6.48) was lower than the CVIT Fund -
Individual Shares ($7.58), and the net asset value per share of the Equity Fund
- - Class I ($6.49) was lower than the CVIT Fund - Institutional Service Shares
($7.78). The pro forma number of shares outstanding consists of the following:
Shares Outstanding Additional Shares
At issued Pro Forma Shares at
September 30, 2002 in the Reorganization September 30, 2002
------------------ --------------------- ------------------
The Catholic Equity Fund - Class C 530 442,147 442,677
The Catholic Equity Fund - Class I 1,514,717 546,599 2,061,316
6. Merger Costs
------------
Each Fund will bear its own expenses incurred in connection with the
reorganiza-tion, including any legal and accounting and financial advisers'
fees. However, the Funds' advisers have agreed to pay the costs, fees and
expenses of filing the Registration State-ment, printing and mailing the Proxy
Statement/Prospectus and related proxy materials, so-liciting the approval of
the CVIT Fund shareholders and conducting the meeting, and to pay the legal and
accounting fees incurred by the Company and the Trust in connection with the
reorganization.
THE CATHOLIC FUNDS, INC.
CATHOLIC EQUITY FUND
Part C. Other Information
Item 15. Indemnification
---------------
Article IX of the Registrant's Bylaws provide indemnification rights
of its directors and officers, as set forth below:
Section 9.1. Indemnification of Officers, Directors, Employees and
------------ --------------------------------------------------------
Agents. The Corporation shall indemnify each person who was or is a
------
party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative ("Proceeding"), by reason of the fact
that he is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such Proceeding to the fullest extent permitted by
law; provided that:
(a) Whether or not there is an adjudication of liability in such
Proceeding, the Corporation shall not indemnify any person for
any liability arising by reason of such person's willful
misfeasance, bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of his office or under any
contract or agreement with the Corporation ("disabling conduct");
and
(b) The Corporation shall not indemnify any person unless:
(1) The court or other body before which the Proceeding was
brought (i) dismisses the Proceeding for insufficiency of
evidence of any disabling conduct, or (ii) reaches a final
decision on the merits that such person was not liable by
reason of disabling conduct; or
(2) Absent such a decision, a reasonable determination is made,
based upon a review of the facts, by (i) the vote of a
majority of a quorum of the Directors of the Corporation who
are neither interested persons of the Corporation as defined
in the Investment Company Act of 1940 nor parties to the
Proceeding, or (ii) if such quorum is not obtainable, or
even if obtainable, if a majority of a quorum of Directors
described in paragraph (b)(2)(i) above so directs, by
independent legal counsel in a written opinion, that such
person was not liable by reason of disabling conduct.
Expenses (including attorneys' fees) incurred in defending a
Proceeding will be paid by the Corporation in advance of the
final disposition thereof upon an undertaking by such person to
repay such expenses (unless it is ultimately determined that he
is entitled to indemnification), if:
(1) Such person shall provide adequate security for his under-
taking;
(2) The Corporation shall be insured against losses arising by
reason of such advance; or
(3) A majority of a quorum of the Directors of the Corporation
who are neither interested persons of the Corporation as de-
fined in the Investment Company Act of 1940 nor parties to
the Proceeding, or independent legal counsel in a written
opinion, shall determine, based on a review of readily
available facts, that there is reason to believe that such
person will be found to be entitled to indemnification.
Section 9.2. Insurance of Officers, Directors, Employees and Agents.
----------- ------------------------------------------------------
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in or arising out
of his position. However, in no event will the Corporation purchase
insurance to indemnify any such person for any act for which the
Corporation itself is not permitted to indemnify him.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel, the matter has
been settled by controlling precedent, submit to a court of appropri-
ate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
Item 16. Exhibits
--------
See Exhibit Index following the Signature Page of this Registration
Statement, which Exhibit Index is incorporated herein by this reference.
Item 17. Undertakings
------------
(1) The Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities
Act, the reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons who may
be deemed underwriters, in addition to the information called for by
the other items of the applicable form.
(2) The Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the
registrant statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering of them.
Registrant undertakes that it will file, by post-effective amendment, an
opinion of counsel supporting the tax consequences of the Reorganization within
a reasonable time after receipt of such opinion.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement on
Form N-14 has been signed on behalf of the Registrant, in the City of Milwaukee,
and State of Wisconsin, on the 20th day of March, 2003.
THE CATHOLIC FUNDS, INC.
By: /s/ Theodore F. Zimmer
---------------------------------------
Theodore F. Zimmer, President and CEO
As required by the Securities Act of 1933, this Registration Statement on
Form N-14 has been signed on this 20th day of March, 2003 by the following
persons in the capacities indicated.
Signature Title
- --------- -----
/s/ Daniel J. Steininger Chairman of the Board and Director
- ------------------------------
Daniel J. Steininger
/s/ Allan G. Lorge President and Chief Executive Officer
- ------------------------------ (Principal Executive and Financial Officer)
Allan G. Lorge
/s/ Mark K. Forbord Controller (Principal Accounting Officer)
- ------------------------------
Mark K. Forbord
/s/ Thomas A. Bausch Director
- ------------------------------
Thomas A. Bausch
/s/ J. Michael Borden Director
- ------------------------------
J. Michael Borden
/s/ Daniel R. Doucette Director
- ------------------------------
Daniel R. Doucette
/s/ Thomas J. Munninghoff Director
- ------------------------------
Thomas J. Munninghoff
/s/ Conrad L. Sobczak Director
- ------------------------------
Conrad L. Sobczak
CATHOLIC EQUITY FUNDS, INC.
EXHIBIT INDEX
TO
REGISTRATION STATEMENT ON FORM N-14
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
(1)(a) Articles of Incorporation*<F7>
(1)(b) Articles of Amendment*<F7>
(1)(c) Articles Supplementary*<F7>
(2) By-Laws*<F7>
(3) None
(4) Agreement and Plan of Reorganization (included as Appendix A to
----------
the Proxy Statement/Prospectus, which is part of this
Registration Statement on Form N-14)
(5) None
(6)(a) Investment Advisory Agreement with Catholic Financial Services
Corporation*<F7>
(6)(b) Sub-Advisory Agreement with Mellon Equity Associates, LLP for the
Catholic Equity Fund*<F7>
(7)(a) Distribution Agreement*<F7>
(7)(c) Form of Selected Dealer Letter Agreement*<F7>
(8) None
(9) Custodian Servicing Agreement *<F7>
(10)(a) Distribution Plan*<F7>
(10)(b) Rule 18f-3 Operating Plan*<F7>
(11) Opinion of Counsel regarding the legality of securities being
registered, and Consent of Counsel
(12) Opinion of Counsel regarding certain tax matters and consequences
to shareholders, and Consent of Counsel**<F8> (Draft is
included)
(13)(a) Transfer Agency Servicing Agreement*<F7>
(13)(b) Fund Accounting Servicing Agreement*<F7>
(13)(c) Fulfillment Servicing Agreement*<F7>
(13)(d) Accounting/Pricing Agreement*<F7>
(14)(a) Consent of Independent Public Accountants (PricewaterhouseCoopers
LLP)
(14)(b) Consent of Independent Public Accountants (Deloitte & Touche LLP)
(15) None
(16) Power of Attorney
(17) Form of Proxy
*<F7> Previously filed as part of the Registrant's Registration Statement on
Form N-1A (Reg. No. 333-69803 and 1940 Act File No. 811-09177), or an
amendment thereto, and incorporated herein by reference.
**<F8> Final opinion to be filed by post-effective amendment to this
Registration Statement on Form N-14.