UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-09025
----------------------------
New Covenant Funds
--------------------------------
(Exact name of registrant as specified in charter)
200 E. Twelfth Street, Suite B
Jeffersonville, IN 47130
--------------------------------
(Address of principal executive offices) (Zip code)
The Corporation Trust Company
1209 Orange Street
Wilmington, DE 19809
--------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 800-858-6127
Date of fiscal year end: June 30, 2003
-----------------------------------
Date of reporting period: June 30, 2003
----------------------------------
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, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO OMITTED]
[GRAPHIC OMITTED]
ANNUAL REPORT
JUNE 30, 2003
NEW COVENANT GROWTH FUND
NEW COVENANT INCOME FUND
NEW COVENANT BALANCED GROWTH FUND
NEW COVENANT BALANCED INCOME FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SHAREHOLDER LETTER .................................................... 2
PORTFOLIOS OF INVESTMENTS ............................................. 6
STATEMENTS OF ASSETS AND LIABILITIES .................................. 14
STATEMENTS OF OPERATIONS .............................................. 15
STATEMENTS OF CHANGES IN NET ASSETS ................................... 16
FINANCIAL HIGHLIGHTS .................................................. 18
NOTES TO FINANCIAL STATEMENTS ......................................... 20
1
TO OUR SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholder:
Thank you for your support of New Covenant Funds. We are grateful for your
continuing confidence in our socially responsible family of funds.
THE ECONOMY
Signs of resurgence are creeping back into our economy. Consumer confidence and
the stock market have rebounded from their March lows. Housing and auto sales
are holding up well while the service sector is showing signs of improvement.
Recovery is still elusive for manufacturing and the labor market.
At the end of the second quarter, we can finally enjoy some healthy profits from
our equity portfolios. The abundance of plus signs from stock investments is a
welcome sight, although still a long way from a full recovery from the 2000-2002
market debacle.
As to market cap, the smaller you owned, the better off you were. The technology
heavy NASDAQ led the way, while the Dow Jones Industrials lagged. Not a
surprising fact, since the bear's damage was most destructive in techs.
Bonds held up well through June 30th, with the equity resurgence. The Federal
Reserve continued to provide liquidity to the monetary system, with interest
rates bottoming on June 16th. After three years of bonds beating stocks, the
long-term outperformance of equities may be reasserting itself.
The key to further gains in the stock market is profits, spurred by a revival in
top line growth. Cost cutting measures by corporate executives will continue to
produce a profit recovery. The most likely path for interest rates is stable to
edging higher as the year progresses.
NEW COVENANT FUNDS
NEW COVENANT GROWTH FUND
The New Covenant Growth Fund was up 15.51% and 10.29% for the second quarter and
year-to-date through June 30, respectively, versus the benchmark, up 16.50% and
12.91% for the same period. For three- and five-year periods, the Growth Fund
was down 10.83% and 3.49% with the benchmark down 10.59% and 1.31%,
respectively. The Growth Fund was up 6.45% over 10 years versus the index, up
9.53%.
Today's low interest rates make stocks more attractive. Smaller stocks have
become especially attractive. We recently have added 5% to our position in
smaller growth stocks in the New Covenant Growth Fund.* We believe this market
will continue to show support for the smaller stocks, especially in the
technology sector. This will add exposure of our fund to that portion of the
market.
NEW COVENANT INCOME FUND
Bond yields have fallen dramatically with the yield on ten-year Treasury bonds
at 3.66% and on thirty-year Treasury bonds at 4.69%. While an increase in
interest rates is not anticipated soon, they have but one direction to go. When
interest rates rise, the price of bonds will decline. During the quarter ended
June 30, the New Covenant Income Fund (NCICX) posted a 2.29% total return
against the Lehman Brothers Aggregate Bond Index up 2.50%. Year-to-date, NCICX
was up 3.61% versus the index up 3.93%. The Fund was up 9.63% for the one year
ended June 30, against the benchmark up 10.40%. And, the Fund was up 6.47% and
6.39% over the past five- and ten-years ending June relative to the benchmark up
7.55% and 7.21%, respectively.
NEW COVENANT BALANCED FUNDS
The New Covenant Balanced Growth Fund (NCBGX) was up 10.22% and 7.60% for the
second quarter and year-to-date through June 30, respectively. The Fund returned
up 3.10%, up 0.88%, and up 6.69% over the past one-, five-, and ten-years ending
June 30 versus the benchmark up 4.92%, 2.58%, and 8.96%, respectively. The Fund
virtually matched the Lipper Balanced Funds Average for the three years ending
June, down 2.67% to down 2.70%.
The New Covenant Balanced Income Fund (NCBIX) was up 6.93% and 5.91% for the
second quarter and year-to-date through June 30, respectively. The Fund was up
6.00%, 3.16%, and 6.61% over the past one-, five-, and ten-year periods ending
June 30 relative to the composite benchmark up 7.20%, 4.77%, and 8.36%,
respectively.
2
TO OUR SHAREHOLDERS
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Early in 2002, we established an automatic rebalancing policy for the balanced
funds. We implemented a 3% range on each side of target asset allocation. For
example, the target asset allocation for the New Covenant Balanced Growth Fund
is 60% stock and 40% bonds. Thus, the stock tolerance band is 57-63%. If and
when the stock allocation is outside the band at month end, we automatically
rebalance. The New Covenant Balanced Income Fund has a 32-38% stock tolerance
band around its stock target allocation of 35%. Because bond interest rates are
at 40-year lows, we moved the rebalancing band for the NCBGX to 60-65% stock
(with 60% remaining as the target stock allocation) and for NCBIX to 35-40%
(with 35% remaining as the target stock allocation) in July 2003.
The interest in socially responsible investing is growing. The funds of the
Presbyterian Foundation, converted into New Covenant Funds in 1999, have been
invested with socially responsible criteria for more than 30 years. Since the
mid-1970s, the Foundation has been involved in investing with an eye to social
responsibility through shareholder activism, proxy voting, and as a last resort,
divesting of certain stocks as a symbolic witness to the principles of tenets of
the faith of the Presbyterian Church (U.S.A.).**
New Covenant Funds continue to be an investor seeking quality and stability of
earnings and management. It was announced recently that the recession ended in
2001 and that we are in a recovery, albeit a jobless one. As the recovery gains
strength, the same U.S. economy that endured the market malaise of the past
three years is in the process of building a very strong platform on which to
build the future. The processes and procedures of our investment sub-advisers
have been scrutinized and are being even more carefully carried out in the
analysis and selection of securities for our portfolios. We remain optimistic
for the intermediate and longer-term markets with cautious optimism for the
shorter time periods.
/S/ DENNIS J. MURPHY
Dennis J. Murphy
Executive Vice President
and Chief Investment Officer
The New Covenant Funds Investment Department of
New Covenant Trust Company, N.A.***
*Small company stocks are generally more risky than large company stocks due
to greater volatility and less liquidity.
**The New Covenant Funds' Proxy Policies & Procedures are available on our
website, www.newcovenantfunds.com, or you may call 877-835-4531 to receive
information.
***A subsidiary of the Presbyterian Foundation.
Past performance is no guarantee of future results. Share prices will fluctuate
and you may have a gain or loss when you redeem shares. The benchmark indices
are unmanaged indices that are not available for direct investment. Unlike a
mutual fund, the performance of an index assumes no taxes, transaction costs,
management fees or other expenses.
PFPC Distributors, Inc. 760 Moore Road, King of Prussia, PA 19406
- --------------------------------------------------------------------------------
New Covenant Growth Fund
TEN LARGEST STOCK HOLDINGS
at June 30, 2003
(Portfolio composition may change at any time)
Security Market Value % of Portfolio Sector
- -------- ------------ -------------- ------
Pfizer, Inc. $13,916,296 2.0% Pharmaceuticals
Microsoft Corp. 13,567,922 1.9 Computer Services and Software
Citigroup, Inc. 12,449,493 1.8 Financial Services
General Electric Co. 11,698,572 1.7 Diversified Operations
International Business Machines Corp. 9,800,175 1.4 Technology
Exxon Mobil Corp. 9,131,913 1.3 Oil and Gas
Cisco Systems, Inc. 8,589,508 1.2 Technology
Bank of America Corp. 8,137,719 1.1 Banking
Procter & Gamble Co. 8,129,649 1.1 Consumer Products
Merck & Co., Inc. 8,096,746 1.1 Pharmaceuticals
3
TO OUR SHAREHOLDERS
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JUNE 30, 2003
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
NEW COVENANT GROWTH FUND*
VS.
THE WILSHIRE 5000 TOTAL MARKET STOCK INDEX+
+WILSHIRE 5000 TOTAL MARKET STOCK INDEX MEASURES THE PERFORMANCE OF ALL U.S.
HEADQUARTERED EQUITY SECURITIES WITH READILY AVAILABLE PRICE DATA. OVER 7,000
CAPITALIZATION WEIGHTED SECURITY RETURNS ARE USED TO ADJUST THE INDEX.
1 Year 3 Year 5 Year 10 Year
Return** Return** Return** Return**
Growth Fund -2.17% -10.83% -3.49% 6.45%
Wilshire 5000 Index 1.27% -10.59% -1.31% 9.53%
[GRAPH OMITTED]
PLOT POINTS FOLLOW:
Growth Fund Wilshire 5000 Index
6/93 10,000 10,000
6/94 10,713 10,119
6/95 12,577 12,620
6/96 15,433 15,929
6/97 19,435 20,600
6/98 22,312 26,545
6/99 24,761 31,745
6/00 26,341 34,768
6/01 23,093 29,434
6/02 19,089 24,542
6/03 18,675 24,854
JUNE 30, 2003
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
NEW COVENANT INCOME FUND*
VS.
THE LEHMAN BROTHERS AGGREGATE BOND INDEX++
++THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS REPRESENTATIVE OF INTERMEDIATE
AND LONG-TERM GOVERNMENT AND INVESTMENT GRADE CORPORATE DEBT SECURITIES.
1 YEAR 3 YEAR 5 YEAR 10 YEAR
RETURN** RETURN** RETURN** RETURN**
INCOME FUND 9.63% 9.30% 6.47% 6.39%
LEHMAN BROTHERS
AGGREGATE BOND INDEX 10.40% 10.08% 7.55% 7.21%
[GRAPH OMITTED]
PLOT POINTS FOLLOW:
Income Fund Lehman Brothers Aggregate Bond Index
6/93 10,000 10,000
6/94 9,894 9,870
6/95 10,818 11,109
6/96 11,431 11,666
6/97 12,377 12,617
6/98 13,587 13,947
6/99 13,746 14,386
6/00 14,234 15,042
6/01 15,702 16,732
6/02 16,953 18,176
6/03 18,586 20,066
* THE PERFORMANCE INFORMATION FOR ALL OF THE NEW COVENANT FUNDS REFLECTS
PERFORMANCE PRIOR TO THE JULY 1, 1999 INCEPTION DATE OF THE FUNDS. IT
REPRESENTS PERFORMANCE RECORDS OF THE PRIVATE POOLS PREVIOUSLY MANAGED BY THE
PRESBYTERIAN CHURCH (U.S.A.) FOUNDATION, THE PREDECESSOR ENTITY TO THE
ADVISER. THESE PRIVATE POOLS HAD INVESTMENT OBJECTIVES AND POLICIES IN ALL
MATERIAL RESPECTS EQUIVALENT TO THOSE OF THE FUNDS. THEY WERE NOT SUBJECT TO
THE REQUIREMENTS OF THE INVESTMENT COMPANY ACT OF 1940 OR THE INTERNAL
REVENUE CODE OF 1986, WHICH MAY ADVERSELY AFFECT PERFORMANCE RESULTS. THE
PERFORMANCE HAS BEEN RESTATED TO REFLECT THE TOTAL EXPENSES OF THE FUNDS.
** RETURNS SHOWN ARE AVERAGE ANNUAL RETURNS, ASSUMING REINVESTMENT OF ALL
DIVIDENDS AND DISTRIBUTIONS.
NOTE: PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE GRAPHS AND TABLES
DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
4
TO OUR SHAREHOLDERS
- --------------------------------------------------------------------------------
JUNE 30, 2003
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
NEW COVENANT BALANCED GROWTH FUND*
VS.
THE BLENDED WILSHIRE/AGGREGATE INDEX+
+THE BLENDED WILSHIRE/AGGREGATE INDEX IS A COMPOSITE INDEX COMPOSED OF 60%
WILSHIRE 5000 TOTAL MARKET STOCK INDEX AND 40% LEHMAN BROTHERS AGGREGATE BOND
INDEX.
1 Year 3 Year 5 Year 10 Year
Return** Return** Return** Return**
Balanced Growth Fund 3.10% -2.67% 0.88% 6.69%
Blended Wilshire/
Aggregate Index 4.92% -2.23% 2.58% 8.96%
[GRAPH OMITTED]
PLOT POINTS FOLLOW:
Balanced Growth Fund Blended Wilshire/Aggregate Index
6/93 10,000 10,000
6/94 10,308 10,019
6/95 11,724 12,008
6/96 13,577 14,139
6/97 16,148 17,087
6/98 18,277 20,766
6/99 19,700 23,469
6/00 20,711 25,237
6/01 20,088 24,048
6/02 18,523 22,480
6/03 19,097 23,587
JUNE 30, 2003
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
NEW COVENANT BALANCED INCOME FUND*
VS.
THE BLENDED WILSHIRE/AGGREGATE INDEX++
++THE BLENDED WILSHIRE/AGGREGATE INDEX IS A COMPOSITE INDEX COMPOSED OF 65%
WILSHIRE 5000 TOTAL MARKET STOCK INDEX AND 35% LEHMAN BROTHERS AGGREGATE BOND
INDEX.
