N-CSRS 1 newcov.txt NEW COVENANT SEMI-ANNUAL 12-31-03 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-09025 ------------------ New Covenant Funds -------------------------------------------- (Exact name of registrant as specified in charter) 200 E. Twelfth Street, Suite B Jeffersonville, IN 47130 -------------------------------------------- (Address of principal executive offices) (Zip code) The Corporation Trust Company Corporation Trust Center 1209 Orange Street Wilmington, DE 19809 -------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 800-858-6127 ------------------ Date of fiscal year end: June 30, 2004 ---------------- Date of reporting period: December 31, 2003 ------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. [LOGO OMITTED] NEW COVENANT FUNDS [GRAPHIC OMITTED] SEMI-ANNUAL REPORT DECEMBER 31, 2003 NEW COVENANT GROWTH FUND NEW COVENANT INCOME FUND NEW COVENANT BALANCED GROWTH FUND NEW COVENANT BALANCED INCOME FUND TABLE OF CONTENTS ---------------------------------------------------------------- SHAREHOLDER LETTER ...................................... 2 PORTFOLIOS OF INVESTMENTS ............................... 4 STATEMENTS OF ASSETS AND LIABILITIES .................... 14 STATEMENTS OF OPERATIONS ................................ 15 STATEMENTS OF CHANGES IN NET ASSETS ..................... 16 FINANCIAL HIGHLIGHTS .................................... 18 NOTES TO FINANCIAL STATEMENTS ........................... 20 1 TO OUR SHAREHOLDERS -------------------------------------------------------------------------------- Dear Shareholder: The long-anticipated market recovery finally materialized in 2003. Consumer confidence picked up, corporate earnings surged through the year as cost-cutting, low interest rates, and stronger spending by businesses all signaled a strong year for stocks. The fear of rising long-term interest rates caused bonds to provide only modest, albeit positive returns for the year. The result was an economic recovery that has finally begun to take hold, touched off by the lowest interest rates in 45 years. A 1990s-style technology rally catapulted the NASDAQ composite index to an almost 50% gain during the year. The Dow Jones Industrial Average cracked 10,000 in December for the first time in 18 months and posted a 25.30% gain in 2003. In spite of a slump early in the year fueled by war in Iraq, the broader Standard & Poor's 500 stock index rose 28.67% for the year. During the past year, "growth style" stocks slightly out-performed their "value style" counterparts and international stocks added value to the year's overall performance. Stocks that featured lower quality earnings, smaller size, and "junk stock" quality levels were the stock performance leaders in 2003. Increases in production by corporate America, an increasing GDP (gross domestic product), better-than-expected corporate earnings, and continued strong consumer spending together will likely support the next stage of the markets' recovery. Improving global economic data from Japan, Europe, and the emerging markets in Asia should point to an improving global economy. The New Covenant Growth Fund participated fully in the strength of the stock market. Last year, the New Covenant Growth Fund (NCGFX) posted a 28.84% net return for the year, down 3.72% for the three-year period, and down 0.46% for the five-year period. These returns beat the returns of the S&P 500 Index in each period, up 28.67%, down 4.05%, and down 0.57% for one, three and five years respectively, as reported by The Wall Street Journal.* During the last six months ending December 31, 2003, the New Covenant Growth Fund beat the Wilshire 5000 Total Stock Market Index, up 16.81% to up 16.59%. During the fourth quarter, the fund was up 12.23% against the index, up 12.42%. We continue to believe that stocks could prove more rewarding than traditional fixed income investments in 2004. Additionally, we feel that an investment approach that focuses on high quality companies with strong cash flows and dividend yields, strong balance sheets, and earnings growth could fair well in the coming investment environment. The third quarter provided a roller-coaster ride for bonds. Most of the damage to Treasuries occurred in July, when investors holding 10-year Treasuries lost 7.10% -- the worst one-month decline in 20 years. But, by August close, over half of the loss was recovered and by quarter close, Treasuries were down only 1.90%. The New Covenant Income Fund (NCICX) provided positive returns for the bond fund holders generating a total return for the year of 3.63%. Longer-term returns were strong: three years at 6.94%, five years at 5.81%, and ten-year return at 5.90%. These performances by our bond fund are comparable to the average returns recorded by general U. S. bond funds and Intermediate U. S. bond funds. For the six months and three months ending December 31, 2003, NCICX was basically flat, up 0.02% and 0.09% versus the benchmark, up 0.17% and 0.32%, respectively. The bond-tilted New Covenant Balanced Income Fund (NCBIX) advanced a very respectable 12.33% during the year and was up 3.66% and up 3.89% for the three- and five-year periods, respectively. The vast majority of assets in the New Covenant Funds are invested in a balanced investment approach through our New Covenant Balanced Growth Fund (NCBGX). This stock-heavy fund returned 18.61% in 2003. This funds' performance exceeded the balanced fund category average returns for three and five years. The New Covenant Balanced Growth Fund returned 1.17% and 2.49% for the three- and five-year periods, respectively. The mutual fund balanced fund category average returns were up 19.09%, 0.28%, and 2.35% for the one-, three-, and five-year periods. During the last six months and final quarter ending ending December 31, 2003, NCBGX returned 10.24% and 7.62%, respectively, against the Lipper Balanced Index up 9.63% and 7.68%, respectively. While it is important that one-year returns are positive for the first time in this new millennium, the long-term performance is also very important. The New Covenant Balanced Growth Fund returned an average annual return of 7.02% over the ten-year period ending December 31, 2003 versus 8.09% for the Lipper Balanced Funds Index. 2 TO OUR SHAREHOLDERS -------------------------------------------------------------------------------- The mutual fund industry has been embroiled in scandal. Many mutual funds have been involved in late trading, (same-day trading of accounts after the 4 P.M. cutoff) and allowing large investors market timing privileges not available to the average shareholder. Based on the number of bills currently in Congress, new regulations will likely be woven into existing regulations to provide more safeguards for shareholders. We are confident that the integrity of our investment and management practices will continue to earn the trust placed in us by our investors. During the third quarter, the Investment Committee moved $30 million of the NCGFX foreign allocation to small-cap growth stocks in order to increase the position in small-cap, domestic issues (which have provided solid returns) and to rebalance the portfolio more closely to its benchmark index, the Wilshire 5000 Total Stock Market Index. We are grateful for the continuing confidence you have placed in the socially responsible funds entrusted to our care. We appreciate your commitment to New Covenant Funds.** We will continue to do everything possible to be worthy of your confidence and trust. /s/Dennis J. Murphy Dennis J. Murphy Executive Vice President and Chief Investment Officer The New Covenant Fund Investment Department of New Covenant Trust Company, N.A.*** *The Wall Street Journal, 1/8/04. **The New Covenant Funds' Proxy Policies & Procedures are available on our website, www.newcovenantfunds.com, or you may call 877-835-4531 to receive information. ***A subsidiary of the Presbyterian Foundation. Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain more current performance information, please visit www.newcovenantfunds.com or call 1-877-835-4531. It is not possible to invest directly in any index. Unlike a mutual fund, the performance of an index assumes no transaction costs, taxes, management fees or expenses. PFPC Distributors, Inc. 760 Moore Road, King of Prussia, PA 19406 -------------------------------------------------------------------------------- New Covenant Growth Fund TEN LARGEST STOCK HOLDINGS at December 31, 2003 (Portfolio composition may change at any time)
Security Market Value % of Portfolio Sector -------- ------------ -------------- ------ Citigroup, Inc. $14,538,507 1.8% Financial Services Microsoft Corp. 14,268,474 1.7 Computer Services and Software Cisco Systems, Inc. 11,370,392 1.4 Technology Pfizer, Inc. 10,878,284 1.3 Pharmaceuticals General Electric Co. 10,873,980 1.3 Diversified Operations International Business Machines Corp. 10,091,925 1.2 Technology Exxon Mobil Corp. 9,909,700 1.2 Oil and Gas Time Warner, Inc. 9,130,825 1.1 Broadcasting and Media Coca-Cola Co. 8,625,470 1.0 Food and Beverages Bank of America Corp. 7,110,012 0.9 Banking
3 PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- NEW COVENANT GROWTH FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- COMMON STOCK -- 93.3% ADVERTISING -- 0.7% 199,500 Interpublic Group of Cos., Inc.* ....................... $ 3,112,200 35,300 Omnicom Group, Inc. ........... 3,082,749 ------------ 6,194,949 ------------ AEROSPACE -- 0.2% 5,900 Moog, Inc. Class A* ........... 291,460 40,500 Rockwell Collins, Inc. ........ 1,216,215 ------------ 1,507,675 ------------ AUTOMOTIVE -- 2.0% 6,600 Aftermarket Technology Corp.* . 90,552 20,900 Autoliv, Inc. ................. 786,885 5,500 Bayerische Motoren Werke AG* .. 254,951 6,900 BorgWarner, Inc. .............. 586,983 11,600 DaimlerChrysler AG ............ 541,372 169,300 Dana Corp. .................... 3,106,655 29,000 General Motors Corp. .......... 1,548,600 103,500 Honda Motor Co. Ltd. Sponsored ADR ............... 2,328,750 18,300 Johnson Controls, Inc. ........ 2,124,996 15,900 Lear Corp. .................... 975,147 111,000 Mitsubishi Motors Corp.* (L) .. 226,827 67,000 Nissan Motor Co. Ltd. ......... 765,214 23,000 PACCAR, Inc. .................. 1,957,760 10,200 Renault SA* ................... 703,759 37,000 Suzuki Motor Corp. (L) ........ 547,560 10,500 Toyota Motor Corp. ............ 354,670 8,800 Visteon Corp. ................. 91,608 ------------ 16,992,289 ------------ BANKING -- 6.1% 51,883 ABN AMRO Holdings NV* ......... 1,213,963 23,920 Australia and New Zealand Banking Group Ltd. .......... 318,638 61,700 Banco Bilbao Vizcaya Argentaria SA (L) ...................... 852,188 88,400 Bank of America Corp. ......... 7,110,012 128,400 Bank One Corp. ................ 5,853,756 37,800 Barclays Plc .................. 337,155 20,300 BNP Paribas SA* ............... 1,278,224 79,200 Comerica, Inc. ................ 4,439,952 5,650 Community Trust Bancorp, Inc. . 170,630 17,550 Corus Bankshares, Inc. ........ 553,878 7,242 Credit Suisse Group ........... 264,969 51,000 DBS Group Holdings Ltd. ADR ++ 441,441 5,800 Deutsche Bank AG* ............. 480,651 33,000 DNB NOR ASA (L) ............... 220,238 6,600 First Federal Capital Corp. ... 148,632 14,200 Flagstar Bancorp., Inc. ....... 304,164 43,000 FleetBoston Financial Corp. ... 1,876,950 22,900 ForeningsSparbanken AB ........ 450,343 10,350 Fremont General Corp. ......... 175,018 15,300 Golden West Financial Corp. ... 1,578,807 12,100 GreenPoint Financial Corp. .... 427,372 13,700 Hang Seng Bank Ltd. ........... 179,994 36,700 Hibernia Corp. Class A ........ 862,817 12,000 Hudson United Bancorp ......... 443,400 42,400 Huntington Bancshares, Inc. ... 954,000 25,050 IndyMac Bancorp, Inc. ......... 746,239 10,650 Irwin Financial Corp. (L) ..... 334,410 1,600 ITLA Capital Corp.* ........... 80,160 59,000 KeyCorp ....................... 1,729,880 8,700 MBT Financial Corp. ........... 