Cathedral of Our Lady of the Angels

The new Cathedral was dedicated on September 2, 2002. As with all major construction projects within the Archdiocese, and to comply with professional accounting requirements, the assets and liabilities are reflected within the financial statements of the Administrative Office until the project is complete. Property, plant and equipment include the capitalized costs relating to the construction of the new Cathedral complex. As of June 30, 2002, these capitalized costs amounted to $189.7 million. The other Cathedral complex balances included within the financial statements are as follows:

o Investments include $47.7 million for the Cathedral which were accumulated through collection of pledges and the unused portion of the note payable.

o Pledges receivable include $34.1 million of donor restricted assets to be used for the Cathedral complex.

o Notes payable total $75.0 million. As of June 30, 2002, the Archdiocese has sufficient designated assets to repay the notes as they come due.

Seminaries

Total support and revenues for Seminaries decreased $0.4 million during fiscal year 2002. This decrease in revenue was primarily due to negative investment returns of $0.5 million. The total expenses increased by $0.1 million. Loans to St. John's Seminary and St. John's Seminary College during the fiscal year 2002 amounted to $3.7 million.

The Tidings / Vida Nueva

The operating results of The Tidings / Vida Nueva remained static during fiscal year 2002. The increase in circulation resulted in a $0.2 million increase in revenue. However, this increase in revenue was offset by an equal increase in expenses.

Catholic Charities

Catholic Charities of Los Angeles is the social service agency of the Archdiocese. Its programs include family and individual counseling, community and employment services, child care, poverty programs, shelters, youth athletics, services for the elderly, residential care, immigration and naturalization services and resettlement of refugees. Funding for these programs was provided through government funded programs, contributions from the public, foundations, users of the services and through fundraising. Catholic Charities received approximately $31.8 million in contributions and government funding for the fiscal year ended June 30, 2002. All of this funding ($31.8 million) was used in fulfilling the mission of the organization and providing program services. Total support and revenue for Catholic Charities increased $2.2 million during fiscal year 2002. This increase came principally from government contributions to the Calworks Youth Jobs Program. This program assists in providing summer jobs to youths from families receiving public assistance. Total expenses for Catholic Charities increased by $4.0 million. The majority of this increase was related to an expansion in programs.

Education Foundation

The Education Foundation provides tuition awards to students from low income families. It also makes grants that benefit Catholic elementary and secondary education. The Foundation's funding is derived from donations and earnings on investments. Total support provided by the Education Foundation amounted to $5.8 million for the year ended June 30, 2002. The Education Foundation experienced a $3.4 million decrease in revenues for fiscal year 2002. This decrease was due to a lower rate of appreciation on certain investments.

Cardinal McIntyre Fund

The Cardinal McIntyre Fund for Charity supports various charitable causes that are not funded through any other charities or programs of the Archdiocese. Funds are generated through collections at the parishes and direct contributions. In fiscal year 2002 the Fund dispersed $0.5 million to parishes. This money was used to provide financial assistance to parishioners for such emergency needs as rent and food. The overall operating results of the Fund remained static during fiscal year 2002.

Investment Pool

In November 1986, the Archdiocese established an investment pool (the "Pool") which holds assets in trust for the benefit of the various entities of the Archdiocese and other religious organizations. The Administrative Office manages the Pool for the mutual benefit of all the participants. The accompanying financial statements presented on page A-2. represent only the Administrative Office's share of the assets of the Pool. The Pool is operated on a total return basis. This means that the gains and losses of the portfolio are allocated to the participants based on their specific interest in the Pool, similar to the way a mutual fund operates.

All funds invested, together with the returns on the invested funds, and held for a parish, school, Catholic Charities or other participating entities remain, at all times, the property of the particular entity. The funds and all returns on the funds are held in trust for the sole benefit of the participating entity. The Investment Committee of the Archdiocesan Finance Council oversees the investment program. The Investment Committee is made up of highly qualified lay professionals and uses professional advisors to assist in the decisions regarding asset allocation. Institutional money managers are responsible for the performance of the portfolios with oversight from the Investment Committee. A separate custodial bank holds the assets and account for the allocation of the participants' interest in the pool.

Funds invested by the various entities are available for use by the participating entity in accordance with donor imposed restrictions or for the operations of that entity. No participant funds are used at the discretion of the Administrative Office. Withdrawals from the pool are upon written request of the participating entity.

The investment pool consists of a balanced portfolio and an income portfolio. As of June 30, 2002 the balanced portfolio had a fair market value of $418.0 million and the income portfolio has a fair market value of $95.1 million. The balanced portfolio rate of return decreased (3.8%) in fiscal year 2001 and an additional (4.7%) in fical year 2002, a cumulative decline of 8.5%. The income portfolio rate of return decreased 2.8% during fiscal year 2002 compared to a 7.0% return in the previous year.

The capital market performance has continued to deteriorate with the first two quarters of the current fiscal year as illustrated in the graph below.

Parishes

Total support and revenue for the parishes increased $0.5 million in fiscal year 2002. While regular contributions and donations were up $5.3 million during the year, special fundraising efforts such as capital campaigns declined $5.0 million. Additionally, there was an increase in rental income. Total expenses increased by $9.6 million. The majority of this increase was from an increase in support to High Schools and Elementary schools of $4.0 million, a $1.8 million increase in salaries, and an increase in depreciation expense of $1.5 million due to the transfer of plant assets (capitalized repair cost transferred to parishes by the Administrative Office). The various other expense categories increased marginally to make up the total increase in expenses.

Elementary Schools and High Schools

The total support and revenue for elementary schools increased $16.8 million during fiscal year 2002. This increase in revenue was primarily due to an increase in tuitions, donations, fundraising and subsidies. Total expenses increased by $21.2 million during fiscal year 2002. This increase is primarily due to employee salary and benefit increases.