1 Year 3 Year 5 Year 10 Year
Return** Return** Return** Return**
Balanced Income Fund 6.00% 2.13% 3.16% 6.61%
Blended Wilshire/
Aggregate Index 7.20% 2.93% 4.77% 8.36%
[GRAPH OMITTED]
PLOT POINTS FOLLOW:
Balanced Income Fund Blended Wilshire/Aggregate Index
6/93 10,000 10,000
6/94 10,173 9,957
6/95 11,399 11,631
6/96 12,726 13,078
6/97 14,520 15,113
6/98 16,233 17,675
6/99 17,052 19,248
6/00 17,802 20,460
6/01 18,172 20,855
6/02 17,890 20,812
6/03 18,964 22,311
* THE PERFORMANCE INFORMATION FOR ALL OF THE NEW COVENANT FUNDS REFLECTS
PERFORMANCE PRIOR TO THE JULY 1, 1999 INCEPTION DATE OF THE FUNDS. IT
REPRESENTS PERFORMANCE RECORDS OF THE PRIVATE POOLS PREVIOUSLY MANAGED BY THE
PRESBYTERIAN CHURCH (U.S.A.) FOUNDATION, THE PREDECESSOR ENTITY TO THE
ADVISER. THESE PRIVATE POOLS HAD INVESTMENT OBJECTIVES AND POLICIES IN ALL
MATERIAL RESPECTS EQUIVALENT TO THOSE OF THE FUNDS. THEY WERE NOT SUBJECT TO
THE REQUIREMENTS OF THE INVESTMENT COMPANY ACT OF 1940 OR THE INTERNAL
REVENUE CODE OF 1986, WHICH MAY ADVERSELY AFFECT PERFORMANCE RESULTS. THE
PERFORMANCE HAS BEEN RESTATED TO REFLECT THE TOTAL EXPENSES OF THE FUNDS.
** RETURNS SHOWN ARE AVERAGE ANNUAL RETURNS, ASSUMING REINVESTMENT OF ALL
DIVIDENDS AND DISTRIBUTIONS.
NOTE: PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE GRAPHS AND TABLES
DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
5
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
NEW COVENANT GROWTH FUND
JUNE 30, 2003
- ----------------------------------------------------------
Value
Shares (Note 2)
- ----------------------------------------------------------
COMMON STOCK -- 98.4%
ADVERTISING -- 1.1%
20,900 Catalina Marketing Corp.* ......$ 368,885
239,000 Interpublic Group of
Cos., Inc.* (L) .............. 3,197,820
50,610 Lamar Advertising Co.* ......... 1,781,978
37,100 Omnicom Group, Inc. ............ 2,660,070
------------
8,008,753
------------
AEROSPACE -- 0.8%
36,000 Goodrich Corp. ................. 756,000
65,700 United Technologies Corp. ...... 4,653,531
------------
5,409,531
------------
AUTOMOTIVE -- 1.2%
8,200 Bayerische Motoren Werke AG .... 315,450
7,200 BorgWarner, Inc. ............... 463,680
10,900 DaimlerChrysler AG ............. 380,515
128,000 Dana Corp. ..................... 1,479,680
19,200 Johnson Controls, Inc. ......... 1,643,520
12,800 Lear Corp.* .................... 589,056
165,000 Mitsubishi Motors Corp.* (L) ... 372,392
111,000 Nissan Motor Co. Ltd. .......... 1,061,237
16,900 Renault SA ..................... 893,498
11,300 Superior Industries
International, Inc. .......... 471,210
55,000 Suzuki Motor Corp. ............. 715,469
------------
8,385,707
------------
BANKING -- 5.7%
71,347 ABN AMRO Holdings NV (L) ....... 1,364,148
27,317 Australia and New Zealand Banking
Group Ltd. ................... 340,942
91,400 Banco Bilbao Vizcaya
Argentaria SA ................ 960,371
102,970 Bank of America Corp. .......... 8,137,719
135,100 Bank One Corp. ................. 5,023,018
68,800 Barclays Plc ................... 510,891
30,100 BNP Paribas SA (L) ............. 1,529,507
47,145 Charter One Financial, Inc. .... 1,469,981
17,227 Credit Suisse Group ............ 453,396
66,000 DBS Group Holdings Ltd. ADR ++ . 386,027
8,200 Deutsche Bank AG* (L) .......... 531,839
34,000 ForeningsSparbanken AB ......... 469,336
38,900 Golden West Financial Corp. .... 3,112,389
34,900 Hang Seng Bank Ltd. ............ 369,223
38,600 Hibernia Corp. Class A ......... 700,976
45,000 Huntington Bancshares, Inc. (L) 878,400
62,600 KeyCorp ........................ 1,581,902
6,300 M&T Bank Corp. ................. 530,586
9,515 National Australia Bank Ltd. ... 213,774
90,300 National City Corp. ............ 2,953,713
56,947 New York Community Bancorp, Inc. 1,656,579
53,900 Royal Bank of Scotland Group Plc 1,512,046
25,700 Sky Financial Group, Inc. ...... 558,204
41,300 Sovereign Bancorp, Inc. (L) .... 646,345
59,300 Standard Chartered Plc* ........ 720,211
10,800 Svenska Handelsbanken AB Class A 176,741
48,400 UnionBanCal Corp. .............. 2,002,308
48,300 Wachovia Corp. ................. 1,930,068
------------
40,720,640
------------
BROADCASTING AND MEDIA -- 2.8%
331,650 AOL Time Warner, Inc.* ......... 5,336,248
27,410 Clear Channel
Communications, Inc.* ........ 1,161,910
41,100 Cox Communications,
Inc. Class A* ................ 1,311,090
44,200 Gannett Co., Inc. .............. 3,395,002
441,840 Liberty Media Corp. Class A* ... 5,107,670
- ----------------------------------------------------------
Value
Shares (Note 2)
- ----------------------------------------------------------
29,241 News Corp. Ltd. ................$ 219,640
79,600 Pearson Plc .................... 743,459
57,800 Reuters Group Plc .............. 167,630
17,000 Scripps (E.W.) Co. Class A ..... 1,508,240
26,000 Viacom, Inc. Class B* .......... 1,135,160
------------
20,086,049
------------
CHEMICALS -- 1.3%
13,700 BOC Group Plc .................. 175,771
26,400 Dow Chemical Co. ............... 817,344
19,900 Eastman Chemical Co. ........... 630,233
52,700 Ecolab, Inc. ................... 1,349,120
124,300 Engelhard Corp. ................ 3,078,911
20,100 Ferro Corp. .................... 452,853
8,900 Minerals Technologies, Inc. .... 433,074
6,200 Nitto Denko Corp. (L) .......... 202,923
10,700 Norsk Hydro ASA (L) ............ 526,225
52,200 Rohm & Haas Co. ................ 1,619,766
8,200 Wellman, Inc. .................. 91,840
------------
9,378,060
------------
COMMERCIAL SERVICES -- 0.7%
39,700 Fluor Corp. .................... 1,335,508
15,000 ITT Educational Services, Inc.* 438,750
22,200 Jacobs Engineering Group, Inc.* 935,730
15,700 Maximus, Inc.* ................. 433,791
40,100 Weight Watchers
International, Inc.* (L) ..... 1,824,149
------------
4,967,928
------------
COMPUTER SERVICES AND SOFTWARE -- 4.8%
40,600 Adobe Systems, Inc. ............ 1,302,042
19,600 Affiliated Computer Services, Inc.
Class A* ..................... 896,308
23,600 ASML Holding NV* ............... 224,124
35,500 Automatic Data Processing, Inc. 1,202,030
43,700 Computer Sciences Corp.* ....... 1,665,844
113,600 Dell Computer Corp.* ........... 3,630,656
46,200 Dendrite International,
Inc.* (L) .................... 595,056
85,500 Electronic Data Systems Corp. .. 1,833,975
79,600 EMC Corp.* ..................... 833,412
57,900 Gartner, Inc. Class A* ......... 438,882
14,700 Hyperion Solutions Corp.* (L) .. 496,272
29,500 Lexmark International, Inc.* ... 2,087,715
132,368 Maxtor Corp.* .................. 994,084
529,790 Microsoft Corp. ................ 13,567,922
96,750 Network Appliance, Inc.* ....... 1,568,318
3,400 SAP AG (L) ..................... 400,978
1,100 SAP AG-Sponsored ADR ........... 32,142
42,900 SunGard Data System, Inc.* ..... 1,111,539
6,700 TDK Corp. ...................... 330,885
43,200 Western Digital Corp.* (L) ..... 444,960
------------
33,657,144
------------
CONSTRUCTION AND BUILDING MATERIALS -- 0.6%
34,600 Bouygues SA (L) ................ 955,173
27,801 CRH Plc ........................ 437,693
23,700 Granite Construction, Inc. ..... 454,092
17,917 Holcim Ltd. Class B (L) ........ 662,030
54,400 Masco Corp. .................... 1,297,440
50,000 Sekisui House Ltd. ............. 378,930
6,000 Tostem Inax Holding Corp. ...... 86,446
------------
4,271,804
------------
See accompanying notes to financial statements.
6
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
NEW COVENANT GROWTH FUND
JUNE 30, 2003
- ----------------------------------------------------------
Value
Shares (Note 2)
- ----------------------------------------------------------
COMMON STOCK -- (CONTINUED)
CONSUMER PRODUCTS -- 3.7%
30,900 Avery Dennison Corp. ...........$ 1,551,180
10,000 Avon Products, Inc. ............ 622,000
49,900 Eastman Kodak Co. .............. 1,364,765
42,640 Estee Lauder Cos., Inc. Class A 1,429,719
6,000 Fuji Photo Film Co. Ltd. ....... 173,392
86,400 Gillette Co. ................... 2,752,704
4,900 L'Oreal SA (L) ................. 345,490
288,000 Li & Fung Ltd. ................. 371,166
22,300 Liz Claiborne, Inc. ............ 786,075
101,200 Mattel, Inc. ................... 1,914,704
34,200 Nike, Inc. Class B ............. 1,829,358
25,000 Nikon Corp. (L) ................ 205,913
47,700 Pitney Bowes, Inc. ............. 1,832,157
91,160 Procter & Gamble Co. ........... 8,129,649
16,000 Reebok International Ltd.* ..... 538,080
14,400 Sherwin-Williams Co. ........... 387,072
10,100 Timberland Co. Class A* ........ 533,886
26,700 Tupperware Corp. ............... 383,412
99,000 Unilever Plc ................... 788,243
------------
25,938,965
------------
DIVERSIFIED OPERATIONS -- 4.9%
12,700 3M Co. ......................... 1,638,046
164,400 Bombardier, Inc. Class B ....... 552,940
49,100 Brambles Industries Ltd. (L) ... 150,487
88,800 Centrica Plc ................... 257,535
10,500 Eaton Corp. .................... 825,405
108,600 First Data Corp. ............... 4,500,384
407,900 General Electric Co. ........... 11,698,572
51,500 Hutchison Whampoa Ltd. ......... 313,697
46,400 ITT Industries, Inc. ........... 3,037,344
24,000 Mitsubishi Corp. ............... 166,496
80,000 Smiths Group Plc ............... 928,053
63,500 SPX Corp.* ..................... 2,797,810
42,900 Swire Pacific Ltd. Class A ..... 187,595
48,500 Textron, Inc. .................. 1,892,470
132,500 Thermo Electron Corp.* ......... 2,785,150
134,000 Tyco International Ltd. ........ 2,543,320
12,400 Varian, Inc.* .................. 429,908
------------
34,705,212
------------
ELECTRONICS -- 4.3%
21,000 Actel Corp.* (L) ............... 430,500
7,800 Advantest Corp. ................ 345,584
207,910 Altera Corp.* .................. 3,409,724
11,000 AMETEK, Inc. ................... 403,150
79,900 Analog Devices, Inc.* .......... 2,782,118
65,080 Applied Materials, Inc.* ....... 1,032,169
59,230 Broadcom Corp. Class A* (L) .... 1,475,419
10,000 Cabot Microelectronics
Corp.* (L) ................... 504,700
51,310 Emulex Corp.* .................. 1,168,329
52,100 Fairchild Semiconductor
International, Inc.* ......... 666,359
8,100 Hirose Electric Co. Ltd. ....... 669,856
45,000 Hitachi Ltd. ................... 190,756
12,900 Infineon Technologies AG* (L) .. 124,731
67,830 Intersil Corp. Class A* ........ 1,804,956
96,900 Jabil Circuit, Inc.* ........... 2,141,490
356,000 Johnson Electric Holdings Ltd. . 440,541
1,400 Keyence Corp. .................. 256,506
51,730 KLA-Tencor Corp.* .............. 2,404,928
18,700 Koninklijke (Royal) Philips
Electronics NV ............... 355,610
3,100 Koninklijke (Royal) Philips
Electronics NV NY Shares ..... 59,241
- ----------------------------------------------------------
Value
Shares (Note 2)
- ----------------------------------------------------------
5,500 Murata Manufacturing Co. Ltd. ..$ 216,198
96,000 NEC Corp.* (L) ................. 479,700
75,600 NVIDIA Corp.* (L) .............. 1,739,556
6,000 Rohm Co. Ltd. .................. 654,091
8,024 Samsung Electronics Co.
