UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT ON REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-09177
THE CATHOLIC FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1100 WEST WELLS STREET
MILWAUKEE, WISCONSIN 53233
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
THEODORE F. ZIMMER, ESQ., PRESIDENT
THE CATHOLIC FUNDS, INC.
1100 WEST WELLS STREET
MILWAUKEE, WISCONSIN 53233
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH A COPY TO:
FREDRICK G. LAUTZ, ESQ.
QUARLES & BRADY LLP
411 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (414) 278-6500
DATE OF FISCAL YEAR END: SEPTEMBER 30, 2004
DATE OF REPORTING PERIOD: SEPTEMBER 30, 2004
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-
CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W.,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS
(THE CATHOLIC FUNDS(R) LOGO)
GIVING VOICE TO CATHOLIC VALUES(SM)
THE CATHOLIC EQUITY FUND
ANNUAL REPORT
SEPTEMBER 30, 2004
The Catholic Funds
1-877-222-2402
THANK YOU FOR CALLING THE CATHOLIC FUNDS.
PLEASE SELECT FROM THE FOLLOWING SEVEN CHOICES:
o FOR FUND PRICES ------------------------------------------- PRESS 1
o TO WORK WITH FUNDS YOU OWN -------------------------------- PRESS 2
o TO ORDER DUPLICATE ACCOUNT
STATEMENTS OR CHECKBOOKS ---------------------------------- PRESS 3
o FOR FUND OBJECTIVES, FUND LITERATURE
AND WATCHLIST INFORMATION --------------------------------- PRESS 4
o FOR MAILING, WIRING AND
INTERNET INFORMATION -------------------------------------- PRESS 5
o FOR YEAR-END ACCOUNT INFORMATION -------------------------- PRESS 6
o TO RETURN TO THE MAIN OR PREVIOUS MENU -------------------- PRESS *
o IF AT ANY TIME DURING THIS CALL YOU
WOULD LIKE TO SPEAK TO A CUSTOMER
SERVICE REPRESENTATIVE ------------------------------------ PRESS 0
2 Letter to Shareholders
3 The Catholic Equity Fund
6 Allocation of Portfolio Assets
7 Schedule of Investments
16 Schedule of Futures Contracts
17 Statement of Assets & Liabilities
18 Statement of Operations
19 Statements of Changes in Net Assets
20 Financial Highlights
23 Notes to Financial Statements
29 Report of Independent Registered Public Accounting Firm
30 Directors and Officers
Letter to Shareholders
Dear Shareholder,
THE ANNUAL REPORT -- The enclosed annual report of the Catholic Equity Fund
covers the 12-month period that ended September 30, 2004. In it you will find
information about the Fund's holdings and performance, as well as commentary on
market conditions. You will see that the Fund's financial statements are
audited by PricewaterhouseCoopers LLP, a major accounting firm that enjoys
national recognition for its significant expertise and experience in the mutual
fund field. We would also like you to know that the Securities and Exchange
Commission (SEC) and National Association of Securities Dealers (NASD) recently
did routine reviews and found nothing of concern in regard to our compliance
with applicable securities laws and regulations.
ADVOCACY PROGRAM -- In the latest Your Catholic Voice newsletter that you
received last month, we reported on our advocacy philosophy and on our advocacy
activities for the shareholder-resolution year that ended June 30, 2004. We are
even more active in the current resolution year. We have already filed new
resolutions with thirteen companies who we believe have been paying their CEOs
at extremely high levels. We have filed three other resolutions, two of which
deal with the treatment of workers and one with the harm to young people caused
by sympathetic depictions of smoking in movies. We expect to join in dialogues
with these and other companies.
FOR MORE INFORMATION -- We invite you to read our four articles (that we call
monographs) that further explain our philosophy and positions. You can obtain
them on the Internet (www.catholicfunds.com) or by calling 414-278-6550. Our
Internet site has other interesting information as well.
Thank you for your continued trust and investment.
/s/Daniel J. Steininger /s/Theodore F. Zimmer
Daniel J. Steininger Theodore F. Zimmer
Chairman of the Board President
An investment in The Catholic Equity Fund involves risk. The principal value
and investment returns will fluctuate, and an investor's shares, when redeemed,
may be worth more or less than their original cost. An investor should consider
the Fund's investment objectives, risks, and charges and expenses carefully
before you invest or send money.
"S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc., and has been
licensed for use by The Catholic Equity Fund. The Catholic Equity Fund is not
sponsored, endorsed, sold or promoted by Standard and Poor's and Standard and
Poor's makes no representation regarding the advisability of investing in the
Fund. The Fund seeks to match the index, but performance can be expected to
differ by a small percentage representing operating costs and the exclusion of
companies that participate in abortion (currently four). An investment cannot be
made directly in the Index.
The Catholic Church has not sponsored or endorsed The Catholic Equity Fund nor
approved or disapproved of the Fund as an investment. The Catholic Equity Fund
is distributed through Catholic Financial Services Corporation, 1100 W. Wells
St., Milwaukee, WI 53233, (414) 278-6550, of which Dan Steininger and Ted Zimmer
are registered representatives. Member NASD and SIPC.
The Catholic Equity Fund
MANAGEMENT:
Mellon Equity Associates is an independently run, wholly owned subsidiary of
Mellon Financial Corporation located in Pittsburgh, Pennsylvania. It has advised
passive and active accounts for institutional and individual clients since 1983.
Today, it manages over $19 billion in assets for 97 clients.
The portfolio manger, Thomas Durante joined Mellon Equity Associates in January
2000. In addition to the Catholic Equity Fund, Tom manages several index
accounts at Mellon Equity. Tom is a Chartered Financial Analyst and has earned
a BS in accounting from Fairfield University in 1982.
MARKET COMMENTARY
For the year ended September 2004, Catholic Equity Fund ("Fund") produced a
total return of 12.70% (Class A without sales load), compared to a return of the
S&P 500 Composite Stock Price Index ("Index") of 13.87%. The primary difference
between the Fund's performance and the Index's return is attributable to
expenses and the net effect of the sampling strategy to compensate for the
securities excluded under our sanctity of life screen.
The strongest returns for the Fund occurred in the first half of the period as
the S&P 500 reached a high in February. Since then the market has remained
locked in a trading range as investors weigh the improving economy against the
uncertainty of the future political and economic environment. On a positive
note, the S&P 500 realized record earnings partially due to low inflation, low
interest rates, persistent consumer spending and strong growth as measured by
GDP. The uncertainty that weighs on the market is due primarily to the
geopolitical risks and uncertainty that persisted about the outcome of the
election in the United States. The geopolitical risks had a direct effect on the
dramatic increase in the price of oil as output from Iraq has been limited and
there is uncertainty of future oil supply disruptions. This caused many
economists to predict a deceleration towards near-trend economic growth for
2005.
The sectors that provided the greatest contribution to return were interest
sensitive and producer goods and services. These sectors benefited from the low
interest rate environment and the increase in demand from emerging markets, most
notably China and India. Energy stocks also provided excellent returns, as the
price of crude climbed and refining capacity was limited. Within the technology
sector, semiconductors performed poorly as companies delayed new products and
saw their profit margins begin to erode. Drug stocks also performed poorly as
many large pharmaceutical companies are having difficulties replacing the
revenues generated from blockbuster drugs whose patents will be expiring in the
near future.
Overall, the Fund, for the year ended September 30, 2004, had solid returns,
which reflected an improving economy, very favorable business conditions in the
United States and increasing global demand. There are concerns about inflation
and a deceleration in global growth due to surging oil and commodity prices. The
Federal Reserve Bank has maintained that it will take a measured approach
regarding changing interest rates in order to avoid stalling the recovery.
THE CATHOLIC EQUITY FUND - CLASS A
GROWTH OF A $10,000 INVESTMENT
The Catholic Equity The Catholic Equity
Date Fund - Class A Fund - Class A w/load S&P 500 Index
---- -------------- --------------------- -------------
5/3/1999 $10,000 $9,600 $10,000
6/30/1999 $10,290 $9,878 $10,306
9/30/1999 $9,690 $9,302 $9,663
12/31/1999 $10,855 $10,421 $11,101
3/31/2000 $11,155 $10,709 $11,356
6/30/2000 $10,945 $10,507 $11,055
9/30/2000 $10,965 $10,526 $10,948
12/31/2000 $10,302 $9,890 $10,092
3/31/2001 $9,338 $8,964 $8,895
6/30/2001 $10,000 $9,600 $9,416
9/30/2001 $8,464 $8,126 $8,034
12/31/2001 $9,385 $9,010 $8,893
3/31/2002 $9,334 $8,961 $8,917
6/30/2002 $8,044 $7,723 $7,722
9/30/2002 $6,632 $6,367 $6,388
12/31/2002 $7,208 $6,920 $6,927
3/31/2003 $6,962 $6,684 $6,709
6/30/2003 $8,020 $7,699 $7,742
9/30/2003 $8,204 $7,876 $7,947
12/31/2003 $9,163 $8,794 $8,912
3/31/2004 $9,298 $8,923 $9,063
6/30/2004 $9,453 $9,072 $9,219
9/30/2004 $9,246 $8,873 $9,047
AVERAGE ANNUAL RETURNS
September 30, 2004
Since Inception
1 Year Inception Date
------ --------- ---------
Class A (without sales load) 12.70% -1.44% 5/3/99
Class A (with sales load) 8.23% -2.18% 5/3/99
S&P 500 Index 13.87% -2.10% 5/3/99
Class C (without sales load) 12.39% 0.34% 4/9/02
Class C (with sales load) 11.39% 0.34% 4/9/02
S&P 500 Index 13.87% 1.64% 4/9/02
Class I 12.89% 0.35% 4/3/02
S&P 500 Index 13.87% 1.37% 4/3/02
Performance information prior to April 3, 2002 reflects performance of The
Catholic Disciplined Capital Appreciation Fund, which had a similar, but not
identical, investment program to that of the Catholic Equity Fund.
