AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION
ON JANUARY 21, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. __ / /
Post-Effective Amendment No. 2 /x/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 3 /x/
(Check appropriate box or boxes)
THE CATHOLIC FUNDS, INC.
(Exact name of registrant as specified in charter)
1100 WEST WELLS STREET
MILWAUKEE, WISCONSIN 53233
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (414) 278-6550
THEODORE F. ZIMMER, ESQ.
THE CATHOLIC FUNDS, INC.
1100 WEST WELLS STREET
MILWAUKEE, WISCONSIN 53233
(Name and Address of Agent for Service)
Copy to:
CONRAD G. GOODKIND, ESQ.
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on January 31, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485 [ ]
If appropriate, check the following box [ ] this post-effective amendment
designates a new effective date for a previously filed post-effective amendment.
Prospectus
January 31, 2000
LOGO Equity Income Fund
LOGO Large-Cap Growth Fund
LOGO Disciplined Capital Appreciation Fund
NEITHER THE CATHOLIC FUNDS NOR THE ADVISER, CATHOLIC FINANCIAL
SERVICES CORPORATION, IS SPONSORED OR ENDORSED BY THE
CATHOLIC CHURCH, NOR HAS THE CATHOLIC CHURCH APPROVED OR
DISAPPROVED THESE FUNDS' SHARES.
AS WITH OTHER MUTUAL FUNDS, THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE FUNDS'
SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
CRIME.
THIS PROSPECTUS HAS INFORMATION YOU SHOULD KNOW BEFORE YOU
DECIDE TO INVEST. PLEASE READ IT CAREFULLY AND KEEP IT WITH YOUR
INVESTMENT RECORDS.
Table of Contents
Overview.......................................................................
Investment Philosophy Statement................................................
General Risks to Consider......................................................
Equity Income Fund.............................................................
Large-Cap Growth Fund..........................................................
Disciplined Capital Appreciation Fund..........................................
Fees and Expenses..............................................................
Management.....................................................................
Using Mutual Funds in an Investment Program...................................
How to Invest.................................................................
Selling Your Shares...........................................................
Shareholder Information.......................................................
Year 2000 Compliance..........................................................
Financial Highlights...........................................................
For More Information..........................................................
[ICON]
Before Reading this Prospectus
REFERENCES TO "YOU" AND "YOUR" IN THE PROSPECTUS REFER TO
PROSPECTIVE INVESTORS OR SHAREHOLDERS. REFERENCES TO "WE",
"US" OR "OUR" REFER TO THE FUNDS AND THE FUND MANAGEMENT
(ADVISER, DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT AND
CUSTODIAN) GENERALLY.
[ICON]
The Catholic Funds
The Catholic Funds, Inc. is a family of mutual funds contained within a single
investment company organized as a Maryland Corporation. This Prospectus
describes shares for three of its Funds: The Catholic Equity Income, Large-Cap
Growth and Disciplined Capital Appreciation Funds. The Catholic Money Market
Fund is described in a separate prospectus.
<TABLE>
<CAPTION>
Primary
Fund Investment Objectives+ Investments
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Equity Income Fund Current income and long-term capital Dividend paying common stocks
growth
- ---------------------------------------------------------------------------------------------------------------------------
Large-Cap Growth Fund Long-term capital growth Large-cap common stocks
- ---------------------------------------------------------------------------------------------------------------------------
Disciplined Capital Appreciation Fund Long-term capital appreciation Common stocks in a broad capitalization
range
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ There can be no assurance that any Fund will achieve its objective.
Catholic Financial Services Corporation, a Wisconsin corporation registered as
an investment adviser under federal securities laws, is the adviser to the
Funds. Catholic Financial Services Corporation and The Catholic Funds have
retained sub-advisers to manage the day-to-day selection and management of each
Fund's investments. The sub-advisers are: Todd Investment Advisors, Inc. for The
Catholic Equity Income Fund, Peregrine Capital Management, Inc. for The Catholic
Large-Cap Growth Fund, and Vantage Investment Advisors for The Catholic
Disciplined Capital Appreciation Fund.
[ICON]
Investment Philosophy Statement
The investment philosophy for The Catholic Funds, Inc. (the "Catholic Funds" or
"CFI") is based on two principles:
1. Prudent Financial Stewardship The investments in CFI will be managed using
strategies aimed at producing results that will help investors reach their
financial goals, without taking unwarranted risks.
2. Responsible Catholic Stewardship CFI will strive to invest the assets of each
of its managed funds in companies whose primary products, services and
activities are substantially consistent with certain core Catholic values.
The Board of Directors of CFI has selected, from among many important core
Catholic values, the following values for us to apply when we select investments
for the Funds:
- - SANCTITY OF HUMAN LIFE--Human life deserves protection from the moment of
conception.
- - NO UNJUST WARS--The indiscriminate destruction of civilians is wrong, even in
the course of an otherwise justifiable war.
- - DIGNITY OF THE HUMAN PERSON--Every person is entitled to be treated with
dignity and justice because every human being is created in the image and
likeness of God.
The Board of Directors selected these three particular core Catholic values
using the following criteria. First, each of the selected values is grounded in
the very fundamental Catholic value that every person is made in the image and
likeness of God. Second, each relates to the protection of innocent victims who
have no choice or whose choices are extremely limited under the relevant
circumstances, such as unborn children, civilians in war and people who need to
earn a living. Third, we can practically and efficiently implement each of
these values in making day-to-day investment decisions, and the Board of
Directors effectively can monitor and direct compliance with these values.
The Board of Directors may from time to time select different or additional core
Catholic values that CFI will implement in its investment program. For example,
the Board of Directors may determine to add or substitute a selected core
Catholic value in response to official doctrinal statements of the Catholic
Church. In any event, the Board of Directors has the sole and exclusive
authority to select the core Catholic values that we will implement in the
Funds' investment programs.
The Board of Directors will establish guidelines from time to time that we will
use to identify and select investments for each of the Funds. These guidelines
will help focus our attention on factors that are relevant in identifying
investments for each Fund which are consistent with the selected core Catholic
values, but we necessarily will exercise some subjective judgment when applying
these guidelines to any specific facts and circumstances. The Board of Directors
will monitor investment selections that we make for each Fund, and will provide
specific direction and modify and refine the guidelines as necessary so that, in
the judgment of the Board of Directors, our investment selections remain
consistent with the selected core Catholic values. The Board of Directors'
decision on these matters will be final. If a Fund owns a company that is found
to be an inappropriate investment, we will sell its securities in an orderly
and prudent manner.
By application of these values, each Fund will avoid investing in companies:
- - That directly participate in abortion;
- - That derive more than 5% of their revenues directly from the production or
development of indiscriminate weapons of mass destruction (for example,
biological and chemical weapons and first-strike nuclear weapons); or
- - Whose employment or other business practices are substantially inconsistent
with the dignity and primacy of the human person (for example, not providing a
livable wage as dictated by the standards of the particular region; not
providing safe, sanitary or humane working conditions; discriminating against
individuals on account of sex, race, color, social condition, language or
religion; or marketing harmful products to children).
From time to time the Funds may decide to avoid investing in companies
because of other business activities or practices that may be determined to
be inconsistent with core Catholic values. For example, the guideline above
regarding producers and developers of weapons of mass destruction states that
the Funds will avoid investing in companies that derive more than 5% of their
revenues DIRECTLY from the production or development of indiscriminate weapons
of mass destruction. We have stated this test in terms of revenues derived
directly from these activities, because objective data regarding indirect
revenues generally is difficult to obtain and verify. However, if we obtain
reliable information establishing that a company derives more than 5% of its
revenues INDIRECTLY from the production or development of indiscriminate
weapons of mass destruction, we may determine that an investment in that company
is inconsistent with the selected core Catholic values. We also may determine
that an investment in a particular company is inconsistent with the selected
core Catholic values based on considerations and factors different from those
specifically listed above.
Investors should bear in mind that, because we consider only certain core
Catholic values when selecting investments for the Funds, it is likely that the
Funds from time to time will own stocks of companies that engage in business and
employment activities and practices that may be perceived by some to be
inconsistent with important core Catholic values other than those described
above.
Because each Fund will purchase only those securities which meet both the Fund's
investment objective and the responsible Catholic stewardship principle, the
return on securities chosen may be lower than if the Funds considered only
financial and other traditional criteria when selecting investments. However,
the sub-advisers have analyzed the anticipated effects of the core Catholic
values screen on their selections of investments for the Funds, and they have
assured CFI's Board of Directors that in their judgment the application of these
core Catholic values will not significantly hamper the ability of the Funds' to
achieve their investment objectives.
[ICON]
General Risks to Consider
MARKET RISK Common stock prices overall will rise and fall over short and even
extended periods. The equity markets tend to move in cycles, and a Fund's net
asset value (and therefore its share price) will fluctuate with these price
changes and market fluctuations. You could lose money investing in the Funds.
OBJECTIVE RISK Objective risk is the risk that a Fund's stocks may not
fluctuate in the same manner as the stock markets generally. This is because
each of the Funds selects stocks in accordance with defined objectives, policies
and principles. For example, when selecting stocks a Fund will focus on
specified sizes of companies, companies that pay dividends, or companies meeting
other specified criteria, in addition to applying its Catholic stewardship
principles. As a result, a Fund's investment portfolio likely will not be
representative of the stock market generally.
ADVISER RISK Adviser risk is the risk that the adviser's application of
investment strategies will be less successful than other funds and the Funds
may underperform other funds. In addition, because the Funds invest
consistent with core Catholic values, the adviser may have fewer investments
to choose from than other funds and the return on the securities the Funds
can purchase may be less than other similar securities.
ADVISER'S BACKGROUND The adviser has no prior experience in managing
mutual funds, nor has it previously been engaged in the business of providing
investment advice on either a discretionary or non-discretionary basis. In part
for this reason, CFI and the adviser have retained the services of experienced
sub-advisers to provide day-to-day portfolio management and other advisory
services to the Funds. CFI's Board of Directors, on the adviser's
recommendation, selected each sub-adviser based on its experience and past
performance record in managing assets under investment objectives, programs and
strategies relevant to those of the particular Fund, including experience with
implementing social and ethical screens similar to CFI's responsible Catholic
stewardship principle. The adviser also has hired personnel experienced with
conducting and managing administrative functions and distribution operations of
mutual funds. Even with these steps, there can be no assurance that the adviser
successfully can manage the advisory, administrative and distribution functions
for each of the Funds, or that it and the sub- advisers will be successful in
achieving the investment objective of any of the Funds.
Other risks specific to each Fund are discussed in the following summary
information about the individual Funds.
Equity Income Fund
[ICON]
Investment Objective
The Equity Income Fund seeks both a reasonable level of current income and long-
term capital growth.
[ICON]
Who Should Invest
The Fund is intended for investors who seek capital growth and, at the same
time, wish to receive current income at a level that is greater than the average
dividend rates of common stocks generally.
[ICON]
Investment Policies
The Fund seeks reasonable income by investing primarily in a diversified
portfolio of dividend paying stocks that have a market capitalization of at
least $1.0 billion and that exhibit long-term growth potential. The Fund's
portfolio manager normally invests at least 75% of the Fund's total assets in
these securities. The Fund has the flexibility, however, to invest the balance
of its assets in all types of domestic securities, including investment-grade
bonds and convertible fixed-income securities (some of which may be below
investment grade), and non-dividend paying stocks. The Fund also may invest in
securities of foreign issuers traded on a U.S. national securities exchange or
the NASDAQ National Market System. Investing in foreign securities offers
potential benefits not available from investing solely in the securities
of domestic issuers, including the opportunity to invest in foreign issuers
that appear to offer growth potential, or in foreign countries with economic
policies or business cycles different from those in the U.S.
The Fund's portfolio manager considers several factors in determining which
individual securities to buy, hold or sell. The portfolio manager looks for
companies with fundamental "value" or "growth" potential that the manager
believes is not reflected in their current market prices. Value potential means
that a company's stock price is low relative to its perceived worth. Growth
potential is the perception that a company's earnings will grow faster than
inflation and the economy in general, and that these earnings will be reflected
in a higher stock price. In researching a company, the portfolio manager
ordinarily will place a substantial emphasis on the company's prospects for
above average sales and earnings growth per share, sound balance sheet and
financial condition, product development, marketing capabilities and strength
of management. The portfolio manager also attempts to spread the Fund's holdings
among many different companies and industries.
In selecting fixed-income securities, the Fund typically buys only investment-
grade bonds (rated Baa3/BBB- and higher). The Fund may purchase debt securities
that are convertible into equity securities and may invest up to 5% of its
assets in convertible securities rated BB. The Fund also may invest up to 5% of
its assets in a single non-Treasury issue. Non-Treasury issues include
corporate, asset-backed, and mortgage-backed bonds and notes.
[ICON]
Investment Risks
OBJECTIVE AND MARKET RISK The value of the Fund's investments (and
therefore its share price) will vary in response to many factors. Stock values
fluctuate in response to the activities of individual companies and general
market and economic conditions. Dividend paying stocks typically have lower
growth potential than other types of stock, and their prices therefore do not
tend to increase as rapidly as other stocks during periods of general increases
in stock prices.
INTEREST RATE RISK Bond values fluctuate based on several factors, but
primarily credit quality and interest rate changes. Because the Fund primarily
will buy investment grade bonds, the principal risk associated with its bond
investments is interest rate risk. Interest rate risk is the possibility that
rising interest rates will cause declines in the prices of the bonds that the
Fund holds. Bond prices typically move in the opposite direction of interest
rates, with the prices of bonds with longer maturities typically changing more
than the prices of those with shorter maturities.
CREDIT RISK Non-treasury bonds in which the Fund may invest are subject to
credit risk. Credit risk is the possibility that the borrower of the bond
proceeds, or the guarantor of the bond, will not be able to make principal and
interest payments on a timely basis. Creditworthiness could deteriorate because
of general economic conditions, adverse developments that affect the industry in
which the borrower conducts its business, or adverse developments that affect
the borrower's business uniquely. If the creditworthiness of an issuer of a
bond held by the Fund were to deteriorate, the value of the bond likely would
drop.
CONVERTIBLE SECURITIES Convertible bonds that the Fund may purchase often
are rated below investment grade or are not rated, because they fall below debt
obligations and just above equity in order of preference on a company's balance
sheet. As a result, an issuer with investment grade senior debt may offer
convertible bonds which are below investment grade. Below investment grade
convertible bonds (sometimes referred to as junk bonds) in which the Fund may
invest generally are more vulnerable to default than higher grade bonds, and
are more susceptible to adverse business, financial and economic conditions
that reduce the capacity and willingness of borrowers to make scheduled interest
and principal payments. The market prices of these convertible bonds may
fluctuate more in times of economic uncertainty than is the case for higher
rated bonds. Also, because the bond is convertible into the company's common
stock, the market price of the bond tends to rise and fall with the price of
the company's common stock. Under some market conditions, this feature can cause
the bond's market price to be more erratic than junk bonds generally.
FOREIGN SECURITIES Investing in foreign securities involves special additional
risks and considerations not typically associated with investing in securities
of U.S. companies. These include: fluctuation in value of foreign portfolio
investments due to changes in currency rates and control regulations (e.g.,
currency blockage); lack of public information about foreign issuers; lack of
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic issuers and greater difficulties in commencing
lawsuits against foreign issuers.
Past Performance
The Fund began on May 3, 1999 and has not completed a calendar year. The
Fund's only audited annual report covers the period from May 3, 1999 through
September 30, 1999. Because this period contains only one calendar quarter, the
third quarter of 1999, no best or worst quarter return can be designated. The
return for the Fund's sole calendar quarter was -5.53% as compared to the S & P
500 return of -6.24%. As with all investments, past performance is not a
guarantee of future results. The S & P 500 R is a broad-based composite
unmanaged index that represents the average performance of a group of 500
widely-held publicly traded stocks.
Large-Cap Growth Fund
[ICON]
Investment Objective
The Large-Cap Growth Fund seeks long-term capital growth by investing primarily
in high quality growth stocks of companies with large market capitalizations.