Ltd. GDR ++ .................. 1,192,348
169,260 Sanmina-SCI Corp. * ............ 1,068,031
14,100 Sony Corp. ..................... 396,902
24,800 STMicroelectronics NV* (L) ..... 520,025
126,075 Taiwan Semiconductor
Manufacturing
Co. Ltd. Sponsored ADR* ...... 1,270,836
20,900 Tokyo Electron Ltd. ............ 990,389
23,000 Venture Corp. Ltd. ............. 210,276
38,960 Xilinx, Inc.* .................. 986,078
------------
30,391,097
------------
ENERGY -- 2.6%
14,200 American Electric
Power Co., Inc. .............. 423,586
14,100 Black Hills Corp. (L) .......... 432,870
26,000 Cleco Corp. (L) ................ 450,320
109,300 Duke Energy Corp. .............. 2,180,535
25,600 Edison International* .......... 420,608
12,200 Energen Corp. .................. 406,260
20,100 Energy East Corp. .............. 417,276
37,700 Entergy Corp. .................. 1,989,806
57,037 Exelon Corp. ................... 3,411,383
12,000 Kansai Electric Power Co., Inc. 189,282
33,900 Massey Energy Co. .............. 445,785
20,200 MDU Resources Group, Inc. ...... 676,498
31,500 Pinnacle West Capital Corp. .... 1,179,675
22,400 PPL Corp. ...................... 963,200
162,600 TXU Corp. ...................... 3,650,370
56,500 Xcel Energy, Inc. .............. 849,760
------------
18,087,214
------------
ENTERTAINMENT AND LEISURE -- 0.2%
39,200 Callaway Golf Co. (L) .......... 518,224
40,130 Walt Disney Co. ................ 792,567
------------
1,310,791
------------
FINANCIAL SERVICES -- 9.5%
3,990 Aiful Corp. .................... 170,134
56,150 Ambac Financial Group, Inc. .... 3,719,937
20,300 American Capital Strategies Ltd. 506,282
26,820 American Express Co. ........... 1,121,344
17,000 Bear Stearns Cos., Inc. ........ 1,231,140
52,800 Capital One Financial Corp. .... 2,596,704
290,876 Citigroup, Inc. ................ 12,449,493
28,700 Concord EFS, Inc.* ............. 422,464
48,600 Countrywide Financial Corp. .... 3,381,102
62,000 Daiwa Securities Group, Inc. ... 356,277
110,700 Equifax, Inc. .................. 2,878,200
90,500 Fannie Mae ..................... 6,103,320
42,470 Fiserv, Inc.* .................. 1,512,357
96,000 Freddie Mac .................... 4,873,920
33,850 Goldman Sachs Group, Inc. ...... 2,834,937
36,400 HBOS Plc ....................... 471,218
70,400 HSBC Holdings PLC .............. 831,789
39,900 ING Groep NV ................... 693,240
42,520 Janus Capital Group, Inc. ...... 697,328
25,900 Lehman Brothers Holdings, Inc. . 1,721,832
84,300 MBIA, Inc. ..................... 4,109,625
56,400 MBNA Corp. ..................... 1,175,376
106,900 Merrill Lynch & Co., Inc. ...... 4,990,092
67,100 Morgan Stanley ................. 2,868,525
92,000 Nikko Cordial Corp. ............ 369,303
34,000 Nomura Holdings, Inc. .......... 431,530
9,700 Orix Corp. ..................... 536,398
See accompanying notes to financial statements.
7
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
NEW COVENANT GROWTH FUND
JUNE 30, 2003
- ----------------------------------------------------------
Value
Shares (Note 2)
- ----------------------------------------------------------
COMMON STOCK -- (CONTINUED)
FINANCIAL SERVICES -- (CONTINUED)
129,150 Providian Financial Corp.* .....$ 1,195,929
11,844 UBS AG ......................... 658,855
44,200 Wells Fargo & Co. .............. 2,227,680
------------
67,136,331
------------
FOOD AND BEVERAGES -- 4.2%
35,400 Bunge Ltd. ..................... 1,012,440
5,700 Carrefour SA ................... 279,364
41,200 Coca-Cola Co. .................. 1,912,092
46,300 Coca-Cola Enterprises, Inc. .... 840,345
18,300 Compass Group Plc .............. 98,672
58,500 General Mills, Inc. ............ 2,773,485
4,200 Groupe Danone * (L) ............ 581,177
54,500 H.J. Heinz Co. ................. 1,797,410
35,700 Interstate Bakeries Corp. ...... 453,390
14,400 Koninklijke Numico NV* (L) ..... 221,584
84,600 Kraft Foods, Inc. .............. 2,753,730
21,500 Lance, Inc. (L) ................ 196,295
5,298 Nestle SA ...................... 1,093,206
78,500 Pepsi Bottling Group, Inc. ..... 1,571,570
169,630 PepsiCo, Inc. .................. 7,548,535
95,000 Safeway, Inc.* ................. 1,943,700
138,100 Sara Lee Corp. ................. 2,597,661
18,200 Sensient Technologies Corp. (L) 418,418
41,300 SUPERVALU, Inc. ................ 880,516
74,937 Tesco Plc ...................... 271,121
62,400 Woolworths Ltd. ................ 523,951
------------
29,768,662
------------
FORESTRY AND PAPER PRODUCTS -- 0.9%
37,100 Abitibi-Consolidated, Inc. (L) . 234,819
17,800 Boise Cascade Corp. ............ 425,420
17,700 Bowater, Inc. .................. 662,865
41,000 Georgia-Pacific Corp. .......... 776,950
39,100 International Paper Co. ........ 1,397,043
15,300 Rayonier, Inc. ................. 504,900
27,000 Sumitomo Forestry Co. Ltd. ..... 139,863
25,800 UPM-Kymmene Oyj ................ 376,562
33,000 Weyerhaeuser Co. ............... 1,782,000
------------
6,300,422
------------
HEALTH SERVICES -- 2.0%
11,200 Advisory Board Co.* (L) ........ 453,824
46,000 Aetna, Inc. .................... 2,769,200
29,600 Anthem, Inc.* .................. 2,283,640
13,000 Health Net, Inc.* .............. 428,350
62,000 McKesson Corp. ................. 2,215,880
14,600 UnitedHealth Group, Inc. ....... 733,650
65,750 WellPoint Health Networks, Inc.* 5,542,725
------------
14,427,269
------------
HOTELS AND OTHER LODGING PLACES -- 0.0%#
6,500 Accor SA (L) ................... 235,123
------------
INSURANCE -- 3.8%
127,571 Aegon NV* ...................... 1,277,434
4,200 Allianz AG ..................... 349,092
91,409 American International
Group, Inc. .................. 5,043,949
123,000 Aon Corp. ...................... 2,961,840
18,200 Arthur J. Gallagher & Co. (L) .. 495,040
7,800 Assicurazioni Generali S.p.A (L) 180,754
59 Berkshire Hathaway, Inc.
Class A* ..................... 4,277,500
41,000 Chubb Corp. .................... 2,460,000
23,500 Endurance Specialty
Holdings Ltd. ................ 701,475
60,000 Hartford Financial
Services Group, Inc. ......... 3,021,600
- ----------------------------------------------------------
Value
Shares (Note 2)
- ----------------------------------------------------------
30,000 Jefferson-Pilot Corp. ..........$ 1,243,800
44,000 Mitsui Sumitomo
Insurance Co. Ltd. ........... 204,106
3,800 Muenchener Rueckversicherungs-
Gesellschaft AG (L) .......... 387,410
36,600 Prudential Plc ................. 221,653
29,446 QBE Insurance Group Ltd. (L) ... 184,053
26,800 Reinsurance Group of
America, Inc. (L) ............ 860,280
48,700 St. Paul Cos., Inc. ............ 1,778,037
23,495 Swiss Re ....................... 1,301,770
------------
26,949,793
------------
INTERNET SERVICES -- 0.7%
14,700 CheckFree Corp.* ............... 409,248
63,000 InterActiveCorp (L) ............ 2,492,910
22,500 Symantec Corp.* ................ 986,850
26,900 TriZetto Group, Inc.* (L) ...... 162,476
21,900 VeriSign, Inc.* ................ 302,877
14 Yahoo Japan Corp.* ............. 227,358
------------
4,581,719
------------
MACHINERY AND EQUIPMENT -- 0.4%
17,900 Albany International
Corp. Class A (L) ............ 490,460
20,370 Deere & Co. .................... 930,909
21,200 Graco, Inc. .................... 678,400
7,000 Sandvik AB (L) ................. 183,200
13,200 Schneider Electric SA (L) ...... 620,574
1,300 SMC Corp. ...................... 109,456
------------
3,012,999
------------
MANUFACTURING -- 0.9%
41,800 Assa Abloy AB Class B (L) ...... 404,688
19,910 Ball Corp. ..................... 906,104
28,330 Emerson Electric Co. ........... 1,447,663
103,700 National Semiconductor Corp.* .. 2,044,964
39,500 Rayovac Corp.* (L) ............. 511,525
19,500 Siemens AG ..................... 956,616
124,000 Toray Industries, Inc. ......... 288,120
------------
6,559,680
------------
MEDICAL PRODUCTS -- 5.3%
24,400 Advanced Medical Optics, Inc.* . 416,020
22,950 Amgen, Inc.* ................... 1,524,798
10,800 Bard (C.R.), Inc. .............. 770,148
60,000 Baxter International, Inc. ..... 1,560,000
24,200 Beckman Coulter, Inc. .......... 983,488
112,310 Becton, Dickinson & Co. ........ 4,363,244
22,900 Cambrex Corp. (L) .............. 527,158
7,800 Essilor International SA ....... 314,214
7,500 Forest Laboratories, Inc.* ..... 410,625
81,900 Genzyme Corp.* ................. 3,423,420
64,800 Guidant Corp. .................. 2,876,472
5,900 Hoya Corp. ..................... 406,354
71,000 IMS Health, Inc. ............... 1,277,290
93,700 Incyte Genomics, Inc.* (L) ..... 434,768
101,370 Johnson & Johnson .............. 5,240,829
67,000 Laboratory Corp. of
America Holdings* ............ 2,020,050
42,920 MedImmune, Inc.* ............... 1,561,000
17,230 Medtronic, Inc. ................ 826,523
20,800 Owens & Minor, Inc. (L) ........ 464,880
16,500 Quest Diagnostics, Inc.* ....... 1,052,700
44,800 Sanofi-Synthelabo SA (L) ....... 2,623,734
23,100 Stryker Corp. .................. 1,602,447
306 Synthes-Stratec, Inc. .......... 219,808
89,500 Triad Hospitals, Inc.* ......... 2,221,390
15,180 Zimmer Holdings, Inc.* ......... 683,859
------------
37,805,219
------------
See accompanying notes to financial statements.