143,637 20 Mitsubishi Tokyo Financial Group, Inc. ................. 156,014 6,415 National Australia Bank Ltd. .. 144,760 4,500 National Bank of Canada ....... 150,226 -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- 41,356 New York Community Bancorp, Inc. $ 1,573,596 12,500 Provident Bankshares Corp. (L) 368,000 8,300 R & G Financial Corp. ......... 330,340 33,700 Royal Bank of Scotland Group Plc 993,004 2,100 Societe Generale* ............. 185,419 34,900 Standard Chartered Plc ........ 576,345 7,300 Svenska Handelsbanken AB Class A 149,139 37,610 Texas Capital Bancshares, Inc.* 543,916 5,850 TriCo Bancshares .............. 184,626 36,500 U.S. Bancorp .................. 1,086,970 29,400 UniCredito Italiano S.p.A. .... 158,718 18,800 UnionBanCal Corp. ............. 1,081,752 85,400 Wachovia Corp. ................ 3,978,786 62,300 Wells Fargo & Co. ............. 3,668,847 24,700 Westamerica Bancorp. .......... 1,227,590 ------------ 50,529,566 ------------ BROADCASTING AND MEDIA-- 3.0% 8,600 4Kids Entertainment, Inc.* .... 223,772 55,380 Belo Corp. .................... 1,569,469 39,000 Cox Communications, Inc. Class A* 1,343,550 40,900 EchoStar Communications Corp.* 1,390,600 42,100 Gannett Co., Inc. ............. 3,753,636 492,940 Liberty Media Corp. Class A* .. 5,861,057 16,862 News Corp. Ltd. ............... 152,329 53,700 Pearson Plc ................... 597,937 507,550 Time Warner, Inc.* ............ 9,130,825 64,000 UnitedGlobalCom, Inc. Class A* 542,720 32,550 World Wrestling Entertainment, Inc. ........................ 426,405 ------------ 24,992,300 ------------ CHEMICALS -- 0.7% 71,900 Dow Chemical Co. .............. 2,988,883 8,200 Nitto Denko Corp. ............. 436,130 9,900 Norsk Hydro ASA ............... 610,863 36,950 Rohm & Haas Co. ............... 1,578,134 2,900 Shin-Etsu Chemical Co. Ltd. ... 118,522 47,000 Sumitomo Chemical Co. Ltd. .... 193,842 ------------ 5,926,374 ------------ COMMERCIAL SERVICES-- 1.7% 97,100 Accenture Ltd. Class A* ....... 2,555,672 16,000 Alliance Data Systems Corp.* .. 442,880 20,600 Checkpoint Systems, Inc.* (L) . 389,546 13,200 CSG Systems International, Inc.* (L) ................... 164,868 21,900 Fluor Corp. ................... 868,116 6,850 FTI Consulting, Inc.* ......... 160,084 20,750 Global Payments, Inc. ......... 977,740 13,700 Iron Mountain, Inc.* .......... 541,698 14,200 ITT Educational Services, Inc.* 666,974 15,500 John H. Harland Co. (L) ....... 423,150 34,480 Manpower, Inc. ................ 1,623,318 9,600 Maximus, Inc.* (L) ............ 375,648 46,360 NETGEAR, Inc.* (L) ............ 741,296 54,180 Plexus Corp.* ................. 930,271 6,700 Rent-A-Center, Inc.* .......... 200,196 28,600 Rent-Way, Inc.* ............... 234,234 5,000 SOURCECORP, Inc.* ............. 128,150 45,800 Tetra Tech, Inc.* ............. 1,138,588 5,500 United Stationers, Inc.* ...... 225,060 26,360 VERITAS Software Corp.* ....... 979,538 4,600 Wackenhut Corrections Corp.* .. 104,880 3,000 Watson Wyatt & Co. Holdings* .. 72,450 ------------ 13,944,357 ------------ See accompanying notes to financial statements. 4 PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- NEW COVENANT GROWTH FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- COMMON STOCK -- (CONTINUED) COMPUTER SERVICES AND SOFTWARE-- 4.6% 3,850 Activision, Inc.* ............. $ 70,070 78,960 Adobe Systems, Inc. ........... 3,103,128 12,600 ASML Holding NV* .............. 249,839 35,270 Automatic Data Processing, Inc. 1,397,045 163,910 Dell, Inc.* ................... 5,566,384 28,900 Dendrite International, Inc.* (L) 452,863 15,500 Diebold, Inc. ................. 834,985 47,490 Embarcadero Technologies, Inc.* 757,465 70,950 EMC Corp.* .................... 916,674 10,800 Epicor Software Corp.* ........ 137,808 61,650 Foundry Networks, Inc.* ....... 1,686,744 25,900 Gartner, Inc. Class A* (L) .... 292,929 13,700 Hutchinson Technology, Inc.* (L) 421,138 4,750 Hyperion Solutions Corp.* (L) . 143,165 15,500 Intuit, Inc.* ................. 820,105 4,800 Kronos, Inc.* (L) ............. 190,128 40,668 Maxtor Corp.* ................. 451,415 518,100 Microsoft Corp. ............... 14,268,474 11,600 Mobius Management Systems, Inc.* 146,740 96,750 Network Appliance, Inc.* ...... 1,986,277 3,400 Progress Software Corp.* ...... 69,564 5,850 QAD, Inc.* .................... 71,721 6,600 Rainbow Technologies, Inc.* ... 74,316 3,800 Renaissance Learning, Inc.* ... 91,504 2,600 SAP AG (L) .................... 436,667 1,100 SAP AG Sponsored ADR .......... 45,716 3,950 SERENA Software, Inc.* ........ 72,482 3,250 SS&C Technologies, Inc. ....... 90,838 40,800 SunGard Data Systems, Inc.* ... 1,130,568 95,540 Symbol Technologies, Inc. ..... 1,613,671 5,500 Transaction Systems Architects, Inc.* ....................... 124,465 7,300 Tyler Technologies, Inc.* ..... 70,299 ------------ 37,785,187 ------------ CONSTRUCTION AND BUILDING MATERIALS -- 1.0% 26,600 Bouygues SA ................... 930,060 6,700 Brookfield Homes Corp. ........ 172,659 14,181 CRH Plc ....................... 291,025 13,100 D.R. Horton, Inc. ............. 566,706 32,100 Dycom Industries, Inc.* ....... 860,922 400 Granite Construction, Inc. .... 9,396 18,106 Holcim Ltd. ................... 843,263 15,190 Hughes Supply, Inc. ........... 753,728 6,100 Lennar Corp. Class A .......... 585,600 78,340 Masco Corp. ................... 2,147,299 2,400 Ryland Group, Inc. ............ 212,736 41,000 Sekisui House Ltd. ............ 423,505 6,000 Tostem Inax Holding Corp. ..... 115,891 24,100 Washington Group International, Inc.* ....................... 818,677 ------------ 8,731,467 ------------ CONSUMER PRODUCTS -- 3.5% 29,500 Avery Dennison Corp. .......... 1,652,590 4,000 Fuji Photo Film Co. Ltd. ...... 129,140 128,300 Gillette Co. .................. 4,712,459 23,600 Hasbro, Inc. .................. 502,208 10,600 HON Industries, Inc. .......... 459,192 35,300 Jarden Corp.* ................. 965,102 71,700 Kimberly-Clark Corp. .......... 4,236,753 3,400 L'Oreal SA* ................... 278,759 194,000 Li & Fung Ltd. ................ 332,346 22,500 Mohawk Industries, Inc.* ...... 1,587,150 41,900 Nike, Inc. Class B ............ 2,868,474 18,000 Nikon Corp. (L) ............... 271,419 -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- 2,300 Nintendo Co. Ltd. ............. $ 214,612 21,800 Nu Skin Enterprises, Inc. (L) . 372,562 36,000 Pactiv Corp.* ................. 860,400 7,450 Polaris Industries, Inc. ...... 659,921 50,860 Procter & Gamble Co. .......... 5,079,897 4,600 Reckitt Benckiser Plc ......... 104,087 53,050 RPM International, Inc. ....... 873,203 13,600 Sherwin-Williams Co. .......... 472,464 2,300 Stanley Furniture Co., Inc. ... 72,450 9,600 Timberland Co. Class A* ....... 499,872 23,950 Toro Co. ...................... 1,111,280 900 Uni-Charm Corp. ............... 44,257 62,400 Unilever Plc (L) .............. 581,708 1,200 Winnebago Industries, Inc. .... 82,500 ------------ 29,024,805 ------------ DIVERSIFIED OPERATIONS -- 5.1% 46,980 3M Co. ........................ 3,994,709 31,600 ARAMARK Corp. Class B ......... 866,472 125,400 Bombardier, Inc. Class B (L) .. 530,809 49,100 Brambles Industries Ltd. (L) .. 195,330 89,400 Cendant Corp.* ................ 1,990,938 59,900 Centrica Plc .................. 226,256 37,850 Crane Co. ..................... 1,163,509 93,600 First Data Corp. .............. 3,846,024 351,000 General Electric Co. .......... 10,873,980 20,500 Hutchison Whampoa Ltd. ........ 151,170 28,810 Ingersoll-Rand Co. Class A .... 1,955,623 30,000 Mitsubishi Corp. .............. 318,000 161,000 Nippon Steel Corp. ............ 345,526 2,050 Rofin-Sinar Technologies, Inc.* 70,848 43,800 Smiths Group Plc .............. 518,283 93,190 SPX Corp.* .................... 5,480,504 28,900 Swire Pacific Ltd. Class A (L) 178,308 48,500 Textron, Inc. ................. 2,767,410 118,500 Thermo Electron Corp.* ........ 2,986,200 134,000 Tyco International Ltd. ....... 3,551,000 4,900 Wesfarmers Ltd. ............... 97,798 ------------ 42,108,697 ------------ ELECTRONICS -- 4.4% 29,300 Actel Corp.* .................. 706,130 3,500 Advantest Corp. ............... 277,596 108,800 Altera Corp.* ................. 2,469,760 20,100 Ameren Corp. .................. 924,600 7,700 Amphenol Corp. Class A ........ 492,261 32,400 Analog Devices, Inc.* ......... 1,479,060 96,580 Applied Materials, Inc.* ...... 2,168,221 3,500 Benchmark Electronics, Inc.* .. 121,835 93,610 Cypress Semiconductor Corp.* (L) 1,999,510 12,950 Diodes, Inc.* ................. 246,050 26,800 ESS Technology, Inc.* (L) ..... 455,868 101,330 Fairchild Semiconductor International, Inc.* ........ 2,530,210 4,700 FANUC Ltd. .................... 281,553 13,300 FLIR Systems, Inc.* (L) ....... 485,450 85,920 GrafTech International Ltd.* .. 1,159,920 3,000 Hirose Electric Co. Ltd. ...... 344,313 12,800 Infineon Technologies AG* (L) . 177,921 61,260 Jabil Circuit, Inc.* .......... 1,733,658 307,500 Johnson Electric Holdings Ltd. 392,118 600 Keyence Corp. ................. 126,472 30,230 KLA-Tencor Corp.* ............. 1,773,594 6,200 Koninklijke (Royal) Philips Electronics NV .............. 181,042 22,600 Linear Technology Corp. ....... 950,782 30,940 Merix Corp.* (L) .............. 758,958 See accompanying notes to financial statements. 5 PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- NEW COVENANT GROWTH FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- COMMON STOCK -- (CONTINUED) ELECTRONICS -- (CONTINUED) 27,160 MKS Instruments, Inc.* ........ $ 787,640 3,700 Murata Manufacturing Co. Ltd. . 199,897 121,000 NEC Corp. ..................... 890,818 300 NEC Electronics Corp.* ........ 21,947 32,040 O2Micro International Ltd.* ... 717,696 70,810 PMC-Sierra, Inc.* ............. 1,426,822 4,000 Rohm Co. Ltd. ................. 468,788 31,260 Rudolph Technologies, Inc.* ... 767,120 5,014 Samsung Electronics Co. Ltd. GDR ++ ....................... 948,936 140,430 Sanmina-SCI Corp.* ............ 1,770,822 6,400 Siliconix, Inc.* .............. 292,480 8,200 Sony Corp. (L) ................ 283,867 5,600 Standard Microsystems Corp.* .. 141,680 11,500 STMicroelectronics NV* (L) .... 311,869 7,500 Stoneridge, Inc.* ............. 112,875 81,925 Taiwan Semiconductor Manufacturing Co. Ltd. Sponsored ADR* ..... 838,912 64,850 Teradyne, Inc.* ............... 1,650,433 12,300 Tokyo Electron Ltd. ........... 934,235 16,000 Venture Corp. Ltd. ............ 188,424 38,700 Xilinx, Inc.* ................. 1,499,238 ------------ 36,491,381 ------------ ENERGY -- 1.9% 13,400 American Electric Power Co., Inc. 408,834 24,700 Cleco Corp. (L) ............... 444,106 26,600 DPL, Inc. ..................... 555,408 24,300 Edison International* ......... 532,899 19,200 Energy East Corp. ............. 430,080 35,800 Entergy Corp. ................. 2,045,254 54,337 Exelon Corp. .................. 3,605,803 17,100 Kansai Electric Power Co., Inc. 299,653 28,900 MDU Resources Group, Inc. ..... 688,109 26,600 NUI Corp. (L) ................. 428,792 24,400 Pinnacle West Capital Corp. ... 976,488 21,400 PPL Corp. ..................... 936,250 153,000 TXU Corp. ..................... 3,629,160 53,800 Xcel Energy, Inc. ............. 913,524 ------------ 15,894,360 ------------ ENTERTAINMENT AND LEISURE -- 0.1% 13,500 Callaway Golf Co. (L) ......... 227,475 2,050 Carmike Cinemas, Inc.* ........ 71,442 22,300 Regal Entertainment Group (L) . 457,596 ------------ 756,513 ------------ FINANCIAL SERVICES-- 8.6% 6,700 Affiliated Managers Group, Inc.* 466,253 2,690 Aiful Corp. ................... 196,786 54,550 Ambac Financial Group, Inc. ... 3,785,224 19,400 American Capital Strategies Ltd. (L) .................... 576,762 23,110 American Express Co. .......... 1,114,595 47,350 BISYS Group, Inc.* ............ 704,568 35,700 Capital One Financial Corp. ... 2,188,053 10,200 Certegy, Inc. ................. 334,560 20,100 CIT Group, Inc. ............... 722,595 299,516 Citigroup, Inc. ............... 14,538,507 27,200 Concord EFS, Inc.* ............ 403,648 49,733 Countrywide Financial Corp. ... 