[ICON]
Who Should Invest
The Fund is intended for investors who want long-term capital appreciation, can
tolerate fluctuations in portfolio value, and have no need for current income
from the Fund.
[ICON]
Investment Policies
The Fund seeks fast growing companies with the potential to produce superior
long-term results. The Fund's investment will consist primarily of stocks with
market capitalizations above $5 billion. These companies have exhibited rapid
earnings gains in relation to the average of companies in the S&P 500 Index,
with superior returns on capital and below average levels of debt. Stocks are
selected with a long-term investment horizon, allowing full participation in
company success with low portfolio turnover and transaction costs. The Fund
typically will be fully invested in equities and will avoid short-term market
timing.
Under normal market conditions, the Fund's portfolio manager will invest at
least 75% of the Fund's total assets in the common stocks of companies with
large market capitalizations. Companies whose capitalizations fall below $5
billion after purchase continue to be considered large-capitalization for
purposes of this 75% policy. Companies with large market capitalizations
typically have a large number of publicly held shares and a high trading volume,
resulting in a high degree of liquidity. These tend to be quality companies with
strong management organizations.
The Fund has the flexibility to invest in other market capitalizations and
various types of domestic securities and in the securities of foreign issuers
traded on a U.S. national securities exchange or the NASDAQ National Market
System. Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers, including the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different
from those of the U.S.
When, in our judgment , the market for large capitalization stocks poses an
undue risk to the Fund in the short term, the Adviser temporarily may invest
without limitation in preferred stocks and investment-grade debt instruments,
to adjust its investment exposure. While the Adviser will use these defensive
strategies only to protect the Fund against anticipated adverse market
developments, the Fund will miss out on growth in the large capitalization
market that potentially could occur during the period that the Fund is in a
defensive posture.
[ICON]
Investment Risks
The value of the Fund's investments will depend not only on the movement of the
market in general, but on factors that affect the individual stocks held in the
Fund's portfolio, such as the companies' financial performance, management and
business trends. The Fund's focus on investment in fast growing companies means
that the market ratios of its portfolio companies (such as the price to earnings
ratio) may be higher than those of large capitalization companies in general.
Also, in recent years, companies that have made disappointing earnings
announcements, especially those with high market ratios, have experienced
sharp and immediate declines in their stock prices.
Investing in foreign securities involves special additional risks and
considerations not typically associated with investing in securities of U.S.
companies. These include: fluctuation in value of foreign portfolio
investments due to changes in currency rates and control regulations (e.g.,
currency blockage); lack of public information about foreign issuers; lack of
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic issuers and greater difficulties in commencing
lawsuits against foreign issuers.
Past Performance
The Fund began on May 3, 1999 and has not completed a calendar year. The
Fund's only audited annual report covers the period from May 3, 1999 through
September 30, 1999. Because this period contains only one calendar quarter, the
third quarter of 1999, no best or worst quarter return can be designated. The
return for the Fund's sole calendar quarter was -7.47% as compared to the S & P
500 return of -6.24%. As with all investments, past performance is not a
guarantee of future results. The S & P 500 R is a broad-based composite
unmanaged index that represents the average performance of a group of 500
widely-held publicly traded stocks.
Disciplined Capital Appreciation Fund
[ICON]
Investment Objective
The Disciplined Capital Appreciation Fund seeks long-term growth of capital with
controlled risk by investing in a diversified portfolio, primarily in common
stocks of companies in a broad range of market capitalizations.
[ICON]
Who Should Invest
This Fund is intended for investors who seek long-term capital appreciation, can
tolerate fluctuations in portfolio value, and have no need for current income
from the Fund.
[ICON]
Investment Policies
The Fund is managed using a systematic, computer driven model to objectively
identify attractive stocks solely based on numerical measures of growth and
value. Consistent and continuous application of this model ensures that stocks
are evaluated solely on their relative values, not influenced by analyst biases.
By analyzing a large universe of stocks daily, new investment opportunities can
be discovered. This disciplined process of stock selection has built in
portfolio risk controls that limit industry and individual stock concentration.
The portfolio is diversified with approximately 100 stocks across many
industries, normally with the majority of the issues in companies with market
capitalizations between $1 and $10 billion at the time of purchase. Under
normal market conditions, the Fund expects to be fully invested in common
stocks, thereby providing investors with broad-based equity exposure. A
significant portion of the Fund's total assets will be invested in companies
with medium market capitalizations. The Fund has the flexibility to invest
in other market capitalizations and other types of securities, including the
securities of foreign issuers traded on a U.S. national securities exchange or
on the NASDAQ National Market System.
When, in our judgment the market poses an undue risk to the Fund in the short
term, we temporarily may invest without limitation in preferred stocks and
investment-grade debt instruments, to adjust its investment exposure. While we
will use these defensive strategies only to protect the Fund against anticipated
adverse market developments, the Fund will miss out on growth in the large
capitalization market that potentially could occur during the period that the
Fund is in a defensive posture.
[ICON]
Investment Risks
The Fund is subject both to objective risk and general market risk. The value of
the Fund's investments will vary in response to many factors. Stock values
fluctuate in response to the activities of individual companies and general
market and economic conditions. Investing in medium capitalization stocks may
involve greater risk than investing in large capitalization stocks, because
they can be subject to more abrupt or erratic market movements.
Investing in foreign securities involves special additional risks and
considerations not typically associated with investing in securities of U.S.
companies. These include: fluctuation in value of foreign portfolio investments
due to changes in currency rates and control regulations (e.g., currency
blockage); lack of public information about foreign issuers; lack of uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers and greater difficulties in commencing lawsuits
against foreign issuers.
Past Performance
The Fund began on May 3, 1999 and has not completed a calendar year. The
Fund's only audited annual report covers the period from May 3, 1999 through
September 30, 1999. Because this period contains only one calendar quarter,
the third quarter of 1999, no best or worst quarter return can be designated.
The return for the Fund's sole calendar quarter was -5.83% as compared to the
S & P 500 R return of -6.24%. As with all investments, past performance is not
a guarantee of future results. The S & P 500 R is a broad-based composite
unmanaged index that represents the average performance of a group of 500
widely-held publicly traded stocks.
[ICON]
Portfolio Turnover
In general, the greater the volume of buying and selling by a mutual fund, the
greater the impact that brokerage commissions and other transaction costs will
have on its return. A mutual fund with turnover expenses in excess of 100%
engages in a high volume of buying and selling, and likely will pay more
brokerage commissions and may realize more taxable gains than a mutual fund
with less turnover.
High portfolio turnover rates may also cause substantial net short-term
gains, and any distributions resulting from such gains will be ordinary income
for federal income tax purposes.
Fees and Expenses
[ICON]
General Information
Fees and expenses are important considerations in choosing a mutual fund. That's
because you, as a shareholder, pay the costs of operating a fund, plus any
transaction costs associated with buying, selling, or exchanging shares.
Shareholder transaction expenses are charges you pay when you buy shares in one
of the Funds, redeem (sell) shares by wire or exchange shares by telephone. In
the case of purchases and exchanges, shareholder transaction expenses reduce
the amount of your payment that is invested in shares of the mutual fund. In
the case of sales, shareholder transaction expenses reduce the amount of the
sale proceeds returned to you.
Annual fund operating expenses, on the other hand, are expenses that a mutual
fund pays to conduct its business, including investment advisory fees and the
costs of maintaining shareholder accounts, administering the fund, providing
shareholder services, and other activities of the mutual fund. Annual fund
operating expenses are deducted from a mutual fund's assets, and therefore
reduce its total return.
THE TABLE BELOW DESCRIBES THE FEES AND EXPENSES THAT YOU MAY
PAY IF YOU BUY AND HOLD SHARES OF THE FUNDS.
Shareholder Transaction Expenses (fees paid directly from your investment)
Disciplined
Equity- Large-Cap Capital
Income Growth Appreciation
Fund Fund Fund
- -----------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) (1) 4.00% 4.00% 4.00%
- -----------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
- -----------------------------------------------------------------------
Redemption Fees (2) None None None
- -----------------------------------------------------------------------
Exchange Fee (3) None None None
- -----------------------------------------------------------------------
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Disciplined
Equity- Large-Cap Capital
Income Growth Appreciation
Fund Fund Fund
- -----------------------------------------------------------------------
Management Fees .80% .90% .90%
- -----------------------------------------------------------------------
Distribution (12b-1) Fees .25% .25% .25%
- -----------------------------------------------------------------------
Other Expenses (4) 3.73% 3.55% 3.68%
- -----------------------------------------------------------------------
Total Fund Operating Expenses 4.78% 4.70% 4.83%
- -----------------------------------------------------------------------
Expense Reimbursement (5) 3.13% 2.95% 3.08%
- -----------------------------------------------------------------------
Net Expenses 1.65% 1.75% 1.75%
- -----------------------------------------------------------------------
(1) To determine if you qualify for a lower sales charge, see "How to Invest".
(2) The Funds charge $12.00 for each wire redemption
(3) The Funds charge $5.00 for each telephone exchange
(4) Other Expenses are based on estimated amounts for the current fiscal year.
(5) The Adviser commits, for the current fiscal year, to reimburse the Funds
to the extent that Annual Total Fund Operating Expenses exceed 1.65% for the
Equity Income Fund and 1.75% for the Large-Cap Growth and Disciplined Capital
Appreciation Funds.
[ICON]
Example
The following example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in a Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher
or lower, based on these assumptions your costs would be*:
1 Year 3 Years
- ------------------------------------------------------------
Equity Income Fund $859 $1,781
- ------------------------------------------------------------
Large-Cap Growth Fund $852 $1,760
- ------------------------------------------------------------
Disciplined Capital Appreciation Fund $864 $1,795
*With reimbursement, the costs would be as follows: Equity Income Fund, $561 and
$900, Large-Cap Growth Fund, $571 and $929 and Disciplined Capital Appreciation
Fund $571 and $929. The Adviser commits, for the current fiscal year, to
reimburse the Funds to the extent that Annual Total Fund Operating Expenses
exceed 1.65% for the Equity Income Fund and 1.75% for the Large-Cap Growth and
Disciplined Capital Appreciation Funds.
Management
[ICON]
Adviser
Catholic Financial Services Corporation ("CFSC"), a Wisconsin corporation
organized in 1994, is the investment adviser and distributor for the Funds.
As the adviser, CFSC makes the investment decisions for the Funds. As the
distributor, CFSC sells the Funds' shares to investors. The Board of Directors
of CFSC has committed to distribute a minimum of 10% of its net operating
income before taxes to support Catholic education and vocations and other
Catholic causes. This is a voluntary commitment that CFSC may elect to
discontinue at anytime. CFSC presently does not anticipate that it will have
any operating income prior to the year 2003.
The majority of the outstanding stock of CFSC is held by Catholic Knights
Financial Services, Inc., which functions as an administrative holding company
and is a wholly-owned subsidiary of Catholic Knights Insurance Society
("Catholic Knights"). Catholic Knights is a non-profit, non-stock membership
organization, licensed to do business as a fraternal benefit insurance society.
The remaining outstanding stock in CFSC is owned by Catholic Order of Foresters
(a non-profit, non-stock Illinois fraternal benefit insurance society) and
Catholic Knights of America (a non-profit, non-stock Missouri fraternal
benefit insurance society). All three fraternals are formed to unite Catholics
and their families for social, religious, and benevolent purposes and for
intellectual improvement and to provide quality financial products
and fraternal benefits to their members. All of the stock in CFSC is owned by
these three fraternal benefit insurance societies, hereafter referred to as the
Catholic Fraternal Alliance.
The Catholic Fraternal Alliance provides ordinary and interest sensitive
whole and universal life insurance, term insurance and a variety of fixed
return annuity products to individual Catholics in more than 30 states. As a
group, the Catholic Fraternal Alliance rank in the top 15% of life insurers in
the U.S. in terms of life insurance in force and total assets. The Catholic
Fraternal Alliance has more than 220,000 members who belong to one of more
than 800 local lodges throughout the U.S. The Catholic Fraternal Alliance
provides $7 million annually in charitable and benevolent funding, as well as
related services to its members, their Catholic parishes and communities.
The Catholic Fraternal Alliance has nearly $5 billion of life insurance in
force and nearly $1 billion of total assets under management.
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Advisory Agreements
Pursuant to the terms of the Advisory Agreements, and subject to the
supervision of the Funds' Board of Directors, the adviser and sub-advisers
manage the investment and reinvestment of the Funds' assets, provide the Funds
with personnel, facilities, and administrative services, and supervise the
Funds' daily business affairs. We formulate and implement a continuous
investment program for the Funds consistent with each Fund's investment
objectives, policies and restrictions.
We provide office space as well as executive and other personnel to the Funds.
In addition to investment advisory fees, each Fund incurs the following
expenses: legal, auditing and accounting expenses; directors' fees and expenses;
insurance premiums; brokers' commissions; taxes and governmental fees; expenses
of issuing and redeeming shares; organizational expenses; expenses of
registering or qualifying shares for sale; postage and printing for reports
and notices to shareholders; fees and disbursements of the Custodian and
Transfer Agent; certain expenses with respect to membership fees of industry
associations; and any extraordinary expenses, such as litigation expenses.
For providing the services listed above, the adviser receives an annual
advisory fee of 0.80 of 1% of daily net assets for the Equity Income Fund and
.90 of 1% for the Large-Cap Growth and Disciplined Capital Appreciation Funds.
Out of these fees, the adviser pays the sub-advisory fees applicable to each
Fund.
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Sub-Advisers
We have engaged Todd Investment Advisors, Inc., Peregrine Capital Management,
Inc. and Vantage investment Advisors to serve as sub-advisers to the
Funds.
Equity Income Fund
Todd Investments Advisors, Inc. ("Todd"), 101 South Fifth Street, Suite 3160,
Louisville, KY 40202, serves as the sub-adviser for the Equity Income Fund. The
Western and Southern Life Insurance Company ("Western-Southern") indirectly
owns all of the outstanding capital stock of Todd through Western-Southern's
investment advisor subsidiary, Fort Washington Investment Advisors, Inc.
("FWIA"). Under our direction and control, Todd makes the day-to-day investment
decisions for the Fund. Todd is registered as an investment adviser under the
securities laws.
Curtiss M. Scott, Jr., CFA, manages the day-to-day Fund investments. Mr. Scott
has served as a senior portfolio manager at Todd since May 1996. Prior to 1996,
Mr. Scott served as partner and managing director of Executive Investment
Advisors, Louisville, Kentucky. Mr. Scott has been managing equity portfolios
since 1978.
Todd receives the following annual fee: 0.38 of 1% on the first $10 million;
0.35 of 1% on the next $40 million; and 0.30 of 1% on average daily net assets
over $50 million (payable from the 0.80% annual advisory fee paid to the
adviser).
Western-Southern is an Ohio mutual life insurance company founded in 1888.
Western-Southern, together with its operating companies, has approximately
$14.0 billion in total assets. FWIA manages most of the assets of the
Western-Southern group of companies, and also manages assets of third parties
on a discretionary basis. Western-Southern and FWIA are each headquartered in
Cincinnati, Ohio.
Large-Cap Growth Fund
Peregrine Capital Management, Inc. ("Peregrine"), a wholly-owned subsidiary
of Wells Fargo & Company serves as the sub-adviser for the Large-Cap Growth
Fund. Peregrine is located at LaSalle Plaza, 800 LaSalle Avenue, Suite 1850,
Minneapolis, Minnesota 54402-2018. Peregrine is registered as an investment
adviser under the securities laws.
John S. Dale, CFA and Gary Nussbaum, CFA, serve as co-managers of the Large
Cap Growth Fund. Mr. Dale and Mr. Nussbaum are both senior vice presidents and
portfolio managers at Peregrine. Prior to joining Peregrine in 1987, Mr. Dale
was with Norwest Corp. Mr. Nussbaum has been with Peregrine since 1990.
Prior to 1990, he worked as an investment research officer with Shawmut
National Corporation/Connecticut National Bank.