Past performance is not an indication of future results. Investment return and
principal value will fluctuate, and shares, when redeemed, may be worth more or
less than their original cost. At various times, the Fund's adviser waived its
management fees and/or reimbursed Fund expenses. Had the adviser not done so,
the Fund's total return would have been lower.
Class A performance has been restated to reflect the maximum sales charge of
4%. Class C performance reflects the maximum contingent sales charge (CDSC) of
1% terminating one year after the purchase of shares. Class I shares have no
sales load and are for institutional shareholders only.
The returns shown do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
The S&P 500 is an unmanaged index comprised of 500 common stocks representative
of the stock market as a whole. It is not possible to invest directly in an
index.
Current performance may be lower or higher than the performance data quoted.
Performance data current to the most recent month-end can be found at our
website, www.CatholicFunds.com
September 30, 2004
Ticker Symbols Net Asset Values
-------------- ----------------
Equity A CTHQX $8.95
Equity C CTHSX $8.90
Equity I CTHRX $8.96
TOP 10 HOLDINGS
As of September 30, 2004
Percentage
of
Rank Ticker Security Name Net Assets
- ---- ------ ------------- ----------
1 GE General Electric Company 3.36%
2 XOM Exxon Mobil Corporation 2.97%
3 MSFT Microsoft Corporation 2.85%
4 C Citigroup Inc. 2.16%
5 WMT Wal-Mart Stores, Inc. 2.14%
6 JNJ Johnson & Johnson 1.92%
7 AIG American International
Group, Inc. 1.68%
8 BAC Bank of America Corporation 1.66%
9 IBM International Business Machines
Corporation (IBM) 1.40%
10 JPM JPMorgan Chase & Co. 1.34%
EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments including payments
made with the proceeds of dividends or other distributions made by the Fund;
redemption fees; and exchange fees; and (2) ongoing costs, including management
fees; distribution and/or service (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds. The example is based on an investment of
$1,000 invested at the beginning of the period and held for the entire period
from April 1, 2004, to September 30, 2004. The example reflects the Adviser's
fee waivers and expense reimbursements in effect during this period.
ACTUAL EXPENSES
For each class, the first line of the table below provides information about
actual account values and actual expenses, after fee waivers and expense
reimbursements. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class, the second line of the table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio, after fee waivers and expense reimbursements and an assumed rate
of return of 5% per year before expenses, which is not the Fund's actual return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expense you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the second line
of the table for each class is useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning different funds. In
addition, if these transaction costs were included, your costs would have been
higher.
EXPENSE EXAMPLES
Expenses Paid During
Beginning Account Ending Account Period1<F1> (4/1/2004 to
Value (4/1/2004) Value (9/30/2004) 9/30/2004)
---------------- ----------------- ------------------------
Class A Actual $1000.00 $ 994.40 $4.47
Class A Hypothetical (5% return before expenses) $1000.00 $1020.25 $4.80
Class C Actual $1000.00 $ 993.30 $5.98
Class C Hypothetical (5% return before expenses) $1000.00 $1019.00 $6.06
Class I Actual $1000.00 $ 995.60 $3.49
Class I Hypothetical (5% return before expenses) $1000.00 $1021.50 $3.54
1<F1> Expenses are equal to the Fund's annualized expense ratio of 0.95%,
1.20% and 0.70% for Class A, Class C and Class I, respectively,
multiplied by the average account value over the period, multiplied by
the number of days in the most recent half-year/366 days (to reflect the
one-half year period).
ALLOCATION OF PORTFOLIO ASSETS
(Calculated as a Percentage of Net Assets1<F2>)
Financials2<F3> 20.41%
Information Technology2<F3> 15.48%
Health Care2<F3> 12.92%
Industrials2<F3> 11.52%
Consumer Discretionary2<F3> 10.96%
Consumer Staples2<F3> 10.51%
Energy2<F3> 7.30%
Telecommunications Services2<F3> 3.59%
Materials2<F3> 3.05%
Utilities2<F3> 2.81%
Futures Contracts 1.57%
U.S. Treasury Bill 0.10%
1<F2> Total Net Assets on September 30, 2004 were $32,030,756
2<F3> Sectors based on Global Industry Classification Standard (GICS(R))
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2004
THE CATHOLIC EQUITY FUND
Common Stocks (98.5%) Shares Value
- --------------------- ------ -----
3M Co. 2,380 $190,329
Abbott Laboratories 6,050 256,278
ACE Limited 850 34,051
ADC Telecommunications,
Inc.* <F4> 2,200 3,982
Adobe Systems
Incorporated 700 34,629
Adolph Coors Company 100 6,792
Advanced Micro
Devices, Inc.* <F4> 1,000 13,000
The AES Corporation*<F4> 1,900 18,981
Aetna Inc. 500 49,965
Affiliated Computer
Services, Inc. - Class A*<F4> 400 22,268
AFLAC INCORPORATED 1,490 58,423
Agilent
Technologies, Inc.* <F4> 1,450 31,276
Air Products and
Chemicals, Inc. 650 35,347
Alberto-Culver Company 300 13,044
Albertson's, Inc. 1,050 25,127
Alcoa Inc. 2,600 87,334
Allegheny Energy, Inc.* <F4> 300 4,788
Allegheny
Technologies, Inc. 300 5,475
Allergan, Inc. 765 55,501
Allied Waste
Industries, Inc.* <F4> 900 7,965
The Allstate Corporation 2,140 102,699
ALLTEL Corporation 890 48,870
Altera Corporation*<F4> 1,150 22,505
Altria Group, Inc. 6,250 294,000
Ambac Financial
Group, Inc. 350 27,982
Amerada Hess
Corporation 250 22,250
Ameren Corporation 600 27,690
American Electric
Power Company, Inc. 1,150 36,754
American Express
Company 3,950 203,267
American International
Group, Inc. 7,902 537,257
American Power
Conversion Corporation 550 9,565
American Standard
Companies Inc.* <F4> 600 23,346
AmerisourceBergen
Corporation 657 35,287
Amgen Inc.* <F4> 3,840 217,651
AmSouth Bancorporation 1,050 25,620
Anadarko Petroleum
Corporation 750 49,770
Analog Devices, Inc. 1,150 44,597
Andrew Corporation*<F4> 400 4,896
Anheuser-Busch
Companies, Inc. 2,400 119,880
Anthem, Inc.* <F4> 400 34,900
Aon Corporation 850 24,429
Apache Corporation 1,032 51,714
Apartment Investment
& Management Company 300 10,434
Apollo Group, Inc. -
Class A*<F4> 600 44,022
Apple Computer, Inc.* <F4> 1,150 44,562
Applera Corporation -
Applied Biosystems Group 550 10,379
Applied Materials, Inc.* <F4> 5,100 84,099
Applied Micro Circuits
Corporation*<F4> 900 2,817
Archer-Daniels-Midland
Company 1,850 31,413
Ashland Inc. 200 11,216
AT&T Corp. 2,300 32,936
AT&T Wireless
Services Inc.* <F4> 8,200 121,196
Autodesk, Inc. 300 14,589
Automatic Data
Processing, Inc. 1,800 74,376
AutoNation, Inc.* <F4> 750 12,810
AutoZone, Inc.* <F4> 275 21,244
Avaya Inc.* <F4> 1,300 18,122
Avery Dennison
Corporation 350 23,023
Avon Products, Inc. 1,500 65,520
Baker Hughes
Incorporated 1,050 45,906
Ball Corporation 400 14,972
Bank of America
Corporation 12,302 533,046
The Bank of New York
Company, Inc. 2,300 67,091
C.R. Bard, Inc. 400 22,652
Bausch & Lomb
Incorporated 200 13,290
Baxter International Inc. 1,750 56,280
BB&T Corporation 1,650 65,489
The Bear Stearns
Companies Inc. 290 27,889
Becton, Dickinson
and Company 750 38,775
Bed Bath & Beyond Inc.* <F4> 915 33,956
BellSouth Corporation 5,500 149,160
Bemis Company, Inc. 300 7,974
Best Buy Co., Inc. 1,000 54,240
Big Lots, Inc.* <F4> 300 3,669
Biogen Idec Inc.* <F4> 1,060 64,840
Biomet, Inc. 750 35,160
BJ Services Company 440 23,060
The Black & Decker
Corporation 300 23,232
BMC Software, Inc.* <F4> 650 10,277
The Boeing Company 2,500 129,050
Boise Cascade
Corporation 200 6,656
Boston Scientific
Corporation*<F4> 2,480 98,530
Bristol-Myers Squibb
