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, 2005
DATE OF REPORTING PERIOD: MARCH 31, 2005
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 LOGO)
GIVING VOICE TO CATHOLIC VALUES
THE CATHOLIC EQUITY FUND
SEMI-ANNUAL REPORT
MARCH 31, 2005
The Catholic Funds
1-877-222-2402
THANK YOU FOR CALLING THE CATHOLIC FUNDS.
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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 Board Approval of Investment Advisory and Subadvisory Agreements
Letter to Shareholders
Dear Shareholder:
In developing the advocacy program of the Catholic Funds, we were inspired by
John Paul II's message that Catholic social teaching is a call to action. He
stressed that the "social message of the Gospel must not be considered a theory,
but above all else a basis and a motivation for action." Noting that "even the
decision to invest in one place rather than another . . . is always a moral and
cultural choice," he stressed that the "Church offers her social teaching as an
indispensable and ideal orientation" when confronting such concrete decisions.
(Encyclical Centesimus Annus (1991), sections 57, 36, 43)
While the Catholic Equity Fund is not sponsored or endorsed by the Catholic
Church, it takes this legacy to heart. The Fund exists to give individuals and
institutions the opportunity to put Catholic values into action in their
investments. The Fund does this by
o Filing shareholder resolutions that urge corporate boards and management
to behave more consistently with Catholic values;
o Voting the shares that the Fund owns on the basis of Catholic values;
o Not investing in stock of companies that directly participate in
abortion.
Naturally, investors must evaluate the Catholic Equity Fund not only on the
basis of putting Catholic values into action but also by its performance as an
investment. This semi-annual report, which covers the 6-month period that ended
March 31, 2005, provides essential information for doing that.
Thank you for your continued trust and investment.
/s/Daniel J. Steininger /s/Theodore F. Zimmer
Daniel J. Steininger Theodore F. Zimmer
Chairman, The Catholic Funds President, The Catholic Funds
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. For the most recent month-end
performance data, and to obtain a prospectus for The Catholic Equity Fund, which
includes fees, expenses, potential risks, and other information, call toll-free
(877) 222-2402 or visit our website at www.CatholicFunds.com. You should read
the prospectus carefully and consider the Fund's investment objectives, risks,
and charges and expenses carefully before you invest or send money.
The Catholic Equity Fund is distributed through Catholic Financial Services
Corporation, 1100 W. Wells St., Milwaukee, WI 53233, (414) 278-6550, of which
Daniel Steininger and Theodore 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 advises
passive and active accounts for institutional and individual clients since 1983.
Today, we manage over $19 billion in assets for 86 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 six months ended March 31, 2005, the Catholic Equity Fund ("Fund")
produced a total return of 6.88% (Class A without sales load), which equaled the
return of the S&P 500 Composite Stock Price Index ("Index") for that period.
Fund expenses, which adversely affect the Fund's performance relative to the
Index, were offset completely by the positive effects relative to the Index of
the Fund's sampling strategy used to compensate for the securities excluded due
to the sanctity of life screen.
The strongest returns for the Fund occurred during the last quarter of 2004, as
terrorism worries subsided and oil prices retreated. Since the beginning of the
current year the Fund has pulled back because of the resumption in the rise of
oil prices and investor uncertainty over the effect of the "measured" rate
increases by the Federal Reserve Bank. On a positive note, interest rates remain
low, employment is increasing albeit at a slow pace and earnings continue to
grow at a healthy rate.
The industries that provided the greatest contribution to return were energy
reserves, electric utilities and drug companies. Energy companies and utilities
benefited from the rising price of crude oil or an expanding global economy.
Generally, companies that were in favor with investors had growing cash flows
and high dividends. Industries that detracted from the Fund's performance were
motor vehicle, internet and electric equipment companies. The motor vehicle
companies had a difficult period as vehicle sales slowed and costs remained high
relative to foreign competitors. Electric equipment companies also faced
increased competition as earnings forecasts were reduced due to increased costs
for research. Internet companies had excellent sales but the stock prices
retreated as many investors perceived that the companies were growing at an
unsustainable pace.
During the six months ended March 31, 2005, the Catholic Equity Fund posted
healthy returns. The economy does appear to be moderating, partially due to
rising energy prices which may lead to a rise in inflation. Large capitalization
stocks typically perform relatively well in a higher inflation environment.
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.
Performance data represents past performance and is not a guarantee of future
results. 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. Without the waiver
of certain fees by the Advisor, the average annual return would have been lower.
Current performance may be higher or lower than the performance quoted. For the
most recent month-end performance data visit our website at
www.CatholicFunds.com.
THE CATHOLIC EQUITY FUND - CLASS A
GROWTH OF A $10,000 INVESTMENT
THE CATHOLIC EQUITY THE CATHOLIC EQUITY S&P 500
DATE FUND - CLASS A FUND - CLASS A W/LOAD INDEX
---- ------------------- --------------------- -------
5/3/99 $10,000 $9,597 $10,000
6/30/99 $10,290 $9,875 $10,158
9/30/99 $9,690 $9,299 $9,523
12/31/99 $10,855 $10,417 $10,940
3/31/2000 $11,155 $10,705 $11,191
6/30/2000 $10,945 $10,504 $10,894
9/30/2000 $10,965 $10,523 $10,789
12/31/2000 $10,302 $9,886 $9,944
3/31/2001 $9,338 $8,961 $8,765
6/30/2001 $10,000 $9,597 $9,278
9/30/2001 $8,464 $8,123 $7,917
12/31/2001 $9,385 $9,007 $8,762
3/31/2002 $9,334 $8,958 $8,787
6/30/2002 $8,044 $7,720 $7,609
9/30/2002 $6,632 $6,365 $6,295
12/31/2002 $7,208 $6,918 $6,826
3/31/2003 $6,962 $6,681 $6,611
6/30/2003 $8,019 $7,696 $7,629
9/30/2003 $8,204 $7,874 $7,830
12/31/2003 $9,163 $8,794 $8,784
3/31/2004 $9,298 $8,923 $8,933
6/30/2004 $9,453 $9,072 $9,086
9/30/2004 $9,246 $8,873 $8,917
12/31/2004 $10,112 $9,704 $9,740
3/31/2005 $9,882 $9,484 $9,531
AVERAGE ANNUAL RETURNS
March 31, 2005 (Unaudited)
Since Inception
1 Year 5 Year Inception Date
------ ------ --------- ---------
Class A (without sales load) 6.29% -2.39% -0.20% 5/3/99
Class A (with sales load) 1.98% -3.18% -0.89% 5/3/99
S&P 500 Index 6.69% -3.16% -0.81% 5/3/99
Class C (without sales load) 6.09% n/a 2.52% 4/9/02
Class C (with sales load) 5.09% n/a 2.52% 4/9/02
S&P 500 Index 6.69% -3.16% 3.66% 4/9/02
Class I 6.51% n/a 2.58% 4/3/02
S&P 500 Index 6.69% -3.16% 3.41% 4/3/02
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 share performance categories shown for periods prior to 4/3/02 are for
the Catholic Equity Fund's predecessor fund, The Catholic Disciplined Capital
Appreciation Fund. Class C and I shares were first available on 4/2/02.
Class A performance has been restated to reflect the maximum sales charge of
4%. Class C performance would reflect 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 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 maybe 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.