Peregrine receives the following annual fee: 0.50 of 1% on the first $25
million; 0.45 of 1% on next $25 million; and 0.40 of 1% on average daily net
assets over $50 million (payable from the 0.90% annual advisory fee paid to
the adviser).
Disciplined Capital Appreciation Fund
Vantage Global Advisors, Inc. dba Vantage Investment Advisors ("Vantage"),
405 Lexington Avenue, 34th Floor, New York, NY 10174 , serves as the sub-adviser
to the Disciplined Capital Appreciation Fund. Vantage, which is registered as an
investment adviser under the securities laws, is wholly owned by Lincoln
National Corporation, located in Fort Wayne, Indiana.
Enrique Chang and Christopher P. Harvey manage the day-to-day Fund
investments. Mr. Chang has served as chief investment officer since 1999 and
director of research and portfolio management since November 1997. Prior to
Joining Vantage, Mr. Chang worked for J&W Seligman from April 1997 to November
1997, and served as director of quantitative analysis and strategy with General
Reinsurance Corporation from October 1993 to March 1997. Mr. Harvey has been
with Vantage since 1993 and is currently vice president, portfolio manager and
research. He has co-managed the Fund since September 30, 1999.
Vantage receives the following fee: 0.50 of 1% on the first $50 million; 0.45
of 1% on the next $50 million; and 0.40 of 1% of the Fund's average daily net
assets over $100 million (payable from the 0.90% annual advisory fee paid to
the adviser).
Vantage has agreed to waive 10 basis points from the fee schedule for the
first two years of the Fund's operations or until its total assets reach $35
million, whichever occurs first.
Using Mutual Funds in an Investment Program
Mutual funds provide small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment can buy part of a diversified
portfolio. That portfolio is managed by investment professionals, relieving
you of the need to make individual stock or bond selections. You also enjoy
conveniences, such as daily pricing and liquidity. The portfolio, because of
its size, has lower transaction costs on its trades than most individuals
would have.
In choosing a mutual fund as an investment vehicle, you are giving up some
investment decisions, but must still make others. The decisions you don't
have to make are those involved with choosing individual securities. We will
perform that function. In addition, we will arrange for the safekeeping of
securities, auditing the annual financial statements, and daily valuation of
the Fund, as well as other functions.
You, however, retain at least part of the responsibility for an equally
important decision. This decision involves determining a portfolio of mutual
funds that balances your investment goals with your tolerance for risk. It is
likely that this decision may include the use of more than one fund of the CFI
Family of Funds.
How to Invest
You can buy shares in the Funds through a licensed registered representative, by
mail or wire transfer. You buy shares at net asset value ("NAV") plus any sales
charge that applies (the "public offering price" or "POP"). The maximum sales
charge is 4.00% of the public offering price (or 4.17% of the NAV). We do not
impose a sales charge when an investor redeems shares. We may reduce or waive
sales charges on certain purchases. The adjacent chart shows the sales charge
percentage for shares at different dollar level purchases.
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Reducing Your Sales Charge
We may reduce your sales charges on purchases of shares under certain
circumstances, described below. If you are eligible for one of these
reductions, you must tell us or your Registered Representative at the time you
purchase shares or you may not receive the reduction. Directors and employees
of the Funds and the Adviser and Sub-Advisers and transfer agent, fraternal
benefit societies and their employees, (including sales representatives),
persons employed by brokers owned by fraternal benefit societies or that sell
shares of the Funds and persons licensed to receive commissions for sales of
the Funds may not pay a sales charge on their purchases or on purchases made by
family members residing with them. We reserve the right to stop or change these
reductions at any time.
50% REDUCTION: Non-profit organizations, charitable trusts, and endowments pay
only 50% of the normal sales charge so long as there is a meaningful Catholic
affiliation. The reduction does not apply to retirement plan accounts.
RIGHT OF ACCUMULATION: You can combine all your share purchases across
Funds and accounts, including the purchases of your immediate family, when
computing your current sales charge for shares. Immediate family means your
spouse and your children who are dependents for federal income tax purposes.
Eligible shares for combination in computing the sales charge include those
contained in individual, joint tenant, gift/transfer to minor, trust and IRA
accounts. Employer-sponsored plans can link the shares in the plan for
purposes of calculating a sales charge reduction. Shares of the Catholic Money
Market Fund are not eligible shares for Right of Accumulation. However, any
Funds' shares that have been exchanged INTO the Catholic Money Market Fund are
eligible shares for Right of Accumulation. Right of Accumulation includes the
value of all shares at the public offering price.
Maximum
Sales 50% Sales
Maximum Charge Charge
Sales as a % 50% Sales as a %
Your Charge of Net Charge of Net
Investment as a % Amount as a % Amount
Account of POP* Invested* of POP* Invested*
- -------------------------------------------------------------------------
Less than $25,000 4.00% 4.17% 2.00% 2.04%
- -------------------------------------------------------------------------
$25,000 but less than $50,000 3.75% 3.90% 1.88% 1.91%
- -------------------------------------------------------------------------
$50,000 but less than $100,000 3.00% 3.09% 1.50% 1.52%
- -------------------------------------------------------------------------
$100,000 but less than
$250,000 2.00% 2.04% 1.00% 1.01%
- -------------------------------------------------------------------------
$250,000 but less than
$500,000 1.00% 1.01% 0.50% 0.50%
- -------------------------------------------------------------------------
$500,000 and up* 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------
* Registered Representatives may receive compensation not exceeding 80% of the
sales charge on amounts purchased and may receive compensation not exceeding
0.35 of 1% of amounts invested at $500,000 and up. Dealers receive the entire
sales charge.
If you expect to invest $25,000 or more during the next 13 months, you can
reduce your sales charge by signing a Letter of Intent. A Letter of Intent
permits you to pay the sales charge that would be applicable if you add up all
shares of the Funds that you agree to buy within the 13-month period. You can
include purchases in accounts you have linked for purposes of the Right of
Accumulation, and you can backdate a Letter of Intent to include purchases
made in the last 90 days. However, we do not recalculate the sales charge on
prior purchases.
You do not have any obligation to buy additional shares. During the Letter of
Intent period, we will escrow shares totaling 5% of the investment goal. If
for some reason you do not fulfill the Letter of Intent within the 13-month
period, we will sell escrowed shares to cover any additional sales charges due
from you. You should sign only one Letter of Intent for all accounts combined
under Right of Accumulation.
Minimum Purchase Amount
Per Account Per Transaction
Minimum
Purchase Amount
Per Account Initial Additional
Per Transaction Purchase Purchase
- -----------------------------------------------------------------
Regular Account* $1,000 $50
IRA* $ 250 $50
Automatic Investment Plan $ 50 $25
UGMA or UTMA** $ 250 $50
* Indicates purchases made by check or wire.
** Depending on state laws, you can set up a custodial account under the
Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act
(UTMA). The custodial accounts provide a way to give money to a child and
obtain tax benefits. Under current federal law an individual can give up to
$10,000 a year per child without paying federal gift tax.
The Funds may waive the minimum investment amount needed to open or add to an
account.
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Opening a New Account
You can open a new account through a licensed Registered Representative, or
directly by mail. A complete, signed application is required for new accounts.
Also, you will need to fill out an application if after you open your account,
you subsequently purchase shares of a Fund that was not selected in your initial
application.
Your CFSC Registered Representative is ready to help you open a new account. If
you do not know the name of your Registered Representative, please call The
Catholic Funds. toll-free at 1-877-222-2402.
To open your account, just follow these steps:
1. Please review this prospectus.
2. Please complete a Catholic Funds application and New Account Form, which
should be attached to the prospectus, for every different account registration.
For example, you need separate applications for an individual account in the
Equity Income Fund and an IRA invested in the Equity Income Fund. If you don't
complete the application properly, your purchase may be delayed or rejected.
3. Mail your completed application and check to: REGULAR MAIL The Catholic
Funds, Inc. P.O. Box 05710 Milwaukee, WI 53205-5710
EXPRESS MAIL/PRIVATE DELIVERY The Catholic Funds, Inc. 1100 W. Wells
Street Milwaukee, WI 53233
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Accounts for Retirement Savings
Shareholders, their enterprises as well as Catholic organizations may establish
their own individual or business retirement plans. These accounts may offer you
tax advantages. You should consult with your legal and/or tax adviser before you
establish a retirement plan.
A third-party maintenance fee may apply to some retirement accounts. Please
review plan documents for more information.
CFSC accepts investments from the retirement plans listed below:
- Traditional IRA (Individual Retirement Account);
- "Rollover" IRA;
- Roth IRA (annual contributions are not tax deductible, but distributions
may not be subject to income tax);
- SEP-IRA (Simplified Employee Pension Plan);
- SIMPLE-IRA (Savings Incentive Match Plan for Employees);
- Education IRA - (annual contributions are not tax deductible, but
distributions may not be subject to income tax);
- 403(b)(7) retirement plan account (legal restrictions apply to your
ability to withdraw funds from this account); and
- Qualified retirement plans.
We do not provide any prototype qualified retirement plans, i.e., pension,
profit sharing and 401(k) plans, although these plans may invest in the Funds.
Buying Additional Shares for Your Account
After you have opened an account with The Catholic Funds, you can make
additional investments of $50 or more to that account by mail, telephone
or wire. Please put your name and your Catholic Funds account number on the
face of all investment checks and make sure your checks are payable to "The
Catholic Funds." Some retirement accounts, such as the 403(b)(7) Retirement
Plan, may allow you to make investments only by deferring part of your salary.
BY MAIL. Purchase orders should be sent to:
REGULAR MAIL
The Catholic Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
EXPRESS MAIL/PRIVATE DELIVERY
The Catholic Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
Third Floor
615 East Michigan Street
Milwaukee, WI 53202
BY TELEPHONE: Before you can buy additional shares by telephone, you must
have selected the Request for Telephone Purchase option on the application.
Once you have selected this option, you can call Firstar Mutual Fund Services
at 1-877-222-2402 and have money withdrawn from your bank checking or savings
account to make your investment. You pay the next price computed after the
Funds have received your investment from your bank.
BY WIRE. If your bank is a member of or has a corresponding relationship with a
member of the Federal Reserve System, you can buy shares of the Funds by wire
transfer by following these steps:
1. Call Firstar Mutual Fund Services at 1-877-222-2402 and provide the
following information:
- Your account registration;
- The name of the Fund(s) in which you want to invest;
- Your address;
- Your Social Security or tax identification number;
- The dollar amount;
- The name of the wiring bank; and
- The name and the telephone number of the person at your bank who the Funds
can contact about your purchase.
Firstar must receive your wire order before the closing of the NYSE (normally
3:00 p.m. Central Time) in order for you to receive that day's price.
2. Instruct your bank to use the following instructions when wiring funds:
WIRE TO: FIRSTAR BANK MILWAUKEE, N.A.
CREDIT: FIRSTAR MUTUAL FUND SERVICES, LLC
ACCOUNT 112-952-137
ROUTING NUMBER 075000022
FURTHER CREDIT: (NAME OF FUND)
(SHAREHOLDER ACCOUNT NUMBER)
(SHAREHOLDER REGISTRATION)
Please call 1-877-222-2402 prior to sending the wire in order to obtain a
confirmation number and to ensure prompt and accurate handling of funds.
We are not responsible for the consequences of delays resulting from the
banking or Federal Reserve Wire system, or from incomplete wiring instructions.
Account Registration
How you register your account with the Funds can affect your legal interests
as well as the rights and interests of your family and beneficiaries. You
should always consult with your legal and/or tax adviser to determine the
account registration that best meets your needs. You must clearly identify the
type of account you want on your Catholic Funds application. Some account
registrations may require additional documents.
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Automatic Investment Plans
To make regular investing more convenient, you can open an automatic investment
plan with an initial investment of $50 and a minimum of $25 per account per
transaction after you start your plan. Using The Catholic Funds Automatic
Investment Plans, you may implement a strategy called dollar cost averaging.
Dollar cost averaging involves investing a fixed amount of money at regular
intervals. When you "dollar cost average," you purchase more shares when the
price is low and fewer shares when the price is high. Dollar cost averaging
does not ensure a profit or protect against a loss during declining markets.
Because such a program involves continuous investment regardless of changing
share prices, you should consider your ability to continue the program through
times when the share prices are low. Your CFSC Registered Representative is
ready to help you set up one of the following plans.
THE BANK DRAFT PLAN allows you to make regular investments in the Funds
directly from your checking or savings account. The following rules and/or
guidelines apply:
- -You must open the account with a check for at least $50 or have an existing
account;
- - You can select up to two transaction dates per month (at least ten days
apart). If you don't select the date(s), the money will automatically be
withdrawn from your bank account on the 5th (and 15th) of the month;
- - To start the plan or change your bank account, you must notify Firstar
Mutual Fund Services, LLC in writing at least 13 business days prior to the
transaction date. All bank account owners must sign the bank draft plan card;
- - To stop or change the amount of your plan, you must notify Firstar Mutual
Fund Services, LLC in writing or via telephone at 1-877-222-2402 at least 5
business days prior to the transaction date; and
- - Make sure you have enough money in your bank account to make the investment
so you can avoid paying any possible fees from your bank or our Transfer Agent.
THE PAYROLL DEDUCTION SAVINGS AND INVESTMENT PLAN allows
employees of participating companies to invest in the Funds through direct
deduction from their paychecks or commission checks.
All payroll deductions for retirement plan accounts will be considered current
year contributions unless we are notified in writing.
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Purchases
Your purchase must be in U.S. dollars and your check must be drawn on a U.S.
bank. We do not accept cash, traveler's checks or third party checks. If your
check does not clear, we will cancel your purchase and hold you liable for any
losses and any applicable fees, currently $20. When you buy shares by any
type of check, electronic funds transfer or automatic investment purchase,
you may not be able to redeem the shares you purchased for 12 days or until
your check has cleared, whichever occurs first. This does not limit your right
to redeem shares. Rather, it operates to make sure that payment for the shares
purchased has been received by the Transfer Agent.
Selling Your Shares
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In General
You can sell your shares on any business day. When you sell your shares you
receive the net asset value per share. If we receive your request in good order
before the close of the New York Stock Exchange ("NYSE") (normally 3:00 p.m.
Central Time) you will receive that day's price. If we receive your redemption
request in good order after the close of the NYSE, or on a holiday, weekend or
a day the NYSE is closed, we will process your transaction at the closing
price on the next business day. A redemption request is in good order when it
contains signatures (including signature guarantees when needed) and the
required information listed below, and any legally required additional
information and documentation. You can sell shares by mail, telephone or wire.
BY MAIL.
Please include the following in your redemption request:
- - Names(s) of the account owner(s);
- - Account number(s);
- - Amount you want to receive or the number of shares you want to sell;
- - Tax withholding information, if required, for retirement accounts; and
- - Signatures of all account owners.
YOU MUST HAVE YOUR SIGNATURE GUARANTEED FOR WRITTEN SELL
ORDERS IF:
1. You want to sell shares with a value of more than $25,000;
2. You want the proceeds sent to an address other than the one listed for your
account; or
3. You want the check payable to someone other than the account owner(s);
You can usually obtain a signature guarantee at commercial banks, trust
companies or broker-dealers. A SIGNATURE GUARANTEE IS NOT THE SAME THING AS A
NOTARIZED SIGNATURE. Accounts held by a corporation, trust, estate,
custodianship, guardianship, partnership or pension and profit sharing plan may
require more documentation.
REGULAR MAIL
The Catholic Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
EXPRESS MAIL/PRIVATE DELIVERY
The Catholic Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
Third Floor
615 East Michigan Street
Milwaukee, WI 53202
BY TELEPHONE
To make investing in the Funds more convenient, you may buy, sell or exchange
shares by telephone. We have established reasonable procedures to protect
against anyone who attempts to use the telephone service fraudulently. Please
be aware, however, that The Catholic Funds, the Custodian, the Transfer Agent
or any of their employees will not be liable for losses suffered by you that
result from following telephone instructions reasonably believed to be
authentic after verification pursuant to these procedures. Once you have made
a telephone request you cannot cancel or modify it! During periods of extreme
volume caused by dramatic economic or stock market changes, or when the
telephone system is not fully functional, you may have difficulty reaching us
by telephone and telephone transactions may be difficult to implement at those
times. We reserve the right to temporarily discontinue or limit
the telephone purchase, redemption or exchange privileges at any time during
such periods.