Company 8,850 209,480
Broadcom Corporation -
Class A*<F4> 950 25,926
Brown-Forman
Corporation - Class B 400 18,320
Brunswick Corporation 300 13,728
Burlington Northern
Santa Fe Corporation 1,150 44,056
Burlington Resources Inc. 1,300 53,040
Calpine Corporation*<F4> 1,000 2,900
Campbell Soup Company 1,150 30,233
Capital One Financial
Corporation 750 55,425
Cardinal Health, Inc. 2,100 91,917
Caremark Rx, Inc.* <F4> 1,400 44,898
Carnival Corporation 1,950 92,215
Caterpillar Inc. 1,050 84,473
Cendant Corporation 3,200 69,120
CenterPoint Energy, Inc. 900 9,324
Centex Corporation 400 20,184
CenturyTel, Inc. 400 13,696
ChevronTexaco
Corporation 6,572 352,522
Chiron Corporation*<F4> 550 24,310
The Chubb Corporation 600 42,168
CIENA Corporation*<F4> 1,400 2,772
CIGNA Corporation 400 27,852
Cincinnati Financial
Corporation 525 21,640
Cinergy Corp. 600 23,760
Cintas Corporation 500 21,020
Circuit City Stores, Inc. 600 9,204
Cisco Systems, Inc.* <F4> 20,485 370,779
Citigroup Inc. 15,705 692,905
Citizens Communications
Company 850 11,381
Citrix Systems, Inc.* <F4> 400 7,008
Clear Channel
Communications, Inc. 1,875 58,444
The Clorox Company 675 35,978
CMS Energy Corporation*<F4> 600 5,712
Coach, Inc.* <F4> 600 25,452
The Coca-Cola Company 7,405 296,570
Coca-Cola Enterprises Inc. 1,450 27,405
Colgate-Palmolive
Company 1,650 74,547
Comcast Corporation -
Class A*<F4> 6,752 190,676
Comerica Incorporated 500 29,675
Computer Associates
International, Inc. 1,750 46,025
Computer Sciences
Corporation*<F4> 600 28,260
Compuware Corporation*<F4> 1,200 6,180
Comverse
Technology, Inc.* <F4> 650 12,239
ConAgra Foods, Inc. 1,540 39,593
ConocoPhillips 2,114 175,145
Consolidated Edison, Inc. 765 32,161
Constellation
Energy Group 500 19,920
Convergys Corporation*<F4> 400 5,372
Cooper Industries, Ltd. -
Class A 300 17,700
Cooper Tire & Rubber
Company 200 4,034
Corning Incorporated*<F4> 4,050 44,874
Costco Wholesale
Corporation 1,450 60,262
Countrywide Financial
Corporation 1,698 66,884
Crane Co. 200 5,784
CSX Corporation 750 24,900
Cummins Inc. 100 7,389
CVS Corporation 1,150 48,449
Dana Corporation 500 8,845
Danaher Corporation 1,000 51,280
Darden Restaurants, Inc. 500 11,660
Deere & Company 750 48,412
Dell Inc.* <F4> 7,670 273,052
Delphi Corporation 1,500 13,935
Delta Air Lines, Inc.* <F4> 300 987
Deluxe Corporation 100 4,102
Devon Energy Corporation 750 53,257
Dillard's, Inc. - Class A 300 5,922
Dollar General Corporation 1,050 21,157
Dominion Resources, Inc. 950 61,988
R. R. Donnelley &
Sons Company 600 18,792
Dover Corporation 650 25,265
The Dow Chemical
Company 2,800 126,504
Dow Jones &
Company, Inc. 300 12,183
DTE Energy Company 490 20,673
E. I. du Pont de Nemours
and Company 3,000 128,400
Duke Energy Corporation 2,800 64,092
Dynegy Inc. - Class A*<F4> 600 2,994
Eastman Chemical
Company 300 14,265
Eastman Kodak Company 850 27,387
Eaton Corporation 500 31,705
eBay Inc.* <F4> 2,050 188,477
Ecolab Inc. 800 25,152
Edison International 950 25,185
El Paso Corporation 1,845 16,956
Electronic Arts Inc. (EA)* <F4> 900 41,391
Electronic Data
Systems Corporation 1,450 28,116
EMC Corporation*<F4> 7,450 85,973
Emerson Electric Co. 1,250 77,363
Engelhard Corporation 400 11,340
Entergy Corporation 750 45,458
EOG Resources, Inc. 400 26,340
Equifax Inc. 400 10,544
Equity Office
Properties Trust 1,171 31,910
Equity Residential 850 26,350
E*TRADE Financial
Corporation*<F4> 1,100 12,562
Exelon Corporation 2,000 73,380
Express Scripts, Inc.* <F4> 200 13,068
Exxon Mobil Corporation 19,698 952,004
Family Dollar Stores, Inc. 500 13,550
Fannie Mae 2,900 183,860
Federated Department
Stores, Inc. 550 24,986
Federated Investors,
Inc. - Class B 300 8,532
FedEx Corp. 950 81,406
Fifth Third Bancorp 1,750 86,135
First Data Corporation 2,629 114,361
FirstEnergy Corp. 1,050 43,134
First Horizon National
Corporation 400 17,344
Fiserv, Inc.* <F4> 550 19,173
Fisher Scientific
International Inc.* <F4> 300 17,499
Fluor Corporation 300 13,356
Ford Motor Company 5,600 78,680
Forest Laboratories, Inc.* <F4> 2,350 105,703
Fortune Brands, Inc. 450 33,340
FPL Group, Inc. 550 37,576
Franklin Resources, Inc. 750 41,820
Freddie Mac 2,050 133,742
Freeport-McMoRan Copper
& Gold, Inc. - Class B 600 24,300
Gannett Co.,Inc. 850 71,196
The Gap, Inc. 2,700 50,490
Gateway, Inc.* <F4> 800 3,960
General Dynamics
Corporation 650 66,365
General Electric
Company 32,035 1,075,735
General Mills, Inc. 1,150 51,635
General Motors
Corporation 1,715 72,853
Genuine Parts Company 500 19,190
Genzyme Corporation*<F4> 650 35,367
Georgia-Pacific Corp 750 26,962
Gilead Sciences, Inc.* <F4> 1,400 52,332
The Gillette Company 2,965 123,759
Golden West Financial
Corporation 500 55,475
The Goldman Sachs
Group, Inc. 1,450 135,198
Goodrich Corporation 300 9,408
The Goodyear Tire &
Rubber Company*<F4> 300 3,222
W.W. Grainger, Inc. 300 17,295
Great Lakes Chemical
Corporation 100 2,560
Guidant Corporation 950 62,738
Halliburton Company 1,350 45,481
Harley-Davidson, Inc. 950 56,468
Harrah's
Entertainment, Inc. 300 15,894
The Hartford Financial
Services Group, Inc. 850 52,640
Hasbro, Inc. 500 9,400
Hercules Incorporated*<F4> 200 2,850
Hershey Foods Corporation 800 37,368
Hewlett-Packard
Company 9,157 171,694
Hilton Hotels Corporation 1,050 19,782
H.J. Heinz Company 1,050 37,821
The Home Depot, Inc. 6,750 264,600
Honeywell
International Inc. 2,600 93,236
Hospira, Inc.* <F4> 625 19,125
H&R Block, Inc. 490 24,216
Humana Inc.* <F4> 400 7,992
Huntington Bancshares
Incorporated 650 16,191
Illinois Tool Works Inc. 900 83,853
IMS Health Incorporated 650 15,548
Ingersoll-Rand Company 500 33,985
Intel Corporation 19,535 391,872
International Business
Machines Corporation
(IBM) 5,215 447,134
International Flavors
& Fragrances Inc. 275 10,505
International Game
Technology 1,000 35,950
International Paper
Company 1,390 56,170
The Interpublic Group
of Companies, Inc.* <F4> 1,250 13,238
Intuit Inc.* <F4> 565 25,651
ITT Industries, Inc. 325 25,997
Jabil Circuit, Inc.* <F4> 665 15,295
Janus Capital Group Inc. 750 10,208
J. C. Penney Company,
Inc. - Holding Company 850 29,988
JDS Uniphase Corporation*<F4> 4,050 13,648
Jefferson-Pilot Corporation 400 19,864
Johnson & Johnson 10,900 613,997
Johnson Controls, Inc. 630 35,790
Jones Apparel Group, Inc. 400 14,320
JPMorgan Chase & Co. 10,795 428,885
KB HOME 200 16,898
Kellogg Company 1,250 53,325
Kerr-McGee Corporation 450 25,762
KeyCorp 1,250 39,500
KeySpan Corporation 500 19,600
Kimberly-Clark
Corporation 1,500 96,885
Kinder Morgan, Inc. 400 25,128
King Pharmaceuticals,
Inc.* <F4> 650 7,761
KLA-Tencor Corporation*<F4> 550 22,814
Knight-Ridder, Inc. 300 19,635
Kohl's Corporation*<F4> 1,015 48,913
The Kroger Co.* <F4> 2,100 32,592
Leggett & Platt,
Incorporated 550 15,455
Lehman Brothers
Holdings Inc. 850 67,762
Lexmark
International, Inc.* <F4> 450 37,805
Eli Lilly and Company 5,500 330,275
Limited Brands 1,450 32,320
Lincoln National
Corporation 500 23,500
Linear Technology
Corporation 950 34,428
Liz Claiborne, Inc. 400 15,088
Lockheed Martin
Corporation 1,350 75,303
Loews Corporation 550 32,175
Louisiana-Pacific
Corporation 300 7,785
Lowe's Companies, Inc. 2,340 127,179
LSI Logic Corporation*<F4> 1,000 4,310
Lucent Technologies Inc.* <F4> 12,950 41,052
M&T Bank Corporation 400 38,280
Manor Care, Inc. 300 8,988
Marathon Oil Corporation 1,050 43,344
Marriott International,
Inc. - Class A 650 33,774
Marsh & McLennan
Companies, Inc. 1,540 70,470
Marshall & Ilsley
Corporation 650 26,195
Masco Corporation 1,450 50,068
Mattel, Inc. 1,250 22,662
Maxim Integrated
Products, Inc. 950 $40,175
The May Department
Stores Company 850 21,785
Maytag Corporation 300 5,511
MBIA Inc. 400 23,284
MBNA Corporation 3,900 98,280
McCormick & Company,
Incorporated 400 13,736
McDonald's Corporation 3,850 107,915