8
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
NEW COVENANT GROWTH FUND
JUNE 30, 2003
- ----------------------------------------------------------
Value
Shares (Note 2)
- ----------------------------------------------------------
COMMON STOCK -- (CONTINUED)
METALS AND MINING -- 0.5%
4,800 Alcan, Inc. (L) ................$ 148,407
55,000 Alumina Ltd. ................... 150,127
23,462 BHP Billiton Ltd. .............. 135,950
23,001 BHP Billiton Ltd. Sponsored ADR 266,582
78,967 BHP Billiton Plc ............... 415,684
8,000 Companhia Vale do Rio Doce ADR . 237,280
10,000 Companhia Vale do Rio Doce
Sponsored ADR ................ 277,500
30,300 Freeport-McMoRan Copper &
Gold, Inc. (L) ............... 742,350
5,100 Pechiney SA (L) ................ 183,076
15,400 Placer Dome, Inc. (L) .......... 187,010
10,500 Precision Castparts Corp. ...... 326,550
55,000 WMC Resources Ltd.* ............ 129,471
35,000 Xstrata Plc* ................... 232,467
------------
3,432,454
------------
OIL AND GAS -- 6.4%
173,700 BG Group Plc ................... 769,611
41,700 Burlington Resources, Inc. ..... 2,254,719
61,311 ChevronTexaco Corp. ............ 4,426,654
82,519 ConocoPhillips ................. 4,522,041
34,970 Cooper Cameron Corp.* .......... 1,761,789
59,791 Devon Energy Corp. ............. 3,192,818
70,550 ENI S.p.A.* (L) ................ 1,066,975
254,300 Exxon Mobil Corp. .............. 9,131,913
101,500 Halliburton Co. ................ 2,334,500
4,162 L'Air Liquide SA * ............. 617,021
140,100 Marathon Oil Corp. ............. 3,691,635
52,400 Noble Corp.* ................... 1,797,320
43,000 Occidental Petroleum Corp. ..... 1,442,650
27,969 Patina Oil & Gas Corp. ......... 899,195
17,400 Repsol YPF, SA* (L) ............ 282,134
49,600 Royal Dutch Petroleum Co. ...... 2,302,235
5,200 Royal Dutch Petroleum
Co. NY Shares ................ 242,424
19,300 Schlumberger Ltd. .............. 918,101
67,000 Statoil ASA .................... 570,833
19,000 Suncor Energy, Inc. (L) ........ 354,341
34,700 Unocal Corp. ................... 995,543
37,000 Weatherford International Ltd.* 1,550,300
------------
45,124,752
------------
PHARMACEUTICALS -- 9.8%
99,500 Abbott Laboratories ............ 4,354,120
18,200 Abgenix, Inc.* (L) ............. 190,918
17,100 Alkermes, Inc.* ................ 183,825
44,360 AmerisourceBergen Corp. ........ 3,076,366
34,380 AstraZeneca Plc ................ 1,378,604
42,670 AstraZeneca Plc
(Stockholm Registered) ....... 1,729,736
10,690 Barr Laboratories, Inc.* ....... 700,195
25,800 Biogen, Inc.* .................. 980,400
33,000 Cephalon, Inc.* (L) ............ 1,358,280
29,300 Chugai Pharmaceutical Co. Ltd. . 332,835
11,300 CV Therapeutics, Inc.* (L) ..... 335,158
82,370 Eli Lilly & Co. ................ 5,681,059
80,700 Gilead Sciences, Inc.* ......... 4,485,306
9,000 GlaxoSmithKline Plc ............ 181,634
12,700 ILEX Oncology, Inc.* (L) ....... 246,507
67,550 IVAX Corp.* .................... 1,205,767
157,100 King Pharmaceuticals, Inc.* .... 2,318,796
133,720 Merck & Co., Inc. .............. 8,096,746
39,024 Novartis AG .................... 1,544,204
7,600 Novo Nordisk A/S Class B ....... 266,055
99,500 Omnicare, Inc. ................. 3,362,105
8,200 OSI Pharmaceuticals, Inc.* (L) . 264,122
- ----------------------------------------------------------
Value
Shares (Note 2)
- ----------------------------------------------------------
28,100 Perrigo Co. ....................$ 439,484
407,505 Pfizer, Inc. ................... 13,916,296
35,700 Regeneron Pharmaceuticals,
Inc.* (L) .................... 562,275
7,200 Roche Holding AG ............... 564,767
18,000 Sankyo Co. Ltd. ................ 214,966
326,600 Schering-Plough Corp. .......... 6,074,760
46,000 Shionogi & Co. Ltd. ............ 623,294
94,500 Watson Pharmaceuticals, Inc.* .. 3,814,965
24,580 Wyeth .......................... 1,119,619
------------
69,603,164
------------
PRINTING AND PUBLISHING -- 0.6%
3,000 Dai Nippon Printing Co. Ltd .... 31,730
34,800 Dow Jones & Co., Inc. (L) ...... 1,497,444
12,700 Knight-Ridder, Inc. ............ 875,411
6,900 Reed Elsevier NV ............... 81,375
24,600 Reed Elsevier Plc .............. 204,696
29,968 Singapore Press Holdings Ltd. .. 311,419
17,800 Thomson Corp. .................. 555,420
17,100 Thomson Corp. (Toronto
Registered) (L) .............. 533,639
10,620 VNU NV ......................... 327,203
------------
4,418,337
------------
REAL ESTATE -- 0.5%
55,000 Cheung Kong (Holdings) Ltd. .... 330,784
5,800 General Growth Properties, Inc. 362,152
253,000 Hang Lung Properties Ltd. (L) .. 228,728
114,000 HongKong Land Holdings Ltd. .... 142,500
18,900 IStar Financial, Inc. .......... 689,850
47,000 Mitsubishi Estate Co. Ltd. ..... 318,226
63,000 Mitsui Fudosan Co. Ltd. ........ 402,424
11,600 ProLogis ....................... 316,680
15,900 Rouse Co. ...................... 605,790
23,000 Sun Hung Kai Properties Ltd. ... 116,207
------------
3,513,341
------------
RESTAURANTS -- 0.4%
15,100 Brinker International, Inc.* ... 543,902
107,500 McDonald's Corp. ............... 2,371,450
------------
2,915,352
------------
RETAIL -- 4.7%
19,700 Abercrombie & Fitch Co.* ....... 559,677
36,000 Aeon Co. Ltd. .................. 824,485
14,700 AutoZone, Inc.* ................ 1,116,759
80,390 Bed, Bath & Beyond, Inc.* ...... 3,119,936
42,930 Best Buy Co., Inc.* ............ 1,885,485
34,600 CVS Corp. ...................... 969,838
38,720 Dollar Tree Stores, Inc.* ...... 1,228,586
31,800 Family Dollar Stores, Inc. ..... 1,213,170
42,800 Federated Department
Stores, Inc. ................. 1,577,180
41,800 Foot Locker, Inc. .............. 553,850
158,400 Gap, Inc. ...................... 2,971,584
53,700 Home Depot, Inc. ............... 1,778,544
33,600 Industria de Diseno
Textil, SA* (L) .............. 844,997
115,970 Lowe's Cos., Inc. .............. 4,980,911
63,142 Marks & Spencer Group Plc ...... 328,995
6,000 Metro AG (L) ................... 193,955
19,500 Pacific Sunwear of
California, Inc.* (L) ........ 469,755
2,900 Shimamura Co. Ltd. ............. 160,125
72,800 Staples, Inc.* ................. 1,335,880
39,000 Target Corp. ................... 1,475,760
82,420 Wal-Mart Stores, Inc. .......... 4,423,481
41,440 Williams-Sonoma, Inc.* ......... 1,210,048
------------
33,223,001
------------
See accompanying notes to financial statements.
9
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
NEW COVENANT GROWTH FUND
JUNE 30, 2003
- ----------------------------------------------------------
Value
Shares (Note 2)
- ----------------------------------------------------------
COMMON STOCK -- (CONTINUED)
TECHNOLOGY -- 4.5%
11,000 Canon, Inc. ....................$ 504,768
514,650 Cisco Systems, Inc.* ........... 8,589,508
34,400 Citrix Systems, Inc.* .......... 700,384
333,650 Intel Corp. .................... 6,934,582
118,790 International Business
Machines Corp. ............... 9,800,175
24,800 Macromedia, Inc.* (L) .......... 521,792
215,300 Texas Instruments, Inc. ........ 3,789,280
114,870 Xerox Corp.* (L) ............... 1,216,473
------------
32,056,962
------------
TELECOMMUNICATIONS -- 6.6%
32,800 Advanced Fibre
Communications, Inc.* ........ 533,656
32,300 America Movil SA de CV,
Series L ADR ................. 605,625
152,040 AT&T Corp. ..................... 2,926,770
30,200 BCE, Inc. (L) .................. 690,349
37,500 BellSouth Corp. ................ 998,625
78,000 CenturyTel, Inc. ............... 2,718,300
74,000 China Mobile (Hong Kong) Ltd. .. 174,606
281,200 Citizens Communications Co.* (L) 3,624,668
112,352 Comcast Corp. Class A* ......... 3,390,783
62,200 Comcast Corp., Special Class A* 1,793,226
47,100 Deutsche Telekom AG* ........... 718,816
21,200 France Telecom SA* (L) ......... 520,006
59 Japan Telecom Holdings Co. Ltd. 179,346
131,700 Koninklijke (Royal) KPN NV* .... 933,131
275,100 mm02 Plc* ...................... 257,623
71,130 Motorola, Inc. ................. 670,756
79,800 National Grid Transco Plc ...... 541,218
99,000 Nextel Communications,
Inc. Class A* ................ 1,789,920
61,900 Nokia Oyj ...................... 1,019,322
100 NTT DoCoMo, Inc. ............... 216,531
20,800 Plantronics, Inc.* ............. 450,736
24,800 Portugal Telecom, SGPS, SA ..... 177,708
17,600 QUALCOMM, Inc. ................. 629,200
174,200 Qwest Communications
International, Inc.* ......... 832,676
151,900 SBC Communications, Inc. ....... 3,881,045
27,700 SES Global* .................... 179,721
1,242,799 Singapore Telecommunications
Ltd. ......................... 1,065,647
3,714 Swisscom AG (L) ................ 1,055,628
110,930 Telecom Corp. of New Zealand
Ltd. (L) ..................... 340,308
58,530 Telefonica, SA ................. 679,519
18,000 Telefonos de Mexico, SA de CV,
Series L Sponsored ADR ....... 565,560
38,000 Telephone and Data Systems, Inc. 1,888,600
17,500 Telus Corp. Non-Voting Shares .. 287,857
54,370 Univision Communications, Inc.
Class A* (L) ................. 1,652,848
116,352 Verizon Communications, Inc. ... 4,590,086
49,800 Vivendi Universal SA* (L) ...... 906,422
1,725,168 Vodafone Group Plc ............. 3,373,472
------------
46,860,310
------------
TRANSPORTATION -- 1.4%
57,400 Burlington Northern
Santa Fe Corp. ............... 1,632,456
21,500 CNF, Inc. ...................... 545,670
41,200 CSX Corp. ...................... 1,239,708
28,500 ExpressJet Holdings, Inc.* ..... 430,350
45,200 FedEx Corp. .................... 2,803,756
- ----------------------------------------------------------
Value
Shares (Note 2)
- ----------------------------------------------------------
52,000 Japan Airlines
System Corp.* (L) ............$ 113,463
44,000 Singapore Airlines Ltd. ........ 259,849
51,000 Tokyu Corp. (L) ................ 164,372
21,500 Union Pacific Corp. ............ 1,247,430
18,890 United Parcel Service,
Inc. Class B ................. 1,203,293
20,100 Werner Enterprises, Inc. ....... 426,120
------------
10,066,467
------------
WASTE MANAGEMENT -- 0.6%
99,000 Republic Services, Inc.* ....... 2,244,330
72,200 Waste Management, Inc. ......... 1,739,298
------------
3,983,628
------------
Total Common Stock
(Cost $704,889,873) .......... 697,293,880
------------
Principal
Amount+
---------
CORPORATE FIXED INCOME SECURITIES -- 0.0% #
(Cost $292,240)
FINANCIAL SERVICES -- 0.0% #
$39,000,000 SMFG Finance Ltd
2.250% due 07/11/2005++ ...... 328,857
------------
REPURCHASE AGREEMENTS -- 1.7% (Cost $11,693,000)
11,693,000 Agreement dated 06/30/2003 with
State Street Bank, 0.950% to be
repurchased at $11,693,309 on
07/01/2003, collateralized by
$4,945,000 Federal National
Mortgage Association 5.260% due
10/02/2003, Market Value
$5,061,984; $4,420,000 Federal
National Mortgage Association
5.250% due 06/15/2006, Market
Value $4,857,165; $405,000 Federal
National Mortgage Association
3.000% due 07/29/2004, Market
Value $410,728; $1,605,000 Federal
Home Loan Bank 1.290% due
04/13/2004, Market Value
$1,610,488 ................. 11,693,000
------------
TOTAL INVESTMENTS
(Cost $716,875,113) ............. 100.1% 709,315,737
OTHER ASSETS AND
LIABILITIES (NET) ............... (0.1)% (430,906)
------- ------------
NET ASSETS .........................100.0% $708,884,831
======= ============
SHORT-TERM INVESTMENTS HELD AS
COLLATERAL FOR LOANED SECURITIES
(Cost $43,330,938) (Note 2) .............$ 43,330,938
============
- ------------------------
* Non-income producing security.
+ Principal amount is stated in the currency of the country in which the
security is denominated.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2003,
the value of these securities amounted to $1,907,232 or 0.27% of net assets.
# Amount is less than 0.1%.
(L) Securities lending -- securities in whole or in part on loan at June 30,
2003.
Abbreviations:
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
See accompanying notes to financial statements.
10
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
NEW COVENANT INCOME FUND
JUNE 30, 2003
- -----------------------------------------------------------
Principal Value
Amount (Note 2)
- -----------------------------------------------------------
CORPORATE FIXED INCOME SECURITIES -- 28.0%
$1,900,000 Alcoa, Inc.
6.500% due 06/15/2018 ........$ 2,245,087
1,900,000 Alliance Capital Management
5.625% due 08/15/2006 ........ 2,082,780
American General Finance
1,000,000 5.875% due 07/14/2006 ........ 1,104,195
3,900,000 6.100% due 05/22/2006 ........ 4,319,995
2,500,000 AOL Time Warner, Inc.
7.625% due 04/15/2031 ........ 2,896,102
2,925,000 Bank of America Corp.
6.875% due 02/15/2005 ........ 3,172,358
5,000,000 Bank of New York
4.140% due 08/02/2007 ........ 5,356,350
2,500,000 BellSouth Telecommunications, Inc.
6.375% due 06/01/2028 ........ 2,799,388
1,125,000 BRE Properties, Inc.
7.125% due 02/15/2013 ........ 1,321,835
1,250,000 Burlington North Santa Fe
6.750% due 07/15/2011 ........ 1,465,881
2,500,000 Carolina Power & Light
6.500% due 07/15/2012 ........ 2,896,915
5,250,000 Citigroup, Inc.
6.750% due 12/01/2005 ........ 5,856,779
Coca-Cola Enterprises
10,000,000 7.013% due 06/20/2020(b) ..... 3,889,340
1,250,000 6.950% due 11/15/2026 ........ 1,510,105
1,375,000 Conoco Funding Co.
5.450% due 10/15/2006 ........ 1,518,979
1,800,000 Delphi Automotive Systems Corp.
6.125% due 05/01/2004 ........ 1,842,642
3,000,000 Dominion Resources, Inc.
7.625% due 07/15/2005 ........ 3,338,649
1,265,000 Duke Realty Corp.
7.050% due 03/01/2006(a) ..... 1,365,206
EOP Operating LP
3,150,000 6.500% due 06/15/2004 ........ 3,295,026
1,600,000 6.800% due 01/15/2009 ........ 1,843,579
3,975,000 Equity Residential Properties
6.875% due 11/01/2004 ........ 4,234,091
2,137,488 FedEx Corp.
6.720% due 01/15/2022 ........ 2,492,792
5,000,000 First Security Corp.
7.000% due 07/15/2005 ........ 5,519,140
1,950,000 Firstar Bank
7.125% due 12/01/2009 ........ 2,360,434
Ford Motor Credit Co.
5,200,000 5.800% due 01/12/2009 ........ 5,174,088
650,000 7.375% due 10/28/2009 ........ 682,434
2,500,000 General Electric Capital Corp.
5.375% due 03/15/2007 ........ 2,753,605
3,970,000 General Motors Acceptance Corp.
6.875% due 09/15/2011 ........ 3,989,425
General Motors Corp.
1,475,000 7.200% due 01/15/2011(L) ..... 1,488,830
615,000 8.800% due 03/01/2021 ........ 637,604
1,400,000 Georgia Power Co.
6.200% due 02/01/2006 ........ 1,553,493
Household Finance Corp.
2,490,000 5.875% due 09/25/2004 ........ 2,621,121
750,000 6.400% due 06/17/2008 ........ 857,060
International Lease Finance Corp.