3,772,273 21,000 Daiwa Securities Group, Inc. .. 142,848 1,972 Deutsche Boerse AG ............ 107,828 136,100 Equifax, Inc. ................. 3,334,450 6,250 Euronet Worldwide, Inc.* ...... 112,500 86,100 Fannie Mae .................... 6,462,666 28,600 Franklin Resources, Inc. ...... 1,488,916 112,100 Freddie Mac ................... 6,537,672 -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- 24,800 Friedman, Billings, Ramsey Group, Inc. Class A ......... $ 572,384 30,250 Goldman Sachs Group, Inc. ..... 2,986,582 38,700 HBOS Plc ...................... 501,234 47,600 HSBC Holdings Plc* ............ 748,157 27,607 ING Groep NV .................. 643,862 81,500 MBIA, Inc. .................... 4,827,245 53,700 MBNA Corp. .................... 1,334,445 92,600 Merrill Lynch & Co., Inc. ..... 5,430,990 63,900 Morgan Stanley ................ 3,697,893 40,000 Nikko Cordial Corp. ........... 222,824 23,000 Nomura Holdings, Inc. ......... 391,667 6,500 Orix Corp. .................... 537,371 136,350 Providian Financial Corp.* .... 1,587,114 8,305 UBS AG ........................ 568,776 ------------ 71,041,248 ------------ FOOD AND BEVERAGES -- 3.3% 15,500 Bunge Ltd. .................... 510,260 3,800 Carrefour SA* ................. 208,597 169,960 Coca-Cola Co. ................. 8,625,470 164,630 Coca-Cola Enterprises, Inc. ... 3,600,458 18,300 Compass Group Plc ............. 124,488 32,400 Cott Corp.* (L) ............... 907,524 2,800 Groupe Danone* (L) ............ 457,013 26,750 Interstate Bakeries Corp. ..... 380,652 9,700 Koninklijke Numico NV* ........ 268,071 94,000 Kraft Foods, Inc. Class A ..... 3,028,680 8,950 Nash Finch Co. (L) ............ 199,943 3,709 Nestle SA ..................... 926,688 55,500 Pepsi Bottling Group, Inc. .... 1,341,990 14,700 PepsiAmericas, Inc. ........... 251,664 68,600 PepsiCo, Inc. ................. 3,198,132 24,300 Ruddick Corp. ................. 434,970 51,000 Safeway, Inc.* ................ 1,117,410 39,100 SUPERVALU, Inc. ............... 1,117,869 37,037 Tesco Plc ..................... 170,894 3,500 Unilever NV ................... 228,904 18,300 Woolworths Ltd. ............... 162,700 ------------ 27,262,377 ------------ FORESTRY AND PAPER PRODUCTS -- 1.5% 32,500 Abitibi-Consolidated, Inc. (L) 260,805 33,200 Boise Cascade Corp. ........... 1,090,952 16,700 Bowater, Inc. ................. 773,377 106,000 Georgia-Pacific Corp. ......... 3,251,020 17,100 Glatfelter .................... 212,895 44,900 International Paper Co. ....... 1,935,639 8,350 Longview Fibre Co.* ........... 103,123 16,126 Rayonier, Inc. ................ 669,390 27,000 Sumitomo Forestry Co. Ltd. .... 228,506 16,300 Temple-Inland, Inc. ........... 1,021,521 9,800 UPM-Kymmene Oyj ............... 186,902 44,200 Weyerhaeuser Co. .............. 2,828,800 ------------ 12,562,930 ------------ HEALTH SERVICES -- 1.4% 43,000 Aetna, Inc. ................... 2,905,940 28,100 Anthem, Inc.* ................. 2,107,500 23,450 Apria Healthcare Group, Inc.* . 667,622 24,200 Humana, Inc.* ................. 552,970 45,430 Manor Care, Inc. .............. 1,570,515 49,100 McKesson Corp. ................ 1,579,056 37,800 UnitedHealth Group, Inc. ...... 2,199,204 11,150 US Oncology, Inc.* ............ 119,974 ------------ 11,702,781 ------------ See accompanying notes to financial statements. 6 PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- NEW COVENANT GROWTH FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- COMMON STOCK -- (CONTINUED) HOTELS AND OTHER LODGING PLACES -- 0.0%# 6,800 Accor SA (L) .................. $ 307,921 ------------ INSURANCE -- 3.5% 83,870 Aegon NV* ..................... 1,240,912 4,000 Allianz AG .................... 504,944 46,479 American International Group, Inc. ........................ 3,080,628 3,750 AmerUs Group Co. .............. 131,137 6,050 Arch Capital Group Ltd.* ...... 241,153 17,400 Arthur J. Gallagher & Co. ..... 565,326 5,300 Assicurazioni Generali S.p.A (L) 140,388 63 Berkshire Hathaway, Inc. Class A* .................... 5,307,750 46,000 Chubb Corp. ................... 3,132,600 43,000 CIGNA Corp. ................... 2,472,500 10,124 Fidelity National Financial, Inc. ........................ 392,609 57,000 Hartford Financial Services Group, Inc. ................. 3,364,710 8,700 LandAmerica Financial Group, Inc. (L) .................... 454,662 23 Millea Holdings, Inc. ......... 300,457 51,000 Mitsui Sumitomo Insurance Co. Ltd. ........................ 418,774 3,342 Muenchener Rueckversicherungs- Gesellschaft AG ............. 405,188 33,900 Old Republic International Corp. 859,704 14,550 Presidential Life Corp. ....... 191,478 19,800 Prudential Plc ................ 167,390 19,846 QBE Insurance Group Ltd. (L) .. 158,501 25,200 Reinsurance Group of America, Inc. (L) .................... 973,980 13,300 Sompo Japan Insurance, Inc. ... 109,334 54,000 St. Paul Cos., Inc. ........... 2,141,100 1,750 Stewart Information Services Corp. ....................... 70,963 15,851 Swiss Re ...................... 1,070,191 18,800 Torchmark Corp. ............... 856,152 ------------ 28,752,531 ------------ INTERNET SERVICES-- 1.1% 106,700 CNET Networks, Inc.* (L) ...... 727,694 4,250 Digital River, Inc.* .......... 93,925 38,590 F5 Networks, Inc.* ............ 968,609 6,400 j2 Global Communications, Inc.* 158,528 54,800 Secure Computing Corp.* (L) ... 981,468 4,650 Sohu.com, Inc.* ............... 139,547 90,160 Symantec Corp.* ............... 3,124,044 10,300 United Online, Inc.* .......... 172,937 125,830 VeriSign, Inc.* ............... 2,051,029 19,650 WebEx Communications, Inc.* (L) 394,965 24 Yahoo Japan Corp.* (L) ........ 322,478 ------------ 9,135,224 ------------ MACHINERY AND EQUIPMENT -- 0.7% 13,450 Albany International Corp. Class A ..................... 455,955 5,000 Briggs & Stratton Corp. ....... 337,000 8,200 Caterpillar, Inc. ............. 680,764 13,370 Deere & Co. ................... 869,719 5,300 Flowserve Corp.* .............. 110,664 30,900 Graco, Inc. ................... 1,239,090 5,000 Lincoln Electric Holdings, Inc. 123,700 1,100 Nidec Corp. (L) ............... 105,001 4,700 Sandvik AB (L) ................ 161,995 5,300 Schneider Electric SA ......... 346,960 3,400 SMC Corp. ..................... 423,215 26,300 Terex Corp.* .................. 749,024 5,050 Watsco, Inc. .................. 114,787 ------------ 5,717,874 ------------ MANUFACTURING -- 0.9% 28,200 Assa Abloy AB Class B ......... 335,094 57,100 Emerson Electric Co. .......... 3,697,225 1,650 NACCO Industries, Inc. ........ 147,642 -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- 36,100 National Semiconductor Corp.* . $ 1,422,701 10,600 Pentair, Inc. ................. 484,420 10,300 Siemens AG (L) ................ 824,987 9,400 ThyssenKrupp AG ............... 185,795 84,000 Toray Industries, Inc. ........ 351,143 ------------ 7,449,007 ------------ MEDICAL PRODUCTS -- 4.8% 8,100 Advanced Medical Optics, Inc.* (L) .................... 159,165 64,800 ALARIS Medical Systems, Inc.* . 985,608 16,350 Amgen, Inc.* .................. 1,010,430 21,050 Applera Corp. - Celera Genomics Group* ...................... 292,805 9,900 Bausch & Lomb, Inc. ........... 513,810 115,500 Baxter International, Inc. .... 3,525,060 23,000 Beckman Coulter, Inc. ......... 1,169,090 30,500 Becton, Dickinson & Co. ....... 1,254,770 21,880 Boston Scientific Corp.* ...... 804,309 5,200 Cerner Corp.* ................. 196,820 6,000 Diagnostic Products Corp. (L) . 275,460 5,300 Essilor International SA ...... 274,092 15,160 Forest Laboratories, Inc.* .... 936,888 21,580 Gen-Probe, Inc.* .............. 787,023 60,900 Genzyme Corp.* ................ 3,004,806 61,500 Guidant Corp. ................. 3,702,300 3,400 Hoya Corp. .................... 312,177 58,200 IMS Health, Inc. .............. 1,446,852 89,200 Incyte Corp.* (L) ............. 610,128 66,000 Johnson & Johnson ............. 3,409,560 70,000 Laboratory Corp. of America Holdings* ................... 2,586,500 12,540 Martek Biosciences Corp.* (L) . 814,724 19,930 Medtronic, Inc. ............... 968,797 21,000 Per-Se Technologies, Inc.* (L) 320,460 63,000 PerkinElmer, Inc. ............. 1,075,410 4,100 PolyMedica Corp. .............. 107,871 80,240 PSS World Medical, Inc.* ...... 968,497 1,550 Quality Systems, Inc.* ........ 69,114 24,500 Quest Diagnostics, Inc.* ...... 1,791,195 10,000 Respironics, Inc.* ............ 450,900 31,500 Sanofi-Synthelabo SA .......... 2,372,036 21,000 Smith & Nephew Plc ............ 176,407 3,800 Sybron Dental Specialities, Inc.* ....................... 106,780 206 Synthes-Stratec, Inc. ......... 203,876 13,050 Telik, Inc.* (L) .............. 300,280 8,000 VISX, Inc.* ................... 185,200 28,800 Waters Corp.* ................. 955,008 24,130 Zimmer Holdings, Inc.* ........ 1,698,752 ------------ 39,822,960 ------------ METALS AND MINING -- 0.6% 4,900 Alcan, Inc. ................... 229,671 23,560 Alcoa, Inc. ................... 895,280 8,100 Anglo American Plc ............ 175,018 23,462 BHP Billiton Ltd. ............. 215,488 72,567 BHP Billiton Plc .............. 633,943 15,850 Carpenter Technology Corp. .... 468,684 4,800 Commercial Metals Co. ......... 145,920 4,000 Companhia Vale do Rio Doce ADR 234,000 5,000 Companhia Vale do Rio Doce Sponsored ADR ............... 257,550 5,700 Inco Ltd.* .................... 227,824 8,500 Placer Dome, Inc. (L) ......... 152,405 10,100 Precision Castparts Corp. ..... 458,641 7,419 Stillwater Mining Co.* ........ 71,000 55,000 WMC Resources Ltd.* ........... 233,305 23,600 Xstrata Plc ................... 266,161 ------------ 4,664,890 ------------ See accompanying notes to financial statements. 7 PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- NEW COVENANT GROWTH FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- COMMON STOCK -- (CONTINUED) OIL AND GAS -- 5.6% 141,000 BG Group Plc .................. $ 723,792 30,700 Burlington Resources, Inc. .... 1,700,166 17,300 Chesapeake Energy Corp. (L) ... 234,934 58,211 ChevronTexaco Corp. ........... 5,028,848 97,819 ConocoPhillips ................ 6,413,992 78,690 Devon Energy Corp. ............ 4,505,789 20,350 Eni S.p.A. (L) ................ 384,001 241,700 Exxon Mobil Corp. ............. 9,909,700 101,500 Halliburton Co. ............... 2,639,000 22,700 Kerr-McGee Corp. .............. 1,055,323 2,762 L'Air Liquide SA .............. 487,740 89,000 Marathon Oil Corp. ............ 2,945,010 43,000 Occidental Petroleum Corp. .... 1,816,320 5,218 Patina Oil & Gas Corp. (L) .... 255,630 44,600 Praxair, Inc. ................. 1,703,720 9,600 Repsol YPF, SA (L) ............ 187,205 35,800 Royal Dutch Petroleum Co. ..... 1,887,538 3,500 Royal Dutch Petroleum Co. NY Shares ................... 183,365 2,500 Sasol ......................... 35,580 48,700 Statoil ASA ................... 547,187 6,000 Stone Energy Corp.* ........... 254,700 12,800 Suncor Energy, Inc. (L) ....... 321,919 5,200 Tesoro Petroleum Corp.* ....... 75,764 33,000 Unocal Corp. .................. 1,215,390 7,700 Valero Energy Corp. ........... 356,818 36,100 Vintage Petroleum, Inc. ....... 434,283 27,000 Weatherford International Ltd.* 972,000 900 YUKOS ADR ..................... 38,340 ------------ 46,314,054 ------------ PHARMACEUTICALS -- 7.3% 4,150 aaiPharma, Inc.* .............. 104,248 134,100 Abbott Laboratories ........... 6,249,060 17,400 Abgenix, Inc.* (L) ............ 216,804 11,880 AstraZeneca Plc ............... 569,957 42,670 AstraZeneca Plc (Stockholm Registered) ................. 2,078,556 25,460 Barr Pharmaceuticals, Inc.* ... 1,959,147 38,650 BioMarin Pharmaceutical, Inc.* (L) ................... 300,272 21,300 Celgene Corp.* ................ 958,926 14,800 Cephalon, Inc.* (L) ........... 716,468 7,800 Connetics Corp.* (L) .......... 141,648 16,500 CV Therapeutics, Inc.* (L) .... 241,890 61,800 Eli Lilly & Co. ............... 4,346,394 73,400 Gilead Sciences, Inc.* ........ 4,267,476 6,100 GlaxoSmithKline Plc ........... 139,775 7,650 ILEX Oncology, Inc.* .......... 