The McGraw-Hill
Companies, Inc. 550 43,829
McKesson Corporation 2,050 52,583
MeadWestvaco Corporation 550 17,545
Medco Health
Solutions, Inc.* <F4> 775 23,948
MedImmune, Inc.* <F4> 650 15,405
Medtronic, Inc. 3,730 193,587
Mellon Financial
Corporation 1,250 34,613
Merck & Co. Inc. 11,150 367,950
Mercury Interactive
Corporation*<F4> 300 10,464
Meredith Corporation 200 10,276
Merrill Lynch & Co., Inc. 2,900 144,188
MetLife, Inc. 2,300 88,895
MGIC Investment
Corporation 300 19,965
Micron Technology, Inc.* <F4> 1,750 21,053
Microsoft Corporation 33,040 913,556
Millipore Corporation*<F4> 200 9,570
Molex Incorporated 550 16,401
Monsanto Company 850 30,957
Monster Worldwide Inc.* <F4> 300 7,392
Moody's Corporation 490 35,892
Morgan Stanley 3,300 162,690
Motorola, Inc. 7,230 130,429
Mylan Laboratories Inc. 800 14,400
Nabors Industries, Ltd*<F4> 400 18,940
National City Corporation 2,050 $79,171
National Semiconductor
Corporation*<F4> 1,100 17,039
Navistar International
Corporation*<F4> 200 7,438
NCR Corporation*<F4> 300 14,877
Network Appliance, Inc.* <F4> 1,050 24,150
The New York Times
Company - Class A 400 15,640
Newell Rubbermaid Inc. 740 14,830
Newmont Mining
Corporation 1,350 61,465
Nextel Communications,
Inc. - Class A*<F4> 3,280 78,195
Nicor Inc. 100 3,670
NIKE, Inc. - Class B 850 66,980
NiSource Inc. 750 15,758
Noble Corporation*<F4> 350 15,732
Nordstrom, Inc. 400 15,296
Norfolk Southern
Corporation 1,150 34,201
North Fork
Bancorporation, Inc. 900 40,005
Northern Trust
Corporation 650 26,520
Northrop Grumman
Corporation 1,114 59,410
Novell, Inc.* <F4> 1,000 6,310
Novellus Systems, Inc.* <F4> 500 13,295
Nucor Corporation 200 18,274
NVIDIA Corporation*<F4> 500 7,260
Occidental Petroleum
Corporation 1,140 63,760
Office Depot, Inc.* <F4> 850 12,776
Omnicom Group Inc. 550 40,183
Oracle Corporation*<F4> 15,680 176,870
PACCAR Inc 525 36,288
Pactiv Corporation*<F4> 400 9,300
Pall Corporation 300 7,344
Parametric Technology
Corporation*<F4> 400 $2,112
Parker Hannifin
Corporation 400 23,544
Paychex, Inc. 1,075 32,411
Peoples Energy
Corporation 100 4,168
PeopleSoft, Inc.* <F4> 1,050 20,842
The Pepsi Bottling
Group, Inc. 700 19,005
PepsiCo, Inc. 5,250 255,413
PerkinElmer, Inc. 300 5,166
PG&E Corporation*<F4> 1,250 38,000
Phelps Dodge Corporation 300 27,609
Pinnacle West Capital
Corporation 300 12,450
Pitney Bowes Inc. 750 33,075
Plum Creek Timber
Company, Inc. 550 19,266
PMC-Sierra, Inc.* <F4> 500 4,405
PNC Financial
Services Group 850 45,985
Power-One, Inc.* <F4> 100 648
PPG Industries, Inc. 500 30,640
PPL Corporation 600 28,308
Praxair, Inc. 1,000 42,740
Principal Financial
Group, Inc. 950 34,171
The Procter & Gamble
Company 7,680 415,642
Progress Energy, Inc. 750 31,755
The Progressive
Corporation 650 55,087
ProLogis 500 17,620
Providian Financial
Corporation*<F4> 800 12,432
Prudential Financial, Inc. 1,650 77,616
Public Service Enterprise
Group Incorporated 650 27,690
Pulte Homes, Inc. 400 24,548
QLogic Corporation*<F4> 300 8,883
QUALCOMM Inc 5,000 195,200
Quest Diagnostics
Incorporated 300 26,466
Qwest Communications
International Inc.* <F4> 5,100 16,983
RadioShack Corporation 500 14,320
Raytheon Company 1,350 51,273
Reebok International Ltd. 200 7,344
Regions Financial
Corporation 1,352 44,697
Reynolds American Inc. 500 34,020
Robert Half
International Inc. 500 12,885
Rockwell Automation, Inc. 550 21,285
Rockwell Collins, Inc. 550 20,427
Rohm and Haas Company 650 27,930
Rowan Companies, Inc.* <F4> 300 7,920
T. Rowe Price Group Inc. 400 20,376
Ryder System, Inc. 200 9,408
Sabre Holdings Corporation 400 9,812
SAFECO Corporation 400 18,260
Safeway Inc.* <F4> 1,250 24,138
Sanmina-SCI Corporation*<F4> 1,500 10,575
Sara Lee Corporation 2,300 52,578
SBC Communications Inc. 9,950 258,203
Schering-Plough
Corporation 7,050 134,373
Schlumberger Limited 1,800 121,158
The Charles Schwab
Corporation 3,900 35,841
Scientific-Atlanta, Inc. 500 12,960
Sealed Air Corporation*<F4> 300 13,905
Sears, Roebuck and Co. 650 25,903
Sempra Energy 650 23,524
The Sherwin-Williams
Company 400 17,584
Siebel Systems, Inc.* <F4> 1,400 10,556
Sigma-Aldrich Corporation 200 11,600
Simon Property
Group, Inc. 590 31,642
SLM Corporation 1,375 61,325
Snap-on Incorporated 200 5,512
Solectron Corporation*<F4> 2,900 14,355
The Southern Company 2,205 66,106
SouthTrust Corporation 1,050 43,743
Southwest Airlines Co. 2,400 32,688
Sovereign Bancorp, Inc. 1,000 21,820
Sprint Corporation 4,400 88,572
St. Jude Medical, Inc.* <F4> 540 40,646
The St. Paul Travelers
Companies, Inc. 2,041 67,475
The Stanley Works 300 12,759
Staples, Inc. 1,550 46,221
Starbucks Corporation*<F4> 1,150 52,279
Starwood Hotels &
Resorts Worldwide, Inc. 650 30,173
State Street Corporation 1,050 44,846
Stryker Corporation 1,180 56,734
Sun Microsystems, Inc.* <F4> 10,050 40,602
SunGard Data
Systems Inc.* <F4> 850 20,205
Sunoco, Inc. 300 22,194
SunTrust Banks, Inc. 1,050 73,930
SUPERVALU INC. 400 11,020
Symantec Corporation*<F4> 1,000 54,880
Symbol Technologies, Inc. 650 8,216
Synovus Financial Corp. 850 22,228
Sysco Corporation 1,915 57,297
Target Corporation 2,745 124,211
TECO Energy, Inc. 600 8,118
Tektronix, Inc. 300 9,975
Tellabs, Inc.* <F4> 1,300 11,947
Temple-Inland Inc. 200 13,430
Teradyne, Inc.*<F4> 550 7,370
Texas Instruments
Incorporated 5,200 110,656
Textron Inc. 400 25,708
Thermo Electron
Corporation*<F4> 500 13,510
Tiffany & Co. 400 12,296
Time Warner Inc.* <F4> 13,800 222,732
The TJX Companies, Inc. 1,465 32,289
Torchmark Corporation 400 21,272
Toys "R" Us, Inc.* <F4> 650 11,531
Transocean Inc.* <F4> 950 33,991
Tribune Company 950 39,093
TXU Corp. 950 45,524
Tyco International Ltd. 6,100 187,026
Union Pacific Corporation 815 47,759
Unisys Corporation*<F4> 950 9,804
United Parcel Service,
Inc. - Class B 3,390 257,369
United States Steel
Corporation 300 11,286
United Technologies
Corporation 1,550 144,739
UnitedHealth Group
Incorporated 2,100 154,854
Univision Communications
Inc. - Class A*<F4> 950 30,030
Unocal Corporation 750 32,250
UnumProvident
Corporation 950 14,906
U.S. Bancorp 5,800 167,620
UST Inc. 500 20,130
Valero Energy Corporation 400 32,084
VERITAS Software
Corporation*<F4> 1,250 22,250
Verizon Communications
Inc. 8,417 331,461
V. F. Corporation 300 14,835
Viacom Inc. - Class B 5,300 177,868
Visteon Corporation 300 2,397
Vulcan Materials Company 300 15,285
Wachovia Corporation 4,050 190,148
Wal-Mart Stores, Inc. 12,900 686,280
Walgreen Co. 3,080 110,356
The Walt Disney Company 6,150 138,683
Washington Mutual, Inc. 2,595 101,413
Waste Management, Inc. 1,750 47,845
Waters Corporation*<F4> 400 17,640
Watson
Pharmaceuticals, Inc.* <F4> 300 8,838
WellPoint Health
Networks Inc.* <F4> 500 52,545
Wells Fargo & Company 5,140 306,498
Wendy's International, Inc. 400 13,440
Weyerhaeuser Company 750 49,860
Whirlpool Corporation 200 12,018
The Williams
Companies, Inc. 1,400 16,940
Winn-Dixie Stores, Inc. 400 1,236
Worthington
Industries, Inc. 340 7,259
Wm. Wrigley Jr. Company 690 43,684
Wyeth 5,800 216,920
Xcel Energy, Inc. 1,150 19,918
Xerox Corporation*<F4> 2,500 35,200
Xilinx, Inc. 1,050 28,350
XL Capital Ltd - Class A 400 29,596
Yahoo! Inc.* <F4> 4,080 138,353
Yum! Brands, Inc 850 34,561
Zimmer Holdings, Inc.* <F4> 690 54,538
Zions Bancorporation 300 18,312
-----------
TOTAL COMMON STOCKS
(COST $29,068,438) 31,565,163
Short-Term Principal
Investments (0.1%) Amount Value
- ------------------ --------- -----
U.S. Treasury Bill,
12/23/2004, 1.6550% $32,000 31,878
-----------
TOTAL SHORT-TERM INVESTMENT
(COST $31,878) 31,878
-----------
TOTAL INVESTMENTS - 98.6%
(COST $29,100,316) 31,597,041
OTHER ASSETS,
LESS LIABILITIES - 1.4% 433,715
-----------
TOTAL NET ASSETS -
100.0% $32,030,756
-----------
-----------
*<F4> Non-income producing security.