3,000,000 5.540% due 03/21/2005 ........ 3,153,390
2,000,000 5.950% due 06/06/2005 ........ 2,127,438
1,070,000 International Paper Co.
6.500% due 11/15/2007 ........ 1,205,866
May Department Stores Co.
4,575,000 6.900% due 01/15/2032(L) ..... 5,106,707
675,000 7.450% due 09/15/2011 ........ 812,645
- -----------------------------------------------------------
Principal Value
Amount (Note 2)
- -----------------------------------------------------------
$5,000,000 Merrill Lynch & Co.
5.360% due 02/01/2007 ........$ 5,422,915
3,525,000 Morgan Stanley
3.625% due 04/01/2008 ........ 3,616,382
National City Corp.
3,250,000 6.875% due 05/15/2019 ........ 3,845,442
2,000,000 7.200% due 05/15/2005 ........ 2,194,206
2,500,000 Nationwide Life
5.350% due 02/15/2007(L) ++ .. 2,705,653
2,475,000 Paccar Financial Corp.
6.920% due 08/15/2003 ........ 2,491,436
1,120,000 Pacific Bell
6.625% due 11/01/2009 ........ 1,321,897
PNC Funding Corp.
3,050,000 6.125% due 09/01/2003 ........ 3,074,562
3,480,000 6.125% due 02/15/2009 ........ 3,997,963
1,025,000 Prologis Trust
7.000% due 10/01/2003 ........ 1,040,274
Sprint Capital Corp.
1,750,000 6.875% due 11/15/2028 ........ 1,761,974
2,000,000 7.625% due 01/30/2011 ........ 2,286,910
4,000,000 Suntrust Banks, Inc.
6.000% due 02/15/2026 ........ 4,373,432
1,090,000 United Parcel Service(a)
8.375% due 04/01/2030 ........ 1,532,238
2,500,000 USAA Capital Corp.
5.591% due 12/20/2006++ ...... 2,775,488
1,825,000 Washington Mutual, Inc.
7.500% due 08/15/2006 ........ 2,113,419
1,400,000 Weyerhaeuser Co.
7.375% due 03/15/2032 ........ 1,614,523
------------
Total Corporate Fixed Income Securities
(Cost $134,444,460) .......... 147,060,068
------------
MORTGAGE BACKED SECURITIES -- 43.7%
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC)-- 9.6%
8,645,000 5.000% due 08/01/2033 .......... 8,753,063
13,555,000 5.500% due 08/15/2011
to 04/15/2014 ................ 13,794,878
12,175,079 6.000% due 04/01/2014
to 04/15/2016 ................ 12,657,813
15,077,965 6.500% due 01/15/2028
to 08/01/2032 ................ 15,535,882
------------
50,741,636
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 31.8%
2,520,000 4.000% due 08/01/2018 .......... 2,520,788
8,580,000 5.500% due 09/25/2017
to 12/25/2017 ................ 9,113,774
4,453,100 5.750% due 01/25/2013 .......... 4,496,672
38,153,600 6.000% due 12/01/2013
to 08/01/2032 ................ 40,028,842
4,212,512 6.140% due 04/01/2009 .......... 4,794,303
1,949,783 6.230% due 01/01/2008 .......... 2,195,301
45,259,704 6.500% due 06/01/2017
to 12/25/2042 ................ 47,938,877
2,398,147 6.905% due 11/01/2003 .......... 2,405,609
5,691,881 6.978% due 10/01/2010 .......... 6,755,124
4,018,702 7.000% due 06/01/2032 .......... 4,233,340
1,453,378 7.010% due 11/01/2008 .......... 1,699,509
4,711,696 7.070% due 11/01/2006 .......... 5,300,406
3,085,134 7.280% due 10/01/2003 .......... 3,095,695
2,257,220 7.305% due 05/01/2007 .......... 2,595,753
14,654,315 7.500% due 05/01/2027
to 06/25/2042 ................ 16,133,646
5,407,302 7.527% due 04/01/2010 .......... 6,588,257
2,288,513 7.740% due 06/01/2007 .......... 2,662,872
4,115,251 8.000% due 08/01/2004
to 04/18/2027 ................ 4,461,116
------------
167,019,884
------------
See accompanying notes to financial statements.
11
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
NEW COVENANT INCOME FUND
JUNE 30, 2003
- -----------------------------------------------------------
Principal Value
Amount (Note 2)
- -----------------------------------------------------------
MORTGAGE BACKED SECURITIES -- (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) -- 2.3%
$4,853,430 5.750% due 07/20/2027 ..........$ 5,007,387
6,580,222 6.500% due 04/20/2032 .......... 6,876,332
------------
11,883,719
------------
Total Mortgage Backed Securities
(Cost $226,060,398) .......... 229,645,239
------------
ASSET-BACKED SECURITIES -- 8.3%
2,595,000 Citibank Credit Card
Issuance Trust
Series 2001-C3, Class C3
6.650% due 05/15/2008 ........ 2,857,526
3,200,000 CommercialMortgage Pass-through
Certificate Series 2000-C1,
Class A2
7.416% due 08/15/2033 ........ 3,861,704
3,780,000 Country Wide Home Loan
Series 2002-22, Class A20
6.250% due 10/25/2032 ........ 3,941,890
6,500,000 Discover Card Master Trust I
Series 1995-1, Class A
1.460% due 02/16/2007(a) ..... 6,516,063
4,435,445 Lehman Brothers-UBS Commercial
Mortgage Trust Series 2000-C4,
Class A1
7.180% due 09/15/2019 ........ 5,025,882
2,815,000 Morgan Stanley Capital I,
Series 2002-IQ2,
Class A3
5.520% due 12/15/2035 ........ 3,122,675
5,865,000 Residential Asset Mortgage
Products, Inc.
Series 2002-RS3, Class A15
5.572% due 06/25/2032 ........ 6,271,013
5,115,000 Residential Asset Mortgage
Products, Inc.
Series 2002-RZ2, Class A3
4.980% due 09/25/2028 ........ 5,174,643
46,922 Saxon Asset Securities Trust
Series 2000-2,
Class AF4
8.234% due 03/25/2024 ........ 47,657
1,629,318 Washington Mutual MSC
Series 2002-MS6,
Class 1A1
5.563% due 10/25/2032 ........ 1,663,960
4,965,000 Wells Fargo Mortgage
Backed Securities
Trusts Series 2002-9, Class A7
6.250% due 06/25/2032 ........ 5,113,835
------------
Total Asset-Backed Securities
(Cost $42,231,924) ........... 43,596,848
------------
- -----------------------------------------------------------
Principal Value
Amount (Note 2)
- -----------------------------------------------------------
U.S. TREASURY BONDS -- 12.0%
$13,890,000 5.000% due 08/15/2011(L) .......$ 15,585,024
39,720,000 6.000% due 02/15/2026(L) ....... 47,491,814
------------
Total U.S. Treasury Bonds
(Cost $60,240,358) ........... 63,076,838
------------
Shares
--------
CLOSED END INVESTMENT COMPANIES -- 1.7%
372,400 BlackRock Income Opportunity
Trust, Inc. .................. 4,286,324
316,200 MFS Government Markets
Income Trust ................. 2,203,914
244,800 TCW/DW Term Trust 2003 ......... 2,592,432
------------
Total Closed End Investment
Companies
(Cost $8,133,996) ............ 9,082,670
------------
Principal
Amount
---------
REPURCHASE AGREEMENTS -- 7.4% (Cost $39,284,000)
$39,284,000 Agreement dated 06/30/2003 with
State Street Bank, 0.950% to be
repurchased at $39,285,037 on
07/01/2003 collateralized by
$39,960,000 Federal Home Loan
Bank 1.350% due 05/03/2004, market
value $40,072,368 .......... 39,284,000
------------
TOTAL INVESTMENTS
(Cost $510,395,136) ............ 101.1% 531,745,663
OTHER ASSETS AND
LIABILITIES (NET) .............. (1.1)% (6,011,859)
------ ------------
NET ASSETS ........................ 100.0% $525,733,804
====== ============
SHORT-TERM INVESTMENTS HELD AS
COLLATERAL FOR LOANED SECURITIES
(Cost $53,402,340) (Note 2) .............$ 53,402,340
============
- -----------------------
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2003,
the value of these securities amounted to $5,481,141. or 1.04% of net
assets.
(a) Variable Rate Security. The interest rate shown reflects the rate in effect
as of June 30, 2003.
(b) Zero Coupon Bond. The interest rate shown reflects the
effective yield at purchase date.
(L) Securities lending -- securities in whole or in part on loan at June 30,
2003.
See accompanying notes to financial statements.
12
NEW COVENANT BALANCED GROWTH FUND
JUNE 30, 2003
- -------------------------------------------------------------
Value
Shares (Note 2)
- -------------------------------------------------------------
INVESTMENT COMPANIES -- 98.6%
7,151,360 New Covenant Growth Fund .......$168,128,468
3,772,905 New Covenant Income Fund ....... 100,434,724
------------
Total Investment Companies
(Cost $303,391,422) .......... 268,563,192
------------
Principal
Amount
---------
REPURCHASE AGREEMENTS -- 1.4% (Cost $3,850,000)
$3,850,000 Agreement dated 06/30/2003 with
State Street Bank, 0.950% to be
repurchased at $3,850,102 on
07/01/2003 collateralized by
$3,840,000 Federal National
Mortgage Association 5.260% due
10/02/2003, market value
$3,930,843 .................. 3,850,000
------------
TOTAL INVESTMENTS
(Cost $307,241,422) ............ 100.0% 272,413,192
OTHER ASSETS AND
LIABILITIES (NET) .............. 0.0%# 53,545
------ ------------
NET ASSETS ........................ 100.0% $272,466,737
====== ============
- -----------------
# Amount is less than 0.1%.
NEW COVENANT BALANCED INCOME FUND
JUNE 30, 2003
- -------------------------------------------------------------
Value
Shares (Note 2)
- -------------------------------------------------------------
INVESTMENT COMPANIES -- 98.5%
1,927,529 New Covenant Growth Fund .......$ 45,316,205
2,834,751 New Covenant Income Fund ....... 75,461,076
------------
Total Investment Companies
(Cost $125,269,504) .......... 120,777,281
------------
Principal
Amount
---------
REPURCHASE AGREEMENTS -- 1.3% (Cost $1,577,000)
$1,577,000 Agreement dated 06/30/2003 with
State Street Bank, 0.950% to be
repurchased at $1,577,042 on
07/01/2003 collateralized by
$1,590,000 Student Loan
Marketing Association 3.150%
due 10/24/2003, market value
$1,609,805 ................. 1,577,000
------------
TOTAL INVESTMENTS
(Cost $126,846,504) ............ 99.8% 122,354,281
OTHER ASSETS AND
LIABILITIES (NET) .............. 0.2% 221,775
----- ------------
NET ASSETS ........................ 100.0% $122,576,056
===== ============
See accompanying notes to financial statements.
13
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
JUNE 30, 2003
BALANCED BALANCED
GROWTH FUND INCOME FUND GROWTH FUND INCOME FUND
- --------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 2) .........$ 709,315,737 $531,745,663 $272,413,192 $122,354,281
Securities lending collateral (Note 2) . 43,330,938 53,402,340 -- --
Foreign currency, at value
(Cost $48,762, $0, $0
and $0, respectively) ............... 53,941 -- -- --
Cash ................................... 3,157 10,349 3 735
Receivable for investments sold ........ 18,225,836 16,100,080 -- 256,328
Receivable for fund shares sold ........ 10,017 11,200 151,619 2,278
Dividends and interest receivable ...... 724,258 4,900,451 101 42
Prepaid expenses and other assets ...... 13,910 13,408 14,513 12,702
------------- ------------ ------------ ------------
Total Assets ........................... 771,677,794 606,183,491 272,579,428 122,626,366
------------- ------------ ------------ ------------
LIABILITIES:
Payable for securities purchased ....... 18,634,806 26,472,034 -- --
Payable for fund share redeemed ........ 142,584 182,215 63,225 26,845
Advisory fee payable ................... 578,016 325,876 -- --
Obligation to return security lending
collateral (Note 2) ................. 43,330,938 53,402,340 -- --
Other accrued expenses and liabilities . 106,619 67,222 49,466 23,465
------------- ------------ ------------ ------------
Total Liabilities ...................... 62,792,963 80,449,687 112,691 50,310
------------- ------------ ------------ ------------
NET ASSETS .................................$ 708,884,831 $525,733,804 $272,466,737 $122,576,056
============= ============ ============ ============
Investments, at Identified Cost ............$ 716,875,113 $510,395,136 $307,241,422 $126,846,504
============= ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital ........................$ 931,093,502 $497,620,211 $319,556,476 $129,959,629
Undistributed net investment income .... 170,404 453,279 -- --
Accumulated net realized gain /
(loss) on investments and foreign
currency transactions ............... (214,824,878) 6,309,787 (12,261,509) (2,891,350)
Net unrealized appreciation /
(depreciation) on investments
and foreign currency transactions ... (7,554,197) 21,350,527 (34,828,230) (4,492,223)
------------- ------------ ------------ ------------
Total Net Assets .......................$ 708,884,831 $525,733,804 $272,466,737 $122,576,056
============= ============ ============ ============
NET ASSET VALUE, offering price
and redemption price per share of
beneficial interest outstanding ........$ 23.51 $ 26.62 $ 67.88 $ 17.52
============= ============ ============ ============
Number of Portfolio Shares Outstanding . 30,157,008 19,747,456 4,014,065 6,997,217
============= ============ ============ ============
See accompanying notes to financial statements.