March 31, 2005
(Unaudited)
Ticker Symbols Net Asset Values
-------------- ----------------
Equity A CTHQX $9.47
Equity C CTHSX $9.46
Equity I CTHRX $9.47
TOP 10 HOLDINGS
March 31, 2005 (Unaudited)
Percentage
of
Rank Ticker Security Name Net Assets
---- ------ ------------- ----------
1 GE General Electric Company 3.44%
2 XOM Exxon Mobil Corporation 3.43%
3 MSFT Microsoft Corporation 2.23%
4 JNJ Johnson & Johnson 2.20%
5 C Citigroup Inc. 2.10%
6 BAC Bank of America Corporation 1.60%
7 ESM5 S&P 500 Index E-mini Futures
Contracts Expiring June 2005 1.59%
8 WMT Wal-Mart Stores, Inc. 1.58%
9 IBM International Business Machines
Corporation (IBM) 1.38%
10 INTC Intel Corporation 1.31%
EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, reinvested
dividends, or other distributions; redemptions 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 October 1, 2004, to March 31, 2005.
ACTUAL EXPENSES
For each class, the first line of the table below provides information about
actual account values and actual expenses. 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 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
Beginning Account Ending Account During Period1<F1> Annualized
Value (10/1/2004) Value (3/31/2005) (10/1/2004 to 3/31/2005) Expense Ratio2<F2>
----------------- ----------------- ------------------------ ------------------
Class A Actual $1,000.00 $1,068.80 $3.51 0.68%
Class A Hypothetical
(5% return before expenses) $1,000.00 $1,021.54 $3.43 0.68%
Class C Actual $1,000.00 $1,066.90 $4.79 0.93%
Class C Hypothetical
(5% return before expenses) $1,000.00 $1,020.29 $4.68 0.93%
Class I Actual $1,000.00 $1,069.90 $2.22 0.43%
Class I Hypothetical
(5% return before expenses) $1,000.00 $1,022.79 $2.17 0.43%
1<F1> Expenses are equal to the Fund's annualized expense ratio multiplied by
the average account value over the period, multiplied by the number of
days in the most recent half-year/365 days (to reflect the one-half year
period).
2<F2> On November 15, 2004, the adviser voluntarily increased its expense
reimbursements and fee waivers for each class of Fund shares, thereby
decreasing the expense ratios for Class A from 0.95% to 0.60%, Class C
from 1.20% to 0.85%, and Class I from 0.70% to 0.35%.
ALLOCATION OF PORTFOLIO ASSETS
(Calculated as a Percentage of Net Assets1<F3>)
Financials2<F4> 19.28%
Information Technology2<F4> 14.73%
Health Care2<F4> 12.80%
Industrials2<F4> 11.57%
Consumer Discretionary2<F4> 11.28%
Consumer Staples2<F4> 10.21%
Energy2<F4> 8.50%
Materials2<F4> 3.13%
Utilities2<F4> 3.00%
Telecommunications Services2<F4> 2.97%
Futures Contracts 2.39%
FHLB Discount Note 1.99%
U.S. Treasury Bill 0.16%
1<F3> Total Net Assets on March 31, 2005 were $37,163,266
2<F4> Sectors based on Global Industry Classification Standard (GICS(R))
SCHEDULE OF INVESTMENTS
MARCH 31, 2005 (UNAUDITED)
THE CATHOLIC EQUITY FUND
Common Stocks (97.5%) Shares Value
- --------------------- ------ -----
3M Co. 2,580 $221,080
Abbott Laboratories 6,550 305,361
ACE Limited 950 39,207
ADC Telecommunications,
Inc.*<F5> 2,200 4,378
Adobe Systems
Incorporated 800 53,736
Advanced Micro
Devices, Inc.*<F5> 1,200 19,344
The AES Corporation*<F5> 2,000 32,760
Aetna Inc. 1,000 74,950
Affiliated Computer
Services, Inc. - Class A*<F5> 400 21,296
AFLAC INCORPORATED 1,690 62,969
Agilent
Technologies, Inc.*<F5> 1,550 34,410
Air Products and
Chemicals, Inc. 750 47,467
Alberto-Culver Company 300 14,358
Albertson's, Inc. 1,150 23,748
Alcoa Inc. 2,800 85,092
Allegheny Energy, Inc.*<F5> 400 8,264
Allegheny
Technologies, Inc. 300 7,233
Allergan, Inc. 765 53,145
Allied Waste
Industries, Inc.*<F5> 900 6,579
The Allstate Corporation 2,240 121,094
ALLTEL Corporation 990 54,301
Altera Corporation*<F5> 1,250 24,725
Altria Group, Inc. 6,950 454,460
Ambac Financial
Group, Inc. 350 26,163
Amerada Hess
Corporation 350 33,674
Ameren Corporation 700 34,307
American Electric
Power Company, Inc. 1,250 42,575
American Express
Company 4,150 213,185
American International
Group, Inc. 8,702 482,178
American Power
Conversion Corporation 650 16,972
American Standard
Companies Inc. 700 32,536
AmerisourceBergen
Corporation 657 37,640
Amgen Inc.*<F5> 4,140 240,989
AmSouth Bancorporation 1,150 29,843
Anadarko Petroleum
Corporation 850 64,685
Analog Devices, Inc. 1,250 45,175
Andrew Corporation*<F5> 400 4,684
Anheuser-Busch
Companies, Inc. 2,600 123,214
Aon Corporation 1,050 23,982
Apache Corporation 1,032 63,189
Apartment Investment &
Management Company 300 11,160
Apollo Group, Inc. -
Class A*<F5> 600 44,436
Apple Computer, Inc.*<F5> 2,700 112,509
Applera Corporation -
Applied Biosystems
Group 650 12,831
Applied Materials, Inc. 5,600 91,000
Applied Micro Circuits
Corporation*<F5> 900 2,961
Archer-Daniels-
Midland Company 2,150 52,847
Archstone-Smith Trust 600 20,466
Ashland Inc. 200 13,494
AT&T Corp. 2,600 48,750
Autodesk, Inc. 800 23,808
Automatic Data
Processing, Inc. 1,900 85,405
AutoNation, Inc.*<F5> 850 16,099
AutoZone, Inc.*<F5> 275 23,568
Avaya Inc.*<F5> 1,500 17,520
Avery Dennison
Corporation 350 21,676
Avon Products, Inc. 1,500 64,410
Baker Hughes
Incorporated 1,050 46,714
Ball Corporation 400 16,592
Bank of America
Corporation 13,502 595,438
The Bank of New York
Company, Inc. 2,500 72,625
C.R. Bard, Inc. 300 20,424
Bausch & Lomb
Incorporated 200 14,660
Baxter International Inc. 1,950 66,261
BB&T Corporation 1,750 68,390
The Bear Stearns
Companies Inc. 390 38,961
Becton, Dickinson
and Company 850 49,657
Bed Bath & Beyond Inc.*<F5> 1,015 37,088
BellSouth Corporation 6,000 157,740
Bemis Company, Inc. 300 9,336