The following rules and/or guidelines for selling by telephone apply:
- - You must call Firstar Mutual Fund Services at 1-877-222-2402;
- - You must provide a form of personal identification to confirm your identity;
- - You can sell up to $25,000 worth of shares;
- - The Funds will mail a check only to the person(s) named on the account
registration and only to the address on the account;
- - Retirement plan accounts are not eligible;
- - You can do only one telephone redemption within any 30-day period for each
authorized account;
- - Telephone redemptions are not available if the address on the account has been
changed in the preceding 60 days; and
- - If we receive your request in good order before the close of the NYSE
(normally 3:00 p.m. Central Time), you will receive that day's price.
BY WIRE
The following rules and/or guidelines for selling by wire apply:
- - You must give us written authorization, including the signatures of all the
owners of the account, on The Catholic Funds Application or Account Change Form;
- - You can make a wire redemption for any amount;
- - You pay a $12.00 fee for each wire redemption;
- - We must receive your request in good order before the close of the NYSE
(normally 3:00 p.m. Central Time) for you to receive that day's price; and
- - Wire redemptions may not be available to you for all retirement account plans.
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Systematic Withdrawal Plan
You can have money automatically withdrawn from your account(s) on a regular
basis by using our systematic withdrawal plan. The plan allows you to receive
funds or pay a bill at regular intervals. The following rules and/or guidelines
apply:
- - You need a minimum of $10,000 in your account to start the plan;
- - You must withdraw a minimum of $100 monthly;
- - You can select the date(s) on which the money is withdrawn. If you don't
select the date(s), we will withdraw the money automatically from your account
on the 15th of the month;
- - To start the plan or change the payee(s), you must notify us in writing at
least 13 business days prior to the first withdrawal and you must have all
account owner(s) sign the appropriate form;
- - To stop or change your plan, you must notify us at least five business days
prior to the next withdrawal; and
- - Because of sales charges, you must consider carefully the costs of frequent
investments in and withdrawals from your account.
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Closing Small Accounts
All Catholic Funds account owners share the high cost of maintaining accounts
with low balances. To reduce this cost, we reserve the right, subject to legal
restrictions, if any, to close an account when, due to a redemption, its
value is less than $1,000. This does not apply to retirement plan accounts,
automatic investment plans or UGMA/ UTMA accounts. We will notify you in
writing before closing any account, and you will have 30 days to add money to
bring the balance up to $1,000.
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Reinstatement Privilege
You have 60 days after you sell shares to reinvest the dollar amount you
redeemed without having to pay another sales charge. You will pay the net
asset value per share on the day when you've made your reinstatement and not
on the day when you sold your investment. The following rules apply:
- - You may use this privilege only once per account;
- - You must send a written request and a check for the amount you wish to
reinvest to the Fund's transfer agent;
- - The dollar amount you reinvest cannot exceed the dollar amount you sold; and
- - The sale of your shares may be a taxable event despite the reinstatement.
Exchange Privilege
Fund to Fund Exchange. You may exchange shares in one Fund for shares in
another Fund either by telephone or in writing without paying any additional
sales charge. However, a $5 service fee will be charged for each telephone
exchange request (no charge is imposed for written exchange requests). The
following rules and/or guidelines apply:
- - Minimum investment rules may apply when you open a new account by
exchanging shares, and you may have to submit a new application (i.e., you must
exchange at least $1,000 worth of shares to another Fund and fill out a new
account form, if you have not previously opened an account in the fund into
which shares will be exchanged);
- - You may only exchange into Funds that are legally available for sale in
your state;
- - You may have a taxable gain or loss as a result of an exchange;
- - We reserve the right to modify or terminate the exchange privilege upon
60 days' written notice to each shareholder prior to the modification or
termination taking effect.
Money Market Exchange. Shareholders may exchange all or a portion of their
shares in the Funds for shares of the Catholic Money Market Fund at their
relative net asset values and may also exchange back into another Catholic
Fund without the imposition of any charges or fees. (However, if you purchase
shares of the Catholic Money Market Fund directly and then exchange into the
Funds, you will be subject to a sales charge.) Exchanges into the Catholic
Money Market Fund are subject to the minimum purchase and redemption amounts
set forth in the prospectus for the Catholic Money Market Fund. No charge
to shareholders is imposed for this exchange; however, the transfer agent
will charge a $5.00 fee for each exchange transaction that is executed by
telephone. Before exchanging into the Catholic Money Market Fund, please
read the prospectus, which may be obtained by calling 1-877-222-2402.
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Reinvestment Of Fund Distributions.
Unless you request otherwise on your account application, we will reinvest
all of your income dividends and/or capital gains distributions into
additional shares of the Fund that generated the distribution. You will not
pay a sales charge on these shares. You also can have your distributions paid
in cash. When you receive a distribution you may have to pay taxes whether or
not you reinvested them or had them paid out to you in cash. If you have
requested cash distributions and we cannot locate you, we will reinvest your
dividends.
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Distribution Fees
In addition to the sales charge deducted at the time of purchase, we have
adopted a plan under rule 12b-1 of the Investment Company Act of 1940 that
allows each Fund to pay distribution fees for the sale and distribution of
its shares and continuing services to shareholder accounts. Each Fund pays
0.25 of 1% of its average daily net assets.
Because these fees are paid on each Fund's net assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
Shareholder Information
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Share Price Calculation
The price at which you purchase and redeem Fund shares is equal to the net
asset value (NAV) per share (plus any applicable sales charge in the case of
purchases) determined on the effective date of the purchase or redemption.
Each Fund's NAV per share is calculated at the close of the regular trading
session of the NYSE, which is usually 3:00 p.m. Central Time. We do not
calculate the net asset value for the Funds on the days when the NYSE is
closed for trading. NAV EQUALS TOTAL ASSETS MINUS LIABILITIES DIVIDED BY NUMBER
OF SHARES OUTSTANDING.
We value securities owned by a Fund at current market value. For securities
with readily available market quotations, we use the quotations to price the
security. If a security does not have a readily available quotation, we value
the security as determined in good faith in accordance with guidance and
policies established by the Board of Directors. The Board of Directors
approves the use of pricing services to assist us in the determination of net
asset values.
[ICON]
Dividends, Capital Gains and Taxes
The Funds will distribute any net investment income and any net realized long or
short-term capital gains at least annually. Each Fund may also pay a special
distribution to comply with federal tax requirements. You may choose to have
your dividends and capital gain distributions automatically reinvested in shares
of the Funds at net asset value without a sales charge or you may take them in
cash.
If your account is a taxable account, you will pay tax on dividends and
distributions from the Funds whether you receive them in cash or additional
shares.
If you redeem a Fund's shares or exchange them for shares of another Fund, any
gain on the transaction may be subject to tax.
Each Fund intends to make distributions that will either be taxed as ordinary
income or capital gains. Capital gains distributions may be taxable at
different rates depending on the length of time the Fund has held the assets
sold.
Federal law requires us to withhold 31% of a shareholder's reportable payments
(which include dividends, capital gain distributions and redemption proceeds)
for those who have not properly certified that the Social Security or other
taxpayer identification number they provided is correct and that he or she is
not subject to backup withholding. We do not provide information on state and
local tax consequences of owning shares in the Funds.
This section summarizes some of the consequences under current federal tax
law of an investment in the Funds. It is not a substitute for personal tax
advice. Consult your personal tax advisor about the potential tax consequences
of an investment in the Funds under all applicable tax laws.
Year 2000 Compliance
Many currently installed computer systems and software products used by
businesses worldwide will need to be upgraded to accept four digit entries to
distinguish 21st century dates from 20th century dates. Significant uncertainty
exists concerning the potential costs and effectiveness of efforts to achieve
"Year 2000" compliance, and the possible consequences of failure.
Year 2000 issues potentially could affect the Funds in a number of ways. For
example, each Fund relies on service providers for such critical daily
operations as pricing, custody, selection of portfolio securities, tracking of
purchases and sales of portfolio securities in automated systems, transfer
agent functions (including purchases and redemptions of Fund shares, opening
and closing of shareholder accounts, calculating and recording automatic
investments and dividend and capital gain reinvestments, etc.), and the like.
The Year 2000 problem in an automated system used to provide these services
could disrupt the service or corrupt the integrity of the information
generated and the transactions recorded. Also, trading prices reported by the
stock exchanges and pricing services could be affected by
Year 2000 problems in the systems they use for this purpose. Such developments
could materially impair the ability of a Fund to conduct day-to-day operations.
Also, issuers of securities that the Funds own face Year 2000 risks. They could
experience disruptions or failures of their own internal automated systems or
those of their principal customers or vendors on whose purchases, products and
services their own businesses and operations depend. These developments could
adversely affect the price of such an issuer's securities or hinder the
ability of the issuer to calculate and make interest and principal or dividend
payments on its securities. If a significant number of issuers of securities
held by a Fund were to experience such difficulties, the value of the Fund's
shares could decline.
We have assured CFI's Board of Directors that we have taken reasonable steps
designed to assure that the stock selection, administration pricing, custodial
and transfer agent services provided to the Funds will not be disrupted or
otherwise affected by Year 2000 issues. These steps include extensive diagnosis
of systems to identify Year 2000 problems, the correction and upgrading of the
systems to eliminate those problems, and the testing of the corrections and
upgrades to verify resolution of the problem. While those firms are incurring
costs in these efforts, they have advised CFI's Board of Directors that they
do not anticipate that they will find it necessary to increase fees for their
services solely to recover these costs. The advisers also have reported that
they consider Year 2000 readiness as a factor in determining which securities
to purchase and sell for the Funds. In this regard, the advisers typically
rely on publicly available information, which may not be complete
or up to date.
CFI's Board of Directors and management will continue to monitor this
situation, and we will continue to give periodic reports and updates on
the progress being made by us and the Funds' other service providers. Despite
the precautions being taken, because of the inherent uncertainty of the scope
of the Year 2000 readiness issue worldwide (as evidenced by the various levels
of severity and catastrophe that numerous "experts" and commentators have
predicted), we can provide no absolute assurance that CFI and its service
providers will be able to identify all Year 2000 compliance risks faced by the
Funds, or that the measures they are taking to resolve those issues and their
contingency plans successfully will enable the Funds to conduct day-to-day
operations across the change to the Year 2000, or to protect the Funds from
potential economic loss.
Financial Highlights
The financial highlights table is intended to help you understand The Funds and
their performance since inception. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information
has been audited by Arthur Andersen, LLP, whose report, along with the Fund's
financial statements, are included in the annual report. You may obtain an
annual report free by calling 877-222-2402.
Equity Income Fund
Per-Share Data
Period from May 3, 1999
Through September 30, 1999
Net Asset Value Beginning of Period $10.00
Income from Investment Operations
Net Investment Income (loss) 0.05
Net Realized and Unrealized Gain (loss)
On Investments (0.46)
Total from Investment Operations (0.41)
Distributions from
Net Investment Income (0.05)
Net Realized Capital Gains
Total Distributions (0.05)
Net Asset Value - End of Period $9.54
Total Return (not annualized)* (4.06)%
Supplemental Data and Ratios
Net Assets at End of Period $3,311,602
Ratio of Expenses to Average Net Assets** 1.65%
Ratio of Investment Income (loss)
to Average Net Assets** 1.47%
Portfolio Turnover Rate 18%
Note - The ratio of net operating expenses to net assets and
the ratio of net investment income to average net assets are
annualized
*Total Return assumes reinvestment of all dividends and distributions but does
not reflect any deduction for sales charge.
**If the Fund had paid all its expenses the Ratio of Expenses to Average Net
Assets would have been 4.78%% and the Ratio of Investment Income (Loss) to
Average Net Assets would have been (1.66%).
Financial Highlights
Large-Cap Growth Fund
Per-Share Data
Period from May 3, 1999
Through September 30, 1999
Net Asset Value Beginning of Period $10.00
Income from Investment Operations
Net Investment Income (loss) (0.03)
Net Realized and Unrealized Gain (loss)
On Investments (0.19)
Total from Investment Operations (0.22)
Distributions from
Net Investment Income
Net Realized Capital Gains
Total Distributions 0
Net Asset Value - End of Period $9.78
Total Return (not annualized)* (2.20)%
Supplemental Data and Ratios
Net Assets at End of Period $3,570,108
Ratio of Expenses to Average Net Assets** 1.75%
Ratio of Investment Income (loss)
to Average Net Assets** (0.92)%
Portfolio Turnover Rate 7%
Note - The ratio of net operating expenses to net assets and
the ratio of net investment income to average net assets are
annualized
*Total Return assumes reinvestment of all dividends and distributions but does
not reflect any deduction for sales charge.
**If the Fund had paid all its expenses the Ratio of Expenses to Average
Net Assets would have been 4.70% and the Ratio of Investment Income (Loss) to
Average Net Assets would have been -(3.87%).
Financial Highlights
Disciplined Capital Appreciation Fund
Per-Share Data
Period from May 3, 1999
Through September 30, 1999
Net Asset Value Beginning of Period $10.00
Income from Investment Operations
Net Investment Income (loss) (less than one cent)
Net Realized and Unrealized Gain (loss)
On Investments (0.31)
Total from Investment Operations (0.31)
Distributions from
Net Investment Income
Net Realized Capital Gains
Total Distributions
Net Asset Value - End of Period $9.69
Total Return (not annualized)* (3.10)%
Supplemental Data and Ratios
Net Assets at End of Period $3,365,592
Ratio of Expenses to Average Net Assets** 1.75%
Ratio of Investment Income (loss)
to Average Net Assets** (0.03)%
Portfolio Turnover Rate 2%
Note - The ratio of net operating expenses to net assets and
the ratio of net investment income to average net assets are
annualized
*Total Return assumes reinvestment of all dividends and distributions but does
not reflect any deduction for sales charge.
**If the Fund had paid all its expenses the Ratio of Expenses to Average Net
Assets would have been 4.83%% and the Ratio of Investment Income (Loss) to
Average Net Assets would have been (3.11%).
Board of Directors
. Thomas Bausch
. J. Michael Borden
. Daniel Doucette
. Allan Lorge
. Thomas Munninghoff
. Daniel Steininger -- Chairman of the Board
. Conrad Sobczak
. David Vollmar
Officers
. Allan Lorge -- President
. Theodore Zimmer -- Vice President
. Russell Kafka -- Treasurer
. Joseph Wreschnig -- Secretary
. Joann Hull -- Assistant Secretary
. Cheri Nagan -- Assistant Secretary
Investment Adviser
Catholic Financial Services Corporation
1100 West Wells Street
Milwaukee, WI 53233
Independent Accountants
Arthur Andersen LLP
Legal Counsel
Quarles & Brady LLP
Transfer Agent and Custodian
Firstar Mutual Fund Services, LLC
Sub-Advisers
The Catholic Equity Income Fund
Todd Investment Advisors, Inc.
101 S. 5th Street, Suite 3160
Louisville, KY 40202
The Catholic Large-Cap Growth Fund
Peregrine Capital Management, Inc.
800 LaSalle Avenue, Suite 1850
Minneapolis, MN 55402
The Catholic Disciplined Capital Appreciation Fund
Vantage Investment Advisors.
405 Lexington Avenue
New York, NY 10174
Catholic Fraternal Alliance
Catholic Knights Insurance Society
Daniel Steininger, President
1100 West Wells Street
Milwaukee, WI 53233
Catholic Order of Foresters
Robert Ciesla, High Chief Ranger
355 Shuman Boulevard
PO Box 3012
Naperville, IL 60566-7012
Catholic Knights of America
John Kenawell, President
3525 Hampton Avenue
St. Louis, MO 63139-1980
(Back Cover)
For More Information
If you would like more information about the Funds, you may call Shareholder
Services at 1-877-222-2402 to request a free copy of the Funds' Statement of
Additional Information (SAI), Annual or Semiannual Reports, or to ask other
questions about the Funds. The SAI has been filed with the Securities and
Exchange Commission SEC and is legally a part of the Prospectus.