162,563 116,500 King Pharmaceuticals, Inc.* ... 1,777,790 8,200 Kos Pharmaceuticals, Inc.* (L) 352,928 87,308 Medco Health Solutions, Inc.* . 2,967,599 42,100 Merck & Co., Inc. ............. 1,945,020 29,324 Novartis AG ................... 1,331,346 4,100 Novo Nordisk A/S Class B ...... 167,038 19,150 NPS Pharmaceuticals, Inc.* (L) 588,671 53,000 Omnicare, Inc. ................ 2,140,670 2,200 OSI Pharmaceuticals, Inc.* (L) 70,862 26,700 Perrigo Co. ................... 419,724 307,905 Pfizer, Inc. .................. 10,878,284 22,000 Pharmaceutical Resources, Inc.* 1,433,300 33,900 Regeneron Pharmaceuticals, Inc.* (L) ................... 498,669 4,900 Roche Holding AG .............. 494,259 18,000 Sankyo Co. Ltd. ............... 338,434 199,200 Schering-Plough Corp. ......... 3,464,088 307 Serono SA ..................... 218,940 31,000 Shionogi & Co. Ltd. ........... 577,363 -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- 17,670 Taro Pharmaceutical Industries Ltd.* ....................... $ 1,139,715 5,100 Trimeris, Inc.* ............... 106,998 121,830 Watson Pharmaceuticals, Inc.* . 5,604,180 33,900 Wyeth ......................... 1,439,055 5,000 Yamanouchi Pharmaceutical Co. Ltd. ........................ 155,361 2,200 ZymoGenetics, Inc.* ........... 34,100 ------------ 60,597,578 ------------ PRINTING AND PUBLISHING-- 0.2% 3,000 Dai Nippon Printing Co. Ltd. .. 42,129 8,350 Information Holdings, Inc.* ... 184,535 6,900 Reed Elsevier NV .............. 85,728 14,800 Reed Elsevier Plc ............. 123,795 17,968 Singapore Press Holdings Ltd. . 199,962 12,000 Thomson Corp. ................. 435,000 11,500 Thomson Corp. (Toronto Registered) (L) ......................... 418,975 6,548 VNU NV ........................ 206,896 ------------ 1,697,020 ------------ REAL ESTATE -- 0.8% 7,050 American Home Mortgage Investment Corp. ............ 158,695 5,400 CBL & Associates Properties, Inc. 305,100 31,000 Cheung Kong (Holdings) Ltd. ... 246,567 13,550 Equity Inns, Inc. ............. 122,627 53,800 General Growth Properties, Inc. 1,492,950 7,100 Glenborough Realty Trust, Inc. 141,645 171,000 Hang Lung Properties Ltd. (L) . 219,157 77,000 HongKong Land Holdings Ltd. ... 130,900 22,700 iStar Financial, Inc. ......... 883,030 5,250 Koger Equity .................. 109,883 21,150 LaSalle Hotel Properties ...... 392,333 11,300 Mack-Cali Realty Corp. ........ 470,306 53,000 Mitsubishi Estate Co. Ltd. .... 502,454 26,000 Mitsui Fudosan Co. Ltd. ....... 234,842 4,750 Novastar Financial, Inc. ...... 204,060 3,350 Parkway Properties, Inc. ...... 139,360 14,700 Reckson Associates Realty Corp. 357,210 4,600 Redwood Trust, Inc. ........... 233,910 9,300 Senior Housing Properties Trust 160,239 16,000 Sun Hung Kai Properties Ltd. .. 132,413 ------------ 6,637,681 ------------ RESTAURANTS -- 0.9% 24,850 Applebee's International, Inc. 975,859 3,150 CEC Entertainment, Inc.* ...... 149,279 145,300 McDonald's Corp. .............. 3,607,799 44,450 Starbucks Corp.* .............. 1,469,517 35,750 Yum! Brands, Inc.* ............ 1,229,800 ------------ 7,432,254 ------------ RETAIL -- 4.7% 24,000 Aeon Co. Ltd. ................. 803,956 30,300 Aeropostale, Inc.* ............ 830,826 14,500 Best Buy Co., Inc. ............ 757,480 5,150 Big 5 Sporting Goods Corp.* ... 107,892 48,700 BJ's Wholesale Club, Inc.* .... 1,118,152 6,900 Brown Shoe Co., Inc. .......... 261,717 25,500 Chico's FAS, Inc.* ............ 942,225 34,300 Claire's Stores, Inc. ......... 646,212 72,300 CVS Corp. ..................... 2,611,476 79,400 Dollar General Corp. .......... 1,666,606 56,600 Federated Department Stores, Inc. ........................ 2,667,558 6,750 Finish Line, Inc.* ............ 202,297 39,700 Foot Locker, Inc. ............. 930,965 150,600 Gap, Inc. ..................... 3,495,426 See accompanying notes to financial statements. 8 PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- NEW COVENANT GROWTH FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- COMMON STOCK -- (CONTINUED) RETAIL -- (CONTINUED) 11,250 Goody's Family Clothing, Inc. . $ 105,300 25,200 Home Depot, Inc. .............. 894,348 24,400 Industria de Diseno Textil SA (L) 495,510 19,740 Jos. A. Bank Clothiers, Inc.* (L) 684,781 104,870 Lowe's Cos., Inc. ............. 5,808,749 3,800 Metro AG (L) .................. 167,520 14,200 Michaels Stores, Inc. ......... 627,640 53,070 Pacific Sunwear of California, Inc.* ....................... 1,120,838 12,050 Party City Corp.* ............. 152,915 2,000 Shimamura Co. Ltd. ............ 135,859 6,300 ShopKo Stores, Inc.* .......... 96,075 12,200 Stage Stores, Inc.* ........... 340,380 89,280 Staples, Inc.* ................ 2,437,344 23,400 Target Corp. .................. 898,560 71,570 TJX Cos., Inc. ................ 1,578,119 23,850 Tractor Supply Co.* ........... 927,527 79,320 Wal-Mart Stores, Inc. ......... 4,207,926 45,340 Williams-Sonoma, Inc.* ........ 1,576,472 1,350 Zale Corp.* ................... 71,820 ------------ 39,370,471 ------------ TECHNOLOGY -- 4.7% 1,750 ANSYS, Inc.* .................. 69,475 6,000 Canon, Inc. ................... 279,369 28,900 CDW Corp. ..................... 1,669,264 468,110 Cisco Systems, Inc.* .......... 11,370,392 32,700 Citrix Systems, Inc.* ......... 693,567 218,850 Intel Corp. ................... 7,046,970 108,890 International Business Machines Corp. ....................... 10,091,925 61,460 Ixia* ......................... 719,082 42,400 Macromedia, Inc.* ............. 756,416 8,000 Ricoh Co. Ltd. ................ 157,880 4,600 ScanSource, Inc.* (L) ......... 209,852 28,400 Tech Data Corp.* .............. 1,127,196 166,800 Texas Instruments, Inc. ....... 4,900,584 ------------ 39,091,972 ------------ TELECOMMUNICATIONS -- 5.7% 14,400 America Movil SA de CV, Series L ADR ....................... 393,696 8,050 Aspect Communications Corp.* .. 126,868 144,540 AT&T Corp. .................... 2,934,162 16,900 BCE, Inc. (L) ................. 377,953 106,800 CenturyTel, Inc. .............. 3,483,816 50,000 China Mobile (Hong Kong) Ltd. . 153,601 246,000 Citizens Communications Co.* .. 3,055,320 87,972 Comcast Corp. Class A* ........ 2,891,640 74,800 Comcast Corp., Special Class A* 2,339,744 3,500 Comtech Telecommunications Corp.* 101,045 35,770 Comverse Technology, Inc.* .... 629,194 193,700 Corning, Inc.* ................ 2,020,291 19,450 Digi International, Inc.* ..... 186,720 13,700 France Telecom SA* (L) ........ 391,577 6,600 Inter-Tel, Inc. (L) ........... 164,868 97,300 Koninklijke (Royal) KPN NV* ... 751,105 275,800 Motorola, Inc. ................ 3,880,506 53,800 National Grid Transco Plc ..... 385,483 130,300 Nextel Communications, Inc. Class A* .................... 3,656,218 36,100 Nokia Oyj ..................... 624,282 206,300 Nokia Oyj Sponsored ADR ....... 3,507,100 19,900 Plantronics, Inc.* ............ 649,735 14,350 Primus Telecommunications Group, Inc.* ....................... 146,083 52,400 PTEK Holdings, Inc.* (L) ...... 461,644 145,780 RF Micro Devices, Inc.* (L) ... 1,465,089 -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- 19,250 Rural Cellular Corp. Class A* . $ 153,037 62,500 SBC Communications, Inc. ...... 1,629,375 4,750 SeaChange International, Inc.* 73,150 17,700 SES Global .................... 178,607 723,999 Singapore Telecommunications Ltd. 835,564 131,400 Sprint Corp. .................. 2,157,588 2,506 Swisscom AG ................... 826,722 27,700 TALK America Holdings, Inc.* (L) 319,104 1,600 TDC A/S ....................... 57,732 34,320 Tekelec* ...................... 533,676 42,130 Telefonica, SA* ............... 618,559 9,800 Telefonos de Mexico, SA de CV, Series L Sponsored ADR ...... 323,694 11,800 Telus Corp. Non-Voting Shares . 220,979 22,152 Verizon Communications, Inc. .. 777,092 22,600 Vivendi Universal SA* (L) ..... 549,321 1,163,868 Vodafone Group Plc ............ 2,885,656 40 Vodafone Holdings K. K. ....... 107,120 15,250 Westell Technologies, Inc.* ... 96,228 ------------ 47,120,944 ------------ TRANSPORTATION -- 1.4% 12,700 Alexander & Baldwin, Inc. ..... 427,863 6,250 Arkansas Best Corp. ........... 196,187 54,600 Burlington Northern Santa Fe Corp. ....................... 1,766,310 20,500 CNF, Inc. ..................... 694,950 39,000 CSX Corp. ..................... 1,401,660 43,000 FedEx Corp. ................... 2,902,500 44,030 Ryder System, Inc. ............ 1,503,624 20,000 Singapore Airlines Ltd. ....... 131,897 6,400 TPG NV* ....................... 149,909 20,500 Union Pacific Corp. ........... 1,424,340 13,690 United Parcel Service, Inc. Class B ..................... 1,020,590 4,750 United Rentals, Inc.* ......... 91,485 ------------ 11,711,315 ------------ WASTE MANAGEMENT -- 0.6% 117,400 Republic Services, Inc. ....... 3,008,962 68,600 Waste Management, Inc. ........ 2,030,560 ------------ 5,039,522 ------------ Total Common Stock (Cost $686,583,041) ......... 774,312,474 ------------ Principal Amount+ --------- CORPORATE FIXED INCOME SECURITIES -- 0.1% FINANCIAL SERVICES -- 0.1% $3,000,000 SMFG Finance Ltd. 2.250% due 07/11/2005 ....... 51,033 27,000,000 SMFG Finance Ltd. 2.250% due 07/11/2005++ ..... 255,085 ------------ 306,118 ------------ Total Corporate Fixed Income Securities (Cost $244,166) ............. 306,118 ------------ Shares --------- EXCHANGE TRADED FUNDS -- 5.4% 187,500 iShares Russell 2000 Index Fund (L) .................... 20,775,000 218,200 SPDR Trust Series 1 ........... 24,283,478 ------------ Total Exchange Traded Funds (Cost $43,881,796) .......... 45,058,478 ------------ See accompanying notes to financial statements. 9 PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- NEW COVENANT GROWTH FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Principal Value Amount (Note 2) -------------------------------------------------------- REPURCHASE AGREEMENTS -- 1.7% (Cost $14,308,000) $14,308,000 Agreement dated 12/31/2003 with State Street Bank, 0.650% to be repurchased at $14,308,517 on 01/02/2004, collateralized by $975,000 Federal National Mortgage Association 1.875% due 02/15/2005, Market Value $985,866; $690,000 Federal Home Loan Mortgage Corporation 2.500% due 04/21/2006, market value $695,175; $7,370,000 Federal Home Loan Bank 1.400% due 06/17/2005, Market Value $7,344,603; $4,865,000 Federal National Mortgage Association 4.625% due 08/13/2004, Market Value $5,049,578; $540,000 Federal National Mortgage Association 1.670% due 05/26/2005, Market Value $541,003 .................. $ 14,308,000 ------------ TOTAL INVESTMENTS (Cost $745,017,003) .......... 100.5% 833,985,070 OTHER ASSETS AND LIABILITIES (NET) ............ (0.5)% (4,171,237) ----- ------------ NET ASSETS ...................... 100.0% $829,813,833 ===== ============ SHORT-TERM INVESTMENTS HELD AS COLLATERAL FOR LOANED SECURITIES (Cost $28,012,366) (Note 2) ............ $ 28,012,366 ============ --------------------------- * Non-income producing security. (L) Securities lending -- securities in whole or in part on loan at December 31, 2003. + Principal amount is stated in the currency of the country in which the security is denominated. ++ Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2003, the value of these securities amounted to $1,645,462 or 0.20% of net assets. # Amount is less than 0.1%. Abbreviations: GDR -- Global Depositary Receipt ADR -- American Depositary Receipt See accompanying notes to financial statements. 10 PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- NEW COVENANT INCOME FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Principal Value Amount (Note 2) -------------------------------------------------------- CORPORATE FIXED INCOME SECURITIES -- 27.0% $1,900,000 Alcoa, Inc. 6.500% due 06/15/2018 ....... $ 2,151,712 1,900,000 Alliance Capital Management 5.625% due 08/15/2006 ....... 2,026,549 American General Finance 1,000,000 5.875% due 07/14/2006 ....... 1,079,765 3,900,000 6.100% due 05/22/2006 ....... 4,221,122 2,925,000 Bank of America Corp. 6.875% due 02/15/2005 ....... 3,086,644 5,000,000 Bank of New York 4.140% due 08/02/2007 ....... 