The accompanying Notes to Financial Statements are an integral part of this
schedule.
SCHEDULE OF FUTURES CONTRACTS
SEPTEMBER 30, 2004
THE CATHOLIC EQUITY FUND
Unrealized
Futures Contracts Purchased Contracts Depreciation
- --------------------------- --------- ------------
S&P 500 Index Futures
Contracts Expiring December 2004 (Underlying Face
Amount at Market Value $278,725) 1 $(1,925)
S&P 500 Index E-mini Futures
Contracts Expiring December 2004 (Underlying Face
Amount at Market Value $222,980) 4 (690)
--------
TOTAL FUTURES CONTRACTS PURCHASED $(2,615)
--------
--------
The accompanying Notes to Financial Statements are an integral part of this
schedule.
STATEMENT OF ASSETS & LIABILITIES
SEPTEMBER 30, 2004
The Catholic
Equity Fund
-----------
ASSETS
- ------
Investments, at cost $29,100,316
-----------
Investments, at value $31,597,041
Cash 404,342
Dividend receivable 38,981
Receivable for Fund shares sold 16,500
Receivable from Adviser 4,472
Other assets 67,441
-----------
TOTAL ASSETS 32,128,777
-----------
LIABILITIES
- -----------
Payable for investments purchased 31,856
Payable for Fund shares redeemed 800
Payable to broker 135
Accrued expenses and other liabilities 65,230
-----------
TOTAL LIABILITIES 98,021
-----------
NET ASSETS $32,030,756
-----------
-----------
NET ASSETS CONSIST OF:
- ----------------------
Paid in capital $33,771,915
Undistributed net investment income 204,866
Undistributed net realized loss on
investments sold and futures contracts (4,440,135)
Net unrealized appreciation/(depreciation) on:
Investments 2,496,725
Futures contracts (2,615)
-----------
NET ASSETS $32,030,756
-----------
-----------
CLASS A SHARES
- --------------
Net assets $6,868,111
Shares authorized ($0.001 par value) 100,000,000(1)<F5>
Shares issued and outstanding 767,538
Net asset value, redemption price
and minimum offering price per share $8.95
Maximum offering price per share ($8.95/0.96) $9.32
CLASS C SHARES
- --------------
Net assets $3,344,454
Shares authorized ($0.001 par value) 100,000,000(1)<F5>
Shares issued and outstanding 375,661
Net asset value and offering price per share $8.90
CLASS I SHARES
- --------------
Net assets $21,818,191
Shares authorized ($0.001 par value) 100,000,000(1)<F5>
Shares issued and outstanding 2,434,474
Net asset value, redemption price
and offering price per share $8.96
(1)<F5> Represents authorized shares of the Fund. Authorized shares are not
allotted to the separate classes.
The accompanying Notes to Financial Statements are an integral part of these
statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
The Catholic
Equity Fund
-----------
INVESTMENT INCOME
- -----------------
Dividend income $522,639
Interest income 2,943
----------
TOTAL INCOME 525,582
----------
EXPENSES
- --------
Investment advisory fees 152,593
Transfer agent fees and expenses 71,974
Portfolio accounting fees 61,874
Federal and state registration fees 29,226
Custody fees 14,176
Legal fees 75,008
Printing and postage expenses 18,334
Audit fees 28,144
12b-1 fees - Class A 15,034
12b-1 fees - Class C 25,365
Directors' fees and expenses 6,714
Other 57,508
----------
TOTAL EXPENSES 555,950
----------
Less waivers and reimbursements by adviser (310,375)
----------
NET EXPENSES 245,575
----------
NET INVESTMENT INCOME 280,007
----------
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- --------------------------------------------------
Net realized gain/(loss) on:
Investments (96,942)
Futures contracts 41,629
Net change in unrealized appreciation on:
Investments 3,159,960
Futures contracts 9,887
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 3,114,534
----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $3,394,541
----------
----------
The accompanying Notes to Financial Statements are an integral part of these
statements.
STATEMENTS OF CHANGES IN NET ASSETS
THE CATHOLIC EQUITY FUND
For the Year Ended September 30,
--------------------------------
2004 2003
---- ----
OPERATIONS
- ----------
Net investment income $280,007 $186,910
Net realized loss on investments and futures contracts (55,313) (541,233)
Net change in unrealized appreciation
on investments and futures contracts 3,169,847 4,103,981
----------- -----------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 3,394,541 3,749,658
----------- -----------
DISTRIBUTIONS TO CLASS A SHAREHOLDERS
- -------------------------------------
Distributions from net investment income (33,289) (10,347)
DISTRIBUTIONS TO CLASS C SHAREHOLDERS
- -------------------------------------
Distributions from net investment income (17,425) (20)
DISTRIBUTIONS TO CLASS I SHAREHOLDERS
- -------------------------------------
Distributions from net investment income (165,953) (89,356)
----------- -----------
CHANGE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (216,667) (99,723)
----------- -----------
CAPITAL SHARE TRANSACTIONS
- --------------------------
Proceeds from shareholder purchases 3,964,509 5,008,504
Net proceeds from acquisition (Note 6) -- 6,305,312
Net asset value of shares issued to shareholders
in payment of distributions declared 211,562 99,324
Cost of shares redeemed (1,563,341) (1,523,231)
----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS 2,612,730 9,889,909
----------- -----------
CHANGE IN NET ASSETS $5,790,604 $13,539,844
----------- -----------
NET ASSETS, BEGINNING OF PERIOD $26,240,152 $12,700,308
----------- -----------
NET ASSETS, END OF PERIOD $32,030,756 $26,240,152
----------- -----------
UNDISTRIBUTED NET INVESTMENT INCOME $204,866 $143,817
----------- -----------
----------- -----------
The accompanying Notes to Financial Statements are an integral part of these
statements.
FINANCIAL HIGHLIGHTS
THE CATHOLIC EQUITY FUND - CLASS A
For the Year Ended September 30,
---------------------------------------------------------------------------------
2004(3)<F8> 2003(3)<F8> 2002(3)<F8> 2001(3)<F8> 2000(3)<F8>
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE,
BEGINNING OF YEAR $7.99 $6.48 $8.43 $10.95 $ 9.69
----- ----- ----- ------ ------
Net investment income (loss) 0.08 0.04 0.06 (0.04)(2)<F7> (0.03)(2)<F7>
Net realized and unrealized
gain (loss) on investments 0.93 1.49 (1.83) (2.45) 1.31
----- ----- ----- ------ ------
TOTAL FROM
INVESTMENT OPERATIONS 1.01 1.53 (1.77) (2.49) 1.28
----- ----- ----- ------ ------
Distributions from net
investment income (0.05) (0.02) -- -- --
Distributions from net
realized gain -- -- (0.18) (0.03) (0.02)
----- ----- ----- ------ ------
TOTAL DISTRIBUTIONS (0.05) (0.02) (0.18) (0.03) (0.02)
----- ----- ----- ------ ------
NET ASSET VALUE,
END OF YEAR $8.95 $7.99 $6.48 $8.43 $10.95
----- ----- ----- ------ ------
----- ----- ----- ------ ------
Total return(1)<F6> 12.70% 23.71% (21.65)% (22.81)% 13.16%
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net assets, end of year $6,868,111 $4,683,756 $2,865,775 $4,525,315 $4,671,129
Ratio of expenses
to average net assets:
Before expense waivers
and reimbursements 1.94% 2.44% 2.48% 3.05% 3.31%
After expense waivers
and reimbursements 0.95% 0.95% 1.23% 1.75% 1.75%
Ratio of net investment income
(loss) to average net assets:
Before expense waivers
and reimbursements (0.22)% (0.66)% (0.94)% (1.75)% (1.89)%
After expense waivers
and reimbursements 0.77% 0.83% 0.31% (0.45)% (0.33)%
Portfolio turnover rate 1.88% 9.46%(4)<F9> 31.23%(5)<F10> 39.17% 28.78%
(1)<F6> Based on net asset value, which does not reflect the sales charge.
(2)<F7> Per share net investment loss has been calculated prior to tax
adjustments.
(3)<F8> Information for the periods ended September 30, 2000, 2001 and October
1, 2001 through April 2, 2002 reflect the operations of The Catholic
Disciplined Capital Appreciation Fund. Information for the period
April 3, 2002 through September 30, 2004 reflects the operations of
The Catholic Equity Fund. (Note 1)
(4)<F9> Portfolio turnover rate excludes purchases and sales from merger of
The Catholic Values Investment Trust and The Catholic Equity Fund.
(5)<F10> Portfolio turnover reflects the operations of the Catholic Equity Fund
for the period April 3, 2002 through September 30, 2002.
The accompanying Notes to Financial Statements are an integral part of these
statements.