To view these documents, along with other related documents, you can visit the
SEC's Internet web site (http://www.sec.gov) or the Commission's Public
Reference Room in Washington, D.C. Information on the operation of the public
reference room can be obtained by calling 1-800-SEC-0330. Additionally,
copies of this information can be obtained, for a duplicating fee, by writing
the Public Reference Section of the Commission, Washington, D.C. 20549-6009.
Investment Company File No. 811-09177
Logo
Catholic Financial Services Corporation
Member NASD
Not available in all states
STATEMENT OF ADDITIONAL INFORMATION
January 31, 2000
THE CATHOLIC FUNDS, INC.
1100 W. Wells Street
Milwaukee, WI 53233
(877) 222-2402
Equity Income Fund
Large-Cap Growth Fund
Disciplined Capital Appreciation Fund
This Statement of Additional Information is not a Prospectus, but contains
additional information which should be read in conjunction with The
Catholic Funds, Inc. Prospectus dated January 31, 2000 for the above
named funds. A Prospectus may be obtained at no charge by writing to
the Funds' Transfer Agent, Firstar Mutual Fund Services, LLC, at 615 East
Michigan Street, Milwaukee, Wisconsin 53202 or by calling the Transfer
Agent at 1-(877) 222-2402.
In this Statement of Additional Information, The Catholic Funds, Inc. may
be referred to as CFI, and the Equity Income Fund, Large-Cap Growth
Fund and the Disciplined Capital Appreciation Fund may be referred to
collectively as the "Funds" or individually as a "Fund." An additional fund,
The Catholic Money Market Fund, is described in a separate prospectus
and statement of additional information that you may obtain by calling 1-
(877) 222-2402. Terms not otherwise defined have the same meaning as
in the Prospectus.
TABLE OF CONTENTS
Page
----
FUND HISTORY.......................................................
INVESTMENT TECHNIQUES AND STRATEGIES...............................
INVESTMENT RESTRICTIONS............................................
MANAGEMENT.........................................................
CONTROL PERSONS....................................................
THE INVESTMENT ADVISER.............................................
PERFORMANCE INFORMATION............................................
DETERMINATION OF NET ASSET VALUE PER SHARE........................
DISTRIBUTION OF SHARES............................................
DISTRIBUTION PLAN.................................................
LETTERS OF INTENT.................................................
REGULATED INVESTMENT COMPANY STATUS...............................
DESCRIPTION OF SHARES.............................................
PORTFOLIO TRANSACTIONS AND BROKERAGE..............................
PAYMENTS "IN KIND"................................................
ACCOUNTING, FULFILLMENT, CUSTODIAN AND TRANSFER AGENT
SERVICES..........................................................
COUNSEL AND INDEPENDENT PUBLIC
ACCOUNTANTS.......................................................
FINANCIAL STATEMENTS..............................................
FUND HISTORY
The CFI family of funds consists of four separate series of CFI, a
Maryland corporation registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act").
CFI was organized by Catholic Financial Services Corporation (CFSC) in
1998. All of the stock of CFSC, a Wisconsin corporation, is owned by a
consortium of Catholic fraternal benefits insurance societies (the "Catholic
Fraternal Alliance"). The majority of the stock of CFSC is held by Catholic
Knights Financial Services, Inc., a wholly-owned subsidiary of Catholic
Knights Insurance Society, which functions as an administrative holding
company. Further information regarding the Catholic Fraternal Alliance is
contained in the Prospectus under "Management."
INVESTMENT TECHNIQUES AND STRATEGIES
The investment objective and policies of the Funds are described in the
Prospectus. Set forth below is supplemental information about those
policies and the types of securities in which the Funds may invest, as well
as the strategies the Funds may use to try to achieve their objectives.
Repurchase Agreements
Each Fund may acquire securities subject to repurchase agreements for
liquidity purposes to meet anticipated redemptions, or pending the
investment of the proceeds from sales of Fund shares, or pending the
settlement of purchases of portfolio securities. In a repurchase
transaction, a Fund acquires a security from, and simultaneously resells it
to, an approved vendor. An "approved vendor" is a U.S. commercial bank
or the U.S. branch of a foreign bank or a broker-dealer which has been
designated a primary dealer in government securities which must meet
credit requirements set by the Board of Directors from time to time. The
repurchase price exceeds the purchase price by an amount that reflects
an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these transactions run
from day to day, and delivery pursuant to the resale typically will occur
within one to five days of the purchase. Repurchase agreements are
considered "loans" under the 1940 Act, collateralized by the underlying
security. The Funds' repurchase agreements require that at all times while
the repurchase agreement is in effect, the value of the collateral must
equal or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Adviser will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
INVESTMENT RESTRICTIONS
The following are fundamental policies for each Fund, and together with
each Fund's investment objective described in the Prospectus, cannot be
changed without the vote of a "majority"of the outstanding voting securities
of that Fund. Such a "majority" vote is defined in the 1940 Act as the vote
of the holders of the lesser of: (i) 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (ii) more than 50% of the
outstanding shares. For any Fund, we may not:
(1) invest more than 5% of its net assets, taken at value at the time of
each investment, in the securities (including repurchase agreements) of
any one issuer (for this purpose, the issuer(s) of a debt security being
deemed to be only the entity or entities whose assets or revenues are
subject to the principal and interest obligations of the security), except that
up to 25% of a Fund's net assets may be invested without regard to this
limitation and provided that such restrictions shall not apply to obligations
issued or guaranteed by the U.S. government or any agency or
instrumentality thereof;
(2) purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities;
(3) make short sales of securities or maintain a short position, or write,
purchase, or sell puts, calls, straddles, spreads, or combinations thereof,
except for short sales against the box;
(4) make loans to other persons, except that we reserve freedom of
action, consistent with a Fund's other investment policies and restrictions
and as described in the prospectus and this statement of additional
information, to: (a) invest in debt obligations, including those that are
either publicly offered or of a type customarily purchased by institutional
investors, even though the purchase of such debt obligations may be
deemed the making of loans; and
(b) enter into repurchase agreements;
(5) issue senior securities or borrow, except that we may borrow for a
Fund in amounts not in excess of 10% of its net assets, taken at current
value, and then only from banks as a temporary measure for extraordinary
or emergency purposes (we will not borrow money for the Funds to
increase income, but only to meet redemption requests that otherwise
might require untimely dispositions of portfolio securities; interest paid on
any such borrowing will reduce a Fund's net income);
(6) mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by a Fund, except
as may be necessary in connection with and subject to the limits in
restriction (5);
(7) underwrite any issue of securities, except to the extent that we
purchase securities directly from an issuer thereof in accord with a Fund's
investment objectives and policies may be deemed to be underwriting or
to the extent that in connection with the disposition of portfolio securities
we may be deemed an underwriter for the Fund under federal securities
laws;
(8) purchase or sell commodities or commodity contracts;
(9) invest more than 25% of a Fund's total assets, taken at current
value at the time of each investment, in securities of issuers whose
principal business activities are in the same industry in any single industry
or issuer (except the U.S. government or any agency or instrumentality
thereof);
(10) invest in oil, gas or mineral related programs or leases except as
may be included in the definition of public utilities, although we may invest
in securities of enterprises engaged in oil, gas or mineral exploration for a
Fund;
(11) invest in repurchase agreements maturing in more than seven
days or in other securities with legal or contractual restrictions on resale if,
as a result thereof, more than 10% of a Fund's net assets (taken at current
value at the time of such investment) would be invested in such securities;
(12) purchase more than 10% of the outstanding voting securities of an
issuer or invest for the purpose of exercising control or management.
Non-Fundamental Investment Restrictions
The following operating policies of the Funds are not fundamental policies
and, as such, may be changed by a majority vote of the Board of Directors
without shareholder approval. These additional restrictions provide that for
any Fund, we may not:
(1) purchase or sell real estate, or real estate limited partnership
interests provided that we may invest in securities for a Fund secured by
real estate or interests therein or issued by companies that invest in real
estate or interests therein;
(2) invest in any security if as a result a Fund would have more than
5% of its net assets invested in securities of companies which, together
with any pre decessors, have been in continuous operation for less than
three years; or
(3) purchase securities or other investment companies, if the purchase
would cause more than 10% of the value of a Fund's net assets to be
invested in investment company securities provided that' (a) no investment
will be made in the securities of any one investment company if
immediately after such investment more than 3% of the outstanding voting
securities of such company would be owned by a Fund or more than 5%
of the value of a Fund's net assets would be invested in such company;
and (b) no restrictions shall apply to a purchase of investment company
securities in connection with a merger, consolidation acquisition or
reorganization.
MANAGEMENT
The Fund Directors and Officers and their principal occupations and
business affiliations during the past five years are listed below.
<TABLE>
<CAPTION>
Principal Occupation
Name, Age and Address Position with CFI During Past Five Years
- --------------------- ----------------- ----------------------
<S> <C> <C>
Daniel J. Steininger* Chairman of the Board of President of Catholic Knights
1100 West Wells Street Directors and Director Insurance Society since 1981
Milwaukee, WI 53233
D.O.B. 5/1/45
Allan G. Lorge* President, Chief Secretary/Treasurer of
1100 W. Wells St. Executive Officer, and Catholic Knights Insurance
Milwaukee, WI 53233 Director Society since 1986
D.O.B. 12/9/49
Thomas A. Bausch, Ph.D. Director Professor of Management,
Marquette University Marquette University
College of Business College of Business
Straz Hall Administration since 1978;
606 N. 13th Street formerly a director for 10 years
Milwaukee, WI 53233 of Heartland Group, Inc.
D.O.B. 06/06/38 (mutual fund family)
J. Michael Borden Director Chief Executive Officer of
P.O. Box 591 HUFCOR (1978-present)
Janesville, WI 53547 Trustee, Jefferson Fund Group
D.O.B. 12/21/36 Mutual Funds (1995 present)
Daniel R. Doucette Director Director of Business
250 North Sunnyslope Road Strategy and Mergers/
Suite 250 Acquisitions, Unicom Corp.
Brookfield, WI 53005 (Financial services and
D.O.B. 9/03/49 insurance); prior thereto,
President and Chief
Executive Officer, Milwaukee
Mutual Insurance Co. since
1991
Thomas J. Munninghoff* Director President, Munninghoff,
430 Reading Road Lange and Co. (accounting
Cincinnati, OH 45202 firm) since 1983, Director
D.O.B. 8/27/47 Catholic Order of Foresters,
since 1999
Conrad L. Sobczak Director Retired, formerly President
6015 Washington Boulevard and CEO, Family Health
Wauwatosa, WI 53213 Systems, Inc. from 1987-1998
D.O.B. 10/20/38
Principal Occupation
Name, Age and Address Position with CFI During Past Five Years
- --------------------- ----------------- ----------------------
David L. Vollmar Director Retired, formerly Partner, Arthur
1700 Arrowhead Court Andersen LLP
Elm Grove, WI 53122
D.O.B. 12/15/33
Mark K. Forbord Chief Financial Officer Controller of Catholic Knights Financial
1100 W. Wells St. Services, Inc. since April 19, 1996; Controller
Milwaukee, WI 53233 of Catholic Brokerage Services Corp. since
D.O.B. 1/21/54 April 19, 1996; Senior Financial Analyst of Catholic
Knights Insurance Society since July 1995;
Instructor at The University of Wisconsin-Milwaukee
since Jan. 1986; and Instructor at Cardinal-
Stritch University since September 1990
Russell J. Kafka Treasurer Director of Catholic Knights Financial Services,
1100 W. Wells St. Inc. since June 1994; Director of Catholic Brokerage
Milwaukee, WI 53233 Services Corp. since November 1994; and Vice
D.O.B. 6/20/44 President-Investments of Catholic Knights Insurance
Society since January 1985
Joseph F. Wreschnig Secretary Director of Mutual Funds Operations, Catholic
1100 W. Wells St. Financial Services Corp., since January 1999; prior
Milwaukee, WI 53233 to January 1999, Assistant Vice President and
D.O.B. 6/30/50 Secretary of AAL Capital Management Corporation
Assistant Secretary, The AAL Mutual Funds
Assistant secretary, The AAL Variable Product
Series Fund, Inc.
Theodore F. Zimmer Vice President General Counsel, Catholic Knights Insurance
1100 W. Wells St. Society since September 1997; Partner at Miller,
Milwaukee, WI 53233 Simon, McGinn and Clark (law firm) from
D.O.B. 12/17/40 October 1996 to Sept. 1997; and prior to October
1996, Partner at Quarles & Brady LLP
*Directors who are "Interested Persons" (as defined in the 1940 Act).
Each of the Funds pays an equal portion of the fees and expenses of the
five Directors who are officers, director of employees or affiliated persons
of the Adviser. Such fees consist of an annual retainer in the amount of
$500 and $250 per Board meeting attended. The estimated annual
compensation to be paid by CFI to each of the Directors is set forth in the
table below:
</TABLE>
<TABLE>
<CAPTION>
Aggregate Com- Total Compensation
Name and Position pensation From the Retirement Benefits From the Funds
With CFI Funds and Fund Complex
-------- ------------------ ------------------- ------------------
<S> <S> <S> <S>
Thomas A. Bausch, Ph.D. $1,500 $0 $1,500
J. Michael Borden
Director $1,500 $0 $1,500
Daniel R. Doucette
Director $1,500 $0 $1,500
Conrad L. Sobczak
Director $1,500 $0 $1,500
David L. Vollmar
Director $1,500 $0 $1,500
</TABLE>
CONTROL PERSONS
As of December 29, 1999 the 3 fraternal benefit societies that own the
adviser own the following percentages of the respective Funds:
Equity Large- Disciplined
Income Cap Capital
Fund Growth Appreciation
Fund Fund
Catholic Knights of America 2% 3% 2%
Catholic Knights Insurance
Society 69% 65% 70%
Catholic Order of Foresters 14% 13% 14%
Equity Large- Disciplined
Income Cap Capital
Fund Growth Appreciation
Fund Fund
Officers and Directors of the
Funds 2% 3% 2%
THE INVESTMENT ADVISER
Each Fund is managed by CFSC pursuant to an Investment Advisory
Agreement. The Agreement was approved by the Board of Directors,
including a majority of the Directors who are not Interested Persons of the
Funds or of CFSC on February 17, 1999.
Basic information as to the Adviser and the Investment Advisory
Agreement is set forth in the Prospectus under "Management".
Todd Investment Advisors, Inc., Peregrine Capital Management, Inc.
and Vantage Global Investment Advisors, Inc. dba Vantage Investment
Advisors. have been engaged to serve as Sub-Advisers to the Equity
Income Fund, Large-Cap Growth Fund and Disciplined Capital
Appreciation Fund, respectively.
The Sub-Advisory Agreements require the Sub-Advisers, at their expense,
to provide the Funds with adequate office space, facilities and equipment,
and to provide and supervise the activities of all administrative and clerical
personnel required to provide effective corporate administration for the
Funds, including the compilation and maintenance of records with respect
to its operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for continuous
public sale of shares of the Funds.
Expenses not expressly assumed by the Adviser under the Investment
Advisory Agreement, the Sub-Advisers under the Sub-Advisory
Agreements, or by the Distributor under the Distribution Agreement are
paid by the Funds.
The Sub-Advisory Agreements provide that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard for obligations and duties under the Sub-
Advisory Agreement, the Sub-Adviser is not liable for any loss resulting
from a good faith error or omission on its part with respect to any of its
duties thereunder.
For the period ended September 30, 1999 the adviser received the
following fees from the Funds:
Equity Income - $8,784
Large-Cap Growth - $10,377
Disciplined Capital Appreciation Fund - $10,012
Pursuant to its agreement to reimburse Fund expenses, the adviser made
the following reimbursements for the period ended September 30, 1999:
Equity Income - $34,367
Large-Cap Growth - $34,038
Disciplined Capital Appreciation Fund - $34,081
PERFORMANCE INFORMATION
From time to time the Funds may advertise their "total return" (The Funds
do not advertise yield). "Total return" of the Funds refers to the annual
average return for 1, 5, and 10-year periods (or the portion thereof during
which a Fund has been in existence). Total return is the change in
redemption value of shares purchased with an initial $1,000 investment,
assuming the reinvestment of dividends and capital gain distributions and
the redemption of the shares at the end of the period.