5,120,200 2,500,000 BellSouth Telecommunications, Inc. 6.375% due 06/01/2028 ....... 2,618,485 3,780,000 Bottling Group LLC 5.000% due 11/15/2013(L) .... 3,837,135 1,125,000 BRE Properties, Inc. 7.125% due 02/15/2013 ....... 1,261,999 3,800,000 Burlington North Santa Fe 6.750% due 07/15/2011 ....... 4,314,148 2,500,000 Carolina Power & Light 6.500% due 07/15/2012 ....... 2,771,510 5,250,000 Citigroup, Inc. 6.750% due 12/01/2005 ....... 5,706,099 Coca-Cola Enterprises 1,250,000 6.950% due 11/15/2026 ....... 1,429,772 10,000,000 7.013% due 06/20/2020(b) .... 3,717,310 1,375,000 Conoco Funding Co. 5.450% due 10/15/2006 ....... 1,476,186 1,800,000 Delphi Automotive Systems Corp. 6.125% due 05/01/2004 ....... 1,826,458 3,000,000 Dominion Resources, Inc. 7.625% due 07/15/2005 ....... 3,242,217 1,265,000 Duke Realty Corp. 7.050% due 03/01/2006(a) .... 1,366,152 EOP Operating LP 3,150,000 6.500% due 06/15/2004 ....... 3,219,817 1,600,000 6.800% due 01/15/2009 ....... 1,796,470 3,975,000 Equity Residential Properties 6.875% due 11/01/2004 ....... 4,140,618 2,114,155 FedEx Corp. 6.720% due 01/15/2022 ....... 2,360,507 5,000,000 First Security Corp. 7.000% due 07/15/2005 ....... 5,383,375 1,950,000 Firstar Bank 7.125% due 12/01/2009 ....... 2,249,994 Ford Motor Credit Co. 2,750,000 5.800% due 01/12/2009 ....... 2,835,159 1,275,000 7.000% due 10/01/2013 ....... 1,347,097 3,250,000 General Electric Capital Corp. 4.250% due 12/01/2010 ....... 3,238,709 2,970,000 General Motors Acceptance Corp. 6.875% due 09/15/2011 ....... 3,203,873 General Motors Corp. 975,000 7.200% due 01/15/2011(L) .... 1,073,490 615,000 8.800% due 03/01/2021 ....... 713,954 1,400,000 Georgia Power Co. 6.200% due 02/01/2006 ....... 1,510,274 1,750,000 Household Finance Corp. 6.400% due 06/17/2008 ....... 1,942,138 International Lease Finance Corp. 3,000,000 5.540% due 03/21/2005 ....... 3,124,938 2,000,000 5.950% due 06/06/2005 ....... 2,112,086 1,070,000 International Paper Co. 6.500% due 11/15/2007 ....... 1,173,972 May Department Stores Co. 4,575,000 6.900% due 01/15/2032(L) .... 4,943,269 675,000 7.450% due 09/15/2011(L) .... 782,098 -------------------------------------------------------- Principal Value Amount (Note 2) -------------------------------------------------------- $5,000,000 Merrill Lynch & Co. 5.360% due 02/01/2007 ....... $ 5,381,810 3,525,000 Morgan Stanley 3.625% due 04/01/2008 ....... 3,533,421 3,250,000 National City Corp. 6.875% due 05/15/2019 ....... 3,760,851 2,500,000 Nationwide Life 5.350% due 02/15/2007++ ..... 2,693,295 1,120,000 Pacific Bell 6.625% due 11/01/2009 ....... 1,268,061 3,480,000 PNC Funding Corp. 6.125% due 02/15/2009 ....... 3,837,194 1,500,000 Progress Energy, Inc. 7.750% due 03/01/2031 ....... 1,754,241 Sprint Capital Corp. 1,750,000 6.875% due 11/15/2028 ....... 1,713,709 2,000,000 7.625% due 01/30/2011 ....... 2,245,600 4,000,000 Suntrust Banks, Inc. 6.000% due 02/15/2026 ....... 4,289,248 3,000,000 Time Warner, Inc. 7.625% due 04/15/2031 ....... 3,474,222 2,500,000 USAA Capital Corp. 5.591% due 12/20/2006++ ..... 2,725,880 1,825,000 Washington Mutual, Inc. 7.500% due 08/15/2006 ....... 2,040,007 2,300,000 Weyerhaeuser Co. 7.375% due 03/15/2032 ....... 2,508,569 ------------ Total Corporate Fixed Income Securities (Cost $130,513,050) ......... 139,631,409 ------------ MORTGAGE BACKED SECURITIES -- 36.9% FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)-- 10.0% 6,659,271 4.500% due 06/01/2033 to 10/01/2033 ............... 6,380,414 8,897,305 5.000% due 09/15/2018 to 09/01/2033 ............... 8,952,040 6,369,365 5.500% due 11/01/2033 ......... 6,451,558 7,686,994 6.000% due 04/01/2014 to 05/15/2017 ............... 8,134,505 9,924,036 6.500% due 02/15/2030 to 09/25/2043 ............... 10,429,920 5,668,473 6.978% due 10/01/2010 ......... 6,464,893 4,419,930 7.000% due 02/25/2043 ......... 4,765,237 236 8.000% due 05/01/2006 ......... 249 ------------ 51,578,816 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 26.9% 6,138,313 3.950% due 07/01/2013 ......... 5,814,304 5,409,235 4.000% due 11/01/2018 ......... 5,279,076 4,859,999 4.500% due 08/01/2033 ......... 4,654,477 5,230,000 5.500% due 07/25/2042 ......... 5,481,450 37,525,751 6.000% due 12/01/2013 to 11/01/2033 ............... 39,377,997 4,183,895 6.140% due 04/01/2009 ......... 4,566,535 2,180,924 6.230% due 01/01/2008 ......... 2,367,978 31,063,001 6.500% due 06/01/2017 to 12/25/2042 ............... 32,899,132 9,638,823 7.000% due 06/01/2032 to 01/25/2048 ............... 10,350,235 1,446,482 7.010% due 11/01/2008 ......... 1,630,265 4,687,991 7.070% due 11/01/2006 ......... 5,095,240 8,542,917 7.500% due 05/01/2027 to 05/25/2042 ............... 9,277,395 5,382,925 7.527% due 04/01/2010 ......... 6,249,568 2,279,783 7.740% due 06/01/2007 ......... 2,553,670 3,099,787 8.000% due 04/18/2027 ......... 3,344,084 ------------ 138,941,406 ------------ Total Mortgage Backed Securities (Cost $187,798,668) ......... 190,520,222 ------------ See accompanying notes to financial statements. 11 PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- NEW COVENANT INCOME FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Principal Value Amount (Note 2) -------------------------------------------------------- ASSET-BACKED SECURITIES -- 10.4% $3,200,000 Commercial Mortgage Pass-through Certificate Series 2000-C1, Class A2 7.416% due 08/15/2033 ....... $ 3,708,866 3,780,000 Country Wide Home Loan Series 2002-22, Class A20 6.250% due 10/25/2032 ....... 3,884,759 6,660,000 Discover Card Master Trust I Series 1995-1, Class A 1.443% due 02/16/2007(a) .... 6,671,027 5,000,000 Ford Credit Floorplan Master Owner Trust Series 2001-1 Class A(a) 1.253% due 07/17/2006 ....... 5,005,121 5,095,000 Goldman Sachs Mortgage Securities Corp. II Series 2003-C1 Class A3 4.608% due 01/10/2040 ....... 5,030,903 4,690,000 JP Morgan Chase Commercial Mortgage Securities Corp. Series 2001-CIB2, Class A2 6.244% due 04/15/2035 ....... 5,155,816 4,305,268 Lehman Brothers-UBS Commercial Mortgage Trust Series 2000-C4, Class A1 7.180% due 09/15/2019 ....... 4,775,985 4,720,000 Lehman Brothers-UBS Commercial Mortgage Trust Series 2001-C2 Class A2 6.653% due 11/15/2027 ....... 5,338,669 2,815,000 Morgan Stanley Capital I, Series 2002-IQ2, Class A3 5.520% due 12/15/2035 ....... 3,001,072 5,865,000 Residential Asset Mortgage Products, Inc. Series 2002-RS3, Class AI5 5.572% due 06/25/2032 ....... 6,142,900 1,800,655 Residential Asset Mortgage Products, Inc. Series 2002-RZ2, Class A3 4.980% due 09/25/2028 ....... 1,801,885 3,482,833 Wells Fargo Mortgage Backed Securities Trusts Series 2002-9, Class A7 6.250% due 06/25/2032 ....... 3,509,799 ------------ Total Asset-Backed Securities (Cost $53,457,939) .......... 54,026,802 ------------ U.S.TREASURY OBLIGATIONS -- 16.7% U.S. TREASURY BONDS -- 11.8% 11,055,000 5.000% due 08/15/2011(L) ...... 11,834,035 44,550,000 6.000% due 02/15/2026(L) ...... 49,417,444 ------------ 61,251,479 ------------ U.S. TREASURY NOTES -- 4.9% 4,565,000 2.625% due 05/15/2008(L) ...... 4,497,776 20,465,000 2.375% due 08/15/2006(L) ...... 20,581,732 ------------ 25,079,508 ------------ Total U.S. Treasury Obligations (Cost $87,363,585) .......... 86,330,987 ------------ -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- CLOSED END INVESTMENT COMPANIES -- 1.2% 372,400 BlackRock Income Opportunity Trust, Inc. ................. $ 4,122,468 328,200 MFS Government Markets Income Trust ................. 2,225,196 ------------ Total Closed End Investment Companies (Cost $5,727,102) ........... 6,347,664 ------------ Principal Amount --------- REPURCHASE AGREEMENTS -- 6.9% (Cost $35,592,000) $35,592,000 Agreement dated 12/31/2003 with State Street Bank, 0.650% to be repurchased at $35,593,285 on 01/02/2004, collateralized by $36,095,000 Federal National Mortgage Association 1.180% due 07/27/2004, market value $36,306,769 ............... 35,592,000 ------------ TOTAL INVESTMENTS (Cost $500,452,344) ........... 99.1% 512,449,084 OTHER ASSETS AND LIABILITIES (NET) ............. 0.9% 4,510,546 ----- ------------ NET ASSETS ....................... 100.0% $516,959,630 ===== ============ SHORT-TERM INVESTMENTS HELD AS COLLATERAL FOR LOANED SECURITIES (Cost $88,520,213) (Note 2) ............ $ 88,520,213 ============ ++ Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2003, the value of these securities amounted to $5,419,175 or 1.05% of net assets. (a) Variable Rate Security. The interest rate shown reflects the rate in effect as of December 31, 2003. (b) Zero Coupon Bond. The interest rate shown reflects the effective yield at purchase date. (L) Securities lending -- securities in whole or in part on loan at December 31, 2003. See accompanying notes to financial statements. 12 PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- NEW COVENANT BALANCED GROWTH FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- INVESTMENT COMPANIES -- 98.5% 6,881,615 New Covenant Growth Fund ...... $188,625,061 3,854,043 New Covenant Income Fund ...... 99,203,078 ------------ Total Investment Companies (Cost $295,921,914) ......... 287,828,139 ------------ Principal Amount --------- REPURCHASE AGREEMENTS -- 1.5% (Cost $4,351,000) $4,351,000 Agreement dated 12/31/2003 with State Street Bank, 0.650% to be repurchased at $4,351,157 on 01/02/2004, collateralized by $4,405,000 Federal National Mortgage Association 2.020% due 02/28/2005, market value $4,441,857 ................ 4,351,000 ------------ TOTAL INVESTMENTS (Cost $300,272,914) .......... 100.0% 292,179,139 OTHER ASSETS AND LIABILITIES (NET) ............ (0.0)%# (41,821) ----- ------------ NET ASSETS ...................... 100.0% $292,137,318 ===== ============ ------------------------ # Amount is less than 0.1%. NEW COVENANT BALANCED INCOME FUND DECEMBER 31, 2003 (UNAUDITED) -------------------------------------------------------- Value Shares (Note 2) -------------------------------------------------------- INVESTMENT COMPANIES -- 98.6% 1,869,978 New Covenant Growth Fund ...... $ 51,256,105 2,920,005 New Covenant Income Fund ...... 75,160,936 ------------ Total Investment Companies (Cost $125,348,600) ......... 126,417,041 ------------ Principal Amount --------- REPURCHASE AGREEMENTS -- 1.4% (Cost $1,839,000) $1,839,000 Agreement dated 12/31/2003 with State Street Bank, 0.650% to be repurchased at $1,839,066 on 01/02/2004, collateralized by $1,865,000 Federal National Mortgage Association 2.020% due 02/28/2005, market value $1,880,604 ................ 1,839,000 ------------ TOTAL INVESTMENTS (Cost $127,187,600) .......... 100.0% 128,256,041 OTHER ASSETS AND LIABILITIES (NET) ............ (0.0)%# (33,439) ----- ------------ NET ASSETS ...................... 100.0% $128,222,602 ===== ============ See accompanying notes to financial statements. 13 STATEMENTS OF ASSETS AND LIABILITIES --------------------------------------------------------------------------------