THE CATHOLIC EQUITY FUND - CLASS C
For the For the For the
Year Ended Year Ended Period Ended
September 30, September 30, September 30,
2004 2003 2002(1)<F11>
------------- ------------- -------------
NET ASSET VALUE, BEGINNING OF PERIOD $7.96 $6.48 $8.92
----- ----- -----
Net investment income 0.05 0.04 0.01
Net realized and unrealized
gain (loss) on investments 0.94 1.48 (2.45)
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.99 1.52 (2.44)
----- ----- -----
Distributions from net investment income (0.05) (0.04) --
----- ----- -----
TOTAL DISTRIBUTIONS (0.05) (0.04) --
----- ----- -----
NET ASSET VALUE, END OF PERIOD $8.90 $7.96 $6.48
----- ----- -----
----- ----- -----
Total return(2)<F12> 12.39% 23.69% (27.47)%(3)<F13>
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Net assets, end of period $3,344,454 $3,016,387 $3,432
Ratio of expenses to average net assets:
Before expense waivers
and reimbursements 2.44% 2.94% 3.71%(4)<F14>
After expense waivers
and reimbursements 1.20% 1.20% 1.20%(4)<F14>
Ratio of net investment income (loss)
to average net assets:
Before expense waivers
and reimbursements (0.72)% (1.16)% (1.84)%(4)<F14>
After expense waivers
and reimbursements 0.52% 0.58% 0.67%(4)<F14>
Portfolio turnover rate 1.88% 9.46%(5)<F15> 31.23%(3)<F13>
(1)<F11> Reflects operations for the period from April 9, 2002 (commencement of
operation), to September 30, 2002.
(2)<F12> Based on net asset value, which does not reflect the contingent
deferred sales charge.
(3)<F13> Not annualized.
(4)<F14> Computed on an annualized basis.
(5)<F15> Portfolio turnover rate excludes purchases and sales from merger of
The Catholic Values Investment Trust and The Catholic Equity Fund.
The accompanying Notes to Financial Statements are an integral part of these
statements.
THE CATHOLIC EQUITY FUND - CLASS I
For the For the For the
Year Ended Year Ended Period Ended
September 30, September 30, September 30,
2004 2003 2002(1)<F16>
------------- ------------- -------------
NET ASSET VALUE, BEGINNING OF PERIOD $8.00 $6.49 $9.02
----- ----- -----
Net investment income 0.09 0.07 0.02
Net realized and unrealized
gain (loss) on investments 0.94 1.49 (2.55)
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 1.03 1.56 (2.53)
----- ----- -----
Distributions from net investment income (0.07) (0.05) --
----- ----- -----
TOTAL DISTRIBUTIONS (0.07) (0.05) --
----- ----- -----
NET ASSET VALUE, END OF PERIOD $8.96 $8.00 $6.49
----- ----- -----
----- ----- -----
Total return 12.89% 24.19% (28.05)%(2)<F17>
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Net assets, end of period $21,818,191 $18,540,009 $9,831,101
Ratio of expenses to average net assets:
Before expense waivers
and reimbursements 1.69% 2.19% 2.55%(3)<F18>
After expense waivers
and reimbursements 0.70% 0.70% 0.70%(3)<F18>
Ratio of net investment income (loss)
to average net assets:
Before expense waivers
and reimbursements 0.03% (0.41)% (0.82)%(3)<F18>
After expense waivers
and reimbursements 1.02% 1.08% 1.03%(3)<F18>
Portfolio turnover rate 1.88% 9.46%(4)<F19> 31.23%(2)<F17>
(1)<F16> Reflects operations for the period from April 3, 2002 (commencement of
operations), to September 30, 2002.
(2)<F17> Not annualized.
(3)<F18> Computed on an annualized basis.
(4)<F19> Portfolio turnover rate excludes purchases and sales from merger of
The Catholic Values Investment Trust and The Catholic Equity Fund.
The accompanying Notes to Financial Statements are an integral part of these
statements.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
1. ORGANIZATION
- ---------------
The Catholic Funds, Inc. (the "Company") was incorporated on December 16, 1998,
as a Maryland Corporation and is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended. The Company
consists of one diversified series, the Catholic Equity Fund (the "Fund"). At
the close of business on April 2, 2002, the Fund acquired, through a non-taxable
reorganization, substantially all of the net assets of the Catholic Equity
Income, Large-Cap Growth and Disciplined Capital Appreciation Funds. The
Catholic Disciplined Capital Appreciation Fund ("Disciplined Capital
Appreciation Fund") was deemed to be the accounting survivor of the
reorganization. In 2002, the Company designated three classes of Fund shares:
Class A, Class C and Class I. The three classes differ principally in their
respective distribution expenses and arrangements as well as their respective
sales and redemption fee arrangements. All classes of shares have identical
rights to earnings, assets and voting privileges, except for class specific
expenses and exclusive rights to vote on matters affecting only individual
classes. All outstanding shares of the Disciplined Capital Appreciation Fund
were redesignated as Class A shares effective on March 25, 2002.
Class A shares are subject to an initial maximum sales charge of 4.00% imposed
at the time of purchase. The sales charge declines as the amount purchased
increases in accordance with the Fund's prospectus. Class C shares became
effective on March 25, 2002 and commenced operations on April 9, 2002. Class C
shares are subject to a contingent deferred sales charge ("CDSC") for
redemptions made within one year of purchase, in accordance with the Fund's
prospectus. The CDSC is 1.00% of the lesser of the original purchase price or
the value of shares being redeemed. Class I shares became effective on March
25, 2002 and commenced operations on April 3, 2002. Class I shares are no-load
shares. The Fund is managed by Catholic Financial Services Corporation (the
"Adviser"). At the close of business on May 22, 2003, the Fund acquired,
through a non-taxable reorganization, substantially all of the net assets of The
Catholic Values Investment Trust Equity Fund ("CVIT"). (See Note 6)
2. SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 listed on the NASDAQ National Market are valued at the NASDAQ
Official Closing Price ("NOCP"). Other securities traded on the national
securities exchange are valued at the last sales price on the exchange where
primarily traded. 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 other than NASDAQ 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 Fund's 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 Directors.
Securities not currently traded or those for which the NOCP, last sales price or
bid price, as the case may be, is deemed unreliable are valued at fair value as
determined in good faith under procedures approved by the Board of Directors.
If the event occurs that will affect the value of a Fund's portfolio securities
before the NAV has been calculated, the security will generally be priced using
a fair value procedure. The Board has adopted specific procedures for valuing
portfolio securities and delegated the responsibility of fair value
determinations to a Valuation Committee. Some of the factors that may be
considered by the Valuation Committee in determining fair value are fundamental
analytical data relating to the investment; the nature and duration of any
restriction on the disposition; trading in similar securities of the same issuer
or comparable companies; information from broker-dealers; and an evaluation of
the forces that influence the market in which the securities are purchased or
sold.
B) STOCK INDEX FUTURES CONTRACTS
The Fund may purchase and sell stock index futures contracts. Upon entering
into a contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by the Fund
as unrealized gains and losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. As
collateral for futures contracts, the Fund is required under the 1940 Act to
maintain assets consisting of cash, cash equivalents or liquid securities. The
Fund's exposure on a futures contract is equal to the amount paid for the
contract by the Fund.
C) FEDERAL INCOME TAXES
The Fund intends to comply with the requirements of Subchapter M of the Internal
Revenue Code necessary to qualify as a regulated investment company and to make
the requisite distributions of income and capital gains to its shareholders
sufficient to relieve it from all or substantially all federal income taxes.
Therefore, no federal income tax provision has been recorded.
D) DISTRIBUTIONS TO SHAREHOLDERS
The Fund will distribute any net investment income and any net realized long or
short-term capital gains at least annually. Distributions from net realized
gains for book purposes may include short-term capital gains. All short-term
capital gains are included in ordinary income for tax purposes. Distributions
to shareholders are recorded on the ex-dividend date. The Fund may also pay a
special distribution at the end of the calendar year to comply with federal tax
requirements.
The tax character of distributions paid during the years ended September 30,
2004 and 2003 was as follows:
Equity Fund
-------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2004 September 30, 2003
------------------ ------------------
Ordinary Income $216,667 $99,723
Long-term Capital Gains -- --
Due to inherent differences in the recognition of income, expenses and realized
gains/losses under GAAP and federal income tax purposes, permanent differences
between book and tax basis of reporting have been identified and appropriately
reclassified on the Statement of Assets and Liabilities.
As of September 30, 2004, the Fund had net capital loss carryforwards of
$3,741,039 that expire in varying amounts through 2012. To the extent the Fund
realizes future net capital gains, those gains will be offset by any unused
capital loss carryforwards, subject to certain IRS limitations. As of September
30, 2004, the Fund had post-October losses of $48,500, which are not recognized
for tax purposes until the first day of the following fiscal year.
As of September 30, 2004, the components of capital on a tax basis were as
follows:
Equity Fund
-----------
Cost of investments $29,753,001
-----------
-----------
Gross unrealized appreciation $ 4,944,116
Gross unrealized depreciation (3,100,076)
-----------
Net unrealized appreciation/depreciation $ 1,844,040
-----------
-----------
Undistributed ordinary income $ 204,339
Undistributed long-term capital gain --
-----------
Total distributable earnings $ 204,339
-----------
-----------
Other accumulated gains/losses $(3,789,538)
-----------
Total accumulated earnings/losses $(1,741,159)
-----------
-----------
The fund designates 100% of dividends declared from net investment income during
the fiscal year ended September 30, 2004 as qualified income under Jobs and
Growth Tax Relief Reconciliation Act of 2003 (unaudited).
For corporate shareholders in the Fund, the percentage of ordinary dividend
income distributed for the year ended September 30, 2004, which is designated as
qualifying for the dividends-received deduction is 100% (unaudited).