Performance information should be considered in light of the particular
Fund's investment objectives and policies, characteristics and quality of its
portfolio securities, and the market conditions during the applicable period,
and should not be considered as a representation of what may be
achieved in the future. Investors should consider these factors and
possible differences in the methods used in calculating performance
information when comparing a Fund's performance to performance figures
published for other investment vehicles.
Average annual total return is computed by finding the average annual
compounded rates of return over the 1, 5, and 10-year periods (or the
portion thereof during which a Fund has been in existence) ended on the
date of the respective Fund's balance sheet that would equate the initial
amount invested to the ending redeemable value, according to the
following formula:
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
periods at the end of the 1, 5, or 10 year periods
(or fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication, and
will cover 1, 5, and 10 year periods or a shorter period dating from the
effectiveness of the Registration Statement of the Funds. In calculating the
ending redeemable value, all dividends and distributions by a Fund are
assumed to have been reinvested at net asset value as described in the
Prospectus on the reinvestment dates during the period. Total return, or
"T" in the formula above, is computed by finding the average annual
compounded rates of return over the 1, 5, and 10 year periods (or
fractional portion thereof) that would equate the initial amount invested to
the ending redeemable value.
The Funds total returns through December 31, 1999 were as follows:
On Gross Amount Invested (from inception):
Equity Income Fund -2.45%
Large Cap Growth Fund 17.75%
Disciplined Capital Appreciation Fund 4.17%
On Net Amount Invested (from inception)
Equity Income Fund 1.64%
Large Cap Growth Fund 22.70%
Disciplined Capital Appreciation Fund 8.55%
Each Fund may, from time to time, compare its performance to other
mutual funds with similar investment objectives and to the industry as a
whole, as quoted by ranking services and publications, such as Lipper
Analytical Services, Inc., Morningstar, Inc., FORBES, FORTUNE,
MONEY, BUSINESS WEEK, VALUE LINE, INC. AND THE WALL
STREET JOURNAL. These rating services and magazines rank the
performance of the Funds against all funds over specified periods and in
specified categories.
DETERMINATION OF NET ASSET VALUE PER SHARE
Each Fund's shares are sold at their next determined net asset value per
share, plus any applicable sales charge. Each Fund determines the net
asset value per share by subtracting the Fund's liabilities (including
accrued expenses and dividends payable) from the Fund's total assets
(the value of the securities a Fund holds plus cash or other assets,
including interest accrued but not yet received) and dividing the result by
the total number of shares outstanding.
The next determined net asset value per share will be calculated as of the
close of regular trading on the New York Stock Exchange at least once
every weekday, Monday through Friday, except on (i) customary national
business holidays which result in the closing of the New York Stock
Exchange which are New Year's Day, Martin Luther King, Jr., Day,
Washington's Birthday, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving, and Christmas; (ii) days when no security is
tendered for redemption and no customer order is received; or (iii) days
when changes in the value of the investment company's portfolio
securities do not affect the current net asset value of the Fund's
redeemable securities. Portfolio securities which are traded on stock
exchanges are valued at the last sale price as of the close of business on
the day the securities are being valued, or, lacking any sales, at the latest
bid price. Each over-the-counter security for which the last sale price
on the day of valuation is available from NASDAQ and falls within the
range of the latest bid and asked quotations is valued at that price. All
other securities traded in the over-the-counter market are valued at the
most recent bid prices as obtained from one or more dealers that make
markets in the securities. Portfolio securities which are traded both in the
over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market.
Securities and other assets for which quotations are not readily available
will be valued at their fair market value as determined by the Board of
Directors.
DISTRIBUTION OF SHARES
CFSC, each Fund's investment Adviser, also acts as Distributor of the
shares of each Fund. CFSC has agreed to use its "best-efforts" to
distribute each Fund's shares, but has not committed to purchase or sell
any specific number of shares. The Distribution Agreement for the Funds
is renewable annually by the vote of the directors at a meeting called for
such purpose and may be terminated upon 30 days' written notice by
either party. Under the Agreement, CFSC will pay for the costs and
expenses of preparing, printing and distributing materials not prepared by
the Funds and used by CFSC in connection with its offering of shares for
sale to the public, including the additional costs of printing copies of the
prospectus and of annual and interim reports to shareholders other than
copies required for distribution to shareholders or for filing under the
federal securities laws, and any expenses of advertising incurred by CFSC
in connection with the offering of the shares. Brokers who sell the Funds
pursuant to a selling agreement receive the entire commission.
The following groups do not pay a sales charge:
Fraternal benefit societies and their employees and sales representatives,
Employees of the adviser, sub-advisers and transfer agent and persons
authorized to sell the Funds.
Catholic organizations pay only 50% of the sales charge.
The waivers and reductions of the sales charge benefit the Funds
because the sales charge is to compensate sales parsons and the above
described groups generally do no purchase through Registered
Representatives. In addition, all shareholders benefit from an increase in
assets by virtue of a reduction in the expense ratio.
The following are sales commissions earned during the period ended
September 30, 1999:
Equity Income Fund - $4,761
Large-Cap Growth Fund - $8,375
Disciplined Capital Appreciation Fund - $6,038
DISTRIBUTION PLAN
Each Fund has adopted a distribution plan (the "Distribution Plan")
pursuant to Rule 12b-1 of the Investment Company Act. Under each Plan,
the Adviser provides the Directors after the end of each quarter a written
report setting forth all amounts expended under the Plan, including all
amounts paid to dealers as distribution or service fees. In approving the
Plan in accordance with the requirements of Rule 12b-1, the Directors
considered various factors, including the amount of the distribution fee.
The Directors determined that there is a reasonable likelihood that the
Plan of each respective Fund will benefit the Fund and the shareholders of
the Fund.
Each Plan may be terminated by vote of a majority of the Directors who
are not interested persons, or by vote of the majority of the outstanding
voting securities of the Fund. Any change in the Plan that would materially
increase the distribution cost to the Fund requires shareholder approval;
otherwise, it may be amended by the Directors, including a majority of the
Directors who are not interested persons, by vote cast in person at a
meeting called for the purpose of voting upon such amendment. So long
as a Distribution Plan is in effect, the selection or nomination of the
Directors who are not interested persons is committed to the discretion of
such Directors.
The Distribution Plan of a Fund may be terminated by the Directors at any
time on 60 days written notice without payment of any penalty by the
Adviser, by vote of a majority of the outstanding voting securities of the
Fund, or by vote of a majority of the Directors who are not interested
persons.
Each Distribution Plan will continue in effect for successive one-year
periods, if not sooner terminated in accordance with its terms, provided
that each such continuance is specifically approved by the vote of the
Directors, including a majority of the Directors who are not interested
persons.
For the period ended September 30, 1999, the total 12b-1 fees collected
and their disbursement is as follows:
Equity Income Fund
12b-1 fees received - $2,745
12b-1 fees paid to sales force - $33
12b-1 fees retained by Catholic Financial Services Corporation - $2,712
Large-Cap Growth Fund
12b-1 fees received - $2,882
12b-1 fees paid to sales force - $72
12b-1 fees retained by Catholic Financial Services Corporation - $2,810
Disciplined Capital Appreciation Fund
12b-1 fees received - $2,781
12b-1 fees paid to sales force - $56
12b-1 fees retained by Catholic Financial Services Corporation - $2,725
LETTERS OF INTENT
A Letter of Intent (referred to as a "Letter") is an investor's statement in
writing to the Distributor of the intention to purchase shares of the Funds
during a 13-month period (the "Letter of Intent period"),which may, at the
investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the
aggregate amount of purchases of shares which, when added to the
investor's holdings of shares of those funds, will equal or exceed the
amount specified in the Letter. Purchases made by reinvestment of
dividends or distributions of capital gains and purchases made at net
asset value without sales charge do not count toward satisfying the
amount of the Letter. A Letter enables an investor to count the shares
purchased under the Letter to obtain the reduced sales charge rate on
purchases of shares of the Funds that apply under the Right of
Accumulation to current purchases of shares. Each purchase under the
Letter will be made at the public offering price applicable to a single lump-
sum purchase of shares in the intended purchase amount.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed
the intended purchase amount, the investor will pay the additional amount
of sales charge applicable to such purchases. Shares equal in value to 5%
of the intended purchase amount will be held in escrow by the Transfer
Agent.
REGULATED INVESTMENT COMPANY STATUS
As a regulated investment company (a "RIC") under Subchapter M of the
U.S. Internal Revenue Code of 1986, as amended (the "Code"), a Fund
would not be subject to Federal income taxes on the net investment
income and capital gains that the Fund distributes to the Fund's
shareholders. The distribution of net investment income and capital gains
will be taxable to Fund shareholders regardless of whether the
shareholder elects to receive these distributions in cash or in additional
shares. Distributions reported to Fund shareholders as capital gains from
property held for more than 1 year, shall be taxable as such, regardless of
how long the shareholder has owned the shares. Fund shareholders will
be notified annually by the Fund as to the Federal tax status of all
distributions made by the Fund. Distributions may be subject to state and
local taxes. To qualify as a RIC, the Code requires that at the end of each
quarter of the taxable year, (i) at least 50% of the market value of the
Fund's total assets be invested in cash, U.S. Government Securities, the
securities of other regulated investment companies, and other securities,
with such securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of Fund's total
assets and 10% of the outstanding voting securities of any one issuer, and
(ii) not more than 25% of the value of the Fund's total assets be invested
in the securities of any one issuer (other than U.S. Government Securities
or the securities of other regulated investment companies), or of two or
more issuers which the Fund controls and which are determined to be
engaged in the same or similar trades or businesses, or related trades or
businesses.
Each of the Funds will seek to qualify for treatment as a RIC under the
Code. Provided that a Fund (i) is a RIC and (ii) distributes at least 90% of
the Fund's net investment income (including, for this purpose, net realized
short-term capital gains), the Fund itself will not be subject to Federal
income taxes to the extent the Fund's net investment income and the
Fund's net realized long and short-term capital gains, if any, are
distributed to the Fund's shareholders. To avoid an excise tax on its
undistributed income, each Fund generally must distribute annually at
least 98% of its income, including its net long-term capital gains as
calculated on a calendar year basis as defined by the Code. One of
several requirements for RIC qualification is that the Fund must receive at
least 90% of the Fund's gross income each year from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of securities or foreign currencies, or other income derived with
respect to the Fund's investments in stock, securities, and foreign
currencies (the "90% Test").
In the event of a failure by a Fund to qualify as a RIC, the Fund would be
subject to Federal income taxes on its taxable income and the Fund's
distributions, to the extent that such distributions are derived from the
Fund's current or accumulated earnings and profits, would constitute
dividends that would be taxable to the shareholders of the Fund as
ordinary income and would be eligible for the dividends received
deduction for corporate shareholders. This treatment would also apply to
any portion of the distributions that might have been treated in the
shareholder's hands as long-term capital gains, as discussed below, had
the Fund qualified as a RIC.
If a Fund were to fail to qualify as a RIC for one or more taxable years, the
Fund could then qualify (or requalify) as a RIC for a subsequent taxable
year only if the Fund had distributed to the Fund's shareholders a taxable
dividend equal to the full amount of any earnings or profits (less the
interest charge mentioned below, if applicable) attributable to such period.
In addition, pursuant to the Code and an interpretative notice issued by
the IRS, if the Fund should fail to qualify as a RIC and should thereafter
seek to qualify as a RIC, the Fund may be subject to tax on the excess (if
any) of the fair market of the Fund's assets over the Fund's basis in such
assets, as of the day immediately before the first taxable year for which
the Fund seeks to qualify as a RIC. A similar rule may apply if the Fund
initially qualifies as a RIC, then fails to qualify for more than 1 taxable
year, and subsequently requalifies as a RIC.
If a Fund determines that the Fund will not qualify as a RIC under
Subchapter M of the Code, the Fund will establish procedures to reflect
the anticipated tax liability in the Fund's net asset value.
DESCRIPTION OF SHARES
In the interest of economy and convenience, certificates representing
shares purchased are not issued. However, such purchases are confirmed
to the investor and credit to their accounts on the books maintained by
Firstar Mutual Fund Services, LLC (the "Agent"), Milwaukee, Wisconsin.
The investor will have the same rights of ownership with respect to such
shares as if certificates had been issued.
Shareholders have the right to vote on the election of Directors at each
meeting of shareholders at which Directors are to be elected and on other
matters as provided by law or the Articles of Incorporation or Bylaws of
CFI. CFI's Bylaws do not require that meetings of shareholders be held
annually. However, special meetings of shareholders may be called for
purposes such as electing or removing directors, changing fundamental
policies, or approving investment advisory contacts. Shareholders of each
series of a series company, such as the Adviser, vote together with each
share of each series of the company on matters affecting all series (such
as election of directors), with each share entitled to a single vote. On
matters affecting only one series (such as a change in that series'
fundamental investment restrictions), only the shareholders of that series
are entitled to vote. On matters relating to all the series but affecting the
series differently (such as a new Investment Advisory Agreement),
separate votes by series are required.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Under the Investment Advisory Agreements and the Sub-Advisory
Agreements (referred to hereinafter in this section as the "Advisory
Agreements"), the Adviser and Sub-Advisers (hereinafter referred to in this
section as the "Advisers") have the authority to direct the placement of
orders for the purchase and sale of the Funds' portfolio securities.
The cost of securities transactions for each Fund will consist primarily of
brokerage commissions or dealer or underwriter spreads.
Occasionally, securities may be purchased directly from the issuer. For
securities traded primarily in the over-the-counter market, the sellers who
make a market in the securities will be dealt with directly unless better
prices and execution are available elsewhere. Such dealers usually act as
principals for their own account. In placing portfolio transactions, the
Advisers seek the best combination of price and execution.
In determining which brokers provide best execution, the Advisers look
primarily to the stock price quoted by the broker, and normally places
orders with the broker through which the most favorable price can be
obtained. It is expected that securities will ordinarily be purchased in the
primary markets, and that in assessing the best net price and execution
available to a Fund, the Advisers will consider all factors they deem
relevant, including the breadth or the market in the security, the price of
the security, the financial condition and execution capability of the broker
or dealer and the reasonableness of the commission, if any (for the
specific transaction and on a continuing basis). Although it is expected
that sales of shares of the Funds will be made only by the Distributor, the
Adviser may in the future consider the willingness of particular brokers to
sell shares of the Funds as a factor in the selection of brokers for the
Funds' portfolio transactions, subject to the overall best price and
execution standard.
Assuming equal execution capabilities, other factors may be taken into
account in selecting brokers or dealers to execute particular transactions
and in evaluating the best net price and execution available. The Advisers
may consider "brokerage and research services" (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934),
statistical quotations, specifically the quotations necessary to determine
the Funds' net asset values, and other information provided to the Funds,
to the Adviser (or their affiliates)). The Advisers may also cause a Fund to
pay to a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction which is in
excess of the amount of commission another broker or dealer would have
charged for effecting that transaction. The Advisers must determine, in
good faith, however, that such commission was reasonable in relation to
the value of the brokerage and research services provided, viewed in
terms of that particular transaction or in terms of all the accounts over
which the Advisers exercise investment discretion. It is possible that
certain of the services received by the Advisers attributable to a particular
transaction will benefit one or more other accounts for which investment
discretion is exercised by the Advisers.
No transactions were made with affiliated brokers.
For the period ended September 30, 1990 the Funds paid the following
brokerage commissions:
Equity Income Fund - $4,682
Large Cap-Growth Fund - $4,788
Disciplined Capital Appreciation Fund - $2,574
PAYMENTS "IN KIND"
Payment for shares tendered for redemption is ordinarily made in cash.