NEW COVENANT FUNDS DECEMBER 31, 2003 (UNAUDITED) BALANCED BALANCED GROWTH FUND INCOME FUND GROWTH FUND INCOME FUND ------------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at value (Note 2) ....... $ 833,985,070 $512,449,084 $292,179,139 $128,256,041 Securities lending collateral (Note 2) 28,012,366 88,520,213 -- -- Foreign currency, at value (Cost $46,955, $0, $0 and $0, respectively) .................... 45,520 -- -- -- Cash ................................. 71,671 273 690 905 Receivable for investments sold ...... 49,058,781 -- -- -- Receivable for fund shares sold ...... 2,820 167 17,821 55 Dividends and interest receivable .... 944,517 4,965,167 157 66 Prepaid expenses and other assets .... 19,666 17,212 13,465 10,162 ------------- ------------ ------------ ------------ Total Assets ......................... 912,140,411 605,952,116 292,211,272 128,267,229 ------------- ------------ ------------ ------------ LIABILITIES: Payable for securities purchased ..... 53,461,617 -- -- -- Payable for fund shares redeemed ..... 13,644 50,000 22,714 20,476 Advisory fee payable ................. 697,466 340,843 -- -- Obligation to return security lending collateral (Note 2) ....... 28,012,366 88,520,213 -- -- Other accrued expenses and liabilities 141,485 81,430 51,240 24,151 ------------- ------------ ------------ ------------ Total Liabilities .................... 82,326,578 88,992,486 73,954 44,627 ------------- ------------ ------------ ------------ NET ASSETS ............................... $ 829,813,833 $516,959,630 $292,137,318 $128,222,602 ============= ============ ============ ============ Investments, at Identified Cost .......... $ 745,017,003 $500,452,344 $300,272,914 $127,187,600 ============= ============ ============ ============ NET ASSETS CONSIST OF: Paid-in capital ...................... $ 934,892,640 $506,344,141 $314,619,168 $130,143,208 Undistributed/ (distributions in excess of) net investment income .. (347,929) 1,427,818 (159,071) 53,039 Accumulated net realized loss on investments and foreign currency transactions ...................... (193,705,317) (2,809,069) (14,229,004) (3,042,086) Net unrealized appreciation / (depreciation) on investments and foreign currency transactions . 88,974,439 11,996,740 (8,093,775) 1,068,441 ------------- ------------ ------------ ------------ Total Net Assets ..................... $ 829,813,833 $516,959,630 $292,137,318 $128,222,602 ============= ============ ============ ============ NET ASSET VALUE, offering price and redemption price per share of beneficial interest outstanding ................. $ 27.41 $ 25.74 $ 74.06 $ 18.30 ============= ============ ============ ============ Number of Portfolio Shares Outstanding 30,273,730 20,083,616 3,944,544 7,005,234 ============= ============ ============ ============
See accompanying notes to financial statements. 14 STATEMENTS OF OPERATIONS -------------------------------------------------------------------------------- NEW COVENANT FUNDS FOR THE SIX MONTHS ENDED DECEMBER 31, 2003 (UNAUDITED)
BALANCED BALANCED GROWTH FUND INCOME FUND GROWTH FUND INCOME FUND -------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $48,876, $0, $0, and $0 respectively) .............. $ 5,192,483 $ 237,539 $ 2,959,921 $2,055,299 Interest ............................. 121,332 12,181,114 15,894 7,110 ------------ ------------ ----------- ---------- Total Investment Income .............. 5,313,815 12,418,653 2,975,815 2,062,409 ------------ ------------ ----------- ---------- EXPENSES: Investment advisory fees (Note 3) .... 3,791,861 1,949,982 -- -- Administration fees .................. 55,680 39,981 21,255 9,371 Accounting and custody fees .......... 317,600 115,229 13,954 9,793 Legal and audit fees ................. 45,488 32,315 17,654 8,304 Transfer agent fees .................. 31,648 36,777 111,635 55,314 Directors' expenses .................. 2,442 1,764 942 424 Registration fees .................... 10,834 10,529 11,052 9,811 Shareholder report expenses .......... 15,931 12,376 6,453 2,706 Insurance expense .................... 12,720 9,349 4,891 2,161 Miscellaneous expenses ............... 10,433 7,537 4,114 2,251 ------------ ------------ ----------- ---------- Total expenses ....................... 4,294,637 2,215,839 191,950 100,135 ------------ ------------ ----------- ---------- NET INVESTMENT INCOME ................ 1,019,178 10,202,814 2,783,865 1,962,274 ------------ ------------ ----------- ---------- NET REALIZED AND UNREALIZED GAIN / (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain / (loss) on: Investments ....................... 21,121,945 (855,628) (2,711,442) (707,819) Foreign currency transactions ..... (2,384) 896 -- -- Realized gains received from underlying funds ............... -- -- 743,947 557,083 ------------ ------------ ----------- ---------- Net realized gain / (loss) on investments and foreign currency transactions ..... 21,119,561 (854,732) (1,967,495) (150,736) ------------ ------------ ----------- ---------- Net change in unrealized appreciation / (depreciation) of investments and foreign currency transactions ..... 96,528,636 (9,353,787) 26,734,455 5,560,664 ------------ ------------ ----------- ---------- Net realized and unrealized gain / (loss) on investments and foreign currency transactions ...................... 117,648,197 (10,208,519) 24,766,960 5,409,928 ------------ ------------ ----------- ---------- NET INCREASE / (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................... $118,667,375 $ (5,705) $27,550,825 $7,372,202 ============ ============ =========== ==========
See accompanying notes to financial statements. 15 STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- NEW COVENANT FUNDS
------------------------------------------------------------------------------------------------------------------- GROWTH FUND ------------------------------------------------------------------------------------------------------------------- FOR THE SIX MONTHS ENDED FOR THE DECEMBER 31, 2003 YEAR ENDED (UNAUDITED) JUNE 30, 2003 ----------------- ------------- OPERATIONS: Net investment income ........................................................ $ 1,019,178 $ 3,113,361 Net realized gain / (loss) on investments and foreign currency transactions 21,119,561 (91,471,683) Net change in unrealized appreciation / (depreciation) on investments and foreign currency transactions ............................................. 96,528,636 76,696,165 ------------ ------------ Net increase / (decrease) in net assets resulting from operations ............ 118,667,375 (11,662,157) ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ........................................................ (1,537,511) (2,747,947) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders ............................... (1,537,511) (2,747,947) ------------ ------------ SHARE TRANSACTIONS: Net increase in net assets from shares of beneficial interest transactions (Note 5) ................................. 3,799,138 27,672,712 ------------ ------------ Net increase in net assets ................................................... 120,929,002 13,262,608 ------------ ------------ NET ASSETS: Beginning of period .......................................................... 708,884,831 695,622,223 ------------ ------------ End of period ................................................................ $829,813,833 $708,884,831 ============ ============ ------------------------------------------------------------------------------------------------------------------- INCOME FUND ------------------------------------------------------------------------------------------------------------------- FOR THE SIX MONTHS ENDED FOR THE DECEMBER 31, 2003 YEAR ENDED (UNAUDITED) JUNE 30, 2003 ----------------- ------------- OPERATIONS: Net investment income ...................................................... $ 10,202,814 $ 19,520,007 Net realized gain / (loss) on investments and foreign currency transactions (854,732) 17,896,236 Net change in unrealized appreciation / (depreciation) on investments and foreign currency transactions ........................................... (9,353,787) 10,426,007 ------------ ------------ Net increase / (decrease) in net assets resulting from operations .......... (5,705) 47,842,250 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ...................................................... (8,774,996) (20,721,289) Net realized gains ......................................................... (8,717,403) (5,326,830) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders ............................. (17,492,399) (26,048,119) ------------ ------------ SHARE TRANSACTIONS: Net increase / (decrease) in net assets from shares of beneficial interest transactions (Note 5) ............................... 8,723,930 (41,416,799) ------------ ------------ Net decrease in net assets ................................................. (8,774,174) (19,622,668) ------------ ------------ NET ASSETS: Beginning of period ........................................................ 525,733,804 545,356,472 ------------ ------------ End of period .............................................................. $516,959,630 $525,733,804 ============ ============ See accompanying notes to financial statements. 16 STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- NEW COVENANT FUNDS ------------------------------------------------------------------------------------------------------------------- BALANCED GROWTH FUND ------------------------------------------------------------------------------------------------------------------- FOR THE SIX MONTHS ENDED FOR THE DECEMBER 31, 2003 YEAR ENDED (UNAUDITED) JUNE 30, 2003 ----------------- ------------- OPERATIONS: Net investment income ........................................................ $ 2,783,865 $ 5,235,230 Net realized loss on investments ............................................. (1,967,495) (8,310,028) Net change in unrealized appreciation / (depreciation) on investments ........ 26,734,455 10,514,095 ------------ ------------ Net increase in net assets resulting from operations ......................... 27,550,825 7,439,297 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ........................................................ (2,942,936) (5,236,205) Net realized gains ........................................................... -- (354,255) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders ............................... (2,942,936) (5,590,460) ------------ ------------ SHARE TRANSACTIONS: Net decrease in net assets from shares of beneficial interest transactions (Note 5) ................................. (4,937,308) (15,696,468) ------------ ------------ Net increase / (decrease) in net assets ...................................... 19,670,581 (13,847,631) ------------ ------------ NET ASSETS: Beginning of period .......................................................... 272,466,737 286,314,368 ------------ ------------ End of period ................................................................ $292,137,318 $272,466,737 ============ ============ ------------------------------------------------------------------------------------------------------------------- BALANCED INCOME FUND ------------------------------------------------------------------------------------------------------------------- FOR THE SIX MONTHS ENDED FOR THE DECEMBER 31, 2003 YEAR ENDED (UNAUDITED) JUNE 30, 2003 ----------------- ------------- OPERATIONS: Net investment income ........................................................ $ 1,962,274 $ 3,523,903 Net realized loss on investments ............................................. (150,736) (1,895,081) Net change in unrealized appreciation / (depreciation) on investments ........ 5,560,664 5,078,734 ------------ ------------ Net increase in net assets resulting from operations ......................... 7,372,202 6,707,556 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ........................................................ (1,909,235) (3,524,688) Net realized gains ........................................................... -- (368,191) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders ............................... (1,909,235) (3,892,879) ------------ ------------ SHARE TRANSACTIONS: Net increase in net assets from shares of beneficial interest transactions (Note 5) ................................. 183,579 5,748,715 ------------ ------------ Net increase in net assets ................................................... 5,646,546 8,563,392 ------------ ------------ NET ASSETS: Beginning of period .......................................................... 122,576,056 114,012,664 ------------ ------------ End of period ................................................................ $128,222,602 $122,576,056 ============ ============
See accompanying notes to financial statements. 17 FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- NEW COVENANT FUNDS For a Share outstanding throughout each period.