Best Buy Co., Inc. 1,100 59,411
Big Lots, Inc.*<F5> 300 3,606
Biogen Idec Inc.*<F5> 1,060 36,581
Biomet, Inc. 850 30,855
BJ Services Company 540 28,015
The Black & Decker
Corporation 300 23,697
BMC Software, Inc.*<F5> 750 11,250
The Boeing Company 2,800 163,688
Boston Scientific
Corporation*<F5> 2,780 81,426
Bristol-Myers Squibb
Company 9,450 240,597
Broadcom Corporation -
Class A*<F5> 1,050 31,416
Brown-Forman
Corporation - Class B 400 21,900
Brunswick Corporation 300 14,055
Burlington Northern
Santa Fe Corporation 1,250 67,412
Burlington Resources Inc. 1,300 65,091
Calpine Corporation*<F5> 1,700 4,760
Campbell Soup Company 1,350 39,177
Capital One Financial
Corporation 850 63,554
Cardinal Health, Inc. 2,200 122,760
Caremark Rx, Inc.*<F5> 1,500 59,670
Carnival Corporation 1,950 101,029
Caterpillar Inc. 1,150 105,156
Cendant Corporation 3,400 69,836
CenterPoint Energy, Inc. 900 10,827
Centex Corporation 400 22,908
CenturyTel, Inc. 400 13,136
ChevronTexaco
Corporation 6,972 406,537
Chiron Corporation*<F5> 650 22,789
The Chubb Corporation 600 47,562
CIENA Corporation*<F5> 1,400 2,408
CIGNA Corporation 400 35,720
Cincinnati Financial
Corporation 525 22,895
Cinergy Corp. 600 24,312
Cintas Corporation 600 24,786
Circuit City Stores, Inc. 600 9,630
Cisco Systems, Inc.*<F5> 21,785 389,734
CIT Group Inc. 700 26,600
Citigroup Inc. 17,405 782,181
Citizens Communications
Company 950 12,293
Citrix Systems, Inc.*<F5> 500 11,910
Clear Channel
Communications, Inc. 1,875 64,631
The Clorox Company 475 29,920
CMS Energy Corporation*<F5> 600 7,824
Coach, Inc.*<F5> 600 33,978
The Coca-Cola Company 8,005 333,568
Coca-Cola
Enterprises Inc. 1,550 31,806
Colgate-Palmolive
Company 1,750 91,297
Comcast Corporation -
Class A*<F5> 7,252 244,973
Comerica Incorporated 600 33,048
Compass Bancshares, Inc. 400 18,160
Computer Associates
International, Inc. 1,855 50,270
Computer Sciences
Corporation*<F5> 600 27,510
Compuware Corporation*<F5> 1,200 8,640
Comverse
Technology, Inc.*<F5> 650 16,393
ConAgra Foods, Inc. 1,640 44,313
ConocoPhillips 2,314 249,542
Consolidated Edison, Inc. 765 32,268
Constellation
Energy Group 600 31,020
Convergys Corporation*<F5> 400 5,972
Cooper Industries, Ltd. -
Class A 300 21,456
Cooper Tire & Rubber
Company 200 3,672
Corning Incorporated*<F5> 4,650 51,754
Costco Wholesale
Corporation 1,550 68,479
Countrywide Financial
Corporation 1,898 61,609
CSX Corporation 650 27,073
Cummins Inc. 100 7,035
CVS Corporation 1,350 71,037
Dana Corporation 500 6,395
Danaher Corporation 1,000 53,410
Darden Restaurants, Inc. 500 15,340
Deere & Company 850 57,060
Dell Inc.*<F5> 8,170 313,891
Delphi Corporation 1,800 8,064
Delta Air Lines, Inc.*<F5> 300 1,215
Devon Energy
Corporation 1,600 76,400
Dillard's, Inc. - Class A 300 8,070
Dollar General
Corporation 1,150 25,197
Dominion Resources, Inc. 1,050 78,151
R. R. Donnelley &
Sons Company 700 22,134
Dover Corporation 650 24,564
The Dow Chemical
Company 3,100 154,535
Dow Jones &
Company, Inc. 300 11,211
DTE Energy Company 590 26,833
E. I. du Pont de Nemours
and Company 3,300 169,092
Duke Energy Corporation 3,100 86,831
Dynegy Inc. - Class A*<F5> 1,200 4,692
Eastman Chemical
Company 300 17,700
Eastman Kodak Company 950 30,923
Eaton Corporation 500 32,700
eBay Inc.*<F5> 4,300 160,218
Ecolab Inc. 800 26,440
Edison International 1,050 36,456
El Paso Corporation 2,045 21,636
Electronic Arts Inc. (EA)*<F5> 1,000 51,780
Electronic Data Systems
Corporation 1,650 34,106
EMC Corporation*<F5> 7,950 97,944
Emerson Electric Co. 1,350 87,655
Engelhard Corporation 400 12,012
Entergy Corporation 750 52,995
EOG Resources, Inc. 800 38,992
Equifax Inc. 400 12,276
Equity Office
Properties Trust 1,271 38,295
Equity Residential 950 30,600
E*TRADE Financial
Corporation*<F5> 1,200 14,400
Exelon Corporation 2,200 100,958
Express Scripts, Inc.*<F5> 200 17,438
Exxon Mobil Corporation 21,398 1,275,321
Family Dollar Stores, Inc. 500 15,180
Fannie Mae 3,200 174,240
Federated Department
Stores, Inc. 550 35,002
Federated Investors,
Inc. - Class B 300 8,493
FedEx Corp. 950 89,252
Fifth Third Bancorp 1,850 79,513
First Data Corporation 2,729 107,277
FirstEnergy Corp. 1,050 44,047
First Horizon National
Corporation 400 16,316
Fiserv, Inc.*<F5> 650 25,870
Fisher Scientific
International Inc.*<F5> 400 22,768
Fluor Corporation 300 16,629
Ford Motor Company 6,000 67,980
Forest Laboratories, Inc.*<F5> 2,450 90,527
Fortune Brands, Inc. 450 36,284
FPL Group, Inc. 1,300 52,195
Franklin Resources, Inc. 850 58,352
Freddie Mac 2,250 142,200
Freeport-McMoRan Copper
& Gold, Inc. - Class B 600 23,766
Freescale Semiconductor
Inc. - Class B*<F5> 1,342 23,150
Gannett Co.,Inc. 850 67,218
The Gap, Inc. 2,800 61,152
Gateway, Inc.*<F5> 1,200 4,836
General Dynamics
Corporation 650 69,582
General Electric
Company 35,435 1,277,786
General Mills, Inc. 1,150 56,522
General Motors
Corporation 1,815 53,343
Genuine Parts Company 600 26,094
Genzyme Corporation*<F5> 850 48,654
Georgia-Pacific Corp 850 30,167
Gilead Sciences, Inc.*<F5> 1,400 50,120
The Gillette Company 3,265 164,817
Golden West Financial
Corporation 1,000 60,500
The Goldman Sachs
Group, Inc. 1,550 170,484
Goodrich Corporation 400 15,316
The Goodyear Tire &
Rubber Company*<F5> 700 9,345
W.W. Grainger, Inc. 300 18,681
Great Lakes Chemical
Corporation 200 6,424
Guidant Corporation 1,050 77,595
Halliburton Company 1,650 71,362
Harley-Davidson, Inc. 950 54,872
Harrah's Entertainment,
Inc. 400 25,832
The Hartford Financial
Services Group, Inc. 950 65,132
Hasbro, Inc. 600 12,270
Hercules Incorporated*<F5> 400 5,796
Hershey Foods
Corporation 800 48,368