14
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
FOR THE YEAR ENDED JUNE 30, 2003
BALANCED BALANCED
GROWTH FUND INCOME FUND GROWTH FUND INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of
$219,045, $0, $0, and $0 respectively) ...... $ 9,935,358 $ 632,068 $ 5,554,867 $ 3,687,456
Interest ....................................... 670,049 23,267,345 48,420 21,539
------------ ------------ ------------ ------------
Total Investment Income ........................ 10,605,407 23,899,413 5,603,287 3,708,995
------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fees (Note 3) .............. 6,574,454 3,860,369 -- --
Administration fees ............................ 107,400 83,064 40,313 17,859
Accounting and custody fees .................... 599,890 233,627 30,945 20,157
Legal and audit fees ........................... 59,707 51,574 30,905 11,007
Transfer agent fees ............................ 42,757 63,754 208,593 101,245
Directors' expenses ............................ 3,466 2,013 1,038 497
Registration fees .............................. 23,319 23,310 23,420 21,252
Shareholder report expenses .................... 46,634 35,878 18,871 7,538
Insurance expense .............................. 18,802 14,366 7,567 3,023
Miscellaneous expenses ......................... 15,617 11,451 6,405 2,514
------------ ------------ ------------ ------------
Total expenses ................................. 7,492,046 4,379,406 368,057 185,092
------------ ------------ ------------ ------------
NET INVESTMENT INCOME .......................... 3,113,361 19,520,007 5,235,230 3,523,903
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN / (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain / (loss) on:
Investments ................................. (91,482,475) 17,886,466 (8,480,559) (2,017,607)
Foreign currency transactions ............... 10,792 9,770 -- --
Realized gains received from underlying funds -- -- 170,531 122,526
------------ ------------ ------------ ------------
Net realized gain / (loss) on investments
and foreign currency transactions ........... (91,471,683) 17,896,236 (8,310,028) (1,895,081)
------------ ------------ ------------ ------------
Net change in unrealized appreciation /
(depreciation) of investments
and foreign currency transactions ........... 76,696,165 10,426,007 10,514,095 5,078,734
------------ ------------ ------------ ------------
Net realized and unrealized gain / (loss)
on investments and foreign currency
transactions ................................ (14,775,518) 28,322,243 2,204,067 3,183,653
------------ ------------ ------------ ------------
NET INCREASE / (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS ................................ $(11,662,157) $ 47,842,250 $ 7,439,297 $ 6,707,556
============ ============ ============ ============
See accompanying notes to financial statements.
15
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
- -------------------------------------------------------------------------------------------------------------------
GROWTH FUND
- -------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002
--------------- ---------------
OPERATIONS:
Net investment income ................................................... $ 3,113,361 $ 1,160,117
Net realized loss on investments and foreign currency transactions ...... (91,471,683) (109,463,149)
Net change in unrealized appreciation / (depreciation) on investments and
foreign currency transactions ........................................ 76,696,165 (36,462,932)
------------- -------------
Net decrease in net assets resulting from operations .................... (11,662,157) (144,765,964)
------------- -------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income ................................................... (2,747,947) (283,511)
Return of capital ....................................................... -- (1,511,062)
------------- -------------
Net decrease in net assets resulting from
dividends and distributions to shareholders .......................... (2,747,947) (1,794,573)
------------- -------------
SHARE TRANSACTIONS:
Net increase in net assets from shares of
beneficial interest transactions (Note 5) ............................ 27,672,712 25,281,453
------------- -------------
Net increase / (decrease) in net assets ................................. 13,262,608 (121,279,084)
------------- -------------
NET ASSETS:
Beginning of year ....................................................... 695,622,223 816,901,307
------------- -------------
End of year ............................................................. $ 708,884,831 $ 695,622,223
============= =============
- -------------------------------------------------------------------------------------------------------------------
INCOME FUND
- -------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002
--------------- ---------------
OPERATIONS:
Net investment income ................................................... $ 19,520,007 $ 26,464,051
Net realized gain on investments and foreign currency transactions ...... 17,896,236 5,967,767
Net change in unrealized appreciation / (depreciation) on investments and
foreign currency transactions ........................................ 10,426,007 10,231,257
------------- -------------
Net increase in net assets resulting from operations .................... 47,842,250 42,663,075
------------- -------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income ................................................... (20,721,289) (26,927,495)
Net realized gains ...................................................... (5,326,830) --
------------- -------------
Net decrease in net assets resulting from
dividends and distributions to shareholders .......................... (26,048,119) (26,927,495)
------------- -------------
SHARE TRANSACTIONS:
Net decrease in net assets from shares of
beneficial interest transactions (Note 5) ............................ (41,416,799) (29,664,776)
------------- -------------
Net decrease in net assets .............................................. (19,622,668) (13,929,196)
------------- -------------
NET ASSETS:
Beginning of year ....................................................... 545,356,472 559,285,668
------------- -------------
End of year ............................................................. $ 525,733,804 $ 545,356,472
============= =============
See accompanying notes to financial statements.
16
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
- -------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH FUND
- -------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002
--------------- ---------------
OPERATIONS:
Net investment income ............................................... $ 5,235,230 $ 6,024,050
Net realized loss on investments .................................... (8,310,028) (3,995,988)
Net change in unrealized appreciation / (depreciation) on investments 10,514,095 (26,406,661)
------------- -------------
Net increase / (decrease) in net assets resulting from operations ... 7,439,297 (24,378,599)
------------- -------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income ............................................... (5,236,205) (5,280,349)
Net realized gains .................................................. (354,255) (26,305,906)
Return of capital ................................................... -- (1,613,282)
------------- -------------
Net decrease in net assets resulting from
dividends and distributions to shareholders ...................... (5,590,460) (33,199,537)
------------- -------------
SHARE TRANSACTIONS:
Net increase / (decrease) in net assets from shares of
beneficial interest transactions (Note 5) ........................ (15,696,468) 29,019,313
------------- -------------
Net decrease in net assets .......................................... (13,847,631) (28,558,823)
------------- -------------
NET ASSETS:
Beginning of year ................................................... 286,314,368 314,873,191
------------- -------------
End of year ......................................................... $ 272,466,737 $ 286,314,368
============= =============
- -------------------------------------------------------------------------------------------------------------------
BALANCED INCOME FUND
- -------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002
--------------- ---------------
OPERATIONS:
Net investment income ............................................... $ 3,523,903 $ 3,621,651
Net realized loss on investments .................................... (1,895,081) (251,449)
Net change in unrealized appreciation / (depreciation) on investments 5,078,734 (5,152,997)
------------- -------------
Net increase / (decrease) in net assets resulting from operations ... 6,707,556 (1,782,795)
------------- -------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income ............................................... (3,524,688) (3,458,509)
Net realized gains .................................................. (368,191) (5,709,821)
Return of capital ................................................... -- (219,232)
------------- -------------
Net decrease in net assets resulting from
dividends and distributions to shareholders ...................... (3,892,879) (9,387,562)
------------- -------------
SHARE TRANSACTIONS:
Net increase in net assets from shares of
beneficial interest transactions (Note 5) ........................ 5,748,715 8,664,274
------------- -------------
Net increase / (decrease) in net assets ............................. 8,563,392 (2,506,083)
------------- -------------
NET ASSETS:
Beginning of year ................................................... 114,012,664 116,518,747
------------- -------------
End of year ......................................................... $ 122,576,056 $ 114,012,664
============= =============
See accompanying notes to financial statements.
17
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
For a Share outstanding throughout each period.
- -----------------------------------------------------------------------------------------------------------------------
GROWTH FUND*
- -----------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2000
--------------- --------------- --------------- ---------------
OPERATING PERFORMANCE:
Net asset value, beginning of year ................ $ 24.13 $ 29.26 $ 42.07 $ 40.81**
-------- -------- -------- --------
Net investment income ............................. 0.10 0.04 0.10 0.15
Net realized and unrealized gain / (loss) on
investments and foreign
currency transactions .......................... (0.63) (5.11) (4.86) 2.49
-------- -------- -------- --------
Total from investment operations .................. (0.53) (5.07) (4.76) 2.64
======== ======== ======== ========
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ............................. (0.09) (0.01) -- (0.30)
Net realized gains ................................ -- -- (7.80) (1.08)
Return of capital ................................. -- (0.05) (0.25) --
-------- -------- -------- --------
Total distributions ............................... (0.09) (0.06) (8.05) (1.38)
-------- -------- -------- --------
NET ASSET VALUE, END OF YEAR ...................... $ 23.51 $ 24.13 $ 29.26 $ 42.07
======== ======== ======== ========
Total return ...................................... (2.17)% (17.34)% (12.33)% 6.38%
======== ======== ======== ========
RATIO TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ................ $708,885 $695,622 $816,901 $905,086
Ratio of net investment income to
average net assets ............................. 0.47% 0.15% 0.20% 0.37%
Ratio of operating expenses to
average net assets ............................. 1.13% 1.11% 1.07% 1.07%
Portfolio turnover rate ........................... 63% 79% 142% 152%
- -----------------------------------------------------------------------------------------------------------------------
INCOME FUND*
- -----------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2000
--------------- --------------- --------------- ---------------
OPERATING PERFORMANCE:
Net asset value, beginning of year ................ $ 25.54 $ 24.83 $ 23.89 $ 24.52**
-------- -------- -------- --------
Net investment income ............................. 1.00 1.21 1.50 1.47
Net realized and unrealized gain / (loss) on
investments, options, and
foreign currency transactions .................. 1.42 0.73 0.92 (0.63)
-------- -------- -------- --------
Total from investment operations .................. 2.42 1.94 2.42 0.84
======== ======== ======== ========
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ............................. (1.06) (1.23) (1.48) (1.47)
Net realized gains ................................ (0.28) -- -- --
-------- -------- -------- --------
Total distributions ............................... (1.34) (1.23) (1.48) (1.47)
-------- -------- -------- --------
NET ASSET VALUE, END OF YEAR ...................... $ 26.62 $ 25.54 $ 24.83 $ 23.89
======== ======== ======== ========
Total return ...................................... 9.63% 7.97% 10.31% 3.55%
======== ======== ======== ========
RATIO TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ................ $525,734 $545,356 $559,286 $571,669
Ratio of net investment income to
average net assets ............................. 3.79% 4.72% 5.99% 6.12%
Ratio of operating expenses to
average net assets ............................. 0.85% 0.84% 0.82% 0.83%
Portfolio turnover rate ........................... 226% 290% 191% 182%
- ---------------
* The Fund commenced investment operations on July 1, 1999.
** Represents net asset value of predecessor Common Trust Fund.
See accompanying notes to financial statements.
18
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
For a Share outstanding throughout each period.
- -----------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH FUND*
- -----------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2000
--------------- --------------- --------------- ---------------
OPERATING PERFORMANCE:
Net asset value, beginning of year ................ $ 67.25 $ 81.92 $ 91.84 $ 90.96**
-------- -------- -------- --------
Net investment income ............................. 1.27 1.52 2.33 3.18
Net realized and unrealized gain / (loss) on
investments .................................... 0.71 (7.44) (5.07) 1.48
-------- -------- -------- --------
Total from investment operations .................. 1.98 (5.92) (2.74) 4.66
======== ======== ======== ========
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ............................. (1.27) (1.34) (5.68) (3.19)
Net realized gains ................................ (0.08) (7.00) (1.50) (0.59)
Return of capital ................................. -- (0.41) -- --
-------- -------- -------- --------
Total distributions ............................... (1.35) (8.75) (7.18) (3.78)
-------- -------- -------- --------
NET ASSET VALUE, END OF YEAR ...................... $ 67.88 $ 67.25 $ 81.92 $ 91.84
======== ======== ======== ========
Total return ...................................... 3.10% (7.79)% (3.01)% 5.13%
======== ======== ======== ========
RATIO TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ................ $272,467 $286,314 $314,873 $343,231
Ratio of net investment income to
average net assets ............................. 1.96% 2.02% 2.61% 3.50%
Ratio of operating expenses to
average net assets ............................. 0.14% 0.11% 0.09% 0.10%
Portfolio turnover rate ........................... 15% 18% 18% 8%
- -----------------------------------------------------------------------------------------------------------------------
BALANCED INCOME FUND*
- -----------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2000
--------------- --------------- --------------- ---------------
OPERATING PERFORMANCE:
Net asset value, beginning of year ................ $ 17.10 $ 18.88 $ 20.01 $ 20.16**
-------- -------- -------- --------
Net investment income ............................. 0.52 0.57 0.78 0.89
Net realized and unrealized gain / (loss) on
investments .................................... 0.47 (0.84) (0.38) (0.02)
-------- -------- -------- --------
Total from investment operations .................. 0.99 (0.27) 0.40 0.87
======== ======== ======== ========
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ............................. (0.52) (0.54) (1.22) (0.89)
Net realized gains ................................ (0.05) (0.94) (0.31) (0.13)
Return of capital ................................. -- (0.03) -- --
-------- -------- -------- --------
Total distributions ............................... (0.57) (1.51) (1.53) (1.02)
-------- -------- -------- --------
NET ASSET VALUE, END OF YEAR ...................... $ 17.52 $ 17.10 $ 18.88 $ 20.01
======== ======== ======== ========
Total return ...................................... 6.00% (1.55)% 2.08% 4.40%
======== ======== ======== ========
RATIO TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ................ $122,576 $114,013 $116,519 $124,809
Ratio of net investment income to
average net assets ............................. 3.08% 3.13% 3.88% 4.46%
Ratio of operating expenses to
average net assets ............................. 0.16% 0.14% 0.12% 0.14%
Portfolio turnover rate ........................... 18% 11% 20% 12%
- ----------------------
* The Fund commenced investment operations on July 1, 1999.
** Represents net asset value of predecessor Common Trust Fund.
See accompanying notes to financial statements.