E) EXPENSES
The Fund is charged for those expenses that are directly attributable to it,
such as investment advisory and custody fees. Expenses that are not directly
attributable to any class of shares of the Equity Fund are allocated between
each class' respective net assets when appropriate. Fees paid under the
Distribution Plan (the "Plan") are borne by the specific class of shares of the
Equity Fund to which the Distribution Plan applies.
F) OTHER
For financial reporting purposes, investment transactions are accounted for on
the trade date. The Fund determines the gain or loss realized from investment
transactions by comparing the original cost of the security lot sold with the
net sale proceeds.
Income Recognition - Interest income is accrued as earned. Dividend income is
recorded on 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 financial reporting purposes.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS WITH RELATED PARTIES
- ----------------------------------------------------------------
The Fund has entered into an agreement with the Adviser, with whom certain
Officers and Directors of the Fund are affiliated, to furnish investment
advisory services to the Fund. The terms of the agreement are as follows:
The 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 has 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 Fund - Class A, Class C
and Class I shares, respectively. Effective November 15, 2004, the Adviser
agreed to increase its waiver and reimbursement so as to cap the Fund's
operating expenses at 0.60% for Class A shares, 0.85% for Class C shares and
0.35% for Class I shares. The expense cap agreement terminates on September 30,
2005, unless extended by the parties.
The Adviser has entered into a sub-advisory agreement with Mellon Equity
Associates, LLP ("Mellon"). The annual rates of the fees, payable from fees
paid to the Adviser, as a percent of average daily net assets under the sub-
advisory agreement is as follows: 0.12% on the first $50 million; 0.06% of the
Fund's average daily net assets in excess of $50 million.
For the year ended September 30, 2004, expenses of $310,375 were reimbursed by
the Adviser for the Fund. The Adviser may terminate the waiver and expense
reimbursement after September 30, 2005.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan authorizes the Company to
use annually 0.25% and 0.75% of its net assets for the Fund - Class A and Class
C, respectively, computed on a daily basis, to finance certain activities
relating to the distribution of its shares to investors. For the year ended
September 30, 2004, 12b-1 distribution expenses of $15,034 and $25,365 were paid
from Class A and Class C, respectively. These expenses were remitted to the
Adviser, who also acts as distributor for the shares of each Fund. The Adviser
also received sales charges from the sale of Class A shares of $44,198 for the
year ended September 30, 2004. There were no contingent deferred sales charges
paid to the Adviser for the redemption of Class C shares during the year ended
September 30, 2004. Sales charges are not an expense of the Fund and are not
included in the financial statements of the Fund.
4. CAPITAL SHARE TRANSACTIONS
- -----------------------------
Transactions of shares of the Fund was as follows:
THE CATHOLIC EQUITY FUND - CLASS A SHARES
For the Year Ended For the Year Ended
September 30, 2004 September 30, 2003
----------------------- -----------------------
Amount Shares Amount Shares
------ ------ ------ ------
Shares sold $2,062,903 232,281 $1,461,659 190,558
Shares issued to holders in
reinvestment of distributions 32,372 3,658 9,948 1,410
Shares redeemed (485,188) (54,555) (352,815) (47,886)
---------- ------- ---------- -------
NET INCREASE $1,610,087 181,384 $1,118,792 144,082
---------- ------- ---------- -------
THE CATHOLIC EQUITY FUND - CLASS C SHARES
For the Year Ended For the Year Ended
September 30, 2004 September 30, 2003
----------------------- -----------------------
Amount Shares Amount Shares
------ ------ ------ ------
Shares sold $605,925 69,231 $59,595 7,525
Shares issued to effect
acquisition (Note 6) -- -- 2,897,282 389,799
Shares issued to holders in
reinvestment of distributions 16,727 1,896 20 3
Shares redeemed (649,619) (74,463) (149,628) (18,860)
-------- ------- ---------- -------
NET INCREASE $(26,967) (3,336) $2,807,269 378,467
-------- ------- ---------- -------
THE CATHOLIC EQUITY FUND - CLASS I SHARES
For the Year Ended For the Year Ended
September 30, 2004 September 30, 2003
----------------------- --------------------------
Amount Shares Amount Shares
------ ------ ------ ------
Shares sold $1,295,680 148,768 $3,487,250 465,483
Shares issued to effect
acquisition (Note 6) -- -- 3,408,030 456,947
Shares issued to holders in
reinvestment of distributions 162,463 18,357 89,356 12,693
Shares redeemed (428,534) (50,748) (1,020,788)(1)<F20> (131,743)
---------- ------- ---------- -------
NET INCREASE $1,029,609 116,377 $5,963,848 803,380
---------- ------- ---------- -------
(1)<F20> Includes $958,818 redeemed from Class I and immediately reinvested in
Class A Shares.
5. INVESTMENT TRANSACTIONS
- --------------------------
The aggregate purchases and sales of securities, excluding short-term
investments for The Catholic Equity Fund, for the year ended September 30, 2004
were $3,373,971 and $560,223, respectively. There were no purchases and sales
of U.S. government securities for the Fund.
Transactions in future contracts for the year ended September 30, 2004 were as
follows:
Equity Fund
----------------------------------
Number of Aggregate Face
Contracts Value of Contracts
--------- ------------------
Outstanding at beginning of year 4 $ 608,962
Contracts opened 39 3,949,318
Contracts closed (38) (4,053,960)
--- -----------
Outstanding at end of period 5 $ 504,320
--- -----------
--- -----------
6. ACQUISITION INFORMATION
- --------------------------
Effective at the close of business on May 22, 2003, the Fund acquired, through a
non-taxable reorganization, substantially all of the net assets of The Catholic
Values Investment Trust Equity Fund. The Fund issued 846,746 shares (valued at
$6,305,312) for the 731,699 shares outstanding for The Catholic Values
Investment Trust. The net assets of CVIT included net unrealized depreciation
on investments of $76,810 and accumulated net realized losses of $3,017. CVIT
also had capital loss carryforwards of $2,706,972, which, subject to certain IRS
limitations, has been limited to $1,841,041. These capital loss carryforwards
have been combined with those of the Fund.
7. GUARANTEES AND INDEMNIFICATIONS
- ----------------------------------
In the normal course of business, the Fund enters into contracts with the
service providers that contain general indemnification clauses. The Fund's
maximum exposure under these arrangements is unknown as this would involve
future claims against the Fund that have not yet occurred. Based on experience,
the Fund expects the risk of loss to be remote.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE CATHOLIC FUNDS, INC.
To the Board of Directors and Shareholders
of The Catholic Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Catholic Equity Fund (the
"Fund") at September 30, 2004, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 2004 by correspondence with the custodian, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
November 8, 2004
DIRECTORS AND OFFICERS (UNAUDITED)
THE CATHOLIC FUNDS, INC.
Number of
Portfolios in Other
Term of Office Complex Directorships
Name, Address and Position(s) and Length of Principal Occupation(s) Overseen by Held by
Date of Birth Held with CFI Time Served During Past 5 Years Director Director
- ----------------- ------------- -------------- ----------------------- ------------- -------------
INDEPENDENT DIRECTORS:
Thomas A. Bausch, PhD Director Indefinite, Professor of Management, 1 None
1100 W. Wells St. until successor Marquette University since 1978.
Milwaukee, WI 53233 elected.
06/06/1938
Since 1999
J. Michael Borden Director Indefinite, Chief Executive Officer of 1 Trustee,
1100 W. Wells St. until successor HUFCOR (1978-present). Jefferson
Milwaukee, WI 53233 elected. Fund Group
12/21/1936 Mutual Funds
Since 1999
Daniel R. Doucette Director Indefinite, President and CEO Milwaukee 1 None
1100 W. Wells St. until successor Insurance (1989 to present).
Milwaukee, WI 53233 elected.
09/03/1949
Since 1999
Thomas J. Munninghoff Director Indefinite, CPA-Munninghoff, Lange and Co. 1 None
1100 W. Wells St. until successor (Accounting Firm) since 1983.
Milwaukee, WI 53233 elected.
08/27/1947
Since 1999
Conrad L. Sobczak Director Indefinite, Retired; President and CEO, Family 1 None
1100 W. Wells St. until successor Health Systems (1987 to 1998).
Milwaukee, WI 53233 elected.
10/20/1938
Since 1999
INTERESTED DIRECTORS:
Daniel J. Steininger(1)<F21> Director, Indefinite, CEO-Catholic Knights 1 None
1100 W. Wells St. Chairman until successor since 1981.
Milwaukee, WI 53233 of the Board elected.
05/01/1945
Since 1999
Allan G. Lorge(1)<F21> Director, Indefinite, CFO-Catholic Knights 1 None
1100 W. Wells St. Vice President, until successor since 1986.
Milwaukee, WI 53233 Secretary and elected.
12/09/1949 Chief Financial
Officer
Since 1999
OFFICERS:
Theodore F. Zimmer President One year term, General Counsel-Catholic n/a n/a
1100 W. Wells St. subject to Knights since 1997.
Milwaukee, WI 53233 election by
12/17/1940 Board of
Directors
or until
successor
is elected.
Since 2002
Russell J. Kafka Treasurer One year term, Vice President-Investments, n/a n/a
1100 W. Wells St. subject to Catholic Knights
Milwaukee, WI 53233 election by since 1985.
06/20/1944 Board of
Directors
or until
successor
is elected.
Since 1999
John M. Koth Chief One year term, Chief Compliance Officer- n/a n/a
1100 W. Wells St. Compliance subject to Catholic Financial Services
Milwaukee, WI 53233 Officer election by Corporation since 2001.
09/27/1964 Board of
Directors Compliance and Operations
or until Director-Prudential Financial
successor Services 1999 to 2001.
is elected.