Hewlett-Packard
Company 9,857 216,263
Hilton Hotels Corporation 1,250 27,938
H.J. Heinz Company 1,150 42,366
The Home Depot, Inc. 7,250 277,240
Honeywell
International Inc. 2,800 104,188
Hospira, Inc.*<F5> 525 16,942
H&R Block, Inc. 490 24,784
Humana Inc.*<F5> 500 15,970
Huntington Bancshares
Incorporated 750 17,925
Illinois Tool Works Inc. 1,000 89,530
IMS Health Incorporated 750 18,293
Ingersoll-Rand Company 600 47,790
Intel Corporation 20,935 486,320
International Business
Machines Corporation
(IBM) 5,615 513,099
International Flavors &
Fragrances Inc. 275 10,863
International Game
Technology 1,100 29,326
International Paper
Company 1,590 58,496
The Interpublic Group
of Companies, Inc.*<F5> 1,250 15,350
Intuit Inc.*<F5> 565 24,730
ITT Industries, Inc. 325 29,328
Jabil Circuit, Inc.*<F5> 665 18,966
Janus Capital Group Inc. 750 10,463
J. C. Penney Company,
Inc. - Holding Company 950 49,324
JDS Uniphase
Corporation *<F5> 4,750 7,933
Jefferson-Pilot
Corporation 400 19,620
Johnson & Johnson 12,200 819,352
Johnson Controls, Inc. 630 35,129
Jones Apparel Group, Inc. 400 13,396
JPMorgan Chase & Co. 11,695 404,647
KB HOME 200 23,492
Kellogg Company 1,350 58,414
Kerr-McGee Corporation 550 43,081
KeyCorp 1,350 43,807
KeySpan Corporation 500 19,485
Kimberly-Clark
Corporation 1,600 105,168
Kinder Morgan, Inc. 400 30,280
King Pharmaceuticals,
Inc.*<F5> 650 5,402
KLA-Tencor Corporation 650 29,907
Knight-Ridder, Inc. 300 20,175
Kohl's Corporation*<F5> 1,115 57,567
The Kroger Co.*<F5> 2,500 40,075
L-3 Communications
Holdings, Inc. 400 28,408
Laboratory Corporation
of America Holdings*<F5> 400 19,280
Leggett & Platt,
Incorporated 650 18,772
Lehman Brothers
Holdings Inc. 850 80,036
Lexmark International,
Inc.*<F5> 450 35,987
Eli Lilly and Company 5,900 307,390
Limited Brands 1,350 32,805
Lincoln National
Corporation 600 27,084
Linear Technology
Corporation 1,050 40,226
Liz Claiborne, Inc. 400 16,052
Lockheed Martin
Corporation 1,450 88,537
Loews Corporation 650 47,801
Louisiana-Pacific
Corporation 400 10,056
Lowe's Companies, Inc. 2,540 145,009
LSI Logic Corporation*<F5> 1,200 6,708
Lucent Technologies Inc.*<F5> 14,550 40,013
M&T Bank Corporation 400 40,824
Manor Care, Inc. 300 10,908
Marathon Oil Corporation 1,150 53,958
Marriott International,
Inc. - Class A 750 50,145
Marsh & McLennan
Companies, Inc. 1,740 52,931
Marshall & Ilsley
Corporation 750 31,313
Masco Corporation 1,450 50,271
Mattel, Inc. 1,350 28,823
Maxim Integrated
Products, Inc. 1,050 42,914
The May Department
Stores Company 950 35,169
Maytag Corporation 300 4,191
MBIA Inc. 500 26,140
MBNA Corporation 4,200 103,110
McCormick & Company,
Incorporated 400 13,772
McDonald's Corporation 4,150 129,231
The McGraw-Hill
Companies, Inc. 650 56,712
McKesson Corporation 2,150 81,162
MeadWestvaco
Corporation 650 20,683
Medco Health
Solutions, Inc.*<F5> 875 43,374
MedImmune, Inc.*<F5> 850 20,239
Medtronic, Inc. 3,930 200,233
Mellon Financial
Corporation 1,350 38,529
Merck & Co. Inc. 11,950 386,821
Mercury Interactive
Corporation*<F5> 300 14,214
Meredith Corporation 200 9,350
Merrill Lynch & Co., Inc. 3,100 175,460
MetLife, Inc. 2,400 93,840
MGIC Investment
Corporation 300 18,501
Micron Technology, Inc.*<F5> 1,950 20,163
Microsoft Corporation 34,340 829,998
Millipore Corporation*<F5> 200 8,680
Molex Incorporated 650 17,134
Molson Coors Brewing
Company 200 15,434
Monsanto Company 850 54,825
Monster Worldwide Inc.*<F5> 400 11,220
Moody's Corporation 490 39,621
Morgan Stanley 3,600 206,100
Motorola, Inc. 8,030 120,209
Mylan Laboratories Inc. 900 15,948
Nabors Industries, Ltd*<F5> 500 29,570
National City Corporation 2,250 75,375
National-Oilwell
Varco Inc.*<F5> 500 23,350
National Semiconductor
Corporation 1,200 24,732
Navistar International
Corporation*<F5> 200 7,280
NCR Corporation*<F5> 600 20,244
Network Appliance, Inc.*<F5> 1,150 31,809
The New York Times
Company - Class A 500 18,290
Newell Rubbermaid Inc. 840 18,430
Newmont Mining
Corporation 1,450 61,262
News Corporation -
Class A 9,500 160,740
Nextel Communications,
Inc. - Class A*<F5> 3,580 101,744
Nicor Inc. 100 3,709
NIKE, Inc. - Class B 850 70,813
NiSource Inc. 850 19,372
Noble Corporation*<F5> 450 25,295
Nordstrom, Inc. 500 27,690
Norfolk Southern
Corporation 1,250 46,312
North Fork
Bancorporation, Inc. 1,500 41,610
Northern Trust
Corporation 750 32,580
Northrop Grumman
Corporation 1,214 65,532
Novell, Inc.*<F5> 1,000 5,960
Novellus Systems, Inc.*<F5> 500 13,365
Nucor Corporation 500 28,780
NVIDIA Corporation*<F5> 500 11,880
Occidental Petroleum
Corporation 1,340 95,368
Office Depot, Inc.*<F5> 1,050 23,289
OfficeMax Inc 300 10,050
Omnicom Group Inc. 650 57,538
Oracle Corporation*<F5> 15,380 191,942
PACCAR Inc 625 45,244
Pactiv Corporation*<F5> 500 11,675
Pall Corporation 400 10,848
Parametric Technology
Corporation*<F5> 900 5,031
Parker Hannifin
Corporation 400 24,368
Paychex, Inc. 1,175 38,564
Peoples Energy
Corporation 100 4,192
The Pepsi Bottling
Group, Inc. 800 22,280
PepsiCo, Inc. 5,550 294,316
PerkinElmer, Inc. 400 8,252
PG&E Corporation 1,250 42,625
Phelps Dodge Corporation 300 30,519
Pinnacle West Capital
Corporation 300 12,753
Pitney Bowes Inc. 750 33,840
Plum Creek Timber
Company, Inc. 650 23,205
PMC-Sierra, Inc.*<F5> 500 4,400
PNC Financial
Services Group 950 48,906
PPG Industries, Inc. 600 42,912
PPL Corporation 600 32,394
Praxair, Inc. 1,100 52,646
Principal Financial
Group, Inc. 1,050 40,415
The Procter & Gamble
Company 8,380 444,140
Progress Energy, Inc. 750 31,463
The Progressive
Corporation 650 59,644
ProLogis 600 22,260
Providian Financial