19
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
JUNE 30, 2003
1. ORGANIZATION
New Covenant Funds (the "Trust"), an open-end, diversified management investment
company, was organized as a Delaware business trust on September 30, 1998. It
currently consists of four investment funds: New Covenant Growth Fund ("Growth
Fund"), New Covenant Income Fund ("Income Fund"), New Covenant Balanced Growth
Fund ("Balanced Growth Fund") and New Covenant Balanced Income Fund ("Balanced
Income Fund"), (individually, a "Fund," and collectively, the "Funds"). The
Funds commenced investment operations on July 1, 1999. The Trust's authorized
capital consists of an unlimited number of shares of beneficial interest of
$0.001 par value. The Funds' investment adviser is the NCF Investment Department
of New Covenant Trust Company, N.A. (the "Adviser").
The objectives of the Funds are as follows:
GROWTH FUND Long-term capital appreciation. Dividend income, if any,
will be incidental.
INCOME FUND High level of current income with preservation of capital.
BALANCED GROWTH FUND Capital appreciation with less risk than would be present
in a portfolio of only common stocks.
BALANCED INCOME FUND Current income and long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of the
significant accounting policies consistently followed by the Funds in the
preparation of its financial statements. These policies are in conformity with
generally accepted accounting principles.
PORTFOLIO VALUATION: Fund investments are recorded at market value. Portfolio
securities listed on a domestic or foreign exchange are valued at the last sale
price on the day of valuation or, if there was no sale that day, at the last
reported bid price as of the close of trading. Equity securities traded on the
National Association of Securities Dealers Automated Quotations system
("NASDAQ"), the NASDAQ Official Closing Price is used. Equity securities which
are traded in the over-the-counter market only, but which are not included in
the NASDAQ National Market System, are valued at the last sale price on the day
of valuation. Debt securities with a remaining maturity of sixty days or more
are valued using a pricing service when such prices are believed to reflect fair
market value. Debt securities with a remaining maturity of less than sixty days
are valued at amortized cost, which approximates market value. All other
securities and securities with no readily determinable market values are valued
using procedures determined in good faith by the Board of Trustees.
Foreign securities traded outside the United States are generally valued as of
the time their trading is complete, which is usually different from the close of
the New York Stock Exchange. Occasionally, events affecting the value of such
securities may occur between such times and the close of the New York Stock
Exchange that will not be reflected in the computation of a Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, these securities will be valued at their fair value according to
procedures decided upon in good faith by the Fund's Board of Trustees. All
securities and other assets of a Fund initially expressed in foreign currencies
will be converted to U.S. dollar values at the mean of the bid and offer prices
of such currencies against U.S. dollars last quoted on a valuation date by any
recognized dealer.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
accounted for on a trade date basis. Net realized gains or losses on sales of
securities are determined by the identified cost method. Interest income,
adjusted for accretion of discounts and amortization of premiums, is recorded on
the accrual basis. Dividend income is recorded on the ex-dividend date, except
that certain dividends from foreign securities are recorded as soon as the Funds
are informed of the ex-dividend date, if the ex-dividend date has passed.
OPTIONS: The Income Fund may purchase or write options which are traded over the
counter to hedge fluctuation risks in the prices of certain securities. When a
Fund writes a call or put option, an amount equal to the premium received is
reflected as a liability. The liability is subsequently "marked-to-market" to
reflect the current market value of the option written.The premium paid by a
Fund for the purchase of a call or put option is recorded as an investment and
subsequently "marked-to-market" to reflect the current market value of the
option purchased.The Fund is subject to the risk of an imperfect correction
between movement in the price of the instrument and the price of the underlying
security or transaction.Risks may also arise due to illiquid secondary markets
for the instruments.There were no options outstanding at June 30, 2003.
20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
JUNE 30, 2003
FOREIGN CURRENCY TRANSLATION: The books and records of the Funds are maintained
in U.S. dollars. Investment valuations and other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based upon current exchange rates. Purchases and sales of foreign
investments and income and expenses are converted into U.S. dollars based upon
exchange rates prevailing on the respective dates of such transactions. That
portion of unrealized gains or losses on investments due to fluctuations in
foreign currency exchange rates is not separately disclosed.
FORWARD FOREIGN CURRENCY CONTRACTS: Certain of the Funds enter into forward
foreign currency contracts as hedges against either specific transactions or
portfolio positions. All commitments are "marked-to-market" daily at the
applicable foreign exchange rate and any resulting unrealized gains or losses
are recorded currently. The Fund realizes gains or losses at the time forward
contracts are extinguished. There were no contracts outstanding at June 30,
2003.
LOANS OF PORTFOLIO SECURITIES: The Growth Fund and the Income Fund may lend
their securities pursuant to a securities lending agreement ("Lending
Agreement") with State Street Bank ("SSB"). Security loans made pursuant to the
Lending Agreement are required at all times to be secured by collateral valued
at least 102% of the market value of the securities loaned. Cash collateral
received is invested by SSB pursuant to the terms of the Lending Agreement. All
such investments are made at the risk of the Funds and, as such, the Funds are
liable for investment losses. To the extent a loan is secured by non-cash
collateral, the borrower is required to pay a loan premium. Non-cash collateral
received can not be sold or repledged. Net income earned on investment of cash
collateral and loan premiums received on non-cash collateral are allocated
between SSB and the Funds in accordance with the Lending Agreement. Income
allocated to the Funds is included in interest income in the respective
statements of operations.
In the event of bankruptcy of the borrower, realization/retention of the
collateral may be subject to legal proceedings.
The value of loaned securities and related collateral outstanding at June 30,
2003, was as follows:
- --------------------------------------------------------------------------------
VALUE OF VALUE OF VALUE OF
FUND SECURITIES LOANED CASH COLLATERAL NON-CASH COLLATERAL
- --------------------------------------------------------------------------------
Growth Fund $41,809,803 $43,330,938 $ --
Income Fund 52,960,515 53,402,340 627,410
================================================================================
Cash collateral received for securities on loan was invested in the following:
- --------------------------------------------------------------------------------
GROWTH FUND INCOME FUND
- --------------------------------------------------------------------------------
State Street Navigator Securities
Lending Prime Portfolio,
1.14% due 07/01/03 $43,330,938 $53,402,340
================================================================================
REPURCHASE AGREEMENTS: The Funds may enter into repurchase agreements with a
bank, broker-dealer or other financial institution, which are secured by
obligations of the U.S. government. Each repurchase agreement is at least 102%
collateralized and marked to market. However, in the event of default or
bankruptcy by the counterparty to the agreement, realization of the collateral
may be subject to certain costs, losses or delays.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income of all Funds are declared and paid at least annually. For all Funds, all
net realized long-term or short-term capital gains, if any, will be declared and
distributed at least annually. Interest and dividend payments will normally be
distributed as income dividends on a quarterly basis for each of the Funds.
Income dividends and capital gain distributions are determined in accordance
with income tax regulations, which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income, gains and losses on various investment securities held by a Fund, timing
differences in the recognition of income, gains and losses and differing
characterizations of distributions made by the Fund.
FEDERAL INCOME TAXES: It is the Funds' intention to qualify annually as a
regulated investment company by complying with the appropriate provisions of the
Internal Revenue Code of 1986, as amended. Accordingly, no provision for federal
income tax has been made.
21
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
JUNE 30, 2003
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Trust, on behalf of each Fund, has entered into an Investment Advisory
Agreement with the New Covenant Funds Investment Department of the New Covenant
Trust Company, N.A. (or the "Adviser"). Under the Agreement, the Adviser is
responsible for managing the Funds' investments as well as furnishing the Funds
with certain administrative services. The Growth Fund pays the Adviser a monthly
fee at the annual rate of 0.99% of the Growth Fund's average daily net assets
and the Income Fund pays the Adviser a monthly fee at the annual rate of 0.75%
of the value of the Income Fund's average daily net assets. The Adviser does not
receive advisory fees for the Balanced Growth and Balanced Income Funds. The
Adviser has entered into Sub-Advisory Agreements with five Sub-Advisers to
assist in the selection and management of each Fund's investment securities. It
is the responsibility of the Sub-Advisers, under the direction of the Adviser,
to make day-to-day investment decisions for the Funds. The Adviser pays each
Sub-Adviser a quarterly fee for their services in managing assets of the Funds.
The Adviser pays the Sub-Advisers' fees directly from its own advisory fees. The
Sub-Advisory fees are based on the assets of a Fund to which a Sub-Adviser is
responsible for making investment decisions.
The following are the Sub-Advisers for the Growth Fund: Capital Guardian Trust
Company, Seneca Capital Management, Sound Shore Management, Inc., and Wellington
Management Company, LLP.
Tattersall Advisory Group is the Sub-Adviser for the Income Fund.
The Trust has a Services Agreement with PFPC Inc. ("PFPC"). Under the Services
Agreement, PFPC provides transfer agency and administrative services to the
Funds. The Trust is providing accounting services under an Accounting Services
Agreement with PFPC.
The Trust has a Distribution Agreement with PFPC Distributors, Inc. (the
"Distributor") to serve as the principal distributor of the Funds' shares. The
Funds do not pay any fees to the Distributor in its capacity as principal
distributor.
The Trust has a Custodian Agreement with State Street Bank.
No officer, director or employee of New Covenant Funds, PFPC, or any affiliate
thereof, receives any compensation from the Company for serving as Director or
officer of the Company. The Company also reimburses expenses incurred by the
unaffiliated Directors in attending such meetings.
4. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding U.S.
Government and short-term investments, for the year ended June 30, 2003 were as
follows:
- ------------------------------------------------------------------------------
FUND PURCHASES SALES
- ------------------------------------------------------------------------------
Growth Fund ............................... $439,636,403 $412,846,369
Income Fund ............................... 68,555,084 97,631,606
Balanced Growth ........................... 38,638,832 54,476,869
Balanced Income ........................... 26,156,713 20,751,992
- ------------------------------------------------------------------------------
The cost of purchases and proceeds from sales of long-term U.S. Government
securities for year ended June 30, 2003 were as follows:
- ----------------------------------------------------------------------------
FUND PURCHASES SALES
- ----------------------------------------------------------------------------
Income Fund ....................... $1,039,239,361 $1,006,279,870
- ----------------------------------------------------------------------------
22
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
JUNE 30, 2003
At June 30, 2003, the aggregate cost of investments, gross unrealized
appreciation and depreciation and net unrealized appreciation/(depreciation) for
Federal tax purposes was as follows:
- -----------------------------------------------------------------------------------------------
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
- -----------------------------------------------------------------------------------------------
Growth Fund .................. $732,984,638 $60,787,580 $(84,456,481) $(23,668,901)
Income Fund .................. 510,485,464 22,084,303 (824,104) 21,260,199
Balanced Growth Fund ......... 314,638,339 5,239,540 (47,464,687) (42,225,147)
Balanced Income Fund ......... 127,548,720 3,502,836 (8,697,275) (5,194,439)
- -----------------------------------------------------------------------------------------------
5. SHARES OF BENEFICIAL INTEREST
The Trust Instrument authorizes the issuance of an unlimited number of shares
for each of the Funds, and each share has a par value of $0.001 per share. The
Fund currently offers a single class of shares. Each issued and outstanding
share of each Fund is entitled to participate equally in dividends and
distributions declared by such Fund and in the net assets of such Fund upon
liquidation or dissolution remaining after satisfaction of outstanding
liabilities.
YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002
- -----------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
GROWTH FUND:
Sold ......................................... 3,848,573 $ 82,094,287 3,021,484 $ 81,887,519
Issued as reinvestment of dividends .......... 7,133 153,247 4,236 115,424
Redeemed ..................................... (2,528,203) (54,574,822) (2,111,568) (56,721,490)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase ................................. 1,327,503 $ 27,672,712 914,152 $ 25,281,453
========================================================================================================================
YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002
- -----------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
INCOME FUND:
Sold ......................................... 1,907,730 $ 50,189,035 2,077,752 $ 52,681,877
Issued as reinvestment of dividends .......... 184,677 4,848,811 52,435 1,323,654
Redeemed ..................................... (3,699,149) (96,454,645) (3,296,121) (83,670,307)
- ------------------------------------------------------------------------------------------------------------------------
Net Decrease ................................. (1,606,742) $(41,416,799) (1,165,934) $(29,664,776)
========================================================================================================================
YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002
- -----------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH FUND:
Sold ......................................... 286,683 $ 18,351,902 407,058 $ 29,859,804
Issued as reinvestment of dividends .......... 66,792 4,232,137 427,488 30,786,270
Redeemed ..................................... (596,621) (38,280,507) (420,836) (31,626,761)
- -----------------------------------------------------------------------------------------------------------------------
Net Increase / (Decrease) .................... (243,146) $(15,696,468) 413,710 $ 29,019,313
=======================================================================================================================
YEAR ENDED YEAR ENDED
JUNE 30, 2003 JUNE 30, 2002
- -----------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
BALANCED INCOME FUND:
Sold ......................................... 982,594 $ 16,737,282 513,514 $ 9,213,964
Issued as reinvestment of dividends .......... 140,426 2,357,342 423,887 7,485,668
Redeemed ..................................... (792,004) (13,345,909) (443,344) (8,035,358)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase ................................. 331,016 $ 5,748,715 494,057 $ 8,664,274
========================================================================================================================
23
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
JUNE 30, 2003
6. RISK FACTORS
The performance of a Fund's investments in non-U.S. companies and in companies
operating internationally or in foreign countries will depend principally on
economic conditions in their product markets, the securities markets where their
securities are traded, and on currency exchange rates. These risks are present
because of uncertainty in future exchange rates back into U.S. dollars and
possible political instability, which could affect foreign financial markets and
local economies. There are also risks related to social and economic
developments abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject.