However, the Board of Directors may determine that it would be
detrimental to the best interests of the remaining shareholders of a
particular Fund to make payment of a redemption order wholly or partly in
cash. In that case the Fund may pay the redemption proceeds in whole or in part
by a distribution "in kind" of securities from the portfolio of the Fund,
in lieu of cash, in conformity with applicable rules of the Securities and
Exchange Commission. The Funds have elected to be governed by Rule
18f-1 under the Investment Company Act, pursuant to which each Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or
1% of the net assets of the Fund during any 90-day period for any one
shareholder. If shares are redeemed in kind, the redeeming shareholder
might incur brokerage or other costs in selling the securities for cash. The
method of valuing securities used to make redemptions in kind will be the
same as the method a Fund uses to value its portfolio securities described
above under"Determination of Net Asset Values Per Share" and that
valuation will be made as of the time the redemption price is determined.
ACCOUNTING, FULFILLMENT, CUSTODIAN AND TRANSFER AGENT
SERVICES
Firstar Mutual Fund Services, LLC ("Firstar") provides fund accounting,
fulfillment, custodian and transfer agent services to each of the Funds.
Firstar provides fund accounting services pursuant to the terms of a Fund
Accounting Servicing Agreement. The current rate of payment for these
services per Fund per year is $22,000 for the first $40 million; .001 of 1%
on average daily net assets on the next $200 million; and .005 of 1% of
average daily net assets exceeding $240 million. The Fund Accounting
Servicing Agreement will continue in effect from year to year.
Under a Fulfillment Servicing Agreement, Firstar is entitled to a fee based
on the volume of transactions. Each Fund pays a minimum monthly fee of
$100.
Firstar serves as the custodian of each Fund's assets, pursuant to a
Custodian Servicing Agreement. The Custodian Servicing Agreement
provides that Firstar is entitled to receive an annual fee set at .002 of 1%
on average daily net asset value. Firstar is entitled to receive a minimum
annual fee of $3,000 from each Fund.
Firstar provides transfer agent and dividend disbursing services to each
Fund pursuant to the terms of a Transfer Agent Servicing Agreement.
Under the terms of the Transfer Agent Servicing Agreement, Firstar is
entitled to annual compensation of minimum annual fees of $25,000 for
the first Fund, and $10,000 for each additional Fund. Firstar is also entitled
to reimbursement for all out of pocket expenses incurred in providing such
services. The Transfer Agent Servicing Agreement will continue in effect
until terminated, and may be terminated by either party without cause on
ninety (90) days' prior written notice.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of the Funds have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in its report
with respect thereto which also is included in this Statement of Additional
Information in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
Quarles & Brady LLP, as counsel to CFI, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance of
the shares of common stock being sold pursuant to the Prospectus.
FINANCIAL STATEMENTS
The audited financial statement including the schedules of investment,
statements of assets and liabilities, statements of changes in net assets,
notes to financial statements and financial highlights filed December 3,
1999, for the period ended September 30, 1999 (CIK 0001075375, file
811-09177) is incorporated by reference for all purposes.
PART C OTHER INFORMATION
Item 23. Exhibits
See Exhibit Index following the Signature Page of this Registration
Statement, which Index is incorporated herein by this reference.
Item 24. Persons Controlled by or under Common Control with Registrant
Not applicable. See "Control Persons" in Part B.
Item 25. Indemnification
Reference is made to Article IX of the Registrant's By-laws filed as Exhibit
(b) to Registrant's Registration Statement with respect to Indemnification
of Registrant's officers and directors, which is set forth below:
SECTION 9.1. INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS. The Corporation shall indemnify each
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative ("Proceeding"), by reason of the
fact that he is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such Proceeding to the
fullest extent permitted by law; PROVIDED that: (a) whether or not there is
an adjudication of liability in such Proceeding, the Corporation shall not
indemnify any person for any liability arising by reason of such person's
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office or under any contract or
agreement with the Corporation ("disabling conduct"); and (b) the
Corporation shall not indemnify any person unless: (1) the court or other
body before which the Proceeding was brought (i) dismisses the
Proceeding for insufficiency of evidence of any disabling C-1 conduct, or
(ii) reaches a final decision on the merits that such person was not liable
by reason of disabling conduct; or (2) absent such a decision, a
reasonable determination is made, based upon a review of the facts, by (i)
the vote of a majority of a quorum of the Directors of the Corporation who
are neither interested persons of the Corporation as defined in the
Investment Company Act of 1940 nor parties to the Proceeding, or (ii) if
such quorum is not obtainable, or even if obtainable, if a majority of a
quorum of Directors described in paragraph (b) (2) (i) above so directs, by
independent legal counsel in a written opinion, that such person was not
liable by reason of disabling conduct. Expenses (including attorneys' fees)
incurred in defending a Proceeding will be paid by the Corporation in
advance of the final disposition thereof upon an undertaking by such
person to repay such expenses (unless it is ultimately determined that he
is entitled to indemnification), if: (1) such person shall provide adequate
security for his undertaking; (2) the Corporation shall be insured against
losses arising by reason of such advance; or (3) a majority of a quorum of
the Directors of the Corporation who are neither interested persons of the
Corporation as defined in the Investment Company Act of 1940 nor parties
to the Proceeding, or independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts, that there is
reason to believe that such person will be found to be entitled to
indemnification.
SECTION 9.2. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES
AND AGENTS. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation
as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in or arising out of his position.
However, in no event will the Corporation purchase insurance to indemnify
any such person for any act for which the Corporation itself is not
permitted to indemnify him.
Item 26. Business and Other Connections of Investment Adviser Catholic
Financial Services Corporation
(a) Catholic Financial Services Corporation acts as the Investment Adviser
and Distributor to the Funds. Set forth below is a list of the officers and
directors of the Adviser as of December 31, 1999, together with
information as to any other business, profession, vocation or employment
of a substantial nature of those officers and directors during the past two
years:
<TABLE>
<CAPTION>
Name and address Position with Adviser Position with Funds Business affiliations
during the past two years
<S> <C> <C> <C>
Daniel Steininger Chairman of the Chairman of the Director and
1100 W. Wells Street Board, Director Board, Director President
Milwaukee, WI 53233 of Catholic
Knights Insurance
Society
Allan Lorge CEO, President, President, Director Director and
1100 W. Wells Street Treasurer, Director Secretary/Treasurer
Milwaukee, WI 53233 of Catholic Knights
Insurance Society
Theodore Zimmer Vice President Vice President General Counsel,
1100 W. Wells Street Catholic Knights
Milwaukee, WI 53233 Insurance Society
since September
1997;
Michael Stivoric Vice President None Director of Catholic
1100 W. Wells Street Knights Financial
Milwaukee, WI 53233 Services, Inc and of
Catholic Brokerage
Services Corp. Vice
President of Fraternal
Relations of Catholic
Knights Insurance
Society
Daniel Strasburg Vice President and None Director of Catholic
1100 W. Wells Street Director Knights Financial
Milwaukee, WI 53233 Services, Inc. Vice
President and
Director of Catholic
Brokerage Services
Corp; and Vice
President and Chief
Actuary of Catholic
Knights Insurance
Society
Russell Kafka Vice President - Treasurer Director of Catholic
1100 W. Wells Street Investments Knights Financial
Milwaukee, WI 53233 Services and of
D.O.B. 6/20/44 Catholic Brokerage
Services Corp.; Vice
President -
Investments of
Catholic Knights
Insurance Society
Joseph Wreschnig Vice President, Secretary Director of Mutual
1100 W. Wells Street Secretary Funds Operations,
Milwaukee, WI 53233 Catholic Financial
Services Corp., since
January 1999; prior to
January 1999,
Assistant Vice
President and
Secretary of AAL
Capital Management
Corporation, Assistant
Secretary, The AAL Mutual Funds
And The AAL Variable Product Series Fund
Instructor at Cardinal
Stritch University
Mark Forbord Controller and Chief Chief Financial Controller of Catholic
1100 W. Wells Street Financial Officer Officer and Knights Financial
Milwaukee, WI 53233 Accountant Services, Inc. and of
Catholic Brokerage
Services Corp; Senior
Financial Analyst of
Catholic Knights
Insurance Society;
Instructor at The
University of
Wisconsin
Milwaukee; and
Instructor at Cardinal
Stritch University
David Hesse Vice President None Vice President of
1100 W. Wells Street Mutual Funds
Milwaukee, WI 53233 Distribution since
June 1999, prior to
that Inside
Wholesaler AAL
Capital Management
Corporation
Joann Hull Assistant Assistant Secretary Assistant Director
1100 W. Wells Street Secretary/Assistant Catholic Financial
Milwaukee, WI 53233 Director Services Corporation
since March 1999,
prior to that
Securities Licensing
Manager AAL Capital
Management
Corporation
Cheri Nagan Assistant Assistant Secretary Assistant Director
1100 W. Wells Street Secretary/Assistant Catholic Financial
Milwaukee, WI 53233 Director Services Corporation
since March 1999,
prior to that Mutual
Fund Specialist at
AAL Capital
Management
Corporation
Robert Ciesla Director None High Chief Ranger,
355 Shuman Blvd Catholic Order of
Naperville, IL 60566 Foresters, Secretary
Treasurer and
Director National
Fraternal Congress of
America, President
and Director
Naperville Office Park
Owner's Association,
Chairman, Illinois
Right to Life
Committee, Director,
Joliet Diocesan
Finance Board
Gregory Temple Director None Investment
355 Shuman Blvd Counselor, Catholic
Naperville, IL 60566 Order of Foresters
John Kenawell Director None President, Catholic
3525 Hampton Ave. Knights of America,
St. Louis, MO 63139 Chairperson,
Investment
Management and
Valuations
Committee of the
National Fraternal
Congress of America,
Director, Old Trails
Historical Society
</TABLE>
Item 27. Principal Underwriter
Catholic Financial Services Corporation acts as the distributor to each of
the Funds. Catholic Financial Services Corporation does not act as the
principal underwriter or distributor of any other open-end mutual funds.
Information regarding its officers and directors is contained in item 26.
Item 28. Location of Accounts and Records
Catholic Financial Services Corporation 1100 West Wells Street
Milwaukee,
Wisconsin 53233; Firstar Mutual Fund Services, LLC 615 East Michigan
Street Milwaukee, Wisconsin 53202,
Item 29. Management Services
Not applicable.
Item 30. Undertakings
None
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this filing
meets the requirements of Rule 485(b) and has duly caused this
amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized,
THE CATHOLIC FUNDS, INC.
By: /s/ Allan G. Lorge
Allan G. Lorge, President and CEO
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registrant's Registration Statement has been signed
on this 17th day of January, 2000, by the following persons in the
capacities indicated.
SIGNATURE TITLE
/s/ Daniel J. Steininger Chairman of the Board and Director
/s/ Allan G. Lorge President, Chief Executive Officer and Director
/s/ Russell J. Kafka Treasurer (Chief Financial Officer)
/s/ Mark K. Forbord Principal Accounting Officer
Thomas A. Bausch* Director
J. Michael Borden* Director
Daniel R. Doucette* Director
Thomas J. Munninghoff* Director
Conrad L. Sobczak* Director
David L. Vollmar* Director
*By: /s/ Allan G. Lorge pursuant to a Power of Attorney dated February 17,
1999, a copy of which was previously filed April 28, 1999.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Description Filing Date Filed Filed Herewith
<C> <S> <S> <S> <S>
(a)(1) Articles of Incorporation Initial Registration December 28, 1998
(a)(2) Articles of Amendment Pre-effective April 28, 1999
changing the name of The Amendment 1
Catholic Funds, Inc.
(a)(3) Supplement for Money August 20, 1999
Market Fund
(b)(1) By-laws Initial Registration December 28, 1998
(C)(1) Articles Sixth through Initial Registration December 28, 1998
Eighth and Article Tenth of
the Articles of Incorporation
(see Exhibit (a))
(C)(2) Articles II, VI, IX, and X of Initial Registration December 28, 1998
the Bylaws (see Exhibit
(b))
(d)(1) Investment Advisory Pre-effective April 28, 1999
Contract Amendment 1
(d)(2) Form of Amendment to *
Investment Advisory
Contract
(d)(3) Form of Investment *
Sub-Advisory Contract
(e)(1) Distribution Agreement Pre-effective April 28, 1999
Amendment 1
(e)(2) Amendment to *
Distribution Agreement
(f) Not Applicable
(g)(1) Custodian Agreement Pre-effective April 28, 1999
Amendment 1
(g)(2) Amendment to *
Custodian Agreement
(h)(1) Transfer Agency Agreement Pre-effective April 28, 1999
Amendment 1
(h)(2) Transfer *
Agency Agreement Amendment
(h)(3) Fund Accounting Servicing Pre-effective April 28, 1999
Agreement Amendment 1
(h)(4) Amendment to *
Fund Accounting Servicing
Agreement
(i) Legal Opinion of Quarles
and Brady
(j) Consent of Independent *
Accountants
(k) Not Applicable
(l) Subscription Agreement Pre-effective April 28, 1999
Amendment 1
(m) Amendment to Rule 12b-1 * Plan
(n) Financial Data Schedule (NA)
(o) Rule 18f-3
(Not Applicable)
</TABLE>
13
QBMKE\4261043.3
(d)(2)
Amendment to Advisory Agreement
The Advisory Agreement dated February 17, 1999 The Catholic Funds, Inc.(f/k/a
as The Catholic Alliance Funds, Inc.) and Catholic Financial Services
Corporation is amended, as follows, to add the Money Market Fund to The
Catholic Funds, Inc.:
The Money Market Fund shall pay management fees as follows:
For its services, the Adviser receives the following annual fee, computed
daily:
If the portfolio is $50 million or less: 0.30%
If the portfolio is over $50 million and less than $100 million: 0.25%
If the portfolio is at least $100 million and less than $200 million: 0.20%
If the portfolio is $200 million or more: 0.15%
From the above fees, the Adviser pays the Sub-Adviser:
If the portfolio is $50 million or less: 0.20%
If the portfolio is over $50 million and less than $100 million: 0.15%
If the portfolio is at least $100 million and less than $200 million: 0.10%
If the portfolio is $200 million or more: 0.075%
However, neither the Adviser nor Sub-Adviser shall receive any fees
until the Money Market Fund has $25 million in assets or for the
first six months, whichever comes earlier, and once either has
occurred; the Adviser shall charge at an annual rate of 0.10% and
pay the Sub-Adviser at an annual rate of 0.05% for the next six
months or until the Money Market Fund has $50 million in assets,
whichever comes first. Thereafter the management fee schedule set
forth in this section applies without any waivers.
All other provisions of the agreement remain in full force and effect.
Dated this 31st day of August, 1999
The Catholic Funds, Inc.
By /s/ Allan G. Lorge title pres.
Catholic Financial Services Corporation
By/s/ Joseph F. Wreschnig titleV. P. Secretary
(d)(3)
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 22 day of December, 1999, by and among THE
CATHOLIC FUNDS, INC. a Maryland corporation ("Fund"), CATHOLIC
FINANCIAL SERVICES CORPORATION, a Wisconsin corporation ("Adviser"), and
STRONG CAPITAL MANAGEMENT, INC., a Wisconsin corporation ("Sub-
Adviser").
W I T N E S S E T H
For good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and among the parties hereto as follows:
1. In General
The Sub-Adviser agrees, as more fully set forth herein, to act as
Sub-Adviser to the Fund with respect to the investment and
reinvestment of the assets of The Catholic Money Market Fund
("Money Market Fund"). The Sub-Adviser agrees to supervise and
arrange the purchase of securities and the sale of securities held in
the Money Market Fund investment portfolio. It is understood that
the Fund may create one or more additional series of shares and
that, if it does so, this Agreement may be amended by the mutual
written consent of the parties to include such additional series under
the terms of this Agreement.
2. Duties and Obligations of the Sub-Adviser with Respect to Investments of
Assets of the Money Market Fund
(a) Subject to the succeeding provisions of this section and subject to
the oversight and review of the Adviser and the direction and control of the
Board of Directors of the Fund, the Sub-Adviser shall:
(i) Determine what securities shall be purchased or sold by the
Money Market Fund;
(ii) Arrange for the purchase and the sale of securities held in the
Money Market Fund; and
(iii) Provide the Adviser and the Directors with such reports as
may reasonably be requested in connection with the discharge of the
foregoing responsibilities and the discharge of the Adviser's
responsibilities under its Investment Advisory Agreement with the
Fund and those of the Distributor under its Distribution Agreement
with the Fund.