Corporation*<F5> 900 15,444
Prudential Financial, Inc. 1,650 94,710
Public Service Enterprise
Group Incorporated 750 40,793
Pulte Homes, Inc. 400 29,452
QLogic Corporation*<F5> 300 12,150
QUALCOMM Inc 5,500 201,575
Quest Diagnostics
Incorporated 300 31,539
Qwest Communications
International Inc.*<F5> 6,000 22,200
RadioShack Corporation 500 12,250
Raytheon Company 1,450 56,115
Reebok International Ltd. 200 8,860
Regions Financial
Corporation 1,552 50,285
Reynolds American Inc. 500 40,295
Robert Half
International Inc. 600 16,176
Rockwell Automation, Inc. 650 36,816
Rockwell Collins, Inc. 550 26,175
Rohm and Haas Company 750 36,000
Rowan Companies, Inc.*<F5> 300 8,979
T. Rowe Price Group Inc. 400 23,752
Ryder System, Inc. 200 8,340
Sabre Holdings
Corporation 400 8,752
SAFECO Corporation 400 19,484
Safeway Inc.*<F5> 1,450 26,869
Sanmina-SCI
Corporation*<F5> 1,700 8,874
Sara Lee Corporation 2,500 55,400
SBC Communications
Inc. 10,850 257,036
Schering-Plough
Corporation 7,550 137,032
Schlumberger Limited 1,900 133,912
The Charles Schwab
Corporation 4,500 47,295
Scientific-Atlanta, Inc. 500 14,110
Sealed Air Corporation*<F5> 300 15,582
Sears Holdings
Corporation*<F5> 305 40,562
Sempra Energy 750 29,880
The Sherwin-Williams
Company 500 21,995
Siebel Systems, Inc.*<F5> 1,600 14,608
Sigma-Aldrich
Corporation 200 12,250
Simon Property
Group, Inc. 690 41,800
SLM Corporation 1,375 68,530
Snap-on Incorporated 200 6,358
Solectron Corporation*<F5> 2,900 10,063
The Southern Company 2,405 76,551
Southwest Airlines Co. 2,500 35,600
Sovereign Bancorp, Inc. 1,200 26,592
Sprint Corporation 4,900 111,475
St. Jude Medical, Inc.*<F5> 1,180 42,480
The St. Paul Travelers
Companies, Inc. 2,141 78,639
The Stanley Works 300 13,581
Staples, Inc. 1,650 51,859
Starbucks Corporation*<F5> 1,350 69,741
Starwood Hotels &
Resorts Worldwide, Inc. 650 39,020
State Street Corporation 1,050 45,906
Stryker Corporation 1,280 57,101
Sun Microsystems, Inc.*<F5> 10,750 43,430
SunGard Data
Systems Inc.*<F5> 950 32,775
Sunoco, Inc. 200 20,704
SunTrust Banks, Inc. 1,250 90,087
SUPERVALU INC. 400 13,340
Symantec Corporation*<F5> 2,300 49,059
Symbol Technologies, Inc. 750 10,868
Synovus Financial Corp. 1,050 29,253
Sysco Corporation 2,115 75,717
Target Corporation 2,945 147,309
TECO Energy, Inc. 600 9,408
Tektronix, Inc. 300 7,359
Tellabs, Inc.*<F5> 1,400 10,220
Temple-Inland Inc. 200 14,510
Teradyne, Inc.*<F5> 650 9,490
Texas Instruments
Incorporated 5,700 145,293
Textron Inc. 500 37,310
Thermo Electron
Corporation*<F5> 500 12,645
Tiffany & Co. 500 17,260
Time Warner Inc.*<F5> 15,100 265,005
The TJX Companies, Inc. 1,565 38,546
Torchmark Corporation 400 20,880
Toys "R" Us, Inc.*<F5> 650 16,744
Transocean Inc.*<F5> 1,050 54,033
Tribune Company 1,050 41,864
TXU Corp. 750 59,722
Tyco International Ltd. 6,600 223,080
Union Pacific Corporation 815 56,805
Unisys Corporation*<F5> 950 6,707
United Parcel Service,
Inc. - Class B 3,690 268,411
United States Steel
Corporation 400 20,340
United Technologies
Corporation 1,650 167,739
UnitedHealth Group
Incorporated 2,200 209,836
Univision Communications
Inc. - Class A*<F5> 1,050 29,075
Unocal Corporation 850 52,436
UnumProvident
Corporation 1,050 17,871
U.S. Bancorp 6,100 175,802
UST Inc. 500 25,850
Valero Energy
Corporation 800 58,616
VERITAS Software
Corporation*<F5> 1,350 31,347
Verizon Communications
Inc. 9,117 323,653
V. F. Corporation 400 23,656
Viacom Inc. - Class B 5,600 195,048
Visteon Corporation *<F5> 300 1,713
Vulcan Materials
Company 300 17,049
Wachovia Corporation 5,284 269,008
Wal-Mart Stores, Inc. 11,700 586,287
Walgreen Co. 3,380 150,140
The Walt Disney
Company 6,750 193,927
Washington Mutual, Inc. 2,895 114,352
Waste Management, Inc. 1,850 53,372
Waters Corporation*<F5> 400 14,316
Watson Pharmaceuticals,
Inc.*<F5> 400 12,292
WellPoint Inc.*<F5> 1,000 125,350
Wells Fargo & Company 5,640 337,272
Wendy's
International, Inc. 400 15,616
Weyerhaeuser Company 750 51,375
Whirlpool Corporation 200 13,546
The Williams
Companies, Inc. 1,900 35,739
Wm. Wrigley Jr. Company 790 51,800
Wyeth 6,200 261,516
Xcel Energy, Inc. 1,250 21,475
Xerox Corporation*<F5> 3,100 46,965
Xilinx, Inc. 1,150 33,615
XL Capital Ltd - Class A 500 36,185
XTO Energy, Inc. 1,200 39,408
Yahoo! Inc.*<F5> 4,580 155,262
Yum! Brands, Inc 950 49,219
Zimmer Holdings, Inc.*<F5> 790 61,470
Zions Bancorporation 300 20,706
-----------
TOTAL COMMON STOCKS
(COST $31,819,419) 36,223,893
-----------
Short-Term Principal
Investments (2.1%) Amount
- ------------------ ---------
FHLB Discount Note,
04/01/2005, 2.4330% $739,000 $ 739,000
U.S. Treasury Bill,
06/23/2005, 2.5506% 60,000 59,618
-----------
TOTAL SHORT-TERM INVESTMENT
(COST $798,618) 798,618
-----------
TOTAL INVESTMENTS - 99.6%
(COST $32,618,037) 37,022,511
OTHER ASSETS,
LESS LIABILITIES - 0.4% 140,755
TOTAL NET ASSETS -
100.0% $37,163,266
-----------
-----------
*<F5> Non-income producing security.
The accompanying Notes to Financial Statements are an integral part of this
schedule.
SCHEDULE OF FUTURES CONTRACTS
MARCH 31, 2005 (UNAUDITED)
THE CATHOLIC EQUITY FUND
Unrealized
Futures Contracts Purchased Contracts Depreciation
- --------------------------- --------- ------------
S&P 500 Index Futures
Contracts Expiring June 2005 (Underlying Face
Amount at Market Value $295,975) 1 $(5,863)
S&P 500 Index E-mini Futures
Contracts Expiring June 2005 (Underlying Face
Amount at Market Value $591,950) 10 (13,150)
--------
TOTAL FUTURES CONTRACTS PURCHASED $(19,013)
--------
--------
The accompanying Notes to Financial Statements are an integral part of this
schedule.