The Funds will not invest more than 15% of the value of their net assets in
securities that are illiquid because of restrictions on transferability or other
reasons. Repurchase agreements with deemed maturities in excess of seven days
and securities that are not registered under the Securities Act of 1933, as
amended, but that may be purchased by institutional buyers pursuant to Rule 144A
are subject to this 15% limit (unless such securities are variable-amount
master-demand notes with maturities of nine months or less or unless the Board
determines that a liquid trading market exists). The Funds may purchase
securities which are not registered under the Securities Act but which can be
sold to "qualified institutional buyers" in accordance with Rule 144A under the
Securities Act. In some cases, such securities are classified as "illiquid
securities," however, any such security will not be considered illiquid so long
as it is determined by the Adviser, under guidelines approved by the Board of
Trustees, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of illiquidity
in a Fund during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities.
The Income Fund may invest a limited amount of assets in debt securities which
are rated below investment grade (hereinafter referred to as "lower-rated
securities") or which are unrated but deemed equivalent to those rated below
investment grade by the portfolio managers. The lower the ratings of such debt
securities, the greater their risks. These debt instruments generally offer a
higher current yield than that available from higher-grade issues, and typically
involve greater risk. The yields on high-yield/high-risk bonds will fluctuate
over time. In general, prices of all bonds rise when interest rates fall and
fall when interest rates rise. Lower-rated securities are subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. During periods of economic downturn or rising interest rates,
issuers of these instruments may experience financial stress that could
adversely affect their ability to make payments of principal and interest, and
increase the possibility of default.
The Balanced Funds invest their assets primarily in the Growth Fund and the
Income Fund. By investing primarily in shares of these Funds, shareholders of
the Balanced Funds indirectly pay a portion of the operating expenses,
management expenses and brokerage costs of the underlying Funds as well as their
own operating expenses. Thus, shareholders of the Balanced Funds may indirectly
pay slightly higher total operating expenses and other costs than they would pay
by directly owning shares of the Growth Fund and Income Fund. Total fees and
expenses to be borne by investors in either Balanced Fund will depend on the
portion of the Funds' assets invested in the Growth Fund and in the Income Fund.
A change in the asset allocation of either Balanced Fund could increase or
reduce the fees and expenses actually borne by investors in that Fund. The
Balanced Funds are also subject to rebalancing risk. Rebalancing activities,
while undertaken to maintain the Fund's investment risk-to-reward ratio, may
cause the Fund to underperform other funds with similar investment objectives.
For the Balanced Growth Fund, it is possible after rebalancing from equities
into a greater percentage of fixed-income securities, that equities will
outperform fixed-income investments. For the Balanced Income Fund, it is
possible that after rebalancing from fixed-income securities into a greater
percentage of equity securities, that fixed-income securities will outperform
equity investments. The performance of the Balanced Growth Fund and the Balanced
Income Fund depends on the performance of the underlying funds in which they
invest.
24
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
JUNE 30, 2003
7. DISTRIBUTION INFORMATION
Income and long-term capital gain distributions are determined in accordance
with Federal income tax regulations, which may differ from generally accepted
accounting principles accepted in the United States. The tax character of
distributions paid during the fiscal years ended June 30, 2002 and June 30, 2003
were as follows:
2002 TAXABLE DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------------
ORDINARY NET LONG-TERM TOTAL TAXABLE RETURN OF TOTAL
FUND INCOME CAPITAL GAINS DISTRIBUTIONS CAPITAL DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------------
Growth Fund .................. $ 283,511 $ -- $ 283,511 $1,511,062 $ 1,794,573
Income Fund .................. 26,927,495 -- 26,927,495 -- 26,927,495
Balanced Growth Fund ......... 5,280,349 26,305,906 31,586,255 1,613,282 33,199,537
Balanced Income Fund ......... 3,458,509 5,709,821 9,168,330 219,232 9,387,562
- ------------------------------------------------------------------------------------------------------------------------
2003 TAXABLE DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------------
ORDINARY NET LONG-TERM TOTAL TAXABLE RETURN OF TOTAL
FUND INCOME CAPITAL GAINS DISTRIBUTIONS CAPITAL DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------------
Growth Fund .................. $ 2,747,947 $ -- $ 2,747,947 $ -- $ 2,747,947
Income Fund .................. 25,160,016 888,103 26,048,119 -- 26,048,119
Balanced Growth Fund ......... 5,227,067 363,393 5,590,460 -- 5,590,460
Balanced Income Fund ......... 3,519,607 373,272 3,892,879 -- 3,892,879
- ------------------------------------------------------------------------------------------------------------------------
8. FEDERAL INCOME TAXES
Permanent differences, incurred during the year ended June 30, 2003, resulting
from differences in book and tax accounting have been reclassified at year end
to undistributed net investment income, accumulated realized gain/(loss) and
paid-in capital as follows:
- -----------------------------------------------------------------------------------------------
INCREASE INCREASE/DECREASE INCREASE/DECREASE
PAID-IN UNDISTRIBUTED NET ACCUMULATED
FUND CAPITAL INVESTMENT INCOME REALIZED GAIN/(LOSS)
- -----------------------------------------------------------------------------------------------
Growth Fund ..................... $ 7,345 $ (10,462) $ 3,117
Income Fund ..................... 12,460 1,675,007 (1,687,467)
Balanced Growth Fund ............ 8,162 (341,066) 332,904
Balanced Income Fund ............ 4,296 (75,205) 70,909
- -----------------------------------------------------------------------------------------------
As of June 30, 2003, the fund had available for Federal tax purposes unused
capital loss carryforwards as follows:
- ------------------------------------------------------------------------------
EXPIRING IN 2010 EXPIRING IN 2011
- ------------------------------------------------------------------------------
Growth Fund $45,005,343 $96,688,185
- ------------------------------------------------------------------------------
COMPONENTS OF ACCUMULATED EARNINGS (LOSSES) ON A TAX BASIS
- ------------------------------------------------------------------------------------------------------------------------
BALANCED BALANCED
GROWTH INCOME GROWTH INCOME
- ------------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income ............... $ 188,665 $ 3,386,092 $ -- $ --
Undistributed long-term capital gains ....... -- 3,467,302 44,742 903
Capital loss carryforwards .................. (141,693,528) -- -- --
Post-October losses ......................... (57,040,086) -- (4,909,334) (2,190,037)
Unrealized appreciation / (depreciation) .... (23,663,722) 21,260,199 (42,225,147) (5,194,439)
- -----------------------------------------------------------------------------------------------------------------------
Total Accumulated Earnings (Losses) ....... $(222,208,671) $28,113,593 $(47,089,739) $(7,383,573)
=======================================================================================================================
Post-October losses represent losses realized on investment transactions from
November 1, 2002 through June 30, 2003 that, in accordance with Federal income
tax regulations, the Funds have elected to defer and treat as having arisen in
the following fiscal year.
25
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
JUNE 30, 2003
To the Shareholders and Board of Trustees
New Covenant Funds
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of New Covenant Growth Fund, New Covenant Income
Fund, New Covenant Balanced Growth Fund and New Covenant Balanced Income Fund
(the "Funds") as of June 30, 2003, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
four years in the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of June 30, 2003, by correspondence with the
Funds' custodian and brokers, or by other auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds at June 30, 2003, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and their financial highlights for each of the four
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
[LOGO OMITTED]
Ernst & Young LLP
Philadelphia, Pennsylvania
August 8, 2003
26
TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
NEW COVENANT FUNDS
JUNE 30, 2003
The information set forth below is for the Fund's fiscal year as required by
Federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in early 2004. Please
consult your tax advisor for proper treatment of this information.
Pursuant to Internal Revenue Code Section 852(b)(3), the amounts of long-term
capital gains designated for the fiscal year ended June 30, 2003 were as
follows:
Growth Fund ......................................... $ --
Income Fund ......................................... $888,103
Balanced Growth Fund ................................ $363,393
Balanced Income Fund ................................ $373,272
For the fiscal year ended June 30, 2003 certain dividends paid by the Funds may
be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth
Tax Relief Reconciliation Act of 2003.The Funds intend to designate up to a
maximum amount shown below as taxed at a maximum rate of 15%. Complete
information will be computed and reported in conjunction with your 2003 Form
1099-DIV.
Growth Fund ......................................... $ 2,747,947
Income Fund ......................................... $25,160,016
Balanced Growth Fund ................................ $ 5,227,067
Balanced Income Fund ................................ $ 3,519,607
27
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
The Trustees, including those Trustees who are not "interested persons" of the
Trust (as defined in the 1940 Act) ("Disinterested Trustees"), and the executive
officers of the Trust and their principal occupations during the past five years
are set forth below. Unless otherwise stated, the address of each Trustee and
officer is 200 East Twelfth Street, Suite C, Jeffersonville, IN 47130. The
Statement of Additional Information ("SAI") includes additional information
about the Trustees and is available without charge, upon request, by calling
(800) 858-6127.
NUMBER OF
PORTFOLIOS IN
FUND OTHER
COMPLEX TRUSTEESHIPS/
NAME, AGE, ADDRESS AND TERM OF OFFICE* AND PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
POSITION(S) WITH TRUST LENGTH OF TIME SERVED DURING PAST 5 YEARS TRUSTEE HELD BY TRUSTEE
- ------------------------ --------------------- ----------------------- -------------- ---------------
DISINTERESTED TRUSTEES
- ----------------------
Gail C. Duree (56) o Indefinite Investment Consultant, 4 None
Trustee o Since Inception Montview Boulevard
Presbyterian Church
(1994 to present);
Women's Foundation of
Colorado (1995 to
present); trustee,
Presbyterian
Foundation (1991 to
1997); Logan School
(1996 to present).
Rev. Donald B. Register (66) o Indefinite Pastor, Sixth-Grace 4 None
Trustee o Since Inception Presbyterian Church
Chicago, IL
(1988 to present).
John D. Stuart (72) o Indefinite Independent Financial 4 None
Trustee o February 2002 Consultant.
INTERESTED TRUSTEES**
- ---------------------
F. Kenneth Bateman (63) o Indefinite Attorney, Gerber & Bateman, 4 None
President and Trustee o Since Inception P.A. (1999 to present); Attorney,
Potter, Mills & Bateman, P.A.
(1997 to 1999); Trustee,
Presbyterian Foundation
(1995 to 2001).
Cynthia S. Gooch (70) o Indefinite Retired; Trustee, Presbyterian 4 None
Trustee o Since Inception Foundation (1997 to present).
28
NUMBER OF
PORTFOLIOS IN
FUND OTHER
COMPLEX TRUSTEESHIPS/
NAME, AGE, ADDRESS AND TERM OF OFFICE* AND PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
POSITION(S) WITH TRUST LENGTH OF TIME SERVED DURING PAST 5 YEARS TRUSTEE HELD BY TRUSTEE
- ------------------------ --------------------- ----------------------- -------------- ---------------
OFFICER(S) WHO ARE NOT TRUSTEES
- -------------------------------
Dennis J. Murphy (61) o Indefinite Executive Vice President and N/A N/A
Vice President o November 2001 Chief Investment Officer
Presbyterian Foundation and
New Covenant Trust Company
(2000 to present).
Senior Vice President and
Chief Financial Officer,
Presbyterian Foundation and
New Covenant Trust Company;
(1982 to 2000).
Andrew McNally (32) o Indefinite Vice President, Accounting N/A N/A
PFPC Inc. o November 2001 & Administration, PFPC Inc.
760 Moore Road (2000 to present); Manager
King of Prussia, PA 19406 of Fund Accounting
Treasurer (1997 to 2000).
Lisa M. King (35) o Indefinite Vice President and Counsel, N/A N/A
PFPC Inc. o November 2002 PFPC Inc., (2000 - present);
301 Bellevue Parkway Associate, Stradley, Ronon,
Wilmington, DE 19809 Stevens & Young, LLC,
Secretary (1996-2000).
- ------------------
* Each Trustee shall hold office for life or until his or her successor is
elected and qualified or until the Trust terminates; each officer serves
until his or her successor shall have been elected and qualified or until
his or her earlier resignation.
** The Interested Trustees are those Trustees who are "interested persons" of
the Trust (as that term is defined in the 1940 Act). Mr. Bateman and Ms.
Gooch are each considered to be Interested Trustees of the Trust due to
their current or past affiliation with the Presbyterian Foundation.
29
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THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY IF
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
SHARES OF NEW COVENANT FUNDS ARE
DISTRIBUTED BY PFPC DISTRIBUTORS, INC.,
760 MOORE ROAD,
KING OF PRUSSIA, PA 19406
FDN12-03-07
NC-A06/03
NEW COVENANT FUNDS
200 EAST TWELFTH STREET, SUITE C
JEFFERSONVILLE, IN 47130
---------------------
PRSRT STD.
U.S. POSTAGE
PAID
PAWTUCKET, RI
PERMIT NO. 1815-140
---------------------
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable; for listed Closed-End Funds and Exchange Traded Funds only.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable; for Closed-End Funds only.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act
(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 10. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 are attached hereto.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 are attached hereto.
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.
(registrant) New Covenant Funds
--------------------------------------------------------------------
By (Signature and Title)* /s/ F. Kenneth Bateman
-------------------------------------------------------
F. Kenneth Bateman, President
(principal executive officer)
Date August 22, 2003
----------------------------------------------------------------------------
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 and on the
dates indicated.
By (Signature and Title)* /s/ F. Kenneth Bateman
-----------------------------------------------------
F. Kenneth Bateman, President
(principal executive officer)
Date August 22, 2003
----------------------------------------------------------------------------
By (Signature and Title)* /s/ Andrew McNally
-------------------------------------------------------
Andrew McNally, Treasurer
(principal financial officer)
Date August 22, 2003
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.