--------------------------------------------------------------------------------------------------------------------------------- GROWTH FUND --------------------------------------------------------------------------------------------------------------------------------- FOR THE SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE DECEMBER 31, 2003 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED (UNAUDITED) JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2000 ----------------- ------------- ------------- ------------- ------------- OPERATING PERFORMANCE: Net asset value, beginning of period ............. $ 23.51 $ 24.13 $ 29.26 $ 42.07 $ 40.81* -------- --------- -------- -------- -------- Net investment income ............................ 0.03 0.10 0.04 0.10 0.15 Net realized and unrealized gain / (loss) on investments and foreign currency transactions . 3.92 (0.63) (5.11) (4.86) 2.49 -------- --------- -------- -------- -------- Total from investment operations ................. 3.95 (0.53) (5.07) (4.76) 2.64 ======== ======== ======== ======== ======== DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ............................ (0.05) (0.09) (0.01) -- (0.30) Net realized gains ............................... -- -- -- (7.80) (1.08) Return of capital ................................ -- -- (0.05) (0.25) -- -------- --------- -------- -------- -------- Total distributions .............................. (0.05) (0.09) (0.06) (8.05) (1.38) -------- --------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD ................... $ 27.41 $ 23.51 $ 24.13 $ 29.26 $ 42.07 ======== ======== ======== ======== ======== Total return ..................................... 16.81% (2.17)% (17.34)% (12.33)% 6.38% ======== ======== ======== ======== ======== RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA: Net assets, end of period (in 000's) ............. $829,814 $708,885 $695,622 $816,901 $905,086 Ratio of net investment income to average net assets ............................ 0.27%+ 0.47% 0.15% 0.20% 0.37% Ratio of operating expenses to average net assets ............................ 1.12%+ 1.13% 1.11% 1.07% 1.07% Portfolio turnover rate .......................... 97%+ 63% 79% 142% 152% ------------------------------------------------------------------------------------------------------------------------------------ INCOME FUND ------------------------------------------------------------------------------------------------------------------------------------ FOR THE SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE DECEMBER 31, 2003 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED (UNAUDITED) JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2000 ----------------- ------------- ------------- ------------- ------------- OPERATING PERFORMANCE: Net asset value, beginning of period ............. $ 26.62 $ 25.54 $ 24.83 $ 23.89 $ 24.52* -------- --------- -------- -------- -------- Net investment income ............................ 0.51 1.00 1.21 1.50 1.47 Net realized and unrealized gain / (loss) on investments, options, and foreign currency transactions ......................... (0.51) 1.42 0.73 0.92 (0.63) -------- --------- -------- -------- -------- Total from investment operations ................. 0.00 2.42 1.94 2.42 0.84 ======== ======== ======== ======== ======== DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ............................ (0.44) (1.06) (1.23) (1.48) (1.47) Net realized gains ............................... (0.44) (0.28) -- -- -- -------- --------- -------- -------- -------- Total distributions .............................. (0.88) (1.34) (1.23) (1.48) (1.47) -------- --------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD ................... $ 25.74 $ 26.62 $ 25.54 $ 24.83 $ 23.89 ======== ======== ======== ======== ======== Total return ..................................... 0.02% 9.63% 7.97% 10.31% 3.55% ======== ======== ======== ======== ======== RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA: Net assets, end of period (in 000's) ............. $516,960 $525,734 $545,356 $559,286 $571,669 Ratio of net investment income to average net assets ............................ 3.93%+ 3.79% 4.72% 5.99% 6.12% Ratio of operating expenses to average net assets ............................ 0.85%+ 0.85% 0.84% 0.82% 0.83% Portfolio turnover rate .......................... 176%+ 226% 290% 191% 182% --------------------------- * Represents net asset value of predecessor Common Trust Fund. + Annualized. See accompanying notes to financial statements. 18 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- NEW COVENANT FUNDS -------------------------------------------------------------------------------- For a Share outstanding throughout each period. ------------------------------------------------------------------------------------------------------------------------------------ BALANCED GROWTH FUND ------------------------------------------------------------------------------------------------------------------------------------ FOR THE SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE DECEMBER 31, 2003 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED (UNAUDITED) JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2000 ----------------- ------------- ------------- ------------- ------------- OPERATING PERFORMANCE: Net asset value, beginning of period ............. $ 67.88 $ 67.25 $ 81.92 $ 91.84 $ 90.96* -------- --------- -------- -------- -------- Net investment income ............................ 0.71 1.27 1.52 2.33 3.18 Net realized and unrealized gain / (loss) on investments ................................... 6.22 0.71 (7.44) (5.07) 1.48 -------- --------- -------- -------- -------- Total from investment operations ................. 6.93 1.98 (5.92) (2.74) 4.66 ======== ======== ======== ======== ======== DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ............................ (0.75) (1.27) (1.34) (5.68) (3.19) Net realized gains ............................... -- (0.08) (7.00) (1.50) (0.59) Return of capital ................................ -- -- (0.41) -- -- -------- --------- -------- -------- -------- Total distributions .............................. (0.75) (1.35) (8.75) (7.18) (3.78) -------- --------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD ................... $ 74.06 $ 67.88 $ 67.25 $ 81.92 $ 91.84 ======== ======== ======== ======== ======== Total return ..................................... 10.24% 3.10% (7.79)% (3.01)% 5.13% ======== ======== ======== ======== ======== RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA: Net assets, end of period (in 000's) ............. $292,137 $272,467 $286,314 $314,873 $343,231 Ratio of net investment income to average net assets ............................ 1.98%+ 1.96% 2.02% 2.61% 3.50% Ratio of operating expenses to average net assets ............................ 0.14%+ 0.14% 0.11% 0.09% 0.10% Portfolio turnover rate .......................... 8%+ 15% 18% 18% 8% ------------------------------------------------------------------------------------------------------------------------------------ BALANCED INCOME FUND ------------------------------------------------------------------------------------------------------------------------------------ FOR THE SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE DECEMBER 31, 2003 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED (UNAUDITED) JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2000 ----------------- ------------- ------------- ------------- ------------- OPERATING PERFORMANCE: Net asset value, beginning of period ............. $ 17.52 $ 17.10 $ 18.88 $ 20.01 $ 20.16* -------- --------- -------- -------- -------- Net investment income ............................ 0.29 0.52 0.57 0.78 0.89 Net realized and unrealized gain / (loss) on investments ................................... 0.77 0.47 (0.84) (0.38) (0.02) -------- --------- -------- -------- -------- Total from investment operations ................. 1.06 0.99 (0.27) 0.40 0.87 ======== ======== ======== ======== ======== DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ............................ (0.28) (0.52) (0.54) (1.22) (0.89) Net realized gains ............................... -- (0.05) (0.94) (0.31) (0.13) Return of capital ................................ -- -- (0.03) -- -- -------- --------- -------- -------- -------- Total distributions .............................. (0.28) (0.57) (1.51) (1.53) (1.02) -------- --------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD ................... $ 18.30 $ 17.52 $ 17.10 $ 18.88 $ 20.01 ======== ======== ======== ======== ======== Total return ..................................... 6.06% 6.00% (1.55)% 2.08% 4.40% ======== ======== ======== ======== ======== RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA: Net assets, end of period (in 000's) ............. $128,223 $122,576 $114,013 $116,519 $124,809 Ratio of net investment income to average net assets ............................ 3.15%+ 3.08% 3.13% 3.88% 4.46% Ratio of operating expenses to average net assets ............................ 0.16%+ 0.16% 0.14% 0.12% 0.14% Portfolio turnover rate .......................... 9%+ 18% 11% 20% 12%
--------------------------- * Represents net asset value of predecessor Common Trust Fund. + Annualized. See accompanying notes to financial statements. 19 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NEW COVENANT FUNDS DECEMBER 31, 2003 (UNAUDITED) 1. ORGANIZATION New Covenant Funds (the "Trust"), an open-end, diversified management investment company, was organized as a Delaware business trust on September 30, 1998. It currently consists of four investment funds: New Covenant Growth Fund ("Growth Fund"), New Covenant Income Fund ("Income Fund"), New Covenant Balanced Growth Fund ("Balanced Growth Fund") and New Covenant Balanced Income Fund ("Balanced Income Fund"), (individually, a "Fund," and collectively, the "Funds"). The Funds commenced investment operations on July 1, 1999. The Trust's authorized capital consists of an unlimited number of shares of beneficial interest of $0.001 par value. The Funds' investment adviser is the NCF Investment Department of New Covenant Trust Company, N.A. (the "Adviser"). The objectives of the Funds are as follows: GROWTH FUND Long-term capital appreciation. Dividend income, if any, will be incidental. INCOME FUND High level of current income with preservation of capital. BALANCED GROWTH FUND Capital appreciation with less risk than would be present in a portfolio of only common stocks. BALANCED INCOME FUND Current income and long-term growth of capital. 2. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the Funds in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States. PORTFOLIO VALUATION: Fund investments are recorded at market value. Portfolio securities listed on a domestic or foreign exchange are valued at the last sale price on the day of valuation or, if there was no sale that day, at the last reported bid price as of the close of trading. For equity securities traded on the National Association of Securities Dealers Automated Quotations system ("NASDAQ"), the NASDAQ Official Closing Price is used. Equity securities which are traded in the over-the-counter market only, but which are not included in the NASDAQ National Market System, are valued at the last sale price on the day of valuation. Debt securities with a remaining maturity of sixty days or more are valued using a pricing service when such prices are believed to reflect fair market value. Debt securities with a remaining maturity of less than sixty days are valued at amortized cost, which approximates market value. All other securities and securities with no readily determinable market values are valued using procedures determined in good faith by the Board of Trustees. Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the New York Stock Exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the New York Stock Exchange that will not be reflected in the computation of a Fund's net asset value. If events materially affecting the value of such securities occur during such period, these securities will be valued at their fair value according to procedures decided upon in good faith by the Board of Trustees. All securities and other assets of a Fund initially expressed in foreign currencies will be converted to U.S. dollar values at the mean of the bid and offer prices of such currencies against U.S. dollars last quoted on a valuation date by any recognized dealer. SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are accounted for on a trade date basis. Net realized gains or losses on sales of securities are determined by the identified cost method. Interest income, adjusted for accretion of discounts and amortization of premiums, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the Funds are informed of the ex-dividend date, if the ex-dividend date has passed. OPTIONS: The Income Fund may purchase or write options which are traded over the counter to hedge fluctuation risks in the prices of certain securities. When a Fund writes a call or put option, an amount equal to the premium received is reflected as a liability. The liability is subsequently "marked-to-market" to reflect the current market value of the option written. The premium paid by a Fund for the purchase of a call or put option is recorded as an investment and subsequently "marked-to-market" to reflect the current market value of the option purchased. The Fund is subject to the risk of an imperfect correlation between movement in the price of the instrument and the price of the underlying security or transaction. Risks may also arise due to illiquid secondary markets for the instruments. There were no options outstanding at December 31, 2003. 20 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NEW COVENANT FUNDS DECEMBER 31, 2003 (UNAUDITED) FOREIGN CURRENCY TRANSLATION: The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investments and income and expenses are converted into U.S. dollars based upon exchange rates prevailing on the respective dates of such transactions. That portion of unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed. FORWARD FOREIGN CURRENCY CONTRACTS: Certain of the Funds enter into forward foreign currency contracts as hedges against either specific transactions or portfolio positions. All commitments are "marked-to-market" daily at the applicable foreign exchange rate and any resulting unrealized gains or losses are recorded currently. A Fund realizes gains or losses at the time forward contracts are extinguished. There were no contracts outstanding at December 31, 2003. LOANS OF PORTFOLIO SECURITIES: The Growth Fund and the Income Fund may lend their securities pursuant to a securities lending agreement ("Lending Agreement") with State Street Bank ("SSB"). Security loans made pursuant to the Lending Agreement are required at all times to be secured by collateral valued at least 102% of the market value of the securities loaned. Cash collateral received is invested by SSB pursuant to the terms of the Lending Agreement. All such investments are made at the risk of the Funds and, as such, the Funds are liable for investment losses. To the extent a loan is secured by non-cash collateral, the borrower is required to pay a loan premium. Non-cash collateral received cannot be sold or repledged. Net income earned on investment of cash collateral and loan premiums received on non-cash collateral are allocated between SSB and the Funds in accordance with the Lending Agreement. Income allocated to the Funds is included in interest income in the respective statements of operations. In the event of bankruptcy of the borrower, realization/retention of the collateral may be subject to legal proceedings. The value of loaned securities and related collateral outstanding at December 31, 2003, was as follows:
----------------------------------------------------------------------------------------------------------------------- VALUE OF VALUE OF VALUE OF FUND SECURITIES LOANED CASH COLLATERAL NON-CASH COLLATERAL ----------------------------------------------------------------------------------------------------------------------- Growth Fund $26,951,864 $28,012,366 $ -- Income Fund 93,986,153 88,520,213 7,410,860 ======================================================================================================================= Cash collateral received for securities on loan was invested in the following: ----------------------------------------------------------------------------------------------------------------------- GROWTH FUND INCOME FUND ----------------------------------------------------------------------------------------------------------------------- State Street Navigator Securities Lending Prime Portfolio, 1.06% due 01/02/04 $28,012,366 $ 88,520,213 =======================================================================================================================
REPURCHASE AGREEMENTS: The Funds may enter into repurchase agreements with a bank, broker-dealer or other financial institution, which are secured by obligations of the U.S. government. Each repurchase agreement is at least 102% collateralized and marked to market. However, in the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral may be subject to certain costs, losses or delays. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income of all Funds are declared and paid at least annually. For all Funds, all net realized long-term or short-term capital gains, if any, will be declared and distributed at least annually. Interest and dividend payments will normally be distributed as income dividends on a quarterly basis for each of the Funds. Income dividends and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income, gains and losses on various investment securities held by a Fund, timing differences in the recognition of income, gains and losses and differing characterizations of distributions made by the Fund. FEDERAL INCOME TAXES: It is the Funds' intention to qualify annually as a regulated investment company by complying with the appropriate provisions of the Internal Revenue Code of 1986, as amended. Accordingly, no provision for federal income tax has been made. 21 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NEW COVENANT FUNDS DECEMBER 31, 2003 (UNAUDITED) 3. INVESTMENT ADVISORY AND OTHER AGREEMENTS The Trust, on behalf of each Fund, has entered into an Investment Advisory Agreement with the Adviser. Under the Agreement, the Adviser is responsible for managing the Funds' investments as well as furnishing the Funds with certain administrative services. The Growth Fund pays the Adviser a monthly fee at the annual rate of 0.99% of the Growth Fund's average daily net assets and the Income Fund pays the Adviser a monthly fee at the annual rate of 0.75% of the Income Fund's average daily net assets. The Adviser does not receive advisory fees for the Balanced Growth and Balanced Income Funds. The Adviser has entered into Sub-Advisory Agreements with five Sub-Advisers to assist in the selection and management of each Fund's investment securities. It is the responsibility of the Sub-Advisers, under the direction of the Adviser, to make day-to-day investment decisions for the Funds. The Adviser pays each Sub-Adviser a quarterly fee for their services in managing assets of the Funds. The Adviser pays the Sub-Advisers' fees directly from its own advisory fees. The Sub-Advisory fees are based on the assets of a Fund to which a Sub-Adviser is responsible for making investment decisions. The following are the Sub-Advisers for the Growth Fund: Capital Guardian Trust Company, Seneca Capital Management, Sound Shore Management, Inc., and Wellington Management Company, LLP. Tattersall Advisory Group is the Sub-Adviser for the Income Fund. The Trust has a Services Agreement with PFPC Inc. ("PFPC"). Under the Services Agreement, PFPC provides transfer agency and administrative services to the Funds. The Trust is provided accounting services under an Accounting Services Agreement with PFPC. The Trust has a Distribution Agreement with PFPC Distributors, Inc. (the "Distributor") to serve as the principal distributor of the Funds' shares. As of January 1, 2004, New Covenant Funds Distributors, Inc. will serve as the principal distributor of the Funds' shares. The Funds do not pay any fees to the Distributor in its capacity as principal distributor. The Trust has a Custodian Agreement with State Street Bank. No officer, director or employee of New Covenant Funds, PFPC, or any affiliate thereof, receives any compensation from the Trust for serving as a Trustee or officer of the Trust. The Trust also reimburses expenses incurred by the unaffiliated Trustees in attending Board meetings. 4. PURCHASES AND SALES OF SECURITIES The cost of purchases and proceeds from sales of securities, excluding U.S. Government and short-term investments, for the six months ended December 31, 2003 were as follows: ------------------------------------------------------------ FUND PURCHASES SALES ------------------------------------------------------------ Growth Fund ....... $393,115,868 $388,713,289 Income Fund ....... 46,103,026 22,597,983 Balanced Growth ... 11,883,730 16,641,797 Balanced Income ... 6,239,319 5,708,730 ------------------------------------------------------------ The cost of purchases and proceeds from sales of long-term U.S. Government securities for the six months ended December 31, 2003 were as follows: ----------------------------------------------------------- FUND PURCHASES SALES ----------------------------------------------------------- Income Fund ....... $461,178,026 $432,215,952 ----------------------------------------------------------- 22 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NEW COVENANT FUNDS DECEMBER 31, 2003 (UNAUDITED) 5. SHARES OF BENEFICIAL INTEREST The Trust Instrument authorizes the issuance of an unlimited number of shares for each of the Funds, and each share has a par value of $0.001 per share. The Funds currently offer a single class of shares. Each issued and outstanding share of each Fund is entitled to participate equally in dividends and distributions declared by such Fund and in the net assets of such Fund upon liquidation or dissolution remaining after satisfaction of outstanding liabilities.
SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED (UNAUDITED) JUNE 30, 2003 --------------------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT --------------------------------------------------------------------------------------------------------------------------- GROWTH FUND: Sold ....................................... 1,222,150 $31,473,969 3,848,573 $ 82,094,287 Issued on reinvestment of dividends ........ 3,598 95,175 7,133 153,247 Redeemed ................................... (1,109,026) (27,770,006) (2,528,203) (54,574,822) --------------------------------------------------------------------------------------------------------------------------- Net Increase ............................... 116,722 $3,799,138 1,327,503 $ 27,672,712 =========================================================================================================================== SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED (UNAUDITED) JUNE 30, 2003 ------------------------------------------------------------------------------------------------------------------------ SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------ INCOME FUND: Sold ....................................... 1,076,121 $ 28,022,678 1,907,730 $ 50,189,035 Issued on reinvestment of dividends ........ 239,823 6,213,436 184,677 4,848,811 Redeemed ................................... (979,784) (25,512,184) (3,699,149) (96,454,645) ------------------------------------------------------------------------------------------------------------------------ Net Increase / (Decrease) .................. 336,160 $ 8,723,930 (1,606,742) $(41,416,799) ======================================================================================================================== SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED (UNAUDITED) JUNE 30, 2003 ------------------------------------------------------------------------------------------------------------------------ SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------ BALANCED GROWTH FUND: Sold ....................................... 192,261 $ 13,565,129 286,683 $ 18,351,902 Issued on reinvestment of dividends ........ 29,789 2,145,619 66,792 4,232,137 Redeemed ................................... (291,571) (20,648,056) (596,621) (38,280,507) ------------------------------------------------------------------------------------------------------------------------ Net Decrease ............................... (69,521) $ (4,937,308) (243,146) $(15,696,468) ======================================================================================================================== SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED (UNAUDITED) JUNE 30, 2003 ------------------------------------------------------------------------------------------------------------------------ SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------ BALANCED INCOME FUND: Sold ....................................... 317,951 $ 5,644,809 982,594 $ 16,737,282 Issued on reinvestment of dividends ........ 61,902 1,112,760 140,426 2,357,342 Redeemed ................................... (371,836) (6,573,990) (792,004) (13,345,909) ------------------------------------------------------------------------------------------------------------------------ Net Increase ............................... 8,017 $ 183,579 331,016 $ 5,748,715 ========================================================================================================================
23 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NEW COVENANT FUNDS DECEMBER 31, 2003 (UNAUDITED) 6. RISK FACTORS The performance of a Fund's investments in non-U.S. companies and in companies operating internationally or in foreign countries will depend principally on economic conditions in their product markets, the securities markets where their securities are traded, and on currency exchange rates. These risks are present because of uncertainty in future exchange rates back into U.S. dollars and possible political instability, which could affect foreign financial markets and local economies. There are also risks related to social and economic developments abroad, as well as risks resulting from the differences between the regulations to which U.S. and foreign issuers and markets are subject. The Funds will not invest more than 15% of the value of their net assets in securities that are illiquid because of restrictions on transferability or other reasons. Repurchase agreements with deemed maturities in excess of seven days and securities that are not registered under the Securities Act of 1933, as amended (the "Securities Act"), but that may be purchased by institutional buyers pursuant to Rule 144A are subject to this 15% limit (unless such securities are variable-amount master-demand notes with maturities of nine months or less or unless the Board determines that a liquid trading market exists). The Funds may purchase securities which are not registered under the Securities Act but which can be sold to "qualified institutional buyers" in accordance with Rule 144A under the Securities Act. In some cases, such securities are classified as "illiquid securities," however, any such security will not be considered illiquid so long as it is determined by the Adviser, under guidelines approved by the Board of Trustees, that an adequate trading market exists for that security. This investment practice could have the effect of increasing the level of illiquidity in a Fund during any period that qualified institutional buyers become uninterested in purchasing these restricted securities. The Income Fund may invest a limited amount of assets in debt securities which are rated below investment grade (hereinafter referred to as "lower-rated securities") or which are unrated but deemed equivalent to those rated below investment grade by the portfolio managers. The lower the ratings of such debt securities, the greater their risks. These debt instruments generally offer a higher current yield than that available from higher-grade issues, and typically involve greater risk. The yields on high-yield/high-risk bonds will fluctuate over time. In general, prices of all bonds rise when interest rates fall and fall when interest rates rise. Lower-rated securities are subject to adverse changes in general economic conditions and to changes in the financial condition of their issuers. During periods of economic downturn or rising interest rates, issuers of these instruments may experience financial stress that could adversely affect their ability to make payments of principal and interest, and increase the possibility of default. The Balanced Funds invest their assets primarily in the Growth Fund and the Income Fund. By investing primarily in shares of these Funds, shareholders of the Balanced Funds indirectly pay a portion of the operating expenses, management expenses and brokerage costs of the underlying Funds as well as their own operating expenses. Thus, shareholders of the Balanced Funds may indirectly pay slightly higher total operating expenses and other costs than they would pay by directly owning shares of the Growth Fund and Income Fund. Total fees and expenses to be borne by investors in either Balanced Fund will depend on the portion of the Funds' assets invested in the Growth Fund and in the Income Fund. A change in the asset allocation of either Balanced Fund could increase or reduce the fees and expenses actually borne by investors in that Fund. The Balanced Funds are also subject to rebalancing risk. Rebalancing activities, while undertaken to maintain the Fund's investment risk-to-reward ratio, may cause the Fund to underperform other funds with similar investment objectives. For the Balanced Growth Fund, it is possible after rebalancing from equities into a greater percentage of fixed-income securities, that equities will outperform fixed-income investments. For the Balanced Income Fund, it is possible that after rebalancing from fixed-income securities into a greater percentage of equity securities, that fixed-income securities will outperform equity investments. The performance of the Balanced Growth Fund and the Balanced Income Fund depends on the performance of the underlying funds in which they invest. 24 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NEW COVENANT FUNDS DECEMBER 31, 2003 (UNAUDITED) 7. DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles accepted in the United States. The tax character of distributions paid during the fiscal years ended June 30, 2002 and June 30, 2003 were as follows:
2002 TAXABLE DISTRIBUTIONS ----------------------------------------------------------------------------------------------------------------------- ORDINARY NET LONG-TERM TOTAL TAXABLE RETURN OF TOTAL FUND INCOME CAPITAL GAINS DISTRIBUTIONS CAPITAL DISTRIBUTIONS ----------------------------------------------------------------------------------------------------------------------- Growth Fund ................ $ 283,511 $ -- $ 283,511 $1,511,062 $ 1,794,573 Income Fund ................ 26,927,495 -- 26,927,495 -- 26,927,495 Balanced Growth Fund ....... 5,280,349 26,305,906 31,586,255 1,613,282 33,199,537 Balanced Income Fund ....... 3,458,509 5,709,821 9,168,330 219,232 9,387,562 ----------------------------------------------------------------------------------------------------------------------- 2003 TAXABLE DISTRIBUTIONS ----------------------------------------------------------------------------------------------------------------------- ORDINARY NET LONG-TERM TOTAL TAXABLE RETURN OF TOTAL FUND INCOME CAPITAL GAINS DISTRIBUTIONS CAPITAL DISTRIBUTIONS ----------------------------------------------------------------------------------------------------------------------- Growth Fund ................ $ 2,747,947 $ -- $ 2,747,947 $ -- $ 2,747,947 Income Fund ................ 25,160,016 888,103 26,048,119 -- 26,048,119 Balanced Growth Fund ....... 5,227,067 363,393 5,590,460 -- 5,590,460 Balanced Income Fund ....... 3,519,607 373,272 3,892,879 -- 3,892,879 ----------------------------------------------------------------------------------------------------------------------- 8. FEDERAL INCOME TAXES As of June 30, 2003, the Growth fund had available for federal tax purposes unused capital loss carryforwards as follows: ----------------------------------------------------------------------------------------------------------------------- EXPIRING IN 2010 EXPIRING IN 2011 ----------------------------------------------------------------------------------------------------------------------- Growth Fund .......................................................... $45,005,343 $96,688,185 -----------------------------------------------------------------------------------------------------------------------
25 This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. SHARES OF NEW COVENANT FUNDS(R) ARE DISTRIBUTED BY NEW COVENANT FUNDS DISTRIBUTOR, INC. 200 EAST TWELFTH STREET, SUITE C JEFFERSONVILLE, IN 47130 [GRAPHIC OMITTED] FDN12-04-17 NC-SA12/03 NEW COVENANT FUNDS(R) 200 EAST TWELFTH STREET, SUITE C JEFFERSONVILLE, IN 47130 ------------------- PRSRT STD. U.S. POSTAGE PAID PAWTUCKET, RI PERMIT NO. 1815-140 ------------------- ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) New Covenant Funds ------------------------------------------------------- By (Signature and Title)* /s/ F. Kenneth Bateman ------------------------------------------ F. Kenneth Bateman, President (principal executive officer) Date February 26, 2004 -------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ F. Kenneth Bateman ------------------------------------------ F. Kenneth Bateman, President (principal executive officer) Date February 26, 2004 -------------------------------------------------------------- By (Signature and Title)* /s/ Andrew McNally ------------------------------------------ Andrew McNally, Treasurer (principal financial officer) Date February 26, 2004 -------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.