STATEMENT OF ASSETS & LIABILITIES
MARCH 31, 2005 (UNAUDITED)
The Catholic
Equity Fund
-----------
ASSETS
- ------
Investments, at cost $32,618,037
-----------
Investments, at value $37,022,511
Cash 2,498
Dividend receivable 50,941
Receivable for Fund shares sold 7,618
Receivable from Adviser 36,689
Other assets 73,921
-----------
TOTAL ASSETS 37,194,178
-----------
LIABILITIES
- -----------
Payable for Fund shares redeemed 5,913
Payable to broker 1,125
Accrued expenses and other liabilities 23,874
-----------
TOTAL LIABILITIES 30,912
-----------
NET ASSETS $37,163,266
-----------
-----------
NET ASSETS CONSIST OF:
- ----------------------
Paid in capital $37,048,054
Undistributed net investment income 131,080
Undistributed net realized loss on
investments sold and futures contracts (4,401,330)
Net unrealized appreciation (depreciation) on:
Investments 4,404,474
Futures contracts (19,012)
-----------
NET ASSETS $37,163,266
-----------
-----------
CLASS A SHARES
- --------------
Net assets $7,894,801
Shares authorized ($0.001 par value) 100,000,000(1)<F6>
Shares issued and outstanding 833,801
Net asset value, redemption price
and minimum offering price per share $9.47
Maximum offering price per share ($9.47/0.96) $9.86
CLASS C SHARES
- --------------
Net assets $3,371,368
Shares authorized ($0.001 par value) 100,000,000(1)<F6>
Shares issued and outstanding 356,434
Net asset value and offering price per share $9.46
CLASS I SHARES
- --------------
Net assets $25,897,097
Shares authorized ($0.001 par value) 100,000,000(1)<F6>
Shares issued and outstanding 2,733,233
Net asset value, redemption price
and offering price per share $9.47
(1)<F6> 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 SIX MONTHS ENDED MARCH 31, 2005 (UNAUDITED)
The Catholic
Equity Fund
-----------
INVESTMENT INCOME
- -----------------
Dividend income $423,045
Interest income 3,581
Other income 154
----------
TOTAL INCOME 426,780
----------
EXPENSES
- --------
Investment advisory fees 89,030
Transfer agent fees and expenses 39,893
Legal fees 38,579
Portfolio accounting fees 32,074
Federal and state registration fees 17,118
Insurance fees 13,535
Audit fees 10,259
Printing and postage expenses 9,646
Custody fees 8,949
Directors' fees and expenses 3,589
12b-1 fees - Class A 9,481
12b-1 fees - Class C 12,742
Other 25,415
----------
TOTAL EXPENSES 310,310
----------
Less waivers and reimbursements by adviser (215,939)
----------
NET EXPENSES 94,371
----------
NET INVESTMENT INCOME 332,409
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- --------------------------------------------------
Net realized gain (loss) on:
Investments (4,459)
Futures contracts 45,555
Net change in unrealized appreciation (depreciation) on:
Investments 1,907,749
Futures contracts (16,397)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,932,448
----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $2,264,857
----------
----------
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 Six For the
Months Ended Year Ended
March 31, 2005 September 30,
(Unaudited) 2004
-------------- -------------
OPERATIONS
- ----------
Net investment income $332,409 $280,007
Net realized gain (loss) on
investments and futures contracts 41,096 (55,313)
Net change in unrealized appreciation
on investments and futures contracts 1,891,352 3,169,847
----------- -----------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 2,264,857 3,394,541
----------- -----------
DISTRIBUTIONS TO CLASS A SHAREHOLDERS
- -------------------------------------
Distributions from net investment income (78,529) (33,289)
DISTRIBUTIONS TO CLASS C SHAREHOLDERS
- -------------------------------------
Distributions from net investment income (16,732) (17,425)
DISTRIBUTIONS TO CLASS I SHAREHOLDERS
- -------------------------------------
Distributions from net investment income (313,225) (165,953)
----------- -----------
CHANGE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (408,486) (216,667)
----------- -----------
CAPITAL SHARE TRANSACTIONS
- --------------------------
Proceeds from shareholder purchases 3,462,505 3,964,509
Net asset value of shares issued to shareholders
in payment of distributions declared 396,621 211,562
Cost of shares redeemed (582,987) (1,563,341)
----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS 3,276,139 2,612,730
----------- -----------
CHANGE IN NET ASSETS $5,132,510 $5,790,604
----------- -----------
NET ASSETS, BEGINNING OF PERIOD $32,030,756 $26,240,152
----------- -----------
NET ASSETS, END OF PERIOD $37,163,266 $32,030,756
----------- -----------
----------- -----------
UNDISTRIBUTED NET INVESTMENT INCOME $131,080 $204,866
----------- -----------
----------- -----------
The accompanying Notes to Financial Statements are an integral part of these
statements.
FINANCIAL HIGHLIGHTS
THE CATHOLIC EQUITY FUND - CLASS A
For the Six
Months Ended For the Year Ended September 30,
March 31, 2005(3)<F9> -----------------------------------------------------------------------
(Unaudited) 2004(3)<F9> 2003(3)<F9> 2002(3)<F9> 2001(3)<F9> 2000(3)<F9>
--------------------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE,
BEGINNING OF PERIOD $8.95 $7.99 $6.48 $8.43 $10.95 $9.69
----- ----- ----- ----- ------ -----
Net investment income (loss) 0.08 0.08 0.04 0.06 (0.04)(2)<F8> (0.03)(2)<F8>
Net realized and unrealized
gain (loss) on investments 0.54 0.93 1.49 (1.83) (2.45) 1.31
----- ----- ----- ----- ------ -----
TOTAL FROM
INVESTMENT OPERATIONS 0.62 1.01 1.53 (1.77) (2.49) 1.28
----- ----- ----- ----- ------ -----
Distributions from net
investment income (0.10) (0.05) (0.02) -- -- --
Distributions from net
realized gain -- -- -- (0.18) (0.03) (0.02)
----- ----- ----- ----- ------ -----
TOTAL DISTRIBUTIONS (0.10) (0.05) (0.02) (0.18) (0.03) (0.02)
----- ----- ----- ----- ------ -----
NET ASSET VALUE,
END OF PERIOD $9.47 $8.95 $7.99 $6.48 $8.43 $10.95
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Total return(1)<F7> 6.88% 12.70% 23.71% (21.65)% (22.81)% 13.16%
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Net assets, end of period $7,894,801 $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(6)<F12> 1.87% 1.94% 2.44% 2.48% 3.05% 3.31%
After expense waivers
and reimbursements(6)<F12> 0.68%(7)<F13> 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(6)<F12> 0.00% (0.22)% (0.66)% (0.94)% (1.75)% (1.89)%
After expense waivers
and reimbursements(6)<F12> 1.19% 0.77% 0.83% 0.31% (0.45)% (0.33)%
Portfolio turnover rate 2.59% 1.88% 9.46%(4) 31.23%(5) 39.17% 28.78%
<F10> <F11>
(1)<F7> Based on net asset value, which does not reflect the sales charge.
(2)<F8> Per share net investment loss has been calculated prior to tax
adjustments.
(3)<F9> 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 March 31, 2005 reflects the operations of The
Catholic Equity Fund. (Note 1)
(4)<F10> Portfolio turnover rate excludes purchases and sales from merger of
The Catholic Values Investment Trust and The Catholic Equity Fund.
(5)<F11> Portfolio turnover reflects the operations of the Catholic Equity Fund
for the period April 3, 2002 through September 30, 2002.
(6)<F12> Computed on an annualized basis.
(7)<F13> On November 15, 2004, the adviser voluntarily increased its expense
reimbursements and fee waivers to the Fund, thereby decreasing its
expense ratio from 0.95% to 0.60%.
The accompanying Notes to Financial Statements are an integral part of these
statements.