(b) Any investment purchases or sales made by the Sub-Adviser under
this section shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the Investment Company
Act of 1940 (the Act) and of any rules or regulations in force thereunder;
and (2) the provisions of the Articles of Incorporation and By-Laws of the
Fund as amended from time to time; (3) any policies and determinations of
the Board of Directors of the Fund including its 2a-7 policy; and (4) the
fundamental investment policies of the Money Market Fund, as reflected in
its Registration Statement under the Act, or as amended by its shareholders;
provided that copies of the items referred to in clauses (2), (3) and (4) shall
have been furnished to the Sub-Adviser.
(c) The Sub-Adviser shall give the Fund the benefit of its best judgment
and effort in rendering services hereunder. In the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its obligations or
duties ("disabling conduct") hereunder on the part of the Sub-Adviser (and
its officers, directors, agents, employees, controlling persons, shareholders
and any other person or entity affiliated with the Sub-Adviser) the Sub-
Adviser shall not be subject to liability to the Fund or to any shareholder of
the Fund for any act or omission in the course of, or connected with,
rendering services hereunder, including without limitation any error of
judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which this Agreement relates, except to the
extent specified in Section 36(b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services. Except for such disabling conduct, the Fund shall indemnify the
Sub-Adviser (and its officers, directors, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the Sub-
Adviser) against any liability arising from the Sub-Adviser's conduct under
this Agreement to the extent permitted by the Fund's Articles of
Incorporation, By-Laws and applicable law. The Adviser shall indemnify
the Sub-Adviser (and its officers, directors, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the Sub-
Adviser) for any liability arising from the Adviser's willful misfeasance,
bad faith, negligence, breach of its duties hereunder, or violation of
applicable law.
(d) Nothing in this Agreement shall prevent the Sub-Adviser or
any affiliated person (as defined in the Act) of the Sub-Adviser from
acting as investment advisor or manager for any other person, firm
or corporation and shall not in any way limit or restrict the Sub-
Adviser or any such affiliated person from buying, selling or trading
any securities for its or their own accounts or for the accounts of
others for whom it or they may be acting. In addition, the Sub-
Adviser expressly represents that it will undertake no activities that,
in its judgment, will adversely affect the performance of its
obligation to the Fund under this Agreement or under the Act. It is
agreed that the Sub-Adviser shall have no responsibility or liability
for the accuracy or completeness of the Fund's Registration
Statement under the Act and the Securities Act of 1933, except for
information supplied by the Sub-Adviser for inclusion therein. The
Sub-Adviser shall be deemed to be an independent contractor and,
unless otherwise expressly provided or authorized, have no authority
to act for or represent the Fund in any way or otherwise be deemed
an agent of the Fund.
(e) In connection with its duties to arrange for the purchase and
sale of the Money Market Fund's portfolio securities, the Sub-
Adviser shall follow the principles set forth in any investment
advisory agreement in effect from time to time between the Fund
and the Adviser, provided that a copy of any such agreement shall
have been provided to the Sub-Adviser. The Sub-Adviser will
promptly communicate to the Adviser and to the officers and the
Directors of the Fund such information relating to portfolio
transactions as they may reasonably request.
Without limiting the generality of the foregoing, with respect to the
execution of transactions on behalf of the Money Market Fund, and
except as otherwise instructed from time to time by the Board of
Directors of the Fund, the Sub-Adviser shall place, or arrange for the
placement of, all orders for purchases, sales or loans either directly
with the issuer or with a broker-dealer, or other counterparty or
agent selected by the Sub-Adviser.
The Fund hereby authorizes any entity or person associated with the
Sub-Adviser that is a member of a national securities exchange to
effect any transaction on the exchange for the account of a Fund to
the extent permitted by and in accordance with Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder.
The Fund hereby consents to the retention by such entity or person
of compensation for such transaction in accordance with Rule 11a2-
2(T)(a)(iv).
(f) The Sub-Adviser shall, where it deems it appropriate, make
recommendations to the Fund as to the manner in which voting
rights, rights to consent to the Fund or Fund Action , and any other
rights pertaining to the Fund shall be exercised; provided that the
Sub-Adviser shall have no obligation nor any authority to execute
any voting proxies or consents on behalf of the Fund, but rather shall
promptly forward to the Fund all proxy and other solicitation
materials that the Sub-Adviser may receive with respect to any such
voting rights or consents.
3. Allocation of Expenses
The Sub-Adviser agrees that it will furnish the Fund, at the Sub-
Adviser's expense, with all office space and facilities, equipment and
clerical personnel necessary for carrying out the Sub-Adviser's
duties under this Agreement. The Sub-Adviser will also pay all
compensation of those of the Fund's officers and employees, if any,
and of those Directors, if any, who in each case are affiliated persons
of the Sub-Adviser. The Sub-Adviser shall not be obligated to pay
any expenses of or for the Fund not expressly assumed by this
Section 3.
4. Certain Records
Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 under the Act which are
prepared or maintained by the Sub-Adviser on behalf of the Fund are
the property of the Fund and will be surrendered promptly to the
Fund or the Adviser on request.
5. Reference to the Sub-Adviser
Neither the Fund nor the Adviser or any affiliate or agent thereof
shall make reference to or use the name of the Sub-Adviser or any of
its affiliates in any advertising or promotional materials without the
prior approval of the Sub-Adviser, which approval shall not be
unreasonably withheld.
6. Compensation of the Sub-Adviser
The Money Market Fund shall pay management fees as follows:
For its services, the Adviser receives the following annual fee, computed
daily:
If the portfolio is $50 million or less: 0.30%
If the portfolio is over $50 million and less than $100 million: 0.25%
If the portfolio is at least $100 million and less than $200 million: 0.20%
If the portfolio is $200 million or more: 0.15%
The Adviser shall pay to the Sub-Adviser the following annual fees:
If the portfolio is $50 million or less: 0.20%
If the portfolio is over $50 million and less than $100 million: 0.15%
If the portfolio is at least $100 million and less than $200 million: 0.10%
If the portfolio is $200 million or more: 0.075%
Payments shall be made to the Sub-Adviser on the first day of
each month, calculated on the daily average value of the
Fund's assets and accrued on a daily basis.
However, neither the Adviser nor Sub-Adviser shall receive any fees
until the Money Market Fund has $25 million in assets or for the
first six months, whichever comes earlier, and once either has
occurred; the Adviser shall charge at an annual rate of 0.10% and
pay the Sub-Adviser at an annual rate of 0.05% for the next six
months or until the Money Market Fund has $50 million in assets,
whichever comes first. Thereafter the management fee schedule set
forth in this section applies without any waivers.
7. Duration and Termination
(a) This Agreement shall go into effect with respect to the Money
Market Fund upon its effective date. In the event the parties hereto
mutually agree that one or more series of the Fund should be
included as additional "Fund(s)" hereunder, this Agreement shall
become effective with respect to each such additional Fund on the
date specified in a separate amendment. Once effective with respect
to any Fund(s), this Agreement shall, unless terminated as
hereinafter provided, continue in effect for a period of two years
with respect to such Fund, and thereafter from year to year, but only
so long as such continuance is specifically approved at least annually
by a majority of the Fund's Board of Directors, or by the vote of the
holders of a "majority" (as defined in the Act) of the outstanding
voting securities of the relevant Fund(s), and, in either case, a
majority of the Directors who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party cast in
person at a meeting called for the purpose of voting on such
approval.
(b) This Agreement may be terminated by the Sub-Adviser in its
entirety or with respect to any one or more specifically identified
Funds at any time without penalty upon giving the Fund and the
Adviser sixty (60) days' written notice (which notice may be waived
by the Fund and the Adviser) and may be terminated by the Fund or
the Adviser in its entirety or with respect to any specifically
identified Fund at any time without penalty upon giving the Sub-
Adviser sixty (60) days' written notice (which notice may be waived
by the Sub-Adviser), provided that such termination by the Fund
shall be directed or approved by the vote of a majority of all of its
Directors in office at the time or by the vote of the holders of a
"majority" (as defined in the Act) of the voting securities of the
Funds with respect to which the Agreement is to be terminated. This
Agreement shall automatically terminate in the event of its
"assignment" (as defined in the Act). This Agreement will also
automatically terminate in the event that the Investment Advisory
Agreement by and between the Fund and the Adviser is terminated
for any reason.
8. Representations and Warranties of Adviser
The Adviser represents and warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act");
(b) The Adviser is a corporation duly organized and validly
existing under the laws of the State of Wisconsin with the power to
own and possess its assets and carry on its business as it is now
being conducted;
(c) The execution, delivery and performance by the Adviser of
this Agreement are within and Adviser's powers and have been duly
authorized by all necessary action on the part of its shareholders, and
no action by or in respect of, or filing with, any governmental body,
agency or official is required on the part of the Adviser for the
execution, delivery and performance by the Adviser of this
Agreement, and the execution, delivery and performance by the
Adviser of this Agreement do not contravene or constitute a default
under (i) any provision of applicable law, rule or regulation, (ii) the
Adviser's governing instruments, or (iii) any agreement, judgment,
injunction, order, decree or other instrument binding upon the
Adviser;
(d) The Form ADV of the Adviser previously delivered is a true
and complete copy of the form filed with the Securities and
Exchange Commission and the information contained therein is
accurate and complete in all material respects and does not omit to
state any material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading;
(e) The Adviser acknowledges that it received a copy of the
Subadviser's Form ADV at least 48 hours prior to the execution of
this Agreement.
9. Representations and Warranties of Subadviser
The Subadviser represents and warrants to the Adviser and the Fund
as follows:
(a) The Subadviser is registered as an investment adviser under
the Advisers Act;
(b) The Subadviser is a corporation duly organized and validly
existing under the laws of the State of Wisconsin with the power to
own and possess its assets and carry on its business as it is now
being conducted;
(c) The execution, delivery and performance by the Subadviser
of this Agreement are within the Subadviser's powers and have been
duly authorized by all necessary action on the part of its
shareholders, and no action by or in respect of, or filing with, any
governmental body, agency or official is required on the part of the
Subadviser for the execution, delivery and performance by the
Subadviser of this Agreement, and the execution, delivery and
performance by the Subadviser of this Agreement do not contravene
or constitute a default under (i) any provision of applicable law, rule
or regulation, (ii) the Subadviser's governing instruments, or (iii)
any agreement, judgment, injunction, order, decree or other
instrument binding upon the Subadviser;
(d) The Form ADV of the Subadviser [previously delivered]
[attached hereto as Exhibit ?] is a true and complete copy of
the form filed with the Securities and Exchange Commission
and the information contained therein is accurate and
complete in all material respects and does not omit to state
any material fact necessary in order to make the statements
made, in light of the circumstances under which they were
made, not misleading.
10. Survival of Representations and Warranties
All representations and warranties made by the Subadviser and the
Adviser pursuant to Sections 8 and 9 hereof shall survive for the
duration of this Agreement and the parties hereto shall promptly
notify each other in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
11. Notice
Any notice that is required to be given by the parties to each other under
the terms of this Agreement shall be in writing, delivered, or mailed
postpaid to the other party, or transmitted by facsimile with
acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties
by notice to the other party:
(a)If to the Adviser:
Catholic Financial Services Corporation
- ----------------------------------------------------
- ----------------------------------------------------
Attention:------------------------------------------
Facsimile:------------------------------------------
(b)If to the Fund
The Catholic Funds, Inc.
- ----------------------------------------------------
- ----------------------------------------------------
Attention:------------------------------------------
Facsimile:------------------------------------------
(c)If to the Subadviser:
Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin, 53051
Attention: General Counsel
Facsimile: (414) 359-3948
12. Governing Law; Jurisdiction
This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Wisconsin.
13. Counterparts
This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the
same instrument.
14. Severability
If any provision of this Agreement shall be held or made invalid by a
court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and
effect.
15. Entire Agreement
This Agreement contains the entire understanding and agreement of
the parties with respect to the Fund.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals
to be hereto affixed, all as of the day and year first above written.
THE CATHOLIC FUNDS, INC.
By: Allan G. Lorge
Its: President
CATHOLIC FINANCIAL SERVICES CORPORATION
By: Allan G. Lorge
Its: President
STRONG CAPITAL MANAGEMENT, INC.
By:Steve Shenkenberg
Its: Vice President
3
QBMKE\4261043.3
(e)(2)
Amendment to Distribution Agreement
The Distribution Agreement dated February 17, 1999 between The Catholic Funds,
Inc. and Catholic Financial Services Corporation is amended to add The Catholic
Money Market Fund. This fund carries no sales charge but has a distribution
(12b-1) fee of 5 basis points.
All other provisions of the agreement remain in full force and effect.
Dated this 31st day of August, 1999
Catholic Financial Services Corporation
By /s/ Joseph F. Wreschnig
title Vice President, Secretary
The Catholic Funds, Inc.
By /s/ Allan G. Lorge
title Pres.
(g)(2)
Amendment to Custody Servicing Agreement
The Custody Servicing Agreement dated April 30, 1999 The Catholic Funds, Inc.
and Firstar Mutual Fund Services, LLC is amended, as follows, to add the
Money Market Fund to The Catholic Funds, Inc.:
Name of Series Date Added
Money Market Fund November 1, 1999
Annual fee based upon average daily net assets:
2 basis points per year
$3,000 minimum annual fee
All other provisions of the agreement remain in full force and effect.
Dated this 31st day of August, 1999
The Catholic Funds, Inc.
By /s/ Allan G. Lorge
title Pres.
Firstar Mutual Fund Services, LLC
By /s/ Robert Kern
title Senior VP
(h)(2)
Amendment to Transfer Agent Servicing Agreement
The Transfer Agency Servicing Agreement dated April 30, 1999 between The
Catholic Funds, Inc. and Firstar Mutual Fund Services, LLC is amended, as
follows, to add the Money Market Fund:
Annual Fee: $21.00 per account per year for the Money Market Fund.
Checkwriting: $1.00 per check with checks being at least $500.
All other provisions of the agreement remain in full force and effect.
Dated this 31st day of August, 1999
The Catholic Funds, Inc.
By /s/ Allan G. Lorge
title Pres.
Firstar Mutual Fund Services, LLC
By /s/ Robert Kern
title Senior VP
(h)(4)
Amendment to Fund Accounting Servicing Agreement
The Fund Accounting Servicing Agreement dated April 30, 1999 between The
Catholic Funds, Inc. and Firstar Mutual Fund Services, LLC is amended, as
follows, to add the Money Market Fund:
Name of Series Date Added
Money Market Fund November 1, 1999
Money Market Fund
$25,000 for the first $40 million
1 basis point for the next $200 million
.5 basis point for over $240 million
All other provisions of the agreement remain in full force and effect.
Dated this 31st day of August, 1999
The Catholic Funds, Inc.
By /s/ Allan G. Lorge
title Pres.
Firstar Mutual Fund Services, LLC
By /s/ Robert Kern
title Senior VP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference into the Statement of Additional Information constituting part of
this Post-Effective Amendment No. 3 to the Registration Statement on Form N-1A
(the "Registration Statement") of our report dated October 22, 1999, relating
to the financial statements and financial highlights appearing in the
September 30, 1999 Annual Report incorporated by reference into the Registration
Statement, and to all references to our firm included in this Registration
Statement.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 20, 2000
(m)
Amendment to Distribution Plan
The Distribution Agreement dated February 17, 1999 between The Catholic Funds,
Inc. and Catholic Financial Services Corporation is amended to add The Catholic
Money Market Fund. This fund has a distribution (12b-1) fee of 5 basis
points.
All other provisions of the agreement remain in full force and effect.
Dated this 31st day of August, 1999
Catholic Financial Services Corporation
By /s/ Joseph F. Wreschnig
title Vice President, Secretary
The Catholic Funds, Inc.
By /s/ Allan G. Lorge
title Pres.