Since 2004
Additional information about the Funds' directors is available in the Statement
of Additional Information and is available, without charge, upon request, by
calling 1-877-222-2402.
(1)<F21> Messrs. Steininger and Lorge are considered to be "interested persons"
(as defined in the 1940 Act) of The Catholic Funds, Inc. by virtue of
their positions with Catholic Knights and Catholic Financial Services
Corporation.
A NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained in this annual report for The
Catholic Funds, Inc., the matters discussed in these reports may constitute
forward-looking statements made pursuant to the safe harbor provisions of the
Securities Litigation Reform Act of 1995. These include any adviser, subadviser
and/or portfolio manager prediction, assessment, analysis or outlook for
individual securities, industries, market sectors and/or markets. These
statements involve risks and uncertainties. In addition to general risks
described for the Fund in the current prospectus, other factors bearing on these
reports include the accuracy of the forecasts and predictions and the
appropriateness of the investment strategies designed by the adviser, any
subadviser or portfolio manager to implement their strategies efficiently and
effectively. Any one or more of these factors, as well as other risks affecting
the securities markets and investment instruments generally, could cause the
actual results of the Fund to differ materially as compared to benchmarks
associated with the Fund.
BOARD OF DIRECTORS
- ------------------
Daniel Steininger
Chairman of the Board
Thomas Bausch
J. Michael Borden
Daniel Doucette
Allan Lorge
Thomas Munninghoff
Conrad Sobczak
OFFICERS
- --------
Theodore Zimmer, President
Allan Lorge
Vice President, Secretary and
Chief Financial Officer
Russell Kafka, Treasurer
John Koth, Chief Compliance Officer
INVESTMENT ADVISER
- ------------------
Catholic Financial Services Corporation
1100 West Wells Street
Milwaukee, WI 53233
SUBADVISER
- ----------
Mellon Equity Associates, LLP
500 Grant St., Suite 4200
Pittsburgh, PA 15258
LEGAL COUNSEL
- -------------
Quarles & Brady LLP
CUSTODIAN
- ---------
U.S. Bank, N.A.
TRANSFER AGENT
- --------------
U.S. Bancorp Fund Services, LLC
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- ---------------------------------------------
PricewaterhouseCoopers LLP
SHAREHOLDER SERVICES
- --------------------
The Catholic Funds
c/o U.S. Bancorp Fund Services, LLC
615 East Michigan Street
P.O. Box 710
Milwaukee, WI 53201-0701
THE CATHOLIC
FRATERNAL ALLIANCE
- ------------------
Catholic Knights
Daniel Steininger, President
1100 West Wells Street
Milwaukee, WI 53233
Catholic Order of Foresters
David E. Huber, High Chief Ranger
355 Shuman Boulevard
P.O. Box 3012
Naperville, IL 60566-7012
Catholic Knights of America
John Kenawell, President
3525 Hampton Avenue
St. Louis, MO 63139-1980
Catholic Union of Texas (The KJT)
Elo J. Goerig, President
P.O. Box 297
LaGrange, TX 78945
The Fund's Statement of Additional Information contains additional information
about the Fund's Directors and is available without charge upon request by
calling 1-877-222-2402.
The Fund's Proxy Voting Policies and Procedures are available without charge
upon request by calling 1-877-222-2402, on the Fund's website,
www.catholicfunds.com, or on the SEC's website, at www.sec.gov. Information
--------------------- ------------
regarding how the Fund voted proxies relating to portfolio securities during the
twelve months ended June 30, 2004 is available on or through the Fund's website
and on the SEC's website.
Beginning with the Fund's first and third quarters ending after July 9, 2004,
the Fund will file a complete schedule of portfolio holdings with the SEC on
Form N-Q. The Form N-Q will be available without charge, upon request, by
calling 1-877-222-2402, on the Fund's website and on the SEC's website.
This report is intended for shareholders of The Catholic Funds. It is not
authorized for distribution to prospective investors unless preceded or
accompanied by a current prospectus. The Catholic Church has not sponsored or
endorsed The Catholic Funds nor approved or disapproved of the Funds as an
investment.
CATHOLIC FINANCIAL SERVICES CORPORATION
GIVING VOICE TO CATHOLIC VALUES
1100 West Wells Street o Milwaukee, WI 53233
1-414-278-6550
Member NASD and SIPC
The Catholic Funds are not available in all states.
ITEM 2. CODE OF ETHICS
As of the end of the period covered by this report on Form N-CSR, the
Registrant has adopted a Code of Ethics that applies to the Registrant's
principal executive officer, principal financial officer and principal
accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Registrant's Board of Directors has determined that the Registrant has
at least one audit committee financial expert serving on its Audit Committee.
Thomas Munninghoff, a director of the Registrant since its commencement of
operations in 1999, has been determined to be an audit committee financial
expert and he is "independent" within the meeting of Item 3(a)(2) of Form N-CSR.
Mr. Munninghoff is a [shareholdero] and the President and Audit Principal for
the accounting firm of Munninghoff, Lange & Co., with which he has served in
various capacities since 1983. Mr. Munninghoff is a Certified Public
Accountant.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth information as to the fees billed to the
Registrant for audit, audit-related, tax and other services and products
provided by PricewaterhouseCoopers LLP, the Registrant's principal accountant,
for each of the last two fiscal years.
FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------
2003 2004
---- ----
Audit Fees $19,340 $20,000
Audit-Related Fees $ -0- $ -0-
Tax Fees(1)<F22> $ 2,125 $ 2,275
All Other Fees $ -0- $ -0-
------- -------
TOTAL $21,465 $22,275
------- -------
------- -------
(1)<F22> For 2003 and 2004, PricewaterhouseCoopers LLP assisted in the
preparation of tax returns for the Registrant and also reviewed the
Registrant's dividend calculations to assure compliance with Sub-
chapter M of the Internal Revenue Code of 1986.
PricewaterhouseCoopers LLP did not bill any amounts over the last two
fiscal years for services or products provided to Catholic Financial Services
Corporation ("CFSC"), the Registrant's investment advisor, or any entity
controlling, controlled by or under common control with CFSC that provides
ongoing services for the Registrant.
The audit committee of the Registrant's Board of Directors selected
PricewaterhouseCoopers LLP and approved all of the audit and non-audit services
that were provided and the fees that were paid in each of 2003 and 2004 before
that firm was engaged to provide such services. The audit committee of the
Registrant's Board of Directors has not adopted any pre-approval policies and
procedures (as described in paragraph (c)(7) of Rule 2-01 of Regulation S-X)
regarding the provision of audit or non-audit services to the Registrant. The
audit committee itself must approve all such services in advance. No non-audit
services were provided to the Registrant with respect to the past two fiscal
years pursuant to a waiver from the pre-approval requirement that were
subsequently approved by the audit committee under paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable to this Registrant, insofar as the Registrant is not a
"listed issuer" within the meaning of Rule 10A-3 under the Securities Exchange
Act of 1934.
ITEM 6. SCHEDULE OF INVESTMENTS
The Schedule of Investments in securities of unaffiliated issuers is
provided in the Registrant's Annual Report to Shareholders dated as of September
30, 2004 provided under Item 1 of this Report.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable to this Registrant, insofar as the Registrant is not a
closed-end management investment company.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable to this Registrant, insofar as the Registrant is not a
closed-end management investment company.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable to this Registrant, insofar as the Registrant is not a
closed-end management investment company.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable insofar as the Registrant has not made any material changes
to the procedures by which shareholders may recommend nominees to the
registrant's board of directors since the Registrant's Board of Directors
adopted the resolution disclosed in the Registrant's semi-annual report on Form
N-CSR for the period ended March 31, 2004.
ITEM 11. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. Within 90 days prior to the
----------------------------------
filing of this report on Form N-CSR, the Registrant's President (Principal
Executive Officer) and its Chief Financial Officer (Principal Financial Officer)
reviewed the Registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) of the Investment Company Act of 1940) and evaluated their
effectiveness. Based on their evaluation, such officers determined that the
disclosure controls and procedures adequately ensure that information required
to be disclosed by the Registrant in this report on Form N-CSR is recorded,
processed, summarized and reported within the time periods required by the
Securities and Exchange Commission's rules and forms.
(b) Change in Internal Controls. There were no changes in the
---------------------------
Registrant's internal control over financial reporting (as defined in Rule 30a-
3(d) under the Investment Company Act of 1940) that occurred during the
Registrant's last fiscal half-year that have materially affected, or are
reasonably likely to materially affect, the Registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
12(a)(1) The Code of Ethics for the Registrant's Principal Executive
Officer, Principal Financial Officer, and Principal Accounting
Officers referred to in Item 2 was filed as Exhibit 12(a)(1) to
the Registrant's Certified Shareholder Report on Form N-CSR
filed on December 2, 2003, and is incorporated herein by
reference.
12(a)(2)(A) Certification of Principal Executive Officer Required by Section
302 of the Sarbanes-Oxley Act of 2002 is filed herewith
12(a)(2)(B) Certification of Principal Financial Officer Required by Section
302 of the Sarbanes-Oxley Act of 2002 is filed herewith
12(b) Certification of Chief Executive Officer and Chief Financial
Officer Required by Section 906 of the Sarbanes-Oxley Act of
2002 is furnished herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on this 8th
day of December, 2004.
THE CATHOLIC FUNDS, INC.
By: /s/ Theodore F. Zimmer
-----------------------------
Theodore F. Zimmer, President
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated on
this 8th day of December, 2004.
By: /s/ Theodore F. Zimmer
-----------------------------
Theodore F. Zimmer, President
(Principal Executive Officer)
By: /s/ Allan G. Lorge
------------------------------
Allan G. Lorge, Vice President,
Secretary and Chief Financial Officer
(Principal Financial Officer)