THE CATHOLIC EQUITY FUND - CLASS C
For the Six For the Year Ended For the
Months Ended September 30, Period Ended
March 31, 2005 ------------------------ September 30,
(Unaudited) 2004 2003 2002(1)<F14>
-------------- ---- ---- -------------
NET ASSET VALUE, BEGINNING OF PERIOD $8.90 $7.96 $6.48 $8.92
----- ----- ----- -----
Net investment income 0.07 0.05 0.04 0.01
Net realized and unrealized
gain (loss) on investments 0.54 0.94 1.48 (2.45)
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.61 0.99 1.52 (2.44)
----- ----- ----- -----
Distributions from net investment income (0.05) (0.05) (0.04) --
----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.05) (0.05) (0.04) --
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $9.46 $8.90 $7.96 $6.48
----- ----- ----- -----
----- ----- ----- -----
Total return(2)<F15> 6.69% 12.39% 23.69% (27.47)%(3)<F16>
RATIOS TO AVERAGE NET ASSETS
Net assets, end of period $3,371,368 $3,344,454 $3,016,387 $3,432
Ratio of expenses to
average net assets:
Before expense waivers
and reimbursements(4)<F17> 2.37% 2.44% 2.94% 3.71%
After expense waivers
and reimbursements(4)<F17> 0.93%(6)<F19> 1.20% 1.20% 1.20%
Ratio of net investment income
(loss) to average net assets:
Before expense waivers
and reimbursements(4)<F17> (0.63)% (0.72)% (1.16)% (1.84)%
After expense waivers
and reimbursements(4)<F17> 0.81% 0.52% 0.58% 0.67%
Portfolio turnover rate 2.59% 1.88% 9.46%(5)<F18> 31.23%(3)<F16>
(1)<F14> Reflects operations for the period from April 9, 2002 (commencement of
operation), to September 30, 2002. (Note 1)
(2)<F15> Based on net asset value, which does not reflect the contingent
deferred sales charge.
(3)<F16> Not annualized.
(4)<F17> Computed on an annualized basis.
(5)<F18> Portfolio turnover rate excludes purchases and sales from the merger
of The Catholic Values Investment Trust and The Catholic Equity Fund.
(6)<F19> On November 15, 2004, the adviser voluntarily increased its expense
reimbursements and fee waivers to the Fund, thereby decreasing its
expense ratio from 1.20% to 0.85%.
The accompanying Notes to Financial Statements are an integral part of these
statements.
THE CATHOLIC EQUITY FUND - CLASS I
For the Six For the Year Ended For the
Months Ended September 30, Period Ended
March 31, 2005 ------------------------ September 30,
(Unaudited) 2004 2003 2002(1)<F20>
-------------- ---- ---- -------------
NET ASSET VALUE, BEGINNING OF PERIOD $8.96 $8.00 $6.49 $9.02
----- ----- ----- -----
Net investment income 0.09 0.09 0.07 0.02
Net realized and unrealized
gain (loss) on investments 0.54 0.94 1.49 (2.55)
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.63 1.03 1.56 (2.53)
----- ----- ----- -----
Distributions from net investment income (0.12) (0.07) (0.05) --
----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.12) (0.07) (0.05) --
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $9.47 $8.96 $8.00 $6.49
----- ----- ----- -----
----- ----- ----- -----
Total return 6.99% 12.89% 24.19% (28.05)%(2)<F21>
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Net assets, end of period $25,897,097 $21,818,191 $18,540,009 $9,831,101
Ratio of expenses to
average net assets:
Before expense waivers
and reimbursements(3)<F22> 1.62% 1.69% 2.19% 2.55%
After expense waivers
and reimbursements(3)<F22> 0.43%(5)<F24> 0.70% 0.70% 0.70%
Ratio of net investment income
(loss) to average net assets:
Before expense waivers
and reimbursements(3)<F22> (0.60)% 0.03% (0.41)% (0.82)%
After expense waivers
and reimbursements(3)<F22> 0.59% 1.02% 1.08% 1.03%
Portfolio turnover rate 2.59% 1.88% 9.46%(4)<F23> 31.23%(2)<F21>
(1)<F20> Reflects operations for the period from April 3, 2002 (commencement of
operations), to September 30, 2002.(Note 1)
(2)<F21> Not annualized.
(3)<F22> Computed on an annualized basis.
(4)<F23> Portfolio turnover rate excludes purchases and sales from the merger
of The Catholic Values Investment Trust and The Catholic Equity Fund.
(5)<F24> On November 15, 2004, the adviser voluntarily increased its expense
reimbursements and fee waivers to the Fund, thereby decreasing its
expense ratio from 0.70% to 0.35%.
The accompanying Notes to Financial Statements are an integral part of these
statements.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005 (UNAUDITED)
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 six months ended March 31,
2005 and the fiscal year ended September 30, 2004 were as follows:
Equity Fund
---------------------------------------
For the Six For the
Months Ended Year Ended
March 31, 2005 September 30, 2004
-------------- ------------------
Ordinary Income $408,486 $216,667
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 0.60%,
0.85% and 0.35% of the average daily net assets of the Fund - Class A, Class C
and Class I shares, respectively. 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 six months ended March 31, 2005, expenses of $215,939 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 six months
ended March 31, 2005, 12b-1 distribution expenses of $9,481 and $12,742 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 $17,377
for the six months ended March 31, 2005. There were no contingent deferred
sales charges paid to the Adviser for the redemption of Class C shares during
the six months ended March 31, 2005. 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 Six Months Ended For the Year Ended
March 31, 2005 September 30, 2004
------------------------ -----------------------
Amount Shares Amount Shares
------ ------ ------ ------
Shares sold $819,434 87,544 $2,062,903 232,281
Shares issued to holders in
reinvestment of distributions 72,993 7,517 32,372 3,658
Shares redeemed (271,890) (28,798) (485,188) (54,555)
-------- ------- ---------- -------
NET INCREASE $620,537 66,263 $1,610,087 181,384
-------- ------- ---------- -------
-------- ------- ---------- -------
THE CATHOLIC EQUITY FUND - CLASS C SHARES
For the Six Months Ended For the Year Ended
March 31, 2005 September 30, 2004
------------------------ -----------------------
Amount Shares Amount Shares
------ ------ ------ ------
Shares sold $113,156 8,298 $605,925 69,231
Shares issued to holders in
reinvestment of distributions 15,991 1,649 16,727 1,896
Shares redeemed (304,097) (29,174) (649,619) (74,463)
--------- ------- -------- -------
NET INCREASE $(174,950) (19,227) $(26,967) (3,336)
--------- ------- -------- -------
--------- ------- -------- -------
THE CATHOLIC EQUITY FUND - CLASS I SHARES
For the Six Months Ended For the Year Ended
March 31, 2005 September 30, 2004
------------------------ -----------------------
Amount Shares Amount Shares
------ ------ ------ ------
Shares sold $2,529,915 267,810 $1,295,680 148,768
Shares issued to holders in
reinvestment of distributions 307,636 31,682 162,463 18,357
Shares redeemed (7,000) (733) (428,534) (50,748)
---------- ------- ---------- -------
NET INCREASE $2,830,551 298,759 $1,029,609 116,377
---------- ------- ---------- -------
---------- ------- ---------- -------
5. INVESTMENT TRANSACTIONS
- --------------------------
The aggregate purchases and sales of securities, excluding short-term
investments for The Catholic Equity Fund, for the six months ended March 31,
2005 were $3,661,030 and $905,590, respectively. There were no purchases and
sales of U.S. government securities for the Fund.
Transactions in future contracts for the six months ended March 31, 2005 were as
follows:
Equity Fund
--------------------------------
Number of Aggregate Face
Contracts Value of Contracts
--------- ------------------
Outstanding at beginning of year 5 $ 504,320
Contracts opened 26 2,032,837
Contracts closed (20) (1,630,220)
--- -----------
Outstanding at end of period 11 $ 906,937
--- -----------
--- -----------
6. 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.
BOARD APPROVAL OF INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS
At its meeting on February 15, 2005, the Board of Directors, including the
Directors who are not "interested persons" (as defined in the Investment Company
Act of 1940) of the Fund or of CFSC (the "Independent Directors"), with the
exception of one Independent Director who was absent from the meeting, voted to
reapprove the current investment advisory agreement between the Fund and CFSC
(the "Advisory Agreement") and the current subadvisory agreement among the Fund,
CFSC and Mellon Equity Associates, LLP ("Mellon") (the "Subadvisory Agreement").
In connection with its reapproval of the Advisory and Subadvisory Agreements,
the Board considered the following factors:
o The nature, extent and quality of the services provided by CFSC and
Mellon;
o The investment performance of the Fund both on an absolute basis and
on a relative basis in comparison to its peers; and
o The reasonableness of the cost of the services provided by CFSC and
Mellon.
Because of its relatively small size and historic slow growth, the Board did not
deem it relevant at this time to consider economies of scale that might be
realized at a substantially greater asset size, nor did it consider appropriate
fee breakpoint levels which would reflect such economies of scale.
In connection with the Advisory and Subadvisory Agreement renewal process under-
taken at a February 1, 2005 meeting of the Governance and Contracts Committee of
the Board (the "Contracts Committee"), which consists of Mr. Conrad Sobczak
(Chair), Mr. Thomas Bausch and Mr. Daniel Doucette, each an Independent
Director, the Contracts Committee reviewed information it previously had
requested from management of CFSC addressing the factors listed above. This
information included: (i) reports prepared by US Bancorp Fund Services, LLC, the
Fund's Administrative Services Agent (the "Fund Administrator"), which compared
the advisory fees, the total operating expenses and the performance of the Fund
to a peer group of S&P 500 Index funds; (ii) financial statements of CFSC,
including profit and loss statements; (iii) information regarding the types of
services furnished to the Fund by CFSC and Mellon; (iv) summaries of compliance
systems and procedures maintained by CFSC and Mellon and reports on their
compliance with those systems and procedures, including especially business
codes of conduct and codes of ethics; and (v) other performance, expense and
related information prepared by management of the Fund. The Contracts Committee
and the Board also received a memorandum from Fund legal counsel summarizing the
responsibilities of the Board and the Independent Directors under the Investment
Company Act of 1940 in reviewing advisory contracts.
In addition, the Contracts Committee authorized and directed management to
engage in discussions to ascertain whether subadvisory services could be
obtained from another quality, experienced investment advisory firm for a lower
fee. At the end of that process, management was unable to finalize an agreement
with another subadviser on terms more favorable than those offered by Mellon and
acceptable to the Board.
NATURE, EXTENT AND QUALITY OF SERVICES -- At each quarterly meeting of the Board
- --------------------------------------
of Directors, management presents information describing the services furnished
to the Fund by CFSC and Mellon under the Advisory and Subadvisory Agreements,
including reports on the investment management, portfolio trading and compliance
functions they perform. The Board also receives reports at each of its
quarterly meetings from the Fund's Chief Compliance Officer in private sessions
in which the officers of the Fund and the Directors who are interested persons
of CFSC do not participate. At least annually, the Board meets either in person
or by conference telephone with investment personnel of Mellon responsible for
managing the day-to-day investments of the Fund. These latter meetings give the
Board an opportunity to evaluate the abilities and experience of these personnel
and the quality of the services they provide to the Fund.
During the course of the year, management also reviewed with the Board existing,
enhanced and new compliance systems and procedures designed to assure regulatory
compliance by CFSC in connection with its provision of management and
administrative services to the Fund, and reviewed oversight functions
implemented by CFSC to monitor and assure regulatory compliance by the Fund's
other service providers, including Mellon. Management also reviewed with the
Board the compliance systems and procedures maintained by Mellon, and the Board
determined that both CFSC and Mellon have strong compliance systems, practices
and cultures. The Fund's Chief Compliance Officer quarterly reports to the
Board on any and all compliance issues that arise during the relevant quarter.
These reports have confirmed the Board's assessment of the strong compliance
focus of CFSC and Mellon. The Board considered the importance of these
compliance and oversight functions to the successful operation of the Fund, and
expressed satisfaction with the quality of service provided by the Fund's
service providers in this regard.
Management also reviewed with the Board its commitment to the Fund, as
demonstrated by the continuing financial subsidy that CFSC provides to the Fund
in order to keep its expense ratios in line with its peers. In this regard, the
Board noted in particular that CFSC had increased, on November 14, 2004, the
amount of its fee waivers and expense reimbursements to the Fund so as to reduce
the Fund's overall operating expense ratio on each Class of shares.
The Board views these actions, reports and information as significant factors in
approving the current Advisory and Subadvisory Agreements, as they demonstrate
the commitment of CFSC and Mellon to provide the Fund with comprehensive,
quality service and competitive investment performance.
INVESTMENT PERFORMANCE -- The Contracts Committee requested and carefully
- ----------------------
reviewed the comparative performance information prepared by management and the
Fund Administrator described above. The information showed that, since April 3,
2002 when the Fund adopted the investment objective to replicate the performance
of the S&P 500 Index and Mellon assumed responsibility for the day-to-day
management of the Fund's assets, the Fund's performance, before expenses, has
closely tracked the performance of the S&P 500 Index. The Board noted that
Mellon achieved this tight correlation notwithstanding the Fund's exclusion of
certain index companies which fail the Fund's abortion screen. The Board
concluded that the performance of the Fund was satisfactory compared to the
performance of the S&P 500 Index and compared to a peer group of S&P 500 Index
funds.
COST OF SERVICES -- The Contracts Committee and the Board also reviewed
- ----------------
information prepared by the Fund Administrator comparing the Fund's contractual
advisory fees with a peer group of funds, and comparing the Fund's overall
expense ratio to the expense ratios of a peer group of funds, both before and
after fee waivers and expense reimbursement. The Contracts Committee and the
Board also reviewed information regarding expenses presented by management,
which showed that overall expenses of the Fund as a percentage of net assets
have declined substantially since the Fund's inception on September 30, 1999,
and continue to show improvement. Based on this information, the Board
concluded that the Fund's expenses are in line with its peers, and that
management of CFSC is doing a credible job of effectively managing expenses,
notwithstanding that the Fund's small size presents challenges given the lack of
the ability to spread fixed costs and minimum fees, such as fund accounting
fees, auditing fees, legal fees, transfer agent fees, custody fees, etc., over a
larger base of assets.
The Contracts Committee and the Board also reviewed CFSC's Profit and Loss
Statement for calendar years 2003 and 2004, noting that CFSC had operating
losses of approximately $1.0 million in each of those years, and is projecting
an operating loss in 2005, albeit somewhat smaller. CFSC's fee waivers and
expense reimbursements resulted in costs to CFSC of approximately $350,000 in
each of those years. Based on this and other information provided by
management, the Board concluded that CFSC's financial commitment to the Fund and
its operations to date is exemplary. Furthermore, based on other information
provided by management of CFSC, the Board concluded that CFSC continues to
maintain a healthy capital position and has capital resources sufficient to
enable it to continue to financially support the Fund's growth and operations.
Based on the factors discussed above, the Contracts Committee recommended
continuation of the Advisory and Subadvisory Agreements, and the Board,
including all of the Independent Directors present at the meeting, approved
continuation of the Advisory and Subadvisory Agreements; one Independent
Director was unable to participate in the meeting.
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 LOGO)
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
Not required in Semi-Annual Reports on Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not required in Semi-Annual Reports on Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not required in Semi-Annual Reports on Form N-CSR.
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 Semi-Annual Report to Shareholders dated as of
March 31, 2005 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
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
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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
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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 second fiscal quarter of the period covered by this report 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
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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 1st
day of June, 2005.
THE CATHOLIC FUNDS, INC.
By: /s/ Theodore F. Zimmer
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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 1st day of June, 2005.
By: /s/ Theodore F. Zimmer
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Theodore F. Zimmer, President
(Principal Executive Officer)
By: /s/ Allan G. Lorge
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Allan G. Lorge, Vice President,
Secretary and Chief Financial Officer
(Principal Financial Officer)